Welcome to the GigaMedia Ltd. conference call to discuss the third quarter 2006 financial results. (Operator Instructions) I would now like to turn the conference over to Mr. Brad Miller. Please go ahead, Mr. Miller.

Thank you, this is Brad Miller, Investor Relations Director of GigaMedia. Welcome to our third quarter 2006 results conference call for GigaMedia Ltd. Here again to speak with you and answer your questions today are Arthur Wang, our CEO; and Thomas Hui, our CFO. Before I turn it over to today’s speakers, I would like to remind you that a number of forward-looking statements will be made during this conference call. Forward-looking statements are any statements that are not historical facts. These forward-looking statements are based on the current expectations of GigaMedia, and there can be no assurance that such expectations will prove to be correct. Because forward-looking statements involve risks and uncertainties, GigaMedia’s actual results could differ materially from these statements. Information about factors that could cause, and in some cases, have caused such differences can be found in GigaMedia’s annual report on Form 20-F filed with the U.S. SEC in June, 2006. This presentation is being made on November 9, 2006. The content of this presentation contains time-sensitive information that is accurate only as of the time hereof. If any portion of this presentation is rebroadcast, retransmitted or redistributed at a later date, GigaMedia will not be reviewing or updating the material that is contained therein. The agenda for today’s call includes: first, a review by Arthur Wang of 2006 Q3 business activities and financial performance; Thomas Hui will then provide details on our financial results during the third quarter period. After the speaker presentations, we will go into question-and-answer session. With that, I would like to turn the call over to Arthur Wang, our CEO.

Thanks, Brad and thank you all for joining us. We were delighted with our performance in the third quarter. Consolidated net profit was $6.5 million, up 270% year over year, driven by record operating income of $6 million, a 441% jump from last year. To put these numbers in context, in this quarter alone, we generated more profit than all of last year. Today’s results provide proof positive of the enormous potential of our international strategy to build the dominant online entertainment provider serving the giant non-English language markets of the world. In just over two years, we have traveled far from our starting position as a legacy ISP and music retailer. We are thrilled with our progress to date and have great confidence that we are on track for more record performance in the quarters ahead of us. Before speaking about our major business drivers, let me highlight a few points. First, operating results. Once again, the most important news today is the strong growth in our operating income, which climbed over $6 million for the first time in our company’s history. Noteworthy, the growth of 31% sequentially over the previous three-month period. We have concentrated much time and attention on continuing to improve our execution, and are pleased with the progress we are making. We look forward to further gains built on continued, solid execution. Second, early returns. In past quarters, I have maintained that the performance of Everest Poker and our casino software in Continental Europe represented only the very early returns on our investments. I think our third quarter results provide strong support for this proposition. Poker revenues climbed another 40% while we doubled the number of active players, both as compared to Q2. Moreover, we remain very excited by the momentum we are seeing. In…

Thanks, Arthur. Let me turn now to look at our financial performance for the third quarter, starting first with our consolidated results and moving later to look at each business unit. GigaMedia again delivered excellent organic growth in the third quarter of 2006. Simply put, this is a blowout quarter. We achieved record results in top line revenue and operating income. Given that we delivered performance this strong during our weakest quarter seasonally, we are very excited about the future growth prospect for our business. Let me quickly summarize the results for this quarter. Consolidated revenue grew 118% year over year, of 15% quarter over quarter to $24.2 million. Operating income rose 441% year over year, and 31% sequentially to $6 million, with our operating income margin expanding to 25% from 21.9% last quarter. The key drivers of the significant growth of our revenue and operating income was record performance in our poker software product. More on the exciting performance of this business in a moment. The net income jumped 278% year over year to $6.5 million, resulting in fully diluted EPS of $0.11. As you will recall, our second quarter net income benefited from a one-time gain as the result of the sale of the ADSL business in May of this year. If we remove the effect of one-time gains, our $6.5 million net income this quarter also represented a significant improvement over the last quarter. We also strengthened our balance sheet in the quarter. During the quarter, we grew our cash, cash equivalents, and current marketable securities from $30.7 million to $35 million. Net operating cash flow for the period was $8 million, capital expenditures was flat at $1.3 million for the quarter. As you will note, during the period we redeemed the full amount of the $15…

Thanks, Thomas. We will now move into a question-and-answer session. Operator, at this point, we would like to open the call up to questions.

(Operator Instructions) Your first question comes from Traci Mangini - ThinkEquity Partners. Traci Mangini - ThinkEquity Partners: Thanks, hello. Congratulations, by the way. That was a fantastic quarter. I just had a couple of questions. First off, with respect to the real money MahJong is there any more detail that you can give us with respect to, say geographic focus with this partnership? Also, economics?

Thanks Traci. As we are in the process of finalizing our business arrangement, there is a limited amount that I can speak to at present. We look forward to making a major announcement shortly. I would say that we believe our products are very strong and the market’s interest is very high, so we remain very confident in our real money MahJong and Asian game strategy. Traci Mangini - ThinkEquity Partners: Is your strategy also going to be an exclusive with this one particular party, or will you also look for other partnerships as well?

At this point we are considering a non-exclusive arrangement where we will have the flexibility to work with other partners also. Traci Mangini - ThinkEquity Partners: Okay, great. Then just on the CESL business, obviously there has always been competition in your markets, but I would imagine it is certainly heating up with the changes in the U.S. laws here. Is there anything that gives you concern with respect to that? And is there any change to your strategy over there, to try and combat that increase in competition?

This is what I would say. Tough competition in our markets is nothing new. As a management team, we always take competition very seriously, but actually net-net we think the recent prohibition in the U.S. probably are a benefit to GigaMedia. First of all, the prohibition has literally wiped out many of our direct competitors. Those that have survived are weakened, faced with a very challenging task of realigning their cost structures, and then turning to drive growth in new and foreign markets without necessarily the localized products, and certainly without the large cash flow stream that used to come from the United States market. In our target marketplaces in Europe, for example, it is sensible to speak of it as one geography, but it is in truth many, many disparate countries, markets, and languages. Quite a challenging market. So I guess I would say that yes, we expect there to be more competition in 2007, but we feel stronger overall and we continue to have significant confidence, I think, in our ability to grow our business in Europe. Traci Mangini - ThinkEquity Partners: Great, thank you. And then with respect to the operating margin in the CESL business, it looked like it jumped up quite attractively in the third quarter. I would imagine with more marketing, maybe increased marketing in the fourth quarter, that would trend back to more normalized levels?

Traci, the operating margin was 31.6% in Q3, which is comparable to the Q2 31%. As we have indicated, we feel the market potential warrants quite a bit of investment at this stage for us to continue to expand our platform and our leadership position. The high 20s to 30s kind of margin is where we are aiming for. We continue to turn up the volume of marketing. Yes, there is a chance that it will go back down to around 30%, but it will be around the high 20s to low 30s. Traci Mangini - ThinkEquity Partners: And I didn’t see if you released it. Did you give the peak concurrent player base for the Poker Network?

Let me just look for that.

No, Traci, it was not in our formal release. Let’s see if we can provide that here. Traci Mangini - ThinkEquity Partners: Okay.

It was about 19,000. Traci Mangini - ThinkEquity Partners: And that is all real money?

Yes. Well actually, no – I think this includes everything. Traci Mangini - ThinkEquity Partners: Okay. And then with FunTown, is there any more information you can give on the T2Fun and how you plan to monetize that?

At present, Traci, we have only just introduced the platform to the market in the third quarter and we are using this period to build it out, to ramp it up. So at present we are offering it on essentially a play-for-free basis. There is some very limited monetization, but we are looking first to grow the platform. Traci Mangini - ThinkEquity Partners: On the divestiture of the ISP, at one point you had hoped to dispose of that before year end. Is there any timing update you can share with us?

As we mentioned in our release, we have retained a financial advisor and we are in discussions with a potential purchaser. But at this point in time, that is all we can say. Traci Mangini - ThinkEquity Partners: Thank you so much.

Thank you.

Your next question comes from Chang Qui – Forun Technology Research. Chang Qui – Forun Technology Research: Right. Good evening, Arthur and Tom. Congratulations on very good results.

Thanks, Chang. Chang Qui – Forun Technology Research: I have a few questions. Given the summer months are weaker months for you and you achieved 40% sequential growth on the poker side and 11% growth on the traditional games side, what can you give us as guidance for Q4 and Q1, the traditionally stronger quarters in terms of revenue growth?

Chang, I would say the following. The 40% sequential growth we achieved on the poker product obviously already, as we have mentioned multiple times in past calls, already was affected by seasonality. You remember that the Q2 versus Q1 sequential growth was 65%, so it is already reduced. We believe this has the effect of seasonality in it. So we certainly hope to achieve higher than a 40% growth rate in this quarter, Q4 versus Q3, and we are on track to doing so. But we have not given exact numerical guidance at this stage. That is how we would see the growth in this next coming quarter. Chang Qui – Forun Technology Research: That is for the poker side. What about the traditional gaming side, the casino side?

I think the traditional gaming side, we also broke 11% sequentially without the historical effect of seasonality. One reason is the spillover effect from the Everest Poker business with the whole Everest brand-building initiative there. So we are seeing some crossover of players moving from the poker player games to the casino games. So if that continues, we think that we can again, increase the growth rate more than what we had achieved sequentially in Q3. But again, the seasonality factor did not come in, and so that would have masked already the typical 20% to 30% growth Q4 versus Q3 historically, so we don’t think we can go to that level of high growth rate, but hopefully achieve a high single-digit to 10% kind of growth rate on a sequential basis. Chang Qui – Forun Technology Research: Another issue is how confident are you regarding your growth in terms of sustainable growth? Which means that maybe this quarter, maybe some of your competitors get too worried about the U.S. and somehow you may benefit in that regard? Or there are other issues here.

Well Chang, I have to say that definitely many of our toughest competitors in Europe have been very occupied with the situation in the United States. It had a dramatic effect on their business. Many of them lost 60%, 70%, 80% of their revenue. Several of them have gone bankrupt. Those, again, that have survived are facing a major restructuring. We don’t discount them in any way. We think they are going to be very focused now on Europe and competition will increase, but we think we too are a stronger organization and are beginning to get the advantages of size and scale; all of this, of course, leveraging upon our longer in-country experience. So we are prepared to face the competition and we think we are still going to be able to drive very strong growth. Chang Qui – Forun Technology Research: In other words, because of your newer product and your focus in the continental Europe, the non-English speaking part of the market, you believe you can sustain the growth for quite some time?

Yes. As far out as we can see, we are very confident in continuing to drive growth and continuing to deliver record results for our company. Chang Qui – Forun Technology Research: That’s great. On the FunTown part, it looks like so far the past three quarters are tracking below expectations; or maybe you will have a huge fourth quarter to achieve your – or early in the year you have a nice 20% to 30% kind of growth.

Yes, the results of FunTown in the second quarter, as we noted, were below our expectations. We really live by the credo, the motto, here of quarterly growth. We spent a great deal of time in the third quarter making sure that we would continue to see growth and we think that we put in place a number of measures which will continue to drive the numbers in Q4. So I think overall we are on-track for the year. Chang Qui – Forun Technology Research: I see. So in other words, can you give us a detailed update regarding FunTown and Xbox? Maybe in that regard.

As far as I know, we are awaiting the final certification from Microsoft. We are still on track to be the first local Asian game released for Xbox 360 as part of Microsoft Live Arcade. I don’t have the exact date yet for launch, but we have already been part of a lot of Microsoft’s local publicity, promotion, events and the like. I think we are waiting some final approvals now. Chang Qui – Forun Technology Research: That is great. Another question relates with your poker and casino business. The minority income looks like the income here by your partner, UIN, looks like it was much less than what we modeled. I just wonder, have you changed revenue share here? Are there any other issues here?

Chang, we have not changed the revenue-sharing model. The revenue sharing percentage is the same. The reason why UIM’s net income is much less, as you can see from the minority interest line, was because a large chunk, most of the marketing expense borne by UIM, as they own obviously the customer-facing relationship. Because this quarter, we increased a lot of the marketing initiatives, as both Arthur and I have talked to. That increased their expense, but as you can see on the revenue side, it has picked up. Again, they view this as a long-term investment. That is the reason why they are willing to put in the expense now with a larger customer base for future revenue benefit.

Should we worry then if they get too little or less income and then they are not motivated enough?

Obviously this is a very friendly relationship. First of all, we have a contractual relationship with them that binds in our relationship. Secondly, obviously the economics will be work -- they will discuss with us and we will discuss with them in terms of the product and marketing initiatives, in order to make it profitable for both parties. Like you say, we worry about that too. Obviously we want to make sure they also make enough money that they will be motivated, and they have been very motivated as far as we can see from all the time that we have been working together.

I would say that I think we and UIM and most who would look at the marketplace are very excited about the possibilities in Europe. I think in the early days, again it was the best -- you never know for certain whether a given product will take in the marketplace. I think where we are now, we see that market potential has been proven. There has been a very clear proof of content. Because of this, I think there is a great deal of enthusiasm about committing money to building this market to building on this brand and to monetize and perhaps more in the future, as the scale advantages show up.

Great. Thanks a lot.

Your next question comes from the line of Bill Garrison with Ironworks Capital.

Thank you for taking my question, and congratulation as well. I wanted to ask if you might be able to provide a little bit more detail with respect to your national mahjong tournament you described. I guess as a starting point, is that considered more of a marketing event, or is that profitable to FunTown? Then, if there is any details in terms of the player periods you might be able to share, it would be helpful.

Sure. Bill, we treat that as a marketing event and also as a thank you to our customer base in Taiwan. The event itself is not set up to be like the World Series of Poker or the like, although we will be hosting a World Series of Mahjong in 2007. This event is cast almost as a family day. We take over the largest stadium, the largest indoor facility we can find and it is a day of game play, dancing, drumming, music, food, all centered around, of course, the suite of FunTown games. There are prizes offered, cash prizes offered. I think the total prize is about a million dollars. That is the nature of the event. I mentioned the World Series of Mahjong. We believe very much that, in particular as an incentive for real money mahjong play, that an international championship event would be very exciting and very successful, both as a marketing tool to drive customers to our real money mahjong offering, as well as a successful event in and of itself. We are in talks with a number of television networks who are very interested in hosting the event, as well as with a number of different venues. As you know, in Asia, Macau is becoming a major gambling center. A lot of new casinos, a lot of interest in using events such as this to attract people to Macau. We look forward to a lot of fun with respect to putting on an event of this sort.

Okay, very good. Then, just a couple quick ones on the poker side, I guess. Have you disclosed, or can you disclose the percentage of players who come to the casino first from the poker site, or are you getting new players in the casino product on its own? Any details you can share in terms of the overlap there?

We have not disclosed such metrics, but I did mention in the prepared remarks that there is a cross-selling effect on the poker players to the casino players. Previously, we were at the early stage of the poker product, and also at the early stage of having a common brand average poker and average casino, so we did not have a mature set of enough data to do such analysis. We are beginning to see a trend and it is a single-digit crossover. It is a high-single-digit crossover. As we have more confidence in such trends, we will be making more disclosure to the marketplace.

Lastly, obviously impressive momentum through September and then we had change in the U.S. regulatory environment. Any observations you could make about activity in the quarter to date in terms of our new players coming? Is a lot of the growth from new players to the poker market, or are you getting perhaps shifts of market share from European players who had previously been more active in the U.S.-focused markets?

As we have indicated, because we do not have any U.S. source revenue, the legislation has no negative impact on our revenue. We do not anticipate any. Subsequent to the October 13th passing, looking at October both in terms of number of players signing in and also the revenue tracking, comparing to September, which was before the passing of the new U.S. legislation, we are still seeing double-digit growth. In fact, similar to accelerating growth. We are not 100% sure whether this is new players just coming into the market or these are players who are from other sites, but we are still not taking any U.S. ones, so if they are from other sites, they will be coming from the European customer base. The important thing here is we are not seeing negative impact. In fact, we are seeing the results continue to grow very significantly.

Okay, very good. Thank you and congratulations again.

(Operator Instructions) Your next question comes from the line of Alicia Yap with Bear Stearns. Madam, please press the mute button on your headset. Your line is open. Sir, there are no further questions in the queue.

Sorry, Operator, did you say no more questions?

Yes, there are no further questions in queue.

Okay, the question from Alicia dropped off the line?

It did, but she has re-queued up for questions. Let me go ahead and open her line. Ms. Yap, your line is open.

Hello? Operator, that is fine. I think we would like to conclude the call at this point. Thank you everyone for joining us. If you have any additional questions, or for further information, please visit our website at www.gigamedia.com.tw, for Taiwan. Thank you.

Thank you for your participation in today’s conference. This concludes the conference call.