DRS

Large accelerated filer

Accelerated filer

Non-accelerated filer

x (Do not check if a smaller reporting company)

Smaller reporting company

0000950123-13-002090.txt : 20131024 0000950123-13-002090.hdr.sgml : 20131024 20130405182544 ACCESSION NUMBER: 0000950123-13-002090 CONFORMED SUBMISSION TYPE: DRS PUBLIC DOCUMENT COUNT: 15 FILED AS OF DATE: 20130408 20130821 DATE AS OF CHANGE: 20130925 FILER: COMPANY DATA: COMPANY CONFORMED NAME: MONTAGE TECHNOLOGY GROUP LTD CENTRAL INDEX KEY: 0001375514 STANDARD INDUSTRIAL CLASSIFICATION: SEMICONDUCTORS & RELATED DEVICES [3674] IRS NUMBER: 000000000 FILING VALUES: FORM TYPE: DRS SEC ACT: 1933 Act SEC FILE NUMBER: 377-00147 FILM NUMBER: 13746947 BUSINESS ADDRESS: STREET 1: ROOM A1601, TECHNOLOGY BUILDING STREET 2: 900 YI SHAN ROAD CITY: XUHUI DISTRICT, SHANGHAI STATE: F4 ZIP: 200233 BUSINESS PHONE: (86 21) 6128-5678 MAIL ADDRESS: STREET 1: ROOM A1601, TECHNOLOGY BUILDING STREET 2: 900 YI SHAN ROAD CITY: XUHUI DISTRICT, SHANGHAI STATE: F4 ZIP: 200233 DRS 1 filename1.htm DRS

This draft registration statement has not been filed publicly with the Securities and Exchange Commission

and all information contained herein remains confidential.

As confidentially submitted to the Securities and Exchange Commission on April 5, 2013

Registration No. 333-

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM S-1

REGISTRATION STATEMENT

UNDER

THE SECURITIES ACT OF 1933

MONTAGE TECHNOLOGY GROUP LIMITED

(Exact name of registrant as specified in its charter)

Cayman Islands

3674

Not applicable

(State or other jurisdiction of

Incorporation or organization)

(Primary Standard Industrial

Classification Code Number)

(I.R.S. Employer

Identification Number)

Room A1601, Technology Building, 900 Yi Shan Road

Xuhui District, Shanghai, 200233

People’s Republic of China

Tel: (86 21) 6128-5678

(Address, including zip code, and telephone number, including area code, of registrant’s principal executive offices)

Mark Voll

Chief Financial Officer

2025 Gateway Place, Suite 262

San Jose CA 95110

Tel: 408-982-2788

(Name, address, including zip code, and telephone number, including area code, of agent for service)

Copies of Communications to:

Portia Ku

Ke Geng

O’Melveny & Myers LLP

2765 Sand Hill Road

Menlo Park, CA 94025

Tel: (650) 473-2600

James J. Masetti

Heidi E. Mayon

Pillsbury Winthrop Shaw Pittman LLP

2550 Hanover Street

Palo Alto, California 94304

Tel: (650) 233-4500

Approximate date of commencement of proposed sale to public: As soon as practicable after the effective date of this Registration Statement.

If any securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, check the following box. ¨

If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. ¨

If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. ¨

If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. ¨

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

CALCULATION OF REGISTRATION FEE



Title of each class of securities to be registered	Proposed maximum aggregate offering price ⁽¹⁾⁽²⁾	Amount of registration fee
Ordinary shares, par value $0.005 per share	$	$

(1)	Estimated solely for the purpose of determining the amount of registration fee in accordance with Rule 457(o) under the Securities Act of 1933, as amended.

(2)	Includes ordinary shares that the underwriters have the option to purchase to cover over-allotments, if any.

The registrant hereby amends this registration statement on such date or dates as may be necessary to delay its effective date until the registrant shall file a further amendment which specifically states that this registration statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933 or until the registration statement shall become effective on such date as the Commission, acting pursuant to said Section 8(a), may determine.

The information in this prospectus is not complete and may be changed. Neither we nor the selling shareholders may sell these securities until the registration statement filed with the Securities and Exchange Commission is effective. This prospectus is not an offer to sell these securities, and neither we nor the selling shareholders are soliciting offers to buy these securities, in any jurisdiction where the offer or sale is not permitted.

Subject to Completion, dated , 2013

shares

LOGO

Montage Technology Group Limited

Ordinary shares

This is an initial public offering of ordinary shares of Montage Technology Group Limited. We are offering ordinary shares. The selling shareholders are offering ordinary shares and we will not receive any of the proceeds in connection with the shares to be sold by the selling shareholders from this offering. We will bear all of the offering expenses other than the underwriting discount.

Prior to this offering, there has been no public market for our ordinary shares. We intend to apply to list our ordinary shares on the NASDAQ Global Select Market under the symbol “MONT.”

It is currently estimated that the initial public offering price per share will be between $ and $ .

Investing in our ordinary shares involves a high degree of risk. See “Risk factors” beginning on page 10.

Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of these securities or passed upon the adequacy or accuracy of this prospectus. Any representation to the contrary is a criminal offense.


	Per Share	Total
Initial public offering price	$	$
Underwriting discounts and commissions	$	$
Proceeds, before expenses, to us	$	$
Proceeds, before expenses, to the selling shareholders	$	$

We have granted the underwriters an option for a period of 30 days to purchase up to additional ordinary shares.

The underwriters expect to deliver the shares to purchasers on , 2013.

Prospectus dated , 2013.

TABLE OF CONTENTS


	Page
Prospectus Summary		1
Risk Factors		10
Special Note Regarding Forward-Looking Statements		34
Market, Industry and Other Data		35
Use of Proceeds		36
Dividend Policy		36
Capitalization		37
Dilution Selected Consolidated Financial Data		38 40
Management’s Discussion and Analysis of Financial Condition and Results of Operations		42
Business		62
Management		76
Executive Compensation		84
Related Party Transactions		89
Principal and Selling Shareholders		91
Description of Share Capital		94
Shares Eligible for Future Sale		101
Taxation		103
Underwriters		108
Enforceability of Civil Liabilities Legal Matters		114 115
Experts		115
Where You Can Find More Information		115
Index to Consolidated Financial Statements		F-1

Through and including , 2013 (the 25th day after the date of this prospectus), all dealers effecting transactions in these securities, whether or not participating in this offering, may be required to deliver a prospectus. This is in addition to a dealer’s obligation to deliver a prospectus when acting as an underwriter and with respect to an unsold allotment or subscription.

Neither we, nor the selling shareholders nor the underwriters have authorized anyone to provide any information or to make any representations other than those contained or incorporated by reference in this prospectus or in any free writing prospectuses we have prepared. We, and not the underwriters, have ultimate authority over the statements contained or incorporated by reference in this prospectus and in any free writing prospectus we have prepared, including the content of those statements and whether and how to communicate them. We take no responsibility for, and can provide no assurance as to the reliability of, any other information that others may give you. This prospectus is an offer to sell only the shares offered hereby, but only under circumstances and in jurisdictions where it is lawful to do so. The information contained or incorporated by reference in this prospectus is current only as of its date.

For investors outside the United States: Neither we, nor the selling shareholders, nor the underwriters have done anything that would permit our initial public offering or possession or distribution of this prospectus in any jurisdiction where action for that purpose is required, other than in the United States. Persons outside the United States who come into possession of this prospectus must inform themselves about, and observe any restrictions relating to, the offering of our ordinary shares and the distribution of this prospectus outside of the United States.

Conventions That Apply to This Prospectus

In this prospectus,

•

“CPU” refers to central processing unit;

•

“DDR” refers to DDR DRAM, or double data rate dynamic random-access memory, a class of memory integrated circuits used in computers;

•

“DDR2” refers to the second generation of DDR;

•

“DDR3” refers to the third generation of DDR;

•

“DDR4” refers to the fourth generation of DDR;

•

“HDTV” refers to high-definition television;

•

“JEDEC” refers to Joint Electron Devices Engineering Council, an independent semiconductor engineering trade organization to develop standards for semiconductor devices;

•

“MPEG” refers to Moving Picture Experts Group;

•

“preferred shares” refers to our Series A preferred shares, Series A-2 preferred shares, Series B preferred shares, Series B-1 preferred shares and Series B-2 preferred shares, each having par value of US$0.005 per share;

•

“RMB” or “Renminbi” refers to the legal currency of China;

•

“SDTV” refers to standard-definition television;

•

“shares” or “ordinary shares” refers to our ordinary shares, par value of US$0.005 per share;

•

“SoC” refers to system-on-chip, an integrated circuit that generally contains digital, analog, mixed-signal and radio-frequency functions on a single chip substrate; and

•

“we,” “us,” “our company” and “our” refer to Montage Technology Group Limited and its subsidiaries, as the context requires.

PROSPECTUS SUMMARY

This summary highlights information contained elsewhere in this prospectus. This summary does not contain all of the information you should consider before investing in our ordinary shares. You should read this entire prospectus carefully, especially the “Risk Factors” section of this prospectus and our consolidated financial statements and related notes appearing at the end of this prospectus, before making an investment decision. Some of the statements in this prospectus constitute forward-looking statements. See “Special Note Regarding Forward-Looking Statements” for more information.

Our Company

We are a global fabless provider of analog and mixed-signal semiconductor solutions currently addressing the home entertainment and cloud computing markets. Our expertise in analog and radio frequency solutions, digital signal processors and high speed interfaces serves as the foundation for our technology platform. These technical capabilities enable us to design high performance, low power semiconductors. In the home entertainment market, our technology platform enables us to design highly integrated end-to-end solutions with customized software and support for set-top boxes. Our solutions are designed to optimize signal processing performance under the challenging operating conditions typically found in emerging market environments. In the cloud computing market, we offer high performance, low power memory interface solutions that enable memory-intensive server applications. Our technology platform approach allows us to provide integrated solutions that meet the expanding needs of our customers through our continuous innovation, cost- and power-efficient design and rapid product development. Since our inception in 2004, we have sold over 230 million integrated circuits, which have been shipped to over 150 end customers worldwide.

While analog and mixed-signal technology is applicable to a broad array of end markets, we have been highly selective in identifying our initial target end markets. We focus on markets with compelling secular growth drivers that are also characterized by complex product design, long life cycles and stringent qualification requirements. We believe our significant investment in our technology platform has created high barriers to entry for set-top box solutions in emerging markets as well as memory interface solutions in the cloud computing market. Initially, we developed commercial solutions for the home entertainment market to address the rapidly growing demand for television in China, Southeast Asia and other emerging markets. According to iSuppli, in 2011, 118 million set-top boxes were sold by Chinese manufacturers, primarily targeting emerging markets. In 2016, the number of set-top boxes sold by Chinese manufacturers is expected to grow to over 243 million units in 2016, representing a compound annual growth rate of 16% from 2011 to 2016. A key to our success in the home entertainment market is our ability to provide integrated end-to-end solutions with customized software and support, which we develop through close collaboration with our end customers. Our collaborative approach allows us to develop extensive localized knowledge of a large, fragmented market with diverse requirements, deepening customer relationships and yielding design wins across multiple product generations. Our end customers in the home entertainment market include nine of the ten largest set-top box manufacturers in China as measured by units sold in 2012.

More recently, we released our memory interface solutions to pursue opportunities arising from the rapid growth in the cloud computing market. Our close collaboration with key ecosystem participants, including CPU manufacturers, memory module manufacturers and server OEMs, has enabled us to successfully develop high performance, low power memory interface solutions for cloud computing environments. We are currently one of two load-reduced dual in-line memory module, or LRDIMM, memory buffer suppliers validated by Intel Corporation for DDR3 technology, the most prevalent industry standard. Our customers in the cloud computing market include three of the world’s five largest memory module manufacturers as measured by revenue generated in 2011.

We offer ten solutions for use in the home entertainment market and two memory interface solutions for use in the cloud computing market. Our solutions are built upon our foundation of 36 issued patents and an additional 44 pending patent applications. As of December 31, 2012, we had 270 engineers in our research and development organization, of which 132 hold post-graduate engineering degrees. Our revenue has grown from $29.1 million in 2010 to $78.2 million in 2012, representing a compound annual growth rate of 64%. In 2012, 94% of our revenue was generated from set-top box solutions and 6% was generated from memory interface solutions. We had a net loss of $8.5 million in 2010 and net income of $5.0 million in 2011 and $18.3 million in 2012.

Our Market Opportunity

Our solutions primarily serve two large target markets, (i) the home entertainment market, in particular set-top boxes for emerging markets; and (ii) the cloud computing market, in particular memory interface solutions for data center servers.

Home Entertainment Market

In emerging markets, such as China, India, the Middle East, Latin and South America, Africa and Southeast Asia, television content is broadcast and accessed through satellite transmissions, cable network connections or terrestrial over-the-air transmissions. Viewers often access content from these three signal transmission systems using set-top boxes that are connected to televisions within the home. According to iSuppli, in 2011, 118 million set-top boxes were sold by Chinese manufacturers, primarily targeting emerging markets. Of the 118 million units sold, 64% were exported outside of China. In 2016, the total number of units sold by Chinese manufacturers is expected to grow to over 243 million units, representing a compound annual growth rate of 16%, with 58% of those units expected to be exported, primarily to emerging markets. In addition, in some emerging markets, such as China, the broadcasting signal of television content is transitioning from analog to digital due to government- sponsored programs requiring the replacement or addition of television access equipment. For example, China has a goal to shut down analog TV signals by 2015 and transition to digital TV in most regions. With improvements in content quality, viewers in emerging markets are expected to increasingly purchase set-top boxes that can receive and display high-definition video content. While currently the satellite set-top box market is the largest market for China-manufactured set-top boxes in terms of total number of set-top boxes sold, the cable set-top box market is expected to represent an increasing proportion of China-manufactured set-top boxes from 2011 to 2016, according to iSuppli.

In order to optimize for superior and robust system performance and deliver cost-efficient solutions to set-top box manufacturers, semiconductor providers are integrating multiple functions into a single silicon package. These integrated solutions also require customized embedded software and field application support to ensure proper functionality and system level performance. The demands for cost-effective yet high-performance solutions are particularly strong in emerging markets. According to iSuppli, the market for semiconductors addressing set-top boxes manufactured in China totaled $828 million in 2011 and is expected to grow at a compound annual growth rate of 10% through 2016, with sales of integrated semiconductor solutions outpacing the growth of the overall market from 2011 to 2016.

Cloud Computing Market

To meet the rising demands being placed on networks, data center operators have increased the number of servers within their facilities. In cloud computing environments where a significant number of memory-intensive applications are simultaneously being run on a server, the processing performance of CPUs is limited by the amount of memory available to the CPU. Additional memory capacity is required to ensure servers perform at optimal levels, which is critical for on-demand applications like cloud computing and virtualization. As a result, memory capacity is added to a server through the use of dual in-line memory modules, or DIMMs, which house dynamic random access memory, or DRAM. Memory performance is enhanced through the use of interface devices called memory buffers that efficiently facilitate the rapid flow of data between the CPU and memory. As the number of cores in the CPU increases, the number of DIMMs required to achieve higher performance also increases. The need for greater amounts of DRAM to support high performance computing is expected to drive the development of higher capacity DIMMs, where a greater amount of gigabit storage is placed on a single DIMM. According to Gartner, the memory content within the overall server market is expected to grow at a compound annual growth rate of 22% from 2012 to 2016. In addition, memory is expected to become a larger percentage of the server semiconductor total addressable market, increasing from 13.4% in 2012 to 21.3% in 2016, according to Gartner.⁽¹⁾

The rise of computing power in a server also drives a significant increase in the energy costs required to operate the server. Therefore, data center operators are increasingly focused on the power efficiency of each component within a server system and ascribe significant value to low power solutions that can drive energy savings without compromising performance. Moreover, CPU manufacturers create technology platforms that server original equipment manufacturers, or OEMs, use as the basis for their server design. A CPU manufacturer sets the specifications for many of the key components to be used in each generation of its server platforms. In the case of memory interface solutions for DIMMs, CPU manufacturers impose strict guidelines and generally qualify only a few vendors to provide memory interface solutions for their server platforms. With each new server platform released by CPU manufacturers, providers of memory interface solutions must be validated for use on the new platform. As such, the increased technical requirements for memory interface solutions not only create higher degrees of complexity and greater requirements for performance, signal integrity and low power on the newer generation memory buffers, but also limit the number of participants in the market for memory interface solutions.

Key Requirements of Our Target Markets

Within the home entertainment market, set-top box manufacturers in emerging markets have the following critical needs which must be addressed when identifying semiconductor solutions for their products:

•

integration;

•

high level of field support;

•

exceptional performance and signal processing in challenging environments;

•

embedded software and comprehensive system-level solutions;

•

cost effectiveness; and

•

ease of manufacture.

⁽¹⁾

Gartner, Inc. (“Gartner”), “Forecast: Electronic Equipment Production and Semiconductor Consumption by Application, Worldwide, 2010-2016, 4Q12 Update.” The Gartner Report described herein, (the “Gartner Report”) represent(s) data, research opinion or viewpoints published, as part of a syndicated subscription service, by Gartner, and are not representations of fact. The Gartner Report speaks as of its original publication date (and not as of the date of this filing) and the opinions expressed in the Gartner Report are subject to change without notice.

Within the cloud computing market, server OEMs have the following critical needs which must be addressed when identifying memory interface solutions for their products:

•

high performance and low power;

•

signal integrity; and

•

built-in self-test capability.

To successfully compete in the home entertainment and cloud computing markets, semiconductor providers must possess strong design capabilities in both analog and mixed-signal technologies as well as system level design expertise. In addition, design solutions must effectively meet the foregoing requirements and offer an attractive value proposition for set-top box manufacturers, memory module manufacturers and server OEMs alike.

Our Solutions

By combining our expertise in high performance, low power mixed-signal semiconductor design technologies, we have designed and developed advanced memory interface solutions that provide high performance and low power consumption for use in data center servers for the cloud computing market. We believe our memory interface solutions can achieve better signal integrity than the competitors in our market, which allow our solutions to efficiently operate at higher speeds thereby increasing memory capacity and improving server performance. Additionally, our built-in self-test capabilities help our memory module manufacturer customers and server OEMs to rapidly validate memory performance.

Competitive Strengths

We believe the following strengths differentiate us from our competitors and are key drivers of our success:

•

High performance, low power analog and mixed-signal technology platform. Our technology platform is built upon our foundation of high performance, low power expertise and consists of a versatile and comprehensive set of hardware and software building blocks that serve both our home entertainment and cloud computing markets. For example, in the cloud computing market, we are currently one of two LRDIMM memory buffer suppliers validated by Intel Corporation for DDR3 technology, the most prevalent industry standard.

•

Deep technology expertise. Our research and development team of 270 professionals, of which 132 have advanced degrees, has extensive digital signal processing, radio frequency and analog and mixed-signal design experience and includes engineers who have participated in the development of key industry standards such as JEDEC and MPEG. Our core system-level expertise and understanding of system requirements enables us to optimize our product roadmap and identify attractive opportunities.

•

solutions have significant advantages over competing discrete products such as improving signal integrity, reducing size and ultimately driving superior system performance.

•

Close collaboration and relationships with customers and ecosystem participants. Our extensive customer interaction, in particular through support provided by our field application engineers, combined with our deep understanding of our customers’ needs, fosters customer loyalty and increases visibility within our business. Our close proximity to our customers, which are primarily located in Asia, also provides us with a better understanding of local system requirements and allows us to achieve faster time to market with our solutions.

•

Broad customer base and attractive market opportunities in home entertainment. We have sold our solutions principally through distributors to over 150 set-top box manufacturers worldwide. Our key customers include nine of the ten largest set-top box manufacturers in China, who manufacture products optimized for end users in emerging markets.

•

Well positioned to capitalize on opportunities in cloud computing. We believe we offer the highest performance and lowest-power memory interface solutions for memory-intensive cloud computing applications. We are currently one of two LRDIMM suppliers validated by Intel Corporation for DDR3 technology, the most prevalent industry standard, and have sold our memory interface solutions to three of the world’s five largest memory module manufacturers.

Growth Strategy

We believe we can continue to grow our revenue by executing on the following strategies:

•

Invest to maintain technology leadership position across product lines. We intend to continue our focus on retaining and attracting high quality engineering staff and investing in our intellectual property portfolio to further extend our leading high performance, low power technologies in our markets.

•

Strengthen our relationships with customers and ecosystem participants. We intend to continue to build upon and strengthen our collaborative relationships to increase our customers’ dependence on us and drive greater demand for our solutions, as well as to continue participating in the development of key industry standards to better align our future roadmap.

•

Expand product offering and market share in home entertainment for emerging markets. We will continue to leverage our engineering expertise to grow our market share in the globally fragmented home entertainment market. We also intend to continue to introduce solutions with higher levels of product functionality and integration, as we seek to increase our average selling price per set-top box by providing more integrated solutions.

•

Continue to position ourselves for growth in the cloud computing market. We intend to further penetrate our existing customer base and collaborate with new memory module partners to increase our revenue. We also intend to further develop our partnership with leading CPU manufacturers and remain aligned with their server and next generation technology roadmaps.

Risk Factors

We are subject to a number of risks, including risks that may prevent us from achieving our business objectives or may adversely affect our business, financial condition, results of operations, cash flows and prospects. You should carefully consider these risks, including all of the risks discussed in the section entitled “Risk Factors,” beginning on page 10 of this prospectus, before investing in our ordinary shares. Risks relating to our business relate to, among other things:

•

Our ability to sustain our recent revenue growth rates;

•

Our ability to sustain or increase our profitability in the future;

•

Our ability to develop and maintain relationships with key industry and technology leaders to enhance our solution offerings and market position;

•

Changes to industry standards and technical requirements relevant to our solutions and markets;

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The rapidly evolving and intensely competitive nature of our markets;

•

Our ability to continuously develop new and enhanced solutions to meet changing market conditions;

•

Our reliance on third parties to manufacture, package, assemble and test the semiconductor products comprising our solutions;

•

Our lengthy sales cycles, which could result in uncertainty and delays in generating revenue;

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Our ability to adequately protect our intellectual property rights; and

•

Government policies that could have a material adverse effect on our results of operations.

Corporate Information

We are a Cayman Islands company. We conduct our business primarily through our wholly owned operating subsidiaries in China, Hong Kong and the United States. Our principal executive office is located at Room A1601, Technology Building, 900 Yi Shan Road, Xuhui District, Shanghai 200233, China and our telephone number is +86 (21) 6128-5678. Our website address is www.montage-tech.com. We do not incorporate the information contained on, or accessible through, our website into this prospectus, and you should not consider it part of this prospectus.

“Montage Technology” and our logo are our trademarks. All other trademarks and trade names appearing in this prospectus are the property of their respective owners. We do not intend our use or display of other parties’ trademarks, trade names or service marks to imply, and such use or display should not be construed to imply, a relationship with, or endorsement or sponsorship of us by, these other parties.

THE OFFERING


Ordinary shares offered by us		shares

Ordinary shares offered by the selling shareholders		shares

Ordinary shares outstanding immediately after this offering		shares ( shares if the over-allotment option is exercised in full)

Over-allotment option		We have granted to the underwriters an option, exercisable within 30 days from the date of this prospectus, to purchase up to an aggregate of additional ordinary shares at the initial public offering price, less underwriting discounts and commissions, solely to cover over-allotments of ordinary shares, if any.

Use of proceeds		We intend to use the net proceeds from this offering for general corporate purposes, including working capital and capital expenditures. See “Use of Proceeds.”

Risk factors		Investing in our ordinary shares involves a high degree of risk. You should carefully read the information set forth under “Risk Factors” beginning on page 10 of this prospectus, together with all of the other information set forth or incorporated by reference in this prospectus, before deciding to invest in our ordinary shares.

Proposed NASDAQ Global Select Market Symbol		“MONT”

The number of ordinary shares that will be outstanding immediately after this offering:

•

is based upon 52,037,816 ordinary shares outstanding as of March 31, 2013;

•

assumes the conversion of all outstanding preferred shares as of the date of this prospectus into an aggregate of ordinary shares immediately upon the completion of this offering;

•

excludes 7,540,084 ordinary shares issuable upon the exercise of options granted under our 2006 Share Incentive Plan outstanding as of March 31, 2013; and

•

excludes ordinary shares that will be available for future issuance under our 2006 Share Incentive Plan and 2013 Performance Incentive Plan.

SUMMARY CONSOLIDATED FINANCIAL DATA

The following table sets forth our summary consolidated financial data for the periods and as of the dates indicated. Our summary consolidated financial data for each of the years ended December 31, 2010, 2011 and 2012 and the summary consolidated balance sheet data as of December 31, 2012 has been derived from our audited consolidated financial statements, which are included elsewhere in this prospectus.

The historical results presented below are not necessarily indicative of the results to be expected for any future period. The following summaries of our consolidated financial data for the periods presented should be read in conjunction with “Risk Factors,” “Capitalization,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and our consolidated financial statements and related notes, which are included elsewhere in this prospectus.


	Year Ended December 31,
	2010			2011			2012
	(in thousands, except share and per share data)
Summary Statement of Operations Data:
Revenue	$	29,078		$	50,338		$	78,245
Cost of revenue⁽¹⁾		(21,248	)		(22,840	)		(31,736	)

Gross profit		7,830			27,498			46,509

Operating expense:
Research and development⁽¹⁾		(11,078	)		(13,651	)		(17,568	)
Sales, general and administrative⁽¹⁾		(5,046	)		(5,895	)		(9,792	)

Total operating expense		(16,124	)		(19,546	)		(27,360	)

Income (loss) from operations		(8,294	)		7,952			19,149
Interest income (expense), net		(44	)		(36	)		207
Fair value change in warrant liability		(37	)		—			—
Other income (expense), net		(114	)		(307	)		153

Income (loss) before income taxes		(8,489	)		7,609			19,509
Provision for income tax		(54	)		(2,637	)		(1,228	)

Net income (loss)	$	(8,543	)	$	4,972		$	18,281

Net income (loss) attributable to ordinary shareholders—Basic	$	(11,056	)	$	77		$	3,114

Net income (loss) per share:
Basic	$	(1.06	)	$	0.01		$	0.29

Diluted	$	(1.06	)	$	0.01		$	0.26

Weighted-average shares used in computing net income (loss) per share:
Basic		10,393,746			10,650,479			10,798,107

Diluted		10,393,746			14,810,976			15,916,704

(1)	Includes stock-based compensation as follows:


	Year Ended December 31,
	2010		2011		2012
	(in thousands)
Cost of revenue	$	31	$	13	$	19
Research and development		358		356		497
Selling, general and administrative		389		262		473

Total stock-based compensation	$	778	$	631	$	989

The following summary consolidated balance sheet data table shows a summary of our balance sheet data as of December 31, 2012:

•

on an actual basis;

•

on a pro forma basis, giving effect to the automatic conversion of all outstanding convertible preferred shares into 40,408,994 ordinary shares; and

•

on a pro forma as adjusted basis to reflect, in addition, the sale by us of ordinary shares in this offering at an assumed initial public offering price of $ per share, the midpoint of the price range listed on the cover page of this prospectus, after deducting estimated underwriting discounts and commissions and estimated offering expenses payable by us.


	As of December 31, 2012
	Actual			Pro Forma	Pro Forma as Adjusted
				(unaudited)	(unaudited)
	(in thousands)
Summary Balance Sheet Data:
Cash and cash equivalents	$	21,580
Working capital		33,496
Total assets		53,802
Total liabilities		20,208
Convertible preferred shares		54,377
Total shareholders’ deficit		(20,783	)

RISK FACTORS

An investment in our ordinary shares involves significant risks. You should carefully consider all of the information in this prospectus, including the risk factors described below, before making an investment in our ordinary shares. The following risk factors describe conditions, circumstances or uncertainties that create or enhance risks to our business, financial condition and results of operations or otherwise to the value of your investment in our ordinary shares. Any of these risks could result in a decline in the market price of our ordinary shares, in which case you could lose all or part of your investment.

Risk Factors Related to Our Business and Our Industry

We may be unable to sustain our recent revenue growth rates.

We experienced significant growth in revenue and profits in 2011 and 2012. Our revenue increased from $29.1 million in 2010 to $78.2 million in 2012, while our net income (loss) improved from a net loss of $8.5 million in 2010 to net income of $5.0 million in 2011 and to $18.3 million in 2012. We may not achieve similar rates of growth in future periods. You should not rely on our results of operations for any prior quarterly or annual periods as an indication of our future performance. Our future revenue growth rate will depend in particular on the success of our memory interface solutions. In 2012, our memory interface solutions generated $4.6 million in revenue and we may not be successful in growing our revenue from our memory interface solutions. If our revenue growth slows significantly or decreases, the market price of our ordinary shares may decline.

We have a history of losses, have only recently become profitable and may not sustain or increase profitability in the future which may cause the market price of our ordinary shares to decline.

We first became profitable on an annual basis in 2011. We incurred significant net losses prior to that year. As of December 31, 2012, we had an accumulated deficit of $24.4 million. We currently expect to increase our expense levels to support our business growth. Therefore, to sustain or increase profitability, we will need to grow our revenue. If our expenditures do not result in increased revenue growth or there is a significant time lag between these expenses and our revenue growth, we may experience net losses in the future. Because many of our expenses are fixed in the short term, or are incurred in advance of anticipated sales, we may not be able to decrease our expenses in a timely manner to offset any shortfall of revenue. Any incurrence of net losses in the future could cause the market price of our ordinary shares to decline.

We rely on our relationships with industry and technology leaders to enhance our solution offerings and market position, and our inability to continue to develop or maintain such relationships in the future would harm our ability to remain competitive.

We develop our semiconductor solutions for applications in systems that are driven by industry and technology leaders, in particular for our memory interface solutions. In the cloud computing market, CPU manufacturers create technology platforms that memory module manufacturers and server OEMs use as the basis for their products and solutions. A CPU manufacturer sets the specifications for many of the key components to be used on each generation of its server platforms. In the case of our memory interface solutions, CPU manufacturers impose strict guidelines and generally qualify only a few vendors to provide memory interface solutions for their server platforms. With each new server platform released by CPU manufacturers, providers of memory interface solutions must be validated for use on the new platform. In addition, we must work closely with memory module manufacturers to ensure our memory interface solutions become qualified for use with their memory modules. As a result, maintaining close relationships with leading CPU manufacturers and memory module manufacturers is crucial to the long-term success of our memory interface solutions business. If our relationships with key ecosystem participants were to deteriorate, our market position and sales could be materially adversely affected.

Changes to industry standards and technical requirements relevant to our solutions and markets could adversely affect our business, results of operations and prospects.

Our solutions comprise only a part of larger electronic systems. All solutions incorporated into these systems must comply with various industry standards and technical requirements created by regulatory bodies or industry participants in order to operate efficiently together. Industry standards and technical requirements in our markets are evolving and may change significantly over time. For our set-top-box solutions, the industry standards are typically set by government regulators and vary by country. Such standards can sometimes change or additional standards may be added with limited advance notice. For memory interface solutions, the industry standards are developed by JEDEC, an industry trade organization. In addition, large industry-leading semiconductor and electronics companies play a significant role in developing standards and technical requirements for the product ecosystems within which our memory interface solutions can be used. Our end customers also may design certain specifications and other technical requirements specific to their products and solutions. These technical requirements may change as the end customer introduces new or enhanced products and solutions.

Our ability to compete in the future will depend on our ability to identify and ensure compliance with evolving industry standards and technical requirements. The emergence of new industry standards and technical requirements could render our solutions incompatible with solutions developed by other suppliers or make it difficult for our solutions to meet the requirements of certain of our end customers in both the home entertainment and cloud computing markets. As a result, we could be required to invest significant time and effort and to incur significant expense to redesign our solutions to ensure compliance with relevant standards and requirements. If our solutions are not in compliance with prevailing industry standards and technical requirements for a significant period of time, we could miss opportunities to achieve crucial design wins, our revenue may decline and we may incur significant expenses to redesign our solutions to meet the relevant standards, which could adversely affect our business, results of operations and prospects.

Our business would be adversely affected by the departure of existing members of our senior management team and other key personnel.

Our success depends, in large part, on the continued contributions of our senior management team, in particular, the services of Dr. Howard C. Yang, our Chairman of the Board and Chief Executive Officer, and Stephen Tai, our President and director, as well as other senior management. The loss of any member of our senior management team or key personnel could harm our ability to implement our business strategy and respond to the rapidly changing market conditions in which we operate.

Our results of operations can fluctuate from period to period, which could cause our share price to fluctuate.

Our results of operations have fluctuated in the past and may fluctuate from period to period in the future due to a variety of factors, many of which are beyond our control. Factors relating to our business that may contribute to these fluctuations include the following factors, as well as other factors described elsewhere in this prospectus:

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the receipt, reduction, delay or cancellation of orders by customers;

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the gain or loss of significant customers;

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the timing and success of our launch of new solutions and launches of new solutions by our competitors;

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market acceptance of our solutions and our customers’ products;

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the timing and extent of research and development costs, and in particular tape-out costs;

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fluctuations in sales by and inventory levels of module manufacturers who incorporate our semiconductor solutions in their products, such as memory modules;

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cyclical and seasonal fluctuations in our markets;

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fluctuations in our manufacturing yields;

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significant warranty claims, including those not covered by our contract manufacturer;

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changes in our revenue mix; and

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loss of key personnel or the inability to attract qualified engineers.

The semiconductor industry has been highly cyclical in the past and our markets may experience significant cyclical fluctuations in demand as a result of changing economic conditions, budgeting and buying patterns of customers and others factors. As a result of the various potential factors affecting demand for our products and our results of operations in any given period, the results of any prior quarterly or annual periods should not be relied upon as indicative of our future revenue or operating performance. Fluctuations in our revenue and operating results could cause our share price to decline.

The markets for our semiconductor solutions are evolving, and changing market conditions, such as the introduction of new technologies or changes in customer preferences, may negatively affect demand for our solutions. If we fail to properly anticipate or respond to changing market conditions, our business prospects and results of operations will suffer.

Our solutions are used in the technologically advanced and rapidly evolving home entertainment and cloud computing markets. The technologies used in these markets are constantly being improved and new technologies that compete with existing technologies may be developed. Furthermore, the home entertainment market, and in particular the market for our set-top-box solutions, is subject to changes in viewer preferences, customer requirements and technical standards. In the cloud computing market, and in particular the market for our memory interface solutions, technology advancements are continuously underway, such as the advancements in memory technology from DDR2 to DDR3 and DDR4. New technologies may be introduced that make the current technologies that our solutions utilize less competitive or obsolete. Due to the evolving nature of our markets, our future success depends on our ability to accurately anticipate and respond to changes in technologies, consumer preferences and other market conditions. Any decrease in demand for our set-top-box and memory interface solutions, or set-top-box and memory interface solutions in general, due to the emergence of competing technologies, changes in customer preferences and requirements or other factors, could adversely affect our business, results of operations and prospects.

We must continuously develop new and enhanced solutions, and if we are unable to successfully market our new and enhanced solutions that we have incurred significant expenses developing, our results of operations and financial condition will be materially adversely affected.

In order to compete effectively in our markets, we must continually design, develop and introduce new and improved solutions with improved features in a cost-effective manner in response to changing technologies and market demand. This requires us to devote substantial financial and other resources to research and development. In the home entertainment market, in response to market trends, we have focused on providing more integrated and customized solutions and are enhancing our offerings of HDTV solutions. In the memory interface market, we are developing next-generation DDR4 memory interface solutions. However, we may not be successful developing and marketing these new and enhanced solutions. In particular in the memory interface market, we have generated limited revenue from sales of our memory interface solutions through 2012. While we expect revenue from our memory interface solutions to grow, we may not be able to increase our market share in this globally competitive market. If we are unable to successfully market our new and enhanced solutions that we have incurred significant expenses developing, our results of operations and financial condition will be materially and adversely affected.

Average selling prices of our solutions have historically decreased over time and will likely continue to do so, which could negatively affect our revenue and margins.

Historically, the semiconductor solutions that we sell have experienced declining average selling prices over their life cycle. The rate at which the average selling price declines may be affected by a number of factors, including relative supply and demand, the level of competition, production costs and technological changes. As a result of the general trend of decreasing average selling prices of our semiconductor solutions following their launch, our ability to grow or maintain our margins depends on our ability to introduce new or enhanced solutions with higher average selling prices and to reduce our per-unit cost of sales and operating costs. However, our new or enhanced solutions may not be as successful or enjoy as high margins as we expect. If we are unable to offset any reductions in the average selling prices by introducing new solutions with higher average selling prices or reducing our costs, our revenue and margins will be negatively affected and may decrease.

We face intense competition and expect competition to increase in the future. If we fail to compete effectively, our revenue growth and results of operations will be materially adversely affected.

The markets in which we operate are highly competitive. We compete with numerous domestic and international semiconductor companies, many of which have greater financial and other resources with which to pursue technology development, product design, manufacturing, marketing and sales and distribution of their products. Currently, our competitors range from large, international companies offering a wide range of semiconductor solutions to smaller companies specializing in set-top box or memory interface solutions. Our primary competitors in the set-top box market include semiconductor companies that sell to emerging markets such as HiSilicon Technologies Co., Ltd., ALi Corporation, RDA Microelectronics, Inc., Airoha Technology Corporation and STMicroelectronics NV, as well as smaller semiconductor design companies based in China. Our competitors in the memory interface market include Inphi Corporation, Integrated Device Technology, Inc. and Texas Instruments Inc. We expect that as the markets for our solutions grow, new entrants will enter these markets and existing competitors may make significant investments to compete more effectively against us. As the emerging markets to which we sell our set-top box solutions become developed markets, leading semiconductor companies focusing on developed markets may increasingly enter our target markets.

Our ability to compete successfully depends on factors both within and outside of our control, including:

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the functionality and performance of our solutions and those of our competitors;

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our relationship with our end customers and other ecosystem participants;

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prices of our solutions and prices of our competitors’ products;

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our reputation and ability to provide satisfactory customer support;

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our research and development capabilities to provide innovative solutions;

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our ability to retain high-level talent, including our management team and engineers; and

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the actions of our competitors, including merger and acquisition activity, launches of new products and other actions that could change the competitive landscape.

Intense competition could result in pricing pressure, reduced revenue and profitability and loss of market share, any of which could materially and adversely affect our business, results of operations and prospects. In the event of a market downturn, competition in the markets in which we operate may intensify as our customers reduce their purchase orders. During market downturns, our competitors that are significantly larger and have greater financial, technical, marketing, distribution, customer support and other resources or more established market recognition than us may be better positioned to accept lower prices and withstand adverse economic or market conditions.

We rely on third parties to manufacture, package, assemble and test the semiconductor products comprising our solutions, which exposes us to a number of risks, including reduced control over manufacturing and delivery timing and potential exposure to price fluctuations, which could result in a loss of revenue or reduced profitability.

As a fabless semiconductor company, we outsource the manufacturing, packaging, assembly and certain testing of our semiconductor solutions to third-party foundries and assembly and testing service providers. We generally use a single foundry for the production of each semiconductor product comprising our set-top box and memory interface solutions. In 2012, we outsourced the manufacturing to three different foundries, Semiconductor Manufacturing International Corporation in China, Fujitsu Semiconductor Limited in Japan and United Microelectronics Corporation in Taiwan. Our assembly and testing contractors in 2012 were Siliconware Precision Industries Co., Ltd. in Taiwan and STATS ChipPAC Ltd. in Singapore and Korea.

Relying on third-party manufacturing, assembly and testing presents a number of risks, including but not limited to:

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capacity shortages during periods of high demand;

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reduced control over delivery schedules, inventories and quality;

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the unavailability of, or potential delays in obtaining access to, key process technologies;

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the inability to achieve required production or test capacity and acceptable yields on a timely basis;

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misappropriation of our intellectual property;

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limited warranties on wafers or products supplied to us; and

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potential increases in prices.

We currently do not have long-term supply contracts with any of our third-party contract manufacturers, and we typically negotiate pricing on a per-purchase order basis. Therefore, they are not obligated to perform services or supply product to us for any specific period, in any specific quantities, or at any specific price, except as may be provided in a particular purchase order. During periods of high demand and tight inventories, our third-party foundries and assembly and testing contractors may allocate capacity to the production of other companies’ products while reducing deliveries to us, or significantly raise their prices. In particular, they may allocate capacity to other customers that are larger and better financed than us or that have long-term agreements, decreasing the capacity available to us. If we need another foundry or assembly and test contractor because of increased demand, or if we are unable to obtain timely and adequate deliveries from our providers, we might not be able to cost effectively and quickly retain other vendors to satisfy our requirements. In the event that we need to shift the production of a solution to a different contract manufacturer, it may take approximately nine to 12 months to allow a smooth transition from our current foundry or assembly services provider to the new provider. Such a transition might require a qualification process by our end customers.

We purchase from our manufacturing contractors based on our estimates of end customers’ demand, and if our estimates are incorrect our results of operations could be materially adversely impacted.

Our sales are made on the basis of purchase orders rather than long-term purchase contracts. We place orders with our third party foundries and service providers for manufacturing, assembling and testing our semiconductor products according to our estimates of customer demand several months prior to the anticipated delivery date to our distributor or end customer. This process requires us to make multiple demand forecast assumptions with respect to our end customers’ demands in advance of actual purchase orders. We might misestimate demand due to unforeseen changes in market conditions, incomplete or inaccurate customer and market information or other factors within and outside of our control. If we overestimate customer demand, we may purchase products from our third-party contractors that we may not be able to sell and may over-budget company operations, which could result in decreases in our prices or write-downs of unsold inventory. Conversely, if we underestimate customer demand or if sufficient manufacturing capacity were unavailable, we would lose out on sales opportunities and could lose market share or damage our customer relationships.

Our costs may increase substantially if our third-party manufacturing contractors do not achieve satisfactory product yields or quality.

The wafer fabrication process is an extremely complicated process where small changes in design, specifications or materials can result in material decreases in product yields or even the suspension of production. From time to time, the third-party wafer foundries that we contract to manufacture the semiconductor products comprising our solutions may experience manufacturing defects and reduced manufacturing yields related to errors or problems in their manufacturing processes or the interrelationship of their processes with our designs. In some cases, our third-party wafer foundries may not be able to detect these defects early in the fabrication process or determine the cause of such defects in a timely manner.

Generally, in pricing our solutions, we assume that manufacturing yields will continue to improve, even as the complexity of our solutions increases. Once our solutions are initially qualified with our third-party wafer foundries, minimum acceptable yields are established. We are responsible for the costs of the wafers if the actual yield is above the minimum. If actual yields are below the minimum we are not required to purchase the wafers. Typically, minimum acceptable yields for our new solutions are generally lower at first and gradually improve as we achieve full production. Unacceptably low product yields or other product manufacturing problems could substantially increase the overall production time and costs and adversely impact our operating results on sales of our solutions. Product yield losses will increase our costs and reduce our gross margin. In addition to significantly harming our operating results and cash flow, poor yields may delay shipment of our solutions and harm our relationships with existing and potential customers.

Our sales cycle can be lengthy, which could result in uncertainty and delays in generating revenue.

As we sell highly integrated end-to-end solutions with customized software and support, our sales cycle for our set-top box solutions from initial engagement to volume production may take a prolonged period of time, typically several months to one year. For our memory interface solutions, our sales cycle can include working with our customers and other ecosystem partners for up to two years or more on product development before we achieve design wins. Any delays in these lengthy sales cycles increase the risk that a customer will decide to cancel, curtail, reduce or delay its product plans or adopt a competing design or solution from one of our competitors, causing us to lose anticipated revenue. In addition, any delay or cancellation of an end customer’s plans could materially and adversely affect our financial results, as we may have incurred significant expense without generating any revenue. Finally, our end customers’ failure to successfully market and sell their products could reduce demand for our solutions and materially and adversely affect our business, results of operations and prospects. If we were unable to generate revenue after incurring substantial expenses during our sales efforts, our results of operations would suffer.

If we fail to achieve initial design wins for our solutions, we may lose the opportunity for sales to customers for a significant period of time and be unable to recoup our investments in our solutions.

We expend considerable resources in order to achieve design wins for our solutions, especially our new solutions and solution enhancements. Once a customer designs a semiconductor solution into its product, it is likely to continue to use the same semiconductor solution or enhanced versions of that solution from the same supplier across a number of similar and successor products for a lengthy period of time due to the significant costs associated with qualifying a new supplier and potentially redesigning the product to incorporate a different semiconductor solution. If we fail to achieve an initial design win in a customer’s qualification process, we may lose the opportunity for significant sales to that customer for a number of its products and for a lengthy period of time. This may cause us to be unable to recoup our investments in our solutions, which would harm our business.

Our customers require our solutions and our third-party contractors to undergo a lengthy and expensive qualification process. If we are unsuccessful or delayed in qualifying any of our solutions with a customer, our business and operating results would suffer.

Prior to selecting and purchasing our solutions, our end customers typically require that our solutions undergo extensive qualification processes, which involve testing of our solutions in the customers’ systems, as well as testing for reliability. This qualification process may continue for several months for our set-top box solutions. Our memory interface solutions must obtain qualification with our memory module manufacturer customers as well as CPU manufacturers. The qualification process for our memory interface solutions can take multiple years. However, obtaining the requisite qualifications for a solution does not assure any sales of the solution. Even after successful qualification and sales of a solution to an end customer, a subsequent revision in our third party contractors’ manufacturing process or our selection of a new contract manufacturer may require a new qualification process, which may result in delays and in our holding excess or obsolete inventory. After our solutions are qualified and selected, it can take several months or more before the customer commences volume production of systems that incorporate our solutions. Despite these uncertainties, we devote substantial resources, including design, engineering, sales, marketing and management efforts, to qualifying our solutions with customers in anticipation of sales. If we are unsuccessful or delayed in qualifying any of our solutions with a customer, sales of those solutions to the customer may be precluded or delayed, which may impede our growth and cause our business to suffer.

We have generated a substantial majority of our revenue from sales through three independent distributors, which subjects us to a number of risks.

We have sold a substantial majority of our set-top box solutions to end customers through three independent distributors, LQW Technology Company Limited, Qinuo International Co., Ltd. and China Electronic Appliance Shenzhen Co., Ltd. Sales through these three distributors accounted for 50%, 18% and 9%, respectively, of our total revenue in 2012. We typically settle accounts receivables with our distributors after the products are sold to the end customers. As of December 31, 2012, we had $7.9 million of accounts receivable, 89% of which was due from LQW Technology Company Limited. We typically enter into distribution agreements with our distributors, with each distributor covering a defined customer base and/or geographic area. In addition, our distribution agreements are typically negotiated and entered into on an annual basis and prohibit the distributor from selling products or solutions competing with ours. If any of our distributors were to default on its obligations and fail to pay our invoices or ship our products in a timely fashion, we may be unable to collect our accounts receivable, recover our inventory, or complete sales to the customers who had placed orders through that distributor, and we may find it difficult to replace that distributor. In addition, our operating results and financial condition could be significantly disrupted by the loss of one or more of these distributors, or various factors outside of our control such as order cancellations or delays in shipment by one or more of these distributors or the failure of any of these distributors to successfully sell our solutions.

The complexity of our solutions could result in undetected defects and we may be subject to warranty and product liability claims, which could result in a decrease in customers and revenue, unexpected expenses and loss of market share.

Our solutions are incorporated into larger electronic equipment sold by our end customers. A solution usually goes through an intense qualification and testing period performed by our customers before being used in production. We primarily outsource our solution testing to third parties and also perform some testing in our laboratories in Shanghai, Suzhou and Taiwan. We inspect and test parts, or have them inspected and tested in order to screen out parts that may be weak or potentially suffer a defect incurred through the manufacturing process. From time to time, we are may be subject to warranty or product liability claims that may require us to make significant expenditures to defend these claims or pay damage awards.

Generally, our agreements seek to limit our liability to the replacement of the part or to the revenue received for the solution, but these limitations on liability may not be effective or sufficient in scope in all cases. In addition, we do

not maintain any product liability insurance. If an end customer’s equipment fails in use, the end customer may incur significant monetary damages including an equipment recall or associated replacement expenses, as well as lost revenue. The end customer may claim that a defect in our solution caused the equipment failure and assert a claim against us to recover monetary damages. The process of identifying a defective or potentially defective solution in systems that have been widely distributed may be lengthy and require significant resources, and we may incur significant replacement costs and contract damage claims from our end customers as well as harm to our reputation. Defects in our solutions could harm our relationships with our customers and damage our reputation. Customers may be reluctant to buy our solutions, which could harm our ability to retain existing customers and attract new customers and our financial results. In addition, the cost of defending these claims and satisfying any arbitration award or judicial judgment with respect to these claims could harm our business prospects and financial condition.

We may not be able to adequately protect our intellectual property rights.

Our success depends in part upon our ability to protect our intellectual property. To accomplish this, we rely on a combination of intellectual property rights, including patents, copyrights, trademarks and trade secrets in the United States, China and other jurisdictions. Effective protection of our intellectual property rights may be unavailable, limited or not applied for in some countries. Some of our solutions and technologies are not covered by any patent or patent application, as we do not believe patent protection of these solutions and technologies is critical to our business strategy at this time. A failure to timely seek patent protection on solutions or technologies generally precludes us from seeking future patent protection on these solutions or technologies. We cannot guarantee that:

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any of our present or future patents or patent claims will not lapse or be invalidated, circumvented, challenged or abandoned;

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our intellectual property rights will provide competitive advantages to us;

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our ability to assert our intellectual property rights against potential competitors or to settle current or future disputes will not be limited by our agreements with third parties;

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any of our pending or future patent applications will be issued or have the coverage originally sought;

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our intellectual property rights will be enforced in jurisdictions where competition may be intense or where legal protection may be weak;

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any of the trademarks, copyrights, trade secrets or other intellectual property rights that we presently employ in our business will not lapse or be invalidated, circumvented, challenged or abandoned; or

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we will not lose the ability to assert our intellectual property rights against or to license our technology to others and collect royalties or other payments.

In addition, our competitors or others may design around our protected patents or technologies. In addition to registered patents, we also rely on contractual protections with our customers, suppliers, distributors, employees and consultants, and we implement security measures designed to protect our trade secrets. However, we cannot assure you that these contractual protections and security measures will not be breached, that we will have adequate remedies for any such breach or that our suppliers, employees or consultants will not assert rights to intellectual property arising out of such contracts.

Monitoring unauthorized use of our intellectual property is difficult and costly. In addition, intellectual property rights and confidentiality protection in China is generally considered less effective as in the United States or other developed countries. Unauthorized use of our intellectual property may have occurred or may occur in the future. Although we have taken steps to minimize the risk of this occurring, any such failure to identify unauthorized use and otherwise adequately protect our intellectual property would adversely affect our business.

Moreover, if we are required to commence litigation, whether as a plaintiff or defendant, not only would this be time-consuming, but we would also be forced to incur significant costs and divert our attention and efforts of

our employees, which could, in turn, result in lower revenue and higher expenses. If we pursue litigation to assert our intellectual property rights, an adverse decision in any of these legal actions could limit our ability to assert our intellectual property rights, limit the value of our technology or otherwise negatively impact our business, financial condition and results of operations.

We may face claims of intellectual property infringement, which could be time-consuming, costly to defend or settle, result in the loss of significant rights, harm our relationships with our customers and distributors, or otherwise materially adversely affect our business, financial condition and results of operations.

The semiconductor industry is characterized by companies that hold patents and other intellectual property rights and that vigorously pursue, protect and enforce intellectual property rights. From time to time, third parties may assert against us and our customers and distributors patent and other intellectual property rights to technologies that are important to our business.

Claims that our solutions, processes or technology infringe third-party intellectual property rights, regardless of their merit or resolution, could be costly to defend or settle and could divert the efforts and attention of our management and technical personnel. Infringement claims also could harm our relationships with our customers or distributors and might deter future customers from doing business with us. If any pending or future proceedings result in an adverse outcome, we could be required to:

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cease the manufacture, use or sale of the infringing solutions, processes or technology;

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pay substantial damages for infringement;

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expend significant resources to develop non-infringing solutions, processes or technology, which may not be successful;

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license technology from the third-party claiming infringement, which license may not be available on commercially reasonable terms, or at all;

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cross-license our technology to a competitor to resolve an infringement claim, which could weaken our ability to compete with that competitor; or

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pay substantial damages to our customers or end users to discontinue their use of or to replace infringing technology sold to them with non-infringing technology, if available.

Any of the foregoing results could have a material adverse effect on our business, financial condition and results of operations.

We incorporate third-party technologies for the development of our solutions and our inability to use such technologies in the future would harm our ability to remain competitive.

We rely on third parties for technologies that are integrated into our solutions, such as wafer fabrication and assembly and test technologies used by our contract manufacturers, as well as licensed software specifically designed for integrated circuit design. For example, substantially all of our existing semiconductor products comprising our set-top box solutions are designed based on CPUs designed by a third party. If we are unable to continue to use or license these technologies on reasonable terms, or if these technologies fail to operate properly, we may not be able to secure alternatives in a timely manner or at all, and our ability to remain competitive would be harmed. In addition, if we are unable to successfully license technology from third parties to develop future solutions, we may not be able to develop such solutions in a timely manner or at all.

If we are unable to attract, train and retain qualified design and technical personnel, we may not be able to execute our business strategy effectively.

Our future success depends on our ability to attract and retain qualified design and technical personnel. As the source of our technological and solution innovations, our design and technical personnel represent a

significant asset. Historically, we have not encountered any difficulty in hiring qualified engineers. We do not know whether we will be able to retain all of these personnel as we continue to pursue our business strategy. The loss of the services of one or more of our key employees, especially our key design and technical personnel, or our inability to attract and retain qualified design and technical personnel, could harm our business, financial condition and results of operations.

Competition for personnel in the semiconductor technology field is intense, and the availability of suitable and qualified candidates is limited. We compete to attract and retain qualified research and development personnel with other semiconductor companies, universities and research institutions. Competition for these individuals could cause us to offer higher compensation and other benefits to attract and retain them, which could materially and adversely affect our financial condition and results of operations. We previously awarded share options to our employees, some of which has not yet vested. Such retention awards may cease to be effective to retain our current employees once the stock options vest. We may need to increase our total compensation costs to attract and retain experienced personnel required to achieve our business objectives and failure to do so could severely disrupt our operations and growth. If we lose the services of any key senior management member or employee, we may not be able to locate suitable or qualified replacements, and may incur additional expenses to recruit and train new personnel, which could severely impact our business and prospects.

We may not be able to effectively manage our growth, and we may need to incur significant expenditures to address the additional operational and control requirements of our growth, either of which could harm our business and operating results.

As we continue to expand our business, we expect to grow our headcount and overall size of our operations significantly. To effectively manage our growth, we must continue to expand our operational, engineering and financial systems, procedures and controls and to improve our accounting and other internal management systems. This may require substantial managerial and financial resources, and our efforts in this regard may not be successful. Our current systems, procedures and controls may not be adequate to support our future operations. If we fail to adequately manage our growth, or to improve our operational, financial and management information systems, or fail to effectively motivate or manage our new and future employees, the quality of our products and the management of our operations could suffer, which could adversely affect our operating results. In addition, we intend to implement a new enterprise resource planning system for many aspects of our business. This implementation is a technically intensive process, requiring testing, modifications and project coordination. We may experience disruptions in our business operations related to this implementation effort.

Potential future acquisitions could be difficult to integrate, divert attention of key personnel, disrupt our business, dilute shareholder value and impair our operating results.

We have completed and may continue to pursue acquisitions in the future that we believe may complement our business, semiconductor solutions or technologies. For example, we acquired a team of 29 engineers, certain intellectual property and equipment from Hengfa Electronics Co., Ltd. in August 2012. Any acquisition involves a number of risks, many of which could harm our business, including:

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difficulties in integrating the operations, technologies, products, existing contracts, accounting and personnel of the target company;

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realizing the anticipated benefits of any acquisition;

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difficulties in transitioning and supporting customers, if any, of the target company;

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diversion of financial and management resources from existing operations;

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the price we pay or other resources that we devote may exceed the value we realize, or the value we could have realized if we had allocated the purchase price or other resources to another opportunity;

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potential loss of key employees, customers and strategic alliances from either our current business or the target company’s business;

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assumption of unanticipated problems or latent liabilities, such as problems with the quality of the target company’s products;

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inability to generate sufficient revenue to offset acquisition costs;

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dilutive effect on our stock as a result of any equity-based acquisitions;

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inability to successfully complete transactions with a suitable acquisition candidate; and

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in the event of international acquisitions, risks associated with accounting and business practices that are different from applicable U.S. practices and requirements.

Acquisitions also frequently result in the recording of goodwill and other intangible assets that are subject to potential impairments, which could harm our financial results. As a result, if we fail to properly evaluate acquisitions or investments, we may not achieve the anticipated benefits of any such acquisitions, and we may incur costs in excess of what we anticipate. The failure to successfully evaluate and execute acquisitions or investments or otherwise adequately address these risks could materially harm our business and financial results.

Our business, financial condition and results of operations could be adversely affected by political and economic conditions in the countries in which we conduct business and our solutions are sold.

Our business and operating results may be adversely impacted by political and economic conditions in various countries and markets in which we operate or in which our solutions are sold. Uncertainty about current global economic conditions may cause businesses to continue to postpone spending in response to tighter credit, unemployment or negative financial news. This in turn could have a material negative effect on the demand for our semiconductor solutions or the products into which our solutions are incorporated. The demand for our set-top box solutions is driven by consumer demand for television, which is often viewed as a discretionary item in the emerging markets that we compete. A downturn in general economic conditions in the emerging markets that we target could result in a decline in demand for our set-top box solutions. In addition, our memory interface solutions are typically sold into data centers when these data centers are upgrading capital equipment such as servers. A downturn in general economic conditions can lead to delays in decisions to upgrade data center equipment or a reduction in the scope of upgrades, which could reduce demand for our memory interface solutions.

Multiple factors relating to our international operations and to particular countries in which we operate could negatively impact our business, financial condition and results of operations. These factors include:

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changes in political, regulatory, legal or economic conditions;

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restrictive governmental actions, such as restrictions on the transfer or repatriation of funds and foreign investments and trade protection measures, including export duties and quotas and customs duties and tariffs;

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disruptions of capital and trading markets;

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changes in import or export requirements;

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transportation delays;

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civil disturbances or political instability;

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geopolitical turmoil, including terrorism, war or political or military coups;

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public health emergencies;

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differing employment practices and labor standards;

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limitations on our ability under local laws to protect our intellectual property;

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local business and cultural factors that differ from our customary standards and practices;

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nationalization and expropriation;

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changes in tax laws;

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currency fluctuations relating to our international operating activities; and

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difficulty in obtaining distribution and support.

We conduct our operations primarily in China, our products are manufactured in Asia, and our solutions are sold primarily in Asia. Political and economic conditions in these markets may be less stable or predictable than in the United States. Any conflict or uncertainty in Asia, and China in particular, including due to natural disasters, public health concerns, political unrest or safety concerns, could harm our business, financial condition and results of operations.

The facilities of our third-party contractors and distributors are located in regions that are subject to earthquakes and other natural disasters.

The facilities of our third-party foundries and contract manufacturers are subject to risk of catastrophic loss due to fire, flood or other natural or man-made disasters. A number of those foundries and service providers are located in areas with above average seismic activity and also subject to typhoons and other Pacific storms. Several foundries that manufacture our wafers are located in Taiwan and Japan, and all of the third-party service providers who assemble and test our solutions are located in Asia. The risk of an earthquake in the Pacific Rim region is significant due to the proximity of major earthquake fault lines. Both Japan and Taiwan have had major earthquakes within the last 15 years that significantly disrupted their economies. Any catastrophic loss to any of these facilities would likely disrupt our operations, delay production, shipments and revenue and result in significant expenses to repair or replace the facility.

Our sales in the set-top-box market experience seasonality, which is likely to cause our revenue to fluctuate.

Revenue for our set-top-box solutions experience seasonality. We typically realize a large portion of our sales of set-top-box solutions during the fourth quarter prior to the Lunar New Year holiday. We typically experience our slowest quarter in the first quarter of each year. Accordingly, our results of operations may vary significantly from quarter to quarter and our yearly results of operations may be disproportionately affected by our results during the fourth quarter.

We are subject to risks related to exchange rate fluctuations.

Our revenue is primarily denominated in U.S. dollars, while a significant portion of our assets and expenses are denominated in Renminbi. As a result, our results of operations and financial condition are subject to risks associated with exchange rate fluctuations, in particular in relation to the exchange rates between the Renminbi and the U.S. dollar. Moreover, appreciation or depreciation in the value of the Renminbi, the functional currency for our operating subsidiaries in China, relative to the U.S. dollar would affect our financial results as reported in U.S. dollars without giving effect to any underlying change in our business or results of operations. Depreciation of the Renminbi against the U.S. dollar would have a negative effect on the U.S. dollar amount available to us if we decide to convert our Renminbi into U.S. dollars for the purpose of making payments for dividends on our ordinary shares or for other business purposes.

The value of the Renminbi against the U.S. dollar is affected by, among other things, changes in China’s political and economic conditions and China’s foreign exchange policies. The People’s Bank of China regularly intervenes in the foreign exchange market to limit fluctuations in Renminbi exchange rates and achieve policy

goals. For example, from mid-2008 to mid-2010 the Renminbi traded within a narrow range against the U.S. dollar at approximately RMB6.83 per U.S. dollar. In June 2010, the People’s Bank of China announced the removal of the de facto peg. Following this announcement, the Renminbi has appreciated modestly. It is difficult to predict when and how Renminbi-U.S. dollar exchange rate may change going forward.

Risk Factors Related to Regulations Applicable to Us

Our business has benefited from certain preferential tax treatment and government incentives. Discontinuation or revocation of the preferential tax treatment and government incentives available to us could decrease our net income and materially and adversely affect our financial condition and results of operations.

Under the PRC Enterprise Income Tax Law, or the PRC EIT Law, and its implementation rules, both effective on January 1, 2008, the PRC has a uniform enterprise income tax rate of 25% for all enterprises incorporated in China. The PRC EIT Law and its implementation rules also permit qualified high and new technology enterprises, or HNTEs, to enjoy a reduced 15% enterprise income tax rate. Our principal operating subsidiary in China, Montage Technology (Shanghai) Co., Ltd., or Montage Shanghai, had obtained the qualification certificate of HNTE status in October 2011 with a valid period of three years. Therefore it is eligible to enjoy a preferential tax rate of 15% as long as it maintains its qualification as an HNTE. Separately, pursuant to the Notice on Several Preferential Enterprise Income Tax Policies jointly issued by the Ministry of Finance, or the MOF, and the State Administration of Taxation, or the SAT, on February 22, 2008, and the Notice on Enterprise Income Tax Policies to Further Stimulate the Development of Software and Integrate Circuit Industries jointly issued by the MOF and the SAT on April 20, 2012, qualified integrated circuit design enterprises are entitled to a two-year income tax exemption followed by a three-year 50% enterprise income tax rate reduction commencing from the first profit-making year. Montage Shanghai was recognized as an integrated circuit design enterprise in January 2007 and has passed the annual inspections from 2007 through 2012. Therefore Montage Shanghai is eligible to enjoy the tax holiday from its first profit-making year as well. However, since this tax holiday for qualified integrated circuit design enterprises and the reduced 15% enterprise income tax rate for HNTEs are mutually exclusive, Montage Shanghai elected to enjoy the tax holiday from its first profit-making year, which was 2010. Accordingly, it is exempted from enterprise income tax for 2010 and 2011 and subject to enterprise income tax at a rate of 12.5% for 2012, 2013 and 2014 as long as it maintains its qualification as a qualified integrated circuit design enterprise. Similarly, Suzhou Montage Microelectronic Technology Co., Ltd. was recognized as an integrated circuit design enterprise in December 2012 and will enjoy this tax holiday when it starts to make profit after certain procedures are completed in competent tax authorities. Furthermore, according to the Notice on the Pilot Program in Shanghai Replacing Business Tax with Value-added Tax in Transportation and Some Modern Service Sectors jointly issued by the MOF and the SAT on November 16, 2011 which is effective in the areas where such pilot program is implemented, Montage Shanghai and Suzhou Montage Microelectronic Technology Co., Ltd. are currently exempted from value-added tax for their income generated from technical development.

In addition, Montage Shanghai has received subsidies from PRC local government authorities. The aggregate amounts of the subsidies we received were $1.1 million, $0.5 million and $0.8 million in 2010, 2011, and 2012, respectively.

Preferential tax treatments and government subsidies are subject to review and may be adjusted or revoked at any time in the future. The discontinuation of any preferential tax treatments or government subsidies available to us will cause our effective tax rate to increase, which will decrease our net income and materially and adversely affect our financial condition and results of operations.

We may be classified as a “resident enterprise” for PRC enterprise income tax purposes under the PRC EIT Law. Such classification could result in unfavorable tax consequences to us and our non-PRC shareholders.

Under the PRC EIT Law, an enterprise established outside the PRC with “de facto management bodies” within the PRC should be considered a PRC “resident enterprise” and is generally subject to a uniform 25% enterprise income tax rate on its worldwide income. Under the implementing rules to the PRC EIT Law, a “de facto management body” is defined as a body that has material and overall management and control over the manufacturing and business operations, personnel and human resources, finances and properties of an enterprise. In addition, a circular issued by the SAT on April 22, 2009, or Circular 82 sets out the standards and procedures for recognizing the location of the “de facto management bodies” of an enterprise registered outside of the PRC and controlled by any PRC enterprise or enterprise group. Circular 82 specifies that certain PRC-controlled offshore enterprises will be classified as PRC resident enterprises if the following are located or resident in the PRC: senior management personnel and departments that are responsible for daily production, operation and management; financial and personnel decision making bodies; key properties, accounting books, the company seal, and minutes of board meetings and shareholders’ meetings; and half or more of the senior management or directors having voting rights. On July 27, 2011, the SAT issued Administrative Measures of Enterprise Income Tax of Chinese-controlled Offshore Incorporated Resident Enterprises (Trial), or Bulletin 45, which became effective on September 1, 2011, to provide further guidance on the implementation of Circular 82. Bulletin 45 clarifies certain issues related to determining PRC resident enterprise status of PRC controlled enterprises, post-determination administration and which competent tax authorities are responsible for determining offshore incorporated PRC resident enterprise status. Bulletin 45 specifies that when provided with a copy of a Chinese tax resident determination certificate issued by the competent tax authorities from an offshore incorporated PRC resident enterprise, the payer should not withhold 10% income tax when paying Chinese-sourced dividends, interest and royalties to the offshore incorporated PRC resident enterprise.

Currently, a substantial majority of the members of our management team are located in China. However, Circular 82 applies only to offshore enterprises controlled by PRC enterprises or PRC corporate groups, not those controlled by PRC or foreign individuals or foreign enterprises like us. In the absence of detailed implementing regulations or other guidance determining that offshore companies controlled by PRC or foreign individuals or foreign enterprises like us are PRC resident enterprises, we do not currently consider our company or any of our overseas subsidiaries to be a PRC resident enterprise.

However, the SAT may take the view that the determining criteria set forth in Circular 82 reflects a general position on how the “de facto management body” test should be applied in determining the tax resident status of all offshore enterprises. Additional implementing regulations or guidance may also be issued determining that our Cayman Islands holding company or other non-PRC entity is a “resident enterprise” for PRC enterprise income tax purposes. If the PRC tax authorities determine that our company or any of our non-PRC subsidiaries is a PRC resident enterprise for PRC enterprise income tax purposes, a number of unfavorable PRC tax consequences could follow. First, our company or our subsidiaries outside of China will be subject to the uniform enterprise income tax rate of 25% as to our global income as well as tax reporting obligations. Second, although dividends paid by one PRC tax resident to another PRC tax resident should qualify as “tax-exempt income” under the PRC EIT Law, there is no assurance that we would enjoy such tax exempt treatment on dividends paid to us from Montage Shanghai. As a result, such dividend may continue to be subject to a 10% withholding tax. Finally, a 10% withholding tax will be imposed on dividends we pay to our non-PRC enterprise shareholders and gains derived by our non-PRC shareholders from transferring our ordinary shares. Similar results would follow if Montage Technology Holdings Company Limited or Montage Technology Hong Kong Limited is considered a PRC “resident enterprise.” In addition to the uncertainty in how the new “resident enterprise” classification could apply, it is also possible that the rules may change in the future, possibly with retroactive effect.

We may not be able to obtain certain treaty benefits on dividends paid by our PRC subsidiary, Montage Shanghai, to us through our Hong Kong Subsidiary.

Under the PRC EIT Law, dividends generated from retained earnings after January 1, 2008 from a PRC company to a foreign parent company are subject to a withholding tax rate of 10% unless the foreign parent’s jurisdiction of incorporation has a tax treaty with China that provides for a preferential withholding arrangement. Pursuant to the Arrangement between Mainland China and the Hong Kong Special Administrative Region for the Avoidance of Double Taxation and Prevention of Fiscal Evasion with respect to Taxes on Income, or the Hong Kong Tax Treaty, which became effective on December 8, 2006, as amended, a company incorporated in Hong Kong, such as Montage Technology Hong Kong Limited, will be subject to withholding income tax at a rate of 5% on dividends it receives from its PRC subsidiary if it holds a 25% or more interest in that particular PRC subsidiary, or 10% if it holds less than a 25% interest in that subsidiary. On October 27, 2009, the SAT promulgated a tax notice or Circular 601, which provides that tax treaty benefits will be denied to “conduit” or shell companies without business substance, and a beneficial ownership analysis will be used based on a “substance-over-the-form” principle to determine whether or not to grant tax treaty benefits. On June 29, 2012, the SAT further issued the Announcement of the State Administration of Taxation regarding Recognition of “Beneficial Owner” under Tax Treaties, or Announcement 30, which provides that a comprehensive analysis should be made when determining the beneficial owner status based on various factors that are supported by various types of documents including the articles of association, financial statements, records of cash movements, board meeting minutes, board resolutions, staffing and materials, relevant expenditures, functions and risk assumption as well as relevant contracts, patent and copyright certificates and other information. As a result, although one of our PRC subsidiaries, Montage Shanghai, is currently wholly owned by our Hong Kong subsidiary Montage Technology Hong Kong Limited, we cannot assure you that we would be entitled to the tax treaty benefits and enjoy the favorable 5% rate applicable under the Hong Kong Tax Treaty on dividends payable by Montage Shanghai. If Montage Technology Hong Kong Limited cannot be recognized as the beneficial owner of the dividends to be paid by our PRC subsidiaries to us, such dividends will be subject to a normal withholding tax of 10% as provided by the PRC EIT Law.

We may be required by the PRC tax authorities to pay withholding tax on capital gains arising out of our restructuring in November 2010 and to pay fines or penalties for the failure to pay such withholding tax.

The Notice on Various Issues Concerning Enterprise Income Tax Treatment of Enterprise Restructuring Transactions, or Circular 59, which was jointly issued by the MOF and the SAT on April 30, 2009 and became effective retroactively on January 1, 2008, as well as subsequent rules issued by the SAT, provide for scrutiny by PRC tax authorities over the transfer of equity interests in a PRC resident enterprise by a non-resident enterprise. In November 2010, Montage Technology Group Limited transferred its 100% equity interest in Montage Shanghai to Montage Technology Hong Kong Limited at a price equal to the registered capital of Montage Shanghai without recognizing any gains. As a result of the par value consideration paid in this transaction, there is a possibility that such consideration may be subject to pricing adjustment by the PRC tax authorities, leading to a recognition of capital gains by Montage Technology Group Limited unless the restructuring can be certified by the PRC tax authorities as a tax-free reorganization under Circular 59. In such case, we may be required to pay PRC withholding tax on the capital gains at a tax rate of 10%. In addition, there is no assurance that the PRC tax authorities will not impose fines or penalties on us for the failure to pay such withholding tax.

Restrictions on currency exchange and cross-border capital flows into and outside of China may limit our ability to receive and use our revenue and the proceeds from this offering effectively.

Because a significant portion of our assets are held in China in Renminbi, any restrictions on currency exchange may limit our ability to convert our revenue generated in foreign currency into Renminbi to fund any business activities we may have in China or to make dividend payments in U.S. dollars. Renminbi is generally convertible for “current account transactions,” which include among other things dividend payments and payments for the import of goods and services. Although the Renminbi has been generally convertible for current

account transactions since 1996, we cannot assure you that the relevant PRC government authorities will not limit or eliminate our ability to purchase and retain foreign currencies for current account transactions in the future. Conversion of Renminbi into foreign currency, and of foreign currencies into Renminbi, for payments relating to “capital account transactions,” which principally include capital injection and loans, remain subject to significant foreign exchange controls and restrictions. As a result, we may be unable to utilize our Renminbi assets for making any investments or other capital account transactions outside of China.

Current PRC regulations permit our subsidiaries in China to pay dividends only out of their accumulated profits, if any, determined in accordance with PRC accounting standards and regulations. In addition, our subsidiaries in China are required to set aside at least 10% of their respective accumulated profits each year, if any, to fund certain reserve funds until such reserves have reached at least 50% of their respective registered capital. These reserves are not distributable as cash dividends. Further, if our subsidiaries in China incur debt on their own behalf in the future, the instruments governing the debt may restrict their ability to pay dividends or make other payments to us.

Any capital contributions or loans that our non-China entities make to our PRC subsidiaries, including from the proceeds of this offering, are subject to PRC regulations and approval requirements. Capital contributions and loans to our PRC subsidiaries must be approved by or registered with relevant PRC regulatory bodies. We cannot assure you that we will be able to complete the necessary registration or obtain the necessary approval on a timely basis, if at all. If we fail to complete the necessary registration or obtain the necessary approval, our ability to make loans or capital contributions to our PRC subsidiaries may be negatively affected, which could adversely affect our PRC subsidiaries’ liquidity and their ability to fund their working capital and expansion projects and meet their obligations and commitments.

Furthermore, under the Circular on the Relevant Operating Issues Concerning the Improvement of the Administration of the Payment and Settlement of Foreign Currency Capital of Foreign-invested Enterprises, or Circular 142, promulgated by the PRC State Administration of Foreign Exchange, or SAFE, in August 2008, Renminbi converted from foreign exchange capital contributions can only be used for activities within the approved business scope of such foreign-invested enterprise and cannot be used for domestic equity investment unless otherwise approved by SAFE or its local branch. As a result, our PRC subsidiary, Montage Shanghai, (which is a foreign-invested enterprise) may not be able to use the proceeds of this offering or other capital contributed by us for equity investment or acquisitions in China or for other purposes outside of its approved scope of business, which may adversely affect our ability to expand our business in China. Violations of Circular 142 or related regulations could result in severe penalties, such as heavy fines.

The approval of the China Securities Regulatory Commission, or the CSRC, may be required in connection with this offering; any requirement to obtain prior CSRC approval could delay this offering and failure to obtain this approval, if required, could have a material adverse effect on our business, operating results and reputation as well as the trading price of our ordinary shares, and could also create uncertainties for this offering.

On August 8, 2006, six PRC regulatory agencies, namely, the PRC Ministry of Commerce, the State Assets Supervision and Administration Commission, or SASAC, the State Administration for Taxation, the State Administration for Industry and Commerce, the CSRC, and SAFE, jointly adopted the Regulations on Mergers and Acquisitions of Domestic Enterprises by Foreign Investors, or the M&A Rule, which became effective on September 8, 2006 and was amended on June 22, 2009. This M&A Rule purports, among other things, to require offshore special purpose vehicles, or SPVs, formed for overseas listing purposes through acquisitions of PRC domestic companies and directly or indirectly controlled by PRC companies or individuals, to obtain the approval of the CSRC prior to publicly listing their securities on an overseas stock exchange. On September 21, 2006, the CSRC published a notice on its official website specifying documents and materials required to be submitted to it by SPVs seeking CSRC approval of their overseas listings. While the implementation of the M&A Rule remains unclear, we believe, based on the advice of our PRC counsel, Commerce & Finance Law Offices,

that CSRC approval will not be applicable to us in the context of this offering because we established our PRC subsidiaries by means of direct investment to establish greenfield entities other than by merger or acquisition of PRC domestic companies or assets. However, as it is uncertain how the M&A Rule will be interpreted or implemented, we cannot assure you that the relevant PRC government agency, including the CSRC, or PRC courts would reach the same conclusion as our PRC counsel. If the CSRC or other PRC regulatory agencies subsequently determine that we need to obtain the CSRC’s approval for this offering, we may face sanctions by the CSRC or other PRC regulatory agencies. In such event, these regulatory agencies may impose fines and penalties on our operations in the PRC, limit our operating privileges in the PRC, delay or restrict the repatriation of the proceeds from this offering into the PRC, or take other actions that could have a material adverse effect on our business, financial condition, results of operations, reputation and prospects, as well as the trading price of our ordinary shares. The CSRC or other PRC regulatory agencies may also take actions requiring us, or making it advisable for us, to halt this offering before settlement and delivery of the ordinary shares offered by this prospectus.

The M&A Rules establish complex procedures for some acquisitions of Chinese companies by foreign investors, which could make it more difficult for us to pursue growth through acquisitions in China.

The M&A Rules establish procedures and requirements that could make some acquisitions of Chinese companies by foreign investors more time-consuming and complex, including requirements in some instances that the MOFCOM be notified in advance of any change-of-control transaction in which a foreign investor takes control of a Chinese domestic enterprise. We may expand our business in part by acquiring complementary businesses. Complying with the requirements of the M&A Rules to complete such transactions could be time-consuming, and any required approval processes, including obtaining approval from the MOFCOM, may delay or inhibit our ability to complete such transactions, which could affect our ability to expand our business or maintain our market share.

We could be subject to penalties under PRC law if our PRC shareholders do not comply with PRC regulations relating to offshore investment activities by PRC residents.

SAFE promulgated in October 2005 the Notice on Issues Relating to the Administration of Foreign Exchange in Fund-raising and Round-trip Investment Activities of Domestic Residents Conducted via Offshore Special Purpose Companies, or Circular 75, which requires PRC residents to register with local branches of SAFE if they use assets or equity interests in PRC entities as capital contributions to establish offshore companies, or if they inject assets or equity interests of their PRC entities into offshore companies to raise capital overseas. In addition, any PRC resident who makes, or has previously made, direct or indirect investments in such an offshore company (defined in Circular 75 as an “offshore special purpose company”) is required to further update that registration for such things as increases or decreases in the offshore special purpose company’s share capital, transfers or swaps of its shares, mergers, long-term equity or debt investments, and the creation of any security interest. Moreover, the PRC subsidiaries of that offshore special purpose company are required to coordinate and supervise the filing of SAFE registrations by the offshore special purpose company’s shareholders who are PRC residents, and do so in a timely manner. However, pursuant to relevant regulations, where PRC resident individuals invest in greenfield ventures through overseas enterprises that are not special purpose companies as defined in Circular 75, the PRC residents are not required to carry out registration procedures for offshore special purpose companies.

Although we believe the registration for offshore special purpose companies under Circular 75 does not apply to our beneficial owners who are PRC resident individuals because it was a greenfield investment, these individuals are generally required under the general PRC foreign exchange regulations to conduct registration with the competent SAFE authority for any offshore direct investment, including by subscribing for shares in our offshore holding companies. Due to a lack of detailed implementation rules of such registration requirements and uncertainty in implementation and interpretation of general SAFE regulations, our beneficial owners who are PRC resident individuals have not yet conducted foreign exchange registration for offshore direct investment. If

SAFE takes a view that our beneficial owners who are PRC residents have not complied with SAFE rules, we could be subject to legal sanctions, such as being prohibited from making distributions of profits or proceeds from any reduction in capital, share transfer or liquidation to our offshore entities or injecting additional capital into our PRC subsidiaries.

All employee participants in our option plan who are PRC citizens may be required to register with SAFE. We may also face regulatory uncertainties that could restrict our ability to adopt additional option plans for our directors and employees under PRC law.

PRC regulations require that individuals in China (including PRC citizens and foreign individuals who have lived in China over one year) who intend to participate in the stock incentive plan of an overseas listed company shall appoint a qualified PRC domestic agent or a PRC subsidiary of such overseas listed company (defined as a “PRC agency”) to conduct foreign exchange registration, opening of accounts and transfer and exchange of funds, and an overseas agency shall be appointed to conduct any exercise of options, buying and selling of relevant stock or equities and transfer of relevant funds. After such individuals’ foreign exchange income received from participation in the stock incentive plan is remitted to PRC, relevant banks shall distribute the above funds from the account opened and managed by the PRC agency to such individuals’ foreign exchange accounts. We and our PRC employees who have been granted stock options or restricted shares will be subject to these regulations upon the completion of this offering. We intend to comply with these regulations upon completion of this offering.

Failure to comply with such registration requirements may subject us and the participants of share incentive plan who are in the PRC to fines and legal sanctions, prevent us from further granting or exercising of options by our employees in China, or limit our ability to contribute additional capital into our PRC subsidiaries, limiting our PRC subsidiaries’ ability to distribute dividends to us, which could adversely affect our business operations. In addition, several of our employees in China have exercised their share options under our 2006 Share Incentive Plan prior to our becoming a publicly listed company. Since there is not yet a clear regulation on how and whether individuals in China can exercise their share options granted by overseas private companies, we cannot assure you that SAFE will not take a view that we or our employees who are PRC individuals and have exercised the option violated SAFE regulations.

The enforcement of the PRC Labor Contract Law and other labor-related regulations in the PRC may adversely affect our business and our results of operations.

The PRC Labor Contract Law, which became effective on January 1, 2008, and its implementing rules impose requirements concerning contracts entered into between a PRC employer and its employees and establishes time limits for probationary periods and for how long an employee can be placed in a fixed-term labor contract. Because the Labor Contract Law and its implementing rules have not been in effect very long and because there is lack of clarity with respect to their implementation and potential penalties and fines, there may be a risk that certain of our employment policies and practices could be determined by relevant PRC authorities as being in violation the Labor Contract Law or its implementing rules, which could result in penalties, fines or other sanctions. If we are subject to large penalties or fees related to the Labor Contract Law or its implementing rules, our business, financial condition and results of operations may be materially and adversely affected. Furthermore, the PRC Labor Contract Law and subsequently passed rules and regulations have tended to provide greater rights to employees and impose more onerous requirements on employers in China. As a result of regulations designed to enhance labor protection, our labor costs in China may increase in the future.

We will be subject to additional regulatory compliance requirements, including Section 404 of the Sarbanes-Oxley Act of 2002, as a result of becoming a public company.

We have never operated as a public company and will incur significant legal, accounting and other expenses that we did not incur as a private company. The individuals who constitute our management team have limited experience managing a publicly traded company, and limited experience complying with the increasingly complex and changing laws pertaining to public companies. Our management team and other personnel will need to devote a

substantial amount of time to new compliance initiatives and we may not successfully or efficiently manage our transition into a public company. We expect rules and regulations such as the Sarbanes-Oxley Act of 2002, or the Sarbanes-Oxley Act, to increase our legal and finance compliance costs and to make some activities more time-consuming and costly. We will need to hire a number of additional employees with public accounting and disclosure experience in order to meet our ongoing obligations as a public company. For example, Section 404 of the Sarbanes-Oxley Act requires that our management report on the effectiveness of our internal control over financial reporting in our Annual Report on Form 10-K for the fiscal year ending December 31, 2014. Moreover, when we are no longer an emerging growth company under the federal securities laws, our independent registered public accounting firm will be required to issue an attestation report on the effectiveness of our internal control over financial reporting. Section 404 compliance may divert internal resources and will take a significant amount of time and effort to complete. We may not be able to successfully complete the procedures and certification and attestation requirements of Section 404 by the time we will be required to do so. If we fail to do so, or if in the future our Chief Executive Officer, Chief Financial Officer or independent registered public accounting firm determines that our internal control over financial reporting is not effective as defined under Section 404, this could result in material misstatements of our financial statements and we could be subject to sanctions or investigations by the NASDAQ Global Select Market, the Securities and Exchange Commission, or the SEC, or other regulatory authorities. Furthermore, investor perceptions of our company may suffer, and this could cause a decline in the market price of our stock. Irrespective of compliance with Section 404, any failure of our internal controls could have a material adverse effect on our stated results of operations and harm our reputation. If we are unable to implement these changes effectively or efficiently, it could harm our operations, financial reporting or financial results and could result in an adverse opinion on internal controls from our independent auditors.

We are an “emerging growth company,” and may elect to comply with reduced public company reporting requirements applicable to emerging growth companies, which could make our ordinary shares less attractive to investors.

We are an “emerging growth company,” as defined in the Jumpstart Our Business Startups Act enacted in April 2012, and, for as long as we continue to be an “emerging growth company,” we may choose to take advantage of exemptions from various reporting requirements applicable to other public companies but not to “emerging growth companies,” including, but not limited to, not being required to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act, reduced disclosure obligations regarding executive compensation in our periodic reports and proxy statements, and exemptions from the requirements of holding a nonbinding advisory vote on executive compensation and shareholder approval of any golden parachute payments not previously approved. We could be an “emerging growth company” for up to five years, although, if the market value of our ordinary shares that is held by non-affiliates exceeds $700 million as of any June 30 before the end of that five-year period, we would cease to be an “emerging growth company” as of the following December 31. We cannot predict if investors will find our ordinary shares less attractive if we choose to rely on these exemptions. If some investors find our ordinary shares less attractive as a result of any choices to reduce future disclosure, there may be a less active trading market for our ordinary shares and our share price may be more volatile.

Under the Jumpstart Our Business Startups Act, “emerging growth companies” can delay adopting new or revised accounting standards until such time as those standards apply to private companies. However, we have irrevocably elected not to avail ourselves of this exemption from new or revised accounting standards and, therefore, we will be subject to the same new or revised accounting standards as other public companies that are not “emerging growth companies.”

Our auditor, like other independent registered public accounting firms operating in China, is not permitted to be subject to inspection by Public Company Accounting Oversight Board, and as such, investors may be deprived of the benefits of such inspection.

Our independent registered public accounting firm that issues the audit reports included in this prospectus filed with the SEC, as an auditor of companies that are traded publicly in the United States and a firm registered with the Public Company Accounting Oversight Board (United States), or PCAOB, is required by the laws of the

United States to undergo regular inspections by PCAOB to assess its compliance with the laws of the United States and professional standards. Because our auditor is located in China, a jurisdiction where PCAOB is currently unable to conduct inspections without the approval of the PRC authorities, our auditor, like other independent registered public accounting firms operating in China, is currently not inspected by PCAOB.

Inspections of other firms that PCAOB has conducted outside of China have identified deficiencies in those firms’ audit procedures and quality control procedures, which may be addressed as part of the inspection process to improve future audit quality. The inability of PCAOB to conduct inspections of independent registered public accounting firms operating in China makes it more difficult to evaluate the effectiveness of our auditor’s audit procedures or quality control procedures. As a result, investors may be deprived of the benefits of PCAOB inspections.

Proceedings instituted recently by the SEC against five PRC-based accounting firms, including our independent registered public accounting firm, could result in financial statements being determined to not be in compliance with the requirements of the Securities Exchange Act of 1934.

In December 2012, the SEC instituted proceedings under Rule 102(e)(1)(iii) of the SEC’s Rules of Practice against five PRC-based accounting firms, including our independent registered public accounting firm, alleging that these firms had violated U.S. securities laws and the SEC’s rules and regulations thereunder by failing to provide to the SEC the firms’ work papers related to their audits of certain PRC-based companies that are publicly traded in the United States. Rule 102(e)(1)(iii) grants to the SEC the authority to deny to any person, temporarily or permanently, the ability to practice before the SEC who is found by the SEC, after notice and opportunity for a hearing, to have willfully violated any such laws or rules and regulations. While we cannot predict the outcome of the SEC’s proceedings, if our independent registered public accounting firm were denied, temporarily or permanently, the ability to practice before the SEC, and we are unable to find timely another registered public accounting firm which can audit and issue a report on our financial statements, our financial statements could be determined to not be in compliance with the requirements for financial statements of public companies with a class of securities registered under the Securities Exchange Act of 1934, as amended, or the Exchange Act. Such a determination could ultimately lead to the delisting of our ordinary shares from the NASDAQ Global Select Market, which event would effectively terminate the trading market for our ordinary shares in the United States, and/or to the SEC’s revoking the registration of our ordinary shares under the Exchange Act pursuant to Section 12(j) thereof, in which event broker-dealers thereafter would be prohibited from effecting transactions in, or inducing the purchase or sale of, our ordinary shares in the United States.

Risk Factors Related to This Offering and Ownership of Our Ordinary Shares

There has been no prior market for our ordinary shares and the offering may not result in an active or liquid market for our ordinary shares, which could adversely affect the market price of our ordinary shares.

Prior to this offering, there has not been a public market for our ordinary shares. We have applied to list our ordinary shares on the NASDAQ Global Select Market. However, an active public market may not develop or be sustained after the offering. If an active market for our ordinary shares does not develop after the offering, the market price and liquidity of our ordinary shares may be adversely affected.

If securities or industry analysts do not publish research or reports about our business, or if they change their recommendations regarding our shares adversely, our share price and trading volume could decline.

The trading market for our ordinary shares will be influenced by the research and reports that industry or securities analysts publish about us or our business. If one or more of the analysts who cover us downgrade our shares, our share price would likely decline. If one or more of these analysts cease coverage of our company or fail to regularly publish reports on us, we could lose visibility in the financial markets, which in turn could cause our share price or trading volume to decline.

Substantial future sales of our ordinary shares in the public market could cause our share price to fall.

Additional sales of our ordinary shares in the public market after this offering, or the perception that these sales could occur, could cause the market price of our ordinary shares to decline. Upon the completion of this offering, we will have ordinary shares outstanding, assuming no exercise of our outstanding options. All shares sold in this offering will be freely transferable without restriction or additional registration under the Securities Act of 1933, or the Securities Act, except for any shares held by our affiliates as defined in Rule 144 under the Securities Act. The remaining shares outstanding after this offering will be eligible for sale at various times beginning 180 days after the date of this prospectus upon the expiration of lock-up agreements as described below and subject to vesting requirements and the requirements of Rule 144 or Rule 701.

Our directors, executive officers and substantially all of our shareholders have agreed with limited exceptions that they will not sell any of our shares owned by them without the prior written consent of Deutsche Bank Securities Inc. and Barclays Capital Inc., on behalf of the underwriters, for a period of 180 days from the date of this prospectus. At any time and without public notice, Deutsche Bank Securities Inc. and Barclays Capital Inc. may in their sole discretion release some or all of the securities from these lock-up agreements prior to the expiration of the lock-up period. As resale restrictions end, the market price of our ordinary shares could decline if the holders of those shares sell them or are perceived by the market as intending to sell them. In addition, after this offering, the holders of approximately of our ordinary shares, including ordinary shares to be issued upon the conversion of the preferred stock, and upon the exercise of warrants to purchase our ordinary shares, will be entitled to contractual rights to cause us to register the sale of those shares under the Securities Act. All of these shares are subject to the 180-day lock-up period. Registration of these shares under the Securities Act would result in these shares becoming freely tradable without restriction under the Securities Act immediately upon the effectiveness of the registration statement. We also intend to file a registration statement on Form S-8 under the Securities Act to register approximately ordinary shares underlying options or other share awards which have been granted or may be granted in the future under our 2006 Share Incentive Plan or our 2013 Performance Incentive Plan.

You may face difficulties in protecting your interests as a shareholder, as Cayman Islands law provides substantially less protection when compared to the laws of the United States.

Our corporate affairs are governed by our memorandum and articles of association and by the Companies Law (Revised) and common law of the Cayman Islands. The rights of shareholders to take legal action against our directors and us, actions by minority shareholders and the fiduciary responsibilities of our directors to us under Cayman Islands law are to a large extent governed by the common law of the Cayman Islands. The common law of the Cayman Islands is derived in part from comparatively limited judicial precedent in the Cayman Islands as well as from English common law, which has persuasive, but not binding, authority on a court in the Cayman Islands. The rights of our shareholders and the fiduciary responsibilities of our directors under Cayman Islands law are not as clearly established as they would be under statutes or judicial precedents in the United States. In particular, the Cayman Islands have a less developed body of securities laws as compared to the United States, and provide significantly less protection to investors. In addition, Cayman Islands companies may not have standing to initiate a shareholder derivative action before the United States federal courts.

As a result of all of the above, our public shareholders may have more difficulty in protecting their interests through actions against us or our officers, directors or major shareholders than would shareholders of a corporation incorporated in a jurisdiction in the United States.

Certain judgments obtained against us by our shareholders may not be enforceable.

We are a Cayman Islands company and substantially all of our assets are located outside of the United States. A significant portion of our assets and operations are conducted in the China and substantially all of our revenue has been generated outside the United States, particularly through sales in Hong Kong. In addition, some of our current directors and officers are nationals and residents of countries other than the United States and may have a substantial portion or

all of their assets outside of the United States. Substantially all of the assets of these persons are located outside the United States. As a result, it may be difficult or impossible for you to bring an action against us or against these individuals in the United States in the event that you believe that your rights have been infringed under the United States federal securities laws or otherwise. Even if you are successful in bringing an action of this kind, the laws of the Cayman Islands and of China may render you unable to enforce a judgment against our assets or the assets of our directors and officers. There is no statutory recognition in the Cayman Islands of judgments obtained in the United States, although the courts of the Cayman Islands will generally recognize and enforce a non-penal judgment of a foreign court of competent jurisdiction without retrial on the merits. Moreover, the PRC does not have treaties with the United States or many other countries providing for the reciprocal recognition and enforcement of judgment of courts. For more information regarding the relevant laws of the Cayman Islands and China, see “Enforceability of Civil Liabilities” section in this prospectus.

We have no specific business plan for the net proceeds from this offering. Our management will therefore have significant flexibility in using the net proceeds of this offering, and you will not have the opportunity, as part of your investment decision, to assess whether the proceeds are being used appropriately.

We intend to use the net proceeds from this offering for general corporate purposes, including working capital. We may also use a portion of the net proceeds to acquire or invest in businesses, products and technologies that we believe will complement our business. However, depending on future developments and circumstances, we may use some of the proceeds for other purposes. We do not have more specific plans for the net proceeds from this offering. Therefore, our management will have significant flexibility in applying the net proceeds we receive from this offering. The net proceeds could be applied in ways that do not improve our operating results. The actual amounts and timing of these expenditures will vary significantly depending on a number of factors, including the amount of cash used in or generated by our operations and the market response to the introduction of any new product offerings.

Our articles of association contain anti-takeover provisions that could adversely affect the rights of our shareholders.

We have adopted an amended and restated memorandum and articles of association, or the Amended and Restated Memorandum and Article of Association, that will become effective immediately upon completion of this offering. Our Amended and Restated Memorandum and Articles of Association contain provisions to limit the ability of others to acquire control of our company or cause us to engage in change-of-control transactions. These provisions could have the effect of depriving our shareholders of an opportunity to sell their shares at a premium over prevailing market prices by discouraging third parties from seeking to obtain control of our company in a tender offer or similar transaction. In addition, our Amended and Restated Memorandum and Articles of Association also provides for a staggered board, which means that our directors are divided into three classes with two or three directors each, with no more than one class eligible for reelection at any annual shareholder meeting. This means that, with our staggered board, at least two annual shareholder meetings, instead of one, are generally required in order to effect a change in a majority of our directors. Our staggered board can discourage proxy contests for the election of our directors and purchases of substantial blocks of our shares by making it more difficult for a potential acquirer to gain control of our board in a relatively short period of time.

We are a foreign private issuer within the meaning of the rules under the Securities Exchange Act of 1934, as amended, and as such we are exempt from certain provisions applicable to United States domestic public companies.

We are a foreign private issuer within the meaning of the rules under the Securities Exchange Act of 1934, as amended, or the Exchange Act. As such, we are exempt from certain provisions applicable to United States domestic public companies. For example:

•

we are not required to provide as many Exchange Act reports, or as frequently, as a domestic public company;

•

we are not required to provide the same level of disclosure on certain issues, such as executive compensation;

•

for interim reporting, we are permitted to comply solely with our home country requirements, which are less rigorous than the rules that apply to domestic public companies;

•

we are not required to comply with the sections of the Exchange Act regulating the solicitation of proxies, consents or authorizations in respect of a security registered under the Exchange Act; and

•

we are not required to comply with Section 16 of the Exchange Act requiring insiders to file public reports of their stock ownership and trading activities and establishing insider liability for profits realized from any “short-swing” trading transaction.

We currently intend to file annual reports on Form 10-K, quarterly reports on Form 10-Q and current reports on Form 8-K similar to U.S. domestic reporting companies and disclose the information required to be disclosed in those reports. However, we may elect in the future to file annual reports on Form 20-F and reports on Form 6-K as a foreign private issuer. If we elected to file reports as a foreign private issuer, our shareholders may not have access to certain information they may deem important.

Being a public company will increase our costs, which could adversely affect our business.

As a public company, we will incur significant legal, accounting and other expenses that we did not incur as a private company, which could be a few million dollars or more. In addition, the Sarbanes-Oxley Act of 2002, as well as rules implemented by the SEC, require certain corporate governance practices for public companies. In addition to these rules, the NASDAQ Global Select Market has certain corporate governance requirements for companies that are NASDAQ-listed. Implementation of the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010, or the Dodd-Frank Act, may also cause us to incur additional costs and subject us to risks if we are unable to fully comply. For instance, the SEC adopted new disclosure requirements in 2012 as part of implementation of the Dodd-Frank Act regarding the use of conflict minerals mined from the Democratic Republic of Congo and adjoining countries and procedures regarding a manufacturer’s efforts to prevent the sourcing of such conflict minerals. The implementation of these requirements, which will require reporting starting in 2014, could adversely affect our costs and our relationships with customers and suppliers as we must obtain additional information from them to ensure our compliance with the disclosure requirement.

We expect these rules and regulations to increase our legal and financial compliance costs, and to make some operating and administrative activities more time consuming and costly, though we are not currently able to estimate these additional costs. In anticipation of becoming a public company, we have created several board committees, adopted additional internal controls and disclosure controls and procedures and will have to bear all of the internal and external costs of preparing and distributing periodic public reports. We also expect these rules and regulations to make it more difficult and more expensive for us to obtain director and officer liability insurance, and we may be required to accept reduced coverage or incur substantially higher costs to obtain coverage. These rules and regulations could also make it more difficult for us to attract and retain qualified members of our board of directors, particularly to serve on our audit committee, and qualified executive officers.

We do not currently intend to pay dividends on our ordinary shares and, consequently, your ability to achieve a return on your investment will depend on appreciation in the price of our ordinary shares.

We have never declared or paid any cash dividends on our ordinary shares and do not currently intend to do so for the foreseeable future. We currently intend to invest our future earnings, if any, to fund our growth. Therefore, you are not likely to receive any dividends on your ordinary shares for the foreseeable future and the success of an investment in our ordinary shares will depend upon any future appreciation in their value. There is no guarantee that our ordinary shares will appreciate in value or even maintain the price at which our shareholders have purchased their shares.

Investors in this offering will pay a much higher price than the book value of our ordinary shares, and therefore, they will experience immediate dilution.

The initial public offering price of our ordinary shares will be $ higher than our pro forma net tangible book value per share. As a result, investors purchasing our ordinary shares in this offering will incur immediate and substantial dilution. In the past, we issued preferred shares that are convertible into our ordinary shares and issued stock options to acquire our ordinary shares at prices significantly below the initial public offering price. To the extent these outstanding options are ultimately exercised, there will be further dilution to investors.

We may be classified as a passive foreign investment company, or PFIC, which could result in adverse United States federal income tax consequence to U.S. holders of ordinary shares.

Depending upon the value of our ordinary shares and the nature and composition of our income and assets over time, we could be classified as a passive foreign investment company, or PFIC, for U.S. federal income tax purposes for any taxable year. Based on assumptions as to our projections of the value of our outstanding ordinary shares and our expected use of the proceeds from the initial public offering and of the other cash that we will hold and generate in the ordinary course of our business, we do not expect to be a PFIC for the taxable year 2013 or in the foreseeable future. However, there can be no assurance that we will not be a PFIC for the taxable year 2013 or any future taxable year as PFIC status is tested each taxable year and depends on the composition of our income and the value of our assets in such taxable year. Our PFIC status for the current taxable year 2013 will not be determinable until the close of the taxable year ending December 31, 2013.

We will be classified as a PFIC for any taxable year if either (i) at least 75% of our gross income for the taxable year is passive income or (ii) at least 50% of the value of our assets (based on a quarterly value of the assets during the taxable year) is attributable to assets that produce or are held for the production of passive income. In determining the average percentage value of our gross assets, the aggregate value of our assets will generally be deemed to be equal to our market capitalization (determined by the sum of the aggregate value of our outstanding equity) plus our liabilities. Therefore, a drop in the market price of our ordinary shares would cause a reduction in the value of our non-passive assets for purposes of the asset test. Accordingly, we would likely become a PFIC if our market capitalization were to decrease significantly while we hold substantial cash.

If we are classified as a PFIC in any taxable year in which you hold our ordinary shares, and you are a U.S. taxpayer, you would generally be subject to additional taxes and interest charges on certain “excess” distributions we make and on any gain recognized on the disposition or deemed disposition of your ordinary shares in a later year, even if we are not a PFIC in the year of disposition or distribution. Moreover, if we are classified as a PFIC in any taxable year in which you hold our ordinary shares, certain non-corporate U.S. shareholders would not be able to benefit from any preferential tax rate with respect to any dividend distribution received from us in that year or in the following year. Finally, you would also be subject to special U.S. tax reporting requirements. For more information on the U.S. tax consequences to you that would result from our classification as a PFIC, see “Taxation—United States Federal Income Taxation—Passive Foreign Investment Company.”

SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

This prospectus contains forward-looking statements. The statements are found, among other places, in the sections entitled “Prospectus Summary,” “Risk Factors,” “Use of Proceeds,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” “Industry,” “Business,” “Regulation” and “Management.” In some cases, these forward-looking statements can be identified by words and phrases such as “may,” “should,” “intend,” “predict,” “potential,” “continue,” “will,” “expect,” “anticipate,” “estimate,” “plan,” “believe,” “is/are likely to” or the negative form of these words and phrases or other comparable expressions. The forward-looking statements included in this prospectus relate to, among other things:

•

our goals and strategies;

•

our future business development;

•

the expected growth of, and trends in, our business and the markets in which we operate;

•

our expectations regarding competition as more semiconductor companies enter our markets and as existing competitors improve or expand their product offerings;

•

our plans for future products and solutions, such as DDR4 memory interface solutions, and enhancements of existing products;

•

future trends and challenges and our expectations regarding our results of operations and financial condition;

•

our expectations regarding our expenses and revenue, including our expectations that our research and development, sales and marketing and general and administrative expenses may increase in absolute dollars; and

•

relevant government policies and regulations relating to our industry and business.

These forward-looking statements are based on our current expectations, assumptions, estimates and projections about us and our industry and involve various risks and uncertainties. Although we believe that our expectations expressed in these forward-looking statements are reasonable, we cannot assure you that our expectations will turn out to be correct. Our actual results could be materially different from our expectations. Important risks and factors that could cause our actual results to be materially different from our expectations are generally set forth in the “Risk Factors,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” “Business” and elsewhere in this prospectus.

This prospectus also contains third-party data relating to the markets in which we operate that includes projections based on a number of assumptions. We have not independently verified such data. Our markets may not grow at the rates projected by market data, or at all. The failure of our markets to grow at the projected rates may have a material adverse effect on our business and the market price of our ordinary shares. Furthermore, if any one or more of the assumptions underlying the market data turns out to be incorrect, actual results may differ from the projections based on these assumptions. You should not place undue reliance on these forward-looking statements. In addition, the relatively new and rapidly changing nature of these markets subjects any projections or estimates relating to the growth prospects or future condition of these markets to significant uncertainties.

The forward-looking statements made in this prospectus relate only to events or information as of the date on which the statements are made in this prospectus. We undertake no obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, after the date of this prospectus.

MARKET, INDUSTRY AND OTHER DATA

Unless otherwise indicated, information contained in this prospectus concerning our industry and the markets in which we operate, including our general expectations and market position, market opportunity and market size, is based on information from third-party sources and our knowledge of the markets for our solutions, This information is based on a number of assumptions and limitations, and you are cautioned not to give undue weight to the estimates included in the data. We have not independently verified any third-party information and cannot assure you of its accuracy or completeness. While we believe the market position, market opportunity and market size information included in this prospectus is generally reliable, such information is inherently imprecise. In addition, projections, assumptions and estimates of our future performance and the future performance of the industry in which we operate is necessarily subject to a high degree of uncertainty and risk due to a variety of factors, including those described in “Risk Factors” and elsewhere in this prospectus. These and other factors could cause results to differ materially from those expressed in the estimates made by the independent parties and by us.

This prospectus contains information and industry data from China Digital STB Market Forecast and Detail Analysis of Chipset Market Share, an industry report commissioned by us and prepared by iSuppli Corporation, or iSuppli, a third-party market research firm, in March 2013. All references to data from iSuppli in this prospectus are to data derived from this commissioned report. This prospectus also contains statistical data and estimates, including those relating to market size and growth rates of the markets in which we participate, that we obtained from industry publications and reports generated by Cisco Systems, Inc., Gartner, Inc. and International Data Corporation, or IDC. These publications and reports typically indicate that they have obtained their information from sources they believe to be reliable, but do not guarantee the accuracy and completeness of their information. Although we have assessed the information in the publications and found it to be reasonable and believe the publications are reliable, we have not independently verified their data.

USE OF PROCEEDS

We estimate that we will receive net proceeds from this offering of approximately $ million, or approximately $ million if the underwriters exercise the over-allotment option in full, after deducting underwriting discounts and commissions and estimated offering expenses payable by us and assuming an initial public offering price of $ per ordinary share, the mid-point of the price range shown on the cover page of this prospectus. Assuming the number of ordinary shares offered by us as set forth on the cover page of this prospectus remains the same, and after deduction of underwriting discounts and commissions and estimated offering expenses payable by us, a $1.00 increase (decrease) in the assumed initial public offering price of $ per ordinary share would increase (decrease) the net proceeds to us of this offering by approximately $ million. We may also increase or decrease the number of ordinary shares we are offering. An increase (decrease) of 1.0 million ordinary shares in the number of ordinary shares offered by us would increase (decrease) the net proceeds to us by $ million, assuming an initial public offering price of $ per share, the midpoint of the price range set forth on the cover page of this prospectus, and after deducting underwriting discounts and commissions and estimated offering expenses payable by us. We will not receive any proceeds from the sale of ordinary shares by the selling shareholders, although we will bear the costs, other than the underwriting discounts and commissions, associated with the sale of these shares.

The primary purposes of this offering are to obtain additional equity capital, create a public market for our ordinary shares, and facilitate future access to capital via public markets. We expect to use the net proceeds from this offering, together with available funds, for general corporate purposes, including working capital, capital expenditures relating to the expansion of our operations, and funding possible future acquisitions where the use of such U.S. dollar proceeds is permitted by PRC or other laws. We have not determined any particular capital expenditures for which we will use the net proceeds, and the timing and size of our particular capital expenditure needs may change rapidly in response to perceived market opportunities, technological changes and actions by our competitors. We do not currently have any agreements or understandings for material acquisitions for which we intend to allocate a portion of the net proceeds. Therefore, our management is currently unable to allocate any specific portions of the net proceeds for particular uses.

Pending our use of the net proceeds we receive from this offering, we intend to invest our net proceeds in short-term investment grade debt securities or to deposit the proceeds into interest-bearing bank accounts.

In utilizing the proceeds of this offering, we, as an offshore holding company, are permitted under PRC laws and regulations to provide funding to our PRC subsidiaries only through loans or capital contributions and to our consolidated affiliated entities only through loans, in each case subject to satisfaction of applicable government registration and approval requirements. We cannot assure you that we will be able to obtain these government registrations or approvals on a timely basis, if at all.

Our plans for the proceeds of this offering are subject to change due to unforeseen events and opportunities, and the amounts and timing of our actual expenditures depend on several factors, including our expansion plans and the amount of cash generated or used by our operations. Other than as described above, we cannot specify with certainty the particular uses for the net proceeds to be received upon the completion of this offering. Accordingly, our management will have broad discretion in the application of the net proceeds we receive from our public offering, and investors will be relying on the judgment of our management regarding the application of the net proceeds.

DIVIDEND POLICY

We have never declared or paid any dividends in the past and we do not have any plan to declare or pay any dividends in the near future. We currently intend to retain most, if not all, of our available funds and any future earnings to operate and expand our business.

CAPITALIZATION

The following table describes our capitalization as of December 31, 2012:

•

on an actual basis;

•

on a pro forma basis, giving effect to the automatic conversion of all outstanding convertible preferred shares into 40,408,994 ordinary shares; and

•

You should read the following table together with our consolidated financial statements and the related notes appearing elsewhere in this prospectus and the sections of this prospectus titled “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and “Selected Consolidated Financial and Operating Data.”


	As of December 31, 2012
	Actual			Pro Forma	Pro Forma as Adjusted (1)
	(In thousands, except per share data)
Cash and cash equivalents	$	21,580

Convertible preferred shares, par value $0.005 per share: 44,011,599 shares authorized, 39,861,320 shares issued and outstanding, actual; no shares authorized, issued and outstanding, pro forma (unaudited) and pro forma as adjusted (unaudited)		54,377
Shareholders’ equity:
Ordinary shares, par value $0.005 per share: 67,011,599 shares authorized, 11,009,655 shares issued and outstanding, actual; shares authorized, shares issued and outstanding, pro forma (unaudited); shares issued and outstanding, pro forma as adjusted (unaudited)		55
Additional paid-in capital		1,010
Accumulated comprehensive income		1,811
Statutory reserve		740
Accumulated deficit		(24,399	)

Total shareholders’ equity		(20,783	)

Total capitalization	$	33,594

(1)

A $1.00 increase (decrease) in the assumed initial public offering price of $ per share, the midpoint of the price range set forth on the cover page of this prospectus, would increase (decrease) each of additional paid-in capital, total shareholders’ equity and total capitalization by $ million, assuming that the number of shares offered by us, as set forth on the cover page of this prospectus, remains the same, and after deducting estimated underwriting discounts and commissions. Each increase (decrease) of 1.0 million shares in the number of shares offered by us would increase (decrease) cash and cash equivalents, additional paid-in capital, total shareholders’ equity and total capitalization by approximately $ million assuming a price of $ per share, the midpoint of the price range set forth on the cover page of this prospectus, and after deducting estimated underwriting discounts and commissions and estimated offering expenses payable by us. The pro forma as adjusted information discussed above is illustrative only and will be adjusted based on the actual public offering price and terms of this offering determined at pricing.

If the underwriters’ over-allotment option were exercised in full, pro forma as adjusted cash and cash equivalents, ordinary shares and additional paid-in capital, shareholders’ equity and shares issued and outstanding as of December 31, 2012 would be $ , $ , $ and $ , respectively.

DILUTION

If you invest in our ordinary shares in this offering, your ownership interest will be diluted to the extent of the difference between the initial public offering price per share of our ordinary shares and the pro forma as adjusted net tangible book value per share of our ordinary shares immediately after this offering. Net tangible book value dilution per ordinary share to new investors represents the difference between the amount per share paid by purchasers of ordinary shares in this offering and the pro forma as adjusted net tangible book value per ordinary share immediately after completion of this offering.

Net tangible book value per share is determined by dividing our total tangible assets less our total liabilities by the number of ordinary shares outstanding. Our historical net tangible book value (deficit) as of December 31, 2012 was $(22.3) million, or $ per share. Our pro forma net tangible book value (deficit) as of December 31, 2012 was $ , or $ per share, based on the total number of shares of our ordinary shares outstanding as of December 31, 2012, after giving effect to the conversion of all outstanding shares of our preferred shares into ordinary shares assuming the conversion immediately upon to the completion of this offering.

After giving effect to our sale of ordinary shares in this offering at an assumed initial public offering price of $ per share, the midpoint of the price range set forth on the cover page of this prospectus, and after deducting estimated underwriting discounts and commissions and estimated offering expenses payable by us, our pro forma as adjusted net tangible book value as of December 31, 2012 would have been $ , or $ per share. This represents an immediate increase in net tangible book value of $ per share to existing shareholders and an immediate dilution in net tangible book value of $ per share to purchasers of ordinary shares in this offering, as illustrated in the following table:


Assumed initial public offering price per share		$
Pro forma net tangible book value (deficit) per share as of December 31, 2012	$
Increase in pro forma net tangible book value (deficit) per share attributable to new investors

Pro forma as adjusted net tangible book value per share after this offering

Dilution per share to investors in this offering		$

Each $1.00 increase (decrease) in the assumed public offering price of $ per share, the midpoint of the price range set forth on the cover page of this prospectus, would increase (decrease) our pro forma as adjusted net tangible book value by approximately $ million, or approximately $ per share, and the pro forma dilution per share to investors in this offering by approximately $ per share, assuming that the number of shares offered by us, as set forth on the cover page of this prospectus, remains the same and after deducting estimated underwriting discounts and commissions and estimated offering expenses payable by us. We may also increase or decrease the number of shares we are offering. An increase of 1.0 million shares in the number of shares offered by us would result in a pro forma as adjusted net tangible book value of approximately $ million, or $ per share, and the pro forma dilution per share to investors in this offering would be $ per share. Similarly, a decrease of 1.0 million shares in the number of shares offered by us would result in a pro forma as adjusted net tangible book value of approximately $ million, or $ per share, and the pro forma dilution per share to investors in this offering would be $ per share.

If the underwriters’ over-allotment option to purchase additional shares from us is exercised in full, the pro forma as adjusted net tangible book value per share after this offering would be $ per share, the increase in pro forma as adjusted net tangible book value per share to existing shareholders would be $ per share and the dilution to new investors purchasing shares in this offering would be $ per share.

The pro forma information discussed above is illustrative only. Our net tangible book value following the completion of this offering is subject to adjustment based on the actual initial public offering price of our ordinary shares and other terms of this offering determined at pricing.

The following table summarizes on a pro forma basis the differences as of December 31, 2012 between the shareholders at December 31, 2012 and the new investors with respect to the number of ordinary shares purchased from us, the total consideration paid and the average price per ordinary share paid. The information in the following table is illustrative only and the total consideration paid and the average price per ordinary share is subject to adjustment based on the actual initial public offering price of our ordinary shares and other terms of this offering determined at pricing.

Ordinary Shares Purchased

Total
Consideration(1)

Average
Price Per
Ordinary
Share

Number

Percent

Amount

Percent

Existing shareholders

New investors

Total

100

(1)

Each $1.00 increase (decrease) in the assumed initial public offering price of $ per share, the midpoint of the price range set forth on the cover page of this prospectus, would increase (decrease) the total consideration paid to us by new investors and total consideration paid to us by all shareholders by $ million, assuming that the number of shares offered by us, as set forth on the cover page of this prospectus, remains the same, and after deducting estimated underwriting discounts and commissions and estimated offering expenses payable by us. An increase (decrease) of 1.0 million shares in the number of shares offered by us would increase (decrease) the total consideration paid to us by new investors and total consideration paid to us by all shareholders by $ million assuming a price of $ per share, the midpoint of the price range set forth on the cover page of this prospectus, and after deducting estimated underwriting discounts and commissions and estimated offering expenses payable by us.

If the underwriters exercise their over-allotment option in full, our existing shareholders would own % and our new investors would own % of the total number of shares of our ordinary shares outstanding immediately after this offering.

The discussion and tables above also do not take into consideration any outstanding share options. As of the date of this prospectus, there were ordinary shares issuable upon the exercise of outstanding share options issued to employees. To the extent that any of these options are exercised, there will be further dilution to new investors.

SELECTED CONSOLIDATED FINANCIAL DATA

The following table sets forth our selected consolidated financial data for the periods and as of the dates indicated. Our selected consolidated financial data for each of the years ended December 31, 2010, 2011 and 2012 and the selected consolidated balance sheet data as of December 31, 2011 and 2012 has been derived from our audited consolidated financial statements, which are included elsewhere in this prospectus.

The historical results presented below are not necessarily indicative of the results to be expected for any future period. The following summaries of our consolidated financial data for the periods presented should be read in conjunction with “Risk Factors,” “Selected Consolidated Financial and Operating Data,” “Capitalization,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and our consolidated financial statements and the related notes, which are included elsewhere in this prospectus.


	Year Ended December 31,
	2010			2011			2012
	(in thousands, except share and per share data)
Selected Statement of Operations Data:
Revenue	$	29,078		$	50,338		$	78,245
Cost of revenue⁽¹⁾		(21,248	)		(22,840	)		(31,736	)

Gross profit		7,830			27,498			46,509

Operating expense:
Research and development⁽¹⁾		(11,078	)		(13,651	)		(17,568	)
Sales, general and administrative ⁽¹⁾		(5,046	)		(5,895	)		(9,792	)

Total operating expense		(16,124	)		(19,546	)		(27,360	)


Income (loss) from operations		(8,294	)		7,952			19,149
Interest income (expense), net		(44	)		(36	)		207
Fair value change in warrant liability		(37	)		—			—
Other income (expense), net		(114	)		(307	)		153

Income (loss) before income taxes		(8,489	)		7,609			19,509
Provision for income tax		(54	)		(2,637	)		(1,228	)

Net income (loss)	$	(8,543	)	$	4,972		$	18,281

Net income (loss) attributable to ordinary shareholders—Basic	$	(11,056	)	$	77		$	3,114

Net income (loss) per share:
Basic	$	(1.06	)	$	0.01		$	0.29

Diluted	$	(1.06	)	$	0.01		$	0.26


Weighted-average shares used in computing net income (loss) per share:
Basic		10,393,746			10,650,479			10,798,107

Diluted		10,393,746			14,810,976			15,916,704

(1)	Includes stock-based compensation as follows:


	Year Ended December 31,
	2010		2011		2012
	(in thousands)
Cost of revenue	$	31	$	13	$	19
Research and development		358		356		497
Selling, general and administrative		389		262		473

Total stock-based compensation	$	778	$	631	$	989


	As of December 31,
	2011			2012
	(in thousands)
Selected Balance Sheet Data:
Cash and cash equivalents	$	23,343		$	21,580
Working capital		16,268			33,496
Total assets		39,866			53,802
Total liabilities		25,620			20,208
Convertible preferred shares		54,322			54,377
Total shareholders’ deficit		(40,076	)		(20,783	)

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion and analysis of our financial condition and results of operations should be read in conjunction with the consolidated financial statements and related notes included elsewhere in this prospectus. This discussion contains forward-looking statements that involve risks and uncertainties such as statements of our plans, objectives, expectations and intentions. Our actual results could differ materially from those discussed below. Factors that could cause or contribute to such differences include, but are not limited to, those identified below and those discussed in the section titled “Risk Factors” included elsewhere in this prospectus.

Overview

We are a global fabless provider of analog and mixed-signal semiconductor solutions currently addressing the home entertainment and cloud computing markets. In the home entertainment market, we offer a range of set-top box solutions including tuners, demodulators and decoders as well as integrated end-to-end solutions with customized software and support. In the cloud computing market, we offer high performance, low power memory interface solutions that enable memory intensive server applications.

Since our inception, we have been focused on developing a technology platform consisting of proprietary hardware building blocks and customized software to enable the design of high performance, low power analog and mixed-signal semiconductor solutions. We have developed expertise in analog and radio frequency solutions, digital signal processors and high speed interfaces, which serve as the foundation for our technology platform. While analog and mixed-signal technology is applicable to a broad array of end markets, in order to best leverage our technology platform, we have been highly selective in identifying our initial target end markets. We have focused on target markets with compelling secular growth drivers that are also characterized by complex product design, long life cycles and stringent qualification requirements.

Initially, we focused on the home entertainment market by designing solutions for set-top boxes used in emerging markets. We believed this end market allowed us to best leverage our technology platform and take advantage of our presence in China, where almost all of our engineering development takes place and we have extensive field application engineers to help serve our target end customers. We began addressing this market by developing stand-alone tuners, demodulators and decoders and introduced our first set-top box solution in 2005. We began selling integrated set-top box solutions, which combine demodulator, decoder and sometimes tuner into a single packaged solution, in 2010. We currently offer ten set-top box solutions for use in the home entertainment market, including multi-standard compliant HDTV and SDTV semiconductor solutions. We believe our ability to provide integrated end-to-end solutions with customized software and support, which we develop through close collaboration with our end customers, has been a key to our success in the home entertainment market. Our collaborative approach, which we believe significantly benefits from our close proximity to our end customers, allows us to develop extensive localized knowledge of a large, fragmented market with diverse requirements. Our revenue from integrated end-to-end solutions, which have higher average selling prices and gross margins than our stand-alone tuner, demodulator and decoder solutions, increased significantly as a proportion of our total revenue between 2010 and 2012.

We have also focused our development efforts on designing memory interface solutions targeting the cloud computing market by leveraging our expertise in high performance, low power mixed-signal semiconductor design technologies and proximity to key industry participants in Asia. Memory interface solutions must meet stringent high performance and low power requirements and must have the ability to process high frequency signals. Our technology platform enables us to address these requirements. We currently offer two memory interface solutions for use in the cloud computing market, consisting of register buffers and memory buffers for use in memory modules compatible with DDR3 DRAM.

We have sold our set-top box solutions primarily through distributors to over 150 end customers worldwide. Our end customers include nine of the ten largest set-top box manufacturers in China who sell solutions

optimized for viewers in emerging markets. We sell substantially all of our memory interface solutions directly to memory module manufacturers. We have sold our memory interface solutions to three of the five largest memory module manufacturers in the world as measured by revenue generated in 2011.

We operate a fabless business model and use third-party foundries and assembly and test manufacturing contractors to manufacture, assemble and test our semiconductor products. This outsourced manufacturing approach allows us to focus our resources on the design, development and marketing of our solutions and reduces overhead and our exposure to semiconductor industry cyclicality risks.

Since inception, we have invested significant resources in our research and development activities. Our engineering design teams are located in Shanghai, Suzhou and Hangzhou in China and in Taipei and Hsinchu in Taiwan. As of December 31, 2012, we had 270 engineers in our research and development organization of which 132 hold post-graduate engineering degrees. We believe our future success depends on our ability to continuously enhance our solutions and technology platform to meet the rapidly changing needs and requirements of our end customers. As a result, we intend to continue to invest in our research and development efforts.

Our revenue has grown from $29.1 million in 2010 to $78.2 million in 2012, representing a compound annual growth rate of 64%. In 2012, we generated 94% of our revenue from sales of set-top box solutions and 6% from sales of memory interface solutions. Our net income (loss) was $(8.5) million in 2010, $5.0 million in 2011 and $18.3 million in 2012.

Significant Factors Affecting Our Operating Results

Market Demand. Demand for our solutions, and semiconductors in general, may fluctuate depending on various factors, including macroeconomic conditions and changing or evolving technologies, viewer preferences, customer requirements and technical standards. In emerging markets, the satellite set-top box market is currently larger than the cable and terrestrial set-top box markets in terms of total number of units sold, while the cable set-top box market is expected to expand rapidly in coming years. In the cloud computing market, next generation server platforms will require LRDIMM technologies to increase memory capacity within servers. Due to the evolving nature of our markets, our results of operations depend on our ability to accurately anticipate and respond to changes in technologies, viewer preferences and other market conditions.

Introduction of New Solutions. Our ability to grow our revenue has depended, and will continue to depend, on our ability to develop new semiconductor solutions and to successfully market those solutions to new and existing customers. We have expanded our set-top box solutions to include a wide range of multi-standard compliant HDTV and SDTV solutions, and we are continuing to expand our portfolio to capture additional segments of the market. For example, we plan to launch an HDTV decoder solution in 2013 and are growing our cable set-top box solutions business. In the cloud computing market, we are working closely with JEDEC and other key ecosystem participants, including leading CPU and memory module manufacturers, to develop the first generation of DDR4-compliant memory interface solutions, including a registering clock driver and a data buffer. Our success depends in large part on our ability to leverage our established customer base, which includes most of the leading set-top box manufacturers in China, to quickly ramp up revenue from our new solutions offerings.

Revenue Mix among Our Solutions. Our revenue and gross margin in any given period can be significantly affected by the relative proportion of revenue from our different solutions. For example, our integrated end-to-end set-top box solutions generally have higher average selling prices and higher gross margins than our stand-alone tuner, demodulator and decoder solutions. In addition, newly launched solutions which incorporate more complex configurations generally have higher margins, subject to market-specific supply and demand. However, we expect that as our existing solutions and target markets mature, the average unit selling price may decline over time.

Life Cycles of Our Solutions. Our semiconductor solutions are subject to life cycles and experience gradually declining average selling prices. In general, set-top boxes targeting the emerging markets have life cycles lasting a number of years, depending on technological or other changes affecting the market, with average selling prices declining moderately during the life cycle. For memory interface solutions, our solutions are designed to support a specific CPU or server platform developed by CPU manufacturers and depend on the life cycle of the platform we are supporting of the CPU manufacturer. The life cycle of a CPU or server platform typically ranges from 24 to 36 months.

Attach Rate. In the cloud computing industry, the attach rate for a specific component within the server is expressed in terms of the percentage of servers sold with that particular component. As an example, the percentage of servers sold with LRDIMMs would be expressed as the attach rate of LRDIMMs to total servers. As one of only two LRDIMM memory buffer suppliers currently validated by Intel Corporation for DDR3 memory buffers, the attach rate for LRDIMMs can have a significant effect on our addressable market and revenue.

Seasonality. Our quarterly revenue and operating results have fluctuated in the past and may continue to fluctuate significantly depending upon numerous factors. In particular, we typically have lower sales during the first quarter of each year, with the fourth quarter typically having the highest quarterly revenue. This fluctuation is driven primarily by the effect of Chinese Lunar New Year on the purchasing patterns of our distributors and end customers. Our relatively stronger performance in the fourth quarter has been largely due to increased demand from our end customers in anticipation of increased demand for set-top boxes during the Chinese Lunar New Year holiday season.

Research and Development Expenses/Tape-out Costs. The semiconductor industry requires substantial investment in research and development in order to develop and bring to market new and enhanced technologies and products. All of our solutions have originated from our research and development efforts, which provided us with a significant competitive advantage. While we are committed to investing in new solution development in order to remain competitive in our target markets, sufficient resources to maintain the level of investment in research and development activities is crucial to our competitiveness and results of operations. In the event that we are unable to put in sufficient resources in research and development activities, which may or may not become commercially successful, our results of operations may be adversely affected. Our research and development expense may be significantly affected by tape-out costs, which include product engineering mask costs and prototype integrated circuit packaging and test costs. The timing of tape-out costs may be difficult to accurately predict and may lead to fluctuations in our quarterly or annual research and development expense and net income.

Jumpstart Our Business Startups Act

Under the Jumpstart Our Business Startups Act, or the JOBS Act, “emerging growth companies” can delay adopting new or revised accounting standards until such time as those standards apply to private companies. We have elected not to take advantage of this exemption from new or revised accounting standards and, therefore, we will be subject to the same new or revised accounting standards as other public companies that are not “emerging growth companies.”

Description of Certain Statement of Operations Items

The following describes the line items set forth in our consolidated statements of operations.

Revenue

We generate revenue from sales of our set-top box and memory interface solutions to set-top box and memory module manufacturers, either directly or through our distributors. Substantially all of our set-top box end customers purchase products indirectly from us through distributors, while we sell substantially all of our memory interface solutions directly to our end customers.

In 2012, we generated 94% of our revenue from sales of set-top box solutions and 6% from sales of memory interface solutions. We expect sales of set-top box solutions to continue to account for the substantial majority of our revenue; however, we expect revenue from sales of memory interface solutions to grow as a percentage of our total revenue in 2013 and beyond. We have generated the significant majority of our revenue from sales to end customers located in Asia. Although our end customers are primarily manufacturers located in Asia, our semiconductor solutions are incorporated into finished products sold globally.

Cost of Revenue and Gross Margin

Cost of revenue primarily includes the cost of finished silicon wafers processed by third-party foundries; costs associated with our outsourced packaging, assembly and testing; shipping costs; and costs of personnel, logistics and quality assurance. Cost of revenue also includes indirect costs, such as warranty, inventory valuation reserves and other overhead costs.

Gross profit is revenue less cost of revenue. Gross margin is gross profit expressed as a percentage of revenue. We expect that our gross margin may fluctuate from period to period, primarily as a result of changes in average selling price, revenue mix among our solutions, and manufacturing costs. In addition, we may reserve against the value at which we carry our inventory based upon the solution’s life cycle and conditions in the markets in which we sell. Any declines in average selling prices may be paired with improvements in our cost of revenue, which may offset some of the gross margin reduction that could result from lower selling prices.

Operating Expenses

Our operating expenses consist of research and development expense and selling, general and administrative expense.

Research and Development. Research and development expense primarily includes personnel-related expenses, including salaries, bonuses, stock-based compensation and employee benefits. Research and development expense also includes the costs of developing new products as well as supporting existing products, including tape out costs, computer-aided design software license costs, intellectual property license costs, reference design development costs, development testing and evaluation costs and depreciation expense. Research and development activities include the design of new products, refinement of existing products and design of test methodologies to ensure compliance with required specifications. All research and development costs are expensed as incurred. We expect our research and development expense to increase as we continue to expand our available solutions.

Selling, General and Administrative. Selling, general and administrative expense primarily includes personnel-related expenses, including salaries, bonuses, stock-based compensation and employee benefits. Selling, general and administrative expense also includes field application engineering support, commissions to independent sales representatives, travel costs, professional and consulting fees, legal fees, trade shows, depreciation expense and occupancy costs. We expect our selling, general and administrative expense to increase as we expand our organization to better support our customers and our anticipated growth. Additionally, these expenses will increase as we establish the necessary infrastructure to operate effectively as a public company.

Interest Income (Expense), Net

Interest income consists of interest earned on our cash, cash equivalents and short-term investment balances. Interest expense primarily consists of interest on our borrowings.

Fair Value Change in Warrant Liability

Fair value change in warrant liability relates to the change in fair value of our Series B-2 preferred share warrants issued to certain of our investors in October 2009. The change in fair value was remeasured at June 30, 2010, when the warrants were exercised in full. We determined the fair value of the warrants with the assistance

of an independent third-party valuation specialist. The change in fair value was recorded as a non-cash charge in our consolidated statements of operations and comprehensive income (loss) in 2010.

Other Income (Expense), Net

Other income (expense), net generally consists of income (expense) generated from minor non-operating transactions.

Provision (Benefit) for Income Tax

We are an exempted company registered in the Cayman Islands and conduct business in several countries including China, Hong Kong, Taiwan and the United States. We are subject to taxation in each of these jurisdictions in which we conduct business. As a result, our worldwide income will be subject to the tax rates in which our income is generated and as such our effective tax rate may fluctuate based on the geographic distribution of our earned income or losses and the applicable tax laws in which those earnings or losses were generated.

Under the current law of the Cayman Islands, we are not subject to income or capital gains tax. In addition, dividend payments made by us are not subject to withholding tax in the Cayman Islands. Our Hong Kong and Taiwan operating subsidiaries are subject to income tax rates at 16.5% and 17%, respectively. Our U.S. subsidiary is subject to U.S. federal income tax at graduated tax rates from 15% to 35% and the income allocated and apportioned to the state of California is subject to California income tax at 8.8%.

The generally applicable corporate income tax rate in China (referred to in as an enterprise income tax rate) is 25%. Our principal PRC operating subsidiary enjoys certain preferential tax rates due to its qualification as a qualified integrated circuit design enterprise and a high and new technology enterprises, or HNTE. As a qualified integrated circuit design enterprise, our principal PRC operating subsidiary is entitled to a two-year enterprise income tax exemption followed by a three-year 50% enterprise income tax rate reduction commencing from the first profit-making year, which was 2010. As a result, our principal PRC operating subsidiary was exempt from PRC enterprise income tax in 2010 and 2011 and enjoys a preferential 12.5% enterprise income tax from 2012 through 2014. PRC preferential tax treatments are subject to review and may be adjusted or revoked at any time in the future. The discontinuation of any preferential tax treatments available to us will cause our effective tax rate to increase, which will decrease our net income and materially and adversely affect our financial condition and results of operations. See “Risk Factors—Risk Factors Related to Regulations Applicable to Us—Our business has benefited from certain preferential tax treatment and government incentives. Discontinuation or revocation of the preferential tax treatments and government incentives available to us could decrease our net income and materially and adversely affect our financial condition and results of operations.”

Results of Operations

The following table sets forth our consolidated statement of operations data (in thousands) for the periods indicated.


	Year Ended December 31,
	2010			2011			2012
	(in thousands, except share and per share data)
Statement of Operations Data:
Revenue	$	29,078		$	50,338		$	78,245
Cost of revenue⁽¹⁾		(21,248	)		(22,840	)		(31,736	)

Gross profit		7,830			27,498			46,509

Operating expense:
Research and development⁽¹⁾		(11,078	)		(13,651	)		(17,568	)
Sales, general and administrative ⁽¹⁾		(5,046	)		(5,895	)		(9,792	)

Total operating expense		(16,124	)		(19,546	)		(27,360	)


Income (loss) from operations		(8,294	)		7,952			19,149
Interest income (expense), net		(44	)		(36	)		207
Fair value change in warrant liability		(37	)		—			—
Other income (expense), net		(114	)		(307	)		153

Income (loss) before income taxes		(8,489	)		7,609			19,509
Provision for income tax		(54	)		(2,637	)		(1,228	)

Net income (loss)	$	(8,543	)	$	4,972		$	18,281

Net income (loss) attributable to ordinary shareholders—Basic	$	(11,056	)	$	77		$	3,114

Net income (loss) per share:
Basic	$	(1.06	)	$	0.01		$	0.29

Diluted	$	(1.06	)	$	0.01		$	0.26

Weighted-average shares used in computing net income (loss) per share:
Basic		10,393,746			10,650,479			10,798,107

Diluted		10,393,746			14,810,976			15,916,704

(1)	Includes stock-based compensation as follows:


	Year Ended December 31,
	2010		2011		2012
	(in thousands)
Cost of revenue	$	31	$	13	$	19
Research and development		358		356		497
Selling, general and administrative		389		262		473

Total stock-based compensation	$	778	$	631	$	989

Revenue


	Year Ended December 31,						% Change
	2010		2011		2012		2011			2012
	(in thousands, except percentage data)
Revenue	$	29,078	$	50,338	$	78,245		73	%		55	%

Revenue in 2012 increased by $27.9 million, or 55%, from 2011 primarily due to an increase in revenue from sales of our set-top box solutions, which increased from $49.0 million to $73.6 million. A substantial portion of the increase in our set-top box solutions revenue was attributable to the continued increase in shipments of our integrated end-to-end solutions, which integrate decoder, demodulator and sometimes tuner, into a single packaged solution. Our memory interface solutions revenue also increased significantly in 2012, increasing from $1.3 million in 2011 to $4.6 million in 2012 due to increased sales volume as well as higher average selling prices.

Revenue in 2011 increased by $21.2 million, or 73%, from 2010 primarily due to the increase in revenue of our set-top box solutions. A substantial portion of the increase in our set-top box solutions revenue was attributable to increased shipments of our integrated end-to-end solutions. This resulted in a higher average selling price for our set-top box solutions in 2011 compared to 2010.

Cost of Revenue and Gross Profit


	Year Ended December 31,									% Change
	2010			2011			2012			2011		2012
	(in thousands, except percentage data)
Cost of revenue	$	21,248		$	22,840		$	31,736			8%		39%
% of revenue		73	%		45	%		41	%
Gross profit	$	7,830		$	27,498		$	46,509			251%		69%
Gross Margin		27	%		55	%		59	%

Cost of revenue increased by $8.9 million, or 39%, from 2011 to 2012. The increase in cost of revenue was primarily due to increased shipments, in particular for integrated solutions for set-top box applications. Gross margin increased from 55% to 59% during the same period due to the increase in sales of our integrated end-to-end solutions, which generally enjoy relatively gross margins compared to our stand-alone tuner, demodulator and decoder solutions for set-top boxes.

Cost of revenue increased by $1.6 million, or 8%, from 2010 to 2011, primarily due to increased shipments, in particular for integrated solutions for set-top boxes. Gross margin increased from 27% to 55% during the same period as a result of an increase in sales of our integrated end-to-end solutions due to their relatively higher average selling prices and gross margins compared to our stand-alone tuner, demodulator and decoder solutions. We also had a $1.6 million write-down of obsolete inventory primarily related to our memory interface solutions that supported servers utilizing DDR2 memory in 2010.

Our gross profit benefited $30,000, $0.6 million and $0.3 million from sales of product that was previously written down to net realizable value for 2010, 2011 and 2012, respectively.

Operating Expenses


	Year Ended December 31,									% Change
	2010			2011			2012			2011		2012
	(in thousands, except percentage data)
Research and development	$	11,078		$	13,651		$	17,568			23%		29%
% of revenue		38	%		27	%		22	%
Selling, general and administrative	$	5,046		$	5,895		$	9,792			17%		66%
% of revenue		17	%		12	%		13	%

Research and development expense for 2012 increased by $3.9 million, or 29%, from 2011 primarily as a result of an increase in headcount to support the number of product development projects in process during the year. The increase in personnel-related expenses of $4.8 million was the largest component of the change and a

direct result of the increase of 85 employees in our research and development organization as we ended the year with 270 research and development employees. The increase was partially offset by proceeds received for government funding of research and development projects which passed the government review process during the year that reduced expenses by $1.0 million.

Research and development expense for 2011 increased by $2.6 million, or 23%, from 2010. The increase in personnel-related expenses of $1.9 million was the largest component of the change and a direct result of the increase of 69 employees in our research and development organization as we ended the year with 185 research and development employees.

Selling, general and administrative expense for 2012 increased by $3.9 million, or 66%, from 2011, primarily as a result of an increase in personnel-related expenses of $2.0 million, which primarily resulted from an increase of 24 selling, general and administrative employees during 2012 as we ended the year with 126 selling, general and administrative employees. In addition, the increase in selling, general and administrative expenses was partially due to a $1.1 million increase in consulting and professional fees.

Selling, general and administrative expense for 2011 increased by $0.8 million, or 17%, from 2010 due to an increase in personnel-related expenses of $0.8 million, which primarily resulted from an increase of 16 selling, general and administrative employees as we ended the year with 102 selling, general and administrative employees.

Interest Income (Expense), Net, Fair Value Change in Warrant Liability and Other Income (Expense), Net


	Year Ended December 31,
	2010			2011			2012
	(in thousands)
Interest income (expense), net	$	(44	)	$	(36	)	$	207
Fair value change in warrant liability	$	(37	)		—			—
Other income (expense), net	$	(114	)	$	(307	)	$	153

Interest income increased in 2010, 2011 and 2012 primarily due to earnings on higher cash balances. Interest expense in 2012 decreased from 2011 due to lower outstanding debt balances. Interest expense in 2011 increased from 2010 due to higher interest rates on outstanding debt balances.

Fair value change in warrant liability of $37,000 in 2010 is the result of the revaluation of warrants issued to our Series B-2 preferred shareholders in 2009 that were exercised in 2010. The expense reflects the increase in the value of the warrant from the time they were issued to the time they were exercised by shareholders.

We had other income in 2012 of $0.2 million compared with other expense of $0.3 million in 2011. Our other expense increased from $0.1 million in 2010 to $0.3 million in 2011.

Provision (Benefit) for Income Tax

Our income tax expense was $1.2 million in 2012 compared to income tax expense of $2.6 million in 2011. Our effective income tax rate decreased to 6.3% in 2012 from 34.7% of 2011. In 2011, we recorded a one-time income tax provision of $2.8 million for research and development expenses that were non-deductible for tax purposes. We had income tax expense of $54,000 in 2010.

Liquidity and Capital Resources

As of December 31, 2012, we had $28.1 million of cash, cash equivalents and short-term investments. Since 2011, we have financed our operations primarily through net cash from operating activities. Prior to 2011, we

financed our operations primarily by net proceeds of approximately $43.1 million from the sales of preferred shares. We believe our current cash, cash equivalents and net cash from operating activities will be sufficient to satisfy our liquidity requirements for the next 12 months. However, management may in the future elect to finance operations by further utilizing bank loans, credit facilities or selling equity securities.

Below is a summary of our cash flows provided by (used in) operating activities, investing activities and financing activities for the periods indicated:


	Year Ended December 31,
	2010			2011			2012
	(in thousands)
Net cash provided by (used in) operating activities	$	(937	)	$	11,187		$	9,298
Net cash used in investing activities		(824	)		(807	)		(10,397	)
Net cash provided by (used in) financing activities		2,415			(636	)		(553	)
Effect of exchange rates on cash and cash equivalents		131			281			(111	)

Net increase (decrease) in cash and cash equivalents	$	785		$	10,025		$	(1,763	)

Net Cash Provided by (Used in) Operating Activities

Our primary uses of cash are to fund operating expenses and purchases of inventory. Cash used to fund operating expenses excludes the impact of non-cash items such as depreciation and stock-based compensation and is impacted by the timing of when we pay these expenses as reflected in the change in our outstanding accounts payable and accrued expenses.

Our primary sources of cash are cash receipts on accounts receivable from our shipment of products to distributors and direct customers. Aside from an increase in amounts billed to our customers, net cash collections of accounts receivable are impacted by the efficiency of our cash collections process, which can vary from period to period depending on the payment cycles of our major distributor customers. Our accounts receivable, net at year end as a percentage of our revenue during the year were 5%, 12% and 10% in 2010, 2011 and 2012, respectively.

Net cash provided by operating activities in 2012 primarily reflected our net income of $18.3 million, stock-based compensation of $1.0 million, depreciation of $1.2 million, inventory write-downs of $0.5 million, and increases in accrued expenses and taxes payable of $0.9 million and $1.1 million, respectively, partially offset by an increase in accounts receivable and inventory of $2.0 million and $4.7 million, respectively, and reductions in accounts payable and deferred margin of $3.1 million and $3.9 million, respectively. Our accounts receivable and inventory grew as a result of our increased sales activity.

Net cash provided by operating activities in 2011 primarily reflected our net income of $5.0 million, stock-based compensation of $0.6 million, depreciation of $0.6 million, inventory write-downs of $0.5 million, and an increase in accounts payable, deferred margin, tax payable and accrued expenses of $4.1 million, $4.3 million, $3.3 million and $2.4 million, respectively, offset by increases in accounts receivable and inventory of $4.4 million and $5.1 million, respectively. Our accounts receivable and inventory grew as a result of our increased sales activity.

Net cash used in operating activities in 2010 of $0.9 million primarily reflected our net loss of $8.5 million, and decrease in deferred margin of $1.2 million, offset by non-cash charge of stock-based compensation, depreciation and inventory write-downs of $0.8 million, $0.8 million and $1.6 million, respectively, decreases in accounts receivable of $3.6 million and increase in accrued expenses of $1.6 million. We wrote-down $1.6 million of obsolete inventory primarily related to our memory interface solutions that supported servers utilizing DDR2 memory in 2010.

Net Cash Used in Investing Activities

Our capital expenditures have primarily consisted of purchases of property, equipment and software. In 2010, 2011 and 2012, our capital expenditures did not significantly affect our liquidity position. We expect our capital expenditures to increase as we grow our business. We currently expect to finance our capital expenditures primarily or exclusively through net cash from operating activities, but we may in the future finance our capital expenditure requirements through issuances of debt or equity securities or bank borrowings.

Net cash used investing activities in 2012 primarily related to $11.2 million of purchases of short-term investments and $2.1 million for purchases of property, equipment and software, partially offset by $4.9 million of proceeds from maturities of short-term investments. Our net cash used in investing activities in 2010 and 2011 primarily related to purchases of property, equipment and software of $0.7 million in 2010 and $0.6 million in 2011.

Net Cash Provided by (Used in) Financing Activities

Net cash used in financing activities in 2012 consisted primarily of $2.1 million for the repayment of bank borrowings, partially offset by $1.6 million in proceeds from new bank borrowings. Net cash used in financing activities in 2011 consisted primarily of $3.8 million for the repayment of bank borrowings, partially offset by proceeds from bank borrowings of $3.1 million. Net cash provided by financing activities in 2010 consisted primarily of $3.8 million in new bank borrowings and $1.5 million of net proceeds from the exercise of warrants to purchase our Series B-2 shares, partially offset by $3.0 million for the repayment of loans.

Contractual Obligations

The following table summarizes our outstanding contractual obligations as of December 31, 2012:


	Payments Due by Period
	Total		Less Than 1 Year		1-3 Years		3-5 Years
	(in thousands)
Operating lease obligations	$	1,775	$	992	$	783	$	—
Purchase obligations		1,086		1,086		—		—

Total contractual obligations	$	2,861	$	2,078	$	783	$	—

During 2012, we entered into a 32 month non-cancelable operating lease agreement for additional office space in our Shanghai facility. The lease commenced in April 2012 with an option to extend the lease for an additional three years. Future minimum annual payments under the operating lease for the years 2013 and 2014 are $0.6 million and $0.6 million, respectively.

Off-Balance Sheet Arrangements

As of December 31, 2012, we did not have any relationships with unconsolidated organizations or financial partnerships, such as structured finance or special purpose entities that would have been established for the purpose of facilitating off-balance sheet arrangements or other contractually narrow or limited purposes.

Quantitative and Qualitative Disclosures About Market Risk

Interest Rate Sensitivity

We had cash and short-term investments of $28.1 million as of December 31, 2012, which was held for working capital purposes. We do not enter into investments for trading or speculative purposes. We do not believe that we have any material exposure to changes in the fair value of these investments as a result of

changes in interest rates due to their short-term nature. Declines in interest rates, however, will reduce future investment income.

Foreign Currency Risk

The functional currency of Montage Technology Group Limited and our non-PRC subsidiaries is the U.S. dollar. The functional currency of our subsidiaries in the PRC is the Renminbi. Monetary assets and liabilities in currency denomination other than the functional currency are translated into the functional currency at the rate of exchange in effect at the balance sheet date. Transactions in currencies other than the functional currency during the reporting period are converted into the functional currency at the applicable exchange rate on the day transaction occurred. Accordingly, the effects of exchange rate fluctuations on the net assets of each of our group entities are accounted for as translation gains or losses in accumulated other comprehensive income within shareholders’ equity. In addition, our revenue is primarily denominated in U.S. dollars and since a significant portion of our assets and expenses are in the PRC, they are in the denominated in Renminbi. As a result, our results of operations and financial condition are subject to risks associated with exchange rate fluctuations, in particular in relation to the exchange rates between the Renminbi and the U.S. dollar. We do not believe that a change of 10% in such foreign currency exchange rates would have a material impact on our financial position or results of operations.

Critical Accounting Policies and Estimates

Our consolidated financial statements and the related notes included elsewhere in this prospectus are prepared in accordance with accounting principles generally accepted in the United States. The preparation of these consolidated financial statements requires us to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenue, costs and expenses, and any related disclosures. We base our estimates on historical experience and on various other assumptions that we believe to be reasonable under the circumstances. Changes in accounting estimates are reasonably likely to occur from period to period. Accordingly, actual results could differ significantly from the estimates made by our management. We evaluate our estimates and assumptions on an ongoing basis. To the extent that there are material differences between these estimates and our actual results, our future financial statement presentation, financial condition, results of operations and cash flows will be affected.

We believe that the following accounting policies involve a greater degree of judgment and complexity than our other accounting policies. Accordingly, these are the policies we believe are the most critical to understanding and evaluating our consolidated financial condition and results of operations.

Revenue Recognition

Our revenue is generated from the sale of our semiconductor solutions sold into the home entertainment and cloud computing markets. In the home entertainment market, we sell set-top box solutions which consist of highly integrated semiconductors and embedded software. We do not deliver software as a separate product in connection with the sale of our solutions nor is any software upgrade offered after the sale of our solutions.

We recognize revenue only when all of the following criteria are met: (i) persuasive evidence of an arrangement exists, (ii) delivery has occurred, (iii) the price to the customer is fixed or determinable, and (iv) collection of the resulting receivable is reasonably assured.

We evaluate each of these criteria as follows:

Evidence of an arrangement – We generally use a customer’s purchase order to establish the existence of an arrangement.

Delivery – We consider delivery to occur when title has been transferred to the customer.

Fixed or determinable fee – We assess whether fees are fixed or determinable at the time of sale. We only consider the fee to be fixed or determinable if the fee is not subject to adjustment.

Collection is deemed probable – We deem collection probable if we expect that the customer will be able to pay amounts under arrangement as payments become due.

We sell our set-top box solutions primarily through third-party independent distributors under agreements allowing for pricing credits and/or rights of return and to a lesser extent, directly to set-top box manufacturers. We sell our memory interface products directly to memory module manufacturers. For direct sales to end customers, we recognize revenue at the time of shipment to our end customers when all of the above criteria are met. For sales through distributors, we defer the recognition of revenue and related product costs until the sale and delivery by the distributor to the end customer occurs because we cannot reliably estimate returns or price adjustments due to rapid changes in technology, consumer preferences and prices. Upon shipment to the distributor, we record an accounts receivable based on the amount we are entitled to bill the distributor according to the contractual arrangement between the Company and the distributor. This amount is recorded, net of the costs of products delivered, as deferred margin, net on our consolidated balance sheet. We do not accept product returns from customers except for returns to satisfy warranty claims of products previously delivered.

Allowance for Doubtful Accounts

We perform ongoing credit evaluations of our distributors and end customers to whom we sell directly and adjust credit limits based on creditworthiness of each, as determined by our review of current credit information. We continuously monitor collections and payments from our distributors and end customers to whom we sell directly and maintain an allowance for doubtful accounts based upon our historical experience, our anticipation of uncollectible accounts receivable and any specific customer collection issues that we have identified. While our credit losses have historically been insignificant, we may experience higher credit loss rates in the future than we have in the past. Our accounts receivable are concentrated in relatively few distributors, with three of our distributors in the aggregate accounting for 92% of our total accounts receivable, net as of December 31, 2012. Therefore, a significant change in the liquidity or financial position of any one significant distributor or end customer could make collection of our accounts receivable more difficult, require us to increase our allowance for doubtful accounts and negatively affect our working capital.

Inventory Valuation

We continually assess the salability of our inventory based on assumptions about demand and market conditions. Forecasted demand is determined based on historical sales and expected future sales. We value our inventory at the lower of cost or its current estimated market value. We reduce our inventory to the estimated lower of cost or market value on a part-by-part basis to account for its obsolescence or lack of marketability. Reductions are calculated as the difference between the cost of inventory and the estimated market value based upon assumptions about future demand and market conditions. If actual market conditions are less favorable than those projected by management, additional inventory write-downs may be required that may adversely affect our operating results. If actual market conditions are more favorable, we may have higher gross profits when products are sold.

Intangible assets

Our intangible assets include acquired assembled workforce and licenses and are amortized on a straight-line basis over their estimated useful lives, which range from 18 to 36 months.

On August 23, 2012, Montage Technology Hong Kong Limited, one of our wholly owned subsidiaries, entered into agreements with a third party to acquire research and development workforce, intellectual property,

or IP, and computers and office equipment for total cash consideration of $2.0 million. The acquisition was completed in September 2012. We determined that the acquisition of research and development workforce, IP and computers and office equipment should be accounted for as an asset acquisition as the group of assets that we acquired did not meet the definition of a business as pursuant to ASC 805. We allocated the total consideration to the acquired research and development workforce, IP (which was obsolete) and computers and office equipment with the amount of $1.9 million, $0 million, and $0.1 million, respectively. The research and development workforce is recorded as assembled workforce and amortized on a straight line basis over 18 months as we expected the acquired workforce provides economic benefit to us during this period based on our prior experience in the area of developing our research and development workforce and conducting research and development activities.

For long-lived assets including amortizable intangible assets, we evaluate for impairment whenever events or changes (triggering events) indicate that the carrying amount of an asset may no longer be recoverable. We assess the recoverability of the long-lived assets by comparing the carrying value of the long-lived assets to the estimated undiscounted future cash flows expected to receive from use of the assets and their eventual disposition. Such assets are considered to be impaired if the sum of the expected undiscounted cash flows is less than the carrying amount of the assets. The impairment to be recognized is measured by the amount by which the carrying amount of the assets exceeds the fair value of the assets. There were no impairments for long-lived assets and intangible assets for the years ended December 31, 2010, 2011 and 2012.

Income Taxes

We account for income taxes using the asset and liability approach. We record deferred tax assets and liabilities for the tax consequences attributable to the differences between the carrying amounts of existing assets and liabilities in our financial statements and their respective tax basis, and operating loss carry-forwards. We measure deferred tax assets and liabilities using tax rates expected to apply to taxable income in the years in which the temporary differences are expected to be recovered or settled. The deferred tax assets would be recovered when the benefits are realized. In the event we were to determine that it is more likely than not that it would be able to realize its deferred tax assets in the future in excess of its net recorded amount, an adjustment to the valuation allowance for the deferred tax asset would be made.

We are subject to income taxes in China, Hong Kong, Taiwan and the United States, and are subject to routine corporate income tax audits in these jurisdictions. We believe that our tax return positions are fully supported, but tax authorities may challenge certain positions, which may not be fully sustained. However, our income tax expense includes amounts intended to satisfy income tax assessments that result from these challenges. Determining the income tax expense for these potential assessments and recording the related assets and liabilities requires management judgment and estimates. We believe that our provision for uncertain tax positions, including related interest and penalties, is adequate based on information currently available to us. The amount ultimately paid upon resolution of audits could be materially different from the amounts previously included in income tax expense and therefore could have a material impact on our tax provision, net income and cash flows. Our overall provision requirement could change due to the issuance of new regulations or new case law, negotiations with tax authorities, resolution with respect to individual audit issues, or the entire audit, or the expiration of statutes of limitations.

Stock-Based Compensation

Effective with the adoption of our 2006 Share Incentive Option Plan in June 2006, we implemented the authoritative guidance for stock-based compensation, which requires us to measure the cost of employee services received in exchange for equity incentive awards, including share options, based on the grant date fair value of the award. The fair value is estimated using the Black-Scholes option pricing model. The resulting cost is recognized over the period during which the employee is required to provide services in exchange for the award, which is usually the vesting period. We recognize compensation expense over the vesting period using the

straight-line method and classify these amounts in the statements of operations based on the department to which the related employee reports.

We account for share options issued to non-employees in accordance with authoritative guidance for equity based payments to non-employees. Share options issued to non-employees are accounted for at their estimated fair value determined using the Black-Scholes option-pricing model. The fair value of options granted to non-employees is re-measured as they vest, and the resulting increase in value, if any, is recognized as expense during the period the related services are rendered.

For purposes of determining our stock-based compensation expense, we used the Black-Scholes option pricing model to calculate the fair value of stock options on the grant date for stock options granted to employees and as of each balance sheet date until the date when services are rendered for stock options granted to non-employees. This model requires inputs such as the expected term of the option, expected volatility, the risk-free interest rate, dividend yield and fair value of the underlying stock at grant date. These inputs are subjective and generally require significant judgment. For each of the three years ended December 31, 2010, 2011 and 2012, we estimated the fair value of stock options using the Black-Scholes option pricing model with the following range of assumptions:


	Year Ended December 31
	2010	2011	2012
Risk-free interest rate	2.37-4.53%	1.42-4.52%	1.10-3.13%
Dividend yield	—	—	—
Expected term (years)	6 to 10	6 to 10	6 to 10
Expected volatility	50.21-63.99%	49.29-57.46%	39.97-52.66%

Risk-Free Interest Rate. We derived the risk-free interest rate assumption from the yield-to-maturity of the USD dominated China International Government bond with the maturity period that can cover the expected term of the stock options.

Dividend Yield. Expected dividend yields are assumed to be 0% for all grant dates, as our dividend policy is to retain earning for reinvestment purpose and we do not intend to distribute dividend in the foreseeable future.

Expected Term. The expected term represents the period that our share-based awards are expected to be outstanding. The expected term was estimated based on the date of the grant, expiration date and vesting period as stated in the stock option grant. The expected term for directors, officers and employees was six years from each measurement date. The expected term for external consultants was ten years from the grant date.

Expected Volatility. We estimated volatility based upon the average share price volatility of comparable listed companies over a period comparable to the expected term of the options. We believe the average share price volatility of the selected comparable companies is a reasonable benchmark in estimating the expected volatility of our ordinary shares. When making the selections of our industry peer companies to be used in the volatility calculation, we also considered their stage of development, size and financial leverage.

In addition to determining the fair value of stock options granted to employees, we also estimate the forfeiture rate to calculate the amount of compensation expense recognized for each reporting period. We utilized our historical forfeiture rates to estimate our future forfeiture rate, which is 5.6%. We will continue to evaluate the appropriateness of estimating the forfeiture rate based on actual forfeiture experience, analysis of employee turnover behavior and other factors. Estimated forfeiture rates also affect the amount of aggregate compensation costs recognized for each reporting period. Quarterly changes in the estimated forfeiture rate can have a significant effect on stock-based compensation expense as the cumulative effect of adjusting the rate for all stock compensation expense amortization is recognized in the period the forfeiture estimate is changed. If a revised forfeiture rate is higher than the previously estimated forfeiture rate, an adjustment is made that will result in a decrease to the stock-based compensation expense recognized in the consolidated financial statements. If a

revised forfeiture rate is lower than the previously estimated forfeiture rate, an adjustment is made that will result in an increase to the stock-based compensation expense recognized in the consolidated financial statements. The effect of forfeiture adjustments during 2010, 2011 and 2012 was insignificant. We will continue to use judgment in evaluating the expected term, volatility and forfeiture rate related to our stock-based compensation on a prospective basis and incorporating these factors in the option pricing model.

If in the future, we determine that other methods are more reasonable, or other methods for calculating these assumptions are prescribed by authoritative guidance, the fair value calculated for our stock options could change significantly. Higher volatility and longer expected lives result in an increase to stock-based compensation expense determined at the date of grant. Stock-based compensation expense affects our cost of revenue, research and development expense and our selling, general and administrative expense.

In order to determine the fair value of stock options using the Black Scholes model, we are required to determine the fair value of our ordinary shares. The following table summarizes, by grant date, the number of stock options granted since March 19, 2012 and the associated per share exercise price for each of these grants and the fair value of the ordinary shares used to calculate our stock-based compensation:


Grant Date	Number of Options Granted		Exercise Price ($)		Fair Value of Underlying Ordinary Shares as of the Grant Date ($)
March 19, 2012		87,000		0.88		3.13
March 19, 2012		126,000		3.77		3.13
June 15, 2012		53,000		3.77		3.68
September 17, 2012		854,800		3.77		4.88
December 13, 2012		237,000		3.77		6.11

None of the option grants set forth in the above table were Incentive Stock Options.

Historically, given the absence of an active market for our ordinary shares, our board of directors determined the exercise prices of stock options granted by referencing to objective and subjective factors affecting value of our ordinary shares. The factors considered by our board of directors included the following:

•

retrospective valuations performed by independent third-party valuation specialist;

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the prices of our convertible preferred shares sold to outside investors in arm’s-length transactions;

•

the rights, preferences and privileges of our convertible preferred shares relative to those of our ordinary shares;

•

our operating and financial performance and revenue outlook;

•

the introduction of new products;

•

the hiring of key personnel;

•

the status of product development and qualifications;

•

the fact that option grants involve illiquid securities in a private company;

•

the public trading prices of the ordinary shares of companies whose business is comparable to ours;

•

the general economic outlook;

•

the risks inherent in the development of our products and expansion of our target markets; and

•

the likelihood of achieving a liquidity event, such as an initial public offering or sale of our company, given prevailing market conditions.

In determining our stock-based compensation expense using the Black Scholes model, we engaged an independent third-party valuation specialist to assist us with the valuation of ordinary shares on a retrospective

basis. However, our management and board of directors have assumed full responsibility for the estimates. We have performed valuations of our ordinary shares in a manner consistent with the methods outlined in the American Institute of Certified Public Accountants Practice Aid, Valuation of Privately-Held-Company Equity Securities Issued as Compensation. These valuations were prepared in a consistent manner and involved a two-step process. First, we established our enterprise value using the income approach and the market approach. The income approach, which relies on a discounted cash flow analysis, measures the value of a company as the present value of its future economic benefits by applying an appropriate risk-adjusted discount rate to expected cash flows, based on forecasts of revenue and costs. The market approach, which relies on analysis of comparable public companies and comparable acquisitions, measures the value of a company through comparison to comparable companies and transactions. Consideration is given to the financial condition and operating performance of the company being valued relative to those of publicly traded companies operating in the same or similar lines of business. When choosing the comparable companies to be used for the market approach, we focused on companies in the semiconductor industry. Some of the specific criteria we used to select comparable companies within our industry included the business description, business size, projected growth, financial condition and historical operating results. For each valuation report, we prepared a financial forecast to be used in the computation of the enterprise value for both the market approach and the income approach. The financial forecasts took into account our past experience and future expectations. The risks associated with achieving these forecasts were assessed in selecting the appropriate discount rate. As discussed below, there is inherent uncertainty in these estimates. We applied a discount for lack of marketability to reflect the increased risk arising from the inability of holders to readily sell the shares and then allocated the resulting equity value among the securities that comprise our capital structure using the Option-Pricing Method. The aggregate value of the ordinary shares derived from the Option-Pricing Method was then divided by the number of ordinary shares outstanding to arrive at the per share common value.

In each valuation, we considered the market approach based on an analysis of comparable public companies. In forming our opinion, we relied upon the income approach to prepare the equity value analysis of the company, due to factors such as lack of a long business history compared with the comparable public companies, differential of business scopes, significant sales increase beginning in 2011, as well as short reporting periods of net profit. Since the fair value of our ordinary shares has been ultimately determined by our discounted cash flow analyses, our valuations have been heavily dependent on our estimates of revenue, costs and related cash flows. These estimates are highly subjective and subject to frequent change based on both new operating data as well as various macroeconomic conditions that impact our business. Each of our valuations was prepared using data that was consistent with our then-current operating plans that we were using to manage our business.

Discussion of Significant Factors in Fair Value Determinations

The fair values of the underlying ordinary shares were determined with the assistance of an independent third-party valuation specialist. To estimate the fair value of the ordinary shares, we first determined our enterprise value by means of a discounted cash flow analysis using the retrospective approach. The cash flow derived by company management considered the nature of our business, our future business plan, specific business and financial risks, the stage of development of our operations, and economic and competitive elements affecting our business, industry and market. We also used other general assumptions, including following: no major changes in the existing political, legal, fiscal and economic conditions in China; no major changes in the current taxation laws in the jurisdictions in which we operate; our ability to retain competent management, key personnel and technical staff to support our ongoing operating; and no significant deviations in industry trends and market conditions from our current economic forecasts. The cash flow is discounted using the weighted average cost of capital of 20% as of December 31, 2010 and 18% as of June 30, 2012, which were benchmarked with discount rates of comparable listed companies. In addition, a lack of marketability discount of 20% and 15% were applied to arrive at the estimated enterprise value as of December 31, 2010 and June 30, 2012. The lack of marketability discount takes into consideration the plans for the status of our proposed initial public offering.

The following discusses the significant factors and probabilities of various outcomes considered by our board of directors in determining the estimated fair value of our ordinary shares at each of the grant dates specified below. Our board of directors estimated the fair value of our ordinary shares, however, the fair value of the underlying ordinary shares was subsequently revisited by our board of directors for financial reporting purposes and reassessed on a retrospective basis.

March 19, 2012

On March 19, 2012, our board of directors granted stock options with an exercise price equal to the fair value of the ordinary shares as of June 30, 2012, as determined by an independent valuation specialist. The stock options granted on this date included options to purchase 87,000 ordinary shares which were committed to existing employees but which had not been submitted to our board of directors for approval. These prior commitments were made to employees with an exercise price of $0.88 per share prior to the receipt of an independent valuation. With respect to these awards, our board of directors determined to honor our prior exercise price commitment to the employees. With respect to other grants approved on March 19, 2012, our board of directors considered an independent valuation as of June 30, 2012 reflecting a fair value of $3.77 per share and determined to establish the exercise price for these options at $3.77 per share.

The significant assumptions used in the June 30, 2012 independent valuation report included a discounted weighted average cost of capital of 18% which was benchmarked with discount rates of comparable listed companies. In addition, a lack of marketability discount of 15% was applied to arrive at the estimated enterprise value. The lack of marketability discount took into consideration the current status of our plan for a proposed initial public offering. The expected outcomes were heavily weighted based on the probability of a public offering, with a probability of an initial public offering set at 55%. Similarly, the second most probable outcome applied was a change in control of the company, with a probability set at 30%.

June 15, 2012

On June 15, 2012, our board of directors granted stock options with an exercise price equal to the fair value of the ordinary shares as of June 30, 2012, as determined by an independent valuation specialist. Subsequent to making the grants, the board of directors considered an independent valuation as of June 30, 2012 reflecting a fair value of $3.77 per share and determined to establish the exercise price for these options at $3.77 per share.

The significant assumptions used in the June 30, 2012 independent valuation report included a discounted weighted average cost of capital of 18% which was benchmarked with discount rates of comparable listed companies. In addition, a lack of marketability discount of 15% was applied to arrive at the estimated enterprise value. The lack of marketability discount took into consideration the current status of our plans for a proposed initial public offering. The expected outcomes were heavily weighted based on the probability of a public offering, with a probability of an initial public offering set at 55%. Similarly, the second most probable outcome applied was a change in control of the company, with a probability set at 30%.

September 17, 2012

On September 17, 2012, our board of directors granted stock options with an exercise price of $3.77 per share. In estimating the fair value of our ordinary shares to set the exercise price of such options, our board of directors considered a number of factors, including an improving revenue forecast, particularly for memory buffer products and our continued strong set-top box revenues. Although our business prospect improved, the changes were deemed not material and as a result our board of directors considered the most recent independent valuation report of June 30, 2012 that reflected a fair value of our ordinary shares of $3.77 per share and the exercise price for these options remained at $3.77 per share.

companies. In addition, a lack of marketability discount of 15% was applied to arrive at the estimated enterprise value. The lack of marketability discount took into consideration the current status of our plans for a proposed initial public offering. The expected outcomes were heavily weighted based on the probability of a public offering, with a probability of an initial public offering set at 55%. Similarly, the second most probable outcome applied was a change of control of the company, with a probability set at 30%.

December 13, 2012

On December 13, 2012, our board of directors granted stock options with an exercise price of $3.77 per share. In estimating the fair value of our ordinary shares to set the exercise price of such options, our board of directors considered a number of factors, including initial revenue from our LRDIMM memory interface products and our continued strong set-top box solutions revenue growth. However, our board of directors noted the high degree of volatility in the U.S. public markets, citing in particular that the NASDAQ Global Select Market declined 6% since our prior quarterly board meeting. As a result, the board of directors estimated that the fair value of our ordinary shares continued to be $3.77 per share based on an independent valuation as of June 30, 2012 and the exercise price for the options approved at this meeting be at $3.77 per share.

The significant assumptions used in the June 30, 2012 independent valuation report included a discounted weighted average cost of capital of 18% which was benchmarked with discount rates of comparable listed companies. In addition, a lack of marketability discount of 15% was applied to arrive at the estimated enterprise value. The lack of marketability discount took into consideration the current status of our plans for a proposed initial public offering. The expected outcomes were heavily weighted based on the probability of a public offering, with a probability of an initial public offering set at 55%. Similarly, the second most probable outcome applied was a change in control of the company, with a probability set at 30%.

In January 2013, our board of directors requested our independent third party valuation specialists to perform a full set of retrospective valuations of our ordinary shares at various dates since our inception. In February 2013, our valuation specialist delivered to our board of directors valuation reports which valued our ordinary shares as of December 31, 2010, September 30, 2011, June 30, 2012 and December 31, 2012. Our valuation specialist valued our ordinary shares at each of these dates at $0.94, $2.08, $3.77 and $6.36, respectively. The significant assumptions used in the December 31, 2012 independent valuation report which was delivered by our valuation specialist in February 2013 included an increase in forecasted revenue for our memory interface solutions as we began initial shipment of our LRDIMM solutions. The valuation also included a discounted weighted average cost of capital of 18%, which was benchmarked with discount rates of comparable listed companies. In addition, a lack of marketability discount of 11% was applied to arrive at the estimated enterprise value. The lack of marketability discount took into consideration the current status of our plans for a proposed initial public offering. The expected outcomes were heavily weighted based on the probability of a public offering, with the probability of an initial public offering set at 60%. Similarly, the second most probable outcome applied was a change in control of the company, with the probability set at 30%. As a result, for the ordinary shares underlying the options, we have attributed a fair value for each grant date. This fair value input at each option grant date was determined by the linear relationship with reference to the fair values of the ordinary shares as of the closest key valuation dates. We believe the linear relationship between key dates to derive the fair value of ordinary shares input for stock option pricing is reasonable during these periods. We determined that stock-based compensation expense that we would record should be calculated with the revised estimated fair value of our ordinary shares at each grant date for all the stock option grants.

As a result of our Black-Scholes option fair value calculations and the allocation of value to the vesting periods using the straight-line vesting attribution method, we recognized employee stock-based compensation in the statements of operations as follows:


	Year Ended December 31
	2010		2011		2012
	(in thousands)
Cost of revenue	$	31	$	13	$	19
Research and development		358		356		497
Selling, general and administrative		389		262		473

Total stock-based compensation	$	778	$	631	$	989

The total compensation cost related to unvested stock option grants not yet recognized as of December 31, 2012 was $4.1 million, and the weighted-average period over which these grants are expected to vest is 3.33 years. In future periods, we expect our stock-based compensation expense to increase as a result of our unrecognized stock-based compensation to be recognized as these awards vest and as we issue additional stock-based awards to attract and retain employees.

Recent Accounting Pronouncements

In December 2011, the FASB issued ASU 2011-11, “Disclosures about Offsetting Assets and Liabilities.” This update requires an entity to disclose both gross and net information about instruments and transactions eligible for offset in the statements of financial position as well as instruments and transactions executed under a master netting or similar arrangement and was issued to enable users of financial statements to understand the effects or potential effects of those arrangements on their financial position. This update is required to be applied retrospectively and is effective for fiscal years, and interim periods within those years, beginning on or after January 1, 2013. In January 2013, the FASB issued ASU 2013-01, “Balance Sheet (Topic 210): Clarifying the Scope of Disclosures about Offsetting Assets and Liabilities.” The amendments clarify that the scope of ASU 2011-11 applies to derivatives accounted for in accordance with ASC 815, Derivatives and Hedging, including bifurcated embedded derivatives, repurchase agreements and reverse repurchase agreements, and securities borrowing and securities lending transactions that are either offset in accordance with ASC 210-20-45 or ASC 815-10-45 or subject to an enforceable master netting arrangement or similar agreement. The effective date is the same as the effective date of ASU 2011-11. The adoption of this update is not expected to have a material impact on our consolidated financial statements.

In July 2012, the FASB issued ASU 2012-02, “Intangibles — Goodwill and Other: Testing Indefinite Lived Intangible Assets for Impairment.” The update applies to all entities, both public and nonpublic, that have indefinite-lived intangible assets, other than goodwill, reported in their financial statements. Per the Update, an entity has the option first to assess qualitative factors to determine whether the existence of events and circumstances indicates that it is more likely than not that the indefinite-lived intangible asset is impaired. If, after assessing the totality of events and circumstances, an entity concludes that it is not more likely than not that the indefinite-lived intangible asset is impaired, then the entity is not required to take further action. The amendments are effective for annual and interim impairment tests performed for fiscal years beginning after September 15, 2012. Early adoption is permitted, including for annual and interim impairment tests performed as of a date before July 27, 2012, if financial statements for the most recent annual or interim period have not yet been issued. The adoption of this update is not expected to have a material impact on our consolidated financial statements.

In February 2013, the FASB issued ASU 2013-02, “Comprehensive Income: Reporting of Amounts Reclassified Out of Accumulated Other Comprehensive Income.” This update does not change the current requirements for reporting net income or other comprehensive income in financial statements. However, this

update requires an entity to provide information about the amounts reclassified out of accumulated other comprehensive income by component. In addition, an entity is required to present, either on the face of the statement where net income is presented or in the notes, significant amounts reclassified out of accumulated other comprehensive income by the respective line items of net income but only if the amount reclassified is required under U.S. GAAP to be reclassified to net income in its entirety in the same reporting period. For other amounts that are not required under U.S. GAAP to be reclassified in their entirety to net income, an entity is required to cross-reference to other disclosures required under U.S. GAAP that provide additional detail about those amounts. This update is effective prospectively for reporting periods beginning after December 15, 2012 for public entities. The adoption of this update is not expected to have a material impact on our consolidated financial statements.

BUSINESS

Overview

We are a global fabless provider of analog and mixed-signal semiconductor solutions currently addressing the home entertainment and cloud computing markets. Our expertise in analog and radio frequency solutions, digital signal processors and high speed interfaces serves as the foundation for our technology platform. These technical capabilities enable us to design high performance, low power semiconductors. In the home entertainment market, our technology platform enables us to design highly integrated end-to-end solutions with customized software and support for set-top boxes. Our solutions are designed to optimize signal processing performance under the challenging operating conditions typically found in emerging market environments. In the cloud computing market, we offer high performance, low power memory interface solutions that enable memory-intensive server applications. Our technology platform approach allows us to provide integrated solutions that meet the expanding needs of our customers through our continuous innovation, cost- and power-efficient efficient design and rapid product development. Since our inception in 2004, we have sold over 230 million integrated circuits which have been shipped to over 150 end customers worldwide.

While analog and mixed-signal technology is applicable to a broad array of end markets, we have been highly selective in identifying our initial target end markets. We focus on markets with compelling secular growth drivers that are also characterized by complex product design, long life cycles and stringent qualification requirements. We believe our significant investment in our technology platform has created high barriers to entry for our set-top box solutions in emerging markets as well as memory interface solutions in the cloud computing market. Initially, we developed commercial solutions for the home entertainment market to address the rapidly growing demand for television in China, Southeast Asia and other emerging markets. According to iSuppli, in 2011, 118 million set-top boxes were sold by Chinese manufacturers, primarily targeting emerging markets. In 2016, the total number of set-top boxes sold by Chinese manufacturers is expected to grow to over 243 million, representing a compound annual growth rate of 16% from 2011 to 2016. A key to our success in the home entertainment market is our ability to provide integrated end-to-end solutions with customized software and support, which we develop through close collaboration with our end customers. Our collaborative approach allows us to develop extensive localized knowledge of a large, fragmented market with diverse requirements, deepening customer relationships and yielding design wins across multiple product generations. Our end customers in the home entertainment market include nine of the ten largest set-top box manufacturers in China as measured by units sold in 2012.

More recently, we released our memory interface solutions to pursue opportunities arising from the rapid growth in the cloud computing market. Our close collaboration with key ecosystem participants, including CPU manufacturers, memory module manufacturers and server OEMs, has enabled us to successfully develop high performance, low power memory interface solutions for cloud computing environments. We are currently one of two LRDIMM memory buffer suppliers validated by Intel Corporation for DDR3 technology, the most prevalent industry standard. Our customers in the cloud computing market include three of the world’s five largest memory module manufacturers as measured by revenue generated in 2011.

We offer ten solutions for use in the home entertainment market and two memory interface solutions for use in the cloud computing market. Our solutions are built upon our foundation of 34 issued patents and an additional 46 pending patent applications. As of December 31, 2012, we had 270 engineers in our research and development organization, of which 132 hold post-graduate engineering degrees. We sell our solutions principally through distributors to over 150 end customers worldwide. Our revenue has grown from $29.1 million in 2010 to $78.2 million in 2012, representing a compound annual growth rate of 64%. In 2012, 94% of our revenue was generated from set-top box solutions and 6% was generated from memory interface solutions. We had a net loss of $8.5 million in 2010 and net income of $5.0 million in 2011 and $18.3 million in 2012.

Our Target Markets

Our technology platform currently serves two large target markets: (i) home entertainment, in particular set-top boxes for emerging markets; and (ii) the cloud computing market, in particular memory interface solutions for data center servers.

Home Entertainment Market

In emerging markets, such as China, India, the Middle East, Latin America, Africa and Southeast Asia, television content is broadcast and accessed through satellite transmissions, cable network connections or terrestrial over-the-air transmissions. Viewers often access content from these three signal transmission systems using set-top boxes that are connected to televisions within the home. According to iSuppli, in 2011, 118 million set-top boxes were sold by Chinese manufacturers, primarily targeting emerging markets. Of the 118 million units sold, 64% were exported outside of China. In 2016, the total number of units sold by Chinese manufacturers is expected to grow to over 243 million units, representing a compound annual growth rate of 16%.

A number of factors determine whether a viewer accesses television broadcasts through a satellite, cable or terrestrial connection including location, existence of wired cable infrastructure and desire for premium content. Within emerging markets, satellite television circumvents expensive capital deployment of wired infrastructure, which makes satellite broadcast a particularly attractive signal transmission solution in rural areas. As a result, the satellite market is the largest market within emerging markets in terms of total number of units sold, with over 68 million units sold, representing 58% of the total number of units sold in emerging markets in 2011, according to iSuppli. Cable television is often accessed in these markets through local or regional providers who utilize multiple standards that differ by region, resulting in a highly fragmented market. Given the proliferation of cable operators, iSuppli estimates that the cable set-top box market is expected to grow 22% from 2011 to 2016, which is faster than the terrestrial and satellite markets. Terrestrial broadcast is also a highly fragmented market with viewers having free access to limited, non-premium content. Across the satellite, cable and terrestrial markets, individual operators typically have their own specialized system requirements that require customized set-top box solutions.

Overall, television content access rates in emerging markets are lower than those in developed markets. However, a number of powerful trends are driving the rapid growth in television viewership. Increasing disposable household income enables viewers who previously could not afford television access to purchase set-top boxes and access standard programming and premium content. In some emerging markets, such as China, the broadcasting signal of television content is transitioning from analog to digital due to government sponsored programs requiring the replacement or addition of television access equipment. For example, China has a goal to shut down analog TV signals by 2015 and transition to digital TV in most regions. Similar to the U.S. market, analog broadcast in emerging markets is expected to transition completely to digital broadcast to enable more channels and provide high-definition service, driving demand for digital signal receivers. As content quality improves and continues to shift from standard definition to high definition video, viewers in emerging markets are expected to increasingly purchase set-top boxes that can receive and display high definition video content. For example, iSuppli estimates the number of high definition set-top boxes sold in emerging markets to grow by 257% from 2011 to 2016. These trends, which are already prevalent in more advanced television markets, are currently taking hold in emerging markets and are driving an increasing demand for set-top box solutions.

A number of key components within a set-top box drive performance, including the tuner, demodulator and decoder. In order to optimize for superior and robust system performance and deliver cost-efficient solutions to set-top box manufacturers, semiconductor providers are integrating these functions into a single silicon package. The integration process requires significant analog and mixed-signal engineering expertise and deep system level knowledge to ensure maximum functionality while at the same time delivering value to the manufacturer. Given the unique system requirements that individual network operators demand, a high level of collaboration is required between set-top box manufacturers and semiconductor providers. These integrated solutions also require customized embedded software and field application support to ensure proper functionality and system level performance.

The key factor for home entertainment in emerging markets is delivering low cost entertainment to viewers. Set-top box solutions typically found in advanced television markets provide features that are not required by viewers in emerging markets and therefore are priced too high for emerging markets. Cost-effective yet high-performance solutions that can address the demanding operating conditions typically found in emerging market environments are required. According to iSuppli, the market for semiconductors used in set-top boxes targeting emerging markets totaled $828 million in 2011 and is expected to grow at a compound annual growth rate of 10% to 2016. Furthermore, iSuppli estimates that sales of semiconductors with high degrees of integration will outpace the growth of the overall market from 2011 to 2016.

Cloud Computing Market

The proliferation of mobile devices, cloud-based software applications and streaming video pose significant challenges for network data centers. Furthermore, the rate at which data is consumed is growing much faster than the rate of mobile device growth. According to International Data Corporation, or IDC, the number of mobile devices will increase by three times from 2010 to 2015, and the amount of data being consumed will increase six times during that same period. The limited memory and processing speed of mobile devices has led to a majority of content viewed on mobile devices being accessed using cloud computing technology. According to the Cisco Global Cloud Index, global cloud IP traffic will increase from 0.7 zettabytes in 2011 to 4.3 zettabytes in 2016, representing a compound annual growth rate of 44%. According to the Cisco Visual Networking Index, in 2012, 74% of all mobile data traffic was from cloud-based applications and the percentage is projected to increase to 84% in 2017, with overall mobile cloud traffic increasing at a compound annual growth rate of 66%.

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Source: Cisco Visual Networking Index

To meet the rising demands being placed on networks, data center operators have had to increase the number of servers within their facilities. It has been estimated that for every 120 tablets sold, an additional server must be added to handle the traffic generated. To address the expanding demands on servers, next generation server platforms utilize a higher number of CPUs while at the same time the computing performance of the CPUs themselves is also increasing. Higher computing performance for CPUs has generally been accomplished by

increasing the number of cores within the CPU. The maximum number of cores per CPU has increased from one core in 2004 to 16 cores for the latest CPU platform developed by Intel Corporation. We believe that as cloud-based applications increase, additional cores will be added to CPUs to address the need for greater computing performance.

In cloud computing environments where a significant number of memory-intensive applications are simultaneously run on a server, the processing performance of CPUs is limited by the amount of memory available to each CPU. Additional memory capacity is required to ensure servers perform at optimal levels, which is critical for on-demand applications like cloud computing and virtualization. Memory capacity is added to a server through the use of dual in-line memory modules, or DIMMs, which house dynamic random access memory, or DRAM. Memory performance is enhanced through the use of interface devices called memory buffers that efficiently facilitate the rapid flow of data between the CPUs and memory. As the number of cores in the CPU increases, the number of DIMMs required to achieve higher performance also increases. According to IDC, the amount of DRAM per entry level server will increase from 45 gigabits per server in 2013 to 90 gigabits per server in 2017. The need for greater amounts of DRAM to support high performance computing is expected to drive the development of higher capacity DIMMs, where a greater amount of gigabit storage is placed on a single DIMM. According to Gartner, the memory content within the overall server market is expected to grow at a compound annual growth rate of 22% from 2012 to 2016. In addition, based on these estimates, memory is expected to become a larger percentage of the sever semiconductor total addressable market, increasing from 13.4% in 2012 to 21.3% in 2016.

CPU manufacturers create technology platforms that server OEMs use as the basis for their server design. A CPU manufacturer sets the specifications for many of the key components to be used in each generation of its server platforms. In the case of memory interface solutions for DIMMs, CPU manufacturers impose strict guidelines and generally qualify only a few vendors to provide memory interface solutions for their server platforms. With each new server platform released by CPU manufacturers, providers of memory interface solutions must be validated for use on the new platform. The design expertise and continuous investment requirements limit the number of participants in the market for memory interface solutions.

The technical requirements for memory interfaces have also increased as historically memory performance was enhanced by the use of register buffers which only buffered the command and address signals between the CPUs and DIMMs. However, increasing CPU performance and memory capacity now requires data signals to be buffered in addition to command and address signals. DIMMs that include memory interface semiconductors that buffer the address, command and data signals are called load-reduced dual in-line memory modules, or LRDIMMs. These memory buffers create higher degrees of complexity and greater requirements for performance, signal integrity and low power, and they command significantly higher average selling prices than register buffers used in RDIMMs. Based on our knowledge gained through qualification processes with CPU and memory module manufacturers, we believe higher capacity DIMMs with memory densities equal to or above 32 gigabits will require the use of LRDIMM technology to ensure the highest server performance. Furthermore, new server platforms will need to expand the capacity for the number of DIMMs to address the increasing amount of data being transmitted over public and private networks.

Key Requirements for Our Target Markets

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Integration – The ability to combine the functionality of multiple semiconductors onto a single integrated circuit to increase signal integrity and performance, while shrinking component size and lowering overall costs.

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High level of field support – Given the fragmented market of network operators and the disparate nature of system requirements, set-top box manufactures require high levels of field support to ensure high performance across multiple networks.

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Exceptional performance and signal processing in challenging environments – Often in emerging markets, limitations in existing broadcast network infrastructure pose challenges, requiring the signal processing and performance capabilities for semiconductor solutions to be more robust than in developed markets.

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Embedded software and comprehensive system-level solutions – Customized embedded software can significantly improve performance and provide the set-top box manufacturer with a complete solution.

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Cost effective – In emerging markets, set-top boxes must be reasonably priced to ensure significant viewer acceptance, requiring solutions incorporated into set-top boxes to be cost effective.

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Ease of manufacture – By providing comprehensive semiconductor solutions, set-top box manufacturers can simplify their manufacturing processes.

Within the cloud computing market, server OEMs have the following critical needs which must be addressed when identifying memory interface solutions for their products:

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High performance and low power – Solutions must optimize processing speed and accuracy while minimizing energy requirements.

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Signal integrity – The ability to process high frequency signals ensuring an efficient link between the CPU and memory which ultimately drives superior performance.

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Built-in self-test – The ability for memory interface solutions to give customers the capability to efficiently validate their products.

To successfully compete in the home entertainment and cloud computing markets, semiconductor providers must possess strong design capabilities in both analog and mixed-signal technologies as well as system level design expertise. In addition design solutions must effectively meet the foregoing requirements and offer an attractive value proposition for both set-top box manufacturers and server OEMs alike.

Our Competitive Strengths

We believe our key competitive strengths include the following:

High performance low power analog and mixed-signal technology platform. Our technology platform is built upon our foundation of high performance, low power expertise and is comprised of a versatile and comprehensive set of hardware and software building blocks that serve both our home entertainment and cloud computing markets. For example in the cloud computing market, we are currently one of two LRDIMM memory buffer suppliers validated by Intel Corporation for DDR3 technology, the most prevalent industry standard. We believe our memory interface solutions consume significantly less power than the only other Intel Corporation- validated DDR3 LRDIMM offering. We also believe our unique and proprietary low power designs allow us to compete effectively against competitors who may utilize smaller semiconductor process geometries that result in higher engineering and manufacturing costs and longer production cycles. Our low power designs are especially critical for certain applications such as data centers where the cost of energy often exceeds the cost of the server over the lifetime of the server.

Deep technology expertise. Our research and development team of 270 professionals, of which 132 have advanced degrees, has extensive digital signal processing, radio frequency and analog and mixed-signal design experience and includes engineers who have participated in the development of key industry standards such as JEDEC and MPEG. Our world-class management team, which oversees our entire team of engineers, has strong

technical backgrounds and prior experience at leading US-based semiconductor companies. We have internally developed our technology platform and our intellectual property portfolio consists of 80 issued and pending patents. Our core system-level expertise and understanding of system requirements enables us to optimize our product roadmap and identify attractive opportunities. We supplement our research and development engineers with 60 application and field application engineers, who collaborate with our customers to provide comprehensive solutions, including embedded software, that reinforce barriers to entry. Our application expertise allows us to partner with industry leading OEMs to develop solutions for a broad range of home entertainment and cloud computing technologies.

High levels of integration. We believe our integrated solutions result in superior performance and lower material costs for our customers, enhancing our attractive value proposition. Our integrated solutions have significant advantages over competing discrete products such as improving signal integrity, reducing size and ultimately driving superior system performance. Our technology optimizes signal paths from entry to exit, resulting in highly efficient and robust performance. We believe our integrated, comprehensive and customized solutions simplify manufacturing for our customers by reducing the number of discrete components within their systems and may lower overall system costs. For example, we believe we are currently the only semiconductor provider to make an integrated tuner, demodulator and decoder into a single chip in the satellite set-top box solutions market in which we compete.

Close collaboration and relationships with customers and ecosystem participants. We primarily collaborate with our customers and ecosystem participants through high levels of support from our field application engineers. Our extensive customer interaction, combined with our deep understanding of our customers’ needs, fosters customer loyalty and increases visibility within our business. Our close proximity to our customers, which are primarily located in Asia, also provides us with a better understanding of local system requirements and allows us to achieve faster time to market with our solutions. We believe this creates barriers to entry against competitors with significant engineering resources located outside of Asia. Our close collaboration with key ecosystem participants has enabled us to successfully develop high performance memory interface solutions for cloud computing environments, proven by the fact that we are currently one of two LRDIMM memory buffer suppliers validated by Intel Corporation for DDR3 technology.

Broad customer base and attractive market opportunities in home entertainment. We sell our solutions principally through distributors to over 150 set-top box customers worldwide. Our versatile home entertainment solutions allow us to address the satellite, cable and terrestrial television in emerging markets. Our key customers include nine of the ten largest set-top box manufacturers in China who manufacture products optimized for end users in emerging markets. We believe the increase in TV viewership penetration, individual disposable income in emerging markets and demand for greater home entertainment options will continue to expand our addressable market. We believe our end-to-end solutions with customized software and support are critical to our set-top box end customers and create a high degree of customer loyalty. We were a leading provider of semiconductors used in set-top boxes manufactured in China in terms of units sold in 2012, and we had the highest growth rate among set-top box solution providers with 10% or greater market share in China in 2012, according to iSuppli.

Well positioned to capitalize on opportunities in cloud computing. We believe we offer the highest performance and lowest power memory interface solutions for memory-intensive cloud computing applications. We are currently one of two LRDIMM memory buffer suppliers validated by Intel Corporation for DDR3 technology, the most prevalent industry standard. We closely follow current and next generation server and DRAM technology roadmaps to ensure our memory interface solutions promptly meet their qualification windows. We believe we are the only integrated circuit supplier to produce Intel-validated solutions for every generation of memory buffers beginning with DDR2 advanced memory buffers. We have sold our memory interface solutions to Micron, Samsung and SK Hynix, three of the world’s five largest memory module manufacturers as measured by revenue generated in 2011.

Our Growth Strategies

Our goal is to be the market leader in analog and mixed-signal semiconductor solutions for our target markets. Key elements of our growth strategies include:

Invest to maintain technology leadership position across product lines. We intend to continue our focus on retaining and attracting high quality engineering staff and investing in our intellectual property portfolio to further extend our leading high performance, low power technologies in our markets. We believe our new product development initiatives will improve our overall average selling price and introduce increasingly diverse revenue streams. In our home entertainment market, the average selling price of our set-top box solutions has increased as we have integrated more functionality in our solutions. Additionally, we believe our average selling price will increase further as high definition grows in popularity in emerging markets and more complex functionality is added to our solutions. Similarly, in the cloud computing market, the average selling price for our memory interface solutions for LRDIMMs is significantly higher than our historical average selling prices for memory interface solutions for DIMMs. To supplement our existing engineering resources, we intend to opportunistically acquire engineering talent by adding new or complementary technologies, such as our recruitment of the research and development team from Hangzhou Motorola Technologies Limited in June 2011.

Strengthen our relationships with customers and ecosystem participants. We believe our close relationships with our customers and ecosystem participants provide us with strong visibility into their design cycles, allowing us to optimize our engineering resources. We intend to continue to build upon and strengthen our collaborative relationships to increase our customers’ dependence on us and drive greater demand for our solutions. We intend to continue educating set-top box manufacturers, memory module manufacturers and server OEMs on the benefits of our high performance low power solutions to achieve future design wins. We also intend to continue participating in the development of key industry standards to better align our future roadmap.

Expand product offering and market share in emerging home entertainment markets. We will continue to leverage our engineering expertise to increase our market share in the globally fragmented home entertainment market. For example, we intend to continue to increase our presence in emerging markets where advances in television-related standards and infrastructure are driving increased demand for our solutions. We intend to continue to introduce solutions with higher levels of product functionality and integration, similar to our complete solution that combines a tuner, demodulator and decoder, as we seek to significantly increase our total average selling price per set-top box. To date, substantially all of our revenue is derived from solutions servicing the standard definition market. However, as broadcasting technologies and requirements continue to evolve, we believe our business will experience growth within the digital TV market from solutions including demodulators for second generation digital video broadcasting standards for satellite, terrestrial and cable, such as DVB-S2, DVB-T2, DVB-C2, as well as TV tuners. Furthermore, we believe the China Terrestrial Television Broadcast standard, which will be required compliance for all TVs sold in China beginning in 2015, will help drive growth for our solutions. Within the set-top box market, we believe significant opportunities exist to sell more complete solutions compliant with the DVB-T2 standard.

Continue to position ourselves for growth in the cloud computing market. We believe the growth in cloud computing and the resulting strain on existing server infrastructure will continue to drive the need for enhanced memory interface solutions. We intend to provide validated solutions for future generations of memory buffers including DDR4. We believe our memory interface solutions will be able to efficiently address the increase in channels, memory capacity and higher throughput speeds required by DDR4. We intend to further penetrate our existing customer base and collaborate with new memory module partners to increase our revenue. We also intend to further develop our relationship with leading CPU manufacturers and remain aligned with their current and next generation server and DRAM technology roadmaps.

Our Technology Platform

Our technology platform leverages our high performance and low power design expertise, proprietary hardware building blocks and customized software to design analog and mixed-signal solutions for the set-top box

solutions for emerging markets and memory interface solutions for the cloud computing markets. Additionally, we provide a high level of field application support to ensure high performance of our solutions. In the home entertainment market, our technology platform enables us to design highly integrated end-to-end solutions for set-top boxes used in the emerging markets. In the cloud computing market, our technology platform has enabled us to produce memory interface solutions that improve server performance while minimizing energy costs.

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The foundation of our technology platform is our analog and mixed-signal design capabilities, which are used to optimize our solutions for high performance and low power. This expertise is combined with a number of internally developed building blocks that are used in the development of our high performance, low power semiconductor solutions. The use of internally developed building blocks provides us with an advantage over competitors who are required to license third party solutions which increases their costs. Furthermore, the use of internally developed building blocks allows us to maximize the integration of multiple functionalities into our solutions. Our proprietary building blocks include analog and radio frequency front end solutions, digital signal processors, SoC technologies, high-speed interfaces and memory buffers. Additionally we develop customized software to increase the functionality of our solutions within our customers’ products. Finally, to ensure optimal performance and build customer loyalty, we provide extensive field application support to our customers.

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Our Solutions

We design, develop and market a range of analog and mixed-signal semiconductor solutions for set-top boxes targeting emerging markets as well as memory interface solutions for the cloud computing markets. In 2012, sales of our set-top box and memory interface solutions accounted for 94% and 6%, respectively, of our total revenue. We expect sales of memory interface solutions to grow as a percentage of our total revenue in 2013 and beyond.

Set-Top Box Solutions

We market a range of high performance and multi-standard compliant HDTV and SDTV semiconductor solutions for set-top boxes, including tuners, demodulators and decoders as well as integrated end-to-end solutions with customized software and support. We provide an integrated end-to-end solution by combining our RF and analog hardware design and customized software. Our integrated solutions can combine tuner, demodulator and decoding technology in a single semiconductor solution. We support our solutions with our extensive team of field application engineers who are geographically close to our customers and work extensively to deepen our customer relationships. In 2012, a majority of our set-top box solutions revenue was generated from sales of integrated end-to-end solutions. We offer set-top box solutions for satellite, cable and terrestrial broadcasts, with a particular strength in satellite and cable set-top boxes aimed at emerging markets. While solutions for the satellite market have contributed, and we expect will continue to contribute, a majority of our set-top box solutions revenue, we expect solutions for the cable market to contribute to our revenue growth over the next several years.

Our tuner and demodulator solutions are compatible with both SDTV and HDTV signals. We currently market our decoder solutions for SDTV, and plan to launch an HDTV decoder solution in 2013. In 2010, we launched what we believe was the first integrated DVB-S tuner/demodulator/decoder solution in the home entertainment market in which we compete. To date, substantially all of our set-top box solution revenue has been generated from the SDTV market. We currently offer ten set-top box solutions, supporting the following broadcast standards:

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Memory Interface Solutions

By combining our expertise in high performance, low power mixed-signal semiconductor design technologies, we have designed and developed advanced memory interface solutions that provide ultra-low power consumption and high performance for use in data center servers. We believe our memory interface solutions can achieve better signal integrity than our competitors in our market, which allow our solutions to efficiently operate at higher speeds thereby increasing memory capacity and improving server performance. Additionally, our built-in self-test capabilities help memory module manufacturers and server OEMs to rapidly validate memory performance.

Our current memory interface solutions include register buffers and memory buffers for use in memory modules compatible with DDR2 and DDR3 DRAM. All our memory interface solutions for DDR2 and DDR3 are JEDEC standard-compliant, and have passed component- and system-level validation by Intel Corporation and other industry-leading companies. We are working closely with JEDEC and other key ecosystem participants, including leading CPU and memory module manufacturers, to develop the first generation of DDR4-compliant memory interface solutions, including a registering clock driver and a data buffer.

Our memory interface solutions that are currently in volume production include:


Standards/Applications	Speed	Intel/OEM Validation
Register	1600 Mbps and 2133 Mbps	ü
Memory Buffer - Generation 2	1600 Mbps and 1866 Mbps	ü

Our memory interface solutions that are sampling include:


Standards/Applications	Speed	Intel/OEM Validation
Register	2400 Mbps	In process
Data Buffer	2400 Mbps	In process

Sales and Distribution

In line with general market practice, we typically sell our set-top box solutions to our end customers through distributors. Once our end customers assemble various components into set-top boxes, the set-top boxes are then sold to set-top box retailers or cable network operators. Our set-top box solutions have been incorporated in set-top boxes sold globally to retail outlets and cable network operators in China, Southeast Asia, India, the Middle East, Africa and other emerging market geographies. The diagram below shows how our set-top box solutions are sold to our customers and reach network operators and retailers:

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While our set-top box solutions are typically sold through distributors, we collaborate with our customers and ecosystem participants through high levels of support from our field application engineers.

Sales through our distributors accounted for 82% of our total revenue in 2012. Sales through our three largest distributors, LQW Technology Company Limited, Qinuo International Co., Ltd. and China Electronic Appliance Shenzhen Co., Ltd., accounted for 50%, 18% and 9%, respectively, of our total revenue in 2012. We typically enter into distribution agreements with our distributors, with each distributor covering a defined customer base and/or geographic area. In addition, our distribution agreements are typically negotiated and entered into on an annual basis and prohibit the distributor from selling products or solutions competing with ours. Our distributors primarily handle the logistics and payment in connection with our sales for us, but we maintain direct relationships, both pre- and post-sale with the end customers.

We typically sell our memory interface solutions directly to memory module manufacturers.

End Customers

We sell our set-top box solutions, directly and through distributors, to end customers who are manufacturers of set-top boxes or televisions in China and internationally and to cable network operators in China. Our set-top

box solutions have been shipped to more than 150 end customers, including nine of the ten largest set-top box manufacturers in China as measured by units sold in 2012. In 2012, only one of our set-top box end customers accounted for more than 10% of our total revenue for the year, and our five largest end customers accounted for in aggregate 41% of our total revenue for the year.

We sell our memory interface solutions to leading memory module manufacturers globally. We have sold our memory interface solutions to Micron Technology, Inc., Samsung and SK Hynix Semiconductor, Inc.

Sales to end customers in Asian countries accounted for 96%, 97% and 94% of our total revenue in 2010, 2011 and 2012, respectively. Although our end customers are primarily manufacturers located in Asia, our integrated circuits are incorporated into finished products sold globally.

Marketing and Customer Support

We work directly with our end customers to provide them with application-specific product information for their system design, engineering and procurement groups. Our technical marketing, sales and field application engineers actively engage potential customers during their design processes to introduce them to our product capabilities and target applications. We design solutions in an effort to meet the increasingly complex and specific design requirements of our end customers.

We work with our set-top box end customers to design integrated solutions, including both hardware and software applications, to maximize the performance and efficiency of their set-top boxes. When we provide integrated, customized solutions, we typically undertake a multi-month sales and development process with the end customer’s system designers and management. Volume production can begin from several months to up to one year after an end customer confirms its decision to use our solutions, depending on the complexity of the end customer’s product and other factors. Once one of our solutions is incorporated into an end customer’s design, it is likely to be used for the life cycle of the customer’s product. We believe this to be the case because a redesign would generally be time-consuming and expensive. We support our solutions with our extensive team of field application engineers who are geographically close to our end customers and work extensively to deepen our relationships with them. Moreover, our extensive customer interaction, combined with our deep understanding of our end customers’ needs, fosters customer loyalty and increases visibility within our business.

In the cloud computing market, our sales and marketing team maintains relationships with technology leaders, which enables us to anticipate and solve next generation challenges facing our customers. We also participate actively in setting industry standards with organizations such as JEDEC to have representation in the definition of future market trends, thereby helping us to maintain our leadership position in the memory interface market.

Research and Development

We believe that our future success depends on our ability to introduce enhancements to our existing products and to develop new products as well as continue to develop and enhance our technology platform to meet the rapidly changing needs and requirements of our end customers. For our set-top box solution offerings, we are currently focused on enhancing our existing integrated solutions to serve HDTV applications. For our memory interface solution offerings, we are currently focused on DDR4 memory interface solutions. We have devoted substantial resources to our research and development activities, and have assembled a team of highly qualified semiconductor and embedded software design engineers who have strong design expertise in high performance and low power analog and mixed-signal semiconductors and related hardware and software application design.

Our engineering design teams are located in Shanghai, Suzhou and Hangzhou in China and in Taipei and Hsinchu in Taiwan. As of December 31, 2012, we had 270 employees in our research and development

department, representing approximately 65% of our total employees. Nearly half of our engineers hold advanced degrees. These engineers and designers are involved in advancing our core technologies, as well as applying these core technologies to our product development activities across a number of areas including consumer electronics, multi-media, telecommunications transport systems, enterprise networking equipment, data centers and enterprise servers, storage platforms and test and measurement systems. In 2010, 2011 and 2012, our research and development expenses were $11.1 million, $13.7 million and $17.6 million, respectively.

All of our currently offered solutions and substantially all of the building blocks comprising our technology platform have been designed in-house with core technology based on our internally developed intellectual property. While we use commercially available simulation tools to predict overall system performance based on the functionality, architecture and design of our product, with the exception of third-party licensed CPU, we do not license any material intellectual property from third parties. After our product is manufactured, we perform system measurements and refine our design to improve the product’s performance and predictive ability. As a result, our design methodology has improved over time and we have been able to very accurately predict overall system performance prior to fabricating a part.

Our research and development team works closely with our sales and marketing and manufacturing teams to develop new and commercially attractive products. We have completed our development and have begun customer qualification for a high-definition decoder. We currently expect to commence volume production of this set-top box solution in 2013. We are also currently in the advanced stages of development of our DDR4 register and memory buffers. We are working with key industry ecosystem participants, including JEDEC, to develop these DDR4 memory interface solutions, and we currently expect to begin volume production of this product by the end of 2014.

Manufacturing

We operate a fabless business model and use third-party foundries and assembly and test manufacturing contractors to manufacture, assemble and test our semiconductor products. For quality control purposes, we also inspect and test the final products manufactured by the third party suppliers in our laboratories by way of sampling before the products are delivered to our distributors or customers. This outsourced manufacturing approach allows us to focus our resources on the design, development and marketing of our solutions and reduces overhead and our exposure to cyclicality risks. In addition, we believe outsourcing manufacturing and assembly activities provides us the flexibility needed to respond to new market opportunities, simplifies our operations and significantly reduces our capital requirements.

We subject our third-party manufacturing contractors to qualification requirements in order to meet the high quality and reliability standards required of our products. We carefully qualify each of our partners and processes before applying the technology to our products. Our engineers work closely with our foundries and other contractors to increase yield, lower manufacturing costs and improve product quality.

Wafer Fabrication. We currently maintain active relationships with a number of world-class semiconductor foundries. We choose the semiconductor process and foundry that we believe provides the best combination of performance and cost-effectiveness attributes for any particular product. For each of our products, we typically utilize a single foundry for semiconductor wafer production. Nonetheless, to ensure adequate wafer supply, we also take into account technologies of other foundries during our design process to ensure that the production of our products can be transferred to other backup foundries if needed. Our principal foundries are Semiconductor Manufacturing International Corporation in China, Fujitsu Semiconductor Limited in Japan and United Microelectronics Corporation in Taiwan.

Packaging, Assembly and Testing. Upon the completion of processing at the foundry, the finished wafers are shipped to our third-party assemblers for packaging, assembly and testing. Currently, our principal packaging,

assembly and testing contractors are STATS ChipPAC Ltd. in Singapore and Siliconware Precision Industries Co., Ltd. in Taiwan. The products are then shipped to us, where we also perform testing in our Shanghai, Suzhou and Hangzhou facilities by way of sampling before delivery to our end customers.

We are committed to maintaining the highest level of quality in our products. Our objective is that our products meet all of our customer requirements, are delivered on-time and function reliably throughout their useful lives. As of the date of this prospectus, we have lowered our defective parts per million, or DPPM, to below 100. In addition, we have achieved an on-time delivery rate of more than 98.5%. As part of our total quality assurance program, our quality management system has been certified to ISO 9001:2008 standards in 2006. Our manufacturing partners are also ISO 9001 certified.

Competition

The markets in which we operate are highly competitive. We compete with numerous semiconductor companies, some of which have greater financial and other resources with which to pursue technology development, product design, manufacturing, marketing, sales and distribution of their products. Currently, our competitors range from large, international companies offering a wide range of semiconductor solutions to smaller companies specializing in set-top box or memory interface solutions. Our primary competitors in the set-top box market include semiconductor companies that sell to emerging markets such as HiSilicon Technologies Co., Ltd., ALi Corporation, RDA Microelectronics, Inc., Airoha Technology Corporation and STMicroelectronics NV, as well as smaller semiconductor design companies based in China. Our competitors in the memory interface market include Inphi Corporation, Integrated Device Technology, Inc. and Texas Instruments Inc.

Our ability to compete successfully depends on elements both within and outside of our control, including industry and general economic trends. Intense competition could result in price pressure, reduced profitability and loss of market share, any of which could materially and adversely affect our business, revenue and operating results. Moreover, our markets are characterized by evolving technologies, industry standards and customer preferences.

We compete or plan to compete in different target markets to various degrees on the basis of a number of principal competitive factors, including but not limited to:

•

our ability to offer integrated, high performance and low power semiconductor solutions that differentiate us from our competitors;

•

our success in identifying and developing new and emerging technologies, solutions and markets;

•

the performance and cost-effectiveness of our solutions;

•

our ability to provide innovative and high-quality functionality and features, including integrated solutions, and superior service;

•

our ability to recruit high-level talent, including engineers and chip designers;

•

our ability to maintain and grow our relationship with key industry players; and

•

our ability to protect our intellectual property.

Specifically, in the home entertainment market we compete primarily on the basis of our customization and field application support capabilities, level of integration of our solutions, performance and price. In the cloud computing market, we primarily compete on the basis of high performance, power efficiency and our track record of achieving validation for our memory solutions with leading CPU manufacturers. We believe we compete favorably with respect to these factors.

Intellectual Property

We rely on a combination of intellectual property rights, including patents, trade secrets, copyrights and trademarks, and contractual protections, to protect our core technology and intellectual property. As of March 31, 2013, among other jurisdictions, we have 19 and 17 issued patents in the United States and China, respectively, and 15 and 29 patent applications pending in the United States and China, respectively. Among these 80 issued and pending patents, 40 of them relate to technology and design features of our set-top box solutions, 37 of them relate to technology and design features of our memory interface solutions and three are related to Wi-Fi technology. There is no assurance that our patent applications will result in the issuance of any patents.

We generally control access to and use of our confidential information through the use of internal and external controls, including contractual protections with employees, contractors and customers. We rely in part on the PRC, United States and international copyright laws to protect our design work. All employees and consultants are required to execute confidentiality agreements in connection with their employment and consulting relationships with us. We also require them to agree to disclose and assign to us all inventions conceived or made in connection with the employment or consulting relationship.

Legal Proceedings

We have not been, and are not currently a party to, nor are we aware of, any legal proceedings, investigation or claim which, in the opinion of our management, is likely to materially and adversely affect our business, financial condition or results of operations. We may become subject to legal proceedings, investigations and claims incidental to the conduct of our business from time to time.

Employees

As of December 31, 2012, we had 418 employees, the significant majority of which are based in China or Taiwan. Among the 418 employees, 270 were in research and development, 84 were in sales and marketing, 22 were in operations and 42 were in general and administrative. Montage Technology (Shanghai) Co., Ltd. maintains a labor union and entered into a collective bargaining agreement with its employees in June 5, 2012 pursuant to PRC law. We consider relations with our employees to be good and have never experienced a work stoppage.

Facilities

We currently lease our principal executive offices in Shanghai under two lease agreements totaling 53,677 square feet of office space in which the lease agreements expire on March 31, 2013 and December 31, 2014, respectively. We also lease 11,534 square feet and 6,427 square feet in Suzhou and Hangzhou, respectively, for our operations in China. The current leases are expected to expire on May 19, 2013 and May 31, 2014, respectively. Our U.S. subsidiary currently leases 2,237 square feet of office space in San Jose, California under a lease that expires on September 30, 2013. Our Taiwan subsidiary currently leases office space of 11,302 and 4,258 square feet of office space in Taipei and Hsinchu, Taiwan, respectively. The current leases are set to expire on October 31, 2013 and November 30, 2015, respectively. We believe that our current facilities are sufficient to meet our needs for the foreseeable future. In addition, we expect to renew our existing lease agreements shortly before their respective expiration dates and do not foresee any obstacles in the renewal of relevant agreements.

MANAGEMENT

Executive Officers, Directors and Significant Employees

Below is a list of our executive officers, directors and significant employees as of March 31, 2013, their respective ages and positions and a brief account of the business experience of each of them.


Name	Age		Position
Executive Officers and Directors:
Howard C. Yang		55	Chairman of the Board and Chief Executive Officer
Stephen Tai		42	Director and President
Mark Voll		58	Chief Financial Officer
Leechung Yiu		57	Chief Technology Officer, Vice President
Bill Franciscovich		53	Vice President, Worldwide Sales
Jack Gu		56	Vice President, China Sales
Kenneth Chew		53	Vice President, Operations
Cathy Yen⁽²⁾⁽³⁾		48	Director
Jung-Kung (Jackie) Yang⁽¹⁾⁽²⁾		46	Director
Edward Way⁽¹⁾		67	Director
Charles G. Sodini⁽¹⁾⁽³⁾		61	Director

Significant Employees:
Cheng Tie Chen		57	Vice President, Engineering (SoC Products)
Shawn Si		46	Vice President, Engineering (STB Front-end Products)
Phoebe Su		40	Vice President, Finance and Administration

(1)	Member of Audit Committee

(2)	Member of Compensation Committee

(3)	Member of Nominations Committee

Dr. Howard C. Yang is one of our founders and has served as our Chairman of the board of directors and Chief Executive Officer since our inception. Prior to co-founding us, he was Vice President at Integrated Device Technology Inc., an analog and digital technology company, from 2001 to 2004. In 1997, Dr. Yang co-founded Newave Semiconductor Corp., an integrated circuit design company located in China. In 2001, Newave merged into Integrated Device Technology Inc., which was ranked China’s top ten mergers of the year by China Merger and Acquisitions Yearbook (2002). Prior to Newave, Dr. Yang held various positions at Shanghai Belling in Shanghai as well as National Semiconductor Corp., Chips and Technology Inc. and Pericom Semiconductor Corp. in Silicon Valley. He has been an IEEE Fellow since January 2010 and was selected into the National “Thousand Talents Program,” a program organized by the Central Coordination Committee on the Recruitment of Talents in China to recruit top overseas scientists and back to China. He has received several awards for his work, including IEEE CAS Industrial Pioneer Award and Magnolia Gold Award from the Shanghai municipal government for his pioneering contributions in China’s integrated circuit design industry. Dr. Yang holds both master’s and Ph.D. degrees in Electrical Engineering from Oregon State University. We believe that Dr. Yang should serve as a member of our board of directors due to the perspective and experience he brings as one of our founders, Chairman, and CEO, and his many years of experience in the semiconductor industry. Dr. Yang was designated to serve as a member of our board of directors by our ordinary shareholders.

Stephen Tai is one of our founders and has served as a member of our board of directors and our President since our inception. Mr. Tai has over 18 years of experience in semiconductor architecture, design and engineering management. Prior to co-founding us, Mr. Tai was the Director of Engineering Research and Development and a founding team member at Marvell Technology Group Ltd., a semiconductor company, from 1995 to 2003. Prior to Marvell, he was a senior design engineer at Sigmax Technology, a CD-ROM controller semiconductor company, from 1994 to 1995. Mr. Tai holds a master’s degree in Electrical Engineering from

Stanford University and a bachelor’s degree in Electrical and Computer Engineering from The Johns Hopkins University. We believe that Mr. Tai should serve as a member of our board of directors due to the perspective and experience he brings as one of our founders and his years of experience in the semiconductor industry. Mr. Tai was designated to serve as a member of our board of directors by our ordinary shareholders.

Mark Voll has served as our Chief Financial Officer since June 2012. Mr. Voll has more than 25 years of experience in finance and accounting and served as Chief Financial Officer in a number of public and private high technology companies. Prior to joining us, Mr. Voll served as Chief Financial Officer of Invensense, Inc., a provider of MEMS devices for consumer electronics products, from June 2010 to January 2011. Prior to Invensense, Mr. Voll was Chief Financial Officer of Techwell, Inc., an analog semiconductor company, from November 2005 to June 2010. Prior to that, he served as Chief Financial Officer for Monolithic System Technology, Inc., an intellectual property semiconductor company, from June 2002 to November 2005. Mr. Voll holds a bachelor’s degree in Business Administration from Providence College.

Dr. Leechung Yiu joined us in October 2008 as Vice President and Chief Technical Officer. Dr. Yiu has over 25 years of product development experience in the integrated circuit design industry in a broad range of areas including storage, communication and multimedia applications. Before joining us, Dr. Yiu served as Vice President of Engineering at Trident Microsystems, Inc., a digital TV chipset manufacturer, from 2007 to 2008. Dr. Yiu also served as VP of Engineering at Shanghai Huahong International, an integrated device manufacturer, from 2005 to 2007, Sunext Technology Company Limited, a supplier of semiconductor products for Optical Disc Drive applications, from 2003 to 2005 and Marvell Semiconductor, Inc., a fabless semiconductor company, from 1999 to 2003. In 1997, Dr. Yiu co-founded Newave Semiconductor Corp., an integrated circuit design company in China, and served as its Vice President of Engineering from 1997 to 2001. Dr. Yiu received both Ph.D. and master’s degrees in Electrical Engineering from University of California at Berkeley, and a bachelor’s degree in Electrical Engineering from National Taiwan University.

Bill Franciscovich joined us in January 2007 as a Vice President, Worldwide Sales. Mr. Franciscovich has over 30 years of experience in semiconductor sales, marketing and manufacturing. Prior to joining us, Mr. Franciscovich served as Vice President of Worldwide Sales at Power-One Inc., a provider of power conversion and power management solutions, from 2004 to 2006. At Integrated Device Technology, Inc., or IDT, an analog and digital technology company Mr. Franciscovich held various executive sales, product-line management and marketing positions from 1986 to 2003. Prior to IDT, Mr. Franciscovich held sales positions with Zeus Electronics (now a division of Arrow Electronics, Inc.) , an electronic components supplier, from 1984 to 1986 and Motorola Semiconductor, a semiconductor company, from 1982 to 1984. Mr. Franciscovich holds a bachelor’s in Materials Science Engineering from Cornell University.

Jack Gu joined us in February 2006 as Vice President, China Sales. Mr. Gu has over 25 years of experience in sales, manufacturing and engineering management in the electronics industry. Prior to joining us, he was a member of the board of directors and Vice President at CEC-View Company Limited in Beijing, a video display company, from 2005 to 2006. Prior to CEC-View, he was the Vice President of Marketing & Sales at Shanghai Belling Co., Ltd, an integrated circuit IDM company, from 1998 to 2005. Mr. Gu holds a master’s degree in Management Science and Engineering from Shanghai Jiaotong University.

Kenneth Chew joined us in March 2005 as a Vice President, Operations. Mr. Chew has over 20 years of experience in semiconductor manufacturing and engineering project management. Prior to joining us, he was the Director of Operations and founding team member at Marvell Asia Pte Ltd, a semiconductor company and subsidiary of Marvell Technology Group Ltd., in Singapore, from 1997 to 2005. Prior to Marvell, he held various engineering manufacturing and project management positions at Adaptec Singapore, a semiconductor company, from 1996 to 1997, and he was also a section leader in product engineering and test development engineering at Silicon Systems Singapore, a semiconductor company, from 1990 to 1996. Mr. Chew holds a master’s degree in Electrical Engineering from Nanyang Technological University of Singapore and a bachelor’s degree in Electronics and Computer Engineering from University of Iowa.

Cathy Yen has served as a member of our board of directors since June 2006. Ms. Yen has served as a Partner of AsiaVest Partners, TCW/YFY Ltd., a venture capital firm, since 2000. Prior to joining AsiaVest, Ms. Yen was with Fortune Capital, as Senior Manager from 1999 to 2000, Crimson Ventures/China Trust Bank, as Vice President, from 1997 to 1999 and Global Financial Services, as Vice President, from 1990 to 1997. Ms. Yen has served as a director of Anyka Technologies Corporation, a fabless integrated circuit design company, since 2005, Sundia MediTech Group, Ltd., a pharmaceutical and biotech research and development outsourcing company, since 2007 and Dynamic Advertising Channels Holding Ltd., an outdoor media communications agency, since 2011. Ms. Yen was previously a director of Chipmore Technology Corporation Limited from 2003 to 2007. Ms. Yen holds master’s degree in Business Administration and a bachelor’s degree in Economics from National Taiwan University. We believe that Ms. Yen should serve as a member of our board of directors due to her accounting and private equity investing experience. Ms. Yen was designated to serve as a member of our board of directors by our Series B-1 and Series B-2 preferred shareholders.

Jung-Kung (Jackie) Yang has served as a member of our board of directors since September 2007. In April 2007, Mr. Yang co-founded TransLink Capital, a venture capital firm, and currently serves as a Managing Director. Before starting TransLink, Mr. Yang was Senior Vice President at UMC Capital, the venture capital arm of semiconductor foundry United Microelectronics Corporation, from 2002 to 2007. Mr. Yang has served as a director of Aicent, Inc., a mobile data service provider, since August 2002, Parade Technologies LTD, a fabless semiconductor company, since December 2005, SiFotonics Technologies Co., Ltd., a fabless photonic integrated circuit company, since November 2009, Winking Entertainment LTD., an online game development and outsourcing company, since July 2011, Global Communication Semiconductors, LLC, a semiconductor wafer foundry, since March 2012, Adwo, a mobile ad platform in China, since June 2012, and Memoright Corporation, a provider of solid state drive solutions and support, since November 2012. Mr. Yang also previously served as a director for SandForce, a fabless semiconductor company, from October 2009 to December 2011. Mr. Yang received his master’s degree in Business Administration from University of Missouri, Columbia and a bachelor’s degree in Mechanical Engineering from National Tsinghua University, Taiwan. We believe that Mr. Yang should serve as a member of our board of directors due to his many years of experience as a private equity investor and his engineering background. Mr. Yang was designated to serve as a member of our board of directors by our Series B-1 and Series B-2 preferred shareholders.

Edward Way has served as a member of our board of directors since August 2012. Prior to joining us, Mr. Way served as Chief Executive Officer Emeritus from June 2006 to May 2007 and Managing Partner and Chief Executive Officer of Deloitte & Touche (Taiwan), a registered public accounting firm, from June 2003 to May 2006. Mr. Way is a certified public accountant and holds a master’s degree in Business Administration from the University of Georgia and a bachelor’s degree in accounting from Soochow University, Taiwan. We believe that Mr. Way should serve as a member of our board of directors due to his many years of accounting experience. Mr. Way was designated to serve as a member of our board of directors by our preferred shareholders.

Dr. Charles Sodini has served as member of our board of directors since February 2013. Since 1983, Dr. Sodini has been a member of the faculty at the Massachusetts Institute of Technology, where he is currently the LeBel Professor of Electrical Engineering. From 1974 to 1982, Dr. Sodini was a Member of the Technical Staff at Hewlett-Packard. Dr. Sodini was also a co-founder of SMaL Camera Technologies, a leader in imaging technology for consumer digital still cameras and machine vision cameras for automotive applications. Dr. Sodini received a master’s degree and a Ph.D. in electrical engineering from the University of California, Berkeley and a bachelor’s degree in electrical engineering from Purdue University. We believe that Dr. Sodini should serve as a member of our board of directors due to his many years of industry and academic experience. Mr. Sodini was designated to serve as a member of our board of directors by our preferred shareholders.

Dr. Cheng Tie Chen joined us in March 2011 as a Vice President, Engineering (SoC Products). Dr. Chen has more than 25 years of industrial research and development experience in digital integrated circuit development and video applications. Prior to joining us, Dr. Chen was a Vice President of Engineering at Trident Microsystems, Inc., a DTV chips manufacturer, from July 2006 to February 2011, responsible for digital TV

integrated circuit development. Prior to Trident, Dr. Chen was a Vice President of Engineering at Magnum Semiconductor Inc., a provider of silicon, modules, software and IP for the professional broadcast infrastructure market, from 2005 to 2006 and Cirrus Logic, Inc., an analog and mixed-signal integrated circuit supplier, from 2001 to 2005. In 1996, Dr. Chen joined Stream Machine Company (which was acquired by Cirrus Logic), a supplier of MPEG-2 video recording technology, as Technology Founder and VP of Engineering. Dr. Chen also held various research and engineering positions at Eastman Kodak Research Laboratories, an industrial research organization, from 1984 to 1987 and Bell Communications Research, from 1987 to 1996. Dr. Chen received his master’s and Ph.D. degrees in Electrical Engineering from University of Pennsylvania, and bachelor’s degree in Electrical Engineering from National Taiwan University.

Shawn Si is one of our founders and has served as a Vice President of Engineering STB Front-end Products since 2010, having previously served as Engineering Director since our inception. He has over 18 years of experience in developing high-performance analog, RF and mixed-signal semiconductor products. Prior to joining us, Mr. Si was served as senior Member of the Technical Staff at Bigbear Networks, Inc. (acquired by Fairchild Semiconductor International, Inc.), a provider of transceivers and electronic dispersion compensation solutions for optical networks, from 2001 to 2004, and a senior Member of Technical Staff of Datapath Systems Inc. (acquired by LSI Logic), a communications chip company, from 1994 to 2000. Mr. Si received his master’s degree in Electrical Engineering from University of Hawaii and a bachelor’s degree in Electrical Engineering from Zhejiang University, China.

Phoebe Su joined us in October 2007 as a Vice President, Finance and Administration. She has more than 15 years of experience in finance and accounting. Before joining us, she was Finance Controller of Dow Corning China, a provider of silicon products and services, from 2003 to 2007. Prior to that, she had worked at PricewaterhouseCoopers Zhong Tian CPAs Limited Company, a registered public accounting firm, as an Audit Manager from 1995 to 2003. She holds a bachelor’s degree in Management Information System from Fudan University.

Election of Officers

Our executive officers are elected by, and serve at the discretion of, our board of directors. There are no family relationships among any of our directors, executive officers or significant employees.

Board Composition

Our business and affairs are managed under the direction of our board of directors. Subject to any rights applicable to any then outstanding preferred share, our board of directors will consist of a number of directors to be fixed from time to time by resolution adopted by the affirmative vote of a majority of the total directors then in office.

Upon the completion of this offering, we will have a board of seven directors divided into class A, class B and class C directors. Initially, the class A directors will be , and , the class B directors will be and , and the class C directors will be and . Each class of directors will stand for election every year at our annual general meeting of shareholders on a rotating basis, beginning with our class A directors at the first annual general meeting of our shareholders following the completion of this offering.

Director Independence

The rules of the NASDAQ Stock Market LLC, or NASDAQ, generally require that a majority of the members of a listed company’s board of directors be independent within specified periods following the completion of an initial public offering. In addition, the listing rules generally require that, subject to specified exceptions, each member of a listed company’s audit, compensation, and governance committees be independent.

Audit committee members must also satisfy the independence criteria set forth in Rule 10A-3 under the Securities Exchange Act of 1934, as amended, or the Exchange Act. In order to be considered independent for purposes of Rule 10A-3, a member of an audit committee of a listed company may not, other than in his or her capacity as a member of the audit committee, the board of directors, or any other board committee: accept, directly or indirectly, any consulting, advisory, or other compensatory fee from the listed company or any of its subsidiaries; or be an affiliated person of the listed company or any of its subsidiaries.

Our board of directors has determined that none of our non-employee directors has a relationship that would interfere with the exercise of independent judgment in carrying out the responsibilities of a director and that each of these directors is “independent” as that term is defined under the rules of the NASDAQ.

Board Committees

Our board of directors has established an audit committee, a compensation committee and a nominations committee. The composition and responsibilities of each committee are described below. Members will serve on these committees until their resignation or until otherwise determined by our board of directors. In the future, our board of directors may establish other committees, as it deems appropriate, to assist with its responsibilities.

Audit Committee

Our audit committee consists of Edward Way, Jung-Kung (Jackie) Yang and Charles G. Sodini. Edward Way is the chairperson of our audit committee. Our board of directors has affirmatively determined that each member of our audit committee meet the definition of an independent director under applicable SEC and NASDAQ listing rules. In addition, our board of directors has determined that Edward Way qualifies as an “audit committee financial expert,” as such term is defined in the rules and regulations of the SEC.

Our audit committee is responsible for, among other things:

•

appointing the independent auditor;

•

pre-approving all auditing and non-auditing services permitted to be performed by the independent auditor;

•

setting clear hiring policies for employees and former employees of the independent auditor;

•

reviewing with the independent auditor any audit problems or difficulties and management’s responses;

•

reviewing and approving all related party transactions, as defined under applicable U.S. securities laws and regulations;

•

reviewing and discussing the annual audited financial statements with management and the independent auditor;

•

reviewing and discussing with management and the independent auditor major issues regarding accounting principles and financial statement presentations;

•

reviewing reports prepared by management relating to significant financial reporting issues and judgments;

•

discussing earnings press releases with management, as well as financial information and earnings guidance provided to analysts and rating agencies;

•

reviewing with management and the independent auditor the effect of regulatory and accounting initiatives, as well as off-balance sheet structures, on our financial statements;

•

discussing policies with respect to risk assessment and risk management with management, internal auditors and the independent auditor;

•

timely reviewing reports from management regarding all critical accounting policies and practices to be used by our company, all alternative treatments of financial information within U.S. GAAP that have been discussed with management and all other material written communications between the independent auditor and management;

•

establishing procedures for the receipt, retention and treatment of complaints received from our employees regarding accounting, internal accounting controls or auditing matters, and the confidential, anonymous submission by our employees of concerns regarding questionable accounting or auditing matters;

•

annually reviewing and reassessing the adequacy of our audit committee charter;

•

such other matters that are specifically delegated to our audit committee by our board of directors from time to time;

•

meeting separately, periodically, with management, internal auditors and the independent auditor; and

•

reporting regularly to the full board of directors.

Compensation Committee

Our compensation committee currently consists of Jung-Kung (Jackie) Yang, Cathy Yen and . Jung-Kung (Jackie) Yang is the chairperson of our compensation committee. Our board of directors has affirmatively determined that each member of our compensation committee meets the definition of an independent director under NASDAQ listing rules.

The compensation committee is responsible for, among other things:

•

reviewing and approving our overall compensation policies;

•

reviewing and approving corporate goals and objectives relevant to the compensation of our chief executive officer, evaluating our chief executive officer’s performance in light of those goals and objectives, reporting the results of such evaluation to the board of directors and determining our chief executive officer’s compensation level based on this evaluation;

•

determining the compensation level of our other executive officers;

•

making recommendations to the board of directors with respect to our incentive-compensation plan and equity-based compensation plans;

•

administering our equity-based compensation plans in accordance with the terms thereof; and

•

such other matters that are specifically delegated to the compensation committee by our board of directors from time to time.

Nominations Committee

Our nominations committee currently consists of Cathy Yen, Charles G. Sodini and . is the chairperson of our nominations committee. Our board of directors has affirmatively determined that each member of our nominations committee meets the definition of an independent director under the NASDAQ listing rules.

The nominations committee is responsible for, among other things:

•

seeking and evaluating qualified individuals to become new directors as needed;

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reviewing and making recommendations to the board of directors regarding the independence and suitability of each board member for continued service; and

•

evaluating the nature, structure and composition of other board committees.

Compensation Committee Interlocks and Insider Participation

None of the members of our compensation committee is an officer or employee of our company, nor have they ever been an officer or employee of our company. None of the executive officers of our company has served on the compensation committee, or any other committee serving an equivalent function, of any entity that has one or more executive officers serving as members of our board of directors or our compensation committee.

Code of Business Conduct and Ethics

Our code of business conduct and ethics applies to all of our employees, officers and directors, including those officers responsible for financial reporting. Our code of business conduct and ethics addresses, among other things, competition and fair dealing, conflicts of interest, financial matters and external reporting, company funds and assets, confidentiality and corporate opportunity requirements and the process for reporting violations of the code of business conduct and ethics, employee misconduct, conflicts of interest or other violations.

Role of the Board in Risk Oversight

One of the key functions of our board of directors is informed oversight of our risk management process. The board of directors does not have a standing risk management committee, but rather administers this oversight function directly through the board of directors as a whole, as well as through its standing committees that address risks inherent in their respective areas of oversight. In particular, our board of directors is responsible for monitoring and assessing strategic risk exposure. Our audit committee has the responsibility to consider and discuss our major financial risk exposures and the steps our management has taken to monitor and control these exposures, including guidelines and policies to govern the process by which risk assessment and management is undertaken. The audit committee also monitors compliance with legal and regulatory requirements, in addition to oversight of the performance of our external audit function. Our nominations committee monitors the effectiveness of our corporate governance guidelines. Our compensation committee assesses and monitors whether any of our compensation policies and programs has the potential to encourage excessive risk-taking.

Non-Employee Director Compensation for 2012

The following table presents information regarding the compensation paid in 2012 to persons who served as members of our board of directors in 2012 who are not also employed by us or any of our subsidiaries (our “non-employee directors”). The compensation paid to Dr. Howard C. Yang, who is also our Chief Executive Officer, and Mr. Stephen Tai, who is also our President, for 2012 is presented below under “Executive Compensation.” Dr. Yang and Mr. Tai, our two employee directors, are not entitled to receive additional compensation for their service on the board of directors.


Name	Fees Earned or Paid in Cash ($)		Stock Awards ($)		Option Awards ($)⁽¹⁾		All Other Compensation ($)		Total ($)
DC Cheng		—		—		—		—		—
Ping Ko		—		—		—		—		—
Edward Y. Way⁽²⁾		11,556		—		53,912		—		65,468
Jung-Kung (Jackie) Yang		—		—		—		—		—
Cathy Yen		—		—		—		—		—

(1)	As of December 31, 2012, the number of outstanding stock options held by each of our non-employee directors was as follows: DC Cheng (40,000 options); Ping Ko (60,000 options); Edward Y. Way (20,000 options); Jung-Kung (Jackie) Yang (60,000 options); and Cathy Yen (0 options).

(2)	Mr. Way joined the Board in September 2012.

Prior to this offering, our non-employee directors generally did not receive any cash compensation for serving as our directors, except that Mr. Way has a right to receive an annual retainer of $20,000 for serving on our board of directors and an additional $20,000 fee for serving as chair of our Audit Committee. During 2012, he received such retainer on a pro rata basis for the portion of the year he served as our director. We also reimburse non-employee directors for travel expenses incurred in connection with their duties as directors. In connection with this offering, we expect to adopt a new compensation program for our non-employee directors.

EXECUTIVE COMPENSATION

This section describes the material elements of compensation awarded to, earned by or paid to the individuals who served as our executive officers during 2012. These individuals are listed in the “Summary Compensation Table” below and are referred to as the named executive officers in this prospectus.

Prior to this offering, we have provided our executives with an annual base salary and an annual cash bonus opportunity, and we have granted our executives stock options to provide an additional incentive to grow the Company and further link the interests of our executives with those of our shareholders. Our board of directors reviews (and after this offering, the compensation committee of the board will review) our executive officers’ overall compensation packages on an annual basis or more frequently as it deems warranted.

Summary Compensation Table for 2012

The following table provides a summary of compensation paid for the year ended December 31, 2012 to Howard C. Yang, our Chief Executive Officer, Stephen Tai, our President, and our two other most highly compensated executive officers for 2012 (collectively, the “named executive officers”):


Name and Principal Position	Year		Base Salary ($)⁽¹⁾		Bonus ($)		Stock Awards ($)		Option Awards ($)⁽²⁾		Non-Equity Incentive Plan Compensation ($)		All Other Compensation ($)⁽¹⁾⁽³⁾		Total ($)
Howard C. Yang Chief Executive Officer		2012		110,061		9,597		—		—		—		29,032		148,690
Stephen Tai President		2012		110,061		9,597		—		—		—		29,032		148,690
Mark Voll⁽⁴⁾ Chief Financial Officer		2012		134,596		—		—		1,078,240		—		14,678		1,227,514
Bill Franciscovich Vice President, Worldwide Sales		2012		200,000		—		—		—		—		—		200,000

(1)	The amounts reported in these columns for Dr. Howard C. Yang and Mr. Tai have been converted based on an exchange rate of 6.2 Renminbi for one U.S. dollar.

(2)

The amounts reported in the “Option Awards” column of the table above for 2012 reflect the fair value on the grant date of the option awards granted to our named executive officers during 2012. These values have been determined under the principles used to calculate the value of equity awards for purposes of our financial statements. For a discussion of the assumptions and methodologies used to calculate the amounts referred to above, please see the discussion of option awards contained in Note 9, Stock Option Plan, to our consolidated financial statements for the year ended December 31, 2012 included elsewhere in this prospectus.

(3)	This amount reflects a housing allowance provided by the Company to each executive.

(4)	Mr. Voll joined the Company as its Chief Financial Officer in June 2012.

Employment Agreements

We have entered into an employment agreement with each of Dr. Yang, Mr. Tai, Mr. Voll and Mr. Franciscovich. The agreement with Dr. Yang is dated May 1, 2012 and provides for Dr. Yang to receive an annual base salary of $114,600. The agreement with Mr. Tai is dated May 1, 2012 and provides for him to receive an annual base salary of $114,600. The agreement with Mr. Voll is dated June 8, 2012 and provides for him to receive an annual base salary of $250,000. He is also eligible for an annual performance bonus of up to 50% of his base salary and was granted in 2012 options to purchase 400,000 of our ordinary shares. We have also agreed to provide Mr. Voll reasonable housing when he works in Shanghai. The agreement with Mr. Franciscovich is dated November 27, 2006 and provides for him to receive an annual base salary of

$200,000. Pursuant to the agreement, Mr. Franciscovich was granted in March 2007 options to purchase 370,000 of our ordinary shares, which options have been exercised. Each agreement has a term of three years and may be terminated by either party upon one month written notice.

In addition, Montage Shanghai, our principal PRC operating subsidiary has entered into employment agreements with Dr. Yang and Mr. Tai pursuant to PRC labor law. Dr. Yang’s agreement was entered into in January 2013 and has a fixed term through April 30, 2022. Mr. Tai’s agreement was entered into in December 2012 and has a fixed term through December 19, 2017. Each of Dr. Yang’s and Mr. Tai’s agreement provides for a monthly base salary of RMB23,800. In addition, each of Dr. Yang and Mr. Tai is eligible to receive quarterly and annual bonuses each year. The agreements provide for each of Dr. Yang and Mr. Tai to receive social insurance, welfare and severance benefits, in each case as provided by applicable law. According to the PRC Labor Contract Law and its implementing regulations, we may terminate Dr. Yang’s or Mr. Tai’s employment agreement under certain specified circumstances. In certain cases, the terminated employee is entitled to receive a severance payment equal to the employee’s average monthly salary for the 12-month period prior to the termination date (up to a maximum of three times the local average monthly salary). If we sought to terminate the employment agreement in any circumstance other than those specified under the PRC Labor Contract Law and its implementing regulations, including termination without cause, the employee could force us to perform under the agreement or pay the employee damages in the amount of two months’ salary per year of service up to the date of termination, but if we pay such damages we are not required to pay other severance or the remainder of the amount owed under the employment agreement.

Outstanding Equity Awards at December 31, 2012

The following table presents information regarding the outstanding equity awards held by each of our named executive officers as of December 31, 2012, including the vesting dates for the portions of these awards that had not vested as of that date.


Name	Award Date		Number of Securities Underlying Unexercised Options Exercisable			Number of Securities Underlying Unexercised Options Unexercisable		Option Exercise Price($)		Option Expiration Date
Howard C. Yang		—		—			—		—		—
Stephen Tai		—		—			—		—		—
Mark Voll		9/17/2012		400,000	⁽¹⁾		—		3.77		9/16/2022
Bill Franciscovich		—		—			—		—		—

(1)

This option will vest as to 25% of the shares covered by the option on June 18, 2013 and as to the remaining 75% of such shares in monthly installments over the three-year period thereafter. The option includes an “early exercise” feature, meaning that it may be exercised prior to the vesting date and any shares received on such exercise will continue to be subject to a right of repurchase which shall lapse in accordance with the original vesting schedule.

Equity Incentive Plans

2006 Share Incentive Plan

On June 13, 2006, our board of directors adopted our 2006 Share Incentive Plan, or 2006 Plan. After this offering, we will not grant any additional awards under the 2006 Plan.

The purpose of this 2006 Plan is to promote the success of the company and the interests of its shareholders by providing a means through which the company may grant equity-based incentives to attract, motivate, retain and reward certain officers, employees, directors and other eligible persons and to further link the interests of award recipients with those of the company’s shareholders generally.

The 2006 Plan is divided into two separate equity programs:

•

The option grant program under which eligible persons may be granted options; and

•

The share award program under which eligible persons may be awarded restricted or unrestricted ordinary shares.

Eligibility. Awards may be granted only to officers, or employees of the company and any of its affiliates, members of the board, directors of the company’s affiliates, or any individual consultants or advisors rendering bona fide services to the company or one of its affiliates, provided, however, that incentive stock options, within the meaning of Section 422 of the Internal Revenue Code, may be granted only to employees.

Share Limits. The maximum number of ordinary shares that may be delivered under our 2006 Plan cannot exceed 18,416,360 shares in the aggregate. Ordinary shares subject to options granted under the 2006 Plan that expire or for any reason are canceled or terminated without having been exercised, as well as ordinary shares that are subject to share awards under the 2006 Plan that are forfeited to the company or otherwise repurchased by the company prior to vesting of such shares for a price not greater than the original purchase or issue price of such shares will again be available for awards granted under the 2006 Plan.

Term. The 2006 Plan provides that, unless earlier terminated by the board, the 2006 Plan will terminate at the close of business on the day before the tenth anniversary of its effective date. Each option shall expire not more than ten years after its date of grant.

Administration. The administrator, which means our board or one or more committees appointed by the board or another committee (within its delegated authority), is entitled to administer our 2006 Plan. The administrator has complete discretion to make all decisions implementing the 2006 Plan, including the power to (a) determine who will receive the awards, (b) approve the forms of award agreements, (c) construe and interpret the terms of the 2006 Plan and the awards thereunder, (d) cancel, modify or terminate any or all outstanding awards, and (e) determine the fair market value for purpose of our 2006 Plan and awards.

Stock Options. In no case will the exercise price of the option be less than the greater of (a) the par value of the ordinary shares; (b) in the case of Incentive Stock Option grants, 100% of the fair market value of the ordinary shares on the date of grant; or (c) in the case of Incentive Stock Option grants, 110% of the fair market value of the ordinary shares on the date of grant, in the case that any holder of more than 10% of the voting power of all classes of our outstanding shares as of the grant date.

When an employee ceases to provide continuous services to us (or any parent, subsidiary, or affiliate), he or she may exercise his or her option for the period of time stated in the 2006 Plan, to the extent his or her option is vested and exercisable on the date of termination. An option, to the extent not vested and exercisable on the date of termination, shall terminate on the date of termination. An option may never be exercised later than the expiration of its term.

Restricted Stock. A restricted share means ordinary shares awarded under our 2006 Plan, subject to payment of such consideration and such conditions on vesting (which may include, among others, the passage of time, specified performance objectives or other factors) and such transfer and other restrictions as are established in or pursuant to this 2006 Plan and the related award agreement, to the extent such remain unvested and restricted under the terms of the applicable award agreement.

Stock Purchase Rights. The administrator may offer rights to purchase our ordinary shares under the 2006 Plan and, to the extent permitted by applicable law, shall determine the purchase price of the shares subject to each share purchase right. Each option shall be evidenced by an award agreement in the form approved by the administrator. The administrator may require that the recipient of an option and the spouse of any married recipient promptly execute and return to our company his or her award agreement evidencing the option. Any exercisable option will be deemed to be exercised when the company receives written notice of such exercise, together with the any required payment made in accordance with the 2006 Plan.

Transferability. All awards are non-transferable and will not be subject in any manner to sale, transfer, anticipation, alienation, assignment, pledge, encumbrance or charge. No one is entitled to exercise the award, unless he or she is the recipient of the award. The amounts payable or shares issuable pursuant to an award will be delivered only to the recipient of such award. However, the exercise and transfer restrictions shall not apply to (a) transfers to our company, (b) transfers by gift or domestic relations order to one or more “family members” (as that term is defined in SEC Rule 701 promulgated under the Securities Act) of the recipient of such award, (c) the designation of a beneficiary to receive benefits if the recipient of such award dies or, if the recipient of such award has died, transfers to or exercises by the recipient of such award Beneficiary, or, in the absence of a validly designated beneficiary, transfers by will or the laws of descent and distribution; or (d) if the recipient of such award has suffered a disability, permitted transfers or exercises on behalf of the recipient of such award by his or her duly authorized legal representative.

Payment. The administrator may permit any of the following methods of payments for the exercise of options:

•

cash, check payable to the order of our company or electronic funds transfer;

•

notice and third party payment in such manner as may be authorized by the administrator;

•

the delivery of previously owned ordinary shares;

•

by a reduction in the number of ordinary shares otherwise deliverable pursuant to the award;

•

subject to such procedures as the administrator may adopt, pursuant to a “cashless exercise;” or if authorized by the administrator or specified in the applicable award agreement, by a promissory note according to the 2006 Plan.

2013 Performance Incentive Plan

Our board of directors plans to adopt a 2013 Performance Incentive Plan, or the 2013 Plan, in connection with this offering to provide a means through the grant of awards to attract, motivate, retain and reward selected employees and other eligible persons. We also intend to obtain approval of this plan from our shareholders prior to the completion of this offering. Employees, officers, directors and consultants that provide services to us or one of our subsidiaries may be selected to receive awards under the 2013 Plan. As noted above, we will not grant any more awards under the 2006 Plan after the date of this offering.

Our board of directors, or one or more committees appointed by the board or another committee (within delegated authority) will be the administrator under the 2013 Plan. The administrator of the plan has broad authority to:

•

select participants and determine the types of awards that they are to receive;

•

determine the number of shares that are to be subject to awards and the terms and conditions of awards, including the price (if any) to be paid for the shares or the award and establish the vesting conditions (if applicable) of such shares or awards;

•

cancel, modify or waive our rights with respect to, or modify, discontinue, suspend or terminate any or all outstanding awards, subject to any required consents;

•

construe and interpret the terms of the 2013 Plan and any agreements relating to the Plan;

•

accelerate or extend the vesting or exercisability or extend the term of any or all outstanding awards subject to any required consent;

•

subject to the other provisions of the 2013 Plan, make certain adjustments to an outstanding award and authorize the termination, conversion, substitution or succession of an award; and

•

allow the purchase price of an award or shares of our ordinary shares to be paid in the form of cash, check or electronic funds transfer, by the delivery of previously-owned shares of our ordinary shares or by a reduction of the number of shares deliverable pursuant to the award, by services rendered by the

recipient of the award, by notice and third party payment or cashless exercise on such terms as the administrator may authorize or any other form permitted by law.

A total of ordinary shares will be authorized for issuance with respect to awards granted under the 2013 Plan. The share limit will automatically increase on the first trading day in January of each year (commencing with January 2014) by an amount equal to the lesser of (1) % of the total number of outstanding shares of our ordinary shares on the last trading day in December in the prior year, (2) shares, or (3) such lesser number as determined by our board of directors. Any shares subject to awards that are not paid, delivered or exercised before they expire or are canceled or terminated, fail to vest, as well as shares used to pay the purchase or exercise price of awards or related tax withholding obligations, will become available for other award grants under the 2013 Plan. As of the date of this prospectus, no awards have been granted under the 2013 Plan, and the full number of shares authorized under the 2013 Plan is available for award purposes.

Awards under the 2013 Plan may be in the form of incentive or nonqualified stock options, share appreciation rights, share bonuses, restricted share and other forms of awards including cash awards. Awards under the plan generally will not be transferable other than by will or the laws of descent and distribution, except that the plan administrator may authorize certain transfers.

Nonqualified and incentive stock options may not be granted at prices below the fair market value of the ordinary shares on the date of grant. Incentive stock options must have an exercise price that is at least equal to the fair market value of our ordinary shares, or 110% of fair market value of our ordinary shares or incentive stock option grants to any 10% owner of our ordinary shares, on the date of grant. These and other awards may also be issued solely or in part for services. Awards are generally paid in cash or shares of our ordinary shares. The plan administrator may provide for the deferred payment of awards and may determine the terms applicable to deferrals.

As is customary in incentive plans of this nature, the number and type of shares available under the 2013 Plan and any outstanding awards, as well as the exercise or purchase prices of awards, will be subject to adjustment in the event of certain reorganizations, mergers, combinations, recapitalizations, share splits, share dividends or other similar events that change the number or kind of shares outstanding, and extraordinary dividends or distributions of property to the shareholders.

Generally, and subject to limited exceptions set forth in the 2013 Plan, if we dissolve or undergo certain corporate transactions such as a merger, business combination or other reorganization, or a sale of all or substantially all of its assets, the plan administrator will generally provide for the substitution, assumption, exchange or other continuation or settlement (in cash, securities or property) of the outstanding awards granted under the plan, or, if the plan administrator does not so provide, the outstanding awards will generally become fully vested and, in the case of options, exercisable, and will terminate or be terminated in such circumstances. The plan administrator also has the discretion to establish other change in control provisions with respect to awards granted under the 2013 Plan. For example, the administrator could provide for the acceleration of vesting or payment of an award in connection with a corporate event that is not described above and provide that any such acceleration shall be automatic upon the occurrence of any such event.

Our board of directors may amend or terminate the 2013 Plan at any time, but no such action will affect any outstanding award in any manner materially adverse to a participant without the consent of the participant. Plan amendments will be submitted to shareholders for their approval as required by applicable law or any applicable listing agency. The 2013 Plan is not exclusive – our board of directors and compensation committee may grant share and performance incentives or other compensation, in share or cash, under other plans or authority.

The 2013 Plan will terminate on the tenth anniversary of the date our board adopts it. However, the plan administrator will retain its authority until all outstanding awards are exercised or terminated. The maximum term of options, share appreciation rights and other rights to acquire ordinary shares under the plan is ten years after the initial date of the award.

RELATED PARTY TRANSACTIONS

In addition to the executive officer and director compensation arrangements discussed in the section titled “Executive Compensation,” we describe below the transactions since January 1, 2010, to which we have been a participant, in which the amount involved in the transaction exceeds or will exceed $120,000 and in which any of our directors, executive officers or holders of more than 5% of our share capital, or any immediate family member of, or person sharing the household with, any of these individuals, had or will have a direct or indirect material interest.

Investor Rights Agreement

In connection with our private placement of Series B-2 preferred shares in October 2009, we and our shareholders entered into an investor rights agreement, or IRA. Pursuant to the IRA, we have granted certain registration rights to holders of our registrable securities as described in “Description of Share Capital—Registration Rights.”

The IRA also provides for other rights enjoyed by our preferred shareholders, all of which rights will automatically terminate upon the completion of this offering. These rights include, among other things, (i) the right to receive certain financial statements, plans and reports to be prepared by us and to inspect our facilities, accounting records and books on demand and (ii) pre-emptive rights to participate in issuances of new securities by us, excluding, among others, securities issued pursuant to this offering.

Indemnification Arrangements with Executive Officers and Directors

Prior to the completion of the offering, we intend to enter into new indemnification agreements with all of our executive officers and directors. Each indemnification agreement provides that we will indemnify the director or executive officer, as the case may be, to the fullest extent permitted by law for claims arising in his or her capacity as our director or executive officer, as the case may be, provided that he or she acted in good faith and in a manner that he or she reasonably believed to be in, or not opposed to, our best interests and, with respect to any criminal proceeding, had no reasonable cause to believe that his or her conduct was unlawful. In the event that we do not assume the defense of a claim against a director or such officer, we will be required to advance his or her expenses in connection with his or her defense, provided that he or she undertakes to repay all amounts advanced if it is ultimately determined that he or she is not entitled to be indemnified by us.

Review, Approval or Ratification of Related Party Transactions

Prior to the completion of this offering, our board of directors plans to adopt a written related party transactions policy. Pursuant to this policy, our directors and nominations committee will review all material facts of all related party transactions and either approve or disapprove entry into the related party transaction, subject to certain limited exceptions. In determining whether to approve or disapprove entry into a related party transaction, our directors and corporate governance committee shall take into account, among other factors, the following: (i) whether the related party transaction is on terms no less favorable to us than terms generally available from an unaffiliated third-party under the same or similar circumstances, (ii) the extent of the related party’s interest in the transaction and (iii) whether the transaction would impair the independence of a non-employee director.

Upon completion of this offering, our audit committee will be responsible for reviewing and approving all related party transactions that are required to be disclosed under the applicable rules of the SEC and NASDAQ, when appropriate, and authorizing or ratifying all such transactions in accordance with written policies and procedures established by our board of directors from time to time. The audit committee may approve or ratify related party transaction only if it determines in good faith that under all the circumstances, the transaction is fair to us.

No member of our audit committee may participate in the review, approval, authorization or ratification of a transaction with respect to which he or she is a related party, except that such member can be counted for purposes of a quorum and shall provide such information with respect to the transaction as may be reasonably requested by other members of the committee.

All of the transactions described under “Related Party Transactions” were entered into prior to the adoption of the written policy and therefore were not reviewed or approved by our audit committee.

PRINCIPAL AND SELLING SHAREHOLDERS

The following table sets forth information as of March 31, 2013 regarding the beneficial ownership of our ordinary shares by:

•

each person or group who we know to beneficially own more than 5% of our ordinary shares;

•

each of our directors;

•

each of our named executive officers;

•

all of our executive officers and directors as a group; and

•

each of the selling shareholders.

Beneficial ownership is determined in accordance with SEC rules. These rules generally provide that a person is the beneficial owner of securities if such person has or shares the power to vote or to dispose of the shares or has the right to acquire such powers within 60 days, such as through the exercise of options. In computing the number of ordinary shares beneficially owned by a person or group of persons, we have assumed conversion of all preferred shares into ordinary shares. Percentage of beneficial ownership for each person or group is calculated by dividing (i) the number of ordinary shares beneficially owned by such person or group, assuming conversion of all preferred shares into ordinary shares, by (ii) the total number of ordinary shares outstanding, assuming conversion of all preferred shares into ordinary shares, plus the number of ordinary shares such person or group has the right to acquire within 60 days after March 31, 2013. The total number of ordinary shares outstanding prior to the offering, assuming conversion of all preferred shares into ordinary shares, is 52,037,816. For the purposes of the table below, we have assumed the total number of ordinary shares outstanding after completion of this offering will be , assuming conversion of all preferred shares into ordinary shares and the underwriters do not exercise their over-allotment option.

Unless otherwise indicated, the persons or entities identified in this table have sole voting and investment power with respect to all shares shown as beneficially owned by them, subject to applicable community property laws. Unless otherwise indicated, the address for each person named in the table below is c/o Montage Technology Group Limited, Room A1601, Technology Building, 900 Yi Shan Road, Xuhui District, Shanghai 200233, China.


	Ordinary Shares Beneficially Owned Prior to This Offering				Ordinary Shares Being Sold in This Offering		Ordinary Shares Beneficially Owned After This Offering
	Number		%		Number	%	Number	%
Directors and Executive Officers
Howard C. Yang⁽¹⁾		4,543,298		8.7
Stephen Tai⁽²⁾		4,543,300		8.7
Cathy Yen		123,086		*
Jung-Kung (Jackie) Yang⁽³⁾		159,414		*
Edward Way⁽⁴⁾		20,000		*
Charles G. Sodini⁽⁵⁾		20,000		*
Mark Voll⁽⁶⁾		400,000		*
Leechung Yiu⁽⁷⁾		673,200		1.3
Bill Franciscovich		370,000		*
Jack Gu⁽⁸⁾		243,958		*
Kenneth Chew⁽⁹⁾		420,691		*
Cheng-Tie Chen⁽¹⁰⁾		220,000		*
Shawn Si⁽¹¹⁾		984,660		1.9
Phoebe Su⁽¹²⁾		116,796		*
All directors and executive officers as a group⁽¹³⁾		12,838,403		24.7
Principal and Selling Shareholders:
Mr. Kuai Lap Tai and Ms. Iong Wa Chao⁽¹⁴⁾		3,280,000		6.3
AsiaVest Opportunities Fund IV⁽¹⁵⁾		10,156,125		19.5
Intel Capital (Cayman) Corporation and its affiliates⁽¹⁶⁾		5,301,667		10.2

*	Beneficially owns less than 1% of our outstanding ordinary shares.

(1)	Includes 1,000,000 ordinary shares and 1,010,000 Series A preferred shares convertible into ordinary shares held jointly by Mr. Howard Yang’s parents, the voting rights of which have been assigned to Mr. Yang.

(2)	Includes 3,130,000 ordinary shares and 150,000 Series A preferred shares convertible into ordinary shares held jointly by Mr. Tai’s parents, the voting rights of which have been assigned to Mr. Tai.

(3)	Includes 60,000 ordinary shares that may be acquired through exercise of stock options.

(4)	Includes 20,000 ordinary shares that may be acquired through exercise of stock options, all of which are subject to our company’s right of repurchase, which right lapses as the options vest according to their vesting schedule.

(5)	Includes 20,000 ordinary shares that may be acquired through exercise of stock options, all of which are subject to our company’s right of repurchase, which right lapses as the options vest according to their vesting schedule.

(6)	Includes 400,000 ordinary shares that may be acquired through exercise of stock options, all of which are subject to our company’s right of repurchase, which right lapses as the options vest according to their vesting schedule.

(7)	Includes 673,200 ordinary shares that may be acquired through exercise of stock options.

(8)	Includes 133,958 ordinary shares that may be acquired through exercise of stock options.

(9)	Includes 10,833 ordinary shares that may be acquired through exercise of stock options, 9,583 of which are subject to our company’s right of repurchase, which right lapses as the options vest according to their vesting schedule.

(10)	Includes 220,000 ordinary shares that may be acquired through exercise of stock options, 105,417 of which are subject to our company’s right of repurchase, which right lapses as the options vest according to their vesting schedule.

(11)	Includes 300,000 ordinary shares that may be acquired through exercise of stock options.

(12)	Includes 90,000 ordinary shares that may be acquired through exercise of stock options.

(13)	Includes 1,927,991 ordinary shares that may be acquired through stock options, 555,000 of which are subject to our company’s right of repurchase, which right lapses as the options vest according to their vesting schedule.

(14)	The voting rights to these shares have been assigned to Mr. Stephen Tai, who is the son of Mr. Tai and Ms. Chao.

(15)

AsiaVest Opportunities Fund IV is a Cayman Islands limited liability company. The manager of AsiaVest Opportunities Fund IV is AsiaVest Partners, TCW/YFY Ltd., a Cayman Island company. The investment committee of AsiaVest Partners TCW/YFY Ltd., which consists of T. J. Huang, Henry Shaw, Harvey Chang, Marc Stern and Clifford Mak, exercises the voting and dispositive power over our shares owned by AsiaVest Opportunities Fund IV. AsiaVest Partners TCW/YFY Ltd. is a joint venture between AsiaVest Investment Ltd., a British Virgin Islands company and TCW (TSOP), Ltd., a Cayman Island company. The address of AsiaVest Opportunities Fund IV is Ugland House, P.O. Box 309, George Town, Grand Cayman, Cayman Islands, British West Indies.

(16)

Includes 4,649,680 Series B preferred shares convertible into ordinary shares held directly by Intel Capital (Cayman) Corporation, an exempted company incorporated in the Cayman Islands wholly owned by Intel Corporation, and 588,367 Series B-1 preferred shares convertible into ordinary shares held directly by Intel Capital Corporation, a Delaware corporation wholly owned by Intel Corporation. The shares of Intel Corporation are listed on NASDAQ. The registered office of Intel Capital (Cayman) Corporation is Caledonian Trust (Cayman) Limited, Caledonian House, 69 Dr. Roy’s Dr., PO Box 1043, George Town, Grand Cayman, Cayman Islands.

DESCRIPTION OF SHARE CAPITAL

We were incorporated as an international business company with limited liability under International Business Companies Act, 1984 of the British Virgin Islands on March 29, 2004 and continued to, and registered in the Cayman Islands as an exempted company on April 24, 2006. Our affairs are currently governed by our amended and restated memorandum and articles of association and the Companies Law, Cap 22 (Law 3 of 1961, as consolidated and revised) of the Cayman Islands, which we refer to as the Companies Law below.

Upon the effectiveness of our second amended and restated memorandum and articles of association upon the completion of this offering, our authorized share capital will consist of ordinary shares, $0.005 par value per share.

As of March 31, 2013, our authorized share capital consisted of 67,011,599 of ordinary shares with a par value of $0.005 each and 44,011,599 preferred shares with a par value of $0.005 each, of which 12,000,000 preferred shares are designated as series A preferred shares, 11,703,540 preferred shares are designated as series B preferred shares, 11,379,273 preferred shares are designated as series B-1 preferred shares and 8,928,786 preferred shares are designated as series B-2 preferred shares. As of March 31, 2013, there were 52,037,816 ordinary shares issued and outstanding, assuming conversion of all of our issued and outstanding preferred shares into ordinary shares. Immediately upon completion of this offering, all of our issued and outstanding preferred shares will be automatically converted into ordinary shares.

The following are summaries of material provisions of our second amended and restated memorandum and articles of association and the Companies Law insofar as they relate to the material terms of our ordinary shares. Our second amended and restated memorandum and articles of association have been filed as exhibits to the registration statement of which this prospectus is a part.

Ordinary Shares

The following discussion primarily concerns our ordinary shares and the rights of holders of ordinary shares.

All of our outstanding ordinary shares are fully paid and non-assessable and issued in registered form. Our shareholders who are non-residents of the Cayman Islands may freely hold and vote their ordinary shares.

Meetings

Shareholders’ meetings may be convened by a majority of our board of directors or chairman and may not be called by any other person. Advance notice of at least ten calendar days is required for the convening of our annual general meeting and any other general meeting of our shareholders. A quorum required for a meeting of shareholders consists of at least one shareholder present or by proxy, representing not less than one-third in nominal value of the total issued voting shares in our company.

Notwithstanding that a meeting is called by shorter notice than that mentioned above, but, subject to the Companies Law, it will be deemed to have been duly called, if it is so agreed in the case of a meeting called as an annual general meeting by all of our shareholders entitled to attend and vote at the meeting; and in the case of any other meeting, by a majority in number of the shareholders holding not less than 95% in nominal value of the issued shares giving that right.

No business other than the appointment of a chairman may be transacted at any general meeting unless a quorum is present at the commencement of business. However, the absence of a quorum will not preclude the appointment of a chairman. If present, the chairman of our board of directors shall be the chairman presiding at any shareholders’ meetings.

A corporation being a shareholder shall be deemed for the purpose of our second amended and restated articles of association to be present in person if represented by its duly authorized representative being the person appointed by resolution of the directors or other governing body of such corporation to act as its representative at the relevant general meeting or at any relevant general meeting of any class of our shareholders. Such duly authorized representative shall be entitled to exercise the same powers on behalf of the corporation that he represents as that corporation could exercise if it were our individual shareholder.

The quorum for a separate general meeting of the holders of a separate class of shares is described in “—Variation of Rights” below.

Our second amended and restated articles of association do not allow our shareholders to approve matters to be determined at shareholders’ meetings by way of written resolutions without a meeting.

Voting Rights

In respect of all matters requiring a shareholders’ vote, each ordinary share is entitled to one vote. Voting at any shareholders’ meeting, or on a poll, is by show of hands of shareholders who are present in person or by proxy (or, in the case of a shareholder being a corporation, by its duly authorized representative) for each fully paid share of which such shareholders hold.

No shareholder shall be entitled to vote or be reckoned in a quorum, in respect of any share, unless such shareholder is duly registered as our shareholder and all calls or installments due by such shareholder to us have been paid.

If a clearing house (or its nominee(s)) or a central depositary entity, being a corporation, is our shareholder, it may authorize such person or persons as it thinks fit to act as its representative(s) at any meeting or at any meeting of any class of shareholders provided that, if more than one person is so authorized, the authorization shall specify the number and class of shares in respect of which each such person is so authorized. A person authorized pursuant to this provision is entitled to exercise the same powers on behalf of the clearing house or central depositary entity (or its nominee(s)) as if such person was the registered holder of our shares held by that clearing house or central depositary entity (or its nominee(s)) including the right to vote individually in a show of hands.

While there is nothing under the laws of the Cayman Islands which specifically prohibits or restricts the creation of cumulative voting rights for the election of directors of our company, it is not a concept that is accepted as an ordinary practice in the Cayman Islands, and our company has made no provisions in our second amended and restated articles of association to allow cumulative voting for such elections.

Calls on Shares and Forfeiture of Shares

Subject to our second amended and restated memorandum and articles of association which will become effective upon the completion of this offering and to the terms of allotment, our directors may from time to time make such calls upon the members in respect of any amounts unpaid on the shares held by them. The shares that have been called upon and remain unpaid on the specified time are subject to forfeiture.

Protection of Minority Shareholders

The Cayman Islands courts ordinarily would be expected to follow English case law precedents which permit a minority shareholder to commence a representative action against or derivative actions in the name of the company to challenge (a) an act which is ultra vires the company or illegal, (b) an act which constitutes a fraud against the minority and regarding which the wrongdoers are themselves in control of the company, and (c) an irregularity in the passing of a resolution which requires a qualified (or special) majority.

In the case of a company (not being a bank) having its share capital divided into shares, the Grand Court of the Cayman Islands may, on the application of members holding not less than one fifth of the shares of the company in issue, appoint an inspector to examine the affairs of the company and to report thereon in such manner as the Grand Court of the Cayman Islands shall direct.

Any of our shareholders may petition the Grand Court of the Cayman Islands which may make a winding up order if the Grand Court of the Cayman Islands is of the opinion that it is just and equitable that we should be wound up or, as an alternative to a winding up order, (a) an order regulating the conduct of our affairs in the future, (b) an order requiring us to refrain from doing or continuing an act complained of by the shareholder petitioner or to do an act which the shareholder petitioner has complained we have omitted to do, (c) an order authorizing civil proceedings to be brought in our name and on our behalf by the shareholder petitioner on such terms as the Grand Court of the Cayman Islands may direct, or (d) an order providing for the purchase of the shares of any of our shareholders by other shareholders or us and, in the case of a purchase by us, a reduction of our capital accordingly.

Generally, claims against us must be based on the general laws of contract or tort applicable in the Cayman Islands or individual rights as shareholders as established by our second amended and restated articles of association.

Pre-Emption Rights

There are no pre-emption rights applicable to the issue of new shares under either Cayman Islands law or our second amended and restated memorandum and articles of association.

Liquidation Rights

Subject to any future shares which are issued with specific rights, (a) if we are wound up and the assets available for distribution among our shareholders are more than sufficient to repay the whole of the capital paid up at the commencement of the winding up, the excess shall be distributed pari passu among those shareholders in proportion to the amount paid up at the commencement of the winding up on the shares held by them, respectively, and (b) if we are wound up and the assets available for distribution among the shareholders as such are insufficient to repay the whole of the paid-up capital, those assets shall be distributed so that, as nearly as may be, the losses shall be borne by the shareholders in proportion to the capital paid up at the commencement of the winding up on the shares held by them, respectively.

If we are wound up (whether the liquidation is voluntary or by the court), the liquidator may with the sanction of our special resolution and any other sanction required by the Companies Law, divide among our shareholders in specie or kind the whole or any part of our assets (whether or not they shall consist of property of the same kind) and may, for such purpose, set such value as the liquidator deems fair upon any property to be divided and may determine how such division shall be carried out as between the shareholders or different classes of shareholders. The liquidator may also vest the whole or any part of these assets in trustees upon such trusts for the benefit of the shareholders as the liquidator shall think fit, but so that no shareholder will be compelled to accept any assets, shares or other securities upon which there is a liability.

Variation of Rights

Alterations to our second amended and restated memorandum and articles of association may only be made by special resolution, meaning a majority of not less than two-thirds of votes cast at a shareholders’ meeting.

If at any time, our share capital is divided into different classes of shares, all or any of the special rights attached to any class of shares may, subject to the provisions of the Companies Law, be varied with the sanction of a special resolution passed at a general meeting of the holders of the shares of that class. Consequently, the

rights of any class of shares cannot be detrimentally altered without a majority of two-thirds of the vote of all of the shares in that class. The provisions of our second amended and restated articles of association relating to general meetings shall apply similarly to every such separate general meeting, but so that the quorum for the purposes of any such separate general meeting or at the adjourned meeting shall be a person or persons together holding (or represented by proxy) on the date of the relevant meeting not less than one-third in nominal value of the issued shares of that class, that every holder of shares of the class shall be entitled on a poll to one vote for every such share held by such holder and that any holder of shares of that class present in person or by proxy may demand a poll.

The rights conferred upon the holders of the shares of any class issued with preferred or other rights shall not, unless otherwise expressly provided by the terms of issue of the shares of that class, be deemed to be varied by the creation or issue of further shares ranking pari passu with such existing class of shares.

Alteration of Capital

We may from time to time by ordinary resolution in accordance with the Companies Law alter the conditions of our second amended and restated memorandum of association to:

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increase our capital by such sum, to be divided into shares of such amounts, as the resolution shall prescribe;

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consolidate and divide all or any of our share capital into shares of larger amounts than our existing shares;

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cancel any shares which at the date of the passing of the resolution have not been taken or agreed to be taken by any person, and diminish the amount of its share capital by the amount of the shares so cancelled subject to the provisions of the Companies Law;

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sub-divide our shares or any of them into shares of smaller amount than is fixed by our second amended and restated memorandum of association, subject nevertheless to the Companies Law, so that the resolution whereby any share is sub-divided may determine that, as between the holders of the shares resulting from such subdivision, one or more of the shares may have any such preferred or other special rights over, or may have such deferred rights or be subject to any such restrictions as compared with the others, as we have power to attach to unissued or new shares; and

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divide shares into several classes and without prejudice to any special rights previously conferred on the holders of existing shares, attach to the shares respectively any preferential, deferred, qualified or special rights, privileges, conditions or such restrictions that in the absence of any such determination in a general meeting may be determined by our directors.

We may, by special resolution, subject to any confirmation or consent required by the Companies Law, reduce our share capital or any capital redemption reserve in any manner authorized by law.

Transfer of Shares

Subject to any applicable restrictions set forth in our second amended and restated articles of association, including, for example, the board of directors’ discretion to refuse to register a transfer of any share (not being a fully paid up share) to a person of whom it does not approve, or any share issued under share incentive plans for employees upon which a restriction on transfer imposed thereby still subsists, or a transfer of any share to more than four joint holders, any of our shareholders may transfer all or any of his or her shares by an instrument of transfer in the usual or common form or in a form prescribed by the NASDAQ or in another form that our directors may approve.

Our directors may decline to register any transfer of any share which is not paid up or on which we have a lien. Our directors may also decline to register any transfer of any share unless:

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the instrument of transfer is lodged with us and is accompanied by the certificate for the shares to which it relates and such other evidence as our directors may reasonably require to show the right of the transferor to make the transfer;

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the instrument of transfer is in respect of only one class of share;

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the instrument of transfer is properly stamped (in circumstances where stamping is required); and

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fee of such maximum sum as the NASDAQ may determine to be payable or such lesser sum as our directors may from time to time require is paid to us in respect thereof.

If our directors refuse to register a transfer, they shall, within three months after the date on which the instrument of transfer was lodged, send to each of the transferor and the transferee notice of such refusal.

The registration of transfers may, after compliance with any notice requirement of the NASDAQ, be suspended and the register closed at such times and for such periods as our directors may from time to time determine; provided, however, that the registration of transfers shall not be suspended nor the register closed for more than 30 days in any year as our directors may determine.

Register of Members

In accordance with Section 48 of the Companies Law, the register of members is prima facie evidence of the registered holder or member of shares of a company. Therefore, a person becomes a registered holder or member of shares of the company only upon entry being made in the register of members. Our directors will maintain one register of members, at the office of , Cayman Islands.

Share Repurchases

We are empowered by the Companies Law and our second amended and restated articles of association to purchase our own shares, subject to certain restrictions. Our directors may only exercise this power on our behalf, subject to the Companies Law, our second amended and restated memorandum and articles of association and to any applicable requirements imposed from time to time by the NASDAQ, the Securities and Exchange Commission, or the SEC, or by any other recognized share exchange on which our securities are listed.

Dividends

Subject to the Companies Law, our company in a general meeting or our directors may declare dividends in any currency to be paid to our shareholders. Dividends may be declared and paid out of our profits, realized or unrealized, or from any reserve set aside from profits which our directors determine is no longer needed. Our board of directors may also declare and pay dividends out of the share premium account or any other fund or account that can be authorized for this purpose in accordance with the Companies Law.

Except in so far as the rights attaching to, or the terms of issue of, any share otherwise provides, (a) all dividends shall be declared and paid according to the amounts paid up on the shares in respect of which the dividend is paid, but no amount paid up on a share in advance of calls shall be treated for this purpose as paid up on that share and (b) all dividends shall be apportioned and paid pro rata according to the amounts paid up on the shares during any portion or portions of the period in respect of which the dividend is paid.

Our directors may also pay interim dividends, whenever our financial position, in the opinion of our directors, justifies such payment.

Our directors may deduct from any dividend or bonus payable to any shareholder all sums of money (if any) presently payable by such shareholder to us on account of calls or otherwise.

No dividend or other money payable by us on or in respect of any share shall bear interest against us.

In respect of any dividend proposed to be paid or declared on our share capital, our directors may resolve and direct that (a) such dividend be satisfied wholly or in part in the form of an allotment of shares credited as fully paid up, provided that our shareholders entitled thereto will be entitled to elect to receive such dividend (or

part thereof if our directors so determine) in cash in lieu of such allotment or (b) the shareholders entitled to such dividend will be entitled to elect to receive an allotment of shares credited as fully paid up in lieu of the whole or such part of the dividend as our directors may think fit. Our shareholders may, upon the recommendation of our directors, by ordinary resolution resolve in respect of any particular dividend that, notwithstanding the foregoing, a dividend may be satisfied wholly in the form of an allotment of shares credited as fully paid up without offering any right to shareholders to elect to receive such dividend in cash in lieu of such allotment.

Any dividend interest or other sum payable in cash to the holder of shares may be paid by check or warrant sent by mail addressed to the holder at his registered address, or addressed to such person and at such addresses as the holder may direct. Every check or warrant shall, unless the holder or joint holders otherwise direct, be made payable to the order of the holder or, in the case of joint holders, to the order of the holder whose name stands first on the register in respect of such shares, and shall be sent at his or their risk and payment of the check or warrant by the bank on which it is drawn shall constitute a good discharge to us.

All dividends unclaimed for one year after having been declared may be invested or otherwise made use of by our board of directors for the benefit of our company until claimed. Any dividend unclaimed after a period of six years from the date of declaration of such dividend shall be forfeited and reverted to us.

Whenever our directors have resolved that a dividend be paid or declared, our directors may further resolve that such dividend be satisfied wholly or in part by the distribution of specific assets of any kind, and in particular of paid up shares, debentures or warrants to subscribe for our securities or securities of any other company. Where any difficulty arises with regard to such distribution, our directors may settle it as they think expedient. In particular, our directors may issue fractional certificates, ignore fractions altogether or round the same up or down, fix the value for distribution purposes of any such specific assets, determine that cash payments shall be made to any of our shareholders upon the footing of the value so fixed in order to adjust the rights of the parties, vest any such specific assets in trustees as may seem expedient to our directors, and appoint any person to sign any requisite instruments of transfer and other documents on behalf of the persons entitled to the dividend, which appointment shall be effective and binding on our shareholders.

Untraceable Shareholders

We are entitled to sell any shares of a shareholder who is untraceable, provided that:

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all checks or warrants in respect of dividends of such shares, not being less than three in number, for any sums payable in cash to the holder of such shares have remained un-cashed for a period of 12 years prior to the publication of the advertisement and during the three months referred to in the third bullet point below;

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we have not during that time received any indication of the whereabouts or existence of the shareholder or person entitled to such shares by death, bankruptcy or operation of law; and

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we, if so required by the rules of the NASDAQ, have caused an advertisement to be published in newspapers in accordance with such applicable rules giving notice of our intention to sell these shares, and a period of three months (or such shorter period as permitted under the applicable rules) has elapsed since such advertisement.

The net proceeds of any such sale shall belong to us, and when we receive these net proceeds we shall become indebted to the former shareholder for an amount equal to such net proceeds.

Inspection of Books and Records

Holders of our ordinary shares will have no general right under Cayman Islands law to inspect or obtain copies of our list of shareholders or our corporate records. However, we will provide our shareholders with annual audited financial statements. See “Where You Can Find More Information.”

Registration Rights

In connection with the private placements of our preferred shares in 2004 through 2009, we granted to all of the holders of our preferred shares certain registration rights. Holders of 49,745,609 of our ordinary shares outstanding immediately following completion of this offering will be entitled to these registration rights. These registration rights apply to (i) our ordinary shares issued upon conversion of our preferred shares, (ii) any other ordinary shares issued as a dividend or other distribution with respect to, in exchange for, or in replacement of, any of our ordinary shares issued upon conversion of our preferred shares, and (iii) ordinary shares otherwise owned or acquired by our preferred share investors. These shares are referred to as registrable securities.

Demand Registration Rights

At any time after the date that is six months after the effectiveness of this registration statement, the holders of 33% or more of our then outstanding registrable securities may require us, upon written request, to file a registration under the Securities Act with an anticipated aggregate price to the public of at least $10 million. We will be obligated to use our best efforts to register the sale of all registrable securities that holders of registrable securities request in writing to be registered within 20 days of the mailing of a notice by us to all holders of such registration. We are obliged to effect no more than two such demand registrations which are declared or ordered effective. We have the right to defer filing the registration statement for a period of no more than 90 days if our board of directors in good faith determines that filing of such registration will be seriously detrimental to us and our shareholders, but we cannot utilize this right more than once in any 12-month period. Additionally, we are not required to effect the filing of a registration statement during the period beginning 60 days prior to our good faith estimate of the date of the filing of, and ending on a date 180 days following the effective date of, a registration initiated by us.

Form S-3 Registration Rights

Holders of registrable securities may also require us to effect a registration on Form S-3 and any related qualification or compliance, as applicable, for a public offering of all or a part of their registrable securities unless a Form S-3 is not available for such offering or the aggregate price to the public of the shares offered is less than $1.0 million. We have the right to defer such filing for a period of no more than 90 days if our board of directors in good faith determines that filing of such registration will be materially detrimental to us and our shareholders, but we cannot utilize this right more than once during any 12-month period. Additionally, we are not required to effect the filing of a registration statement during the period ending on a date 180 days following the effective date of a registration initiated by us.

Piggyback Registration Rights

Holders of registrable securities also have “piggyback” registration rights, pursuant to which they may require us to register all or any part of the registrable securities then held by such holders when we file any registration statement for purposes of effecting a public offering of our securities. The underwriters of any underwritten offering will have the right to limit the number of shares with registration rights to be included in the registration statement, subject to certain conditions.

Expenses of Registration

We are required to pay all expenses incurred by us in complying with any demand, Form S-3 or piggyback registration. In addition, we are required to pay for counsel to the Company and one counsel to the selling holders and all the selling shareholders of registrable securities in the registration. We are not required to pay any underwriting discounts and selling commissions applicable to the sale of registered securities nor are we required to pay for any expenses of any demand registration if the request is subsequently withdrawn at the request of a majority of the holders of the registrable securities to be registered, subject to limited exceptions.

We will have no obligations to effect any demand, S-3 or piggyback registration with respect to any registrable securities after five years following the consummation of this offering.

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SHARES ELIGIBLE FOR FUTURE SALE

Prior to this offering, there has been no public market for our ordinary shares, and while application has been made for our ordinary shares to be listed on the NASDAQ, we cannot assure you that an active trading market for our shares will develop or be sustained after this offering. Future sales of substantial amounts of our ordinary shares in the public market following this offering or perception that such future sales may occur could adversely affect the prevailing market price of our ordinary shares from time to time and could impair our ability to raise equity capital in the future.

Upon completion of this offering, we will have outstanding ordinary shares, assuming the underwriters do not exercise their option to purchase additional ordinary shares. All of the ordinary shares sold in this offering will be freely transferable without restriction or further registration under the Securities Act, except for any ordinary shares purchased by our “affiliates” as that term is defined in Rule 144 under the Securities Act. Rule 144 defines an affiliate of a company as a person that, directly or indirectly, through one or more intermediaries, controls or is controlled by, or is under common control with, our company. All outstanding ordinary shares prior to this offering are “restricted securities” as that term is defined in Rule 144 because they were issued in a transaction or series of transactions not involving a public offering. Restricted securities may be sold on the NASDAQ only if they are sold pursuant to an effective registration statement under the Securities Act or an exemption from the registration requirement of the Securities Act such as those provided for in Rules 144 and 701 promulgated under the Securities Act, which rules are summarized below. Restricted ordinary shares may also be sold outside of the United States in accordance with Regulation S under the Securities Act. This prospectus may not be used in connection with any resale of our ordinary shares acquired in this offering by our affiliates.

Rule 144

In general, under Rule 144 as currently in effect, beginning 90 days after the date of this prospectus a person who has owned our restricted securities for at least six months is entitled to sell the restricted securities without registration under the Securities Act, subject to certain restrictions. Persons who are our affiliates (as that term is defined in Rule 144) may sell within any three-month period a number of restricted securities that does not exceed the greater of the following:

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1% of the number of our ordinary shares then outstanding, which will equal approximately million shares immediately after this offering, assuming the underwriters do not exercise their option to purchase additional ordinary shares; and

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the average weekly trading volume of our ordinary shares on the NASDAQ during the four calendar weeks preceding the date on which notice of the sale is filed with the SEC.

Such sales are also subject to manner-of-sale provisions, notice requirements and the availability of current public information about us. Persons who are not our affiliates and have owned our restricted securities for more than six months but not more than one year may sell the restricted securities without registration under the Securities Act subject to the availability of current public information about us. Persons who are not our affiliates and have beneficially owned our restricted securities for more than one year may freely sell the restricted securities without registration under the Securities Act.

Share Options

Rule 701

In general, under Rule 701 of the Securities Act as currently in effect, each of our employees, consultants or advisors who purchases our ordinary shares from us in connection with a compensatory stock or option plan or other written agreement relating to compensation is eligible to resell such ordinary shares 90 days after we

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became a reporting company under the Exchange Act in reliance on Rule 144, but without compliance with some of the restrictions, including the holding period contained in Rule 144.

Form S-8

We intend to file a registration statement on Form S-8 under the Securities Act covering all ordinary shares which are either subject to outstanding options granted prior to this offering or that may be issued pursuant to equity awards which may be granted in the future under our 2006 Share Incentive Plan or our 2013 Performance Incentive Plan. We expect to file this registration statement as soon as practicable after the date of this prospectus. Shares registered on Form S-8 generally may be sold in the open market, except to the extent that the shares are (i) held by affiliates has defined in Rule 144, who are, however, eligible to resell such ordinary shares in reliance on Rule 144 but without compliance with the holding period restriction contracted in Rule 144, or (ii) subject to vesting restrictions or lock-up or other contractual restrictions.

Registration Rights

Upon completion of this offering, the holders of 49,745,609 of our outstanding shares will be entitled to request that we register their ordinary shares under the Securities Act, following the expiration of the lockup agreements described below. For a further description of these registration rights, see “Description of Share Capital—Registration Rights.”

Lock-Up Agreements

We, our executive officers and directors and all of our existing shareholders have agreed, with exceptions, not to sell or transfer any ordinary shares or securities convertible into, exchangeable or exercisable for ordinary shares for 180 days after the date of this prospectus without first obtaining the written consent of Deutsche Bank Securities Inc. and Barclays Capital Inc. Specifically, we and these other individuals have agreed not to directly or indirectly:

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offer, pledge, sell, contract to sell, sell any option or contract to purchase, purchase any option or contract to sell, grant any option, right or warrant to purchase, lend or otherwise transfer or dispose of, directly or indirectly, any ordinary shares or any securities convertible into or exercisable or exchangeable for ordinary shares; or

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enter into any hedge or other arrangement that transfers to another, in whole or in part, any of the economic consequences of ownership of our ordinary shares.

Whether any transaction described above is to be settled by delivery of ordinary shares or such other securities, in cash or otherwise.

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TAXATION

The following is a summary of the material Cayman Islands, PRC and United States federal income tax consequences of an investment in our ordinary shares. The summary is not intended to be, nor should it be construed as, legal or tax advice to any particular prospective purchaser. The summary is based on laws and relevant interpretations thereof in effect as of the date of this prospectus, all of which are subject to change or different interpretations, possibly with retroactive effect. The discussion does not deal with all possible tax consequences relating to an investment in our ordinary shares, such as U.S. state or local tax laws, or tax laws of jurisdictions other than the Cayman Islands, the PRC and the United States. To the extent that the discussion relates to matters of Cayman Islands tax law, it represents the opinion of Conyers, Dill & Pearman, special Cayman Islands counsel to us. To the extent that the discussion relates to matters of PRC tax law, it represents the opinion of Commerce & Finance. To the extent the discussion relates to matters of current U.S. federal income tax law, and subject to the qualifications herein, it represents the opinion of O’Melveny & Myers LLP, our special U.S. counsel. You should consult your own tax advisors with respect to the consequences of acquisition, ownership and disposition of our ordinary shares.

Cayman Islands Taxation

The Cayman Islands currently levies no taxes on individuals or corporations based upon profits, income, gains or appreciation and there is no taxation in the nature of inheritance tax or estate duty or withholding tax applicable to us or to any holder of our ordinary shares. There are no other taxes likely to be material to us levied by the Government of the Cayman Islands except for stamp duties, which may be applicable on instruments executed in, or after execution brought within the jurisdiction of the Cayman Islands. No stamp duty is payable in the Cayman Islands on transfers of shares of Cayman Islands companies, except those which hold interests in land in the Cayman Islands. The Cayman Islands is not party to any double tax treaties. There are no exchange control regulations or currency restrictions in the Cayman Islands.

Pursuant to Section 6 of the Tax Concessions Law (1999 Revision) of the Cayman Islands, we have obtained an undertaking from the Governor-in-Council:

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that no law which is enacted in the Cayman Islands imposing any tax to be levied on profits or income or gains or appreciation shall apply to us or our operations; and

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that the aforesaid tax or any tax in the nature of estate duty or inheritance tax shall not be payable on our shares, debentures or other obligations.

The undertaking for us is for a period of twenty years from .

People’s Republic of China Taxation

On March 16, 2007, the National People’s Congress, the PRC legislature, enacted the Enterprise Income Tax Law, or the PRC EIT Law, which became effective on January 1, 2008, and on December 6, 2007, the State Council promulgated the Implementation Rules to the Enterprise Income Tax Law, or the Implementation Rules, which also became effective on January 1, 2008. Under the PRC EIT Law and the Implementation Rules, unless otherwise specified, foreign invested enterprises and domestic companies are subject to a uniform income tax rate of 25%. In addition, the dividends payable to foreign investors are subject to PRC withholding tax at the rate of 10% unless the foreign investor’s jurisdiction of incorporation has a tax treaty with the PRC that provides for a reduced withholding tax rate. According to the Hong Kong Tax Treaty, a company incorporated in Hong Kong, will be subject to withholding income tax at a rate of 5% on dividends it receives from its PRC subsidiary if it holds a 25% or more interest in that particular PRC subsidiary. However, the SAT promulgated Circular 601 and Announcement 30, which provide that tax treaty benefits will be denied to “conduit” or shell companies without business substance, and a beneficial ownership analysis will be used based on a “substance-over-the-form” principle to determine whether or not to grant tax treaty benefits. Therefore, it is unclear at this stage whether the reduced rate of 5% under the Hong Kong

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Tax Treaty could apply to dividends from Montage Shanghai paid to us through our Hong Kong subsidiary. See “Risk Factors — Risk Factors Related to Regulations Applicable to Us- We may not be able to obtain certain treaty benefits on dividends paid by Montage Shanghai to us through our Hong Kong Subsidiary.”

The PRC EIT Law created a new “resident enterprise” classification which if applied could treat our Cayman Islands holding company or any of our other overseas holding companies in a manner similar to a Chinese enterprise for enterprise income tax purposes. If the PRC tax authorities determine that our Cayman Islands holding company or any of our other overseas holding companies is a “resident enterprise” for PRC enterprise income tax purposes, a number of unfavorable PRC tax consequences could follow. One example is the possibility of a 10% withholding tax being imposed on dividends we pay to our non-PRC enterprise shareholders and with respect to gains derived by our non-PRC enterprise shareholders from transferring our shares. See “Risk Factors — Risk Factors Related to Regulations Applicable to Us—Under the PRC enterprise income tax law, we may be classified as a PRC “resident enterprise,” which could result in unfavorable tax consequences to us and our shareholders and have a material adverse effect on our results of operations and the value of your investment.”

United States Federal Income Taxation

This discussion describes the material U.S. federal income tax consequences of the purchase, ownership and disposition of our ordinary shares. This discussion does not address any aspect of U.S. federal gift or estate tax, or the state, local or non-U.S. tax consequences of an investment in our ordinary shares. This discussion applies only to U.S. Holders (as defined below) who beneficially own our ordinary shares as capital assets for U.S. federal income tax purposes. This discussion does not apply to you if you are a member of a class of holders subject to special rules, such as:

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dealers in securities or currencies;

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traders in securities that elect to use a mark-to-market method of accounting for securities holdings;

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banks or certain financial institutions;

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insurance companies;

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tax-exempt organizations;

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partnerships or other entities treated as partnerships or other pass-through entities for U.S. federal income tax purposes or persons holding ordinary shares through any such entities;

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regulated investments companies or real estate investment trusts;

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persons that hold ordinary shares as part of a hedge, straddle, constructive sale, conversion transaction or other integrated investment;

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persons whose functional currency for tax purposes is not the U.S. dollar;

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persons liable for alternative minimum tax; or

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persons who actually or constructively own 10% or more of the total combined voting power of all classes of our shares entitled to vote.

This discussion is based on the U.S. Internal Revenue Code of 1986, as amended, which we refer to in this discussion as the Code, its legislative history, existing and proposed regulations promulgated thereunder, published rulings and court decisions, all as of the date hereof. These laws are subject to change, possibly on a retroactive basis.

Prospective purchasers are urged to consult their own tax advisor concerning the particular U.S. federal income tax consequences to them of the purchase, ownership and disposition of our ordinary shares, as well as the consequences to them arising under the laws of any other taxing jurisdiction.

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For purposes of the U.S. federal income tax discussion below, you are a “U.S. Holder” if you beneficially own our ordinary shares and are:

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an individual citizen or resident of the United States for U.S. federal income tax purposes;

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a corporation, or other entity taxable as a corporation, that was created or organized in or under the laws of the United States or any state thereof or the District of Columbia;

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

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a trust if (a) a court within the United States is able to exercise primary supervision over its administration and one or more U.S. persons have the authority to control all substantial decisions of the trust, or (b) the trust has a valid election in effect to be treated as a U.S. person.

For U.S. federal income tax purposes, income earned through a non-U.S. or U.S. partnership or other flow-through entity is attributed to its owners. Accordingly, if a partnership or other flow-through entity holds ordinary shares, the tax treatment of the holder will generally depend on the status of the partner or other owner and the activities of the partnership or other flow-through entity.

Dividends on Ordinary Shares

Subject to the “Passive Foreign Investment Company” discussion below, the gross amount of any distributions you receive on your ordinary shares (including any withheld taxes) will generally be includible in your gross income on the day you actually or constructively receive such income as dividend income if the distributions are made from our current or accumulated earnings and profits, calculated according to U.S. federal income tax principles. We do not intend to determine our earnings and profits on the basis of U.S. federal income tax principles. Accordingly, distributions paid on our ordinary shares, if any, will generally be treated as dividend distributions for U.S. federal income tax purposes. With respect to non-corporate U.S. Holders, certain dividends received from a qualified foreign corporation may be subject to a reduced capital gains rate rather than the marginal tax rates generally applicable to ordinary income. A non-U.S. corporation is treated as a qualified foreign corporation with respect to dividends from that corporation on shares that are readily tradable on an established securities market in the United States. U.S. Treasury Department guidance indicates that our ordinary shares, which we have applied to list on the NASDAQ, will be readily tradable on an established securities market in the United States. There can be no assurance that our ordinary shares will be considered readily tradable on an established securities market in later years. Non-corporate U.S. Holders that do not meet a minimum holding period requirement during which they are not protected from the risk of loss will not be eligible for the reduced rates of taxation regardless of our status as a qualified foreign corporation. You should consult your own tax advisor as to the rate of tax that will apply to you with respect to dividend distributions, if any, you receive from us.

Dividends received on our ordinary shares will not be eligible for the dividends received deduction allowed for corporations. Dividends generally will constitute foreign source passive income for purposes of the U.S. foreign tax credit rules. You should consult your own advisor as to your ability, and the various limitations on your ability, to claim foreign tax credits in connection with the receipt of dividends.

Sales and Other Dispositions of Ordinary Shares

Subject to the “Passive Foreign Investment Company” discussion below, when you sell or otherwise dispose of our ordinary shares, you will generally recognize capital gain or loss in an amount equal to the difference between the amount realized on the sale or other disposition and your adjusted tax basis in the ordinary shares. Your adjusted tax basis will generally equal the amount you paid for the ordinary shares. Any gain or loss you recognize will be long-term capital gain or loss if your holding period in our ordinary shares is more than one year at the time of disposition. If you are a non-corporate U.S. Holder, including an individual, any such long-term capital gain will be taxed at preferential rates. The deductibility of a capital loss may be subject to various limitations. Any gain or loss recognized by you will generally be treated as U.S. source gain or loss. You should consult your own tax advisor as to your ability, and the various limitations on your ability, to claim foreign tax credits in connection with a disposition of ordinary shares.

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Passive Foreign Investment Company

If we are a passive foreign investment company or “PFIC” in any taxable year in which you hold our ordinary shares, as a U.S. Holder, you would generally be subject to adverse U.S. tax consequences, in the form of increased tax liabilities and special U.S. tax reporting requirements.

In general, we will be classified as a PFIC in any taxable year if either: (a) the average quarterly value of our gross assets that produce passive income or are held for the production of passive income is at least 50% of the average quarterly value of our total gross assets (the “asset test”) or (b) 75% or more of our gross income for the taxable year is passive income (such as certain dividends, interest or royalties). For this purpose, we will be treated as owning our proportionate share of the assets and earning our proportionate share of the income of any other corporation in which we own, directly or indirectly, at least 25% (by value) of the share. For purposes of the asset test: (a) any cash and cash invested in short-term, interest bearing, debt instruments, or bank deposits that are readily convertible into cash will generally count as producing passive income or held for the production of passive income, and (b) the total value of our assets is calculated based on our market capitalization.

We do not expect to be a PFIC for the taxable year 2013 or in the foreseeable future. Our expectation regarding our status as a PFIC is based on assumptions as to our projections of the value of our outstanding shares during the year and our use of the proceeds of the initial public offering of our ordinary shares and of other cash that we will hold and generate in the ordinary course of our business throughout taxable year 2013. Despite our expectation, there can be no assurance that we will not be a PFIC in 2013 or any future taxable year as PFIC status is tested each taxable year and will depend on the composition of our assets and income in such taxable year. In particular, in determining the average percentage value of our gross assets, the aggregate value of our assets will generally be deemed to be equal to our market capitalization (the sum of the aggregate value of our outstanding equity) plus our liabilities. Therefore, a drop in the market price of our ordinary shares and associated decrease in the value of our goodwill would cause a reduction in the value of our non-passive assets for purposes of the asset test. Accordingly, we would likely become a PFIC if our market capitalization were to decrease significantly while we hold substantial cash and cash equivalents. We could also be a PFIC for any taxable year if the gross income that we and our subsidiaries earn from investing the portion of the cash raised in our initial public offering that exceeds the immediate capital needs of our business is substantial in comparison with the gross income from our business operations. Our special U.S. counsel expresses no opinion with respect to our expectations contained in this paragraph.

If we were a PFIC for any taxable year during which you held our ordinary shares, certain adverse U.S. federal income tax rules would apply. You would generally be subject to additional taxes and interest charges on certain “excess distributions” we make and on any gain realized on the disposition or deemed disposition of your ordinary shares, regardless of whether we continue to be a PFIC in the year in which you receive an “excess distribution” or dispose of or are deemed to dispose of your ordinary shares. Distributions in respect of your ordinary shares during a taxable year would generally constitute “excess distributions” if, in the aggregate, they exceed 125% of the average amount of distributions with respect to your ordinary shares over the three preceding taxable years or, if shorter, the portion of your holding period before such taxable year.

To compute the tax on “excess distributions” or any gain, (a) the “excess distribution” or the gain would be allocated ratably to each day in your holding period for the ordinary shares, (b) the amount allocated to the current year and any tax year prior to the first taxable year in which we were a PFIC would be taxed as ordinary income in the current year, (c) the amount allocated to other taxable years would be taxable at the highest applicable marginal rate in effect for that year, and (d) an interest charge at the rate for underpayment of taxes for any period described under (c) above would be imposed on the resulting tax liability on any portion of the “excess distribution” or gain that is allocated to such period. In addition, if we were a PFIC, no distribution that you receive from us would qualify for taxation at the preferential rate discussed in the “—Dividends on Ordinary Shares” section above in the taxable year in which such distribution is made or in the preceding taxable year.

Under certain attribution rules, if we are a PFIC, you will be deemed to own your proportionate share (by value) of lower-tier PFICs, and will be subject to U.S. federal income tax on (i) a distribution on the shares of a

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lower-tier PFIC and (ii) a disposition of shares of a lower-tier PFIC, both as if you directly held the shares of such lower-tier PFIC.

If we were a PFIC in any year, you would generally be able to avoid the “excess distribution” rules described above by making a timely so-called “mark-to-market” election with respect to your ordinary shares provided our ordinary shares are “marketable.” Our ordinary shares will be “marketable” as long as they remain regularly traded on a national securities exchange, such as the NASDAQ. If you made this election in a timely fashion, you would generally recognize as ordinary income or ordinary loss the difference between the fair market value of your ordinary shares on the first day of any taxable year and your adjusted tax basis in the ordinary shares. Any ordinary income resulting from this election would generally be taxed at ordinary income rates and would not be eligible for the reduced rate of taxation discussed in the “—Dividends on Ordinary Shares” section above. Any ordinary losses would be deductible, but only to the extent of the net amount of previously included income as a result of the mark-to-market election, if any. Your basis in the ordinary shares would be adjusted to reflect any such income or loss. You should consult your own tax adviser regarding potential advantages and disadvantages to you of making a “mark-to-market” election with respect to your ordinary shares. The mark-to-market election will not be available for any lower tier PFIC that is deemed owned pursuant to the attribution rules discussed above. If you make a mark-to-market election it will be effective for the taxable year for which the election is made and all subsequent taxable years unless the ordinary shares are no longer “marketable” or the Internal Revenue Service (“IRS”) consents to the revocation. We do not intend to provide you with the information you would need to make or maintain a “Qualified Electing Fund” election and you will, therefore, not be able to make or maintain such an election with respect to your ordinary shares.

If you own our ordinary shares during any taxable year that we are a PFIC, you are required to file an annual report containing such information as the United States Treasury Department may require and may be required to file an annual IRS Form 8621. Each U.S. Holder is advised to consult with its tax advisor concerning the U.S. federal income tax consequences of purchasing, holding and disposing ordinary shares if we are or become classified as a PFIC.

U.S. information reporting and backup withholding rules

In general, dividend payments with respect to the ordinary shares and the proceeds received on the sale or other disposition of ordinary shares may be subject to information reporting to the IRS and to backup withholding. Backup withholding will not apply, however, if you (a) come within certain exempt categories and, when required, can demonstrate that fact or (b) provide a taxpayer identification number, certify as to no loss of exemption from backup withholding and otherwise comply with the applicable backup withholding rules. To establish your status as an exempt person, you will generally be required to provide certification on IRS Form W-9. Any amounts withheld from payments to you under the backup withholding rules that exceed your U.S. federal income tax liability will be allowed as a refund or a credit against your U.S. federal income tax liability, provided that you timely furnish the required information to the IRS. Certain U.S. Holders who hold “specific foreign financial assets,” including shares of a non-U.S. corporation that is not held in an account maintained by a U.S. “financial institution,” the aggregate value of which exceeds $50,000 during the tax year, may be required to attach to their tax returns for the year certain specified information. A U.S. Holder who fails to timely furnish the required information may be subject to a penalty. Each U.S. Holder is advised to consult with its tax advisor regarding the application of the U.S. information reporting rules to their particular circumstances.

PROSPECTIVE PURCHASERS OF OUR ORDINARY SHARES SHOULD CONSULT WITH THEIR OWN TAX ADVISOR REGARDING THE APPLICATION OF THE U.S. FEDERAL INCOME TAX LAWS TO THEIR PARTICULAR SITUATIONS AS WELL AS ANY TAX CONSEQUENCES RESULTING FROM PURCHASING, HOLDING OR DISPOSING OF OUR ORDINARY SHARES, INCLUDING THE APPLICABILITY AND EFFECT OF THE TAX LAWS OF ANY STATE, LOCAL OR NON-US JURISDICTION AND INCLUDING ESTATE, GIFT AND INHERITANCE LAWS.

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UNDERWRITERS

Subject to the terms and conditions of the underwriting agreement, the underwriters named below, through their representatives Deutsche Bank Securities Inc. and Barclays Capital Inc., have severally agreed to purchase from us and the selling shareholders the following respective number of ordinary shares at a public offering price less the estimated underwriting discounts and commissions set forth on the front cover page of this prospectus:


Underwriters		Number of Shares
Deutsche Bank Securities Inc.
Barclays Capital Inc.
Stifel, Nicholas & Company, Incorporated
Wells Fargo Securities, LLC
Needham & Company, LLC

Total

The underwriting agreement provides that the obligations of the several underwriters to purchase the ordinary shares offered hereby are subject to certain conditions precedent and that the underwriters will purchase all of the ordinary shares offered by this prospectus, other than those covered by the over-allotment option described below, if any of these shares are purchased.

We have been advised by the representatives of the underwriters that the underwriters propose to offer the ordinary shares to the public at the initial public offering price set forth on the front cover page of this prospectus and to dealers at a price that represents a concession not in excess of $ per share under the public offering price. The underwriters may allow, and these dealers may re-allow, a concession of not more than $ per share to other dealers. After the initial public offering, representatives of the underwriters may change the offering price and other selling terms.

We and the selling shareholders have granted to the underwriters an option, exercisable not later than 30 days after the date of this prospectus, to purchase up to additional ordinary shares at the initial public offering price less the estimated underwriting discounts and commissions set forth on the cover page of this prospectus. The underwriters may exercise this option only to cover over-allotments made in connection with the sale of the ordinary shares offered by this prospectus. To the extent that the underwriters exercise this option, each of the underwriters will become obligated, subject to conditions, to purchase approximately the same percentage of these additional ordinary shares as the number of ordinary shares to be purchased by it in the above table bears to the total number of ordinary shares offered by this prospectus. We will be obligated, pursuant to the option, to sell these additional ordinary shares to the underwriters to the extent the option is exercised. If any additional ordinary shares are purchased, the underwriters will offer the additional shares on the same terms as those on which the shares are being offered.

The underwriting discounts and commissions per share are equal to the initial public offering price per ordinary share less the amount paid by the underwriters to us per ordinary share. The underwriting discounts and commissions are % of the initial public offering price. We have agreed to pay the underwriters the following discounts and commissions, assuming either no exercise or full exercise by the underwriters of the underwriters’ over-allotment option:

Total Fees

Fee per
share

Without
Exercise of
Over-
Allotment Option

With Full
Exercise of
Over-
Allotment Option

Discounts and commissions paid by us

Discounts and commissions paid by the selling shareholders

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In addition, we estimate that our share of the total expenses of this offering, excluding underwriting discounts and commissions, will be approximately $ .

We and the selling shareholders have agreed to indemnify the underwriters against some specified types of liabilities, including liabilities under the Securities Act, and to contribute to payments the underwriters may be required to make in respect of any of these liabilities.

Each of our officers and directors, and substantially all of our shareholders, have agreed not to offer, sell, contract to sell or otherwise dispose of, or enter into any transaction that is designed to, or could be expected to, result in the disposition of any our ordinary shares or other securities convertible into or exchangeable or exercisable for ordinary shares or derivatives of our ordinary shares owned by these persons prior to this offering or ordinary shares issuable upon exercise of options or warrants held by these persons for a period of 180 days after the effective date of the registration statement of which this prospectus is a part without the prior written consent of Deutsche Bank Securities Inc. and Barclays Capital Inc. In certain instances, this consent may be given at any time without public notice. Transfers or dispositions can be made during the lock-up period in the case of gifts or for estate planning purposes where the donee signs a lock-up agreement. We have entered into a similar agreement with the representatives of the underwriters. There are no agreements between the representatives and any of our shareholders or affiliates releasing them from these lock-up agreements prior to the expiration of the 180-day period.

The representatives of the underwriters have advised us that the underwriters do not intend to confirm sales to any account over which they exercise discretionary authority. In connection with the offering, the underwriters may purchase and sell our ordinary shares in the open market. These transactions may include short sales, purchases to cover positions created by short sales and stabilizing transactions.

Short sales involve the sale by the underwriters of a greater number of shares than they are required to purchase in the offering. Covered short sales are sales made in an amount not greater than the underwriters’ option to purchase additional ordinary shares from us in the offering. The underwriters may close out any covered short position by either exercising their option to purchase additional shares or purchasing shares in the open market. In determining the source of shares to close out the covered short position, the underwriters will consider, among other things, the price of shares available for purchase in the open market as compared to the price at which they may purchase shares through the over-allotment option.

Naked short sales are any sales in excess of the over-allotment option. The underwriters must close out any naked short position by purchasing shares in the open market. A naked short position is more likely to be created if underwriters are concerned that there may be downward pressure on the price of the shares in the open market prior to the completion of the offering.

Stabilizing transactions consist of various bids for or purchases of our ordinary shares made by the underwriters in the open market prior to the completion of the offering.

The underwriters may impose a penalty bid. This occurs when a particular underwriter repays to the other underwriters a portion of the underwriting discount received by it because the representatives of the underwriters have repurchased shares sold by or for the account of that underwriter in stabilizing or short covering transactions.

Purchases to cover a short position and stabilizing transactions may have the effect of preventing or slowing a decline in the market price of our ordinary shares. Additionally, these purchases, along with the imposition of the penalty bid, may stabilize, maintain or otherwise affect the market price of our ordinary shares. As a result, the price of our ordinary shares may be higher than the price that might otherwise exist in the open market. These transactions may be effected on the NASDAQ, in the over-the-counter market or otherwise.

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Certain of the underwriters and their affiliates have provided in the past to us and our affiliates, and may provide from time to time in the future, certain commercial banking, financial advisory, investment banking and other services for us and such affiliates in the ordinary course of their business, for which they have received and may continue to receive customary fees and commissions. In addition, from time to time, certain of the underwriters and their affiliates may effect transactions for their own account or the account of customers, and hold, on behalf of themselves or their customers, long or short positions in our debt or equity securities or loans, and may do so in the future.

A prospectus in electronic format is being made available on Internet web sites maintained by one or more of the lead underwriters of this offering and may be made available on web sites maintained by other underwriters. Other than the prospectus in electronic format, the information on any underwriter’s website and any information contained in any other web site maintained by an underwriter is not part of the prospectus or the registration statement of which the prospectus forms a part.

Other than in the United States, no action has been taken by us or the underwriters that would permit a public offering of the securities offered by this prospectus in any jurisdiction where action for that purpose is required. The securities offered by this prospectus may not be offered or sold, directly or indirectly, nor may this prospectus or any other offering material or advertisements in connection with the offer and sale of any such securities be distributed or published in any jurisdiction, except under circumstances that will result in compliance with the applicable rules and regulations of that jurisdiction. Persons into whose possession this prospectus comes are advised to inform themselves about and to observe any restrictions relating to the offering and the distribution of this prospectus. This prospectus does not constitute an offer to sell or a solicitation of an offer to buy any securities offered by this prospectus in any jurisdiction in which such an offer or a solicitation is unlawful.

Pricing of this Offering

Prior to this offering, there has been no public market for our ordinary shares. Consequently, the initial public offering price of our ordinary shares will be determined by negotiation among us, the selling shareholders and the representatives of the underwriters. Among the primary factors that will be considered in determining the public offering price are:

•

prevailing market conditions;

•

our results of operations in recent periods;

•

the present stage of our development;

•

the market capitalizations and stages of development of other companies that we and the representatives of the underwriters believe to be comparable to our business; and

•

estimates of our business potential.

Notice to Prospective Investors in European Economic Area

In relation to each Member State of the European Economic Area which has implemented the Prospectus Directive (each, a “Relevant Member State”) an offer to the public of any shares which are the subject of the offering contemplated by this prospectus (the “Shares”) may not be made in that Relevant Member State except that an offer to the public in that Relevant Member State of any Shares may be made at any time under the following exemptions under the Prospectus Directive, if they have been implemented in that Relevant Member State:

(a)

to any legal entity which is a qualified investor as defined under the Prospectus Directive;

(b)

by the Managers to fewer than 100, or, if the Relevant Member State has implemented the relevant provisions of the 2010 PD Amending Directive, 150, natural or legal persons (other than qualified

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investors as defined in the Prospectus Directive) subject to obtaining the prior consent of Lead Manager for any such offer; or

(c)

in any other circumstances falling within Article 3(2) of the Prospectus Directive,

provided that no such offer of Shares shall result in a requirement for the Issuer or any Manager to publish a prospectus pursuant to Article 3 of the Prospectus Directive or supplement a prospectus pursuant to Article 16 of the Prospectus Directive.

For the purposes of this provision, the expression an “offer to the public” in relation to any Shares in any Relevant Member State means the communication in any form and by any means of sufficient information on the terms of the offer and any Shares to be offered so as to enable an investor to decide to purchase any Shares, as the same may be varied in that Member State by any measure implementing the Prospectus Directive in that Member State. The expression “Prospectus Directive” means Directive 2003/71/EC (and amendments thereto, including the 2010 PD Amending Directive, to the extent implemented in the Relevant Member State), and includes any relevant implementing measure in each Relevant Member State and the expression “2010 PD Amending Directive” means Directive 2010/73/EU.

The EEA selling restriction is in addition to any other selling restrictions set out in this prospectus.

Notice to Prospective Investors in Australia

This offering memorandum is not a formal disclosure document and has not been, nor will be, lodged with the Australian Securities and Investments Commission. It does not purport to contain all information that an investor or their professional advisers would expect to find in a prospectus or other disclosure document (as defined in the Corporations Act 2001 (Australia)) for the purposes of Part 6D.2 of the Corporations Act 2001 (Australia) or in a product disclosure statement for the purposes of Part 7.9 of the Corporations Act 2001 (Australia), in either case, in relation to the securities.

The securities are not being offered in Australia to “retail clients” as defined in sections 761G and 761GA of the Corporations Act 2001 (Australia). This offering is being made in Australia solely to “wholesale clients” for the purposes of section 761G of the Corporations Act 2001 (Australia) and, as such, no prospectus, product disclosure statement or other disclosure document in relation to the securities has been, or will be, prepared.

This offering memorandum does not constitute an offer in Australia other than to persons who do not require disclosure under Part 6D.2 of the Corporations Act 2001 (Australia) and who are wholesale clients for the purposes of section 761G of the Corporations Act 2001 (Australia). By submitting an application for our securities, you represent and warrant to us that you are a person who does not require disclosure under Part 6D.2 and who is a wholesale client for the purposes of section 761G of the Corporations Act 2001 (Australia). If any recipient of this offering memorandum is not a wholesale client, no offer of, or invitation to apply for, our securities shall be deemed to be made to such recipient and no applications for our securities will be accepted from such recipient. Any offer to a recipient in Australia, and any agreement arising from acceptance of such offer, is personal and may only be accepted by the recipient. In addition, by applying for our securities you undertake to us that, for a period of 12 months from the date of issue of the securities, you will not transfer any interest in the securities to any person in Australia other than to a person who does not require disclosure under Part 6D.2 and who is a wholesale client.

Notice to Prospective Investors in Hong Kong

The contents of this prospectus have not been reviewed by any regulatory authority in Hong Kong. You are advised to exercise caution in relation to the offer. If you are in any doubt about any of the contents of this prospectus, you should obtain independent professional advice. Please note that (i) our securities may not be

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offered or sold in Hong Kong, by means of this prospectus or any document other than to “professional investors” within the meaning of Part I of Schedule 1 of the Securities and Futures Ordinance (Cap.571, Laws of Hong Kong) (SFO) and any rules made thereunder, or in other circumstances which do not result in the document being a “prospectus” within the meaning of the Companies Ordinance (Cap.32, Laws of Hong Kong) (CO) or which do not constitute an offer or invitation to the public for the purpose of the CO or the SFO, and (ii) no advertisement, invitation or document relating to our securities may be issued or may be in the possession of any person for the purpose of issue (in each case whether in Hong Kong or elsewhere) which is directed at, or the contents of which are likely to be accessed or read by, the public in Hong Kong (except if permitted to do so under the securities laws of Hong Kong) other than with respect to the securities which are or are intended to be disposed of only to persons outside Hong Kong or only to “professional investors” within the meaning of the SFO and any rules made thereunder.

Notice to Prospective Investors in Japan

Our securities have not been and will not be registered under the Financial Instruments and Exchange Law of Japan (the Financial Instruments and Exchange Law) and our securities will not be offered or sold, directly or indirectly, in Japan, or to, or for the benefit of, any resident of Japan (which term as used herein means any person resident in Japan, including any corporation or other entity organized under the laws of Japan), or to others for re-offering or resale, directly or indirectly, in Japan, or to a resident of Japan, except pursuant to an exemption from the registration requirements of, and otherwise in compliance with, the Financial Instruments and Exchange Law and any other applicable laws, regulations and ministerial guidelines of Japan.

Notice to Prospective Investors in Singapore

This document has not been registered as a prospectus with the Monetary Authority of Singapore. Accordingly, this document and any other document or material in connection with the offer or sale, or invitation for subscription or purchase, of our securities may not be circulated or distributed, nor may our securities be offered or sold, or be made the subject of an invitation for subscription or purchase, whether directly or indirectly, to persons in Singapore other than (i) to an institutional investor under Section 274 of the Securities and Futures Act, Chapter 289 of Singapore (the “SFA”), (ii) to a relevant person pursuant to Section 275(1), or any person pursuant to Section 275(1A), and in accordance with the conditions specified in Section 275, of the SFA, or (iii) otherwise pursuant to, and in accordance with the conditions of, any other applicable provision of the SFA.

Where our securities are subscribed or purchased under Section 275 by a relevant person which is:

(a)

a corporation (which is not an accredited investor (as defined in Section 4A of the SFA)) the sole business of which is to hold investments and the entire share capital of which is owned by one or more individuals, each of whom is an accredited investor; or

(b)

a trust (where the trustee is not an accredited investor) whose sole purpose is to hold investments and each beneficiary of the trust is an individual who is an accredited investor, securities (as defined in Section 239(1) of the SFA) of that corporation or the beneficiaries’ rights and interest (howsoever described) in that trust shall not be transferred within six months after that corporation or that trust has acquired our securities pursuant to an offer made under Section 275 except:

(1)

to an institutional investor or to a relevant person defined in Section 275(2) of the SFA, or to any person arising from an offer referred to in Section 275(1A) or Section 276(4)(i)(B) of the SFA;

(2)

where no consideration is or will be given for the transfer;

(3)

where the transfer is by operation of law; or

(4)

as specified in Section 276(7) of the SFA.

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Notice to Prospective Investors in Switzerland

The Prospectus does not constitute an issue prospectus pursuant to Article 652a or Article 1156 of the Swiss Code of Obligations (“CO”) and the shares will not be listed on the SIX Swiss Exchange. Therefore, the Prospectus may not comply with the disclosure standards of the CO and/or the listing rules (including any prospectus schemes) of the SIX Swiss Exchange. Accordingly, the shares may not be offered to the public in or from Switzerland, but only to a selected and limited circle of investors, which do not subscribe to the shares with a view to distribution.

Notice to Prospective Investors in the United Kingdom

This prospectus is only being distributed to and is only directed at: (1) persons who are outside the United Kingdom; (2) investment professionals falling within Article 19(5) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005 (the “Order”); or (3) high net worth companies, and other persons to whom it may lawfully be communicated, falling within Article 49(2)(a) to (d) of the Order (all such persons falling within (1)-(3) together being referred to as “relevant persons”). The shares are only available to, and any invitation, offer or agreement to subscribe, purchase or otherwise acquire such shares will be engaged in only with, relevant persons. Any person who is not a relevant person should not act or rely on this prospectus or any of its contents.

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ENFORCEABILITY OF CIVIL LIABILITIES

Our ultimate holding company, Montage Technology Group Limited, is registered under the laws of the Cayman Islands as an exempted company with limited liability. Montage Technology Group Limited is registered in the Cayman Islands because of certain benefits associated with being a Cayman Islands company, such as political and economic stability, an effective judicial system, a favorable tax system, the absence of foreign exchange control or currency restrictions and the availability of professional and support services. However, the Cayman Islands has a less developed body of securities laws as compared to the United States and provides protections for investors to a significantly lesser extent. In addition, Cayman Islands companies may not have standing to sue before the federal courts of the United States.

A significant portion of our assets and operations are located outside the United States. In addition, some of our directors and officers are nationals or residents of jurisdictions other than the United States and a substantial portion of their assets may be located outside the United States. As a result, it may be difficult for investors to effect service of process within the United States upon us or these persons, or to enforce against us or them judgments obtained in U.S. courts, including judgments predicated upon the civil liability provisions of the securities laws of the United States or any state in the United States.

Conyers Dill & Pearman (Cayman) Limited, our counsel as to Cayman Islands law, and Commerce & Finance Law Offices, our counsel as to PRC law, have advised us that there is uncertainty as to whether the courts of the Cayman Islands or China would, respectively, (i) recognize or enforce judgments of U.S. courts obtained against us or our directors or officers predicated upon the civil liability provisions of the securities laws of the United States or any state in the United States, or (ii) entertain original actions brought in the Cayman Islands or China against us or our directors or officers predicated upon the civil liability provisions of the securities laws of the United States or any state in the United States.

Conyers Dill & Pearman (Cayman) Limited has informed us that the uncertainty with regard to Cayman Islands law relates to whether a judgment obtained from the U.S. courts under civil liability provisions of the securities law will be determined by the courts of the Cayman Islands as penal or punitive in nature. The courts of the Cayman Islands may not recognize or enforce such judgments against a Cayman company, and because such a determination has not yet been made by a court of the Cayman Islands, it is uncertain whether such civil liability judgments from U.S. courts would be enforceable in the Cayman Islands. Conyers Dill & Pearman (Cayman) Limited has further advised us that a final and conclusive judgment in the federal or state courts of the United States under which a sum of money is payable, other than a sum payable in respect of taxes, fines, penalties or similar charges, may be subject to enforcement proceedings as a debt in the courts of the Cayman Islands under the common law doctrine of obligation, provided that (a) such federal or state courts of the United States had proper jurisdiction over the parties subject to such judgment; (b) such federal or state courts of the United States did not contravene the rules of natural justice of the Cayman Islands; (c) such judgment was not obtained by fraud; (d) the enforcement of the judgment would not be contrary to the public policy of the Cayman Islands; (e) no new admissible evidence relevant to the action is submitted prior to the rendering of the judgment by the courts of the Cayman Islands; and (f) there is due compliance with the correct procedures under the laws of the Cayman Islands.

Commerce & Finance Law Offices has further advised us that the recognition and enforcement of foreign judgments are provided for under PRC Civil Procedure Law. Under the PRC Civil Procedure Law, courts in China may recognize and enforce foreign judgments pursuant to treaties between China and the country where the judgment is rendered or based on reciprocity arrangements for the recognition and enforcement of foreign judgments between jurisdictions. China does not have any treaties or other arrangements that provide for reciprocal recognition and enforcement of foreign judgments with the United States or the Cayman Islands. As a result, it is generally difficult to recognize and enforce in China a judgment rendered by a court in either of these two jurisdictions.

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LEGAL MATTERS

Certain matters of United States Federal and New York State law will be passed upon for us by O’Melveny & Myers LLP. Pillsbury Winthrop Shaw Pittman LLP, Palo Alto, California is acting as counsel to the underwriters in connection with certain legal matters related to the ordinary shares being offered by this prospectus. The validity of the ordinary shares offered in this offering will be passed upon for us by Conyers Dill & Pearman (Cayman) Limited. Legal matters as to PRC law will be passed upon for us by Commerce & Finance, and will be passed upon for the underwriters by Fangda Partners.

EXPERTS

The consolidated financial statements of Montage Technology Group Limited as of December 31, 2011 and 2012 and for each of the three years in the period ended December 31, 2012 included in this prospectus have been so included in reliance on the report of PricewaterhouseCoopers Zhong Tian CPAs Limited Company, an independent registered public accounting firm, given on the authority of said firm as experts in auditing and accounting.

WHERE YOU CAN FIND MORE INFORMATION

We have filed a registration statement on Form S-1 under the Securities Act with the SEC with respect to the ordinary shares to be sold in this offering. This prospectus, which constitutes part of the registration statement, does not include all of the information contained in the registration statement and the exhibits and schedules thereto. You should refer to the registration statement and its exhibits and schedules for additional information. Whenever we make reference in this prospectus to any of our contracts, agreements or other documents, the references are not necessarily complete and you should refer to the exhibits attached to the registration statement for copies of the actual contract, agreement or other document.

You can read our SEC filings, including the registration statement and the exhibits and schedules thereto, at the SEC’s website at www.sec.gov. You may also read and copy any document we file with the SEC at its public reference facilities at 100 F Street, N.E., Washington, DC 20549. You may also obtain copies of the documents at prescribed rates by writing to the Public Reference Section of the SEC at 100 F Street, N.E., Washington, DC 20549. Please call the SEC at 1-800-SEC-0330 for further information on the operation of the public reference facilities.

Upon completion of this offering, we will be subject to the informational requirements of the Exchange Act and will file annual, quarterly and current reports, proxy statements and other information with the SEC. You are able to inspect and copy these reports and other information at the public reference facilities maintained by the SEC at the address noted above. You are also able to inspect them without charge at the SEC’s website.

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Montage Technology Group Limited

Index to Consolidated Financial Statements


	Page
Report of Independent Registered Public Accounting Firm		F-2
Consolidated Balance Sheets as of December 31, 2011 and 2012		F-3
Consolidated Statements of Operations and Comprehensive Income (Loss) for the year ended December 31, 2010, 2011 and 2012		F-4
Consolidated Statements of Changes in Convertible Preferred Stock and Stockholders’ Deficit for the year ended December 31, 2010, 2011 and 2012		F-5
Consolidated Statements of Cash Flows for the year ended December 31, 2010, 2011 and 2012		F-6
Notes to Consolidated Financial Statements		F-7

F-1

Report of Independent Registered Public Accounting Firm

To the board of directors and stockholders of Montage Technology Group Limited:

In our opinion, the accompanying consolidated balance sheets and related consolidated statements of operations and comprehensive income (loss), changes in convertible preferred stock and stockholders’ deficit and cash flows present fairly, in all material respects, the financial position of Montage Technology Group Limited and its subsidiaries (the “Company”) at December 31, 2012 and 2011, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 2012 in conformity with accounting principles generally accepted in the United States of America. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these statements 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, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

/s/ PricewaterhouseCoopers Zhong Tian CPAs Limited Company

Shanghai, the People’s Republic of China

April 5, 2013

F-2

Montage Technology Group Limited

Consolidated Balance Sheets

(Dollars in thousands, except share and per share data)


	December 31,						Pro Forma December 31, 2012
	2011			2012			Pro Forma December 31, 2012
	(in thousands)						Unaudited (Note 17)
Assets
Current assets:
Cash and cash equivalents	$	23,343		$	21,580
Short term investments		—			6,472
Accounts receivable, net		5,924			7,903
Inventories		6,981			11,116
Prepaid expenses and other current assets		1,798			2,000
Current deferred tax assets		420			338

Total current assets		38,466			49,409

Property and equipment, net		1,015			2,284
Acquired intangible asset, net		94			1,496
Deferred tax assets		291			330
Deferred offering costs		—			283

Total assets	$	39,866		$	53,802

Liabilities, Convertible Preferred Shares and Stockholders’ Deficit
Current liabilities:
Accounts payable	$	6,855		$	3,719
Short term loans		2,063			1,591
Accrued liabilities		8,091			9,108
Deferred margin, net		5,147			1,200
Income tax payable		42			261
Current deferred tax liabilities		—			34

Total current liabilities		22,198			15,913

Long-term tax liabilities		3,422			4,295

Total liabilities	$	25,620		$	20,208

Commitments and contingencies (Note 14)

Convertible Preferred Share:
Series A convertible preferred shares, $0.005 par value; 12,000,000 shares authorized; 12,000,000 issued and outstanding as of December 31, 2011 and 2012, respectively; none outstanding on a pro-forma basis as of December 31, 2012 (Liquidation value: $6,000 and $6,000 as of December 31, 2011 and 2012)	$	6,000		$	6,000
Series B convertible preferred shares, $0.005 par value; 11,703,540 shares authorized; 10,639,608 issued and outstanding as of December 31, 2011 and 2012, respectively; none outstanding on a pro-forma basis as of December 31, 2012 (Liquidation value: $13,092, and $13,092 as of December 31, 2011 and 2012)		17,020			17,020
Series B-1 convertible preferred shares, $0.005 par value; 11,379,273 shares authorized; 10,123,189 issued and outstanding as of December 31, 2011 and 2012, respectively; none outstanding on a pro-forma basis as of December 31, 2012 (Liquidation value: $16,191 and $16,191 as of December 31, 2011 and 2012)		21,048			21,048
Series B-2 convertible preferred shares, $0.005 par value; 8,928,786 shares authorized; 7,098,523 issued and outstanding as of December 31, 2011 and 2012, respectively; none outstanding on a pro-forma basis as of December 31, 2012 (Liquidation value: $7,947 and $7,947 as of December 31, 2011 and 2012)		10,254			10,309

Stockholders’ deficit:
Ordinary Shares, $0.005 par value; 67,011,599 shares authorized; 10,734,105, and 11,009,655 and issued and outstanding at December 31, 2011 and 2012, respectively		54			55
Additional paid-in capital		—			1,010
Accumulated comprehensive income		1,810			1,811
Statutory reserve		610			740
Accumulated deficit		(42,550	)		(24,399	)

Total stockholders’ deficit		(40,076	)		(20,783	)

Total liabilities, convertible preferred share and stockholders’ deficit	$	39,866		$	53,802

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

F-3

Montage Technology Group Limited

Consolidated Statements of Operations and Comprehensive Income (Loss)

(Dollars in thousands, except share and per share data)


	Year Ended December 31,
	2010			2011			2012
	(in thousands except share and per share data)
Revenue	$	29,078		$	50,338		$	78,245
Cost of revenue		(21,248	)		(22,840	)		(31,736	)

Gross profit		7,830			27,498			46,509

Operating expense:
Research and development		(11,078	)		(13,651	)		(17,568	)
Sales, general and administrative		(5,046	)		(5,895	)		(9,792	)

Total operating expense		(16,124	)		(19,546	)		(27,360	)

Income (loss) from operations		(8,294	)		7,952			19,149
Interest income (expense), net		(44	)		(36	)		207
Fair value change in warrant liability		(37	)		—			—
Other income (expense), net		(114	)		(307	)		153

Income (loss) before income taxes		(8,489	)		7,609			19,509
Provision for income tax		(54	)		(2,637	)		(1,228	)

Net income (loss)	$	(8,543	)	$	4,972		$	18,281

Other comprehensive income
Cumulative translation adjustment		276			507			1

Comprehensive income (loss)	$	(8,267	)	$	5,479		$	18,282

Accretion for Series B convertible preferred shares		(960	)		(470	)		—
Accretion for Series B-1 convertible preferred shares		(1,274	)		(623	)		—
Accretion for Series B-2 convertible preferred shares		(279	)		(54	)		(55	)
Allocation to preferred shareholders		—			(3,748	)		(15,112	)

Net Income (loss) attributable to ordinary shareholders—Basic	$	(11,056	)	$	77		$	3,114
Undistributed earnings re-allocated to common stockholders		—			22			1,059

Net Income (loss) attributable to ordinary shareholders—Diluted	$	(11,056	)	$	99		$	4,173

Net income (loss) per share:
Basic	$	(1.06	)	$	0.01		$	0.29

Diluted	$	(1.06	)	$	0.01		$	0.26

Weighted-average shares used in computing net income (loss) per share:
Basic		10,393,746			10,650,479			10,798,107

Diluted		10,393,746			14,810,976			15,916,704

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

F-4

Montage Technology Group Limited

Consolidated Statements of Changes in Convertible Preferred Stock and Stockholders’ Deficit

(Dollars in thousands, except share amounts)


	Series A Convertible Preferred Share				Series B Convertible Preferred Share				Series B1 Convertible Preferred Share				Series B2 Convertible Preferred Share				Subscription receivable Amount			Total Preferred Share Amount		Ordinary Shares				Additional Paid-in Capital Amount			Statutory reserve Amount		Accumulated Other Comprehensive Income Amount		Accumulated Deficit Amount			Total Stockholders’ Equity (Deficit) Amount
	Shares		Amount		Shares		Amount		Shares		Amount		Shares		Amount		Subscription receivable Amount			Total Preferred Share Amount		Shares		Amount		Additional Paid-in Capital Amount			Statutory reserve Amount		Accumulated Other Comprehensive Income Amount		Accumulated Deficit Amount			Total Stockholders’ Equity (Deficit) Amount
Balance as of January 1, 2010		12,000,000	$	6,000		10,639,608	$	15,590		10,123,189	$	19,151		4,000,456	$	6,383	$	(42	)	$	47,082		10,162,855	$	51	$	217		$	—	$	1,027	$	(36,427	)	$	(35,132	)
Issuance of ordinary shares in connection with stock option exercises		—		—		—		—		—		—		—		—		—			—		35,417		—		5			—		—		—			5
Vesting of ordinary shares issued for early exercised options		—		—		—		—		—		—		—		—		—			—		325,000		2		28			—		—		—			30
Issuance of Series B-2 convertible preferred share in connection with warrant exercises		—		—		—		—		—		—		3,098,067		3,538		—			3,538		—		—		—			—		—		—			—
Collection of Series B-2 convertible preferred shares consideration		—		—		—		—		—		—		—		—		42			42		—		—		—			—		—		—			—
Accretion to redemption value of convertible preferred shares		—		—		—		960		—		1,274		—		279		—			2,513		—		—		(1,028	)		—		—		(1,485	)		(2,513	)
Share-based compensation		—		—		—		—		—		—		—		—		—			—		—		—		778			—		—		—			778
Foreign currency translation adjustment		—		—		—		—		—		—		—		—		—			—		—		—		—			—		276		—			276
Net loss for the year		—		—		—		—		—		—		—		—		—			—		—		—		—			—		—		(8,543	)		(8,543	)

Balance as of December 31, 2010		12,000,000		6,000		10,639,608		16,550		10,123,189		20,425		7,098,523		10,200		—			53,175		10,523,272		53		—			—		1,303		(46,455	)		(45,099	)

Issuance of ordinary shares in connection with stock option exercises		—		—		—		—		—		—		—		—		—			—		153,333		1		42			—		—		—			43
Vesting of ordinary shares issued for early exercised options		—		—		—		—		—		—		—		—		—			—		57,500		—		17			—		—		—			17
Accretion to redemption value of convertible preferred shares		—		—		—		470		—		623		—		54		—			1,147		—		—		(690	)		—		—		(457	)		(1,147	)
Share-based compensation		—		—		—		—		—		—		—		—		—			—		—		—		631			—		—		—			631
Foreign currency translation adjustment		—		—		—		—		—		—		—		—		—			—		—		—		—			—		507		—			507
Appropriations to statutory reserves		—		—		—		—		—		—		—		—		—			—		—		—		—			610		—		(610	)		—
Net income for the year		—		—		—		—		—		—		—		—		—			—		—		—		—			—		—		4,972			4,972

Balance as of December 31, 2011		12,000,000		6,000		10,639,608		17,020		10,123,189		21,048		7,098,523		10,254		—			54,322		10,734,105		54		—			610		1,810		(42,550	)		(40,076	)

Issuance of ordinary shares in connection with stock option exercises		—		—		—		—		—		—		—		—		—			—		265,550		1		67			—		—		—			68
Vesting of ordinary shares issued for early exercised options		—		—		—		—		—		—		—		—		—			—		10,000		—		9			—		—		—			9
Accretion to redemption value of convertible preferred shares		—		—		—		—		—		—		—		55		—			55		—		—		(55	)		—		—		—			(55	)
Share-based compensation		—		—		—		—		—		—		—		—		—			—		—		—		989			—		—		—			989
Foreign currency translation adjustment		—		—		—		—		—		—		—		—		—			—		—		—		—			—		1		—			1
Appropriations to statutory reserves		—		—		—		—		—		—		—		—		—			—		—		—		—			130		—		(130	)		—
Net income for the year		—		—		—		—		—		—		—		—		—			—		—		—		—			—		—		18,281			18,281

Balance as of December 31, 2012		12,000,000	$	6,000		10,639,608	$	17,020		10,123,189	$	21,048		7,098,523	$	10,309	$	—		$	54,377		11,009,655	$	55	$	1,010		$	740	$	1,811	$	(24,399	)	$	(20,783	)

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

F-5

Montage Technology Group Limited

Consolidated Statements of Cash Flows

(Dollars in thousands)


	Year Ended December 31,
	2010			2011			2012
	(in thousands)
Cash flows from operating activities
Net income (loss)	$	(8,543	)	$	4,972		$	18,281
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:
Depreciation and amortization		813			583			1,240
Stock-based compensation		778			631			989
Deferred income taxes		(22	)		(660	)		77
Investment income from short-term investments		—			—			(141	)
Inventory write-downs		1,561			545			522
Fair value changes in warrant liability		37			—			—
Writedown of prepaid expenses and other current assets		755			—			—
Exchange loss		269			495			126
Changes in assets and liabilities:
Accounts receivable		3,624			(4,433	)		(1,979	)
Inventories		437			(5,140	)		(4,654	)
Prepaid expenses and other assets		(823	)		41			(94	)
Accounts payable		(396	)		4,146			(3,139	)
Tax payable		76			3,296			1,092
Deferred margin, net		(1,151	)		4,319			(3,947	)
Other payables and accruals		1,648			2,392			925

Net cash provided by (used in) operating activities		(937	)		11,187			9,298

Cash flows from investing activities
Purchases of property and equipment		(734	)		(648	)		(2,109	)
Purchase of intangible assets		(90	)		(159	)		(1,900	)
Prepayment for acquisition		—			—			(26	)
Purchase of short-term investments		—			—			(11,232	)
Proceeds from maturities of short-term investments		—			—			4,870

Net cash used in investing activities		(824	)		(807	)		(10,397	)

Cash flows from financing activities
Proceeds from exercise of options		5			43			68
Proceeds from early exercise of options		—			18			—
Proceeds from issuance of Series B-2 convertible preferred shares		42			—			—
Proceeds from exercise of warrants		1,545			—			—
Proceeds from borrowings from bank		3,843			3,087			1,578
Repayment for loans		(3,020	)		(3,784	)		(2,056	)
Cash paid for initial public offering cost		—			—			(143	)

Net cash provided by (used in) financing activities		2,415			(636	)		(553	)

Effect of exchange rate changes on cash		131			281			(111	)

Net increase (decrease) in cash and cash equivalents		785			10,025			(1,763	)
Cash and cash equivalents at beginning of period		12,533			13,318			23,343

Cash and cash equivalents at end of period	$	13,318		$	23,343		$	21,580

Supplemental Cash Flow Information
Income taxes paid	$	—		$	—		$	62
Interest paid		112			147			103
Non-cash Investing and Financing Activities
Accounts payable for acquisition of property and equipment		—			2			87
Accounts payable for acquisition of intangible assets		99			—			—
Vesting of ordinary shares issued for early exercised options		30			17			9
Series B-2 convertible preferred shares issued upon warrant exercise		1,989			—			—
Accrued initial public offering cost		—			—			140

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

F-6

Montage Technology Group Limited

Notes to Consolidated Financial Statements

(Dollars in thousands except share and per share data)

1. Organization and Summary of Significant Accounting Policies

Montage Technology Group Limited (the “Company”) was incorporated as an international business company with limited liability under International Business Companies Act, 1984 of the British Virgin Islands on March 29, 2004 and continued to, and registered in the Cayman Islands as an exempted company on April 24, 2006. The Company conducts business in several countries including China, Hong Kong, Taiwan and the United States through its wholly owned subsidiaries. As of December 31, 2012, the Company had 418 employees, the significant majority of which are based in China.

The Company is a global fabless provider of analog and mixed signal semiconductor solutions currently addressing the home entertainment and cloud computing markets. The foundation of its technology platform is the Company’s ability to design high performance, low power semiconductors by using its proprietary building blocks which include radio frequency and analog front end solutions, digital signal processors and high speed interfaces. In the home entertainment market, the Company’s technology platform enables it to design highly integrated end-to-end solutions with customized software for set-top boxes. The Company’s solutions optimize signal processing performance under demanding operating conditions typically found in emerging market environments. In the cloud computing market, the Company offers high performance, low power memory interface solutions that enable memory intensive server applications.

a.	Basis of Presentation

The consolidated financial statements include the accounts of the Company and all of its subsidiaries. All intercompany transactions have been eliminated upon consolidation. The consolidated financial statements have been prepared in conformity with generally accepted accounting principles in the United States (“U.S. GAAP”). The Company’s fiscal year end is December 31.

b.	Use of Estimates

The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amount of assets and liabilities and disclosures of contingent assets and liabilities at the date of the financial statements, and the reported amounts of net revenue and expenses during the reporting period. Actual results could differ from those estimates. Significant accounting estimates reflected in the Company’s consolidated financial statements mainly include share-based compensation, allowance for doubtful accounts, inventory write-down, allowance for deferred tax assets, provision for uncertain tax positions, and estimated useful lives of equipment and intangible assets.

c.	Cash and Cash Equivalents

The Company considers all cash on demand and time deposits with original maturities of less than three months to be cash and cash equivalents.

d.	Short-term Investments

Highly liquid investments with original maturities of greater than three months and less than one year are classified as short-term investments. For investments in financial instruments with a variable interest rate indexed to the performance of underlying assets, the Company elected the fair value method at the date of initial recognition and remeasured these investments subsequently at fair value. Changes in the fair value are reflected in the consolidated statements of operations and comprehensive income (loss).

F-7

Montage Technology Group Limited

Notes to Consolidated Financial Statements—(Continued)

(Dollars in thousands except share and per share data)

e.	Fair Market Value of Financial Instruments

Fair value reflects the price that would be received from selling an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. When determining the fair value measurements for assets and liabilities required or permitted to be recorded at fair value, the Company considers the principal or most advantageous market in which it would transact and considers assumptions that market participants would use when pricing the assets or liabilities.

The Company applies a fair value hierarchy that requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. A financial instrument’s categorization within the fair value hierarchy is based upon the lowest level of input that is significant to the fair value measurement. This guidance specifies a hierarchy of valuation techniques, which is based on whether the inputs into the valuation technique are observable or unobservable. The hierarchy is as follows:

Level 1—Valuation techniques in which all significant inputs are unadjusted quoted prices from active markets for assets or liabilities that are identical to the assets or liabilities being measured.

Level 2—Valuation techniques in which significant inputs include quoted prices from active markets for assets or liabilities that are similar to the assets or liabilities being measured and/or quoted prices for assets or liabilities that are identical or similar to the assets or liabilities being measured from markets that are not active. Also, model-derived valuations in which all significant inputs and significant value drivers are observable in active markets are Level 2 valuation techniques.

Level 3—Valuation techniques in which one or more significant inputs or significant value drivers are unobservable. Unobservable inputs are valuation technique inputs that reflect the Company’s own assumptions about the assumptions that market participants would use in pricing an asset or liability.

The fair value guidance describes three main approaches to measure the fair value of assets and liabilities: (1) market approach, (2) income approach and (3) cost approach. The market approach uses prices and other relevant information generated from market transactions involving identical or comparable assets or liabilities. The income approach uses valuation techniques to convert future amounts to a single present value amount. The measurement is based on the value indicated by current market expectations about those future amounts. The cost approach is based on the amount that would currently be required to replace an asset.

When available, the Company uses quoted market prices to determine the fair value of an asset or liability. If quoted market prices are not available, the Company will measure fair value using valuation techniques that use, when possible, current market-based or independently sourced market parameters, such as interest rates and currency rates.

The carrying amount reflected in the balance sheet for cash and cash equivalents, accounts receivable, prepaid and other current assets, accounts payable, accrued expenses and other current liabilities, approximate their fair value due to the short-term nature of these financial instruments. The fair market value of outstanding warrants that were exercised to purchase convertible preferred shares in June 2010 was classified as Level 3 financial instruments.

There were no financial assets and liabilities classified as Level 3 financial instruments as of December 31, 2011 and 2012.

F-8

Montage Technology Group Limited

Notes to Consolidated Financial Statements—(Continued)

(Dollars in thousands except share and per share data)

The following table sets forth the financial instruments, measured at fair value by level within the fair value hierarchy as of December 31, 2011:


			Fair value measurements at reporting date using
Items	As of December 31, 2011		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Cash	$	16,438	$	16,438	$	—	$	—
Time deposits		6,905		6,905		—		—

	$	23,343	$	23,343	$	—	$	—

The following table sets forth the financial instruments, measured at fair value by level within the fair value hierarchy as of December 31, 2012:


			Fair value measurements at reporting date using
Items	As of December 31, 2012		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Cash	$	12,175	$	12,175	$	—	$	—
Time deposits		9,405		9,405		—		—
Short-term investments		6,472		—		6,472		—

	$	28,052	$	21,580	$	6,472	$	—

As of December 31, 2012, the investments are issued by a bank with a variable interest rate indexed to performance of underlying assets. Since these investments’ maturity dates are within one year, they are classified as short-term investments. To estimate the fair value of the short-term investments, the Company refers to the quoted rate of return provided by the bank at the end of each period using the discounted cash flow method. The Company classifies the valuation techniques that use these inputs as Level 2 of fair value measurements. For the year ended December 31, 2012, the Company recorded in the consolidated statements of operations and comprehensive income (loss) change in the fair value of short-term investments in the amount of $141.

For changes in the fair value of warrant liabilities for the year ended December 31, 2010 and assumptions used for the fair value measurement of the Level 3 warrant liabilities, please see Note 9.

f.	Concentration of Credit Risks

Financial instruments that potentially subject the Company to significant concentration of credit risk consist primarily of cash and cash equivalents and accounts receivable.

As of December 31, 2011 and 2012, substantially all of the Company’s cash and cash equivalents and short-term investments were held by reputable financial institutions in the jurisdictions where the Company and its subsidiaries are located. The Company believes that it is not exposed to unusual risks as these financial institutions have high credit quality. The Company has not experienced any losses on its deposits of cash and cash equivalents, and short-term investments.

F-9

Montage Technology Group Limited

Notes to Consolidated Financial Statements—(Continued)

(Dollars in thousands except share and per share data)

The following table summarizes the percentage of the Company’s revenue and accounts receivable represented by distributors and customers with balances over 10% of total revenue for the years ended December 31, 2010, 2011 and 2012, and over 10% of accounts receivable as of December 31, 2011 and 2012, respectively:


	Year Ended December 31,
Revenue	2010			2011			2012
Company A		21	%		33	%		9	%
Company B		19	%		9	%		5	%
Company C		33	%		36	%		18	%
Company D		0	%		0	%		50	%


	As of December 31,
Accounts receivable	2011			2012
Company B		18	%		1	%
Company D		68	%		89	%

The Company establishes credit limits for each distributor and customer and reviews such limits prior to product shipment. The Company has not experienced any credit loss from its distributors and customers.

g.	Accounts Receivable and Allowance for Doubtful Accounts

The Company records its accounts receivable as invoiced. The Company performs ongoing assessments of the credit worthiness of its customers. The Company will establish an allowance for doubtful accounts based upon its assessment of the collectability of specific customer accounts. There was no allowance for doubtful accounts or any write-offs of accounts receivable for the years ended December 31, 2010, 2011 and 2012.

h.	Inventories

Inventories include work in progress and finished goods and are stated at the lower of cost or market. Cost is determined on a first-in, first-out basis. Inventory reserves are established based on estimated obsolescence or marketability of the specified inventory. The reserve that is established is equal to the difference between the cost of the inventory and the estimated realized value based upon management assumptions. These assumptions include estimates of future demand and market conditions in which the product is sold. Once the inventory is written down, a new cost basis is established and it is not reversed.

i.	Property and Equipment

Property and equipment are stated at cost less accumulated depreciation and amortization. Depreciation and amortization is provided on property and equipment over the estimated useful lives ranging from three to five years on a straight-line basis. Leasehold improvements are amortized on a straight-line basis over the shorter of their estimated useful lives or lease terms. Repairs and maintenance are charged to expense as incurred. Useful lives by asset category are as follows:


Asset Category		Years
Office equipment		3-7 years
Leasehold improvements		Shorter of lease term or estimated useful life
Equipment		3-5 years
Furniture and fixtures		3-7 years

F-10

Montage Technology Group Limited

Notes to Consolidated Financial Statements—(Continued)

(Dollars in thousands except share and per share data)

j.	Intangible assets

Intangible assets include acquired assembled workforce and licenses and are amortized on a straight-line basis over their estimated useful lives, which range from 18 to 36 months.

k.	Impairment of long-lived assets and intangible assets

For long-lived assets including amortizable intangible assets, the Company evaluates for impairment whenever events or changes (triggering events) indicate that the carrying amount of an asset may no longer be recoverable. The Company assesses the recoverability of the long-lived assets by comparing the carrying value of the long-lived assets to the estimated undiscounted future cash flows expected to be received from use of the assets and their eventual disposition. Such assets are considered to be impaired if the sum of the expected undiscounted cash flows is less than the carrying amount of the assets. The impairment to be recognized is measured by the amount by which the carrying amount of the assets exceeds the fair value of the assets. There were no impairments for long-lived assets and intangible assets for the years ended December 31, 2010, 2011 and 2012.

l.	Revenue Recognition

The Company’s revenue is generated from the sale of its semiconductor solutions sold into the home entertainment and cloud computing markets. In the home entertainment market, the Company sells set-top box solutions which consist of highly integrated semiconductors and embedded software. The Company does not deliver software as a separate product in connection with the sale of the Company’s solutions nor is any software upgrade offered after the sale of the Company’s solutions.

The Company recognizes revenue only when all of the following criteria are met: (i) persuasive evidence of an arrangement exists, (ii) delivery has occurred, (iii) the price to the customer is fixed or determinable, and (iv) collection of the resulting receivable is reasonably assured.

The Company sells substantially all of its set-top solutions through third-party independent distributors under agreements allowing for pricing credits and/or rights of return. It sells substantially all of its memory interface products to memory module manufacturers. For direct sales to end customers, the Company recognizes revenue at the time of shipment to its end customers when all of the above criteria are met. For sales through distributors, the Company defers the recognition of revenue and related product costs until the sale and delivery by the distributor to the end customer occurs because returns or price adjustments cannot be reliably estimated due to rapid changes in technology, consumer preferences and prices. Upon shipment to the distributor, the Company records an accounts receivable from the distributors based on the amount it is entitled to bill the distributors according to contractual arrangements. This amount less related costs of products delivered is recorded as deferred margin, net on the consolidated balance sheet (See Note 1.n below). If the distributors’ margin to the end customer is greater/lower than the distributor’s margin agreed in the contractual agreement, the distributor will receive a debit/credit for the difference.

The Company does not accept product returns from customers except for returns to satisfy warranty claims (See Note 1.o below).

F-11

Montage Technology Group Limited

Notes to Consolidated Financial Statements—(Continued)

(Dollars in thousands except share and per share data)

m.	Cost of Revenue

Cost of revenue includes cost of materials, such as wafers processed by third-party foundries, cost associated with packaging and assembly, test and shipping, cost of personnel, including stock-based compensation, logistics and quality assurance, warranty cost, and write down of inventories.

n.	Deferred Margin, Net

Deferred margin, net consists of deferred revenue attributable to product shipment to distributor which has been invoiced and will be held by the distributor, less the associated cost of the products shipped which will be recognized when the distributor sells the products to the end customers.

o.	Warranty

The Company provides a one-year product warranty, although it may offer a longer period for certain customers. The Company establishes a reserve for the estimated cost of the product warranty at the time revenue is recognized. The reserves established are regularly monitored based upon historical experiences and any actual claims are charged against the reserve. Warranty reserves are recorded as a cost of net revenue. The warranty cost incurred during the years ended December 31, 2010, 2011 and 2012 were $211, $75 and $255, respectively.

p.	Research and Development Expense

Research and development costs are expensed when incurred and consist primarily of personnel-related expenses, including salaries, bonuses, stock-based compensation and employee benefits. Research and development expense also includes new product engineering mask costs, prototype integrated circuit packaging and test costs, computer-aided design software license costs, intellectual property license costs, reference design development costs, development testing and evaluation costs and depreciation expense.

q.	Government Funded Research and Development Projects

The Company participates in research and development projects which are funded by the People’s Republic of China (“PRC”) government under agreed upon written agreements. Under these government funded projects, the Company records the government funds as accrued liabilities when received and such funds are subsequently recognized as a reduction to expenses in the period when the Company has reasonable assurance that it has complied with the conditions attached to the agreement. This is typically after the Company passes a review process. If an agreement does not carry any conditions, the Company records the amount as a reduction of research and development expense in the period the cash is received. For government funds specifically approved for the purchase of depreciable assets, the related funds received are recorded as a reduction to the carrying value of the related assets. For the years ended December 31, 2010, 2011 and 2012, the Company recorded $0, $0, and $1,025 government funding as a deduction to expense, respectively. For the years ended December 31, 2010, 2011 and 2012, the Company has not incurred or recorded any reduction to the carrying value of the related assets. As of December 31, 2011 and 2012, the Company has recorded an accrued liability for cash funding received from the PRC government of $3,273 and $3,055, respectively, because the government had not commenced its review of the research and development projects qualified for funding at the end of the respective periods.

r.	Operating Leases

The Company records rent expense on a straight-line basis over the lease term. Any difference between rent expensed and rent paid is recorded as deferred rent.

F-12

Montage Technology Group Limited

Notes to Consolidated Financial Statements—(Continued)

(Dollars in thousands except share and per share data)

s.	Stock-Based Compensation

The Company has adopted a stock incentive plan under which options to purchase ordinary shares have been granted to employees, consultants and directors. Under the plan, the Company is authorized to issue options to purchase 18,416,360 ordinary shares as of December 31, 2012. Options granted expire ten years from the date of grant. Options granted generally vest over four years, 25% on the first anniversary of the date of grant and monthly thereafter over the remaining vesting period.

The Company recognizes a compensation expense for each stock option grant on a straight-line basis over the vesting period identified in the grant. The vesting period is typically aligned with the term of a requisite service period. The Company uses the Black-Scholes option pricing model to determine the fair value of the options granted.

The fair value of options granted to non-employees is determined using the Black-Scholes option pricing model. The fair value of unvested options granted to non-employees is re-measured at each reporting period until the options are fully vested.

t.	Selling, General and Administrative Expense

Selling, general and administrative expense primarily includes personnel-related expenses, including salaries, bonuses, stock-based compensation and employee benefits. Selling, general and administrative expense also includes field application engineering support, commissions to independent sales representatives, travel costs, professional and consulting fees, legal fees, trade shows, depreciation expense and occupancy costs.

u.	Income Taxes

The Company accounts for income taxes using the asset and liability approach. Deferred tax assets and liabilities are recorded for the tax consequences attributable to the differences between the carrying amounts of existing assets and liabilities in the financial statements and their respective tax basis, and operating loss carry-forwards. Deferred tax assets and liabilities are measured using tax rates enacted and expected to apply to taxable income in the years in which the temporary differences are expected to be recovered or settled.

Deferred tax assets are reduced by a valuation allowance if, based on available evidence, it is considered that it is more likely than not that some portion of or all of the deferred tax assets will not be realized. In making such determination, the Company considers factors including future reversals of existing taxable temporary differences, future profitability and tax planning strategies. If events were to occur in the future that would allow the Company to realize more of its deferred tax assets than the presently recorded net amount, an adjustment would be made to the deferred tax assets that would increase income for the period when those events occurred. If events were to occur in the future that would require the Company to realize less of its deferred tax assets than the presently recorded net amount, an adjustment would be made to the valuation allowance against deferred tax assets that would decrease income for the period when those events occurred. Significant management judgment is required in determining income tax expense and deferred tax assets and liabilities.

The Company applies the authoritative guidance for the accounting for uncertainty in income taxes. The guidance requires that the tax effect of a position be recognized only if it is “more likely than not” to be sustained based solely on the technical merits of tax laws and regulations as of the reporting date. The Company assesses its tax position and benefits by evaluating numerous factors which may require periodic adjustment. The Company’s financial statements reflect only those tax positions that are more likely than not to be sustained under examination.

F-13

Montage Technology Group Limited

Notes to Consolidated Financial Statements—(Continued)

(Dollars in thousands except share and per share data)

v.	Comprehensive Income (Loss)

Comprehensive income (loss) is defined as the change in equity during a period from transactions and other events and circumstances from non-owner sources. Other comprehensive income (loss) includes certain changes in equity that are excluded from net income (loss), such as the differences for translation of subsidiaries’ financial statements where the United States dollar (“USD”) is not their functional currency.

w.	Net Income (Loss) Per Share

The Company follows the authoritative guide that establishes a two class method for calculating net income (loss) per share. Under the two class method, net income is allocated between ordinary shares and other participating securities based on their participating rights. The guidance requires earnings available to ordinary shareholders, after deducting preferred stock dividends, be allocated between ordinary and preferred shareholders based on each shareholders’ respective rights to dividends, whether or not declared. Basic net income (loss) is calculated by dividing net income (loss) allocable to ordinary shareholders by the weighted average number of ordinary shares outstanding for the period. Diluted net income (loss) per share is calculated under the as-if-converted method unless the conversion of the preferred stock is anti-dilutive to basic net income per share. Diluted net income (loss) per share is calculated by dividing the net income (loss) allocable to ordinary shareholders by the weighted average number of ordinary shares outstanding, adjusted for the effects of potentially dilutive ordinary shares, which are comprised of stock options and convertible preferred stock. The guidance does not require the presentation of basic and diluted net income (loss) per share for securities other than ordinary shares, therefore net income (loss) per share pertain only to the Company’s ordinary shares.

x.	Foreign Currency Translation

The functional currency of the Company and its subsidiaries not incorporated in PRC is the USD. The functional currency of the Company’s subsidiaries in the PRC is the Renminbi (“RMB”). Monetary assets and liabilities in currency denomination other the functional currency are translated into the functional currency at the rate of exchange in effect at the balance sheet date. Transactions in currencies other than the functional currency during the reporting period are converted into the functional currency at the applicable exchange rate on the day the transaction occurred. Gains and losses resulting from the translation are included in the statement of operations and comprehensive income (loss).

The Company has chosen the USD as the reporting currency. For the subsidiaries whose functional currency is not the USD, their assets and liabilities are translated at the exchange rates at the balance sheet date, equity accounts are translated at historical exchange rates, and revenues, and expenses, gains, and losses are translated using the average exchange rate for the reporting period. Foreign currency translation adjustments are accounted for as accumulated comprehensive income, which is a component of stockholders’ deficit.

y.	Appropriations to Statutory Reserves

In accordance with the relevant PRC regulations, the Company’s subsidiaries in the PRC are required to allocate at least 10% of their after-tax profit, after the recovery of accumulated deficit reported under PRC accounting standards, to the general reserve until the general reserve has reached 50% of the registered capital of each subsidiary in PRC. These reserves can only be used for specific purposes and are not transferable to the Company in the form of loans, advances, or cash dividends. For the years ended December 31, 2010, 2011 and 2012, the appropriations to statutory reserves for profit making subsidiaries in PRC were $0, $610, and $130, respectively.

F-14

Montage Technology Group Limited

Notes to Consolidated Financial Statements—(Continued)

(Dollars in thousands except share and per share data)

z.	Employee Benefit Plan

The Company’s subsidiaries incorporated in the PRC participate in a government-mandated multi-employer defined contribution plan pursuant to which certain retirement, medical and other welfare benefits are provided to employees. Chinese labor regulations require the Company’s subsidiaries in PRC to pay to the local labor bureau a monthly contribution at a stated contribution rate based on the monthly compensation of qualified employees. The relevant local labor bureau is responsible for meeting all retirement benefit obligations. The Company’s subsidiaries in the PRC have no further commitments beyond their monthly contributions. For the years ended December 31, 2010, 2011 and 2012, the Company’s subsidiaries in the PRC contributed a total of $1,111, $1,558 and $2,339, respectively, to these funds.

The Company’s subsidiaries in Hong Kong and Taiwan contribute to pension funds administrated by independent third parties and have no further payment obligations once the contributions have been paid. The contributions to the schemes are based on a fixed percentage of the employees’ relevant income per month and are expensed as incurred. The Company has no legal or constructive obligation to pay further contributions if the funds do not hold sufficient assets to pay all employees the benefits relating to employee service in the current and prior periods. For the years ended December 31, 2010, 2011 and 2012, the Company’s subsidiaries in Hong Kong and Taiwan contributed a total of $0, $0 and $10, respectively, to these funds.

The Company’s subsidiary in the United States does not participate in any pension or similar employee saving plans.

aa.

Recent Accounting Pronouncements

In July 2012, the FASB issued ASU 2012-02, “Intangibles — Goodwill and Other: Testing Indefinite Lived Intangible Assets for Impairment.” The update applies to all entities, both public and nonpublic, that have indefinite-lived intangible assets, other than goodwill, reported in their financial statements. Per the update, an entity has the option first to assess qualitative factors to determine whether the existence of events and circumstances indicates that it is more likely than not that the indefinite-lived intangible asset is impaired. If, after assessing the totality of events and circumstances, an entity concludes that it is not more likely than not that the indefinite-lived intangible asset is impaired, then the entity is not required to take further action. The amendments are effective for annual and interim impairment tests performed for fiscal years beginning after September 15, 2012. Early adoption is permitted, including for annual and interim impairment tests performed as of a date before July 27, 2012, if financial statements for the most recent annual or interim period have not yet been issued. The adoption of this update is not expected to have a material impact on the Company’s consolidated financial statements.

F-15

Montage Technology Group Limited

Notes to Consolidated Financial Statements—(Continued)

(Dollars in thousands except share and per share data)

2. Inventories

Inventories consist of the following:


	As of December 31,
	2011		2012
	(in thousands)
Work in process	$	6,818	$	11,038
Finished goods		163		78

	$	6,981	$	11,116

For the years ended December 31, 2010, 2011 and 2012, the Company recorded inventory write-downs of $1,561, $545 and $522, respectively, due to excess and obsolete inventory and lower of cost or market markdown. As of December 31, 2011 and 2012, the Company has a total inventory reserve balance of $2,173 and $2,406, respectively.

3. Prepaid Expenses and Other Current Assets

Prepaid expenses and other current assets consist of the following:


	As of December 31,
	2011		2012
	(in thousands)
Value-added tax recoverable	$	543	$	486
Prepaid license fees		150		294
Prepayment for material purchase		481		170
Rental deposits		316		321
Value-added tax refundable on export sales		56		306
Other prepaid expenses and other current assets		252		423

	$	1,798	$	2,000

F-16

Montage Technology Group Limited

Notes to Consolidated Financial Statements—(Continued)

(Dollars in thousands except share and per share data)

4. Property and Equipment, Net

Property and equipment, net consist of the following:


	As of December 31,
	2011			2012
	(in thousands)
Machinery and equipment	$	2,103		$	3,193
Furniture and fixtures		389			475
Leasehold improvements		512			1,354

		3,004			5,022
Less: accumulated depreciation and amortization		(1,989	)		(2,738	)

	$	1,015		$	2,284

For the years ended December 31, 2010, 2011 and 2012, depreciation expense was $313, $405 and $742, respectively.

5. Acquired Intangible Assets, Net

Acquired intangible assets, net consist of the following:


	As of December 31,
	2011			2012
	(in thousands)
Assembled workforce	$	—		$	1,900
Licenses		1,200			1,200
Less: accumulated amortization		(1,106	)		(1,604	)

	$	94		$	1,496

For the years ended December 31, 2010, 2011 and 2012, amortization expense was $500, $178 and $498, respectively.

As of December 31, 2012, the Company expects to record estimated amortization expenses of $1,285, $211, $0, $0 and $0 for the years ending December 31, 2013, 2014, 2015, 2016 and 2017, respectively.

On August 23, 2012, Montage Technology Hong Kong Limited, a wholly owned subsidiary of the Company, entered into agreements with a third party to acquire a research and development workforce, intellectual property (“IP”) and computers and office equipment for total cash consideration of $2,016. The acquisition has been completed in September 2012. The Company determined that the acquisition of research and development workforce, IP and computers and office equipment should be accounted for an asset acquisition as the group of assets acquired by the Company did not meet the definition of a business as pursuant to ASC 805. The Company allocated the total consideration to the acquired research and development workforce, IP (which was obsolete) and computers and office equipment with the amount of $1,900, $0 and $116, respectively. The research and development workforce is recorded as assembled workforce and amortized on a straight line basis over 18 months as the Company expected the acquired workforce to provide economic benefit to the Company during this period based on the Company’s prior experience in developing research and development workforce and conducting research and development activities.

F-17

Montage Technology Group Limited

Notes to Consolidated Financial Statements—(Continued)

(Dollars in thousands except share and per share data)

6. Short Term Loans

The short-term bank loans outstanding as of December 31, 2011 and 2012 carried a weighted average interest rate of 6.35% and 5.88% per annum, respectively. The borrowings were repayable in one year of their respective draw-down date. Proceeds from short-term bank borrowings were for working capital purposes. None of the short-term bank loans bear financial covenants or restrictions.

Short-term bank loans as of December 31, 2011 and 2012 were all denominated in RMB.

7. Accrued Liabilities

Accrued liabilities consist of the following:


	As of December 31,
	2011		2012
	(in thousands)
Government funding for research and development projects	$	3,273	$	3,055
Accrued employee compensation and other employee expenses		2,196		4,505
Accrued research and development expenses		1,317		28
Accrued royalty on licensed technology		466		0
Advances from customers		141		230
Accrued warranty		111		149
Accrued professional service fee		33		497
Proceeds received for early exercised options		9		—
Other accrued liabilities		545		644

	$	8,091	$	9,108

8. Deferred Margin, Net

Deferred margin, net consists of the following:


	As of December 31,
	2011			2012
	(in thousands)
Deferred revenue	$	12,685		$	15,878
Deferred cost of revenue		(7,538	)		(14,678	)

	$	5,147		$	1,200

9. Convertible Preferred Shares

The Company recorded each series of convertible preferred shares at their fair values on the dates of issuance, net of issuance costs.

F-18

Montage Technology Group Limited

Notes to Consolidated Financial Statements—(Continued)

(Dollars in thousands except share and per share data)

Convertible preferred share consists of the following as of December 31, 2012:


Convertible Preferred Shares	Issuance date	Par Value Per Share		Subscription Price Per Share			Shares					Carrying amount		Liquidation Value
Convertible Preferred Shares	Issuance date	Par Value Per Share		Subscription Price Per Share			Authorized			Outstanding		Carrying amount		Liquidation Value
Series A	April 23, 2004 and August 31, 2004	$	0.005	$	0.5000			12,000,000			12,000,000	$	6,000	$	6,000
Series B	June 19, 2006		0.005		1.2905			11,703,540	⁽¹⁾		8,314,608		13,949		10,730
Series B issued upon exercise of warrant	December 20, 2007		0.005		1.0160						2,325,000		3,071		2,362
Series B-1	May 18, 2007		0.005		1.5994			11,379,273			10,123,189		21,048		16,191
Series B-2	October 8, 2009 October 22, 2009 June 30, 2010		0.005		1.1196	⁽²⁾		8,928,786			7,098,523		10,309		7,947

								44,011,599			39,861,320	$	54,377	$	43,230

(1)	Authorized shares for Series B convertible preferred shares issued on June 19, 2006 also included shares authorized for Series B convertible preferred shares issued upon exercise of warrant on December 20, 2007.

(2)	Pursuant to the Company’s Amended and Restated Memorandum and Articles dated September 2009, the subscription price for Series B-2 convertible preferred shares represents the weighted average price of the shares issued in October 2009 and June 2010, respectively.

The Company’s Board of Directors is authorized to determine the rights of each offering of convertible preferred shares including, among other terms, dividend rights, voting rights, conversion rights, redemption prices and liquidation preferences, if any, subject to the limitations of applicable laws, regulations and its charter. The following summarizes the terms of each series of convertible preferred shares:

Conversion Rights

Each share of Series A, Series B, Series B-1 and Series B-2 is convertible, at the holder’s option, into such number of fully paid and nonassessable ordinary shares as is determined by dividing the applicable original issuance price by the conversion price which is the same as the original issue price.

In the event of the issuance of additional ordinary shares, subject to certain exclusions, at a price per share less than the conversion price for any series of convertible preferred shares in effect on the date of such issuance, the conversion price for that series will be adjusted based on a weighted average anti-dilution formula. The conversion price is also subject to adjustment based on certain other anti-dilution provisions. Each convertible preferred share will automatically convert into ordinary shares at its then effective conversion rate immediately upon the closing of an initial public offering pursuant to an effective registration statement under the Securities Act of 1933, as amended, covering the offer and sale of ordinary shares with gross proceeds to the Company of not less than $50 million at a price per share of at least $5.00 (“Qualified IPO”). The Company is required to reserve and keep available, out of its authorized but unissued ordinary shares, 40,408,994 shares for the conversion of convertible preferred shares.

In connection with the issuance of Series B-2 upon the exercise in full of all the Series B-2 warrants, the weighted average price for Series B-2 originally issued in October 2009 and Series B-2 issued upon

F-19

Montage Technology Group Limited

Notes to Consolidated Financial Statements—(Continued)

(Dollars in thousands except share and per share data)

exercise of warrant in June 2010 was $1.1196 per share, which was less than the original conversion price of Series B issued on June 19, 2006 and Series B-1, the conversion price for Series B and Series B-1 was adjusted to $1.2686 and $1.5380 per share, respectively, on August 18, 2010. After such adjustment, each Series B issued on June 19, 2006 and Series B-1 share is convertible into approximately 1.0173 and 1.040 ordinary shares, respectively.

Dividends

The holders of each series of convertible preferred shares are entitled to receive noncumulative dividends per annum when and if declared by the Board of Directors. The Series A, Series B, Series B-1 and Series B-2 convertible preferred shares are entitled to dividends at 8% of the original issuance price per share. After the foregoing dividend payments, if any, have been made in full in a given calendar year, any dividends declared by the Board out of funds legally available shall be shared ratably among the holders of ordinary shares; provided, however, that any non-cash dividends shall be shared ratably among the holders of ordinary and preferred shares on an as-if-converted basis. No dividends have been declared or paid to date.

Liquidation

In the event of any liquidation, dissolution or winding up of the Company, whether voluntarily or involuntary, including a consolidation, merger or acquisition or sale of assets where the beneficial owners of the Company’s ordinary shares and convertible preferred shares own less than a majority of the resulting voting power of the surviving entity, the holders of Series A, Series B, Series B-1 and Series B-2 convertible preferred shares are entitled to receive an amount equal to 100% of the subscription price per share, based on the number of preferred shares plus any declared but unpaid dividends prior to the distribution to the ordinary shares. The remaining assets, if any, shall be distributed among the holders of ordinary shares on a pro rata basis based on the number of shares they hold.

Voting Rights

The holders of each preferred share are entitled to the number of votes equal to the number of ordinary shares into which such preferred shares are converted.

Redemption Rights

The holders of the Company’s Series B and B-1 preferred shares hold redemption rights such that at any time after June 19, 2011, if at least two-thirds of the holders of Series B and B-1 convertible preferred shares, voting together, elect to redeem their shares, the Company shall redeem all Series B and B-1 convertible preferred shares. The holders of the Company’s Series B-2 convertible preferred shares hold redemption rights such that at any time after June 1, 2013, if at least two-thirds of the holders of Series B-2 elect to redeem their shares, the Company shall redeem all Series B-2 convertible preferred shares. The redemption price available to Series B, B-1 and B-2 shall be 130% of subscription price per share, plus all declared and unpaid dividends.

The aggregate amount of redemption for all issued redeemable preferred shares each year for the five years following December 31, 2012 is $48,399, respectively.

F-20

Montage Technology Group Limited

Notes to Consolidated Financial Statements—(Continued)

(Dollars in thousands except share and per share data)

Accretion

In accordance with authoritative guidance and consistent with the accounting for Series B, B-1 and B-2 convertible preferred shares, the carrying value of the Series B, B-1 and B-2 convertible preferred shares is adjusted for accretion to the redemption price over the period from the date of issuance to the first possible redemption date (June 19, 2011 for Series B and B-1 and June 1, 2013 for Series B-2) using the effective interest rate method. For the years ended December 31, 2010, 2011 and 2012, the accretion to the carrying value of Series B, B-1 and B-2 was summarized as follows:


	First Possible Redemption Date		Accretion for the Year Ended December 31,
	First Possible Redemption Date		2010		2011		2012
			(in thousands)
Series B		June 19, 2011	$	905	$	444	$	—
Series B issued upon warrant exercise		June 19, 2011		55		26		—
Series B-1		June 19, 2011		1,274		623		—
Series B-2		June 1, 2013		279		54		55

Total			$	2,513	$	1,147	$	55

In absence of retained earnings, the accretion is charged to additional paid-in capital. Once previously recorded additional paid-in capital has been reduced to zero, further accretion charge is recorded in accumulated deficit.

Warrants

In connection with the Series B-2 convertible preferred share financing agreement in 2009, the Company issued warrants to purchase 3,098,067 Series B-2 convertible preferred shares at an exercise price of $0.50 prior to June 30, 2010. On June 30, 2010, the warrants were exercised in full to purchase Series B-2 and total cash consideration of $1,549 and extinguishment of warrant liabilities of $1,989 as of exercise date was recorded in the carrying value of Series B-2.

The Company followed the authoritative guidance which requires liability classification for warrants issued that are exercisable into convertible preferred stock. Liability classification requires the warrants to be remeasured to their fair value for each reporting period. The warrants were exercised in 2010 and, for the year ended December 31, 2010, the Company expensed $37 reflecting the change in the fair value of the warrants recorded at the time of exercise.

The Company utilized the service of an independent third party specialist to determine the fair value of the warrants, which took into consideration the underlying price of ordinary shares, a risk-free interest rate, expected term and expected volatility. Certain inputs used in the model are unobservable. As a result, the valuation of the warrant was categorized as Level 3 in accordance with ASC 820, Fair Value Measurement.

F-21

Montage Technology Group Limited

Notes to Consolidated Financial Statements—(Continued)

(Dollars in thousands except share and per share data)

In determining the fair value of the warrants, the Company applied the Black-Scholes pricing model with the following assumptions used:


	January 1, 2010
Expected volatility (%)⁽¹⁾		43.55	%
Expected dividend yield (%)⁽²⁾		0	%
Expected term(years)⁽³⁾		0.5
Risk-free interest rate (per annum) (%)⁽⁴⁾		1.162	%

(1)	The expected volatility was estimated based on the historical volatility of comparable companies in the period equal to average time to expiration.

(2)	The expected dividends are considered to be zero because the Company has no history or expectation of paying dividends on its ordinary shares.

(3)	The expected term was determined based on the period between the valuation date and the expiration date as the warrants are transferable.

(4)	The risk-free interest rates are based on the yield of government securities with similar time duration as the expected term.

For the year ended December 31, 2010, the changes in the fair value of warrant liabilities were summarized as follows:


	Amount
Balance as of January 1, 2010	$	1,952
Changes in the fair value prior to warrant exercise on June 30, 2010		37
Transferred warrant liabilities to carrying value of Series B-2 preferred shares		(1,989	)

Balance as of December 31, 2010	$	—

10. Stock Option Plan

The Company’s 2006 Stock Option Plan (“Plan”) was adopted in June 2006. The Plan provides for the issuance of both incentive stock options (ISOs) and nonstatutory stock options (NSOs). NSOs may be granted to employee, directors and consultants, while ISOs may be granted only to employees. Options granted vest over a maximum period of four years and expire ten years from the date of the grant. Options generally vest over four years, one-quarter on the first anniversary of the date of the grant and monthly thereafter for the remaining three years. As of December 31, 2010, 2011 and 2012, the number of ordinary shares authorized for option issuance under the Plan was 13,640,000, 13,640,000 and 18,416,360 shares, respectively.

The Company uses the Black-Scholes valuation model to calculate the fair value of stock options. The fair value of stock options granted to employees is estimated as of the grant date. The fair value of the stock options granted to non-employees is re-measured at each reporting date. The assumptions used in valuation were as follows:


	Year Ended December 31,
	2010	2011	2012
Risk-free interest rate	2.37-4.53%	1.42-4.52%	1.10-3.13%
Expected term (in years)	6 to 10	6 to 10	6 to 10
Dividend yield	—	—	—
Volatility	50.21-63.99%	49.29-57.46%	39.97-52.66%

F-22

Montage Technology Group Limited

Notes to Consolidated Financial Statements—(Continued)

(Dollars in thousands except share and per share data)

The risk-free interest rate assumption was based on the yield-to-maturity of the government bond with the longest maturity in the respective countries in which the Company operates.

The assumed dividend yield was based on the Company’s expectation of not paying dividends in the foreseeable future.

The expected term was estimated based on the date of the grant, expiration date and vesting period as stated in the stock option grant. The expected term was 6 years for employees and for subsequent re-measurement of options granted to non-employee consultants, expected term is calculated based on remaining life of options of originally 10 years.

Due to the Company’s limited historical data, the estimated volatility incorporated the historical volatility of comparable companies whose share prices are publicly available.

In connection with the grant of stock options to all participants, the Company recorded stock-based compensation of $778, $631, and $989 for the years ended December 31, 2010, 2011 and 2012, respectively.

From inception to December 31, 2012, the Company issued stock options to certain employees and non-employees under the Plan with exercise prices below the fair value of the Company’s common stock at the date of grant. The Company estimated the fair value of its common stock based upon several factors, including progress and milestones attained in its business. In accordance with the requirements of ASC 718, the Company has recorded stock-based compensation expense based on the fair value of stock options at the date of grant or remeasurement date on a straight line basis over the option vesting or service period.

Early Exercise of Employee Stock Options

Certain stock options granted under the Company’s Plan provide option holders the right to elect to exercise unvested options in exchange for restricted ordinary shares. Unvested shares, which amounted to 10,000 and 0 as of December 31, 2011 and 2012, respectively, are subject to a repurchase right held by the Company at the lower of (a) the fair market value of the restricted ordinary shares at the time of the termination, or (b) the original purchase price of the restricted ordinary shares, upon termination of the holder’s status as an employee or consultant. For exercises of employee options, this right usually lapses 25% on the first anniversary of the vesting start date and in 36 equal monthly amounts thereafter. These repurchase terms are considered to be a forfeiture provision and do not result in variable accounting. In accordance with authoritative guidance, the cash received from option holders for the exercise of unvested options is treated as a refundable deposit shown as a liability in the Company’s financial statements. As of December 31, 2011 and 2012, cash received for early exercise of options totaled $9 and $0, respectively.

Total fair value for stock options vested during the years ended December 31, 2010, 2011 and 2012 was $762, $561, and $860, respectively.

The total compensation cost related to all unvested stock option grants not yet recognized as of December 31, 2012 was $4,100 and the weighted-average period over which these grants are expected to vest is 3.33 years.

F-23

Montage Technology Group Limited

Notes to Consolidated Financial Statements—(Continued)

(Dollars in thousands except share and per share data)

The following table summarizes information regarding options outstanding starting from 2010 onwards:


	Number of Shares		Weighted Average Exercise Price		Weighted Average Remaining Contractual Life		Aggregate Intrinsic Value
Outstanding as of December 31, 2010		5,120,580	$	0.20
Granted		1,068,000		0.86
Exercised		173,333		0.35
Forfeited		125,323		0.52
Expired		63,905		0.21

Outstanding as of December 31, 2011		5,826,019		0.31
Granted		1,357,800		3.58
Exercised		265,550		0.25
Forfeited		9,408		0.88
Expired		36,143		0.19

Outstanding as of December 31, 2012		6,872,718	$	0.96		6.16	$	35,373

Exercisable as of December 31, 2012		5,630,032	$	0.68		5.51	$	30,588

Vested as of December 31, 2012		4,796,984	$	0.26		4.85	$	28,111

Vested and expected to vest as of December 31, 2012		6,703,257	$	0.91		6.08	$	34,819

The following table summarizes information about stock options outstanding as of December 31, 2012:


	Stock Options Outstanding						Stock Options Exercisable
Range of Exercise Prices	Shares Outstanding		Weighted Average Remaining Contractual Term (in years)		Weighted Average Exercise Price		Shares Exercisable		Weighted Average Exercise Price
$0.05 - $0.10		2,562,000		3.48	$	0.05		2,562,000	$	0.05
$0.16 - $0.41		1,995,450		6.07		0.39		1,871,075		0.39
$0.88 - $3.77		2,315,268		9.19		2.47		1,196,957		2.47

		6,872,718		6.16	$	0.96		5,630,032	$	0.68

The Company recognized stock-based compensation expense as follows (in thousands):


	Year Ended December 31,
	2010		2011		2012
Cost of revenue	$	31	$	13	$	19
Research and development		358		356		497
Selling, general and administrative		389		262		473

F-24

Montage Technology Group Limited

Notes to Consolidated Financial Statements—(Continued)

(Dollars in thousands except share and per share data)

11. Income Taxes

The Company is incorporated as an international business company with limited liability under International Business Companies Act, 1984 of the British Virgin Islands on March 29, 2004 and continued to, and registered in the Cayman Islands as an exempted company on April 24, 2006. The Company conducts business in several countries including China, Hong Kong, Taiwan and the United States. The Company is subject to taxation in each of these counties in which it conducts business. As a result, the Company’s worldwide income will be subject to the tax rates in which its income is generated and as such its effective tax rate may fluctuate based on the geographic distribution of its earned income or losses and the applicable tax laws in which those earnings or losses were generated.

Cayman Islands

The Company is not subject to income or capital gains tax.

United States

The Company’s subsidiary incorporated in the U.S. is subject to U.S. federal income taxes at graduated tax rates from 15% to 35% and the income allocated and apportioned to California is subject to California income tax at 8.8%.

Hong Kong

The Company’s subsidiaries incorporated in Hong Kong are subject to income tax rates at 16.5% on their assessable profits.

Taiwan

The Company’s subsidiary incorporated in Taiwan is subject to income tax rates at 17% on their assessable profits.

PRC

The generally applicable corporate income tax rate in China (referred to herein as an enterprise income tax rate) is 25%. The Company’s principal PRC operating subsidiary enjoys certain preferential tax rates due to its qualification as a qualified integrated circuit design enterprise and a high and new technology enterprise, or HNTE. As a qualified integrated circuit design enterprise, the Company’s principal PRC operating subsidiary is entitled to a two-year enterprise income tax exemption followed by a three-year 50% enterprise income tax rate reduction commencing from the first profit-making year, which was 2010. As a result, the Company’s principal PRC operating subsidiary was exempt from PRC enterprise income tax in 2010 and 2011 and enjoys a preferential 12.5% enterprise income tax from 2012 through 2014. PRC preferential tax treatments are subject to review and may be adjusted or revoked at any time in the future.

Pursuant to the PRC CIT Law, net operating losses can be carried forward 5 years to offset future taxable income.

F-25

Montage Technology Group Limited

Notes to Consolidated Financial Statements—(Continued)

(Dollars in thousands except share and per share data)

Income (loss) before income taxes consists of the following:


	Year Ended December 31,
	2010			2011		2012
	(in thousands)
China operations	$	319		$	5,952	$	2,241
Non-China operations		(8,808	)		1,657		17,268

Income (loss) before income taxes	$	(8,489	)	$	7,609	$	19,509

Management’s intention is to indefinitely reinvest any undistributed earnings from its subsidiaries in China, Hong Kong, Taiwan and the United States. Accordingly, no provision for withholding taxes has been provided nor is it practical to determine the amount of this liability. Upon distribution of those earnings in the form of dividends or otherwise, the Company will be subject to potential withholding taxes in the above-mentioned jurisdictions.

The Company’s worldwide operating income is subject to varying rates and its consolidated effective tax rate is dependent upon the countries in which earnings or loss were realized and the tax laws in effect in each country. The Company is incorporated in the Cayman Islands with foreign subsidiaries in China, Hong Kong, Taiwan and the United States. Under the current laws of the Cayman Islands, the Company is not subject to tax on income or capital gains. The laws of the Cayman Islands also provide for the distribution of dividends without any related withholding tax imposed.

Income tax provision consists of the following:


	Year Ended December 31,
	2010			2011			2012
	(in thousands)
Current:
China operations	$	—		$	178		$	263
Non-China operations		76			3,119			888

	$	76		$	3,297		$	1,151

Deferred:
China operations	$	(22	)	$	(208	)	$	(159	)
Non-China operations		—			(452	)		236

	$	(22	)	$	(660	)	$	77

Provision for income taxes	$	54		$	2,637		$	1,228

F-26

Montage Technology Group Limited

Notes to Consolidated Financial Statements—(Continued)

(Dollars in thousands except share and per share data)

Income tax provision differed from the amounts computed by applying the statutory income tax rate of 25% for the PRC subsidiaries to pre-tax income (loss) as a result of the following:


	Year Ended December 31,
	2010			2011			2012
	(in thousands)
Income tax at statutory rate	$	(2,122	)	$	1,902		$	4,877
Foreign tax rate differential		1,619			(670	)		(4,144	)
Tax holiday benefit		(374	)		(1,746	)		(161	)
Change in valuation allowance		(63	)		(447	)		(75	)
Provision for uncertain tax position		814			3,646			760
Others		180			(48	)		(29	)

Provision for income taxes	$	54		$	2,637		$	1,228

The following table sets out the reconciliation of statutory income tax rate and the Company’s effective tax rate:


	Year Ended December 31,
	2010			2011			2012
Income tax at statutory rate		25	%		25	%		25	%
Foreign tax rate differential		(19.07	%)		(8.80	%)		(21.24	%)
Tax holiday benefit		4.41	%		(22.95	%)		(0.83	%)
Change in valuation allowance		0.74	%		(5.87	%)		(0.38	%)
Provision for uncertain tax position		(9.59	%)		47.91	%		3.89	%
Others		(2.12	%)		(0.63	%)		(0.15	%)

Effective tax rate		(0.63	%)		34.66	%		6.29	%

Foreign tax rate differential mainly reflected the impact of profit or loss of the Company on the consolidated effective tax rate. The Company, which is a Cayman Islands company, is not subject to income tax and accounted for a significant portion of the Company’s consolidated profit or loss in each of 2010, 2011 and 2012. The Company was generating losses from its inception through 2010 due to the significant research and development expenses related to new products. The Company achieved profit in 2011 as the sale of products ramped up, and its profit continued to increase in 2012. Due primarily to the increase in the profit of the Company in 2011 and 2012, the foreign tax rate differential was (8.8%) and (21.24%) for 2011 to 2012, respectively.

Tax holiday benefit was related to the Company’s subsidiary in the PRC which enjoyed a zero tax rate for the years ended December 31, 2010 and 2011. This subsidiary started to pay income tax at the rate of 12.5% for the year ended December 31, 2012.

For the year ended December 31, 2011, provision of uncertain tax position primarily comprises of a provision made for the unrecognized tax benefit of the Company’s Hong Kong subsidiary which was related to the disallowance of certain cooperative research fee as discussed below.

F-27

Montage Technology Group Limited

Notes to Consolidated Financial Statements—(Continued)

(Dollars in thousands except share and per share data)

The aggregated amount and per ordinary share effect of the tax holiday are as follows:


	Year Ended December 31,
	2010		2011		2012
The aggregated dollar effect (in thousands)	$	374	$	1,746	$	161
Per ordinary share effect — basic		0.04		0.16		0.01
Per ordinary share effect — diluted		0.04		0.12		0.01

Temporary differences that gave rise to significant portions of the Company’s deferred tax assets and liabilities were as follows:


	As of December 31,
	2010			2011			2012
	(in thousands)
Deferred tax assets:
Deferred revenue, accruals and reserves	$	396		$	681		$	586
Depreciation and amortization		51			69			83
Net operating loss carryforwards		178			87			50

Total deferred tax assets	$	625		$	837		$	719

Less: valuation allowance		(573	)		(126	)		(51	)

Deferred tax assets, net	$	52		$	711		$	668

Deferred tax liabilities:
Prepaid expense	$	—		$	—		$	(34	)

Deferred tax liabilities	$	—		$	—		$	(34	)

As of December 31, 2010, 2011 and 2012, the Company had deferred tax assets of $625, $837 and $719, respectively. The Company also had a valuation allowance of $573, $126 and $51, as of December 31, 2010, 2011 and 2012, respectively, attributable to management’s determination that it is more likely than not that most of the deferred tax assets will not be realized. Should it be determined that additional amounts of the net deferred tax asset will not be realized in the future, an adjustment to increase the deferred tax asset valuation allowance will be charged to income in the period such determination is made. Likewise, in the event the Company were to determine that it is more likely than not that it would be able to realize its deferred tax assets in the future in excess of its net recorded amount, an adjustment to the valuation allowance for the deferred tax asset would increase income in the period such determination was made.

The following table summarizes the Company’s unrecognized tax benefit from January 1, 2010 to December 31, 2012:


	As of December 31,
	2010		2011		2012
	(in thousands)
Beginning balance	$	1,411	$	2,215	$	5,851
Increases related to prior year tax positions		—		—		—
Increases related to current year tax positions		804		3,636		757

Ending balance	$	2,215	$	5,851	$	6,608

F-28

Montage Technology Group Limited

Notes to Consolidated Financial Statements—(Continued)

(Dollars in thousands except share and per share data)

Interest and penalties of $10, $10 and $3 associated with unrecognized tax benefit were accrued for the years ended December 31, 2010, 2011 and 2012.

As of December 31, 2010, 2011 and 2012, the total amount of unrecognized tax benefit was $2,215, $5,851, and $6,608, respectively.

The major unrecognized tax benefit for 2011 was related to the potential disallowance of cooperative research fee of $17,140 recorded in the Company’s Hong Kong subsidiary’s books. The cooperative research fee was charged by the Company for the expense incurred for the reimbursement of the research and development services performed by its China subsidiaries.

According to the Hong Kong tax regulations, capital expenditure is generally non-deductible unless otherwise specified. Certain R&D expenditure is deductible provided that certain criteria are satisfied. Based on the current view of the Hong Kong tax authority, it may challenge that the cooperative research fee is capital in nature, and that it also does not satisfy the specific criteria set out in the tax regulations. Although management does not agree with the tax authority’s view, it believes that it is more likely than not that the Hong Kong tax authority will disallow such expense upon tax audit.

12. Net Income (Loss) Per Share

The following shows the computation of basic and diluted net income (loss) per ordinary share:


	Year Ended December 31,
	2010			2011			2012
Numerator
Net income (loss)	$	(8,543	)	$	4,972		$	18,281
Less: Accretion to preferred shares		(2,513	)		(1,147	)		(55	)
Less: Allocation of net income to participating preferred shares		—			(3,748	)		(15,112	)

Numerator for basic calculation		(11,056	)		77			3,114
Undistributed earnings re-allocated to common stock holders		—			22			1,059

Numerator for diluted calculation	$	(11,056	)	$	99		$	4,173

Denominator
Denominator for basic calculation, weighted-average number of shares of common stock outstanding		10,393,746			10,650,479			10,798,107
Dilutive effect of options using treasury stock method		—			4,160,497			5,118,597

Denominator for diluted calculation		10,393,746			14,810,976			15,916,704

Net income (loss) per share
Basic	$	(1.06	)	$	0.01		$	0.29

Diluted	$	(1.06	)	$	0.01		$	0.26

F-29

Montage Technology Group Limited

Notes to Consolidated Financial Statements—(Continued)

(Dollars in thousands except share and per share data)

The following table sets forth potential shares of common stock that are not included in the calculation of diluted net loss per share because including them would be anti-dilutive as of the end of each period presented:


	As of December 31,
	2010		2011		2012
Convertible preferred stock		38,527,583		40,408,994		40,408,994
Stock options outstanding		4,983,000		—		—
Warrants to purchase convertible preferred stock		1,536,302		—		—
Unvested restricted shares subject to right of repurchase		152,619		13,170		—

		45,199,504		40,422,164		40,408,994

13. Segment and Geographic Information

The Company operates in one segment related to the design, development and sale of high performance, low power semiconductors for the home entertainment and cloud computing markets. The Company’s chief operating decision maker is its chief executive officer, who reviews the Company’s operating results on an aggregate basis for the purpose of evaluating financial performance and allocating resources.

The following table sets forth the Company’s revenue by geographic region:


	Year Ended December 31,
	2010		2011		2012
	(in thousands)
Hong Kong	$	27,382	$	48,911	$	72,570
Asia Pacific		581		44		1,325
United States		977		1,115		3,160
Europe		138		268		1,190

	$	29,078	$	50,338	$	78,245

As of December 31, 2012, substantially all of the Company’s long-lived tangible assets were located in the Asia Pacific region.

The following table sets forth the Company’s revenue generated from sales of semiconductors solutions for the home entertainment and cloud computing markets for the years ended December 31, 2010, 2011 and 2012:


	Year Ended December 31,
	2010		2011		2012
	(in thousands)
Home entertainment market	$	27,991	$	48,995	$	73,611
Cloud computing market		1,087		1,343		4,634

	$	29,078	$	50,338	$	78,245

F-30

Montage Technology Group Limited

Notes to Consolidated Financial Statements—(Continued)

(Dollars in thousands except share and per share data)

14. Commitments and Contingencies

Future minimum lease payment under noncancelable operating leases having initial terms in excess of one year are as follows:


	Payment Due by Period
	Total		Less than 1 Year		1 - 3 Years		3 - 5 Years
	(in thousands)
Operating lease obligations	$	1,775	$	992	$	783	$	—
Purchase obligations		1,086		1,086		—		—

Total contractual obligations	$	2,861	$	2,078	$	783	$	—

Rental expenses for the years ended December 31, 2010, 2011 and 2012 were $373, $489 and $887, respectively.

As of December 31, 2012, there was no unsettled or unasserted claim or litigation against the Company.

15. Off-Balance Sheet Arrangements

As of December 31, 2010, 2011 and 2012, the Company did not have any transactions, obligations or relationships that could be considered off-balance sheet arrangements.

16. Subsequent Events

The Company entered into a memorandum of understanding to acquire, Sonoma Commercial Offshore, Ltd, a Macau Offshore Company (“MOC”) to be the principle entity in the Company’s new international corporate structure. The Company has received the approval for the acquisition from the Macau government. Total price of this acquisition was $129. The new international structure will be implemented and is expected to be effective in May 2013.

In conjunction with the preparation of these financial statements, an evaluation of subsequent events was performed through April 5, 2013, which is the date the financial statements were issued.

17. Pro Forma Balance Sheet and Earnings per Share for Conversion of Preferred Shares

The Series A, B, B-1 and B-2 convertible preferred shares shall automatically be converted into common stocks based on the then effective conversion ratio immediately upon the closing of a Qualified IPO. The unaudited pro forma balance sheet as of December 31, 2012 assumes a Qualified IPO has occurred and presents an as adjusted financial position as if the conversion of the Series A, B, B-1 and B-2 convertible preferred shares into common stocks occurred on December 31, 2012 at the then conversion ratio of 1 for 1 (Series A and Series B-2), 1 for 1.0173 (Series B) and 1 for 1.040 (Series B-1). Accordingly, the carrying value of the convertible preferred shares, in the amount of $54,377 was reclassified from Convertible Preferred Shares to common stocks and additional paid in capital for such pro forma presentation.

F-31

Montage Technology Group Limited

Notes to Consolidated Financial Statements—(Continued)

(Dollars in thousands except share and per share data)

The unaudited pro-forma income per share for the year ended December 31, 2012 after giving effect to the conversion of the Series A, B, B-1 and B-2 Preferred Shares into ordinary shares as if the closing occurred at the beginning of fiscal 2012 was as follows:


		For the Year Ended December 31, 2012
		Unaudited
Numerator:
Net income attributable to common stockholders
Pro-forma effect of convertible preferred shares

Pro-forma net income attributable to common stockholders—Basic and diluted

Denominator:
Denominator—weighted average number of ordinary shares outstanding
Basic
Diluted
Pro-forma effect of preferred shares

Denominator for pro-forma
Basic
Diluted
Pro-forma income per share attributable to ordinary shareholders
Basic

Diluted

The potentially dilutive share options are not included in the calculation of pro-forma diluted loss per share because of their anti-dilutive effect.

18. Restricted Net Assets

Regulations in the PRC currently permit payment of dividends of a PRC company only out of accumulated profits as determined in accordance with accounting standards and regulations in China. Under PRC law, the Company’s subsidiaries incorporated in China are required to set aside at least 10% of their after-tax profit based on PRC accounting standards each year to their general reserves until the cumulative amount reaches 50% of their paid-in capital. These reserves are not distributable as cash dividends, or as loans or advances.

As a result of these and other restrictions under PRC laws and regulations, the PRC subsidiaries are restricted in their ability to transfer a portion of their net assets to the Company either in the form of dividends, loans or advances, which restricted portion amounted to approximately $13,500 of the Company’s total consolidated net assets as of December 31, 2012. Even though the Company currently does not require any such dividends, loans or advances from the PRC subsidiaries for working capital and other funding purposes, the Company may in the future require additional cash resources from our PRC subsidiaries due to changes in business conditions, to fund future acquisitions and developments, or merely declare and pay dividends to or distributions to the Company’s shareholders.

F-32

Montage Technology Group Limited

Notes to Consolidated Financial Statements—(Continued)

(Dollars in thousands except share and per share data)

19. Additional Information — Condensed Financial Statements of the Company

The Company is required to include the condensed financial statements of the parent company in accordance with Regulation S-X, Rule 5-04 promulgated by the United States Securities and Exchange Commission. The separate condensed financial statements of the Company as presented below have been prepared in accordance with Securities and Exchange Commission Regulation S-X Rule 5-04 and Rule 12-04 and present the Company’s investments in its subsidiaries under the equity method of accounting. Such investments are presented on the separate condensed balance sheets of the Company as “Investments in subsidiaries.” Subsidiaries’ income or losses are included as the Company’s “Share of income from subsidiaries” on the statement of income and comprehensive income (loss).

F-33

Montage Technology Group Limited

Additional Information of Montage Technology Group Limited

Condensed Balance Sheets


	December 31
	2011			2012
	(in thousands)
Assets
Current assets:
Cash and cash equivalents	$	7,211		$	5,638
Inventories		3,327			5,871
Amount due from subsidiaries		22,480			30,993
Prepaid expenses and other current assets		166			333

Total current assets		33,184			42,835

Investments in subsidiaries		6,149			6,799
Property and equipment, net		19			10
Acquired intangible asset, net		94			19
Deferred offering costs		—			283

Total assets	$	39,446		$	49,946

Liabilities, Convertible Preferred Shares and Stockholders’ Deficit
Current liabilities:
Accounts payable	$	3,623		$	1,546
Amount due to subsidiaries		17,029			14,162
Accrued liabilities		23			241
Deferred margin, net		4,484			356
Income tax payable		41			47

Total current liabilities		25,200			16,352


Total liabilities		25,200			16,352

Commitments and contingencies (Note 13)
Convertible Preferred Share:
Series A convertible preferred shares, $0.005 par value; 12,000,000 shares authorized; 12,000,000 issued and outstanding as of December 31, 2011 and 2012 (Liquidation value: 6,000 and 6,000 as of December 31, 2011 and 2012)		6,000			6,000
Series B convertible preferred shares, $0.005 par value; 11,703,540 shares authorized; 10,639,608 issued and outstanding as of December 31, 2011 and 2012 (Liquidation value: 13,092, and 13,092 as of December 31, 2011 and 2012)		17,020			17,020
Series B-1 convertible preferred shares, $0.005 par value; 11,379,273 shares authorized; 10,123,189 issued and outstanding as of December 31, 2011 and 2012 (Liquidation value: 16,191 and 16,191 as of December 31, 2011 and 2012)		21,048			21,048
Series B-2 convertible preferred shares, $0.005 par value; 8,928,786 shares authorized; 7,098,523 issued and outstanding as of December 31, 2011 and 2012 respectively (Liquidation value: 7,947 and 7,947 as of December 31, 2011 and 2012)		10,254			10,309

Stockholders’ deficit:
Ordinary Shares, $0.005 par value; 67,011,599 shares authorized; 10,734,105, and 11,009,655 and issued and outstanding at December 31, 2011 and 2012, respectively		54			55
Additional paid-in capital		—			1,010
Accumulated comprehensive income		1,810			1,811
Statutory reserve		610			740
Accumulated deficit		(42,550	)		(24,399	)

Total stockholders’ deficit		(40,076	)		(20,783	)

Total liabilities, convertible preferred share and stockholders’ deficit	$	39,446		$	49,946

F-34

Montage Technology Group Limited

Additional Information of Montage Technology Group Limited

Condensed Statements of Operations


	Year Ended December 31,
	2010			2011			2012
	(in thousands)
Revenue	$	5,195		$	5,746		$	40,702
Cost of revenue		(2,591	)		(1,619	)		(9,876	)

Gross profit		2,604			4,127			30,826

Operating expense:
Research and development		(8,903	)		(356	)		(13,209	)
Sales, general and administrative		(315	)		(245	)		(980	)

Total operating expense		(9,218	)		(601	)		(14,189	)

Income (loss) from operations		(6,614	)		3,526			16,637
Interest Income (Expense), net		10			31			60
Fair value change in warrant liability		(37	)		—			—
Equity gain (loss) from subsidiaries		(1,877	)		1,430			1,590

Income (loss) before income taxes		(8,518	)		4,987			18,287
Provision for Income tax		(25	)		(15	)		(6	)

Net income (loss)	$	(8,543	)	$	4,972		$	18,281

Income tax represented withholding income tax on the profit from license fee charged to the Company’s subsidiary in Hong Kong.

F-35

Montage Technology Group Limited

Additional Information of Montage Technology Group Limited

Condensed Statements of Cash Flows


	Year Ended December 31,
	2010			2011			2012
	(in thousands)
Cash flows from operating activities
Net income (loss)	$	(8,543	)	$	4,972		$	18,281
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:
Depreciation and amortization		515			185			84
Stock-based compensation		623			577			928
Equity in profit of subsidiaries		1,876			(1,431	)		(1,589	)
Fair value changes in warrant liability		37			—			—

Changes in assets and liabilities:
Inventories		4,336			(3,327	)		(2,544	)
Prepaid expenses and other assets		472			54			(281	)
Amount due from subsidiaries		(415	)		(14,742	)		(8,513	)
Accounts payable		(2,805	)		3,623			(2,077	)
Amount due to subsidiaries		3,819			5,945			(2,867	)
Tax payable		25			16			6
Deferred margin, net		—			4,484			(4,128	)
Other payables and accruals		(222	)		(52	)		228

Net cash provided by (used in) operating activities		(282	)		304			(2,472	)

Cash flows from investing activities
Purchases of property and equipment		(16	)		(9	)		—
Proceeds from disposal of a subsidiary		—			—			1,000
Purchase of intangible assets		(90	)		(159	)		—
Prepayment for acquisition		—			—			(26	)

Net cash provided by (used in) investing activities		(106	)		(168	)		974

Cash flows from financing activities
Proceeds from exercise of options		5			43			68
Proceeds from early exercise of options		—			18			—
Proceeds from issuance of Series B-2 convertible preferred shares		42			—			—
Proceeds from exercise of warrant		1,545			—			—
Cash paid for initial public offering cost		—			—			(143	)

Net cash provided by (used in) financing activities		1,592			61			(75	)

Effect of exchange rate changes on cash		—			—			—

Net increase (decrease) in cash and cash equivalents		1,204			197			(1,573	)
Cash and cash equivalents at beginning of period		5,810			7,014			7,211

Cash and cash equivalents at end of period	$	7,014		$	7,211		$	5,638

As of December 31, 2011 and 2012, there were no material contingencies, significant provisions for long-term obligations, or guarantees of the Company, except for those which have been separately disclosed in the consolidated financial statements, if any.

F-36

shares

LOGO

Montage Technology Group Limited

Ordinary shares


Deutsche Bank Securities				Barclays

Stifel
Wells Fargo Securities				Needham & Company

PART II

INFORMATION NOT REQUIRED IN PROSPECTUS

Item 13.

Other Expenses of Issuance and Distribution

The following table sets forth the fees and expenses, other than underwriting discounts and commissions, payable in connection with this offering. All amounts are estimates except the SEC registration fee, the FINRA filing fee and the NASDAQ listing fee.


SEC registration fee	$	*
FINRA filing fee		*
The NASDAQ Global Select Market listing fee		*
Accounting fees and expenses		*
Legal fees and expenses		*
Blue Sky fees and expenses		*
Transfer Agent fees and expenses		*
Printing and engraving expenses		*
Miscellaneous Expenses		*

Total	$	*

*	To be filed by amendment.

Item 14.

Indemnification of Directors and Officers

Cayman Islands law does not limit the extent to which a company’s articles of association may provide for indemnification of officers and directors, except to the extent any such provision may be held by the Cayman Islands courts to be contrary to public policy, such as to provide indemnification against civil fraud or the consequences or committing a crime. Our second amended and restated articles of association provide for indemnification of officers and directors for losses, damages, costs and expenses incurred in their capacities as such, except through their own willful neglect or default.

Pursuant to the form of indemnification agreements filed as Exhibit 10.3 to this Registration Statement, we will agree to indemnify our directors and officers against certain liabilities and expenses incurred by such persons in connection with claims made by reason of their being such a director or officer.

The form of Underwriting Agreement to be filed as Exhibit 1.1 to this Registration Statement will also provide for indemnification of us and our officers and directors in certain instances.

Item 15.

Recent Sales of Unregistered Securities

During the past three years, we have issued and sold the securities listed below without registering these securities under the Securities Act. None of these transactions involved any underwriters’ underwriting discounts or commissions or any public offering. We believe that each of the following issuances was exempt from

II-1

registration under the Securities Act in reliance on Regulation S or pursuant to Section 4(2) of the Securities Act regarding transactions not involving a public offering.


Purchaser	Date of Issuance	Number of Securities Originally Issued	Number of Ordinary Shares as Converted		Consideration
Certain directors, officers and employees and consultants	January 20, 2010	Options to purchase 40,000 ordinary shares		40,000	Exercise price of $0.41 per ordinary share
Certain directors, officers and employees and consultants	March 26, 2010	Options to purchase 69,000 ordinary shares		69,000	Exercise price of $0.41 per ordinary share

	May 21, 2010	Options to purchase 49,000 ordinary shares		49,000	Exercise price of $0.41 per ordinary share

	August 10, 2010	Options to purchase 168,000 ordinary shares		168,000	Exercise price of $0.41 per ordinary share

	October 13, 2010	Options to purchase 52,000 ordinary shares		52,000	Exercise price of $0.41 per ordinary share

	December 14, 2010	Options to purchase 26,000 ordinary shares		26,000	Exercise price of $0.41 or $0.88 per ordinary share

	March 8, 2011	Options to purchase 118,000 ordinary shares		118,000	Exercise price of $0.41 or $0.88 per ordinary share

	May 18, 2011	Options to purchase 293,000 ordinary shares		293,000	Exercise price of $0.41 or $0.88 per ordinary share

	June 20, 2011	Options to purchase 20,000 ordinary shares		20,000	Exercise price of $0.88 per ordinary share

	August 2, 2011	Options to purchase 490,000 ordinary shares		490,000	Exercise price of $0.88 per ordinary share

	October 19, 2011	Options to purchase 51,000 ordinary shares		51,000	Exercise price of $0.88 per ordinary share

	December 12, 2011	Options to purchase 53,000 ordinary shares		53,000	Exercise price of $0.88 per ordinary share

	March 19, 2012	Options to purchase 213,000 ordinary shares		213,000	Exercise price of $0.88 or $3.77 per ordinary share

	June 15, 2012	Options to purchase 53,000 ordinary shares		53,000	Exercise price of $3.77 per ordinary share

	September 17, 2012	Options to purchase 851,800 ordinary shares		851,800	Exercise price of $3.77 per ordinary share

	December 13, 2012	Options to purchase 240,000 ordinary shares		240,000	Exercise price of $3.77 per ordinary share

	February 25, 2013	Options to purchase 102,000 ordinary shares		102,000	Exercise price of $6.41 per ordinary share

II-2


Purchaser	Date of Issuance	Number of Securities Originally Issued	Number of Ordinary Shares as Converted		Consideration
Certain directors, officers, employees and consultants	April 30, 2010	35,417 ordinary shares acquired through exercise of options		35,417	$5,667
Certain directors, officers, employees and consultants	February 28, 2011	27,500 ordinary shares acquired through exercise of options		27,500	$11,275

	April 7, 2011	52,083 ordinary shares acquired through exercise of options		52,083	$21,354

	June 20, 2011	53,750 ordinary shares acquired through exercise of options		53,750	$7,638

	June 26, 2011	20,000 ordinary shares acquired through exercise of options		20,000	$17,600

	November 6, 2011	20,000 ordinary shares acquired through exercise of options		20,000	$3,200

	May 7, 2012	58,750 ordinary shares acquired through exercise of options		58,750	$9,688

	September 30, 2012	80,000 ordinary shares acquired through exercise of options		80,000	$4,000

	November 14, 2012	126,800 ordinary shares acquired through exercise of options		126,800	$51,988

	January 23, 2013	6,000 ordinary shares acquired through exercise of options		6,000	$2,460

	January 23, 2013	200,000 ordinary shares acquired through exercise of options		200,000	$10,000

	February 5, 2013	313,167 ordinary shares acquired through exercise of options		313,167	$23,267

	March 1, 2013	100,000 ordinary shares acquired through exercise of options		100,000	$41,000

Certain holders of preferred Shares	June 30, 2010	Series B-2 Preferred Shares in connection with warrants exercise		3,098,087	Exercise price of $1.016 per share

II-3

Item 16.

Exhibits and Financial Statement Schedules

(a)

Exhibits

See the Exhibit Index immediately following the signature pages for a list of exhibits filed as part of this registration statement on Form S-1, which Exhibit Index is incorporated herein by reference.

(b)

Financial Statement Schedules

Schedules not listed have been omitted because the information required to be set forth therein is not applicable, not material or is shown in the financial statements or notes thereto.

Item 17.

Undertakings.

The undersigned registrant hereby undertakes to provide the underwriter at the closing specified in the underwriting agreements certificates in such denominations and registered in such names as required by the underwriter to permit prompt delivery to each purchaser.

Insofar as indemnification for liabilities arising under the Securities Act of 1933 may be permitted to directors, officers and controlling persons of the Registrant pursuant to the foregoing provisions, or otherwise, the Registrant has been advised that, in the opinion of the Securities and Exchange Commission, such indemnification is against public policy as expressed in the Securities Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the Registrant of expenses incurred or paid by a director, officer or controlling person of the Registrant in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, the Registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question of whether such indemnification by it is against public policy as expressed in the Securities Act and will be governed by the final adjudication of such issue.

The undersigned Registrant hereby undertakes that:

(1) For purposes of determining any liability under the Securities Act of 1933, the information omitted from the form of prospectus filed as part of this registration statement in reliance upon Rule 430A and contained in a form of prospectus filed by the Registrant pursuant to Rule 424(b)(1) or (4) or 497(h) under the Securities Act shall be deemed to be part of the registration statement as of the time it was declared effective.

(2) For the purpose of determining any liability under the Securities Act of 1933, each post-effective amendment that contains a form of prospectus shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof.

II-4

SIGNATURES

Pursuant to the requirements of the Securities Act of 1933, the Registrant has duly caused this registration statement on Form S-1 to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of , State of , on , 2013.


MONTAGE TECHNOLOGY GROUP LIMITED

By:
		Name: Howard C. Yang
		Title: Chief Executive Officer

POWER OF ATTORNEY

We, the undersigned officers and directors of Montage Technology Group Limited, hereby severally constitute and appoint Howard Yang and Mark Voll, and each of them singly (with full power to each of them to act alone), our true and lawful attorneys-in-fact and agents, with full power of substitution and resubstitution in each of them for him and in his name, place and stead, and in any and all capacities, to sign any and all amendments (including post-effective amendments) to this Registration Statement, and any other registration statement for the same offering pursuant to Rule 462(b) under the Securities Act of 1933, as amended, and to file the same, with all exhibits thereto and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorneys-in-fact and agents, and each of them, full power and authority to do and perform each and every act and thing requisite or necessary to be done in and about the premises, as full to all intents and purposes as he might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents or any of them, or their or his substitute or substitutes, may lawfully do or cause to be done by virtue hereof.

Pursuant to the requirements of the Securities Act of 1933, this registration statement has been signed by the following persons in the capacities indicated on , 2013.


Signature		Title

Howard C. Yang		Chairman and Chief Executive Officer

Stephen Tai		Director and President

Mark Voll		Chief Financial Officer (principal financial and accounting officer and authorized United States representative)

Cathy Yen		Director

Jung-Kung (Jackie) Yang		Director

Edward Way		Director

Charles G. Sodini		Director

II-5

EXHIBIT INDEX


Exhibit Number		Description
1.1^*		Form of Underwriting Agreement

3.1		Amended and Restated Memorandum and Articles of Association of Montage Technology Group Limited (as currently in effect)

3.2*		Form of Second Amended and Restated Memorandum and Articles of Association of Montage Technology Group Limited (to be effective upon completion of this offering)

4.1*		Form of Specimen Certificate for Ordinary Shares of Montage Technology Group Limited

4.2		Amended and Restated Investors Rights Agreement, dated as of October 8, 2009

5.1^*		Opinion of Conyers Dill & Pearman (Cayman) Limited regarding the validity of the ordinary shares being registered

8.1*		Opinion of O’Melveny & Myers regarding certain U.S. tax matters

8.2*		Opinion of Conyers Dill & Pearman (Cayman) Limited regarding certain Cayman Islands tax matters

8.3*		Opinion of Commerce & Finance regarding certain PRC tax matters

10.1		Montage Technology Group Limited 2006 Share Incentive Plan and related form stock option agreement

10.2*		Montage Technology Group Limited 2013 Performance Incentive Plan and related form stock option agreements

10.3*		Form of Indemnification Agreement between the Registrant and its officers and directors

10.4*		Employment Agreements with Howard Yang

10.5*		Employment Agreements with Stephen Tai

10.6*		Employment Agreement with Mark Voll

10.7*		Employment Agreements with Leechung Yiu

10.8*		Employment Agreement with Bill Franciscovich

10.9*		Distribution Agreement with LQW Technology Company Limited

21.1		Subsidiaries of Montage Technology Group Limited

23.1*		Consent of PricewaterhouseCoopers Zhong Tian CPAs Limited Company

23.2*		Consent of O’Melveny & Myers LLP (included as part of Exhibit 8.1)

23.3*		Consent of Conyers Dill & Pearman (Cayman) Limited (included as part of Exhibit 5.1)

23.4*		Consent of Commerce & Finance (included as part of Exhibit 8.3)

23.5		Consent of iSuppli Corporation

24.1		Powers of Attorney (included on signature pages to the Registration Statement).

*	To be filed by amendment.

EX-3.1 2 filename2.htm EX-3.1

Exhibit 3.1

THE COMPANIES LAW (2007 REVISION)

OF THE CAYMAN ISLANDS

COMPANY LIMITED BY SHARES

AMENDED AND RESTATED MEMORANDUM AND ARTICLES

ASSOCIATION

MONTAGE TECHNOLOGY GROUP LIMITED

(adopted by a special resolution dated September 17, 2009)

THE COMPANIES LAW (2007 REVISION)

OF THE CAYMAN ISLANDS

COMPANY LIMITED BY SHARES

AMENDED AND RESTATED MEMORANDUM OF ASSOCIATION

MONTAGE TECHNOLOGY GROUP LIMITED

(adopted by a special resolution dated September 17, 2009)

1.	The name of the Company is Montage Technology Group Limited.

2.	The registered office of the Company shall be at the offices of Offshore Incorporations (Cayman) Limited, 4^th Floor, Scotia Centre, P. O. Box 2804, George Town, Grand Cayman, Cayman Islands or at such other place as the Directors may from time to time decide.

3.	The objects for which the Company is established are unrestricted and the Company shall have full power and authority to carry out any object not prohibited by the Companies Law (2007 Revision) or as the same may be revised from time to time, or any other law of the Cayman Islands.

4.	The liability of each Member is limited to the amount from time to time unpaid on such Member’s Shares.

The share capital of the Company is US$555,115.99 divided into 67,011,599 Ordinary Shares of par value US$0.005 each and 44,011,599 Preferred Shares of par value US$0.005 each. The Preferred Shares are subdivided into four series designated Series A Preferred Shares, Series B Preferred Shares, Series B-1 Preferred Shares and Series B-2 Preferred Shares, of par value US$0.005 each. 12,000,000 Preferred Shares are hereby designated Series A Preferred Shares, 11,703,540 Preferred Shares are hereby designated Series B Preferred Shares, 11,379,273 Preferred Shares are hereby designated Series B-1 Preferred Shares, and 8,928,786 Preferred Shares are hereby designated as Series B-2 Preferred Shares.

6.	The Company has power to register by way of continuation as a body corporate limited by shares under the laws of any jurisdiction outside the Cayman Islands and to be deregistered in the Cayman Islands.

7.	Capitalised terms that are not defined in this Memorandum of Association bear the same meaning as those given in the Articles of Association of the Company.

THE COMPANIES LAW (2007 REVISION)

OF THE CAYMAN ISLANDS

COMPANY LIMITED BY SHARES

AMENDED AND RESTATED ARTICLES OF ASSOCIATION

MONTAGE TECHNOLOGY GROUP LIMITED

(adopted by a special resolution dated September 17, 2009)

INTERPRETATION

1.	In these Articles Table A in the First Schedule to the Statute does not apply and, unless there is something in the subject or context inconsistent therewith:


“Articles”		means these articles of association of the Company as originally formed or as from time to time altered by Special Resolution.

“Auditor”		means the person for the time being performing the duties of auditor of the Company (if any).

“Board” or “Board of Directors”		mean the Board of Directors of the Company.

“Company”		means the above named company.

“Directors”		means the directors for the time being of the Company.

“Dividend”		includes an interim dividend.

“Electronic Record”		has the same meaning as in the Electronic Transactions Law (2003 Revision).

“Initial Public Offering” or “IPO”		means the first firmly underwritten listing or registered public offering by the Company of its Ordinary Shares under the U.S. Securities Act of 1933, as amended, or such other applicable securities laws

“Key Shareholder”		means each of Howard Yang (and his immediate family members), Stephen Tai (and his immediate family members), Larry Wu and Shawn Si.


“Liquidation Event”		means any transaction (treating any series of related transactions as a “transaction”) involving: (i) the sale or conveyance by the Company, or its primary operating subsidiary, of all or substantially all of its assets (including the sale or exclusive licensing of all or substantially all the intellectual property assets of the Company, or its primary operating subsidiary, or any dissolution, liquidation, winding up, bankruptcy reorganization, whether voluntary or involuntary; (ii) any merger, amalgamation, scheme of arrangement, consolidation or other acquisition of the Company or its primary operating subsidiary (other than for the sole purpose of changing the corporate domicile); provided, however, that the holders of the Company’s stock prior to the transaction own or control less than a majority of the as-converted voting power of the surviving entity’s securities after such transaction (or, in the case of a merger, amalgamation, scheme of arrangement, consolidiation, or other acquisition of the Company’s primary operating subsidiary, the Company owns or controls less than a majority of the as-if converted voting power of such subsidiary after such transaction); or (iii) any transaction as a result of which persons, other than those holders of the Company’s capital stock prior to the transaction own or control a majority of the as-converted voting power of the surviving entity’s securities after such transaction, other than a transaction primarily for financing purposes.

“Member”		has the same meaning as in the Statute.

“Memorandum”		means the memorandum of association of the Company.

“Ordinary Resolution”		means a resolution passed by a simple majority of the votes cast calculated in accordance with Article 54.

“Ordinary Share”		means an ordinary share of U.S. $0.005 par value in the capital of the Company having the rights attaching to it set out herein.

“Preferred Share”		means a preferred share of any series of U.S. $0.005 par value in the capital of the Company having the rights attaching to it set out herein, including Series A Preferred Shares, Series B Preferred Shares, Series B-1 Preferred Shares and Series B-2 Preferred Shares.


“Qualified IPO”		means the earlier to occur of (i) the listing of all Ordinary Shares of the Company on The Nasdaq Global Market or Global Select Market (“Nasdaq”), the Main Board of the Hong Kong Stock Exchange or any other major international stock exchange approved by holders of at least a majority of the Series B Preferred Shares, Series B-1 Preferred Shares and Series B-2 Preferred Shares, voting together as a single class, at a listing price of at least US$5 per Ordinary Share and (ii) a firm commitment underwritten public offering of the Company’s Ordinary Shares pursuant to an effective registration statement on Form F-1 under the Securities Act, at an offering price to the public of at least $5.00 per Ordinary Share, resulting in aggregate cash proceeds to the Company of at least $50,000,000 (net of underwriting discounts and commissions).

“Register of Members”		means the register maintained in accordance with the Statute and includes (except where otherwise stated) any duplicate Register of Members.

“Registered Office”		means the registered office for the time being of the Company.

“Securities Act”		means the U.S. Securities Act of 1933, as amended.

“Series A Preferred Share”		means a Preferred Share designated as a Series A Preferred Share on allotment and issue having the rights, privileges and preferences attaching to it set out herein.

“Series B Preferred Share”		means a Preferred Share designated as a Series B Preferred Share on allotment and issue having the rights, privileges and preferences attaching to it set out herein.

“Series B-1 Preferred Share”		means a Preferred Share designated as a Series B-1 Preferred Share on allotment and issue having the rights, privileges and preferences attaching to it set out herein.


“Series B-2 Preferred Share”		means a Preferred Share designated as a Series B-2 Preferred Share on allotment and issue having the rights, privileges and preferences attaching to it set out herein.

“Series B Purchase Agreement”		means the Montage Technology Group Limited Share Purchase Agreement dated June 19, 2006 among the Company and purchasers listed on Exhibit A thereto in relation to Series B Preferred Shares of the Company, as amended from time to time.

“Series B-2 Purchase Agreement”		means the Montage Technology Group Limited Share and Warrant Purchase Agreement dated on or around September 18, 2009 among the Company and purchasers listed on Exhibit A thereto in relation to Series B-2 Preferred Shares of the Company, as amended from time to time.

“Series B Subscription Price”		means, with respect to each Series B Preferred Share, the actual price paid by the initial holder to the Company for the subscription of such Series B Preferred Share.

“Series B-1 Subscription Price”		means, with respect to each Series B-1 Preferred Share, the actual price paid by the initial holder to the Company for the subscription of such Series B-1 Preferred Share.

“Series B-2 Subscription Price”		means US$1.5994 per Series B-2 Preferred Share; provided, however, that if any Series B-2 Warrant is exercised, the Series B-2 Subscription Price shall be adjusted to be the weighted average price based on the number of Series B-2 Preferred Shares outstanding (including Series B-2 Preferred Shares issued upon exercise of Series B-2 Warrant) at the time of such calculation (such adjusted Series B-2 Subscription Price, the “Adjusted Series B-2 Subscription Price”).

“Series B-2 Warrants”		means the warrants to purchase the Series B-2 Preferred Shares issued by the Company pursuant to the Series B-2 Purchase Agreement.

“Seal”		means the common seal of the Company and includes every duplicate seal.


“Share” and “Shares”		means a share or shares in the capital of the Company and includes a fraction of a share.

“Special Resolution”		means a resolution passed by a two thirds majority of votes cast calculated in accordance with Article 54 or, where passed by resolution in writing, by all Members entitled to vote as provided in Article 45.

“Statute”		means the Companies Law of the Cayman Islands as amended and every statutory modification or re-enactment thereof for the time being in effect.

2.	In the Articles:

2.1

words importing the singular number include the plural number and vice versa;

2.2

words importing the masculine gender include the feminine gender;

2.3

words importing persons include corporations, partnerships, limited liability companies or other business organizations;

2.4

“written” and “in writing” include all modes of representing or reproducing words in visible form, including in the form of an Electronic Record;

2.5

references to provisions of any law or regulation shall be construed as references to those provisions as amended, modified, re-enacted or replaced from time to time;

2.6

any phrase introduced by the terms “including,” “include,” “in particular” or any similar expression shall be construed as illustrative and shall not limit the sense of the words preceding those terms;

2.7

headings are inserted for reference only and shall be ignored in construing these Articles; and

2.8

Section 8 of the Electronic Transaction Law shall not apply.

COMMENCEMENT OF BUSINESS

3.	The business of the Company may be commenced as soon after incorporation as the Directors shall see fit notwithstanding that any part of the Shares may not have been allotted. The Company shall have perpetual existence until wound up or struck off in accordance with the Statute and these Articles.

4.	The Directors may pay, out of the capital or any other monies of the Company, all expenses incurred in or about the formation and establishment of the Company, including the expenses of registration.

ISSUE OF SHARES

Subject to the provisions, if any, in the Memorandum (and to any direction that may be given by the Company in a general meeting) and to the applicable approval requirements under Article 7 and without prejudice to any rights attached to any existing Shares, the Directors may allot, issue, grant options or warrants over or otherwise dispose of two classes of Shares to be designated, respectively, as Ordinary Shares and Preferred Shares. The Preferred Shares may be allotted and issued from time to time in one or more series. In the event that any Preferred Shares shall be converted pursuant to Article 7.3 hereof, the Shares so converted shall be cancelled and shall not be re-issuable by the Company. Further, any Preferred Share acquired by the Company by reason of redemption, repurchase, conversion or otherwise shall be cancelled and shall not be re-issuable by the Company.

6.	The Company shall not issue Shares to bearer.

PREFERRED SHARES

7.	Certain rights, preferences, privileges and limitations of the Preferred Shares of the Company are as follows:

7.1

(a)

Dividends. Subject to the Statute and these Articles, the holders of Series B Preferred Shares, Series B-1 Preferred Shares and Series B-2 Preferred Shares shall be entitled to receive Dividends, on a pari passu basis with each other, out of any assets legally available therefore, prior and in preference to any Dividends paid on the Series A Preferred Shares or Ordinary Shares, at 8% of the Series B Subscription Price, the Series B-1 Subscription Price and the Series B-2 Subscription Price, as applicable. Such Dividends shall be payable only when, as and if declared by the Board. Such Dividends shall not be cumulative, and no rights shall accrue to holders of Series B Preferred Shares, Series B-1 Preferred Shares or Series B-2 Preferred Shares by reason of the fact that Dividends on such Shares are not declared in any prior year.

(b)

No Dividends shall be paid on or declared and set aside for any Series A Preferred Share or Ordinary Share during any fiscal year until the Dividends set forth in Article 7.1(a) above have been paid with respect to the Series B Preferred Shares, Series B-1 Preferred Shares and Series B-2 Preferred Shares in such fiscal year.

(c)

Subject to the Statute and these Articles, the holders of Series A Preferred Shares shall be entitled to receive Dividends, out of any assets legally available therefore, prior and in preference to any Dividends paid on the Ordinary Shares, at the rate of U.S.$0.04 per share, for each outstanding Series A Preferred Share (as adjusted for any share Dividends, combinations, reclassifications or splits with respect to such Shares). Such Dividends shall be payable only when, as and if declared by the Board. Such Dividends shall not be cumulative, and no rights shall accrue to holders of Series A Preferred Shares by reason of the fact that Dividends on such Shares are not declared or paid in any prior year.

(d)

No Dividends (other than those payable in Ordinary Shares or other securities and rights convertible into or entitling the holder thereof to receive, directly or indirectly, additional Ordinary Shares of the Company) shall be paid on or declared and set aside for any Ordinary Share during any fiscal year until the Dividends set forth in Article 7.1(a) and (c) above have been paid with respect to the Series B Preferred Shares, Series B-1 Preferred Shares, Series B-2 Preferred Shares and Series A Preferred Shares, respectively, in such fiscal year.

(e)

After the holders of Preferred Shares have received their dividend preference as set forth above, any Dividends declared by the Board out of funds legally available therefor shall, subject to the Statute and these Articles, be shared ratably among the holders of Ordinary Shares; provided, however, that any non-cash Dividends shall be shared ratably among the holders of Ordinary Shares and the holders of Preferred Shares on an as-if-converted basis.

(f)

In the event the Company shall declare a distribution payable in securities of other persons, assets (excluding cash Dividends) or options or rights to purchase any such securities or evidences of indebtedness, then, in each such case, the holders of the Preferred Shares shall be entitled to a proportionate share of any such distribution as though the holders of the Preferred Shares were the holders of the number of Ordinary Shares of the Company into which their Preferred Shares are convertible as of the record date fixed for the determination of the holders of Ordinary Shares entitled to receive such distribution.

(g)

All declared but unpaid dividends shall be payable immediately prior to (i) a Liquidation Event or (ii) the consummation of a Qualified IPO.

7.2

Liquidation Preference.

(a)

In the event of any Liquidation Event, the holders of Preferred Shares and Ordinary Shares shall, subject to the Statute and these Articles, and, with respect to the liquidation preference of the Series B Preferred Shares, Series B-1 Preferred Shares or Series B-2 Preferred Shares, unless waived by the holders of at least 75% of the Series B Preferred Shares, 75% of the Series B-1 Preferred Shares, or 75% of the Series B-2 Preferred Shares (as applicable), be entitled to receive and the Company shall distribute, subject to the Statute and these Articles, assets and funds to its members as follows:

(i)

the holders of Series B-2 Preferred Shares shall be entitled to receive, prior and in preference to any distribution of the assets or surplus funds of the Company to the holders of the Series B-1 Preferred Shares, Series B Preferred Shares, Series A Preferred Shares or Ordinary Shares, and any other equity securities of the Company, by reason of their ownership thereof, an amount equal to 100% of the Series B-2 Subscription Price per Series B-2 Preferred Share (as adjusted for any share Dividends, combinations, reclassifications or splits with respect to such Shares) then held by them, plus all declared but unpaid Dividends on such Shares. If upon the occurrence of a Liquidation Event, the assets and funds available to be distributed among the holders of Series B-2 Preferred Shares shall be insufficient to permit the payment to such holders of the full preferential amount due to them, then the entire assets and funds of the Company legally available for distribution to them shall, subject to the Statute and these Articles, be distributed ratably among the holders of Series B-2 Preferred Shares in proportion to the full preferential amount to which each such holder would otherwise be entitled.

(ii)

following full payment of the preferential amount to the holders of the Series B-2 Preferred Shares as set forth in Article 7.2(a)(i) above, the holders of Series B-1 Preferred Shares shall be entitled to receive, prior and in preference to any distribution of the assets or surplus funds of the Company to the holders of the Series B Preferred Shares, Series A Preferred Shares or Ordinary Shares, and any other equity securities of the Company (other than the Series B-2 Preferred Shares), by reason of their ownership thereof, an amount equal to 100% of the Series B-1 Subscription Price per Series B-1 Preferred Share (as adjusted for any share Dividends, combinations, reclassifications or splits with respect to such Shares) then held by them, plus all declared but unpaid Dividends on such Shares. If upon the occurrence of a Liquidation Event and after payment in full of the preferential amount to the holders of Series B-2 Preferred Shares pursuant to Article 7.2(a)(i) above, the assets and funds available to be distributed among the holders of Series B-1 Preferred Shares shall be insufficient to permit the payment to such holders of the full preferential amount due to them, then the entire assets and funds of the Company legally available for distribution to them shall, subject to the Statute and these Articles, be distributed ratably among the holders of Series B-1 Preferred Shares in proportion to the full preferential amount to which each such holder would otherwise be entitled.

(iii)

following full payment of the preferential amount to the holders of the Series B-2 Preferred Shares and the Series B-1 Preferred Shares as set forth in Articles 7.2(a)(i) and 7.2(a)(ii) above, the holders of Series B Preferred Shares shall be entitled to receive, prior and in preference to any distribution of the assets or surplus funds of the Company to the holders of the Series A Preferred Shares or Ordinary Shares, and any other equity securities of the Company (other than the Series B-1 Preferred Shares and the Series B-2 Preferred Shares), by reason of their ownership thereof, an amount equal to 100% of the Series B Subscription Price per Series B Preferred Share (as adjusted for any share Dividends, combinations, reclassifications or splits with respect to such Shares) then held by them, plus all declared but unpaid Dividends on such Shares. If upon the occurrence of a Liquidation Event and after payment in full of the preferential amounts to the holders of Series B-2 Preferred Shares pursuant to Article 7.2(a)(i) above and Series B-1 Preferred Shares pursuant to Articles 7(2)(ii) above, the assets and funds available to be distributed among the holders of Series B Preferred Shares shall be insufficient to permit the payment to such holders of the full preferential amount due to them, then the entire assets and funds of the Company legally available for distribution to them shall, subject to the Statute and these Articles, be distributed ratably among the holders of Series B Preferred Shares in proportion to the full preferential amount to which each such holder would otherwise be entitled.

(iv)

Following full payment of the preferential amount to the holders of the Series B Preferred Shares, Series B-1 Preferred Shares and the Series B-2 Preferred Shares as set forth in Articles 7.2(a)(i) through 7.2(a)(iii) above, the holders of Series A Preferred Shares shall be entitled to receive, prior and in preference to any distribution of the assets or surplus funds of the Company to the holders of the Ordinary Shares, and any other equity securities of the Company (other than the Series A Preferred Share, Series B-1 Preferred Shares and the Series B-2 Preferred Shares), by reason of their ownership thereof, an amount equal to U.S.$0.50 per Series A Preferred Share (as adjusted for any share Dividends, combinations, reclassifications or splits with respect to such Shares) then held by them, plus all declared but unpaid Dividends on such Shares. If upon the occurrence of a Liquidation Event and after payment in full of the preferential amounts to the holders of Series B-2 Preferred Shares, Series B-1 Preferred Shares and Series B Preferred Shares pursuant to Article 7.2(a)(i) through Articles 7(2)(iii) above, the assets and funds available to be distributed among the holders of Series A Preferred Shares shall be insufficient to permit the payment to such holders of the full preferential amount due to them, then the entire assets and funds of the Company legally available for distribution to them shall, subject to the Statute and these Articles, be distributed ratably among the holders of Series A Preferred Shares in proportion to the full preferential amount to which each such holder would otherwise be entitled.

(v)

Upon completion of the distributions required by Articles 7.2(a)(i) through 7.2(a)(iv) above, all of the remaining assets of the Company, if any, shall, subject to the Statute and these Articles, be distributed ratably to the holders of the Ordinary Shares and Preferred Shares (on an as if converted basis).

(b)

In the event of a Liquidation Event, if the consideration received by the Company or its shareholders is other than cash, its value will be deemed its fair market value as determined (unless otherwise provided for herein) in good faith by the Board.

(c)

In the event the requirements of this Article 7.2 cannot lawfully be complied with, the Company shall forthwith either cause the closing of the transaction(s) constituting the Liquidation Event to be postponed until such requirements have been complied with, or cancel such transaction(s).

(d)

If a Liquidation Event occurs that does not as a corporate matter constitute a liquidation, dissolution or winding up of the Company (a “Winding Up”), then the distributions to be made to Members pursuant to this Article 7.2 shall be effected by way of a repurchase of shares following the occurrence of such Liquidation Event for a repurchase price per share equivalent to the sums that would have been payable per share pursuant to this Article 7.2 if such events were a Winding Up provided, however, that the Company may issue one share to such person or persons as the Company may direct to ensure that the Company at all times maintains an issued share capital.

7.3

Conversion. The holders of Preferred Shares shall have conversion rights as follows (the “Conversion Rights”):

(a)

Right to Convert. Subject to Article 7.3(c) below, each Preferred Share shall be convertible, at the option of the holder thereof, at any time after the date of issuance of such Share at the office of the Company or any transfer agent for such Share, into such number of fully paid and non-assessable Ordinary Shares as is determined as follows: (1) With respect to a Series B Preferred Share by dividing (i) the Series B Subscription Price (as adjusted for any share Dividends, combinations, reclassifications or splits with respect to such Shares) by the Series B Conversion Price applicable to such Series B Preferred Share, determined as hereinafter provided, in effect on the date the certificate is surrendered for conversion; (2) with respect to a Series B-1 Preferred Share by dividing (i) the Series B-1 Subscription Price (as adjusted for any share Dividends, combinations, reclassifications or splits with respect to such Shares) by the Series B-1 Conversion Price applicable to such Series B-1 Preferred

Share, determined as hereinafter provided, in effect on the date the certificate is surrendered for conversion; (3) with respect to a Series B-2 Preferred Share by dividing (i) the applicable Series B-2 Subscription Price (as adjusted for any share Dividends, combinations, reclassifications or splits with respect to such Shares) by the Series B-2 Conversion Price applicable to such Series B-2 Preferred Share, determined as hereinafter provided, in effect on the date the certificate is surrendered for conversion; and (4) with respect to a Series A Preferred Share by dividing (i) U.S.$0.50 (as adjusted for any share Dividends, combinations, reclassifications or splits with respect to such Shares) by the Series A Conversion Price applicable to such Series A Preferred Share, determined as hereinafter provided, in effect on the date the certificate is surrendered for conversion. The initial “Series B Conversion Price” per Series B Preferred Share shall be the Series B Subscription Price. The initial “Series B-1 Conversion Price” per Series B-1 Preferred Share shall be the Series B-1 Subscription Price. The initial “Series B-2 Conversion Price” per Series B-2 Preferred Share shall be the applicable Series B-2 Subscription Price. The initial “Series A Conversion Price” per Series A Preferred Share shall be U.S. $0.50. Such initial Conversion Prices shall be subject to adjustment as set forth in this Article 7.3.

(b)

Automatic Conversion. Each Preferred Share shall be converted automatically, and without any further action by the holders thereof, into Ordinary Shares at the Series B Conversion Price, the Series B-1 Conversion Price, Series B-2 Conversion Price or the Series A Conversion Price, as applicable, at the time in effect for such Share immediately upon the earlier of: (i) a Qualified IPO and (ii) (x) with respect to the Series B Preferred Shares, the Series B-1 Preferred Shares and the Series B-2 Preferred Shares, the date specified by written consent or agreement of the holders of at least 75% of the then outstanding Series B Preferred Shares, Series B-1 Preferred Shares and Series B-2 Preferred Shares (voting together as a single class) and (iii) with respect to Series A Preferred Shares, the date specified by written consent or agreement of the holders of at least 75% of the then outstanding Series A Preferred Shares.

(c)

Mechanics of Conversion. Before any holder of Preferred Shares shall be entitled to convert the same into Ordinary Shares, such holder shall surrender the certificate or certificates therefor at the office of the Company or of any transfer agent for such Share and shall give written notice by mail or courier, postage or freight prepaid, to the Company at its principal corporate office, of the election to convert the same and shall state therein the name or names in which the certificate or certificates for Ordinary Shares are to be issued. The Company shall effect such conversion by the redemption of the Preferred Shares to be converted followed by the allotment and issue of such number of Ordinary Shares receivable upon such conversion. The Company shall, as soon as practicable thereafter, issue and deliver at such office to such holder of

Preferred Shares, or to the nominee or nominees of such holder, a certificate or certificates for the number of Ordinary Shares to which such holder shall be entitled as aforesaid. Such conversion shall be deemed to have been made immediately prior to the close of business on the date of such surrender of the Preferred Shares to be converted, and the person or persons entitled to receive the Ordinary Shares issuable upon such conversion shall be treated for all purposes as the record holder or holders of such Ordinary Shares as of such date. Unless otherwise designated in writing by the holder of such Preferred Shares, if the conversion is in connection with an underwritten public offering of securities registered pursuant to the Securities Act, the conversion will be conditioned upon the closing with the underwriter of the sale of securities pursuant to such offering and the person(s) entitled to receive the Ordinary Shares issuable upon such conversion of the Preferred Shares shall not be deemed to have converted such Preferred Shares until immediately prior to the closing of such sale of securities.

(d)

Adjustments to Preferred Conversion Price for Diluting Issuances.

(i)

Special Definition. “Additional Ordinary Shares” shall mean all Ordinary Shares issued (or, pursuant to Article 7.3(d)(iii), deemed to be issued) by the Company after the date of first issuance of a Series B-2 Preferred Share, other than:

(aa)

Ordinary Shares or options therefore issuable or issued to employees, directors, officers or consultants of the Company (or any of its subsidiaries) pursuant to a stock option plan or restricted stock plan or any similar equity incentive plan (collectively, the “Option Plan”) approved from time to time by the Board (including the approval of the Series B Directors (as defined in Article 67)),

(bb)

securities issued pursuant to a stock split, subdivision, recapitalization or similar transaction, or dividend or other distribution payable in additional Ordinary Shares or other securities or rights exercisable for or convertible into Ordinary Shares, or pursuant to any event for which adjustment is made pursuant to Article 7.3(e) or 7.3(f) hereof;

(cc)

Ordinary Shares issued or issuable upon conversion of the Preferred Shares or upon the conversion or exercise of convertible or exercisable securities outstanding on the date of, and immediately following, the adoption of these Articles;

(dd)

securities issued by the Company in connection with the licensing or acquisition of technology or intellectual property by the Company and entered into primarily for non-equity financing purposes and approved by the Board (including the approval of the Series B Directors);

(ee)

securities issued by the Company in connection with the acquisition of or by the Company of or by another entity, whether by merger, amalgamation, consolidation, reorganization, scheme of arrangement, purchase or sale of all or substantially all of the assets, sale or exchange of shares or otherwise, where such acquisition is approved by the Board (including the approval of the Series B Directors);

(ff)

securities issued or issuable by the Company in connection with a strategic corporate partner arrangement, corporate collaboration, investment, and/or the acquisition of other assets, properties or other entities entered into primarily for non-equity financing purposes, if approved by the Board (including the approval of the Series B Directors);

(gg)

securities issued or issuable by the Company to suppliers or third party service providers in connection with the provision of bona fide goods or services pursuant to transactions approved by the Board (including the approval of the Series B Directors);

(hh)

securities issued by the Company in connection with general or equipment financings, bank financings, real estate leases, joint ventures or similar transactions entered into primarily for non-equity financing purposes and approved by the Board (including the approval of the Series B Directors);

(ii)

Ordinary Shares issued or issuable in a public offering before or in connection with which all outstanding Preferred Shares will be converted to Ordinary Shares or upon the exercise of warrants or cover-allotment options granted to underwriters in connection with such offering;

(jj)

securities issued or issuable in connection with any settlement of any action, suit, proceeding or litigation approved by the Board (including the approval of the Series B Directors);

(kk)

Ordinary Shares or other securities that are expressly determined not to be Additional Ordinary Shares hereunder by holders of at least 75% of the Series B Preferred Shares, the Series B-1 Preferred Shares and the Series B-2 Preferred Shares then outstanding, voting together as a single class on an as-converted basis;

(ll)

Series B-2 Preferred Shares issued under the Share Purchase Agreement, and Ordinary Shares issuable upon conversion of such shares; and

(mm)

Series B-2 Warrants issued under the Share Purchase Agreement and the Series B-2 Preferred Shares issued or issuable upon exercise of the Series B-2 Warrants.

(ii)

No Adjustment of Applicable Conversion Price. No adjustment in the applicable Conversion Price for the Preferred Shares shall be made in respect of the issuance of Additional Ordinary Shares unless the consideration per Share for an Additional Ordinary Share issued or deemed to be issued by the Company is less than the applicable Conversion Price in effect on the date of, and immediately prior to such issuance, as provided for by Article 7.3(d)(iv) below. No adjustment in the applicable Conversion Price otherwise required by this Article 7.3 shall affect any Ordinary Shares issued upon conversion of a Preferred Share prior to such adjustment.

(iii)

Deemed Issuance of Additional Ordinary Shares. In the event the Company at any time or from time to time after the date on which the first Series B-2 Preferred Share is issued shall issue any rights, options or warrants to acquire Ordinary Shares (“Options”) or securities convertible into, exercisable for or exchangeable for Ordinary Shares (“Convertible Securities”) or shall fix a record date for the determination of holders of any series of securities entitled to receive any such Options or Convertible Securities, then the maximum number of Ordinary Shares (as set forth in the instrument relating thereto without regard to any provisions contained therein for a subsequent adjustment of such number) issuable upon the exercise of such Options or, in the case of Convertible Securities and Options therefor, the conversion or exchange of such Convertible Securities or the exercise of such Options, shall be deemed to be Additional Ordinary Shares issued as of the time of such issue or, in case such a record date shall have been fixed, as of the close of business on such record date, provided that Additional Ordinary Shares shall not be deemed to have been issued unless the consideration per Share (determined pursuant to Article 7.3(d)(v) hereof) of such Additional Ordinary

Shares would be less than the applicable Conversion Price, as provided for by Article 7.3(d)(iv), in effect on the date of and immediately prior to such issue or record date, as the case may be, and provided further that in any such case in which Additional Ordinary Shares are deemed to be issued:

(aa)

no further adjustment in the applicable Conversion Price shall be made upon the subsequent issue of Convertible Securities or Ordinary Shares upon the exercise of such Options or conversion or exchange of such Convertible Securities or upon the subsequent issue of Options for Convertible Securities or Ordinary Shares;

(bb)

if such Options or Convertible Securities by their terms provide, with the passage of time or otherwise, for any increase in the consideration payable to the Company, or decrease in the number of Ordinary Shares issuable, upon the exercise, conversion or exchange thereof, the applicable Conversion Price computed upon the original issue thereof (or upon the occurrence of a record date with respect thereto), and any subsequent adjustments based thereon, shall, upon any such increase or decrease becoming effective, be recomputed to reflect such increase or decrease insofar as it affects such Options or the rights of conversion or exchange under such Convertible Securities;

(cc)

no readjustment pursuant to clause (bb) above shall have the effect of increasing the applicable Conversion Price to an amount which exceeds the lower of: (i) the applicable Conversion Price on the original adjustment date or (ii) the applicable Conversion Price that would have resulted from any issuance of Additional Ordinary Shares between the original adjustment date and such readjustment date;

(dd)

upon the expiration of any such Options or any rights of conversion or exchange under such Convertible Securities that shall not have been exercised, the applicable Conversion Price computed upon the original issue thereof (or upon the occurrence of a record date with respect thereto) and any subsequent adjustments based thereon shall, upon such expiration, be recomputed as if:

(i)

in the case of Convertible Securities or Options for Ordinary Shares, the only Additional Ordinary Shares issued were the Ordinary Shares, if any, actually issued upon the exercise of such Options or the conversion or exchange of such Convertible

Securities and the consideration received therefor was the consideration actually received by the Company for the issue of such exercised Options plus the consideration actually received by the Company upon such exercise or for the issue of all such Convertible Securities that were actually converted or exchanged, plus the additional consideration, if any, actually received by the Company upon such conversion or exchange, and

(ii)

in the case of Options for Convertible Securities, only the Convertible Securities, if any, actually issued upon the exercise thereof were issued at the time of issue of such Options, and the consideration received by the Company for the Additional Ordinary Shares deemed to have been then issued was the consideration actually received by the Company for the issue of such exercised Options, plus the consideration deemed to have been received by the Company (determined pursuant to Article 7.3(d)(v)) upon the issue of the Convertible Securities with respect to which such Options were actually exercised; and

(ee)

if such record date shall have been fixed and such Options or Convertible Securities are not issued on the date fixed therefor, the adjustment previously made in the applicable Conversion Price which became effective on such record date shall be canceled as of the close of business on such record date, and thereafter the applicable Conversion Price shall be adjusted pursuant to this Article 7.3(d)(iii) as of the actual date of their issuance.

(iv)

Adjustment of Conversion Price Upon Issuance of Additional Ordinary Shares and Upon Exercise of Series B-2 Warrants.

(aa)

In the event of an issuance of Additional Ordinary Shares at any time after the date on which the first Series B-2 Preferred Share is issued for a consideration per Share less than the Series B Conversion Price, Series B-1 Conversion Price or the Series A Conversion Price, as applicable, the Series B Conversion Price, the Series B-1 Conversion Price or the Series A Conversion Price, as the case may be, shall be reduced, concurrently with such issue, to a price determined by multiplying the applicable Conversion Price by a fraction, the numerator of which shall be the sum of the number of Ordinary Shares outstanding immediately

prior to such issue plus the number of Ordinary Shares issuable upon conversion of Preferred Shares and exercise of all Options and Convertible Securities outstanding immediately prior to such issue plus the number of Ordinary Shares that the aggregate consideration received by the Company for the total number of Additional Ordinary Shares so issued would purchase at the Series B Conversion Price, Series B-1 Conversion Price or the Series A Conversion Price, as applicable, and the denominator of which shall be the sum of the number of Ordinary Shares outstanding immediately prior to such issue plus the number of Ordinary Shares issuable upon conversion of Preferred Shares and exercise of all Options and Convertible Securities outstanding immediately prior to such issue plus the number of such Additional Ordinary Shares so issued.

(bb)

In the event of an issuance of Additional Ordinary Shares at any time after the date on which the first Series B-2 Preferred Share is issued without consideration or for a consideration per Share less than the applicable Series B-2 Conversion Price, the Series B-2 Conversion Price, shall be reduced, concurrently with such issue, to a price equal to the consideration per share received by the Company for such issue or deemed issue of the Additional Ordinary Shares; provided that if such issuance or deemed issuance was without consideration, then the Company shall be deemed to have received an aggregate of US$0.01 of consideration for all such Additional Ordinary Shares issued or deemed to be issued.

(cc)

In the event of an issuance of any Series B-2 Preferred Shares upon the exercise of any Series B-2 Warrant, which issuance results in the Adjusted Series B-2 Subscription Price that is less than the then effective Series B Conversion Price or the Series B-1 Conversion Price, as applicable, the Series B Conversion Price or the Series B-1 Conversion Price, as the case may be, shall be reduced, concurrently with such issue, to a price determined by multiplying the applicable Series B Conversion Price or Series B-1 Conversion Price by a fraction, the numerator of which shall be the sum of the number of Ordinary Shares outstanding immediately prior to such issue plus the number of Ordinary Shares issuable upon conversion of all Preferred Shares and exercise of all Options and Convertible Securities outstanding immediately prior to such issue plus the number of Ordinary Shares that the

aggregate consideration received by the Company for the issue of Series B-2 Preferred Shares and such additional number of Series B-2 Preferred Shares issued upon the exercise of the Series B-2 Warrant (or number of Ordinary Shares issuable upon exercise of such Series B-2 Preferred Shares) would purchase at the Series B Conversion Price or Series B-1 Conversion Price, as applicable, and the denominator of which shall be the sum of the number of Ordinary Shares outstanding immediately prior to such issue plus the number of Ordinary Shares issuable upon conversion of Preferred Shares and exercise of all Options and Convertible Securities outstanding immediately prior to such issue plus the number of such additional Series B-2 Preferred Shares issued upon exercise of the Series B-2 Warrant.

(v)

Determination of Consideration. For purposes of this Article 7.3(d), the consideration received by the Company for the issuance of any Additional Ordinary Shares shall be computed as follows:

(aa)

Cash and Property. Such consideration shall:

(i)

insofar as it consists of cash, be computed at the aggregate amount of cash received by the Company excluding amounts paid or payable for accrued interest or accrued Dividends and excluding any discounts, commissions or placement fees payable by the Company to any underwriter or placement agent in connection with the issuance of any Additional Ordinary Shares;

(ii)

insofar as it consists of property other than cash, be computed at the fair value thereof at the time of such issue, as determined in good faith by the Board; and

(iii)

in the event Additional Ordinary Shares are issued together with other Shares or securities or other assets of the Company for consideration which covers both, be the proportion of such consideration so received, computed as provided in clauses (i) and (ii) above, as reasonably determined in good faith by the Board.

(bb)

Options and Convertible Securities. The consideration per Share received by the Company for Additional Ordinary Shares deemed to have been issued pursuant to Article 7.3(d)(iii) hereof, relating to Options and Convertible Securities, shall be determined by dividing (i) the total amount, if any, received or receivable by the Company as consideration for the issue of such Options or Convertible Securities (determined in the manner described in paragraph (aa) above), plus the minimum aggregate amount of additional consideration (as set forth in the instruments relating thereto, without regard to any provision contained therein for a subsequent adjustment of such consideration) payable to the Company upon the exercise of such Options or the conversion or exchange of such Convertible Securities, or in the case of Options for Convertible Securities, the exercise of such Options for Convertible Securities and the conversion or exchange of such Convertible Securities by (ii) the maximum number of Ordinary Shares (as set forth in the instruments relating thereto, without regard to any provision contained therein for a subsequent adjustment of such number) issuable upon the exercise of such Options or the conversion or exchange of such Convertible Securities.

(e)

Adjustments for Share Dividends, Subdivisions or Combinations of Ordinary Shares. In the event that the Company at any time after the date on which the first Series B-2 Preferred Share is issued shall declare or pay without consideration any Dividends on the Ordinary Shares payable in Ordinary Shares or in any right to acquire Ordinary Shares, or in the event the outstanding Ordinary Shares shall be subdivided (by share split or otherwise than by payment of a Dividend in Ordinary Shares and without a corresponding adjustment to the Preferred Shares), into a greater number of Ordinary Shares, the applicable Conversion Price for the Preferred Shares in effect immediately prior to such subdivision shall, concurrently with the effectiveness of such subdivision, be proportionately decreased. In the event the outstanding Ordinary Shares shall be combined (by reclassification or otherwise) into a lesser number of Ordinary Shares and without a corresponding adjustment to the Preferred Shares, the Conversion Price for the Preferred Shares in effect immediately prior to such combination shall, concurrently with the effectiveness of such combination, be proportionately increased.

(f)

Adjustments for Reclassification, Exchange and Substitution. Subject to Article 7.3(b) hereinabove, if the Ordinary Shares issuable upon conversion of the Preferred Shares shall be changed into the same or a different number of Shares of any other series of Shares, whether by capital reorganization, reclassification or otherwise (other than a subdivision or combination of Shares provided for above), then, concurrently with the effectiveness of such reorganization or reclassification, each Preferred Share shall be convertible into, in lieu of

the number of Ordinary Shares which the holders would otherwise have been entitled to receive, a number of Shares of such other series of Shares which a holder of the number of Ordinary Shares deliverable upon conversion of such Preferred Shares immediately before that change would have been entitled to receive in such reorganization or reclassification.

(g)

No Impairment. Subject to the right of the Company to amend its Memorandum and its Articles or take any other corporate action upon obtaining the necessary approvals required by these Articles and applicable law, the Company will not, by amendment of these Articles or through any reorganization, recapitalization, transfer of assets, consolidation, merger, amalgamation, scheme of arrangement, dissolution, issue or sale of securities or any other voluntary action, avoid or seek to avoid the observance or performance of any of the terms to be observed or performed hereunder by the Company, but will at all times in good faith assist in the carrying out of all the provisions of this Article 7.3 and in the taking of all such action as may be necessary or appropriate to protect the Conversion Rights of the holders of Preferred Shares against impairment.

(h)

No Fractional Shares and Certificate as to Adjustments.

(i)

No fractional Shares shall be issued upon the conversion of any Preferred Shares, and the number of Ordinary Shares to be issued shall be rounded to the nearest whole Share. Whether or not fractional shares are issuable upon such conversion shall be determined on the basis of the total number of Preferred Shares the holder is at the time converting into Ordinary Shares and the number of Ordinary Shares issuable upon such aggregate conversion.

(ii)

Upon the occurrence of each adjustment or readjustment of the applicable Conversion Price for the Preferred pursuant to this Article 7.3, the Company, at its expense, shall promptly compute such adjustment or readjustment in accordance with the terms hereof and prepare and furnish to each holder of Preferred Shares a certificate setting forth such adjustment or readjustment and showing in detail the facts upon which such adjustment or readjustment is based. The Company shall, upon the written request at any time of any holder of Preferred Shares, furnish or cause to be furnished to such holder a like certificate setting forth (A) such adjustment and readjustment, (B) the applicable Conversion Price at the time in effect, and (C) the number of Ordinary Shares and the amount, if any, of other property that at the time would be received upon the conversion of a Series A Preferred Share, a Series B Preferred Share or a Series B-1 Preferred Share, as the case may be.

(i)

Notices of Record Date. If the Company shall propose at any time:

(i)

to declare any Dividend or distribution upon its Ordinary Shares, whether in cash, property, shares or other securities, whether or not a regular cash Dividend and whether or not out of earnings or earned surplus;

(ii)

to offer for subscription pro rata to the holders of any class or series of its Shares any additional Shares of any class or series or other rights;

(iii)

to effect any reclassification or recapitalization of its Ordinary Shares outstanding involving a change in the Ordinary Shares; or

(iv)

to enter into a merger, amalgamation, consolidation, scheme of arrangement or other business combination with or into any other corporation, or sell, lease or convey all or substantially all its property or business, or to liquidate, dissolve or wind up;

then, in connection with each such event, unless such notice is waived in its entirety or the period for notice shortened with the written consent of holders of a majority of the then outstanding Preferred Shares, voting as a separate series, the Company shall send to the holders of the Preferred Shares at least thirty (30) days’ prior written notice of the date on which a record shall be taken for such Dividend, distribution or subscription rights (and specifying the date on which the holders of Ordinary Shares shall be entitled thereto) or for determining rights to vote in respect of the matters referred to in (iii) and (iv) above.

Each such written notice shall be given by registered first class mail, postage prepaid, return receipt requested addressed to the holders of the Preferred Shares at the address for each such holder as shown on the Register of Members.

(j)

Reservation of Shares Issuable Upon Conversion. The Company shall at all times reserve and keep available out of its authorized but unissued Ordinary Share capital, solely for the purpose of effecting the conversion of the Preferred Shares, such number of its Ordinary Shares as shall from time to time be sufficient to effect the conversion of all outstanding Preferred Shares; and if at any time the number of authorized but unissued Ordinary Shares shall not be sufficient to effect the conversion of all then outstanding Preferred Shares, in addition to such other remedies as shall be available to the holder of such Preferred Shares, the Company will take such corporate action as may, in the opinion of its counsel, be necessary to increase its authorized but unissued Ordinary Share capital to such number of Shares as shall be sufficient for such purposes, including, without limitation, engaging in best efforts to obtain the requisite shareholder approval of any necessary amendment to these Articles and each shareholder agrees to give such approval if requested by the Company.

(k)

Notice. Any notice required by the provisions of this Article 7.3 to be given to the holders of Preferred Shares shall be given in writing and shall be given either personally or by sending it by next-day or second-day courier service, fax, electronic mail or similar means permitted under applicable law to the address of each holder of record at the holder’s address appearing on the books of the Company. Where a notice is sent by next-day or second-day courier service, service of the notice shall be deemed to be effected by properly addressing, pre-paying and sending by next-day or second-day service through an internationally-recognized courier a letter containing the notice, with a confirmation of delivery, and to have been effected at the expiration of two days after the letter containing the same is sent as aforesaid. Where a notice is sent by fax or electronic mail, service of the notice shall be deemed to be effected by properly addressing, and sending such notice through a transmitting organization, with a written confirmation of delivery, and to have been effected on the day the same is sent as aforesaid.

7.4

Voting Rights. Each holder of any Preferred Shares shall be entitled to the number of votes equal to that number of Ordinary Shares into which such Preferred Shares could then be converted, and with respect to such vote, such holder shall have full voting rights and powers equal to the voting rights and powers of the holders of Ordinary Shares, and shall be entitled, notwithstanding any provision hereof, to notice of any shareholders’ meeting in accordance with these Articles, and shall be entitled to vote, together with holders of Ordinary Shares and not as a separate class (except as specifically provided herein or as otherwise required by law), with respect to any question upon which holders of Ordinary Shares have the right to vote. Fractional votes shall not, however, be permitted and any fractional voting rights available on an as converted basis (after aggregating all shares into which the Preferred Shares held by each holder could be converted) shall be rounded down to the nearest whole number.

7.5

Protective Provisions.

(a)

So long as any Series B Preferred Shares, Series B-1 Preferred Shares or any Series B-2 Preferred Shares are outstanding, the Company shall not, without first obtaining the approval by vote or written consent of the Board (including the approval of the Series B Directors, and, solely with respect to item (x) below, the Series A Director):

(i)

redeem, repurchase, or acquire, directly or indirectly, any capital shares of the Company, other than repurchases of Ordinary Shares pursuant to Article 18 and the repurchases of Ordinary Shares issued to or held by officers, directors, employees or consultants providing services to the Company or any subsidiary, upon termination of services to the Company, pursuant to the Company’s standard provisions and at or below the original purchase price of such shares (“Termination Repurchases”);

(ii)

increase or decrease the number of Ordinary Shares authorized under the Company’s stock option plan;

(iii)

issue or grant any shares, options, or other securities of the Company or any of its subsidiaries to any Key Shareholder, whether in connection with an employment agreement or otherwise;

(iv)

approve any guarantee or agreement by the Company to indemnify any other person against any loss or liability, other than commercially reasonable warranties or indemnification granted to suppliers, customers and employees in the ordinary course of business;

(v)

grant any mortgage, pledge, hypothecation, or other security interest over all or substantially all of the Company’s assets or properties, whether tangible or intangible;

(vi)

enter into any purchase, lease, sale, or other transaction by the Company involving real property, except for a lease or termination of a lease of reasonable commercial office space for use by the Company and/or its affiliates;

(vii)

borrow or incur indebtedness of the Company or its subsidiaries (including indebtedness in the form of the assumption or guaranty of indebtedness of any other person) which (A) is not in the ordinary course of business or in the business plan approved by the Board, or (B) cumulatively with all other borrowing, indebtedness of the Company in excess of $1,000,000 in the aggregate at any time;

(viii)

enter into any transaction or series of related transactions between the Company or any of its subsidiaries and any Key Shareholder, director, officer, employee, consultant or affiliate of the Company (or any person related to or in which any director, officer, employee, consultant or affiliate of the Company holds a financial interest) (A) which involves a loan or advance of any kind (other than reasonable advances for travel expenses); (B) which is not in the ordinary course of business or in the most recent business plan approved by Board; or (C) in which the aggregate value given or received exceeds $50,000 individually or $150,000 in the aggregate during any 12-month period;

(ix)

enter into any loan, advance, or extension of credit by the Company or its subsidiaries (A) not in the ordinary course of business or in the most recent business plan approved by the Board, or (B) which cumulatively with all other loans and extensions of credit by the Companies exceeds $500,000 in the aggregate at any time;

(x)

appoint or remove the Chief Executive Officer, Chief Operating Officer, Managing Director, General Manager, Chief Financial Officer, or Chief Technology Officer of the Company, or increase the compensation of any of the five most highly compensated employees of the Company by more than 15% in any 12-month period (excluding, for purposes of this calculation, bonuses paid in accordance with the Company’s budget);

(xi)

change the auditors of the Company or any material accounting policy of the Company;

(xii)

delegate any authority in respect of any of the foregoing matters to any committee of the Board;

(xiii)

enter into any agreement, commitment, or corporate resolution to do any of the foregoing;

(xiv)

take any action that will in the good faith opinion of the Company’s counsel result in taxation of the holders of the Series B Preferred Shares, Series B-1 Preferred Shares or Series B-2 Preferred Shares under Section 305 of the United States Internal Revenue Code of 1986, as amended; or

(xv)

authorize and issue any securities of the Company in connection with any strategic transaction, corporate collaboration or legal settlement to which the Company is a party.

(b)

So long as any Series B Preferred Shares, any Series B-1 Preferred Shares, or any Series B-2 Preferred Shares are outstanding, without first obtaining the approval by vote or written consent of the holders of at least two-thirds (2/3) of the sum of all of the then outstanding Series B Preferred Shares, all of the then outstanding Series B-1 Preferred Shares and all of the Series B-2 Preferred Shares, all of such series voting together as a single class on an as-converted basis, the Company shall not, and will not permit any of its subsidiaries to:

(i)

amend the Memorandum or these Articles or other constitutional documents of the Company;

(ii)

increase or decrease the authorized number of Preferred Shares, or amend or alter the rights, privileges and protections of the Series B Preferred Shares, the Series B-1 Preferred Shares and the Series B-2 Preferred Shares;

(iii)

authorize, designate, reclassify or issue any Shares or any equity securities convertible or exchangeable into Shares ranking senior to or on parity with the Series B Preferred Shares, the Series B-1 Preferred Shares or the Series B-2 Preferred Shares with respect to liquidation, redemption, dividend rights and other rights, privileges and preferences of the Series B Preferred Shares, the Series B-1 Preferred Shares or the Series B-2 Preferred Shares;

(iv)

change the authorized number, manner of election, or term of office of Directors;

(v)

declare or pay any dividend or distribution on any Shares or any equity security convertible or exchangeable into Shares ranking junior to the Series B Preferred Shares, the Series B-1 Preferred Shares or the Series B-2 Preferred Shares in liquidation, redemption, or dividend rights or privileges; or redeem or repurchase any shares ranking junior to the Series B Preferred Shares, the Series B-1 Preferred Shares or the Series B-2 Preferred Shares in liquidation, redemption, or dividend rights or privileges except Termination Repurchases;

(vi)

enter into or agree to enter into any transaction or series of transactions that would constitute a Liquidation Event; or

(vii)

approve any material change to the Company’s fundamental business plan or strategy.

(viii)

undertake or enter into any agreement to undertake an Initial Public Offering of Shares unless approved by a majority vote of the Board of Directors of the Company, which majority shall include at least one (1) of the Series B Directors.

(c)

Without limiting any voting requirements or protections with respect to the Series B Preferred Shares, the Series B-1 Preferred Shares and the Series B-2 Preferred Shares above, in addition to the approval of the Board, the prior written consent of holders of at least two-thirds (2/3) of the outstanding Series A Preferred Shares, Series B Preferred Shares, Series B-1 Preferred Shares and Series B-2 Preferred Shares, all four series voting together as a single class on an as-converted basis, is required to authorize or issue, or obligate the Company to authorize or issue, any new class or series of equity securities of the Company or any majority-owned subsidiary of the Company.

Reserved.

REGISTER OF MEMBERS

The Company shall maintain or cause to be maintained the Register of Members in accordance with the Statute. The Register of Members shall be the only evidence as to who are the Members entitled to examine the Register of Members, the list required by Article 42 or the books of the Company, or to vote in person or by proxy at any meeting of Members.

CLOSING REGISTER OF MEMBERS OR FIXING RECORD DATE

10.

For the purpose of determining Members entitled to notice of, or to vote at any meeting of Members or any adjournment thereof, or Members entitled to receive payment of any Dividend, or in order to make a determination of Members for any other proper purpose, the Board may provide that the Register of Members shall be closed for transfers for a stated period that shall not in any case exceed forty (40) days. If the Register of Members shall be closed for the purpose of determining Members entitled to notice of, or to vote at, a meeting of Members, the Register of Members shall be closed for at least ten (10) days immediately preceding the meeting.

11.

In lieu of, or apart from, closing the Register of Members, the Board may fix in advance a date as the record date for any such determination of Members entitled to notice of or to vote at a meeting of the Members, or any adjournment thereof, and for the purpose of determining the Members entitled to receive payment of any Dividend.

12.

If the Register of Members is not so closed and no record date is fixed for the determination of Members entitled to notice of, or to vote at, a meeting of Members or Members entitled to receive payment of a Dividend, the date on which notice of the meeting is sent or the date on which the resolution of the Board declaring such Dividend is adopted, as the case may be, shall be the record date for such determination of Members. When a determination of Members entitled to vote at any meeting of Members has been made as provided in this Article, such determination shall apply to any adjournment thereof.

CERTIFICATES FOR SHARES

13.

A Member shall only be entitled to a share certificate if the Board resolves that share certificates shall be issued. Share certificates representing Shares, if any, shall be in such form as the Board may determine. Share certificates shall be signed by one or more Directors or other person authorised by the Directors. The Directors may authorise certificates to be issued with the authorised signature(s) affixed by mechanical process. All certificates for Shares shall be consecutively numbered or otherwise identified and shall specify the Shares to which they relate. All certificates surrendered to the Company for transfer shall be cancelled and, subject to these Articles, no new certificate shall be issued until the former certificate representing a like number of relevant Shares shall have been surrendered and cancelled.

14.

The Company shall not be bound to issue more than one certificate for Shares held jointly by more than one person and delivery of a certificate to one joint holder shall be a sufficient delivery to all of them.

15.

If a share certificate is defaced, worn out, lost or destroyed, it may be renewed on such terms (if any) as to evidence and indemnity and on the payment of such expenses reasonably incurred by the Company in investigating evidence, as the Board may prescribe, and (in the case of defacement or wearing out) upon delivery of the old certificate.

TRANSFER OF SHARES

16.

Subject to the provisions of these Articles and any member agreements, to effect the transfer of any Shares, the instrument of transfer with respect to such Shares shall be executed in accordance with the provision of this Article 16. The instrument of transfer of any Share shall be in writing and shall be executed by or on behalf of the transferor (and, if the Board so require, signed by the transferee). The transferor shall be deemed to remain the holder of a Share until the name of the transferee is entered in the Register of Members. The registration of transfers may be suspended at such time and for such periods as the Board may from time to time determine, provided always that such registration shall not be suspended for more than forty five (45) days in any year.

17.

Reserved.

REDEMPTION

18.

18.1

Redemption of Series B-2 Preferred Shares. Subject to the provisions in the Statute and the terms and conditions of this Section 18, the Company shall, upon the receiving, at any time after June 1, 2013 (the “B-2 Redemption Availability Date”), a written request for the redemption of the Series B-2 Preferred Shares signed by the holders of at least two-thirds (2/3) of the then outstanding Series B-2 Preferred Shares (the “B-2 Redemption Request”), redeem from funds legally available therefor at the redemption price therefor described in Article 18.3, on a date (the “B-2 Redemption Date”) that is within 90 days following its receipt of such written B-2 Redemption Request, all Series B-2 Preferred Shares that are outstanding on the date the Company receives such first written Redemption Request, until all outstanding Series B-2 Preferred Shares have been redeemed. Notwithstanding the foregoing, if upon the B-2 Redemption Date, the funds and assets of the Company legally available to redeem such stock shall be insufficient to redeem all outstanding Series B-2 Preferred Shares to be redeemed, then the Company shall redeem such number of Series B-2 Preferred Shares as it is able to redeem pro rata from each holder, and any unredeemed shares shall be carried forward and shall be redeemed at the earliest date upon which the Company has funds lawfully available to continue redemption of such unredeemed shares, to the full extent of legally available funds of the Company at such time, and any such

unredeemed shares shall continue to be so carried forward until redeemed. The Series B-2 Preferred Shares that are subject to redemption hereunder but that have not been redeemed due to insufficient legally available funds and assets of the Company shall continue to be outstanding and entitled to all dividend, liquidation, and other rights, preferences, privileges and restrictions of the Series B-2 Preferred Shares until such shares have been converted or redeemed.

18.2

Redemption of Series B Preferred Shares and Series B-1 Preferred Shares. Subject to the provisions in the Statute and the terms and conditions of this Section 18, the Company shall, upon the receiving, at any time after the June 19, 2011 (the “B/B-1 Redemption Availability Date”), a written request for the redemption of (i) the Series B Preferred Shares and Series B-1 Preferred Shares signed by the holders of at least two-thirds (2/3) of the then outstanding shares of the Series B Preferred Shares and the Series B-1 Preferred Shares, both series voting together as a single class (“B/B-1 Redemption Request”), redeem from funds legally available therefor at the redemption price therefor described in Article 18.3, on a date (the “B/B-1 Redemption Date”) that is within 90 days following its receipt of such written B/B-1 Redemption Request, all Series B Preferred Shares and Series B-1 Preferred Shares that are outstanding on the date the Company receives such first written B/B-1 Redemption Request, until all outstanding Series B Preferred Shares and Series B-1 Preferred Shares have been redeemed. Notwithstanding the foregoing, if upon the B/B-1 Redemption Date, the funds and assets of the Company legally available to redeem such stock shall be insufficient to redeem all outstanding Series B Preferred Shares and Series B-1 Preferred Shares to be redeemed, then the Company shall redeem such number of Series B Preferred Shares and Series B-1 Preferred Shares as it is able to redeem pro rata from each holder, and any unredeemed shares shall be carried forward and shall be redeemed at the earliest date upon which the Company has funds lawfully available to continue redemption of such unredeemed shares, to the full extent of legally available funds of the Company at such time, and any such unredeemed shares shall continue to be so carried forward until redeemed. The Series B Preferred Shares and the Series B-1 Preferred Shares that are subject to redemption hereunder but that have not been redeemed due to insufficient legally available funds and assets of the Company shall continue to be outstanding and entitled to all dividend, liquidation, and other rights, preferences, privileges and restrictions of the Series B Preferred Shares and Series B-1 Preferred Shares until such shares have been converted or redeemed.

18.3

Redemption Price. The redemption price for each Series B Preferred Share, Series B-1 Preferred Share and Series B-2 Preferred Share redeemed under Articles 18.1 and 18.2 above, respectively, shall be an amount equal to 130% of the Series B Subscription Price, Series B-1 Subscription Price or the Series B-2 Subscription Price (as applicable) per share, plus all declared and unpaid dividends thereon (as appropriately adjusted for any stock splits, stock dividends, reorganizations or the like).

18.4

Redemption Notice. At least 20 but no more than 60 days prior to the Redemption Date, written notice shall be mailed by the Company to each holder of record (at the close of business on the business day next preceding the day on which notice is given) of the Series B Preferred Shares, the Series B-1 Preferred Shares and/or the Series B-2 Preferred Shares to be redeemed (as applicable), at the address last shown on the records of the corporation for such holder or given by the holder in writing to the corporation for the purpose of notice or, if no such address appears or is given, at the place where the principal executive office of the corporation is located, notifying such holder of the redemption to be effected, the redemption price, the number of such holder’s Series B Preferred Shares, Series B-1 Preferred Shares or Series B-2 Preferred Shares (as applicable) to be redeemed, the place at which payment may be obtained and calling upon such holder to surrender to the Company, in the manner and at the place designated, the certificate or certificates representing the shares to be redeemed (each such notice is referred to herein as the “Redemption Notice”).

18.5

Surrender of Certificates. On or before the Redemption Date, each holder of Series B Preferred Shares, Series B-1 Preferred Shares and/or Series B-2 Preferred Shares (as applicable) to be redeemed on such Redemption Date shall surrender the certificate(s) representing such shares to be redeemed to the Company, in the manner and at the place designated in the relevant Redemption Notice, and thereupon the redemption price for such shares shall be payable to the order of the person whose name appears on such certificate(s) as the owner thereof, and each surrendered certificate shall be canceled and retired. If less than all of the shares represented by such certificate are redeemed, then the corporation shall promptly issue a new certificate representing the unredeemed shares.

18.6

Effect of Redemption. If the relevant Redemption Notice has been duly given, and if on the relevant Redemption Date the redemption price is either paid or made available for payment, then notwithstanding that the certificates evidencing any of the Series B Preferred Shares, the Series B-1 Preferred Shares or the Series B-2 Preferred Shares (as applicable) so called for redemption shall not have been surrendered, all dividends with respect to such shares shall cease to accrue after the relevant Redemption Date, such shares shall not thereafter be transferred on the corporation’s books and all of the rights of the holders of such shares with respect to such shares shall terminate after the relevant Redemption Date, except only the right of the holders to receive the redemption price therefor without interest upon surrender of their certificate(s) therefor.

19.

Subject to the provisions of the Statute and the applicable Board and/or shareholder approval provisions of Article 7.5, the Company may repurchase its own Ordinary Shares registered in the name of a person who is or was a Director, officer, employee or consultant of the Company and who has acquired such Ordinary Shares pursuant to a purchase agreement entered into by the Company with such person that allows for the repurchase thereof, such repurchase to be effected to the extent, in the manner and at the time or times, provided for in such agreement, it being expressly recognised that the foregoing constitutes the authorization of a manner of purchase of the Shares as contemplated by section 37(3)(d) of the Statute.

20.

Subject to the provisions of the Statute and Article 7 (and without prejudice to the authority contained in Article 19), the Company may purchase its own Shares (including any redeemable Shares) provided that the Members shall have approved the manner of purchase by Ordinary Resolution.

21.

The Company may make a payment in respect of the redemption or purchase of its own Shares in any manner permitted by the Statute, including out of capital.

VARIATION OF RIGHTS OF SHARES

22.

Subject to the applicable shareholder and/or Board approval provisions of Article 7.5, if at any time the share capital of the Company is divided into different classes of Shares, the rights attached to any class (unless otherwise provided by the terms of issue of the Shares of that class) may, whether or not the Company is being wound-up, be varied with the consent in writing of the holders of a majority of the issued Shares of that class and the holders of a majority of the issued Shares of any other class that the Board, in their absolute discretion (such determination to be conclusive) determine, may be affected by such variation.

23.

The rights conferred upon the holders of the Shares shall not, unless otherwise expressly provided by the terms of issue of the Shares, be deemed to be varied by the creation or issue of further Shares ranking senior thereto or pari passu therewith and the provisions of these Articles relating to general meetings shall apply to every class meeting of the holders of one class of shares except the necessary quorum shall be one or more persons holding or representing by proxy at least a majority of the issued shares of the class and that any holder of shares of the class present in person or by proxy may demand a roll.

COMMISSION ON SALE OF SHARES

24.

The Company may, in so far as the Statute permits, pay a commission to any person in consideration of his or her subscribing or agreeing to subscribe whether absolutely or conditionally for any Shares of the Company. Such commissions may be satisfied by the payment of cash and/or the issue of fully or partly paid-up Shares. The Company may also on any issue of Shares pay such brokerage as may be lawful.

NON RECOGNITION OF INTERESTS

25.

The Company shall not be bound by or compelled to recognise in any way (even when having notice thereof) any equitable, contingent, future or partial interest in any Share, or (except only as is otherwise provided by these Articles or the Statute) any other rights in respect of any Share other than an absolute right to the entirety thereof in the registered holder.

TRANSMISSION OF SHARES

26.

If a Member dies, the survivor or survivors where such Member was a joint holder, and his or her legal personal representatives where such Member was a sole holder, shall be the only persons recognised by the Company as having any title to such Member’s interest. The estate of a deceased Member is not thereby released from any liability in respect of any Share that had been jointly held by such Member.

27.

Any person becoming entitled to a Share in consequence of the death or bankruptcy or liquidation or dissolution of a Member (or in any other way than by transfer) may, upon such evidence being produced as may from time to time be required by the Board, elect either to become the holder of the Share or to have some person nominated by him or her as the transferee. If he or she elects to become the holder, he or she shall give notice to the Company to that effect but the Board shall, in any case, have the same right to decline or suspend registration as they would have had in the case of a transfer by that Member before his death or bankruptcy, as the case may be.

28.

If the person so becoming entitled shall elect to be registered as holder such person shall deliver or send to the Company a notice in writing signed by such person stating that he or she so elects.

AMENDMENTS OF MEMORANDUM AND ARTICLES OF ASSOCIATION AND ALTERATION OF CAPITAL

29.

Subject to the applicable shareholder and/or Board approval provisions of Article 7.5, the Company may by Ordinary Resolution:

29.1

increase the share capital by such sum as the resolution shall prescribe and with such rights, priorities and privileges annexed thereto, as the Company in general meeting may determine;

29.2

consolidate and divide all or any of its share capital into Shares of larger amount than its existing Shares;

29.3

by subdivision of its existing Shares or any of them divide the whole or any part of its share capital into Shares of smaller amount than is fixed by the Memorandum or into Shares without par value; and

29.4

cancel any Shares that at the date of the passing of the resolution have not been taken or agreed to be taken by any person.

30.

Subject to the provisions of the Statute and the provisions of these Articles as regards the matters to be dealt with by Ordinary Resolution, and subject further to applicable shareholder and/or Board approval provisions of Article 7.5, the Company may by Special Resolution:

30.1

change its name;

30.2

alter or add to these Articles;

30.3

alter or add to the Memorandum with respect to any objects, powers or other matters specified therein; and

30.4

reduce its share capital and any capital redemption reserve fund.

REGISTERED OFFICE

31.

Subject to the provisions of the Statute, the Company may by resolution of the Board change the location of its Registered Office.

GENERAL MEETINGS

32.

All general meetings other than annual general meetings shall be called extraordinary general meetings.

33.

The Company shall, if required by the Statute, in each year hold a general meeting as its annual general meeting, and shall specify the meeting as such in the notices calling it. The annual general meeting shall be held at such time and place as the Board shall appoint and if no other time and place is prescribed by them, it shall be held at the Registered Office on the first Wednesday in June of each year at ten o’clock in the morning. At these meetings, the report of the Board (if any) shall be presented.

34.

The Company may hold an annual general meeting, but shall not (unless required by Statute) be obliged to hold an annual general meeting.

35.

The Board may call general meetings, and they shall on a Members requisition forthwith proceed to convene an extraordinary general meeting of the Company.

36.

A Members requisition is a requisition of (i) Members of the Company holding at the date of deposit of the requisition not less than a majority of the aggregate voting power of all of the Shares (whether Preferred or Ordinary) of the Company entitled to attend and vote at general meetings of the Company, or (ii) Members holding at the time of the requisition, Preferred Shares representing a majority of the Preferred Shares of any series then outstanding.

37.

The requisition must state the objects of the meeting and must be signed by the requisitionists and deposited at the Registered Office, and may consist of several documents in like form each signed by one or more requisitionists.

38.

If the Directors do not within twenty-one (21) days from the date of the deposit of the requisition duly proceed to convene a general meeting to be held within a further twenty-one (21) days, the requisitionists, or any of them representing more than one-half of the total voting rights of all of them, may themselves convene a general meeting, but any meeting so convened shall not be held after the expiration of three (3) months after the expiration of the said twenty-one (21) days.

39.

A general meeting convened as aforesaid by requisitionists shall be convened in the same manner as nearly as possible as that in which general meetings are to be convened by Directors.

NOTICE OF GENERAL MEETINGS

40.

At least three (3) days’ notice shall be given of any general meeting unless such notice is waived either before, at or after such meeting by the Members (or their proxies) holding a majority of the aggregate voting power of all of the Shares (whether Preferred or Ordinary) of the Company entitled to attend and vote thereat. Every notice shall be exclusive of the day on which it is given or deemed to be given and of the day for which it is given and shall specify the place, the day and the hour of the meeting and the general nature of the business and shall be given in the manner hereinafter mentioned or in such other manner, if any, as may be prescribed by the Company, provided that a general meeting of the Company shall, whether or not the notice specified in this regulation has been given and whether or not the provisions of the Articles regarding general meetings have been complied with, be deemed to have been duly convened if it is so agreed by the Members (or their proxies) holding a majority of the aggregate voting power of all of the Shares (whether Preferred or Ordinary) of the Company entitled to attend and vote thereat.

41.

The accidental omission to give notice of a general meeting to, or the non receipt of notice of a meeting by, any person entitled to receive notice shall not invalidate the proceedings of that meeting.

42.

The officer of the Company who has charge of the Register of Members of the Company shall prepare and make, at least two (2) days before every general meeting, a complete list of the Members entitled to vote at the general meeting, arranged in alphabetical order, and showing the address of each Member and the number of shares registered in the name of each Member. Such list shall be open to examination by any Member for any purpose germane to the meeting, during ordinary business hours, for a period of at least two (2) days prior to the meeting, either at a place within the city where the meeting is to be held, which place shall be specified in the notice of the meeting, or, if not so specified, at the place where the meeting is to be held. The list shall also be produced and kept at the time and place of the meeting during the whole time thereof, and may be inspected by any Member of the Company who is present.

PROCEEDINGS AT GENERAL MEETINGS

43.

No business shall be transacted at any general meeting unless a quorum is present at the time when the meeting proceeds to business. The holders of a majority of the aggregate voting power of all of the Shares (whether Preferred or Ordinary) entitled to notice of and to attend and vote at such general meeting present in person or by proxy or if a company or other non-natural person by its duly authorised representative shall be a quorum.

44.

A person may participate at a general meeting by conference telephone or other communications equipment by means of which all the persons participating in the meeting can communicate with each other. Participation by a person in a general meeting in this manner is treated as presence in person at that meeting.

45.

A resolution in writing (in one or more counterparts) shall be as valid and effective as if the resolution had been passed at a duly convened and held general meeting of the Company if:

45.1

in the case of a Special Resolution, it is signed by all Members required for such Special Resolution to be deemed effective under the Statute; or

45.2

in the case of any resolution passed other than as a Special Resolution, it is signed by Members for the time being holding Shares carrying in aggregate not less than the minimum number of votes that would be necessary to authorize or take such action at a general meeting at which all Shares entitled to vote thereon were present and voted (calculated in accordance with Article 54) (or, being companies, signed by their duly authorised representative).

46.

A quorum, once established, shall not be broken by the withdrawal of enough votes to leave less than a quorum and the votes present may continue to transact business until adjournment. If, however, such quorum shall not be present or represented at any general meeting, the Members (or their proxies) holding a majority of the aggregate voting power of all of the Shares (whether Preferred or Ordinary) of the Company represented at the meeting may adjourn the meeting from time to time, without notice other than announcement at the meeting, until a quorum shall be present or represented. At such adjourned meeting at which a quorum shall be present or represented, any business may be transacted that might have been transacted at the meeting as originally notified. If the adjournment is for more than thirty (30) days, or if after the adjournment a new record date is fixed for the adjourned meeting, a notice of the adjourned meeting shall be given to each Member entitled to vote thereat.

47.

The chairman, if any, of the Board shall preside as chairman at every general meeting of the Company, or if there is no such chairman, or if he or she shall not be present within ten (10) minutes after the time appointed for the holding of the meeting, or is unwilling or unable to act, the Directors present shall elect one of their number, or shall designate a Member, to be chairman of the meeting.

48.

With the consent of a general meeting at which a quorum is present, the chairman may (and shall if so directed by the meeting), adjourn the meeting from time to time and from place to place, but no business shall be transacted at any adjourned meeting other than the business left unfinished at the meeting from which the adjournment took place. When a general meeting is adjourned for thirty (30) days or more, notice of the adjourned meeting shall be given as in the case of an original meeting. Otherwise it shall not be necessary to give any such notice.

49.

A resolution put to the vote of the meeting shall be decided on a show of hands unless before or on the declaration of the result of the show of hands, the chairman demands a poll, or any other Member or Members collectively present in person or by proxy and holding at least (i) a majority of the aggregate voting power of all of the Shares (whether Preferred or Ordinary) of the Company entitled to attend and vote at the meeting, or (ii) Preferred Shares representing a majority of the Preferred Shares of any series then outstanding, demand a poll.

50.

Unless a poll is duly demanded, a declaration by the chairman that a resolution has been carried or carried unanimously, or by a particular majority, or lost or not carried by a particular majority and an entry to that effect in the minutes of the proceedings of the meeting shall be conclusive evidence of that fact without proof of the number or proportion of the votes recorded in favour of or against such resolution.

51.

The demand for a poll may be withdrawn.

52.

Except on a poll demanded on the election of a chairman or on a question of adjournment, a poll shall be taken as the chairman directs, and the result of the poll shall be deemed to be the resolution of the general meeting at which the poll was demanded.

53.

A poll demanded on the election of a chairman or on a question of adjournment shall be taken forthwith. A poll demanded on any other question shall be taken at such time as the chairman of the general meeting directs, and any business other than that upon which a poll has been demanded or is contingent thereon may proceed pending the taking of the poll.

VOTES OF MEMBERS

54.

Except as otherwise required by law or these Articles, the Ordinary Shares and the Preferred Shares shall vote together as a single series on all matters submitted to a vote of Members. Each Ordinary Share issued and outstanding shall have one vote and each Preferred Share issued and outstanding shall have the number of votes equal to the number of Ordinary Shares into which such Preferred Shares are then convertible pursuant to Article 7.3.

55.

In the case of joint holders of record, the vote of the senior holder who tenders a vote, whether in person or by proxy, shall be accepted to the exclusion of the votes of the other joint holders, and seniority shall be determined by the order in which the names of the holders stand in the Register of Members.

56.

A Member of unsound mind, or in respect of whom an order has been made by any court, having jurisdiction in lunacy, may vote, whether on a show of hands or on a poll, by his or her committee, receiver, curator bonis or other person on such Member’s behalf appointed by that court, and any such committee, receiver, curator bonis or other person may vote by proxy.

57.

No person shall be entitled to vote at any general meeting or at any separate meeting of the holders of a series of Shares unless he or she is registered as a Member on the record date for such meeting nor unless all calls or other monies then payable by such Member in respect of Shares have been paid.

58.

No objection shall be raised to the qualification of any voter except at the general meeting or adjourned general meeting at which the vote objected to is given or tendered and every vote not disallowed at the meeting shall be valid. Any objection made in due time shall be referred to the chairman whose decision shall be final and conclusive.

59.

On a poll or on a show of hands, votes may be cast either personally or by proxy. A Member may appoint more than one proxy or the same proxy under one or more instruments to attend and vote at a meeting. Where a Member appoints more than one proxy, the instrument of proxy shall state which proxy is entitled to vote on a show of hands.

60.

A Member holding more than one Share need not cast the votes in respect of his or her Shares in the same way on any resolution and therefore may vote a Share or some or all such Shares either for or against a resolution and/or abstain from voting a Share or some or all of the Shares and, subject to the terms of the instrument appointing him or her, a proxy appointed under one or more instruments may vote a Share or some or all of the Shares in respect of which he or she is appointed either for or against a resolution and/or abstain from voting.

PROXIES

61.

The instrument appointing a proxy shall be in writing, be executed under the hand of the appointor or of his or her attorney duly authorised in writing, or, if the appointor is a corporation, under the hand of an officer or attorney duly authorised for that purpose. A proxy need not be a Member of the Company.

62.

The instrument appointing a proxy shall be deposited at the Registered Office or at such other place as is specified for that purpose in the notice convening the meeting, no later than the time for holding the meeting or adjourned meeting. The chairman may in any event, at his or her discretion, direct that an instrument of proxy shall be deemed to have been duly deposited. An instrument of proxy that is not deposited in the manner permitted shall be invalid.

63.

The instrument appointing a proxy may be in any usual or common form and may be expressed to be for a particular meeting or any adjournment thereof or generally until revoked. An instrument appointing a proxy shall be deemed to include the power to demand or join or concur in demanding a poll.

64.

Votes given in accordance with the terms of an instrument of proxy shall be valid notwithstanding the previous death or insanity of the principal or revocation of the proxy or of the authority under which the proxy was executed, or the transfer of the Share in respect of which the proxy is given unless notice in writing of such death, insanity, revocation or transfer was received by the Company at the Registered Office before the commencement of the general meeting or adjourned meeting at which it is sought to use the proxy.

CORPORATE MEMBERS

65.

Any corporation or other non-natural person that is a Member may in accordance with its constitutional documents, or in the absence of such provision by resolution of its directors or other governing body, authorise such person as it thinks fit to act as its representative at any meeting of the Company or any class of Members, and the person so authorised shall be entitled to exercise the same powers on behalf of the corporation which he or she represents as the corporation could exercise if it were an individual Member.

SHARES THAT MAY NOT BE VOTED

66.

Shares in the Company that are beneficially owned by the Company or held by it in a fiduciary capacity shall not be voted, directly or indirectly, at any meeting and shall not be counted in determining the total number of outstanding Shares at any given time.

APPOINTMENT OF DIRECTORS

67.

The Board shall consist of seven Directors. The holders of a majority of the Ordinary Shares, voting as a single class, shall be entitled to elect two Directors. The holders of a majority of the Series A Preferred Shares, voting as a single class, shall be entitled to elect one Director (the “Series A Director”). The holders of a majority of the Series B Preferred Shares, plus the Series B-1 Preferred Shares, plus the Series B-2 Preferred Shares, voting together as a single class on an as-converted basis, shall be entitled to elect two Directors (the “Series B Directors”). The holders of a majority of the Ordinary Shares and holders of a majority of the Preferred Shares, with the Ordinary Shares and the Preferred Shares voting as separate classes (and the holders of the Preferred Shares voting together as a single class on an as-converted basis), shall be entitled to elect two Directors (the “Independent Directors”).

POWERS OF DIRECTORS

68.

Subject to the provisions of the Statute, the Memorandum and the Articles and to any directions given by Special Resolution, the business of the Company shall be managed by or under the direction of the Directors who may exercise all the powers of the Company; provided, however, that the Company shall not without first obtaining the approval (by vote or written consent, as provided by law) of Members holding a majority of the aggregate voting power of all shares (whether Preferred or Ordinary) effect the sale of all or substantially all of the assets of the Company, or assets of any of its subsidiaries, to any person other than a wholly-owned subsidiary of the Company. No alteration of the Memorandum or Articles and no such direction shall invalidate any prior act of the Board that would have been valid if that alteration had not been made or that direction had not been given. A duly convened meeting of the Board at which a quorum is present may exercise all powers exercisable by the Board.

69.

All cheques, promissory notes, drafts, bills of exchange and other negotiable instruments and all receipts for monies paid to the Company shall be signed, drawn, accepted, endorsed or otherwise executed as the case may be in such manner as the Board shall determine by resolution.

70.

The Board on behalf of the Company may pay a gratuity or pension or allowance on retirement to any Director who has held any other salaried office or place of profit with the Company or to his or her spouse or dependants and may make contributions to any fund and pay premiums for the purchase or provision of any such gratuity, pension or allowance.

71.

The Board may exercise all the powers of the Company to borrow money and to mortgage or charge its undertaking, property and uncalled capital or any part thereof and to issue debentures, debenture share, mortgages, bonds and other such securities whether outright or as security for any debt, liability or obligation of the Company or of any third party.

VACATION OF OFFICE AND REMOVAL OF DIRECTOR

72.

The office of a Director shall be vacated if:

72.1

a Director gives notice in writing to the Company that he or she resigns the office of Director; or

72.2

if the Director dies, becomes bankrupt or makes any arrangement or composition with such Director’s creditors generally; or

72.3

if the Director is found to be or becomes of unsound mind;

72.4

any Director who shall have been elected by a specified group of Members may be removed during the aforesaid term of office, either for or without cause, by, and only by, the affirmative vote of the holders of a majority of the Shares of such specified group, given at a special meeting of such Members duly called or by an action by written consent for that purpose. Any vacancy in the Board caused as a result of one or more of the events set out in Article 72.1 to 72.3 of any such Director who shall have been elected by a specified group of Members, may be filled by, and only by, the vote of the holders of a majority of the Shares of such specified group given at a special meeting of such Members or by an action by written consent, unless otherwise agreed upon among such Members.

PROCEEDINGS OF DIRECTORS

73.

At all meetings of the Board at least four of Directors elected in accordance with Article 67 (including in such Directors the Series B Directors) shall be necessary and sufficient to constitute a quorum for the transaction of business, and the vote of a majority of the Directors present at any meeting at which there is a quorum, shall be the act of the Board of Directors, except as may be otherwise specifically provided by the Statute, the Memorandum or these Articles. If a quorum shall not be present at any meeting of the Board of Directors, the Directors present thereat may adjourn the meeting, until a quorum shall be present. If only one Director is elected, such sole Director shall constitute a quorum.

74.

Subject to the provisions of the Articles, the Directors may regulate their proceedings as they think fit.

75.

A person may participate in a meeting of the Board or committees thereof by conference telephone or other communications equipment by means of which all the persons participating in the meeting can communicate with each other at the same time. Participation by a person in a meeting in this manner is treated as presence in person at that meeting. Unless otherwise determined by the Board, the meeting shall be deemed to be held at the place where the chairman is at the start of the meeting.

76.

A resolution in writing (in one or more counterparts) signed by all the Directors or all the members of a committee of the Directors shall be as valid and effectual as if it had been passed at a meeting of the Directors, or committee of Directors as the case may be, duly convened and held.

77.

Meetings of the Board may be called by the President or Chief Executive Officer on forty-eight (48) hours’ notice to each Director, either personally or by mail or by facsimile; meetings shall be called by the President, Chief Executive Officer or the Secretary in like manner and on like notice on the written request of one (1) Director unless the Board consists of only one Director; in which case meetings shall be called by the President, Chief Executive Officer or Secretary in like manner or on like notice on the written request of the sole Director.

78.

The continuing Directors may act notwithstanding any vacancy in their body, but if and so long as their number is reduced below the number fixed by or pursuant to these Articles as the necessary quorum of Directors, the continuing Directors or Director may act for the purpose of increasing the number of Directors to that number, or of summoning a general meeting of the Company, but for no other purpose.

79.

The Directors may elect a chairman of their Board and determine the period for which he or she is to hold office; but if no such chairman is elected, or if at any meeting the chairman shall not be present within ten (10) minutes after the time appointed for holding the same, the Directors present may choose one of their number to be chairman of the meeting.

80.

All acts done by any meeting of the Board or of a committee thereof shall, notwithstanding that it be afterwards discovered that there was some defect in the appointment of any Director or that they or any of them were disqualified, be as valid as if every such person had been duly appointed and qualified to be a Director.

PRESUMPTION OF ASSENT

81.

A Director of the Company who is present at a meeting of the Board at which action on any Company matter is taken shall be presumed to have assented to the action taken unless the Director’s dissent shall be entered in the minutes of the meeting or unless the Director shall file his or her written dissent from such action with the person acting as the chairman or secretary of the meeting before the adjournment thereof or shall forward such dissent by registered post to such person immediately after the adjournment of the meeting. Such right to dissent shall not apply to a Director who voted in favour of such action.

DIRECTORS’ INTERESTS

82.

Subject to Article 85, a Director may hold any other office or place of profit under the Company (other than the office of Auditor) in conjunction with his or her office of Director for such period and on such terms as to remuneration and otherwise as the Directors may determine.

83.

Subject to Article 85, a Director may act by him or herself or his or her firm in a professional capacity for the Company and such firm shall be entitled to remuneration for professional services as if such Director were not a Director.

84.

Subject to Article 85, a Director of the Company may be or become a director or other officer of or otherwise interested in any company promoted by the Company or in which the Company may be interested as shareholder or otherwise, and no such Director shall be accountable to the Company for any remuneration or other benefits received by such Director as a director or officer of, or from his or her interest in, such other company.

85.

In addition to any further restrictions set forth in these Articles, no person shall be disqualified from the office of Director or prevented by such office from contracting with the Company, either as vendor, purchaser or otherwise, nor shall any such contract or any contract or transaction entered into by or on behalf of the Company in which any Director shall be in any way interested (each, an “Interested Transaction”) be or be liable to be avoided, nor shall any Director so contracting or being so interested be liable to account to the Company for any profit realised by any such Interested Transaction by reason of such Director holding office or of the fiduciary relation thereby established, so long as the requirements of Section 144 of the General Corporation Law of the State of Delaware in the United States of America (as the same shall be amended hereafter from time to time, and as the same is interpreted through applicable case law) are satisfied with respect to such Interested Transaction as if the Company were a corporation organized under the laws of the State of Delaware and subject to such Section 144.

MINUTES

86.

The Directors shall cause minutes to be made in books kept for the purpose of all appointments of officers made by the Directors, all proceedings at meetings of the Company or the holders of any series of Shares and of the Directors, and of committees of Directors including the names of the Directors present at each meeting.

DELEGATION OF DIRECTORS’ POWERS

87.

The Directors may approve the delegation of any of their powers to any committee consisting of one or more Directors. The Directors may designate one or more Directors as alternate members of any committee, who may replace any absent or disqualified member at any meeting of any such committee. In the absence or disqualification of a member of a committee, and in the absence of a designation by the Directors of an

alternate member to replace the absent or disqualified member, the member or members thereof present at any meeting and not disqualified from voting, whether or not he, she or they constitute a quorum, may unanimously appoint another Director to act at the meeting in the place of the absent or disqualified member if such other Director’s appointment is approved or ratified by the Directors. Any committee, to the extent allowed by law and provided in the resolution establishing such committee, shall have and may exercise all the powers and authority of the Directors in the management of the business and affairs of the Company. Each committee shall keep regular minutes and report to the Directors when required. The Directors may also delegate to any managing director or any Director holding any other executive office such of their powers as they consider desirable to be exercised by such person provided that the appointment of a managing director shall be revoked forthwith if he or she ceases to be a Director. Any such delegation may be made subject to any conditions the Directors may impose, and either collaterally with or to the exclusion of their own powers and may be revoked or altered. Subject to any such conditions, the proceedings of a committee of Directors shall be governed by the Articles regulating the proceedings of Directors, so far as they are capable of applying.

88.

The Directors may establish any committees, local boards or agencies or appoint any person to be a manager or agent for managing the affairs of the Company and may appoint any person to be a member of such committees or local boards. Any such appointment may be made subject to any conditions the Directors may impose, and either collaterally with or to the exclusion of their own powers and may be revoked or altered. Subject to any such conditions, the proceedings of a committee of Directors shall be governed by the Articles regulating the proceedings of Directors, so far as they are capable of applying.

89.

The Directors may by power of attorney or otherwise appoint any person to be the agent of the Company on such conditions as the Directors may determine, provided that the delegation is not to the exclusion of their own powers and may be revoked by the Directors at any time.

90.

The Directors may by power of attorney or otherwise appoint any company, firm, person or body of persons, whether nominated directly or indirectly by the Directors, to be the attorney or authorised signatory of the Company for such purpose and with such powers, authorities and discretions (not exceeding those vested in or exercisable by the Directors under these Articles) and for such period and subject to such conditions as they may think fit, and any such powers of attorney or other appointment may contain such provisions for the protection and convenience of persons dealing with any such attorneys or authorised signatories as the Directors may think fit and may also authorise any such attorney or authorised signatory to delegate all or any of the powers, authorities and discretions vested in him or her.

91.

The Directors may appoint such officers as they consider necessary on such terms, at such remuneration and to perform such duties, and subject to such provisions as to disqualification and removal as the Directors may think fit. Unless otherwise specified in the terms of an officer’s appointment, an officer may be removed by resolution of the Directors or Members.

NO MINIMUM SHAREHOLDING

92.

The Company in a general meeting may fix a minimum shareholding required to be held by a Director, but unless and until such a shareholding qualification is fixed, a Director is not required to hold Shares.

REMUNERATION OF DIRECTORS

93.

The remuneration to be paid to the Directors, if any, shall be such remuneration as the Directors shall determine. The Directors shall also be entitled to be paid all travelling, hotel and other expenses properly incurred by them in connection with their attendance at meetings of Directors or committees of Directors, or otherwise in connection with the business of the Company in their capacity as a Director, or to receive a fixed allowance in respect thereof as may be determined by the Directors, or a combination partly of one such method and partly the other.

94.

The Directors may by resolution approve additional remuneration to any Director for any services other than his or her ordinary routine work as a Director. Any fees paid to a Director who is also counsel or solicitor to the Company, or otherwise serves it in a professional capacity shall be in addition to his or her remuneration as a Director.

SEAL

95.

The Company may, if the Directors so determine, have a Seal. The Seal shall only be used by the authority of the Directors or of a committee of the Directors authorised by the Directors. Every instrument to which the Seal has been affixed shall be signed by at least one person who shall be either a Director or some officer or other person appointed by the Directors for the purpose.

96.

The Company may have for use in any place or places outside the Cayman Islands a duplicate Seal or Seals each of which shall be a facsimile of the common Seal of the Company and, if the Directors so determine, with the addition on its face of the name of every place where it is to be used.

97.

A Director or officer, representative or attorney of the Company may without further authority of the Directors affix the Seal over his or her signature alone to any document of the Company required to be authenticated by him or her under seal or to be filed with the Registrar of Companies in the Cayman Islands or elsewhere wheresoever.

DIVIDENDS, DISTRIBUTIONS AND RESERVE

98.

Subject to the Statute and these Articles and Article 7.1, the Directors may declare Dividends and distributions on Shares in issue and authorise payment of the Dividends or distributions out of the assets of the Company lawfully available therefor. No Dividend or distribution shall be paid except out of the realised or unrealised profits of the Company, or out of the share premium account or as otherwise permitted by the Statute.

99.

All Dividends and distributions shall be declared and paid according to the provisions of Articles 7 and 8.

100.

The Directors may deduct from any Dividend or distribution payable to any Member all sums of money (if any) then payable by such Member to the Company on account of calls or otherwise.

101.

Subject to the provisions of Articles 7 and 8, the Directors may declare that any Dividend or distribution be paid wholly or partly by the distribution of specific assets and in particular of shares, debentures or securities of any other company or in any one or more of such ways and where any difficulty arises in regard to such distribution, the Directors may settle the same as they think expedient and in particular may issue fractional Shares and fix the value for distribution of such specific assets or any part thereof and may determine that cash payments shall be made to any Members upon the basis of the value so fixed in order to adjust the rights of all Members and may vest any such specific assets in trustees as may seem expedient to the Directors.

102.

Any Dividend, distribution, interest or other monies payable in cash in respect of Shares may be paid by wire transfer to the holder or by cheque or warrant sent through the post directed to the registered address of the holder or, in the case of joint holders, to the registered address of the holder who is first named on the Register of Members or to such person and to such address as such holder or joint holders may in writing direct. Every such cheque or warrant shall be made payable to the order of the person to whom it is sent. Any one of two or more joint holders may give effectual receipts for any Dividends, bonuses or other monies payable in respect of the Share held by them as joint holders.

103.

No Dividend or distribution shall bear interest against the Company.

104.

Any Dividend that cannot be paid to a Member and/or that remains unclaimed after six (6) months from the date of declaration of such Dividend may, in the discretion of the Directors, be paid into a separate account in the Company’s name, provided that the Company shall not be constituted as a trustee in respect of that account and the Dividend shall remain as a debt due to the Member. Any Dividend that remains unclaimed after a period of six (6) years from the date of declaration of such Dividend shall be forfeited and shall revert to the Company.

CAPITALISATION

105.

Subject to the applicable shareholder and/or Board approval and provisions of Article 7.5, the Directors may capitalise any sum standing to the credit of any of the Company’s reserve accounts (including share premium account and capital redemption reserve fund) or any sum standing to the credit of profit and loss account or otherwise available for distribution and to appropriate such sum to Members in the proportions in which such sum would have been divisible amongst them had the same been a distribution of profits

by way of Dividend and to apply such sum on their behalf in paying up in full unissued Shares for allotment and distribution credited as fully paid-up to and amongst them in the proportion aforesaid. In such event, the Directors shall do all acts and things required to give effect to such capitalisation, with full power to the Directors to make such provisions as they think fit for the case of Shares becoming distributable in fractions (including provisions whereby the benefit of fractional entitlements accrue to the Company rather than to the Members concerned). The Directors may authorise any person to enter on behalf of all of the Members interested into an agreement with the Company providing for such capitalisation and matters incidental thereto and any agreement made under such authority shall be effective and binding on all concerned.

BOOKS OF ACCOUNT

106.

The Directors shall cause proper books of account to be kept at such place as they may from time to time designate with respect to all sums of money received and expended by the Company and the matters in respect of which the receipt or expenditure takes place, all sales and purchases of goods by the Company and the assets and liabilities of the Company. Proper books shall not be deemed to be kept if there are not kept such books of account as are necessary to give a true and fair view of the state of the Company’s affairs and to explain its transactions. The Directors shall from time to time determine whether and to what extent and at what times and places, and under what conditions or regulations, the accounts and books of the Company or any of them shall be open to inspection of Members not being Directors and no such member shall have any right of inspecting any account or book or document of the Company except as conferred by the Statute or authorized by the Directors (either explicitly or implicitly by authorizing the Company to enter into an agreement or contract in which such rights are conferred) or the Company in general meeting.

107.

The Directors may from time to time cause to be prepared and to be laid before the Company in general meeting profit and loss accounts, balance sheets, group accounts (if any) and such other reports and accounts as may be required by law.

AUDIT

108.

The Directors may appoint an Auditor of the Company who shall hold office until removed from office by a resolution of the Directors, and may fix the Auditor’s remuneration.

109.

Every Auditor of the Company shall have a right of access at all times to the books and accounts and vouchers of the Company and shall be entitled to require from the Directors and officers of the Company such information and explanation as may be necessary for the performance of the duties of the Auditor.

110.

Auditors shall, if so required by the Directors, make a report on the accounts of the Company during their tenure of office at the next annual general meeting following their appointment in the case of a company that is registered with the Registrar of Companies as an ordinary company, and at the next extraordinary general meeting following their appointment in the case of a company that is registered with the Registrar of Companies as an exempted company and at any other time during their term of office, upon request of the Directors or any general meeting of the Members.

NOTICES

111.

Notices shall be in writing and may be given by the Company to any Member either personally or by sending it by post, cable, telex, fax or e-mail to such Member or to such Member’s address as shown in the Register of Members (or where the notice is given by e-mail by sending it to the e-mail address provided by such Member). Any notice, if send by post from one country to another, is to be sent airmail.

112.

Where a notice is sent by post, service of the notice shall be deemed to be effected by properly addressing, pre paying and posting a letter containing the notice, and shall be deemed to have been received on the seventh day (not including Saturdays or Sundays or public holidays) following the day on which the notice was posted. Where a notice is sent by cable, telex or fax, service of the notice shall be deemed to be effected by properly addressing and sending such notice and shall be deemed to have been received on the same day that it was transmitted. Where a notice is given by e-mail, service shall be deemed to be effected by transmitting the e-mail to the e-mail address provided by the intended recipient and shall be deemed to have been received on the same day that it was sent and it shall not be necessary for the receipt of the e-mail to be acknowledged by the recipient.

113.

A notice may be given by the Company to the person or persons that the Company has been advised are entitled to a Share or Shares in consequence of the death or bankruptcy of a Member in the same manner as other notices that are required to be given under these Articles and shall be addressed to them by name, or by the title of representatives of the deceased, or trustee of the bankrupt, or by any like description at the address supplied for that purpose by the persons claiming to be so entitled, or at the option of the Company, by giving the notice in any manner in which the same might have been given if the death or bankruptcy had not occurred.

114.

Notice of every general meeting shall be given in any manner hereinbefore authorised to every person shown as a Member in the Register of Members on the record date for such meeting except that in the case of joint holders the notice shall be sufficient if given to the joint holder first named in the Register of Members and every person upon whom the ownership of a Share devolves by reason of his or her being a legal personal representative or a trustee in bankruptcy of a Member of record where the Member of record but for his or her death or bankruptcy would be entitled to receive notice of the meeting, and no other person shall be entitled to receive notices of general meetings.

115.

Whenever any notice is required by law or these Articles to be given to any Director, member of a committee or Member, a waiver thereof in writing, signed by the person or persons entitled to said notice, whether before or after the time stated therein, shall be deemed equivalent thereto.

WINDING UP

116.

If the Company shall be wound up, assets available for distribution amongst the Members shall be distributed in accordance with Articles 7 and 8.

117.

If the Company shall be wound up, the liquidator may, with the sanction of a Special Resolution of the Company and any other sanction required by the Statute and subject to the applicable approval provisions of Articles 7 and 8, divide amongst the Members in kind the whole or any part of the assets of the Company (whether they shall consist of property of the same kind or not) and may for that purpose value any assets and determine how the division shall be carried out as between the Members or different classes of Members. The liquidator may, with the like sanction, vest the whole or any part of such assets in trustees upon such trusts for the benefit of the Members as the liquidator, with the like sanction, shall think fit, but so that no Member shall be compelled to accept any asset upon which there is a liability.

INDEMNITY

118.

To the maximum extent permitted by applicable law, the Directors and officers for the time being of the Company and any trustee for the time being acting in relation to any of the affairs of the Company and their heirs, executors, administrators and personal representatives respectively shall be indemnified out of the assets of the Company from and against all actions, proceedings, costs, charges, losses, damages and expenses that they or any of them shall or may incur or sustain by reason of any act done or omitted in or about the execution of their duty in their respective offices or trusts, except such (if any) as they shall incur or sustain by or through their own wilful neglect or wilful default, and no such Director or officer or trustee shall be answerable for the acts, receipts, neglects or defaults of any other Director or officer or trustee or for joining in any receipt for the sake of conformity or for the solvency or honesty of any banker or other persons with whom any monies or effects belonging to the Company may be lodged or deposited for safe custody or for any insufficiency of any security upon which any monies of the Company may be invested or for any other loss or damage due to any such cause as aforesaid or which may happen in or about the execution of his or her office or trust unless the same shall happen through the wilful neglect or wilful default of such Director or officer or trustee. Except with respect to proceedings to enforce rights to indemnification pursuant to this Article, the Company shall indemnify any such indemnitee pursuant to this Article in connection with a proceeding (or part thereof) initiated by such indemnitee only if such proceeding (or part thereof) was authorized by the Board. The right to indemnification conferred in this Article 118 shall include the right to be paid by the Company the expenses incurred in defending any such proceeding in advance of its final disposition to the maximum extent provided by, and subject to the requirements of, applicable law, so long as the indemnitee agrees with the Company to repay all amounts so advanced if it shall ultimately be determined by final judicial decision from which there is no further right to appeal that such indemnitee is not entitled to be indemnified for such expenses under this Article.

119.

FINANCIAL YEAR

120.

Unless the Directors otherwise prescribe, the financial year of the Company shall end on 31st December in each year and, following the year of incorporation, shall begin on 1st January in each year.

TRANSFER BY WAY OF CONTINUATION

121.

If the Company is exempted as defined in the Statute, it shall, subject to the provisions of the Statute and with the approval of a Special Resolution, have the power to register by way of continuation as a body corporate under the laws of any jurisdiction outside the Cayman Islands and to be deregistered in the Cayman Islands.

EX-4.2 3 filename3.htm EX-4.2

Exhibit 4.2

MONTAGE TECHNOLOGY GROUP LIMITED

AMENDED AND RESTATED INVESTOR RIGHTS AGREEMENT

This Amended and Restated Investor Rights Agreement (this “Agreement”) is made as of October 8, 2009, by and among Montage Technology Group Limited., an exempted company registered by way of continuation under the Companies Law (2007 Revision) of the Cayman Islands (the “Company”), the holders of Series A Preferred Shares, the Series B Preferred Shares, the Series B-1 Preferred Shares and the Series B-2 Preferred Shares set forth on Schedule A hereto (collectively, the “Investors”).

WHEREAS, the Company, holders of the Series A Preferred Shares, the holders of the Series B Preferred Shares and the holders of the Series B-1 Preferred Shares are parties to that certain Amended and Restated Investor Rights Agreement dated as of May 18, 2007 (the “Prior Agreement”), which provides that such Prior Agreement may be amended, by a written instrument signed by the Company and by the Investors (as defined therein) holding 66 2/3% of the outstanding Registrable Securities (as defined therein) then held by the Investors (as defined therein); provided that any provision of the Prior Agreement which requires the vote, consent or approval of a greater proportion of a specified class or series for a particular matter, then any amendment to that provision shall require the vote, consent or approval of such greater proportion (the “Amendment Prerequisite”);

WHEREAS, the Company, the holders of the Ordinary Shares, the Series A Preferred Shares, the Series B Preferred Shares and the Series B-1 Preferred Shares constituting the Amendment Prerequisite, desire to amend and restate the Prior Agreement in its entirety with this Agreement;

WHEREAS, the Company and certain Investors are entering into a Share and Warrant Purchase Agreement of even date herewith (the “Share Purchase Agreement”) whereby the Company will sell, and the Investors will purchase, Series B-2 Preferred Shares and certain warrants to purchase the Series B-2 Preferred Shares of the Company (the “Financing”);

WHEREAS, the Share Purchase Agreement requires, as a condition to closing the Financing, that the parties hereto enter into this Agreement;

NOW, THEREFORE, in consideration of the premises and the mutual covenants herein contained, and other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the parties hereto hereby agree as follows:

SECTION 1

REGISTRATION RIGHTS

1.1 Certain Definitions.

For purposes of this Agreement:

(a) The term “ADSs” means American Depositary Shares representing the right to receive Ordinary Shares;

(b) The term “Capital Shares” means the outstanding Ordinary Shares and Preferred Shares of the Company.

(c) The term “Change of Control” means (i) a consolidation or merger of the Company with or into any other company or entity in which the shareholders of the Company prior to such transaction would own, as a result of such transaction, less than a majority of the voting securities of the successor or surviving company or entity immediately thereafter or in a transaction in which more than 50% of the voting interest of the Company is transferred (and such transaction is not primarily for financing purposes), or (ii) a sale of all or substantially all of the assets or business of the Company in one or more related transactions.

(d) The term “Form F-3” or “Form S-3” means such form under the Securities Act of 1933, as amended (the “Securities Act”) as in effect on the date hereof or any successor form under the Securities Act;

(e) The term “Form F-4” or “Form S-4” means such form under the Securities Act as in effect on the date hereof or any successor form under the Securities Act;

(f) The term “Holder” means any Investor holding Registrable Securities or any assignee thereof in accordance with Section 1.11 of this Agreement.

(g) The term “Ordinary Shares” means the ordinary shares of the Company.

(h) The term “Preferred Shares” means the Series A Preferred Shares, the Series B Preferred Shares, the Series B-1 Preferred Shares and the Series B-2 Preferred Shares of the Company.

(i) The term “Qualified IPO” means the earlier to occur of (i) the listing of all Ordinary Shares of the Company on The Nasdaq Global Market or Global Select Market (“Nasdaq”), the Main Board of the Hong Kong Stock Exchange or any other major international stock exchange approved by holders of at least a majority of the Series B Preferred Shares, the Series B-1 Preferred Shares and the Series B-2 Preferred Shares (voting together as a single class) at a listing price of at least US$5.00 per Ordinary Share and (ii) a firm commitment underwritten public offering of the Company’s Ordinary Shares pursuant to an effective registration statement on Form F-1 under the Securities Act of 1933, as amended (the “Securities Act”), at an offering price to the public of at least $5.00 per Ordinary Share, resulting in aggregate cash proceeds to the Company of at least $50,000,000 (net of underwriting discounts and commissions).

(j) The terms “register,” “registered,” and “registration” refer to a registration effected by preparing and filing a registration statement or similar document in compliance with the Securities Act (or other applicable securities regulations, as the case may be) and the declaration or ordering of effectiveness of such registration statement or document.

(k) The term “Registrable Securities” means (i) the Ordinary Shares issuable or issued upon conversion of the Preferred Shares held by the Investors, (ii) any other Ordinary Shares issued as (or issuable upon the conversion or exercise of any warrant, right or other security which is issued as) a dividend or other distribution with respect to, or in exchange for or in replacement of, the shares listed in (i) and (iii) any Ordinary Shares owned or hereafter acquired by the Investors; provided, however, that the foregoing definition shall exclude in all cases any Registrable Securities sold by a person in a transaction in which his or her rights under this Agreement are not assigned. Notwithstanding the foregoing, Ordinary Shares or other securities shall only be treated as Registrable Securities if and so long as they have not been (A) sold to or through a broker or dealer or underwriter in a public distribution or a public securities transaction, or (B) sold in a transaction exempt from the registration and prospectus delivery requirements of the Securities Act under Section 4(1) thereof so that all transfer restrictions, and restrictive legends with respect thereto, if any, are removed upon the consummation of such sale. Reference to Registrable Securities in this Agreement shall include such securities in the form of ADSs.

(l) The number of shares of “Registrable Securities then outstanding” shall be determined by the number of shares of Ordinary Shares outstanding which are, and the number of shares of Ordinary Shares issuable pursuant to then exercisable or convertible securities which are, Registrable Securities.

(m) The term “SEC” means the United States Securities and Exchange Commission.

(n) The term “Series B Directors” shall have the same meaning as defined in the Company’s Memorandum and Articles of Association (as amended from time to time).

1.2 Demand Registration.

(a) If the Company shall receive, upon the later to occur of (i) four years from the date hereof or (ii) at any time subsequent to six months after the effective date of an initial public offering of the Company’s Ordinary Shares pursuant to an effective registration statement on Form F-1 under the Securities Act, a written request from the Holders of at least 33% of the Registrable Securities then outstanding that the Company file a registration statement under the Securities Act covering the registration of at least such number of the Registrable Securities then outstanding as would yield an aggregate offering price of at least $10,000,000, then the Company shall, within 30 days of the receipt thereof, give written notice of such request to all Holders and shall, subject to the limitations of Section 1.2(b), use its best efforts to effect as soon as practicable, the registration under the Securities Act of all Registrable Securities which the Holders request to be registered within 20 days of the mailing of such notice by the Company. Registrations under this Section 1.2 shall be on such appropriate registration form of the SEC or other governmental entity as shall be selected by the Company and as shall permit the disposition of such Registrable Securities in accordance with the intended method or methods of disposition specified in their request for such registration.

(b) If the Holders initiating the registration request under this Section 1.2 (“Initiating Holders”) intend to distribute the Registrable Securities covered by their request by means of an underwriting, they shall so advise the Company as a part of their request made pursuant to this Section 1.2 and the Company shall include such information in the written notice referred to in Section 1.2(a). The underwriter will be selected by a majority in interest of the Initiating Holders and shall be reasonably acceptable to the Company. In such event, the right of any Holder to include its Registrable Securities in such registration shall be conditioned upon such Holder’s participation in such underwriting and the inclusion of such Holder’s Registrable Securities in the underwriting (unless otherwise mutually agreed by a majority in interest of the Initiating Holders and such Holder) to the extent provided herein. All Holders proposing to distribute their Registrable Securities through such underwriting shall (together with the Company as provided in Section 1.5(e)) enter into an underwriting agreement in customary form with the underwriter or underwriters selected for such underwriting. Notwithstanding any other provision of this Section 1.2, if the underwriter advises the Initiating Holders in writing that marketing factors require a limitation of the number of shares to be underwritten, then the Initiating Holders shall so advise all Holders of Registrable Securities which would otherwise be underwritten pursuant hereto, and the number of shares of Registrable Securities that may be included in the underwriting shall be allocated among all Holders thereof, including the Initiating Holders, in proportion (as nearly as practicable) to the amount of Registrable Securities of the Company owned by each Holder; provided, however, that the number of shares of Registrable Securities of the Initiating Holder to be included in such underwriting shall not be reduced unless all other securities are first entirely excluded from the underwriting; and provided further that the total number of Registrable Securities of the Initiating Holder included in such underwriting shall not be reduced below 25% of the Registrable Securities initially requested for registration by the Initiating Holders.

(c) Notwithstanding the foregoing, if the Company shall furnish to Holders requesting a registration statement pursuant to this Section 1.2, a certificate signed by the President or Chief Executive Officer of the Company stating that in the good faith judgment of the Board of Directors of the Company (the “Board”), it would be seriously detrimental to the Company and its shareholders for such registration statement to be filed and it is therefore essential to defer the filing of such registration statement, the Company shall have the right to defer such filing for a period of not more than 90 days after receipt of the request of the Initiating Holders; provided, however, that the Company may not utilize this right more than once in any 12-month period.

(d) In addition and without limitation of Section 1.15 hereof, the Company shall not be obligated to effect, or to take any action to effect, any registration pursuant to this Section 1.2:

(i) After the Company has effected two registrations pursuant to this Section 1.2 (with ADSs and their underlying Ordinary Shares constituting a single registration) and such registrations have been declared or ordered effective;

(ii) During the period commencing with the date 60 days prior to the Company’s good faith estimate of the date of filing of, and ending on a date 180 days after the effective date of (subject to such extension as provided in Section 1.14), a registration subject to Section 1.3 hereof (other than a registration relating solely to the sale of securities to participants in a Company stock plan, a registration on any form that does not include substantially the same information as would be required to be included in a registration statement covering the sale of the Registrable Securities, or a registration in which the only Ordinary Shares being registered are Ordinary Shares issuable upon conversion of debt securities that are also being registered or an SEC Rule 145 transaction); provided that the Company is actively employing its best efforts to cause such registration statement to become effective; or

(iii) If the Initiating Holders propose to dispose of shares of Registrable Securities that may be immediately registered on Form F-3 or Form S-3 (or any successor form that provides for short-form registration), as the case may be.

1.3 Company Registration. If (but without any obligation to do so) the Company proposes to register (including for this purpose a registration effected by the Company for shareholders other than the Holders) any of its shares under the Securities Act (or such applicable securities laws, as the case may be), in connection with the public offering of such securities solely for cash (other than a registration relating solely to the sale of securities to participants in a Company share plan, an offering or sale of securities pursuant to a registration statement on Form F-4 or Form S-4 (or any successor form), as the case may be, a registration in which the only shares being registered are Ordinary Shares issuable upon conversion of debt securities which are also being registered, a registration of securities in a transaction under Rule 145 promulgated under the Securities Act, or in any registration on any form which does not include substantially the same information as would be required to be included in a registration statement covering the sale of the Registrable Securities), the Company shall, at such time, promptly give each Holder written notice of such registration. Upon the written request of each Holder given within 20 days after mailing of such notice by the Company, the Company shall, subject to the provisions of Section 1.8, cause to be registered under the Securities Act the Registrable Securities (including in the form of ADSs) that each such Holder has requested to be registered.

1.4 Form F-3 or S-3 Registration. In case the Company shall receive from Holders of the Registrable Securities then outstanding a written request or requests that the Company effect a registration on Form F-3 or Form S-3, as the case may be, and any related qualification or compliance with respect to all or a part of the Registrable Securities owned by such Holder or Holders, the Company will:

(a) promptly give written notice of the proposed registration, and any related qualification or compliance, to all other Holders; and

(b) as soon as practicable, effect such registration and all such qualifications and compliances as may be so requested and as would permit or facilitate the sale and distribution of all or such portion of such Holder’s or Holders’ Registrable Securities as are specified in such request, together with all or such portion of the Registrable Securities of any other Holder or

Holders joining in such request as are specified in a written request given within fifteen (15) days after receipt of such written notice from the Company; provided, however, that the Company shall not be obligated to effect any such registration, qualification or compliance, pursuant to this Section 1.4:

(i) if Form F-3 or Form S-3, as the case may be, is not available for such offering by the Holders;

(ii) if the Holders, together with the holders of any other securities of the Company entitled to inclusion in such registration, propose to sell Registrable Securities and such other securities (if any) at an aggregate offering price to the public (before any underwriters’ discounts or commissions) of less $1,000,000;

(iii) if the Company shall furnish to the Holders a certificate signed by the President or Chief Executive Officer of the Company stating that in the good faith judgment of the Board, it would be seriously detrimental to the Company and its shareholders for such registration on Form F-3 or Form S-3 (as the case may be) to be effected at such time, in which event the Company shall have the right to defer the filing of the registration statement on Form F-3 or Form S-3 (as the case may be) for a period of not more than 90 days after receipt of the request of the Holder or Holders under this Section 1.4; provided, however, that the Company shall not utilize this right more than once in any 12-month period;

(iv) in any particular jurisdiction in which the Company would be required to qualify to do business or to execute a general consent to service of process in effecting such registration, qualification or compliance; or

(v) during the period ending on a date one hundred eighty (180) days after the effective date of a registration statement subject to Section 1.3, which period may be extended as provided in Section 1.14.

(c) Subject to the foregoing, the Company shall file a registration statement covering the Registrable Securities and other securities so requested to be registered as soon as practicable after receipt of the request or requests of the Holders. Registrations effected pursuant to this Section 1.4 shall not be counted as demands for registration or registrations effected pursuant to Sections 1.2 or 1.3, respectively.

1.5 Obligations of the Company. Whenever required under this Section 1 to effect the registration of any Registrable Securities, the Company shall, as expeditiously as reasonably possible:

(a) Prepare and file with the SEC (or such other governing bodies as the case may be) a registration statement with respect to such Registrable Securities and use its best efforts to cause such registration statement to become effective, and, upon the request of the Holders of a majority of the Registrable Securities registered thereunder, keep such registration statement effective for up to one hundred twenty (120) days.

(b) Prepare and file with the SEC (or such other governing bodies as the case may be) such amendments and supplements to such registration statement and the prospectus used in connection with such registration statement as may be necessary to comply with the provisions of the Securities Act (or such applicable securities laws, as the case may be) with respect to the disposition of all securities covered by such registration statement for up to one hundred twenty (120) days.

(c) Furnish to the Holders such numbers of copies of a prospectus, including a preliminary prospectus, in conformity with the requirements of the Securities Act (or such applicable securities laws, as the case may be), and such other documents as they may reasonably request in order to facilitate the disposition of Registrable Securities owned by them.

(d) Use its best efforts to register and qualify the securities covered by such registration statement under such other securities or blue sky laws of such jurisdictions as shall be reasonably requested by the Holders; provided, however, that the Company shall not be required in connection therewith or as a condition thereto to qualify to do business or to file a general consent to service of process in any such states or jurisdictions.

(e) In the event of any underwritten public offering, enter into and perform its obligations under an underwriting agreement, in usual and customary form, with the managing underwriter of such offering, and each Holder participating in such underwriting shall also enter into and perform its obligations under such an agreement.

(f) Notify each Holder of Registrable Securities covered by such registration statement at any time when a prospectus relating thereto is required to be delivered under the Securities Act (or such applicable securities laws, as the case may be) of the happening of any event as a result of which the prospectus included in such registration statement, as then in effect, includes an untrue statement of a material fact or omits to state a material fact required to be stated therein or necessary to make the statements therein not misleading in the light of the circumstances then existing, such obligation to continue until the earlier of (i) the sale of all Registrable Securities registered pursuant to the registration statement of which such prospectus forms a part or (ii) withdrawal of such registration statement.

(g) Cause all such Registrable Securities registered pursuant to this Agreement to be listed on each securities exchange on which similar securities issued by the Company are then listed.

(h) Provide a transfer agent and registrar for all Registrable Securities registered pursuant hereunder and a CUSIP number for all such Registrable Securities, in each case not later than the effective date of such registration.

(i) Use its best efforts to furnish, at the request of any Holder requesting registration of Registrable Securities pursuant to this Section 1, on the date that such Registrable Securities are delivered to the underwriters for sale in connection with a registration pursuant to this Section 1, if such securities are being sold through underwriters, or, if such securities are not being sold through underwriters, on the date that the registration statement with respect to such

securities becomes effective, (i) an opinion, dated such date, of the counsel representing the Company for the purposes of such registration, in form and substance as is customarily given to underwriters in an underwritten public offering, addressed to the underwriters, if any, and to the Holders requesting registration of Registrable Securities and (ii) a letter dated such date, from the independent certified public accountants of the Company, in form and substance as is customarily given by independent certified public accountants to underwriters in an underwritten public offering, addressed to the underwriters, if any, and to the Holders requesting registration of Registrable Securities.

1.6 Furnish Information. It shall be a condition precedent to the obligations of the Company to take any action pursuant to this Section 1 with respect to the Registrable Securities of any selling Holder that such Holder shall furnish to the Company such information regarding itself, the Registrable Securities held by it, and the intended method of disposition of such securities as shall be required to effect the registration of such Holder’s Registrable Securities. The Company shall have no obligation with respect to any registration requested pursuant to Sections 1.2 and 1.4 of this Agreement if, as a result of the application of the preceding sentence, the number of shares or the anticipated aggregate offering price of the Registrable Securities to be included in the registration does not equal or exceed the number of shares or the anticipated aggregate offering price required to originally trigger the Company’s obligation to initiate such registration as specified in Sections 1.2(a) and 1.4(b)(ii), whichever is applicable.

1.7 Expenses of Registration.

(a) Expenses of Demand Registration. All expenses (other than underwriting discounts and commissions and such underwriting expenses to be borne by the underwriters) incurred in connection with registrations, filings or qualifications pursuant to Section 1.2, including (without limitation) all registration, filing and qualification fees, printers’ and accounting fees, fees and disbursements of counsel for the Company, and the reasonable fees and disbursements of one (1) counsel for the selling Holders selected by them with the approval of the Company, which approval shall not be unreasonably withheld, shall be borne by the Company; provided, however, that the Company shall not be required to pay for any expenses of any registration proceeding begun pursuant to Section 1.2 if the registration request is subsequently withdrawn at the request of the Holders of a majority of the Registrable Securities to be registered (in which case all participating Holders shall bear such expenses pro rata based on their Registratable Securities included in such registration), unless the Holders of a majority of the Registrable Securities agree to forfeit their right to one demand registration pursuant to Section 1.2.

(b) Expenses of Company Registration. All expenses (other than underwriting discounts and commissions and such underwriting expenses to be borne by the underwriters) incurred in connection with registrations, filings or qualifications of Registrable Securities pursuant to Section 1.3 for each Holder (which right may be assigned as provided in Section 1.11), including (without limitation) all registration, filing, and qualification fees, printers’ and accounting fees, fees and disbursements of counsel for the Company and the reasonable fees and disbursements of one counsel for the selling Holder or Holders selected by them with the approval of the Company, which approval shall not be unreasonably withheld, shall be borne by the Company.

(c) Expenses of Registration on Form F-3 or Form S-3. All expenses (other than underwriting discounts and commissions and such underwriting expenses to be borne by the underwriters) incurred in connection with registrations requested pursuant to Section 1.4, including (without limitation) all registration, filing, qualification, printers’ and legal and accounting fees shall be borne by the Company.

1.8 Underwriting Requirements. If a registration statement for which the Company gives notice pursuant to Section 1.3 is for an underwritten offering, then the Company shall so advise the Holders of Registrable Securities as part of such written notice. In such event, the right of any Holder to include its Registrable Securities in a registration pursuant to Section 1.3 shall be conditioned upon such Holder’s participation in such underwriting and the inclusion of such Holder’s Registrable Securities in the underwriting to the extent provided herein. All Holders proposing to distribute their Registrable Securities through such underwriting shall (together with the Company and the other holders of securities of the Company whose securities are to be included in such registration and underwriting) enter into an underwriting agreement in customary form with the managing underwriter or underwriter(s) selected for such underwriting. Notwithstanding any other provision of this Agreement, if the managing underwriter(s) determine(s) in good faith that marketing factors require a limitation of the number of shares to be underwritten, then the managing underwriter(s) may exclude shares (including Registrable Securities) from the registration and the underwriting, and the number of shares that may be included in the registration and the underwriting shall be allocated (i) first, to the Company, (ii) second, to each of the Holders requesting inclusion of their Registrable Securities in such registration statement on a pro rata basis based upon the total number of Registrable Securities then held by each such Holder; provided, however, that no exclusion of such Holders’ Registrable Securities shall be made unless all other securities (including securities held by officers, directors, founders, employees or consultants of the Company) are first excluded in their entirety; and provided further, that in any underwriting that is not in connection with the Company’s initial public offering, the number of shares of Registrable Securities included in the offering shall not be reduced below 25% of the Registrable Securities requested to be included in such offering, and (iii) third, to other stockholders. If any Holder disapproves of the terms of any such underwriting, such Holder may elect to withdraw therefrom by written notice to the Company and the underwriter, delivered at least 20 business days prior to the effective date of the registration statement. Any Registrable Securities excluded or withdrawn from such underwriting shall be excluded and withdrawn from the registration. For any Holder that is a venture capital fund, partnership or corporation, the affiliated venture capital funds, partners, retired partners and stockholders of such Holder, or the estates and family members of any such partners, stockholders and retired partners and any trusts for the benefit of any of the foregoing persons shall be deemed to be a single “Holder,” and any pro rata reduction with respect to such “Holder” shall be based upon the aggregate amount of shares carrying registration rights owned by all entities and individuals included in such “Holder,” as defined in this sentence.

1.9 Delay of Registration. No Holder shall have any right to obtain or seek an injunction restraining or otherwise delaying any such registration as the result of any controversy that might arise with respect to the interpretation or implementation of this Section 1.

1.10 Indemnification. In the event any Registrable Securities are included in a registration statement under this Section 1:

(a) To the extent permitted by law, the Company will indemnify and hold harmless each Holder, any “underwriter” (as defined in the Securities Act) for such Holder and each person, if any, who controls such Holder or underwriter within the meaning of the Securities Act or the Securities Exchange Act of 1934, as amended (the “Exchange Act”), against any losses, claims, damages, or liabilities (joint or several) to which they may become subject under the Securities Act, the Exchange Act or other federal or state law, insofar as such losses, claims, damages, or liabilities (or actions, proceedings or settlements in respect thereof) arise out of or are based upon any of the following statements, omissions or violations (each, a “Violation”): (i) any untrue statement or alleged untrue statement of a material fact contained in such registration statement, including any preliminary prospectus or final prospectus contained in such registration statement or any amendments or supplements thereto, (ii) the omission or alleged omission to state therein a material fact required to be stated therein, or necessary to make the statements therein not misleading, or (iii) any violation or alleged violation by the Company of the Securities Act, the Exchange Act, any state securities law or any rule or regulation promulgated under the Securities Act, the Exchange Act or any state securities law; and the Company will pay to each such Holder, underwriter or controlling person, as incurred, any legal or other expenses reasonably incurred by them in connection with investigating, defending or settling any such loss, claim, damage, liability, or action; provided, however, that the indemnity agreement contained in this Section 1.10(a) shall not apply to amounts paid in settlement of any such loss, claim, damage, liability, or action if such settlement is effected without the consent of the Company (which consent shall not be unreasonably withheld), nor shall the Company be liable to any Holder, underwriter or controlling person for any such loss, claim, damage, liability, or action to the extent that it arises out of or is based upon a Violation which occurs in reliance upon and in conformity with written information furnished expressly for use in connection with such registration by any such Holder, underwriter or controlling person.

(b) To the extent permitted by law, each selling Holder will severally and not jointly indemnify and hold harmless the Company, each of its directors, each of its officers who has signed the registration statement, each person, if any, who controls the Company within the meaning of the Securities Act, any underwriter, any other Holder selling securities in such registration statement and any controlling person of any such underwriter or other Holder, against any losses, claims, damages, or liabilities (joint or several) to which any of the foregoing persons may become subject, under the Securities Act, the Exchange Act or other federal or state law, insofar as such losses, claims, damages, or liabilities (or actions in respect thereto) arise out of or are based upon any Violation by such Holder, in each case to the extent (and only to the extent) that such Violation occurs in reliance upon and in conformity with written information furnished by such Holder expressly for use in connection with such registration; and each such Holder will pay, as incurred, any legal or other expenses reasonably incurred by any person intended to be indemnified pursuant to this Section 1.10(b), in connection with investigating,

defending or settling any such loss, claim, damage, liability, or action; provided, however, that the indemnity agreement contained in this Section 1.10(b) shall not apply to amounts paid in settlement of any such loss, claim, damage, liability or action if such settlement is effected without the consent of the Holder (which consent shall not be unreasonably withheld); provided further, that in no event shall any indemnity under this Section 1.10(b) exceed the net proceeds from the offering received by such Holder.

(c) Promptly after receipt by an indemnified party under this Section 1.10 of notice of the commencement of any action (including any governmental action), such indemnified party will, if a claim in respect thereof is to be made against any indemnifying party under this Section 1.10, deliver to the indemnifying party a written notice of the commencement thereof and the indemnifying party shall have the right to participate in, and, to the extent the indemnifying party so desires, jointly with any other indemnifying party similarly noticed, to assume the defense thereof with counsel mutually satisfactory to the parties; provided, however, that an indemnified party (together with all other indemnified parties which may be represented without conflict by one counsel) shall have the right to retain one separate counsel, with the reasonable fees and expenses to be paid by the indemnifying party, if representation of such indemnified party by the counsel retained by the indemnifying party would be inappropriate due to actual or potential differing interests between such indemnified party and any other party represented by such counsel in such proceeding. The failure to deliver written notice to the indemnifying party within a reasonable time of the commencement of any such action, if prejudicial to its ability to defend such action, shall relieve such indemnifying party of any liability to the indemnified party under this Section 1.10, but the omission so to deliver written notice to the indemnifying party will not relieve it of any liability that it may have to any indemnified party otherwise than under this Section 1.10. No indemnifying party, in the defense of any such claim or litigation, shall, except with the consent of each indemnified party, consent to entry of any judgment or enter into any settlement that does not include as an unconditional term thereof the giving by the claimant or plaintiff to such indemnified party of a release from all liability in respect to such claim or litigation.

(d) If the indemnification provided for in this Section 1.10 is held by a court of competent jurisdiction to be unavailable to an indemnified party with respect to any loss, liability, claim, damage or expense referred to therein, then the indemnifying party, in lieu of indemnifying such indemnified party hereunder, shall contribute to the amount paid or payable by such indemnified party as a result of such loss, liability, claim, damage, or expense in such proportion as is appropriate to reflect the relative fault of the indemnifying party on the one hand and of the indemnified party on the other in connection with the statements or omissions that resulted in such loss, liability, claim, damage or expense as well as any other relevant equitable considerations; provided, however, that in no event shall any contribution by a Holder under this Section 1.10(d) exceed the net proceeds from the offering received by such Holder. The relative fault of the indemnifying party and of the indemnified party shall be determined by reference to, among other things, whether the untrue or alleged untrue statement of a material fact or the omission to state a material fact relates to information supplied by the indemnifying party or by the indemnified party and the parties’ relative intent, knowledge, access to information, and opportunity to correct or prevent such statement or omission.

(e) The obligations of the Company and Holders under this Section 1.10 shall survive the completion of any offering of Registrable Securities in a registration statement under this Section 1.

1.11 Assignment of Registration Rights. The rights to cause the Company to register Registrable Securities pursuant to this Section 1 may be assigned (but only with all related obligations) by an Investor to (i) any partner or retired partner or affiliated fund of any Holder which is a partnership, (ii) any member or former member of any Holder which is a limited liability company, (iii) any family member or trust for the benefit of any individual Holder, (iv) any transferee who satisfies the criteria to be an Investor, (v) any entities affiliated with a Holder, or (vi) a transferee or assignee who acquires at least 100,000 shares of Registrable Securities (as adjusted for any share dividends, combinations, reclassifications or splits with respect to such shares); provided, in each case, the Company is promptly furnished with written notice of the name and address of such transferee or assignee and the securities with respect to which such registration rights are being assigned. For the purposes of determining the number of shares of Registrable Securities held by a transferee or assignee, the holdings of transferees and assignees of a business entity who are affiliates, retired affiliates of such entity (including spouses and ancestors, lineal descendants and siblings of such affiliates or affiliates who acquire Registrable Securities by gift, will or intestate succession) shall be aggregated together and with the business entity; provided that all assignees and transferees who would not qualify individually for assignment of registration rights shall have a single attorney-in-fact for the purpose of exercising any rights, receiving notices or taking any action under Section 1.

1.12 Limitations on Subsequent Registration Rights. From and after the date of this Agreement, the Company shall not, without the prior written consent of the Holders of a majority of the outstanding Registrable Securities, enter into any agreement with any holder or prospective holder of any securities of the Company which would allow such holder or prospective holder (a) to include such securities in any registration filed under Section 1.3 hereof, unless under the terms of such agreement, such holder or prospective holder may include such securities in any such registration only to the extent that the inclusion of its securities will not reduce the amount of the Registrable Securities of the Holders which is included or (b) to make a demand registration.

1.13 Reports Exchange Act. With a view to making available to the Holders the benefits of Rule 144 promulgated under the Securities Act and any other rule or regulation of the SEC that may at any time permit a Holder to sell securities of the Company to the public pursuant to a registration on Form F-3 or Form S-3, as the case may be, or without registration, the Company agrees to:

(a) make and keep public information available, as those terms are understood and defined in SEC Rule 144, at all times after the effective date of the first registration statement filed by the Company for the offering of its securities to the general public so long as the Company remains subject to the periodic reporting requirements under Sections 13 or 15(d) of the Exchange Act;

(b) take such action, including the voluntary registration of its Ordinary Shares under Section 12 of the Exchange Act, as is necessary to enable the Holders to utilize Form F-3 or Form S-3 (or any successor form that provides for short-form registration), as the case may be, for the sale of their Registrable Securities, such action to be taken as soon as practicable after the end of the fiscal year in which the first registration statement filed by the Company for the offering of its securities to the general public is declared effective;

(c) file with the SEC (or such governing bodies as applicable) in a timely manner all reports and other documents required of the Company under the Securities Act and the Exchange Act, or other applicable securities regulations; and

(d) furnish to any Holder, so long as the Holder owns any Registrable Securities, forthwith upon request (i) a written statement by the Company that it has complied with the reporting requirements of SEC Rule 144 (at any time after 90 days after the effective date of the first registration statement filed by the Company), the Securities Act and the Exchange Act (at any time after it has become subject to such reporting requirements), or that it qualifies as a registrant whose securities may be resold pursuant to Form F-3 or Form S-3 (or any successor form that provides for short-form registration) (at any time after it so qualifies), as the case may be, (ii) copy of the most recent annual or quarterly report of the Company and such other reports and documents so filed by the Company, and (iii) information as may be reasonably requested in availing any Holder of any rule or regulation of the SEC which permits the selling of any such securities without registration or pursuant to such form.

1.14 “Market Stand-Off” Agreement.

(a) Each Holder hereby agrees that, during the period (the “Lock-up Period”) of duration up to, but not exceeding, one 180 days following the date of the final prospectus which forms a part of the registration statement of the Company filed under the Securities Act with respect to the initial public offering of securities of the Company, it shall not, to the extent requested by the Company and such underwriter, directly or indirectly sell, offer to sell, contract to sell (including, without limitation, any short sale), grant any option to purchase or otherwise transfer or dispose of (other than to donees who agree to be similarly bound) any securities of the Company held by it at any time during such period except Ordinary Shares included in such registration, if any. Each Holder agrees to execute an agreement with said underwriters in customary form consistent with the provisions of this Section 1.14, provided, however that (i) all directors, officers and holders of 1% or more of the outstanding Capital Shares shall sign substantially identical agreements; (ii) if any person bound by lockup or stand-off restrictions relating to securities of the Company is released from such restrictions, the underwriter shall so notify the Holder and shall simultaneously release the Holder from its own restrictions hereunder; and (iii) the agreement permits transfers to affiliates or other transferees if, in each case, the transferee enters into a substantially similar agreement.

(b) In order to enforce the foregoing covenant, the Company may impose stop-transfer instructions with respect to the Registrable Securities of each Holder (and the shares or securities of every other person subject to the foregoing restriction) until the end of such Lock-up Period and, if applicable, the Restricted Period, and each Holder agrees that, if so requested, such Holder will execute an agreement in the form provided by the underwriter containing terms which are essentially consistent with the provisions of this Section 1.14.

(c) Notwithstanding the foregoing, the obligations described in this Section 1.14 shall not apply to a registration relating solely to employee benefit plans on Form S-1 or Form S-8 or similar forms which may be promulgated in the future, or a registration relating solely to an SEC Rule 145 transaction on Form S-4 or similar forms which may be promulgated in the future.

1.15 Termination of Registration Rights. No Holder shall be entitled to exercise any right provided for in this Section 1 (except Section 1.10 hereof) after (i) five (5) years following the consummation of a Qualified IPO, and (ii) during such times as Rule 144 or another similar exemption under the Securities Act is available for the sale of all of such Holder’s shares during a three (3) month period without registration.

1.16 Re-sale Rights. The Company shall at its own cost use its commercially reasonable efforts to assist each Investor in the sale or disposition of the Registrable Securities after its initial public offering under Rule 144 promulgated under the Securities Act and any other rule or regulation of the Securities and Exchange Commission of the United States that may at any time permit the Investors to sell securities of the company to the public pursuant to a registration on Form F-3 or Form S-3, as the case may be, or without registration, including without limitation (a) the prompt delivery of applicable instruction letters to the Company’s transfer agent to remove legends from the Investor’s share certificates, (b) causing the prompt delivery of appropriate legal opinions from the Company’s counsels in forms reasonably satisfactory to the Investor’s counsel, (c) if the Company has depository receipts listed or traded on any exchange or inter-dealer quotation system, (i) the prompt delivery of instruction letters to the Company’s share registrar and depository agent to convert the Investor’s securities into depository receipts or similar instruments to be deposited in the Investor’s brokerage account(s), and (ii) the prompt payment of all reasonable costs and fees charged by the depository agent, including conversion fees and maintenance fees. The Company acknowledges that time is of the essence with respect to its obligations under this Section 1.16, and that any delay will cause the Investors irreparable harm and constitutes a material breach of the Company’s obligations under this Agreement.

1.17 Foreign Registrations. To the extent the Company effects a listing, public offering or registration in a jurisdiction other than the U.S., the registration rights afforded the Holders, and the intent of the related provisions, hereunder shall, subject to the applicable securities regulations, be carried out and applied as nearly as possible in such jurisdiction as if such listing, public offering or registration were effected in the U.S. Also, notwithstanding anything to the contrary and subject to applicable securities laws, to the extent that the Company effects a listing, public offering or registration in a jurisdiction other than the U.S. for the account of any Shareholders (other than the holders of Series B Preferred Shares, Series B-1 Preferred Shares or Series B-2 Preferred Shares), other than a listing, public offering or registration solely to the sale of securities to participants in a Company Share Option Plan, the holders of Series B Preferred Shares, Series B-1 Preferred Shares and Series B-2 Preferred Shares shall have the right to participate in the sale of Shares by requesting the Company to include a pro rata portion (based on aggregate number of shares to be sold) of such holders’

Registrable Securities in such listing, public offering or registration. The Company shall use its reasonable best efforts to include in such listing, public offering or registration any Registrable Securities thereby requested to be included by such holders of Series B Preferred Shares, Series B-1 Preferred Shares or Series B-2 Preferred Shares (as applicable).

SECTION 2

RIGHT OF FIRST OFFER

2.1 Right of First Offer. For so long as at least 10% of the sum of all of the Series B Preferred Shares, Series B-1 Preferred Shares and Series B-2 Preferred Shares (as applicable) originally issued remain outstanding, the Company hereby grants to each Investor a right of first offer with respect to future sales by the Company of its “Shares” (as hereinafter defined).

2.2 Mechanics. Each time the Company proposes to offer any shares of, or securities convertible into or exercisable for any shares of, any class of its Capital Shares (the “Shares”), the Company shall first make an offering of such Shares to each Investor in accordance with the following provisions:

(a) The Company shall deliver a notice (“Notice”) to the Investors stating (i) its bona fide intention to offer such Shares, (ii) the number of such Shares to be offered, and (iii) the price and terms, if any, upon which it proposes to offer such Shares.

(b) Within twenty (20) days after delivery of the Notice, each Investor may elect to purchase or obtain, at the price and on the terms specified in the Notice, up to that portion of such Shares which equals a fraction, the numerator of which shall be the number of shares of Ordinary Shares then held by the Investor (assuming the conversion of all securities convertible into Ordinary Shares and exercise of all warrants, options and other securities exercisable for Ordinary Shares), and the denominator of which shall be the total number of shares of Ordinary Shares of the Company then outstanding (assuming the conversion of all securities convertible into Ordinary Shares and exercise of all warrants, options and other securities exercisable for Ordinary Shares) (each a “First Offer Portion”). The Company shall promptly, in writing, inform each Investor that elects to purchase all the shares available to it under this Section 2 (each, a “Fully-Exercising Investor”) of any other Investor’s failure to do likewise. During the ten (10)-day period commencing after receipt of such information, each Fully-Exercising Investor shall be entitled to obtain that portion of the Shares for which Investors were entitled to subscribe but which were not subscribed for by the Investors that is equal to the proportion that the number of Ordinary Shares then held by the Investor (assuming the conversion of all securities convertible into Ordinary Shares and exercise of all warrants, options and other securities exercisable for Ordinary Shares) bears to the total number of Ordinary Shares of the Company then held by Investors (assuming the conversion of all securities convertible into Ordinary Shares and exercise of all warrants, option and other securities exercisable for Ordinary Shares).

(c) The Company may, during the sixty (60) day period following the expiration of the period provided in Section 2.1(b) hereof, offer the remaining unsubscribed portion of the Shares to any person or persons at a price not less than, and upon terms no more favorable to the offeree than, those specified in the Notice. If the Company does not enter into an agreement for the sale of the available and remaining Shares within such period, or if such agreement is not consummated within ninety (90) days of the execution thereof, the right provided hereunder shall be deemed to be revived and such Shares shall not be offered unless first reoffered to the Investors in accordance herewith.

2.3 Inapplicable Issuance of Securities. The right of first offer in this Section 2 shall not apply to the issuance or sale of

(i) Ordinary Shares or options therefore issuable or issued to employees, directors, officers or consultants of the Company (or any of its subsidiaries) pursuant to a stock option plan or restricted stock plan or any similar equity incentive plan (collectively, the “Option Plan”) approved from time to time by the Board (including the approval of the Series B Directors);

(ii) securities issued pursuant to a stock split, subdivision, recapitalization or similar transaction, or dividend or other distribution payable in additional Ordinary Shares or other securities or rights exercisable for or convertible into Ordinary Shares;

(iii) Ordinary Shares issued or issuable upon conversion of the Preferred Shares or upon the conversion or exercise of convertible or exercisable securities outstanding on the date hereof;

(iv) securities issued by the Company in connection with the licensing or acquisition of technology or intellectual property by the Company and entered into primarily for non-equity financing purposes and approved by the Company (including the approval of the Series B Directors);

(v) securities issued by the Company in connection with the acquisition of or by the Company of or by another entity, whether by merger, amalgamation, consolidation, reorganization, scheme of arrangement, purchase or sale of all or substantially all of the assets, sale or exchange of shares or otherwise, where such acquisition is approved by the Board (including the approval of the Series B Directors);

(vi) securities issued by the Company in connection with a strategic corporate partnership arrangement, investment, and/or the acquisition of other assets, properties or other entities and entered into primarily for non-equity financing purposes and approved by the Board (including the approval of the Series B Directors);

(vii) securities issued by the Company to suppliers or third party service providers (excluding directors of the Company and their affiliates) in connection with the provision of bona fide goods or services pursuant to transactions approved by a majority of the Board (including the approval of the Series B Directors);

(viii) securities issued by the Company in connection with general or equipment financings, bank financings, real estate leases, joint ventures or similar transactions entered into primarily for non-equity financing purposes and approved by the Board (including the approval of the Series B Directors);

(ix) Ordinary Shares issued or issuable in a public offering before or in connection with which all outstanding Preferred Shares will be converted to Ordinary Shares or upon the exercise of warrants or cover-allotment options granted to underwriters in connection with such offering;

(x) securities issued or issuable in connection with any settlement of any action, suit, proceeding or litigation approved by the Board (including the approval of the Series B Directors);

(xi) Ordinary Shares or other securities that are expressly determined not to be Additional Ordinary Shares hereunder by holders of at least 75% of the Series B Preferred Shares, Series B-1 Preferred Shares and Series B-2 Preferred Shares then outstanding, voting together as a single class on an as-converted basis;

(xii) Series B-2 Preferred Shares issued under the Share Purchase Agreement; and

(xiii) Series B-2 Warrants (as defined in the Share Purchase Agreement), the Series B-2 Preferred Shares issued or issuable upon the exercise thereof, and the Ordinary Shares issuable upon conversion of shares.

2.4 Termination of Right of First Offer. The covenants set forth in Sections 2 shall terminate as to each Investor and be of no further force or effect upon the earlier of (i) immediately prior to the consummation of a Qualified IPO and (ii) upon a Liquidation Event (as defined in the Company’s Memorandum and Articles of Association).

SECTION 3

INFORMATION RIGHTS

3.1 Delivery of Financial Statements and Other Information. The Company shall deliver to each Investor, for as long as such Investor continues to hold at least 1,000,000 Preferred Shares (as adjusted for stock splits, stock dividends and the like) (a “Major Investor”), the information set forth below:

(a) within 120 days after the end of each fiscal year of the Company, a management report and an income statement for such fiscal year, a balance sheet of the Company and statement of shareholder’s equity as of the end of such year, and a statement of cash flows for such year, such year-end financial reports to be prepared in accordance with U.S. GAAP or International Financial Reporting Standard (“IFRS”), applied on a consistent basis, and audited and certified by an independent accounting firm;

(b) within 45 days after the end of each of the first three quarters of each fiscal year of the Company, a management report and an unaudited profit or loss statement, a statement of cash flows and summary of bookings for such fiscal quarter and an unaudited balance sheet as of the end of such fiscal quarter, on a consolidated basis, prepared in accordance with U.S. GAAP or IFRS applied on a consistent basis;

(c) within 30 days prior to the end of each fiscal year, a budget and business plan for the next fiscal year, prepared on a monthly basis, including balance sheets and sources of applications of funds statements for such months and, as soon as prepared, any other budgets or revised budgets prepared by the Company;

(d) copies of all documents or other information sent to all shareholders generally, in their capacity as shareholders of the Company; and

(e) copies of any and all material reports filed by the Company with any relevant securities exchange, securities regulatory authority or other similar governmental agency.

In addition to the foregoing rights, for so long as any Major Investor holds any shares of the Company, the Company agrees to provide such Major Investor upon request with copies of the current versions of the Company’s Memorandum and Articles of Association (as amended and restated from time to time) and all agreements relating to any subsequent financings by the Company, in each case reflecting all amendments and restatements thereto through such date of request. The copies of the documents provided under this Section 3 may be delivered in either hardcopy or electronic format (Portable Document Format (PDF)).

3.2 Inspection Rights. The Company (and its subsidiaries) shall permit each Major Investor to visit and inspect the Company’s (or that of its subsidiary) properties, to examine its books of account and records and to discuss the Company’s business, operations, affairs, finances and accounts with its directors and officers, all at such reasonable times as may be requested by the Investor; provided, however, that the Company shall not be obligated to provide any information the disclosure of which to a particular Investor would pose the risk of a specific, identifiable material conflict of interest for such Investor.

3.3 Termination. The covenants set forth in Section 3 shall terminate as to each Investor and be of no further force or effect upon the earliest of (i) immediately prior to the consummation of the Company’s initial public offering, and (ii) upon a Liquidation Event. Following the Company’s initial public offering, for as long as Intel or AsiaVest holds 100,000 Ordinary Shares or other shares of the Company (as adjusted for stock splits, stock dividends and the like), the Company shall, at its own initiative and expense, provide Intel and/or AsiaVest with copies of each of the following which are filed by the Company with any stock exchange or securities regulatory authority and made available to the public: (i) annual reports to shareholders; (ii) annual, semiannual, and quarterly financial statements and reports; and (iii) prospectuses, registration statements, offering circulars, offering memoranda, and other document relating to any offering of securities of the Company. Such materials shall be provided to Intel and/or AsiaVest promptly (and in any event within ten (10) business days) after the same are made available to the public.

SECTION 4

COVENANTS OF THE COMPANY AND OTHER MATTERS

4.1 Management Incentive Plan.

(a) Following the closing under the Share Purchase Agreement, and subject to the approval of the Board, the Company shall reserve 2,000,000 Ordinary Shares (as adjusted for stock split, recapitalization and the like), for issuance to certain members of its management team as options to purchase Ordinary Shares (having an exercise price per share equal to the then fair market value of such Ordinary Shares), upon the occurrence of any of the following events of the Company upon the attainment of any of the following milestones:

(i) the successful completion of an equity financing round in which the Company raises at least US$5,000,000 in cash from subscribers unaffiliated with the Company’s management team, customers, or existing investors on or before October 31, 2010, in exchange for issuing Series C Preferred Shares bearing rights and privileges customary in venture capital financings, at a pre-financing valuation exceeding US$125,000,000;

(ii) a Change of Control of the Company on or before April 30, 2012 at an implied valuation exceeding US$125,000,000; or

(iii) the completion of a Qualified IPO on or before April 30, 2013.

(b) Each Investor shall, and shall cause its affiliates and designees to, vote for the reservation and issuance of the Ordinary Shares in accordance with the provisions in this Section 4.1.

4.2 Key Man Insurance. The Company shall retain its “key man” insurance policies for each of Howard Yang, Stephen Tai, Larry Wu and Shawn Si in an amount of US$1,000,000, with such policies payable to the Company.

4.3 Meetings of the Board of Directors. The Board of Directors of the Company shall hold meetings at least once every two months for the 12-month period following the date hereof.

4.4 Employment Contracts. The company shall ensure that each of Howard Yang, Stephen Tai, Larry Wu and Shawn Si, and any senior management personnel of the Company shall have entered into and be subject to an employment contract with the Company in form and substance as approved by the Board (including the directors designated by holders of Series B Preferred Shares, Series B-1 Preferred Shares and Series B-2 Preferred Shares pursuant to the Articles of Association of the Company (as amended and restated from time to time), unless executed prior to the initial sale of the Series B-2 Preferred Shares) containing, among other things, the amount of remuneration or other compensation packages, non-competition obligations and confidentiality undertaking for as long as they are employees of the Company.

4.5 Redemption of Shares.

(a) Redemption of Series B-2 Preferred Shares. Subject to the provisions in the Companies Law of the Cayman Islands (as amended from time to time), the Company shall, upon the receiving, at any time after June 1, 2013 (the “B-2 Redemption Availability Date”), a written request for the redemption of the Series B-2 Preferred Shares signed by the holders of at least two-thirds (2/3) of the then outstanding Series B-2 Preferred Shares (a “B-2 Redemption Request”), redeem from funds legally available therefor at the redemption price set forth in Section 4.5(c), on a date (the “B-2 Redemption Date”) that is within 90 days following its receipt of such written B-2 Redemption Request, all Series B-2 Preferred Shares that are outstanding on the date that the Company receives such first written B-2 Redemption Request, until all outstanding Series B-2 Preferred Shares have been redeemed. Notwithstanding the foregoing, if upon the B-2 Redemption Date, the funds and assets of the Company legally available to redeem such stock shall be insufficient to redeem all outstanding Series B-2 Preferred Shares to be redeemed, then the Company shall redeem such number of Series B-2 Preferred Shares as it is able to redeem pro rata from each holder, and any unredeemed shares shall be carried forward and shall be redeemed at the earliest date upon which the Company has funds lawfully available to continue redemption of such unredeemed shares, to the full extent of legally available funds of the Company at such time, and any such unredeemed shares shall continue to be so carried forward until redeemed. The Series B-2 Preferred Shares that are subject to redemption hereunder but that have not been redeemed due to insufficient legally available funds and assets of the Company shall continue to be outstanding and entitled to all dividend, liquidation, and other rights, preferences, privileges and restrictions of the Series B-2 Preferred Shares until such shares have been converted or redeemed.

(b) Redemption of Series B Preferred Shares and Series B-1 Preferred Shares. Subject to the provisions in the Companies Law of the Cayman Islands (as amended from time to time), the Company shall, upon the receiving, at any time after June 19, 2011 (the “B/B-1 Redemption Availability Date”), a written request for the redemption of the Series B Preferred Shares and the Series B-1 Preferred Shares signed by the holders of at least two-thirds (2/3) of the then outstanding shares of the Series B Preferred Shares and the Series B-1 Preferred Shares, both series voting together as a single class (a “B/B-1 Redemption Request”), redeem from funds legally available therefor at the redemption price set forth in Section 4.5(c), on a date (the “B/B-1 Redemption Date”) that is within 90 days following its receipt of such written B/B-1 Redemption Request, all Series B Preferred Shares and Series B-1 Preferred Shares (as applicable) that are outstanding on the date that the Company receives such first written B/B-1 Redemption Request, until all outstanding Series B Preferred Shares and Series B-1 Preferred Shares have been redeemed. Notwithstanding the foregoing, if upon the B/B-1 Redemption Date, the funds and assets of the Company legally available to redeem such stock shall be insufficient to redeem all outstanding Series B Preferred Shares and Series B-1 Preferred Shares (as applicable) to be redeemed, then the Company shall redeem such number of Series B Preferred Shares and Series B-1 Preferred Shares (as applicable) as it is able to redeem pro rata from each holder, and any unredeemed shares shall be carried forward and shall be redeemed at the earliest date upon which the Company has funds lawfully available to continue redemption of such unredeemed shares, to the full extent of legally available funds of the Company at such time, and any such unredeemed shares shall continue to be so carried forward until redeemed. The Series B Preferred Shares and the Series B-1 Preferred Shares that are subject to redemption hereunder but that have not been redeemed due to insufficient legally available funds and assets

of the Company shall continue to be outstanding and entitled to all dividend, liquidation, and other rights, preferences, privileges and restrictions of the Series B Preferred Shares or the Series B-1 Preferred Shares (as applicable) until such shares have been converted or redeemed.

(c) Redemption Price. The redemption price for each Series B Preferred Share, Series B-1 Preferred Share and Series B-2 Preferred Share redeemed under Sections 4.5(a) and 4.5(b) above, respectively, shall be an amount equal to 130% of the Series B Subscription Price, Series B-1 Subscription Price or the Series B-2 Subscription Price (as applicable, each term as defined in the Articles of Association of the Company (as amended and restated from time to time) per share, plus all declared and unpaid dividends thereon (as appropriately adjusted for any stock splits, stock dividends, reorganizations or the like).

(d) Redemption Notice. At least 20 but no more than 60 days prior to the Redemption Date, written notice shall be mailed by the Company to each holder of record (at the close of business on the business day next preceding the day on which notice is given) of the Series B Preferred Shares, the Series B-1 Preferred Shares and/or the Series B-2 Preferred Shares to be redeemed (as applicable), at the address last shown on the records of the corporation for such holder or given by the holder in writing to the corporation for the purpose of notice or, if no such address appears or is given, at the place where the principal executive office of the corporation is located, notifying such holder of the redemption to be effected, the redemption price, the number of such holder’s Series B Preferred Shares, Series B-1 Preferred Shares or Series B-2 Preferred Shares (as applicable) to be redeemed, the place at which payment may be obtained and calling upon such holder to surrender to the Company, in the manner and at the place designated, the certificate or certificates representing the shares to be redeemed (each such notice is referred to herein as the “Redemption Notice”).

(e) Surrender of Certificates. On or before the Redemption Date, each holder of Series B Preferred Shares, Series B-1 Preferred Shares and/or Series B-2 Preferred Shares (as applicable) to be redeemed on such Redemption Date shall surrender the certificate(s) representing such shares to be redeemed to the Company, in the manner and at the place designated in the relevant Redemption Notice, and thereupon the redemption price for such shares shall be payable to the order of the person whose name appears on such certificate(s) as the owner thereof, and each surrendered certificate shall be canceled and retired. If less than all of the shares represented by such certificate are redeemed, then the corporation shall promptly issue a new certificate representing the unredeemed shares.

(f) Effect of Redemption. If the relevant Redemption Notice has been duly given, and if on the relevant Redemption Date the redemption price is either paid or made available for payment, then notwithstanding that the certificates evidencing any of the Series B Preferred Shares, the Series B-1 Preferred Shares or the Series B-2 Preferred Shares (as applicable) so called for redemption shall not have been surrendered, all dividends with respect to such shares shall cease to accrue after the relevant Redemption Date, such shares shall not thereafter be transferred on the corporation’s books and all of the rights of the holders of such shares with respect to such shares shall terminate after the relevant Redemption Date, except only the right of the holders to receive the redemption price therefor without interest upon surrender of their certificate(s) therefor.

4.6 Protective Provisions.

(a) So long as any Series B Preferred Shares, Series B-1 Preferred Shares or Series B-2 Preferred Shares are outstanding, the Company shall not, without first obtaining the approval by vote or written consent of the Board (including the approval of the Series B Directors, and, solely with respect to item (x) below, the director designated by the holders of Series A Preferred Shares):

(i) redeem, repurchase, or acquire, directly or indirectly, any capital shares of the Company, other than repurchases of Ordinary Shares pursuant to Section 4.5 and the repurchases of Ordinary Shares issued to or held by officers, directors, employees or consultants providing services to the Company or any subsidiary, upon termination of services to the Company, pursuant to the Company’s standard provisions and at or below the original purchase price of such shares (“Termination Repurchases”);

(ii) increase or decrease the number of Ordinary Shares authorized under the Company’s stock option plan;

(iii) issue or grant any shares, options, or other securities of the Company or any of its subsidiaries to any Key Shareholder (as defined in the Memorandum and Articles of Association of the Company), whether in connection with an employment agreement or otherwise;

(iv) approve any guarantee or agreement by the Company to indemnify any other person against any loss or liability, other than commercially reasonable warranties or indemnification granted to suppliers, customers and employees in the ordinary course of business;

(v) grant any mortgage, pledge, hypothecation, or other security interest over all or substantially all of the Company’s assets or properties, whether tangible or intangible;

(vi) enter into any purchase, lease, sale, or other transaction by the Company involving real property, except for a lease or termination of a lease of reasonable commercial office space for use by the Company and/or its affiliates;

(vii) borrow or incur indebtedness of the Company or its subsidiaries (including indebtedness in the form of the assumption or guaranty of indebtedness of any other person) which (A) is not in the ordinary course of business or in the business plan approved by the Board, or (B) cumulatively with all other borrowing, indebtedness of the Company in excess of $1,000,000 in the aggregate at any time;

(viii) enter into any transaction or series of related transactions between the Company or any of its subsidiaries and any Key Shareholder (as defined in the Memorandum and Articles of Association of the Company), director, officer, employee, consultant or affiliate of the Company (or any person related to or in which any director, officer, employee, consultant or affiliate of the Company holds a financial interest) (A) which involves a loan or advance of any kind (other than reasonable advances for travel expenses); (B) which is not in the ordinary course of business or in the most recent business plan approved by Board; or (C) in which the aggregate value given or received exceeds $50,000 individually or $150,000 in the aggregate during any 12-month period;

(ix) enter into any loan, advance, or extension of credit by the Company or its subsidiaries (A) not in the ordinary course of business or in the most recent business plan approved by the Board, or (B) which cumulatively with all other loans and extensions of credit by the Companies exceeds $500,000 in the aggregate at any time;

(x) appoint or remove the Chief Executive Officer, Chief Operating Officer, Managing Director, General Manager, Chief Financial Officer, or Chief Technology Officer of the Company, or increase the compensation of any of the five most highly compensated employees of the Company by more than 15% in any 12-month period (excluding, for purposes of this calculation, bonuses paid in accordance with the Company’s budget);

(xi) change the auditors of the Company or any material accounting policy of the Company;

(xii) delegate any authority in respect of any of the foregoing matters to any committee of the Board;

(xiii) enter into any agreement, commitment, or corporate resolution to do any of the foregoing;

(xiv) take any action that will in the good faith opinion of the Company’s counsel result in taxation of the holders of the Series B Preferred Shares, Series B-1 Preferred Shares or Series B-2 Preferred Shares under Section 305 of the United States Internal Revenue Code of 1986, as amended; or

(xv) authorize and issue any securities of the Company in connection with any strategic transaction, corporate collaboration or legal settlement to which the Company is a party.

(b) So long as any Series B Preferred Shares, Series B-1 Preferred Shares or Series B-2 Preferred Shares are outstanding, without first obtaining the approval by vote or written consent of the holders of at least two-thirds (2/3) of the sum of all of the then outstanding Series B Preferred Shares, Series B-1 Preferred Shares and Series B-2 Preferred Shares, all of such series voting together as a single class on an as-converted basis, the Company shall not, and will not permit any of its subsidiaries to:

(i) amend the Memorandum and Articles of Association of the Company or other constitutional documents of the Company;

(ii) increase or decrease the authorized number of Preferred Shares, or amend or alter the rights, privileges and protections of the Series B Preferred Shares, the Series B-1 Preferred Shares or Series B-2 Preferred Shares;

(iii) authorize, designate, reclassify or issue any shares or any equity securities convertible or exchangeable into shares ranking senior to or on parity with the Series B Preferred Shares, Series B-1 Preferred Shares or Series B-2 Preferred Shares with respect to liquidation, redemption, dividend rights and other rights, privileges and preferences of the Series B Preferred Shares, Series B-1 Preferred Shares or Series B-2 Preferred Shares;

(iv) change the authorized number, manner of election, or term of office of Directors;

(v) declare or pay any dividend or distribution on any shares or any equity security convertible or exchangeable into shares ranking junior to the Series B Preferred Shares, Series B-1 Preferred Shares or Series B-2 Preferred Shares in liquidation, redemption, or dividend rights or privileges; or redeem or repurchase any shares ranking junior to the Series B Preferred Shares, Series B-1 Preferred Shares or Series B-2 Preferred Shares in liquidation, redemption, or dividend rights or privileges except Termination Repurchases;

(vi) enter into or agree to enter into any transaction or series of transactions that would constitute a Liquidation Event;

(vii) approve any material change to the Company’s fundamental business plan or strategy; or

(viii) undertake or enter into any agreement to undertake an Initial Public Offering of Shares unless approved by a majority vote of the Board of Directors of the Company, which majority shall include at least one (1) of the Series B Directors.

(c) Without limiting any voting requirements or protections with respect to the Series B Preferred Shares, Series B-1 Preferred Shares and Series B-2 Preferred Shares above, in addition to the approval of the Board, the prior written consent of holders of at least two-thirds (2/3) of the outstanding Series A Preferred Shares, Series B Preferred Shares, Series B-1 Preferred Shares and Series B-2 Preferred Shares, all four series voting together as a single class on an as-converted basis, is required to authorize or issue, or obligate the Company to authorize or issue, any new class or series of equity securities of the Company or any majority-owned subsidiary of the Company.

4.7 Circular 75 Registration. As promptly as practicable after the date hereof, each shareholder of the Company who qualifies as a “PRC resident shareholder” pursuant to the Circular Huifa [2005] No. 75 issued by the State Administration of Foreign Exchange of the PRC and effective as of November 11, 2005 (the “Circular 75”) shall use commercially reasonable efforts to file a registration form with the State Administration of Foreign Exchange or its competent local counterpart (“SAFE”) pursuant to the requirements of Circular 75 and SAFE.

SECTION 5

MISCELLANEOUS

5.1 Enforceability/Severability. The parties hereto agree that each provision of this Agreement shall be interpreted in such a manner as to be effective and valid under applicable law. If any provision of this Agreement shall nonetheless be held to be prohibited by or invalid under applicable law, such provision shall be effective only to the extent of such prohibition or invalidity, without invalidating the remainder of such provision or the remaining provisions of this Agreement.

5.2 Remedies. Each party hereto will be entitled to enforce its rights under this Agreement specifically, to recover damages by reason of any breach of any provision hereof, and to exercise all other rights existing in its favor. Each party hereto agrees and acknowledges that money damages may not be an adequate remedy for any breach of the provisions of this Agreement and that each holder may, in its sole discretion, apply for specific performance and injunctive relief in order to enforce or prevent any violations of the provisions of this Agreement.

5.3 Entire Agreement; Successors and Assigns. This Agreement constitutes the full and entire understanding and agreement between the parties with regard to the subjects hereof and supersedes and replaces the Prior Agreement in its entirety. Subject to the exceptions specifically set forth in this Agreement, the terms and conditions of this Agreement shall inure to the benefit of and be binding upon the respective executors, administrators, heirs, successors and assigns of the parties.

5.4 Governing Law. This Agreement shall be governed by and construed in accordance with the laws of Hong Kong S.A.R. notwithstanding any rules regarding conflict of laws; provided, however, that all provisions hereof pertaining or relating to the corporate governance of the Company shall be construed in accordance with and governed by the Companies Law of the Cayman Islands.

5.5 Dispute Resolution.

(a) Any dispute, controversy or claim arising out of or relating to this Agreement, or the interpretation, breach, termination or validity hereof, shall be submitted to arbitration upon the request of either party with notice to the other.

(b) The arbitration shall be conducted in Hong Kong under the auspices of the Hong Kong International Arbitration Centre (the “Centre”). There shall be three arbitrators. The Company on the one hand, and the Investors, on the other hand, shall select one arbitrator within

thirty (30) days after giving or receiving the demand for arbitration. Such arbitrators shall be freely selected, and the parties shall not be limited in their selection to any prescribed list. The Chairman of the Centre shall select the third arbitrator, who shall be qualified to practice law in Hong Kong, S.A.R. If either party does not appoint an arbitrator who has consented to participate within thirty (30) days after selection of the first arbitrator, the relevant appointment shall be made by the Chairman of the Centre.

(c) The arbitration proceedings shall be conducted in English. The arbitration tribunal shall apply the Arbitration Rules of the Centre in effect at the time of the arbitration. However, if such rules are in conflict with the provisions of this Section 5.5, including the provisions concerning the appointment of arbitrators, the provisions of this Section 5.5 shall prevail.

(d) Subject to Section 5.4 hereof, the arbitrators shall decide any dispute submitted by the parties to the arbitration strictly in accordance with the substantive law of Hong Kong, S.A.R. and shall not apply any other substantive law.

(e) The award of the arbitration tribunal shall be final and binding upon the disputing parties, and either party may apply to a court of competent jurisdiction for enforcement of such award.

(f) Either party shall be entitled to seek preliminary injunctive relief, if possible, from any court of competent jurisdiction pending the constitution of the arbitral tribunal.

5.6 Counterparts. This Agreement may be executed in counterparts, each of which shall be an original, but all of which together shall constitute one and the same instrument. Any counterpart or signature of a party delivered by facsimile, email or similar electronic transmission pursuant to which the signature of (or behalf of) such party can be seen shall be deemed for all purposes as being a good and valid execution and delivery of this Agreement by such party.

5.7 Headings. The section headings of this Agreement are for convenience and shall not by themselves determine the interpretation of this Agreement.

5.8 Notices. Any notice required or permitted hereunder shall be given in writing and shall be conclusively deemed effectively given (i) upon personal delivery, (ii) upon delivery by overnight courier, or (iii) five days after deposit in the United States mail, by registered or certified mail, postage prepaid, addressed (a) if to the Company, to its principal office and (b) if to an Investor, to such Investor’s address as is on file with the records of the Company, or at such other address as the parties may designate by ten days’ advance written notice to the other parties.

5.9 Amendment of Agreement. Any provision of this Agreement may be amended and the observance thereof may be waived by a written instrument signed by the Company and by the Investors holding 66 2/3% of the outstanding Registrable Securities then held by the Investors; provided that any provision of this Agreement which requires the vote, consent or

approval of a greater proportion of a specified class or series for a particular matter, then any amendment to that provision shall require the vote, consent or approval of such greater proportion Any such amendment, modification or waiver shall be binding on all parties hereto whether or not they execute such instrument.

[Signature Pages Follow]

IN WITNESS WHEREOF, the undersigned have executed, or have caused to be executed, this Agreement, effective as of the date first written above.


MONTAGE TECHNOLOGY GROUP LIMITED

By:
Name:		Howard Yang
Title:		Chief Executive Officer

MONTAGE TECHNOLOGY GROUP LIMITED

SIGNATURE PAGE TO AMENDED AND RESTATED INVESTOR RIGHTS AGREEMENT

IN WITNESS WHEREOF, the undersigned have executed, or have caused to be executed, this Agreement, effective as of the date first written above.

Shareholders

HOWARD CHONGHE YANG

LEI WU

XIAOMIN SI

MONTAGE TECHNOLOGY GROUP LIMITED

SIGNATURE PAGE TO AMENDED AND RESTATED INVESTOR RIGHTS AGREEMENT

IN WITNESS WHEREOF, the undersigned have executed, or have caused to be executed, this Agreement, effective as of the date first written above.


Shareholders ULFERS GLOBAL HOLDINGS LIMITED

By:
Name:
Title:


ELITE GLOBAL INTERNATIONAL CORPORATION

By:
Name:
Title:

MONTAGE TECHNOLOGY GROUP LIMITED

SIGNATURE PAGE TO AMENDED AND RESTATED INVESTOR RIGHTS AGREEMENT

IN WITNESS WHEREOF, the undersigned have executed, or have caused to be executed, this Agreement, effective as of the date first written above.


Shareholders HSIE CHENG INVEST CO.

By:
Name:
Title:


ESSEX GLOBAL HOLDINGS LTD.

By:
Name:
Title:

MONTAGE TECHNOLOGY GROUP LIMITED

SIGNATURE PAGE TO AMENDED AND RESTATED INVESTOR RIGHTS AGREEMENT

IN WITNESS WHEREOF, the undersigned have executed, or have caused to be executed, this Agreement, effective as of the date first written above.


Shareholders VENGLOBAL CAPITAL FUND II, L.P.

By:
Name:
Title:



CAROLINE T. CHENG



		XUNREN YANG AND SHUZHUANG LIANG

MONTAGE TECHNOLOGY GROUP LIMITED

SIGNATURE PAGE TO AMENDED AND RESTATED INVESTOR RIGHTS AGREEMENT

IN WITNESS WHEREOF, the undersigned have executed, or have caused to be executed, this Agreement, effective as of the date first written above.


Shareholders STEPHEN TAI



		ERIC KWONG HANG TSANG

MONTAGE TECHNOLOGY GROUP LIMITED

SIGNATURE PAGE TO AMENDED AND RESTATED INVESTOR RIGHTS AGREEMENT

IN WITNESS WHEREOF, the undersigned have executed, or have caused to be executed, this Agreement, effective as of the date first written above.


Shareholders YUNG YUNG KUO


DAVID N.K WANG AND AILEEN A.P WANG REVOCABLE LIVING TRUST

By:
Name:
Title:

MONTAGE TECHNOLOGY GROUP LIMITED

SIGNATURE PAGE TO AMENDED AND RESTATED INVESTOR RIGHTS AGREEMENT

IN WITNESS WHEREOF, the undersigned have executed, or have caused to be executed, this Agreement, effective as of the date first written above.


Shareholders JUNG KUNG YANG



SHARON LIU


PROVENANCE INVESTMENTS LTD

By:
Name:
Title:

MONTAGE TECHNOLOGY GROUP LIMITED

SIGNATURE PAGE TO AMENDED AND RESTATED INVESTOR RIGHTS AGREEMENT

IN WITNESS WHEREOF, the undersigned have executed, or have caused to be executed, this Agreement, effective as of the date first written above.


Shareholders SOMJAI CHUANGCHAROENDEE



PING K. KO


SENEGAL INTERNATIONAL LIMITED

By:
Name:
Title:

MONTAGE TECHNOLOGY GROUP LIMITED

SIGNATURE PAGE TO AMENDED AND RESTATED INVESTOR RIGHTS AGREEMENT

IN WITNESS WHEREOF, the undersigned have executed, or have caused to be executed, this Agreement, effective as of the date first written above.


Shareholders LINDA U. CO



SHUCHEN TINA WANG

MONTAGE TECHNOLOGY GROUP LIMITED

SIGNATURE PAGE TO AMENDED AND RESTATED INVESTOR RIGHTS AGREEMENT

IN WITNESS WHEREOF, the undersigned have executed, or have caused to be executed, this Agreement, effective as of the date first written above.


Shareholders GAIN AGAIN INVESTMENTS LIMITED

By:
Name:
Title:


JUPITER GLOBAL PROFITS LIMITED

By:
Name:
Title:

MONTAGE TECHNOLOGY GROUP LIMITED

SIGNATURE PAGE TO AMENDED AND RESTATED INVESTOR RIGHTS AGREEMENT

IN WITNESS WHEREOF, the undersigned have executed, or have caused to be executed, this Agreement, effective as of the date first written above.


Shareholders ASIAVEST OPPORTUNITIES FUND IV

By:
Name:
Title:

MONTAGE TECHNOLOGY GROUP LIMITED

SIGNATURE PAGE TO AMENDED AND RESTATED INVESTOR RIGHTS AGREEMENT

IN WITNESS WHEREOF, the undersigned have executed, or have caused to be executed, this Agreement, effective as of the date first written above.


Shareholders TRANSLINK CAPITAL PARTNERS I, L.P.

By:
Name:
Title:

MONTAGE TECHNOLOGY GROUP LIMITED

SIGNATURE PAGE TO AMENDED AND RESTATED INVESTOR RIGHTS AGREEMENT

IN WITNESS WHEREOF, the undersigned have executed, or have caused to be executed, this Agreement, effective as of the date first written above.


Shareholders INTEL CAPITAL CORPORATION

By:
Name:
Title:


INTEL CAPITAL (CAYMAN) CORPORATION

By:
Name:
Title:

MONTAGE TECHNOLOGY GROUP LIMITED

SIGNATURE PAGE TO AMENDED AND RESTATED INVESTOR RIGHTS AGREEMENT

IN WITNESS WHEREOF, the undersigned have executed, or have caused to be executed, this Agreement, effective as of the date first written above.


Shareholders SILICON FEDERATION INTERNATIONAL LIMITED

By:
Name:
Title:


SFVEST, LLC

By:
Name:
Title:

MONTAGE TECHNOLOGY GROUP LIMITED

SIGNATURE PAGE TO AMENDED AND RESTATED INVESTOR RIGHTS AGREEMENT

IN WITNESS WHEREOF, the undersigned have executed, or have caused to be executed, this Agreement, effective as of the date first written above.


Shareholders NA ZHANG

MONTAGE TECHNOLOGY GROUP LIMITED

SIGNATURE PAGE TO AMENDED AND RESTATED INVESTOR RIGHTS AGREEMENT

IN WITNESS WHEREOF, the undersigned have executed, or have caused to be executed, this Agreement, effective as of the date first written above.


Shareholders CHEW, KHENG HENG

MONTAGE TECHNOLOGY GROUP LIMITED

SIGNATURE PAGE TO AMENDED AND RESTATED INVESTOR RIGHTS AGREEMENT

IN WITNESS WHEREOF, the undersigned have executed, or have caused to be executed, this Agreement, effective as of the date first written above.


Shareholders BEOMSUP KIM



CATHY YEN

MONTAGE TECHNOLOGY GROUP LIMITED

SIGNATURE PAGE TO AMENDED AND RESTATED INVESTOR RIGHTS AGREEMENT

IN WITNESS WHEREOF, the undersigned have executed, or have caused to be executed, this Agreement, effective as of the date first written above.


Shareholders SF CAPITAL LIMITED

By:
Name:
Title:

MONTAGE TECHNOLOGY GROUP LIMITED

SIGNATURE PAGE TO AMENDED AND RESTATED INVESTOR RIGHTS AGREEMENT

IN WITNESS WHEREOF, the undersigned have executed, or have caused to be executed, this Agreement, effective as of the date first written above.


Shareholders JIANJUN ZHOU

MONTAGE TECHNOLOGY GROUP LIMITED

SIGNATURE PAGE TO AMENDED AND RESTATED INVESTOR RIGHTS AGREEMENT

IN WITNESS WHEREOF, the undersigned have executed, or have caused to be executed, this Agreement, effective as of the date first written above.


Shareholders RIVERWOOD CAPITAL LLC

By:
Name:
Title:


DREAMACHINA LIMITED

By:
Name:
Title:

MONTAGE TECHNOLOGY GROUP LIMITED

SIGNATURE PAGE TO AMENDED AND RESTATED INVESTOR RIGHTS AGREEMENT

IN WITNESS WHEREOF, the undersigned have executed, or have caused to be executed, this Agreement, effective as of the date first written above.


Shareholders AIL

By:
Name:
Title:


CHINA ELECTRONICS CORPORATION HUA HONG INTERNATIONAL LTD.

By:
Name:
Title:

MONTAGE TECHNOLOGY GROUP LIMITED

SIGNATURE PAGE TO AMENDED AND RESTATED INVESTOR RIGHTS AGREEMENT

IN WITNESS WHEREOF, the undersigned have executed, or have caused to be executed, this Agreement, effective as of the date first written above.


Shareholders TSONG-JEN HUANG



SHUNG HO SHAW



YEH DON-CHARNG

MONTAGE TECHNOLOGY GROUP LIMITED

SIGNATURE PAGE TO AMENDED AND RESTATED INVESTOR RIGHTS AGREEMENT

IN WITNESS WHEREOF, the undersigned have executed, or have caused to be executed, this Agreement, effective as of the date first written above.


Shareholders LEE FANG-LIN



CHENG WEN-FENG



CHEN CHIA-CHIN

MONTAGE TECHNOLOGY GROUP LIMITED

SIGNATURE PAGE TO AMENDED AND RESTATED INVESTOR RIGHTS AGREEMENT

IN WITNESS WHEREOF, the undersigned have executed, or have caused to be executed, this Agreement, effective as of the date first written above.


Shareholders CHANG MING-FONG



TAI CHEN-CHEN

MONTAGE TECHNOLOGY GROUP LIMITED

SIGNATURE PAGE TO AMENDED AND RESTATED INVESTOR RIGHTS AGREEMENT

IN WITNESS WHEREOF, the undersigned have executed, or have caused to be executed, this Agreement, effective as of the date first written above.


Shareholders CAO YUN

MONTAGE TECHNOLOGY GROUP LIMITED

SIGNATURE PAGE TO AMENDED AND RESTATED INVESTOR RIGHTS AGREEMENT

IN WITNESS WHEREOF, the undersigned have executed, or have caused to be executed, this Agreement, effective as of the date first written above.


Shareholders QUAKER INVESTMENT LIMITED

By:
Name:
Title:

MONTAGE TECHNOLOGY GROUP LIMITED

SIGNATURE PAGE TO AMENDED AND RESTATED INVESTOR RIGHTS AGREEMENT

IN WITNESS WHEREOF, the undersigned have executed, or have caused to be executed, this Agreement, effective as of the date first written above.


Shareholders BRIDGTON INVESTMENTS LTD.

By:
Name:
Title:


GOLDEN GLOBAL INTERNATIONAL CORPORATION

By:
Name:
Title:


SHARP FOCUS ASSETS MANAGEMENT LIMITED

By:
Name:
Title:

MONTAGE TECHNOLOGY GROUP LIMITED

SIGNATURE PAGE TO AMENDED AND RESTATED INVESTOR RIGHTS AGREEMENT

IN WITNESS WHEREOF, the undersigned have executed, or have caused to be executed, this Agreement, effective as of the date first written above.


Shareholders DAOLIN MAO



JIE GU



LIN SU

MONTAGE TECHNOLOGY GROUP LIMITED

SIGNATURE PAGE TO AMENDED AND RESTATED INVESTOR RIGHTS AGREEMENT

Schedule A

Investors

Series A Investors:

ESSEX Global Holdings Ltd.

Jupiter Global Profits Limited

Hsie Cheng Invest Co.

Venglobal Capital Fund II, L.P.

Caroline T. Cheng

Xunren Yang and Shuzhuang Liang

Stephen Tai

Eric Kwong Hang Tsang

Lei Wu

XiaoMin Si

Yung Yung Kuo

Jung Kung Yang

Sharon Liu

Daolin Mao

Dreamachina Limited

Somjai Chuangcharoendee

Ping K. Ko

Linda U. Co

David N.K Wang and Aileen A.P Wang Revocable Living Trust

Shuchen Tina Wang

Howard Chonghe Yang

Gain Again Investments Limited

Provenance Investments Ltd

Senegal International Limited

Golden Global International Corporation

Sharp Focus Assets Management Limited

Series B Investors:

AsiaVest Opportunities Fund IV

Intel Capital (Cayman) Corporation (formerly known as Intel Capital Corporation), a Cayman Islands company

Silicon Federation International Limited

SFVEST, LLC

Gain Again Investments Limited

Na Zhang

Jupiter Global Profits Limited

Chew, Kheng Heng

Hsie Cheng Invest Co.

Jung Kung Yang

Beomsup Kim

Cathy Yen

SF Capital Limited

Ulfers Global Holdings Limited

Elite Global International Corporation

Sharp Focus Assets Management Limited

China Electronics Corporation Hua Hong International Ltd.

Series B-1 Investors:

AsiaVest Opportunities Fund IV

Translink Capital Partners I, L.P.

Intel Capital Corporation

Silicon Federation International Limited

Beomsup Kim

Riverwood Capital LLC

Jianjun Zhou

SF Capital Limited

Dreamachina Limited

AIL

Bridgton Investments Ltd.

Elite Global International Corporation

Sharp Focus Assets Management Limited

Tsong-Jen Huang

Shung Ho Shaw

Yeh Don-Charng

Lee Fang-Lin

Cheng Wen-Feng

Chen Chia-Chin

Chang Ming-Fong

Tai Chen-Chen

Cathy Yen

Cao Yun

Quaker Investment Limited

China Electronics Corporation Hua Hong International Ltd.

Series B-2 Investors:

AsiaVest Opportunities Fund IV

Bridgton Investments Ltd.

Golden Global International Corporation

Sharp Focus Assets Management Limited

Dreamachina Limited

Translink Capital Partners I, L.P.

Ping K. Ko

Howard Chonghe Yang

Stephen Tai

Jie Gu

Lei Wu

XiaoMin Si

Lin Su

Cathy Yen

EX-10.1 4 filename4.htm EX-10.1

Exhibit 10.1

MONTAGE TECHNOLOGY GROUP LIMITED

2006 SHARE INCENTIVE PLAN

TABLE OF CONTENTS


			Page

1.	PURPOSE OF THE PLAN			1

2.	ADMINISTRATION			1

	2.1	Administrator		1

	2.2	Plan Awards; Interpretation; Powers of Administrator		2

	2.3	Binding Determinations		3

	2.4	Reliance on Experts		3

	2.5	Delegation		3

3.	ELIGIBILITY			3

4.	SHARES SUBJECT TO THE PLAN			4

	4.1	Shares Available		4

	4.2	Share Limits		4

	4.3	Replenishment and Reissue of Unvested Awards		4

	4.4	Reservation of Shares		5

5.	OPTION GRANT PROGRAM			5

	5.1	Option Grants in General		5

	5.2	Types of Options		6

	5.3	Option Price		6

	5.4	Vesting; Term; Exercise Procedure		8

	5.5	Limitations on Grant and Terms of Incentive Stock Options		9

	5.6	Limits on 10% Holders		10

	5.7	Effects of Termination of Employment on Options		10

	5.8	Option Repricing/Cancellation and Regrant/Waiver of Restrictions		11

	5.9	Early Exercise Options		12

6.	SHARE AWARD PROGRAM			12

	6.1	Share Awards in General		12

	6.2	Types of Share Awards		12

	6.3	Purchase Price		12

	6.4	Vesting		13

	6.5	Term		13

	6.6	Share Certificates; Fractional Shares		13

-i-

TABLE OF CONTENTS

(continued)


			Page

	6.7	Dividend and Voting Rights		14

	6.8	Termination of Employment; Return to the Company		14

	6.9	Waiver of Restrictions		14

7.	PROVISIONS APPLICABLE TO ALL AWARDS			14

	7.1	Rights of Eligible Persons, Participants and Beneficiaries		14

	7.2	No Transferability; Limited Exception to Transfer Restrictions		15

	7.3	Adjustments; Changes in Control		17

	7.4	Termination of Employment or Services		21

	7.5	Compliance with Laws		22

	7.6	Tax Withholding		24

	7.7	Plan and Award Amendments, Termination and Suspension		25

	7.8	Privileges of Share Ownership		26

	7.9	Share-Based Awards in Substitution for Awards Granted by Other Company		26

	7.10	Effective Date of the Plan		26

	7.11	Term of the Plan		26

	7.12	Governing Law/Severability		26

	7.13	Captions		27

	7.14	Non-Exclusivity of Plan		27

	7.15	No Restriction on Corporate Powers		27

	7.16	Other Company Compensation or Benefit Programs		27

8.	DEFINITIONS			27

-ii-

MONTAGE TECHNOLOGY GROUP LIMITED

2006 SHARE INCENTIVE PLAN

PREFACE

This Plan is divided into two separate equity programs: (1) the option grant program set forth in Section 5 under which Eligible Persons (as defined in Section 3) may, at the discretion of the Administrator, be granted Options, and (2) the share award program set forth in Section 6 under which Eligible Persons may, at the discretion of the Administrator, be awarded restricted or unrestricted Ordinary Shares. Section 2 of this Plan contains the general rules regarding the administration of this Plan. Section 3 sets forth the requirements for eligibility to receive an Award grant under this Plan. Section 4 describes the authorized shares of the Company that may be subject to Awards granted under this Plan. Section 7 contains other provisions applicable to all Awards granted under this Plan. Section 8 provides definitions for certain capitalized terms used in this Plan and not otherwise defined herein.

1.	PURPOSE OF THE PLAN.

The purpose of this Plan is to promote the success of the Company and the interests of its shareholders by providing a means through which the Company may grant equity-based incentives to attract, motivate, retain and reward certain officers, employees, directors and other eligible persons and to further link the interests of Award recipients with those of the Company’s shareholders generally.

2.	ADMINISTRATION.

2.1

Administrator. This Plan shall be administered by and all Awards under this Plan shall be authorized by the Administrator. The “Administrator” means the Board or one or more committees appointed by the Board or another committee (within its delegated authority) to administer all or certain aspects of this Plan. Any such committee shall be comprised solely of one or more directors or such number of directors as may be required under applicable law. A committee may delegate some or all of its authority to another committee so constituted. The Board or a committee comprised solely of directors may also delegate, to the extent permitted by the Companies Law (2004 Revision) of the Cayman Islands and any other applicable law, to one or more officers of the Company, its powers under this Plan (a) to designate the officers and employees of the Company and its Affiliates who will receive grants of Awards under this Plan and (b) to determine the number of shares subject to, and the other terms and conditions of, such Awards. The Board may delegate different levels of authority to different committees with administrative and grant authority under this Plan. Unless otherwise provided in the Memorandum and Articles of Association of the Company (as amended) or the applicable charter of any Administrator: (a) a majority of the members of the acting Administrator shall constitute a quorum and (b) the vote of a majority of the members present assuming the presence of a quorum or the unanimous written consent of the members of the Administrator shall constitute action by the acting Administrator.

2.2

Plan Awards; Interpretation; Powers of Administrator. Subject to the express provisions of this Plan, the Administrator is authorized and empowered to do all things it deems necessary or desirable in connection with the authorization of Awards and the administration of this Plan (in the case of a committee or delegation to one or more officers, within the authority delegated to that committee or person(s)), including, without limitation, the authority to:

(a)

determine eligibility and, from among those persons determined to be eligible, the particular Eligible Persons who will receive Awards;

(b)

grant Awards to Eligible Persons, determine the price and number of securities to be offered or awarded to any of such persons, determine the other specific terms and conditions of Awards consistent with the express limits of this Plan, establish the installments (if any) in which such Awards will become exercisable or will vest (which may include, without limitation, performance and/or time-based schedules) or determine that no delayed exercisability or vesting is required, establish any applicable performance targets and establish the events of termination or reversion of such Awards;

(c)

approve the forms of Award Agreements, which need not be identical either as to type of Award or among Participants;

(d)

construe and interpret this Plan and any Award Agreement or other agreements defining the rights and obligations of the Company, its Affiliates and Participants under this Plan, make factual determinations with respect to the administration of this Plan, further define the terms used in this Plan, and prescribe, amend and rescind rules and regulations relating to the administration of this Plan or the Awards;

(e)

cancel, modify or waive the Company’s rights with respect to, or modify, discontinue, suspend or terminate any or all outstanding Awards, subject to any required consent under Section 7.7.4;

(f)

accelerate or extend the vesting or exercisability or extend the term of any or all outstanding Awards (within the maximum ten-year term of Awards under Sections 5.4.2 and 6.5) in such circumstances as the Administrator may deem appropriate (including, without limitation, in connection with a termination of employment or services or other events of a personal nature);

(g)

determine Fair Market Value for purposes of this Plan and Awards;

(h)

determine the duration and purposes of leaves of absence that may be granted to Participants without constituting a termination of their employment for purposes of this Plan;

(i)

determine whether, and the extent to which, adjustments are required pursuant to Section 7.3 hereof and authorize the termination, conversion, substitution or succession of awards upon the occurrence of an event of the type described in Section 7.3; and

(j)

implement any procedures or steps or additional or different requirements as may be necessary to comply with any relevant laws of the People’s Republic of China (the “PRC”) that may be applicable to this Plan, any Award pursuant to this Plan or any related documents, including but not limited to foreign exchange laws, tax laws and securities law of the PRC.

2.3

Binding Determinations. Any action taken by, or inaction of, the Company, any Affiliate, the Board or the Administrator relating or pursuant to this Plan and within its authority hereunder or under applicable law shall be within the absolute discretion of that entity or body and shall be conclusive and binding upon all persons. Neither the Board nor the Administrator, nor any member thereof or person acting at the direction thereof, shall be liable for any act, omission, interpretation, construction or determination made in good faith in com1ection with this Plan (or any Award), and all such persons shall be entitled to indemnification and reimbursement by the Company in respect of any claim, loss, damage or expense (including, without limitation, attorneys’ fees) arising or resulting therefrom to the fullest extent permitted by law and/or under any directors and officers liability insurance coverage that may be in effect from time to time.

2.4

Reliance on Experts. In making any determination or in taking or not taking any action under this Plan, the Administrator or the Board, as the case may be, may obtain and may rely upon the advice of experts, including employees of and professional advisors to the Company. No director, officer or agent of the Company or any of its Affiliates shall be liable for any such action or detem1ination taken or made or omitted in good faith.

2.5

Delegation. The Administrator may delegate ministerial, non-discretionary functions to individuals who are officers or employees of the Company or any of its Affiliates or to third parties.

3.	ELIGIBILITY.

Awards may be granted under this Plan only to those persons that the Administrator determines to be Eligible Persons. An “Eligible Person” means any person who qualifies as one of the following at the time of grant of the respective Award:

(a)

an officer (whether or not a director) or employee of the Company or any of its Affiliates;

(b)

any member of the Board; or

(c)

any director of one of the Company’s Affiliates, or any individual consultant or advisor who renders or has rendered bona fide services (other than services in connection with the offering or sale of securities of the Company or one of its Affiliates, as applicable, in a capital raising transaction or as a market maker or promoter of that entity’s securities) to the Company or one of its Affiliates.

An advisor or consultant may be selected as an Eligible Person pursuant to clause (c) above only if such person’s participation in this Plan would not adversely affect (1) the Company’s eligibility to rely on an exemption from registration under the Securities Act for the offering of shares issuable under this Plan by the Company, such as under Rule 701, or (2) the Company’s compliance with any other applicable laws.

An Eligible Person may, but need not, be granted one or more Awards pursuant to Section 5 and/or one or more Awards pursuant to Section 6. An Eligible Person who has been granted an Award under this Plan may, if otherwise eligible, be granted additional Awards under this Plan if the Administrator so determines. However, a person’s status as an Eligible Person is not a commitment that any Award will be granted to that person under this Plan. Furthermore, an Eligible Person who has been granted an Award under Section 5 is not necessarily entitled to an Award under Section 6, or vice versa, unless otherwise expressly determined by the Administrator.

Each Award granted under this Plan must be approved by the Administrator at or prior to the grant of the Award.

4.	SHARES SUBJECT TO THE PLAN.

4.1

Shares Available. Subject to the provisions of Section 7.3.1, the shares that may be delivered under this Plan will be the Company’s authorized but unissued Ordinary Shares. The Ordinary Shares issued and delivered may be issued and delivered for any lawful consideration.

4.2

Share Limits. Subject to the provisions of Section 7.3.1 and further subject to the share counting rules of Section 4.3, the maximum number of Ordinary Shares that may be delivered pursuant to Awards granted under this Plan will not exceed Eleven Million Six Hundred Forty Thousand (11,640,000) shares (the “Share Limit”) in the aggregate.^* As required under U.S. Treasury Regulation Section 1.422-2(b)(3)(i), in no event will the number of Ordinary Shares that may be delivered pursuant to Incentive Stock Options granted under this Plan exceed the Share Limit.

4.3

Replenishment and Reissue of Unvested Awards. To the extent that an Award is settled in cash or a form other than Ordinary Shares, the shares that would have been delivered had there been no such cash or other settlement shall not be counted against the shares available for issuance under this Plan. No Award may

^*	Award grants (including the number of shares subject to Awards granted) must be structured to satisfy the requirements of Rule 701 promulgated under the Securities Act and applicable “blue sky” laws.

be granted under this Plan unless, on the date of grant, the sum of (a) the maximum number of Ordinary Shares issuable at any time pursuant to such Award, plus (b) the number of Ordinary Shares that have previously been issued pursuant to Awards granted under this Plan, plus (c) the maximum number of Ordinary Shares that may be issued at any time after such date of grant pursuant to Awards that are outstanding on such date, does not exceed the Share Limit. Notwithstanding the foregoing, Ordinary Shares that are subject to or underlie Options granted under this Plan that expire or for any reason are canceled or terminated without having been exercised (or Ordinary Shares subject to or underlying the unexercised portion of such Options in the case of Options that were partially exercised), as well as Ordinary Shares that are subject to Share Awards made under this Plan that are forfeited to the Company or otherwise repurchased by the Company prior to the vesting of such shares for a price not greater than the original purchase or issue price of such shares (as adjusted pursuant to Section 7.3.1) will again, except to the extent prohibited by law or applicable listing or regulatory requirements (and subject to any applicable limitations of the Code in the case of Awards intended to be Incentive Stock Options), be available for subsequent Award grants under this Plan. Shares that are exchanged by a Participant or withheld by the Company as full or partial payment in connection with any Award under this Plan, as well as any shares exchanged by a Participant or withheld by the Company or one of its Affiliates to satisfy the tax withholding obligations related to any Award, shall be available for subsequent awards under this Plan.

4.4

Reservation of Shares. The Company shall at all times reserve a number of Ordinary Shares sufficient to cover the Company’s obligations and contingent obligations to deliver shares with respect to Awards then outstanding under this Plan.

5.	OPTION GRANT PROGRAM.

5.1

Option Grants in General. Each Option shall be evidenced by an Award Agreement in the form approved by the Administrator. The Award Agreement evidencing an Option shall contain the terms established by the Administrator for that Option, as well as any other terms, provisions or restrictions that the Administrator may impose on the Option or any Ordinary Shares subject to the Option; in each case subject to the applicable provisions and limitations of this Section 5 and the other applicable provisions and limitations of this Plan. The Administrator may require that the recipient of an Option promptly execute and return to the Company his or her Award Agreement evidencing the Option. In addition, the Administrator may require that the spouse of any married recipient of an Option also promptly execute and return to the Company the Award Agreement evidencing the Option granted to the recipient or such other spousal consent form that the Administrator may require in connection with the grant of the Option.

5.2

Types of Options. The Administrator will designate each Option granted under this Plan to a U.S. resident as either an Incentive Stock Option or a Nonqualified Option, and such designation shall be set forth in the applicable Award Agreement. Any Option granted under this Plan to a U.S. resident that is not expressly designated in the applicable Award Agreement as an Incentive Stock Option will be deemed to be designated a Nonqualified Option under this Plan and not an “incentive stock option” within the meaning of Section 422 of the Code. Incentive Stock Options shall be subject to the provisions of Section 5.5 in addition to the provisions of this Plan applicable to Options generally. The Administrator may, in its discretion, designate any Option as an Early Exercise Option pursuant to Section 5.9. Notwithstanding the above provision of this Section 5.2, the Administrator may designate any Option granted under this Plan to a non-U.S. resident in accordance with the rules and regulations applicable to options in the jurisdiction in which such person is a resident. The Administrator may, in its discretion, designate any Option as an Early Exercise Option pursuant to Section 5.9.

5.3

Option Price.

5.3.1

Pricing Limits. Subject to the following provisions of this Section 5.3.1, the Administrator will determine the purchase price per share of the Ordinary Shares covered by each Option (the “exercise price” of the Option) at the time of the grant of the Option, which exercise price will be set forth in the applicable Award Agreement. In no case will the exercise price of an Option be less than the greater of:

(a)

the par value of the Ordinary Shares;

(b)

in the case of an Incentive Stock Option and subject to clause (c) below, or as otherwise required by applicable law, 100% of the Fair Market Value of the Ordinary Shares on the date of grant; or

(c)

in the case of an Incentive Stock Option granted to a Participant described in Section 5.6, 110% of the Fair Market Value of the Ordinary Shares on the date of grant.

5.3.2

Payment Provisions. The Company will not be obligated to deliver certificates for the Ordinary Shares to be purchased on exercise of an Option unless and until it receives full payment of the exercise price therefor, all related withholding obligations under Section 7.6 have been satisfied and all other conditions to the exercise of the Option set forth herein or in the Award Agreement have been satisfied. The purchase price of any Ordinary Shares purchased on exercise of an Option must be paid in full at the time of each purchase in such lawful consideration as may be permitted or required by the Administrator, which may include, without limitation, one or a combination of the following methods:

(a)

cash, check payable to the order of the Company or electronic funds transfer;

(b)

notice and third party payment in such manner as may be authorized by the Administrator;

(c)

the delivery of previously owned Ordinary Shares;

(d)

by a reduction in the number of Ordinary Shares otherwise deliverable pursuant to the Award;

(e)

subject to such procedures as the Administrator may adopt, pursuant to a “cashless exercise;” or

(f)

if authorized by the Administrator or specified in the applicable Award Agreement, by a promissory note of the Participant consistent with the requirements of Section 5.3.3.

In no event shall any shares newly-issued by the Company be issued for less than the minimum lawful consideration for such shares or for consideration other than consideration permitted by applicable law. In the event that the Administrator allows a Participant to exercise an Award by delivering Ordinary Shares previously owned by such Participant and unless otherwise expressly provided by the Administrator, any shares delivered which were initially acquired by the Participant from the Company (upon exercise of an option or otherwise) must have been owned by the Participant for at least six months as of the date of delivery or such other period, if any, as the Administrator prescribes based on accounting or other applicable rules then in effect. Ordinary Shares used to satisfy the exercise price of an Option (whether previously-owned shares or shares otherwise deliverable pursuant to the terms of the Option) shall be valued at their Fair Market Value on the date of exercise. Unless otherwise expressly provided in the applicable Award Agreement, the Administrator may eliminate or limit a Participant’s ability to pay the purchase or exercise price of any Award by any method other than cash payment to the Company. The Administrator may take all actions necessary to alter the method of Option exercise and the exchange and transmittal of proceeds with respect to Participants resident in the People’s Republic of China (the “PRC”) not having permanent residence in a country other than the PRC in order to comply with applicable PRC foreign exchange and tax regulations and any other applicable PRC laws and regulations.

5.3.3

Acceptance of Notes to Finance Exercise. The Company may, with the Administrator’s approval in each specific case, accept one or more promissory notes from any Eligible Person in connection with the exercise of any Option; provided that any such note shall be subject to the following terms and conditions:

(a)

The principal of the note shall not exceed the amount required to be paid to the Company upon the exercise, purchase or acquisition of one or more Awards under this Plan and the note shall be delivered directly to the Company in consideration of such exercise, purchase or acquisition.

(b)

The initial term of the note shall be determined by the Administrator; provided that the term of the note, including extensions, shall not exceed a period of five years.

(c)

The note shall provide for full recourse to the Participant and shall bear interest at a rate determined by the Administrator, but not less than the interest rate necessary to avoid the imputation of interest under the Code and to avoid any adverse accounting consequences in connection with the exercise, purchase or acquisition.

(d)

If the employment or services of the Participant by or to the Company and its Affiliates terminates, the unpaid principal balance of the note shall become due and payable on the 30th business day after such termination; provided, however, that if a sale of the shares acquired on exercise of the Option would cause such Participant to incur liability under Section 16(b) of the Exchange Act, the unpaid balance shall become due and payable on the 10th business day after the first day on which a sale of such shares could have been made without incurring such liability assuming for these purposes that there are no other transactions (or deemed transactions) in securities of the Company by the Participant subsequent to such termination.

(e)

If required by the Administrator or by applicable law, the note shall be secured by a pledge of any shares or rights financed thereby or other collateral, in compliance with applicable law.

The terms, repayment provisions and collateral release provisions of the note and the pledge securing the note shall conform with all applicable rules and regulations, including those of the Federal Reserve Board of the United States and any applicable law, as then in effect.

5.4

Vesting; Term; Exercise Procedure.

5.4.1

Vesting. Except as provided in Section 5.9, an Option may be exercised only to the extent that it is vested and exercisable. The Administrator will determine the vesting and/or exercisability provisions of each Option (which may be based on performance criteria, passage of time or other factors or any combination thereof), which provisions will be set forth in

the applicable Award Agreement. Unless the Administrator otherwise expressly provides, once exercisable an Option will remain exercisable until the expiration or earlier termination of the Option. To the extent required to satisfy applicable securities laws and subject to Section 5.7, no Option (except an Option granted to an officer, director, or consultant of the Company or any of its Affiliates) shall vest and become exercisable at a rate of less than 20% per year over five years after the date the Option is granted.

5.4.2

Term. Each Option shall expire not more than ten (10) years after its date of grant. Each Option will be subject to earlier termination as provided in or pursuant to Sections 5.7 and 7.3. Any payment of cash or delivery of shares in payment of or pursuant to an Option may be delayed until a future date if specifically authorized by the Administrator in writing and by the Participant.

5.4.3

Exercise Procedure. Any exercisable Option will be deemed to be exercised when the Company receives written notice of such exercise from the Participant (on a form and in such manner as may be required by the Administrator), together with any required payment made in accordance with Section 5.3 and Section 7.6 and any written statement required pursuant to Section 7.5.1.

5.4.4

Fractional Shares/Minimum Issue. Fractional share interests will be disregarded, but may be accumulated. The Administrator, however, may determine that cash, other securities or other property will be paid or transferred in lieu of any fractional share interests. No fewer than one hundred (100) shares (subject to adjustment pursuant to Section 7.3.1) may be purchased on exercise of any Option at one time unless the number purchased is the total number at the time available for purchase under the Option.

5.5

Limitations on Grant and Terms of Incentive Stock Options.

5.5.1

U.S. $100,000 Limit. To the extent that the aggregate Fair Market Value of shares with respect to which incentive stock options first become exercisable by a Participant in any calendar year exceeds U.S. $100,000, taking into account both Ordinary Shares subject to Incentive Stock Options under this Plan and shares subject to incentive stock options under all other plans of the Company or any of its Affiliates, such options will be treated as nonqualified options. For this purpose, the Fair Market Value of the shares subject to options will be determined as of the date the options were awarded. In reducing the number of options treated as incentive stock options to meet the U.S. $100,000 limit, the most recently granted options will be reduced (recharacterized as nonqualified options) first. To the extent a reduction of simultaneously granted options is necessary to meet the U.S. $100,000 limit, the Administrator may, in the manner and to the extent permitted by law, designate which Ordinary Shares are to be treated as shares acquired pursuant to the exercise of an incentive stock option.

5.5.2

Other Code Limits. Incentive Stock Options may only be granted to individuals that are employees of the Company or one of its Affiliates and satisfy the other eligibility requirements of the Code. Any Award Agreement relating to Incentive Stock Options will contain or shall be deemed to contain such other terms and conditions as from time to time are required in order that the Option be an “incentive stock option” as that term is defined in Section 422 of the Code.

5.5.3

ISO Notice of Sale Requirement. Any Participant who exercises an Incentive Stock Option shall give prompt written notice to the Company of any sale or other transfer of the Ordinary Shares acquired on such exercise if the sale or other transfer occurs within (a) one year after the exercise date of the Option or (b) two years after the grant date of the Option.

5.6

Limits on 10% Holders. No Incentive Stock Option may be granted to any person who, at the time the Incentive Stock Option is granted, owns (or is deemed to own under Section 424(d) of the Code) outstanding shares of the Company (or any of its Affiliates) possessing more than 10% of the total combined voting power of all classes of shares of the Company (or any of its Affiliates), unless the exercise price of such Incentive Stock Option is at least 110% of the Fair Market Value of the shares subject to the Incentive Stock Option and such Incentive Stock Option by its terms is not exercisable after the expiration of five years from the date such Incentive Stock Option is granted.

5.7

Effects of Termination of Employment on Options.

5.7.1

Dismissal for Cause. Unless otherwise provided in the Award Agreement and subject to earlier termination pursuant to or as contemplated by Sections 5.4.2 or 7.3, if a Participant’s employment by or service to the Company or any of its Affiliates is terminated by such entity for Cause, the Participant’s Option will terminate on the Participant’s Severance Date, whether or not the Option is then vested and/or exercisable.

5.7.2

Death or Disability. Unless otherwise provided in the Award Agreement (consistent with applicable securities laws) and subject to earlier termination pursuant to or as contemplated by Sections 5.4.2 or 7.3, if a Participant’s employment by or service to the Company or any of its Affiliates terminates as a result of the Participant’s death or Total Disability:

(a)

the Participant (or his or her Personal Representative or Beneficiary, in the case of the Participant’s Total Disability or death, respectively), will have until the date that is twelve (12) months after the Participant’s Severance Date to exercise the Participant’s Option (or portion thereof) to the extent that it was vested and exercisable on the Severance Date;

(b)

the Option, to the extent not vested and exercisable on the Participant’s Severance Date, shall terminate on the Severance Date; and

(c)

the Option, to the extent exercisable for the twelve (12)-month period following the Participant’s Severance Date and not exercised during such period, shall terminate at the close of business on the last day of the twelve (12)-month period.

5.7.3

Other Terminations of Employment. Unless otherwise provided in the Award Agreement (consistent with applicable securities laws) and subject to earlier termination pursuant to or as contemplated by Sections 5.4.2 or 7.3, if a Participant’s employment by or service to the Company or any of its Affiliates terminates for any reason other than a termination by such entity for Cause or because of the Participant’s death or Total Disability:

(a)

the Participant will have until the date that is ninety (90) days after the Participant’s Severance Date to exercise his or her Option (or portion thereof) to the extent that it was vested and exercisable on the Severance Date;

(b)

the Option, to the extent not vested and exercisable on the Participant’s Severance Date, shall terminate on the Severance Date; and

(c)

the Option, to the extent exercisable for the ninety (90)-day period following the Participant’s Severance Date and not exercised during such period, shall terminate at the close of business on the last day of the ninety (90)-day period.

5.8

Option Repricing/Cancellation and Regrant/Waiver of Restrictions. Subject to Section 4 and Section 7.7 and the specific limitations on Options contained in this Plan, the Administrator from time to time may authorize, generally or in specific cases only, for the benefit of any Eligible Person, any adjustment in the exercise price, the vesting schedule, the number of shares subject to, or the term of, an Option granted under this Plan by cancellation of an outstanding Option and a subsequent regranting of the Option, by amendment, by substitution of an outstanding Option, by waiver or by other legally valid means. Such amendment or other action may result in, among other changes, an exercise price that is higher or lower than the exercise price of the original or prior Option, provide for a greater or lesser number of Ordinary Shares subject to the Option, or provide for a longer or shorter vesting or exercise period.

5.9

Early Exercise Options. The Administrator may, in its discretion, designate any Option as an Early Exercise Option which, by express provision in the applicable Award Agreement, may be exercised prior to the date such Option has vested. If the Participant elects to exercise all or a portion of an Early Exercise Option before it is vested, the Ordinary Shares acquired under the Option which are attributable to the unvested portion of the Option shall be Restricted Shares. The applicable Award Agreement will specify the extent (if any) to which and the time (if ever) at which the Participant will be entitled to dividends, voting and other rights in respect of such Restricted Shares prior to vesting, and the restrictions imposed on such shares and the conditions of release or lapse of such restrictions. Unless otherwise expressly provided in the applicable Award Agreement, such Restricted Shares shall be subject to the provisions of Sections 6.6 through 6.9, below.

6.	SHARE AWARD PROGRAM.

6.1

Share Awards in General. Each Share Award shall be evidenced by an Award Agreement in the form approved by the Administrator. The Award Agreement evidencing a Share Award shall contain the terms established by the Administrator for that Share Award, as well as any other terms, provisions or restrictions that the Administrator may impose on the Share Award; in each case subject to the applicable provisions and limitations of this Section 6 and the other applicable provisions and limitations of this Plan. The Administrator may require that the recipient of a Share Award promptly execute and return to the Company his or her Award Agreement evidencing the Share Award. In addition, the Administrator may require that the spouse of any married recipient of a Share Award also promptly execute and return to the Company the Award Agreement evidencing the Share Award granted to the recipient or such other spousal consent form that the Administrator may require in connection with the grant of the Share Award.

6.2

Types of Share Awards. The Administrator shall designate whether a Share Award shall be a Restricted Share Award, and such designation shall be set forth in the applicable Award Agreement.

6.3

Purchase Price.

6.3.1

Pricing Limits. Subject to the following provisions of this Section 6.3, the Administrator will determine the purchase price per share of the Ordinary Shares covered by each Share Award at the time of grant of the Award. In no case will such purchase price be less than the greater of:

(a)

the par value of the Ordinary Shares;

(b)

eighty five percent (85%) of the Fair Market Value of the Ordinary Shares on the date of grant or at the time the purchase is consummated; or

(c)

one hundred percent (100%) of the Fair Market Value of the Ordinary Shares on the date of grant, or at the time the purchase is consummated, in the case of any person who owns shares possessing more than ten percent (10%) of the total combined voting power of all classes of shares of the Company or one of its Affiliates.

6.3.2

Payment Provisions. The Company will not be obligated to record in the Company’s register of members, or issue certificates evidencing, Ordinary Shares awarded under this Section 6 unless and until it receives full payment of the purchase price therefor and all other conditions to the purchase, as determined by the Administrator, have been satisfied, at which point the relevant shares shall be issued and noted in the Company’s register of members. The purchase price of any shares subject to a Share Award must be paid in full at the time of the purchase in such lawful consideration as may be permitted or required by the Administrator, which may include, without limitation, one or a combination of the methods set forth in clauses (a) through (f) in Section 5.3.2 and/or past services rendered to the Company or any of its Affiliates.

6.4

Vesting. The restrictions imposed on the Ordinary Shares subject to a Restricted Share Award (which may be based on performance criteria, passage of time or other factors or any combination thereof) will be set forth in the applicable Award Agreement. To the extent required to satisfy applicable securities laws, the restrictions imposed on the Ordinary Shares subject to a Restricted Share Award (other than an Award granted to an officer, director or consultant of the Company or any of its Affiliates, which may include more restrictive provisions) shall lapse as to such shares, subject to Section 6.8, at a rate of at least twenty percent (20%) of the shares subject to the Award per year over the five years after the date the Award is granted.

6.5

Term. A Share Award shall either vest or be forfeited or terminated by the Company not more than ten (10) years after the date of grant. Each Share Award will be subject to earlier forfeiture or termination as provided in or pursuant to Sections 6.8 and 7.3. Any payment of cash or delivery of shares in payment for a Share Award may be delayed until a future date if specifically authorized by the Administrator in writing and by the Participant.

6.6

Share Certificates; Fractional Shares. Share certificates evidencing Restricted Shares will bear a legend making appropriate reference to the restrictions imposed hereunder and will be held by the Company or by a third party designated by the Administrator until the restrictions on such shares have lapsed, the shares have vested in accordance with the provisions of the Award Agreement and Section 6.4 and any related loan has been repaid. Fractional share interests will be disregarded, but may be accumulated. The Administrator, however, may determine that cash, other securities or other property will be paid or transferred in lieu of any fractional share interests.

6.7

Dividend and Voting Rights. Unless otherwise provided in the applicable Award Agreement, a Participant holding Restricted Shares will be entitled to cash dividend and voting rights for all Restricted Shares issued even though they are not vested, but such rights will terminate immediately as to any Restricted Shares which are repurchased, terminated or forfeited by the Company or cease to be eligible for vesting.

6.8

Termination of Employment; Return to the Company. Unless the Administrator otherwise expressly provides, Restricted Shares subject to an Award that remain subject to vesting conditions that have not been satisfied by the time specified in the applicable Award Agreement (which may include, without limitation, the Participant’s Severance Date), will not vest and will be reacquired by the Company in such manner and on such terms as the Administrator provides, which terms shall include return or repayment of the lower of (a) the Fair Market Value of the Restricted Shares at the time of the termination, or (b) the original purchase price of the Restricted Shares, without interest, to the Participant to the extent not prohibited by law. The Award Agreement shall specify any other terms or conditions of the repurchase if the Award fails to vest. Any other Share Award that has not been exercised as of a Participant’s Severance Date shall be forfeited or terminated on that date unless otherwise expressly provided by the Administrator in the applicable Award Agreement.

6.9

Waiver of Restrictions. Subject to Sections 4 and 7.7 and the specific limitations on Share Awards contained in this Plan, the Administrator from time to time may authorize, generally or in specific cases only, for the benefit of any Eligible Person, any adjustment in the vesting schedule, or the restrictions upon or the term of, a Share Award granted under this Plan by amendment, by substitution of an outstanding Share Award, by waiver or by other legally valid means.

7.	PROVISIONS APPLICABLE TO ALL AWARDS.

7.1

Rights of Eligible Persons, Participants and Beneficiaries.

7.1.1

Employment Status. No person shall have any claim or rights to be granted an Award (or additional Awards, as the case may be) under this Plan, subject to any express contractual rights (set forth in a document other than this Plan) to the contrary.

7.1.2

No Employment/Service Contract. Nothing contained in this Plan (or in any other documents under this Plan or related to any Award) shall confer upon any Eligible Person or Participant any right to continue in the employ or other service of the Company or any of its Affiliates, constitute any contract or agreement of employment or other service or affect an employee’s status as an employee at will, nor shall interfere in any way

with the right of the Company or any Affiliate to change such person’s compensation or other benefits, or to terminate his or her employment or other service, with or without cause at any time. Nothing in this Section 7.1.2, or in Sections 7.3 or 7.15, however, is intended to adversely affect any express independent right of such person under a separate employment or service contract. An Award Agreement shall not constitute a contract of employment or service.

7.1.3

Plan Not Funded. Awards payable under this Plan will be payable in Ordinary Shares or from the general assets of the Company, and (except as to the share reservation provided in Section 4.4) no special or separate reserve, fund or deposit will be made to assure payment of such Awards. No Participant, Beneficiary or other person will have any right, title or interest in any fund or in any specific asset (including Ordinary Shares, except as expressly provided) of the Company or any of its Affiliates by reason of any Award hereunder. Neither the provisions of this Plan (or of any related documents), nor the creation or adoption of this Plan, nor any action taken pursuant to the provisions of this Plan will create, or be construed to create, a trust of any kind or a fiduciary relationship between the Company or any of its Affiliates and any Participant, Beneficiary or other person. To the extent that a Participant, Beneficiary or other person acquires a right to receive payment pursuant to any Award hereunder, such right will be no greater than the right of any unsecured general creditor of the Company.

7.1.4

Charter Documents. The Memorandum and Articles of Association of the Company, as may lawfully be amended from time to time, may provide for additional restrictions and limitations with respect to the Ordinary Shares (including additional restrictions and limitations on the voting or transfer of Ordinary Shares) or priorities, rights and preferences as to securities and interests prior in rights to the Ordinary Shares. To the extent that these restrictions and limitations are greater than those set forth in this Plan or any Award Agreement, such restrictions and limitations shall apply to any Ordinary Shares acquired pursuant to the exercise of Awards and are incorporated herein by this reference.

7.2

No Transferability; Limited Exception to Transfer Restrictions.

7.2.1

Limit on Exercise and Transfer. Unless otherwise expressly provided in (or pursuant to) this Section 7.2, by applicable law and by the Award Agreement, as the same may be amended:

(a)

all Awards are non-transferable and will not be subject in any manner to sale, transfer, anticipation, alienation, assignment, pledge, encumbrance or charge;

(b)

Awards will be exercised only by the Participant; and

(c)

amounts payable or shares issuable pursuant to an Award will be delivered only to (or for the account of), and, in the case of Ordinary Shares, registered in the name of, the Participant.

In addition, the shares shall be subject to the restrictions set forth in the applicable Award Agreement.

7.2.2

Further Exceptions to Limits On Transfer. The exercise and transfer restrictions in Section 7.2.1 will not apply to:

(a)

transfers to the Company;

(b)

transfers by gift or domestic relations order to one or more “family members” (as that term is defined in SEC Rule 701 promulgated under the Securities Act) of the Participant;

(c)

the designation of a Beneficiary to receive benefits if the Participant dies or, if the Participant has died, transfers to or exercises by the Participant’s Beneficiary, or, in the absence of a validly designated Beneficiary, transfers by will or the laws of descent and distribution; or

(d)

if the Participant has suffered a disability, permitted transfers or exercises on behalf of the Participant by the Participant’s duly authorized legal representative.

Notwithstanding anything else in this Section 7.2.2 to the contrary, but subject to compliance with all applicable laws, unless otherwise determined by the Administrator, Incentive Stock Options and Restricted Share Awards will be subject to any and all transfer restrictions under the Code applicable to such awards or necessary to maintain the intended tax consequences of such Awards. Notwithstanding clause (b) above but subject to compliance with all applicable laws, any contemplated transfer by gift or domestic relations order to one or more “family members” of a Participant as referenced in clause (b) above is subject to the condition precedent that the transfer be approved by the Administrator in order for it to be effective. The Administrator may, in its sole discretion, withhold its approval of any such proposed transfer.

7.2.3

Company’s Call Right. The Company shall have the right (but not the obligation) to repurchase in one or more transactions in connection with the Participant’s termination of employment by or services to the Company or any of its Affiliates, and the Participant (or any permitted transferee) shall be obligated to sell any of the shares acquired in accordance with Sections 5 and 6 of this Plan at the Repurchase Price (the “Call Right”). If the Company elects to exercise its Call Right, the Participant shall be notified within ninety (90) days after the Participant’s termination of employment by or services to the Company or any of its Affiliates. The Company may designate and assign one or more employees, officers or shareholders of the Company or other persons to exercise all or a part of the Company’s Call Rights under this Section 7.2.3.

7.3

Adjustments; Changes in Control.

7.3.1

Adjustments. Upon or in contemplation of any reclassification, recapitalization, share split (including a share split in the form of a share dividend) or reverse share split (“share split”); any merger, amalgamation, combination, consolidation or other reorganization; any split-up, spin-off, or similar extraordinary dividend distribution in respect of the Ordinary Shares (whether in the form of securities or property); any exchange of Ordinary Shares or other securities of the Company, or any similar, unusual or extraordinary corporate transaction in respect of the Ordinary Shares; or a sale of all or substantially all the assets of the Company as an entirety; then the Administrator shall, in such manner, to such extent (if any) and at such time as it deems appropriate and equitable in the circumstances:

(a)

proportionately adjust any or all of (1) the number of Ordinary Shares or the number and type of other securities that thereafter may be made the subject of Awards (including the specific share limits, maxima and numbers of shares set forth elsewhere in this Plan), (2) the number, amount and type of Ordinary Shares (or other securities or property) subject to any or all outstanding Awards, (3) the grant, purchase or exercise price of any or all outstanding Awards or (4) the securities, cash or other property deliverable upon exercise or vesting of any outstanding Awards, or

(b)

make provision for a settlement by a cash payment or for the assumption, substitution or exchange of any or all outstanding Awards (or the cash, securities or other property deliverable to the holder(s) of any or all outstanding Awards) based upon the distribution or consideration payable to holders of the Ordinary Shares upon or in respect of such event.

The Administrator may adopt such valuation methodologies for outstanding Awards as it deems reasonable in the event of a cash, securities or other property settlement. In the case of Options, but without limitation on other methodologies, the Administrator may base such settlement solely upon the excess (if any) of the amount payable upon or in respect of such event over the exercise price of the Option to the extent of the then vested and exercisable shares subject to the Option.

The Administrator may make adjustments to and/or accelerate the exercisability of Options in a manner that disqualifies the Options as Incentive Stock Options without the written consent of the Option holders affected thereby.

In any of such events, the Administrator may take such action prior to such event to the extent that the Administrator deems the action necessary to permit the Participant to realize the benefits intended to be conveyed with respect to the underlying shares in the same manner as is or will be available to shareholders generally.

Any adjustment by the Administrator pursuant to this Section 7.3.1 shall be final, binding and conclusive. Unless otherwise expressly provided by the Administrator, in no event shall a conversion of one or more outstanding shares of the Company’s preferred shares (if any) or any new issuance of securities by the Company for consideration be deemed, in and of itself, to require an adjustment pursuant to this Section 7.3.1.

In the case of any event described in the first paragraph of this Section 7.3.1, if no action is formally taken by the Administrator in the circumstances with respect to then outstanding Awards, the proportionate adjustments contemplated by clause (a) above shall nevertheless be deemed to have been made with respect to the Awards outstanding at the time of such event in order to preserve the intended level of incentives.

7.3.2

Consequences of a Change in Control Event. Subject to Sections 7.3.4 through 7.3.6, upon (or, as may be necessary to effectuate the purposes of this acceleration, immediately prior to) the occurrence of a Change in Control Event:

(a)

each Option will become immediately vested and exercisable, and

(b)

Restricted Shares will immediately vest free of forfeiture restrictions and/or restrictions giving the Company the right to repurchase the shares at their original purchase price;

provided, however, that such acceleration provision shall not apply, unless otherwise expressly provided by the Administrator, with respect to any Award to the extent that the Administrator has made a provision for the substitution, assumption, exchange or other continuation or settlement of the Award, or the Award would otherwise continue in accordance with its terms, in the circumstances.

The foregoing Change in Control Event provisions shall not in any way limit the authority of the Administrator to accelerate the vesting of one or more Awards (as to all or only a portion of any Award) in such circumstances (including, but not limited to, a Change in Control Event) as the Administrator may determine to be appropriate, regardless of whether accelerated vesting of all or a portion of the Award(s) is otherwise required or contemplated by the foregoing in the circumstances.

7.3.3

Early Termination of Awards. Upon the occurrence of a Change in Control Event, each then-outstanding Award (whether or not vested and/or exercisable, but after giving effect to any accelerated vesting required in the circumstances pursuant to Sections 7.3.2, 7.3.4, 7.3.5 and 7.3.6) shall terminate, subject to any provision that has been expressly made by the Administrator, through a plan of reorganization or otherwise, for the survival, substitution, assumption, exchange or other continuation or settlement of such Award and provided that, in the case of Options that will not survive or be substituted for, assumed, exchanged or otherwise continued or settled in the Change in Control Event, the holder of such Award shall be given reasonable advance notice of the impending termination and a reasonable opportunity to exercise his or her outstanding and vested Options (the vested portion of such Options determined after giving effect to any accelerated vesting required in the circumstances pursuant to Sections 7.3.2, 7.3.4, 7.3.5 and 7.3.6) in accordance with their terms before the termination of the Awards (except that in no case shall more than ten (10) days’ notice of accelerated vesting and the impending termination be required and any acceleration may be made contingent upon the actual occurrence of the event). For purposes of this Sections 7.3, an Award shall be deemed to have been “assumed” if (without limiting other circumstances in which an Award is assumed) the Award continues after the Change in Control Event, and/or is assumed and continued by a Parent (as such term is defined in the definition of Change in Control Event) following a Change in Control Event, and confers the right to purchase or receive, as applicable and subject to vesting and the other terms and conditions of the Award, for each Ordinary Share subject to the Award immediately prior to the Change in Control Event, the consideration (whether cash, shares or other securities or property) received in the Change in Control Event by the shareholders of the Company for each Ordinary Share sold or exchanged in such transaction (or the consideration received by a majority of the shareholders participating in such transaction if the shareholders were offered a choice of consideration); provided, however, that if the consideration offered for an Ordinary Share in the transaction is not solely the ordinary or common shares of a successor company or a Parent, the Board may provide for the consideration to be received upon exercise or payment of the Award, for each share subject to the Award, to be solely ordinary or common shares (as applicable) of the successor company or a Parent equal in Fair Market Value to the per share consideration received by the shareholders participating in the Change in Control Event.

7.3.4

Other Acceleration Rules. Any acceleration of Awards pursuant to this Section 7.3 shall comply with applicable legal requirements and, if necessary to accomplish the purposes of the acceleration or if the circumstances require, may be deemed by the Administrator to occur a limited period of time not greater than thirty (30) days before the event that triggered such acceleration. Without limiting the generality of the

foregoing, the Administrator may deem an acceleration to occur immediately prior to the applicable event and/or reinstate the original terms of an Award if an event giving rise to an acceleration does not occur. The Administrator may override the provisions of this Section 7.3 as to any Award by express provision in the applicable Award Agreement and may accord any Participant a right to refuse any acceleration, whether pursuant to the Award Agreement or otherwise, in such circumstances as the Administrator may approve. The portion of any Incentive Stock Option accelerated in connection with a Change in Control Event or any other action permitted hereunder shall remain exercisable as an Incentive Stock Option only to the extent the applicable U.S. $100,000 limitation on Incentive Stock Options is not exceeded. To the extent exceeded, the accelerated portion of the Option shall be exercisable as a Nonqualified Option.

7.3.5

Possible Rescission of Acceleration. If the vesting of an Award has been accelerated expressly in anticipation of an event or upon shareholder approval of an event and the Administrator later determines that the event will not occur, the Administrator may rescind the effect of the acceleration as to any then outstanding and unexercised or otherwise unvested Awards.

7.3.6

Golden Parachute Limitation. Notwithstanding anything else contained in this Section 7.3 to the contrary, in no event shall an Award be accelerated under this Section 7.3 to an extent or in a manner which would not be fully deductible by the Company or one of its Affiliates for federal income tax purposes because of Section 280G of the Code, nor shall any payment hereunder be accelerated to the extent any portion of such accelerated payment would not be deductible by the Company or one of its Affiliates because of Section 280G of the Code. If a holder of an Award would be entitled to benefits or payments hereunder and under any other plan or program that would constitute “parachute payments” as defined in Section 280G of the Code, then the holder may by written notice to the Company designate the order in which such parachute payments will be reduced or modified so that the Company or one of its Affiliates is not denied federal income tax deductions for any “parachute payments” because of Section 280G of the Code. Notwithstanding the foregoing, if a Participant is a party to an employment or other agreement with the Company or one of its Affiliates, or is a participant in a severance program sponsored by the Company or one of its Affiliates that contains express provisions regarding Section 280G and/or Section 4999 of the Code (or any similar successor provision), the Section 280G and/or Section 4999 provisions of such employment or other agreement or plan, as applicable, shall control as to any Awards held by that Participant (for example, and without limitation, a Participant may be a party to an employment agreement with the Company or one of its Affiliates that provides for a “gross-up” as opposed to a “cut-back” in the event that the Section 280G thresholds are reached or exceeded in connection with a change in control and, in such event, the Section 280G and/or Section 4999 provisions of such employment agreement shall control as to any Awards held by that Participant).

7.4

Termination of Employment or Services.

7.4.1

Events Not Deemed a Termination of Employment. Unless the Administrator otherwise expressly provides with respect to a particular Award, if a Participant’s employment by or service to the Company or an Affiliate terminates but immediately thereafter the Participant continues in the employ of or service to another Affiliate or the Company, as applicable, the Participant shall be deemed to have not had a termination of employment or service for purposes of this Plan and the Participant’s Awards. Unless the express policy of the Company or the Administrator otherwise provides, a Participant’s employment relationship with the Company or any of its Affiliates shall not be considered terminated solely due to any sick leave, military leave or any other leave of absence authorized by the Company or any Affiliate or the Administrator; provided that, unless reemployment upon the expiration of such leave is guaranteed by contract or law, such leave is for a period of not more than ninety (90) days. In the case of any Participant on an approved leave of absence, continued vesting of the Award while on leave from the employ of or service with the Company or any of its Affiliates will be suspended until the Participant returns to service, unless the Administrator otherwise provides or applicable law otherwise requires. In no event shall an Award be exercised after the expiration of the term of the Award set forth in the Award Agreement.

7.4.2

Effect of Change of Affiliate Status. For purposes of this Plan and any Award, if an entity ceases to be an Affiliate, a termination of employment or service will be deemed to have occurred with respect to each Eligible Person in respect of such Affiliate who does not continue as an Eligible Person in respect of another Affiliate that continues as such after giving effect to the transaction or other event giving rise to the change in status.

7.4.3

Administrator Discretion. Notwithstanding the provisions of Sections 5.7 or 6.8, in the event of, or in anticipation of, a termination of employment or service with the Company or any of its Affiliates for any reason, the Administrator may accelerate the vesting and exercisability of all or a portion of the Participant’s Award, and/or, subject to the provisions of Sections 5.4.2 and 7.3, extend the exercisability period of the Participant’s Option upon such terms as the Administrator determines and expressly sets forth in or by amendment to the Award Agreement.

7.4.4

Termination of Consulting or Affiliate Services. If the Participant is an Eligible Person solely by reason of clause (c) of Section 3, the Administrator shall be the sole judge of whether the Participant continues to render services to the Company or any of its Affiliates, unless a written contract or the Award Agreement otherwise provides. If, in these circumstances, the Company or any Affiliate notifies the Participant in writing that a termination of the Participant’s services to the Company or any Affiliate has occurred for purposes of this Plan, then (unless the contract or the Award Agreement otherwise expressly provides), the Participant’s termination of services with the Company or Affiliate for purposes of this Plan shall be the date which is ten (10) days after the mailing of the notice by the Company or Affiliate or, in the case of a termination for Cause, the date of the mailing of the notice.

7.5

Compliance with Laws.

7.5.1

General. This Plan, the granting and vesting of Awards under this Plan, and the offer, issuance and delivery of Ordinary Shares, the acceptance of promissory notes and/or the payment of money under this Plan or under Awards are subject to compliance with all applicable federal and state laws, applicable foreign laws, rules and regulations (including but not limited to state and federal securities laws, and federal margin requirements) and to such approvals by any listing, regulatory or governmental authority as may, in the opinion of counsel for the Company, be necessary or advisable in connection therewith. The person acquiring any securities under this Plan will, if requested by the Company, provide such assurances and representations to the Company as the Administrator may deem necessary or desirable to assure compliance with all applicable legal and accounting requirements.

7.5.2

Compliance with Securities Laws. No Participant shall sell, pledge or otherwise transfer Ordinary Shares acquired pursuant to an Award or any interest in such shares except in accordance with the express terms of this Plan and the applicable Award Agreement. Any attempted transfer in violation of this Section 7.5 shall be void and of no effect. Without in any way limiting the provisions set forth above, no Participant shall make any disposition of all or any portion of the Ordinary Shares acquired or to be acquired pursuant to an Award, except in compliance with all applicable securities laws and unless and until:

(a)

there is then in effect a registration statement under the Securities Act covering such proposed disposition and such disposition is made in accordance with such registration statement;

(b)

such disposition is made in accordance with Rule 144 under the Securities Act; or

(c)

such Participant notifies the Company of the proposed disposition and furnishes the Company with a statement of the circumstances surrounding the proposed disposition, and, if requested by the Company, furnishes to the Company an opinion of counsel acceptable to the Company’s counsel, that such disposition will not require registration under the Securities Act and will be in compliance with all applicable securities laws.

Notwithstanding anything else herein to the contrary, neither the Company or any Affiliate has any obligation to register the Ordinary Shares or file any registration statement under either federal or state securities laws, nor does the Company or any Affiliate make any representation concerning the likelihood of a public offering of the Ordinary Shares or any other securities of the Company or any Affiliate.

7.5.3

Share Legends. All certificates evidencing Ordinary Shares issued or delivered under this Plan shall bear the following legends and/or any other appropriate or required legends under applicable laws:

“OWNERSHIP OF THIS CERTIFICATE, THE SHARES EVIDENCED BY THIS CERTIFICATE AND ANY INTEREST THEREIN ARE SUBJECT TO SUBSTANTIAL RESTRICTIONS ON TRANSFER UNDER APPLICABLE LAW AND UNDER AGREEMENTS WITH THE COMPANY, INCLUDING RESTRICTIONS ON SALE, ASSIGNMENT, TRANSFER, PLEDGE OR OTHER DISPOSITION.”

“THE SHARES ARE SUBJECT TO THE COMPANY’S RIGHT OF FIRST REFUSAL AND CALL RIGHTS TO REPURCHASE THE SHARES UNDER THE COMPANY’S SHARE INCENTIVE PLAN AND AGREEMENTS WITH THE COMPANY THEREUNDER, COPIES OF WHICH ARE AVAILABLE FOR REVIEW AT THE OFFICE OF THE SECRETARY OF THE COMPANY.”

“THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED OR QUALIFIED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (“ACT”), NOR HAVE THEY BEEN REGISTERED OR QUALIFIED UNDER THE SECURITIES LAWS OF ANY STATE. NO TRANSFER OF SUCH SECURITIES WILL BE PERMITTED UNLESS A REGISTRATION STATEMENT UNDER THE ACT IS IN EFFECT AS TO SUCH TRANSFER, THE TRANSFER IS MADE IN ACCORDANCE WITH RULE 144 UNDER THE ACT, OR IN THE OPINION OF COUNSEL TO THE COMPANY, REGISTRATION UNDER THE ACT IS UNNECESSARY IN ORDER FOR SUCH TRANSFER TO COMPLY WITH THE ACT AND WITH APPLICABLE STATE SECURITIES LAWS.”

7.5.4

Delivery of Financial Statements. The Company shall deliver annually to Participants such financial statements of the Company, if any, as may be required to satisfy applicable securities laws.

7.5.5

Confidential information. Any financial or other information relating to the Company obtained by Participants in connection with or as a result of this Plan or their Awards shall be treated as confidential.

7.6

Tax Withholding.

7.6.1

Tax Withholding. Upon any exercise, vesting or payment of any Award or upon the disposition of Ordinary Shares acquired pursuant to the exercise of an fucentive Stock Option prior to satisfaction of the holding period requirements of Section 422 of the Code, the Company or any of its Affiliates shall have the right at its option to:

(a)

require the Participant (or the Participant’s Personal Representative or Beneficiary, as the case may be) to pay or provide for payment of at least the minimum amount of any taxes which the Company or Affiliate may be required to withhold with respect to such Award event or payment;

(b)

deduct from any amount otherwise payable (in respect of an Award or otherwise) in cash to the Participant (or the Participant’s Personal Representative or Beneficiary, as the case may be) the minimum amount of any taxes which the Company or Affiliate may be required to withhold with respect to such Award event or payment; or

(c)

reduce the number of Ordinary Shares to be delivered by (or otherwise reacquire shares held by the Participant at least six (6) months) the appropriate number of Ordinary Shares, valued at their then Fair Market Value, to satisfy the minimum withholding obligation.

In any case where a tax is required to be withheld (including taxes under PRC law where applicable) in connection with the issuance, delivery or disposition of Ordinary Shares under this Plan, the Administrator may in its sole discretion (subject to Section 7.5) grant (either at the time of the Award or thereafter) to the Participant the right to elect, pursuant to such rules and subject to such conditions as the Administrator may establish, to have the Company reduce the number of shares to be delivered by (or otherwise reacquire) the appropriate number of shares, valued in a consistent manner at their Fair Market Value or at the sales price in accordance with authorized procedures for cashless exercises, necessary to satisfy the minimum applicable withholding obligation on exercise, vesting or payment. In no event shall the shares withheld exceed the minimum whole number of shares required for tax withholding under applicable law. The Company may, with the Administrator’s approval, accept one or more promissory notes from any Eligible Person in connection with taxes required to be withheld upon the exercise, vesting or payment of any Award under this Plan; provided that any such note shall be subject to terms and conditions established by the Administrator and the requirements of applicable law.

7.6.2

Tax Loans. If so provided in the Award Agreement or otherwise authorized by the Administrator, the Company may, to the extent permitted by law, authorize a loan to an Eligible Person in the amount of any taxes that the Company or any of its Affiliates may be required to withhold with respect to Ordinary Shares received (or disposed of, as the case may be) pursuant to a transaction described in Section 7.6.1. Such a loan will be for a term and at a rate of interest and pursuant to such other terms and conditions as the Company may establish, subject to compliance with applicable law. Such a loan need not otherwise comply with the provisions of Section 5.3.3.

7.7

Plan and Award Amendments, Termination and Suspension.

7.7.1

Board Authorization. The Board may, at any time, terminate or, from time to time, amend, modify or suspend this Plan, in whole or in part. No Awards may be granted during any period that the Board suspends this Plan.

7.7.2

Shareholder Approval. To the extent then required by applicable law or any applicable listing agency or required under Sections 162, 409A, 422 or 424 of the Code to preserve the intended tax consequences of this Plan, or deemed necessary or advisable by the Board, any amendment to this Plan shall be subject to shareholder approval.

7.7.3

Amendments to Awards. Without limiting any other express authority of the Administrator under (but subject to) the express limits of this Plan, the Administrator by agreement or resolution may waive conditions of or limitations on Awards to Participants that the Administrator in the prior exercise of its discretion has imposed, without the consent of a Participant, and (subject to the requirements of Sections 2.2 and 7.7.4) may make other changes to the terms and conditions of Awards.

7.7.4

Limitations on Amendments to Plan and Awards. No amendment, suspension or termination of this Plan or amendment of any outstanding Award Agreement shall, without written consent of the Participant, affect in any manner materially adverse to the Participant any rights or benefits of the Participant or obligations of the Company under any Award granted under this Plan prior to the effective date of such change. Changes, settlements and other actions contemplated by Section 7.3 shall not be deemed to constitute changes or amendments for purposes of this Section 7.7.

7.8

Privileges of Share Ownership. Except as otherwise expressly authorized by the Administrator or this Plan or in the Award Agreement, a Participant will not be entitled to any privilege of share ownership as to any Ordinary Shares not actually delivered to and held of record by the Participant. No adjustment will be made for dividends or other rights as a shareholder for which a record date is prior to such date of delivery.

7.9

Share-Based Awards in Substitution for Awards Granted by Other Company. Awards may be granted to Eligible Persons in substitution for or in connection with an assumption of employee share options, share appreciation rights, restricted shares or other share-based awards granted by other entities to persons who are or who will become Eligible Persons in respect of the Company or one of its Affiliates, in connection with a distribution, merger, amalgamation or other reorganization by or with the granting entity or an affiliated entity, or the acquisition by the Company or one of its Affiliates, directly or indirectly, of all or a substantial part of the shares or assets of the employing entity. The Awards so granted need not comply with other specific terms of this Plan, provided the Awards reflect only adjustments giving effect to the assumption or substitution consistent with the conversion applicable to the Ordinary Shares in the transaction and any change in the issuer of the security. Any shares that are delivered and any Awards that are granted by, or become obligations of, the Company, as a result of the assumption by the Company of, or in substitution for, outstanding awards previously granted by an acquired company (or previously granted by a predecessor employer (or direct or indirect parent thereof) in the case of persons that become employed by the Company or one of its Affiliates in connection with a business or asset acquisition or similar transaction) shall not be counted against the Share Limit or other limits on the number of shares available for issuance under this Plan.

7.10

Effective Date of the Plan. This Plan is effective upon the Effective Date, subject to approval by the shareholders of the Company within twelve (12) months after the date the Board approves this Plan.

7.11

Term of the Plan. Unless earlier terminated by the Board, this Plan will terminate at the close of business on the day before the 10^th anniversary of the Effective Date. After the termination of this Plan either upon such stated expiration date or its earlier termination by the Board, no additional Awards may be granted under this Plan, but previously granted Awards (and the authority of the Administrator with respect thereto, including the authority to amend such Awards) shall remain outstanding in accordance with their applicable terms and conditions and the terms and conditions of this Plan.

7.12

Governing Law/Severability.

7.12.1

Choice of Law. This Plan, the Awards, all documents evidencing Awards and all other related documents will be governed by, and construed in accordance with, the laws of the Cayman Islands.

7.12.2

Severability. If it is determined that any provision of this Plan or an Award Agreement is invalid and unenforceable, the remaining provisions of this Plan and/or the Award Agreement, as applicable, will continue in effect provided that the essential economic terms of this Plan and the Award can still be enforced.

7.13

Captions. Captions and headings are given to the sections and subsections of this Plan solely as a convenience to facilitate reference. Such headings will not be deemed in any way material or relevant to the construction or interpretation of this Plan or any provision thereof.

7.14

Non-Exclusivity of Plan. Nothing in this Plan will limit or be deemed to limit the authority of the Board or the Administrator to grant awards or authorize any other compensation, with or without reference to the Ordinary Shares, under any other plan or authority.

7.15

No Restriction on Corporate Powers. The existence of this Plan, the Award Agreements and the Awards granted hereunder, shall not limit, affect or restrict in any way the right or power of the Board or the shareholders of the Company to make or authorize: (a) any adjustment, recapitalization, reorganization or other change in the Company’s or any Affiliate’s capital structure or its business; (b) any merger, amalgamation, consolidation or change in the ownership of the Company or any Affiliate; (c) any issue of bonds, debentures, capital, preferred or prior preference shares ahead of or affecting the Company’s authorized shares or the rights thereof; (d) any dissolution or liquidation of the Company or any Affiliate; (e) any sale or transfer of all or any part of the Company or any Affiliate’s assets or business; or (f) any other corporate act or proceeding by the Company or any Affiliate. No Participant, Beneficiary or any other person shall have any claim under any Award or Award Agreement against any member of the Board or the Administrator, or the Company or any employees, officers or agents of the Company or any Affiliate, as a result of any such action.

7.16

Other Company Compensation or Benefit Programs. Payments and other benefits received by a Participant under an Award made pursuant to this Plan shall not be deemed a part of a Participant’s compensation for purposes of the determination of benefits under any other employee welfare or benefit plans or arrangements, if any, provided by the Company or any Affiliate, except where the Administrator or the Board expressly otherwise provides or authorizes in writing. Awards under this Plan may be made in addition to, in combination with, as alternatives to or in payment of grants, awards or commitments under any other plans or arrangements of the Company or any Affiliate.

8.	DEFINITIONS.

“Administrator” has the meaning given to such term in Section 2.1.

“Affiliate” means (a) any entity (other than the Company) in an unbroken chain of entities ending with the Company if, at the time of the determination, each of the entities other than the Company owns securities possessing fifty percent (50%) or more of the total combined voting power of all classes of securities in one of the other entities in such chain, or (b) any entity (other than the Company) in an unbroken chain of entities beginning with the Company if, at the time of the determination, each of the entities other than the last entity in the unbroken chain owns securities possessing fifty percent (50%) or more of the total combined voting power of all classes of securities in one of the other entities in such chain.

“Award” means an award of any Option or Share Award, or any combination thereof, whether alternative or cumulative, authorized by and granted under this Plan.

“Award Agreement” means any writing, approved by the Administrator, setting forth the terms of an Award that has been duly authorized and approved.

“Award Date” means the date upon which the Administrator took the action granting an Award or such later date as the Administrator designates as the Award Date at the time of the grant of the Award.

“Beneficiary” means the person, persons, trust or trusts designated by a Participant, or, in the absence of a designation, entitled by will or the laws of descent and distribution, to receive the benefits specified in the Award Agreement and under this Plan if the Participant dies, and means the Participant’s executor or administrator if no other Beneficiary is designated and able to act under the circumstances.

“Board” means the Board of Directors of the Company.

“Cause” with respect to a Participant means (unless otherwise expressly provided in the applicable Award Agreement, or another applicable contract with the Participant that defines such term for purposes of determining the effect that a “for cause” termination has on the Participant’s options and/or share awards) a termination of employment or service based upon a finding by the Company or any of its Affiliates, acting in good faith and based on its reasonable belief at the time, that the Participant:

(a)

has been negligent in the discharge of his or her duties to the Company or any Affiliate, has refused to perform stated or assigned duties or is incompetent in or (other than by reason of a disability or analogous condition) incapable of performing those duties;

(b)

has been dishonest or committed or engaged in an act of theft, embezzlement or fraud, a breach of confidentiality, an unauthorized disclosure or use of inside information, customer lists, trade secrets or other confidential information;

(c)

has breached a fiduciary duty, or willfully and materially violated any other duty, law, rule, regulation or policy of the Company or any of its Affiliates; or has been convicted of, or plead guilty or nolo contendere to, a felony or misdemeanor (other than minor traffic violations or similar offenses);

(d)

has materially breached any of the provisions of any agreement with the Company or any of its Affiliates;

(e)

has engaged in unfair competition with, or otherwise acted intentionally in a manner injurious to the reputation, business or assets of, the Company or any of its Affiliates; or

(f)

has improperly induced a vendor or customer to break or terminate any contract with the Company or any of its Affiliates or induced a principal for whom the Company or any Affiliate acts as agent to terminate such agency relationship.

A termination for Cause shall be deemed to occur (subject to reinstatement upon a contrary final determination by the Administrator) on the date on which the Company or any Affiliate first delivers written notice to the Participant of a finding of termination for Cause.

“Change in Control Event” means any of the following:

(a)

Approval by shareholders of the Company (or, if no shareholder approval is required, by the Board alone) of the complete dissolution or liquidation of the Company, other than in the context of a Business Combination that does not constitute a Change in Control Event under paragraph (c) below;

(b)

The acquisition by any individual, entity or group (within the meaning of Sections 13(d)(3) or 14(d)(2) of the Exchange Act (a “Person”)) of beneficial ownership (within the meaning of Rule 13d-3 promulgated under the Exchange Act) of 50% or more of either (1) the then outstanding Ordinary Shares of the Company (the “Outstanding Company Ordinary Shares”) or (2) the combined voting power of the then outstanding voting securities of the Company entitled to vote generally in the election of directors (the “Outstanding Company Voting Securities”); provided, however, that, for purposes of this paragraph (b), the following acquisitions shall not constitute a Change in Control Event; (A) any acquisition directly from the Company, (B) any acquisition by the Company, (C) any acquisition by any employee benefit plan (or related trust) sponsored or maintained by the Company or any Affiliate or a successor, (D) any acquisition by any entity pursuant to a Business Combination, (E) any acquisition by a Person described in and satisfying the conditions of Rule 13d-l (b) promulgated under the Exchange Act, or (F) any acquisition by a Person who is the beneficial owner (within the meaning of Rule 13d-3 promulgated under the Exchange Act) of 50% or more of the Outstanding Company Ordinary Shares and/or the Outstanding Company Voting Securities on the Effective Date (or an affiliate, heir, descendant, or related party of or to such Person);

(c)

Consummation of a reorganization, amalgamation, merger, statutory share exchange or consolidation or similar corporate transaction involving the Company or any other entity a majority of whose outstanding voting shares or voting power is beneficially owned directly or indirectly by the Company (a “Subsidiary”), a

sale or other disposition of all or substantially all of the assets of the Company, or the acquisition of assets or shares of another entity by the Company or any of its Subsidiaries (each, a “Business Combination”), in each case unless, following such Business Combination, (1) all or substantially all of the individuals and entities that were the beneficial owners of the Outstanding Company Ordinary Shares and the Outstanding Company Voting Securities immediately prior to such Business Combination beneficially own, directly or indirectly, more than 50% of the then outstanding ordinary or common shares and the combined voting power of the then outstanding voting securities entitled to vote generally in the election of directors, as the case may be, of the entity resulting from such Business Combination (including, without limitation, an entity that, as a result of such transaction, owns the Company or all or substantially all of the Company’s assets directly or through one or more subsidiaries (a “Parent”)), and (2) no Person (excluding any individual or entity described in clauses (C), (E) or (F) of paragraph (b) above) beneficially owns (within the meaning of Rule 13d-3 promulgated under the Exchange Act), directly or indirectly, more than 50% of, respectively, the then outstanding ordinary shares of the entity resulting from such Business Combination or the combined voting power of the then outstanding voting securities of such entity, except to the extent that the ownership in excess of 50% existed prior to the Business Combination;

provided, however, that a transaction shall not constitute a Change in Control Event if it is in connection with the underwritten public offering of the Company’s securities.

“Code” means the Internal Revenue Code of 1986 of the United States, as amended from time to time.

“Company” means Montage Technology Group Limited, an exempted company organized under the Companies Law (2004 Revision) of the Cayman Islands, and its successors.

“Early Exercise Option” shall mean an Option eligible for exercise prior to vesting in accordance with the provisions of Section 5.9 of this Plan. An Early Exercise Option may be a Nonqualified Option or an Incentive Stock Option, as designated by the Administrator in the applicable Award Agreement.

“Effective Date” means the date the Board approved this Plan.

“Eligible Person” has the meaning given to such term in Section 3 of this Plan.

“Exchange Act” means the Securities Exchange Act of 1934 of the United States, as amended from time to time.

“Fair Market Value,” for purposes of this Plan and unless otherwise determined or provided by the Administrator in the circumstances, means as follows:

(a)

If the Ordinary Shares are listed or admitted to trade on the New York Stock Exchange or other national securities exchange (the “Exchange”), the Fair Market Value shall equal the closing price of an Ordinary Share as reported on the composite tape for securities on the Exchange for the date in question, or, if no sales of Ordinary Shares were made on the Exchange on that date, the closing price of an Ordinary Share as reported on said composite tape for the next preceding day on which sales of Ordinary Shares were made on the Exchange. The Administrator may, however, provide with respect to one or more Awards that the Fair Market Value shall equal the last closing price of an Ordinary Share as reported on the composite tape for securities listed on the Exchange available on the date in question or the average of the high and low trading prices of an Ordinary Share as reported on the composite tape for securities listed on the Exchange for the date in question or the most recent trading day.

(b)

If the Ordinary Shares are not listed or admitted to trade on the a national securities exchange, the Fair Market Value shall equal the last price of an Ordinary Share as furnished by the National Association of Securities Dealers, Inc. (the “NASD”) through the NASDAQ National Market Reporting System (the “National Market”) for the date in question, or, if no sales of Ordinary Shares were reported by the NASD through the National Market on that date, the last price of an Ordinary Share as furnished by the NASD through the National Market for the next preceding day on which sales of Ordinary Shares were reported by the NASD. The Administrator may, however, provide with respect to one or more Awards that the Fair Market Value shall equal the last closing price of an Ordinary Share as furnished by the NASD through the National Market available on the date in question or the average of the high and low trading prices of an Ordinary Share as furnished by the NASD through the National Market for the date in question or the most recent trading day.

(c)

If the Ordinary Shares are not listed or admitted to trade on a national securities exchange and is not reported on the National Market Reporting System, the Fair Market Value shall equal the mean between the bid and asked price for an Ordinary Share on such date, as furnished by the NASD or a similar organization.

(d)

If the Ordinary Shares are not listed or admitted to trade on a national securities exchange, are not reported on the National Market Reporting System and if bid and asked prices for the shares are not furnished by the NASD or a similar organization, the Fair Market Value shall be the value as reasonably determined by the Administrator for purposes of the Award in the circumstances.

The Administrator also may adopt a different methodology for determining Fair Market Value with respect to one or more Awards if a different methodology is necessary or advisable to secure any intended favorable tax, legal or other treatment for the particular Award(s) (for example, and without limitation, the Administrator may provide that Fair Market Value for purposes of one or more Awards will be based on an average of closing prices (or the average of high and low daily trading prices) for a specified period preceding the relevant date).

Any determination as to Fair Market Value made pursuant to this Plan shall be determined without regard to any restriction other than a restriction which, by its terms, will never lapse, and shall be conclusive and binding on all persons with respect to Awards granted under this Plan.

“Incentive Stock Option” means an Option that is designated and intended as an “incentive stock option” within the meaning of Section 422 of the Code, the award of which contains such provisions (including but not limited to the receipt of shareholder approval of this Plan, if the award is made prior to such approval) and is made under such circumstances and to such persons as may be necessary to comply with that section.

“Nonqualified Option” means an Option that is not an “incentive stock option” within the meaning of Section 422 of the Code and includes any Option designated or intended as a Nonqualified Option and any Option designated or intended as an Incentive Stock Option that fails to meet the applicable legal requirements thereof.

“Option” means an option to purchase Ordinary Shares granted under Section 5 of this Plan. The Administrator will designate any Option granted to an employee of the Company or an Affiliate as a Nonqualified Option or an Incentive Stock Option and may also designate any Option as an Early Exercise Option.

“Ordinary Shares” means the Company’s Ordinary Shares, par value U.S. $0.005 per share, and such other securities or property as may become the subject of Awards, or become subject to Awards, pursuant to an adjustment made under Section 7.3.1 of this Plan.

“Participant” means an Eligible Person who has been granted and holds an Award under this Plan.

“Personal Representative” means the person or persons who, upon the disability or incompetence of a Participant, has acquired on behalf of the Participant, by legal proceeding or otherwise, the power to exercise the rights or receive benefits under this Plan by virtue of having become the legal representative of the Participant.

“Plan” means this Montage Technology Group Limited 2006 Share Incentive Plan, as it may hereafter be amended from time to time.

“Pub1ic Offering Date” means the date the Ordinary Shares are first registered under the Exchange Act or a similar statute in a jurisdiction other than the United States and listed or quoted on a recognized national securities exchange or in the NASDAQ National Market Quotation System.

“Repurchase Price” means, (i) in the event of the repurchase of Restricted Shares, the lesser of (a) the price paid by the Participant to acquire such Restricted Shares or (b) the Fair Market Value of such Restricted Shares determined as of the exercise date of the Call Right, or (ii) in the event of the repurchase of shares other than Restricted Shares, the Fair Market Value of such shares determined as of the exercise date of the Call Right.

“Restricted Shares” means Ordinary Shares awarded to a Participant under this Plan, subject to payment of such consideration and such conditions on vesting (which may include, among others, the passage of time, specified performance objectives or other factors) and such transfer and other restrictions as are established in or pursuant to this Plan and the related Award Agreement, to the extent such remain unvested and restricted under the terms of the applicable Award Agreement.

“Restricted Share Award” means an award of Restricted Shares.

“Securities Act” means the Securities Act of 1933 of the United States, as amended from time to time.

“Severance Date” with respect to a particular Participant means, unless otherwise provided in the applicable Award Agreement:

(a)

if the Participant is an Eligible Person under clause (a) of Section 3 and the Participant’s employment by the Company or any of its Affiliates terminates (regardless of the reason), the last day that the Participant is actually employed by the Company or such Affiliate (unless, immediately following such termination of employment, the Participant is a member of the Board or, by express written agreement with the Company or any of its Affiliates, continues to provide other services to the Company or any Affiliate as an Eligible Person under clause (c) of Section 3, in which case the Participant’s Severance Date shall not be the date of such termination of employment but shall be determined in accordance with clause (b) or (c) below, as applicable, in connection with the termination of the Participant’s other services);

(b)

if the Participant is not an Eligible Person under clause (a) of Section 3 but is an Eligible Person under clause (b) thereof, and the Participant ceases to be a member of the Board (regardless of the reason), the last day that the Participant is actually a member of the Board (unless, immediately following such termination, the Participant is an employee of the Company or any of its Affiliates or, by express written agreement with the Company or any of its Affiliates, continues to provide other services to the Company or any Affiliate as an Eligible Person under clause (c) of Section 3, in which case the Participant’s Severance Date shall not be the date of such termination but shall be determined in accordance with clause (a) above or (c) below, as applicable, in connection with the termination of the Participant’s employment or other services);

(c)

if the Participant is not an Eligible Person under clause (a) or clause (b) of Section 3 but is an Eligible Person under clause (c) thereof, and the Participant ceases to provide services to the Company or any of its Affiliates as determined in accordance with Section 7.4.4 (regardless of the reason), the last day that the Participant actually provides services to the Company or such Affiliate as an Eligible Person under clause (c) of Section 3 (unless, immediately following such termination, the Participant is an employee of the Company or any of its Affiliates or is a member of the Board, in which case the Participant’s Severance Date shall not be the date of such termination of services but shall be determined in accordance with clause (a) or (b) above, as applicable, in connection with the termination of the Participant’s employment or membership on the Board).

“Share Award” means an award of Ordinary Shares under Section 6 of this Plan. A Share Award may be a Restricted Share Award or an award of unrestricted Ordinary Shares.

“Total Disability” means a “total and permanent disability” within the meaning of Section 22(e)(3) of the Code and, with respect to Awards other than Incentive Stock Options, such other disabilities, infirmities, afflictions or conditions as the Administrator may include.

EXHIBIT A

MONTAGE TECHNOLOGY GROUP LIMITED

2006 SHARE INCENTIVE PLAN

OPTION EXERCISE AND ORDINARY SHARE

PURCHASE AGREEMENT

(VESTED PORTION OF OPTION)

The undersigned (the “Purchaser”) hereby irrevocably elects to exercise his/her right, evidenced by that certain Early Exercise Option Agreement, dated as of (the “Option Agreement”), under the Montage Technology Group Limited 2006 Share Incentive Plan (the “Plan”), as follows:

•

the Purchaser hereby irrevocably elects to purchase Ordinary Shares, par value U.S.$0.005 per share (the “Shares”), of Montage Technology Group Limited, an exempted company organized under the Companies Law (2004 Revision) of the Cayman Islands (the “Company”), and

•

such purchase shall be at the price of U.S. $ per share, for an aggregate amount of U.S. $ (subject to applicable withholding taxes pursuant to Section 7.6.1 of the Plan).

Capitalized terms are defined in the Plan if not defined herein.


1. Delivery of Share Certificate. The Purchaser requests that a certificate representing the Shares be registered to Purchaser and
delivered to:
				.

2. Investment Representations. The Purchaser acknowledges that the sale of the Shares by the Purchaser is restricted by Securities and Exchange Commission Rule 701. The Purchaser hereby affirms as made as of the date hereof the representations in Section 6 of the “Terms and Conditions of Early Exercise Option” (which are attached to and a part of the Option Agreement, the “Terms”) and such representations are incorporated herein by this reference. The Purchaser represents that he/she has no need for liquidity in this investment, has the ability to bear the economic risk of this investment, and can afford a complete loss of the purchase price for the Shares.

The Purchaser acknowledges receipt of the Company’s condensed consolidated financial information.

The Purchaser also understands and acknowledges (a) that the certificates representing the Shares will be legended as provided for in Section 7.5.3 of the Plan, and (b) that the Company has no obligation to register the Shares or file any registration statement under applicable securities laws.

3. Limitation on Disposition and Other Restrictions. The Shares are subject to and the Purchaser hereby agrees to the following terms and conditions of the sale of the Shares to the Purchaser:

•

any transfer of the Shares must comply with the restrictions on transfer set forth in Section 7.2 of the Plan and with all applicable laws as set forth in Section 7.5 of the Plan;

•

the Shares are subject to, and following any otherwise permitted transfer of the Shares, the Shares shall remain subject to and the transferee shall be bound by, the lock-up provisions set forth in Section 7 of the Terms, the Company’s call right and right of first refusal set forth in Sections 8 and 9 of the Terms, the share legend requirements of Section 7.5.3 of the Plan, the foregoing provisions of this Section 3, and the arbitration provisions of Section 15.3 of the Terms; and

•

as a condition to any otherwise permitted transfer of the Shares, the Company may require the transferee to execute a written agreement, in a form acceptable to the Administrator, that the transferee acknowledges and agrees to the foregoing terms and restrictions imposed on the Shares.

4. Plan and Option Agreement. The Purchaser acknowledges that all of his/her rights are subject to, and the Purchaser agrees to be bound by, all of the terms and conditions of the Plan and the Option Agreement (including the Terms), both of which are incorporated herein by this reference. If a conflict or inconsistency between the terms and conditions of this Option Exercise and Ordinary Share Purchase Agreement and of the Plan or the Option Agreement shall arise, the terms and conditions of the Plan and/or the Option Agreement shall govern. The Purchaser acknowledges receipt of a copy of all documents referenced herein (including the Terms and a disclosure statement) and acknowledges reading and understanding these documents and having an opportunity to ask any questions that he/she may have had about them. Any controversy or claim arising out of or relating to this Option Exercise and Ordinary Share Purchase Agreement shall be submitted to arbitration in accordance with Section 15.3 of the Terms, and Cayman Islands law shall apply as provided in Section 15.1 of the Terms.

5. Entire Agreement. This Option Exercise and Ordinary Share Purchase Agreement, the Option Agreement (including the Terms), and the Plan together constitute the entire agreement and supersede all prior understandings and agreements, written or oral, of the parties hereto with respect to the subject matter hereof. The Plan, the Option Agreement and this Option Exercise and Ordinary Share Purchase Agreement may be amended pursuant to Section 7.7 of the Plan. Such amendment must be in writing and signed by the Company. The Company may, however, unilaterally waive any provision hereof or of the Option Agreement in writing to the extent such waiver does not adversely affect the interests of the Purchaser hereunder, but no such waiver shall operate as or be construed to be a subsequent waiver of the same provision or a waiver of any other provision hereof.

6. Notice of Sale of ISO Shares. If the Shares are being acquired upon exercise of an Option intended to qualify as an Incentive Stock Option, the Purchaser agrees that, upon any sale or other transfer of the Shares within either one (1) year of the date that they are acquired by the Purchaser or two (2) years after the Award Date set forth in the Option Agreement, the Purchaser shall provide the notice required under Section 5.5.3 of the Plan.


“PURCHASER”				ACCEPTED BY:
				MONTAGE TECHNOLOGY GROUP
Signature				LIMITED,
				an exempted company organized under the
				Companies Law (2004 Revision) of the
Print Name				Cayman Islands


Date				By:

				Its:

				(To be completed by the Company after the price (including applicable withholding taxes), value (if applicable) and receipt of funds is verified.)

EXHIBIT B

MONTAGE TECHNOLOGY GROUP LIMITED

2006 SHARE INCENTIVE PLAN

OPTION EXERCISE AND ORDINARY SHARE PURCHASE AGREEMENT

(UNVESTED PORTION OF OPTION)

•

the Purchaser hereby irrevocably elects to purchase Ordinary Shares, par value U.S. $0.005 per share (the “Shares”), of Montage Technology Group Limited, an exempted company organized under the Companies Law (2004 Revision) of the Cayman Islands (the “Company”), and

•

such purchase shall be at the price of U.S. $ per share, for an aggregate amount of U.S. $ (subject to applicable withholding taxes pursuant to Section 7.6.1 of the Plan).

Capitalized terms are defined in the Plan if not defined herein.

1. Investment Representations. The Purchaser acknowledges that the sale of the Shares by the Purchaser is restricted by SEC Rule 701. The Purchaser hereby affirms as made as of the date hereof the representations in Section 6 of the “Terms and Conditions of Early Exercise Option” (which are attached to and a part of the Option Agreement, the “Terms”) and such representations are incorporated herein by this reference. The Purchaser represents that he/she has no need for liquidity in this investment, has the ability to bear the economic risk of this investment, and can afford a complete loss of the purchase price for the Shares.

The Purchaser acknowledges receipt of the Company’s condensed consolidated financial information.

The Purchaser also understands and acknowledges (a) that the certificates representing the Shares will be legended as provided for in Section 7.5.3 of the Plan, (b) that, in addition to such legends, the certificates representing the Shares will bear a legend making appropriate reference to the restrictions imposed hereunder, and (c) that the Company has no obligation to register the Shares or file any registration statement under applicable securities laws.

2. Vesting. The Shares are being acquired prior to the time that they have become vested in accordance with the terms of the Option Agreement. Accordingly, the Shares are subject to the Company’s repurchase right set forth in Section 5 below and other restrictions set forth herein. The Shares shall vest, and the Company’s repurchase right under Section 5 shall lapse, as of the date(s) that the Option would have otherwise become vested as to such Shares.

The maximum number of Shares that may vest on any occasion or event shall not exceed the number of shares that would have otherwise vested on such date under the Option Agreement had the underlying option not been exercised early to acquire the Shares. No additional Shares shall vest after the Purchaser’s Severance Date.

3. Delivery of Shares.

•

Form. The Company shall, in its discretion, issue the Shares either: (1) in certificate form as provided in clause (b) below; or (2) if the Ordinary Shares are then publicly-traded, in book entry form, registered in the name of the Purchaser with notations regarding the applicable restrictions on transfer imposed under this Agreement.

•

Certificates to be Held by Company; Legend. Any certificates representing the Shares that may be delivered to the Purchaser by the Company prior to vesting of the Shares pursuant to Section 2 shall be redelivered to the Company to be held by the Company or its designee until the shares represented thereby vest pursuant to Section 2 or are repurchased pursuant to Section 5.

•

Delivery of Certificates Upon Vesting. Promptly after the vesting of any Shares pursuant to Section 2, the Company shall, as applicable, either remove the notations on any such vested Shares issued in book entry form or deliver to the Purchaser a certificate or certificates evidencing the number of such vested Shares (or, in either case, such lesser number of shares as may be permitted pursuant to the tax withholding provisions referred to in Section 7.6.1). The Purchaser (or the Purchaser’s Beneficiary or Personal Representative in the event of the Purchaser’s death or incapacity, as the case may be) shall deliver to the Company any representations or other documents or assurances as the Company may deem necessary or reasonably desirable to ensure compliance with all applicable legal and regulatory requirements. The Shares so delivered shall no longer be subject to the Company’s repurchase right under Section 5, but such Shares shall continue to be subject to the other restrictions set forth herein, in the Option Agreement and in the Plan.

•

Share Power; Power of Attorney. Concurrent with the execution and delivery of this Agreement, the Purchaser shall deliver to the Company an executed share power in the form attached hereto as Exhibit 1, in blank, with respect to the Shares and any related Restricted Property (as defined below). The Purchaser, by acceptance of the Award, shall be deemed to appoint, and does so appoint by execution of this Agreement, the Company and each of its authorized representatives as the Purchaser’s attorney(s)-in-fact to (1) effect any transfer to the Company (or other purchaser, as the case may be) of the Shares acquired pursuant to this Agreement (including any related Restricted Property) that are repurchased by the Company (or other permitted purchaser), and (2) execute such documents as the Company or such representatives deem necessary or advisable in connection with any such transfer.

•

Share Legend Generally. The certificate(s) representing the Shares (both before and after such shares shall have become vested pursuant to Section 2) shall bear the legend set forth in Section 7.5.3 of the Plan and/or any other appropriate or required legends under applicable laws. Such legends shall remain on the certificate(s) representing the Restricted Shares until the later of (1) the Public Offering Date (or such later date that counsel to the

Company may reasonably determine is advisable to help ensure the Company’s compliance with all applicable legal and regulatory requirements) or (2) the date that such shares become vested pursuant to Section 2. For purposes of this Option Exercise and Ordinary Share Purchase Agreement, the term “Public Offering Date” means the first day that the Ordinary Shares are registered under the Exchange Act or a similar law in a jurisdiction other than the United States and listed or quoted on a recognized national securities exchange or in the NASDAQ National Market Quotation System.

4. Dividend; Voting Rights. After the date of issuance of the Shares, the Purchaser shall be entitled to cash dividends and voting rights with respect to the Shares, but such rights shall terminate as to any Shares that are repurchased by the Company in accordance with Section 5. Any securities or other property receivable in respect of the Shares by the Purchaser as a result of any dividend or other distribution, conversion or exchange of or with respect to the Shares are, together, referred to as “Restricted Property.” Upon a repurchase of any Shares prior to the time such Shares have vested by the Company in accordance with Section 5, the Restricted Property related to such repurchased Shares shall be automatically transferred to the Company, without any further action by the Purchaser (or the Purchaser’s Beneficiary or Personal Representative, as the case may be) or additional consideration from the Company. The Company may take any other action necessary or advisable to evidence such transfer. The Purchaser (or the Purchaser’s Beneficiary or Personal Representative, as the case may be) shall deliver any additional documents of transfer that the Company may request to confirm the transfer of such Restricted Property to the Company.

5. Company’s Repurchase Right. Subject to the terms and conditions of this Section 5, the Company shall have the right (the “Repurchase Right”) (but not the obligation) to repurchase in one or more transactions in connection with the termination of the Purchaser’s employment by or services to the Company or any of its Affiliates, and the Purchaser (or any permitted transferee) shall be obligated to sell any of the Shares that have not, as of the Purchaser’s Severance Date, become vested.

To exercise the Repurchase Right, the Company must give written notice thereof to the Purchaser (the “Repurchase Notice”). The Repurchase Notice is irrevocable by the Company and must (a) be in writing and signed by an authorized officer of the Company, (b) set forth the Company’s intent to exercise the Repurchase Right and contain the total number of Shares to be sold to the Company pursuant to the exercise of the Repurchase Right, (c) be mailed or delivered to the Purchaser at the Purchaser’s address reflected or last reflected on the Company’s payroll records or delivered to the Purchaser in person, and (d) be so mailed or delivered no later than the ninetieth (90^th) day following the Purchaser’s Severance Date. If mailed, the Repurchase Notice shall be enclosed in a properly sealed envelope, addressed as aforesaid, and deposited (postage prepaid) in a post office or branch post office. The Repurchase Notice shall be deemed to have been duly given as of the date mailed or delivered in accordance with the foregoing provisions.

The price per Share to be paid by the Company upon settlement of the Company’s Repurchase Right (the “Repurchase Price”) shall equal the lesser of (a) the price paid by the Purchaser to exercise the option and acquire such Share, or (b) the Fair Market Value of a Share determined as of the date of the Repurchase Notice. No interest shall be paid with respect to and

no other adjustments (other than adjustments in accordance with Section 7.3.1 of the Plan to reflect share splits and similar changes in capitalization) shall be made to the Repurchase Price. The closing of any repurchase under this Section 5 shall be at a date to be specified by the Company, such date to be no later than ninety (90) days after the Purchaser’s Severance Date. The Repurchase Price shall be paid at the closing in the form of a check or by cancellation of money purchase indebtedness.

Upon a repurchase of any Shares by the Company, such repurchased Shares shall be automatically transferred to the Company, without any further action by the Purchaser (or the Purchaser’s Beneficiary or Personal Representative, as the case may be). The Company may exercise its powers under this Option Exercise and Ordinary Share Purchase Agreement (including, without limitation, its powers under Section 3) and take any other action necessary or advisable to evidence such transfer. The Purchaser (or the Purchaser’s Beneficiary or Personal Representative, as the case may be) shall deliver any additional documents of transfer that the Company may request to confirm the transfer of such repurchased Shares to the Company.

If the Purchaser (or any permitted transferee who is an employee of the Company or any Affiliate) ceases to be an employee of the Company or any of its Affiliates and holds Shares as to which the Company’s Repurchase Right has been exercised, the Purchaser shall be entitled to the value of such Shares in accordance with the foregoing provisions of this Section 5, but (unless otherwise required by law) shall no longer be entitled to participation in the Company or other rights as a shareholder with respect to the Shares subject to the repurchase. To the maximum extent permitted by law, the Purchaser’s rights following the exercise of the Repurchase Right shall, with respect to the repurchase and the Shares covered thereby, be solely the rights that he or she has as a general creditor of the Company to receive payment of the amount specified above in this Section 5.

6. Limitation on Disposition and Other Restrictions. The Shares are subject to and the Purchaser hereby agrees to the following terms and conditions of the sale of the Shares to the Purchaser:

•

any transfer of the Shares must comply with the restrictions on transfer set forth in Section 7.2 of the Plan and all applicable laws as set forth in Section 7.5 of the Plan;

•

any Restricted Property in respect of the Shares may not be sold, assigned, transferred, pledged or otherwise disposed of, alienated or encumbered, either voluntarily or involuntarily, other than by will or the laws of descent and distribution, until the time that the Shares to which the Restricted Property relates become vested in accordance with Section 2;

•

the Shares are subject to, and following any otherwise permitted transfer of the Shares, the Shares shall remain subject to and the transferee shall be bound by, the lock-up provisions set forth in Section 7 of the Terms, the Company’s call right and right of first refusal set forth in Sections 8 and 9 of the Terms, the share legend requirements of Section 7.5.3 of the Plan, and the arbitration provisions of Section 15.3 of the Terms; and

•

7. Plan and Option Agreement. The Purchaser acknowledges that all of his/her rights are subject to, and the Purchaser agrees to be bound by, all of the terms and conditions of the Plan and the Option Agreement (including the Terms), both of which are incorporated herein by this reference. If a conflict or inconsistency between the terms and conditions of this Option Exercise and Ordinary Share Purchase Agreement and of the Plan or the Option Agreement shall arise, the terms and conditions of the Plan and/or the Option Agreement shall govern. The Purchaser acknowledges receipt of a copy of all documents referenced herein (including the Terms and a disclosure statement) and acknowledges reading and understanding these documents and having an opportunity to ask any questions that he/she may have had about them. Any controversy or claim arising out of or relating to this Option Exercise and Ordinary Share Purchase Agreement shall be submitted to arbitration in accordance with Section 15.3 of the Terms, and Cayman Islands law shall apply as provided in Section 15.1 of the Terms.

8. Entire Agreement. This Option Exercise and Ordinary Share Purchase Agreement, the Option Agreement (including the Terms), and the Plan together constitute the entire agreement and supersede all prior understandings and agreements, written or oral, of the parties hereto with respect to the subject matter hereof. The Plan, the Option Agreement and this Option Exercise and Ordinary Share Purchase Agreement may be amended pursuant to Section 7.7 of the Plan. Such amendment must be in writing and signed by the Company. The Company may, however, unilaterally waive any provision hereof or of the Option Agreement in writing to the extent such waiver does not adversely affect the interests of the Participant hereunder, but no such waiver shall operate as or be construed to be a subsequent waiver of the same provision or a waiver of any other provision hereof.

9. Notice of Sale of ISO Shares. If the Shares are being acquired upon exercise of an Option intended to qualify as an Incentive Stock Option, the Purchaser agrees that, upon any sale or other transfer of the Shares within either one (1) year after the date that they are acquired by the Purchaser or two (2) years after the Award Date set forth in the Option Agreement, the Purchaser shall provide the notice required under Section 5.5.3 of the Plan.


“PURCHASER”				ACCEPTED BY:
				MONTAGE TECHNOLOGY GROUP
Signature				LIMITED,
				an exempted company organized under the
				Companies Law (2004 Revision) of the
Print Name				Cayman Islands


Date				By:

				Its:

				(To be completed by the Company after the price (including applicable withholding taxes), value (if applicable) and receipt of funds is verified.)

EXHIBIT 1

SHARE POWER

FOR VALUE RECEIVED and pursuant to that certain Option Exercise and Ordinary Share Purchase Agreement between Montage Technology Group Limited, an exempted company organized under the Companies Law (2004 Revision) of the Cayman Islands (the “Company”), and the individual named below (the “Individual”), dated as of , the Individual, hereby sells, assigns and transfers to the Company, an aggregate of Ordinary Shares of the Company, standing in the Individual’s name on the books of the Company and represented by share certificate number(s) to which this instrument is attached, and hereby irrevocably constitutes and appoints as his or her attorney in fact and agent to transfer such shares on the books of the Company, with full power of substitution in the premises.


Dated ,


				Signature


				Print Name

(Instruction: Please do not fill in any blanks other than the signature line. The purpose of the assignment is to enable the Company to exercise its sale/purchase option set forth in the Option Exercise and Ordinary Share Purchase Agreement without requiring additional signatures on the part of the Individual.)

MONTAGE TECHNOLOGY GROUP LIMITED

2006 SHARE INCENTIVE PLAN

EARLY EXERCISE OPTION AGREEMENT

THIS EARLY EXERCISE OPTION AGREEMENT (this “Option Agreement”), dated , by and between Montage Technology Group Limited, an exempted company organized under the Companies Law (2004 Revision) of the Cayman Islands (the “Company”), and (the “Participant”) evidences the option (the “Option”) granted by the Company to the Participant as to the number of the Company’s Ordinary Shares, par value US$0.005 per share, first set forth below.


Number of Ordinary Shares:¹	_____________	Award Date:

Exercise Price per Share:¹	U.S. $	Expiration Date:^1,²

Vesting Commencement Date:	____________

Type of Option (check one):	Nonqualified Option	[ ]

	Incentive Stock Option	[ ]

Vesting^1,2The Option shall become vested as to 25% of the total number of Ordinary Shares subject to the Option on the one year anniversary of the Vesting Commencement Date. The remaining 75% of the total number of Ordinary Shares subject to the Option shall vest in 36 substantially equal monthly installments, with the first installment vesting on the last day of the month following the month in which the first anniversary of the Vesting Commencement Date occurs and an additional installment vesting on the last day of each of the 35 months thereafter.

The Option is granted under the Montage Technology Group Limited 2006 Share Incentive Plan (the “Plan”) and subject to the Terms and Conditions of Early Exercise Option (the “Terms”) attached to this Option Agreement (incorporated herein by this reference) and to the Plan. The Option has been granted to the Participant in addition to, and not in lieu of, any other form of compensation otherwise payable or to be paid to the Participant. Capitalized terms are defined in the Plan if not defined herein. The parties agree to the terms of the Option set forth herein. The Participant acknowledges receipt of a copy of the Terms, the Plan and the Option Questions & Answers (including the supplement thereto for Early Exercise Options) for the Plan, specifically acknowledges and agrees to Section 14 of the Terms, and agrees to maintain in confidence all information provided to him/her in connection with the Option.


“PARTICIPANT”				MONTAGE TECHNOLOGY GROUP LIMITED, an exempted company organized under the Companies Law (2004 Revision) of the Cayman Islands

Signature

Print Name

Address				By:

				Its:
City, State, Zip Code

¹	Subject to adjustment under Section 7.3.1 of the Plan.

²	Subject to early termination under Section 5.7 or 7.3 of the Plan.

CONSENT OF SPOUSE

In consideration of the Company’s execution of this Option Agreement, the undersigned spouse of the Participant agrees to be bound by all of the terms and provisions hereof and of the Plan.



Signature of Spouse				Date

TERMS AND CONDITIONS OF EARLY EXERCISE OPTION

1.	Vesting; Limits on Exercise.

Subject to other provisions of this Option Agreement, the Option shall vest and become exercisable in percentage installments of the aggregate number of shares subject to the Option as set forth on the cover page of this Option Agreement. The Option may be exercised only to the extent the Option is vested and exercisable.

•

Cumulative Exercisability. To the extent that the Option is vested and exercisable, the Participant has the right to exercise the Option (to the extent not previously exercised), and such right shall continue, until the expiration or earlier termination of the Option.

•

Restricted Shares. If the Participant elects to exercise all or any portion of the Option before it has fully vested, the Ordinary Shares acquired upon exercise of the Option which are attributable to the unvested portion of the Option shall be Restricted Shares (as such term is defined in the Plan). Such Restricted Shares shall continue to vest in accordance with the vesting schedule set forth on the cover page of this Option Agreement.

•

No Fractional Shares. Fractional share interests shall be disregarded, but may be cumulated.

•

Minimum Exercise. No fewer than 100 Ordinary Shares (subject to adjustment under Section 7.3.1 of the Plan) may be purchased at any one time, unless the number purchased is the total number at the time exercisable under the Option.

•

ISO Value Limit. If the Option is designated as an Incentive Stock Option (an “ISO”), as indicated on the cover page of this Option Agreement, and if the aggregate fair market value of the shares with respect to which ISOs (whether granted under the Option or otherwise) first become exercisable by the Participant in any calendar year exceeds U.S. $100,000, as measured on the applicable Award Dates, the limitations of Section 5.5.1 of the Plan shall apply and to such extent the Option will be rendered a Nonqualified Option.

2.	Continuance of Employment/Service Required; No Employment/Service Commitment.

The vesting schedule requires continued employment or service through each applicable vesting date as a condition to the vesting of the applicable installment of the Option and the rights and benefits under this Option Agreement. Employment or service for only a portion of the vesting period, even if a substantial portion, will not entitle the Participant to any proportionate vesting or avoid or mitigate a termination of rights and benefits upon or following a termination of employment or services as provided in Section 4 below, under the Plan, or under the applicable Exercise Agreement (as such term is defined below).

Nothing contained in this Option Agreement, the Plan or any Exercise Agreement constitutes a continued employment or service commitment by the Company or any of its Affiliates, affects the Participant’s status, if he or she is an employee, as an employee at will who is subject to termination without cause, confers upon the Participant any right to remain employed by or in service to the Company or any Affiliate, interferes in any way with the right of the Company or any Affiliate at any time to terminate such employment or service, or affects the right of the Company or any Affiliate to increase or decrease the Participant’s other compensation.

3.	Exercise of Option.

To the extent that the Participant desires to exercise a portion of the Option that is then vested, the Participant shall deliver to the Company an executed Option Exercise and Ordinary Share Purchase Agreement in substantially the form attached hereto as Exhibit A and satisfy the other exercise procedures described below. To the extent that the Participant desires to exercise a portion of the Option that is not vested, the Participant shall deliver to the Company an executed Option Exercise and Ordinary Share Purchase Agreement in substantially the form attached hereto as Exhibit B and satisfy the other exercise procedures described below. The applicable form of Option Exercise and Ordinary Share Purchase Agreement is referred to as the “Exercise Agreement.”

The Option shall be exercisable (whether the exercise is with respect to the vested or the unvested portion of the Option, as described above) by the delivery to the Secretary of the Company (or such other person as the Administrator may require pursuant to such administrative exercise procedures as the Administrator may implement from time to time) of:

•

an executed Exercise Agreement (stating the number of Ordinary Shares to be purchased pursuant to the Option) in substantially the form attached hereto as Exhibit A or Exhibit B, as applicable, or such other form as the Administrator may require from time to time;

•

payment in full for the Exercise Price of the shares to be purchased, in cash or by electronic funds transfer to the Company, or by certified or cashier’s check payable to the order of the Company subject to such specific procedures or directions as the Administrator may establish;

•

any written statements or agreements required pursuant to Section 7.5.1 of the Plan; and

•

satisfaction of the tax withholding provisions of Section 7.6.1 of the Plan.

The Administrator also may, but is not required to, authorize a non-cash payment alternative specified below at or prior to the time of exercise. In which case, the Exercise Price and/or applicable withholding taxes, to the extent so authorized, may be paid in full or in part by delivery to the Company of:

•

Ordinary Shares already owned by the Participant, valued at their Fair Market Value on the exercise date, provided, however, that any shares acquired directly from the Company (upon exercise of an option or otherwise) must have been owned by the Participant for at least six (6) months before the date of such exercise; and/or

•

if the Ordinary Shares are then registered under the Exchange Act or a similar statute in a jurisdiction other than the United States and listed or quoted on a recognized national securities exchange or in the NASDAQ National Market Quotation System, irrevocable instructions to a broker to, upon exercise of the Option, promptly sell a sufficient number of Ordinary Shares acquired upon exercise of the Option and deliver to the Company the amount necessary to pay the Exercise Price (and, if applicable, the amount of any related tax withholding obligations); and/or

•

a note meeting the requirements of Section 5.3.3 of the Plan (or, in the case of tax loans, Section 7.6.2 of the Plan).

An Option will qualify as an ISO only if it meets all of the applicable requirements of the Code. If the Option is designated as an ISO, the Option may be rendered a Nonqualified Option if the Administrator permits the use of one or more of the non-cash payment alternatives referenced above.

The Participant (and his/her spouse, if any) hereby acknowledges and confirms that the delivery to the Company of a duly signed Power of Attorney for use in connection with the foreign exchange registration for overseas investment by natural persons of the People’s Republic of China (the “PRC”) in substantially the form provided by the Company is a condition to the Participant’s receiving the Shares upon the exercise of the applicable installment of the Option and the rights and benefits under this Option Agreement, and the Participant undertakes to take, or cause to be taken, such other actions as reasonably requested by the Company in order to complete such foreign exchange registration.

4.	Early Termination of Option.

The Option, to the extent not previously exercised, and all other rights in respect thereof, whether vested and exercisable or not, shall terminate and become null and void prior to the Expiration Date in the event of:

•

the termination of the Participant’s employment or services as provided in Section 5.7 of the Plan, or

•

the termination of the Option pursuant to Section 7.3 of the Plan.

Notwithstanding any post-termination exercise period provided for herein or in the Plan, an Option will qualify as an ISO only if it is exercised within the applicable exercise periods for ISOs under, and meets all of the other requirements of, the Code. If the Option is designated as an ISO and is not exercised within the applicable exercise periods for ISOs or does not meet such other requirements, the Option will be rendered a Nonqualified Option.

5.	Non-Transferability and Other Restrictions.

The Option and any other rights of the Participant under this Option Agreement or the Plan are nontransferable and exercisable only by the Participant, except as set forth in Section 7.2 of the Plan. Any Ordinary Shares issued on exercise of the Option are subject to substantial restrictions on transfer, and are subject to call, rights of first refusal, and other rights in favor of the Company as set forth herein and in the Exercise Agreement.

6.	Securities Law Compliance.

The Participant acknowledges that the Option and the Ordinary Shares are not being registered under the Securities Act, based, in part, in reliance upon an exemption from registration under Securities and Exchange Commission Rule 701 promulgated under the Securities Act, and a comparable exemption from qualification under applicable state securities laws, as each may be amended from time to time. The Participant, by executing this Option Agreement, hereby makes the following representations to the Company and acknowledges that the Company’s reliance on federal and state securities law exemptions from registration and qualification is predicated, in substantial part, upon the accuracy of these representations:

•

The Participant is acquiring the Option and, if and when he/she exercises the Option, will acquire the Ordinary Shares solely for the Participant’s own account, for investment purposes only, and not with a view to or an intent to sell, or to offer for resale in connection with any unregistered distribution, all or any portion of the shares within the meaning of the Securities Act and/or any applicable securities laws.

•

The Participant has had an opportunity to ask questions and receive answers from the Company regarding the terms and conditions of the Option and the restrictions imposed on any Ordinary Shares purchased upon exercise of the Option. The Participant has been furnished with, and/or has access to, such information as he or she considers necessary or appropriate for deciding whether to exercise the Option and purchase Ordinary Shares. However, in evaluating the merits and risks of an investment in the Ordinary Shares, the Participant has and will rely upon the advice of his/her own legal counsel, tax advisors, and/or investment advisors.

•

The Participant is aware that the Option may be of no practical value, that any value it may have depends on its vesting and exercisability as well as an increase in the Fair Market Value of the underlying Ordinary Shares to an amount in excess of the Exercise Price, and that any investment in ordinary shares of a closely held entity such as the Company is non-marketable, non-transferable and could require capital to be invested for an indefinite period of time, possibly without return, and at substantial risk of loss.

•

The Participant understands that any Ordinary Shares acquired on exercise of the Option will be characterized as “restricted securities” under the U.S. federal securities laws, and that, under such laws and applicable regulations, such securities may be resold without registration under the Securities Act only in certain limited circumstances, including in accordance with the conditions of Rule 144 promulgated under the Securities Act, as presently in effect, with which the Participant is familiar.

•

The Participant has read and understands the restrictions and limitations set forth in the Plan, this Option Agreement (including these Terms), and the applicable Exercise and Agreement, which are imposed on the Option and any Ordinary Shares which may be acquired upon exercise of the Option.

•

At no time was an oral representation made to the Participant relating to the Option or the purchase of Ordinary Shares and the Participant was not presented with or solicited by any promotional meeting or material relating to the Option or the Ordinary Shares.

7.	Lock-Up Agreement.

Neither the Participant (nor any permitted transferee) may, directly or indirectly, offer, sell or transfer or dispose of any of the Ordinary Shares acquired upon exercise of the Option (whether vested or unvested) (the “Shares”) or any interest therein (or agree to do any thereof) (collectively, a “Transfer”) during the period commencing as of 14 days prior to and ending 180 days, or such lesser period of time as the relevant underwriters may permit, after the effective date of a registration statement covering any public offering of the Company’s securities of which the Participant has notice. (The term “Participant” includes, where the context so requires, any permitted direct or indirect transferee of the Participant.) The Participant shall agree and consent to the entry of stop transfer instructions with the Company’s transfer agent against the Transfer of the Company’s securities beneficially owned by the Participant and shall conform the limitations hereunder and under the Exercise Agreement by agreement with and for the benefit of the relevant underwriters by a lock-up agreement or other agreement in customary form. Notwithstanding anything else herein to the contrary, this Section 7 shall not be construed so as to prohibit the Participant from participating in a registration or a public offering of the Ordinary Shares with respect to any shares which he or she may hold at that time, provided, however, that such participation shall be at the sole discretion of the Board.

8.	Limited Call Right; Mandatory Sale; Transfer Restrictions.

8.1 Company’s Call Right. The Company shall have the right (but not the obligation), subject to the terms and conditions of this Section 8, to repurchase in one or more transactions in connection with the Participant’s termination of employment or services to the Company or any of its Affiliates, and the Participant (or any permitted transferee) shall be obligated to sell any of the Shares acquired upon exercise of the Option (to the extent that such Shares have vested pursuant to Section 1) at the Repurchase Price (as defined below) (the “Call Right”). To exercise the Call Right, the Company must give written notice thereof to the Participant (the “Call Notice”). The Call Notice is irrevocable by the Company and must (a) be in writing and signed by an authorized officer of the Company, (b) set forth the Company’s intent to exercise the Call Right and contain the total number of Shares to be sold to the Company pursuant to the Call Right, (c) be mailed or delivered in accordance with Section 11, and (d) be so mailed or delivered during the Notice Period (determined in accordance with the following sentence). The “Notice Period” shall:

(a)

commence on the Participant’s Severance Date (determined in accordance with the Plan); and

(b)

terminate on the date that is ninety (90) days after the Participant’s Severance Date.

The Call Right shall apply only to Shares owned by the Participant for at least six months after the date the Shares were acquired on exercise of the Option or such other period, if any, as the Administrator prescribes based on accounting or other applicable rules then in effect (unless an earlier date is required in order for the Call Right to be validly exercised under applicable law), whether or not the purchase price is still owing under any note used to finance the purchase.

8.2 Repurchase Price. The price per Share to be paid by the Company upon settlement of the Company’s Call Right (the “Repurchase Price”) shall equal (i) in the event of the repurchase of Restricted Shares, the lesser of (a) the price paid by the Participant to exercise the option and acquire such Share or (b) the Fair Market Value of a Share determined as of the date of the Call Notice, or (ii) in the event of the repurchase of Shares other than Restricted Shares, the Fair Market Value of a Share determined as of the date of the Call Notice. No adjustments (other than pursuant to Section 8.3.1 of the Plan) shall be made to the Repurchase Price as so determined for fluctuations in the Fair Market Value of the Ordinary Shares after the date of the Call Notice.

8.3 Closing. The closing of any repurchase under this Section 8 shall be at a date to be specified by the Company, such date to be no later than thirty (30) days after the date of the Call Notice. The aggregate Repurchase Price for the shares to be repurchased shall be paid at the closing in the form of a check or by cancellation of money purchase indebtedness against surrender by the Participant of a share certificate evidencing the Shares with duly endorsed share powers.

8.4 Repurchase of Restricted Shares. The Company shall have the right (but not the obligation) to repurchase in one or more transactions in connection with the Participant’s termination of employment or services to the Company or any of its Affiliates, and the Participant (or any permitted transferee) shall be obligated to sell, any Restricted Shares acquired upon exercise of the Option to the extent that such Restricted Shares have not vested pursuant to Section 1 as of the Participant’s Severance Date. Any such repurchase by the Company shall be made in accordance with Section 5 of the applicable Exercise Agreement.

8.5 Termination of Call Right. The Company’s Call Right to repurchase Shares that are vested pursuant to Section 1 as of the Participant’s Severance Date shall terminate to the extent that it is not exercised prior to the Public Offering Date. The Company’s right to repurchase Shares that are not vested pursuant to Section 1 as of the Participant’s Severance Date shall continue in effect notwithstanding any Public Offering Date.

8.6 Assignment. Notwithstanding anything to the contrary, the Company may assign any or all of its rights under this Section 8 to one or more shareholders of the Company.

9.	Right of First Refusal.

The Company shall have a right of first refusal, as set forth below, to purchase the Shares acquired upon exercise of the Option before the Shares (or any interest in them) can be validly transferred to any other person or entity.

9.1 Notice of Intent to Sell. Before there can be a valid sale or transfer of any Shares (or any interest in them) by any holder thereof, the holder shall first give notice in writing to the Company, mailed or delivered in accordance with the provisions of Section 11, of his or her intention to sell or transfer such Shares (the “Option Notice”).

The Option Notice shall specify the identity of the proposed transferee, the number of Shares to be sold or transferred to the transferee, the price per Share and the terms upon which such holder intends to make such sale or transfer. If the payment terms for the Shares described in the Option Notice differ from delivery of cash or a check at closing, the Company shall have the option, as set forth herein, of purchasing the Shares for cash (or a cash equivalent) at closing in an amount which the Company determines is a fair value equivalent of that payment. The determination of a fair value equivalent shall be made in the Company’s best judgment and such determination shall be mailed or delivered to the selling or transferring shareholder (the “Company’s Notice”) within ten (10) days of its receipt of the Option Notice. Should the selling or transferring shareholder disagree with the Company’s determination of a fair value equivalent, he or she shall have the right (the “Retraction Right”) to retract the proposed sale or transfer to a third party and the offer of Shares to the Company pursuant to the Option Notice (such retraction to be made in writing and mailed or delivered in accordance with the provisions of Section 11). If the shareholder again proposes to sell or transfer the Shares, the shareholder shall again offer such Shares to the Company pursuant to the terms of this Section 9 prior to any sale or transfer.

9.2 Option to Purchase. Subject to the selling shareholder’s Retraction Right, during the sixty (60)-day period commencing upon receipt of the Option Notice by the Company (the “Option Period”), the Company shall have an option to purchase any or all of the Shares specified in the Option Notice at the price offered therein (the “Right of First Refusal”).

9.3 Purchase of Shares. Not more than thirty (30) days after receipt of the Option Notice, the Company shall give written notice to the shareholder desiring to sell or transfer Shares of the number of such Shares to be purchased (or, if no Shares are to be purchased, stating such fact) by the Company pursuant to the terms of this Section 9 (the “Purchase Notice”). Purchases pursuant to this Section 9 shall be consummated within thirty (30) days after delivery of the Purchase Notice to the selling shareholder, but in no event later than the expiration of the Option Period. The purchase price shall be paid at the closing in cash, by check, by cancellation of money purchase indebtedness, or, if the payment terms set forth in the Option Notice differ from payment in cash or by check at closing, in accordance with the payment terms set forth in the Option Notice (or payment of the amount set forth in the Company’s Notice in cash, by cancellation of money purchase indebtedness, or by check). The purchase price shall be paid against surrender by the selling shareholder of a share certificate evidencing the number of Shares specified in the Option Notice, with duly endorsed share powers.

9.4 Ability to Sell Unpurchased Shares. Unless all of the Shares referred to in the Option Notice are to be purchased as indicated in the Purchase Notice, the shareholder desiring to sell or transfer may dispose of any Shares referred to in the Option Notice that are not to be purchased by the Company to the person or persons specified in the Option Notice during a period of twenty (20) days commencing upon his or her receipt of the Purchase Notice; provided, however, that he or she shall not sell or transfer such Shares (a) at a lower price or on terms more favorable to the Participant or transferee than those specified in the Option Notice, and (b) to a person other than the person or persons specified in the Option Notice; and provided further that such transfer is consistent with the other provisions and limitations of the Plan, this Option Agreement (including these Terms), and the Exercise Agreement. If the transfer is not consummated within such twenty (20) day period, the shareholder shall again offer such Shares to the Company pursuant to the terms of this Section 9 prior to any sale or transfer to the same or any other person.

9.5 Assignment. Notwithstanding anything to the contrary, the Company may assign any or all of its rights under this Section 9 to one or more shareholders of the Company.

9.6 Termination of Right of First Refusal. The Company’s Right of First Refusal shall terminate to the extent that it is not exercised prior to the Public Offering Date.

10.

No Shareholder Rights Following Exercise of a Call or Repurchase.

If the Participant (or any permitted transferee) holds Shares as to which the Call Right or the Right of First Refusal has been exercised (in connection with the termination of the Participant’s employment or otherwise), the Participant shall be entitled to the value of such shares in accordance with the provisions of Section 8 or 9, as applicable, but (unless otherwise required by law) shall no longer be entitled to participation in the Company or other rights as a shareholder with respect to the shares subject to the call or repurchase. To the maximum extent permitted by law, the Participant’s rights following the exercise of the Call Right or Right of First Refusal shall, with respect to the call or repurchase and the Shares covered thereby, be solely the rights that he or she has as a general creditor of the Company to receive payment of the amount specified in Section 8 or 9, as applicable.

11.

Notices.

Any notice to be given under the terms of this Option Agreement or any Exercise Agreement shall be in writing and addressed to the Company at its principal office to the attention of the Secretary, and to the Participant at the address reflected or last reflected on the Company’s payroll records. Any notice shall be delivered in person or shall be enclosed in a properly sealed envelope, addressed as aforesaid, registered or certified, and deposited (postage and registry or certification fee prepaid) in a post office or branch post office. Any such notice shall be given only when received, but if the Participant is no longer an Eligible Person, shall be deemed to have been duly given five (5) business days after the date mailed in accordance with the foregoing provisions of this Section 11.

12.

Plan.

The Option and all rights of the Participant under this Option Agreement are subject to, and the Participant agrees to be bound by, all of the terms and conditions of the Plan, incorporated herein by this reference. In the event of a conflict or inconsistency between the terms and conditions of this Option Agreement and of the Plan, the terms and conditions of the Plan shall govern. The Participant agrees to be bound by the terms of the Plan and of this Option Agreement (including the Terms). The Participant acknowledges having read and understood the Plan, the Option Questions & Answers for the Plan, and this Option Agreement. Unless otherwise expressly provided in other sections of this Option Agreement, provisions of the Plan that confer discretionary authority on the Board or the Administrator do not and shall not be deemed to create any rights in the Participant unless such rights are expressly set forth herein or are otherwise in the sole discretion of the Board or the Administrator so conferred by appropriate action of the Board or the Administrator under the Plan after the date hereof.

13.

Entire Agreement.

This Option Agreement (including these Terms and together with the forms of Exercise Agreement attached hereto) and the Plan together constitute the entire agreement and supersede all prior understandings and agreements, written or oral, of the parties hereto with respect to the subject matter hereof. The Plan, this Option Agreement and the Exercise Agreements may be amended pursuant to Section 7.7 of the Plan. Such amendment must be in writing and signed by the Company. The Company may, however, unilaterally waive any provision hereof or of the Exercise Agreements in writing to the extent such waiver does not adversely affect the interests of the Participant hereunder, but no such waiver shall operate as or be construed to be a subsequent waiver of the same provision or a waiver of any other provision hereof.

14.

Satisfaction of All Rights to Equity.

The Option is in complete satisfaction of any and all rights that the Participant may have (under an employment, consulting, or other written or oral agreement with the Company or any of its Affiliates, or otherwise) to receive (1) options or share awards with respect to the securities of the Company or any of its Affiliates, and/or (2) any other equity or derivative security in or with respect to the Company or any of its Affiliates. This Option Agreement supersedes the terms of all prior understandings and agreements, written or oral, of the parties with respect to such matters. The Participant shall have no further rights or benefits under any prior agreement conveying any right with respect to any security or derivative security in or with respect to the Company or any of its Affiliates. The foregoing notwithstanding, this Section 14 shall not adversely affect the Participant’s rights under any prior option or share award agreement under the Plan (provided such agreement is expressly labeled as an option or share award agreement under the Plan and is similar in form to this Option Agreement) which has been signed by an authorized officer of the Company.

15.

Governing Law; Limited Rights; Severability.

15.1. Cayman Islands Law; Construction. This Option Agreement and the Exercise Agreements shall be governed by and construed and enforced in accordance with the laws of the Cayman Islands without regard to conflict of law principles thereunder. The terms of the Option grant have resulted from the negotiations of the parties and each of the parties has had an opportunity to obtain and consult with its own counsel. The language of all parts of the Plan, this Option Agreement (including these Terms) and the Exercise Agreements shall in all cases be construed as a whole, according to its fair meaning, and not strictly for or against either of the parties.

15.2. Limited Rights. The Participant has no rights as a shareholder of the Company with respect to the Option as set forth in Section 7.8 of the Plan. The Option does not place any limit on the corporate authority of the Company as set forth in Section 7.15 of the Plan.

15.3. Arbitration.

either party with written notice to the other (the “Notice”). The arbitration shall be conducted in Hong Kong under the auspices of the Hong Kong International Arbitration Centre (the “Centre”). There shall be three (3) arbitrators. Each party shall nominate one (1) arbitrator within thirty (30) days after the delivery of the Notice to the other party. The appointment of party nominated arbitrators shall be confirmed by the Centre. Both arbitrators shall agree on the third arbitrator within thirty (30) days of their confirmation by the Centre. Should either party fail to appoint an arbitrator or should the two arbitrators fail within thirty (30) days to reach agreement on the third arbitrator, such arbitrator shall be appointed by the Secretary General of the Centre.

(b) The arbitration proceedings shall be conducted in English. The arbitration tribunal shall apply the UNCITRAL Arbitration Rules as administered by the Centre at the time of the arbitration. However, if such rules conflict with the provisions of this Section 15.3, including the provisions concerning the appointment of an arbitrator(s), the provisions of this Section 15.3 shall prevail.

(c) The arbitrators shall decide any dispute submitted by the parties strictly in accordance with the substantive laws of the Cayman Islands and shall not apply any other substantive law.

(d) Each party shall cooperate with the other in making full disclosure of and providing complete access to all information and documents requested by the other in connection with such arbitration proceedings, subject only to any confidentiality obligations binding on such party.

(e) The costs of arbitration shall be borne by the losing party, unless otherwise determined by the arbitration tribunal.

(f) When any dispute occurs and when any dispute is under arbitration, except for the matters in dispute, the parties shall continue to fulfill their respective obligations and shall be entitled to exercise their rights under this Agreement.

(g) The award of the arbitration tribunal shall be final and binding upon the parties, and the prevailing party may apply to a court of competent jurisdiction for enforcement of such award.

15.4. Severability. If the arbitrator selected in accordance with Section 15.3 or a court of competent jurisdiction determines that any portion of this Option Agreement, the Plan, or the applicable Exercise Agreement is in violation of any statute or public policy, then only the portions of this Option Agreement, the Plan, or the applicable Exercise Agreement, as applicable, which violate such statute or public policy shall be stricken, and all portions of this Option Agreement, the Plan, and the applicable Exercise Agreement which do not violate any statute or public policy shall continue in full force and effect. Furthermore, it is the parties’ intent that any court order striking any portion of this Option Agreement, the Plan, and/or the applicable Exercise Agreement should modify the stricken terms as narrowly as possible to give as much effect as possible to the intentions of the parties hereunder.

15.5. Shareholder Approval. Notwithstanding anything else contained herein to the contrary, the Option and all rights of the Participant under this Option Agreement are subject to approval of the Plan by the Company’s shareholders (such approval to be obtained in accordance with the terms of the Plan, the Company’s Memorandum and Articles of Association, and applicable law) within twelve (12) months after the Effective Date of the Plan.

15.6. PRC Law; Foreign Exchange and Tax Compliance. Notwithstanding anything to the contrary in this Option Agreement, with respect to any Participant who is a PRC citizen, resides or resided in China at any time since January 1, 2004, or otherwise, as the Administrator in its sole discretion may determine, may be deemed as a “domestic resident” as defined in the Circular No. 75 (and/or such successor Circular, the “SAFE Circular”) issued by the State Administration of Foreign Exchange of the PRC issued on October 21, 2005 (a “PRC Participant”), the Option shall become exercisable only upon the written confirmation from the PRC Participant, or counsel to the Company, in form and substance reasonably satisfactory to the Administrator that

(A) (a) such PRC Participant is not subject to the registration or other compliance requirement of the SAFE Circular or (b) such PRC Participant (i) is subject is subject to such registration and compliance requirement of the SAFE Circular and (ii) has complied with such registration requirement of the SAFE Circular; and

(B) the exercise of the Option by the PRC Participant will not violate any applicable laws or regulations of the PRC and will not subject the Participant or the Company to any filing or registration with, or obtain any approval or permit from, any PRC governmental or regulatory authorities (“PRC Compliance”) which, as the Administrator may determine in its sole discretion, would be unreasonably burdensome on the Company or is likely to have a material adverse effect on the Company’s business, operations or prospects.

The PRC Participant shall have executed a Power of Attorney in the form provided by the Company authorizing the Company (or any representative designated by the Company) to take such actions and execute such instruments on behalf of such PRC Participant in the event where such PRC Compliance is required but is determined by the Administrator as acceptable to the Company, and the PRC Participant agrees to take any additional actions and execute any additional instruments as may be requested by the Company to ensure such compliance.

In addition, notwithstanding anything else contained herein to the contrary, the Administrator may, at its discretion, limit the method of Option exercise to a cashless method for PRC Participants for purpose of such PRC Compliance. Such discretion includes and is not limited to the required exchange of proceeds by the Administrator into Renminbi for transmittal to such PRC Participants, deductions for fees associated with the exchange, and deductions for PRC taxes, as may be necessary to comply with applicable PRC foreign exchange and tax regulations.

(Remainder of Page Intentionally Left Blank)

MONTAGE TECHNOLOGY GROUP LIMITED

2006 SHARE INCENTIVE PLAN

OPTION AGREEMENT

THIS OPTION AGREEMENT (this “Option Agreement”), dated , by and between Montage Technology Group Limited, an exempted company organized under the Companies Law (2004 Revision) of the Cayman Islands (the “Company”), and (the “Participant”) evidences the option (the “Option”) granted by the Company to the Participant as to the number of the Company’s Ordinary Shares, par value US$0.005 per share, first set forth below.


Number of Ordinary Shares:³	_____________	Award Date:

Exercise Price per Share:¹	U.S. $	Expiration Date:^1,⁴

Vesting Commencement Date:	____________

Type of Option (check one):	Nonqualified Option	[ ]

	Incentive Stock Option	[ ]

Vesting^1,2The Option shall become vested as to 25% of the total number of Ordinary Shares subject to the Option on the first anniversary of the Vesting Commencement Date. The remaining 75% of the total number of Ordinary Shares subject to the Option shall vest in 36 substantially equal monthly installments, with the first installment vesting on the last day of the month following the month in which the first anniversary of the Vesting Commencement Date occurs and an additional installment vesting on the last day of each of the 35 months thereafter.

The Option is granted under the Montage Technology Group Limited 2006 Share Incentive Plan (the “Plan”) and subject to the Terms and Conditions of Option (the “Terms”) attached to this Option Agreement (incorporated herein by this reference) and to the Plan. The Option has been granted to the Participant in addition to, and not in lieu of, any other form of compensation otherwise payable or to be paid to the Participant. Capitalized terms are defined in the Plan if not defined herein. The parties agree to the terms of the Option set forth herein. The Participant acknowledges receipt of a copy of the Terms, the Plan and the Option Questions & Answers for the Plan, specifically acknowledges and agrees to Section 14 of the Terms, and agrees to maintain in confidence all information provided to him/her in connection with the Option.


“PARTICIPANT”				MONTAGE TECHNOLOGY GROUP
				LIMITED,
Signature				an exempted company organized under the
				Companies Law (2004 Revision) of the
Print Name				Cayman Islands

				By:
Address
				Its:
City, State, Zip Code

³	Subject to adjustment under Section 7.3.1 of the Plan.

⁴	Subject to early termination under Section 5.7 or 7.3 of the Plan.

CONSENT OF SPOUSE

In consideration of the Company’s execution of this Option Agreement, the undersigned spouse of the Participant agrees to be bound by all of the terms and provisions hereof and of the Plan.



Signature of Spouse				Date

TERMS AND CONDITIONS OF OPTION

1.	Vesting; Limits on Exercise.

•

No Fractional Shares. Fractional share interests shall be disregarded, but may be cumulated.

•

2.	Continuance of Employment/Service Required; No Employment/Service Commitment.

Nothing contained in this Option Agreement or the Plan constitutes a continued employment or service commitment by the Company or any of its Affiliates, affects the Participant’s status, if he or she is an employee, as an employee at will who is subject to termination without cause, confers upon the Participant any right to remain employed by or in service to the Company or any Affiliate, interferes in any way with the right of the Company or any Affiliate at any time to terminate such employment or service, or affects the right of the Company or any Affiliate to increase or decrease the Participant’s other compensation.

3.	Method of Exercise of Option.

The Option shall be exercisable by the delivery to the Secretary of the Company (or such other person as the Administrator may require pursuant to such administrative exercise procedures as the Administrator may implement from time to time) of:

•

an executed Option Exercise and Ordinary Share Purchase Agreement (stating the number of Ordinary Shares to be purchased pursuant to the Option) in substantially the form attached hereto as Exhibit A or such other form as the Administrator may require from time to time (the “Exercise Agreement”);

•

any written statements or agreements required pursuant to Section 7.5.1 of the Plan; and

•

satisfaction of the tax withholding provisions of Section 7.6.1 of the Plan.

•

a note meeting the requirements of Section 5.3.3 of the Plan (or, in the case of tax loans, Section 7.6.2 of the Plan).

4.	Early Termination of Option.

•

the termination of the Participant’s employment or services as provided in Section 5.7 of the Plan, or

•

the termination of the Option pursuant to Section 7.3 of the Plan.

5.	Non-Transferability and Other Restrictions.

The Option and any other rights of the Participant under this Option Agreement or the Plan are nontransferable and exercisable only by the Participant, except as set forth in Section 7.2 of the Plan. Any Ordinary Shares issued on exercise of the Option are subject to substantial restrictions on transfer, and are subject to call, rights of first refusal and other rights in favor of the Company as set forth herein and in the Exercise Agreement.

6.	Securities Law Compliance.

•

The Participant has read and understands the restrictions and limitations set forth in the Plan, this Option Agreement (including these Terms), and the Exercise Agreement, which are imposed on the Option and any Ordinary Shares which may be acquired upon exercise of the Option.

•

7.	Lock-Up Agreement.

Neither the Participant (nor any permitted transferee) may, directly or indirectly, offer, sell or transfer or dispose of any of the Ordinary Shares acquired upon exercise of the Option (the “Shares”) or any interest therein (or agree to do any thereof) (collectively, a “Transfer”) during the period commencing as of 14 days prior to and ending 180 days, or such lesser period of time as the relevant underwriters may permit, after the effective date of a registration statement covering any public offering of the Company’s securities of which the Participant has notice. (The term “Participant” includes, where the context so requires, any permitted direct or indirect transferee of the Participant.) The Participant shall agree and consent to the entry of stop transfer instructions with the Company’s transfer agent against the Transfer of the Company’s securities beneficially owned by the Participant and shall conform the limitations hereunder and under the Exercise Agreement by agreement with and for the benefit of the relevant underwriters by a lock-up agreement or other agreement in customary form. Notwithstanding anything else herein to the contrary, this Section 7 shall not be construed so as to prohibit the Participant from participating in a registration or a public offering of the Ordinary Shares with respect to any shares which he or she may hold at that time, provided, however, that such participation shall be at the sole discretion of the Board.

8.	Limited Call Right; Mandatory Sale; Transfer Restrictions.

8.1 Company’s Call Right. The Company shall have the right (but not the obligation), subject to the terms and conditions of this Section 8, to repurchase in one or more transactions in connection with the Participant’s termination of employment or services to the Company or any of its Affiliates, and the Participant (or any permitted transferee) shall be obligated to sell any of the Shares acquired upon exercise of the Option at the Repurchase Price (as defined below) (the “Call Right”). To exercise the Call Right, the Company must give written notice thereof to the Participant (the “Call Notice”). The Call Notice is irrevocable by the Company and must (a) be in writing and signed by an authorized officer of the Company, (b) set forth the Company’s intent to exercise the Call Right and contain the total number of Shares to be sold to the Company pursuant to the Call Right, (c) be mailed or delivered in accordance with Section 11, and (d) be so mailed or delivered during the Notice Period (determined in accordance with the following sentence). The “Notice Period” shall:

(a)

commence on the Participant’s Severance Date (determined in accordance with the Plan); and

(b)

terminate on the date that is ninety (90) days after the Participant’s Severance Date.

The Call Right shall apply only to Shares owned by the Participant for at least six (6) months after the date the Shares were acquired on exercise of the Option or such other period, if any, as the Administrator prescribes based on accounting or other applicable rules then in effect (unless an earlier date is required in order for the Call Right to be validly exercised under applicable law), whether or not the purchase price is still owing under any note used to finance the purchase.

8.3 Closing. The closing of any repurchase under this Section 8 shall be at a date to be specified by the Company, such date to be no later than thirty (30) days after the date of the Call Notice. The purchase price shall be paid at the closing in the form of a check or by cancellation of money purchase indebtedness against surrender by the Participant of a share certificate evidencing the Shares with duly endorsed share powers. No adjustments (other than pursuant to Section 8.3.1 of the Plan) shall be made to the purchase price for fluctuations in the fair market value of the Ordinary Shares after the date of the Call Notice.

8.4 Termination of Call Right. The Company’s Call Right shall terminate to the extent that it is not exercised prior to the Public Offering Date.

8.5 Assignment. Notwithstanding anything to the contrary, the Company may assign any or all of its rights under this Section 8 to one or more shareholders of the Company.

9.	Right of First Refusal.

(such retraction to be made in writing and mailed or delivered in accordance with the provisions of Section 11). If the shareholder again proposes to sell or transfer the Shares, the shareholder shall again offer such Shares to the Company pursuant to the terms of this Section 9 prior to any sale or transfer.

9.4 Ability to Sell Unpurchased Shares. Unless all of the Shares referred to in the Option Notice are to be purchased as indicated in the Purchase Notice, the shareholder desiring to sell or transfer may dispose of any Shares referred to in the Option Notice that are not to be purchased by the Company to the person or persons specified in the Option Notice during a period of twenty (20) days commencing upon his or her receipt of the Purchase Notice; provided, however, that he or she shall not sell or transfer such Shares (a) at a lower price or on terms more favorable to the Participant or transferee than those specified in the Option Notice and (b) to a person other than the person or persons specified in the Option Notice; and provided further that such transfer is consistent with the other provisions and limitations of the Plan, this Option Agreement (including these Terms), and the Exercise Agreement. If the transfer is not consummated within such twenty (20) day period, the shareholder shall again offer such Shares to the Company pursuant to the terms of this Section 9 prior to any sale or transfer to the same or any other person.

9.5 Assignment. Notwithstanding anything to the contrary, the Company may assign any or all of its rights under this Section 9 to one or more shareholders of the Company.

9.6 Termination of Right of First Refusal. The Company’s Right of First Refusal shall terminate to the extent that it is not exercised prior to the Public Offering Date.

10.

No Shareholder Rights Following Exercise of a Call or Repurchase.

11.

Notices.

Any notice to be given under the terms of this Option Agreement or the Exercise Agreement shall be in writing and addressed to the Company at its principal office to the attention of the Secretary, and to the Participant at the address reflected or last reflected on the Company’s payroll records. Any notice shall be delivered in person or shall be enclosed in a properly sealed envelope, addressed as aforesaid, registered or certified, and deposited (postage and registry or certification fee prepaid) in a post office or branch post office. Any such notice shall be given only when received, but if the Participant is no longer an Eligible Person, shall be deemed to have been duly given five (5) business days after the date mailed in accordance with the foregoing provisions of this Section 11.

12.

Plan.

The Option and all rights of the Participant under this Option Agreement are subject to, and the Participant agrees to be bound by, all of the terms and conditions of the Plan, incorporated herein by this reference. In the event of a conflict or inconsistency between the terms and conditions of this Option Agreement and of the Plan, the terms and conditions of the Plan shall govern. The Participant agrees to be bound by the terms of the Plan and this Option Agreement (including these Terms). The Participant acknowledges having read and understood the Plan, the Option Questions & Answers for the Plan, and this Option Agreement. Unless otherwise expressly provided in other sections of this Option Agreement, provisions of the Plan that confer discretionary authority on the Board or the Administrator do not and shall not be deemed to create any rights in the Participant unless such rights are expressly set forth herein or are otherwise in the sole discretion of the Board or the Administrator so conferred by appropriate action of the Board or the Administrator under the Plan after the date hereof.

13.

Entire Agreement.

This Option Agreement (including these Terms and together with the form of Exercise Agreement attached hereto) and the Plan together constitute the entire agreement and supersede all prior understandings and agreements, written or oral, of the parties hereto with respect to the subject matter hereof. The Plan, this Option Agreement and the Exercise Agreement may be amended pursuant to Section 7.7 of the Plan. Such amendment must be in writing and signed by

the Company. The Company may, however, unilaterally waive any provision hereof or of the Exercise Agreement in writing to the extent such waiver does not adversely affect the interests of the Participant hereunder, but no such waiver shall operate as or be construed to be a subsequent waiver of the same provision or a waiver of any other provision hereof.

14.

Satisfaction of All Rights to Equity.

The Option is in complete satisfaction of any and all rights that the Participant may have (under an employment, consulting or other written or oral agreement with the Company or any of its Affiliates, or otherwise) to receive (1) options or share awards with respect to the securities of the Company or any of its Affiliates and/or (2) any other equity or derivative security in or with respect to the Company or any of its Affiliates. This Option Agreement supersedes the terms of all prior understandings and agreements, written or oral, of the parties with respect to such matters. The Participant shall have no further rights or benefits under any prior agreement conveying any right with respect to any security or derivative security in or with respect to the Company or any of its Affiliates. The foregoing notwithstanding, this Section 14 shall not adversely affect the Participant’s rights under any prior option or share award agreement under the Plan (provided such agreement is expressly labeled as an option or share award agreement under the Plan and is similar in form to this Option Agreement) which has been signed by an authorized officer of the Company.

15.

Governing Law; Limited Rights; Severability.

15.1. Cayman Islands Law; Construction. This Option Agreement and the Exercise Agreement shall be governed by and construed and enforced in accordance with the laws of the Cayman Islands without regard to conflict of law principles thereunder. The terms of the Option grant have resulted from the negotiations of the parties and each of the parties has had an opportunity to obtain and consult with its own counsel. The language of all parts of the Plan, this Option Agreement (including these Terms) and the Exercise Agreement shall in all cases be construed as a whole, according to its fair meaning, and not strictly for or against either of the parties.

15.3. Arbitration.

(a) Any dispute, controversy or claim arising out of or in connection with or relating to this Option Agreement, or the interpretation, breach, termination or validity hereof, shall be resolved through arbitration. A dispute may be submitted to arbitration upon the request of either party with written notice to the other (the “Notice”). The arbitration shall be conducted in Hong Kong under the auspices of the Hong Kong International Arbitration Centre (the “Centre”). There shall be three (3) arbitrators. Each party shall nominate one (1) arbitrator within thirty (30) days after the delivery of the Notice to the other party. The appointment of party nominated arbitrators shall be confirmed by the Centre. Both arbitrators shall agree on the third arbitrator within thirty (30) days of their confirmation by the Centre. Should either party fail to appoint an arbitrator or should the two arbitrators fail within thirty (30) days to reach agreement on the third arbitrator, such arbitrator shall be appointed by the Secretary General of the Centre.

(c) The arbitrators shall decide any dispute submitted by the parties strictly in accordance with the substantive laws of the Cayman Islands and shall not apply any other substantive law.

(e) The costs of arbitration shall be borne by the losing party, unless otherwise determined by the arbitration tribunal.

(g) The award of the arbitration tribunal shall be final and binding upon the parties, and the prevailing party may apply to a court of competent jurisdiction for enforcement of such award.

15.4. Severability. If the arbitrator selected in accordance with Section 15.3 or a court of competent jurisdiction determines that any portion of this Option Agreement, the Plan or the Exercise Agreement is in violation of any statute or public policy, then only the portions of this Option Agreement, the Plan or the Exercise Agreement, as applicable, which violate such statute or public policy shall be stricken, and all portions of this Option Agreement, the Plan and the Exercise Agreement which do not violate any statute or public policy shall continue in full force and effect. Furthermore, it is the parties’ intent that any court order striking any portion of this Option Agreement, the Plan and/or the Exercise Agreement should modify the stricken terms as narrowly as possible to give as much effect as possible to the intentions of the parties hereunder.

15.5. Shareholder Approval. Notwithstanding anything else contained herein to the contrary, the Option and all rights of the Participant under this Option Agreement are subject to approval of the Plan by the Company’s shareholders (such approval to be obtained in accordance with the terms of the Plan, the Company’s Memorandum and Articles of Association and applicable law) within twelve (12) months after the Effective Date of the Plan.

(Remainder of Page Intentionally Left Blank)

EXHIBIT A

MONTAGE TECHNOLOGY GROUP LIMITED

2006 SHARE INCENTIVE PLAN

OPTION EXERCISE AND ORDINARY SHARE PURCHASE AGREEMENT

The undersigned (the “Purchaser”) hereby irrevocably elects to exercise his/her right, evidenced by that certain Option Agreement, dated as of (the “Option Agreement”), under the Montage Technology Group Limited 2006 Share Incentive Plan (the “Plan”), as follows:

•

the Purchaser hereby irrevocably elects to purchase Ordinary Shares, par value U.S. $0.005 per share (the “Shares”), of Montage Technology Group Limited, an exempted company organized under the Companies Law (2004 Revision) of the Cayman Islands (the “Company”), and

•

such purchase shall be at the price of U.S. $ per share, for an aggregate amount of U.S. $ (subject to applicable withholding taxes pursuant to Section 7.6.1 of the Plan).

Capitalized terms are defined in the Plan if not defined herein.

1. Delivery of Share Certificate. The Purchaser requests that a certificate representing the Shares be registered to Purchaser and delivered to: .

2. Investment Representations. The Purchaser acknowledges that the sale of the Shares by the Purchaser is restricted by Securities and Exchange Commission Rule 701. The Purchaser hereby affirms as made as of the date hereof the representations in Section 6 of the “Terms and Conditions of Option” (which are attached to and a part of the Option Agreement, the “Terms”) and such representations are incorporated herein by this reference. The Purchaser represents that he/she has no need for liquidity in this investment, has the ability to bear the economic risk of this investment and can afford a complete loss of the purchase price for the Shares.

The Purchaser acknowledges receipt of the Company’s condensed consolidated financial information.

The Purchaser also understands and acknowledges (a) that the certificates representing the Shares will be legended as provided for in Section 7.5.3 of the Plan and (b) that the Company has no obligation to register the Shares or file any registration statement under applicable securities laws.

3. Limitation on Disposition and Other Restrictions. The Shares are subject to and the Purchaser hereby agrees to the following terms and conditions of the sale of the Shares to the Purchaser:

•

any transfer of the Shares must comply with the restrictions on transfer set forth in Section 7.2 of the Plan and all applicable laws as set forth in Section 7.5 of the Plan;

•

the Shares are subject to, and following any otherwise permitted transfer of the Shares, the Shares shall remain subject to and the transferee shall be bound by, the lock-up provisions set forth in Section 7 of the Terms, the Company’s call right and right of first refusal set forth in Sections 8 and 9 of the Terms, the share legend requirements of Section 7.5.3 of the Plan, the foregoing provisions of this Section 3 and the arbitration provisions of Section 15.3 of the Terms; and

•

5. Entire Agreement. This Option Exercise and Ordinary Share Purchase Agreement, the Option Agreement (including the Terms) and the Plan together constitute the entire agreement and supersede all prior understandings and agreements, written or oral, of the parties hereto with respect to the subject matter hereof. The Plan, the Option Agreement and this Option Exercise and Ordinary Share Purchase Agreement may be amended pursuant to Section 7.7 of the Plan. Such amendment must be in writing and signed by the Company. The Company may, however, unilaterally waive any provision hereof or of the Option Agreement in writing to the extent such waiver does not adversely affect the interests of the Purchaser hereunder, but no such waiver shall operate as or be construed to be a subsequent waiver of the same provision or a waiver of any other provision hereof.


“PURCHASER”	ACCEPTED BY: MONTAGE TECHNOLOGY GROUP LIMITED, an exempted company organized under the Companies Law (2004 Revision) of the Cayman Islands

Signature

Print Name

	By:
Date	Its:
		(To be completed by the Company after the price (including applicable withholding taxes), value (if applicable) and receipt of funds is verified.)

EX-21.1 5 filename5.htm EX-21.1

Exhibit 21.1

List of Subsidiaries


	Name	Place of Incorporation
1.	Montage Semiconductor Holdings Company Limited	Cayman Islands
2.	Montage Technology Holdings Company Limited	Cayman Islands
3.	Montage Technology, Inc.	USA
4.	Montage Semiconductor Hong Kong Company Limited	Hong Kong
5.	Montage Technology Hong Kong Limited	Hong Kong
6.	Montage Technology Company Limited	Hong Kong
7.	Montage Technology (Taiwan) Co., Ltd.	Taiwan
8.	Montage Technology (Shanghai) Co., Ltd.	PRC
9.	Montage Semiconductor (Shanghai) Co., Ltd.	PRC
10.	Suzhou Montage Microelectronic Technology Co., Ltd.	PRC

EX-23.5 6 filename6.htm EX-23.5

Exhibit 23.5

IHS iSuppli Corporation Letterhead

March 18, 2013

Montage Technology Group Limited

Room A1601, Technology Building

900 Yi Shan Road, Xuhui District

Shanghai, 200233 People’s Republic of China

Mr. Howard Yang:

We, IHS iSuppli Corporation, hereby consent to the use of HIS iSuppli’s name and inclusion of information found in and derived from our report entitled “China Digital STB Market Forecast and Detail Analysis of Chipset Market Share”, which you commissioned us to prepared, in (i) a registration statement on Form S-1 (the “Registration Statement”) to be filed by Montage Technology Group Limited (the “Company”) with the United States Securities and Exchange Commission (the “SEC”) in connection with the Company’s initial public offering, (ii) any other future filings by the Company with the SEC, including future registration statements and filings on Form 20-F or Form 6-K or other SEC filings, and (iii) the Company’s websites, investor relations presentations and other marketing materials.

We also hereby consent to the filing of this letter as an exhibit to the Registration Statement. Our contact information and address are: 1700 East Walnut Avenue, Suite 600, El Segundo, California, 90245, USA (Tel: +1-310-524-4007).

Very truly yours,

/s/ Kevin Wang

Kevin Wang, Director China Research,

Electronics Supply Chain,

HIS Global Products & Services

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BEIJING

BRUSSELS

CENTURY CITY

HONG KONG

JAKARTA^†

LONDON

LOS ANGELES

NEWPORT BEACH

2765 Sand Hill Road

Menlo Park, California 94025-7019

TELEPHONE (650) 473-2600

FACSIMILE (650) 473-2601

www.omm.com

NEW YORK

SAN FRANCISCO

SEOUL

SHANGHAI

SINGAPORE

TOKYO

WASHINGTON, D.C.

WRITER’S DIRECT DIAL

(650) 473-2630

WRITER’S E-MAIL ADDRESS

pku@omm.com

April 5, 2013

VIA EDGAR

Draft Registration Statement

U.S. Securities and Exchange Commission

100 F. Street, N.E.

Washington, DC 20549

Re: Montage Technology Group Limited

   Registration Statement on Form S-1, Submitted Confidentially

Ladies and Gentlemen:

On behalf of our client, Montage Technology Group Limited (the “Company”), a Cayman Islands company with its principal operations in the People’s Republic of China, we are submitting this letter in connection with the Company’s draft registration statement on Form S-1 (the “Draft Registration Statement”), which is being submitted via EDGAR simultaneously with this transmittal letter. The Draft Registration Statement relates to the planned initial public offering and listing on the NASDAQ Global Select Market of ordinary shares of the Company, par value US$0.005 per share. We are also submitting via EDGAR certain exhibits to the Draft Registration Statement and will provide the remainder of the exhibits in subsequent submissions or filings.

The Company is submitting the Draft Registration Statement on a confidential basis in accordance with Section 6(e) of the Securities Act of 1933, as amended (the “Securities Act”) and confirms that (i) it is an “emerging growth company,” as defined in the Securities Act, (ii) the Company’s common equity securities have not been sold pursuant to an effective registration statement on or prior to December 8, 2011, and (iii) the Company will publicly file the initial confidential submission and all amendments thereto no later than 21 days prior to the date the Company first conducts a road show for its proposed initial public offering.

The Draft Registration Statement includes the Company’s audited consolidated financial statements for the three years ended December 31, 2010, 2011 and 2012 and as of December 31, 2011 and 2012. The Company will provide selected quarterly financial data under Item 302 of Regulation S-K in a subsequent submission.

^† In association with Tumbuan & Partners

April 5, 2013 - Page 2

On behalf of the Company, we appreciate your attention to this matter. If you have any questions or wish to discuss any matters with respect to the confidential submission, please do not hesitate to contact me at (650) 473-2630 (email: pku@omm.com) or my colleague Ke Geng at +86 (10) 6563 4261 (email: kgeng@omm.com). Regarding accounting matters, you may contact Mr. Mark Voll, chief financial officer of the Company at (408) 982-2788 (email: mark.voll@)montage-tech.com). You may also contact Alison Wong of PricewaterhouseCoopers Zhong Tian CPAs Limited Company at +86 (21) 2323 2551 (email: alison.cy.wong@cn.pwc.com) in respect of any accounting issues.

Thanks in advance for your cooperation in connection with this matter.

Sincerely,

/s/ Portia Ku

cc: Howard C. Yang, Chief Executive Officer and Chairman

   Mark Voll, Chief Financial Officer

   (Montage Technology Group Limited)

   Ke Geng, Esq.

   (O’Melveny & Myers LLP)

   James J. Masetti

   (Pillsbury Winthrop Shaw Pittman LLP)

   Heidi E. Mayon

   (Pillsbury Winthrop Shaw Pittman LLP)

   Alison Wong

   (PricewaterhouseCoopers Zhong Tian CPAs Limited Company)


BEIJING BRUSSELS CENTURY CITY HONG KONG JAKARTA^† LONDON LOS ANGELES NEWPORT BEACH	2765 Sand Hill Road Menlo Park, California 94025-7019 TELEPHONE (650) 473-2600 FACSIMILE (650) 473-2601 www.omm.com	NEW YORK SAN FRANCISCO SEOUL SHANGHAI SINGAPORE TOKYO WASHINGTON, D.C.

		WRITER’S DIRECT DIAL (650) 473-2630 WRITER’S E-MAIL ADDRESS pku@omm.com