-----BEGIN PRIVACY-ENHANCED MESSAGE-----
Proc-Type: 2001,MIC-CLEAR
Originator-Name: webmaster@www.sec.gov
Originator-Key-Asymmetric:
 MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen
 TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB
MIC-Info: RSA-MD5,RSA,
 SbSYuFXJ7e19ZgUwmdjg6aLdGBvkppLzVo36xNAc3aAtGRV6YZ9my8WvSSiqFoPa
 jtT65OH9xuBfYkwUdy6hmQ==

<SEC-DOCUMENT>0001104659-06-072209.txt : 20070129
<SEC-HEADER>0001104659-06-072209.hdr.sgml : 20070129
<ACCEPTANCE-DATETIME>20061107161814
<PRIVATE-TO-PUBLIC>
ACCESSION NUMBER:		0001104659-06-072209
CONFORMED SUBMISSION TYPE:	CORRESP
PUBLIC DOCUMENT COUNT:		1
FILED AS OF DATE:		20061107

FILER:

	COMPANY DATA:	
		COMPANY CONFORMED NAME:			UTSTARCOM INC
		CENTRAL INDEX KEY:			0001030471
		STANDARD INDUSTRIAL CLASSIFICATION:	COMMUNICATIONS EQUIPMENT, NEC [3669]
		IRS NUMBER:				521782500
		STATE OF INCORPORATION:			DE
		FISCAL YEAR END:			1231

	FILING VALUES:
		FORM TYPE:		CORRESP

	BUSINESS ADDRESS:	
		STREET 1:		1275 HARBOR BAY PARKWAY
		STREET 2:		STE 100
		CITY:			ALAMEDA
		STATE:			CA
		ZIP:			94502
		BUSINESS PHONE:		5108648800

	MAIL ADDRESS:	
		STREET 1:		1275 HARBOR BAY PARKWAY
		STREET 2:		STE 100
		CITY:			ALAMEDA
		STATE:			CA
		ZIP:			94502
</SEC-HEADER>
<DOCUMENT>
<TYPE>CORRESP
<SEQUENCE>1
<FILENAME>filename1.htm
<TEXT>
<html>

<head>






</head>

<body lang="EN-US">

<div>

<p align="right" style="margin:0pt 0pt 12.0pt;text-align:right;"><b><font size="2" face="Times New Roman" style="font-size:10.0pt;font-weight:bold;">Confidential Treatment Requested</font></b></p>

<p style="margin:0pt 0pt 12.0pt;text-align:center;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">November 7, 2006</font></p>

<p style="margin:0pt 0pt 12.0pt;"><b><i><u><font size="2" face="Times New Roman" style="font-size:10.0pt;font-style:italic;font-weight:bold;">VIA
EDGAR AND FEDERAL EXPRESS</font></u></i></b></p>

<p style="margin:0pt 0pt 12.0pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">United States Securities
and Exchange Commission<br>
Division of Corporation Finance<br>
100 F Street, N.E., Mail Stop 3720<br>
Washington DC&#160; 20549-3720<br>
Attention:&#160; Joseph M. Kempf, Senior Staff
Accountant</font></p>

<p style="font-family:Times New Roman;font-size:10.0pt;margin:0pt 0pt 12.0pt 35.0pt;text-indent:-35.0pt;"><b><font size="2" face="Times New Roman" style="font-size:10.0pt;font-weight:bold;">Re:</font></b><b><font size="1" style="font-size:3.0pt;font-weight:bold;">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; </font>UTStarcom,
Inc.<br>
Form 10-K for Fiscal Year Ended December 31, 2005<br>
Filed June 1, 2006, as amended June 26, 2006<br>
Form 10-Q for Fiscal Quarter Ended June 30, 2006<br>
Filed August 9, 2006<br>
File No. 0-29661</b></p>

<p style="margin:0pt 0pt 12.0pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">Dear Mr. Kempf:</font></p>

<p style="margin:0pt 0pt 12.0pt;text-indent:36.0pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">This letter
responds to the comment of the staff (the &#147;<u>Staff</u>&#148;) of the Securities and
Exchange Commission (the &#147;<u>Commission</u>&#148;) in its letter dated September 25,
2006 related to the Annual Report on Form 10-K for the fiscal year ended
December 31, 2005 and the Quarterly Report on Form 10-Q for the fiscal quarter
ended June 30, 2006 of UTStarcom, Inc. (the &#147;<u>Company</u>&#148;).&#160; For ease of reference, we have repeated the
Staff&#146;s comment in the comment letter in bold type and followed each comment
with the Company&#146;s response.</font></p>

<p style="margin:12.0pt 0pt;"><b><font size="2" face="Times New Roman" style="font-size:10.0pt;font-weight:bold;">Confidential
Treatment Request</font></b></p>

<p style="margin:12.0pt 0pt;text-indent:24.5pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">Because of the sensitive nature of the information
contained herein, this submission is accompanied by a request for confidential
treatment for this letter. The Company is requesting confidential treatment for
this letter in connection with the Freedom of Information Act and has filed a
separate letter with the Office of Freedom of Information and Privacy Act
Operations in connection with that request.</font></p>

<p style="margin:12.0pt 0pt;text-indent:24.5pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">All notices and orders regarding this request should
be sent to:</font></p>

<p style="margin:12.0pt 0pt 12.0pt 48.95pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">UTStarcom,
Inc.<br>
1275 Harbor Bay Parkway<br>
Alameda, CA 94502<br>
Attention: Russell Boltwood, General Counsel<br>
Phone: (510) 864-8800<br>Fax: (510) 864-8802</font></p>

<br><hr size="3" width="100%" noshade color="#010101" align="center">

<!-- SEQ.=1,FOLIO='',FILE='C:\fc\3096627936_D11431_1461359\23396-1-de.htm',USER='jmsproofassembler',CD='Nov  5 06:06 2006' -->
<br clear="all" style="page-break-before:always;">
 <p style="margin:0pt 0pt .0001pt;text-align:center;"></p>


<p align="right" style="margin:0pt 0pt 12.0pt;text-align:right;"><b><font size="2" face="Times New Roman" style="font-size:10.0pt;font-weight:bold;">Confidential Treatment Requested</font></b></p>

<table border="0" cellspacing="0" cellpadding="0" width="100%" style="border-collapse:collapse;font-family:Times New Roman;width:100.0%;">
 <tr style="page-break-inside:avoid;">
  <td width="81%" valign="top" style="padding:0pt .7pt 0pt 0pt;width:81.52%;">
  <p style="font-size:10.0pt;margin:0pt 0pt .0001pt;"><!-- SET mrlNoTableShading -->United States Securities and
  Exchange Commission</p>
  </td>
  <td width="2%" valign="top" style="padding:0pt .7pt 0pt 0pt;width:2.38%;">
  <p style="margin:0pt 0pt .0001pt;"><font size="2" face="Times New Roman" style="font-size:1.0pt;">&nbsp;</font></p>
  </td>
  <td width="16%" valign="top" style="padding:0pt .7pt 0pt 0pt;width:16.1%;">
  <p align="right" style="margin:0pt 0pt .0001pt;text-align:right;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">November 7, 2006</font></p>
  </td>
 </tr>
 <tr style="page-break-inside:avoid;">
  <td width="81%" valign="top" style="padding:0pt .7pt 0pt 0pt;width:81.52%;">
  <p style="margin:0pt 0pt .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">Mr. Joseph M.
  Kempf, Senior Staff Accountant</font></p>
  </td>
  <td width="2%" valign="top" style="padding:0pt .7pt 0pt 0pt;width:2.38%;">
  <p style="margin:0pt 0pt .0001pt;"><font size="2" face="Times New Roman" style="font-size:1.0pt;">&nbsp;</font></p>
  </td>
  <td width="16%" valign="top" style="padding:0pt .7pt 0pt 0pt;width:16.1%;">
  <p style="margin:0pt 0pt .0001pt;"><font size="2" face="Times New Roman" style="font-size:1.0pt;">&nbsp;</font></p>
  </td>
 </tr>
</table>

<p style="line-height:1.0pt;margin:0pt 0pt 12.0pt;"><font size="1" face="Times New Roman">&nbsp;</font></p>

<p style="margin:0pt 0pt 12.0pt;"><b><font size="2" face="Times New Roman" style="font-size:10.0pt;font-weight:bold;">Comment Responses</font></b></p>

<p style="margin:0pt 0pt 12.0pt;"><b><u><font size="2" face="Times New Roman" style="font-size:10.0pt;font-weight:bold;">Form 10-K<br>
Management&#146;s Discussion and Analysis, page 47</font></u></b></p>

<p style="font-family:Times New Roman;font-size:10.0pt;margin:0pt 0pt 12.0pt 36.0pt;text-indent:-36.0pt;"><b><font size="2" face="Times New Roman" style="font-size:10.0pt;font-weight:bold;">1.</font></b><font size="1" style="font-size:3.0pt;">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; </font><b>Refer to the penultimate paragraph of page 85, which states that your
Broadband Infrastructure operating segment sales to Japan reported a negative
margin because of quality issues.&#160; With a
view towards expanded disclosure, please explain to us the nature of the &#147;quality
issues&#148; and your related accounting for them.&#160;
Please address the adequacy of your warranty reserves, the timing of
your expenses recognition, the amount of revenue that is involved, and whether
there were any issues concerning customer acceptance.</b></p>

<p style="margin:0pt 0pt 12.0pt;text-indent:36.0pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">The $9 million
provided for additional estimated warranty liability during the quarter ended
September 30, 2005 consists of two elements. The Company provided a $4.9
million addition to its accrued warranty liability because its product failure
analysis process identified the causes of excessive failures in three products
in the Broadband Infrastructure operating segment. Also in the third quarter of
2005 the Company found it needed to accrue an additional $4.0 million for
future warranty costs for all products in the Broadband Infrastructure
operating segment after reviewing its warranty cost development experience.
This additional warranty expense resulted from new conditions not known or
reasonably foreseeable at the sale date when the Company originally established
a warranty liability for these products and was recognized in cost of sales in
the quarter ended September 30, 2005, the period such information first became
known and quantifiable.</font></p>

<p style="margin:0pt 0pt 12.0pt;text-indent:36.0pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">As an example of
the issues discovered in the third quarter of 2005, the Company determined
excessive failures in one of the three products were occurring because of
faulty wiring in some connector cables made for the Company by a third-party
vendor. This condition required field replacement of all installed connector
cables in the opinion of the Company&#146;s engineering staff. Company management
estimated the cost of the replacement cables for all the products sold was
around $200,000. The total warranty cost estimate was much higher because of
the cost to send field service personnel to all customer sites to make the
cable replacements. To lessen its total cost and carry out the repair more quickly,
the Company negotiated with its customer, Softbank Broadband Corp. (SBBC) - a
subsidiary of Softbank and one of Japan&#146;s largest broadband communication
carriers, to provide SBBC with replacement cables and pay it approximately $<b>[***]</b> for SBBC personnel to make the field replacement in
the course of their other service activities at SBBC&#146;s various sites. The total
warranty cost recorded for this issue was $<b>[***]</b>.</font></p>

<p style="margin:0pt 0pt 12.0pt;text-indent:36.0pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">Instead, the
additional warranty charge was to provide for a greater number of replacement products
being required during the warranty period.</font></p>


 <p style="font-size:10.0pt;margin:24.0pt 0pt .0001pt;text-align:center;"><font face="Times New Roman">2</font></p> <br><hr size="3" width="100%" noshade color="#010101" align="center">

<!-- SEQ.=1,FOLIO='2',FILE='C:\fc\3096627936_D11431_1461359\23396-1-de.htm',USER='jmsproofassembler',CD='Nov  5 06:06 2006' -->
<br clear="all" style="page-break-before:always;">
 <p style="margin:0pt 0pt .0001pt;text-align:center;"></p>


<p style="margin:0pt 0pt 12.0pt;text-indent:36.0pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">Note 13 of Notes
to Consolidated Financial Statements for the year ended December 31, 2005
reports the Company recognized $30.6 million of special warranty charges in
2005 for equipment sold to SBBC and Japan Telecom, affiliates of Softbank
Corp., in 2003 and 2004. The $9 million warranty charge discussed above
includes $4.9 million of this amount. These special warranty charges provided
for issues that did not arise until long after the original sales and
principally were due to causes other than product quality such as changing
product specifications, network interoperability issues, and maintenance of
good customer relationships. Therefore, the Company believes these amounts
could not have been estimated and provided for in the warranty costs recorded
at the time sales were recognized. Further, the Company believes the size of
the special warranty charges as compared to related levels of recognized sales
and gross profit and the Company does not appear unreasonably large given the
leading edge nature of this product line. (Note 21 of Notes to Consolidated
Financial Statements for the year ended December 31, 2005 reports the Company
recognized total Broadband Infrastructure products sales and gross profit for
the 2003 through 2005 period of $964.6 million and $321.6 million,
respectively.) For these reasons, the Company does not believe the special
warranty charges recognized in 2005 indicate an inability to estimate and
recognize adequate warranty provisions at the sales dates.</font></p>

<p style="margin:0pt 0pt 12.0pt;text-indent:36.0pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">None of the extra
warranty provision involved customer acceptance issues. To the contrary the
Company was straining its productive capacity to keep up with demand for its
Broadband Infrastructure products from SBBC, which was the major customer in
the Broadband Infrastructure operating segment during 2003 through 2005.</font></p>

<p style="margin:0pt 0pt 12.0pt;text-indent:36.0pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">In response to the
Staff&#146;s comment, the Company will expand the disclosures concerning these
issues in its Quarterly Report on Form 10-Q for the period ending September 30,
2006 as follows (additions are in bold and deletions are in strikethrough):</font></p>

<p style="margin:11.25pt 36.0pt 12.0pt;text-autospace:none;text-indent:24.0pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">Our Broadband Infrastructure operating segment
reported a negative gross margin of 45% during the three&nbsp;months ended
September&nbsp;30, 2005 primarily due to <b>recognizing</b> $<strike>9.0</strike>&nbsp;
<b>$4.9</b> million of additional <b>warranty expense</b>  <strike>costs incurred</strike> relating to <strike>certain
contracts</strike>  <b>sales made principally</b> in Japan <b>in prior quarters of three products </b>where quality issues
were encountered. <b>The Company also provided
a $4.0 million increase in its overall estimated warranty liability for
Broadband Infrastructure products in this three month period based on the
results of an analysis of warranty costs incurred.</b> The gross profit
percentage decreased in our Broadband and Handsets operating segments, and
improved in our Wireless and Service segments in the three&nbsp;months ended
September&nbsp;30, 2005.</font></p>


 <p style="font-size:10.0pt;margin:24.0pt 0pt .0001pt;text-align:center;"><font face="Times New Roman">3</font></p> <br><hr size="3" width="100%" noshade color="#010101" align="center">

<!-- SEQ.=1,FOLIO='3',FILE='C:\fc\3096627936_D11431_1461359\23396-1-de.htm',USER='jmsproofassembler',CD='Nov  5 06:06 2006' -->
<br clear="all" style="page-break-before:always;">
 <p style="margin:0pt 0pt .0001pt;text-align:center;"></p>


<p style="margin:0pt 0pt 12.0pt;"><b><u><font size="2" face="Times New Roman" style="font-size:10.0pt;font-weight:bold;">Financial Statements<br>
Financial Instruments and Derivatives, page 133</font></u></b></p>

<p style="font-family:Times New Roman;font-size:10.0pt;margin:0pt 0pt 12.0pt 36.0pt;text-indent:-36.0pt;"><b><font size="2" face="Times New Roman" style="font-size:10.0pt;font-weight:bold;">2.</font></b><font size="1" style="font-size:3.0pt;">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; </font><b>Pursuant to paragraph 10 of SFAS 107, please disclose how you
determined the fair value of your long-term investments, convertible debt,
purchased and written call options.</b></p>

<p style="margin-left:0pt;margin-right:0pt;text-indent:36.0pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">The Company follows the accounting practices set forth
below to establish the carrying values of its long-term investments disclosed
in its consolidated financial statements:</font></p>

<div align="center" style="font-family:Times New Roman;">

<table border="0" cellspacing="0" cellpadding="0" style="border-collapse:collapse;">
 <tr bgcolor="#CCEEFF" style="page-break-inside:avoid;">
  <td width="253" valign="top" style="padding:0pt .7pt 0pt 0pt;width:189.85pt;">
  <p style="font-size:10.0pt;margin:0pt 0pt .0001pt;"><!-- SET mrlHTMLTableCenter -->Publicly traded securities</p>
  </td>
  <td width="16" valign="top" style="padding:0pt .7pt 0pt 0pt;width:12.0pt;">
  <p style="margin:0pt 0pt .0001pt;"><font size="2" face="Times New Roman" style="font-size:1.0pt;">&nbsp;</font></p>
  </td>
  <td width="296" valign="top" style="padding:0pt .7pt 0pt 0pt;width:221.65pt;">
  <p style="margin:0pt 0pt .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">Quoted market prices per FAS 115</font></p>
  </td>
 </tr>
 <tr style="page-break-inside:avoid;">
  <td width="253" valign="top" style="padding:0pt .7pt 0pt 0pt;width:189.85pt;">
  <p style="margin:0pt 0pt .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>
  </td>
  <td width="16" valign="top" style="padding:0pt .7pt 0pt 0pt;width:12.0pt;">
  <p style="margin:0pt 0pt .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>
  </td>
  <td width="296" valign="top" style="padding:0pt .7pt 0pt 0pt;width:221.65pt;">
  <p style="margin:0pt 0pt .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>
  </td>
 </tr>
 <tr bgcolor="#CCEEFF" style="page-break-inside:avoid;">
  <td width="253" valign="top" style="padding:0pt .7pt 0pt 0pt;width:189.85pt;">
  <p style="margin:0pt 0pt .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">Equity method
  investments</font></p>
  </td>
  <td width="16" valign="top" style="padding:0pt .7pt 0pt 0pt;width:12.0pt;">
  <p style="margin:0pt 0pt .0001pt;"><font size="2" face="Times New Roman" style="font-size:1.0pt;">&nbsp;</font></p>
  </td>
  <td width="296" valign="top" style="padding:0pt .7pt 0pt 0pt;width:221.65pt;">
  <p style="margin:0pt 0pt .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">Equity method per APB 18</font></p>
  </td>
 </tr>
 <tr style="page-break-inside:avoid;">
  <td width="253" valign="top" style="padding:0pt .7pt 0pt 0pt;width:189.85pt;">
  <p style="margin:0pt 0pt .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>
  </td>
  <td width="16" valign="top" style="padding:0pt .7pt 0pt 0pt;width:12.0pt;">
  <p style="margin:0pt 0pt .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>
  </td>
  <td width="296" valign="top" style="padding:0pt .7pt 0pt 0pt;width:221.65pt;">
  <p style="margin:0pt 0pt .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>
  </td>
 </tr>
 <tr bgcolor="#CCEEFF" style="page-break-inside:avoid;">
  <td width="253" valign="top" style="padding:0pt .7pt 0pt 0pt;width:189.85pt;">
  <p style="margin:0pt 0pt .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">Other
  investments</font></p>
  </td>
  <td width="16" valign="top" style="padding:0pt .7pt 0pt 0pt;width:12.0pt;">
  <p style="margin:0pt 0pt .0001pt;"><font size="2" face="Times New Roman" style="font-size:1.0pt;">&nbsp;</font></p>
  </td>
  <td width="296" valign="top" style="padding:0pt .7pt 0pt 0pt;width:221.65pt;">
  <p style="margin:0pt 0pt .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">Cost method per APB 18, less any impairment charge</font></p>
  </td>
 </tr>
</table>

</div>

<p style="margin-left:0pt;margin-right:0pt;text-indent:36.0pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">The excess of the fair value over the carrying value
of long-term investments mainly arises from the Company&#146;s non-publicly tradable
common stock investments. The Company estimates the fair values for these
investments considering the quoted market prices of an investee&#146;s freely
tradable stock when the Company&#146;s investment is in the form of restricted
stock, and recent equity transactions when the investee is a nonpublic entity.
The Company believes the carrying values of its remaining portfolio of
long-term investments approximate their current fair value based on its
monitoring of the investments.</font></p>

<p style="margin-left:0pt;margin-right:0pt;text-indent:36.0pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">In August 2006 restrictions on one of the Company&#146;s
investments in restricted common stock were eliminated. Accordingly, the
Company will increase the carrying value of this long-term investment to its
quoted market value, with the increase reported in other comprehensive income,
in the Company&#146;s Quarterly Report on Form 10-Q for the period ended September
30, 2006.</font></p>

<p style="margin:0pt 0pt 12.0pt;text-indent:36.0pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">The Company
obtains a quotation from Credit Suisse First Boston (CSFB) of the bid-asked prices
for the Company&#146;s convertible debt at the end of each annual reporting period
to estimate fair value. CSFB participates as a dealer in the market for the
debt. As at the close of business December 30, 2005, the last trading day of
2005, CSFB reported bid/asked quotes of 83%-84%. The Company uses the midpoint
of the bid/asked spread to calculate fair value or 83.5% of the principal
balance of $229.6 million outstanding at December 31, 2005.</font></p>

<p style="margin:0pt 0pt 12.0pt;text-indent:36.0pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">The Company also obtains a report prepared for it by
CSFB which gives that firm&#146;s estimates of current values for&#160; the convertible bond hedge and the written
call option derivatives for which CSFB is the counterparty. The report is &#147;prepared
on a mid-market basis by reference to CSFB&#146;s proprietary models and do not reflect
any bid/offered spread.&#148; The amounts reported as the fair values of the
convertible bond hedge and the written call option in the Notes to Consolidated
Financial Statements for the year ended December 31, 2005 are taken from such
report prepared as at the close of business December 30, 2005.</font></p>


 <p style="font-size:10.0pt;margin:24.0pt 0pt .0001pt;text-align:center;"><font face="Times New Roman">4</font></p> <br><hr size="3" width="100%" noshade color="#010101" align="center">

<!-- SEQ.=1,FOLIO='4',FILE='C:\fc\3096627936_D11431_1461359\23396-1-de.htm',USER='jmsproofassembler',CD='Nov  5 06:06 2006' -->
<br clear="all" style="page-break-before:always;">
 <p style="margin:0pt 0pt .0001pt;text-align:center;"></p>


<p style="margin:0pt 0pt 12.0pt;text-indent:36.0pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">The report contains a caution noting the following:</font></p>

<p style="margin:0pt 36.0pt 12.0pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&#147;Because CSFB&#146;s
Mid-Market Prices are provided for information purposes only, they do not
constitute an offer, or a solicitation of an offer, to conclude any transaction
at the prices noted. In addition, as CSFB&#146;s Mid-Market Prices are prepared as
of a particular date and time, they will not reflect subsequent changes in
market values or prices or in any other factors relevant to their
determination.&#148;</font></p>

<p style="margin:0pt 0pt 12.0pt;text-indent:36.0pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">There is no
established trading market for these derivative securities; therefore there is
no market quotation available from which to derive fair value. While the CSFB
report does not constitute a market quotation, it does present an estimate of
current value prepared by a knowledgeable third party using valuation
techniques comparable to those it uses in its dealings in the financial
derivatives and futures markets. Accordingly, the Company believes it
represents the best available fair value estimate.</font></p>

<p style="margin:0pt 0pt 12.0pt;text-indent:36.0pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">Because all the
Company&#146;s bank loans are short-term and mature in 2006, the Company believes
their fair value approximates their carrying value in the Company&#146;s
consolidated financial statements.</font></p>

<p style="margin:0pt 0pt 12.0pt;text-indent:36.0pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">In responding to
the Staff&#146;s comment, the Company reconsidered its fair value disclosures and
decided to make the following improvements:</font></p>

<p style="font-family:Times New Roman;font-size:10.0pt;margin:0pt 0pt 12.0pt 36.0pt;text-autospace:none;text-indent:-18.0pt;"><font size="2" face="Symbol" style="font-size:10.0pt;">&#183;</font><font size="1" style="font-size:3.0pt;">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; </font>First, pursuant
to FAS 133.532(b), the Company will reorder the table to show whether the
carrying and fair value amounts represent assets, liabilities or equity.</p>

<p style="font-family:Times New Roman;font-size:10.0pt;margin:0pt 0pt 12.0pt 36.0pt;text-autospace:none;text-indent:-18.0pt;"><font size="2" face="Symbol" style="font-size:10.0pt;">&#183;</font><font size="1" style="font-size:3.0pt;">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; </font>Additionally,
pursuant to FAS 107.10, the Company will provide disclosure of the method(s)
and significant assumptions used to estimate the fair value of financial
instruments.</p>

<p style="margin:0pt 0pt 12.0pt;text-indent:36.0pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">The Company will modify its disclosures of fair values
of financial instruments commencing with its December 31, 2006 Consolidated
Financial Statements. The enhanced disclosures will be substantially similar to
the following, which is taken from existing disclosures beginning at the third
paragraph of Note 3 &#147;Summary of Significant Accounting Policies Financial
Instruments and Derivatives&#148; in the Notes to Consolidated Financial Statements
for the year ended December 31, 2005:</font></p>


 <p style="font-size:10.0pt;margin:24.0pt 0pt .0001pt;text-align:center;"><font face="Times New Roman">5</font></p> <br><hr size="3" width="100%" noshade color="#010101" align="center">

<!-- SEQ.=1,FOLIO='5',FILE='C:\fc\3096627936_D11431_1461359\23396-1-de.htm',USER='jmsproofassembler',CD='Nov  5 06:06 2006' -->
<br clear="all" style="page-break-before:always;">
 <p style="margin:0pt 0pt .0001pt;text-align:center;"></p>


<p style="margin:0pt 36.0pt 12.0pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">The following table
summarizes the Company&#146;s carrying values and the fair values of its other
financial instruments:</font></p>

<div align="center" style="font-family:Times New Roman;">

<table border="0" cellspacing="0" cellpadding="0" style="border-collapse:collapse;">
 <tr style="page-break-inside:avoid;">
  <td width="208" valign="bottom" style="padding:0pt .7pt 0pt 0pt;width:156.3pt;">
  <p style="font-size:8.0pt;font-weight:bold;line-height:8.0pt;margin:0pt 0pt .0001pt;page-break-after:avoid;text-align:center;"><!-- SET mrlHTMLTableCenter --></p>
  </td>
  <td width="16" valign="bottom" style="padding:0pt .7pt 0pt 0pt;width:12.0pt;">
  <p style="font-weight:bold;line-height:8.0pt;margin:0pt 0pt .0001pt;page-break-after:avoid;text-align:center;"><b><font size="1" face="Times New Roman" style="font-size:1.0pt;">&nbsp;</font></b></p>
  </td>
  <td width="338" colspan="11" valign="bottom" style="border:none;border-bottom:solid windowtext 1.0pt;padding:0pt .7pt 0pt 0pt;width:253.2pt;">
  <p style="font-weight:bold;line-height:8.0pt;margin:0pt 0pt .0001pt;page-break-after:avoid;text-align:center;"><b><font size="1" face="Times New Roman" style="font-size:8.0pt;">December&nbsp;31,</font></b></p>
  </td>
  <td width="6" valign="bottom" style="padding:0pt .7pt 0pt 0pt;width:4.15pt;">
  <p style="font-weight:bold;line-height:8.0pt;margin:0pt 0pt .0001pt;page-break-after:avoid;text-align:center;"><b><font size="1" face="Times New Roman" style="font-size:1.0pt;">&nbsp;</font></b></p>
  </td>
 </tr>
 <tr style="page-break-inside:avoid;">
  <td width="208" valign="bottom" style="padding:0pt .7pt 0pt 0pt;width:156.3pt;">
  <p style="font-weight:bold;line-height:8.0pt;margin:0pt 0pt .0001pt;page-break-after:avoid;text-align:center;"><b><font size="1" face="Times New Roman" style="font-size:1.0pt;">&nbsp;</font></b></p>
  </td>
  <td width="16" valign="bottom" style="padding:0pt .7pt 0pt 0pt;width:12.0pt;">
  <p style="font-weight:bold;line-height:8.0pt;margin:0pt 0pt .0001pt;page-break-after:avoid;text-align:center;"><b><font size="1" face="Times New Roman" style="font-size:1.0pt;">&nbsp;</font></b></p>
  </td>
  <td width="161" colspan="5" valign="bottom" style="border:none;border-bottom:solid windowtext 1.0pt;padding:0pt .7pt 0pt 0pt;width:120.6pt;">
  <p style="font-weight:bold;line-height:8.0pt;margin:0pt 0pt .0001pt;page-break-after:avoid;text-align:center;"><b><font size="1" face="Times New Roman" style="font-size:8.0pt;">2005</font></b></p>
  </td>
  <td width="16" valign="bottom" style="padding:0pt .7pt 0pt 0pt;width:12.0pt;">
  <p style="font-weight:bold;line-height:8.0pt;margin:0pt 0pt .0001pt;page-break-after:avoid;text-align:center;"><b><font size="1" face="Times New Roman" style="font-size:1.0pt;">&nbsp;</font></b></p>
  </td>
  <td width="161" colspan="5" valign="bottom" style="border:none;border-bottom:solid windowtext 1.0pt;padding:0pt .7pt 0pt 0pt;width:120.6pt;">
  <p style="font-weight:bold;line-height:8.0pt;margin:0pt 0pt .0001pt;page-break-after:avoid;text-align:center;"><b><font size="1" face="Times New Roman" style="font-size:8.0pt;">2004</font></b></p>
  </td>
  <td width="6" valign="bottom" style="padding:0pt .7pt 0pt 0pt;width:4.15pt;">
  <p style="font-weight:bold;line-height:8.0pt;margin:0pt 0pt .0001pt;page-break-after:avoid;text-align:center;"><b><font size="1" face="Times New Roman" style="font-size:1.0pt;">&nbsp;</font></b></p>
  </td>
 </tr>
 <tr style="page-break-inside:avoid;">
  <td width="208" valign="bottom" style="padding:0pt .7pt 0pt 0pt;width:156.3pt;">
  <p style="font-weight:bold;line-height:8.0pt;margin:0pt 0pt .0001pt;page-break-after:avoid;text-align:center;"><b><font size="1" face="Times New Roman" style="font-size:1.0pt;">&nbsp;</font></b></p>
  </td>
  <td width="16" valign="bottom" style="padding:0pt .7pt 0pt 0pt;width:12.0pt;">
  <p style="font-weight:bold;line-height:8.0pt;margin:0pt 0pt .0001pt;page-break-after:avoid;text-align:center;"><b><font size="1" face="Times New Roman" style="font-size:1.0pt;">&nbsp;</font></b></p>
  </td>
  <td width="72" colspan="2" valign="bottom" style="border:none;border-bottom:solid windowtext 1.0pt;padding:0pt .7pt 0pt 0pt;width:54.3pt;">
  <p style="font-weight:bold;line-height:8.0pt;margin:0pt 0pt .0001pt;page-break-after:avoid;text-align:center;"><b><font size="1" face="Times New Roman" style="font-size:8.0pt;">Carrying&nbsp;value</font></b></p>
  </td>
  <td width="16" valign="bottom" style="padding:0pt .7pt 0pt 0pt;width:12.0pt;">
  <p style="font-weight:bold;line-height:8.0pt;margin:0pt 0pt .0001pt;page-break-after:avoid;text-align:center;"><b><font size="1" face="Times New Roman" style="font-size:1.0pt;">&nbsp;</font></b></p>
  </td>
  <td width="72" colspan="2" valign="bottom" style="border:none;border-bottom:solid windowtext 1.0pt;padding:0pt .7pt 0pt 0pt;width:54.3pt;">
  <p style="font-weight:bold;line-height:8.0pt;margin:0pt 0pt .0001pt;page-break-after:avoid;text-align:center;"><b><font size="1" face="Times New Roman" style="font-size:8.0pt;">Fair&nbsp;value</font></b></p>
  </td>
  <td width="16" valign="bottom" style="padding:0pt .7pt 0pt 0pt;width:12.0pt;">
  <p style="font-weight:bold;line-height:8.0pt;margin:0pt 0pt .0001pt;page-break-after:avoid;text-align:center;"><b><font size="1" face="Times New Roman" style="font-size:1.0pt;">&nbsp;</font></b></p>
  </td>
  <td width="72" colspan="2" valign="bottom" style="border:none;border-bottom:solid windowtext 1.0pt;padding:0pt .7pt 0pt 0pt;width:54.3pt;">
  <p style="font-weight:bold;line-height:8.0pt;margin:0pt 0pt .0001pt;page-break-after:avoid;text-align:center;"><b><font size="1" face="Times New Roman" style="font-size:8.0pt;">Carrying&nbsp;Value</font></b></p>
  </td>
  <td width="16" valign="bottom" style="padding:0pt .7pt 0pt 0pt;width:12.0pt;">
  <p style="font-weight:bold;line-height:8.0pt;margin:0pt 0pt .0001pt;page-break-after:avoid;text-align:center;"><b><font size="1" face="Times New Roman" style="font-size:1.0pt;">&nbsp;</font></b></p>
  </td>
  <td width="72" colspan="2" valign="bottom" style="border:none;border-bottom:solid windowtext 1.0pt;padding:0pt .7pt 0pt 0pt;width:54.3pt;">
  <p style="font-weight:bold;line-height:8.0pt;margin:0pt 0pt .0001pt;page-break-after:avoid;text-align:center;"><b><font size="1" face="Times New Roman" style="font-size:8.0pt;">Fair&nbsp;value</font></b></p>
  </td>
  <td width="6" valign="bottom" style="padding:0pt .7pt 0pt 0pt;width:4.15pt;">
  <p style="font-weight:bold;line-height:8.0pt;margin:0pt 0pt .0001pt;page-break-after:avoid;text-align:center;"><b><font size="1" face="Times New Roman" style="font-size:1.0pt;">&nbsp;</font></b></p>
  </td>
 </tr>
 <tr style="page-break-inside:avoid;">
  <td width="208" valign="bottom" style="padding:0pt .7pt 0pt 0pt;width:156.3pt;">
  <p style="font-weight:bold;line-height:8.0pt;margin:0pt 0pt .0001pt;page-break-after:avoid;text-align:center;"><b><font size="1" face="Times New Roman" style="font-size:1.0pt;">&nbsp;</font></b></p>
  </td>
  <td width="16" valign="bottom" style="padding:0pt .7pt 0pt 0pt;width:12.0pt;">
  <p style="font-weight:bold;line-height:8.0pt;margin:0pt 0pt .0001pt;page-break-after:avoid;text-align:center;"><b><font size="1" face="Times New Roman" style="font-size:1.0pt;">&nbsp;</font></b></p>
  </td>
  <td width="338" colspan="11" valign="bottom" style="padding:0pt .7pt 0pt 0pt;width:253.2pt;">
  <p style="font-weight:bold;line-height:8.0pt;margin:0pt 0pt .0001pt;page-break-after:avoid;text-align:center;"><b><font size="1" face="Times New Roman" style="font-size:8.0pt;">(In&nbsp;thousands)</font></b></p>
  </td>
  <td width="6" valign="bottom" style="padding:0pt .7pt 0pt 0pt;width:4.15pt;">
  <p style="font-weight:bold;line-height:8.0pt;margin:0pt 0pt .0001pt;page-break-after:avoid;text-align:center;"><b><font size="1" face="Times New Roman" style="font-size:1.0pt;">&nbsp;</font></b></p>
  </td>
 </tr>
 <tr bgcolor="#CCEEFF" style="page-break-inside:avoid;">
  <td width="208" valign="top" style="padding:0pt .7pt 0pt 0pt;width:156.3pt;">
  <p style="margin:0pt 0pt .0001pt 10.0pt;page-break-after:avoid;text-indent:-10.0pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">Included in
  Assets</font></p>
  </td>
  <td width="16" valign="bottom" style="padding:0pt .7pt 0pt 0pt;width:12.0pt;">
  <p style="margin:0pt 0pt .0001pt;page-break-after:avoid;"><font size="2" face="Times New Roman" style="font-size:1.0pt;">&nbsp;</font></p>
  </td>
  <td width="72" colspan="2" valign="bottom" style="padding:0pt .7pt 0pt 0pt;width:54.3pt;">
  <p style="margin:0pt 0pt .0001pt;page-break-after:avoid;text-align:right;"><font size="2" face="Times New Roman" style="font-size:1.0pt;">&nbsp;</font></p>
  </td>
  <td width="16" valign="bottom" style="padding:0pt .7pt 0pt 0pt;width:12.0pt;">
  <p style="margin:0pt 0pt .0001pt;page-break-after:avoid;"><font size="2" face="Times New Roman" style="font-size:1.0pt;">&nbsp;</font></p>
  </td>
  <td width="72" colspan="2" valign="bottom" style="padding:0pt .7pt 0pt 0pt;width:54.3pt;">
  <p style="margin:0pt 0pt .0001pt;page-break-after:avoid;text-align:right;"><font size="2" face="Times New Roman" style="font-size:1.0pt;">&nbsp;</font></p>
  </td>
  <td width="16" valign="bottom" style="padding:0pt .7pt 0pt 0pt;width:12.0pt;">
  <p style="margin:0pt 0pt .0001pt;page-break-after:avoid;"><font size="2" face="Times New Roman" style="font-size:1.0pt;">&nbsp;</font></p>
  </td>
  <td width="72" colspan="2" valign="bottom" style="padding:0pt .7pt 0pt 0pt;width:54.3pt;">
  <p style="margin:0pt 0pt .0001pt;page-break-after:avoid;text-align:right;"><font size="2" face="Times New Roman" style="font-size:1.0pt;">&nbsp;</font></p>
  </td>
  <td width="16" valign="bottom" style="padding:0pt .7pt 0pt 0pt;width:12.0pt;">
  <p style="margin:0pt 0pt .0001pt;page-break-after:avoid;"><font size="2" face="Times New Roman" style="font-size:1.0pt;">&nbsp;</font></p>
  </td>
  <td width="72" colspan="2" valign="bottom" style="padding:0pt .7pt 0pt 0pt;width:54.3pt;">
  <p style="margin:0pt 0pt .0001pt;page-break-after:avoid;text-align:right;"><font size="2" face="Times New Roman" style="font-size:1.0pt;">&nbsp;</font></p>
  </td>
  <td width="6" valign="bottom" style="padding:0pt .7pt 0pt 0pt;width:4.15pt;">
  <p style="margin:0pt 0pt .0001pt;page-break-after:avoid;"><font size="2" face="Times New Roman" style="font-size:1.0pt;">&nbsp;</font></p>
  </td>
 </tr>
 <tr style="page-break-inside:avoid;">
  <td width="208" valign="top" style="padding:0pt .7pt 0pt 0pt;width:156.3pt;">
  <p style="margin:0pt 0pt .0001pt 20.0pt;page-break-after:avoid;text-indent:-10.0pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">Long-term investments</font></p>
  </td>
  <td width="16" valign="bottom" style="padding:0pt .7pt 0pt 0pt;width:12.0pt;">
  <p style="margin:0pt 0pt .0001pt;page-break-after:avoid;"><font size="2" face="Times New Roman" style="font-size:1.0pt;">&nbsp;</font></p>
  </td>
  <td width="7" valign="bottom" style="padding:0pt 0pt 0pt 0pt;width:5.0pt;">
  <p align="left" style="margin:0pt 0pt .0001pt;page-break-after:avoid;text-align:left;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">$</font></p>
  </td>
  <td width="66" valign="bottom" style="padding:0pt .7pt 0pt 0pt;width:49.3pt;">
  <p style="margin:0pt 0pt .0001pt;page-break-after:avoid;text-align:right;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">26,023</font></p>
  </td>
  <td width="16" valign="bottom" style="padding:0pt .7pt 0pt 0pt;width:12.0pt;">
  <p style="margin:0pt 0pt .0001pt;text-align:right;"><font size="2" face="Times New Roman" style="font-size:1.0pt;">&nbsp;</font></p>
  </td>
  <td width="7" valign="bottom" style="padding:0pt 0pt 0pt 0pt;width:5.0pt;">
  <p align="left" style="margin:0pt 0pt .0001pt;page-break-after:avoid;text-align:left;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">$</font></p>
  </td>
  <td width="66" valign="bottom" style="padding:0pt .7pt 0pt 0pt;width:49.3pt;">
  <p style="margin:0pt 0pt .0001pt;page-break-after:avoid;text-align:right;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">42,887</font></p>
  </td>
  <td width="16" valign="bottom" style="padding:0pt .7pt 0pt 0pt;width:12.0pt;">
  <p style="margin:0pt 0pt .0001pt;text-align:right;"><font size="2" face="Times New Roman" style="font-size:1.0pt;">&nbsp;</font></p>
  </td>
  <td width="7" valign="bottom" style="padding:0pt 0pt 0pt 0pt;width:5.0pt;">
  <p align="left" style="margin:0pt 0pt .0001pt;page-break-after:avoid;text-align:left;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">$</font></p>
  </td>
  <td width="66" valign="bottom" style="padding:0pt .7pt 0pt 0pt;width:49.3pt;">
  <p style="margin:0pt 0pt .0001pt;page-break-after:avoid;text-align:right;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">35,590</font></p>
  </td>
  <td width="16" valign="bottom" style="padding:0pt .7pt 0pt 0pt;width:12.0pt;">
  <p style="margin:0pt 0pt .0001pt;text-align:right;"><font size="2" face="Times New Roman" style="font-size:1.0pt;">&nbsp;</font></p>
  </td>
  <td width="7" valign="bottom" style="padding:0pt 0pt 0pt 0pt;width:5.0pt;">
  <p align="left" style="margin:0pt 0pt .0001pt;page-break-after:avoid;text-align:left;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">$</font></p>
  </td>
  <td width="66" valign="bottom" style="padding:0pt .7pt 0pt 0pt;width:49.3pt;">
  <p style="margin:0pt 0pt .0001pt;page-break-after:avoid;text-align:right;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">47,398</font></p>
  </td>
  <td width="6" valign="bottom" style="padding:0pt .7pt 0pt 0pt;width:4.15pt;">
  <p style="margin:0pt 0pt .0001pt;text-align:right;"><font size="2" face="Times New Roman" style="font-size:1.0pt;">&nbsp;</font></p>
  </td>
 </tr>
 <tr bgcolor="#CCEEFF" style="page-break-inside:avoid;">
  <td width="208" valign="top" style="padding:0pt .7pt 0pt 0pt;width:156.3pt;">
  <p style="margin:0pt 0pt .0001pt 10.0pt;page-break-after:avoid;text-indent:-10.0pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>
  </td>
  <td width="16" valign="bottom" style="padding:0pt .7pt 0pt 0pt;width:12.0pt;">
  <p style="margin:0pt 0pt .0001pt;page-break-after:avoid;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>
  </td>
  <td width="72" colspan="2" valign="bottom" style="padding:0pt .7pt 0pt 0pt;width:54.3pt;">
  <p style="margin:0pt 0pt .0001pt;page-break-after:avoid;text-align:right;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>
  </td>
  <td width="16" valign="bottom" style="padding:0pt .7pt 0pt 0pt;width:12.0pt;">
  <p style="margin:0pt 0pt .0001pt;page-break-after:avoid;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>
  </td>
  <td width="72" colspan="2" valign="bottom" style="padding:0pt .7pt 0pt 0pt;width:54.3pt;">
  <p style="margin:0pt 0pt .0001pt;page-break-after:avoid;text-align:right;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>
  </td>
  <td width="16" valign="bottom" style="padding:0pt .7pt 0pt 0pt;width:12.0pt;">
  <p style="margin:0pt 0pt .0001pt;page-break-after:avoid;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>
  </td>
  <td width="72" colspan="2" valign="bottom" style="padding:0pt .7pt 0pt 0pt;width:54.3pt;">
  <p style="margin:0pt 0pt .0001pt;page-break-after:avoid;text-align:right;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>
  </td>
  <td width="16" valign="bottom" style="padding:0pt .7pt 0pt 0pt;width:12.0pt;">
  <p style="margin:0pt 0pt .0001pt;page-break-after:avoid;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>
  </td>
  <td width="72" colspan="2" valign="bottom" style="padding:0pt .7pt 0pt 0pt;width:54.3pt;">
  <p style="margin:0pt 0pt .0001pt;page-break-after:avoid;text-align:right;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>
  </td>
  <td width="6" valign="bottom" style="padding:0pt .7pt 0pt 0pt;width:4.15pt;">
  <p style="margin:0pt 0pt .0001pt;page-break-after:avoid;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>
  </td>
 </tr>
 <tr style="page-break-inside:avoid;">
  <td width="208" valign="top" style="padding:0pt .7pt 0pt 0pt;width:156.3pt;">
  <p style="margin:0pt 0pt .0001pt 10.0pt;page-break-after:avoid;text-indent:-10.0pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">Included in
  Liabilities</font></p>
  </td>
  <td width="16" valign="bottom" style="padding:0pt .7pt 0pt 0pt;width:12.0pt;">
  <p style="margin:0pt 0pt .0001pt;page-break-after:avoid;"><font size="2" face="Times New Roman" style="font-size:1.0pt;">&nbsp;</font></p>
  </td>
  <td width="72" colspan="2" valign="bottom" style="padding:0pt .7pt 0pt 0pt;width:54.3pt;">
  <p style="margin:0pt 0pt .0001pt;page-break-after:avoid;text-align:right;"><font size="2" face="Times New Roman" style="font-size:1.0pt;">&nbsp;</font></p>
  </td>
  <td width="16" valign="bottom" style="padding:0pt .7pt 0pt 0pt;width:12.0pt;">
  <p style="margin:0pt 0pt .0001pt;page-break-after:avoid;"><font size="2" face="Times New Roman" style="font-size:1.0pt;">&nbsp;</font></p>
  </td>
  <td width="72" colspan="2" valign="bottom" style="padding:0pt .7pt 0pt 0pt;width:54.3pt;">
  <p style="margin:0pt 0pt .0001pt;page-break-after:avoid;text-align:right;"><font size="2" face="Times New Roman" style="font-size:1.0pt;">&nbsp;</font></p>
  </td>
  <td width="16" valign="bottom" style="padding:0pt .7pt 0pt 0pt;width:12.0pt;">
  <p style="margin:0pt 0pt .0001pt;page-break-after:avoid;"><font size="2" face="Times New Roman" style="font-size:1.0pt;">&nbsp;</font></p>
  </td>
  <td width="72" colspan="2" valign="bottom" style="padding:0pt .7pt 0pt 0pt;width:54.3pt;">
  <p style="margin:0pt 0pt .0001pt;page-break-after:avoid;text-align:right;"><font size="2" face="Times New Roman" style="font-size:1.0pt;">&nbsp;</font></p>
  </td>
  <td width="16" valign="bottom" style="padding:0pt .7pt 0pt 0pt;width:12.0pt;">
  <p style="margin:0pt 0pt .0001pt;page-break-after:avoid;"><font size="2" face="Times New Roman" style="font-size:1.0pt;">&nbsp;</font></p>
  </td>
  <td width="72" colspan="2" valign="bottom" style="padding:0pt .7pt 0pt 0pt;width:54.3pt;">
  <p style="margin:0pt 0pt .0001pt;page-break-after:avoid;text-align:right;"><font size="2" face="Times New Roman" style="font-size:1.0pt;">&nbsp;</font></p>
  </td>
  <td width="6" valign="bottom" style="padding:0pt .7pt 0pt 0pt;width:4.15pt;">
  <p style="margin:0pt 0pt .0001pt;page-break-after:avoid;"><font size="2" face="Times New Roman" style="font-size:1.0pt;">&nbsp;</font></p>
  </td>
 </tr>
 <tr bgcolor="#CCEEFF" style="page-break-inside:avoid;">
  <td width="208" valign="top" style="padding:0pt .7pt 0pt 0pt;width:156.3pt;">
  <p style="margin:0pt 0pt .0001pt 20.0pt;page-break-after:avoid;text-indent:-10.0pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">Bank loans</font></p>
  </td>
  <td width="16" valign="bottom" style="padding:0pt .7pt 0pt 0pt;width:12.0pt;">
  <p style="margin:0pt 0pt .0001pt;page-break-after:avoid;"><font size="2" face="Times New Roman" style="font-size:1.0pt;">&nbsp;</font></p>
  </td>
  <td width="72" colspan="2" valign="bottom" style="padding:0pt .7pt 0pt 0pt;width:54.3pt;">
  <p style="margin:0pt 0pt .0001pt;page-break-after:avoid;text-align:right;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">(198,826</font></p>
  </td>
  <td width="16" valign="bottom" style="padding:0pt .7pt 0pt 0pt;width:12.0pt;">
  <p style="margin:0pt 0pt .0001pt;page-break-after:avoid;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">)</font></p>
  </td>
  <td width="72" colspan="2" valign="bottom" style="padding:0pt .7pt 0pt 0pt;width:54.3pt;">
  <p style="margin:0pt 0pt .0001pt;page-break-after:avoid;text-align:right;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">(198,826</font></p>
  </td>
  <td width="16" valign="bottom" style="padding:0pt .7pt 0pt 0pt;width:12.0pt;">
  <p style="margin:0pt 0pt .0001pt;page-break-after:avoid;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">)</font></p>
  </td>
  <td width="72" colspan="2" valign="bottom" style="padding:0pt .7pt 0pt 0pt;width:54.3pt;">
  <p style="margin:0pt 0pt .0001pt;page-break-after:avoid;text-align:right;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">(358,155</font></p>
  </td>
  <td width="16" valign="bottom" style="padding:0pt .7pt 0pt 0pt;width:12.0pt;">
  <p style="margin:0pt 0pt .0001pt;page-break-after:avoid;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">)</font></p>
  </td>
  <td width="72" colspan="2" valign="bottom" style="padding:0pt .7pt 0pt 0pt;width:54.3pt;">
  <p style="margin:0pt 0pt .0001pt;page-break-after:avoid;text-align:right;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">(358,155</font></p>
  </td>
  <td width="6" valign="bottom" style="padding:0pt .7pt 0pt 0pt;width:4.15pt;">
  <p style="margin:0pt 0pt .0001pt;page-break-after:avoid;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">)</font></p>
  </td>
 </tr>
 <tr style="page-break-inside:avoid;">
  <td width="208" valign="top" style="padding:0pt .7pt 0pt 0pt;width:156.3pt;">
  <p style="margin:0pt 0pt .0001pt 20.0pt;page-break-after:avoid;text-indent:-10.0pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">Convertible debt</font></p>
  </td>
  <td width="16" valign="bottom" style="padding:0pt .7pt 0pt 0pt;width:12.0pt;">
  <p style="margin:0pt 0pt .0001pt;page-break-after:avoid;"><font size="2" face="Times New Roman" style="font-size:1.0pt;">&nbsp;</font></p>
  </td>
  <td width="72" colspan="2" valign="bottom" style="padding:0pt .7pt 0pt 0pt;width:54.3pt;">
  <p style="margin:0pt 0pt .0001pt;page-break-after:avoid;text-align:right;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">(274,600</font></p>
  </td>
  <td width="16" valign="bottom" style="padding:0pt .7pt 0pt 0pt;width:12.0pt;">
  <p style="margin:0pt 0pt .0001pt;page-break-after:avoid;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">)</font></p>
  </td>
  <td width="72" colspan="2" valign="bottom" style="padding:0pt .7pt 0pt 0pt;width:54.3pt;">
  <p style="margin:0pt 0pt .0001pt;page-break-after:avoid;text-align:right;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">(229,291</font></p>
  </td>
  <td width="16" valign="bottom" style="padding:0pt .7pt 0pt 0pt;width:12.0pt;">
  <p style="margin:0pt 0pt .0001pt;page-break-after:avoid;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">)</font></p>
  </td>
  <td width="72" colspan="2" valign="bottom" style="padding:0pt .7pt 0pt 0pt;width:54.3pt;">
  <p style="margin:0pt 0pt .0001pt;page-break-after:avoid;text-align:right;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">(402,500</font></p>
  </td>
  <td width="16" valign="bottom" style="padding:0pt .7pt 0pt 0pt;width:12.0pt;">
  <p style="margin:0pt 0pt .0001pt;page-break-after:avoid;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">)</font></p>
  </td>
  <td width="72" colspan="2" valign="bottom" style="padding:0pt .7pt 0pt 0pt;width:54.3pt;">
  <p style="margin:0pt 0pt .0001pt;page-break-after:avoid;text-align:right;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">(475,200</font></p>
  </td>
  <td width="6" valign="bottom" style="padding:0pt .7pt 0pt 0pt;width:4.15pt;">
  <p style="margin:0pt 0pt .0001pt;page-break-after:avoid;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">)</font></p>
  </td>
 </tr>
 <tr bgcolor="#CCEEFF" style="page-break-inside:avoid;">
  <td width="208" valign="top" style="padding:0pt .7pt 0pt 0pt;width:156.3pt;">
  <p style="margin:0pt 0pt .0001pt 10.0pt;page-break-after:avoid;text-indent:-10.0pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>
  </td>
  <td width="16" valign="bottom" style="padding:0pt .7pt 0pt 0pt;width:12.0pt;">
  <p style="margin:0pt 0pt .0001pt;page-break-after:avoid;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>
  </td>
  <td width="72" colspan="2" valign="bottom" style="padding:0pt .7pt 0pt 0pt;width:54.3pt;">
  <p style="margin:0pt 0pt .0001pt;page-break-after:avoid;text-align:right;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>
  </td>
  <td width="16" valign="bottom" style="padding:0pt .7pt 0pt 0pt;width:12.0pt;">
  <p style="margin:0pt 0pt .0001pt;page-break-after:avoid;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>
  </td>
  <td width="72" colspan="2" valign="bottom" style="padding:0pt .7pt 0pt 0pt;width:54.3pt;">
  <p style="margin:0pt 0pt .0001pt;page-break-after:avoid;text-align:right;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>
  </td>
  <td width="16" valign="bottom" style="padding:0pt .7pt 0pt 0pt;width:12.0pt;">
  <p style="margin:0pt 0pt .0001pt;page-break-after:avoid;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>
  </td>
  <td width="72" colspan="2" valign="bottom" style="padding:0pt .7pt 0pt 0pt;width:54.3pt;">
  <p style="margin:0pt 0pt .0001pt;page-break-after:avoid;text-align:right;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>
  </td>
  <td width="16" valign="bottom" style="padding:0pt .7pt 0pt 0pt;width:12.0pt;">
  <p style="margin:0pt 0pt .0001pt;page-break-after:avoid;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>
  </td>
  <td width="72" colspan="2" valign="bottom" style="padding:0pt .7pt 0pt 0pt;width:54.3pt;">
  <p style="margin:0pt 0pt .0001pt;page-break-after:avoid;text-align:right;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>
  </td>
  <td width="6" valign="bottom" style="padding:0pt .7pt 0pt 0pt;width:4.15pt;">
  <p style="margin:0pt 0pt .0001pt;page-break-after:avoid;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>
  </td>
 </tr>
 <tr style="page-break-inside:avoid;">
  <td width="208" valign="top" style="padding:0pt .7pt 0pt 0pt;width:156.3pt;">
  <p style="margin:0pt 0pt .0001pt 10.0pt;page-break-after:avoid;text-indent:-10.0pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">Included in
  Stockholders&#146; Equity</font></p>
  </td>
  <td width="16" valign="bottom" style="padding:0pt .7pt 0pt 0pt;width:12.0pt;">
  <p style="margin:0pt 0pt .0001pt;page-break-after:avoid;"><font size="2" face="Times New Roman" style="font-size:1.0pt;">&nbsp;</font></p>
  </td>
  <td width="72" colspan="2" valign="bottom" style="padding:0pt .7pt 0pt 0pt;width:54.3pt;">
  <p style="margin:0pt 0pt .0001pt;page-break-after:avoid;text-align:right;"><font size="2" face="Times New Roman" style="font-size:1.0pt;">&nbsp;</font></p>
  </td>
  <td width="16" valign="bottom" style="padding:0pt .7pt 0pt 0pt;width:12.0pt;">
  <p style="margin:0pt 0pt .0001pt;page-break-after:avoid;"><font size="2" face="Times New Roman" style="font-size:1.0pt;">&nbsp;</font></p>
  </td>
  <td width="72" colspan="2" valign="bottom" style="padding:0pt .7pt 0pt 0pt;width:54.3pt;">
  <p style="margin:0pt 0pt .0001pt;page-break-after:avoid;text-align:right;"><font size="2" face="Times New Roman" style="font-size:1.0pt;">&nbsp;</font></p>
  </td>
  <td width="16" valign="bottom" style="padding:0pt .7pt 0pt 0pt;width:12.0pt;">
  <p style="margin:0pt 0pt .0001pt;page-break-after:avoid;"><font size="2" face="Times New Roman" style="font-size:1.0pt;">&nbsp;</font></p>
  </td>
  <td width="72" colspan="2" valign="bottom" style="padding:0pt .7pt 0pt 0pt;width:54.3pt;">
  <p style="margin:0pt 0pt .0001pt;page-break-after:avoid;text-align:right;"><font size="2" face="Times New Roman" style="font-size:1.0pt;">&nbsp;</font></p>
  </td>
  <td width="16" valign="bottom" style="padding:0pt .7pt 0pt 0pt;width:12.0pt;">
  <p style="margin:0pt 0pt .0001pt;page-break-after:avoid;"><font size="2" face="Times New Roman" style="font-size:1.0pt;">&nbsp;</font></p>
  </td>
  <td width="72" colspan="2" valign="bottom" style="padding:0pt .7pt 0pt 0pt;width:54.3pt;">
  <p style="margin:0pt 0pt .0001pt;page-break-after:avoid;text-align:right;"><font size="2" face="Times New Roman" style="font-size:1.0pt;">&nbsp;</font></p>
  </td>
  <td width="6" valign="bottom" style="padding:0pt .7pt 0pt 0pt;width:4.15pt;">
  <p style="margin:0pt 0pt .0001pt;page-break-after:avoid;"><font size="2" face="Times New Roman" style="font-size:1.0pt;">&nbsp;</font></p>
  </td>
 </tr>
 <tr bgcolor="#CCEEFF" style="page-break-inside:avoid;">
  <td width="208" valign="top" style="padding:0pt .7pt 0pt 0pt;width:156.3pt;">
  <p style="margin:0pt 0pt .0001pt 20.0pt;page-break-after:avoid;text-indent:-10.0pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">Convertible bond hedge</font></p>
  </td>
  <td width="16" valign="bottom" style="padding:0pt .7pt 0pt 0pt;width:12.0pt;">
  <p style="margin:0pt 0pt .0001pt;page-break-after:avoid;"><font size="2" face="Times New Roman" style="font-size:1.0pt;">&nbsp;</font></p>
  </td>
  <td width="72" colspan="2" valign="bottom" style="padding:0pt .7pt 0pt 0pt;width:54.3pt;">
  <p style="margin:0pt 0pt .0001pt;page-break-after:avoid;text-align:right;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">85,307</font></p>
  </td>
  <td width="16" valign="bottom" style="padding:0pt .7pt 0pt 0pt;width:12.0pt;">
  <p style="margin:0pt 0pt .0001pt;page-break-after:avoid;"><font size="2" face="Times New Roman" style="font-size:1.0pt;">&nbsp;</font></p>
  </td>
  <td width="72" colspan="2" valign="bottom" style="padding:0pt .7pt 0pt 0pt;width:54.3pt;">
  <p style="margin:0pt 0pt .0001pt;page-break-after:avoid;text-align:right;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">5,335</font></p>
  </td>
  <td width="16" valign="bottom" style="padding:0pt .7pt 0pt 0pt;width:12.0pt;">
  <p style="margin:0pt 0pt .0001pt;page-break-after:avoid;"><font size="2" face="Times New Roman" style="font-size:1.0pt;">&nbsp;</font></p>
  </td>
  <td width="72" colspan="2" valign="bottom" style="padding:0pt .7pt 0pt 0pt;width:54.3pt;">
  <p style="margin:0pt 0pt .0001pt;page-break-after:avoid;text-align:right;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">125,040</font></p>
  </td>
  <td width="16" valign="bottom" style="padding:0pt .7pt 0pt 0pt;width:12.0pt;">
  <p style="margin:0pt 0pt .0001pt;page-break-after:avoid;"><font size="2" face="Times New Roman" style="font-size:1.0pt;">&nbsp;</font></p>
  </td>
  <td width="72" colspan="2" valign="bottom" style="padding:0pt .7pt 0pt 0pt;width:54.3pt;">
  <p style="margin:0pt 0pt .0001pt;page-break-after:avoid;text-align:right;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">151,610</font></p>
  </td>
  <td width="6" valign="bottom" style="padding:0pt .7pt 0pt 0pt;width:4.15pt;">
  <p style="margin:0pt 0pt .0001pt;page-break-after:avoid;"><font size="2" face="Times New Roman" style="font-size:1.0pt;">&nbsp;</font></p>
  </td>
 </tr>
 <tr style="page-break-inside:avoid;">
  <td width="208" valign="top" style="padding:0pt .7pt 0pt 0pt;width:156.3pt;">
  <p style="margin:0pt 0pt .0001pt 20.0pt;text-indent:-10.0pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">Written call
  option</font></p>
  </td>
  <td width="16" valign="bottom" style="padding:0pt .7pt 0pt 0pt;width:12.0pt;">
  <p style="margin:0pt 0pt .0001pt;"><font size="2" face="Times New Roman" style="font-size:1.0pt;">&nbsp;</font></p>
  </td>
  <td width="7" valign="bottom" style="padding:0pt 0pt 0pt 0pt;width:5.0pt;">
  <p align="left" style="margin:0pt 0pt .0001pt;text-align:left;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">$</font></p>
  </td>
  <td width="66" valign="bottom" style="padding:0pt .7pt 0pt 0pt;width:49.3pt;">
  <p style="margin:0pt 0pt .0001pt;text-align:right;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">(55,430</font></p>
  </td>
  <td width="16" valign="bottom" style="padding:0pt .7pt 0pt 0pt;width:12.0pt;">
  <p style="margin:0pt 0pt .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">)</font></p>
  </td>
  <td width="7" valign="bottom" style="padding:0pt 0pt 0pt 0pt;width:5.0pt;">
  <p align="left" style="margin:0pt 0pt .0001pt;text-align:left;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">$</font></p>
  </td>
  <td width="66" valign="bottom" style="padding:0pt .7pt 0pt 0pt;width:49.3pt;">
  <p style="margin:0pt 0pt .0001pt;text-align:right;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">(2,133</font></p>
  </td>
  <td width="16" valign="bottom" style="padding:0pt .7pt 0pt 0pt;width:12.0pt;">
  <p style="margin:0pt 0pt .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">)</font></p>
  </td>
  <td width="7" valign="bottom" style="padding:0pt 0pt 0pt 0pt;width:5.0pt;">
  <p align="left" style="margin:0pt 0pt .0001pt;text-align:left;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">$</font></p>
  </td>
  <td width="66" valign="bottom" style="padding:0pt .7pt 0pt 0pt;width:49.3pt;">
  <p style="margin:0pt 0pt .0001pt;text-align:right;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">(81,248</font></p>
  </td>
  <td width="16" valign="bottom" style="padding:0pt .7pt 0pt 0pt;width:12.0pt;">
  <p style="margin:0pt 0pt .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">)</font></p>
  </td>
  <td width="7" valign="bottom" style="padding:0pt 0pt 0pt 0pt;width:5.0pt;">
  <p align="left" style="margin:0pt 0pt .0001pt;text-align:left;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">$</font></p>
  </td>
  <td width="66" valign="bottom" style="padding:0pt .7pt 0pt 0pt;width:49.3pt;">
  <p style="margin:0pt 0pt .0001pt;text-align:right;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">(107,582</font></p>
  </td>
  <td width="6" valign="bottom" style="padding:0pt .7pt 0pt 0pt;width:4.15pt;">
  <p style="margin:0pt 0pt .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">)</font></p>
  </td>
 </tr>
</table>

</div>

<p style="margin:5.0pt 36.0pt 12.0pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">The Company determines the fair value of its
convertible debt and related convertible bond hedge and written call option
using estimates of fair values at the balance sheet date provided by a major
securities firm. The fair value of long-term investments is determined by
management based on quoted market prices or available information about
investees. Because of the short-term nature of the Company&#146;s bank loans, the
Company believes carrying value approximates fair value.</font></p>

<p style="margin:0pt 0pt 12.0pt;"><b><u><font size="2" face="Times New Roman" style="font-size:10.0pt;font-weight:bold;">Note 11 &#151; Debt, page 153</font></u></b></p>

<p style="font-family:Times New Roman;font-size:10.0pt;margin:0pt 0pt 12.0pt 36.0pt;text-indent:-36.0pt;"><b><font size="2" face="Times New Roman" style="font-size:10.0pt;font-weight:bold;">3.</font></b><font size="1" style="font-size:3.0pt;">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; </font><b>Explain to us your consideration of the guidance in SFAS 133 and EITF
00-19 when accounting for your Convertible Bond Hedge (the put) and the Written
Call Option contracts.&#160; Please include a
full explanation of all the terms of these instruments and your consideration
of them when determining your accounting.&#160;
In this regard, it appears that the amount of shares issued in net share
settlement upon exercise of the $32.025 call option may be indeterminate; if so
please explain your consideration of this when complying with the guidance of
EITF 00-19.</b></p>

<p style="margin:0pt 0pt 12.0pt;text-indent:36.0pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">The Company
entered the Convertible Bond Hedge (&#147;CBH&#148;) March 7, 2003 in connection with the
sale of the Company&#146;s 7/8% Convertible Subordinated Notes due March 1, 2008 (&#147;Bonds&#148;)
with an original principal amount of $402.5 million. The counterparty is CSFB
to which the Company paid $125,039,500 to buy this hedge. Its principal terms
are as follows:</font></p>

<p style="font-family:Times New Roman;font-size:10.0pt;margin:0pt 0pt 12.0pt 36.0pt;text-indent:-18.0pt;"><font size="2" face="Symbol" style="font-size:10.0pt;">&#183;</font><font size="1" style="font-size:3.0pt;">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; </font>The
Bonds are convertible in certain circumstances at a price of $23.79 per share.
Upon a Conversion Event (i.e., the conversion of any of the Bonds into shares
of the Company pursuant to the Bond Indenture), unless the Company elects Net
Cash Settlement or Net Share Settlement as further defined below, CSFB will
deliver to the Company the number of shares of the Company&#146;s common stock the
Company is </p>


 <p style="font-size:10.0pt;margin:24.0pt 0pt .0001pt;text-align:center;"><font face="Times New Roman">6</font></p> <br><hr size="3" width="100%" noshade color="#010101" align="center">

<!-- SEQ.=1,FOLIO='6',FILE='C:\fc\3096627936_D11431_1461359\23396-1-de.htm',USER='jmsproofassembler',CD='Nov  5 06:06 2006' -->
<br clear="all" style="page-break-before:always;">
 <p style="margin:0pt 0pt .0001pt;text-align:center;"></p>


<p style="margin:0pt 0pt 12.0pt 36.0pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">required to deliver to holders of Bonds with respect
to the Conversion Event. In exchange the Company will pay CSFB an amount in
U.S. Dollars (&#147;Conversion Amount&#148;) equal to the principal amount of Bonds
submitted to the Company in the Conversion Event. If the entire $402.5 million
principal amount of the Bonds were to be converted, the Company would receive
16,918,873 shares of its common stock ($402.5 million divided by $23.79) for
which it would pay $402.5 million. This is the Physical Settlement option.</font></p>

<p style="font-family:Times New Roman;font-size:10.0pt;margin:0pt 0pt 12.0pt 36.0pt;text-indent:-18.0pt;"><font size="2" face="Symbol" style="font-size:10.0pt;">&#183;</font><font size="1" style="font-size:3.0pt;">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; </font>The
Company has the right to elect either Net Cash Settlement or Net Share
Settlement instead of the Physical Settlement option for any Conversion Event.
To do so it must notify CSFB, in which case the terms of the Physical
Settlement option will not apply. CSFB has no choice in the settlement method
to be used.</p>

<p style="font-family:Times New Roman;font-size:10.0pt;margin:0pt 0pt 12.0pt 36.0pt;text-indent:-18.0pt;"><font size="2" face="Symbol" style="font-size:10.0pt;">&#183;</font><font size="1" style="font-size:3.0pt;">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; </font>If
the Company elects either the Net Cash or Net Share Settlement alternatives, a
Net Settlement Amount is calculated as the product of (x) the number of shares
of Company common stock into which the Bonds are to be converted in the
Conversion Event and (y) the Final Price Differential. The Final Price
Differential, in turn, is the greater of (m) the excess of the Reference Price
over the Conversion Price and (n) zero. The Reference Price is calculated as
the average of Volume Weighted Average Price for each of the first 15 trading
days in the period of not more than 20 days following CSFB&#146;s receipt of a
Conversion Notice from the Company.</p>

<p style="font-family:Times New Roman;font-size:10.0pt;margin:0pt 0pt 12.0pt 36.0pt;text-indent:-18.0pt;"><font size="2" face="Symbol" style="font-size:10.0pt;">&#183;</font><font size="1" style="font-size:3.0pt;">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; </font>For
a Net Cash Settlement, CSFB will pay the Net Settlement Amount to the Company.</p>

<p style="font-family:Times New Roman;font-size:10.0pt;margin:0pt 0pt 12.0pt 36.0pt;text-indent:-18.0pt;"><font size="2" face="Symbol" style="font-size:10.0pt;">&#183;</font><font size="1" style="font-size:3.0pt;">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; </font>For
a Net Share Settlement, CSFB will deliver to the Company the number of shares
of the Company&#146;s common stock determined by dividing (c) the Net Settlement
Amount by (d) the Reference Price.</p>

<p style="font-family:Times New Roman;font-size:10.0pt;margin:0pt 0pt 12.0pt 36.0pt;text-indent:-18.0pt;"><font size="2" face="Symbol" style="font-size:10.0pt;">&#183;</font><font size="1" style="font-size:3.0pt;">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; </font>If
the Conversion Amount for a Conversion Event is less than the principal amount
of the Bonds then outstanding, then the CBH remains in effect for the remaining
outstanding principal balance of the Bonds.</p>

<p style="margin:0pt 0pt 12.0pt;text-indent:36.0pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">The Company also
entered the Written Call Option on March 7, 2003 in connection with the sale of
the Bonds. The counterparty also is CSFB which paid the Company $81,247,500 to
buy the Written Call Option. Its principal terms are as follows:</font></p>

<p style="font-family:Times New Roman;font-size:10.0pt;margin:0pt 0pt 12.0pt 36.0pt;text-indent:-18.0pt;"><font size="2" face="Symbol" style="font-size:10.0pt;">&#183;</font><font size="1" style="font-size:3.0pt;">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; </font>The
Company sold CSFB 16,918,873 European style call options (&#147;Options&#148;). Each
Option entitles the holder to buy one share of its common stock from the
Company at a strike price of $32.025 (Strike Price). The Expiration Date for
the Options is the close of trading on March 1, 2008, subject to accelerated
expiration or extension as discussed further below. The call option is subject
to automatic exercise at the Expiration Date. If the entire $402.5 million
principal amount of the Bonds were to be </p>


 <p style="font-size:10.0pt;margin:24.0pt 0pt .0001pt;text-align:center;"><font face="Times New Roman">7</font></p> <br><hr size="3" width="100%" noshade color="#010101" align="center">

<!-- SEQ.=1,FOLIO='7',FILE='C:\fc\3096627936_D11431_1461359\23396-1-de.htm',USER='jmsproofassembler',CD='Nov  5 06:06 2006' -->
<br clear="all" style="page-break-before:always;">
 <p style="margin:0pt 0pt .0001pt;text-align:center;"></p>


<p style="margin:0pt 0pt 12.0pt 36.0pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">converted at a time when the Written Call Option was &#147;in-the-money&#148;
the Company would receive $541.8 million for issuing 16,918,873 shares of its
common stock (plus some number of additional shares of restricted stock [such
number being subject to a cap of an additional 16,918,873 shares of its common
stock] if the Company were to settle its delivery obligation to CSFB with
restricted stock). This is the Physical Settlement option.</font></p>

<p style="font-family:Times New Roman;font-size:10.0pt;margin:0pt 0pt 12.0pt 36.0pt;text-indent:-18.0pt;"><font size="2" face="Symbol" style="font-size:10.0pt;">&#183;</font><font size="1" style="font-size:3.0pt;">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; </font>If
the Company receives notice of a Conversion Event (as defined in the discussion
of the CBH terms), the Company must inform CSFB immediately (an Expiration
Notice), and the Expiration Date with respect to the number of Options equal to
the total number of Options multiplied by the ratio of (r) the principal amount
of Bonds to be exchanged in the Conversion Option to (s) the total principal
amount of Bonds originally issued in the sale of the Bonds is accelerated.</p>

<p style="font-family:Times New Roman;font-size:10.0pt;margin:0pt 0pt 12.0pt 36.0pt;text-indent:-18.0pt;"><font size="2" face="Symbol" style="font-size:10.0pt;">&#183;</font><font size="1" style="font-size:3.0pt;">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; </font>The
Company has the right to elect either Net Cash Settlement or Net Share
Settlement instead of the Physical Settlement option for any Written Call
Options CSFB elects to exercise at any Expiration Date. To do so it must notify
CSFB, in which case the terms of the Physical Settlement option will not apply.
CSFB has no choice in the settlement method to be used.</p>

<p style="font-family:Times New Roman;font-size:10.0pt;margin:0pt 0pt 12.0pt 36.0pt;text-indent:-18.0pt;"><font size="2" face="Symbol" style="font-size:10.0pt;">&#183;</font><font size="1" style="font-size:3.0pt;">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; </font>The
Company expects each to settle all option exercises on a Net Share Settlement
basis, <b>with a limit on the maximum number of shares of
the Company&#146;s common stock that it is required to deliver of two times the
total number of options covered by the transaction.</b></p>

<p style="font-family:Times New Roman;font-size:10.0pt;margin:0pt 0pt 12.0pt 36.0pt;text-indent:-18.0pt;"><font size="2" face="Symbol" style="font-size:10.0pt;">&#183;</font><font size="1" style="font-size:3.0pt;">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; </font>In
no event may CSFB exercise any Option, including automatic exercises, if such
exercise would cause CSFB to become, directly or indirectly, the beneficial
owner of more than 9.9% of the Company&#146;s common stock. If&#160; CSFB is unable to exercise any Option due to
this limitation, at a later date when its ownership falls below 9.9% then such
Option will become exercisable to such extent as soon as reasonably
practicable. The Net Settlement Amount for such Option will be the amount
calculated at the original Expiration Date.</p>

<p style="font-family:Times New Roman;font-size:10.0pt;margin:0pt 0pt 12.0pt 36.0pt;text-indent:-18.0pt;"><font size="2" face="Symbol" style="font-size:10.0pt;">&#183;</font><font size="1" style="font-size:3.0pt;">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; </font>For
Net Share Settlements, at each Expiration Date the Final Settlement Amount is
the number of shares of the Company&#146;s common stock determined to be equal to
the quotient of (e) the Net Settlement Amount and (f) the Reference Price. The
Net Settlement Amount is calculated as the product of (x) the number of Options
expiring on the Expiration Date and (y) the Final Price Differential. The Final
Price Differential, in turn, is the greater of (m) the excess of the Reference
Price over the Strike Price and (n) zero. The Reference Price is calculated as
the average of Volume Weighted Average Price for each of the first 15 trading
days in the period of not more than 20 days following CSFB&#146;s receipt of an
Expiration Notice from the Company.</p>


 <p style="font-size:10.0pt;margin:24.0pt 0pt .0001pt;text-align:center;"><font face="Times New Roman">8</font></p>
</div><br><hr size="3" width="100%" noshade color="#010101" align="center">

<!-- SEQ.=1,FOLIO='8',FILE='C:\fc\3096627936_D11431_1461359\23396-1-de.htm',USER='jmsproofassembler',CD='Nov  5 06:06 2006' -->



<br clear="all" style="page-break-before:always;">

<div>
 <p style="margin:0pt 0pt .0001pt;text-align:center;"></p>

<p style="font-family:Times New Roman;font-size:10.0pt;margin:0pt 0pt 12.0pt 36.0pt;text-indent:-18.0pt;"><font size="2" face="Symbol" style="font-size:10.0pt;">&#183;</font><font size="1" style="font-size:3.0pt;">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; </font>As
noted two&#160; paragraphs above, the number
of shares of common stock to be issued in at any Expiration Date cannot cause
CSFB to become the beneficial owner of more than 9.9% of the Company&#146;s common
stock. As noted three paragraphs above, on a cumulative basis the Company is
not required to deliver shares of its common stock in excess of two times the
total number of Options covered by the transaction</p>

<p style="font-family:Times New Roman;font-size:10.0pt;margin:0pt 0pt 12.0pt 36.0pt;text-indent:-18.0pt;"><font size="2" face="Symbol" style="font-size:10.0pt;">&#183;</font><font size="1" style="font-size:3.0pt;">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; </font>The
Company has the right to elect a Net Cash Settlements at each Expiration Date,
in which case the Company will pay CSFB the Net Settlement Amount.</p>

<p style="margin:0pt 0pt 12.0pt;text-indent:36.0pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">The Company has
concluded the CBH and the Written Call Option each qualify for exemption from
being accounted for as a derivative instrument under FAS 133 because they met
the exemption in paragraphs 11 and 11(a) of that statement. Those paragraphs
state the following:</font></p>

<p style="margin:5.0pt 36.0pt 12.0pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&#147;11.&nbsp; &nbsp; &nbsp;Notwithstanding the conditions
of paragraphs 6&#151;10, the reporting entity shall <i>not</i>
consider the following contracts to be derivative instruments for purposes of
this Statement:</font></p>

<p style="margin:5.0pt 36.0pt 12.0pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">a.&nbsp; &nbsp; &nbsp;Contracts
issued or held by that reporting entity that are both (1) indexed to its own
stock and (2) classified in stockholders&#146; equity in its statement of financial
position.&#148;</font></p>

<p style="margin-left:0pt;margin-right:0pt;text-indent:36.0pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">Both the CBH and the
Written Call Option are indexed to the Company&#146;s common stock. In analyzing
whether these contracts qualify for classification in stockholders&#146; equity, the
Company considered the provisions of EITF 00-19 &#147;Accounting for Derivative
Financial Instruments Indexed to, and Potentially Settled in, a Company&#146;s Own
Stock.&#148;</font></p>

<p style="margin-left:0pt;margin-right:0pt;text-indent:36.0pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">The Company found the
following to be determinative in its analysis the CBH against the provisions of
EITF 00-19:</font></p>

<p style="font-family:Times New Roman;font-size:10.0pt;margin:6.0pt 0pt 12.0pt 36.0pt;text-indent:-18.0pt;"><font size="2" face="Symbol" style="font-size:10.0pt;">&#183;</font><font size="1" style="font-size:3.0pt;">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; </font>The
CBH is initially accounted for as equity under EITF 00-19.07 and .08 because it
gives the Company a choice of net-cash settlement or settlement in its own
shares (physical settlement or net-share settlement), and all criteria of EITF
00-19.12-.32 have been met. (Compliance with the criteria of EITF 00-19.12-.32
will be discussed below.)</p>

<p style="font-family:Times New Roman;font-size:10.0pt;margin:12.0pt 0pt 12.0pt 36.0pt;text-indent:-18.0pt;"><font size="2" face="Symbol" style="font-size:10.0pt;">&#183;</font><font size="1" style="font-size:3.0pt;">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; </font>Under
EITF 00-19.09, the CBH was accounted for as a reduction of permanent equity at
its original fair value of $125,039,500, which the Company paid to CSFB to
purchase the CBH, because: (a) the Company always has the right to settle on a
net share basis thereby eliminating any requirement to settle in cash, and,
more importantly, (b) the contract never requires the Company to deliver cash
in a net cash settlement (i.e., the amount payable by the Company if the
Company elects a net cash settlement when the Reference Price is below the
Conversion Price is zero).</p>

<p style="font-family:Times New Roman;font-size:10.0pt;margin:12.0pt 0pt 12.0pt 36.0pt;text-indent:-18.0pt;"><font size="2" face="Symbol" style="font-size:10.0pt;">&#183;</font><font size="1" style="font-size:3.0pt;">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; </font>This
is true because the formula for the Net Settlement Amount returns either a zero
result or an amount receivable from CSFB. Per the discussion of the terms of
the CBH, if the Reference Price is below the Conversion Price, the Net
Settlement </p>


 <p style="font-size:10.0pt;margin:24.0pt 0pt .0001pt;text-align:center;"><font face="Times New Roman">9</font></p> <br><hr size="3" width="100%" noshade color="#010101" align="center">

<!-- SEQ.=1,FOLIO='9',FILE='C:\JMS\aloew\06-23396-1\task1466296\23396-1-dg.htm',USER='aloew',CD='Nov  7 01:27 2006' -->
<br clear="all" style="page-break-before:always;">
 <p style="margin:0pt 0pt .0001pt;text-align:center;"></p>


<p style="margin:12.0pt 0pt 5.0pt 36.0pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">Amount is zero and the Company is not required to
issue shares or cash. If the Reference Price is above the Conversion Price,
CSFB is obligated to deliver the Net Settlement Amount in shares of the Company&#146;s
common stock at the Company&#146;s sole election. Accordingly, the Company could
elect the net settlement option if there were ever a conversion when the
Company&#146;s common stock were trading at a price below the conversion price in
the bond indenture, and the settlement amount would be zero. Similarly, the
Company could elect the net-share settlement option when the Company&#146;s common
stock price was above the conversion price. In this situation, CSFB would be
obligated to settle by delivering the net share effect of the excess of the
Company&#146;s common stock price above the conversion price. In no event would the
Company be required to deliver any cash to CSFB. Thus the CBH serves as a hedge
to the Company against the economic loss that would occur from conversions of
the Bonds when the Company&#146;s stock is trading at prices above the conversion
price. However, it has no effect if a conversion were to occur when the Company&#146;s
common stock is trading at prices below the conversion price.</font></p>

<p style="margin-left:0pt;margin-right:0pt;text-indent:36.0pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">The Company found the
following to be determinative in its analysis of the Written Call Option
against the provisions of EITF 00-19:</font></p>

<p style="font-family:Times New Roman;font-size:10.0pt;margin:6.0pt 0pt 12.0pt 36.0pt;text-indent:-18.0pt;"><font size="2" face="Symbol" style="font-size:10.0pt;">&#183;</font><font size="1" style="font-size:3.0pt;">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; </font>The
Written Call Option is initially accounted for as equity under EITF 00-19.07
and .08 because it gives the Company a choice of net-cash settlement or
settlement in its own shares (physical settlement or net-share settlement), and
all the criteria of EITF 00-19.12-.32 have been met. (Compliance with the
criteria of EITF 00-19.12-.32 will be discussed below.)</p>

<p style="font-family:Times New Roman;font-size:10.0pt;margin:6.0pt 0pt 12.0pt 36.0pt;text-indent:-18.0pt;"><font size="2" face="Symbol" style="font-size:10.0pt;">&#183;</font><font size="1" style="font-size:3.0pt;">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; </font>Under
EITF 00-19.09, the Written Call Option was accounted for as an increase of
permanent equity at its original fair value of $81,247,500, which CSFB paid to
the Company to purchase the call option, because the Company always has the
right to settle on a net share basis.</p>

<p style="margin-left:0pt;margin-right:0pt;margin-top:6.0pt;text-indent:36.0pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">Paragraphs12
through 32 of EITF 00-19 contain &#147;Additional Conditions Necessary for Equity
Classification&#148; for financial instruments indexed to the Company&#146;s common
stock. Those considerations and the compliance of the CBH and the Written Call
Options with such conditions are as follows:</font></p>

<p style="font-family:Times New Roman;font-size:10.0pt;margin:6.0pt 0pt 12.0pt 36.0pt;text-indent:-18.0pt;"><font size="2" face="Symbol" style="font-size:10.0pt;">&#183;</font><font size="1" style="font-size:3.0pt;">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; </font><b>The contract permits the company to settle in unregistered shares
(paragraphs 14 through 18). </b>The Company meets this condition. The
CBH allows the Company to elect Net Share Settlement in which case the Company
is never required to deliver its shares or cash. The Written Call Option allows
the Company to elect Net Share Settlement and permits the Company to deliver
shares of its registered or unregistered common stock.</p>

<p style="font-family:Times New Roman;font-size:10.0pt;margin:6.0pt 0pt 12.0pt 36.0pt;text-indent:-18.0pt;"><font size="2" face="Symbol" style="font-size:10.0pt;">&#183;</font><font size="1" style="font-size:3.0pt;">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; </font><b>The company has sufficient authorized and unissued shares available to
settle the contract after considering all other commitments that may require </b></p>


 <p style="font-size:10.0pt;margin:24.0pt 0pt .0001pt;text-align:center;"><font face="Times New Roman">10</font></p> <br><hr size="3" width="100%" noshade color="#010101" align="center">

<!-- SEQ.=1,FOLIO='10',FILE='C:\JMS\aloew\06-23396-1\task1466296\23396-1-dg.htm',USER='aloew',CD='Nov  7 01:27 2006' -->
<br clear="all" style="page-break-before:always;">
 <p style="margin:0pt 0pt .0001pt;text-align:center;"></p>


<p style="font-family:Times New Roman;font-size:10.0pt;margin:6.0pt 0pt 5.0pt 36.0pt;"><b><font size="2" face="Times New Roman" style="font-size:10.0pt;font-weight:bold;">the issuance of stock during the maximum period
the derivative contract could remain outstanding (paragraph 19). </font></b>The
Company meets this condition. The CBH requires CSFB to deliver shares or cash
to the Company in certain circumstances. It does not require the Company to
issue any shares under any circumstances. The Written Call Option contains a
limit on the maximum number of shares of common stock the Company is required
to deliver of 33,837,746 shares. At December 31, 2005, the Company had
120,585,158 shares of common stock outstanding, approximately 11.6 million
shares reserved for conversion of the Bonds, and not more than 36.7 million
shares for employee benefit plans. The total of these share amounts either
outstanding or reserved for potential future issuances is approximately 170
million shares. If the maximum commitment for issuance of the Company&#146;s common
stock under the Written Call Option of 33.8 million is added, it increases the
maximum share commitment amount to approximately 204 million shares. The
Company has had 750 million authorized shares since September 24, 2003 when the
number of authorized shares was increased by a vote of the shareholder. The
Company had 250 million authorized shares in March 2003 when the Written Call
Option was entered into.</p>

<p style="font-family:Times New Roman;font-size:10.0pt;margin:6.0pt 0pt 12.0pt 36.0pt;text-indent:-18.0pt;"><font size="2" face="Symbol" style="font-size:10.0pt;">&#183;</font><font size="1" style="font-size:3.0pt;">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; </font><b>The contract contains an explicit limit on the number of shares to be
delivered in a share settlement (paragraphs 20 through 24). </b>The
Company meets this condition. The CBH requires CSFB to deliver value to the
Company in certain circumstances. It does not require the Company to issue any
shares under any circumstances. As noted in the discussion of the principal
terms of the Written Call Option, the maximum number of shares of the Company&#146;s
common stock that it is required to deliver is two times the total number of
options covered by the transaction or 33,837,746 shares (i.e., 16,918,873
options time two). Additionally, the Written Call Option contains no provision
requiring value in excess of 33,837,746 shares be delivered in any form.</p>

<p style="font-family:Times New Roman;font-size:10.0pt;margin:6.0pt 0pt 12.0pt 36.0pt;text-indent:-18.0pt;"><font size="2" face="Symbol" style="font-size:10.0pt;">&#183;</font><font size="1" style="font-size:3.0pt;">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; </font><b>There are no required cash payments to the counterparty in the event
the company fails to make timely filings with the SEC (paragraph 25). </b>The
Company meets this condition. Neither the CBH nor the Written Call Option
contain any provision requiring cash payments in the event the Company fails to
make timely filings with the SEC.</p>

<p style="font-family:Times New Roman;font-size:10.0pt;margin:6.0pt 0pt 12.0pt 36.0pt;text-indent:-18.0pt;"><font size="2" face="Symbol" style="font-size:10.0pt;">&#183;</font><font size="1" style="font-size:3.0pt;">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; </font><b>There are no required cash payments to the counterparty if the shares
initially delivered upon settlement are subsequently sold by the counterparty
and the sales proceeds are insufficient to provided the counterparty with full
return of the amount due (that is, there are no cash settled &#147;top-off&#148; or &#147;make-whole&#148;
provisions) (paragraph 26). </b>The Company meets this condition. The
CBH requires CSFB to deliver shares or cash to the Company in certain
circumstances. It does not require the Company to issue any shares under any
circumstances. The Written Call Option does contain &#147;top-off or make-whole&#148;
provisions for settlements in unregistered common stock, but such provisions
may be settled in additional shares of </p>


 <p style="font-size:10.0pt;margin:24.0pt 0pt .0001pt;text-align:center;"><font face="Times New Roman">11</font></p> <br><hr size="3" width="100%" noshade color="#010101" align="center">

<!-- SEQ.=1,FOLIO='11',FILE='C:\JMS\aloew\06-23396-1\task1466296\23396-1-dg.htm',USER='aloew',CD='Nov  7 01:27 2006' -->
<br clear="all" style="page-break-before:always;">
 <p style="margin:0pt 0pt .0001pt;text-align:center;"></p>


<p style="margin:6.0pt 0pt 5.0pt 36.0pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">restricted stock in the following manner. If
unregistered common stock is delivered, CSFB must immediately sell the shares.
If after selling all unregistered delivered shares CSFB incurs a shortfall in
the proceeds of such sale(s) as compared to the Net Settlement Amount, then the
Company must issue CSFB additional restricted shares of its common stock to
cover such shortfall, which in turn must be sold immediately and the proceeds
thereof used to reduce the shortfall. This process may continue until the
aggregate net proceeds from share sales by CSFB equals the Net Settlement
Amount. However, the total number of shares that must be delivered pursuant to
this requirement are considered along with all other shares delivered pursuant
to the terms of the Written Call Option in calculating total shares issued that
are subject to a limitation on the maximum number of shares of the Company&#146;s
common stock it is required to deliver. That limitation is 33,837,746 shares of
the Company&#146;s common stock, which is two times the total number of options
covered by the transaction (i.e., 16,918,873 options time two).</font></p>

<p style="font-family:Times New Roman;font-size:10.0pt;margin:6.0pt 0pt 12.0pt 36.0pt;text-indent:-18.0pt;"><font size="2" face="Symbol" style="font-size:10.0pt;">&#183;</font><font size="1" style="font-size:3.0pt;">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; </font><b>The contract requires net-cash settlement only in specific
circumstances in which holders of shares underlying the contract also would
receive cash in exchange for their shares (paragraphs 27 through 28). </b>The
Company meets this condition. The CBH has no provisions under which the
counterparty must receive cash from the Company because the CBH only requires
CSFB to deliver shares or cash to the Company in certain circumstances. It does
not require the Company to issue any shares or any other consideration to CSFB
under any circumstances. The Written Call Option provides that in the event of
a Nationalization, a Merger Event in which the merger consideration to be paid
to holders of Company Shares is other than a share-for-share exchange, or an
Insolvency, the Written Call Option is cancelled and the Company may notify
CSFB that it intends to satisfy any obligation to CSFB by delivering shares of
its common stock. Thereafter, the Company may deliver registered or
unregistered shares of its common stock with a value equal to the amount of the
Payment Obligation. Net-share settlement is permitted in all other
circumstances. Thus there are no circumstances where a net-cash settlement is
required.</p>

<p style="font-family:Times New Roman;font-size:10.0pt;margin:6.0pt 0pt 12.0pt 36.0pt;text-indent:-18.0pt;"><font size="2" face="Symbol" style="font-size:10.0pt;">&#183;</font><font size="1" style="font-size:3.0pt;">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; </font><b>There are no provisions in the contract that indicate that the
counterparty has rights that rank higher than those of a shareholder of the
stock underlying the contract (paragraphs 29 through 31). </b>The
Company meets this condition. The CBH requires CSFB to deliver shares to the
Company. It does not require the Company to issue any shares under any
circumstances. Accordingly, the counterparty, CSFB, is never in a position
where something is due to it with rights that rank higher than those of a
shareholder of the stock underlying the contract. The Written Call Option
specifically states that in the event of the bankruptcy of the Company, the
counterparty, CSFB, &#147;shall not have rights of assert a claim that is senior in
priority to the rights and claims available to the shareholders of the common
stock of [the Company].&#148;</p>


 <p style="font-size:10.0pt;margin:24.0pt 0pt .0001pt;text-align:center;"><font face="Times New Roman">12</font></p> <br><hr size="3" width="100%" noshade color="#010101" align="center">

<!-- SEQ.=1,FOLIO='12',FILE='C:\JMS\aloew\06-23396-1\task1466296\23396-1-dg.htm',USER='aloew',CD='Nov  7 01:27 2006' -->
<br clear="all" style="page-break-before:always;">
 <p style="margin:0pt 0pt .0001pt;text-align:center;"></p>


<p style="font-family:Times New Roman;font-size:10.0pt;margin:6.0pt 0pt 12.0pt 36.0pt;text-indent:-18.0pt;"><font size="2" face="Symbol" style="font-size:10.0pt;">&#183;</font><font size="1" style="font-size:3.0pt;">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; </font><b>There is no requirement in the contract to post collateral at any point
or for any reason (paragraph 32). </b>The Company meets this condition.
Neither the CBH nor the Written Call Option contain any requirement to post
collateral at any point or for any reason.</p>

<p style="margin-left:0pt;margin-right:0pt;margin-top:6.0pt;text-indent:36.0pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">For purposes of
specifically answering the Staff&#146;s query as to whether the amount of shares
issued in net share settlement upon exercise of the $32.025 call option is
indeterminate, the Written Call Option provides the maximum number of shares of
the Company&#146;s common stock that it is required to deliver is two times the
total number of options covered by the transaction or 33,837,746 shares (i.e.,
16,918,873 options time two). Additionally, the Written Call Option contains no
provision requiring value in excess of 33,837,746 shares be delivered in any
form. For these reasons, the Company believes the maximum number of shares of
its common stock that it is required to deliver in net share settlements is not
indeterminate.</font></p>

<p style="font-family:Times New Roman;font-size:10.0pt;margin:0pt 0pt 12.0pt 36.0pt;text-indent:-36.0pt;"><b><font size="2" face="Times New Roman" style="font-size:10.0pt;font-weight:bold;">4.</font></b><font size="1" style="font-size:3.0pt;">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; </font><b>Also, refer to the table on page 133 and tell us how you determined the
fair value of the Convertible Bond Hedge and of the Written Call Option at the
time you entered into these option contracts.</b></p>

<p style="margin:0pt 0pt 12.0pt;text-indent:36.0pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">At the time the
Company entered the Convertible Bond Hedge and the Written Call Option, it
considered fair values at such date to be the $125,039,500 it paid to CSFB and
the $81,247,500 it received from CSFB, respectively, for the purchase and sale
of these financial instruments or a net price of $43.8 million.</font></p>

<p style="font-style:italic;margin:0pt 0pt 12.0pt;"><b><i><u><font size="2" face="Times New Roman" style="font-size:10.0pt;font-style:normal;font-weight:bold;">Note 21 &#151; Segment Reporting</font></u></i></b></p>

<p style="font-family:Times New Roman;font-size:10.0pt;font-style:italic;margin:0pt 0pt 12.0pt 36.0pt;text-indent:-36.0pt;"><b><i><font size="2" face="Times New Roman" style="font-size:10.0pt;font-style:normal;font-weight:bold;">5.</font></i></b><font size="1" style="font-size:3.0pt;font-style:normal;">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; </font><b style="font-style:normal;">We note that a significant amount of your long lived
assets are located within China.&#160; We
understand that it is not uncommon for there to be restrictions on the ability
of PRC subsidiaries to transfer funds to their off-shore parent companies,
including restrictions on the payment of dividends and reserve fund
requirements.&#160; We also understand third
party and regulatory approvals may be necessary in order for a PRC subsidiary
to make loans in a freely tradable currency, such as the U.S. Dollar, to its
parent as this would be a foreign exchange capital account transaction.&#160; Please explain to us all of the restrictions
on the ability of your PRC subsidiaries to transfer funds to the parent company
and provide the disclosures required pursuant to 4-08(e) of Regulation S-X, if
applicable.&#160; In addition, please explain
your consideration of any restrictions when determining whether condensed
financial statements of the registrant are required pursuant to Rule 5-04 of
Regulation S-X or revise.</b></p>

<p style="margin:0pt 0pt 12.0pt;text-indent:36.0pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">Based on the
analysis below and consideration of the requirements of Rule 4-08(e) of
Regulation S-X, the Company believes disclosure in its financial statements of
the restricted net assets of its PRC subsidiaries at December 31, 2005 was not
required as such amounts did not exceed 25% of consolidated net assets.<i> </i>However, the Company continued to include </font></p>


 <p style="font-size:10.0pt;margin:24.0pt 0pt .0001pt;text-align:center;"><font face="Times New Roman">13</font></p> <br><hr size="3" width="100%" noshade color="#010101" align="center">

<!-- SEQ.=1,FOLIO='13',FILE='C:\JMS\aloew\06-23396-1\task1466296\23396-1-dg.htm',USER='aloew',CD='Nov  7 01:27 2006' -->
<br clear="all" style="page-break-before:always;">
 <p style="margin:0pt 0pt .0001pt;text-align:center;"></p>


<p style="margin:0pt 0pt 12.0pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">condensed financial
information of the registrant in its Annual Report on Form 10-K as a carryover
from earlier years where the restricted net assets of PRC domiciled
subsidiaries were more significant. (See Schedule I beginning at page 244 of
the Company&#146;s Annual Report on Form 10-K for the year ended December 31, 2005)</font></p>

<p style="margin:0pt 0pt 12.0pt;text-indent:36.0pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">The Company
voluntarily plans to continue to include in future Annual Reports on Form 10-K
condensed financial information of the registrant in Schedule I so long as the
Company&#146;s operations in China are a significant portion of its total
operations. Additionally, so long as the Company voluntarily files Schedule I,
it has decided to include disclosure of the amount of restricted net assets of
subsidiaries in its Notes to Consolidated Financial Statements. Such enhanced
disclosure will be made in its Annual Report on Form 10-K for the year ended
December 31, 2006, even if the amount is below the Rule 4-08(e) of Regulation
S-X requirement for disclosure. The Company agrees with the Staff&#146;s concern
that such information may be of interest to users of its consolidated financial
statements.</font></p>

<p style="margin:0pt 0pt 12.0pt;text-indent:36.0pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">Such disclosure is
expected to be substantially similar to the following:</font></p>

<p style="margin:0pt 36.0pt 12.0pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">Chinese law requires the
Company&#146;s subsidiaries domiciled in China to obtain government consent prior to
making certain payments to the Company. As a result, approximately $&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
million of the Company&#146;s consolidated net assets cannot be transferred to the
Company from its subsidiaries in China without first obtaining the consent of
the Chinese government.</font></p>

<p style="margin:0pt 0pt 12.0pt;text-indent:36.0pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">Set forth below for
the Staff&#146;s review is a calculation of the Company&#146;s restricted net assets at
December 31, 2005 under the criteria of Rule 4-08(e) of Regulation S-X (in
millions of dollars):</font></p>

<table border="0" cellspacing="0" cellpadding="0" width="100%" style="border-collapse:collapse;width:100.0%;">
 <tr style="page-break-inside:avoid;">
  <td width="43%" valign="bottom" style="padding:0pt .7pt 0pt 0pt;width:43.24%;">
  <p style="font-weight:bold;line-height:8.0pt;margin:0pt 0pt .0001pt;page-break-after:avoid;text-align:center;"><b><font size="1" face="Times New Roman" style="font-size:1.0pt;">&nbsp;</font></b></p>
  </td>
  <td width="2%" valign="bottom" style="padding:0pt .7pt 0pt 0pt;width:2.38%;">
  <p style="font-weight:bold;line-height:8.0pt;margin:0pt 0pt .0001pt;page-break-after:avoid;text-align:center;"><b><font size="1" face="Times New Roman" style="font-size:1.0pt;">&nbsp;</font></b></p>
  </td>
  <td width="9%" colspan="2" valign="bottom" style="border:none;border-bottom:solid windowtext 1.0pt;padding:0pt .7pt 0pt 0pt;width:9.74%;">
  <p style="font-weight:bold;line-height:8.0pt;margin:0pt 0pt .0001pt;page-break-after:avoid;text-align:center;"><b><font size="1" face="Times New Roman" style="font-size:8.0pt;">Intercompany<br>
  Payables&nbsp;to<br>
  Parent,&nbsp;Net</font></b></p>
  </td>
  <td width="4%" valign="bottom" style="padding:0pt .7pt 0pt 0pt;width:4.36%;">
  <p style="font-weight:bold;line-height:8.0pt;margin:0pt 0pt .0001pt;page-break-after:avoid;text-align:center;"><b><font size="1" face="Times New Roman" style="font-size:1.0pt;">&nbsp;</font></b></p>
  </td>
  <td width="9%" colspan="2" valign="bottom" style="border:none;border-bottom:solid windowtext 1.0pt;padding:0pt .7pt 0pt 0pt;width:9.74%;">
  <p style="font-weight:bold;line-height:8.0pt;margin:0pt 0pt .0001pt;page-break-after:avoid;text-align:center;"><b><font size="1" face="Times New Roman" style="font-size:8.0pt;">Stated<br>
  Capital</font></b></p>
  </td>
  <td width="4%" valign="bottom" style="padding:0pt .7pt 0pt 0pt;width:4.36%;">
  <p style="font-weight:bold;line-height:8.0pt;margin:0pt 0pt .0001pt;page-break-after:avoid;text-align:center;"><b><font size="1" face="Times New Roman" style="font-size:1.0pt;">&nbsp;</font></b></p>
  </td>
  <td width="9%" colspan="2" valign="bottom" style="border:none;border-bottom:solid windowtext 1.0pt;padding:0pt .7pt 0pt 0pt;width:9.74%;">
  <p style="font-weight:bold;line-height:8.0pt;margin:0pt 0pt .0001pt;page-break-after:avoid;text-align:center;"><b><font size="1" face="Times New Roman" style="font-size:8.0pt;">Retained<br>
  Earnings</font></b></p>
  </td>
  <td width="4%" valign="bottom" style="padding:0pt .7pt 0pt 0pt;width:4.36%;">
  <p style="font-weight:bold;line-height:8.0pt;margin:0pt 0pt .0001pt;page-break-after:avoid;text-align:center;"><b><font size="1" face="Times New Roman" style="font-size:1.0pt;">&nbsp;</font></b></p>
  </td>
  <td width="9%" colspan="2" valign="bottom" style="border:none;border-bottom:solid windowtext 1.0pt;padding:0pt .7pt 0pt 0pt;width:9.74%;">
  <p style="font-weight:bold;line-height:8.0pt;margin:0pt 0pt .0001pt;page-break-after:avoid;text-align:center;"><b><font size="1" face="Times New Roman" style="font-size:8.0pt;">Total&nbsp;Net<br>
  Assets</font></b></p>
  </td>
  <td width="2%" valign="bottom" style="padding:0pt .7pt 0pt 0pt;width:2.38%;">
  <p style="font-weight:bold;line-height:8.0pt;margin:0pt 0pt .0001pt;text-align:center;"><b><font size="1" face="Times New Roman" style="font-size:1.0pt;">&nbsp;</font></b></p>
  </td>
 </tr>
 <tr bgcolor="#CCEEFF" style="page-break-inside:avoid;">
  <td width="43%" valign="top" style="padding:0pt .7pt 0pt 0pt;width:43.24%;">
  <p style="margin:0pt 0pt .0001pt 10.0pt;page-break-after:avoid;text-indent:-10.0pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">Consolidated
  balances</font></p>
  </td>
  <td width="2%" valign="bottom" style="padding:0pt .7pt 0pt 0pt;width:2.38%;">
  <p style="margin:0pt 0pt .0001pt;page-break-after:avoid;"><font size="2" face="Times New Roman" style="font-size:1.0pt;">&nbsp;</font></p>
  </td>
  <td width="9%" colspan="2" valign="bottom" style="border:none;padding:0pt .7pt 0pt 0pt;width:9.74%;">
  <p style="margin:0pt 0pt .0001pt;page-break-after:avoid;text-align:right;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">N/A</font></p>
  </td>
  <td width="4%" valign="bottom" style="padding:0pt .7pt 0pt 0pt;width:4.36%;">
  <p style="margin:0pt 0pt .0001pt;page-break-after:avoid;"><font size="2" face="Times New Roman" style="font-size:1.0pt;">&nbsp;</font></p>
  </td>
  <td width="1%" valign="bottom" style="border:none;border-bottom:double windowtext 2.25pt;padding:0pt 0pt 0pt 0pt;width:1.0%;">
  <p align="left" style="margin:0pt 0pt .0001pt;page-break-after:avoid;text-align:left;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">$</font></p>
  </td>
  <td width="8%" valign="bottom" style="border-bottom:double windowtext 2.25pt;border-left:none;border-right:none;border-top:solid windowtext 1.0pt;padding:0pt .7pt 0pt 0pt;width:8.74%;">
  <p style="margin:0pt 0pt .0001pt;page-break-after:avoid;text-align:right;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">1,181.7</font></p>
  </td>
  <td width="4%" valign="bottom" style="padding:0pt .7pt 0pt 0pt;width:4.36%;">
  <p style="margin:0pt 0pt .0001pt;text-align:right;"><font size="2" face="Times New Roman" style="font-size:1.0pt;">&nbsp;</font></p>
  </td>
  <td width="1%" valign="bottom" style="border:none;border-bottom:double windowtext 2.25pt;padding:0pt 0pt 0pt 0pt;width:1.0%;">
  <p align="left" style="margin:0pt 0pt .0001pt;page-break-after:avoid;text-align:left;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">$</font></p>
  </td>
  <td width="8%" valign="bottom" style="border-bottom:double windowtext 2.25pt;border-left:none;border-right:none;border-top:solid windowtext 1.0pt;padding:0pt .7pt 0pt 0pt;width:8.74%;">
  <p style="margin:0pt 0pt .0001pt;page-break-after:avoid;text-align:right;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">(253.2</font></p>
  </td>
  <td width="4%" valign="bottom" style="padding:0pt .7pt 1.125pt 0pt;width:4.36%;">
  <p style="margin:0pt 0pt .0001pt;page-break-after:avoid;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">)</font></p>
  </td>
  <td width="1%" valign="bottom" style="border:none;border-bottom:double windowtext 2.25pt;padding:0pt 0pt 0pt 0pt;width:1.0%;">
  <p align="left" style="margin:0pt 0pt .0001pt;page-break-after:avoid;text-align:left;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">$</font></p>
  </td>
  <td width="8%" valign="bottom" style="border-bottom:double windowtext 2.25pt;border-left:none;border-right:none;border-top:solid windowtext 1.0pt;padding:0pt .7pt 0pt 0pt;width:8.74%;">
  <p style="margin:0pt 0pt .0001pt;page-break-after:avoid;text-align:right;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">928.5</font></p>
  </td>
  <td width="2%" valign="bottom" style="padding:0pt .7pt 0pt 0pt;width:2.38%;">
  <p style="margin:0pt 0pt .0001pt;text-align:right;"><font size="2" face="Times New Roman" style="font-size:1.0pt;">&nbsp;</font></p>
  </td>
 </tr>
 <tr style="page-break-inside:avoid;">
  <td width="43%" valign="top" style="padding:0pt .7pt 0pt 0pt;width:43.24%;">
  <p style="margin:0pt 0pt .0001pt 10.0pt;page-break-after:avoid;text-indent:-10.0pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>
  </td>
  <td width="2%" valign="bottom" style="padding:0pt .7pt 0pt 0pt;width:2.38%;">
  <p style="margin:0pt 0pt .0001pt;page-break-after:avoid;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>
  </td>
  <td width="9%" colspan="2" valign="bottom" style="padding:0pt .7pt 0pt 0pt;width:9.74%;">
  <p style="margin:0pt 0pt .0001pt;page-break-after:avoid;text-align:right;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>
  </td>
  <td width="4%" valign="bottom" style="padding:0pt .7pt 0pt 0pt;width:4.36%;">
  <p style="margin:0pt 0pt .0001pt;page-break-after:avoid;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>
  </td>
  <td width="9%" colspan="2" valign="bottom" style="padding:0pt .7pt 0pt 0pt;width:9.74%;">
  <p style="margin:0pt 0pt .0001pt;page-break-after:avoid;text-align:right;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>
  </td>
  <td width="4%" valign="bottom" style="padding:0pt .7pt 0pt 0pt;width:4.36%;">
  <p style="margin:0pt 0pt .0001pt;page-break-after:avoid;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>
  </td>
  <td width="9%" colspan="2" valign="bottom" style="padding:0pt .7pt 0pt 0pt;width:9.74%;">
  <p style="margin:0pt 0pt .0001pt;page-break-after:avoid;text-align:right;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>
  </td>
  <td width="4%" valign="bottom" style="padding:0pt .7pt 0pt 0pt;width:4.36%;">
  <p style="margin:0pt 0pt .0001pt;page-break-after:avoid;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>
  </td>
  <td width="9%" colspan="2" valign="bottom" style="padding:0pt .7pt 0pt 0pt;width:9.74%;">
  <p style="margin:0pt 0pt .0001pt;page-break-after:avoid;text-align:right;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>
  </td>
  <td width="2%" valign="bottom" style="padding:0pt .7pt 0pt 0pt;width:2.38%;">
  <p style="margin:0pt 0pt .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>
  </td>
 </tr>
 <tr bgcolor="#CCEEFF" style="page-break-inside:avoid;">
  <td width="43%" valign="top" style="padding:0pt .7pt 0pt 0pt;width:43.24%;">
  <p style="margin:0pt 0pt .0001pt 10.0pt;page-break-after:avoid;text-indent:-10.0pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">Consolidated PRC
  subsidiaries</font></p>
  </td>
  <td width="2%" valign="bottom" style="padding:0pt .7pt 0pt 0pt;width:2.38%;">
  <p style="margin:0pt 0pt .0001pt;page-break-after:avoid;"><b><font size="2" face="Times New Roman" style="font-size:1.0pt;font-weight:bold;">&nbsp;</font></b></p>
  </td>
  <td width="9%" colspan="2" valign="bottom" style="padding:0pt .7pt 0pt 0pt;width:9.74%;">
  <p style="margin:0pt 0pt .0001pt;page-break-after:avoid;text-align:right;"><b><font size="2" face="Times New Roman" style="font-size:10.0pt;font-weight:bold;">[***]</font></b></p>
  </td>
  <td width="4%" valign="bottom" style="padding:0pt .7pt 0pt 0pt;width:4.36%;">
  <p style="margin:0pt 0pt .0001pt;page-break-after:avoid;"><b><font size="2" face="Times New Roman" style="font-size:1.0pt;font-weight:bold;">&nbsp;</font></b></p>
  </td>
  <td width="9%" colspan="2" valign="bottom" style="padding:0pt .7pt 0pt 0pt;width:9.74%;">
  <p style="margin:0pt 0pt .0001pt;page-break-after:avoid;text-align:right;"><b><font size="2" face="Times New Roman" style="font-size:10.0pt;font-weight:bold;">[***]</font></b></p>
  </td>
  <td width="4%" valign="bottom" style="padding:0pt .7pt 0pt 0pt;width:4.36%;">
  <p style="margin:0pt 0pt .0001pt;page-break-after:avoid;"><b><font size="2" face="Times New Roman" style="font-size:1.0pt;font-weight:bold;">&nbsp;</font></b></p>
  </td>
  <td width="9%" colspan="2" valign="bottom" style="padding:0pt .7pt 0pt 0pt;width:9.74%;">
  <p style="margin:0pt 0pt .0001pt;page-break-after:avoid;text-align:right;"><b><font size="2" face="Times New Roman" style="font-size:10.0pt;font-weight:bold;">[***]</font></b></p>
  </td>
  <td width="4%" valign="bottom" style="padding:0pt .7pt 0pt 0pt;width:4.36%;">
  <p style="margin:0pt 0pt .0001pt;page-break-after:avoid;"><b><font size="2" face="Times New Roman" style="font-size:1.0pt;font-weight:bold;">&nbsp;</font></b></p>
  </td>
  <td width="9%" colspan="2" valign="bottom" style="padding:0pt .7pt 0pt 0pt;width:9.74%;">
  <p style="margin:0pt 0pt .0001pt;page-break-after:avoid;text-align:right;"><b><font size="2" face="Times New Roman" style="font-size:10.0pt;font-weight:bold;">[***]</font></b></p>
  </td>
  <td width="2%" valign="bottom" style="padding:0pt .7pt 0pt 0pt;width:2.38%;">
  <p style="margin:0pt 0pt .0001pt;"><b><font size="2" face="Times New Roman" style="font-size:1.0pt;font-weight:bold;">&nbsp;</font></b></p>
  </td>
 </tr>
 <tr style="page-break-inside:avoid;">
  <td width="43%" valign="top" style="padding:0pt .7pt 0pt 0pt;width:43.24%;">
  <p style="margin:0pt 0pt .0001pt 10.0pt;page-break-after:avoid;text-indent:-10.0pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>
  </td>
  <td width="2%" valign="bottom" style="padding:0pt .7pt 0pt 0pt;width:2.38%;">
  <p style="margin:0pt 0pt .0001pt;page-break-after:avoid;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>
  </td>
  <td width="9%" colspan="2" valign="bottom" style="padding:0pt .7pt 0pt 0pt;width:9.74%;">
  <p style="margin:0pt 0pt .0001pt;page-break-after:avoid;text-align:right;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>
  </td>
  <td width="4%" valign="bottom" style="padding:0pt .7pt 0pt 0pt;width:4.36%;">
  <p style="margin:0pt 0pt .0001pt;page-break-after:avoid;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>
  </td>
  <td width="9%" colspan="2" valign="bottom" style="padding:0pt .7pt 0pt 0pt;width:9.74%;">
  <p style="margin:0pt 0pt .0001pt;page-break-after:avoid;text-align:right;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>
  </td>
  <td width="4%" valign="bottom" style="padding:0pt .7pt 0pt 0pt;width:4.36%;">
  <p style="margin:0pt 0pt .0001pt;page-break-after:avoid;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>
  </td>
  <td width="9%" colspan="2" valign="bottom" style="padding:0pt .7pt 0pt 0pt;width:9.74%;">
  <p style="margin:0pt 0pt .0001pt;page-break-after:avoid;text-align:right;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>
  </td>
  <td width="4%" valign="bottom" style="padding:0pt .7pt 0pt 0pt;width:4.36%;">
  <p style="margin:0pt 0pt .0001pt;page-break-after:avoid;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>
  </td>
  <td width="9%" colspan="2" valign="bottom" style="padding:0pt .7pt 0pt 0pt;width:9.74%;">
  <p style="margin:0pt 0pt .0001pt;page-break-after:avoid;text-align:right;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>
  </td>
  <td width="2%" valign="bottom" style="padding:0pt .7pt 0pt 0pt;width:2.38%;">
  <p style="margin:0pt 0pt .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>
  </td>
 </tr>
 <tr bgcolor="#CCEEFF" style="page-break-inside:avoid;">
  <td width="43%" valign="top" style="padding:0pt .7pt 0pt 0pt;width:43.24%;">
  <p style="margin:0pt 0pt .0001pt 10.0pt;page-break-after:avoid;text-indent:-10.0pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">Restricted due
  to PRC consent requirements</font></p>
  </td>
  <td width="2%" valign="bottom" style="padding:0pt .7pt 0pt 0pt;width:2.38%;">
  <p style="margin:0pt 0pt .0001pt;page-break-after:avoid;"><b><font size="2" face="Times New Roman" style="font-size:1.0pt;font-weight:bold;">&nbsp;</font></b></p>
  </td>
  <td width="9%" colspan="2" valign="bottom" style="padding:0pt .7pt 0pt 0pt;width:9.74%;">
  <p style="margin:0pt 0pt .0001pt;page-break-after:avoid;text-align:right;"><b><font size="2" face="Times New Roman" style="font-size:10.0pt;font-weight:bold;">[***]</font></b></p>
  </td>
  <td width="4%" valign="bottom" style="padding:0pt .7pt 0pt 0pt;width:4.36%;">
  <p style="margin:0pt 0pt .0001pt;page-break-after:avoid;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">(1)</font></p>
  </td>
  <td width="9%" colspan="2" valign="bottom" style="padding:0pt .7pt 0pt 0pt;width:9.74%;">
  <p style="margin:0pt 0pt .0001pt;page-break-after:avoid;text-align:right;"><b><font size="2" face="Times New Roman" style="font-size:10.0pt;font-weight:bold;">[***]</font></b></p>
  </td>
  <td width="4%" valign="bottom" style="padding:0pt .7pt 0pt 0pt;width:4.36%;">
  <p style="margin:0pt 0pt .0001pt;page-break-after:avoid;"><b><font size="2" face="Times New Roman" style="font-size:1.0pt;font-weight:bold;">&nbsp;</font></b></p>
  </td>
  <td width="9%" colspan="2" valign="bottom" style="padding:0pt .7pt 0pt 0pt;width:9.74%;">
  <p style="margin:0pt 0pt .0001pt;page-break-after:avoid;text-align:right;"><b><font size="2" face="Times New Roman" style="font-size:10.0pt;font-weight:bold;">[***]</font></b></p>
  </td>
  <td width="4%" valign="bottom" style="padding:0pt .7pt 0pt 0pt;width:4.36%;">
  <p style="margin:0pt 0pt .0001pt;page-break-after:avoid;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">(2)</font></p>
  </td>
  <td width="1%" valign="bottom" style="padding:0pt 0pt 0pt 0pt;width:1.0%;">
  <p align="left" style="margin:0pt 0pt .0001pt;page-break-after:avoid;text-align:left;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">$</font></p>
  </td>
  <td width="8%" valign="bottom" style="padding:0pt .7pt 0pt 0pt;width:8.74%;">
  <p style="margin:0pt 0pt .0001pt;page-break-after:avoid;text-align:right;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">179.3</font></p>
  </td>
  <td width="2%" valign="bottom" style="padding:0pt .7pt 0pt 0pt;width:2.38%;">
  <p style="margin:0pt 0pt .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">(1)</font></p>
  </td>
 </tr>
 <tr style="page-break-inside:avoid;">
  <td width="43%" valign="top" style="padding:0pt .7pt 0pt 0pt;width:43.24%;">
  <p style="margin:0pt 0pt .0001pt 10.0pt;page-break-after:avoid;text-indent:-10.0pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>
  </td>
  <td width="2%" valign="bottom" style="padding:0pt .7pt 0pt 0pt;width:2.38%;">
  <p style="margin:0pt 0pt .0001pt;page-break-after:avoid;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>
  </td>
  <td width="9%" colspan="2" valign="bottom" style="padding:0pt .7pt 0pt 0pt;width:9.74%;">
  <p style="margin:0pt 0pt .0001pt;page-break-after:avoid;text-align:right;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>
  </td>
  <td width="4%" valign="bottom" style="padding:0pt .7pt 0pt 0pt;width:4.36%;">
  <p style="margin:0pt 0pt .0001pt;page-break-after:avoid;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>
  </td>
  <td width="9%" colspan="2" valign="bottom" style="padding:0pt .7pt 0pt 0pt;width:9.74%;">
  <p style="margin:0pt 0pt .0001pt;page-break-after:avoid;text-align:right;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>
  </td>
  <td width="4%" valign="bottom" style="padding:0pt .7pt 0pt 0pt;width:4.36%;">
  <p style="margin:0pt 0pt .0001pt;page-break-after:avoid;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>
  </td>
  <td width="9%" colspan="2" valign="bottom" style="padding:0pt .7pt 0pt 0pt;width:9.74%;">
  <p style="margin:0pt 0pt .0001pt;page-break-after:avoid;text-align:right;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>
  </td>
  <td width="4%" valign="bottom" style="padding:0pt .7pt 0pt 0pt;width:4.36%;">
  <p style="margin:0pt 0pt .0001pt;page-break-after:avoid;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>
  </td>
  <td width="9%" colspan="2" valign="bottom" style="padding:0pt .7pt 0pt 0pt;width:9.74%;">
  <p style="margin:0pt 0pt .0001pt;page-break-after:avoid;text-align:right;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>
  </td>
  <td width="2%" valign="bottom" style="padding:0pt .7pt 0pt 0pt;width:2.38%;">
  <p style="margin:0pt 0pt .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>
  </td>
 </tr>
 <tr bgcolor="#CCEEFF" style="page-break-inside:avoid;">
  <td width="43%" valign="top" style="padding:0pt .7pt 0pt 0pt;width:43.24%;">
  <p style="margin:0pt 0pt .0001pt 10.0pt;page-break-after:avoid;text-indent:-10.0pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">Restricted due
  to debt covenants</font></p>
  </td>
  <td width="2%" valign="bottom" style="padding:0pt .7pt 0pt 0pt;width:2.38%;">
  <p style="margin:0pt 0pt .0001pt;page-break-after:avoid;"><font size="2" face="Times New Roman" style="font-size:1.0pt;">&nbsp;</font></p>
  </td>
  <td width="9%" colspan="2" valign="bottom" style="padding:0pt .7pt 0pt 0pt;width:9.74%;">
  <p style="margin:0pt 0pt .0001pt;page-break-after:avoid;text-align:right;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">None</font></p>
  </td>
  <td width="4%" valign="bottom" style="padding:0pt .7pt 0pt 0pt;width:4.36%;">
  <p style="margin:0pt 0pt .0001pt;page-break-after:avoid;"><font size="2" face="Times New Roman" style="font-size:1.0pt;">&nbsp;</font></p>
  </td>
  <td width="9%" colspan="2" valign="bottom" style="padding:0pt .7pt 0pt 0pt;width:9.74%;">
  <p style="margin:0pt 0pt .0001pt;page-break-after:avoid;text-align:right;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">None</font></p>
  </td>
  <td width="4%" valign="bottom" style="padding:0pt .7pt 0pt 0pt;width:4.36%;">
  <p style="margin:0pt 0pt .0001pt;page-break-after:avoid;"><font size="2" face="Times New Roman" style="font-size:1.0pt;">&nbsp;</font></p>
  </td>
  <td width="9%" colspan="2" valign="bottom" style="padding:0pt .7pt 0pt 0pt;width:9.74%;">
  <p style="margin:0pt 0pt .0001pt;page-break-after:avoid;text-align:right;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">None</font></p>
  </td>
  <td width="4%" valign="bottom" style="padding:0pt .7pt 0pt 0pt;width:4.36%;">
  <p style="margin:0pt 0pt .0001pt;page-break-after:avoid;"><font size="2" face="Times New Roman" style="font-size:1.0pt;">&nbsp;</font></p>
  </td>
  <td width="9%" colspan="2" valign="bottom" style="padding:0pt .7pt 0pt 0pt;width:9.74%;">
  <p style="margin:0pt 0pt .0001pt;page-break-after:avoid;text-align:right;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">None</font></p>
  </td>
  <td width="2%" valign="bottom" style="padding:0pt .7pt 0pt 0pt;width:2.38%;">
  <p style="margin:0pt 0pt .0001pt;"><font size="2" face="Times New Roman" style="font-size:1.0pt;">&nbsp;</font></p>
  </td>
 </tr>
 <tr style="page-break-inside:avoid;">
  <td width="43%" valign="top" style="padding:0pt .7pt 0pt 0pt;width:43.24%;">
  <p style="margin:0pt 0pt .0001pt 10.0pt;page-break-after:avoid;text-indent:-10.0pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>
  </td>
  <td width="2%" valign="bottom" style="padding:0pt .7pt 0pt 0pt;width:2.38%;">
  <p style="margin:0pt 0pt .0001pt;page-break-after:avoid;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>
  </td>
  <td width="9%" colspan="2" valign="bottom" style="padding:0pt .7pt 0pt 0pt;width:9.74%;">
  <p style="margin:0pt 0pt .0001pt;page-break-after:avoid;text-align:right;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>
  </td>
  <td width="4%" valign="bottom" style="padding:0pt .7pt 0pt 0pt;width:4.36%;">
  <p style="margin:0pt 0pt .0001pt;page-break-after:avoid;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>
  </td>
  <td width="9%" colspan="2" valign="bottom" style="padding:0pt .7pt 0pt 0pt;width:9.74%;">
  <p style="margin:0pt 0pt .0001pt;page-break-after:avoid;text-align:right;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>
  </td>
  <td width="4%" valign="bottom" style="padding:0pt .7pt 0pt 0pt;width:4.36%;">
  <p style="margin:0pt 0pt .0001pt;page-break-after:avoid;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>
  </td>
  <td width="9%" colspan="2" valign="bottom" style="padding:0pt .7pt 0pt 0pt;width:9.74%;">
  <p style="margin:0pt 0pt .0001pt;page-break-after:avoid;text-align:right;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>
  </td>
  <td width="4%" valign="bottom" style="padding:0pt .7pt 0pt 0pt;width:4.36%;">
  <p style="margin:0pt 0pt .0001pt;page-break-after:avoid;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>
  </td>
  <td width="9%" colspan="2" valign="bottom" style="padding:0pt .7pt 0pt 0pt;width:9.74%;">
  <p style="margin:0pt 0pt .0001pt;page-break-after:avoid;text-align:right;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>
  </td>
  <td width="2%" valign="bottom" style="padding:0pt .7pt 0pt 0pt;width:2.38%;">
  <p style="margin:0pt 0pt .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>
  </td>
 </tr>
 <tr bgcolor="#CCEEFF" style="page-break-inside:avoid;">
  <td width="43%" valign="top" style="padding:0pt .7pt 0pt 0pt;width:43.24%;">
  <p style="margin:0pt 0pt .0001pt 10.0pt;text-indent:-10.0pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">Total restricted net
  assets of PRC subsidiaries</font></p>
  </td>
  <td width="2%" valign="bottom" style="padding:0pt .7pt 0pt 0pt;width:2.38%;">
  <p style="margin:0pt 0pt .0001pt;"><font size="2" face="Times New Roman" style="font-size:1.0pt;">&nbsp;</font></p>
  </td>
  <td width="1%" valign="bottom" style="border:none;border-bottom:double windowtext 2.25pt;padding:0pt 0pt 0pt 0pt;width:1.0%;">
  <p align="left" style="margin:0pt 0pt .0001pt;text-align:left;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">$</font></p>
  </td>
  <td width="8%" valign="bottom" style="border:none;border-bottom:double windowtext 2.25pt;padding:0pt .7pt 0pt 0pt;width:8.74%;">
  <p style="margin:0pt 0pt .0001pt;text-align:right;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">31.0</font></p>
  </td>
  <td width="4%" valign="bottom" style="padding:0pt .7pt 1.125pt 0pt;width:4.36%;">
  <p style="margin:0pt 0pt .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">(1)</font></p>
  </td>
  <td width="1%" valign="bottom" style="border:none;border-bottom:double windowtext 2.25pt;padding:0pt 0pt 0pt 0pt;width:1.0%;">
  <p align="left" style="margin:0pt 0pt .0001pt;text-align:left;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">$</font></p>
  </td>
  <td width="8%" valign="bottom" style="border:none;border-bottom:double windowtext 2.25pt;padding:0pt .7pt 0pt 0pt;width:8.74%;">
  <p style="margin:0pt 0pt .0001pt;text-align:right;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">113.3</font></p>
  </td>
  <td width="4%" valign="bottom" style="padding:0pt .7pt 0pt 0pt;width:4.36%;">
  <p style="margin:0pt 0pt .0001pt;text-align:right;"><font size="2" face="Times New Roman" style="font-size:1.0pt;">&nbsp;</font></p>
  </td>
  <td width="1%" valign="bottom" style="border:none;border-bottom:double windowtext 2.25pt;padding:0pt 0pt 0pt 0pt;width:1.0%;">
  <p align="left" style="margin:0pt 0pt .0001pt;text-align:left;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">$</font></p>
  </td>
  <td width="8%" valign="bottom" style="border:none;border-bottom:double windowtext 2.25pt;padding:0pt .7pt 0pt 0pt;width:8.74%;">
  <p style="margin:0pt 0pt .0001pt;text-align:right;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">35.0</font></p>
  </td>
  <td width="4%" valign="bottom" style="padding:0pt .7pt 1.125pt 0pt;width:4.36%;">
  <p style="margin:0pt 0pt .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">(2)</font></p>
  </td>
  <td width="1%" valign="bottom" style="border:none;border-bottom:double windowtext 2.25pt;padding:0pt 0pt 0pt 0pt;width:1.0%;">
  <p align="left" style="margin:0pt 0pt .0001pt;text-align:left;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">$</font></p>
  </td>
  <td width="8%" valign="bottom" style="border:none;border-bottom:double windowtext 2.25pt;padding:0pt .7pt 0pt 0pt;width:8.74%;">
  <p style="margin:0pt 0pt .0001pt;text-align:right;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">179.3</font></p>
  </td>
  <td width="2%" valign="bottom" style="padding:0pt .7pt 1.125pt 0pt;width:2.38%;">
  <p style="margin:0pt 0pt .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">(1)</font></p>
  </td>
 </tr>
 <tr height="0">
  <td width="323" style="border:none;"></td>
  <td width="18" style="border:none;"></td>
  <td width="7" style="border:none;"></td>
  <td width="65" style="border:none;"></td>
  <td width="33" style="border:none;"></td>
  <td width="7" style="border:none;"></td>
  <td width="65" style="border:none;"></td>
  <td width="33" style="border:none;"></td>
  <td width="7" style="border:none;"></td>
  <td width="65" style="border:none;"></td>
  <td width="33" style="border:none;"></td>
  <td width="7" style="border:none;"></td>
  <td width="65" style="border:none;"></td>
  <td width="18" style="border:none;"></td>
 </tr>
</table>

<div style="margin:0pt 0pt .0001pt;page-break-after:avoid;"><hr size="1" width="160" noshade color="black" align="left" style="width:120.0pt;"></div>

<p style="margin:0pt 0pt 12.0pt;text-indent:0pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">(1)&#160;&#160;&#160; These amounts are approximations that the
Company believes are reasonable for purposes of this analysis.</font></p>

<p style="margin:0pt 0pt 12.0pt;text-indent:0pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">(2)&#160;&#160;&#160; Retained earnings restricted for its reserve
fund and its employee bonus and welfare fund are estimated for purposes of this
analysis to be approximately 10% of total retained earnings, which the Company
believes is the maximum amount of retained earnings that could be utilized for
such purposes under current PRC regulations.</font></p>


 <p style="font-size:10.0pt;margin:24.0pt 0pt .0001pt;text-align:center;"><font face="Times New Roman">14</font></p> <br><hr size="3" width="100%" noshade color="#010101" align="center">

<!-- SEQ.=1,FOLIO='14',FILE='C:\JMS\aloew\06-23396-1\task1466296\23396-1-dg.htm',USER='aloew',CD='Nov  7 01:27 2006' -->
<br clear="all" style="page-break-before:always;">
 <p style="margin:0pt 0pt .0001pt;text-align:center;"></p>


<p style="font-family:Times New Roman;font-size:10.0pt;font-style:italic;margin:0pt 0pt 12.0pt;text-indent:36.0pt;"><i><font size="2" face="Times New Roman" style="font-size:10.0pt;font-style:normal;">As one can see from this
calculation, the $179.3 million amount of restricted net assets of PRC
subsidiaries at December 31, 2005 is roughly $53 million less than 25% of the
Company&#146;s consolidated net assets at such date (25% of $928.5 million equals
$232.1 million). When performing this calculation, </font></i><font style="font-style:normal;">the Company interprets the
phrase &#147;which may not be transferred to the parent company in the form of
loans, advances or cash dividends by the subsidiaries <b>without the
consent of a third party </b>[emphasis added] (i.e., lender, regulatory
agency, foreign government, etc.)&#148; in Rule 4-08(e) of Regulation S-X to mean
any form of required governmental consent. (There are no lender restrictions on
transfers of funds to the Company by any of its PRC domiciled subsidiaries.)</font></p>

<p style="font-style:italic;margin:0pt 0pt 12.0pt;text-indent:36.0pt;"><i><font size="2" face="Times New Roman" style="font-size:10.0pt;font-style:normal;">PRC governmental consent is not required to
transfer funds from the PRC to the Company as dividends except in the case of
the liquidation of a subsidiary. The PRC government also blocks (a) payment of
dividends from retained earnings that must be set aside for reserve fund and
its employee bonus and welfare fund requirements until payments to fulfill such
requirements are made, and (b) payments by a PRC domiciled subsidiary of
intercompany amounts due the Company for certain items disallowed by PRC tax
authorities.</font></i></p>

<p style="margin:0pt 0pt 12.0pt;text-indent:36.0pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">Based on
information from the Company&#146;s PRC based legal counsel, its experience with the
process for dividend remittances from PRC domiciled subsidiaries to the
Company, and agreements on certain issues made with PRC tax authorities, the
Company understands the process for and limitations on obtaining remittances in
U. S. dollars from its PRC subsidiaries to be as follows:</font></p>

<p style="font-family:Times New Roman;font-size:10.0pt;margin:0pt 0pt 12.0pt 36.0pt;text-indent:-18.0pt;"><font size="2" face="Symbol" style="font-size:10.0pt;">&#183;</font><font size="1" style="font-size:3.0pt;">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; </font>Each
PRC domiciled subsidiary must allocate certain percentages of its after tax
profits for its reserve fund and its employee bonus and welfare fund. These
retained earnings may not be transferred to an offshore parent until the
obligations that such allocated retained earnings provide for are settled.</p>

<p style="font-family:Times New Roman;font-size:10.0pt;margin:0pt 0pt 12.0pt 36.0pt;text-indent:-18.0pt;"><font size="2" face="Symbol" style="font-size:10.0pt;">&#183;</font><font size="1" style="font-size:3.0pt;">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; </font>Annually
each PRC subsidiary must complete an enterprise tax clearance and settlement
procedure with the competent local counterpart of the State Administration of
Taxation (SAT). The annual enterprise tax clearance and settlement procedure is
a requirement of doing business in the PRC and occurs whether or not a dividend
payment to the Company is anticipated.</p>

<p style="font-family:Times New Roman;font-size:10.0pt;margin:0pt 0pt 12.0pt 36.0pt;text-indent:-18.0pt;"><font size="2" face="Symbol" style="font-size:10.0pt;">&#183;</font><font size="1" style="font-size:3.0pt;">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; </font>As
a part of the enterprise tax clearance and settlement procedure, the PRC
subsidiary must engage a CPA firm licensed in the PRC to perform an audit and
issue an audit report. In some cases, the CPA firm that performs this audit
must be approved by or in limited instances appointed by the SAT or its
competent local counterpart. Based on conversations with the Company&#146;s
statutory auditor in the PRC, the Company believes such audits are accomplished
for any of its PRC subsidiaries in a two to four week period.</p>


 <p style="font-size:10.0pt;margin:24.0pt 0pt .0001pt;text-align:center;"><font face="Times New Roman">15</font></p> <br><hr size="3" width="100%" noshade color="#010101" align="center">

<!-- SEQ.=1,FOLIO='15',FILE='C:\JMS\aloew\06-23396-1\task1466296\23396-1-dg.htm',USER='aloew',CD='Nov  7 01:27 2006' -->
<br clear="all" style="page-break-before:always;">
 <p style="margin:0pt 0pt .0001pt;text-align:center;"></p>


<p style="font-family:Times New Roman;font-size:10.0pt;margin:0pt 0pt 12.0pt 36.0pt;text-indent:-18.0pt;"><font size="2" face="Symbol" style="font-size:10.0pt;">&#183;</font><font size="1" style="font-size:3.0pt;">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; </font>After
the PRC subsidiary completes its tax clearance and settlement procedure, it may
request the SAT local counterpart to issue an enterprise income tax payment
certificate. Obtaining an enterprise income tax payment certificate is a
ministerial action once the enterprise tax clearance and settlement procedure
is complete. It is not a process that requires governmental consent.</p>

<p style="font-family:Times New Roman;font-size:10.0pt;margin:0pt 0pt 12.0pt 36.0pt;text-indent:-18.0pt;"><font size="2" face="Symbol" style="font-size:10.0pt;">&#183;</font><font size="1" style="font-size:3.0pt;">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; </font>In
general, the payment of dividends by a PRC domiciled subsidiary to a foreign
parent does not require the prior approval of the State Administration of
Foreign Exchange (SAFE). The PRC subsidiary may present the enterprise tax
payment certificate and other required documentation to a qualified bank
directly and have dividends remitted in U.S. dollars to the offshore parent.</p>

<p style="font-family:Times New Roman;font-size:10.0pt;margin:0pt 0pt 12.0pt 36.0pt;text-indent:-18.0pt;"><font size="2" face="Symbol" style="font-size:10.0pt;">&#183;</font><font size="1" style="font-size:3.0pt;">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; </font>The
remittance of the liquidation proceeds of a PRC subsidiary requires SAFE
approval. The PRC subsidiary must submit documentation, including the
enterprise tax payment certificate concerning the liquidation proceeds, to be
considered by SAFE.</p>

<p style="font-family:Times New Roman;font-size:10.0pt;margin:0pt 0pt 12.0pt 36.0pt;text-indent:-18.0pt;"><font size="2" face="Symbol" style="font-size:10.0pt;">&#183;</font><font size="1" style="font-size:3.0pt;">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; </font>SAFE
generally prohibits loans by a PRC domiciled subsidiary to a foreign parent
entity.</p>

<p style="margin:0pt 0pt 12.0pt;text-indent:36.0pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">SAFE also
restricts payment of the following intercompany liabilities of the Company&#146;s
PRC subsidiaries to the Company that arise from transactions that do not result
in allowable deductions for PRC income tax purposes:</font></p>

<p style="font-family:Times New Roman;font-size:10.0pt;margin:0pt 0pt 12.0pt 36.0pt;text-indent:-18.0pt;"><font size="2" face="Symbol" style="font-size:10.0pt;">&#183;</font><font size="1" style="font-size:3.0pt;">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; </font>The
Company allocates its worldwide research and development expenses among its
entities using the relative sales method whereby each subsidiary bears a
percentage of consolidated research and development expense equal to the
percentage that its net sales bears to consolidated net sales. However, the
sharing of research and development expenses between a PRC subsidiary and an
offshore parent company is subject to the supervision of the SAT and its local
counterpart. The Company&#146;s PRC domiciled subsidiaries have applied for approval
of this allocation method, but only one cost sharing application has been
approved, and it limits allowable charges by the Company for research and
development expenses to three percent of the PRC domiciled subsidiary&#146;s sales.
Until and unless charges by the Company to a PRC subsidiary are approved by the
SAT or its local counterpart, they are not deductible for PRC income tax
purposes and cannot be remitted to the Company.</p>

<p style="font-family:Times New Roman;font-size:10.0pt;margin:0pt 0pt 12.0pt 36.0pt;text-indent:-18.0pt;"><font size="2" face="Symbol" style="font-size:10.0pt;">&#183;</font><font size="1" style="font-size:3.0pt;">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; </font>The
PRC requires expatriates to obtain local work permits. To the extent the
Company charges a PRC subsidiary for salaries and wages of an expatriate
working in the PRC who does not hold a valid local work permit, any accrued
intercompany liability arising from this charge cannot be remitted to the
Company.</p>


 <p style="font-size:10.0pt;margin:24.0pt 0pt .0001pt;text-align:center;"><font face="Times New Roman">16</font></p> <br><hr size="3" width="100%" noshade color="#010101" align="center">

<!-- SEQ.=1,FOLIO='16',FILE='C:\JMS\aloew\06-23396-1\task1466296\23396-1-dg.htm',USER='aloew',CD='Nov  7 01:27 2006' -->
<br clear="all" style="page-break-before:always;">
 <p style="margin:0pt 0pt .0001pt;text-align:center;"></p>


<p style="font-style:italic;margin:0pt 0pt 12.0pt;"><b><i><u><font size="2" face="Times New Roman" style="font-size:10.0pt;font-style:normal;font-weight:bold;">Note 22 &#151; Related Party
Transactions</font></u></i></b></p>

<p style="font-style:italic;margin:0pt 0pt 12.0pt;"><b><i><u><font size="2" face="Times New Roman" style="font-size:10.0pt;font-style:normal;font-weight:bold;">Softbank, page 173</font></u></i></b></p>

<p style="font-family:Times New Roman;font-size:10.0pt;font-style:italic;margin:0pt 0pt 12.0pt 36.0pt;text-indent:-36.0pt;"><b><i><font size="2" face="Times New Roman" style="font-size:10.0pt;font-style:normal;font-weight:bold;">6.</font></i></b><font size="1" style="font-size:3.0pt;font-style:normal;">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; </font><b style="font-style:normal;">Refer to the penultimate paragraph of page 67 of your
Form 10-K/A and tell us why Softbank America, Inc. resold to you 8.0 million of
your common shares at $17.385 per share on April 5, 2003 when the Friday April
4, 2003 closing price for your shares was $21.03.&#160; Tell us why a 17.3% haircut was appropriate
and whether this sale was related to any other transactions, agreements or
understandings between the parties.</b></p>

<p style="margin:0pt 0pt 12.0pt;text-indent:36.0pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">The Company
believes Softbank America, Inc. (&#147;Softbank America&#148;) entered into the share
repurchase transaction because its parent, Softbank Corp., was directing
members of the Softbank group of companies to sell portions of some investments
they held to generate cash for SBBC to use in building its ADSL/fiber optic
high-speed Internet connection services business in Japan, and for Softbank&#146;s
use in paying down corporate debt. During the late 2002 to mid 2003 period the
Company was aware the Softbank group of companies were also selling portions of
other companies in their portfolios, including a portion of their investment in
Yahoo!. However, the Company is unable to make any representation as to
Softbank&#146;s reasons for entering the share repurchase transaction with the
Company to the Staff. The Company entered the share repurchase transaction
because it believed the use of a portion of the proceeds from the Bond offering
for such purpose would improve the Company&#146;s total capital structure.</font></p>

<p style="margin:0pt 0pt 12.0pt;text-indent:36.0pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">The price to be
paid by the Company to acquire 8.0 million of its shares beneficially owned by
Softbank America was agreed to among the parties after market close on March 6,
2003. The agreed-upon per share transaction price was the closing price for
UTStarcom&#146;s common stock on March 6, 2003 of $18.30 less a 5% discount in
recognition of the unregistered status of such shares. This amount, $17.385 per
share or an aggregate of $139.08 million, was paid to Softbank America to
purchase the shares in a closing which occurred on April 5, 2003.</font></p>

<p style="margin:0pt 0pt 12.0pt;text-indent:36.0pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">The Company
disclosed this planned purchase in the &#147;Use of Proceeds&#148; section of the&#160; &#147;Confidential Offering Circular&#148; dated March
7, 2003 for the sale of the Bonds. The disclosure was as follows: &#147;We intend to
use $139.6 million of the net proceeds to repurchase 8.0 million shares
beneficially owned by Softbank America Inc., including the estimated associated
expenses.&#148; March 6, 2003 was the latest market quotation that could have been
used to agree upon a price for the Company&#146;s purchase of the 8.0 million shares
given the March 7, 2003 issuance of the Confidential Offering Circular. From
March 6, 2003 until closing the share purchase on April 5, 2003 both the
Company and Softbank America assumed the risk of unfavorable changes in the
market price of the Company&#146;s common stock.</font></p>


 <p style="font-size:10.0pt;margin:24.0pt 0pt .0001pt;text-align:center;"><font face="Times New Roman">17</font></p>
</div><br><hr size="3" width="100%" noshade color="#010101" align="center">

<!-- SEQ.=1,FOLIO='17',FILE='C:\JMS\aloew\06-23396-1\task1466296\23396-1-dg.htm',USER='aloew',CD='Nov  7 01:27 2006' -->



<br clear="all" style="page-break-before:always;">

<div>
 <p style="margin:0pt 0pt .0001pt;text-align:center;"></p>

<p style="margin:0pt 0pt 12.0pt;text-indent:36.0pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">Except as
disclosed in its Quarterly Report on Form 10-Q for the period ended June 30,
2003 and its Annual Report on Form 10-K/A for the year ended December 31, 2003,
the Company did not agree to the share repurchase transaction as a part of any
other transaction or series of transactions or any other agreements or
understandings with Softbank America. The Company did disclose:&#160; &#147;In connection with this repurchase
transaction, Softbank America&nbsp;Inc. entered into an agreement with the
Company not to offer, sell or otherwise dispose of the Company&#146;s common stock
for a period of one year, subject to a number of exceptions.&#148;</font></p>

<p style="font-style:italic;margin:0pt 0pt 12.0pt;"><b><i><u><font size="2" face="Times New Roman" style="font-size:10.0pt;font-style:normal;font-weight:bold;">Form 10-Q, June 30, 2006<br>
Financial Statements</font></u></i></b></p>

<p style="font-family:Times New Roman;font-size:10.0pt;font-style:italic;margin:0pt 0pt 12.0pt 36.0pt;text-indent:-36.0pt;"><b><i><font size="2" face="Times New Roman" style="font-size:10.0pt;font-style:normal;font-weight:bold;">7.</font></i></b><font size="1" style="font-size:3.0pt;font-style:normal;">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; </font><b style="font-style:normal;">Describe for us the terms of your Development Service
Agreement with Cellon, which is referred to the third paragraph of page
25.&#160; Explain how you accounted for the
$5.0 million payment to Cellon and how you plan to account for related
royalties.&#160; Please refer to all pertinent
authoritative accounting literature in your response.</b></p>

<p style="font-family:Times New Roman;font-size:10.0pt;margin:0pt 0pt 12.0pt;text-autospace:none;text-indent:36.0pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">The Company and Cellon International Holding
Corporation (&#147;Cellon&#148;) signed a &#147;Development Services and Co-Operation
Agreement&#148; (&#147;Development Agreement&#148;) in November 2005 as part of the Company&#146;s
plan to outsource non-PAS wireless handset research and development in China.
This was an element of the Company&#146;s 2005 restructuring activities discussed in
&#147;Note 23</font>&#151;Restructuring
Costs&#148; of the Company&#146;s Notes to Consolidated Financial Statements for the year
ended December 31, 2005. Previously these activities were conducted by in-house
groups located in Hangzhou and Shanghai, China.</p>

<p style="margin:0pt 0pt 12.0pt;text-autospace:none;text-indent:36.0pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">The Development Agreement has the following essential
features:</font></p>

<p style="font-family:Times New Roman;font-size:10.0pt;margin:0pt 0pt 12.0pt 36.0pt;text-indent:-18.0pt;"><font size="2" face="Symbol" style="font-size:10.0pt;">&#183;</font><font size="1" style="font-size:3.0pt;">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; </font>The
Company engages Cellon to perform design services pursuant to several Design
Statements of Work attached to the Development Agreement.</p>

<p style="font-family:Times New Roman;font-size:10.0pt;margin:0pt 0pt 12.0pt 36.0pt;text-indent:-18.0pt;"><font size="2" face="Symbol" style="font-size:10.0pt;">&#183;</font><font size="1" style="font-size:3.0pt;">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; </font>For
a period of <b>[***]</b> after the effective date of
the agreement, Cellon is granted a 20 day right of first negotiation for all
additional wireless handset design services projects other than those to be
performed in-house by the Company. After conducting negotiations during the 20
day period, if the Company does not reach an agreement with Cellon, it is free
to submit its request for proposal or request for bids for design services to
third parties. Cellon may submit a proposal response along with the third
parties, and <b>[***]</b>.</p>

<p style="font-family:Times New Roman;font-size:10.0pt;margin:0pt 0pt 12.0pt 36.0pt;text-indent:-18.0pt;"><font size="2" face="Symbol" style="font-size:10.0pt;">&#183;</font><font size="1" style="font-size:3.0pt;">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; </font>The
Company will own all rights to designs and intellectual property created in the
design services.</p>


 <p style="font-size:10.0pt;margin:24.0pt 0pt .0001pt;text-align:center;"><font face="Times New Roman">18</font></p> <br><hr size="3" width="100%" noshade color="#010101" align="center">

<!-- SEQ.=1,FOLIO='18',FILE='C:\JMS\aloew\06-23396-1\task1466296\23396-1-di.htm',USER='aloew',CD='Nov  7 01:30 2006' -->
<br clear="all" style="page-break-before:always;">
 <p style="margin:0pt 0pt .0001pt;text-align:center;"></p>


<p style="font-family:Times New Roman;font-size:10.0pt;margin:0pt 0pt 12.0pt 36.0pt;text-indent:-18.0pt;"><font size="2" face="Symbol" style="font-size:10.0pt;">&#183;</font><font size="1" style="font-size:3.0pt;">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; </font>In
addition to design services fees, the parties may agree the Company will pay a
per-unit royalty for each product developed by Cellon and sold by the Company.</p>

<p style="font-family:Times New Roman;font-size:10.0pt;margin:0pt 0pt 12.0pt 36.0pt;text-indent:-18.0pt;"><font size="2" face="Symbol" style="font-size:10.0pt;">&#183;</font><font size="1" style="font-size:3.0pt;">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; </font>The
Company agrees to pay Cellon $5.0 million as a prepayment of royalties that may
otherwise be due under this agreement.</p>

<p style="margin:0pt 0pt 12.0pt;text-indent:36.0pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">The $5.0 million
royalty prepayment has been reported as an asset. Paragraph 25 of Statements of
Financial Accounting Concepts 6 <i>Elements of Financial
Statements</i> defines assets as &#147;. . . probable future economic
benefits obtained or controlled by a particular entity as a result of past
transactions or events.&#148; Paragraph 27 of this publication enhances the
definition as follows:</font></p>

<p style="margin:0pt 36.0pt 12.0pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&#147;An asset has three
essential characteristics:&nbsp; (a) it embodies a probable future benefit that
involves a capacity, singly or in combination with other assets, to contribute
directly or indirectly to future net cash inflows, (b) a particular entity can
obtain the benefit and control others&#146; access to it, and (c) the transaction or
other event giving rise to the entity&#146;s right to or control of the benefit has
already occurred.&#148;</font></p>

<p style="margin:0pt 0pt 12.0pt;text-indent:36.0pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">The economic
purpose of the $5.0 million royalty prepayment was to encourage Cellon, the
Company&#146;s newly selected source of non-PAS handset design services, to develop
products that can be manufactured efficiently and sold at prices and in
sufficient volume that they will allow a royalty to be paid to Cellon and yet,
after consideration of the royalty, still allow the Company to enhance its
profitability from handset sales. At the date of the $5.0 million prepayment it
&#147;embodied a probable future benefit that involves a capacity, singly or in
combination with other assets, to contribute directly or indirectly to future
net cash inflows&#148; thus meeting the first essential asset characteristic
specified in paragraph 27 of FASC 6. Similarly, only the Company &#147;can obtain
the benefit and control others&#146; access to it,&#148; the second essential asset
characteristic in paragraph 27, because under the Development Agreement the
prepayment can only be applied against amounts otherwise due from the Company
and the Company will own all rights to designs and intellectual property
created in design services Cellon performs for the Company. Lastly, as required
by the third essential asset characteristic in paragraph 27, &#147;the transaction
or other event giving rise to the entity&#146;s right to or control of the benefit
has already occurred.&#148;</font></p>

<p style="margin:0pt 0pt 12.0pt;text-indent:36.0pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">Per the
Development Agreement, the Company has no obligation to remit any royalties to
Cellon until the total amount of royalties due exceeds the $5.0 million prepaid
royalty. However, subsequently negotiated Design Statements of Work contain
provisions that permit Cellon&#146;s design service fee and related out-of-pocket
costs to be set off against the prepaid royalty. Through June 30, 2006, the
Company has offset Cellon design services invoices aggregating $1.3 million
against the $5.0 million payment. The $1.3 million of design services and all
other design services performed under the Development Agreement are expensed as
research and development expenses as incurred whether or not the prepayment is
used to settle such invoices. Royalties earned by Cellon under the Development
Agreement will be accrued through charges to cost of sales when handsets </font></p>


 <p style="font-size:10.0pt;margin:24.0pt 0pt .0001pt;text-align:center;"><font face="Times New Roman">19</font></p> <br><hr size="3" width="100%" noshade color="#010101" align="center">

<!-- SEQ.=1,FOLIO='19',FILE='C:\JMS\aloew\06-23396-1\task1466296\23396-1-di.htm',USER='aloew',CD='Nov  7 01:30 2006' -->
<br clear="all" style="page-break-before:always;">
 <p style="margin:0pt 0pt .0001pt;text-align:center;"></p>


<p style="margin:0pt 0pt 12.0pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">bearing a royalty to
Cellon are sold, and the accrued liability will be set off against the prepaid
royalty.</font></p>

<p style="margin:0pt 0pt 12.0pt;text-indent:36.0pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">The Company has
reconsidered its disclosure of this arrangement and will expand the disclosure
concerning the use of the prepaid $5.0 million in its Quarterly Report on Form
10-Q for the period ending September 30, 2006 substantially as follows using
the disclosure in the Quarterly Report on Form 10-Q for the period ended June
30, 2006 for illustrative purposes (additions are in bold and deletions are in
strikethrough):</font></p>

<p style="margin:11.25pt 36.0pt 12.0pt;text-autospace:none;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;In <strike>May&nbsp;2006 </strike><b>November
2005</b>, the Company <strike>has also</strike> entered into a Development Service<b>s</b> Agreement with Cellon in which $5.0&nbsp;million was
prepaid in exchange for future product development. <b>Approximately
$1.3&nbsp;million of the prepaid amount has been used in the three months ended
June&nbsp;30, 2006 as payments for design services.</b>  <b>The Company may also use the $5 million prepayment in satisfaction of
royalties Cellon may earn from sales by the Company of products Cellon designs
under the Development Services Agreement.</b>  <b>This
agreement also obligates</b> Cellon <strike>will</strike>  <b>to</b>
pay the Company a royalty if certain technology shared by the Company to Cellon
is used in products developed and sold to customers other than the Company
through November&nbsp;2007. <strike>Approximately $1.3&nbsp;million of the prepaid
has been consumed in the three months ended June&nbsp;30, 2006.</strike></font></p>

<p style="margin:0pt 0pt 12.0pt;text-indent:36.0pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">As is required for
all other assets, the Company will evaluate the carrying value of the prepaid
royalty periodically for impairment and make any required write-down for
impairment in the period in which it becomes known.</font></p>

<p style="font-family:Times New Roman;font-size:10.0pt;font-style:italic;margin:0pt 0pt 12.0pt 36.0pt;text-indent:-36.0pt;"><b><i><font size="2" face="Times New Roman" style="font-size:10.0pt;font-style:normal;font-weight:bold;">8.</font></i></b><font size="1" style="font-size:3.0pt;font-style:normal;">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; </font><b style="font-style:normal;">Refer to the fifth paragraph of page 27 of your June
30, 2006 Form 10-Q, which states that you &#147;agreed to incur special warranty
coverage&#148; for ADSL equipment sold to a related party, SBBC, during 2003 and
2004.&#160; Please explain to us, in detail,
the facts and circumstances and the business reasons for the additional
warranty coverage.&#160; In your response,
please address each of the following questions.</b></p>

<p style="font-family:Times New Roman;font-size:10.0pt;font-style:italic;margin:0pt 0pt 12.0pt 72.0pt;text-indent:-36.0pt;"><b><i><font size="2" face="Times New Roman" style="font-size:10.0pt;font-style:normal;font-weight:bold;">a.</font></i></b><b><font size="1" style="font-size:3.0pt;font-style:normal;font-weight:bold;">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; </font></b><b style="font-style:normal;">Did you provide the extended warranty terms as part
of the original equipment sale?</b></p>

<p style="font-family:Times New Roman;font-size:10.0pt;font-style:italic;margin:0pt 0pt 12.0pt 72.0pt;text-indent:-36.0pt;"><b><i><font size="2" face="Times New Roman" style="font-size:10.0pt;font-style:normal;font-weight:bold;">b.</font></i></b><font size="1" style="font-size:3.0pt;font-style:normal;">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; </font><b style="font-style:normal;">If not, did you receive any consideration from
Softbank for agreeing to make repairs beyond the normal warranty period?</b></p>

<p style="font-family:Times New Roman;font-size:10.0pt;font-style:italic;margin:0pt 0pt 12.0pt 72.0pt;text-indent:-36.0pt;"><b><i><font size="2" face="Times New Roman" style="font-size:10.0pt;font-style:normal;font-weight:bold;">c.</font></i></b><b><font size="1" style="font-size:3.0pt;font-style:normal;font-weight:bold;">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; </font></b><b style="font-style:normal;">Tell us why you recorded the additional $11.7&nbsp;million
warranty charge in 2005 and not in an earlier period.</b></p>

<p style="font-family:Times New Roman;font-size:10.0pt;font-style:italic;margin:0pt 0pt 12.0pt 72.0pt;text-indent:-36.0pt;"><b><i><font size="2" face="Times New Roman" style="font-size:10.0pt;font-style:normal;font-weight:bold;">d.</font></i></b><font size="1" style="font-size:3.0pt;font-style:normal;">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; </font><b style="font-style:normal;">Since this is a unique agreement, explain to us your
ability to estimate your warranty reserve.</b></p>

<p style="margin:0pt 0pt 12.0pt;text-indent:36.0pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">In 2001 the
Company began selling ADSL cards to SBBC, pursuant to orders that ultimately
resulted in approximately <b>[***]</b> units
being manufactured and sold to this customer in the 2001-January 2004 period.
These ADSL cards contained modifications of the Company&#146;s standard product
making it unlikely that they could be used other than in SBBC&#146;s network, and
periodically during this period the card&#146;s design was modified to improve
performance and reliability or to reduce cost while maintaining performance and
reliability </font></p>


 <p style="font-size:10.0pt;margin:24.0pt 0pt .0001pt;text-align:center;"><font face="Times New Roman">20</font></p> <br><hr size="3" width="100%" noshade color="#010101" align="center">

<!-- SEQ.=1,FOLIO='20',FILE='C:\JMS\aloew\06-23396-1\task1466296\23396-1-di.htm',USER='aloew',CD='Nov  7 01:30 2006' -->
<br clear="all" style="page-break-before:always;">
 <p style="margin:0pt 0pt .0001pt;text-align:center;"></p>


<p style="margin:0pt 0pt 12.0pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">standards. SBBC was in
the process of performing a rapid rollout of its broadband services throughout
Japan pursuant to its strategy of being first to market as a national broadband
services provider.</font></p>

<p style="margin:0pt 0pt 12.0pt;text-indent:36.0pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">Beginning in
November 2004 it became apparent that one design revision of the ADSL cards had
a problem that caused an unacceptably high failure rate from SBBC&#146;s
perspective. However, many of the cards were out of warranty when this issue
was discovered because they were manufactured and sold with only a one year
warranty.</font></p>

<p style="margin:0pt 0pt 12.0pt;"><b><font size="2" face="Times New Roman" style="font-size:10.0pt;font-weight:bold;">[***]</font></b></p>

<p style="margin:0pt 0pt 12.0pt;text-indent:36.0pt;"><b><font size="2" face="Times New Roman" style="font-size:10.0pt;font-weight:bold;">[***]</font></b></p>

<p style="margin:0pt 0pt 12.0pt;text-indent:36.0pt;"><b><font size="2" face="Times New Roman" style="font-size:10.0pt;font-weight:bold;">[***]</font></b></p>

<p style="margin:0pt 0pt 12.0pt;text-indent:36.0pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">The Company and
SBBC ultimately reached agreement on a solution to this issue in March 2005
which included the following elements:&#160;
(a) the Company would redesign and rework all of the approximately <b>[***]</b> ADSL cards experiencing higher failure rates; (b) the
warranty on all ADSL cards purchased by SBBC was extended to March 31, 2005;
and (c) SBBC would pay the Company $<b>[***]</b> as a &#147;support
settlement fee&#148; to partially cover the cost of the rework services and to
obtain the additional warranty coverage. Subsequently, the parties entered into
a &#147;Support Services Agreement&#148; that continued the ADSL card warranty for the <b>[***]</b>. This agreement, entered into in October 2005,
requires SBBC to make <b>[***]</b>&#160; quarterly payments of $<b>[***]</b>,
aggregating $<b>[***]</b>, to keep the warranty in
effect. Additionally, the Company also retroactively increased its warranty on
ADSL card sales <b>[***]</b> beginning December 2004.</font></p>

<p style="margin:0pt 0pt 12.0pt;text-indent:36.0pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">In the first
quarter of 2005, the Company recorded its estimate of the additional obligation
it had incurred of $<b>[***]</b> as an
addition to its warranty liability for the SBBC ADSL cards. The charge was
principally to provide for the labor and material cost for rework of cards in
the Company&#146;s manufacturing facility in China, manufacturing an additional <b>[***]</b> new and defect free ADSL cards that would be used as a
buffer stock to replace the first to be reworked batch of ADSL cards, de- and
re-installation of <b>[***]</b> ADSL
cards throughout Japan, and freight charges.</font></p>

<p style="margin:0pt 0pt 12.0pt;text-indent:36.0pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">The $<b>[***]</b> charge was not recorded earlier because the Company
believed it did not have an obligation to meet SBBC&#146;s request for additional
warranty coverage beyond one year or to rework or replace all of the ADSL cards
sold to SBBC until there was an agreement among the parties to do so.</font></p>

<p style="margin:0pt 0pt 12.0pt;text-indent:36.0pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">In the latter part
of 2005, SBBC became dissatisfied with the pace at which the ADSL card
replacements was progressing. The rework and replacement process involved:
obtaining batches of <b>[***]</b> ADSL
cards for rework by replacing ADSL cards at various sites throughout Japan with
new or previously reworked ADSL cards; packing the to be reworked ADSL </font></p>


 <p style="font-size:10.0pt;margin:24.0pt 0pt .0001pt;text-align:center;"><font face="Times New Roman">21</font></p> <br><hr size="3" width="100%" noshade color="#010101" align="center">

<!-- SEQ.=1,FOLIO='21',FILE='C:\JMS\aloew\06-23396-1\task1466296\23396-1-di.htm',USER='aloew',CD='Nov  7 01:30 2006' -->
<br clear="all" style="page-break-before:always;">
 <p style="margin:0pt 0pt .0001pt;text-align:center;"></p>


<p style="margin:0pt 0pt 12.0pt;text-indent:36.0pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">cards for shipment
to the Company&#146;s manufacturing facility in China; performing the rework;
packaging and shipping the reworked ADSL cards to Japan; and, lastly,
installing the reworked ADSL cards in SBBC&#146;s network while accumulating the
next group of ADSL cards for rework. Especially time consuming parts of this
process included time awaiting customs clearance in Japan and China, and wait
time in China that began when the ADSL cards to be reworked arrived at the
facility and continued until the rework could occur based on fitting the rework
job into the facility&#146;s master manufacturing schedule.</font></p>

<p style="margin:0pt 0pt 12.0pt;text-indent:36.0pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">To address SBBC&#146;s
concern, the Company decided to use a third party subcontractor in Japan to perform
the rework; this eliminated customs clearance delays, wait time to fit the
rework into the manufacturing facility&#146;s schedule, and it also permitted use of
smaller batch sizes. All of these improvements led to a shortening of rework
cycle time, but they also increased rework cost. The Company provided for such
increased costs by recording an additional $<b>[***]</b>
estimated warranty liability in the fourth quarter of 2005. The ADSL card
rework program was completed in the second quarter of 2006.</font></p>

<p style="margin:0pt 0pt 12.0pt;text-indent:36.0pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">The Company does
not believe the agreement to rework and extend the warranty on the ADSL cards
sold to SBBC has any effect on its ability to estimate its warranty reserve
because it is a separate transaction not contemplated in the original sales
agreement.</font></p>


 <p style="font-size:10.0pt;margin:24.0pt 0pt .0001pt;text-align:center;"><font face="Times New Roman">22</font></p> <br><hr size="3" width="100%" noshade color="#010101" align="center">

<!-- SEQ.=1,FOLIO='22',FILE='C:\JMS\aloew\06-23396-1\task1466296\23396-1-di.htm',USER='aloew',CD='Nov  7 01:30 2006' -->
<br clear="all" style="page-break-before:always;">
 <p style="margin:0pt 0pt .0001pt;text-align:center;"></p>


<p style="font-style:italic;margin:0pt 0pt 12.0pt;"><b><i><u><font size="2" face="Times New Roman" style="font-size:10.0pt;font-style:normal;font-weight:bold;">18.&#160; Related Party Transactions<br>
Global Asia Partners L.P., page 38</font></u></i></b></p>

<p style="font-family:Times New Roman;font-size:10.0pt;font-style:italic;margin:0pt 0pt 12.0pt 36.0pt;text-indent:-36.0pt;"><b><i><font size="2" face="Times New Roman" style="font-size:10.0pt;font-style:normal;font-weight:bold;">9.</font></i></b><font size="1" style="font-size:3.0pt;font-style:normal;">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; </font><b style="font-style:normal;">Refer to the fourth paragraph of page 28, which
indicates that you are committed to make half, or perhaps more, of the
investments in Global Asia Partners L.P. (GAP).&#160;
Refer also to the third paragraph of page 38 which indicates that
UTStarcom holds a 49% investment in GAP.&#160;
Please provide us your analysis explaining your consideration of how FIN
46(R) applies to this investment.</b></p>

<p style="margin:0pt 0pt 12.0pt;text-indent:36.0pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">Global Asia
Partners, LP, a Delaware limited partnership, (&#147;GAP&#148;) filed its Certificate of
Limited Partnership with the Secretary of State of the State of Delaware, in
May 2002. GAP has two limited partners, one of which is the Company, each of
which initially invested $1.0 million under capital commitments of $5.0 million
to become limited partners, ultimately owning 49.5% limited partnership
interests each. The sole general partner initially invested $20,202.02 for a
one percent partnership interest. Subsequently, each limited partner invested
an additional $1.6 million in the partnership, and the general partner invested
the amount necessary to maintain its interest in the partnership at 1%. This
investment is carried at $1.7 million in the Company&#146;s consolidated balance
sheets at December 31, 2005 and June 30, 2006.</font></p>

<p style="margin:0pt 0pt 12.0pt;text-indent:36.0pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">The Company
analyzed its investment in GAP in implementing the accounting requirements of
FIN 46 in the fourth quarter of 2003. It reconsidered its FIN 46 analyses in
preparing its consolidated financial statements for the year ended December 31,
2004 when the Company discovered it needed to make a correction to its 2003
financial statements to reflect the consolidation of MDC Holding Limited as a
variable interest entity.</font></p>

<p style="margin:0pt 0pt 12.0pt;text-indent:36.0pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">In its analysis of
the investment in GAP, the Company determined that GAP might be considered a
variable interest entity (&#147;VIE&#148;), primarily because of GAP&#146;s development stage
enterprise status at the end of 2003. GAP&#146;s development stage status and its
failure to attract $50 million or more of limited partner capital as envisioned
by its business plan raised&#160; questions
about whether its investment at risk is sufficient to finance its activities
without additional subordinated financial support being provided by any party
(FIN 46(R).5a and .11).</font></p>

<p style="margin:0pt 0pt 12.0pt;text-indent:36.0pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">However, in
analyzing whether it was the primary beneficiary of GAP the Company noted the
following:</font></p>

<p style="font-family:Times New Roman;font-size:10.0pt;margin:0pt 0pt 12.0pt 72.0pt;text-indent:-18.0pt;"><font size="2" face="Symbol" style="font-size:10.0pt;">&#183;</font><font size="1" style="font-size:3.0pt;">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; </font>it
owns a 49.5% interest in GAP as a limited partner, which is less than a
majority of GAP&#146;s equity interests</p>

<p style="font-family:Times New Roman;font-size:10.0pt;margin:0pt 0pt 12.0pt 72.0pt;text-indent:-18.0pt;"><font size="2" face="Symbol" style="font-size:10.0pt;">&#183;</font><font size="1" style="font-size:3.0pt;">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; </font>the
other limited partner in GAP holds an equal interest with that of the Company</p>

<p style="font-family:Times New Roman;font-size:10.0pt;margin:0pt 0pt 12.0pt 72.0pt;text-indent:-18.0pt;"><font size="2" face="Symbol" style="font-size:10.0pt;">&#183;</font><font size="1" style="font-size:3.0pt;">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; </font>all
three partners having equivalent amounts of risk capital per percentage
ownership interest in GAP</p>


 <p style="font-size:10.0pt;margin:24.0pt 0pt .0001pt;text-align:center;"><font face="Times New Roman">23</font></p> <br><hr size="3" width="100%" noshade color="#010101" align="center">

<!-- SEQ.=1,FOLIO='23',FILE='C:\JMS\aloew\06-23396-1\task1466296\23396-1-di.htm',USER='aloew',CD='Nov  7 01:30 2006' -->
<br clear="all" style="page-break-before:always;">
 <p style="margin:0pt 0pt .0001pt;text-align:center;"></p>


<p style="font-family:Times New Roman;font-size:10.0pt;margin:0pt 0pt 12.0pt 72.0pt;text-indent:-18.0pt;"><font size="2" face="Symbol" style="font-size:10.0pt;">&#183;</font><font size="1" style="font-size:3.0pt;">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; </font>the
Company understands GAP does not intend to make additional investments;
therefore, it does not believe it will be called on to honor its remaining
capital commitment of $2.4 million</p>

<p style="font-family:Times New Roman;font-size:10.0pt;margin:0pt 0pt 12.0pt 72.0pt;text-indent:-18.0pt;"><font size="2" face="Symbol" style="font-size:10.0pt;">&#183;</font><font size="1" style="font-size:3.0pt;">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; </font>as
a limited partner its maximum exposure to loss is limited, unlike GAP&#146;s general
partner.</p>

<p style="margin:0pt 0pt 12.0pt;text-indent:36.0pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">Next, the Company
considered whether it had any other variable interests (as that term is defined
in FIN 46(R).2c ) in GAP other than its limited partner ownership interest. It
concluded there were none because the Company has no contractual or other
pecuniary business relationships with GAP other than as an investor.</font></p>

<p style="margin:0pt 0pt 12.0pt;text-indent:36.0pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">The Company then
considered whether GAP&#146;s other variable interests are ascribable to it for
purposes of the primary beneficiary test based either on the definition of
related parties in FAS 57, &#147;Related
Party Disclosures&#148; or based on the &#147;de facto agents of an enterprise&#148;
definition in FIN 46(R).16. The Company and the other partners in GAP are not
related parties under the definition of related parties in FAS 57. However, the
partnership agreement requires a partner to obtain the consent of partners
holding at least a majority of the remaining partnership interests to transfer
its partnership interest to a third party. This creates a potential &#147;de facto
agent of an enterprise&#148; situation. Therefore all the partnership&#146;s ownership
interests are potentially ascribable to each of the three partners, and each
partner would be deemed the owner of 100% of GAP&#146;s partnership interests when
an FIN 46(R) analysis of its interest was made.</font></p>

<p style="margin:0pt 0pt 12.0pt;text-indent:36.0pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">Because there can
be only one primary beneficiary for a VIE, the Company considered the
provisions of FIN 46(R).17 to decide whether it should be considered the
primary beneficiary. This analysis concluded that the general partner should be
considered the primary beneficiary because it:</font></p>

<p style="font-family:Times New Roman;font-size:10.0pt;margin:0pt 0pt 12.0pt 72.0pt;text-indent:-18.0pt;"><font size="2" face="Symbol" style="font-size:10.0pt;">&#183;</font><font size="1" style="font-size:3.0pt;">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; </font>significantly
influenced the design of the VIE</p>

<p style="font-family:Times New Roman;font-size:10.0pt;margin:0pt 0pt 12.0pt 72.0pt;text-indent:-18.0pt;"><font size="2" face="Symbol" style="font-size:10.0pt;">&#183;</font><font size="1" style="font-size:3.0pt;">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; </font>manages
its operations</p>

<p style="font-family:Times New Roman;font-size:10.0pt;margin:0pt 0pt 12.0pt 72.0pt;text-indent:-18.0pt;"><font size="2" face="Symbol" style="font-size:10.0pt;">&#183;</font><font size="1" style="font-size:3.0pt;">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; </font>makes
investment decisions that have a significant affect of the success of GAP&#146;s
activities</p>

<p style="font-family:Times New Roman;font-size:10.0pt;margin:0pt 0pt 12.0pt 72.0pt;text-indent:-18.0pt;"><font size="2" face="Symbol" style="font-size:10.0pt;">&#183;</font><font size="1" style="font-size:3.0pt;">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; </font>receives
incentive compensation based on GAP&#146;s investment results</p>

<p style="font-family:Times New Roman;font-size:10.0pt;margin:0pt 0pt 12.0pt 72.0pt;text-indent:-18.0pt;"><font size="2" face="Symbol" style="font-size:10.0pt;">&#183;</font><font size="1" style="font-size:3.0pt;">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; </font>bears
the obligation to fund any losses in excess of invested capital as a result of
the limited partnership structure.</p>

<p style="margin:0pt 0pt 12.0pt;text-indent:36.0pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">The only factors
set forth in FIN 46(R) that might point to the Company being the primary
beneficiary are:</font></p>

<p style="font-family:Times New Roman;font-size:10.0pt;margin:0pt 0pt 12.0pt 72.0pt;text-indent:-18.0pt;"><font size="2" face="Symbol" style="font-size:10.0pt;">&#183;</font><font size="1" style="font-size:3.0pt;">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; </font>the
Company has a greater &#147;exposure to the expected losses of the variable interest
entity&#148; than the general partner by holding 49.5% of GAP&#146;s capital, but it has no
greater exposure to expected losses than the other limited partner</p>

<p style="font-family:Times New Roman;font-size:10.0pt;margin:0pt 0pt 12.0pt 72.0pt;text-indent:-18.0pt;"><font size="2" face="Symbol" style="font-size:10.0pt;">&#183;</font><font size="1" style="font-size:3.0pt;">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; </font>at
the time GAP was formed the general partner was an independent part-time sales
agent for the Company, which might be indicative of a principal-agent
relationship among them.</p>


 <p style="font-size:10.0pt;margin:24.0pt 0pt .0001pt;text-align:center;"><font face="Times New Roman">24</font></p> <br><hr size="3" width="100%" noshade color="#010101" align="center">

<!-- SEQ.=1,FOLIO='24',FILE='C:\JMS\aloew\06-23396-1\task1466296\23396-1-di.htm',USER='aloew',CD='Nov  7 01:30 2006' -->
<br clear="all" style="page-break-before:always;">
 <p style="margin:0pt 0pt .0001pt;text-align:center;"></p>


<p style="margin:0pt 0pt 12.0pt;text-indent:36.0pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">In considering the
facts and circumstances of the initial investment, the Company determined the
investment did not occur nor was it influenced by any principal-agency
relationship. At the time of the investment in GAP, the Company was developing
an international sales force staffed with Company employees and it was phasing
out the use of contract sales agents. As a result the GAP general partner no
longer has any position or relationship with the Company other than through
their joint investment in GAP. This demonstrates there was never a close
association between the Company and the GAP general partner of the type
envisioned by&#160; FIN 46(R).16. Instead, the
Company agreed to become a limited partner in GAP because GAP&#146;s business plan,
as a venture capital fund, was to invest in a diversified portfolio of Asia
based technology start-ups, the Company believed the GAP general partner had
the skill set and business contacts to make GAP a profitable venture, and the
Company wanted to have access to any investee entities that might be developing
technology of interest.</font></p>

<p style="margin:0pt 0pt 12.0pt;text-indent:36.0pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">After the
determination that the Company was not the GAP&#146;s primary beneficiary, the
Company concluded it was not required to consolidate it as a VIE.</font></p>

<p style="margin:0pt 0pt 12.0pt;text-indent:36.0pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">The Company
reviews its investment in GAP annually under FIN 46(R).7 to ascertain whether
an event that requires a reconsideration of the initial determination of
whether it is the primary beneficiary of GAP&#146;s residual losses and gains has
occurred. To date there have been no such events.</font></p>

<p style="font-family:Times New Roman;font-size:10.0pt;margin:0pt 0pt 12.0pt;text-indent:36.0pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">The Company has
made the disclosures required by FIN 46(R).24 of &#147;[a]n enterprise that holds a
significant variable interest in a variable interest entity but is not the
primary beneficiary.&#148; Such disclosures can be found in &#147;Note 9</font>&#151;Long-Term Investments,&#148; &#147;Note 18&#151;Commitments and Contingencies,&#148; and &#147;Note
22&#151;Related Party Transactions&#148;
of the Notes to Consolidated Financial Statements for the year ended December
31, 2005. Condensed disclosure of the Company&#146;s investment in GAP is contained
in &#147;Note 13-Long-Term Investments&#148; and &#147;Note 18&#151;Related Parties&#148; in the Notes to Condensed Consolidated
Financial Statements contained in the Company&#146;s Quarterly Report on Form 10-Q
for the period ended June 30, 2006.</p>

<p style="line-height:normal;margin:0pt 0pt 12.0pt 4.3pt;text-indent:-4.3pt;"><b><font size="2" face="Times New Roman" style="font-size:10.0pt;font-weight:bold;">Acknowledgements
and Concluding Statements</font></b></p>

<p style="line-height:normal;margin:0pt 0pt 12.0pt;text-indent:36.0pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">The Company hereby acknowledges that:</font></p>

<p style="font-family:Times New Roman;font-size:10.0pt;line-height:normal;margin:12.0pt 0pt 12.0pt 54.0pt;text-indent:-18.0pt;"><font size="2" face="Symbol" style="font-size:10.0pt;">&#183;</font><font size="1" style="font-size:3.0pt;">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; </font>The Company is responsible for the adequacy
and accuracy of the disclosure in the filings;</p>

<p style="font-family:Times New Roman;font-size:10.0pt;line-height:normal;margin:12.0pt 0pt 12.0pt 54.0pt;text-indent:-18.0pt;"><font size="2" face="Symbol" style="font-size:10.0pt;">&#183;</font><font size="1" style="font-size:3.0pt;">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; </font>Staff comments or changes to disclosure in
response to Staff comments do not foreclose the Commission from taking any
action with respect to the filings; and</p>


 <p style="font-size:10.0pt;margin:24.0pt 0pt .0001pt;text-align:center;"><font face="Times New Roman">25</font></p> <br><hr size="3" width="100%" noshade color="#010101" align="center">

<!-- SEQ.=1,FOLIO='25',FILE='C:\JMS\aloew\06-23396-1\task1466296\23396-1-di.htm',USER='aloew',CD='Nov  7 01:30 2006' -->
<br clear="all" style="page-break-before:always;">
 <p style="margin:0pt 0pt .0001pt;text-align:center;"></p>


<p style="font-family:Times New Roman;font-size:10.0pt;line-height:normal;margin:12.0pt 0pt 12.0pt 54.0pt;text-indent:-18.0pt;"><font size="2" face="Symbol" style="font-size:10.0pt;">&#183;</font><font size="1" style="font-size:3.0pt;">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; </font>The Company may not assert Staff comments as
a defense in any proceeding initiated by the Commission or any person under the
federal securities laws of the United States.</p>

<p style="margin:0pt 0pt 12.0pt;text-indent:36.0pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">We are separately
providing a copy of this letter via courier. Please acknowledge receipt of this
letter and any materials included herewith by file-stamping the additional copy
of this letter with the date of receipt and returning it to the undersigned in
the envelope provided for your convenience.</font></p>

<p style="margin:0pt 0pt 12.0pt;text-indent:36.0pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">Please call the
undersigned at (510) 769-2890 if you should have any further comments or
questions concerning this matter.</font></p>

<table border="0" cellspacing="0" cellpadding="0" width="100%" style="border-collapse:collapse;font-family:Times New Roman;width:100.0%;">
 <tr style="page-break-inside:avoid;">
  <td width="50%" valign="top" style="padding:0pt .7pt 0pt 0pt;width:50.0%;">
  <p style="font-size:10.0pt;margin:0pt 0pt .0001pt;"><!-- SET mrlNoTableShading --></p>
  </td>
  <td width="50%" valign="top" style="padding:0pt .7pt 0pt 0pt;width:50.0%;">
  <p style="margin:0pt 0pt .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">Very truly
  yours,</font></p>
  </td>
 </tr>
 <tr style="page-break-inside:avoid;">
  <td width="50%" valign="top" style="padding:0pt .7pt 0pt 0pt;width:50.0%;">
  <p style="margin:0pt 0pt .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>
  </td>
  <td width="50%" valign="top" style="padding:0pt .7pt 0pt 0pt;width:50.0%;">
  <p style="margin:0pt 0pt .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>
  </td>
 </tr>
 <tr style="page-break-inside:avoid;">
  <td width="50%" valign="top" style="padding:0pt .7pt 0pt 0pt;width:50.0%;">
  <p style="margin:0pt 0pt .0001pt;"><font size="2" face="Times New Roman" style="font-size:1.0pt;">&nbsp;</font></p>
  </td>
  <td width="50%" valign="top" style="border:none;border-bottom:solid windowtext 1.0pt;padding:0pt .7pt 0pt 0pt;width:50.0%;">
  <p style="margin:0pt 0pt .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">/s/ FRANCIS P.
  BARTON</font></p>
  </td>
 </tr>
 <tr style="page-break-inside:avoid;">
  <td width="50%" valign="top" style="padding:0pt .7pt 0pt 0pt;width:50.0%;">
  <p style="margin:0pt 0pt .0001pt;"><font size="2" face="Times New Roman" style="font-size:1.0pt;">&nbsp;</font></p>
  </td>
  <td width="50%" valign="top" style="border:none;padding:0pt .7pt 0pt 0pt;width:50.0%;">
  <p style="margin:0pt 0pt .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">Francis P.
  Barton</font></p>
  </td>
 </tr>
 <tr style="page-break-inside:avoid;">
  <td width="50%" valign="top" style="padding:0pt .7pt 0pt 0pt;width:50.0%;">
  <p style="margin:0pt 0pt .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>
  </td>
  <td width="50%" valign="top" style="padding:0pt .7pt 0pt 0pt;width:50.0%;">
  <p style="margin:0pt 0pt .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>
  </td>
 </tr>
 <tr style="page-break-inside:avoid;">
  <td width="50%" valign="top" style="padding:0pt .7pt 0pt 0pt;width:50.0%;">
  <p style="margin:0pt 0pt .0001pt;"><font size="2" face="Times New Roman" style="font-size:1.0pt;">&nbsp;</font></p>
  </td>
  <td width="50%" valign="top" style="padding:0pt .7pt 0pt 0pt;width:50.0%;">
  <p style="margin:0pt 0pt .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">Executive Vice
  President and</font></p>
  </td>
 </tr>
 <tr style="page-break-inside:avoid;">
  <td width="50%" valign="top" style="padding:0pt .7pt 0pt 0pt;width:50.0%;">
  <p style="margin:0pt 0pt .0001pt;"><font size="2" face="Times New Roman" style="font-size:1.0pt;">&nbsp;</font></p>
  </td>
  <td width="50%" valign="top" style="padding:0pt .7pt 0pt 0pt;width:50.0%;">
  <p style="margin:0pt 0pt .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">Chief Financial
  Officer</font></p>
  </td>
 </tr>
</table>

<p style="margin:0pt 0pt 12.0pt 228.0pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>

<p style="font-family:Times New Roman;font-size:10.0pt;margin:0pt 0pt 12.0pt 35.0pt;text-indent:-35.0pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">cc:</font><font size="1" style="font-size:3.0pt;">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; </font>Hong
Liang Lu, Chief Executive Officer of UTStarcom, Inc.<br>
Russell Boltwood, General Counsel of UTStarcom, Inc.<br>
Carmen Chang, Esq., Wilson Sonsini Goodrich &amp; Rosati, P.C.</p>


 <p style="font-size:10.0pt;margin:24.0pt 0pt .0001pt;text-align:center;"><font face="Times New Roman">26</font></p>
</div><br><hr size="3" width="100%" noshade color="#010101" align="center">

<!-- SEQ.=1,FOLIO='26',FILE='C:\JMS\aloew\06-23396-1\task1466296\23396-1-di.htm',USER='aloew',CD='Nov  7 01:30 2006' -->


</body>

</html>
</TEXT>
</DOCUMENT>
</SEC-DOCUMENT>
-----END PRIVACY-ENHANCED MESSAGE-----
