6-K

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON D.C. 20549

FORM 6-K

REPORT OF FOREIGN PRIVATE ISSUER

PURSUANT TO RULE 13a-16 OR 15D-16

UNDER THE SECURITIES EXCHANGE ACT OF 1934

For the month of May, 2014

Commission File Number: 000-30540

GIGAMEDIA LIMITED

8F, No. 22, Lane 407,

Section 2, Tiding

Boulevard

Neihu District

Taipei, Taiwan (R.O.C.)

(Indicate by check mark whether the registrant files or will file annual reports under cover of Form 20-F or Form 40-F.)

Form 20-F  x            Form 40-F  ¨

(Indicate by check mark whether the registrant by furnishing the information contained in this Form is also thereby furnishing the information to the Commission pursuant to Rule 12g3-2(b) under the Securities Exchange Act of 1934.)

Yes  ¨            No   x

(If “Yes” is marked, indicate below the file number assigned to the registrant in connection with Rule 12g3-2(b) :82-             .)

GIGAMEDIA LIMITED is submitting under cover of Form 6-K:

1. GigaMedia Notice of Annual Shareholder Meeting and Proxy Statement (attached hereto as Exhibit 99.1)

2. GigaMedia Annual General Meeting Proxy Card (attached hereto as Exhibit 99.2)

3. GigaMedia 2011 Financial Statements Prepared in Accordance with U.S. GAAP (attached hereto as Exhibit 99.3)

4. GigaMedia 2011 Statements Prepared in Accordance with Singapore GAAP (attached hereto as Exhibit 99.4)

Signatures

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

	GigaMedia Limited
	(Registrant)
Date: May 26, 2014	By: /s/ Dirk Chen
	(Signature)
	Name: Dirk Chen
	Title: Chief Financial Officer

EX-99.1

Exhibit 99.1

NOTICE OF THE FIFTEENTH ANNUAL GENERAL MEETING OF SHAREHOLDERS

GigaMedia Limited

Incorporated in the Republic of Singapore

Registration No.: 199905474H

REGISTERED OFFICE

80 Robinson Road, #02-00

Singapore 068898

The 2014 annual general meeting of the shareholders of GigaMedia Limited (the “Company”) will be held on June 20, 2014 at 3 p.m. local time at 1404-5 Sunbeam Plaza, 1155 Canton Road, Kowloon, Hong Kong, for the following purposes:

AS ORDINARY AND SPECIAL BUSINESS

ORDINARY RESOLUTIONS:

To consider and, if thought fit, to pass, with or without modification, the following resolutions which will be proposed as Ordinary Resolutions:

1. Adoption of audited financial statements

RESOLVED that the Report of the Directors, Statement by the Directors, Auditor’s Report and Audited Financial Statements of the Company for the financial year ended December 31, 2013 are received and adopted.

(Resolution 1)

2. Approval of appointment of auditors

RESOLVED that KPMG and KPMG LLP be and are hereby appointed as the independent external auditors of the Company and that the Directors be and are hereby authorized to fix their remuneration.

(Resolution 2)

3. Approval of Directors’ remuneration

RESOLVED that the remuneration of the Directors is hereby approved in an aggregate amount not exceeding US$350,000 in respect of their professional services to the Company until the conclusion of the next Annual General Meeting of the Company.

(Resolution 3)

4. Approval for authority to allot and issue shares

RESOLVED that pursuant to Section 161 of the Companies Act, Chapter 50 of Singapore (“Companies Act”), authority be and is hereby given to the Directors of the Company to:

(1)      (a) issue ordinary shares in the Company (“Shares”) whether by way of rights, bonus or otherwise; and/or

          (b) make or grant offers, agreements or options (collectively, “Instruments”) that might or would require Shares to be issued, including but not limited to the creation and issue of (as well as adjustments to) options, warrants, debentures or other instruments convertible into Shares,

at any time and upon such terms and conditions and for such purposes and to such persons as the Directors may in their absolute discretion deem fit; and

(2) notwithstanding that the authority conferred by this Resolution may have ceased to be in force, issue Shares pursuant to any Instrument made or granted by the Directors while this Resolution was in force; and

(3) unless varied or revoked by the Company in general meeting, such authority conferred on the Directors of the Company shall continue in force:

(i) until the conclusion of the next Annual General Meeting of the Company or the date by which the next Annual General Meeting of the Company is required by law to be held whichever is earlier; or

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(ii) in the case of Shares to be issued in pursuance of the Instruments, made or granted pursuant to this Resolution, until the issuance of such Shares in accordance with the terms of the Instruments.

(Resolution 4)

5. Approval for share purchase mandate RESOLVED that:

(1) for the purposes of Sections 76C and 76E of the Companies Act, the exercise by the Directors of the Company of all the powers of the Company to purchase or otherwise acquire issued Shares not exceeding in aggregate the Maximum Limit (as hereafter defined), at such price or prices as may be determined by the Directors from time to time up to the Maximum Price (as hereafter defined), by way of market purchase(s) on The Nasdaq Stock Market (“Nasdaq”) or off-market purchase(s) on an equal access scheme(s) as may be determined by the Directors as they see fit, which scheme(s) shall satisfy all the conditions of the Companies Act, and otherwise in accordance with all other laws and regulations and rules of Nasdaq as may for the time being be applicable, be and is hereby authorized and approved generally and unconditionally (the “Share Purchase Mandate”);

(2) unless varied or revoked by the Company in general meeting, the authority conferred on the Directors of the Company pursuant to the Share Purchase Mandate may be exercised by the Directors at any time and from time to time during the period commencing from the date of the passing of this Resolution and expiring on the earlier of:

(a) the date on which the next Annual General Meeting of the Company is held; and

(b) the date by which the next Annual General Meeting of the Company is required by law to be held;

(3) in this Resolution:

“Average Closing Price” means the average of the last dealt prices of a Share for the five consecutive trading days on which the Shares are transacted on Nasdaq immediately preceding the date of market purchase by the Company or the date of making the offer pursuant to an equal access scheme and deemed to be adjusted in accordance with the listing rules of Nasdaq for any corporate action which occurs after the relevant five day period;

“Maximum Limit” means that number of issued Shares representing 10% of the total number of issued Shares as at the date of the passing of this Resolution (excluding any Shares which are held as treasury shares as at that date); and

“Maximum Price”, in relation to a Share to be purchased or acquired pursuant to the Share Purchase Mandate, means the purchase price (excluding brokerage, commission, applicable goods and services tax and other related expenses) which shall not exceed 105% of the Average Closing Price of the Shares; and

(4) the Directors of the Company and/or any of them be and are hereby authorized to complete and do all such acts and things (including executing such documents as may be required) as they and/or he may consider expedient or necessary to give effect to the transactions contemplated and/or authorized by this Resolution.

(Resolution 5)

6. To transact any other business as may properly be transacted at the Fifteenth Annual General Meeting of the Company.

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NOTES:

1. Shareholders are cordially invited to attend the Fifteenth Annual General Meeting in person. Whether or not you plan to be at the Fifteenth Annual General Meeting, you are urged to return your proxy. A shareholder entitled to attend and vote is entitled to appoint one or more proxies to attend and to vote instead of him.

2. Shareholders wishing to vote by proxy should complete the attached form.

3. The proxy form of an individual shareholder shall be signed either by the shareholder personally or by his attorney. The proxy form of a corporate shareholder shall be given either under its common seal or signed on its behalf by an attorney or a duly authorized officer of the corporate shareholder.

4. A proxy need not be a shareholder of the Company.

5. The proxy form (and if relevant, the original power of attorney, or other authority under which it is signed or a notarially certified copy of such power or authority) must be deposited at Vote Processing, c/o Broadridge, 51 Mercedes Way, Edgewood, NY 11717, or the office of the Company, 8F, No. 22, Lane 407, Section 2, Tiding Boulevard, Taipei 114, Taiwan R.O.C., not less than 48 hours before the time for holding the Fifteenth Annual General Meeting, that is by no later than 3 a.m. June 17, 2014 (New York time), or 3 p.m. June 18, 2014 (Taipei time), failing which the proxy shall not be treated as valid.

6. Electronic Delivery of Future Proxy Materials. Shareholders can consent to receiving all future proxy statements, proxy card and annual reports electronically via e-mail or the internet. To sign up for electronic delivery, please follow the instructions below relating to “Electronic Delivery of Future Proxy Materials” and, when prompted, indicate that you agree to receive or access proxy materials electronically in future years.

7. Only shareholders of record at the close of business on May 1, 2014 are entitled to notice of and to vote at the Fifteenth Annual General Meeting, or any adjournment or postponement of the Fifteenth Annual General Meeting.

8. The Company intends to use internal sources of funds or external borrowings or a combination of both to finance the Company’s purchase or acquisition of the Shares pursuant to the Share Purchase Mandate. The Directors do not propose to exercise the Share Purchase Mandate to such extent that it would materially and adversely affect the financial position of the Company and its subsidiaries. The amount of financing required for the Company to purchase or acquire its Shares, and the impact on the Company’s financial position, cannot be ascertained as at the date of this Notice as this will depend on the number of Shares purchased or acquired, the price at which such Shares were purchased or acquired and whether the Shares purchased or acquired would be held in treasury or cancelled.

BY ORDER OF THE BOARD

/s/ Kuo-Lun Huang

Kuo-Lun Huang (aka Collin Hwang)

Director and Chief Executive Officer

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TABLE OF CONTENTS

NOTICE OF ANNUAL MEETING OF SHAREHOLDERS

PROXY STATEMENT

Questions and Answers about the Annual Meeting and Voting

Proposal 1

Proposal 2

Proposal 3

Proposal 4

Proposal 5

Other Matters

Proxy Solicitation

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GigaMedia Limited

Incorporated in the Republic of Singapore

Registration No.: 199905474H

REGISTERED OFFICE

80 Robinson Road, #02-00

Singapore 068898

PROXY STATEMENT

QUESTIONS AND ANSWERS ABOUT THE ANNUAL MEETING AND VOTING

Why Did I Receive This Proxy Statement?

We sent you this proxy statement and the enclosed proxy card because the Company’s Board of Directors is soliciting your proxy to be used at the Company’s annual meeting of shareholders on June 20, 2014 at 3 p.m. local time at 1404-5 Sunbeam Plaza, 1155 Canton Road, Kowloon, Hong Kong, or at any adjournment or postponement of the meeting.

Who Can Vote?

You are entitled to vote if you owned the Shares on the record date (“Record Date”), which is the close of business on May 1, 2014. Each Share that you own entitles you to one vote.

How Many Shares of Voting Stock Are Outstanding?

On the Record Date, there were 50,842,580 Shares outstanding. The Shares are our only class of voting stock.

What May I Vote On?

1. Adoption of Audited Financial Statements

2. Approval of Appointment of Auditors

3. Approval of Directors’ Remuneration

4. Approval for Authority to Allot and Issue Shares

5. Approval for Share Purchase Mandate

Other Business

How Do I Vote?

To vote by proxy, you should complete, sign and date the enclosed proxy card and return it promptly in the prepaid envelope provided.

Electronic Delivery of Future Proxy Materials

If you would like to reduce the costs incurred by our company in mailing proxy materials, you can consent to receiving all future proxy statements, proxy cards and annual reports electronically via e-mail or the internet. To sign up for electronic delivery, please go to www.proxyvote.com to indicate that you agree to receive or access proxy materials electronically in future years.

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May I Revoke My Proxy?

Your proxy may be revoked prior to its exercise by appropriate notice to the undersigned.

If I Plan To Attend The Meeting, Should I Still Vote By Proxy?

Whether you plan to attend the meeting or not, we urge you to vote by proxy. Returning the proxy card will not affect your right to attend the meeting, and your proxy will not be used if you are personally present at the meeting and inform the Secretary in writing prior to the voting that you wish to vote your Shares in person.

How Will My Proxy Get Voted?

If you properly fill in your proxy card and send it to us, your proxy holder (the individual named on your proxy card) will vote your Shares as you have directed. If you sign the proxy card but do not make specific choices, the proxy holder will vote your Shares as recommended by the Board of Directors and the Company’s management.

How Will Voting On Any Other Business Be Conducted?

Although we do not know of any business to be considered at the meeting other than the proposals described in this proxy statement, if any other business is presented at the meeting, your returned proxy gives authority to the proxy holder to vote on these matters in his discretion.

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Proposal 1. ADOPTION OF AUDITED FINANCIAL STATEMENTS

The Company seeks shareholders’ adoption of the audited financial statements of the Company (the “Audited Financial Statements”), which have been prepared under Singapore Generally Accepted Accounting Principles, in respect of the financial year ended December 31, 2013. Along with the Audited Financial Statements, the Company seeks Shareholders’ adoption of the Report of the Directors, Statement by the Directors and Auditor’s Report of the Company in respect of the same financial year.

Adoption of this proposal requires the affirmative vote of a majority of the votes cast by shareholders entitled to vote at the Fifteenth Annual General Meeting of the Company (“AGM”).

The Board of Directors of the Company (the “Board of Directors”) recommends a vote FOR this proposal.

Proposal 2. APPROVAL OF APPOINTMENT OF AUDITORS

The Company seeks Shareholders’ approval for the appointment of KPMG and KPMG LLP as the independent external auditors of the Company to hold such office until the conclusion of the next Annual General Meeting of the Company. The Board of Directors also seeks shareholders’ approval to authorize the Board of Directors to fix the remuneration for KPMG and KPMG LLP in respect of their service to the Company for the financial year ended December 31, 2014.

Adoption of this proposal requires the affirmative vote of a majority of the votes cast by shareholders entitled to vote at the AGM.

The Board of Directors recommends a vote FOR this proposal.

Proposal 3. APPROVAL OF DIRECTORS’ REMUNERATION

The Company seeks shareholders’ approval on the remuneration of Directors in an aggregated amount not exceeding US$350,000 in respect of their professional services to the Company until the conclusion of the next Annual General Meeting of the Company.

Adoption of this proposal requires the affirmative vote of a majority of the votes cast by shareholders entitled to vote at the AGM.

The Company’s management recommends a vote FOR this proposal.

Proposal 4. APPROVAL FOR AUTHORITY TO ALLOT AND ISSUE SHARES

The Company is incorporated in Singapore. Under the Companies Act, Chapter 50 of Singapore (the “Companies Act”), the Directors may exercise any power of the Company to issue new Shares only with the prior approval of the shareholders of the Company at a general meeting. Such approval, if granted, is effective from the date of the general meeting at which the approval was given until the date on which the next Annual General Meeting of the Company is held or is required by law to be held, whichever is earlier.

Shareholders’ approval is sought to give Directors authority to allot and issue new Shares and other instruments convertible into Shares during the period from the Fifteenth Annual General Meeting to the earlier of the next Annual General Meeting or the date by which the next Annual General Meeting of the Company is required by law to be held.

Adoption of this proposal requires the affirmative vote of a majority of the votes cast by shareholders entitled to vote at the AGM.

The Board of Directors recommends a vote FOR this proposal.

Proposal 5. APPROVAL FOR SHARE PURCHASE MANDATE

The approval of the Share Purchase Mandate authorizing the Company to purchase or acquire its Shares would give the Company the flexibility to undertake share purchases or acquisitions at any time, subject to market conditions, during the period when the Share Purchase Mandate is in force.

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In managing the business of the Company and its subsidiaries (the “Group”), the Company’s management strives to increase shareholders’ value by improving, inter alia, the return on equity of the Group. A share purchase by the Company is one of the ways through which the return on equity of the Group may be enhanced.

A Share purchase is also an available option for the Company to return surplus cash which is in excess of the financial and possible investment needs of the Group to its shareholders. In addition, the Share Purchase Mandate will allow the Company to have greater flexibility over, inter alia, the Company’s share capital structure and its dividend policy.

The Company intends to use internal sources of funds or external borrowings or a combination of both to finance the Company’s purchase or acquisition of the Shares pursuant to the Share Purchase Mandate. The Directors do not propose to exercise the Share Purchase Mandate to such extent that it would materially and adversely affect the financial position of the Group.

Share repurchase programmes may also help buffer short-term share price volatility and off-set the effects of short-term speculators and investors and, in turn, bolster shareholder confidence and employee morale.

Adoption of this proposal requires the affirmative vote of a majority of the votes cast by shareholders entitled to vote at the AGM.

The Board of Directors recommends a vote FOR this proposal.

OTHER MATTERS

As of the date of this Proxy Statement, the Company does not intend to present and has not been informed that any other person intends to present any business not specified in this Proxy Statement for action at the Fifteenth Annual General Meeting.

Shareholders are urged to sign the enclosed proxy form and to return it promptly in the enclosed envelope. Proxies will be voted in accordance with shareholders’ directions. Signing the proxy form does not affect a shareholder’s right to vote at the Fifteenth Annual General Meeting, and the proxy may be revoked prior to its exercise by appropriate notice to the undersigned.

PROXY SOLICITATION

The Company will pay the cost of preparing and mailing this proxy statement and form of proxy to its shareholders. The Company has retained Mackenzie Partners, Inc. to request banks and brokers to forward copies of these materials to persons for whom they hold Shares and to request authority for execution of the proxies.

GIGAMEDIA LIMITED

/s/ Kuo-Lun Huang

Kuo-Lun Huang (aka Collin Hwang)

Director and Chief Executive Officer

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EX-99.2

Exhibit 99.2

ELECTRONIC DELIVERY OF FUTURE PROXY MATERIALS If you would like to reduce the costs incurred by our company in mailing proxy materials, you can consent to receiving all future proxy statements, proxy cards GIGAMEDIA LIMITED and annual reports electronically via e-mail or the Internet. To sign up for 8F, NO. 22, LANE 407, SECTION 2 TIDING BLVD. electronic delivery, please go to www.proxyvote.com, indicate that you agree NEIHU DISTRICT, TAIPEI 114 to receive or access proxy materials electronically in future years. TAIWAN R.O.C VOTE BY MAIL Mark, sign and date your proxy card and return it, no less than 48 hours before the time of the meeting, in the postage-paid envelope we have provided or return it to Vote Processing, c/o Broadridge, 51 Mercedes Way, Edgewood, NY 11717. TO VOTE, MARK BLOCKS BELOW IN BLUE OR BLACK INK AS FOLLOWS: M70740-P51364 KEEP THIS PORTION FOR YOUR RECORDS PLEASE SIGN, DATE AND RETURN THIS PROXY IN THE ENCLOSED POSTAGE PRE-PAID ENVELOPE. DETACH AND RETURN THIS PORTION ONLY GIGAMEDIA LIMITED The Board of Directors recommends you vote FOR proposals 1 through 5. For Against Abstain 1. Adoption of Audited Financial Statements ! ! ! 2. Approval of Appointment of Auditors ! ! ! 3. Approval of Directors’ Remuneration ! ! ! 4. Approval of Authority to Allot and Issue Shares ! ! ! 5. Approval for Share Purchase Mandate ! ! ! NOTE: Such other business as may properly come before the meeting or any adjournment thereof. For address changes/comments, mark here. ! (see reverse for instructions) Please sign exactly as your name(s) appear(s) hereon. When signing as attorney, executor, administrator, or other ?duciary, please give full title as such. Joint owners should each sign personally. All holders must sign. If a corporation or partnership, please sign in full corporate or partnership name by authorized of?cer. Signature [PLEASE SIGN WITHIN BOX] Date Signature (Joint Owners) Date

Important Notice Regarding the Availability of Proxy Materials for the Annual Meeting: The Notice and Proxy Statement, U.S. Annual Report and Singapore Annual Report are available at www.proxyvote.com. M70741-P51364 GIGAMEDIA LIMITED Annual Meeting of Shareholders June 20, 2014 3:00 PM This proxy is solicited by the Board of Directors I/We, being a Shareholder/Shareholders of the above named Company, hereby appoint Kuo-Lun Huang (aka Collin Hwang) of 8F, No. 22, Lane 407, Section 2 Tiding Blvd., Neihu District, Taipei R.O.C., failing whom the Chairman of the Meeting, as my/our proxy to vote for me/us on my/our behalf at the Annual General Meeting of the Company to be held at 1404 5 Sunbeam Plaza, 1155 Canton Rd., Kowloon, Hong Kong on Friday, June 20, 2014, at 3:00 PM local time, and at any adjournment or postponement thereof. This Proxy, when properly executed, and returned in a timely manner, will be voted at the Annual General Meeting and any adjournments thereof in the manner described herein. If no contrary indication is made, the proxy will be voted as recommended by the Board of Directors and the Company’s management. 1. The proxy form must be signed by the Shareholder or by the Shareholders’ attorney duly authorized in writing or, if the appointer is a corporation, either, under seal or in some other manner approved by the directors of the Company. 2. To be effective, the proxy form (and power of attorney or other authority under which it is signed or a notarially certi?ed copy of such power of authority, if relevant) must be returned to Vote Processing, c/o Broadridge, 51 Mercedes Way, Edgewood, NY 11717, no less than 48 hours before the meeting. Address Changes/Comments: you noted any Address Changes/Comments above, please mark corresponding box on the reverse side.) Continued and to be signed on reverse side

EX-99.3

Exhibit 99.3

GIGAMEDIA LIMITED

CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2012 AND 2013

FOR THE YEARS ENDED DECEMBER 31, 2011, 2012 AND 2013

(With Reports of Independent Registered Public Accounting Firms Thereon)

GIGAMEDIA LIMITED AND SUBSIDIARIES

Index to Consolidated Financial Statements

	Page
Reports of Independent Registered Public Accounting Firms		1
Consolidated balance sheets as of December 31, 2012 and 2013		3
Consolidated statements of operations for the years ended December 31, 2011, 2012 and 2013		5
Consolidated statements of comprehensive loss for the years ended December 31, 2011, 2012 and 2013		6
Consolidated statements of changes in equity for the years ended December 31, 2011, 2012 and 2013		7
Consolidated statements of cash flows for the years ended December 31, 2011, 2012 and 2013		8
Notes to consolidated financial statements		10

Report of Independent Registered Public Accounting Firm

The Board of Directors and and Shareholders

GigaMedia Limited:

We have audited the accompanying consolidated balance sheet of GigaMedia Limited and subsidiaries (the “Company”) as of December 31, 2013, and the related consolidated statements of operations, comprehensive loss, changes in equity, and cash flows for the year then ended. These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidated 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 financial position of GigaMedia Limited and subsidiaries as of December 31, 2013, and the results of their operations and their cash flows for the year then ended in conformity with U.S. generally accepted accounting principles.

KPMG

Taipei, Taiwan (the Republic of China)

April 30, 2014

1

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

Board of Directors and Shareholders

GigaMedia Limited

We have audited the accompanying consolidated balance sheet of GigaMedia Limited and subsidiaries (the “Company”) as of December 31, 2012, and the related consolidated statements of operations, comprehensive loss, changes in equity and cash flows for each of the years in the two-year period ended December 31, 2012. The Company’s management is responsible for these financial statements. Our responsibility is to express an opinion on these financial statements based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audits 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, 2012, and the results of their operations and their cash flows for each of the years in the two-year period ended December 31, 2012, in conformity with accounting principles generally accepted in the United States of America.

GHP Horwath, P.C.

Denver, Colorado

April 30, 2013

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GIGAMEDIA LIMITED AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

DECEMBER 31, 2012 AND 2013

(in thousands of US dollars)

	December 31
	2012			2013
ASSETS
CURRENT ASSETS
Cash and cash equivalents (Note 10)	$	62,731		$	58,801
Marketable securities - current (Note 11)		17,773			21,460
Accounts receivable - net (Note 12)		2,829			2,027
Prepaid expenses		801			750
Other current assets (Notes 13 and 25)		1,001			293
Total Current Assets		85,135			83,331
Marketable securities - noncurrent (Note 14)		4,292			6,048
Equity method investments (Note 15)		5,223			5,822
PROPERTY, PLANT AND EQUIPMENT
Land and buildings		1,243			1,211
Information and communication equipment		3,986			4,082
Office furniture and fixtures		295			184
Leasehold improvements		455			122
Other		28			—
		6,007			5,599
Less: Accumulated depreciation and amortization		(4,058	)		(3,922	)
		1,949			1,677
GOODWILL (Note 6)		16,934			—
INTANGIBLE ASSETS - NET (Note 7)		15,675			1,461
OTHER ASSETS
Refundable deposits		392			306
Prepaid licensing and royalty fees (Note 8)		8,644			4,666
Other (Note 5)		2,150			10
Total Other Assets		11,186			4,982
TOTAL ASSETS	$	140,394		$	103,321

(Continued)

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GIGAMEDIA LIMITED AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS - (Continued)

DECEMBER 31, 2012 AND 2013

(in thousands of US dollars, except share data)

	December 31
	2012			2013
LIABILITIES & EQUITY
CURRENT LIABILITIES
Short-term borrowings (Note 16)	$	7,748		$	4,361
Accounts payable		324			1,178
Accrued compensation		1,233			380
Accrued expenses (Note 17)		5,182			2,617
Deferred revenue		3,174			2,441
Other current liabilities (Note 18)		3,986			3,862
Total Current Liabilities		21,647			14,839
OTHER LIABILITIES
Accrued pension liabilities (Note 19)		281			170
Other (Notes 20 and 25)		573			11
Total Other Liabilities		854			181
Total Liabilities		22,501			15,020
EQUITY (Note 22)
GigaMedia Shareholders’ Equity:
Common shares, no par value, and additional paid-in capital; issued and outstanding 50,720 thousand shares in 2012 and 50,723 thousand shares in 2013		304,851			305,072
Accumulated deficit		(178,241	)		(213,021	)
Accumulated other comprehensive loss		(8,379	)		(3,603	)
Total GigaMedia shareholders’ equity		118,231			88,448
Noncontrolling interest		(338	)		(147	)
Total Equity		117,893			88,301
COMMITMENTS AND CONTINGENCIES (Note 27)		—			—
TOTAL LIABILITIES AND EQUITY	$	140,394		$	103,321

The accompanying notes are an integral part of these consolidated financial statements.

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GIGAMEDIA LIMITED AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

FOR THE YEARS ENDED DECEMBER 31, 2011, 2012 AND 2013

(in thousands of US dollars, except for earnings per share amounts)

	2011			2012			2013
OPERATING REVENUES
Asian online game and service revenues	$	34,367		$	27,470		$	14,106
Other revenues		—			—			926
		34,367			27,470			15,032
COSTS OF REVENUES
Cost of Asian online game and service revenues		(14,413	)		(11,388	)		(6,425	)
Cost of other revenues		—			—			(1,159	)
		(14,413	)		(11,388	)		(7,584	)
GROSS PROFIT		19,954			16,082			7,448
OPERATING EXPENSES
Product development and engineering expenses		(1,956	)		(1,471	)		(1,698	)
Selling and marketing expenses		(10,079	)		(8,377	)		(4,815	)
General and administrative expenses		(18,101	)		(13,384	)		(6,324	)
Bad debt expense (Note 12)		(1,820	)		(169	)		(37	)
Impairment loss on goodwill (Notes 6 and 9)		(5,097	)		(12,489	)		(17,054	)
Impairment loss on intangible assets (Note 9)		(2,583	)		(15	)		(13,251	)
Impairment loss on prepaid licensing and royalty fees (Notes 8 and 9)		(247	)		(702	)		(2,752	)
Other		—			(49	)		(4	)
		(39,883	)		(36,656	)		(45,935	)
LOSS FROM OPERATIONS		(19,929	)		(20,574	)		(38,487	)
NON-OPERATING INCOME (EXPENSES)
Interest income		762			283			238
Gain on sales of marketable securities (Notes 11 and 14)		6,299			5,665			1,739
Interest expense		(426	)		(247	)		(49	)
Foreign exchange gain (loss), net		(365	)		434			45
Gain (loss) on equity method investments - net (Note 15)		(47,869	)		234			526
Gain on sale of T2CN (Note 5)		4,739			—			—
Impairment loss on marketable securities and investments (Note 9)		(13,327	)		(1,193	)		—
Gain on sale of equity method investments (Note 5)		—			2,480			1,220
Recovery of loss on termination of third-party contract (Note 4)		2,012			—			—
Other		469			(7	)		86
		(47,706	)		7,649			3,805
LOSS FROM CONTINUING OPERATIONS BEFORE INCOME TAXES		(67,635	)		(12,925	)		(34,682	)
INCOME TAX (EXPENSE) BENEFIT (Note 25)		245			(671	)		(61	)
LOSS FROM CONTINUING OPERATIONS		(67,390	)		(13,596	)		(34,743	)
LOSS FROM DISCONTINUED OPERATIONS - NET OF TAX (Note 5)		(4,188	)		(2,521	)		(318	)
NET LOSS		(71,578	)		(16,117	)		(35,061	)
LESS: NET LOSS ATTRIBUTABLE TO THE NONCONTROLLING INTERESTS		366			827			281
NET LOSS ATTRIBUTABLE TO SHAREHOLDERS OF GIGAMEDIA		($71,212	)		($15,290	)		($34,780	)
NET LOSS ATTRIBUTABLE TO SHAREHOLDERS OF GIGAMEDIA
Loss from continuing operations - net of tax		($67,024	)		($12,769	)		($34,462	)
Loss from discontinued operations - net of tax		(4,188	)		(2,521	)		(318	)
		($71,212	)		($15,290	)		($34,780	)
LOSS PER SHARE ATTRIBUTABLE TO GIGAMEDIA
Basic:
Loss from continuing operations		($1.23	)		($0.25	)		($0.68	)
Loss from discontinued operations		(0.08	)		(0.05	)		(0.01	)
Net loss		($1.31	)		($0.30	)		($0.69	)
Diluted:
Loss from continuing operations		($1.23	)		($0.25	)		($0.68	)
Loss from discontinued operations		(0.08	)		(0.05	)		(0.01	)
Net loss		($1.31	)		($0.30	)		($0.69	)
WEIGHTED AVERAGE SHARES USED TO COMPUTE LOSS PER SHARE ATTRIBUTABLE TO GIGAMEDIA SHAREHOLDERS (Note 2)
Basic		54,268			50,720			50,720
Diluted		54,268			50,720			50,720

The accompanying notes are an integral part of these consolidated financial statements.

5

GIGAMEDIA LIMITED AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS

FOR THE YEARS DECEMBER 31, 2011, 2012 AND 2013

(in thousands of US dollars)

	2011			2012			2013
NET LOSS		($71,578	)		($16,117	)		($35,061	)
OTHER COMPREHENSIVE INCOME (LOSS) - NET OF TAX:
Unrealized gain (loss) on marketable securities		16,167			(24,004	)		4,698
Defined benefit pension plan adjustment		69			(323	)		15
Foreign currency translation adjustments		(1,813	)		1,814			57
Deconsolidation of subsidiaries		—			2,799			—
		14,423			(19,714	)		4,770
COMPREHENSIVE LOSS		(57,155	)		(35,831	)		(30,291	)
COMPREHENSIVE (INCOME) LOSS ATTRIBUTABLE TO THE NONCONTROLLING INTERESTS		366			(2,189	)		287
COMPREHENSIVE LOSS ATTRIBUTABLE TO GIGAMEDIA SHAREHOLDERS		($56,789	)		($38,020	)		($30,004	)

The accompanying notes are an integral part of these consolidated financial statements.

6

GIGAMEDIA LIMITED AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY

FOR THE YEARS ENDED DECEMBER 31, 2011, 2012 AND 2013

(in thousands of US dollars and shares, except per share amounts)

	GIGAMEDIA SHAREHOLDERS
	Common shares and additional paid-in capital						Accumulated			Accumulated other comprehensive			Noncontrolling
	Shares			Amount			deficit (Note 22)			income (loss)			interest			Total
Balance as of January 1, 2011		56,263		$	309,332			($91,739	)		($72	)		($2,420	)	$	215,101
Issuance of common shares from exercise of stock options and RSUs		79			—			—			—			—			—
Stock-based compensation		—			1,165			—			—			—			1,165
Acquisition of OneNet		—			—			—			—			111			111
Share repurchase and retirement of common shares (Note 22)		(5,622	)		(5,825	)		—			—			—			(5,825	)
Cumulative dividend to subsidiary preferred shares (Note 21)		—			—			—			—			(321	)		(321	)
Net loss		—			—			(71,212	)		—			(366	)		(71,578	)
Other comprehensive income		—			—			—			14,423			—			14,423
Balance as of December 31, 2011		50,720			304,672			(162,951	)		14,351			(2,996	)		153,076
Stock-based compensation		—			179			—			—			—			179
Reversal of cumulative dividend to subsidiary preferred shares (Note 21)		—			—			—			—			469			469
Net loss		—			—			(15,290	)		—			(827	)		(16,117	)
Other comprehensive income (loss)		—			—			—			(22,730	)		3,016			(19,714	)
Balance as of December 31, 2012		50,720			304,851			(178,241	)		(8,379	)		(338	)		117,893
Issuance of common shares from exercise of stock options and RSUs		3			2			—			—			—			2
Stock-based compensation		—			219			—			—			—			219
Acquisition of FingerRockz		—			—			—			—			478			478
Net loss		—			—			(34,780	)		—			(281	)		(35,061	)
Other comprehensive income (loss)		—			—			—			4,776			(6	)		4,770
Balance as of December 31, 2013		50,723		$	305,072			($213,021	)		($3,603	)		($147	)	$	88,301

The accompanying notes are an integral part of these consolidated financial statements.

7

GIGAMEDIA LIMITED AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

FOR THE YEARS ENDED DECEMBER 31, 2011, 2012 AND 2013

(in thousands of US dollars)

	2011			2012			2013
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss	$	(71,578	)	($	16,117	)	($	35,061	)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation		2,080			1,224			408
Amortization		2,314			2,204			1,907
Stock-based compensation		1,165			179			219
Gain on sale of equity method investments		—			(2,480	)		(1,220	)
Impairment loss on goodwill		5,097			12,489			17,054
Impairment loss on intangible assets		2,583			15			13,251
Impairment loss on prepaid licensing and royalty fees		247			702			2,752
Provision for bad debt expenses		1,820			169			37
Loss on disposal of property, plant and equipment		49			208			4
Gain on sales of marketable securities		(6,299	)		(5,665	)		(1,739	)
Gain on sale of T2CN		(4,739	)		—			—
Loss (gain) on equity method investments		47,869			(234	)		(526	)
Impairment loss on marketable securities and investments		13,327			1,193			—
Gain on cancellation of warrant liabilities		(665	)		—			—
Other		200			377			(141	)
Net changes in operating assets and liabilities, net of business acquisitions and divestitures:
Accounts receivable		(153	)		1,537			767
Prepaid expenses		871			755			52
Other current assets		865			(174	)		708
Accounts payable		(336	)		(515	)		854
Accrued expenses		(452	)		(59	)		(2,223	)
Accrued compensation		(2,139	)		(831	)		(853	)
Other current liabilities		(1,334	)		(467	)		(1,017	)
Accrued pension liabilities		128			110			(111	)
Prepaid licensing and royalty fees		(3,007	)		(2,397	)		1,026
Other		(361	)		454			(453	)
Net cash used in operating activities		(12,448	)		(7,323	)		(4,305	)
CASH FLOWS FROM INVESTING ACTIVITIES:
Decrease in restricted cash		2,000			3,694			—
Cash dividends received from equity method investees		1,907			—			—
Proceeds from disposal of marketable securities		9,899			8,610			3,419
Divestiture of business, net of cash transferred		4,739			(1,308	)		—
Purchase of property, plant and equipment		(768	)		(429	)		(225	)
Proceeds from disposal of property, plant and equipment		117			76			35
Proceeds from disposal of businesses, net of transaction costs		—			1,735			3,258
Purchase of marketable securities		—			—			(2,460	)
Purchase of intangible assets		(1,274	)		(1,679	)		(1,227	)
Acquisitions, net of cash acquired		11			—			73
Advances to equity investees		(5,243	)		—			—
Decrease (increase) in refundable deposits		185			428			86
Other		(22	)		(10	)		(5	)
Net cash provided by investing activities		11,551			11,117			2,954

(Continued)

8

GIGAMEDIA LIMITED AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS - (Continued)

FOR THE YEARS ENDED DECEMBER 31, 2011, 2012 AND 2013

(in thousands of US dollars)

	2011			2012			2013
CASH FLOWS FROM FINANCING ACTIVITIES:
Net repayment of short-term borrowings		(400	)		(4,348	)		(3,146	)
Repurchase and retirement of common shares		(5,825	)		—			—
Cash received from the exercise of stock options		—			—			2
Net cash used in financing activities		(6,225	)		(4,348	)		(3,144	)
Exchange difference		130			(712	)		565
NET DECREASE IN CASH AND CASH EQUIVALENTS		(6,992	)		(1,266	)		(3,930	)
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR		70,989			63,997			62,731
CASH AND CASH EQUIVALENTS AT END OF YEAR	$	63,997		$	62,731		$	58,801
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Interest paid during the year	$	436		$	248		$	53
Income tax paid (refunded) during the year	$	783		$	121			($285	)

The accompanying notes are an integral part of these consolidated financial statements.

9

GIGAMEDIA LIMITED AND SUBSIDIARIES

Notes To Consolidated Financial Statements

December 31, 2011, 2012 AND 2013

NOTE 1. Principal Activities, Basis of Presentation, and Summary of Significant Accounting Policies

(a) Principal Activities

GigaMedia Limited (referred to hereinafter as GigaMedia, our Company, we, us, or our) is a diversified provider of online games and cloud computing services, with headquarters in Taipei, Taiwan.

Our Asian online game and service business operates a suite of play-for-fun online games and provides related services, mainly targeting online game players across Asia, including Greater China and Southeast Asia.

We began developing a new cloud computing business in the second half of 2012. The cloud business aims at providing an integrated platform of services and tools for small-to-medium enterprises in Greater China to increase flexibility, efficiency and competitiveness. We launched the business in April 2013.

In July 2012 we sold a non-controlling interest we held in an online gaming software and service business to BetClic Everest Group (“BEG”). (See Note 5, “Divestitures”, for additional information.) Prior to the disposal, through our equity investment, the gaming software and service business offered software solutions for online gaming, which was licensed under a software license and support service contract.

(b) Basis of Presentation

The accompanying consolidated financial statements of our Company have been prepared in accordance with U.S. generally accepted accounting principles (“U.S. GAAP”).

Following the completion of the sale of 60 percent interest in our gaming software and service business in April 2010, we deconsolidated the results of the gaming software and service business and began accounting for the remaining interest under the equity method of accounting until the closing of the disposal transaction in July 2012 when we sold our remaining ownership. (See Note 5, “Divestitures”, for additional information.)

10

GIGAMEDIA LIMITED AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

YEARS ENDED DECEMBER 31, 2011, 2012 AND 2013

In June 2012, our board of directors approved a plan to liquidate and dissolve JIDI Network Technology (Shanghai) Co., Ltd. (“JIDI”), a wholly-owned subsidiary, and Shanghai JIDI Network Technology Co., Ltd. (“Shanghai JIDI”), a variable-interest entity controlled through a series of contractual arrangements. Therefore the results of these entities are reported as discontinued operations for all periods presented. (See Note 5, “Divestitures”, for additional information.)

(c) Summary of significant accounting policies

Principles of Consolidation

The consolidated financial statements include the accounts of GigaMedia and subsidiaries after elimination of all significant inter-company accounts and transactions. In addition, the accounts of our Company’s variable-interest entities are included in the consolidated financial statements. (See Note 3, “Variable-Interest Entities”, for additional information.) The accounting policies for other less than majority-owned investments are described in Note 1 below within the paragraphs headed “Marketable Securities” and “Investments”.

Foreign Currency Translation and Transactions

Assets and liabilities denominated in non-U.S. dollars 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. Gains and losses on foreign currency transactions are included in other income and expenses.

11

GIGAMEDIA LIMITED AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

YEARS ENDED DECEMBER 31, 2011, 2012 AND 2013

Use of Estimates

The preparation of consolidated financial statements in conformity with accounting principles generally accepted in the United States of America (“GAAP”) requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the dates of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting periods. Management bases its estimates on historical experience and also on assumptions that it believes are reasonable. Management assesses these estimates on a regular basis; however, actual results could differ from those estimates. Significant items subject to such estimates and assumptions include the useful lives of property, plant and equipment; allowances for doubtful accounts; the valuation of deferred tax assets, long-lived assets, inventory, investments and share-based compensation; and accrued pension liabilities, income tax uncertainties and other contingencies.

Revenue Recognition

General

Revenues are recognized when persuasive evidence of an arrangement exists, delivery occurs and the customer takes ownership and assumes risks or services are rendered, the sales price is fixed or determinable and collectability is reasonably assured.

Sales taxes assessed by governmental authorities on our revenue transactions are presented on a net basis and therefore are excluded from revenues in our consolidated financial statements.

Multiple-Element Arrangements

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 accounting guidance, 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.

12

GIGAMEDIA LIMITED AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

YEARS ENDED DECEMBER 31, 2011, 2012 AND 2013

In addition to the aforementioned general policies, the following are the specific revenue recognition policies for each major category of revenue.

Asian Online Game and Service Revenues

Online game revenues are earned through the sale of online game points, prepaid cards, game packs, through the sublicensing of certain games to distributors and through licensing fee revenues. Virtual online game points are sold to distributors or end-users who can make the payments through credit cards, Internet ATMs or telecommunication service operators. Physical prepaid cards and game packs are sold through distributors and convenience stores. Proceeds from sales of physical cards and game packs, net of sales discounts, and online game points are deferred when received and revenue is recognized upon the actual usage of the playing time or in-game virtual items by the end-users; over the estimated useful life of virtual items; or when the sold game points expire and can no longer be used to access the online games or products in accordance with our published game points expiration policy. Sublicensing revenues from the distributors are recognized based on end-users’ activation to the game system and when the performance obligations have been completed. Licensing fee revenues are recognized when the delivery of licensed products has occurred and the fee is fixed or determinable.

Sales of virtual online game points and licensing fee revenues are reported on a gross basis. In the sales of virtual online game points and game licenses, we act as principal and we have latitude in establishing price. Fixed percentage fees retained by service providers for payment processing related to our online game services are recognized as cost of online game revenues. We report sublicensing revenues on a net basis. In the sublicense agreements, we act as agent and the distributors are responsible for the operating and the marketing.

13

GIGAMEDIA LIMITED AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

YEARS ENDED DECEMBER 31, 2011, 2012 AND 2013

Online game and service revenues also include revenues derived from online advertising arrangements, sponsorship arrangements, or a combination of both. These service arrangements allow advertisers to place advertisements on particular areas of our Company’s websites and online game platforms over a stated period of time. Service revenues from online advertising arrangements are recognized ratably over the period of the contract when the collectability is reasonably assured.

Cloud Product and Service Revenues

Cloud service revenues are related to cloud computing services provided by our Company. Revenues are recorded net of discounts. Cloud service revenues are recognized for the period of time for which we provide services to the customer. Customers have a choice of paying either monthly or in advance for a certain period of time, for which they receive corresponding discounts. Our Company records any such advanced payment receipts as other current liabilities and amortizes such revenues over the subscription period.

Revenues from the sales of equipment and other related products are recognized upon acceptance.

Deferred Revenues

Deferred revenues consist mainly of the prepaid income related to our Asian online game and service business. Deferred revenue represents proceeds received relating to the sale of game points and in-game items which are activated or charged to the respective player game account by players, but which have not been consumed by the players or expired. Deferred revenue is credited to profit or loss when the game points and in-game items are consumed or expired.

Prepaid Licensing and Royalty Fees

Our Company, through our subsidiaries, routinely enters into agreements with licensors to acquire licenses for using, marketing, distributing, selling and publishing multi-player online games.

14

GIGAMEDIA LIMITED AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

YEARS ENDED DECEMBER 31, 2011, 2012 AND 2013

Prepaid licensing fees paid to licensors are amortized on a straight-line basis over the shorter of the estimated useful economic life of the relevant online game or license period, which is usually within two to five years. The annual amortization is modified if the amount computed on the ratio of current gross revenues for a game license over the total of current and anticipated future gross revenues for that game license is greater than the amount computed using the straight-line method.

Prepaid royalty fees and related costs are initially deferred when paid to licensors and amortized as operating costs based on certain percentage of revenues generated by the licensee from operating the related online game in the specific country or region over the contract period.

Fair Value Measurements

Our Company utilizes valuation techniques that maximize the use of observable inputs and minimize the use of unobservable inputs to the extent possible. We determine fair value based on assumptions that market participants would use in pricing an asset or liability in the principal or most advantageous market. When considering market participant assumptions in fair value measurements, the following fair value hierarchy distinguishes between observable and unobservable inputs, which are categorized in one of the following levels:

• Level 1 Inputs: Unadjusted quoted prices in active markets for identical assets or liabilities accessible to the reporting entity at the measurement date.

• Level 2 Inputs: Other than quoted prices included in Level 1 inputs that are observable for the asset or liability, either directly or indirectly, for substantially the full term of the asset or liability.

• Level 3 Inputs: Unobservable inputs for the asset or liability used to measure fair value to the extent that observable inputs are not available, thereby allowing for situations in which there is little, if any, market activity for the asset or liability at measurement date.

15

GIGAMEDIA LIMITED AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

YEARS ENDED DECEMBER 31, 2011, 2012 AND 2013

Our Company generally determines or calculates the fair value of financial instruments using quoted market prices in active markets when such information is available; otherwise we apply appropriate present value or other valuation techniques, such as discounted cash flow analyses, incorporating adjusted available market discount rate information and our Company’s estimates for non-performance and liquidity risk. These techniques rely extensively on the use of a number of assumptions, including the discount rate, credit spreads, and estimates of future cash flows. (See Note 9, “Fair Value Measurements”, for additional information.)

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 relatively 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. Pledged time deposits are excluded from cash and cash equivalents for purposes of the consolidated statements of cash flows.

Marketable Securities

All of our Company’s investments in marketable securities are classified as available-for-sale. These marketable securities are stated at fair value with any unrealized gains or losses recorded in accumulated other comprehensive income (loss) within equity until realized.

Other-than-temporary impairments, if any, are charged to non-operating expense in the period in which the loss occurs. In determining whether an other-than-temporary impairment has occurred, our Company primarily considers, among other factors, the length of the time and the extent to which the fair value of an investment has been at a value less than cost. When an other-than-temporary loss is recorded, the fair value of the investment becomes the new cost basis of the investment and is not adjusted for subsequent recoveries in fair value. Realized gains and losses also are included in non-operating income and expense in the consolidated statements of operations. (See Note 9, “Fair Value Measurements”, for additional information.)

16

GIGAMEDIA LIMITED AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

YEARS ENDED DECEMBER 31, 2011, 2012 AND 2013

Investments

Equity investments in non-publicly traded securities of companies over which our Company has no ability to exercise significant influence are accounted for under the cost method.

For equity investment accounted for as available-for-sale, cash dividends are recognized as investment income upon a resolution of shareholders of an investee but are accounted for as a reduction to the original cost of investment if such dividends are declared prior to the purchase of the investment. Stock dividends are recorded as an increase in the number of shares held and do not affect investment income. The cost per share is recalculated based on the new total number of shares.

For equity investments accounted under equity method, stock dividends received from investees as a result of appropriation of net earnings and additional paid-in capital are recorded as an increase in the number of shares held and do not affect investment income. The cost per share is recalculated based on the weighted-average method. Cash dividends are accounted for as a reduction to the original cost of investment.

Equity investments in companies over which our Company has the ability to exercise significant influence but does not hold a controlling financial interest are accounted for under the equity method and our Company’s income or loss on equity method investments is recorded in non-operating income or expenses. The difference between the cost of the acquisition and our Company’s share of the fair value of the net identifiable assets is recognized as goodwill and is included in the carrying amount of the investment. When our Company’s carrying value in an equity method investee is reduced to zero, no further losses are recorded in our Consolidated Financial Statements unless our Company guaranteed obligations of the investee or has committed to additional funding. When the investee subsequently reports income, our Company will not record its share of such income until it equals the amount of its share of losses not previously recognized. Unrealized losses that are considered other-than-temporary, if any, are charged to non-operating expenses. Realized gains and losses, measured against carrying amount, are also included in non-operating income and expenses. (See Note 9, “Fair Value Measurements”, for additional information.)

17

GIGAMEDIA LIMITED AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

YEARS ENDED DECEMBER 31, 2011, 2012 AND 2013

Receivables

Accounts receivable are recorded at the invoiced amount and do not bear interest. Amounts collected on accounts receivable are included in net cash provided by operating activities in the consolidated statements of cash flows. Our Company maintains an allowance for doubtful accounts for estimated losses inherent in its accounts receivable portfolio. In establishing the required allowance, management considers historical losses adjusted to take into account current market conditions and our customers’ financial condition, the amount of receivables in dispute, and the current receivables aging and current payment patterns. Account balances are charged off against the allowance after all means of collection have been exhausted and the potential for recovery is considered remote.

Property, Plant and Equipment

Property, plant and equipment are stated at cost, less accumulated depreciation and amortization. Depreciation is recorded on a straight-line basis over useful lives that correspond to categories as follows:

Categories	Years
Buildings		50
Information and communication equipment		2 to 5
Office furniture and equipment		3 to 5
Leasehold improvements		1 to 5

Leasehold improvements are amortized over the shorter of the term of the lease or the economic useful life of the assets. Improvements and replacements are capitalized and depreciated over their estimated useful lives, while ordinary repairs and maintenance are expensed as incurred.

18

GIGAMEDIA LIMITED AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

YEARS ENDED DECEMBER 31, 2011, 2012 AND 2013

We have entered into agreements to lease certain of our Company’s land and buildings to a third party under operating leases, which were renewed in September and October 2013, and which expire no later than September 2016. As of December 31, 2012 and 2013, the carrying amount of the land and buildings under lease was approximately $1.2 million and $1.2 million, respectively. The rental income under the operating lease amounted to $72 thousand, $74 thousand and $74 thousand for 2011, 2012 and 2013, respectively. The minimum rental income to be received under this operating lease is $209 thousand through September 2016.

Business Acquisitions

Our Company accounts for its business acquisitions using the acquisition method. Under this method, our Company recognizes and measures the identifiable assets acquired, the liabilities assumed and any noncontrolling interest at their acquisition-date fair values, with limited exceptions. Acquisition-related costs are generally expensed as incurred.

Intangible Assets and Goodwill

Intangible assets with finite lives are amortized by the straight-line method over their estimated useful lives, ranging from half a year to nine years. Intangible assets with indefinite useful lives are not amortized. Goodwill is not amortized.

Impairment of Intangible Assets, Goodwill and Long-Lived Assets

Goodwill is reviewed for impairment annually or sooner when circumstances indicate an impairment may exist, using a fair-value approach at the reporting unit level. A reporting unit is the operating segment, or a business, which is one level below that operating segment (the “component” level) if discrete financial information is prepared and regularly reviewed by management at the segment level. Components are aggregated as a single reporting unit if they have similar economic characteristics. In connection with our goodwill impairment test, we first assess qualitative factors as a basis for determining whether it is necessary to perform the two-step goodwill impairment test.

19

GIGAMEDIA LIMITED AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

YEARS ENDED DECEMBER 31, 2011, 2012 AND 2013

If the two-step goodwill impairment test is required, first, the fair value of the reporting unit is compared with its carrying amount (including goodwill). If the fair value of the reporting unit is less than its carrying amount, an indication of goodwill impairment exists for the reporting unit and the entity must perform step two of the impairment test (measurement). Under step two, an impairment loss is recognized for any excess of the carrying amount of the reporting unit’s goodwill over the implied fair value of that goodwill. The implied fair value of goodwill is determined by allocating the fair value of the reporting unit in a manner similar to a purchase price allocation and the residual fair value after this allocation is the implied fair value of the reporting unit goodwill. Fair value of the reporting unit is determined using a discounted cash flow analysis. If the fair value of the reporting unit exceeds its carrying amount, step two does not need to be performed.

Intangible assets with indefinite useful lives are tested for impairment at the reporting unit level, at least annually, or whenever events or changes in circumstances indicate that the carrying value of an asset might not be recoverable from its related future discounted cash flows. Impairment is measured as the difference between the carrying amounts and the fair value of the assets, and is recognized as a loss from operations. In connection with our impairment test for the intangible assets with indefinite useful lives, we first assess qualitative factors as a basis for determining whether it is necessary to perform the quantitative impairment test.

Long-lived assets other than goodwill and intangible assets not being amortized are reviewed for impairment at least annually or whenever events or changes in circumstances indicate that the carrying value of an asset might not be recoverable from its related future undiscounted cash flows. If such assets are considered to be impaired, the impairment to be recognized is measured by the extent to which the carrying amount of the assets exceeds the fair value of the assets. Fair value is determined through various valuation techniques including discounted cash flow models, quoted market values and third-party independent appraisals, as considered necessary. When impairment is identified, the carrying amount of the asset is reduced to its estimated fair value, and is recognized as a loss from operations.

20

GIGAMEDIA LIMITED AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

YEARS ENDED DECEMBER 31, 2011, 2012 AND 2013

(See Note 9, “Fair Value Measurements”, for additional information.)

Software Cost

Costs to develop our Asian online game products are capitalized after technological feasibility has been established, and when the product is available for general release to customers, costs are expensed. Costs incurred prior to the establishment of technological feasibility are expensed when incurred and are included in product development and engineering expenses. Capitalized amounts are amortized using the straight-line method, which is applied over the estimated useful economic life of the software, ranging from half a year to five years. The annual amortization is modified if the amount computed using the ratio that current gross revenues for a product bear to the total of current and anticipated future gross revenues for that product is greater than the amount computed using the straight-line method.

We capitalize certain costs incurred to purchase or to internally create and implement internal-use computer software, which includes software coding, installation, testing and certain data conversion. These capitalized costs are amortized on a straight-line basis over the shorter of the useful economic life of the software or its contractual license period, which is typically three years.

Product Development and Engineering

Product development and engineering expenses primarily consist of research compensation, depreciation and amortization, and are expensed as incurred.

Advertising

Direct-response advertising costs incurred in relation to the acquisition or origination of a customer relationship are capitalized and deferred. The deferred costs are recognized as expense in the Consolidated Statements of Operations over the estimated lives of customer relationships. Costs of broadcast advertising are recorded as expenses as advertising airtime is used. Other advertising expenditures are expensed as incurred.

21

GIGAMEDIA LIMITED AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

YEARS ENDED DECEMBER 31, 2011, 2012 AND 2013

Advertising expenses incurred in 2011, 2012 and 2013 totaled $3.5 million, $3.2 million and $676 thousand, respectively. As of December 31, 2012 and 2013, prepaid advertising amounted to $1 thousand and $1 thousand, respectively.

Leases

Leases for which substantially all of the risks and rewards of ownership remain with the leasing company are accounted for as operating leases. Payments made under operating leases, net of any incentives received by our Company from the leasing company, are charged to the consolidated statements of operations on a straight-line basis over the lease periods.

Leases are classified as capital leases whenever the terms of the lease transfer substantially all the risks and rewards of ownership to the lessee. Assets held under capital leases are recognized as assets of our Company at their fair value at the inception of the lease or, if lower, at the present value of the minimum lease payments. The corresponding liability to the lessor is included in the balance sheet as a lease obligation. Lease payments are apportioned between finance charges and a reduction of the lease obligation in order to achieve a constant rate of interest on the remaining balance of the liability. Finance charges are charged directly to profit or loss.

Share-Based Compensation

Share-based compensation represents the cost related to share-based awards granted to employees. We measure share-based compensation cost at the grant date, based on the estimated fair value of the award. Share-based compensation is recognized for the portion of the award that is ultimately expected to vest, and the cost is amortized on a straight-line basis (net of estimated forfeitures) over the vesting period. Our Company estimates the fair value of stock options using the Black-Scholes valuation model. The cost is recorded in operating costs and operating expenses in the consolidated statements of operations based on the employees’ respective function.

For shares and stock options granted to non-employees, we measure the fair value of the equity instruments granted at the earlier of the performance commitment date or when the performance is completed.

22

GIGAMEDIA LIMITED AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

YEARS ENDED DECEMBER 31, 2011, 2012 AND 2013

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, amortization of unrecognized net transition obligation and gains or losses on plan assets, is recognized based on an actuarial valuation report. We recognize 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.

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

Income Taxes

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. We recognize the investment tax credit associated with the purchase of intangible assets and technology, research and development expenditures, employee compensation and certain equity investments using the flow-through method. Deferred tax assets and liabilities are measured using the enacted tax rate and laws that will be in effect when the related temporary differences are expected to reverse. A valuation allowance is 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.

In addition, we recognize the financial statement impact of a tax position when it is more-likely-than-not that the position will be sustained upon examination. If the tax position meets the more-likely-than-not recognition threshold, the tax effect is measured at the largest amount that is greater than a 50 percent likely of being realized upon settlement. Interest and penalties on an underpayment of income taxes are reflected as income tax expense in the consolidated financial statements.

23

GIGAMEDIA LIMITED AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

YEARS ENDED DECEMBER 31, 2011, 2012 AND 2013

Earnings Per Share

Basic earnings per share is computed by dividing the net income available to common shareholders for the period by the weighted average number of common shares outstanding during the period. Diluted earnings per share is computed by dividing the net income 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 options in all periods, are included in the computation of diluted earnings per share to the extent such shares are dilutive. Diluted EPS also takes into consideration the effect of dilutive securities issued by subsidiaries. In a period in which a loss is incurred, only the weighted average number of common shares issued and outstanding is used to compute the diluted loss per share, as the inclusion of potential common shares would be anti-dilutive. Therefore, for the years ended December 31, 2011, 2012 and 2013, basic and diluted loss per share are the same.

Noncontrolling Interest

Noncontrolling interest in the equity of a subsidiary is accounted for and reported as equity. Changes in our Company’s ownership interest in a subsidiary that do not result in deconsolidation are accounted for as equity transactions. Any retained noncontrolling equity investment upon the deconsolidation of a subsidiary is initially measured at fair value.

Reclassifications

Certain amounts in 2011 and 2012 have been reclassified to conform to the presentation in our consolidated financial statements as of and for the year ended December 31, 2013.

Segment Reporting

We use the management approach in determining reportable operating segments. The management approach considers the internal organization and reporting used by our Company’s chief operating decision maker for making operating decisions, allocating resources and assessing performance as the source for determining our operating segments. Our Company’s chief operating decision maker (“CODM”) has been identified as the Chief Executive Officer.

24

GIGAMEDIA LIMITED AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

YEARS ENDED DECEMBER 31, 2011, 2012 AND 2013

Segment profit and loss is determined on a basis that is consistent with how our Company reports operating income (loss) in its consolidated statements of operations. Our Company does not report segment asset information to the CODM. Consequently, no asset information by segment is presented. There are no intersegment transactions.

Discontinued Operations

Discontinued operations are reported when a component of an entity either has been disposed of, or is classified as held for sale, and (a) represents a separate major line of business or geographical area of operations, (b) is part of a single coordinated plan to dispose of a separate major line of business or geographical area of operations or (c) is a subsidiary acquired exclusively with a view to resale. Discontinued operations are presented separately in the accompanying consolidated statements of operations and prior period financial statements are revised to present discontinued operations retrospectively.

(d) Recent Accounting Pronouncements Not Yet Adopted

The FASB issued Accounting Standards Update (“ASU”) 2013-04, Liabilities (Topic 405); Obligations Resulting from Joint and Several Liability Arrangements for Which the Total Amount of the Obligation is Fixed at the Reporting Date, in February 2013. This update requires an entity to measure obligations resulting from joint and several liability arrangements for which the total amount of the obligation is fixed as the sum of the amount the entity agreed to pay on the basis of its arrangement among its co-obligors and any additional amount the entity expects to pay on behalf of its co-obligors. The update is effective for our fiscal years beginning January 1, 2014, and is to be applied retrospectively to all prior years presented for those obligations resulting from joint and several liability arrangements within the Update’s scope that exist at the beginning of the fiscal year of adoption. We do not expect the initial adoption of the updated guidance to have a significant impact on our consolidated financial position, results of operations or cash flows.

25

GIGAMEDIA LIMITED AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

YEARS ENDED DECEMBER 31, 2011, 2012 AND 2013

NOTE 2. LOSS PER SHARE

The following table provides a reconciliation of the denominators of the basic and diluted per share computations:

(in thousand shares)	2011		2012		2013
Weighted average number of outstanding shares
Basic		54,268		50,720		50,720
Effect of dilutive securities
Employee share-based compensation		—		—		—
Diluted		54,268		50,720		50,720

Options to purchase 1,432 thousand, 1,444 thousand and 1,149 thousand shares of common stock were not included in dilutive securities for the years ended December 31, 2011, 2012 and 2013, respectively, as the effect would be anti-dilutive.

NOTE 3. VARIABLE-INTEREST ENTITIES

Shanghai JIDI

In order to comply with foreign ownership restrictions and to hold the necessary licenses required, through June 2012 we had operated our Asian online game and service business in the People’s Republic of China (“PRC”) through our VIE, Shanghai JIDI. We had no ownership interest in Shanghai JIDI and relied on a series of contractual arrangements that were intended to give us effective control over Shanghai JIDI. Those contractual arrangements were duly executed and the share pledge agreements were registered with local government authority in compliance with PRC legal requirements. Therefore, we effectively controlled Shanghai JIDI, and were the primary beneficiary of Shanghai JIDI. Shanghai JIDI held an Internet Content Provider (“ICP”) license, an Internet cultural operation license and an Internet publishing license. The financial results of Shanghai JIDI had been included in our consolidated financial statements since January 2011. In June 2012, our board of directors approved a plan to dispose of Shanghai JIDI. As a result, Shanghai JIDI’s operations had been accounted for as discontinued operations. (See Note 5, “Divestitures”, for additional information.) In May 2013, we were notified by the competent authority that Shanghai JIDI had completed the dissolution procedures and was duly deregistered.

26

GIGAMEDIA LIMITED AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

YEARS ENDED DECEMBER 31, 2011, 2012 AND 2013

For the years ended December 31, 2011 and 2012, and the period from January to May 2013, total revenues and net loss of Shanghai JIDI (which are included within discontinued operations) were as follows:

(in US$ thousands)	2011			2012			2013
Total revenues	$	29		$	100		$	—
Net loss	$	(2,110	)	$	(888	)	$	—

NOTE 4. ACQUISITIONS

Monsoon

Through Infocomm Asia Holdings Pte Ltd. (“IAHGames”), our then subsidiary in Southeast Asia, we made an equity investment in Monsoon Online Pte Ltd. (“Monsoon”), an operator and distributor of online games in Southeast Asia, in connection with our acquisition of a controlling financial interest in IAHGames with effect from July 1, 2010. In connection with a strategic alliance, Monsoon entered into various agreements with a game licensor to distribute selected games in Southeast Asia (collectively referred to as the “Distribution Partnership”). Although IAHGames owned 100 percent of the common stock of Monsoon, we could not consolidate Monsoon at the time of the acquisition as the game licensor had substantive participating rights in Monsoon’s business operations pursuant to Monsoon’s management agreement. In September 2011, IAHGames, Monsoon and the game licensor entered into an agreement whereby all parties agreed to terminate early Monsoon’s management agreement and other agreements with the game licensor which had granted the licensor the abovementioned substantive participating rights in connection with Monsoon. The agreement was effective from August 31, 2011. Starting from September 1, 2011, IAHGames had effective control over Monsoon and had consolidated Monsoon thereon.

27

GIGAMEDIA LIMITED AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

YEARS ENDED DECEMBER 31, 2011, 2012 AND 2013

The agreement was effective from the third quarter of 2011. In January 2012, IAHGames’ and Monsoon’s commitments under the Distribution Partnership with the game licensor were fully terminated. The execution and closing of this agreement resulted in the following significant financial statement impacts in our consolidated statements of operations:

(in US$ thousands)	2011
Gain on cancellation of warrant liabilities	$	665
Gain on reversal of impairment of prepaid expenses		1,347
Recovery of loss on termination of third-party contract	$	2,012

FingerRockz

On October 18, 2013, we subscribed in cash to 405 thousand new common shares of FingerRockz Co., Ltd. (“FingerRockz”), which represents a controlling financial interest of 51.6 percent of the ownership; thereupon we began consolidating FingerRockz. FingerRockz is a mobile game developer and publisher in Taiwan, and we acquired it purposely to enhance our research and development capabilities for mobile games. This primary factor among others, contributed to a purchase price in excess of the fair value of the net identifiable assets acquired and liabilities assumed, and intangible assets. In the acquisition, the most appealing asset to our Company was FingerRockz’s creative team. Because the assembled workforce was not an identifiable asset to be recognized separately from goodwill, the value attributed to it was subsumed into goodwill. The goodwill related to this acquisition is not expected to be deductible for tax purpose.

28

GIGAMEDIA LIMITED AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

YEARS ENDED DECEMBER 31, 2011, 2012 AND 2013

The following table summarizes the consideration paid for the acquisition and the amounts of estimated fair value of the assets acquired and liabilities assumed at the acquisition date.

(In US$ thousands)	Amount
Consideration and noncontrolling interest:
The consideration transferred	$	510
The fair value of noncontrolling interest in FingerRockz		478
	$	988
Identifiable assets acquired and liabilities assumed:
Cash, receivables and other current assets	$	585
Customer contracts		67
Payables and other current liabilities		(160	)
Net		492
Goodwill		496
	$	988

The following unaudited pro forma results of operations for the years ended December 31, 2012 and 2013 are presented as if the acquisition had been consummated on January 20, 2012, the inception of FingerRockz:

	For the years ended
	December 31 (unaudited)
(in US$ thousands, except for loss per share)	2012			2013
Net revenues	$	27,477		$	15,040
Net loss attributable to GigaMedia shareholders	$	(15,334	)	$	(34,845	)
Basic and diluted loss per share	$	(0.30	)	$	(0.69	)

The above unaudited pro forma information does not reflect any incremental direct costs, including any restructuring charges to be recorded in connection with the acquisition, or any potential cost savings that may result from the consolidation of certain operations of our Company or FingerRockz. Accordingly, the unaudited pro forma financial information above not necessarily indicative the actual results that would have occurred had the acquisition of FingerRockz been combined during the periods presented, nor it necessarily indicative of future consolidated results of operations.

29

GIGAMEDIA LIMITED AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

YEARS ENDED DECEMBER 31, 2011, 2012 AND 2013

NOTE 5. DIVESTITURES

T2CN

On December 14, 2011, we completed the sale of our equity method investee T2CN. Pursuant to the agreement, we sold all of our ownership interest in T2CN to Hornfull Limited in exchange for a cash payment of $4.7 million, resulting in a gain of $4.7 million being recognized in 2011. Hornfull Limited also reimbursed us $790 thousand in cash for legal fees incurred by us in connection with the T2CN dispute.

IAHGames

In July 2012, we entered into agreements to sell a 60 percent ownership in IAHGames, together with the sale of a 100 percent ownership in Spring Asia Limited (“Spring Asia”), which has a 30 percent interest in Game First International Corporation (“GFI”), to IAHGames’ management and Management Capital International Limited (“MCIL”), a British Virgin Islands company owned by IAHGames’ management. We retained a 20 percent ownership in IAHGames. Upon the closing of the agreements, we deconsolidated the results of IAHGames’ operations and began accounting for our remaining 20 percent interest under the equity method.

Our Company accounted for the deconsolidation of and the retained noncontrolling investment in IAHGames in August 2012 at fair value.

In consideration for the sale of IAHGames and Spring Asia, we were to receive $3 million in cash. The consideration was to be collected in four equal installments, with the first due upon closing, the second due in October 2012, the third due in January 2013 and the fourth due in April 2013. The payments were collateralized by the shares of Spring Asia and were only released from the escrow in proportion to the payment made upon each installment. The first installment of $750 thousand was received upon the closing on August 15, 2012. However, the buyer had defaulted on the remaining three installments. Considering the uncertainty as to the collectability of the remaining three installments, we had deferred the disposal gain of $211 thousand against the consideration installments receivable of $2,250 thousand as of December 31, 2012. The deferred gain was determined as follows:

30

GIGAMEDIA LIMITED AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

YEARS ENDED DECEMBER 31, 2011, 2012 AND 2013

(In US$ thousand)	Amount
The fair value of consideration received and receivable, net of any transaction costs, plus	$	3,000
The fair value of the 20% retained noncontrolling investment in IAH at the date of deconsolidation		—
		3,000
The carrying amount (credit balance) of IAHGames at the date of deconsolidation		(14,536	)
Net receivables due to GigaMedia from IAHGames waived upon the closing of the sale		17,542
Other comprehensive income component of equity related to IAHGames at the date of the deconsolidation		(217	)
		2,789
Deferred gain on deconsolidation of IAH	$	211

On April 17, 2013, we entered into a settlement agreement with IAHGames, IAHGames’ management, and MCIL. Pursuant to the settlement agreement, either IAHGames or IAHGames’ management was to pay us $2,258 thousand, which included interest, to fulfill IAHGames’ obligation under the aforementioned sale of ownership in Spring Asia. In addition, MCIL was to purchase all of our remaining shares in IAHGames for a consideration of $1,000 thousand. The payments were received in May 2013. Upon the receipt of these payments, the above deferred gain and disposal gain for the remaining shares were recognized in the non-operating income accordingly.

JIDI Network Technology (Shanghai) Co., Ltd. (“JIDI”)

In June 2012, our board of directors approved a plan to liquidate and dissolve JIDI, a wholly-owned subsidiary, and Shanghai JIDI, a VIE controlled through a series of contractual arrangements.

31

GIGAMEDIA LIMITED AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

YEARS ENDED DECEMBER 31, 2011, 2012 AND 2013

Results for JIDI and Shanghai JIDI operations are reported as discontinued operations for all periods presented. The carrying amounts of the remaining assets and liabilities, if any, of JIDI and Shanghai JIDI were not significant to our consolidated financial statements as of December 31, 2012 and 2013, and we recorded a loss of approximately $588 thousand in connection with the disposal of property, plant and equipment, which was included within discontinued operations in 2012. The process of liquidation and dissolution was completed by the end of 2013. Summarized financial information for discontinued operations of JIDI and Shanghai JIDI are as follows:

(in US$ thousands)	2011			2012			2013
Revenue	$	29		$	100		$	—
Loss from discontinued operations before tax	$	(4,240	)	$	(2,521	)	$	(318	)
Income tax expense		—			—			—
Loss from discontinued operations	$	(4,240	)	$	(2,521	)	$	(318	)

Non-controlling Interest in Gaming software and service business

We held a non-controlling equity interest in a gaming software and service business to July 2012, when we entered into another agreement with BEG to sell our non-controlling ownership interest, along with the shareholders loan (discussed in more detail in Note 26, “Related-Party Transactions”), for a consideration of $1.7 million. Of this consideration, $985 thousand was paid to us in cash, while the remainder related to the extinguishment of a 2009 tax liability. The closing of the sale occurred in August 2012. The sale resulted in the recognition of a gain of $2.5 million, net of transaction costs.

32

GIGAMEDIA LIMITED AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

YEARS ENDED DECEMBER 31, 2011, 2012 AND 2013

NOTE 6. GOODWILL

The following table summarizes the changes to our Company’s goodwill:

(In US$ thousands)	2011			2012			2013
Balance at beginning of year	$	39,493		$	28,437		$	16,934
Acquisition—OneNet and FingerRockz (Note 4)		1,049			—			496
Impairment charge—IAHGames, OneNet, FunTown and FingerRockz (Note 9)		(5,097	)		(12,489	)		(17,054	)
Reversal of contingent payment of minimum guarantee under licensing agreement		(5,885	)		—			—
Translation adjustment		(1,123	)		986			(376	)
Balance at end of year	$	28,437		$	16,934		$	—

By the acquisition of FingerRockz in 2013, we obtained its mobile platform development experience which now constitutes an important complement to FunTown’s R&D capacity in mobile games. We reassigned its role and developed our estimates of future cash flows from mobile games accordingly. Therefore, for the purpose of testing goodwill for impairment, we determined FingerRockz to be an integral part of FunTown with respect to determining reporting unit, and goodwill arising from the acquisition of FingerRockz was reassigned to FunTown.

33

GIGAMEDIA LIMITED AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

YEARS ENDED DECEMBER 31, 2011, 2012 AND 2013

NOTE 7. INTANGIBLE ASSETS – NET

The following table summarizes our Company’s intangible assets, by major asset class:

	December 31, 2012
(In US$ thousands)	Gross carrying amount		Accumulated amortization		Net
With finite-life intangible assets
Completed technology	$	2,603	$	2,603	$	—
Capitalized software development cost		3,480		1,414		2,066
Customer relationships		6,274		4,880		1,394
Other		137		133		4
		12,494		9,030		3,464
With indefinite-life intangible assets
Trade name and trademark		12,211		—		12,211
	$	24,705	$	9,030	$	15,675
	December 31, 2013
(In US$ thousands)	Gross carrying amount		Accumulated amortization		Net
With finite-life intangible assets
Completed technology	$	2,536	$	2,536	$	—
Capitalized software development cost		3,130		2,471		659
Customer relationships		6,112		5,433		679
Other		141		18		123
		11,919		10,458		1,461
With indefinite-life intangible assets
Trade name and trademark		—		—		—
	$	11,919	$	10,458	$	1,461

Intangible assets with finite lives are amortized over their estimated useful lives ranging from 0.5 to 9 years, with the overall weighted-average life of 5.6 years.

34

GIGAMEDIA LIMITED AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

YEARS ENDED DECEMBER 31, 2011, 2012 AND 2013

For the years ended December 31, 2011, 2012 and 2013, total amortization expense of intangible assets were $2.3 million, $2.2 million and $1.9 million, respectively, which includes amortization of capitalized software development costs of $962 thousand, $1.1 million and $1.2 million. As of December 31, 2013, based on the current amount of intangibles subject to amortization, the estimated amortization expense for each of the following years is as follows:

(In US$ thousands)	Amount
2014	$	1,104
2015		202
2016		147
2017		8
	$	1,461

NOTE 8. PREPAID LICENSING AND ROYALTY FEES

The following table summarizes changes to our Company’s prepaid licensing and royalty fees:

(in US$ thousands)	2011			2012			2013
Balance at beginning of year	$	4,214		$	7,103		$	8,644
Net operating additions		3,379			2,395			(908	)
Acquisition—OneNet		129			—			—
Deconsolidation—IAHGames		—			(152	)		—
Impairment charges (Note 9)		(247	)		(702	)		(3,070	)
Impairment charges (Note 9) recorded in loss from discontinued operations		(372	)		—			—
Balance at end of year	$	7,103		$	8,644		$	4,666

35

GIGAMEDIA LIMITED AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

YEARS ENDED DECEMBER 31, 2011, 2012 AND 2013

NOTE 9. FAIR VALUE MEASUREMENTS

The following table presents the carrying amounts and estimated fair values of our Company’s financial instruments at December 31, 2012 and 2013.

(in US$ thousands)	2012				2013
	Carrying amount		Fair value		Carrying amount		Fair value
Financial assets
Cash and cash equivalents	$	62,731	$	62,731	$	58,801	$	58,801
Marketable securities—current		17,773		17,773		21,460		21,460
Accounts receivable		2,829		2,829		2,027		2,027
Marketable securities—noncurrent		4,292		4,292		6,048		6,048
Refundable deposits		392		392		306		306
Other receivable—noncurrent		2,039		2,039		—		—
Financial liabilities
Accounts payable		324		324		1,178		1,178
Accrued compensation		1,233		1,233		380		380
Accrued expenses		5,182		5,182		2,617		2,617
Short-term borrowings		7,748		7,748		4,361		4,361

The carrying amounts shown in the table are included in the consolidated balance sheets under the indicated captions, except for Other receivable—noncurrent, which is included in Other assets—other.

The fair values of the financial instruments shown in the above table as of December 31, 2012 and 2013 represent the amounts that would be received to sell those assets or that would be paid to transfer those liabilities in an arm’s length transaction between market participants at that date. Those fair value measurements maximize the use of observable inputs. In situations where there is little market activity for the asset or liability at the measurement date, the fair value measurement reflects our Company’s own judgments about the assumptions that market participants would use in pricing the asset or liability. Those judgments are developed by us based on the best information available in the circumstances, including expected cash flows and appropriately risk-adjusted discount rates, available observable and unobservable inputs.

36

GIGAMEDIA LIMITED AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

YEARS ENDED DECEMBER 31, 2011, 2012 AND 2013

The following methods and assumptions were used to estimate the fair value of each class of financial instruments:

• Cash and cash equivalents, accounts receivable, accounts payable, accrued compensation and expenses, and short-term borrowings: The carrying amounts, at face value or cost plus accrued interest, approximate fair value because of the short maturity of these instruments.

• Marketable securities: Open-end fund, debt and equity securities classified as available for sale are measured using quoted market prices at the reporting date multiplied by the quantity held. Equity securities under resale restriction are measured with estimated restriction discount. Redeemable preferred shares are measured using valuation techniques.

• Refundable deposits: Measurement of refundable deposits with no fixed maturities is based on carrying amounts.

• Other receivable—noncurrent: Considering the uncertainty of collectability being mitigated by the short maturity and the equity securities pledged as collateral, we determined that its carrying amount approximated the fair value.

Significant Unobservable Inputs

The table below presents the ranges of significant unobservable inputs used to value our Company’s level 3 financial instruments. These ranges represent the significant unobservable inputs that were used in the valuation of each type of financial instrument. These inputs are not representative of the inputs that could have been used in the valuation of any one financial instrument. Accordingly, the ranges of inputs presented below do not represent uncertainty in, or possible ranges of, fair value measurements of our level 3 financial instruments.

37

GIGAMEDIA LIMITED AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

YEARS ENDED DECEMBER 31, 2011, 2012 AND 2013

Level 3 Financial Instruments	Significant Unobservable Inputs by Valuation Technique	Range of Significant Unobservable Inputs as of December 2012
Debt securities - Preferred shares with redemption rights	Recoverability considering: •     Undiscounted cash flow forecast •     Long-term growth rate •     Discount rate •     Volatility •     Redemption date	•     KRW -8.2 billion ~ 22.1 billion, (equivalent to -$7.7 million ~$20.8 million) •     3% •     17.8% •     44.7% •     1 year later
Equity securities - Listed securities under resale restriction	•     Restriction discount	•     34.81%
Level 3 Financial Instruments	Significant Unobservable Inputs by Valuation Technique	Range of Significant Unobservable Inputs as of December 2013
Debt securities - Preferred shares with redemption rights	•     Price/Sales per share ratio for selective comparable companies •     Discount for lack of marketability	•     2.5 times ~ 5.9 times •     25%

Assets and Liabilities that are Measured at Fair Value on a Recurring Basis

Our Company has segregated all financial assets and liabilities that are measured at fair value on a recurring basis (at least annually) into the most appropriate level within the fair value hierarchy based on the inputs used to determine the fair value at the measurement date in the table below.

38

GIGAMEDIA LIMITED AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

YEARS ENDED DECEMBER 31, 2011, 2012 AND 2013

Assets and liabilities measured at fair value on a recurring basis are summarized as below:

(in US$ thousands)	Fair Value Measurement Using						Year Ended
	Level 1		Level 2		Level 3		December 31, 2012
Assets
Cash equivalents—time deposits	$	—	$	1,514	$	—	$	1,514
Marketable securities—current
Equity securities		17,773		—		—		17,773
Marketable securities—noncurrent
Debt securities		—		—		2,727		2,727
Equity securities		—		—		1,565		1,565
	$	17,773	$	1,514	$	4,292	$	23,579
(in US$ thousands)	Fair Value Measurement Using						Year Ended
	Level 1		Level 2		Level 3		December 31, 2013
Assets
Cash equivalents—time deposits	$	—	$	14,638	$	—	$	14,638
Marketable securities—current
Open-end fund		336		—		—		336
Equity securities		21,124		—		—		21,124
Marketable securities—noncurrent
Debt securities		—		2,109		3,939		6,048
	$	21,460	$	16,747	$	3,939	$	42,146

Our Company’s accounting policy is to recognize transfers between levels of the fair value hierarchy on the date of the event or change in circumstances that caused the transfer. There were no transfers into or out of Level 1 for the years ended December 31, 2012 and 2013.

39

GIGAMEDIA LIMITED AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

YEARS ENDED DECEMBER 31, 2011, 2012 AND 2013

Level 1 and 2 measurements:

Cash equivalents—time deposits are convertible into a known amount of cash and are subject to an insignificant risk of change in value. Certain marketable securities are valued using a market approach based on the quoted market prices of identical instruments when available, or other observable inputs such as trading prices of identical instruments in inactive markets. The fair values of the marketable equity securities that have publicly quoted trading prices are valued using those observable prices, unless adjustments are required to available observable inputs.

In 2011, 2012 and 2013, we recorded unrealized gains (losses) of $16.2 million, $(24.0) million and $4.7 million, respectively, on marketable securities, which are included in other comprehensive income.

Level 3 measurements:

For assets measured at fair value on a recurring basis using significant unobservable inputs (Level 3) during 2012 and 2013, a reconciliation of the beginning and ending balances are presented as follows:

(in US$ thousands)	Marketable Securities - Debt and Equity Securities
	2012			2013
Balance at beginning of year	$	5,454		$	4,292
Total gains or (losses) (realized/unrealized)
included in earnings		(493	)		985
included in other comprehensive income		—			1,212
Sale		(2,727	)		(2,550	)
Transfer into Level 3		2,058			—
Balance at end of year	$	4,292		$	3,939
The amount of total gains or (losses) for the period included in earnings attributable to the change in unrealized gains or losses relating to assets still held at the reporting date.	$	(493	)	$	—

40

GIGAMEDIA LIMITED AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

YEARS ENDED DECEMBER 31, 2011, 2012 AND 2013

Realized and unrealized gains (or losses) included in income for 2012 and 2013 for assets and liabilities measured at fair value on a recurring basis using significant unobservable inputs (Level 3) are reported in the consolidated statements of operations within the following line items:

(in US$ thousands)	Gain on sales of marketable securities			Impairment loss on marketable securities and			Recovery of loss on termination of third-party
Total gains (losses) included in earnings
for 2011	$	—		$	—		$	665
for 2012		3,370			(493	)		—
for 2013		985			—			—
Change in unrealized gains (losses) relating to assets still held at the reporting date
for 2011	$	(674	)	$	—		$	—
for 2012		352			(493	)		—
for 2013		1,212			—			—

The marketable equity securities were transferred from Level 2 to Level 3 in 2012 to reflect the fact of dwindled market transaction volume of the investee’s shares, and the auditors’ report on its interim financial statements including an explanatory paragraph about uncertainties regarding the investee’s ability to continue as a going-concern.

The fair values of the marketable debt and equity securities are derived using a discounted cash flow method with unobservable inputs or adopting a market approach using observable inputs of guideline public companies that market participants would use in pricing the securities. The discounted cash flow method incorporates adjusted available market discount rate information and our Company’s estimates of liquidity risk, and other cash flow model related assumptions.

41

GIGAMEDIA LIMITED AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

YEARS ENDED DECEMBER 31, 2011, 2012 AND 2013

In 2011, 2012 and 2013, we recognized other-than-temporary impairments of $0, $493 thousand and $0, respectively, related to marketable debt and equity securities, which is included in non-operating expenses within “impairment loss on marketable securities and investments” in the consolidated statements of operations.

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

Assets and liabilities measured at fair value on a nonrecurring basis include measuring impairment when required for long-lived assets. For GigaMedia, long-lived assets measured at fair value on a nonrecurring basis include investments accounted for under the equity method and cost method, property, plant, and equipment, intangible assets, prepaid licensing and royalty fees, and goodwill.

Assets and liabilities measured at fair value on a nonrecurring basis that were determined to be impaired as of December 31, 2012 and 2013 are summarized as below:

(in US$ thousands)	Fair Value measurement Using						Year Ended December 31,		Total Impairment
Assets	Level 1		Level 2		Level 3		2012		Losses
(a) Goodwill—Resulting from acquisition of FunTown	$	—	$	—	$	16,934	$	16,934	$	12,489
(b) Intangible assets—Capitalized software cost		—		—		—		—		15
(c) Prepaid licensing and royalty fees		—		—		—		—		702
(d) Investments—Cost-method		—		—		—		—		700
Total	$	—	$	—	$	16,934	$	16,934	$	13,906

42

GIGAMEDIA LIMITED AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

YEARS ENDED DECEMBER 31, 2011, 2012 AND 2013

(in US$ thousands)	Fair Value measurement Using						Year Ended December		Total Impairment Losses
Assets	Level 1		Level 2		Level 3		31, 2013
(a) Goodwill—Resulting from acquisition of FunTown and FingerRockz	$	—	$	—	$	—	$	—	$	17,054
(b) Intangible assets—Trade name and Capitalized software cost		—		—		—		—		13,251
(c) Prepaid licensing and royalty fees		—		—		—		—		2,752
Total	$	—	$	—	$	—	$	—	$	33,057

(a) Impairment losses on goodwill which was determined to be impaired:

The fair value of the Asian online game reporting unit was determined based on the present value of estimated future net cash flows discounted at the weighted average cost of capital. In the 2012 goodwill impairment assessment, we estimated future net cash flow using management’s internally developed estimates and included a terminal value calculated using a long-term future growth rate of 0% based on analysis of the current and expected future economic conditions. Other significant estimates and assumptions used in developing the future net cash flows included an assumed average revenue decline of 7% and a weighted average cost of capital to discount these expected future cash flows of 17%. As a result, the carrying value of this reporting unit exceeded its fair value, and the implied fair value of the goodwill was determined to be $16.9 million. Consequently, a goodwill impairment charge of $12.5 million was recognized in 2012.

43

GIGAMEDIA LIMITED AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

YEARS ENDED DECEMBER 31, 2011, 2012 AND 2013

In 2013, due to a continued slowdown in demand for our casual online games and the unexpected loss of a key licensed game, we experienced a significant decline in revenues and a negative operating margin in Taiwan from our previous future cash flow expectations from this reporting unit. Further, in the Fall of 2013 we went through an internal restructuring of our operations and made a business decision to transition from PC-based games to browser/mobile games and social casino games. Also our market capitalization had also fallen below our net book value based on the quoted market price of our common stock for a sustained period of time. Based on these qualitative factors, we determined it was more likely than not the revised fair value of this reporting unit may be less than its carrying value, and the related recovery of the remaining goodwill could be impaired. Using the same methodology as in the past to determine the estimated fair value of this reporting unit, we developed our expected future net cash flows based on historical data and internally developed estimates as part of our updated long-term strategic plan and included a terminal value of $0. Other significant estimates and assumptions used in developing the future net cash flows included an assumed average revenue decline of 28% and a weighted average cost of capital to discount these expected future cash flows of 13%. As a result, the carrying value of this reporting unit exceeded its fair value, and the implied fair value of the goodwill was determined to be $0. Consequently, a goodwill impairment charge of $17.1 million was recognized in 2013.

(b) Impairment losses on certain intangible assets which were determined to be impaired:

In 2012 and 2013, the trade name arising from the acquisition of FunTown and certain capitalized software development costs were fully written down, resulting in impairment charges of $15 thousand and $13.3 million, respectively, included in operating expenses within “impairment loss on intangible assets” in the consolidated statements of operations. The impairment charge for the Trade name of FunTown is a result of our repositioning of it as described above, while the impairment charges for the capitalized software costs were the result of certain projects within our Asian online game and service business that we ceased further development on, and as a result, we recorded a full impairment of the carrying value of the assets related to these projects.

44

GIGAMEDIA LIMITED AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

YEARS ENDED DECEMBER 31, 2011, 2012 AND 2013

(c) Impairment losses on certain prepaid licensing and royalty fees which were determined to be impaired:

In 2012 and 2013, certain prepaid licensing and royalty fees were fully written down, resulting in impairment charges of $702 thousand and $2.8 million, respectively. This impairment is included in operating expenses in the consolidated statements of operations. The impairment charges for the prepaid licensing and royalty fees related to certain licensed games within our Asian online game and service business that we stopped operating or for which the carrying amounts of the related assets were determined not to be recoverable from their expected future undiscounted cash flows. The licensing fee games and related royalties are re-valued on when impairment exists, using unobservable inputs such as discounted cash flows, incorporating adjusted available market discount rate information and our Company’s estimates for liquidity risk, along with other cash flow model related assumptions.

(d) Impairment losses on certain cost method investments which were determined to be impaired:

In 2012, certain cost method investments were fully written down, resulting in an impairment charge of $700 thousand. The impairment charges are included in non-operating expenses within “impairment loss on marketable securities and investments” in the consolidated statements of operations.

Cost method and equity method investments are measured at fair value on a nonrecurring basis when declines in fair value are determined to be other-than-temporary, using other observable inputs such as trading prices of similar classes of the stock or using discounted cash flows, incorporating adjusted available market discount rate information and our Company’s estimates for liquidity risk.

45

GIGAMEDIA LIMITED AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

YEARS ENDED DECEMBER 31, 2011, 2012 AND 2013

NOTE 10. CASH AND CASH EQUIVALENTS

Cash and cash equivalents consist of the following:

	December 31
(in US$ thousands)	2012		2013
Cash and savings accounts	$	61,217	$	44,163
Time deposits		1,514		14,638
	$	62,731	$	58,801

We maintain cash and cash equivalents in bank accounts with major financial institutions with high credit ratings located in the following jurisdictions:

	December 31
(in US$ thousands)	2012		2013
Taiwan	$	59,195	$	55,661
Hong Kong		2,809		2,956
Malaysia		100		133
PRC		626		—
Others		1		51
	$	62,731	$	58,801

NOTE 11. MARKETABLE SECURITIES – CURRENT

Marketable securities – current consist of the following:

	December 31
(in US$ thousands)	2012		2013
Available-for-sale securities:
Equity securities	$	17,773	$	21,124
Open-end fund		—		336
	$	17,773	$	21,460

46

GIGAMEDIA LIMITED AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

YEARS ENDED DECEMBER 31, 2011, 2012 AND 2013

All of our Company’s marketable securities – current are classified as available-for-sale. As of December 31, 2012 and 2013, the balances of unrealized gains for marketable securities – current were $14.4 million and $17.9 million, respectively. During 2011, 2012 and 2013, realized gains from the disposal of marketable securities – current amounted to $535 thousand, $2.3 million, and $754 thousand, respectively. The costs for calculating gains on disposal were based on each security’s average cost.

NOTE 12. ACCOUNTS RECEIVABLE – NET

Accounts receivable consist of the following:

	December 31
(in US$ thousands)	2012			2013
Accounts receivable	$	2,959		$	2,082
Less: Allowance for doubtful accounts		(130	)		(55	)
	$	2,829		$	2,027

The following is a summary of the changes in our Company’s allowance for doubtful accounts during the years ended December 31, 2011, 2012 and 2013:

(in US$ thousands)	2011			2012			2013
Balance at beginning of year	$	842		$	2,594		$	130
Additions: Provision for bad debt expense		1,820			169			37
Less: Write-offs		(61	)		(269	)		(109	)
Deconsolidation - IAHGames		—			(2,370	)		—
Translation adjustment		(7	)		6			(3	)
Balance at end of year	$	2,594		$	130		$	55

47

GIGAMEDIA LIMITED AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

YEARS ENDED DECEMBER 31, 2011, 2012 AND 2013

NOTE 13. OTHER CURRENT ASSETS

Other current assets consist of the following:

	December 31
(in US$ thousands)	2012			2013
Loans receivable – current	$	3,437		$	3,394
Less: Allowance for loans receivable – current		(3,437	)		(3,394	)
Deferred income tax assets – current, net (Note 25)		840			—
Other		161			293
	$	1,001		$	293

The following is a reconciliation of changes in our Company’s allowance for loans receivable – current during the years ended December 31, 2011, 2012 and 2013:

(in US$ thousands)	2011		2012			2013
Balance at beginning of year	$	5,057	$	5,057		$	3,437
Additions: Provision for bad debt expenses		—		—			—
Less: Writes-offs		—		(1,620	)		—
Less: Reversal for collection of bad debt		—		—			(54	)
Translation adjustment		—		—			11
Balance at end of year	$	5,057	$	3,437		$	3,394

48

GIGAMEDIA LIMITED AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

YEARS ENDED DECEMBER 31, 2011, 2012 AND 2013

NOTE 14. MARKETABLE SECURITIES – NONCURRENT

Marketable securities – noncurrent consist of the following:

	December 31
(in US$ thousands)	2012		2013
Available-for-sale securities
Debt securities	$	2,727	$	6,048
Equity securities		1,565		—
	$	4,292	$	6,048

Our Company’s marketable securities – noncurrent are invested in convertible preferred shares, corporate bonds and publicly-traded common shares and are classified as available-for-sale securities.

The preferred shares are convertible into common shares on 1:1 basis, subject to certain adjustments, and shall be automatically converted upon certain conditions outlined in the agreements. The convertible preferred shares are all redeemable based upon certain agreed-upon conditions.

The embedded conversion options of the convertible preferred shares do not meet the definition of derivative instruments and therefore are not bifurcated from the preferred share investment.

We have also considered and determined whether our investments in preferred shares are in-substance common shares which should be accounted for under the equity method. Given that our convertible preferred shares have substantive redemption rights and thus do not meet the criteria of in-substance common shares, we have accounted for them as debt securities.

49

GIGAMEDIA LIMITED AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

YEARS ENDED DECEMBER 31, 2011, 2012 AND 2013

As of December 31, 2012 and 2013, the balances of unrealized gains for marketable securities – noncurrent were $0 and $1.2 million, respectively. During 2011, 2012 and 2013, realized gains from the disposal of marketable securities – non-current amounted to $5.8 million, $3.4 million and $985 thousand, respectively. Gains on disposal were based on the security’s average cost.

NOTE 15. INVESTMENTS

Investments consist of the following:

	December 31
(in US$ thousands)	2012		2013
Investments accounted for under the equity method	$	5,223	$	5,822

Our Company’s investments accounted for under the equity method primarily consist of the following: (a) through July 31, 2012, a 40 percent equity interest investment, later diluted to 33.66 percent interest in Mangas Everest S.A.S. (“Mangas Everest”), which is engaged in the gaming software and service business (See Note 5 “Divestitures” for additional information); (b) through August 15, 2012, a 30 percent equity interest investment in Game First International Corporation (“GFI”), an operator and distributor of online games in Taiwan (See Note 5 “Divestitures”, for additional information); (c) through August 31, 2011, a 100 percent equity interest investment in Monsoon Online Pte Ltd. (“Monsoon”), an operator and distributor of online games in Southeast Asia (See Note 4 “Acquisitions” for additional information); (d) from July 2012 to May 2013, a 20 percent equity interest investment in Infocomm Asia Holdings Pte Ltd. (“IAHGames”), an online game operator, publisher and distributor in Southeast Asia (See Note 5 “Divestitures”, for additional information); and (e) an 18 percent equity interest investment in East Gate Media Contents & Technology Fund (“East Gate”), a Korean Fund Limited Partnership that invests in online game businesses and films. The investments in these companies amounted to $5.2 million and $5.8 million as of December 31, 2012 and 2013, respectively.

50

GIGAMEDIA LIMITED AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

YEARS ENDED DECEMBER 31, 2011, 2012 AND 2013

As of December 31, 2011, our share of the underlying net assets of Mangas Everest exceeded the carrying value of our investment by $9.3 million. The excess results from the difference between the fair value we assigned to the 40 percent retained interest in Mangas Everest at the date the business was deconsolidated, compared to 40 percent of the total fair value of Mangas Everest as determined by BEG, the purchaser of the 60 percent interest.

In 2011 and 2012 (through July 31, 2012 when we sold the remaining 33.66 percent interest to BEG), we recognized our share of losses in Mangas Everest under the equity method of accounting which totaled $49.7 million, and $0, respectively, which resulted in a negative investment balance as of July 31, 2012. We charged this negative investment balance against the loan receivable that Mangas Everest had outstanding to us as of July 31, 2012. (See Note 26, “Related Party Transactions”, for additional information.)

We, through IAHGames, made an equity investment in Monsoon in connection with our acquisition of a controlling financial interest in IAHGames. Although IAHGames owned 100 percent of the common stock of Monsoon, prior to September 2011 we determined that Monsoon could not be consolidated by IAHGames due to the substantive participating rights that the game licensor had in Monsoon pursuant to Monsoon’s management agreement. In 2011 (through August 31, 2011), we recognized our share of gains under the equity method of accounting which totaled $230 thousand. (See Note 26, “Related Party Transactions”, for additional information.)

In September 2011, IAHGames, Monsoon and the game licensor entered a transition agreement to early terminate the previous agreement in which the abovementioned substantive participating rights were granted, effective August 31, 2011, and thus restored IAHGames’ full control in Monsoon. Therefore, starting September 1, 2011, we had consolidated Monsoon until July 2012 when we deconsolidated IAHGames. (See Note 4, “Acquisition”, for additional information.)

51

GIGAMEDIA LIMITED AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

YEARS ENDED DECEMBER 31, 2011, 2012 AND 2013

In July 2012, we entered into agreements to sell a 60 percent ownership in IAHGames to IAHGames’ management and Management Capital International Limited (“MCIL”), a British Virgin Islands company owned by IAHGames’ management. As we only retained a 20 percent ownership in IAHGames, upon the closing of the agreements, we deconsolidated the results of IAHGames’ operations and began accounting for our remaining 20 percent interest under the equity method up to May 2013 when we sold the remaining interest in IAHGames to IAHGames’ management and MCIL. (See Note 5, “Divestitures” for additional information.)

Our Company has an 18 percent interest in East Gate, a Korean Limited Partnership. We account for this limited partnership investment under the equity method accounting since we have the ability to exercise significant influence over partnership operating and financial policies based on the terms of the partnership agreement.

NOTE 16. SHORT-TERM BORROWINGS

As of December 31, 2012 and 2013, unsecured short-term borrowings totaled $7.7 million and $4.4 million, respectively. These amounts were borrowed from certain financial institutions. The annual interest rates on these borrowings was 1.42 percent for 2012, and ranged from 1.50 percent to 1.60 percent for 2013. The maturity dates fell in mid-January 2013 as of December 31, 2012 and in late January 2014 as of December 31, 2013. As of December 31, 2012 and 2013, the weighted-average interest rate on total short-term borrowings was 1.42 percent and 1.52 percent, respectively.

As of December 31, 2012 and 2013, the total amount of unused lines of credit available for borrowing under these agreements was approximately $6.9 million and $9.9 million, respectively.

During the period from January 2014 to March 2014, we repaid certain short-term borrowings totaling $11.9 million, and renewed short-term borrowing agreements totaling $11.9 million.

52

GIGAMEDIA LIMITED AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

YEARS ENDED DECEMBER 31, 2011, 2012 AND 2013

NOTE 17. ACCRUED EXPENSES

Accrued expenses consist of the following:

	December 31
(in US$ thousands)	2012		2013
Accrued professional fees	$	1,319	$	740
Accrued royalties		967		128
Accrued advertising expenses		696		421
Accrued incentive to distributors		172		137
Accrued director compensation and liability insurance		513		424
Other		1,515		767
	$	5,182	$	2,617

NOTE 18. OTHER CURRENT LIABILITIES

Other current liabilities consist of the following:

	December 31
(in US$ thousands)	2012		2013
Income taxes payable	$	1,381	$	1,560
Deferred tax liabilities (Note 25)		2,207		1,987
Other		398		315
	$	3,986	$	3,862

NOTE 19. PENSION BENEFITS

Our Company and our subsidiaries have defined benefit and defined contribution pension plans that cover substantially all of our employees.

53

GIGAMEDIA LIMITED AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

YEARS ENDED DECEMBER 31, 2011, 2012 AND 2013

Defined Benefit Pension Plan

We have a defined benefit pension plan in accordance with the Labor Standards Law of the Republic of China (R.O.C.) 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 a lump sum retirement benefit upon retirement equivalent to the aggregate of 2 months’ pensionable salary for each of the first 15 years of service and 1 month’s pensionable salary for each year of service thereafter subject to a maximum of 45 months’ pensionable salary. The pensionable salary is the monthly average salary or wage of the final six months prior to approved retirement.

We use a December 31 measurement date for our defined benefit pension plan. As of December 31, 2012 and 2013, the accumulated benefit obligation amounted to $429 thousand and $360 thousand, respectively, and the funded status of accrued pension liability amounted to $281 thousand and $170 thousand, respectively. The fair value of plan assets amounted to $291 thousand and $300 thousand as of December 31, 2012 and 2013, respectively. The accumulated other comprehensive income amounted to $2 thousand and $0 as of December 31, 2012 and 2013, respectively. The net periodic benefit cost (income) for 2011, 2012 and 2013 amounted to $(18) thousand, $30 thousand and ($77) thousand, respectively.

54

GIGAMEDIA LIMITED AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

YEARS ENDED DECEMBER 31, 2011, 2012 AND 2013

The following table sets forth the plan’s benefit obligations, fair value of plan assets, and funded status at December 31, 2013 and 2012:

	December 31
(in US$ thousands)	2012		2013
Benefit Obligation	$	572	$	470
Fair value of plan assets		291		300
	$	281	$	170
Amounts recognized in the balance sheet consist of:
Noncurrent liabilities	$	281	$	170
Accumulated other comprehensive income		2		—
Net amount recognized	$	279	$	170
Amounts recognized in accumulated comprehensive income consist of:
Unrecognized net gain	$	2	$	—

Weighted average assumptions used to determine benefit obligations for 2013 and 2012 were as follows:

	December 31
	2012			2013
Discount rate		1.75	%		2.00	%
Rate of compensation increase		1.50	%		1.50	%
Rate of return on plan assets		1.75	%		2.00	%

Management determines the discount rate and rate of return on plan assets based on the yields of twenty year ROC central government bonds which is in line with the respective employees remaining service period and the historical rate of return on the above mentioned Fund mandated by the ROC Labor Standard Law.

55

GIGAMEDIA LIMITED AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

YEARS ENDED DECEMBER 31, 2011, 2012 AND 2013

We have contributed an amount equal to 2 percent of the salaries and wages paid to all qualified 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 Bank of 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 seek to maintain a normal, highly liquid working capital balance to ensure payments are made timely.

We expect to make a contribution of $17 thousand to the Fund in 2014. We do not expect to make any benefit payments through 2020.

Defined Contribution Pension Plans

We have provided defined contribution plans for employees located in Taiwan and Hong Kong. Contributions to the plans are expensed as incurred.

Taiwan

Pursuant to the new “Labor Pension Act” enacted on July 1, 2005, our Company has 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 an employee’s monthly salary and wage and up to the maximum amount of NT$9 thousand (approximately $302), to each of the eligible employees’ individual pension accounts at the Bureau of Labor Insurance each month. 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.

Hong Kong

According to the relevant Hong Kong regulations, we provide a contribution plan for the eligible employees in Hong Kong. We must contribute at least 5 percent of the employees’ total salaries. For this purpose, the monthly relevant contribution to their individual contribution accounts is subject to a cap of HK$1.25 thousand (approximately $161). After the termination of employment, the benefits still belong to the employees in any circumstances.

56

GIGAMEDIA LIMITED AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

YEARS ENDED DECEMBER 31, 2011, 2012 AND 2013

The total amount of defined contribution pension expenses pursuant to our defined contribution plans for the years ended December 31, 2011, 2012, and 2013 were $896 thousand, $585 thousand, and $357 thousand, respectively.

NOTE 20. OTHER LIABILITIES – OTHER

Other liabilities consist of the following:

	December 31
(in US$ thousands)	2012		2013
Deferred tax liabilities (Note 25)	$	561	$	—
Other		12		11
	$	573	$	11

NOTE 21. SUBSIDIARY PREFERRED SHARES

In connection with our acquisition of a controlling financial interest in IAHGames, that subsidiary had Class A preferred shares, which were owned by the noncontrolling shareholders. As August 15, 2012 when we deconsolidated IAHGames, these Class A preferred shares were valued at $1.3 million, and represented 8.9 percent of IAHGames’ accumulated voting interest. The holder of the Class A preferred shares was entitled to cumulative dividends at 10 percent per annum. The preferred shares were redeemable at the holder’s option at any time after the expiration of certain licensed games, and were convertible into ordinary shares at any time. Pursuant to agreements entered into in connection with our acquisition of IAHGames in July 2010, all Class A preferred shares were to be converted to ordinary shares of IAHGames at the acquisition date. The preferred shares were fully converted into ordinary shares by the closing date when we sold 60 percent of IAHGames. (See Note 5, “Divestitures”, for additional information.)

57

GIGAMEDIA LIMITED AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

YEARS ENDED DECEMBER 31, 2011, 2012 AND 2013

Since the Class A preferred shares were never currently redeemable and it was not probable that they would become redeemable as a result of our acquisition of IAHGames, the subsequent adjustment for accretion was not required. However, the cumulative dividends and the reversal of dividends upon the conversion described above for these Class A preferred shares of $321 thousand and $(469) thousand for the years ended December 31, 2011 and the period from January 1, 2012 to July 31, 2012, respectively, are included as a component of “net income (loss) attributable to the noncontrolling interest” in the consolidated statement of operations.

NOTE 22. EQUITY

In accordance with Singapore law, the holders of ordinary shares that do not have par value, are entitled to receive dividends as declared from time to time and are entitled to one vote per share at the general meeting of our company. All shares rank equally with regard to our company’s residual assets. In addition, we are not required to have a number of authorized common shares to be issued.

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, 2012 and 2013, the legal reserves of Hoshin GigaMedia Center Inc. (“Hoshin GigaMedia”) were $3.0 million for each period. 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.

Under PRC laws and regulations, there were certain foreign exchange restrictions on our Company’s PRC subsidiaries and VIE subsidiaries with respect to transferring certain of their net assets to our Company either in the form of dividends, loans or advances. As of December 31, 2012 and 2013, our Company’s total restricted net assets, which included paid up capital of PRC subsidiaries and the net assets of VIE subsidiaries in which our Company had no legal ownership, were approximately $1.5 million and $0, respectively.

58

GIGAMEDIA LIMITED AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

YEARS ENDED DECEMBER 31, 2011, 2012 AND 2013

On May 20, 2011, our board of directors approved an $11 million share repurchase program of GigaMedia’s common stock. Under the terms of the share repurchase program, GigaMedia could repurchase up to $11 million worth of its issued and outstanding shares during the period starting from June 1, 2011 to November 30, 2011. The repurchases could be made from time to time on the open market at prevailing market prices pursuant to a Rule 10b5-1 plan, subject to restrictions relating to volume, pricing and timing. The timing and extent of any repurchases depended upon market conditions, the trading price of GigaMedia’s shares and other factors. This share repurchase program was implemented in a manner consistent with market conditions, in the interests of our shareholders, and in compliance with GigaMedia’s securities trading policy and relevant Singapore and U.S. laws and regulations. During 2011, repurchases under this program amounted to approximately 5.6 million shares at a cost of $6.0 million. All of the treasury shares under this program were cancelled by the end of 2011.

NOTE 23. COMPREHENSIVE INCOME

The accumulated balances for each classification of other comprehensive income are as follows:

(in US$ thousands)	Foreign currency items			Unrealized gain on securities			Pension and post retirement benefit plans			Accumulated other comprehensive income
Balance at January 1, 2011	$	(22,554	)	$	22,243		$	239		$	(72	)
Net current period change		(1,813	)		22,466			69			20,722
Reclassification adjustments for gains reclassified into income		—			(6,299	)		—			(6,299	)
Balance at December 31, 2011		(24,367	)		38,410			308			14,351
Net current period change		1,814			(18,339	)		(323	)		(16,848	)
Reclassification adjustments for gains reclassified into income		—			(5,665	)		—			(5,665	)
Deconsolidation of subsidiaries		(217	)		—			—			(217	)
Balance at December 31, 2012		(22,770	)		14,406			(15	)		(8,379	)
Net current period change		(801	)		6,437			15			5,651
Reclassification adjustments for gains reclassified into income		864			(1,739	)		—			(875	)
Balance at December 31, 2013	$	(22,707	)	$	19,104		$	—		$	(3,603	)

59

GIGAMEDIA LIMITED AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

YEARS ENDED DECEMBER 31, 2011, 2012 AND 2013

There were no significant tax effects allocated to each component of other comprehensive income for the years ended December 31, 2011, 2012 and 2013.

NOTE 24. SHARE-BASED COMPENSATION

The following table summarizes the total stock-based compensation expense recognized in our consolidated statements of operations:

(in US$ thousands)	2011			2012			2013
Cost of online game and service revenues	$	—		$	—		$	—
Product development & engineering expenses		—			—			—
Selling and marketing expenses		62			20			—
General and administrative expenses		1,103			159			219
Pre-tax stock-based compensation expense		1,165			179			219
Income tax (benefit) expense		(109	)		(41	)		27
Total stock-based compensation expense reported in continuing operations	$	1,056		$	138		$	246
Total stock-based compensation expense reported in discontinued operations, net of tax	$	—		$	—		$	—

There were no significant capitalized stock-based compensation costs at December 31, 2012 and 2013. There was no recognized stock-based compensation tax benefit for the years ended December 31, 2013 and 2012, as our Company recorded a full allowance on net deferred tax assets as of December 31, 2013 and 2012.

60

GIGAMEDIA LIMITED AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

YEARS ENDED DECEMBER 31, 2011, 2012 AND 2013

(a) Overview of Stock-Based Compensation Plans

2002 Employee 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, the eligible individuals who 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 vesting schedule. The maximum contractual term for the options under the 2002 Plan is 10 years.

2004 Employee 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, the eligible individuals who 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 vesting schedule. The maximum contractual term for the options under the 2004 Plan is 10 years.

61

GIGAMEDIA LIMITED AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

YEARS ENDED DECEMBER 31, 2011, 2012 AND 2013

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. The maximum contractual term for the options under the 2006 Plan is 10 years.

2007 Equity Incentive Plan

At the June 2007 annual general meeting of shareholders, the shareholders of our Company approved the GigaMedia Limited 2007 Equity Incentive Plan (the “2007 Plan”) under which up to two million common shares of our Company have been reserved for issuance. The 2007 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 2007 Plan. The maximum contractual term for the options under the 2007 Plan is 10 years.

2008 Equity Incentive Plan

At the June 2008 annual general meeting of shareholders, the shareholders of our Company approved the GigaMedia Limited 2008 Equity Incentive Plan (the “2008 Plan”) under which up to one million common shares of our Company have been reserved for issuance. The 2008 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 2008 Plan. The maximum contractual term for the options under the 2008 Plan is 10 years.

62

GIGAMEDIA LIMITED AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

YEARS ENDED DECEMBER 31, 2011, 2012 AND 2013

2008 Employee Share Purchase Plan

At the June 2008 annual general meeting of shareholders, the shareholders of our Company approved the GigaMedia Limited 2008 Employee Share Purchase Plan (the “2008 ESPP”) under which up to two hundred thousand common shares of our Company were reserved for issuance. Any person who is regularly employed by our Company or our designated subsidiaries shall be eligible to participate in the 2008 ESPP. Pursuant to the 2008 ESPP, our Company would offer the shares to qualified employees on favorable terms. 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 2008 ESPP. The 2008 ESPP is administered by a committee designated by the board of directors. As of December 31, 2013, no shares have been subscribed by qualified employees under the 2008 ESPP.

2009 Equity Incentive Plan

At the June 2009 annual general meeting of shareholders, the shareholders of our Company approved the GigaMedia Limited 2009 Equity Incentive Plan (the “2009 Plan”) under which up to one and a half million common shares of our Company have been reserved for issuance. The 2009 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 2009 Plan. The maximum contractual term for the options under the 2009 Plan is 10 years.

2009 Employee Share Purchase Plan

At the June 2009 annual general meeting of shareholders, the shareholders of our Company approved the GigaMedia Limited 2009 Employee Share Purchase Plan (the “2009 ESPP”) under which up to two hundred thousand common shares of our Company have been reserved for issuance. To be eligible, employees must be regularly employed by us or our designated subsidiaries. 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 2009 ESPP. The 2009 ESPP is administered by a committee designated by the board of directors. As of December 31, 2013, no shares have been issued to employees under the 2009 ESPP.

63

GIGAMEDIA LIMITED AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

YEARS ENDED DECEMBER 31, 2011, 2012 AND 2013

2010 Equity Incentive Plan

At the June 2010 annual general meeting of shareholders, the shareholders of our Company approved the GigaMedia Limited 2010 Equity Incentive Plan (the “2010 Plan”) under which up to one million common shares of our Company have been reserved for issuance. The 2010 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 2010 Plan. The maximum contractual term for the options under the 2010 Plan is 10 years.

2010 Employee Share Purchase Plan

At the June 2010 annual general meeting of shareholders, the shareholders of our Company approved the GigaMedia Limited 2010 Employee Share Purchase Plan (the “2010 ESPP”) under which up to two hundred thousand common shares of our Company have been reserved for issuance. To be eligible, employees must be regularly employed by us or our designated subsidiaries. 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 2010 ESPP. The 2010 ESPP is administered by a committee designated by the board of directors. As of December 31, 2013, no shares have been issued to employees under the 2010 ESPP.

Summarized below are the general terms of our stock-based compensation plans, for which awards have been granted as of December 31, 2013.

Stock-Based compensation plan	Granted awards			Vesting schedule	Options’ exercise price	RSUs’ grant date fair value
2002 Plan		3,000,000		immediately upon granting	$0.79		—
2004 Plan		7,703,185	(1)	immediately upon granting to four years	$0.79~$2.55		—
2006 Plan		1,217,333	(2)	immediately upon granting to four years	$0.8101~$16.60	$	2.91~$16.01
2007 Plan		3,205,217	(3)	immediately upon granting to four years	$1.20~$18.17	$	2.47~$15.35
2008 Plan		1,000,000		immediately upon granting to six years	$2.47~$4.24		—
2009 Plan		2,500,000	(4)	immediately upon granting to four years	$0.955~$2.47		—
2010 Plan		2,200,000	(5)	three years	$0.8101~$1.14		—

64

GIGAMEDIA LIMITED AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

YEARS ENDED DECEMBER 31, 2011, 2012 AND 2013

(1) The granted awards, net of forfeited or canceled shares, were within reserved shares of seven million common shares.

(2) The granted awards, net of forfeited or canceled shares, were within reserved shares of one million common shares.

(3) The granted awards, net of forfeited or canceled shares, were within reserved shares of two million common shares.

(4) The granted awards, net of forfeited or canceled shares, were within reserved shares of one and a half million common shares.

(5) The granted awards, net of forfeited or canceled shares, were within reserved shares of one million common shares.

Options and Restricted Stock Units (“RSUs”) generally vest over the schedule described above. Certain RSUs provide for accelerated vesting if there is a change in control. All options and RSUs are expected to be settled by issuing new shares.

(b) Options

In 2011, 2012 and 2013, 0, 0 and 3,000 options were exercised, and cash received from the exercise of stock options was $0, $0 and $2 thousand, respectively, which resulted in no significant tax benefit realized on a consolidated basis.

Our Company uses the Black-Scholes option-pricing model to estimate the fair value of stock options granted to employees. The following table summarizes the assumptions used in the model for options granted during 2012 and 2013:

	2012	2013
Option term (years)	5.73	5.8
Volatility	59.76%~67.02%	59.46%~61.84%
Weighted-average volatility	62%	61%
Risk-free interest rate	0.885%~1.152%	0.930%~1.610%
Dividend yield	0%	0%
Weighted-average fair value of option granted	$0.54	$0.60

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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GIGAMEDIA LIMITED AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

YEARS ENDED DECEMBER 31, 2011, 2012 AND 2013

Expected volatility rate. An analysis of historical volatility was used to develop the estimate of expected volatility.

Risk-free interest rate. The risk-free interest rate is based on yields of 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 transactions during the last three years are summarized as follows:

	2011					2012					2013
	Weighted Avg. Exercise Price		No. of Shares (in thousands)			Weighted Avg. Exercise Price		No. of Shares (in thousands)			Weighted Avg. Exercise Price		No. of Shares (in thousands)			Weighted- Average Remaining Contractual Term		Aggregate Intrinsic Value (in thousands)
Balance at January 31	$	2.33		9,780		$	2.13		9,493		$	1.97		9,210
Options granted		1.06		1,060			0.96		2,070			1.09		620
Options exercised		—		—			—		—			0.79		(3	)
Options Forfeited / canceled / expired		2.72		(1,347	)		1.74		(2,353	)		1.28		(604	)
Balance at December 31	$	2.13		9,493		$	1.97		9,210		$	1.95		9,223			3.00	$	1,055
Exercisable at December 31	$	2.19		7,754		$	2.15		7,584		$	2.13		7,770			1.87	$	1,021
Vested and expected to vest at December 31	$	2.13		9,493		$	1.97		9,210		$	1.95		9,223			3.00	$	1,055

The aggregate intrinsic value in the table above represents the total pre-tax intrinsic value (the difference between GigaMedia’s closing stock price on the last trading day of 2013 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 had they exercised their options on December 31, 2013. 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, 2011, 2012, and 2013 were $0, $0, and $600 thousand, respectively.

66

GIGAMEDIA LIMITED AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

YEARS ENDED DECEMBER 31, 2011, 2012 AND 2013

As of December 31, 2013, there was approximately $348 thousand of unrecognized compensation cost related to nonvested options. That cost is expected to be recognized over a period of 2.16 years.

The following table sets forth information about stock options outstanding at December 31, 2013:

Options outstanding					Option currently exercisable
Exercise price	No. of Shares (in thousands)		Weighted average remaining contractual life		Exercise price	No. of Shares (in thousands)
Under $1		6,188		1.88 years	Under $1		5,175
$1~$10		2,419		5.72 years	$1~$10		1,979
$10~$20		616		3.65 years	$10~$20		616
		9,223					7,770

(c) RSUs

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 years ended December 31, 2011, 2012 and 2013 was $1.0 million, $0 and $0, respectively. The total fair value of RSUs vested during the years ended December 31, 2011, 2012 and 2013 was $0.2 million, $0 and $0, respectively, which resulted in no significant tax benefit realized on a consolidated basis.

As of December 31 2012 and 2013, there was no unrecognized compensation cost related to nonvested RSUs. Our Company received no cash from employees as a result of employee stock award vesting and the forfeiture of RSUs during 2011, 2012 and 2013.

67

GIGAMEDIA LIMITED AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

YEARS ENDED DECEMBER 31, 2011, 2012 AND 2013

NOTE 25. INCOME TAXES

Loss from continuing operations before income taxes by geographic location is as follows:

(in US$ thousands )	2011			2012			2013
Taiwan operations	$	(770	)	$	(14,871	)	$	(33,077	)
Non-Taiwan operations		(66,865	)		1,946			(1,605	)
	$	(67,635	)	$	(12,925	)	$	(34,682	)

Income tax provision (benefit) from continuing operations by geographic location is as follows:

(in US$ thousands )	2011			2012		2013
Taiwan operations	$	33		$	456	$	248
Non-Taiwan operations		(278	)		215		(187	)
	$	(245	)	$	671	$	61

Our ultimate parent company is based in Singapore. It reported no pretax income or loss.

The components of income tax provision (benefit) from continuing operations by taxing jurisdiction are as follows:

(in US$ thousands)	2011			2012		2013
Taiwan:
Current	$	—		$	410	$	(131	)
Deferred		33			46		379
	$	33		$	456	$	248
Non-Taiwan:
Current	$	(539	)	$	215	$	(187	)
Deferred		261			—		—
	$	(278	)	$	215	$	(187	)
Total current income tax expense (benefit)	$	(539	)	$	625	$	(318	)
Total deferred income tax expense (benefit)	$	294		$	46	$	379
Total income tax provision (benefit)	$	(245	)	$	671	$	61

68

GIGAMEDIA LIMITED AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

YEARS ENDED DECEMBER 31, 2011, 2012 AND 2013

A reconciliation of our effective tax rate related to continuing operations to the statutory tax rate in Taiwan, where our major operations are based, is as follows:

	2011			2012			2013
Taiwan statutory rate, including taxes on income and retained earnings		23.85	%		23.85	%		23.85	%
Foreign tax differential		1.02	%		(0.17	%)		(3.71	%)
Non-deductible items - impairment charges on goodwill		(1.82	%)		(16.43	%)		(10.39	%)
Changes in unrecognized tax benefits		0.00	%		0.00	%		(4.12	%)
Tax-exempted income in foreign jurisdictions		0.00	%		0.00	%		3.12	%
Adjustment for prior year payable		0.00	%		0.00	%		0.55	%
Change in valuation allowance		(21.70	%)		(4.00	%)		(10.17	%)
Tax effect of earnings for equity method investees and certain subsidiaries		(0.02	%)		(4.38	%)		0.00	%
Other		(0.99	%)		(4.06	%)		0.69	%
Effective rate		0.34	%		(5.19	%)		(0.18	%)

The provision (benefit) for income taxes attributable to discontinued operations was $0 for each of the years ended December 31, 2011, 2012 and 2013, respectively.

69

GIGAMEDIA LIMITED AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

YEARS ENDED DECEMBER 31, 2011, 2012 AND 2013

Significant components of our deferred tax assets consist of the following:

(in US$ thousands)	December 31
	2012			2013
Net operating loss carryforwards	$	3,248		$	4,072
Loss on equity method investment		15,621			—
Share-based compensation		234			267
Intangible assets		354			738
Property, plant and equipment		100			86
Other		(275	)		109
		19,282			5,272
Less: valuation allowance		(18,333	)		(5,216	)
Deferred tax assets—net	$	949		$	56

As of December 31, 2012 and 2013, $840 thousand and $0, respectively, of the net deferred tax assets were reported as current and included in other current assets on the balance sheet.

Significant components of our deferred tax liabilities consist of the following:

(in US$ thousands)	December 31
	2012		2013
Depreciation and amortization	$	255		—
Investment in affiliated companies, principally due to undistributed income		2,207	$	1,987
Capitalized software development costs		306		56
Deferred tax liabilities	$	2,768	$	2,043

As of December 31, 2012 and 2013, $561 thousand and $0, respectively, of deferred tax liabilities were reported as non-current deferred tax liabilities and included in other liabilities.

70

GIGAMEDIA LIMITED AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

YEARS ENDED DECEMBER 31, 2011, 2012 AND 2013

A reconciliation of the beginning and ending amounts of our valuation allowance on deferred tax assets for the years ended December 31, 2011, 2012 and 2013 are as follows:

(in US$ thousands)	2011			2012			2013
Balance at beginning of year	$	7,402		$	25,256		$	18,333
Subsequent utilization of valuation allowance		(270	)		(4	)		(7	)
Additions to valuation allowance		15,597			214			3,527
Divestitures		—			(7,026	)		(16,616	)
Acquisitions		2,491			—			—
Exchange differences		36			(107	)		(21	)
Balance at end of year	$	25,256		$	18,333		$	5,216

Under ROC Income Tax Acts, the tax loss carryforward in the preceding ten years would be deducted from income tax for Taiwan operations. The Statutory losses would be deducted from undistributed earnings tax and were not subject to expiration from Taiwan operations.

As of December 31, 2013, we had net operating loss carryforwards available to offset future income, amounting to $20.1 million. Below is the breakdown of the expiration of the net operating loss carryforwards in major jurisdictions:

Jurisdiction	Amount		Expiring year
Hong Kong		9,975		indefinite
Taiwan		10,170		2020~2023
		20,145

71

GIGAMEDIA LIMITED AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

YEARS ENDED DECEMBER 31, 2011, 2012 AND 2013

Unrecognized Tax Benefits

A reconciliation of the beginning and ending amount of unrecognized tax benefits (excluding the effects of accrued interest) for the years 2011, 2012 and 2013 are as follows:

(in US$ thousands)	2011			2012			2013
Balance at beginning of year	$	3,887		$	4,714		$	4,202
Increase related to prior year tax positions		965			573			706
Deconsolidation of IAHGames		—			(1,072	)		—
Exchange differences		(138	)		(13	)		63
Balance at end of year	$	4,714		$	4,202		$	4,971

As of December 31, 2011, 2012 and 2013, there were approximately $4.7 million, $4.2 million and $5.0 million of unrecognized tax benefits that if recognized would affect the effective tax rate. As of December 31, 2011, 2012 and 2013, $2.3 million, $2.8 million and $2.9 million of the total unrecognized tax benefit were presented as a reduction of a deferred tax asset that, if recognized, would be offset by a valuation allowance.

There were no interest and penalties related to income tax liabilities recognized for the years ended December 31, 2011, 2012 and 2013.

Our major tax jurisdictions are located in Taiwan. As of December 31, 2013, the income tax filings under tax jurisdictions located in Taiwan have been examined for the years through 2008 and for 2011, but we have filed appeals for the 2008 and 2011 tax filings. Our Company also files income tax returns in the United States federal and state jurisdictions.

72

GIGAMEDIA LIMITED AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

YEARS ENDED DECEMBER 31, 2011, 2012 AND 2013

In 2011, 2012 and 2013, our unrecognized tax benefits were related to amortization of goodwill and intangible assets resulting from the acquisition of FunTown. The income tax authority has made decisions on the amortization for our 2006, 2007 and 2008 tax filings. We have filed appeals against the unfavorable parts of the decision regarding these amortization adjustments, appending further response from the tax authority.

In 2011, our unrecognized tax benefits increased due to IAHGames. These unrecognized tax benefits primarily related to certain related party transactions.

The amount of unrecognized tax benefits may increase or decrease in the future for various reasons such as current year tax positions, expiration of statutes of limitations, litigation, legislative activity, or other changes in facts regarding realizability. Taiwanese entities are customarily examined by the tax authorities and it is possible that a future examination will result in positive or negative adjustment to our unrecognized tax benefit within the next 12 months; however management does not expect that the total amount of unrecognized tax benefit will change significantly within the next 12 months of December 31, 2013.

NOTE 26. RELATED-PARTY TRANSACTIONS

In 2011, to support our current operations we had short-term indebtedness from Waterland Financial Holdings (“Waterland”), a key manager of which was one of our directors. The largest amounts of outstanding short-term indebtedness to Waterland during the year ended December 31, 2011 was $1.7 million. As of December 31, 2012 and 2013, we did not have any indebtedness owed to Waterland.

73

GIGAMEDIA LIMITED AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

YEARS ENDED DECEMBER 31, 2011, 2012 AND 2013

We, through IAHGames, made an equity investment in Monsoon in connection with our acquisition of IAHGames with effect from July 1, 2010. In 2010, prior to our acquisition, IAHGames loaned $5.0 million to Monsoon to support Monsoon’s current operations at interest of 7 percent per annum. In addition, from September to December 2010, IAHGames, then one of our subsidiaries, loaned an additional $5.1 million to Monsoon to support its operation at an interest rate of 7 percent per annum. The largest amount outstanding to Monsoon from July 1, 2010 through August 31, 2011, after which we began to consolidate Monsoon, was $10.3 million. As of August 31, 2011, the net book value of the loans receivable was $3.2 million, after being reduced in connection with absorbing additional losses of Monsoon as discussed in more detail in Note 15, “Investments”. Upon the deconsolidation of IAHGames’ operations of in August 2012, the loans receivable were deconsolidated as well. (See Note 5, “Divestitures”, for additional information.)

During 2011, our Company entered into loan agreements in the aggregate of $5.2 million with Mangas Everest, with interest rates of 3 percent per annum. As of December 31, 2011, the net book value of this loan receivable was nil after being reduced in connection with absorbing additional losses of Mangas Everest (as discussed in more detail in Note 15, “Investments”) and considering the financial status of Mangas Everest, from which we do not expect to collect all principal and interest. We also reversed the interest recognized previously on these loans and ceased to recognize interest income going forward. Upon the closing of the sale of our remaining ownership in the gaming software and service business in August 2012, the rights and interest in and to the loan agreements were also assigned to BEG. (See Note 5, “Divestitures”, for additional information.)

74

GIGAMEDIA LIMITED AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

YEARS ENDED DECEMBER 31, 2011, 2012 AND 2013

NOTE 27. COMMITMENTS AND CONTINGENCIES

Commitments

(a) Operating Leases

We rent certain properties which are used as office premises under lease agreements that expire at various dates through 2016. The following table sets forth our future aggregate minimum lease payments required under these operating leases, as of December 31, 2013:

(in US$ thousands)	Amount
2014	$	941
2015		754
2016		138
	$	1,833

Rental expense for operating leases amounted to $2.5 million, $1.8 million and $1.0 million for the years ended December 31, 2011, 2012 and 2013, respectively.

(b) Service agreement

We entered in to certain maintenance and out-sourcing service agreement in 2013 regarding our cloud business operations. The following table sets forth our future aggregate minimum payments required under this agreement as of December 31, 2013:

(in US$ thousands)	Amount
2014	$	214
2015		251
2016		42
	$	507

The service fee under this agreement amounted to $111 thousand for the year ended December 31, 2013.

75

GIGAMEDIA LIMITED AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

YEARS ENDED DECEMBER 31, 2011, 2012 AND 2013

(c) License Agreements

We have contractual obligations under various license agreements to pay the licensors license fees and minimum guarantees against future royalties. The following table summarizes the committed license fees and minimum guarantees against future royalties set forth in our significant license agreements as of December 31, 2013.

(in US$ thousands)	License fees		Minimum guarantees against future royalties		Total
Minimum required payments:
In 2014	$	100	$	100	$	200
After 2014		5,300		1,500		6,800
	$	5,400	$	1,600	$	7,000

The initial minimum guarantees against future royalties and license fees are not required to be paid until the licensed games are commercially released or until certain milestones are achieved, as stipulated in the individual license agreements. The remaining minimum guarantees are generally required to be paid within three years subsequent to the commercial release dates of the licensed games.

(d) Guaranty

In 2008, Cambridge Interactive Development Corp. (“CIDC”), a then wholly owned subsidiary of GigaMedia, entered into a lease agreement (the “CIDC Lease”) for an office in Delaware. The term of the CIDC Lease is for the period from October 1, 2008 through September 30, 2014. Pursuant to the CIDC Lease, CIDC deposited approximately $690 thousand with a bank in exchange for a letter of credit issued by the bank (the “CIDC L/C”) and GigaMedia’s guaranty of all of CIDC’s obligations under the CIDC Lease.

76

GIGAMEDIA LIMITED AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

YEARS ENDED DECEMBER 31, 2011, 2012 AND 2013

In July 2012, we entered into an agreement with BEG to sell and assign our remaining ownership interest in and all rights and interests related to the shareholders loans to Mangas Everest (including the CIDC lease) (the “Mangas Agreement”). Pursuant to the Mangas Agreement, BEG was to use all its reasonable efforts to procure the cancellation and return of the CIDC L/C to GigaMedia and the landlord’s release of GigaMedia’s lease guaranty by September 30, 2012; and unless and until BEG procures the cancellation and return of the CIDC L/C and landlord’s release of GigaMedia’s lease guaranty, BEG is obligated to indemnify and hold GigaMedia (and any Affiliate thereof) harmless from any and all losses, costs and expenses that may be borne by GigaMedia (and any Affiliate thereof) arising under or in connection with the CIDC L/C and/or GigaMedia’s lease guaranty.

In accordance with the Mangas Agreement, BEG procured that the bank cancel the CIDC L/C and issue to BEG a new letter of credit under the same terms and conditions as the CIDC L/C. BEG, however, did not obtain the landlord’s consent to release us from our lease guaranty within the allotted time. BEG’s major shareholders, therefore, issued a separate guaranty to us wherein they are obligated to indemnify and hold GigaMedia (and any Affiliate thereof) harmless from any and all losses, costs and expenses arising under or in connection with the CIDC Lease. GigaMedia’s commitment amount under this lease guaranty has been constantly reduced as Mangas Everest’s subsidiary who assumed the CIDC Lease makes its monthly rental payments. The leasee is current on its monthly payments through March 2014.

Contingencies

We are subject to legal proceedings and claims that arise in the normal course of business. Currently there are no outstanding claims or litigation against us.

77

GIGAMEDIA LIMITED AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

YEARS ENDED DECEMBER 31, 2011, 2012 AND 2013

NOTE 28. SEGMENT INFORMATION

We currently have two operating segments: an Asian online game and service business segment, and a cloud service business segment (began in 2013). The Asian online game and service business segment mainly derives its revenues from recognizing the usage of game playing time or in-game items by the end-users. The cloud service business segment mainly derives its revenues from providing cloud products and services to small-to-medium and larger enterprises.

Financial information for each operating segment was as follows as of and for the years ended December 31, 2011, 2012, and 2013:

	Asian online
(in US$ thousands)	game and service
2011:
Segment profit or loss:
Net revenue from external customers	$	34,367
Loss from operations	$	(10,931	)
Share-based compensation	$	308
Impairment loss on intangible assets	$	2,583
Impairment loss on prepaid licensing and royalty fees	$	247
Impairment loss on goodwill	$	5,097
Interest income	$	492
Interest expense	$	(50	)
Gain on sales of marketable securities	$	6,299
Foreign exchange loss	$	(282	)
Gain on equity method investments—net	$	1,846
Impairment loss on marketable securities and investments	$	13,327
Depreciation	$	1,790
Amortization, including intangible assets	$	2,251
Income tax expense	$	859

78

GIGAMEDIA LIMITED AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

YEARS ENDED DECEMBER 31, 2011, 2012 AND 2013

	Asian online
(in US$ thousands)	game and service
2012:
Segment profit or loss:
Net revenue from external customers	$	27,470
Loss from operations	$	(12,271	)
Share-based compensation	$	199
Impairment loss on intangible assets	$	15
Impairment loss on prepaid licensing and royalty fees	$	702
Impairment loss on goodwill	$	12,489
Contract termination costs	$	49
Interest income	$	9
Interest expense	$	44
Gain on sales of marketable securities	$	5,665
Foreign exchange gain	$	55
Gain on equity method investments—net	$	234
Impairment loss on marketable securities and investments	$	1,193
Depreciation	$	1,059
Amortization, including intangible assets	$	2,181
Income tax expense	$	710

(in US$ thousands)	Asian online game and service		Cloud service business		Total
2013:
Segment profit or loss:
Net revenue from external customers	$	14,106	$	925	$	15,031
Loss from operations	$	(33,677)	$	(1,218)	$	(34,895)
Share-based compensation	$	(225)	$	69	$	(156)
Impairment loss on intangible assets	$	13,251	$	—	$	13,251
Impairment loss on prepaid licensing and royalty fees	$	2,752	$	—	$	2,752
Impairment loss on goodwill	$	17,054	$	—	$	17,054
Interest income	$	9	$	—	$	9
Interest expense	$	8	$	—	$	8
Gain on sales of marketable securities	$	1,739	$	—	$	1,739
Foreign exchange gain	$	236	$	—	$	236
Gain on equity method investments - net	$	526	$	—	$	526
Depreciation	$	336	$	8	$	344
Amortization, including intangible assets	$	1,862	$	42	$	1,904
Income tax expense	$	150	$	78	$	228

79

GIGAMEDIA LIMITED AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

YEARS ENDED DECEMBER 31, 2011, 2012 AND 2013

The reconciliations of segment information to GigaMedia’s consolidated totals are as follows:

(in US$ thousands)	2011		2012		2013
Income (loss) from operations:
Total segments	$	(10,931)	$	(12,271)	$	(34,895)
Other**		(204)		7		—
Adjustment*		(8,794)		(8,310)		(3,592)
Total GigaMedia consolidated	$	(19,929)	$	(20,574)	$	(38,487)
Share-based compensation
Total segments	$	308	$	199	$	(156)
Adjustment*		857		(20)		375
Total GigaMedia consolidated	$	1,165	$	179	$	219
Impairment loss on intangible
Total segments	$	2,583	$	15	$	13,251
Adjustment*		—		—		—
Total GigaMedia consolidated	$	2,583	$	15	$	13,251
Impairment loss on prepaid licensing and royalty fees:
Total segments	$	247	$	702	$	2,752
Adjustment*		—		—		—
Total GigaMedia consolidated	$	247	$	702	$	2,752
Interest income:
Total segments	$	492	$	9	$	9
Adjustment*		270		274		229
Total GigaMedia consolidated	$	762	$	283	$	238
Interest expense:
Total segments	$	(50)	$	44	$	8
Adjustment*		476		203		41
Total GigaMedia consolidated	$	426	$	247	$	49
Gain on sales of marketable
Total segments	$	6,299	$	5,665	$	1,739
Adjustments*		—		—		—
Total GigaMedia consolidated	$	6,299	$	5,665	$	1,739
Foreign exchange gain (loss):
Total segments	$	(282)	$	55	$	236
Adjustments*		(83)		379		(191)
Total GigaMedia consolidated	$	(365)	$	434	$	45

80

GIGAMEDIA LIMITED AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

YEARS ENDED DECEMBER 31, 2011, 2012 AND 2013

(in US$ thousands)	2011			2012			2013
Gain (loss) on equity method investments—net:
Total segments	$	1,846		$	234		$	526
Other**		(49,715	)		—			—
Adjustment*		—			—			—
Total GigaMedia consolidated	$	(47,869	)	$	234		$	526
Impairment loss on marketable securities and investments:
Total segments	$	13,327		$	1,193		$	—
Adjustment*		—			—			—
Total GigaMedia consolidated	$	13,327		$	1,193		$	—
Depreciation:
Total segments	$	1,790		$	1,059		$	344
Adjustments*		290			165			64
Total GigaMedia consolidated	$	2,080		$	1,224		$	408
Amortization:
Total segments	$	2,251		$	2,181		$	1,904
Adjustments*		63			23			3
Total GigaMedia consolidated	$	2,314		$	2,204		$	1,907
Income tax expense (benefit):
Total segments	$	859		$	710		$	228
Other**		(934	)		37			—
Adjustments*		(170	)		(76	)		(167	)
Total GigaMedia consolidated	$	(245	)	$	671		$	61

* Adjustment items include corporate and certain back-office costs and expenses not attributable to any specific segment. As of December 31, 2011, 2012 and 2013, the compensation related was approximately $4.3 million, $4.2 million and $2.1 million, respectively; accrued professional fees was approximately $2.3 million, $911 thousand and $125 thousand, respectively.

** Other items relate to the results of operations arising from our non-controlling interest in the online gaming software and service business before we disposed of it in July 2012.

Major Customers

No single customer represented 10 percent or more of GigaMedia’s total net revenues in any period presented.

81

GIGAMEDIA LIMITED AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

YEARS ENDED DECEMBER 31, 2011, 2012 AND 2013

Geographic Information

Revenues by geographic area are attributed by country of the server location. Revenue from by geographic region is as follows:

(in US$ thousands) Geographic region / country	2011		2012		2013
Taiwan	$	21,214	$	18,744	$	11,793
Hong Kong		5,061		4,703		3,239
Singapore		4,150		2,004		—
Malaysia		2,228		1,550		—
Thailand		1,447		204		—
Others		267		265		—
	$	34,367	$	27,470	$	15,032

Net tangible long-lived assets by geographic region are as follows:

(in US$ thousands) Geographic region / country	December 31,
	2011		2012		2013
Taiwan	$	2,375	$	1,932	$	1,657
PRC		763		—		—
Hong Kong		107		17		20
Singapore		551		—		—
Thailand		380		—		—
Other		112		—		—
	$	4,288	$	1,949	$	1,677

82

GIGAMEDIA LIMITED AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

YEARS ENDED DECEMBER 31, 2011, 2012 AND 2013

NOTE 29. SUBSEQUENT EVENT

On April 10, 2014 (with supplemental modification on April 15, 2014), we entered into a short-term loan agreement on an arm’s-length basis with Wen He Investment Ltd. (“Wen He”) to finance its purchase from a third-party of 15 million common shares of a company in Taiwan. The amount of the loan is approximately $18.8 million, maturing on May 10, 2014, and carries an interest rate of 5% per annum. The term of the loan also requires that all of the shares so purchased by Wen He be pledged to us as collateral together with the personal guarantee of another major shareholder of the Taiwan company. We entered into this loan agreement because we believe it will support the growth of our online games business.

83

EX-99.4

Exhibit 99.4

GigaMedia Limited

and its subsidiaries

Registration Number: 199905474H

Annual Report

Year ended 31 December 2013

KPMG LLP (Registration No. T08LL1267L), an accounting limited liability partnership registered in Singapore under the Limited Liability Partnership Act (Chapter 163A) and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity.

GigaMedia Limited and its subsidiaries

Directors’ report

Year ended 31 December 2013

Directors’ report

We are pleased to submit this annual report to the members of the Company together with the audited financial statements for the financial year ended 31 December 2013.

Directors

The directors in office at the date of this report are as follows:

Chen, Dirk Chi-Ching
Chien, Mo-Na
Hong, Chin Fock (Damian)	(Appointed on 31 October 2013)
Huang, John Ping Chang
Huang, Billy Bing-Yuan
Hwang, Collin
Liu, Nick Chia-En
Tung, Casey Kuo Chong
Wong, King Wai Alfred	(Appointed on 28 October 2013)

Directors’ interests

According to the register kept by the Company for the purposes of Section 164 of the Companies Act, Chapter 50 (the Act), the particulars of interests of directs who held office at the end of the financial year (including those held by their spouses and infant children) in shares, debentures, warrants and share options in the Company and in related corporations (other than wholly-owned subsidiaries) are as follows:

	Holdings at beginning of the financial		Holdings at
Name of director and corporation	year/date of		end of the
in which interests are held	appointment		financial year
Hwang, Collin
GigaMedia Limited
- ordinary shares
- interests held		961,200		961,200
- option to subscribe for ordinary shares		1,000,000		1,000,000
Chien, Mo-Na GigaMedia Limited - option to subscribe for ordinary shares		20,000		20,000

1

GigaMedia Limited and its subsidiaries

Directors’ report

Year ended 31 December 2013

Name of director and corporation in which interests are held	Holdings at beginning of the financial year/date of appointment		Holdings at end of the financial year
Huang, John Ping Chan
GigaMedia Limited
- option to subscribe for ordinary shares		20,000		20,000
Huang, Billy Bing-Yuan
GigaMedia Limited
- option to subscribe for ordinary shares		—		20,000
Liu, Nick Chia-En
GigaMedia Limited
- option to subscribe for ordinary shares		20,000		20,000
Tung, Casey Kuo Chong
GigaMedia Limited
- option to subscribe for ordinary shares		20,000		20,000

Except as disclosed in this report, no director who held office at the end of the financial year had interests in shares, debentures, warrants or share options of the Company or of related corporations either at the beginning of the financial year, or date of appointment, if later, or at the end of the financial year.

Except as disclosed under the “Share Options” section of this report, neither at the end of, nor at any time during the financial year, was the Company a party to any arrangement whose objects are, or one of whose objects is, to enable the directors of the Company to acquire benefits by means of the acquisition of shares in or debentures of the Company or any other body corporate.

Except for salaries, bonuses and fees and those benefits that are disclosed in this report and in note 29 to the financial statements, since the end of the last financial year, no director has received or become entitled to receive, a benefit by reason of a contract made by the Company or a related corporation with the director, or with a firm of which he is a member, or with a company in which he has a substantial financial interest.

Share options

2002 Employee Share Option Plan

At the June 2002 annual general meeting of shareholders, the shareholders of the Company approved the GigaMedia Limited 2002 Employee Share Option Plan (the “2002 Plan”) under which up to three million common shares of the Company have been reserved for issuance. All employees, officers, directors, supervisors, advisors, and consultants of the Group 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, the eligible individuals who 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 vesting schedule. The maximum contractual term for the options under the 2002 Plan is 10 years.

2

GigaMedia Limited and its subsidiaries

Directors’ report

Year ended 31 December 2013

2004 Employee Share Option Plan

At the June 2004 annual general meeting of shareholders, the shareholders of the Company approved the GigaMedia Limited 2004 Employee Share Option Plan (the “2004 Plan”) under which up to seven million common shares of the Company have been reserved for issuance. All employees, officers, directors, supervisors, advisors, and consultants of the Group 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, the eligible individuals who 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 vesting schedule. The maximum contractual term for the options under the 2004 Plan is 10 years.

2006 Equity Incentive Plan

At the June 2006 annual general meeting of shareholders, the shareholders of the Company approved the GigaMedia Limited 2006 Equity Incentive Plan (the “2006 Plan”) under which up to one million common shares of the 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. The maximum contractual term for the options under the 2006 Plan is 10 years.

2007 Equity Incentive Plan

At the June 2007 annual general meeting of shareholders, the shareholders of the Company approved the GigaMedia Limited 2007 Equity Incentive Plan (the “2007 Plan”) under which up to two million common shares of the Company have been reserved for issuance. The 2007 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 2007 Plan. The maximum contractual term for the options under the 2007 Plan is 10 years.

2008 Equity Incentive Plan

At the June 2008 annual general meeting of shareholders, the shareholders of the Company approved the GigaMedia Limited 2008 Equity Incentive Plan (the “2008 Plan”) under which up to one million common shares of the Company have been reserved for issuance. The 2008 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 2008 Plan. The maximum contractual term for the options under the 2008 Plan is 10 years.

2008 Employee Share Purchase Plan

At the June 2008 annual general meeting of shareholders, the shareholders of the Company approved the GigaMedia Limited 2008 Employee Share Purchase Plan (the “2008 ESPP”) under which up to two hundred thousand common shares of the Company were reserved for issuance. Any person who is regularly employed by the Company or its designated subsidiaries shall be eligible to participate in the 2008 ESPP. Pursuant to the 2008 ESPP, the Company would offer the shares to qualified employees on favorable terms. 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 2008 ESPP. The 2008 ESPP is administered by a committee designated by the board of directors. As of the date of this annual report, no shares have been subscribed by qualified employees under the 2008 ESPP.

3

GigaMedia Limited and its subsidiaries

Directors’ report

Year ended 31 December 2013

2009 Equity Incentive Plan

At the June 2009 annual general meeting of shareholders, the shareholders of the Company approved the GigaMedia Limited 2009 Equity Incentive Plan (the “2009 Plan”) under which up to one and a half million common shares of the Company have been reserved for issuance. The 2009 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 2009 Plan. The maximum contractual term for the options under the 2009 Plan is 10 years.

2009 Employee Share Purchase Plan

At the June 2009 annual general meeting of shareholders, the shareholders of the Company approved the GigaMedia Limited 2009 Employee Share Purchase Plan (the “2009 ESPP”) under which up to two hundred thousand common shares of the Company have been reserved for issuance. To be eligible, employees must be regularly employed by the Company or its designated subsidiaries. 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 2009 ESPP. The 2009 ESPP is administered by a committee designated by the board of directors. As of the date of this annual report, no shares have been subscribed by qualified employees under the 2009 ESPP.

2010 Equity Incentive Plan

At the June 2010 annual general meeting of shareholders, the shareholders of the Company approved the GigaMedia Limited 2010 Equity Incentive Plan (the “2010 Plan”) under which up to one million common shares of the Company have been reserved for issuance. The 2010 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 2010 Plan. The maximum contractual term for the options under the 2010 Plan is 10 years.

2010 Employee Share Purchase Plan

At the June 2010 annual general meeting of shareholders, the shareholders of the Company approved the GigaMedia Limited 2010 Employee Share Purchase Plan (the “2010 ESPP”) under which up to two hundred thousand common shares of the Company have been reserved for issuance. To be eligible, employees must be regularly employed by the Company or its designated subsidiaries. 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 2010 ESPP. The 2010 ESPP is administered by a committee designated by the board of directors. As of the date of this annual report, no shares have been subscribed by qualified employees under the 2010 ESPP.

4

GigaMedia Limited and its subsidiaries

Directors’ report

Year ended 31 December 2013

Summarised below are the general terms of its share-based compensation plans as of 31 December 2013.

Share-based compensation plan	Granted awards			Vesting schedule	Options’ exercise price US$
2002 plan		3,000,000		Immediately upon granting	$0.79
2004 plan		7,703,185	*	Immediately upon granting to four years	$0.79 ~ $2.55
2006 plan		1,217,333	**	Immediately upon granting to four years	$0.81 ~ $16.60
2007 plan		3,205,217	***	Immediately upon granting to four years	$1.20 ~ $18.17
2008 plan		1,000,000		Immediately upon granting to six years	$2.47 ~ $4.24
2009 plan		2,500,000	****	Immediately upon granting to four years	$0.96 ~ $2.47
2010 plan		2,200,000	*****	Three years	$0.81 ~ $1.14

* The granted awards, net of forfeited or cancelled shares, were within reserved shares of seven million common shares.

** The granted awards, net of forfeited or cancelled shares, were within reserved shares of one million common shares.

*** The granted awards, net of forfeited or cancelled shares, were within reserved shares of two million common shares.

**** The granted awards, net of forfeited or cancelled shares, were within reserved shares of one and a half million common shares.

***** The granted awards, net of forfeited or cancelled shares, were within reserved shares of one million common shares.

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

5

GigaMedia Limited and its subsidiaries

Directors’ report

Year ended 31 December 2013

Auditors

At the Annual General Meeting held on 7 June 2013, KPMG LLP was appointed as auditors of the Company. KPMG LLP, have indicated their willingness to accept re-appointment.

On behalf of the Board of Directors

CHIEN, MO-NA

Director

HWANG, COLLIN

Director

30 April 2014

6

GigaMedia Limited and its subsidiaries

Statement by Directors

Year ended 31 December 2013

Statement by Directors

In our opinion:

(a) the financial statements set out on pages FS1 to FS72 are drawn up so as to give a true and fair view of the state of affairs of the Group and of the Company as at 31 December 2013 and the results, changes in equity and cash flows of the Group for the year ended on that date in accordance with the provisions of the Singapore Companies Act, Chapter 50 and Singapore Financial Reporting Standards; and

(b) at the date of this statement, there are reasonable grounds to believe that the Company will be able to pay its debts as and when they fall due.

The Board of Directors has, on the date of this statement, authorised these financial statements for issue.

On behalf of the Board of Directors

CHIEN, MO-NA

Director

HWANG, COLLIN

Director

30 April 2014

7

KPMG LLP
16 Raffles Quay #22-00	Telephone	+65 6213 3388
Hong Leong Building	Fax	+65 6225 0984
Singapore 048581	Internet	www.kpmg.com.sg

Independent auditors’ report

Members of the Company

GigaMedia Limited

Report on the financial statements

We have audited the accompanying financial statements of GigaMedia Limited (the “Company”) and its subsidiaries (the “Group”), which comprise the statements of financial position of the Group and the Company as at 31 December 2013, the statement of profit or loss, statement of comprehensive income, statement of changes in equity and statement of cash flows of the Group for the year then ended, and a summary of significant accounting policies and other explanatory information, as set out on pages FS1 to FS72.

Management’s responsibility for the financial statements

Management is responsible for the preparation of financial statements that give a true and fair view in accordance with the provisions of the Singapore Companies Act, Chapter 50 (the “Act”) and Singapore Financial Reporting Standards, and for devising and maintaining a system of internal accounting controls sufficient to provide a reasonable assurance that assets are safeguarded against loss from unauthorised use or disposition; and transactions are properly authorised and that they are recorded as necessary to permit the preparation of true and fair profit and loss accounts and balance sheets and to maintain accountability of assets.

Auditors’ responsibility

Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with Singapore Standards on Auditing. Those standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor’s judgement, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity’s preparation of financial statements that give a true and fair view in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by management, as well as evaluating the overall presentation of the financial statements.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.

KPMG LLP (Registration No. T08LL1267L), an accounting limited liability partnership registered in Singapore under the Limited Liability Partnership Act (Chapter 163A) and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity.

8

GigaMedia Limited and its subsidiaries

Independent auditors’ report

Year ended 31 December 2013

Other matters

The financial statements of GigaMedia Limited and its subsidiaries for the year ended 31 December 2012 were audited by another auditor who expressed an unqualified opinion on those statements on 30 April 2013.

Opinion

In our opinion, the consolidated financial statements of the Group and the statement of financial position of the Company are properly drawn up in accordance with the provisions of the Act and Singapore Financial Reporting Standards to give a true and fair view of the state of affairs of the Group and of the Company as at 31 December 2013 and the results, changes in equity and cash flows of the Group for the financial year ended on that date.

Report on other legal and regulatory requirements

In our opinion, the accounting and other records required by the Act to be kept by the Company have been properly kept in accordance with the provisions of the Act.

KPMG LLP

Public Accountants and

Chartered Accountants

Singapore

30 April 2014

9

GigaMedia Limited and its subsidiaries

Financial statements

Year ended 31 December 2013

Statements of financial position

As at 31 December 2013

		Group						Company
	Note	31/12/2013			31/12/2012			31/12/2013			31/12/2012
		US$’000			US$’000			US$’000			US$’000
					Restated*
Assets
Property, plant and equipment	4		1,863			2,144			—			—
Intangible assets and goodwill	5		1,461			32,609			—			—
Subsidiaries	6		—			—			88,487			118,514
Associates	7		5,822			5,223			—			—
Available-for-sale financial assets	8		6,048			4,647			—			—
Other assets (non-current)	9		4,982			9,038			—			—
Deferred tax assets	10		56			949			—			—
Non-current assets			20,232			54,610			88,487			118,514
Trade and other receivables	11		2,238			2,891			2,671			3,129
Available-for-sale financial assets	8		21,460			17,773			—			—
Other assets (current)	12		832			3,150			—			—
Cash and cash equivalents	13		58,801			62,731			62			2
Current assets			83,331			86,545			2,733			3,131
Total assets			103,563			141,155			91,220			121,645
Equity
Share capital	14		209,645			209,643			209,645			209,643
Reserves	15		13,839			9,152			1,819			4,623
Accumulated losses			(134,850	)		(99,803	)		(120,435	)		(93,044	)
Equity attributable to owners of the Company			88,634			118,992			91,029			121,222
Non-controlling interests			(147	)		(338	)		—			—
Total equity			88,487			118,654			91,029			121,222

* See Note 2.5

The accompanying notes form an integral part of these financial statements.

FS1

GigaMedia Limited and its subsidiaries

Financial statements

Year ended 31 December 2013

Statements of financial position (cont’d)

As at 31 December 2013

		Group				Company
	Note	31/12/2013		31/12/2012		31/12/2013		31/12/2012
		US$’000		US$’000		US$’000		US$’000
				Restated*
Liabilities
Employee benefits	16		170		281		—		—
Deferred tax liabilities	10		2,043		561
Other liabilities			11		12		—		—
Non-current liabilities			2,224		854		—		—
Trade and other payables	17		4,175		6,739		191		423
Loans and borrowings	18		4,361		7,748		—		—
Other current liabilities	19		2,756		3,572		—		—
Current tax liabilities			1,560		3,588		—		—
Current liabilities			12,852		21,647		191		423
Total liabilities			15,076		22,501		191		423
Total equity and liabilities			103,563		141,155		91,220		121,645

* See Note 2.5

The accompanying notes form an integral part of these financial statements.

FS2

GigaMedia Limited and its subsidiaries

Financial statements

Year ended 31 December 2013

Consolidated statement of profit or loss

Year ended 31 December 2013

	Note	2013 US$’000			2012 US$’000
					Restated*
Continuing operations
Revenue	20		15,032			27,470
Cost of revenue			(7,584	)		(11,388	)
Gross profit			7,448			16,082
Other income	21		1,095			412
Product development and engineering expenses			(1,698	)		(1,471	)
Selling and marketing expenses			(4,815	)		(8,377	)
General and administrative expenses			(6,340	)		(13,380	)
Other operating expenses	22		(33,098	)		(14,362	)
Results from operating activities			(37,408	)		(21,096	)
Finance income			1,977			5,948
Finance expenses			(81	)		(2,639	)
Net finance income	23		1,896			3,309
Share of profit of associates, net of tax	7		526			234
Loss before tax			(34,986	)		(17,553	)
Tax expense	24		(61	)		(671	)
Loss from continuing operations			(35,047	)		(18,224	)
Discontinued operations
Loss from discontinued operations	25		(318	)		(41	)
Loss for the year	26		(35,365	)		(18,265	)
Loss attributable to:
Owners of the Company
- Continuing operations			(34,766	)		(17,397	)
- Discontinued operations			(318	)		(41	)
Non-controlling interests			(35,084	)		(17,438	)
- Continuing operations			(281	)		(827	)
			(35,365	)		(18,265	)
Loss per share
Basic and diluted loss per share (cents)	27		(0.69	)		(0.34	)
Loss per share—continuing operations
Basic and diluted loss per share (cents)	27		(0.68	)		(0.34	)

* See Note 2.5

The accompanying notes form an integral part of these financial statements.

FS3

GigaMedia Limited and its subsidiaries

Financial statements

Year ended 31 December 2013

Consolidated statement of comprehensive income

Year ended 31 December 2013

	2013			2012
	US$’000			US$’000
				Restated*
Loss for the year		(35,365	)		(18,265	)
Other comprehensive income:
Items that will not be reclassified subsequently to profit or loss:
Defined benefit plan remeasurements		37			(297	)
Items that are or may be reclassified subsequently to profit or loss:
Net change in fair value of available-for-sale financial assets		4,420			(23,265	)
Foreign currency translation differences—foreign operations		42			1,936
		4,462			(21,329	)
Other comprehensive income for the year, net of tax		4,499			(21,626	)
Total comprehensive income for the year		(30,866	)		(39,891	)
Total comprehensive income attributable to:
Owners of the Company		(30,579	)		(39,064	)
Non-controlling interests		(287	)		(827	)
Total comprehensive income for the year		(30,866	)		(39,891	)

* See Note 2.5

The accompanying notes form an integral part of these financial statements.

FS4

GigaMedia Limited and its subsidiaries

Financial statements

Year ended 31 December 2013

Consolidated statement of changes in equity

Year ended 31 December 2013

		Attributable to owners of the Company
	Note	Share capital		Share option reserve		Statutory reserves		Accumulated losses			Fair value reserve		Foreign currency translation reserve			Total			Non- controlling interests			Total equity
		US$’000		US$’000		US$’000		US$’000			US$’000		US$’000			US$’000			US$’000			US$’000
At 1 January 2013			209,643		12,557		3,022		(99,803	)		15,256		(21,683	)		118,992			(338	)		118,654
Total comprehensive income for the year
Loss for the year			—		—		—		(35,084	)		—		—			(35,084	)		(281	)		(35,365	)
Other comprehensive income
Foreign currency translation			—		—		—		—			—		48			48			(6	)		42
Defined benefit plan remeasurements			—		—		—		37			—		—			37			—			37
Net change in fair value of available-for-sale financial assets, net of tax			—		—		—		—			4,420		—			4,420			—			4,420
Total other comprehensive income			—		—		—		37			4,420		48			4,505			(6	)		4,499
Total comprehensive income for the year			—		—		—		(35,047	)		4,420		48			(30,579	)		(287	)		(30,866	)
Transactions with owners, recorded directly in equity
Contributions by and distributions to owners
Issuance of ordinary shares			2		—		—		—			—		—			2			—			2
Share-based payment transactions			—		219		—		—			—		—			219			—			219
Total contributions by and distributions to owners			2		219		—		—			—		—			221			—			221
Changes in ownership interest in subsidiary
Acquisition of subsidiary with non-controlling interests	32		—		—		—		—			—		—			—			478			478
Total changes in ownership interest in subsidiary			—		—		—		—			—		—			—			478			478
Total transactions with owners			2		219		—		—			—		—			221			478			699
At 31 December 2013			209,645		12,776		3,022		(134,850	)		19,676		(21,635	)		88,634			(147	)		88,487

The accompanying notes form an integral part of these financial statements.

FS5

GigaMedia Limited and its subsidiaries

Financial statements

Year ended 31 December 2013

Consolidated statement of changes in equity

Year ended 31 December 2013

			Attributable to owners of the Company
	Note		Share capital		Share option reserve		Statutory reserves		Accumulated losses			Fair value reserve			Foreign currency translation reserve			Total			Non- controlling interests			Total equity
			US$’000		US$’000		US$’000		US$’000			US$’000			US$’000			US$’000			US$’000			US$’000
At 1 January 2012, as previously stated				209,643		12,378		3,022		(82,294	)		38,521			(23,402	)		157,868			(2,996	)		154,872
Impact of change in accounting policy		2.5		—		—		—		226			—			—			226			—			226
At 1 January 2012, as restated				209,643		12,378		3,022		(82,068	)		38,521			(23,402	)		158,094			(2,996	)		155,098
Total comprehensive income for the year
Loss for the year				—		—		—		(17,438	)		—			—			(17,438	)		(827	)		(18,265	)
Other comprehensive income
Foreign currency translation				—		—		—		—			—			1,936			1,936			—			1,936
Defined benefit plan remeasurements				—		—		—		(297	)		—			—			(297	)		—			(297	)
Net change in fair value of available-for-sale financial assets, net of tax				—		—		—		—			(23,265	)		—			(23,265	)		—			(23,265	)
Total other comprehensive income				—		—		—		(297	)		(23,265	)		1,936			(21,626	)		—			(21,626	)
Total comprehensive income for the year				—		—		—		(17,735	)		(23,265	)		1,936			(39,064	)		(827	)		(39,891	)
Transactions with owners, recorded directly in equity
Contributions by and distributions to owners
Share-based payment transactions				—		179		—		—			—			—			179			—			179
Waiver of cumulative dividend to non-controlling interests				—		—		—		—			—			—			—			469			469
Total contributions by and distributions to owners				—		179		—		—			—			—			179			469			648
Changes in ownership interest in subsidiary
Deconsolidation of IAHGames		6		—		—		—		—			—			(217	)		(217	)		3,016			2,799
Total changes in ownership interest in subsidiary				—		—		—		—			—			(217	)		(217	)		3,016			2,799
Total transactions with owners				—		179		—		—			—			(217	)		(38	)		3,485			3,447
At 31 December 2012				209,643		12,557		3,022		(99,803	)		15,256			(21,683	)		118,992			(338	)		118,654

The accompanying notes form an integral part of these financial statements.

FS6

GigaMedia Limited and its subsidiaries

Financial statements

Year ended 31 December 2013

Consolidated statement of cash flows

Year ended 31 December 2013

	Note	2013			2012
		US$’000			US$’000
Cash flows from operating activities
Loss before tax
- continuing operations			(34,986	)		(17,553	)
- discontinued operations			(318	)		(41	)
Adjustments for:
Allowance for doubtful receivables			37			169
Amortisation—intangible assets	5		1,904			2,192
Depreciation	4		411			1,226
Gain on sale of associate (continued operations)	21		(1,000	)		—
Gain on sale of associate (discontinued operations)	25		—			(2,480	)
Gain on sale of available-for-sale financial assets	23		(1,739	)		(5,665	)
Impairment loss on property, plant and equipment	4		—			217
Impairment loss on prepaid licensing fees	9		2,752			702
Impairment loss on intangible assets	5		30,305			12,504
Loss on disposal of property, plant and equipment			4			208
Interest expense	23		49			247
Interest income	23		(238	)		(283	)
Impairment loss on available-for-sale financial assets (non-current)	8		—			1,193
Net gain on deconsolidation of IAHGames and Spring Asia	21		—			(211	)
Share-based compensation			219			179
Share of profit of associates	7		(526	)		(234	)
Unrealised exchange loss/(gain) on available-for-sale financial assets (non-current)			77			(1,206	)
Operating loss before working capital changes			(3,049	)		(8,836	)
Trade and other receivables			595			5,002
Other assets			961			(1,452	)
Trade and other payables			(2,218	)		(1,357	)
Other liabilities			(976	)		(884	)
Employee benefits			(111	)		336
Cash used in operating activities			(4,798	)		(7,191	)
Tax refunded/(paid)			285			(121	)
Net cash used in operating activities			(4,513	)		(7,312	)

The accompanying notes form an integral part of these financial statements.

FS7

GigaMedia Limited and its subsidiaries

Financial statements

Year ended 31 December 2013

Consolidated statement of cash flows (cont’d)

Year ended 31 December 2013

	Note	2013			2012
		US$’000			US$’000
Cash flows from investing activities
Acquisition of business, net of cash acquired	32		73			—
Decrease in restricted cash			—			3,000
Interest received			261			284
Net cash inflow/(outflow) from disposal of IAHGames and Spring Asia	6(a)		2,258			(558	)
Proceeds from disposal of associate (continued operations)	7(b)		1,000			—
Proceeds from disposal of associate (discontinued operations)			—			985
Proceeds from disposal of available-for-sale financial assets			3,419			8,610
Proceeds from disposal of property, plant and equipment			35			76
Purchase of available-for-sale financial assets			(2,460	)		—
Purchase of property, plant and equipment	4		(225	)		(429	)
Purchase of intangible assets	5		(1,229	)		(1,679	)
Refundable deposit			83			1,112
Net cash from investing activities			3,215			11,401
Cash flows from financing activities
Repayment of short-term borrowings			(3,146	)		(4,348	)
Cash received from the exercise of stock option			2			—
Interest paid			(53	)		(295	)
Net cash used in financing activities			(3,197	)		(4,643	)
Net decrease in cash and cash equivalents			(4,495	)		(554	)
Cash and cash equivalents at 1 January			62,731			63,997
Effect of exchange rate changes on balances held in foreign currencies			565			(712	)
Cash and cash equivalents at 31 December			58,801			62,731

The accompanying notes form an integral part of these financial statements.

FS8

GigaMedia Limited and its subsidiaries

Financial statements

Year ended 31 December 2013

Notes to the financial statements

These notes form an integral part of the financial statements.

The financial statements were authorised for issue by the Board of Directors on 30 April 2014.

1 Domicile and activities

GigaMedia Limited (the “Company”) is a limited liability company domiciled and incorporated in Singapore. The address of its registered office is at 80 Robinson Road, #02-00, Singapore 068898. Its principal place of business is at 8th Floor, No.22, Ln. 407, Sec. 2, Tiding Blvd., Taipei, Taiwan, 114 Republic of China.

The financial statements of the Group as at and for the year ended 31 December 2013 comprise the Company and its subsidiaries (together referred to as the “Group” and individually as “Group entities”) and the Group’s interest in associates.

The principal activity of the Company is that of investment holding. The principal activities of the subsidiaries are providing online entertainment software and services and investment holding.

2 Basis of preparation

2.1 Statement of compliance

The financial statements have been prepared in accordance with Singapore Financial Reporting Standards (FRS).

2.2 Basis of measurement

The financial statements have been prepared on the historical cost basis except as otherwise described in the notes below.

2.3 Functional and presentation currency

The Company’s functional currency is New Taiwan dollars. Items included in the financial statements of each entity in the Group are measured using the currency of the primary economic environment in which the entity operates. The financial statements are presented in United States dollars (“US$”) which is the Company’s presentation currency as the Company is listed on the NASDAQ Stock Market at United States. All financial information presented in United States dollars have been rounded to the nearest thousand, unless otherwise stated.

2.4 Use of estimates and judgements

The preparation of financial statements in conformity with FRSs requires management to make judgements, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets, liabilities, income and expenses. Actual results may differ from these estimates.

FS9

GigaMedia Limited and its subsidiaries

Financial statements

Year ended 31 December 2013

Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimates are revised and in any future periods affected.

Information about critical judgements in applying accounting policies that thave the most significant effect on the amounts recognised in the financial statements is included in the following note:

Note 3.4(iii)	-	Capitalisation of software development costs as intangible assets
Note 3.12	-	Revenue recognition of Asian online game and services revenues and cloud product and service revenues

Information about assumption and estimation uncertainties that have a significant risk of resulting in a material adjustment within the next financial year are included in the following notes:

Note 4	-	Measurement of recoverable amounts of property, plant and equipment
Note 5	-	Measurement of recoverable amounts of intangible assets
Note 6	-	Measurement of recoverable amounts of subsidiaries
Note 7	-	Measurement of recoverable amounts of associates
Note 8	-	Measurement of fair values of available-for-sale financial assets
Note 9	-	Assessment of impairment loss on prepaid licensing and royalty fees
Note 16	-	Measurement of defined benefit obligations
Note 24	-	Estimation of provision for current and deferred taxation
Note 30	-	Fair value determination of assets, liabilities and contingent liabilities acquired in business combination

2.5 Changes in accounting policies

Defined benefit plans and short-term or other long-term employee benefits definition

From 1 January 2013, as a result of FRS 19 (2011), the Group changed its accounting policy with respect to the basis for determining the income or expense related to defined benefit plans, the costs of managing plan assets and definition of employee benefits as short-term or other long-term employee benefits.

Defined benefit plans

Under FRS 19 (2011), the Group determines the net interest expense (income) for the period on the net defined benefit liability (asset) by applying the discount rate used to measure the defined benefit obligation at the beginning of the annual period to the net defined benefit liability (asset) at the beginning of the annual period. It takes into account any changes in the net defined benefit liability (asset) during the period as a result of contributions and benefit payments. Consequently, the net interest on the net defined benefit liability (asset) now comprises:

• interest cost on the defined benefit obligation;

• interest income on plan assets; and

• interest on the effect on the asset ceiling.

FS10

GigaMedia Limited and its subsidiaries

Financial statements

Year ended 31 December 2013

Fair value measurement

FRS 113 establishes a single framework for measuring fair value and making disclosures about fair value measurements, when such measurements are required or permitted by other FRSs. In particular, it unifies the definition of fair value as the price at which an orderly transaction to sell an asset or to transfer a liability would take place between market participants at the measurement date. It also replaces and expands the disclosure requirements about fair value measurements in other FRSs, including FRS 107 Financial Instruments: Disclosures.

From 1 January 2013, in accordance with the transitional provisions of FRS 113, the Group has applied the new fair value measurement guidance prospectively, and has not provided any comparative information for new disclosures. Notwithstanding the above, the change had no significant impact on the measurements of the Group’s assets and liabilities. The additional disclosures necessary as a result of the adoption of this standard has been included in note 30.

Presentation of items of other comprehensive income

From 1 January 2013, as a result of the amendments to FRS 1, the Group has modified the presentation of items of other comprehensive income in its statement of comprehensive income, to present separately items that would be reclassified to profit or loss in the future from those that would never be. Comparative information has also been re-presented accordingly.

The adoption of the amendment to FRS 1 has no impact on the recognised assets, liabilities and comprehensive income of the Group.

Summary of quantitative impact

The following tables summarise the material impacts resulting from the above changes in accounting policies on the Group’s financial position, profit or loss and other comprehensive income.

The changes in accounting policies had an immaterial impact on income taxes and earnings per share for the current and comparative periods.

Consolidated statement of financial position

	As previously reported			Defined benefit plan			As restated
	US$’000			US$’000			US$’000
1 January 2012
Assets
Employee benefits		—			55			55
Liabilities
Employee benefits		(171	)		171			—
Equity
Accumulated losses		82,294			(226	)		82,068

FS11

GigaMedia Limited and its subsidiaries

Financial statements

Year ended 31 December 2013

	As previously reported US$’000			Defined benefit plan US$’000			As restated US$’000
31 December 2012
Liabilities
Employee benefits		(210	)		(71	)		(281	)
Equity
Accumulated losses		99,732			71			99,803

Consolidated statement of comprehensive income

	As previously reported		Defined benefit plans		As restated
	US$’000		US$’000		US$’000
Year ended 31 December 2012
Defined benefit plan remeasurements		—		297		297

	Defined benefit plans US$’000
Year ended 31 December 2013
Defined benefit plan remeasurements		(37	)

3 Significant accounting policies

The accounting policies set out below have been applied consistently to all periods presented in these financial statements, and have been applied consistently by Group entities, except as explained in Note 2.5, which addresses changes in accounting policies.

3.1 Basis of consolidation

Business combinations

Business combinations are accounted for using the acquisition method in accordance with FRS 103 Business Combination as at the acquisition date, which is the date on which control is transferred to the Group. Control is the power to govern the financial and operating policies of an entity so as to obtain benefits from its activities. In assessing control, the Group takes into consideration potential voting rights that are currently exercisable.

The Group measures goodwill at the acquisition date as:

• the fair value of the consideration transferred; plus

• the recognised amount of any non-controlling interests in the acquiree; plus

• if the business combination is achieved in stages, the fair value of the pre-existing equity interest in the acquiree, over the net recognised amount (generally fair value) of the identifiable assets acquired and liabilities assumed.

FS12

GigaMedia Limited and its subsidiaries

Financial statements

Year ended 31 December 2013

When the excess is negative, a bargain purchase gain is recognised immediately in profit or loss.

The consideration transferred does not include amounts related to the settlement of pre-existing relationships. Such amounts are generally recognised in profit or loss.

Any contingent consideration payable is recognised at fair value at the acquisition date and included in the consideration transferred. If the contingent consideration is classified as equity, it is not remeasured and settlement is accounted for within equity. Otherwise, subsequent changes to the fair value of the contingent consideration are recognised in profit or loss.

Non-controlling interests that are present ownership interests and entitle their holders to a proportionate share of the acquiree’s net assets in the event of liquidation are measured either at fair value or at the non-controlling interests’ proportionate share of the recognised amounts of the acquiree’s identifiable net assets, at the acquisition date. The measurement basis taken is elected on a transaction-by-transaction basis. All non-controlling interest are measured at acquisition-date fair value, unless another measurement basis is required by FRSs.

Costs related to the acquisition, other than those associated with the issue of equity securities, that the Group incurs in connection with a business combination are expensed as incurred.

Changes in the Group’s interest in a subsidiary that do not result in a loss of control are accounted for as transactions with owners in their capacity as owners and therefore no adjustments are made to goodwill and no gain or loss is recognised in profit or loss. Adjustments to non-controlling interests arising from transactions that do not involve the loss of control are based on a proportionate amount of the net assets of the subsidiary.

Subsidiaries

Subsidiaries are entities controlled by the Group. The financial statements of subsidiaries are included in the consolidated financial statements from the date that control commences until the date that control ceases.

The accounting policies of subsidiaries have been changed when necessary to align them with the policies adopted by the Group. Losses applicable to the non-controlling interests in a subsidiary are allocated to the non-controlling interests even if doing so causes the non-controlling interests to have a deficit balance.

Loss of control

Upon the loss of control, the Group derecognises the assets and liabilities of the subsidiary, any non-controlling interests and the other components of equity related to the subsidiary. Any surplus or deficit arising on the loss of control is recognised in profit or loss. If the Group retains any interest in the previous subsidiary, then such interest is measured at fair value at the date that control is lost. Subsequently, it is accounted for as an equity-accounted investee or as an available-for-sale financial asset depending on the level of influence retained.

FS13

GigaMedia Limited and its subsidiaries

Financial statements

Year ended 31 December 2013

Associates

Associates are those entities in which the Group has significant influence, but not control or joint control, over the financial and operating policies. Significant influence is presumed to exist when the Group holds between 20% and 50% or more of the voting power of another entity.

Investments in associates are accounted for using the equity method and are recognised initially at cost. The cost of the investments includes transaction costs.

The consolidated financial statements include the Group’s share of the profit or loss and other comprehensive income of associate, after adjustments to align the accounting policies with those of the Group, from the date that significant influence commences until the date that significant influence ceases.

When the Group’s share of losses exceeds its interest in an associate, the carrying amount of the investment, including any long-term interests that form part thereof, is reduced to zero, and the recognition of further losses is discontinued except to the extent that the Group has an obligation or has made payments on behalf of the investee.

Transactions eliminated on consolidation

Intra-group balances and transactions, and any unrealised income and expenses arising from intra-group transactions, are eliminated in preparing the consolidated financial statements. Unrealised gains arising from transactions with equity-accounted investees are eliminated against the investment to the extent of the Group’s interest in the investee. Unrealised losses are eliminated in the same way as unrealised gains, but only to the extent that there is no evidence of impairment.

Subsidiaries in the separate financial statements

Investments in subsidiaries are stated in the Company’s statement of financial position at cost less accumulated impairment losses.

3.2 Foreign currency

(i) Foreign currency transactions

Transactions in foreign currencies are translated to the respective functional currencies of Group entities at the exchange rates at the dates of the transactions. Monetary assets and liabilities denominated in foreign currencies at the reporting date are retranslated to the functional currency at the exchange rate at that date. The foreign currency gain or loss on monetary items is the difference between amortised cost in the functional currency at the beginning of the year, adjusted for effective interest and payments during the year, and the amortised cost in foreign currency translated at the exchange rate at the end of the year.

Non-monetary assets and liabilities denominated in foreign currencies that are measured at fair value are retranslated to the functional currency at the exchange rate at the date on that the fair value was determined. Non-monetary items in a foreign currency that are measured in terms of historical cost are translated using the exchange rate at the date of the transaction.

Foreign currency differences arising on retranslation are recognised in profit or loss.

FS14

GigaMedia Limited and its subsidiaries

Financial statements

Year ended 31 December 2013

(ii) Foreign operations

The assets and liabilities of foreign operations, excluding goodwill and fair value adjustments arising on acquisition, are translated to United States dollars at exchange rates at the end of the reporting period. The income and expenses of foreign operations are translated to United States dollars at exchange rates at the dates of the transactions. Goodwill and fair value adjustments arising on the acquisition of a foreign operation are treated as assets and liabilities of the foreign operation and are translated at the exchange rates at the end of the reporting period. For acquisitions prior to 1 January 2005, the exchange rates at the date of acquisition were used.

Foreign currency differences are recognised in other comprehensive income, and presented in the foreign currency translation reserve (translation reserve) in equity. However, if the foreign operation is a non-wholly-owned subsidiary, then the relevant proportionate share of the translation difference is allocated to the non-controlling interests. When a foreign operation is disposed of such that control, significant influence is lost, the cumulative amount in the translation reserve related to that foreign operation is reclassified to profit or loss as part of the gain or loss on disposal. When the Group disposes of only part of its interest in a subsidiary that includes a foreign operation while retaining control, the relevant proportion of the cumulative amount is reattributed to non-controlling interests. When the Group disposes of only part of its investment in an associate that includes a foreign operation while retaining significant influence, the relevant proportion of the cumulative amount is reclassified to profit or loss.

When the settlement of a monetary item receivable from or payable to a foreign operation is neither planned nor likely to occur in the foreseeable future, foreign exchange gains and losses arising from such a monetary item that are considered to form part of a net investment in a foreign operation are recognised in other comprehensive income, and are presented in the translation reserve in equity.

3.3 Property, plant and equipment

(i) Recognition and measurement

Items of property, plant and equipment are measured at cost less accumulated depreciation and accumulated impairment losses.

Cost includes expenditure that is directly attributable to the acquisition of the asset. The cost of self-constructed assets includes:

• the cost of materials and direct labour;

• any other costs directly attributable to bringing the assets to a working condition for their intended use;

• when the Group has an obligation to remove the asset or restore the site, an estimate of the costs of dismantling and removing the items and restoring the site on which they are located; and

• capitalised borrowing costs.

Purchased software that is integral to the functionality of the related equipment is capitalised as part of that equipment.

FS15

GigaMedia Limited and its subsidiaries

Financial statements

Year ended 31 December 2013

When parts of an item of property, plant and equipment have different useful lives, they are accounted for as separate items (major components) of property, plant and equipment.

The gain or loss on disposal of an item of property, plant and equipment (calculated as the difference between the net proceeds from disposal with the carrying amount of the item), and is recognised in profit or loss.

(ii) Subsequent costs

The cost of replacing a component of an item of property, plant and equipment is recognised in the carrying amount of the item if it is probable that the future economic benefits embodied within the component will flow to the Group, and its cost can be measured reliably. The carrying amount of the replaced component is derecognised. The costs of the day-to-day servicing of property, plant and equipment are recognised in profit or loss as incurred.

(iii) Depreciation

Depreciation is based on the cost of an asset less its residual value. Significant components of individual assets are assessed and if a component has a useful life that is different from the remainder of that asset, that component is depreciated separately.

Depreciation is recognised as an expense in profit or loss on a straight-line basis over the estimated useful lives of each component of an item of property, plant and equipment, unless it is included in the carrying amount of another asset. Leased assets are depreciated over the shorter of the lease term and their useful lives unless it is reasonably certain that the Group will obtain ownership by the end of the lease term. Freehold land is not depreciated.

Depreciation is recognised from the date that the property, plant and equipment are installed and are ready for use.

The estimated useful lives for the current and comparative years are as follows:

Buildings	50 years
Information and communication equipment	2 to 5 years
Transportation equipment	5 to 10 years
Office furniture and equipment	3 to 5 years
Leasehold improvements	1 to 5 years

Depreciation methods, useful lives and residual values are reviewed at the end of each reporting period and adjusted if appropriate.

3.4 Intangible assets and goodwill

(i) Goodwill

Goodwill that arises upon the acquisition of subsidiaries is included in intangible assets. For the measurement of goodwill at initial recognition, see note 3.1.

Subsequent measurement

Goodwill is measured at cost less accumulated impairment losses.

FS16

GigaMedia Limited and its subsidiaries

Financial statements

Year ended 31 December 2013

(ii) Trademarks

Trademarks acquired in a business combination are identified and recognised separately from goodwill where they satisfy the definition of an intangible asset and their fair values can be measured reliably. Trademarks are measured initially at cost. The cost of trademarks is their fair value at the acquisition date.

Subsequent to initial recognition, trademarks acquired in a business combination are measured at cost less accumulated amortisation and any accumulated impairment losses, on the same basis as intangible assets acquired separately.

Trademarks with indefinite useful lives are tested for impairment annually, or at the cash- generating unit level. Trademarks are not amortised. The useful life of trademarks with an indefinite useful life is reviewed annually to determine whether the useful life assessment continues to be supportable. If not, the change in useful life from indefinite to finite is made on a prospective basis.

(iii) Other intangible assets

Other intangible assets represents the capitalised software development costs and customer relationship.

Development activities involve a plan or design for the production of new or substantially improved software. Development expenditure is capitalised only if development costs can be measured reliably, the software is technically and commercially feasible, future economic benefits are probable, and the Group intends to and has sufficient resources to complete development and to use or sell the asset. The expenditure capitalised includes the direct labour and overhead costs that are directly attributable to preparing the asset for its intended use. Other development expenditure is recognised in profit or loss as incurred.

Other intangible assets with finite useful lives are measured at cost less accumulated amortisation and accumulated impairment losses.

(iv) Subsequent expenditure

Subsequent expenditure is capitalised only when it increases the future economic benefits embodied in the specific asset to which it relates. All other expenditure, including expenditure on internally generated goodwill and brands, is recognised in profit or loss as incurred.

(v) Amortisation

Amortisation is calculated based on the cost of the asset, less its residual value.

Amortisation is recognised in profit or loss on a straight-line basis over the estimated useful lives of intangible assets, other than goodwill, from the date that they are available for use. The estimated useful lives for the current and comparative years are as follows:

Capitalised software costs	3 to 5 years
Customer relationship	9 years

Amortisation methods, useful lives and residual values are reviewed at the end of each reporting period and adjusted if appropriate.

FS17

GigaMedia Limited and its subsidiaries

Financial statements

Year ended 31 December 2013

3.5 Financial instruments

(i) Non-derivative financial assets

The Group initially recognises loans and receivables and deposits on the date that they are originated. All other financial assets are recognised initially on the trade date, which is the date that the Group becomes a party to the contractual provisions of the instrument.

The Group derecognises a financial asset when the contractual rights to the cash flows from the asset expire, or it transfers the rights to receive the contractual cash flows on the financial asset in a transaction in which substantially all the risks and rewards of ownership of the financial asset are transferred. Any interest in transferred financial assets that is created or retained by the Group is recognised as a separate asset or liability.

Financial assets and liabilities are offset and the net amount presented in the statement of financial position when and only when, the Group has a legal right to offset the amounts and intends either to settle on a net basis or to realise the assets and settle the liability simultaneously.

The Group classifies non-derivative financial assets into the following categories: loans and receivables and available-for-sale financial assets.

Loans and receivables

Loans and receivables are financial assets with fixed or determinable payments that are not quoted in an active market. Such assets are recognised initially at fair value plus any directly attributable transaction costs. Subsequent to initial recognition, loans and receivables are measured at amortised cost using the effective interest method, less any impairment losses.

Loans and receivables comprise trade and other receivables, other assets and cash and cash equivalents.

Cash and cash equivalents comprise cash balances and short-term deposits with maturities of three months or less from the acquisition date that are subject to an insignificant risk of changes in their fair value, and are used by the Group in the management of its short-term commitments. For the purpose of the consolidated statement of cash flows, pledged deposits are excluded whilst bank overdrafts that are repayable on demand and that form an integral part of the Group’s cash management are included in cash and cash equivalents.

Available-for-sale financial assets

Available-for-sale financial assets are non-derivative financial assets that are designated as available for sale or are not classified in any of the above categories of financial assets. Available-for-sale financial assets are recognised initially at fair value plus any directly attributable transaction costs. Subsequent to initial recognition, they are measured at fair value and changes therein, other than impairment losses and foreign currency differences on available-for-sale debt instruments, are recognised in other comprehensive income and presented in the fair value reserve in equity. When an investment is derecognised, the gain or loss accumulated in equity is reclassified to profit or loss.

Available-for-sale financial assets comprise equity securities, debt securities and open-end funds.

FS18

GigaMedia Limited and its subsidiaries

Financial statements

Year ended 31 December 2013

(ii) Non-derivative financial liabilities

All other financial liabilities are recognised initially on the trade date, which is the date that the Group becomes a party to the contractual provisions of the instrument.

The Group derecognises a financial liability when its contractual obligations are discharged, cancelled or expire.

Financial assets and liabilities are offset and the net amount presented in the statement of financial position when, and only when, the Group has a legal right to offset the amounts and intends either to settle on a net basis or to realise the asset and settle the liability simultaneously.

The Group classifies non-derivative financial liabilities into the other financial liabilities category. Such financial liabilities are recognised initially at fair value plus any directly attributable transaction costs. Subsequent to initial recognition, these financial liabilities are measured at amortised cost using the effective interest method.

Other financial liabilities comprise trade and other payables, other liabilities and loans and borrowings.

(iii) Share capital

Ordinary shares

Ordinary shares are classified as equity. Incremental costs directly attributable to the issue of ordinary shares are recognised as a deduction from equity, net of any tax effects.

3.6 Impairment

(i) Non-derivative financial assets

A financial asset not carried at fair value through profit or loss, including an interest in an associate, is assessed at the end of each reporting period to determine whether there is objective evidence that it is impaired. A financial asset is impaired if objective evidence indicates that a loss event(s) has occurred after the initial recognition of the asset, and that the loss event(s) has an impact on the estimated future cash flows of that asset that can be estimated reliably.

Objective evidence that financial assets (including equity securities) are impaired can include default or delinquency by a debtor, restructuring of an amount due to the Group on terms that the Group would not consider otherwise, indications that a debtor or issuer will enter bankruptcy, adverse changes in the payment status of borrowers or issuers in the Group, economic conditions that correlate with defaults or the disappearance of an active market for a security. In addition, for an investment in an equity security, a significant or prolonged decline in its fair value below its cost is objective evidence of impairment.

Loans and receivables financial assets

The Group considers evidence of impairment for loans and receivables financial assets at both a specific asset and collective level. All individually significant loans and receivables are assessed for specific impairment.

FS19

GigaMedia Limited and its subsidiaries

Financial statements

Year ended 31 December 2013

In assessing collective impairment, the Group uses historical trends of the probability of default, the timing of recoveries and the amount of loss incurred, adjusted for management’s judgement as to whether current economic and credit conditions are such that the actual losses are likely to be greater or less than suggested by historical trends.

Losses are recognised in profit or loss and reflected in an allowance account against loans and receivables. Interest on the impaired asset continues to be recognised. When a subsequent event (eg. repayment by a debtor) causes the amount of impairment loss to decrease, the decrease in impairment loss is reversed through profit or loss.

Available-for-sale financial assets

Impairment losses on available-for-sale financial assets are recognised by reclassifying the losses accumulated in the fair value reserve in equity to profit or loss. The cumulative loss that is reclassified from equity to profit or loss is the difference between the acquisition cost, net of any principal repayment and amortisation, and the current fair value, less any impairment loss recognised previously in profit or loss. Changes in cumulative impairment provisions attributable to application of the effective interest method are reflected as a component of interest income. If, in a subsequent period, the fair value of an impaired available-for-sale equity security increases and the increase can be related objectively to an event occurring after the impairment loss was recognised, then the impairment loss is reversed. The amount of the reversal is recognised in profit or loss. However, any subsequent recovery in the fair value of an impaired available-for-sale equity security is recognised in other comprehensive income.

An impairment loss in respect of an associate is measured by comparing the recoverable amount of the investment with its carrying amount in accordance with Note 3.6 (see below). An impairment loss is recognised in profit or loss. An impairment loss is reversed if there has been a favourable change in the estimates used to determine the recoverable amount.

(ii) Non-financial assets

The carrying amounts of the Group’s non-financial assets, other than inventories and deferred tax assets, are reviewed at each reporting date to determine whether there is any indication of impairment. If any such indication exists, then the asset’s recoverable amount is estimated. For goodwill and intangible assets, the recoverable amount is estimated each year at the same time. An impairment loss is recognised if the carrying amount of an asset or its related cash- generating unit (CGU) exceeds its estimated recoverable amount.

The recoverable amount of an asset or CGU is the greater of its value in use and its fair value less costs to sell. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset or CGU. For the purpose of impairment testing, assets that cannot be tested individually are grouped together into the smallest group of assets that generates cash inflows from continuing use that are largely independent of the cash inflows of other assets or CGUs. Subject to an operating segment ceiling test, for the purposes of goodwill impairment testing, CGUs to which goodwill has been allocated are aggregated so that the level at which impairment testing is performed reflects the lowest level at which goodwill is monitored for internal reporting purposes. Goodwill acquired in a business combination is allocated to groups of CGUs that are expected to benefit from the synergies of the combination.

FS20

GigaMedia Limited and its subsidiaries

Financial statements

Year ended 31 December 2013

The Group’s corporate assets do not generate separate cash inflows and are utilised by more than one CGU. Corporate assets are allocated to CGUs on a reasonable and consistent basis and tested for impairment as part of the testing of the CGU to which the corporate asset is allocated.

Impairment losses are recognised in profit or loss. Impairment losses recognised in respect of CGUs are allocated first to reduce the carrying amount of any goodwill allocated to the CGU (group of CGUs), and then to reduce the carrying amounts of the other assets in the CGU (group of CGUs) on a pro rata basis.

An impairment loss in respect of goodwill is not reversed. In respect of other assets, impairment losses recognised in prior periods are assessed at each reporting date for any indications that the loss has decreased or no longer exists. An impairment loss is reversed if there has been a change in the estimates used to determine the recoverable amount. An impairment loss is reversed only to the extent that the asset’s carrying amount does not exceed the carrying amount that would have been determined, net of depreciation or amortisation, if no impairment loss had been recognised.

3.7 Leases payments

Payments made under operating leases are recognised in profit or loss on a straight-line basis over the term of the lease. Lease incentives received are recognised as an integral part of the total lease expense, over the term of the lease.

Contingent lease payments are accounted for by revising the minimum lease payments over the remaining term of the lease when the lease adjustment is confirmed.

3.8 Inventories

Inventories are measured at the lower of cost and net realisable value. The cost of inventories is based on the first-in first-out principle, and includes expenditure incurred in acquiring the inventories, production or conversion costs, and other cost incurred in bringing them to their existing location and condition. In the case of manufactured inventories and work in progress, cost includes an appropriate share of production overheads based on normal operating capacity.

Net realisable value is the estimated selling price in the ordinary course of business, less the estimated costs of completion and estimated costs necessary to make the sale.

3.9 Provisions

A provision is recognised if, as a result of a past event, the Group has a present legal or constructive obligation that can be estimated reliably, and it is probable that an outflow of economic benefits will be required to settle the obligation. Provisions are determined by discounting the expected future cash flows at a pre-tax rate that reflects current market assessments of the time value of money and the risks specific to the liability. The unwinding of the discount is recognised as finance cost.

FS21

GigaMedia Limited and its subsidiaries

Financial statements

Year ended 31 December 2013

3.10 Finance income and finance costs

Finance income comprises interest income on funds invested (including available-for-sale financial assets), dividend income, gains on disposal of available-for-sale financial assets, and reclassifications of net gains previously recognised in other comprehensive income. Interest income is recognised as it accrues in profit or loss, using the effective interest method. Dividend income is recognised in profit or loss on the date that the Group’s right to receive payment is established, which in the case of quoted equity securities is normally the ex-dividend date.

Finance costs comprise interest expense on borrowings, losses on disposal of available-for-sale financial assets, impairment losses recognised on financial assets (other than trade receivables), and reclassification of net losses previously recognised in other comprehensive income.

Borrowing costs that are not directly attributable to the acquisition, construction or production of a qualifying asset are recognised in profit or loss using the effective interest method.

Foreign currency gains and losses on financial assets and financial liabilities are reported on a net basis as either finance income or finance cost depending on whether foreign currency movements are in net gain or net loss position.

3.11 Employee benefits

(i) Defined contribution plans

A defined contribution plan is a post-employment benefit plan under which an entity pays fixed contributions into a separate entity and will have no legal or constructive obligation to pay further amounts. Obligations for contributions to defined contribution pension plans are recognised as an employee benefit expense in profit or loss in the periods during which related services are rendered by employees.

(ii) Defined benefits plan

A defined benefit plan is a post-employment benefit plan other than a defined contribution plan. The Group’s net obligation in respect of defined benefit plans is calculated separately for each plan by estimating the amount of future benefit that employees have earned in return for their service in the current and prior periods; that benefit is discounted to determine its present value. The fair value of any plan assets is deducted. The Group determines the net interest expense (income) on the net defined benefit liability (asset) for the period by applying the discount rate used to measure the defined benefit obligation at the beginning of the annual period to the net defined benefit liability (asset).

The calculation is performed annually by a qualified actuary using the projected unit credit method. When the calculation results in a benefit to the Group, the recognised asset is limited to the present value of economic benefits available in the form of any future refunds from the plan or reductions in future contributions to the plan. In order to calculate the present value of economic benefits, consideration is given o any minimum funding requirements that apply to any plan in the Group. An economic benefit is available to the Group if it is realisable during the life of the plan, or on settlement of the plan liabilities.

FS22

GigaMedia Limited and its subsidiaries

Financial statements

Year ended 31 December 2013

Remeasurements from defined benefit plans comprise actuarial gains and losses, the return on plan assets (excluding interest) and the effect of the asset ceiling (if any, excluding interest). The Group recognises them immediately in other comprehensive income and all expenses related to defined benefit plans in employee benefits expense in profit or loss.

When the benefits of a plan are changed, or when a plan is curtailed, the portion of the changed benefit related to past service by employees, or the gain or loss on curtailment, is recognised immediately in profit or loss when the plan amendment or curtailment occurs.

The Group recognises gains and losses on the settlement of a defined benefit plan when the settlement occurs. The gain or loss on settlement is the difference between the present value of the defined benefit obligation being settled as determined on the date of settlement and the settlement price, including any plan assets transferred and any payments made directly by the Group in connection with the settlement.

(iii) Share-based payment transactions

The grant date fair value of share-based payment awards granted to employees is recognised as an employee expense, with a corresponding increase in equity, over the period that the employees unconditionally become entitled to the awards. The amount recognised as an expense is adjusted to reflect the number of awards for which the related service and non-market performance conditions are expected to be met, such that the amount ultimately recognised as an expense is based on the number of awards that meet the related service and non-market performance conditions at vesting date. For share-based payment awards with non-vesting conditions, the grant date fair value of the share-based payment is measured to reflect such conditions and there is no true-up for differences between expected and actual outcomes.

The fair value of the amount payable to employees in respect of share appreciation rights, which are settled in cash, is recognised as an expense with a corresponding increase in liabilities, over the period that the employees become unconditionally entitled to payment. The liability is remeasured at each reporting date and at settlement date based on the fair value of the share appreciation rights. Any changes in the fair value of the liability are recognised as employee benefits expense in profit or loss.

3.12 Revenue recognition

Revenue is recognised to the extent that it is probable that the economic benefits will flow to the Group and the revenue can be reliably measured.

Revenue comprises the fair value for the sale of goods and rendering of services net of value added tax, rebates and discounts, after eliminating sales within the Group.

FS23

GigaMedia Limited and its subsidiaries

Financial statements

Year ended 31 December 2013

Asian online game and service revenues

Online game revenues are earned through the sale of online game points, prepaid cards, game packs and also through the sublicensing of certain games to distributors. Virtual online game points are sold to distributors or end-users who can make the payments through credit cards, internet banking or telecommunication service operators. Physical prepaid cards and game packs are sold through distributors and convenience stores. Proceeds from sales of physical cards and game packs, net of sales discounts, and online game points are deferred when received and revenue is recognised upon the actual usage of the playing time or in-game virtual items 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 the Group’s published game points expiration policy. Sublicensing revenues from the distributors are recognised based on end users’ activation to the game system and when the performance obligations have been completed. Licensing fee revenues are recognized when the delivery of licensed products has occurred and the fee is fixed or determinable.

The Group reports sales of virtual online game points on a gross basis. In the sales of virtual online game points, the Group acts as principal and the Group has latitude in establishing price. Fixed percentage fees retained by service providers for payment processing related to the Group’s online game services are recognised as cost of online game revenues. The Group reports sublicensing revenues on a net basis. In the sublicense agreements, the Group acts as agent and the distributors are responsible for the operating and the marketing.

Online game and service revenues also include revenues derived from online advertising arrangements, sponsorship arrangements, or a combination of both. These service arrangements allow advertisers to place advertisements on particular areas of the Group’s Web sites and online games platforms over a stated period of time. Service revenues from online advertising arrangements are recognised ratably over the period of the contract when the collectability is reasonably assured.

Cloud product and service revenues

Cloud service revenues are related to cloud computing services provided by the Group. Revenues are recorded net of discounts. Cloud service revenues are recognised for the period of time for which the Group provide services to the customer. Customers have a choice of paying either monthly or in advance for a certain period of time, for which they receive corresponding discounts. The Group records any such advanced payment receipts as other current liabilities and amortises such revenues over the subscription period.

Revenue from the sales of equipment and other related products are recognised upon acceptance. The Group reports the sales of equipment and other related products on a gross basis. In the sales of equipment and other related products, the Group acts as principal as the Group is the primary obligor in the transaction and has the latitude in establishing price.

FS24

GigaMedia Limited and its subsidiaries

Financial statements

Year ended 31 December 2013

3.13 Tax

Tax expense comprises current and deferred tax. Current tax and deferred tax is recognised in profit or loss except to the extent that it relates to a business combination, or items recognised directly in equity or in other comprehensive income.

Current tax is the expected tax payable or receivable on the taxable income or loss for the year, using tax rates enacted or substantively enacted at the reporting date, and any adjustment to tax payable in respect of previous years.

Deferred tax is recognised in respect of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for taxation purposes. Deferred tax is not recognised for:

• temporary differences on the initial recognition of assets or liabilities in a transaction that is not a business combination and that affects neither accounting nor taxable profit or loss;

• temporary differences related to investments in subsidiaries and associates entities to the extent that the Group is able to control the timing of the reversal of the temporary difference and it is probable that they will not reverse in the foreseeable future; and

• taxable temporary differences arising on the initial recognition of goodwill.

The measurement of deferred taxes reflects the tax consequences that would follow the manner in which the Group expects, at the end of the reporting period, to recover or settle the carrying amount of its assets and liabilities. For investment property that is measured at fair value, the presumption that the carrying amount of the investment property will be recovered through sale has not been rebutted. Deferred tax is measured at the tax rates that are expected to be applied to temporary differences when they reverse, based on the laws that have been enacted or substantively enacted by the reporting date.

Deferred tax assets and liabilities are offset if there is a legally enforceable right to offset current tax liabilities and assets, and they relate to taxes levied by the same tax authority on the same taxable entity, or on different tax entities, but they intend to settle current tax liabilities and assets on a net basis or their tax assets and liabilities will be realised simultaneously.

A deferred tax asset is recognised for unused tax losses, tax credits and deductible temporary differences, to the extent that it is probable that future taxable profits will be available against which they can be utilised. Deferred tax assets are reviewed at each reporting date and are reduced to the extent that it is no longer probable that the related tax benefit will be realised.

In determining the amount of current and deferred tax, the Group takes into account the impact of uncertain tax positions and whether additional taxes and interest may be due. The Group believes that its accruals for tax liabilities are adequate for all open tax years based on its assessment of many factors, including interpretations of tax law and prior experience. This assessment relies on estimates and assumptions and may involve a series of judgements about future events. New information may become available that causes the Group to change its judgement regarding the adequacy of existing tax liabilities; such changes to tax liabilities will impact tax expense in the period that such a determination is made.

FS25

GigaMedia Limited and its subsidiaries

Financial statements

Year ended 31 December 2013

3.14 Discontinued operations

A discontinued operation is a component of the Group’s business, the operations and cash flows of which can be clearly distinguished from the rest of the Group and which:

• Represents a separate major line of business of geographical area of operations;

• Is part of a single co-ordinated plan to dispose of a separate major line of business or geographical area of operations; or

• Is a subsidiary acquired exclusively with a view to resale.

Classification as a discontinued operation occurs upon disposal or when the operation meets the criteria to be classified as held for sale, if earlier. When an operation is classified as a discontinued operation, the comparative statement of profit or loss is re-presented as if the operation had been discontinued from the start of the comparative year.

3.15 Earnings per share

The Group presents basic and diluted earnings per share data for its ordinary shares. Basic earnings per share is calculated by dividing the profit or loss attributable to ordinary shareholders of the Company by the weighted average number of ordinary shares outstanding during the year, adjusted for own shares held. Diluted earnings per share is determined by adjusting the profit or loss attributable to ordinary shareholders and the weighted average number of ordinary shares outstanding, adjusted for own shares held, for the effects of all dilutive potential ordinary shares, which comprise share options granted to employees.

3.16 Segment reporting

An operating segment is a component of the Group that engages in business activities from which it may earn revenues and incur expenses, including revenues and expenses that relate to transactions with any of the Group’s other components. All operating segments’ operating results are reviewed regularly by the Board of Directors (the chief operating decision maker) to make decisions about resources to be allocated to the segment and to assess its performance, and for which discrete financial information is available.

Segment results that are reported to the Board of Directors include items directly attributable to a segment as well as those that can be allocated on a reasonable basis. Unallocated items comprise mainly corporate assets (primarily the Company’s headquarters), head office expenses and tax assets and liabilities.

Segment capital expenditure is the total cost incurred during the year to acquire property, plant and equipment, investment property, and intangible assets other than goodwill.

3.17 New standards and interpretations not adopted

A number of new standards, amendments to standards and interpretations are effective for annual periods beginning after 1 January 2013 and have not been applied in preparing these financial statements. Those which may be relevant to the Group that are expected to have a significant effect on the financial statements of the Group and the Company in future financial periods, and which the Group does not plan to early adopt except as otherwise indicated below, are set out below.

FS26

GigaMedia Limited and its subsidiaries

Financial statements

Year ended 31 December 2013

Applicable for the Group’s 2014 financial statements

• FRS 110 Consolidated Financial Statements introduces a new control model that is applicable to all investees, by focusing on whether the Group has power over an investee, exposure, or rights to variable returns from its involvement with the investee and ability to use its power to affect those returns. In particular, FRS 110 requires the Group to consolidate investees that it controls on the basis of de facto circumstances.

In accordance with the transitional provisions of FRS 110, the Group re-assessed the control conclusion for its investees. At 31 January 2013, the adoption of FRS110 has no significant impact on the Group’s assessment of its control over the subsidiaries.

• FRS 112 Disclosure of Interests in Other Entities brings together into a single standard all the disclosure requirements about an entity’s interests in subsidiaries, joint arrangements, associates and unconsolidated structured entities. The Group is currently assessing the disclosure requirements for interests in subsidiaries, interests in joint arrangements and associates and unconsolidated structured entities in comparison with the existing disclosures. FRS 112 requires the disclosure of information about the nature, risks and financial effects of these interests.

FRS 110, FRS 111 and FRS 112 are effective for annual periods beginning on or after 1 January 2014 with early adoption permitted.

• Amendments to FRS 32 Financial Instruments: Presentation—Offsetting Financial Assets and Financial Liabilities, which clarifies the existing criteria for net presentation on the face of the statement of financial position.

Under the amendments, to qualify for offsetting, the right to set off a financial asset and a financial liability must not be contingent on a future event and must be enforceable both in the normal course of business and in the event of default, insolvency or bankruptcy of the entity and all counterparties.

The adoption of the amendment is not expected to have a significant impact on the consolidated financial statements of the Group.

FS27

GigaMedia Limited and its subsidiaries

Financial statements

Year ended 31 December 2013

4 Property, plant and equipment

	Freehold land			Buildings			Leasehold improvements			Information and communication equipment			Office furniture and equipment			Transportation equipment			Equipment under installation			Total
	US$’000			US$’000			US$’000			US$’000			US$’000			US$’000			US$’000			US$’000
Group
Cost
At 1 January 2012		734			1,251			1,781			8,304			928			148			188			13,334
Additions		—			—			95			229			12			—			93			429
Disposals		—			—			(711	)		(1,124	)		(300	)		(106	)		—			(2,241	)
Reclassification		—			—			175			82			—			—			(257	)		—
Deconsolidation of business - IAHGames		—			—			(898	)		(2,793	)		(357	)		(44	)		—			(4,092	)
Written off		—			—			—			(5	)		(1	)		—			(1	)		(7	)
Currency translation difference		31			53			13			164			6			2			5			274
At 31 December 2012		765			1,304			455			4,857			288			—			28			7,697
Additions		—			—			29			183			13			—			—			225
Disposals		—			—			(351	)		(94	)		(43	)		—			—			(488	)
Reclassification		—			—			—			27			—			—			(27	)		—
Currency translation difference		(20	)		(34	)		(10	)		(114	)		(6	)		—			(1	)		(185	)
At 31 December 2013		745			1,270			123			4,859			252			—			—			7,249
Accumulated depreciation and impairment losses
At 1 January 2012		26			356			1,328			6,233			578			125			—			8,646
Depreciation charge to profit or loss		—			17			189			887			130			3			—			1,226
Depreciation capitalised in intangible assets		—			—			—			13			—			—			—			13
Disposals		—			—			(490	)		(595	)		(177	)		(106	)		—			(1,368	)
Deconsolidation of business - IAHGames		—			—			(664	)		(2,404	)		(268	)		(24	)		—			(3,360	)
Impairment loss		188			29			—			—			—			—			—			217
Currency translation difference		4			16			12			139			6			2			—			179
At 31 December 2012		218			418			375			4,273			269			—			—			5,553

FS28

GigaMedia Limited and its subsidiaries

Financial statements

Year ended 31 December 2013

	Freehold land			Buildings			Leasehold improvements			Information and communication equipment			Office furniture and equipment			Transportation equipment		Equipment under installation		Total
	US$’000			US$’000			US$’000			US$’000			US$’000			US$’000		US$’000		US$’000
Accumulated depreciation and impairment losses
At 1 January 2013		218			418			375			4,273			269			—		—		5,553
Depreciation charge to profit or loss		—			17			46			340			8			—		—		411
Depreciation capitalised in intangible assets		—			—			—			2			—			—		—		2
Disposals		—			—			(350	)		(59	)		(40	)		—		—		(449	)
Currency translation difference		(5	)		(11	)		(8	)		(101	)		(6	)		—		—		(131	)
At 31 December 2013		213			424			63			4,455			231			—		—		5,386
Carrying amounts
At 1 January 2012		708			895			453			2,071			350			23		188		4,688
At 31 December 2012		547			886			80			584			19			—		28		2,144
At 31 December 2013		532			846			60			404			21			—		—		1,863

In 2012, based on a valuation performed by an independent valuer using the Direct Comparison Method, the Group recorded an impairment loss of US$217,000 for freehold land and buildings.

FS29

GigaMedia Limited and its subsidiaries

Financial statements

Year ended 31 December 2013

5 Intangible assets

	Goodwill			Trademarks			Others			Total
	US$’000			US$’000			US$’000			US$’000
Group
Cost
At 1 January 2012		35,789			11,711			16,245			63,745
Additions		—			—			1,696			1,696
Disposal		—			—			(6,039	)		(6,039	)
Deconsolidation of subsidiary		(7,352	)		—			—			(7,352	)
Effect of movements in exchange rates		1,214			500			592			2,306
At 31 December 2012		29,651			12,211			12,494			54,356
At 1 January 2013		29,651			12,211			12,494			54,356
Additions		—			—			1,229			1,229
Disposals		—			—			(1,552	)		(1,552	)
Acquisitions through business combination		496			—			67			563
Effect of movements in exchange rates		(773	)		(316	)		(319	)		(1,408	)
At 31 December 2013		29,374			11,895			11,919			53,188
Accumulated amortisation and impairment losses
At 1 January 2012		7,352			—			12,422			19,774
Amortisation for the year		—			—			2,192			2,192
Disposal		—			—			(6,039	)		(6,039	)
Deconsolidation of subsidiary		(7,352	)		—			—			(7,352	)
Impairment loss		12,489			—			15			12,504
Effect of movements in exchange rates		228			—			440			668
At 31 December 2012		12,717			—			9,030			21,747
At 1 January 2013		12,717			—			9,030			21,747
Amortisation for the year		—			—			1,904			1,904
Disposals		—			—			(1,547	)		(1,547	)
Impairment loss		17,054			11,943			1,308			30,305
Effect of movements in exchange rates		(397	)		(48	)		(237	)		(682	)
At 31 December 2013		29,374			11,895			10,458			51,727
Carrying amounts
At 1 January 2012		28,437			11,711			3,823			43,971
At 31 December 2012		16,934			12,211			3,464			32,609
At 31 December 2013		—			—			1,461			1,461

FS30

GigaMedia Limited and its subsidiaries

Financial statements

Year ended 31 December 2013

Impairment testing for cash-generating units containing goodwill

For the purpose of impairment testing, the entire goodwill is allocated to the Group’s cash- generating unit (CGU)—FunTown Group (“FunTown”), whose operations is that of Asian online game and service operating segment. The carrying amount is as follows:

	2013		2012
	US$’000		US$’000
FunTown		—		16,934

(The FunTown refers to a sub-group of operating entities held by Funtown World Limited, a wholly owned subsidiary of GigaMedia Limited, incorporated in the British Virgin Islands.)

In 2013, with the acquisition of FingerRockz Co., Ltd. (“FingerRockz”), the Group obtained its mobile platform development team. FingerRockz now constitutes an important complement to FunTown’s research and development capacity in mobile games. Consequently, the Group reassigned its role and developed its estimates of future cash flows from mobile games accordingly. For the purpose of testing goodwill for impairment, the Group has determined that FingerRockz is an integral part of FunTown and goodwill arising from the acquisition of FingerRockz was reassigned to FunTown.

The recoverable amount of a FunTown was determined based on value-in-use calculations. The fair value of the FunTown was determined based on the present value of estimated future net cash flows over a five year period discounted at the weighted average cost of capital. Cash flows beyond the five-year period were extrapolated using the estimated growth rates stated below. The growth rate did not exceed the long-term average growth rate for the business in which the FunTown operates.

Key assumption used in discounted cash flow projection calculations:

	2013			2012
	FunTown			FunTown
	%			%
Group
Budgeted operating margin		(26.0	)		19.4
Growth rate		0.0			0.0
Discount rate		13.0			17.1

Management determined budgeted operating margin based on past performance and its expectations of the game market development. The weighted average growth rate used are consistent with the forecasts included in industry reports and the Group’s historical performance. Management recognises that the speed of technological change and the possibility of new entrants can have a significant impact on operating margin and growth rate assumptions.

The discount rate used was a post-tax measure estimated based on past experience, and industry average weighted average cost of capital.

FS31

GigaMedia Limited and its subsidiaries

Financial statements

Year ended 31 December 2013

In 2012, the Group has estimated future net cash flow using the management internal developed estimates and included a terminal value calculated using a long-term future growth rate of 0% based on analysis of the current and expected future economic conditions. Other significant estimates and assumptions used in developing the future net cash flows include an assumed average revenue decline of 7% and a discount rate of 17%. As a result, the carrying value of FunTown exceeded its fair value, and the implied fair value of the goodwill was determined to be US$16,900,000. Consequently, a goodwill impairment charge of US$12,500,000 was recognised in 2012.

In 2013, due to the continual slowdown in demand for casual online games and loss of a key licensed game, the Group experienced significant decline in revenues and negative operating margin in Taiwan as compared to its previous future cash flow expectations. In 2013, the Group went through an internal restructuring of its operations and made a business decision to transit from PC-based games to browser/mobile games and social casino games. In addition, its market capitalisation had also fallen below its net book value based on the quoted market price of its common stock for a sustained period of time. Based on these qualitative factors, the Group has determined its fair value of FunTown may be less than its carrying value, and the recoverable amount of the remaining goodwill could be impaired. Using the same methodology, the Group developed its expected future net cash flows based on historical data and internally developed estimates. Based on the abovementioned, the Group has assumed a terminal value of zero. Other significant estimates and assumptions used in developing the future net cash flows include an assumed average revenue decline of 28% and a discount rate of 13%. As a result, the carrying value of FunTown exceeded its fair value, and the implied fair value of the goodwill was determined to be US$Nil. Consequently, a goodwill impairment charge of US$17,000,000 was recognised in 2013.

Trademarks

Trademarks have indefinite useful lives and are not amortised as management expects to continue the related business indefinitely. All conditions required for treatment as an intangible with indefinite useful life has been met.

The Group recorded an impairment charge of US$11.9 million for the year ended 31 December 2013 (31 December 2012: US$Nil) relating to impairment on the trade name arising from the acquisition of FunTown. The impairment for the trademarks of FunTown is a result of the Group’s repositioning itself as described above.

Others

During the year, the Group recorded an impairment loss of US$1,308,000 (31 December 2012: US$15,000) relating to impairment on capitalised software development costs as a result of the cessation of development in certain projects within its Asian online game and service segment.

FS32

GigaMedia Limited and its subsidiaries

Financial statements

Year ended 31 December 2013

6 Subsidiaries

	Company
	2013			2012
	US$’000			US$’000
At beginning of year		118,514			168,063
Impairment during the year		(27,075	)		(56,884	)
Disposal of subsidiary		—			(34	)
Currency alignment		(2,952	)		7,369
		88,487			118,514

At the reporting date, the Company assessed the recoverable amount of its investment in subsidiaries. The recoverable amount has been determined based on the fair value less costs to sell. Fair value is based on the revalued net asset value of the subsidiaries at the reporting date as, in the opinion of the management of the Company, the revalued net asset value of the investment reasonably approximates the fair value. This resulted in an impairment loss of US$27,075,000 (2012: US$56,884,000) being charged to the statement of comprehensive income of the Company.

Details of the subsidiaries are as follows:

Name of subsidiaries	Principal activities	Country of incorporation	Percentage ownership interest
			2013 %			2012 %
Held by the Company
GigaMedia International Holdings Limited	Holding company	British Virgin Islands		100			100
Held by GigaMedia International Holdings Limited
GigaMedia Global Limited	Online games	British Virgin Islands		—			100
Cambridge Entertainment Software Limited	Holding company	British Virgin Islands		100			100
GigaMedia (HK) Limited	Holding company	Hong Kong		100			100
Bridgepoint International Limited	Holding company	British Virgin Islands		—	**		100
GigaMedia Online Entertainment Corp.	Holding company	Cayman Islands		100			100

FS33

GigaMedia Limited and its subsidiaries

Financial statements

Year ended 31 December 2013

Name of subsidiaries	Principal activities	Country of incorporation	Percentage ownership interest
			2013 %			2012 %
Held by GigaMedia Online Entertainment Corp.
FunTown World Limited	Holding company	British Virgin Islands		100			100
GigaMedia Asia Limited	Holding company	British Virgin Islands		—	**		100
GigaMedia Asia Pacific Limited	Holding company	British Virgin Islands		100			100
Skyace Pacific Limited	Online games	British Virgin Islands		100			100
Centermax Limited	Holding company	British Virgin Islands		—	**		100
GigaMedia Capital Limited	Holding company	British Virgin Islands		100			100
Giga Slam Dunk Corporation	Online games	Labuan		—			100
Giga Wartime Corporation	Online games	Labuan		—			100
Dragon Mark Holdings Limited	Holding company	British Virgin Islands		100			100
Premiere Vantage Holdings Limited	Holding company	British Virgin Islands		100			100
GigaMedia Freestyle Holdings Limited	Holding company	British Virgin Islands		100			100
Spring Asia Limited	Holding company	Labuan		100			100
GigaMedia (Labuan) Limited	Holding company	Labuan		100			100
Megabiz Limited	Holding company	British Virgin Islands		100			100

FS34

GigaMedia Limited and its subsidiaries

Financial statements

Year ended 31 December 2013

Name of subsidiaries	Principal activities	Country of incorporation	Percentage ownership interest
			2013 %		2012 %
Held by FunTown World Limited
FunTown Hong Kong Limited	Online games	Hong Kong		100		100
Held by FunTown Hong Kong Limited
FunTown Software (Shanghai) PRC Limited	Online games	PRC		—		100
Held by Skyace Pacific Limited
Dragongate Enterprises Limited	Online games	British Virgin Islands		70		70
Held by Dragongate Enterprises Limited
GigaMedia Dragongate Limited	Online games	Labuan		100		100
Held by Cambridge Entertainment Software Limited
Cambridge Interactive Development Corporation	Software development and application services	U.S.A.		100		100
Internet Media Licensing Limited	Software development and application services	British Virgin Islands		100		100
Held by Internet Media Licensing Limited
Ultra Internet Media S. A. (“UIM”)	Holding company	Nevis		100		100

FS35

GigaMedia Limited and its subsidiaries

Financial statements

Year ended 31 December 2013

Name of subsidiaries	Principal activities	Country of incorporation	Percentage ownership interest
			2013 %			2012 %
Held by Dragon Mark Holdings Limited
Wolverine Holdings Group Limited	Holding company	British Virgin Islands		100			100
Held by GigaMedia (Labuan) Limited
Leisure Alliance Sdn. Bhd.	Holding company	Malaysia		100			100
Held by Leisure Alliance Sdn. Bhd.
Hoshin GigaMedia Center Inc.	Online games	Taiwan		100			100
GigaMedia Cloud Services Co., Ltd.	Cloud computing services	Taiwan		100			100
Giga Development Corporation	Dormant	Taiwan		100			—
Held by Hoshin GigaMedia Center Inc
Play2gether Digital Technology Co., Ltd.	Online games	Taiwan		100			—
PerfectPairs Gaming Co., Ltd.	Online games	Taiwan		100			—
Gaminfinity Publishing Co., Ltd.	Online games	Taiwan		100			—
FingerRockz Co., Ltd.	Online games	Taiwan		51.6	#		—
Held by Bridgepoint International Limited
Implus International Limited	Holding company	British Virgin Islands		—	**		100

FS36

GigaMedia Limited and its subsidiaries

Financial statements

Year ended 31 December 2013

Name of subsidiaries	Principal activities	Country of incorporation	Percentage ownership interest
			2013 %			2012 %
Held by GigaMedia Asia Pacific Limited
Infocomm Asia Holdings Pte. Ltd. (“IAHGames”)	Online games	Singapore		—			note (a)
Held by GigaMedia Asia Limited
GigaMedia China Limited	Holding company	British Virgin Islands		—	**		100
Held by GigaMedia (HK) Limited
GigaMedia Europe Limited S.à.r.l.	Holding company	Luxembourg		—			100
JIDI Network Technology (Shanghai) Co., Ltd. (“JIDI”)	Online games	PRC		—	*		100	*
Controlled by JIDI Network Technology (Shanghai) Co., Ltd.
Shanghai JIDI Network Technology Co., Ltd. (“Shanghai JIDI”)	Online gaming operator	PRC		—	*		—	*

* In order to comply with foreign ownership restrictions and to hold the necessary licenses required, the Group had operated its Asian online game and service business in the People’s Republic of China (“PRC”) through Shanghai JIDI Network Technology Co., Ltd. (“Shanghai JIDI”). The Group has no ownership interest in Shanghai JIDI and relies on a series of contractual arrangements that are intended to give the Group control over Shanghai JIDI. The Group is therefore considered to have significant beneficial interest in Shanghai JIDI. As part of contractual arrangements, each of the shareholders of Shanghai JIDI has pledged all of their respective equity interests in Shanghai JIDI to JIDI Network Technology (Shanghai) Co., Ltd. (“JIDI”) as security for the full performance of their respective obligations under all of their agreements with JIDI. According to the People’s Republic of China (“PRC”) Property Rights Law, a pledge over the equity interests of a limited liability company is created only when such equity pledge agreements are registered with the relevant local branch of the State Administration for Industry and Commerce (the “SAIC”). Shanghai JIDI has successfully registered the equity pledge agreements with the relevant local branch of the SAIC. The Group therefore believes that it will be able to enforce these pledges in the China since these equity pledge agreements have been properly registered.

FS37

GigaMedia Limited and its subsidiaries

Financial statements

Year ended 31 December 2013

Those contractual arrangements have been duly executed and the share pledge agreements have been registered with local government authority in compliance with PRC legal requirements. Shanghai JIDI held an Internet Content Provider (“ICP”) license, an Internet cultural operation licenses and an Internet publishing license. The financial results of Shanghai JIDI had been included in the accompanying consolidated financial statements since January 2011. In June 2012, the board of directors approved a plan to dispose of Shanghai JIDI. As a result, Shanghai JIDI’s operations had been accounted for as discontinued operations. In May 2013, the Group was notified by the authority that Shanghai JIDI had completed the dissolution procedures and was duly deregistered.

** Dormant /investment holding companies liquidated or deregistered with no material financial impact during the year.

# The fair value of the net assets acquired and the effect of the acquisition to the Group’s financial position is in this note 32.

(a) Deconsolidation of IAHGames and Disposal of Spring Asia in 2012

In July 2012, the Group entered into the following agreements:

• Agreement to dispose all of its shares in Spring Asia, an investment holding subsidiary that holds 30% shareholdings of Game First International Corporation (“GFI”), to IAHGames; and

• Agreement to dispose 60% shareholdings in IAHGames to IAHGames’ non-controlling interests and Management Capital International Limited (“MCIL”), a British Virgin Islands company owned by IAHGames’ management.

As a result of the disposal, the Group lost control of both subsidiaries in August 2012. 20% shareholdings in IAH Games was still retained by the Group and accounted as an associate (see Note 7) as at 31 December 2012.

In consideration for the sale of IAHGames and Spring Asia, the Group was to receive US$1 million and US$3 million respectively, in cash. The consideration was to be collected in four equal instalments, with the first due upon closing, the second due in October 2012, the third due in January 2013 and the fourth due in April 2013. The payments were collateralised by the shares of Spring Asia and its shares in GFI and were only released from the escrow in proportion to the payment made upon each instalment. The first instalment of US$750,000 was received upon the closing on 15 August 2012.

On 17 April 2013, the Group entered into a settlement agreement with IAHGames and its management, and MCIL when the remaining three instalments were delayed. Pursuant to the settlement agreement, either IAHGames or IAHGames’ management was to pay the Group US$2,258,000, which included interest, to fulfill IAHGames’ obligation under the aforementioned sale of ownership in Spring Asia. In addition, MCIL was to purchase all of the Group’s remaining 20% shares in IAHGames for a consideration of US$1,000,000. The total payments of US$3,258,000 were made in May 2013.

FS38

GigaMedia Limited and its subsidiaries

Financial statements

Year ended 31 December 2013

The Group accounted for the deconsolidation of and the retained non-controlling investment of IAHGames in August 2012 at fair value. Net assets of the IAHGames and Spring Asia as at the date of disposal were as follows:

	Note	IAHGames and Spring Asia As at date of disposal
		US$’000
Assets:
Cash and bank balances			1,308
Trade receivables			1,009
Other receivables, deposits and prepayment			25
Investments in associates	7		3,023
Property, plant and equipment	4		732
Other non-current assets			366
Total assets			6,463
Liabilities:
Trade payables			992
Other payables and accruals			2,080
Income tax payable			1,080
Other current liabilities			239
Other liabilities			2,082
Total liabilities			6,473
Net liabilities derecognised			(10	)
Less: Foreign currency translation reserve reclassified			(217	)
Add: Non-controlling interest			3,016
			2,789
Fair value of consideration			3,000
The fair value of the 20% retained non-controlling investment in IAHGames at the date the control was lost			—
Net assets of IAHGames and Spring Asia at the date of the deconsolidation			(2,789	)
			211
Representing:
Gain on deconsolidation of IAHGames			234
Loss on disposal of Spring Asia			(23	)
Net gain on disposal in 2012	21		211
Net cash inflow/(outflow) on disposal
Consideration received in cash in 2012			750
Less: Cash and cash equivalent disposed			(1,308	)
Net cash outflow on disposal in 2012			(558	)

FS39

GigaMedia Limited and its subsidiaries

Financial statements

Year ended 31 December 2013

The settlement of remaining instalments, cashflow and gain on disposal of remaining shares in 2013 were as follows:

	Note	US$’000
Consideration received in cash for settlement of remaining instalments in 2013			2,258
Consideration received in cash on disposal of remaining shares in 2013	7(b)		1,000
Fair value of consideration			1,000
Carrying amount of remaining shares in IAHGames			—
Net gain on disposal of remaining shares in 2013	21		1,000

7 Associates

	Group
	2013 US$’000		2012 US$’000
Equity shares at cost		5,055		5,055
Carrying amount
At 1 January		5,223		7,615
Disposal of subsidiary (note 6)		—		(3,023	)
Share of profit, net of tax		526		234
Currency translation differences		73		397
		5,822		5,223

The summarised financial information relating to associates, not adjusted for the percentage of ownership held by the Group, are as follows:

	2013 US$’000		2012 US$’000
Revenue		5,530		6,641
Net profit for the year		2,980		(2,412	)
Total assets		33,287		40,808
Total liabilities		299		5,054

FS40

GigaMedia Limited and its subsidiaries

Financial statements

Year ended 31 December 2013

Details of the Group’s associates at 31 December 2013 are as follows:

Name of associates	Principal activities	Country of incorporation and place of business	Effective equity held by the Group
			2013 %		2012 %
East Gate Media Contents & Technology Fund (“East Gate”)	Online game business and films	Korea		18		18
Infocomm Asia Holdings Pte. Ltd. (Note 6(a))	Online games	Singapore		—		20

(a) The Group has a 18 percent interest in East Gate, a Korean Limited Partnership. The Group has significant influence over partnership operating and financial policies based on the terms of the partnership agreement. The Group accounts for this limited partner investment under the equity method of accounting.

(b) The Group has not recognised its share of losses in IAHGames amounting to US$156,000 in 2012 because the Group’s cumulative share of losses exceeds its interest in that entity and the Group has no obligation in respect of those losses. In May 2013, the Group sold the remaining 20% interest in IAHGames to IAHGames’ management and MCIL for a consideration of US$1,000,000. The proceed was received in May 2013. The Group has recognised a gain on disposal of US$1,000,000 in 2013.

8 Available-for-sale financial assets

	Group
	2013		2012
	US$’000		US$’000
Non-current
Available-for-sale financial assets
Equity instrument (quoted)		—		1,565
Debt instrument (unquoted)		6,048		3,082
		6,048		4,647
Current
Equity instrument (quoted)		21,124		17,773
Open-end fund		336		—
		21,460		17,773

For information on determination of fair value, refer to Note 30.

In 2012, the Group recorded an impairment charge of US$1,193,000 in profit or loss related to available-for-sale financial assets (non-current). This impairment charge has been reclassified from other comprehensive income. Considering the financial status of the available-for-sale financial asset, which is currently facing cash flow problems and lower operating margins, its fair value has been written down.

FS41

GigaMedia Limited and its subsidiaries

Financial statements

Year ended 31 December 2013

9 Other assets (non-current)

	Group
	2013			2012
	US$’000			US$’000
Refundable deposits		306			392
Prepaid licensing and royalty fees		7,418			9,346
Others		10			2
		7,734			9,740
Less: Impairment loss on prepaid licensing and royalty fees		(2,752	)		(702	)
		4,982			9,038

In 2013, the Group recorded an impairment charge of US$2,752,000 (2012: US$702,000) relating to prepaid licensing and royalty fees. The impairment charge for the prepaid licensing and royalty fees related to certain licensed games within its Asian online game and service segment that the Group has stopped operating or for which the carrying amounts of the related assets was determined not to be recoverable from its related future undiscounted cash flows. The Group recorded a full impairment on the games that the Group stopped operating. The licensed games and related royalties are valued when indication for impairment exists, using unobservable inputs such as discounted cash flows, incorporating available market discount rate information and the Group’s estimates for liquidity risk, and other cash flow model related assumptions.

FS42

GigaMedia Limited and its subsidiaries

Financial statements

Year ended 31 December 2013

10 Deferred tax assets

Movement in temporary differences during the year

						Recognised												Recognised
				Deconsoli		in profit			Currency									in profit			Currency
	At			dation of		or loss			translation			At			Reclassifi			or loss			translation			At
	1/1/2012			business		(Note 24)			difference			31/12/2012			cation			(Note 24)			difference			31/12/2013
	US$’000			US$’000		US$’000			US$’000			US$’000			US$’000			US$’000			US$’000			US$’000
Group
Deferred tax assets
Tax loss carry-forward		480			—		156			23			659			—			(650	)		(9	)		—
Share-based payment transactions		190			—		36			8			234			—			(230	)		(4	)		—
Others		89			—		(35	)		2			56			—			1			(1	)		56
		759			—		157			33			949			—			(879	)		(14	)		56
Deferred tax liabilities
Property, plant and equipment		(344	)		—		111			(22	)		(255	)		—			253			2			—
Dividend withholding tax from investees		—			—		—			—			—			(1,987	)		—			—			(1,987	)
Intangible assets		(662	)		768		(314	)		(98	)		(306	)		—			247			3			(56	)
		(3,215	)		768		(203	)		(118	)		(561	)		(1,987	)		500			5			(2,043	)

FS43

GigaMedia Limited and its subsidiaries

Financial statements

Year ended 31 December 2013

Deferred income tax assets and liabilities are offset when there is a legally enforceable right to set off current income tax assets against current income tax liabilities and when the deferred income taxes relate to the same fiscal authority. The amounts are shown on the balance sheets as follows:

	Group
	2013			2012
	US$’000			US$’000
Deferred income tax assets:		56			949
Deferred income tax liabilities:		(2,043	)		(561	)

As of 31 December 2013, the Group has net operating losses carried forward, available to offset future income, amounting to US$20,145,000 Below is the breakdown of the expiration of the net operating losses carried forward in major jurisdictions:

Jurisdiction	Amount (US$’000)		Expiring year
Hong Kong		9,975	Indefinite
Taiwan		10,170	2020-2023
		20,145

As of 31 December 2012, the Company has net operating losses carried forward, available to offset future income, amounting to US$13,507,000. Below is the breakdown of the expiration of the net operating losses carried forward in major jurisdictions:

Jurisdiction	Amount (US$’000)		Expiring year
Hong Kong		9,174	Indefinite
Taiwan		4,333	2021
		13,507

Out of the above tax losses, an amount of US$20,145,000 (2012: US$9,631,000) relating to unutilised tax losses, has not been recognised due to the unpredictability of future profit streams. Consequently, the Group did not recognise the deferred tax assets of US$5,216,000 (2012: US$1,637,000).

11 Trade and other receivables

	Group						Company
	2013			2012			2013		2012
	US$’000			US$’000			US$’000		US$’000
Trade receivables
- third parties		2,061			2,912			—		—
Less: Allowance for doubtful receivables		(55	)		(130	)		—		—
		2,006			2,782			—		—

FS44

GigaMedia Limited and its subsidiaries

Financial statements

Year ended 31 December 2013

	Group				Company
	2013		2012		2013		2012
	US$’000		US$’000		US$’000		US$’000
Notes receivable
- third parties		21		47		—		—
Other receivables
- subsidiaries		—		—		2,669		3,129
- third parties		211		62		2		—
		211		62		2,671		3,129
Trade and other receivables		2,238		2,891		2,671		3,129

The non-trade amounts due from subsidiaries are unsecured, interest-free and repayable on demand.

The Group and the Company’s exposure to credit and currency risks, and impairment losses related to trade and other receivables are disclosed in note 30.

12 Other assets (current)

	Group
	2013		2012
	US$’000		US$’000
Prepayments		750		807
Others		82		93
Proceeds receivable from deconsolidation of IAHGames and Spring Asia		—		2,250
		832		3,150

13 Cash and cash equivalents

	Group				Company
	2013		2012		2013		2012
	US$’000		US$’000		US$’000		US$’000
Bank balances		44,163		61,217		62		2
Short-term deposits		14,638		1,514		—		—
Cash and cash equivalents in the statement of cash flows		58,801		62,731		62		2

The weighted average effective interest rate per annum relating to the fixed deposits at the balance sheet date for the Group is 1.48% (31/12/2012: 0.54%). Depending on the terms of the deposit, interest rates reprice every quarterly and half-yearly.

FS45

GigaMedia Limited and its subsidiaries

Financial statements

Year ended 31 December 2013

14 Share capital

	31/12/2013		31/12/2012
	No. of		No. of
	shares ’000		shares ’000
Company
In issue at beginning of the year		50,720		50,720
Issuance under option exercised		3		—
In issue at end of the year		50,723		50,720

The holders of ordinary shares are entitled to receive dividends as declared from time to time, and are entitled to one vote per share at meetings of the Company. All shares rank equally with regard to the Company’s residual assets.

All issued shares are fully paid, with no par value.

Capital management

The Group’s primary objective when managing capital is to safeguard the Group’s ability to continue as a going concern while looking for appropriate opportunities to expand its business. In order to do so, the Group may obtain new borrowings or issue new shares.

The Group actively and regularly reviews and manages its capital structure to ensure optimal capital structure and shareholder returns, taking into consideration the future capital requirements of the Group and capital efficiency, prevailing and projected profitability, projected operating cash flows, projected capital expenditures and projected strategic investment opportunities. The Group currently does not adopt any formal dividend policy.

The Group’s policy is to keep its debt-to-equity ratio below 1.00 and with sufficient current assets to cover its current liabilities. The Group’s debt-to-equity ratio and current ratio at the end of the reporting period were as follows:

	Group
	2013		2012
Debt-to-equity ratio		0.17		0.18
Current ratio		6.48		4.00

There were no changes in the Group’s approach to capital management during the year.

Neither the Company nor any of its subsidiaries are subject to externally imposed capital requirements.

FS46

GigaMedia Limited and its subsidiaries

Financial statements

Year ended 31 December 2013

15 Reserves

	Group						Company
	2013			2012			2013			2012
	US$’000			US$’000			US$’000			US$’000
Share option reserve		12,776			12,557			12,776			12,557
Statutory reserve		3,022			3,022			—			—
Fair value reserve		19,676			15,256			—			—
Translation reserve		(21,635	)		(21,683	)		(11,957	)		(7,934	)
		13,839			9,152			1,819			4,623

Share option reserve

Employee share options represent the equity-settled share option granted to employees and executive director of the Group, the details of which are disclosed in the directors’ report. The reserve is made up of the cumulative value of services received from employee and executive directors recorded over the vesting period commencing from the grant date of share options, and is reduced by the expiry or exercise of the share options.

At the end of the financial year, details of the options granted are as follow:

	Number of outstanding share options
					Expired/								Weighted
	At		Granted		forfeited			Exercised					average
Range of	beginning		during the		during			during			At end of		remaining
exercise price	of the year		year		the year			the year			the year		exercise
	’000		’000		’000			’000			’000		period
2013
Under US$1		6,211		—		(20	)		(3	)		6,188		1.88 years
US$1-US$10		2,383		620		(584	)		—			2,419		5.72 years
US$10-US$20		616		—		—			—			616		3.65 years
		9,210		620		(604	)		(3	)		9,223
2012
Under US$1		5,201		1,620		(610	)		—			6,211		2.87 years
US$1-US$10		3,676		450		(1,743	)		—			2,383		6.40 years
US$10-US$20		616		—		—			—			616		4.65 years
		9,493		2,070		(2,353	)		—			9,210

7,770,000 options (31 December 2012: 7,584,000) out of 9,223,000 options (31 December 2012: 9,210,000) are exercisable at the end of the year.

The weighted average share price at the date of exercise of share options exercised in 2013 was US$0.79 (2012: no options exercised).

As at 31 December 2013, approximately US$348,000 (2012: US$707,000) of unrecognised compensation cost relates to non-vested options. That cost is expected to be recognised over a period of 2.16 years.

FS47

GigaMedia Limited and its subsidiaries

Financial statements

Year ended 31 December 2013

The Company has used the Black-Scholes option-pricing model to derive the fair value of share options granted to employees. The following summarises the assumptions used:

	31/12/2013		31/12/2012
Option term (years)		5.8		5.73
Volatility		59.46% – 61.84%		59.76% – 67.02%
Weighted average volatility		61%		62%
Weighted average share price		US$1.09		US$0.96
Risk- free interest rate		0.930% – 1.610%		0.885% – 1.152%
Dividend yield		0%		0%
Weighted-average fair value of option granted during the year		US$0.60		US$0.54

Option term

Option term represents the period of time that they are expected to be outstanding. Management estimates this based on historical trends.

Expected volatility rate

An analysis of historical volatility was used to develop the estimate of expected volatility.

Risk-free interest rate

The risk-free interest rate is based on yields of U.S. Treasury bonds for the expected term of the options.

Expected dividend yield

Expected dividend yield is based on the Company’s current dividend yield.

Statutory reserves

In accordance with R.O.C. law, an appropriation for legal reserve amounting to 10% 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 31 December 2013 and 2012, the legal reserves of Hoshin GigaMedia Center Inc. (“Hoshin GigaMedia”), were both US$3.0 million. The reserve can only be used to offset a deficit or be distributed as a stock dividend of up to 50% of the reserve balance when the reserve balance has reached 50% of the aggregate paid-in capital of Hoshin GigaMedia.

Under PRC laws and regulations, there were certain foreign exchange restrictions on the Group’s PRC subsidiaries with respect to transferring certain of their net assets to the Group either in the form of dividends, loans or advances. As of 31 December 2013 and 2012, the Group’s total restricted net assets, which include paid up capital and the net assets of those subsidiaries in which the Group has no legal ownership, were approximately US$Nil and US$1.5 million, respectively.

Fair value reserve

The fair value reserve comprises the cumulative net change in the fair value of available-for-sale financial assets until the investments are derecognised or impaired.

Translation reserve

The translation reserve comprises all foreign currency differences arising from the translation of the financial statements of foreign operations.

FS48

GigaMedia Limited and its subsidiaries

Financial statements

Year ended 31 December 2013

16 Employee benefits

The Group has defined benefit and defined contribution pension plans that covered substantially all of the Group’s employees.

Defined benefit pension plan

In accordance with the Labor Standards Law of the Republic of China, the Group has a defined benefit pension plan for its employees in Taiwan. The pension plan covers substantially all full-time employees for services provided prior to 1 July 2005, and employees who have elected to remain in the defined benefit pension plan subsequent to the enactment of the Labor Pension Act on 1 July 2005. Under the defined benefit pension plan, employees are entitled to twice the monthly salary for each year of service for the first 15 years, and an additional one month for every additional year of service, up to a maximum of 45 months. The pension payment to employees is computed based on the average monthly salary for the six months prior to approved retirement.

The Group has contributed an amount equal to 2 percent of the salaries and wages paid to all qualified 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 Bank of Taiwan. The Group makes pension payments from its account in the Fund unless the Fund is insufficient, in which case the Group makes payments from internal funds as payments become due. The Group seeks to maintain a normal, highly liquid working capital balance to ensure payments are made timely.

The following provides fund status of the plan and a reconciliation of employee benefits.

	Group
	2013			2012
	US$’000			US$’000
Fair value of plan assets		(300	)		(291	)
Projected benefit obligation		470			572
Employee benefits		170			281
Expense recognised in profit or loss
Current service costs		14			5
Net interest on net defined benefit liability		5			2
Past service cost		73			—
Gain on curtailments and settlements		(73	)		—
Employee benefits		19			7

FS49

GigaMedia Limited and its subsidiaries

Financial statements

Year ended 31 December 2013

	Group
	2013			2012
	US$’000			US$’000
Movement in the present value of the defined benefit obligations
Projected benefit obligation at 1 January		572			208
Service cost		15			6
Interest cost		10			7
Actuarial loss/(gain)		(39	)		27
Adjustment		—			309
Curtailment gain		(73	)		—
Currency translation difference		(15	)		15
Defined benefit obligation at 31 December		470			572
Movement in the fair value of plan assets
Fair value of plan assets at 1 January		291			284
Expected return on plan assets		5			2
Actuarial losses		(1	)		(3	)
Contributions by employer		13			4
Currency translation difference		(8	)		4
Fair value of plan assets at 31 December		300			291
Return on plan assets
Expected return on plan assets		5			2
Actuarial losses		(1	)		(3	)
Actual return on plan assets		4			(1	)
Assets Categories	2013			2012
Cash		100	%		100	%

Actuarial assumptions

Weighted-average assumptions used to determine defined benefit obligations as at 31 December 2013 and 2012 were as follows:

	2013			2012
Discount rate		2.00	%		1.75	%
Rate of return on plan assets		2.00	%		1.75	%
Rate of compensation increase		1.50	%		1.50	%

FS50

GigaMedia Limited and its subsidiaries

Financial statements

Year ended 31 December 2013

Weighted-average assumptions used to determine defined benefit costs for the year ended 31 December 2013 and 2012 were as follows:

	2013			2012
Discount rate		1.75	%		2.00	%
Rate of return on plan assets		1.75	%		2.00	%
Rate of compensation increase		1.00	%		1.00	%

The Group expects to make a contribution of US$17,000 to the Fund in 2014. The Group does not expect to make any benefit payments through 2020.

Defined contribution pension plan

The Group has provided defined contribution plans for employees located in Taiwan and Hong Kong. Contributions to the plans are expensed as incurred.

Taiwan

Pursuant to the new “Labor Pension Act” enacted on 1 July 2005, the Group set up a defined contribution pension plan for its employees located in Taiwan. For eligible employees who elect to participate in the defined contribution pension plan, the Group contribute no less than 6% of the employees’ salaries and wages paid each month, up to the maximum amount of NT$9,000 (approximately US$302 per individual), to the employees’ individual pension accounts at the Bureau of Labor Insurance. 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.

Hong Kong

According to the relevant Hong Kong regulations, the Group provides a contribution plan for the eligible employees in Hong Kong. The Group must contribute at least 5 percent of their total salaries, up to the maximum amount of HK$1,250 (approximately US$161 per individual), to their individual contribution accounts of the authorities monthly. After the termination of employment, the benefits still belong to the employees in any circumstances.

The total amount of defined contribution pension expenses pursuant to defined contribution plans for the years ended 31 December 2013 were US$357,000 (2012: US$585,000).

17 Trade and other payables

	Group				Company
	2013		2012		2013		2012
	US$’000		US$’000		US$’000		US$’000
Trade payables
- third parties		1,178		324		—		—
Accrued expenses
- third parties		2,997		6,415		191		423
Trade and other payables		4,175		6,739		191		423

The Group and the Company’s exposure to currency and liquidity risks related to trade and other payables are disclosed in note 30.

FS51

GigaMedia Limited and its subsidiaries

Financial statements

Year ended 31 December 2013

18 Loans and borrowings

	Group
	2013 US$’000		2012 US$’000
Unsecured bank loans		4,361		7,748

Terms and debt repayment schedule

Terms and conditions of outstanding loans and borrowings are as follows:

	Nominal interest rate	Year of maturity		Carrying amount
				US’000
At 31 December 2013
Unsecured bank loan	1.5% – 1.6%		2014		4,361
At 31 December 2012
Unsecured bank loan	1.42%		2013		7,748

19 Other liabilities (current)

	Group
	2013 US$’000		2012 US$’000
Deferred revenue		2,441		3,174
Others		315		398
		2,756		3,572

20 Revenue

	Group
	2013 US$’000		2012 US$’000
Asian online game and service revenues		14,106		27,470
Others		926		—
		15,032		27,470

21 Other operating income

		Group
	Note	2013		2012
		US$’000		US$’000
Net gain on sale of IAHGames and Spring Asia	6(a)		—		211
Gain on disposal of associate	7(b)		1,000		—
Others			95		201
			1,095		412

FS52

GigaMedia Limited and its subsidiaries

Financial statements

Year ended 31 December 2013

22 Other operating expenses

		Group
	Note	2013		2012
		US$’000		US$’000
Loss on disposal of property, plant and equipment			4		208
Impairment loss on prepaid licensing fees	9		2,752		702
Impairment loss on intangible assets	5		30,305		12,504
Impairment loss on property, plant and equipment	4		—		217
Allowance for doubtful receivables			37		169
Others			—		562
			33,098		14,362

23 Finance income and finance costs

	Group
	2013			2012
	US$’000			US$’000
Recognised in profit or loss
Interest income		238			283
Gain on sale of available-for-sale financial assets		1,739			5,665
Finance income		1,977			5,948
Interest expense		(49	)		(247	)
Net foreign exchange loss		(32	)		(1,199	)
Impairment loss on available-for-sale financial assets (non-current)		—			(1,193	)
Finance costs		(81	)		(2,639	)
Net finance income		1,896			3,309

24 Tax expense/(benefit)

	Group
	Year ended			Year ended
	31/12/2013			31/12/2012
	US$’000			US$’000
Current tax expense
Current year		(120	)		605
Adjustment for prior years		(198	)		20
		(318	)		625
Deferred tax expense
Origination and reversal of temporary differences		379			46
Tax expense from continuing operations		61			671

FS53

GigaMedia Limited and its subsidiaries

Financial statements

Year ended 31 December 2013

	Group
	Year ended			Year ended
	31/12/2013			31/12/2012
	US$’000			US$’000
Reconciliation of effective tax rate
Loss before tax
- continuing operations		(34,986	)		(17,553	)
- discontinued operations		(318	)		(41	)
		(35,304	)		(17,594	)
Tax calculated at 17% (31/12/2012: 17%)		(6,001	)		(2,991	)
Effect of tax rates in foreign jurisdictions		(884	)		(668	)
Expenses not deductible for tax purposes		4,490			4,024
Income not subject to tax		(694	)		(472	)
Current year losses for which no deferred tax asset was recognised		3,526			517
(Over)/under provided in prior years		(198	)		20
Others		(178	)		241
		61			671

Source of estimation uncertainty

The Group has exposure to income taxes in several jurisdictions. Significant judgment is involved in determining the group-wide provision for income taxes. These are certain transactions and computations for which the ultimate tax determination is uncertain during the ordinary course of business. The Group recognised liabilities for expected tax issues based on estimation of whether additional taxes will be due. Where the final tax outcome of these matters is different from the amounts that were initially recognised, such differences will impact the income tax and deferred tax provisions in the period in which such determination is made.

25 Loss from discontinued operations

JIDI Network Technology (Shanghai) Co., Ltd. (JIDI)

In June 2012, the board of directors approved the plan to liquidate and dissolve JIDI Network Technology (Shanghai) Co., Ltd. (“JIDI”), a wholly-owned subsidiary in the People’s Republic of China, and Shanghai JIDI Network Technology Co., Ltd. (“Shanghai JIDI”), a variable interest entity (“VIE”) controlled through a series of contractual arrangements. Accordingly, results of JIDI and Shanghai JIDI operations are reported as discontinued operations since 31 December 2012. As at 31 December 2013, Shanghai JIDI had completed the dissolution procedure and was duly deregistered.

FS54

GigaMedia Limited and its subsidiaries

Financial statements

Year ended 31 December 2013

Gaming software and service business

The 40% ownership of Mangas Everest S.A.S. held by the Group diluted to 33.66 percent after Betclic Everest Group (“BEG”) converted its US$8.3 million shareholder loan in April 2012, and the Group entered into another agreement with BEG to sell the remaining 33.66 percent in Everest Gaming for a consideration of US$1,700,000, in which US$985,000 were to be settled in cash, while the remainder were to fulfill a 2009 tax liability. The disposal was completed in early August 2012. The sale resulted in the recognition of a gain of US$2,500,000, inclusive of gain on mutually waived net liabilities, and net of transaction costs.

The carrying amounts of the remaining assets and liabilities, if any, of JIDI and Shanghai JIDI are insignificant to the Group as 31 December 2013 and 31 December 2012.

	Group
	2013			2012
	US$’000			US$’000
Results of discontinued operation
Revenue		—			99
Expenses		(318	)		(2,620	)
Results from operating activities, net of tax		(318	)		(2,521	)
Gain on sale of discontinued operation		—			2,480
Loss for the year		(318	)		(41	)
Basic loss per share (cents)		(0.01	)		—
Diluted loss per share (cents)		(0.01	)		—
Cash flows from discontinued operations
Net cash used in operating activities		(168	)		(942	)
Net cash from investing activities		—			1,003
Net cash from financing activities		(468	)		—
Net cash flows for the year		(636	)		61

Effect of disposal on the financial position of the Group

	Group
	2013		2012
	US$’000		US$’000
Trade and other receivables		—		(423	)
Cash and cash equivalents		—		(636	)
Trade and other payables		—		196
Other current liabilities		—		1,604
Net assets and liabilities		—		741
Consideration received, satisfied in cash		—		1,014
Cash and cash equivalents disposed of		—		(11	)
Net cash inflow		—		1,003

FS55

GigaMedia Limited and its subsidiaries

Financial statements

Year ended 31 December 2013

26 Loss for the year

The following items have been included in arriving at loss for the year:

	Group
	2013		2012
	US$’000		US$’000
Employee benefits expense (See below)		8,484		13,711
Amortisation charge on intangible assets		1,904		2,192
Depreciation of property, plant and equipment		411		1,226
Rental expenses		882		1,486
Employee benefits expense
Wages and salaries		7,596		12,209
Employee equity-settled share-based payment		219		179
Employee expense relating to defined benefit and contribution pension plans		280		684
Termination benefits		389		639
		8,484		13,711

27 Loss per share

The calculation of basic loss per share at 31 December 2013 was based on the loss attributable to ordinary shareholders of US$35,084,000 (2012: US$17,438,000), and a weighted average number of ordinary shares outstanding of 50,720,000 (2012: 50,720,000), calculated as follows:

Loss attributable to ordinary shareholders

	Continuing operations US$’000			2013 Discontinued operation US$’000			Total US$’000			Continuing operations US$’000			2012 Discontinued operation US$’000			Total US$’000
Loss for the year		(34,766	)		(318	)		(35,084	)		(17,397	)		(41	)		(17,438	)

Weighted average number of ordinary shares:

	Group
	31/12/2013		31/12/2012
	’000		’000
At 1 January and 31 December		50,720		50,720

FS56

GigaMedia Limited and its subsidiaries

Financial statements

Year ended 31 December 2013

28 Commitments

(a) Operating leases

The Group leases offices premises under operating leases, where the lease agreements expire in 2016. The following table sets forth the future minimum lease payments required under these operating leases:

	2013		2012
	US$’000		US$’000
Payable:
Within 1 year		941		930
After 1 year but within 5 years		892		1,593
		1,833		2,523

(b) License Agreements

The Group has contractual obligations under various license agreements to pay the licensors license fees and minimum guarantees against future royalties. The following table summarises the committed licensing fees and minimum guarantees against future royalties set forth in the major licenses agreements as of 31 December 2013.

	License fees		Minimum guarantees against future royalties		Total
	US$’000		US$’000		US$’000
Minimum required payments:
Within 1 year		100		100		200
After 1 year		5,300		1,500		6,800
		5,400		1,600		7,000

The initial minimum guarantees against future royalties and license fees are not required to be paid until the licensed games are commercially released or until certain milestones are achieved, as stipulated in the individual license agreements. The remaining minimum guarantees are generally required to be paid within three years subsequent to the commercial release dates of the licensed games.

(c) Guarantee

In 2008, Cambridge Interactive Development Corp. (“CIDC”), a then wholly owned subsidiary of GigaMedia, entered into a lease agreement (the “CIDC Lease”) for an office in Delaware. The term of the CIDC Lease is for the period from 1 October 2008 through 30 September 2014. Pursuant to the CIDC Lease, CIDC deposited approximately US$690,000 with a bank in exchange for a letter of credit issued by the bank (the “CIDC L/C”) and GigaMedia’s guaranty of all of CIDC’s obligations under the CIDC Lease.

FS57

GigaMedia Limited and its subsidiaries

Financial statements

Year ended 31 December 2013

In July 2012, the Group entered into an agreement with BEG, a third party, to sell and assign the remaining ownership interest in and all rights and interests related to the shareholders’ loans to Mangas Everest S.A.S. (including the CIDC lease) (the “Mangas Agreement”). Pursuant to the Mangas Agreement, BEG was to use all its reasonable efforts to procure the cancellation and return of the CIDC L/C to GigaMedia and the landlord’s release of GigaMedia’s lease guaranty by 30 September 2012; and unless and until BEG procures the cancellation and return of the CIDC L/C and landlord’s release of GigaMedia’s lease guaranty, BEG is obligated to indemnify and hold GigaMedia (and any Affiliate thereof) harmless from any and all losses, costs and expenses that may be borne by GigaMedia (and any Affiliate thereof) arising under or in connection with the CIDC L/C and/or GigaMedia’s lease guarantee.

In accordance with the Mangas Agreement, BEG procured that the bank cancel the CIDC L/C and issue to BEG a new letter of credit under the same terms and conditions as the CIDC L/C. BEG, however, did not obtain the landlord’s consent to release us from our lease guarantee within the allotted time. BEG’s major shareholders, therefore, issued a separate guaranty to us wherein they are obligated to indemnify and hold GigaMedia (and any Affiliate thereof) harmless from any and all losses, costs and expenses arising under or in connection with the CIDC Lease. GigaMedia’s commitment amount under this lease guarantee will be reduced as Mangas Everest’s subsidiary who assumed the CIDC Lease makes its monthly rental payments. The lease is current on its monthly payments through March 2014.

29 Related party transactions

Except for the following transactions, the Group was 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 it.

Share options granted to key management

As at the end of the financial year, the total outstanding number of share options granted to key management of the Group was 1,646,000 (2012: 1,363,000).

Transaction with key management personnel

Key management personnel of the Group are those persons having the authority and responsibility for planning, directing and controlling the activities of the entity. The directors are considered as key management personnel of the Group.

Key management personnel compensation comprised:

	Group
	2013		2012
	US$’000		US$’000
Wages and salaries		1,088		1,699
Director fee		159		190
Share-based payments		488		56
Other benefit		17		6
		1,752		1,951

FS58

GigaMedia Limited and its subsidiaries

Financial statements

Year ended 31 December 2013

30 Financial instruments

Financial risk management

The Group has exposure to the following risks from its use of financial instruments:

• Credit risk

• Liquidity risk

• Market risk

This note presents information about the Group’s exposure to each of the above risks, the Group’s objectives, policies and processes for measuring and managing risk, and the Group’s management of capital.

Risk management framework

The Board of Directors has overall responsibility for the establishment and oversight of the Group’s risk management framework. The Board has established the Audit Committee, which is responsible for overseeing the Group’s risk management policies. The Audit Committee reports regularly to the Board of Directors on its activities.

The Group’s risk management policies are established to identify and analyse the risks faced by the Group, to set appropriate risk limits and controls, and to monitor risks and adherence to limits. Risk management policies and systems are reviewed regularly to reflect changes in market conditions and the Group’s activities. The Group, through its training and management standards and procedures, aims to develop a disciplined and constructive control environment in which all employees understand their roles and obligations.

The Audit Committee oversees how management monitors compliance with the Group’s risk management policies and procedures, and reviews the adequacy of the risk management framework in relation to the risks faced by the Group. The Audit Committee is assisted in its oversight role by Internal Audit. Internal Audit undertakes both regular and ad hoc reviews of risk management controls and procedures, the results of which are reported to the Audit Committee.

Credit risk

The customers of the Group settle the payments in accordance with one of the following ways: (1) by bank transfer or credit card and (2) by advanced payment. The Group is subject to credit risk only for those receivables with credits granted.

None of the Group’s customers accounted for over 10 percent of net operating revenues in 2013 and 2012 or of the balance of notes and accounts receivables as of 31 December 2013 and 2012. The Group has provided for trade receivables based on estimated irrecoverable amounts from the sale of goods and services, determined by reference to past default experience.

The credit risk of the Group’s and the Company’s other financial assets, which comprise bank deposits and other receivables, the maximum exposure to credit risk is the carrying amounts of these instruments.

FS59

GigaMedia Limited and its subsidiaries

Financial statements

Year ended 31 December 2013

Trade of other receivables

The quantitative data in respect of the Group’s exposure to credit risk arising from trade and other receivables (including notes receivables) is as follows:

	Group										Company
	Gross		Impairment losses			Gross		Impairment losses			Gross		Impairment losses		Gross		Impairment losses
	31/12/2013		31/12/2013			31/12/2012		31/12/2012			31/12/2013		31/12/2013		31/12/2012		31/12/2012
	US$’000		US$’000			US$’000		US$’000			US$’000		US$’000		US$’000		US$’000
Not past due		2,009		(55	)		2,573		(130	)		2,671		—		3,129		—
Past due 0 – 90 days		265		—			395		—			—		—		—		—
Past due 91 – 180 days		16		—			50		—			—		—		—		—
More than 180 days		3		—			3		—			—		—		—		—
		2,293		(55	)		3,021		(130	)		2,671		—		3,129		—

The Group establishes an allowance for impairment that represents its estimate of incurred losses in respect of trade and other receivables. The allowance is a specific loss component that rebates to individual significant exposures. Based on historical default rates, the Group believes that no additional impairment is necessary.

Movements in allowance for impairment losses on loans and receivables during the year were as follows:

	Group						Company
	31/12/2013			31/12/2012			31/12/2013		31/12/2012
	US$’000			US$’000			US$’000		US$’000
At 1 January		130			2,594			—		—
Impairment loss recognised		37			169			—		—
Amounts written off		(109	)		(269	)		—		—
Deconsolidation of business - IAHGames		—			(2,370	)		—		—
Translation difference		(3	)		6			—		—
At 31 December		55			130			—		—

Cash and cash equivalents

The Group held cash and cash equivalents of US$58,801,000 as at 31 December 2013 (2012: $62,731,000), which represents its maximum credit exposure on these assets. The cash and cash equivalents are held with banks, which are regulated.

Liquidity risk

Liquidity risk is the risk that the Group will encounter difficulty in meeting the obligations associated with its financial liabilities that are settled by delivering cash or another financial asset. The Group’s approach to managing liquidity is to ensure, as far as possible, that it will always have sufficient liquidity to meet its liabilities when due, under both normal and stressed conditions, without incurring unacceptable losses or risking damage to the Group’s reputation.

FS60

GigaMedia Limited and its subsidiaries

Financial statements

Year ended 31 December 2013

The following are the contractual maturities of financial liabilities, including estimated interest payments and excluding the impact of netting agreements:

					After 1 year
	Carrying		Within		but within
	amount		1 year		5 years		Total
	US$’000		US$’000		US$’000		US$’000
Group
2013
Other liabilities (non-current)		11		—		11		11
Trade and other payables		4,175		4,175		—		4,175
Loans and borrowings		4,361		4,366		—		4,366
Other current liabilities (current)#		315		315		—		315
		8,862		8,856		11		8,867
2012
Other liabilities		12		—		12		12
Trade and other payables		6,739		6,739		—		6,739
Loans and borrowings		7,748		7,752		—		7,752
Other current liabilities (current)#		398		398		—		398
		14,897		14,889		12		14,901
Company
2013
Trade and other payables		191		191		—		191
2012
Trade and other payables		423		423		—		423

# Excludes deferred revenue.

Market risk

Market risk is the risk that changes in market prices, such as foreign exchange rates, interest rates and equity prices will affect the Group’s income of the value of its holdings of financial instruments. The objective of market risk management is to manage and control market risk exposures within acceptable parameters, while optimising returns.

Foreign currency risk

The subsidiaries of the Group assessed and concluded that most of its business transactions are denominated in its own functional currencies; therefore the foreign currency risks derived from operations are not significant. However, the Group holds some assets or liabilities in foreign currency other than functional currency and the value of these assets and liabilities are subject to foreign currency risks resulting from fluctuations in exchange rates between the foreign currency and the functional currency. The currencies in which these assets are denominated are the US dollar (USD), Korean on (KRW), Taiwan dollar (TWD), Renminbi (RMB), Hong Kong dollar (HKD).

FS61

GigaMedia Limited and its subsidiaries

Financial statements

Year ended 31 December 2013

The Group’s and Company’s exposures to foreign currencies in US dollar equivalent are as follows:

	USD			KRW		TWD			RMB			HKD			Other			Total
	US$’000			US$’000		US$’000			US$’000			US$’000			US$’000			US$’000
Group
2013
Cash and cash equivalents		42,180			51		10,145			3,553			2,808			64			58,801
Available-for-sale financial assets (current)		—			21,124		336			—			—			—			21,460
Trade and other receivables		209			—		1,865			—			164			—			2,238
Available-for-sale financial assets (non-current)		2,109			3,939		—			—			—			—			6,048
Refundable deposits		—			—		267			—			39			—			306
Trade and other payables		(1,043	)		—		(2,906	)		(3	)		(223	)		—			(4,175	)
Short-term borrowings		—			—		(4,361	)		—			—			—			(4,361	)
Net financial assets/(liabilities)		43,455			25,114		5,346			3,550			2,788			64			80,317
Less: Net financial (assets)/liabilities denominated in the respective entities’ functional currencies		(42,140	)		—		(5,346	)		—			(2,788	)		(61	)		(50,335	)
Foreign currency exposure		1,315			25,114		—			3,550			—			3			29,982
2012
Cash and cash equivalents		52,554			—		6,832			398			2,853			94			62,731
Available-for-sale financial assets (current)		—			17,773		—			—			—			—			17,773
Trade and other receivables		1			—		2,506			—			384			—			2,891
Available-for-sale financial assets (non-current)		—			3,082		1,565			—			—			—			4,647
Refundable deposits		5			—		353			—			34			—			392
Trade and other payables		(2,239	)		—		(3,596	)		(482	)		(422	)		—			(6,739	)
Short-term borrowings		—			—		(7,748	)		—			—			—			(7,748	)
Net financial assets/(liabilities)		50,321			20,855		(88	)		(84	)		2,849			94			73,947
Less: Net financial (assets)/liabilities denominated in the respective entities’ functional currencies		(49,916	)		—		88			84			(2,850	)		(89	)		(52,683	)
Foreign currency exposure		405			20,855		—			—			(1	)		5			21,264

FS62

GigaMedia Limited and its subsidiaries

Financial statements

Year ended 31 December 2013

	USD			TWD			Total
	US$’000			US$’000			US$’000
Company
2013
Cash and cash equivalents		62			—			62
Trade and other receivables		1,875			796			2,671
Trade and other payables		(32	)		(159	)		(191	)
Net financial assets		1,905			637			2,542
Less: Net financial (assets)/liabilities denominated in the respective entities’ functional currencies		—			(637	)		(637	)
Foreign currency exposure		1,905			—			1,905
2012
Cash and cash equivalents		2			—			2
Trade and other receivables		2,312			817			3,129
Trade and other payables		(33	)		(390	)		(423	)
Net financial assets		2,281			427			2,708
Less: Net financial (assets)/liabilities denominated in the respective entities’ functional currencies		—			(427	)		(427	)
Foreign currency exposure		2,281			—			2,281

Sensitivity analysis

A 10% strengthening of the foreign currencies against USD at 31 December would have increased/(decreased) profit before tax by the amounts shown below. This analysis is based on foreign currency exchange rate variances that the Group considered to be reasonably possible at the end of the reporting period. The analysis assumes that all other variables, in particular interest rates, remain constant. The analysis is performed on the same basis for the previous financial year ended 31 December 2012. Similarly, a 10% weakening would have the equal but opposite effect.

	Group				Company
	Profit after tax		Equity		Profit after tax		Equity
	US$’000		US$’000		US$’000		US$’000
31 December 2013
KRW (10% strengthening)		399		2,112		—		—
RMB (10% strengthening)		355		—		—		—
31 December 2012
KRW (10% strengthening)		308		1,777		—		—

Interest rate risk

The Group and Company are not exposed to significant interest rate risk.

FS63

GigaMedia Limited and its subsidiaries

Financial statements

Year ended 31 December 2013

Equity price risk

The Group has investment in quoted equity securities which are listed in Korea. A 10% increase/(decrease) in the underlying equity prices at the reporting dates would increase/(decrease) equity by the following amounts:

	Group
	2013		2012
	Equity		Equity
	US$’000		US$’000
Quoted equity investments available-for-sale		2,112		1,777

This analysis assumes that all other variables remain constant.

Estimation of fair values

The following summarises the significant methods and assumptions used in estimating the fair values of financial instruments of the Group and the Company.

Investments in equity securities

The fair value of available-for-sale financial assets is determined by reference to their quoted bid prices at the reporting date.

Where such information is unavailable, a valuation technique is used. Valuation techniques employed in clued market multiples and discounted cash flow analysis using contractual or expected future cash flows as applicable, and a market-related discount rate.

Non-derivative non-current financial liabilities

Fair value, which is determined for disclosure purposes, is calculated based on the present value of future principal and interest cash flows, discounted at the market rate of interest at the reporting date.

Other financial assets and liabilities

The carrying amounts of financial assets and liabilities with a maturity of less than one year (including trade and other receivables, cash and cash equivalents, trade and other payables and other assets and liabilities) are assumed to approximate their fair values because of the short period to maturity.

Fair value hierarchy

The different levels in the fair value hierarchy are defined as follows:

• Level 1: quoted prices (unadjusted) in active markets for identical assets or liabilities.

• Level 2: inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly (i.e., as prices) or indirectly (i.e., derived from prices).

• Level 3: unobservable inputs for the asset or liability.

FS64

GigaMedia Limited and its subsidiaries

Financial statements

Year ended 31 December 2013

The table below analyses fair value measurements for financial assets and liabilities by the levels in the fair value hierarchy based on the inputs to valuation techniques.

Financial assets and liabilities carried at fair value

Group	Level 1 US$’000		Level 2 US$’000		Level 3 US$’000		Total US$’000
2013
Available-for-sale financial assets (current)		21,460		—		—		21,460
Available-for-sale financial assets (non-current)		—		2,109		3,939		6,048
		21,460		2,109		3,939		27,508
2012
Available-for-sale financial assets (current)		17,773		—		—		17,773
Available-for-sale financial assets (non-current)		—		1,565		3,082		4,647
		17,773		1,565		3,082		22,420

The fair value of certain available-for-sale financial assets (non-current) that have publicly quoted trading prices are valued using those observable prices unless adjustments are required to available observable inputs. These instruments are included in Level 1. Certain available-for-sale financial assets are valued using a market approach based on the quoted market prices of identical instruments when available, or other observable inputs such as trading prices of identical instruments in inactive markets. These instruments are classified as Level 2.

Level 3 measurements:

The following table shows a reconciliation from the beginning balances to the ending balances for fair value measurements in Level 3 of the fair value hierarchy:

	Group Available-for-sale debt securities
	2013 US$’000			2012 US$’000
At 1 January		3,082			6,703
Total gains and losses for the period included in other comprehensive income		934			(1,607	)
Impairment loss		—			(493	)
Disposal		—			(2,727	)
Currency translation difference		(77	)		1,206
At 31 December		3,939			3,082

FS65

GigaMedia Limited and its subsidiaries

Financial statements

Year ended 31 December 2013

Available-for-sale debt securities

The following table shows the valuation technique and the key unobservable inputs used in the determination of fair value of the Available-for-sale debt securities.

31 December 2013

Valuation technique	Significant unobservable inputs	Range of significant unobservable inputs
Market approach	•       Price/Sales per share ratio for selective comparable companies	•       2.5 times ~ 5.9 times
	•       Discount for lack of marketability	•       25%

Management considers that changing one or more of the significant unobservable inputs used to other reasonably possible alternative assumptions would not result in a significant change in the estimated fair value.

Fair value versus carrying amounts

						Liabilities at			Total
		Loans and		Available-		amortised			carrying
	Note	receivables		for-sale		cost			amount			Fair value
		US$’000		US$’000		US$’000			US$’000			US$’000
Group
2013
Available-for-sale equity securities	8		—		27,508		—			27,508			27,508
Trade and other receivables	11		2,238		—		—			2,238			2,238
Other assets (current)#	12		82		—		—			82			82
Cash and cash equivalents	13		58,801		—		—			58,801			58,801
			61,121		27,508		—			88,629			88,629
Other liabilities (non-current)			—		—		(11	)		(11	)		(11	)
Trade and other payables	17		—		—		(4,175	)		(4,175	)		(4,175	)
Loans and borrowings	18		—		—		(4,361	)		(4,361	)		(4,361	)
Other liabilities (current)##	19		—		—		(315	)		(315	)		(315	)
			—		—		(8,862	)		(8,862	)		(8,862	)
2012
Available-for-sale equity securities	8		—		22,420		—			22,420			22,420
Trade and other receivables	11		2,891		—		—			2,891			2,891
Other assets (current)#	12		2,343		—		—			2,343			2,343
Cash and cash equivalents	13		62,731		—		—			62,731			62,731
			67,965		22,420		—			90,385			90,385
Other liabilities (non-current)			—		—		(12	)		(12	)		(12	)
Trade and other payables	17		—		—		(6,739	)		(6,739	)		(6,739	)
Loans and borrowings	18		—		—		(7,748	)		(7,748	)		(7,748	)
Other liabilities (current)##	19		—		—		(398	)		(398	)		(398	)
			—		—		(14,897	)		(14,897	)		(14,897	)

FS66

GigaMedia Limited and its subsidiaries

Financial statements

Year ended 31 December 2013

							Liabilities at			Total
			Loans and		Available-		amortised			carrying
	Note		receivables		for-sale		cost			amount			Fair value
			US$’000		US$’000		US$’000			US$’000			US$’000
Company
2013
Trade and other receivables		11		2,671		—		—			2,671			2,671
Cash and cash equivalents		13		62		—		—			62			62
				2,733		—		—			2,733			2,733
Trade and other payables		17		—				(191	)		(191	)		(191	)
2012
Trade and other receivables		11		3,129		—		—			3,129			3,129
Cash and cash equivalents		13		2		—		—			2			2
				3,131		—		—			3,131			3,131
Trade and other payables		17		—		—		(423	)		(423	)		(423	)

# Excludes prepayments

## Excludes deferred revenue

Valuation processes applied by the Group

Those fair value measurements maximize the use of observable inputs. In situations where there is little market activity for the asset or liability at the measurement date, the fair value measurement reflects the Group’s own judgments about the assumptions that market participants would use in pricing the asset or liability. Those judgments are based on the best information available in the circumstances, including expected cash flows and appropriately risk adjusted discount rates, available observable and unobservable inputs.

31 Segment information

Business segments

The Group has 2 reportable segments as described below. For each of the reportable segment, the Group’s chief operating decision maker reviews internal management reports on at least a quarterly basis. The following summary describes the operations in each of the Group’s reportable segments:

Asian online game and service:	The development and licensure of online games and investment in associates and available-for-sale financial assets.
Others:	The provision of cloud products and services to small-to-medium and larger enterprises

FS67

GigaMedia Limited and its subsidiaries

Financial statements

Year ended 31 December 2013

Information regarding the results of each reportable segment is included below. Performance is measured based on segment profit before tax, as included in the internal management reports that are reviewed by the Group’s chief operating decision maker. Segment profit is used to measure performance as management believes that such information is the most relevant in evaluating the results of certain segments relative to other entities that operate within these industries. Inter-segment pricing is determined on an arm’s length basis.

				Asian online
				game and
	Others			service**			Total
	US$’000			US$’000			US$’000
2013
External revenues		926			14,106			15,032
Interest revenue		—			9			9
Interest expense		—			8			8
Depreciation and amortisation		50			2,198			2,248
Reportable segment loss before tax		(1,218	)		(29,398	)		(30,616	)
Share of profit of associates		—			526			526
Tax expense		—			150			150
Other material non-cash items:
Impairment loss on prepaid licensing fees		—			2,752			2,752
Impairment loss on intangible assets		—			30,305			30,305
Reportable segment assets		1,261			50,829			52,090
Investment in associates		—			5,822			5,822
Capital expenditure		257			1,657			1,914
Reportable segment liabilities		1,354			12,539			13,893
2012
External revenues		—			27,470			27,470
Interest revenue		1			9			10
Interest expense		10			44			54
Depreciation and amortisation		—			3,240			3,240
Reportable segment profit/(loss) before tax		2,423			(9,271	)		(6,848	)
Share of profit of associates		—			234			234
Tax expense		37			710			747
Other material non-cash items:
Impairment loss on prepaid licensing fees		—			702			702
Impairment loss on intangible assets		—			12,504			12,504
Impairment loss on available-for-sale financial assets (non-current)		—			1,193			1,193
Reportable segment assets		3,685			78,893			82,578
Investment in associates		—			5,223			5,223
Capital expenditure		—			1,993			1,993
Reportable segment liabilities		4,569			7,406			11,975

# With the disposal of subsidiaries and investments, the entire segment of Gaming software and service was discontinued.

** The discontinued operation JIDI was taken out of the Asian online game and service segment.

FS68

GigaMedia Limited and its subsidiaries

Financial statements

Year ended 31 December 2013

Reconciliations of reportable segment revenues, profit or loss, assets and liabilities and other material items:

	2013			2012
	US$‘000			US$‘000
Interest revenue
Total segments		9			10
Adjustment *		229			273
Total for continuing operations		238			283
Interest expense
Total segments		8			54
Adjustment *		41			193
Total for continuing operations		49			247
Profit or loss
Total segments		(30,616	)		(6,848	)
Add: Loss in other business		(4,370	)		(8,282	)
Less: Discontinued operations		—			(2,423	)
Consolidated profit before tax		(34,986	)		(17,553	)
	2013			2012
	US$‘000			US$‘000
Tax expense
Total segments		150			747
Adjustment *		(89	)		(76	)
Total for continuing operations		61			671
Assets
Total asset for reportable segments		52,090			82,578
Unallocated corporate assets
- Cash and cash equivalents		47,326			52,205
- Property, plant and equipment		1,436			1,567
- Prepaid licensing fee		—			3,040
- Deferred tax assets		—			388
- Others		2,711			1,377
Consolidated total assets		103,563			141,155
Liabilities
Total liabilities for reportable segments		13,893			11,975
Loans and borrowings		—			7,748
Unallocated corporate liabilities
- Accrued expense		1,147			2,369
- Others		36			409
Consolidated total liabilities		15,076			22,501

* Adjustment items relate to other business operations such as investment holding which is included as corporate and certain back-office costs and expenses not attributable to any specific segment.

FS69

GigaMedia Limited and its subsidiaries

Financial statements

Year ended 31 December 2013

Major Customers

No single customer represented 10 percent or more of GigaMedia’s total net revenues in 2013 and 2013.

Geographic Information

In presenting information on the basis of geographical segments, segment revenue is based on the geographical location of revenue sources. Segment assets are based on the geographical location of the assets.

Revenue

	2013		2012
	US$’000		US$’000
Taiwan		11,793		18,744
Hong Kong		3,239		4,703
Singapore		—		2,004
Malaysia		—		1,550
Thailand		—		204
Others		—		265
Consolidated revenue		15,032		27,470
Non-current assets#
Taiwan		8,136		41,235
Hong Kong		226		461
Korea		5,822		5,223
Others		—		3,044
Total		14,184		49,963

# Non-current assets presented consist of property, plant and equipment, intangible assets, associates and other assets relating mainly to prepaid licensing and royalty fees.

32 Acquisition

On 18 October 2013, the Group obtained control of FingerRockz Co., Ltd. (“FingerRockz”), by acquiring in cash 405,000 common shares of the Company, which represents 51.6% of voting interests. FingerRockz is a mobile game developer and publisher based in Taiwan, and the Group acquired it so as to enhance the research and development capacity of mobile games. This primary factor among others, contributed to a purchase price in excess of the fair value of the net identifiable assets acquired and liabilities assumed, and intangible assets.

FS70

GigaMedia Limited and its subsidiaries

Financial statements

Year ended 31 December 2013

The following summarises the major class of consideration transferred, and the recognised amounts of assets acquired and liabilities assumed at the acquisition date:

Identifiable assets acquired and liabilities assumed

	Note	US$’000
Trade receivables and other receivables			2
Cash and cash equivalents			583
Intangible assets			67
Trade and other payables			(160	)
			492
Goodwill	5		496
			988
Net cash inflow from acquisition of subsidiary
Consideration paid in cash			(510	)
Cash and cash equivalents			583
			73

The trade receivables comprise gross contractual amounts due of US$2,000 and were expected to be collectible at the acquisition date.

From the date of acquisition to 31 December 2013, FingerRockz contributed revenue of US$308 and loss for the period of US$300,000 to the Group’s results. If the acquisition had occurred on 1 January 2013, the Group’s revenue for the period ended 31 December 2013 would have increased by US$17,000 and loss for the period would have increased by US$64,000.

Goodwill

Goodwill was recognised as a result of the acquisition as follows:

	US$’000
Total cash consideration transferred		510
Non-controlling interests, based on their proportionate interest in the recognised amounts of the asset and liabilities of the acquiree		478
Fair value of identifiable net assets		(492	)
Goodwill		496

In the acquisition, the most appealing asset to the Group was FingerRockz’s creative team. However, the assembled workforce was not an identifiable asset to be recognised separately from goodwill so that the value attributed to it was subsumed into goodwill. The goodwill related to this acquisition is not expected to be deductible for tax purpose.

FS71

GigaMedia Limited and its subsidiaries

Financial statements

Year ended 31 December 2013

33 Comparative information

Comparative figures of the financial statements were audited by another firm of certified public accountants.

Certain comparatives in the financial statements have been changed from prior year due to change in accounting policy as described in Note 2.5. The effects of the change are stated at Note 2.5.

34 Subsequent event

On 10 April 2014 (with supplemental modification on 15 April 2014), the Group entered into a short-term loan agreement on an arms-length basis with Wen He Investment Ltd. (“Wen He”) to finance its shares purchase of a game company in Taiwan. The amount of the loan is approximately US$18,800,000 and will be maturing on 10 May 2014. The loan carries an interest rate of 5% per annum. In accordance with the terms of the loan, all the shares purchased by Wen He has to be pledged to the Group as collateral and the major shareholder of the Taiwan Company has to provide a personal guarantee for the loan.

FS72