Unassociated Document

Year ended December 31, 2007 and 2006

Revenues. Revenues decreased by US$53.6 million, or 31.5%, from US$170.2 million in 2006 to US$116.6 million in 2007. The decrease was due primarily to a 28.8% decline in the average selling price of our SoCs for portable media players in 2007 compared to 2006 as well as a slight 3.2% decrease in units shipped compared to last year. The decline in average selling price was primarily the result of our strategy to reduce prices on certain products from time to time in order to maintain our sales volume and market share as well as the product mix adjustment as the low-end products accounted for larger portion of our total units shipments in 2007.

Revenues resulted from providing semiconductor products testing services comprised of 0.1% and 0.3% of our total revenue in 2006 and 2007, respectively.

Cost of Revenues. Cost of revenues decreased by US$19.0 million, or 25.0%, from US$75.9 million in 2006 to US$56.9 million in 2007, primarily due to a decrease in average unit cost resulted from our cost reduction measures, including wafer pricing and process migration from 0.18 micron to 0.162 micron. The decrease in units shipped of our SoC products also caused a drop in costs of revenue in proportion thereto.

Gross Profit. As a result of the decrease in sales of our SoC products, our gross profit decreased by US$34.6 million, or 36.7%, from US$94.3 million in 2006 to US$59.7 million in 2007. Our gross profit margin was 51.2% in 2007, compared to 55.4% in 2006. The decrease in gross margin was due to the decline in average selling price which was larger than the decline in average unit cost.

Other Operating Income. Other operating income decreased by US$1.2 million, or 75.0%, from US$1.6 million in 2006 to US$0.4 million in 2007. In 2007, our other operating income relates to royalty income from licensing fee. In 2007, we recognized royalty payment of $0.3 million from licensing our technology in the energy metering SoCs to our affiliate Hi-Trend Investment Holding Co., Ltd., which completed its license royalty payment plan to us in April 2007. In 2006, we recognized a US$0.5 million license fee and a US$0.7 million royalty payment from Hi-Trend Investment Holding Co., Ltd.

Operating Expenses. Total operating expenses increased by US$4.7 million, or 23.3%, from US$20.1 million in 2006 to US$24.7 million in 2007.

•

Research and development. Research and development expenses increased by US$2.6 million, or 26.7%, from US$9.8 million in 2006 to US$12.4 million in 2007, due primarily to US$1.3 million increase in intangible assets amortization associated with the acquired development tools and software, US$0.5 million increase in the compensation and welfare expenses resulted from an increase in number of the research and development personnel, and an increase in costs associated with new research and development projects, totaled US$0.5 million, including mask costs, verification expenses, depreciation of equipments, etc.

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General and administrative expenses. General and administrative expenses increased by US$1.8 million, or 21.0%, from US$8.7 million in 2006 to US$10.5 million in 2007, due primarily to an increase of US$1.4 million compensation and welfare expenses resulted from an increase in number of personnel, an increase of US$0.4 million claim payments associated with our employment dispute with one of our former employees, US$0.6 million in foreign currency exchange loss, and US$0.3 million in allowance for doubtful accounts. The increase was partially offset by a decrease of US$1.1 million in payment of consultancy and legal fees as we settled all of our disputes with SigmaTel.

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Selling and marketing expenses. Selling and marketing expenses increased by US$0.3 million, or 15.6%, from US$1.6 million in 2006 to US$1.9 million in 2007, due primarily to the US$0.2 million sponsor fee for a concert held in Shenzhen in December 2007 jointly by us and our partner Muzgame.com, a music content internet company.

Income from Operations. As a result of the foregoing, our income from operations decreased by US$40.5 million, or 53.4%, from US$75.9 million in 2006 to US$35.4 million in 2007.

Interest Income. The amount of our cash, cash equivalents and time deposits decreased to US$74.7 million as of December 31, 2007, compared to US$183.5 million as of December 31, 2006. While the balance has decreased, the marketable securities has increased to US$165.3 million compared to US$20.5 million. As we had generally higher levels of cash position and we had recorded higher yield due to more active cash management, our interest income increased by US$2.3 million, or 46.9%, from US$4.9 million in 2006 to US$7.2 million in 2007.

Other Income (non-operating). Other income excluded from income from operations increased to US$11.6 million from Nil in 2006 due primarily to an increase of tax refund of approximately US$5.9 million received from Zhuhai municipal government, and an increase of US$5.6 million foreign currency exchange rate gain.

Year ended December 31, 2006 and 2005

Revenues. Revenues increased by US$20.6 million, or 13.8%, from US$149.6 million in 2005 to US$170.2 million in 2006. This increase was due primarily to an increase of 55.6% in units shipped of our SoCs for portable media players, which was driven by an increase in the market share of our products and an increase in the demand for SoCs for portable media players. This increase was offset by a 26.0% decline in the average selling price of our SoCs for portable media players in 2006 compared to 2005. The decline in average selling price was primarily the result of aggressive pricing strategies employed by other SoC designers and our strategy to reduce prices on certain products from time to time in order to increase our sales volume and market share. Our average selling price was also affected by our eight series products reaching maturity during 2006, which resulted in lower prices than in earlier periods, and reduced prices for our mature five series products. Sales of our more advanced nine series products helped to partially offset reduced prices in our eight and five series products.

Revenues from the sale of energy metering SoCs comprised of 1.2% and 0.7% of our total revenues in 2005 and 2006, respectively. We licensed our technology in energy metering SoCs to our affiliate Hi-Trend Investment Holding Co., Ltd. and discontinued manufacturing these products in May 2006.

Cost of Revenues. Cost of revenues increased by US$15.3 million, or 25.2%, from US$60.6 million in 2005 to US$75.9 million in 2006, due primarily to an increase in units shipped of our SoC products. Such increase resulted in an increase in the cost of products shipped and an increase in the associated cost to support shipment of the increased units, including increased wafer prices, and external testing and packaging costs. Offsetting these increases was a decrease in licensing fees paid due to a change in product mix and because some of our customers chose to purchase our solutions excluding the compression software, in which case we do not pay royalties on these products.

Gross Profit. As a result of the increase in sales of our SoC products, our gross profit increased by US$5.3 million, or 6.0%, from US$89.0 million in 2005 to US$94.3 million in 2006. Our gross profit margin was 59.6% in 2005, compared to 55.4% in 2006.

Other Operating Income. Other operating income increased by US$0.5 million, or 45.5%, from US$1.1 million in 2005 to US$1.6 million in 2006. In 2006, we recognized a US$0.5 million license fee and a US$0.7 million royalty payment from licensing our technology in the energy metering SoCs to our affiliate Hi-Trend Investment Holding Co., Ltd. In 2005, we recognized income of US$620,000 from the grant of rights to use indefinitely our proprietary technology in SoCs for remote control toy cars to a third-party after we discontinued sales of this type of SoC.

Operating Expenses. Total operating expenses increased by US$1.9 million, or 10.4%, from US$18.2 million in 2005 to US$20.1 million in 2006.

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Research and development. Research and development expenses increased by US$2.0 million, or 25.6%, from US$7.8 million in 2005 to US$9.8 million in 2006, due primarily to an increase in the number of our research and development personnel, depreciation related to the purchase of additional equipment and costs associated with new research and development projects.

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General and administrative expenses. General and administrative expenses decreased by US$0.3 million, or 3.3%, from US$9.0 million in 2005 to US$8.7 million in 2006, due primarily to a significant decrease of US$3.6 million in litigation expenses in connection with our intellectual property dispute with SigmaTel from US$4.9 million in 2005 to US$1.3 million in 2006. This decrease was partially offset by an increase in professional services fees in connection with the ongoing improvement of our internal controls of approximately US$0.9 million, an increase in expenses incurred with respect to directors and officers insurance we procured for our management team and legal expenses in connection with our business expansion in Europe.

•

Selling and marketing expenses. Selling and marketing expenses increased by US$0.2 million, or 14.3%, from US$1.4 million in 2005 to US$1.6 million in 2006, due primarily to commission payments to our overseas sales agents.

Income from Operations. As a result of the foregoing, our income from operations increased by US$3.9 million, or 5.4%, from US$72.0 million in 2005 to US$75.9 million in 2006.

Interest Income. The amount of our cash, cash equivalents and time deposits was US$183.5 million as of December 31, 2006. As we had generally higher levels of cash and time deposits in 2006 than 2005, our interest income increased by US$3.8 million, or 345.5%, from US$1.1 million in 2005 to US$4.9 million in 2006.

B. Liquidity and Capital Resources

The following table sets forth the summary of our cash flows for the periods indicated:

	For the year ended December 31,
	2005			2006			2007
	(thousands)
Net cash provided by operating activities	US$	77,140		US$	76,774		US$	46,607
Net cash used in investing activities		(28,567	)		(48,188	)		(111,147	)
Net cash provided by (used in) financing activities		27,128			(1,917	)		(4,202	)
Effect of exchange rate changes on cash		1,182			2,213			3,018
Net increase in cash and cash equivalents		76,883			28,882			(65,724	)
Cash and cash equivalents, beginning of year		32,013			108,896			137,778
Cash and cash equivalents, end of year	US$	108,896		US$	137,778		US$	72,054

On December 31, 2007, we had US$241.8 million of cash, cash equivalents, restricted cash, time deposits and marketable securities. We began to generate significant cash flow from operations beginning in the second half of 2004. As a result of our initial public offering in November 2005, we generated additional cash in the amount of US$44.6 million. In the future, we anticipate that our primary sources of liquidity will be cash provided by operations, and the proceeds of capital markets transactions, if any.

Operating Activities

In 2007, net cash provided by operating activities amounted to US$46.6 million. We generated net income during this period of US$52.2 million. We recorded a decrease in accounts payable of US$4.0 million due to less purchase near the end of 2007, a decrease in income tax payable of US$1.6 million due to less taxable income, and decrease of accrued expenses and other current liabilities of US$3.8 million mainly due to the foreign exhange gain, an increase in inventory of US$5.6 million due to slower sales than expected, and an increase in accounts receivable of US$0.2 million, which was partially offset by the depreciation and amortization of US$1.6 million, the amortization of acquired intangible assets of US$2.3 million, a decrease in notes receivable of US$1.8 million, and a decrease in prepaid expenses and other current assets of US$4.3 million due to more VAT refund received in 2007.

In 2006, net cash provided by operating activities amounted to US$76.8 million. We generated net income during this period of US$74.6 million. We recorded an increase in accounts payable of US$2.2 million, an increase in income tax payable of US$2.3 million, an increase in depreciation and amortization of US$2.0 million, and a decrease in accounts receivable of US$2.2 million, which was partially offset by a decrease in accrued expenses and other current liabilities of US$2.7 million relating to unpaid legal fees and accrued bonuses, and an increase in prepaid expenses and other current assets of US$4.0 million.

In 2005, net cash provided by operating activities amounted to US$77.1 million. We generated net income in 2005 of US$73.6 million. We recorded an increase in accrued expenses and other current liabilities of US$7.3 million relating to unpaid legal fees and accrued bonuses and an increase in accounts payable of US$3.2 million, which was partially offset by an increase in accounts receivable of US$4.5 million and an increase in inventory level of US$2.0 million. During the first quarter of 2004 we instituted an inventory management policy to maintain inventory levels equivalent to no more than 30 to 40 days of sales. In connection with this policy, our inventory balances increased together with our increased sales volume. Our inventories increased further throughout 2005 as a result of these efforts.

Investing Activities

In 2007, net cash used in investing activities was US$111.2 million. We recorded an increase in marketable securities of US$141.1 million, an increase in other investments of US$6.1 million, an increase in purchase of intangible assets of US$4.2 million, an increase in purchase of equipments of US$2.6 million, and an increase of US$1.6 million in restricted cash, reflecting a time deposit placed into an account with the Agriculture Bank of China as collateral for the net short-term loan. This is offset by a decrease in time deposits with maturities between three and six months, which provided cash amounted to US$44.4 million for our activities.

The increase in marketable securities in 2007 is mainly structured deposits and trust financial products issued by the PRC commercial banks and financial institution with maturities between three and twelve months. In addition, the increase in other investment in 2007 consist of strategic investments of US$2.3 million in Mavrix Technology Inc., a fabless semiconductor company developing SoC solutions for the emerging Mobile Digital TV market, and long-term financial investments of US$ 2.8 million in AMC Holdings Limited, US$1.0 million in Bizlink Holdings Inc., and US$0.1 million in Unitech Electronics Co., Ltd.

Net cash used in investing activities was US$48.2 million in 2006, Net cash used in investing activities in 2006 consisted principally of an increase of US$21.5 million in time deposits, an increase of US$20.5 million in marketable securities, which reflects a short-term interest rate contract linked to the Yen-Dollar exchange rate with Citibank, amounting to US$2.6 million, and structured deposits in the amount of US$17.9 million at Bank of Communications.

Net cash used in investing activities was US$28.6 million in 2005 consisted principally of an increase in time deposits, with maturity terms of greater than three months but less than one year, in the amount of US$23.2 million, and an increase in restricted cash in the amount of US$2.5 million, reflecting a time deposit placed into an account with the Agriculture Bank of China as collateral for the net short-term working-capital loan in the amount of US$2.4 million.

In addition, on July 15, 2005, we purchased 400,000 shares, representing 8% of the share capital, of Hi- Trend Investment Holding Co., Ltd., an international business company incorporated in the British Virgin Islands for US$500,000, which has been accounted for as a cost method investment. We increased our investment to 18% of the share capital by purchasing an additional 500,000 shares in March 2006 for US$1.1 million.

Financing Activities

Net cash used in financing activities was US$4.2 million in 2007, consist of increase in short term bank loans of US$1.4 million and payment for the repurchase of ADSs pursuant to our shares repurchase program in the amount of US$6.7 million.

Net cash used in financing activities was US$1.9 million in 2006, consisting principally of a short-term loan in the amount of US$5.3 million, which was more than offset by repayment of short-term bank loans in the amount of $7.7 million.

Net cash provided by financing activities was US$27.1 million in 2005, principally from the issue of shares in our initial public offering in the amount of US$44.6 million, which was partially offset by a special dividend declared by our subsidiary Actions Semiconductor (Mauritius) in June 2005 in the amount of US$20 million, which was paid in July 2005. In addition, net cash from financing activities included US$2.4 million short-term loan from the Agriculture Bank of China.

As of December 31, 2007, we have a short-term bank loan in the amount of approximately US$1.5 million.

Capital Expenditures

We have historically financed our capital expenditures, consisting principally of wafer and final product testing equipment, engineering tools, software and other intangible assets, as well as long-term investments, with cash contributions from our shareholder and starting from the second half of 2004 with cash flows from operations. We made capital expenditures of US$3.6 million, US$8.8 million and US$12.9 million in 2005, 2006 and 2007, respectively. In 2007 we made capital expenditures of US$12.9 million consisting principally of US$2.6 million for the purchase of property, plant and equipment, US$4.2 million for the acquisition of intangible assets, and US$6.1 million for long-term equity investments.

We plan to construct new corporate headquarters in Zhuhai in response to our anticipated growth, and may also establish offices in other cities in China, such as Shanghai, to better serve our existing and future customers in those areas. We anticipate continuing to invest in improving and upgrading our technology infrastructure, including acquiring additional engineering tools, software and other intangible assets. We also plan to continue to invest in additional testing equipment to expand our internal testing capacity, or make long-term investments in companies or technologies consistent with our business objectives. Accordingly, we expect to make additional capital expenditures totaling approximately US$26.3 million in 2008 and 2009 in connection with such efforts.

Capital Requirements

Our capital requirements depend on numerous factors, including:

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market acceptance of our products;

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our expenditures on our planned new headquarters in Zhuhai;

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our expenditures on research and development activities;

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our expenditures on workstations, testing equipment, licenses and royalty payments and electronic design automation tools;

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the resources we devote to marketing, selling and supporting our products;

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the payment terms we negotiate with our customers;

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market prices for our products; and

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other working capital requirements.

We expect to devote substantial capital resources to support our research and development efforts, hire and expand our sales and marketing resources, and for other corporate activities. We believe that our current cash and cash equivalents, cash flow from operations, bank loans and the proceeds from the sale of our equity securities will be sufficient to meet our anticipated cash needs, including our cash needs for working capital and capital expenditures, for at least the next 12 months, and do not anticipate that we will require additional bank loans or proceeds from equity offerings during such period. We may, however, require additional cash resources due to changing business conditions or other future developments, including any investments or acquisitions we may decide to pursue.

Restricted Net Assets

Relevant PRC laws and regulations permit payments of dividends by our PRC subsidiaries only out of its retained earnings, if any, as determined in accordance with PRC regulations and accounting standards. For example, our principle subsidiaries, Actions Semiconductor (Zhuhai) and Artek Microelectronics (Shenzhen), as wholly foreign owned enterprises, are required to set aside at least 10% (up to an aggregate amount equal to half of its registered capital) of its after-tax profits each year as a statuary reserve fund and to provide for a staff and workers’ bonus fund at the discretion of its board of directors. Retained earnings calculated under PRC regulations and accounting standards may differ from retained earnings calculated in accordance with U.S. GAAP. As a result of these and other restrictions under PRC laws and regulations, Actions Semiconductor (Zhuhai) and Artek Microelectronics (Shenzhen) are restricted in their ability to transfer a portion of their net assets to us in the form of dividends, loans or advances, which restricted portion amounted to approximately US$3.9 million, or 3.0%, and US$5.2 million, or 2.5% of our total consolidated net assets, as of December 31, 2005 and 2006, respectively.

As of December 31, 2007, the restricted net assts associated with the statutory reserves of Actions Semiconductor (Zhuhai) and Artek Microelectronics (Shenzhen) totaled approximately US$9.4 million, or 3.6% of our total consolidated net assets. In addition to those reserves, the registered capital of the Company’s PRC subsidiaries are also restricted. In December 2007, Actions Semiconductor (Mauritius) re-invested the undistributed earnings of approximately US$80.2 million, or 30.9% of our total consolidated net assets from our subsidiary Actions Semiconductor (Zhuhai) back into Actions Semiconductor (Zhuhai) by way of a capital injection. As of December 31, 2007, the total amount of the registered capital and reserves amounted to US$106.4 million, or 41.0% of our total consolidated net assets as of December 31, 2007.

Taxation

We are a tax exempted company incorporated in Cayman Islands and are not subject to taxation under the current Cayman Islands law. Our net income is primarily derived from Actions Semiconductor (Zhuhai) and Artek Microelectronics (Shenzhen). Prior to January 1, 2008, foreign invested enterprises in the PRC are generally subject to a 30% Foreign Enterprise Income Tax, or FEIT, and a 3% local income tax. However, Actions Semiconductor (Zhuhai) was established in the Zhuhai Special Economic Zone of China as a foreign invested enterprise and principally conducts its business operations in this zone. And Artek Microelectronics (Shenzhen) was established in the Shenzhen Special Economic Zone of China as a foreign investment enterprise and principally conducts its business operations in that zone. Therefore, each of them was subject to the reduced FEIT rate of 15% and was exempt from FEIT for its first two years of profitable operations after offsetting prior years’ tax losses, and will be entitled to a 50% reduction in its FEIT for the following three years as approved by the tax authorities in accordance with the China Income Tax Law for Enterprises with Foreign Investment and Foreign Enterprises and its Implementation Rules issued in 1991. According to the Rules on Exemption or Reduction of Local Income Tax for Foreign Investment Enterprises promulgated by People’s Government of Guangdong Province effective on January 1, 1992, during such five-year preferential tax treatment period, Actions Semiconductor (Zhuhai) and Artek Microelectronic (Shenzhen) are also exempt from the 3% local income tax.

As a result of such preferential tax treatment, Actions Semiconductor (Zhuhai) was exempt from FEIT in the years ended December 31, 2004 and 2005, which were the first two years Actions Semiconductor (Zhuhai) achieved profitable operations after offsetting prior years’ tax losses. Actions Semiconductor (Zhuhai) also benefited from a 50% reduction in FEIT, which were 7.5% during each of the years ending December 31, 2006 and 2007 and expects to benefit from a 50% reduction in Enterprise Income Tax, or EIT, for the year ended December 31, 2008. Artek Microelectronics (Shenzhen) was exempt from FEIT in the year ended December 31, 2007, which was the first year Artek Microelectronics (Shenzhen) achieved profitable operations after offsetting prior years’ tax losses and expects to be exempted from EIT in the year ended December 31, 2008, which would be the second year after it achieved profitable operation after offsetting prior years’ tax losses. Furthermore, Artek Microelectronics (Shenzhen) expects it could continue to benefit from a 50% reduction of EIT rate, during each of three years ending December 31, 2009, 2010 and 2011.

On March 16, 2007, the National People’s Congress passed a new Enterprise Income Tax Law. The new PRC Enterprise Income Tax Law, effective January 1, 2008, imposes a single uniform EIT rate of 25% for most foreign-invested enterprises while permitting certain certified high technology companies may be taxed at a reduced tax rate of 15%. The new PRC Enterprise Income Tax law also contemplates various transition periods and measures for existing preferential tax policies, including among others, a grace period for as long as five years for foreign-invested enterprises which are currently entitled to a lower income tax rate, and continued implementation of preferential tax treatment with a fixed term until the expiration of such fixed term. Under the grace period the enterprises that were granted the preferential tax treatment may adjust its tax rate into 25% gradually within the next five years at the rate of 18%, 20%, 22%, 24% and 25% from 2008 to 2012, respectively.

Under this formulation, Actions Semiconductor (Zhuhai) expects to enjoy an income tax rate of 9% for the year ended December 31, 2008, which will be the last year of its preferential tax treatment where it may benefit from a 50% reduction of EIT. Further, Actions Semiconductor (Zhuhai) was certified as a “High-Tech Enterprise” in 2006 and may be able to benefit from the reduced tax rate of 15% starting from the fiscal year of 2009, if it can continue to obtain the “Hi-Tech Enterprise” certification every two year since 2006.

Artek Microelectronics (Shenzhen) was exempt from FEIT in the year ended December 31, 2007, which was the first year Artek Microelectronics (Shenzhen) achieved profitable operations after offsetting prior years’ tax losses, and expects to be exempted from EIT in the year ended December 31, 2008, which is the second year after it achieved profitable operation after offsetting prior years’ tax losses. From 2009 to 2011, Artek Microelectronics (Shenzhen) expects to benefit from a 50% reduction of EIT, as a result of which its applicable income tax rate could be 10%, 11% and 12% for the years ended December 31, 2009, 2010 and 2011, respectively. Further, Artek Microelectronics (Shenzhen) was certified as a “Hi-Tech Enterprise” in 2007. If Artek Microelectronics (Shenzhen) can continue to obtain its Hi-Tech Enterprise certification every two year since 2007, it may be able to benefit from the reduced rate of 15% starting from the year 2012.

In December 2007, we received a tax refund of US$5.9 million from the Zhuhai Municipal Bureau of Tax. This refund was received as Actions Semiconductor (Mauritius) reinvested the undistributed earnings of approximately US$80.2 million back into Actions Semiconductor (Zhuhai).

Pursuant to the Interim Regulations on Value-added Tax and its Implementation Rules issued in 1993, all entities and individuals that are engaged in the sale of goods, the provision of repairs and replacement services and the importation of goods in China are generally required to pay value-added tax, or VAT, at a rate of 17% of the gross sales proceeds received. We received a full rebate of the VAT on most of our export sales since the establishment of Actions Semiconductor (Zhuhai) through December 31, 2003. Due to changes in PRC regulations, from January 1, 2004 through October 31, 2004 we received a rebate of approximately 76% of our VAT payments. Beginning November 1, 2004 we resumed receiving a full rebate on our VAT payments. As most of our sales consist of exports, historically we have not incurred significant VAT expense.

We have historically had minimal taxable income in jurisdictions other than China.

Reconciliation between the benefits for FEIT computed by applying the China tax rate to loss before income taxes is as follows:

	Year ended December 31,
	2005			2006			2007
Tax provision at reduced PRC enterprise income tax rate of 15%	$	10,959		$	12,091		$	8,101
Expenses not deductible for tax purposes		745			477			764
Income not taxable for tax purposes		(77	)		(519	)		(2,393	)
Deferred tax assets not recognized		44			233			134
Effect of tax exemption and preferential income tax rate granted to a PRC subsidiary		(12,165	)		(6,206	)		(4,284	)
Effect of the different income tax rate in other jurisdiction		(3	)		(111	)		(121	)
Over provision of taxation		(10	)		—			—
Other		(19	)		19			1
	$	(526	)		5,984			2,202

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

Research and Development

We devote a substantial portion of our resources to the development of our SoCs and our ability to provide SDKs and reference designs. We make continuous investment in our design technologies to improve design, fabrication and verification of our products. As of December 31, 2007, we had 348 research and development engineers who work closely with value-added distributors, contract manufacturers and brand owners in adding new features and functions to our existing products or developing new products.

Our mixed-signal integration expertise enables us to reduce the size and cost of our SoC products. For example, we incorporate standard digital components in these products, including a processor, embedded memory, certain peripheral connections such as a universal serial bus, or USB, interface, and analog components, such as analog-to-digital and digital-to-analog converters and audio signal amplifiers. Because we are able to integrate several analog and digital components on the same integrated circuit, our customers can avoid significant design challenges when they use our SoCs.

Our research and development efforts during 2006 and 2007 focused principally on increasing the solutions and applications of our nine series and thirteen series products to enhance their appeal to our customers, and on the development and production of our newest eleven series products. In addition to pursuing these efforts, we are currently focusing our research and development efforts on gaining know-how and intellectual property in the areas of advanced audio and video technology. Our continuing goal for our research and development efforts is to develop and integrate increasing functionality into our SoCs and integrated platform solutions products while maintaining our competitive pricing structure.

Providing additional features to our SoCs requires us to develop greater technological expertise and will also require us to continue to migrate to smaller process geometry technologies. We cannot be certain that we will be able to design SoCs incorporating advanced video and audio features ahead of our competitors, or that the SoCs we develop will be accepted by our target customers.

We have a stable core team of engineers that have detailed knowledge of our proprietary architecture, algorithms, integrated circuit designs, firmware and software engineering, as well as system-level knowledge of our customer’s manufacturing processes. Our ability to adapt to changing customer requirements and evolving industry standards through the development of new and enhanced products is a significant factor in maintaining our competitive position and our prospects for growth.

We spent US$7.8 million in 2005, US$9.8 million in 2006 and US$12.4 million in 2007 on research and development, which represented 5.2%, 5.8% and 10.6%, respectively, of our revenues in those respective periods.

Intellectual Property

As of December 31, 2007, we hold 15 issued patents and have 52 patent applications pending in China. We also have 12 proprietary rights granted for layout-design of integrated circuits in China. In addition, we hold seven registered trademarks and 34 trademark applications pending in China. Outside of China, we also hold four registered trademarks in Hong Kong, one registered trademark in the United States, one registered trademark in the European Union and two registered trademarks in Taiwan. We also have 36 trademark applications pending in Hong Kong, Taiwan, the United States, European Union, Russia, Korea, Japan, Canada, Brazil, India and Singapore, respectively.

Although we file patents to protect our inventions, our revenue is not dependent on any particular patent. We do not believe the expiration or loss of any particular patent would materially harm our business. We do not know if our patent applications or any future patent application will result in a patent being issued with the scope of the protection we seek, if at all, or whether any patents we may receive will be challenged, invalidated or declared unenforceable. We intend to continue to assess appropriate occasions for seeking patent protection for those aspects of our technology that we believe provide significant competitive advantages.

We have established an IPR department which serves for patent application, trademark registration, IC layout design, software copyright registration, and related legal affairs. As of December 31, 2007, we had nine in house intellectual property lawyers who work closely with all departments including marketing, research and development and have extensive connection with external law firms and IP offices.

Our products are designed for use in devices manufactured by our customers that comply with international standards. These international standards are often covered by patents or copyrights held by third-parties, We have entered into various licensing agreements with major technology companies, including MIPS, Microsoft, Thomson, SRS, Samsung, CSR and Real Networks. We integrate third-party software or other licensed technology into almost all of our products.

From time to time, we may be required to license additional technology from third-parties to develop new products or product enhancements. Third-party licenses may not continue to be available to us on commercially reasonable terms or at all. Our inability to maintain any third-party licenses required in our current products, or obtain third-party licenses necessary to develop new products and product enhancements, could require us to obtain substitute technology at greater cost or of lower quality or performance standards.

Actions Semiconductor and the Actions Semiconductor logo are our registered trademarks. These trademarks remain valid while we continue to use and renew them.

Third-parties could infringe or misappropriate our patents, copyrights, trademarks and other proprietary rights. In addition, other parties may assert infringement claims against us or our customers. Although we do not believe our platforms infringe any patents, our platforms may be found to infringe one or more issued patents. In addition, because many pending patent applications in China, the United States and elsewhere are not publicly disclosed by the relevant patent and trademark offices until the application is published, there may be applications that relate to our platforms of which we have no knowledge.

We have settled all outstanding litigation worldwide with SigmaTel, Inc. Pursuant to the final settlement agreement entered on June 20, 2007, all outstanding claims and counterclaims in the lawsuits in which the two companies have been engaged had been dismissed with prejudice. Both companies also agreed to not pursue possible third party IP infringements or new legal actions against each other and their respective customers for three years. Additionally, Actions and SigmaTel entered into a comprehensive cross-license agreement covering patents owned or controlled by either party or its subsidiaries.

We may be subject to other legal proceedings and claims in the ordinary course of our business, including claims of alleged infringement of the trademarks and other intellectual property rights of third-parties. We may also be required to resort to litigation to enforce our intellectual property rights. Intellectual property litigation is expensive and time-consuming and could divert management’s attention away from running our business. Intellectual property litigation could also require us to pay substantial damages to the party claiming infringement, stop selling products or using technology that contains the allegedly infringing intellectual property, develop non-infringing technology or enter into royalty or license agreements. These royalty or license agreements, if required, may not be available on acceptable terms, if at all, in the event of a successful claim of infringement.

D. Trend Information

Demand for portable media players. Throughout 2004 and 2005, a combination of factors, including a decrease in the price of portable media players caused by a significant decrease in the price of flash memory, which is a major cost component of many portable media players, and the growing acceptance of digital media distribution channels on the Internet such as Apple iTunes, Yahoo, MusicMatch and Napster, resulted in rapid growth in demand for portable media players. Because we supply SoCs for use in portable media players, we benefited greatly from the increased demand, and our revenues and profitability grew rapidly during this period. Further, we expect the growth in emerging markets, including China, India, Russia, and Brazil, will outpace the growth of the overall market for portable media players. However, while we anticipate future growth, it is unlikely that we will experience growth in revenues and profitability on a percentage basis comparable to what we experienced during 2004 and 2005 when consumer demand for portable media players began to increase rapidly. Accordingly, you should not rely on the results of any prior quarterly or annual periods as an indication of our future operating performance.

Average selling price of our products. The portable media player market has been characterized by rapidly changing technical standards and consumer preferences. Consumers generally expect that new product releases will have more capabilities than previous generations. To succeed in this intensely competitive and quickly evolving market, brand owners must constantly and rapidly introduce portable media players with more functions and enhanced features. As an SoC and integrated platform solutions provider for these brand owners, we typically introduce a new product series every nine to 12 months, and introduce new SoC products within a series with increased functionality and enhanced features more frequently.

The average selling price of any particular SoC product declines over time after it reaches maturity in the product life cycle. In general, we earn higher margins when a new SoC model is first introduced to the market and experience a corresponding decline in margins as its average selling price declines. However, we typically are able to partially offset the decline in the average selling price of a particular SoC, and mitigate the decline in our margins, through progressively increasing our yields during the product’s life. For example, we experienced a significant increase in shipments of our eight series SoCs commencing in the fourth quarter of 2004, and the eight series was one of our principal product lines in 2006. However, over a two years period from the fourth quarter of 2004 to the fourth quarter of 2006, the average selling price of our eight series SoCs decreased by approximately 48.1%. We introduced our nine series SoCs in the third quarter of 2005, which provide more functionality than our earlier series SoCs and are sold at higher prices. From the third quarter of 2005 to the fourth quarter of 2007, we have also experienced an approximately 59% decrease in the average selling price in our nine series SoCs. While our overall average selling prices generally benefit from the introduction of new SoC products, this benefit may be partially offset by pricing strategies we employ. For example, we may, from time to time, seek to take advantage of market opportunities by reducing our prices for certain SoC products in order to increase our sales volume and market share.

We seek to achieve revenue growth and margin stability through increasing our share of the total volume of units shipped by offering products with high functionality and competitive pricing; continuously integrating additional functionality to improve the value of our products; and reducing costs by achieving smaller die size, greater integration and migration to more advanced process technologies. In the event that we are not able to timely introduce new products, the average selling price of our products will decline and we may not be able to offset such decline by realizing additional production efficiencies.

Seasonality of the demand for our products. Like sales for most consumer electronics products, portable media player sales tend to increase significantly in the fourth quarter to meet the year-end holiday demand. As a result, orders for our SoCs generally increase in the third and forth quarters of each year and decrease in the first quarter. For example, our revenues decreased by US$19.2 million, or 38.8%, from US$49.5 million in the three months ended December 31, 2006 to US$30.3 million in the three months ended March 31, 2007, principally due to a 30.9% decrease in units shipped. Our revenues increased by US$5.3 million, or 19.6%, from US$27.0 million in the three months ended September 31, 2007 to US$32.3 million in the three months ended December 31, 2007, principally due to a 23.7% increase in units shipped. As the rate of growth in our sales declines, we expect seasonality to have a more pronounced effect on our sales and cause our quarterly results to fluctuate significantly in future periods.

Foundry capacity and wafer pricing. To maximize our unit sales and profits, we must secure committed foundry capacity that is adequate to produce all of the SoCs that we can sell to our customers at prices that enable us to maintain or increase our profit margins. Wafer pricing is affected by the volume of our purchases and overall market demand, and tends to be cyclical. Because contract foundries have fixed capacities, in times of strong market demand, the prices that contract foundries charge for their wafer products and services generally increase, and correspondingly in times of lesser market demand, the prices that contract foundries charge for their wafer products and services may decrease. As a result, if the overall demand for electronics products is high, contract foundries that manufacture wafer products for electronics products may increase the prices that they charge to their customers, including our company. While our increased sales volume has helped us to negotiate better pricing terms and secure committed capacity with our foundries, we are still subject to seasonal and other factors affecting foundry capacity and pricing that are beyond our control.

Presently, He Jian manufactures almost all of our semiconductors. We also maintain relationships with other foundries to help ensure that we have alternative manufacturing capabilities if He Jian fails to achieve satisfactory yields or is unable to meet our requirements. However, there are many purchasers of foundry products and services that are larger than us, and our ability to source adequate foundry services could be affected by significant increases in demand for electronics products.

E. Off-balance Sheet Arrangements

We do not have any outstanding derivative financial instruments, off-balance sheet guarantees, interest rate swap transactions or foreign currency forward contracts as of December 31, 2007.

F. Tabular Disclosure of Contractual Obligations

The following sets forth information regarding our aggregate payment obligations under our contracts and commercial commitments as of December 31, 2007:

	Payments due by period
Contractual obligations	Total		Less than 1 year		1-3 years		3-5 years		After 5 years
	(thousands)
Operating lease obligations	US$	767	US$	546	US$	221		—		—
Royalty Commitment		150		150		—		—		—
Purchase Obligations		7,463		7,463		—		—		—
Capital Commitment		572		572		—		—		—
Other Liabilities		1,570		884		686		—		—
Total contractual obligations	US$	10,522	US$	9,615	US$	907		—		—

ITEM 6. DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES

A. Directors and Senior Management

Directors, Executive Officers and Key Employees

The following table sets forth our executive officers, directors and key employees, their ages as of December 31, 2007 and the positions held by them. The business address for each of our executive officers and directors is c/o Actions Semiconductor Co., Ltd., 15-1, No. 1, HIT Road, Tangjia, Zhuhai, Guangdong, 519085, the People’s Republic of China.

Name	Age	Position
Lee, Hsiang-Wei (David)	48	Director, Chairman of the Board
Kang, Byung-Jin (Peter)	58	Director, Chairman of the Board⁽²⁾
Chiu, Tzu-Yin⁽¹⁾	52	Director
Tien, Hui-Dong (Terry)	49	Director⁽²⁾
Lin, Yu-Hsin Casper⁽¹⁾	61	Director
Hsiao, Paul⁽¹⁾	36	Director
Chen, Chin-Hsin (Fred)	65	Director
Yeh, Nan-Horng	49	Director and Chief Executive Officer
Li, Shao Chuan (Shawn)	40	Director and Chief Technology Officer
Chou, Pei-Fen (Patricia)	40	Chief Financial Officer

(1)	Member of each of the audit committee, compensation committee and nominations committee.

(2)	Mr. Kang and Mr. Tien resigned from our board of directors in October 2007.

Lee, Hsiang-Wei (David) has served as our Chairman since October 2007. Previously, Mr. Lee served as our Chief Financial Officer since August 2005. Mr. Lee also currently serves as the director of Pacific Sun Investment Management Co., Ltd. Previously, Mr. Lee was the CEO of ABN AMRO Asset Management (China). From 1995 to 2002 he was the Chairman and CEO of ABN AMRO Asset Management’s Taiwan operations where he managed assets in the amount of US$3.5 billion. Mr. Lee has more than 15 years of experience in corporate finance and investment management. Mr. Lee holds a Master of Business Administration degree from Duke University and a Bachelor of Science degree in biometrics from National Taiwan University.

Kang, Byung-Jin (Peter) has served as our Chairman since September 2005. Mr. Kang has been the President of Namyoung Corporation of Korea since February 1987. Namyoung Corporation is the business agent for various integrated circuit design companies, including UMC, Realtek, Princeton Technology, Holtek Semiconductor and Inter Action Corporation. Mr. Kang holds a Bachelor of Business Economics degree from the International Trade Department of Hong-Ik University in Korea. Mr. Kang resigned from our board of directors in October 2007

Chiu, Tzu-Yin has served as one of our directors since September 2005. Mr. Chiu also currently serves as the President and Chief Operating Officer of SilTerra Malaysia Sdn. Bhd. since January 2007. Previously, Mr. Chiu served as a senior vice president and the Chief Operating Officer of Huahong International Corporation until December 2006, as a senior vice president of operations in Semiconductor Manufacturing International Corporation, a major foundry in China from January 2001 until July 2005, and as a fab director for Taiwan Semiconductor Manufacturing Company from 1996 to 2001. Mr. Chiu holds a Ph.D. in Electrical Engineering from University of California at Berkeley and an EMBA from Columbia University.

Tien, Hui-Dong (Terry) has served as one of our directors since August 2005. Mr. Tien is also currently the general manager of each of Shanghai Sino-Century Assets Management Co., Ltd., an asset management company permitted to conduct high-tech investment activities in China. He is also a partner of Sino-Century Capital and Development Ltd., which is a Hong Kong based investment management company. Mr. Tien holds a Master in Business Administration degree from the New York University Graduate School of Business Administration and a Bachelor of Science degree in management from National Chiao Tung University in Taiwan. Mr. Tien resigned from our board of directors in October 2007.

Lin, Yu-Hsin Casper has served as one of our directors since August 2005. Mr. Lin also currently serves as the chairman and director of Memory Devices Co., Ltd., a memory module manufacturer. Previously, Mr. Lin was a director of Twinmos Tech. Inc., a network module manufacturer, and a director and the chief financial officer of United Microelectronics, a semiconductor wafer manufacturer. Mr. Lin holds a Master in Business Administration degree from Bloomsbury University of Pennsylvania and a Bachelor of Art degree from the accounting department of Soochow University in Taiwan.

Hsiao, Paul has served as one of our directors since October 2005. Paul is a partner at New Enterprise Associates (NEA), a venture capital firm with $8 billion under management. Paul has been involved with numerous NEA semiconductor investments, including Spreadtrum Communications, a multimedia cellular semiconductor company, Atheros Communications, a wireless semiconductor company, and Luminary Micro, a fabless semiconductor company. Paul holds a Master of Business Administration degree from Harvard Business School and a Bachelor of Science degree in mechanical engineering from Massachusetts Institute of Technology.

Chen, Chin-Hsin (Fred) has served as one of our directors since October 2007. Mr. Chen also currently serves as the Director of the OLED Laboratory, Display Institute, National Chiao Tung University in Hsinchu, Taiwan and Director of the Centre for Advanced Luminescence Materials (CALM) at Hong Kong Baptist University. Previously Mr. Chen was a group leader and senior scientist at the Display Technology Laboratory of Eastman Kodak Co., in Rochester, New York, USA. Mr. Chen is the co-inventor of the key Doped OLED Guest-Host Emitter Technology and has been awarded more than 35 U.S. patents.

Yeh, Nan-Horng has served as our Chief Executive Officer since May 2005 and as one of our directors since October 2007. Previously, Mr. Yeh served as a director and vice president of Realtek Semiconductor Corp. He also served as a director and the president of each of Globaltec Management Consulting Corp. and Globaltec Technology Partner I Venture Capital Corp. Mr. Yeh holds a Master in Business Administration degree from Washington University in St. Louis and a Bachelor of Science degree in transportation management from National Chiao Tung University in Taiwan.

Li, Shao Chuan (Shawn) has served as one of our directors since September 2005 and as our Chief Technology Officer since the establishment of our operations in December 2001. Before joining us, Mr. Li was the director of research and development at Zhuhai Arestek Electronic Co., Ltd. Mr. Li holds a Master of Science degree in electrical engineering from Beijing Institute of Technology.

Chou, Pei-Fen (Patricia) has served as our Chief Financial Officer since October 2007. Previously Ms. Chou was the Vice President of Finance at Actions. Prior to joining Actions in November 2006, Ms. Chou served as the Director of Business Development and then Senior Director of Accounting at Semiconductor Manufacturing International Corporation (SMIC), where she was responsible for establishing a U.S. presence, developing new business initiatives, and leading the company’s global accounting team. She also participated in raising US$650 million in private funds and SMIC’s US$1.6 billion NYSE-listed IPO. From 1996 to 2001, Patricia was the Director of Accounting and Planning of Winbond Electronics Corporation U.S. operation. Prior to that, Chou worked as a financial auditor in Taiwan, Hong Kong, and the United States with Deloitte. Ms. Chou received a Bachelor of Business Administration from National Taiwan University, Master of Accounting from University of Southern California, and Master of Business Administration from University of California at Berkeley. She is also a Certified Public Accountant in Taiwan, the United States, and China.

B. Compensation

Cash Compensation

Our directors and senior management receive compensation in the form of salaries and annual bonuses. While we do not have a specific bonus plan setting the calculation of our annual bonuses, each director is entitled to receive an annual discretionary bonus of such amount as shall be determined by the board of directors. Additionally, our senior management and employees are entitled to receive an annual discretionary bonus based on their individual performance and our financial performance during the year in question.

The aggregate amount of salaries and bonuses paid by us to our directors and executive officers during the year ended December 31, 2007 was approximately US$1.4 million. None of our directors or executive officers has any employment or service contracts with us providing for benefits upon termination of employment.

Indemnification

Cayman Islands law and our articles of association provide that we may indemnify our directors and officers acting in relation to any of our affairs against any liability incurred as a result of any act or failure to act in carrying out their functions other than such liability (if any) that may be incurred by the willful neglect or default of any such persons. No such director or officer shall be liable to the company for any loss or damage in carrying out their functions unless that liability arises through the willful neglect or default of such person.

Insofar as indemnification for liabilities arising under the Securities Act may be permitted to directors, officers or persons controlling the registrant pursuant to the foregoing provisions, or otherwise, the registrant has been informed that in the opinion of the U.S. Securities and Exchange Commission, or the SEC, such indemnification is against public policy as expressed in the Securities Act and is, therefore, unenforceable.

2007 Equity Performance and Incentive Plan

In May, 2007, our board of directors and shareholders adopted a 2007 equity incentive plan, or the 2007 Plan, which is intended to attract and retain officers, employees, non-employee directors and consultants for us and our subsidiaries and to provide to such persons incentives to stay with us or our subsidiaries and make superior contributions to us in the future. We have reserved 8 million ADSs upon exercise of awards granted under the 2007 Plan. As of December 31, 2007, we have not yet granted any shares to our directors, executive officers or employees.

Types of Awards. We may grant the following types of awards under our 2007 Plan:

•

Option rights to purchase our ADSs;

•

Restricted shares, which are non-transferable ADSs, that may be subject to forfeiture;

•

Restricted Shares Units, which represent the right to receive our ADSs at a specified date in the future, which may be subject to forfeiture;

Plan Administration. Our board of directors, or our compensation committee (or its subcommittee) designated by our board or directors, will administer the 2007 Plan. A majority of the committee (or subcommittee) will constitute a quorum, and the action of the members of the committee (or subcommittee) present at any meeting at which a quorum is present, or acts unanimously approved in writing, will be the acts of the committee (or subcommittee).

The interpretation and construction by our board of directors of any provision of the 2007 Plan or of any agreement, notification or document evidencing the grant of option rights, restricted shares or restricted share units and any determination by the board of directors pursuant to any provision of the 2007 Plan or of any such agreement, notification or document will be final and conclusive. No member of our board of directors will be liable for any such action or determination made in good faith.

Amendment Our board of directors may at any time and from time to time amend the 2007 Plan in whole or in part; provided, however, that any amendment that must be approved by our shareholders in order to comply with applicable law or the rules of the NASDAQ Global Market or, if our ADSs are not quoted on the NASDAQ Global Market, the principal national securities exchange upon which our ordinary shares are traded or quoted, will not be effective unless and until such approval has been obtained. Nothing herein shall be construed to limit our authority to offer similar or dissimilar benefits under other plans or otherwise with or without further shareholder approval.

Our board of directors also may permit participants to elect to defer the issuance of ADSs or the settlement of awards in cash under the 2007 Plan pursuant to such rules, procedures or programs as it may establish for purposes of the 2007 Plan. Our board of directors also may provide that deferred issuances and settlements include the payment or crediting of dividend equivalents or interest on the deferral amounts.

Our board of directors may condition the grant of any award or combination of awards authorized under the 2007 Plan on the surrender or deferral by the participant of his or her right to receive a cash bonus or other compensation otherwise payable by us or one of our subsidiaries to the participant.

In case of termination of employment by reason of death, disability or normal or early retirement, or in the case of hardship or other special circumstances, of a participant who holds an option right not immediately exercisable in full, or any restricted shares as to which the risk of forfeiture or the prohibition or restriction on transfer has not lapsed, or any restricted share units as to which the restriction period has not been completed, or who holds shares subject to any transfer restriction imposed pursuant to the 2007 Plan, the board of directors may, in its sole discretion, accelerate the time at which such option right may be exercised or the time at which such risk of forfeiture or prohibition or restriction on transfer will lapse or the time when such restriction period will end or the time when such transfer restriction will terminate or may waive any other limitation or requirement under any such award.

Our 2007 Plan shall not confer upon any participant any right with respect to employment or other service with us or any of our subsidiary (including, without limitation, continuation of employment), nor shall it interfere in any way with any of our right or the right of any of our subsidiaries would otherwise have to terminate such participant’s employment or other service at any time, with or without cause. The terms of employment of an employee shall not be affected by the execution of the 2007 Plan. Awards granted under the 2007 Plan shall not form a part of the terms of employment of an employee or entitle such employee to take into account awards granted under the 2007 Plan when calculating any compensation or damages upon the termination of such employee’s employment for any reason.

Termination. No grant will be made under this 2007 Plan after January 1, 2020, but all grants made on or prior to such date will continue in effect thereafter subject to the terms thereof and of this Plan.

C. Board Practices

Our board of directors currently consists of seven members. Currently, three committees have been established under the board: the audit committee, the compensation committee and the nominations committee. Mr. Lin, Yu-Hsin Casper, Mr. Paul Hsiao and Mr. Chiu, Tzu-Yin serve as independent board members on our audit committee, nominations committee and compensation committee. There are no family relationships between any of our executive officers and directors.

The audit committee is responsible for overseeing the accounting and financial reporting processes of our company and audits of our financial statements, including the appointment, compensation and oversight of the work of our independent auditors. Mr. Lin, Yu-Hsin Casper is the Chairman of the audit committee and a “financial expert” within the meaning of the Sarbanes-Oxley Act of 2002.

The compensation committee of the board of directors reviews and makes recommendations to the board regarding our compensation policies for our officers. Mr. Paul Hsiao is the Chairman of the compensation committee.

The nominations committee of the board of directors identifies individuals qualified to become members of the board, consistent with criteria approved by the board and selects or recommends that the board select, the director nominees for the next annual shareholders’ meeting and recommends members of the board to the board for committee membership. Mr. Chiu, Tzu-Yin is the Chairman of the nominations committee.

D. Employees

As of December 31, 2005 and 2006, we had 259 and 423 full-time employees, respectively. As of December 31, 2007, we had 568 full-time employees, including 348 dedicated engineers in the research and development department, 68 field application engineers in customer service department, 18 in sales and marketing, 96 in general and administration and 38 in manufacturing and logistics. Of these full-time employees, 445 are located in Zhuhai, China, 43 are located in Beijing, China, 72 are located in Shenzhen, China, 2 are located in Shanghai and 6 are located in Hong Kong. We have never had a work stoppage and none of our employees is covered by a collective bargaining agreement. We believe that relations with our employees are good.

E. Share ownership

The following table sets forth the share ownership by our directors and senior management as of April 21, 2008.

	Ordinary shares owned
Name	Number		Percent
Starlink Development Limited⁽¹⁾		11,028,402		2.14	%
Surrey Glory Investments Limited⁽²⁾		17,549,440		3.40	%

(1)

Starlink Development Limited is a British Virgin Islands international business company owned by two investors for investment purposes. Mr. Kang, Byung Jin, the former chairman of our board of directors, is its sole director and 94.4% owner. Mr. Kang resigned from our board of directors in October, 2007.

(2)	Surrey Glory Investments Limited has six shareholders, Mr. Li, Shao Chuan (Shawn), one of our directors and Chief Technology Officer is a 11.9% owner.

ITEM 7. MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS

A. Major Shareholders

According to the Schedule 13G jointly filed by Tetrad Ventures Pte Ltd., GIC Special Investments Pte Ltd., Government of Singapore Investment Corporation Pte Ltd. and Government of Singapore with the Securities and Exchange Commission on January 16, 2008, they beneficially owned 5,142,801 ADSs, or approximately 6.0% of our outstanding shares, as of January 16, 2008. We do not have further information with respect to their ownership in us subsequent to their Schedule 13G filed on January 16, 2008.

According to the Schedule 13G jointly filed by Janus Capital Management LLC and Janus Overseas Fund with the Securities and Exchange Commission on February 14, 2008, Janus Capital Management LLC may be deemed to be the beneficial owner of 10,028,989 ADSs, or approximately 11.7% of our outstanding shares, through its managed portfolio and Janus Overseas Fund beneficially owned 5,783,139 ADSs, or approximately 6.7% of our outstanding shares, as of February 14, 2008. We do not have further information with respect to their ownership in us subsequent to their Schedule 13G filed on February 14, 2008.

As of April 22, 2008, we do not have any other person known to us to own, directly or indirectly, 5% or more of our ordinary shares. We are not aware of any arrangement that may at a subsequent date result in a change of control of our company.

As of March 31, 2008, there was three registered holder of 42,213,513 of our American depositary shares in the United States, consisting of approximately 49.1% of our outstanding ordinary shares.

B. Related Party Transactions

During the years ended December 31, 2002, 2003 and 2004, we received capital contributions of US$1.9 million, US$2.4 million and US$0.7 million, respectively, from Honorable Data, our sole shareholder during those periods.

Pursuant to a share purchase agreement entered into in August 2004 and amended in December 2004, Honorable Data, the sole registered shareholder of Actions Semiconductor (Mauritius) since its inception, transferred all of the shares it owned in Actions Semiconductor (Mauritius) for an aggregate purchase price of US$35,580,000 to 25 purchasers, consisting of companies owned by financial investors and four British Virgin Islands companies owned by our employees. Honorable Data was owned by a single shareholder who is not affiliated with any of our officers or directors. None of the companies owned by financial investors that purchased shares from Honorable Data are affiliates of our Company or have relationships with us other than their shareholdings. We believe that the price at which Honorable Data sold its shares was negotiated on an arm’s length bases between Honorable Data and the companies that purchased our shares. We did not receive any proceeds from that sale.

Certain of our employees formed British Virgin Islands companies for the sole purpose of making an investment in our Company. We did not advise our employees on the benefits, if any, of holding shares in us through BVI companies.

We were incorporated as an exempted company under the laws of the Cayman Islands on July 27, 2005 to hold the equity interests in Actions Semiconductor (Mauritius). In connection with our incorporation, the then 25 shareholders of Actions Semiconductor (Mauritius) transferred their respective interests representing the entire share capital of Actions Semiconductor (Mauritius) to us in consideration for 480 million newly-issued ordinary shares of our company. Following this transfer, we own 100% of the share capital of Actions Semiconductor (Mauritius) and the 25 shareholders, in aggregate, held 100% of our total outstanding shares including 8.09% of our total shares outstanding held by four British Virgin Islands companies on behalf of 47 of our employees.

Details of the ownership by our employees of our ordinary shares as of April 21, 2008 are provided in the following table:

Name of BVI Company	Directors		Shares Beneficially Owned
Surrey Glory Investments Limited⁽¹⁾		Wang Yang, Yun-Ching		17,549,440	3.40	%
Fairly Consultants Limited⁽²⁾		Wu, Zhang Liang		10,415,167	2.02	%
Cheshire Red Investments Limited⁽³⁾		Zhu, Wen Ge		9,507,237	1.84	%
Cumbria Universal Corporation Limited⁽⁴⁾		Cai, Jian Yu		7,950,079	1.54	%
Paobridge Success Ventures Limited⁽⁵⁾		Wang, De Liang		5,169,414	1.00	%
Fineway Group Limited⁽⁶⁾		Ding, Ran		3,418,698	0.66	%
				54,010,035	10.46	%

(1)	Surrey Glory Investments Limited has six shareholders, two of whom are employees.

(2)	Fairly Consultants Limited has twenty-four shareholders, twenty of whom are employees.

(3)	Cheshire Red Investments Limited has thirty-eight shareholders, twenty-nine of whom are employees

(4)	Cumbria Universal Corporation Limited has twenty-two shareholders, fifteen of whom are employees

(5)	Paobridge Success Ventures Limited has twenty-five shareholders, fourteen of whom are employees

(6)	Fineway Group Limited has sixteen shareholders, ten of whom are employees

We have been notified by each of the entities named in the table above that its respective director has sole voting and investment power with respect to all of our ordinary shares shown as beneficially owned by it.

Sale of Our Shares

On September 2, 2005, certain of our shareholders entered into a share purchase agreement (the “Share Purchase Agreement”) for the sale and transfer of an aggregate of 115,113,930 of our issued and outstanding ordinary shares to 24 purchasers (the “Purchasers”) at a purchase price of US$0.833 per share, for an aggregate consideration of US$95,889,905. Among our shareholders that were parties to the Share Purchase Agreement was Starlink Development Limited, for which Mr. Kang, Byung Jin, the former chairman of our board of directors, is the sole director and majority shareholder. Starlink Development Limited sold 15,599,520 of our ordinary shares pursuant to the Share Purchase Agreement. We were also a party to the Share Purchase Agreement in order to make certain representations and warranties regarding the Company to the Purchasers. The transactions contemplated under the Share Purchase Agreement were completed on September 9, 2005 (the “Closing Date”).

Consultancy Services

During the year ended December 31, 2005 and 2006, we received consultancy services for intellectual property and legal affairs, product technology, product development and technology licensing and research and development from several individual shareholders for fees amounting to approximately US$600,000 and US$540,000, respectively.

Our Audit Committee has determined that these transactions were fair and reasonable to us and on terms comparable to those from unrelated third parties.

Transactions with DVI

Mr. Lee, Hsiang-Wei (David) our Chairman of board of directors and former Chief Financial Officer, was previously a shareholder and director of a customer, Digital Vision Incorporation Limited (“DVI”). As of December 31, 2006, Mr. Hsiang-Wei Lee had disposed of all his equity interest in DVI, which were acquired before becoming our Chief Financial Officer, and resigned as director of DVI.

Our Audit Committee has determined that our transactions with DVI were fair and reasonable to us and on terms comparable to those from unrelated third parties.

Transactions with Namyoung Corporation

Mr. Kang, Byung-Jin (Peter), our former chairman of the board of directors, is also the President of Namyoung Corporation, which provides agency service by introducing customers and providing technology support. As of December 31st, 2007, the commission fees paid to Namyoung Corporation amounted to US$159,000.

Our Audit Committee has determined that our transactions with Namyoung were fair and reasonable to us and on terms comparable to those from unrelated third parties.

Transactions with Hi-Trend

During the year ended December, 31, 2007, we recognized income of US$278,000 for granting of rights to use its proprietary technology in SoCs for power meters indefinitely to an affiliate, Hi-Trend Investment Holding Co., Ltd. Further, during the year ended December 31, 2007, we made sales to Hi-Trend amounting to US$308,000.

Our Audit Committee has determined that our transactions with Hi-Trend were fair and reasonable to us and on terms comparable to those from unrelated third parties.

Transactions with GMI Technology

During the year ended December 31, 2007, we sold products to GMI Technology amounting to US$13,694,000. The president of GMI Technology is the elder brother of Mr. Yeh, Nan-Horng, one of our directors and the CEO of our Company.

Our Audit Committee has determined that our transactions with GMI were fair and reasonable to us and on terms comparable to those from unrelated third parties.

C. Interests of Experts and Counsel

Not applicable.

ITEM 8. FINANCIAL INFORMATION

A. Consolidated Statements and Other Financial Information

Financial Statements

Please see “Item 18. Financial Statements”. Other than as disclosed elsewhere in this annual report, no significant changes have occurred since the date of our annual financial statements.

Legal Proceedings

On January 4, 2005, one of our main competitors, SigmaTel, Inc., filed a complaint in the U.S. District Court for the Western District of Texas, Austin Division against us alleging that some of our SoC designs infringed certain of SigmaTel’s U.S. patents, including U.S. patent numbers 6,633,187, or the 187 patent, and 6,366,522, or the 522 patent . Subsequently, SigmaTel filed similar complaints with the U.S. International Trade Commission, or ITC, alleging that we had infringed SigmaTel’s U.S. patents in the design of some of our SoCs for PMP players.

On September 15, 2006, the ITC announced its final determination that certain of our SoCs had infringed the 187 patent and certain of our SoCs, utilizing a prior version of firmware, had infringed the 522 patent. The ITC also issued a limited exclusive order prohibiting some of our products shipping into U.S. The ITC’s final determination is subject to appeal at the United States Circuit Court for the Federal Circuit. On January 3, 2007, SigmaTel’s complaint in the U.S. District Court for the Western District of Texas, Austin Division was dismissed without prejudice. On January 4, 2007, we filed a Notice of Appeal with the United States Court of Appeals for the Federal Circuit to review the September 15, 2006 ITC decision.

On September 13, 2006, we filed a complaint in Shenzhen Intermediate People’s Court in China, asserting that certain SigmaTel products infringe one of our key digital audio processing technology patents in China. Further, we applied the court to grant and execute a series of border detention orders, enforced by China customs, prohibiting the importation and the exportation of the infringing products and the devices that contain SigmaTel’s infringing chips.

On June 21 2007, we settled all the disputes with SigmaTel, Inc. Under the terms of the settlement, all outstanding claims and counterclaims in the lawsuits would be dismissed. Both companies also agreed to not to pursue possible third party IP infringements or new legal actions against each other and their respective customers for three years. Additionally, both companies entered into a comprehensive cross-license agreement covering patents owned or controlled by either party or its subsidiaries. Subsequently, on August 20, 2007, we and SigmaTel filed a joint petition to rescind the remedial order on the basis of the settlement agreement. On September 11, 2007, the US International Trade Commission has determined to rescind the limited exclusion order previously issued in this investigation.

In addition, two of our former advisors have filed a complaint in the U.S. District Court for the Southern District of California against us on August 17, 2006, seeking compensatory damages for services rendered. The Company has filed a motion to dismiss the complaint on the grounds that it is not subject to personal jurisdiction in California and that the Peoples’ Republic of China would be the more appropriate forum for this. That motion is currently pending before the U.S. District Court for the Southern District of California. We do not believe this dispute will have any material impact on our financial conditions or results of operation.

Dividend Policy

Annual dividends, if any, on our shares and ADSs will be declared by and subject to the discretion of our board of directors. Our board of directors may from time to time pay to the shareholders such interim dividends as appear to our board of directors to be justified by our profits. We may pay dividends to shareholders in the future; however, such payments will depend upon a number of factors, including our results of operations, earnings, capital requirements and surplus, general financial condition, contractual restrictions and other factors considered relevant by our board of directors. We currently intend to retain all of our earnings to finance the development and expansion of our business and therefore do not intend to declare or pay cash dividends on our shares and ADSs in the near to medium term.

Our dividends may be declared and paid out of our profits, realized or unrealized, or from any reserve set aside from profits which the directors determine is no longer needed or out of our share premium account. We currently have no reserve set aside from profits for the payment of dividends.

Our ability to pay dividends depends substantially on the payment of dividends to us by Actions Semiconductor (Zhuhai). Actions Semiconductor (Zhuhai) may pay dividends only out of its accumulated distributable profits, if any, determined in accordance with its articles of association, and the accounting standards and regulations in China. In addition, Actions Semiconductor (Zhuhai), as a wholly foreign owned enterprise, is required to provide for a reserve fund and a staff and workers’ bonus fund, and to set aside at least 10% (up to an aggregate amount equal to half of its registered capital) of its after-tax profits each year at the discretion of its board of directors. Allocations to these statutory reserves and funds can only be used for specific purposes and are not distributable to us in the form of loans, advances, or cash dividends. Any limitation on the payment of dividends by our subsidiaries could materially and adversely limit our ability to grow, make investments or acquisitions that could be beneficial to our businesses, pay dividends, and otherwise fund and conduct our businesses.

Our subsidiary Actions Semiconductor (Mauritius) declared a special dividend in June 2005 in the amount of US$20 million, which was paid in July 2005. We will not use this dividend distribution as a reference or basis to determine the amount of future dividends, if any. Any future dividends will be paid in accordance with our policy described above.

B. Significant Changes

Not applicable.

ITEM 9. THE OFFER AND LISTING

A. Offer and Listing Details

Our ADSs have been quoted on The NASDAQ Global Market under the symbol ACTS since November 30, 2005. Each ADS represents six ordinary shares. On April 21, 2008, the last reported sale price of our ADSs on the Nasdaq Global Market was US$3.17. As of March 31, 2008, there was three registered holder and 5,757 beneficial holders of ADSs on our record.

The table below sets forth, for the periods indicated, the highest and lowest closing prices and the average daily volume of trading activities on the Nasdaq Global Market for our ordinary shares represented by ADSs.

	High		Low		Average Daily Trading Volume
2005	US$	9.25	US$	7.08		212,164
2006		12.24		6.55		226,776
2007		8.50		3.98		399,942
First Quarter		8.50		6.41		456,051
Second Quarter		7.64		5.66		352,933
Third Quarter		6.99		4.50		402,538
Fourth Quarter		6.30		3.98		390,183
October		6.30		4.66		669,630
November		5.10		4.07		279,881
December		5.00		3.98		184,635
2008
First Quarter		4.40		2.82		129,759
January		4.40		3.01		178,652
February		3.79		3.25		99,940
March		3.49		2.82		108,240
April (through April 21, 2008)		3.20		3.03		137,933

B. Plan of Distribution

Not applicable.

C. Markets

Our ADSs are listed on the Nasdaq Global Market under the symbol “ACTS”.

D. Selling Shareholders

Not applicable.

E. Dilution

Not applicable.

F. Expense of the Issue

Not applicable.

ITEM 10. ADDITIONAL INFORMATION

A. Share Capital

As of March 31, 2008, our authorized share capital consisted of 2.0 billion shares, par value 0.000001 per share, and there were 516.0 million ordinary shares issued and outstanding. All of our issued and outstanding shares are fully paid and non-assessable.

In August 2005, we issued 480.0 million ordinary shares of our company in consideration for 100% of the total outstanding shares of Action Semiconductor (Mauritius).

B. Memorandum and Articles of Association

Company Objects and Purposes

We are a Cayman Islands exempted company and our affairs are governed by our memorandum and articles of association, as amended and restated from time to time, and the Companies Law (2004 Revision) of the Cayman Islands, which is referred to below as the Companies Law. A Cayman Islands exempted company is a company that conducts its business outside of the Cayman Islands, is exempted from certain requirements of the Companies Law, including a filing of an annual return of its shareholders with the Registrar of Companies or the Immigration Board, does not have to make its register of shareholders open to inspection and may obtain an undertaking against the imposition of any future taxation. According to our memorandum and articles of association, the objects for which we are established are unrestricted and we have full power and authority to carry out any object not prohibited by the Companies Law or as the same may be revised from time to time, or any other law of the Cayman Islands.

The following are summaries of material terms and provisions of our memorandum and articles of association and the Companies Law insofar as they relate to the material terms of our ordinary shares. This summary is not complete, and you should read the forms of our memorandum and articles of association, which was filed as exhibits to our registration statement on Form F-1.

The holders of ADSs will not be treated as our shareholders and will be required to surrender their ADSs for cancellation and withdrawal from the depositary facility in which the ordinary shares are held in order to exercise shareholders’ rights in respect of the ordinary shares. The depositary will agree, so far as it is practical, to vote or cause to be voted the amount of ordinary shares represented by ADSs in accordance with the non-discretionary written instructions of the holder of such ADSs.

Board of Directors

We are managed by a board of directors which currently consists of seven members. Our articles of association provide that the board of directors shall consist of not more than eleven directors, including at least three independent directors.

The directors are divided into three classes, designated Class I, Class II, and Class III, as nearly equal in number as the then total number of directors permits. At the 2006 annual meeting of shareholders, all directors must stand for election. Class I Directors will be elected for a one-year term, Class II Directors for a two-year term and Class III Directors for a three-year term. At each succeeding annual meeting of shareholders beginning in 2007, successors to the class of directors whose terms expire at that annual meeting shall be elected for a three-year term. If the number of directors is changed, any increase or decrease shall be apportioned among the classes so as to maintain the number of directors in each class as nearly equal as possible, and any additional directors of any class elected to fill a vacancy resulting from an increase in such class will hold office for a term that coincides with the remaining term of that class, but in no case will a decrease in the number of directors shorten the term of any incumbent director.

Our shareholders may by special resolution at any time remove any director for negligence or other reasonable cause before the expiration of his period of office notwithstanding anything in the articles of association or in any agreement between us and such director, and may by ordinary resolution elect another person in his stead. Any person so elected will hold office during such term only as the director in whose place he is elected would have held the same if he had not been removed. Subject to our articles of association, the directors will have power at any time and from time to time to appoint any person to be a director, either as an addition to the existing directors or to fill a vacancy resulting from death, resignation, retirement, disqualification, removal from office or any other reason, but so that the total amount of directors (exclusive of alternate directors) must not at any time exceed the number fixed in accordance with the articles of association.

There are no share ownership qualifications for directors.

Meetings of our board of directors may be convened at any time deemed necessary by any members of our board of directors. Advance notice of a meeting is not required if all our directors are present or represented at the meeting concerned and consent to the holding of such meeting.

A meeting of our board of directors will be competent to make lawful and binding decisions if any two members of our board of directors are present or represented. At any meeting of our directors, each director, be it by his or her presence or by his or her alternate, is entitled to one vote. A director may vote in respect of any contract or transaction in which he is interested, provided, (a) such director must, if his interest in such contract or arrangement is material, declare the nature of his interest at the earliest meeting of the board at which it is practicable for him to do so, either specifically or by way of a general notice stating that, by reason of the facts specified in the notice, he is to be regarded as interested in any contracts of a specified description which we may subsequently make and (b) if such contract or arrangement is a transaction with a related party, such transaction has been approved by the Audit Committee.

Questions arising at a meeting of our board of directors are required to be decided by simple majority votes of the members of our board of directors present or represented at the meeting. In the case of a tie vote, the chairman of the meeting shall have a second or deciding vote. Our board of directors may also pass resolutions without a meeting by unanimous written consent.

Subject to the recommendation of our Compensation Committee, the remuneration to be paid to the directors shall be such remuneration as the directors shall determine. Such remuneration shall be deemed to accrue from day to day. The directors shall also be entitled to be paid their traveling, hotel and other expenses properly incurred by them in going to, attending and returning from meetings of the directors, or any committee of the directors, or general meetings of the company, or otherwise in connection with our business, or to receive a fixed allowance in respect thereof as may be determined by the directors from time to time, or a combination partly of one such method and partly the other.

Under Cayman Islands laws, our directors have a duty of loyalty and must act honestly and in good faith and in our best interests. Our directors also have a duty to exercise the care, diligence, and skills that a reasonably prudent person would exercise in comparable circumstances. In fulfilling their duties to us, our directors must ensure compliance with the memorandum and articles of association and the class rights vested thereunder in the holders of the shares. A shareholder may in certain circumstances have rights to damages if a duty owed by the directors is breached.

Voting Rights Attaching to the Shares

Subject to any rights or restrictions attached to any shares, at any general meeting every shareholder who is present in person (or, in the case of a shareholder being a corporation, by its duly authorized representative) or by proxy shall have one vote and on a poll every shareholder present in person (or, in the case of a shareholder being a corporation, by its duly appointed representative) or by proxy shall have one vote for each share which such shareholder is the holder. Voting at any meeting of the shareholders is by show of hands unless a poll is demanded. A poll may be demanded by the chairman or any other shareholder present in person or by proxy holding at least 10% in par value of the shares giving a right to attend and vote at the meeting.

Any ordinary resolution to be passed by the shareholders requires the affirmative vote of a simple majority of the votes cast at a meeting of our shareholders, while a special resolution requires the affirmative vote of no less than two-thirds of the votes cast at a meeting of our shareholders. Holders of our ordinary shares may by ordinary resolution, among other things, elect directors, and make alterations of capital. A special resolution is required for matters such as a change of name.

No shareholder shall be entitled to vote or be reckoned in a quorum, in respect of any share, unless such shareholder is registered as our shareholder at the applicable record date for that meeting.

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

Protection of Minority Shareholders

The Grand Court of the Cayman Islands may, on the application of shareholders holding not less than one- fifth of our shares in issue, appoint an inspector to examine our affairs and report thereon in a manner as the Grand Court shall direct.

Any shareholder may petition the Grand Court of the Cayman Islands which may make a winding up order, if the court is of the opinion that it is just and equitable that we should be wound up.

Claims against us by our shareholders must, as a general rule, be based on the general laws of contract or tort applicable in the Cayman Islands or their individual rights as shareholders as established by our memorandum and articles of association.

The Cayman Islands courts ordinarily would be expected to follow English case law precedents which permit a minority shareholder to commence a representative action against, or derivative actions in our name to challenge (1) an act which is ultra vires or illegal, (2) an act which constitutes a fraud against the minority and the wrongdoers are themselves in control of us, and (3) an irregularity in the passing of a resolution which requires a qualified (or special) majority.

Pre-emption Rights

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

Liquidation Rights

Subject to any special rights, privileges or restrictions as to the distribution of available surplus assets on liquidation for the time being attached to any class or classes of shares, if the Company shall be wound up the liquidator may, with the sanction of a Special Resolution of the Company and any other sanction required by the Companies Law, divide among the shareholders in kind the whole or any part of the assets of the Company (whether they shall consist of property of the same kind or not) and may for that purpose value any assets and determine how the division shall be carried out as between the shareholders or different classes of shareholders. The liquidator may, with the like sanction, vest the whole or any part of such assets in trustees upon such trusts for the benefit of the shareholders as the liquidator, with the like sanction, shall think fit, but so that no shareholders shall be compelled to accept any asset upon which there is a liability. If the Company shall be wound up, and the assets available for distribution among the shareholders as such shall be insufficient to repay the whole of the paid-up capital, such assets shall be distributed so that, as nearly as may be, the losses shall be borne by the shareholders in proportion to the capital paid up, or which ought to have been paid up, at the commencement of the winding up on the shares held by them respectively. And if winding up the assets available for distribution among the shareholders shall be more than sufficient to repay the whole of the capital paid up at the commencement of the winding up, the excess shall be distributed amongst the shareholders in proportion to the capital paid up at the commencement of the winding up on the shares held by them respectively.

Modification of Rights

Except with respect to share capital (as described below) and the location of the registered office, alterations to our memorandum and articles of association may only be made by special resolution of no less than two-thirds of votes cast at a meeting of the shareholders.

Subject to the Companies Law, all or any of the special rights attached to any class, unless otherwise provided for by the terms of issue of the shares of that class, may be varied, modified or abrogated either with the consent in writing of the holders of not less than three-fourths in nominal value of the issued shares of that class or with the sanction of a special resolution passed at a separate general meeting of the holders of the shares of that class. The provisions of our articles of association relating to general meetings shall apply mutatis mutandis to every such separate general meeting, but so that the quorum for the purposes of any such separate general meeting other than an adjourned meeting shall be a person or persons together holding, or represented by proxy, on the date of the relevant meeting not less than one-third in nominal value of the issued shares of that class, every holder of shares of the class shall be entitled on a poll to one vote for every such share held by such holder and that any holder of shares of that class present in person or by proxy may demand a poll.

The special rights conferred upon the holders of any class of shares shall not, unless otherwise expressly provided in the rights attaching to or the terms of issue of such shares, be deemed to be varied by the creation or issue of further shares ranking pari passu therewith.

Meetings

Subject to our articles of association, an annual general meeting and any extraordinary general meeting called for the passing of a special resolution shall be called by not less than 20 days’ notice in writing and any other extraordinary general meeting shall be called by not less than 20 days’ notice in writing. Notice of every general meeting will be given to all of our shareholders.

Notwithstanding that a meeting is called by shorter notice than that mentioned above, but, subject to our articles of association, it will be deemed to have been duly called, if it is so agreed (1) in the case of a meeting called as an annual general meeting by all of our shareholders (or their proxies) entitled to attend and vote at the meeting; or (2) in the case of any other meeting, by a majority in number of our shareholders having a right to attend and vote at the meeting, being a majority together holding not less than 95% in nominal value of the ordinary shares giving that right.

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

Two of our members present in person or by proxy or corporate representative representing not less than one third in nominal value of our total issued voting shares shall be a quorum.

A corporation being a shareholder shall be deemed for the purpose of our articles of association to be present in person if represented by its duly authorized representative. Such duly authorized representative shall be entitled to exercise the same powers on behalf of the corporation which he or she represents as that corporation could exercise if it were our individual shareholder.

The quorum for a separate general meeting of the holders of a separate class of shares is described in “Modification of Rights” above.

Transfer of Shares

Subject to any applicable restrictions set forth in our articles of association, any of our shareholders may transfer all or any of his or her shares by an instrument of transfer in the usual or common form or in any other form which our directors may approve.

Our board of directors may, in its absolute discretion, decline to register any transfer of any share without assigning any reasons therefor.

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

The registration of transfers may be suspended and the register closed at such times and for such periods as our board of directors may from time to time determine, provided, however, that the registration of transfers shall not be suspended nor the register closed for more than 45 days in any year.

Share Repurchase

We are empowered by the Companies Law and our articles of association to purchase our own shares, subject to certain restrictions. Our directors may only exercise this power on our behalf, subject to the Companies Law, our memorandum and articles of association and to any applicable requirements imposed from time to time by the SEC, the Nasdaq Global Market, or by any recognized stock exchange on which our securities are listed.

Dividends

Subject to the Companies Law and to our articles of association, in general meeting we may declare dividends in any currency, but no dividends shall exceed the amount recommended by our board of directors. No dividend may be declared or paid other than out of our profits and reserves lawfully available for distribution, including share premium.

Unless and to the extent that the rights attached to any shares or the terms of issue thereof otherwise provide, with respect to any shares not fully paid throughout the period in respect of which the dividend is paid, all dividends shall be apportioned and paid pro rata according to the amounts paid up on the shares during any portion or portions of the period in respect of which the dividend is paid. For these purposes no amount paid up on a share in advance of calls shall be treated as paid up on the share.

Our board of directors may from time to time pay to our shareholders such interim dividends as appear to the directors to be justified by our profits. Our directors may also pay dividends semi-annually or at other intervals to be selected by them at a fixed rate if they are of the opinion that the profits available for distribution justify the payment. The board may also declare and pay special dividends as they think fit.

Our board of directors may retain any dividends or other monies payable on or in respect of a share upon which we have a lien, and may apply the same in or towards satisfaction of the debts, liabilities or engagements in respect of which the lien exists. Our board of directors may also deduct from any dividend or other monies payable to any shareholder all sums of money, if any, presently payable by him or her to us on account of calls, installments or otherwise.

No dividend shall carry interest against us.

Whenever our board of directors or we in general meeting have resolved that a dividend be paid or declared on our share capital, the board of directors may further resolve: (a) that such dividend be satisfied wholly or in part in the form of an allotment of shares credited as fully paid up on the basis that the shares so allotted are to be of the same class as the class already held by the allottee, provided that those of our shareholders entitled thereto will be entitled to elect to receive such dividend, or part thereof, in cash in lieu of such allotment; or (b) that those of our shareholders entitled to such dividend will be entitled to elect to receive an allotment of shares credited as fully paid up in lieu of the whole or such part of the dividend as our board of directors may think fit on the basis that the shares so allotted are to be of the same class as the class already held by the allottee. We may upon the recommendation of our board of directors by ordinary resolution resolve in respect of anyone particular dividend that notwithstanding the foregoing a dividend may be satisfied wholly in the form of an allotment of shares credited as fully paid without offering any right to our shareholders to elect to receive such dividend in cash in lieu of such allotment.

Any dividend, interest or other sum payable in cash to a holder of shares may be paid by check or warrant sent through the post addressed to the registered address of the shareholder entitled, or in the case of joint holders, to the registered address of the person whose name stands first in our register of shareholders in respect of the joint holding to such person and to such address as the holder or joint holders may in writing direct. Every check or warrant so sent shall be made payable to the order of the holder or, in the case of joint holders, to the order of the holder whose name stands first on our register of shareholders in respect of such shares, and shall be sent at his or their risk and the payment of any such check or warrant by the bank on which it is drawn shall operate as a good discharge to us in respect of the dividend and/or bonus represented thereby, notwithstanding that it may subsequently appear that the same has been stolen or that any endorsement there on has been forged.

Any dividend unclaimed for six years from the date of declaration of such dividend may be forfeited by the board of directors and shall revert to us.

Our board of directors may, with the sanction of the shareholders in general meeting, direct that any dividend be satisfied wholly or in part by the distribution of specific assets of any kind, and in particular of paid up shares, debentures or warrants to subscribe securities of any other company, and where any difficulty arises in regard to such distribution our directors may settle it as they think expedient, and in particular may disregard fractional entitlements, round the same up or down or provide that the same shall accrue to our benefit, and may fix the value for distribution of such specific assets and may determine that cash payments shall be made to any of our shareholders upon the footing of the value so fixed in order to adjust the rights of all parties, and may vest any such specific assets in trustees as may seem expedient to our board of directors.

Issuance of Additional Ordinary Shares or Preferred Shares

Our articles of association authorizes our board of directors to issue additional ordinary shares from time to time as our board of directors shall determine, to the extent of available authorized but unissued shares.

Our articles of association authorizes our board of directors to establish from time to time one or more series of preferred shares and to determine, with respect to any series of preferred shares, the terms and rights of that series, including:

•

the designation of the series;

•

the number of shares of the series;

•

the dividend rights, dividend rates, conversion rights, voting rights; and

•

the rights and terms of redemption and liquidation preferences.

Our board of directors may issue series of preferred shares without action by our shareholders to the extent authorized but unissued. Accordingly, the issuance of preferred shares may adversely affect the rights of the holders of the ordinary shares. In addition, the issuance of preferred shares may be used as an anti-takeover device without further action on the part of the shareholders. We have no immediate plans to issue any preferred shares.

Issuance of preferred shares may dilute the voting power of holders of ordinary shares. Subject to applicable regulatory requirements, our board of directors may issue additional ordinary shares without action by our shareholders to the extent of available authorized but unissued shares. The issuance of additional ordinary shares may be used as an anti-takeover device without further action on the part of the shareholders. Such issuance may dilute the voting power of existing holders of ordinary shares.

The listing maintenance requirements of the Nasdaq Global Market, which apply so long as our ADSs are quoted on that market, require shareholder approval of certain issuances of our securities equal to or exceeding 20% of the then outstanding voting power of all our securities or the then outstanding number of our ordinary shares.

Inspection of Books and Records

Holders of our ordinary shares will have no general right under Cayman Islands law to inspect or obtain copies of our list of shareholders or our corporate records. However, we will provide our shareholders with annual audited financial statements.

Untraceable Shareholders

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

•

all checks or warrants, not being less than three in number, for any sums payable in cash to the holder of such shares have remained uncashed for a period of 12 years;

•

we have not during that time or before the expiry of the three-month period referred to in the last bullet under this section received any indication of the whereabouts or existence of the shareholder or person entitled to such shares by death, bankruptcy or operation of law;

•

during the 12-year period, at least three dividends in respect of the shares in question have become payable and no dividend during that period has been claimed by the shareholder; and

•

Upon expiration of the 12-year period, we have caused an advertisement to be published in newspapers (or, by electronic communication in the manner in which notices may be served by us by electronic means as provided in our articles of association), giving notice of its intention to sell these shares, and a period of three months has elapsed since such advertisement.

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

Differences in Corporate Law

The Companies Law (2004 Revision) of the Cayman Islands (the “Companies Law”) distinguishes between ordinary resident companies and exempted companies, and we are an exempted company with limited liability under the Companies Law. Any company that is registered in the Cayman Islands but conducts business mainly outside of the Cayman Islands may apply to be registered as an exempted company. The responsibilities of an exempted company are essentially the same as for an ordinary company except for the exemptions and privileges listed below:

•

an exempted company does not have to file an annual return of its shareholders with the Registrar of Companies;

•

an exempted company’s register of members is not open to inspection;

•

an exempted company does not have to hold an annual general meeting;

•

an exempted company may issue no par value, negotiable or bearer shares;

•

an exempted company may obtain an undertaking against the imposition of any future taxation (such undertakings are usually given for 20 years in the first instance);

•

an exempted company may register by way of continuation in another jurisdiction and be deregistered in the Cayman Islands;

•

an exempted company may register as a limited duration company; and

•

an exempted company may register as a segregated portfolio company.

The company has not registered as a limited duration company or a segregated portfolio company and could not do so without prior shareholder approval. The company has no intention to seek such shareholder approval.

The Companies Law is modeled after similar laws in the United Kingdom but does not follow recent changes in United Kingdom laws. In addition, the Companies Law differs from laws applicable to U.S. corporations and their shareholders. Set forth below is a summary of the significant provisions of the Companies Law applicable to us.

Duties of Directors

Under Cayman Islands law, at common law, members of a board of directors owe a fiduciary duty to the company to act in good faith in their dealings with or on behalf of the company and exercise their powers and fulfill the duties of their office honestly. This duty has four essential elements:

•

a duty to act in good faith in the best interests of the company;

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a duty not to personally profit from opportunities that arise from the office of director;

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a duty to avoid conflicts of interest; and

•

a duty to exercise powers for the purpose for which such powers were intended.

In general, the Companies Law imposes various duties on officers of a company with respect to certain matters of management and administration of the company. The Companies Law contains provisions, which impose default fines on persons who fail to satisfy those requirements. However, in many circumstances, an individual is only liable if he knowingly is guilty of the default or knowingly and willfully authorizes or permits the default.

Interested Directors

There are no provisions under Cayman Islands law that require a director who is interested in a transaction entered into by a Cayman company to disclose his interest nor will render such director liable to such company for any profit realized pursuant to such transaction.

Voting Rights and Quorum Requirements

Under Cayman Islands law, the voting rights of shareholders are regulated by the company’s articles of association and, in certain circumstances, the Companies Law. The articles of association will govern matters such as quorum for the transaction of business, rights of shares, and majority votes required to approve any action or resolution at a meeting of the shareholders or board of directors. Our articles of association provide that a quorum for a general meeting shall be two members present in person or by proxy or corporate representative provided, however, that in no case shall such quorum be less than one-third of the outstanding voting shares in the capital of the company. Under Cayman Islands law, certain matters must be approved by a special resolution which is defined as two-thirds of the votes cast by shareholders present at a meeting and entitled to vote. Other than special resolutions, all resolutions shall be passed by a simple majority of those shares voted at a meeting at which a quorum is present.

Mergers and Similar Arrangements

Cayman Islands law does not provide for mergers as that expression is understood under United States corporate law. However, there are statutory provisions that facilitate the reconstruction and amalgamation of companies, provided that the arrangement in question is approved by a majority in number of each class of shareholders and creditors with whom the arrangement is to be made, and who must in addition represent three- fourths in value of each such class of shareholders or creditors, as the case may be, that are present and voting either in-person or by proxy at a meeting, or meetings convened for that purpose. The convening of the meetings and subsequently the arrangement must be sanctioned by the Grand Court of the Cayman Islands. While a dissenting shareholder would have the right to express to the court the view that the transaction should not be approved, the court can be expected to approve the arrangement if it satisfies itself that:

•

the statutory provisions as to majority vote have been complied with;

•

the shareholders have been fairly represented at the meeting in question;

•

the arrangement is one that a businessman would reasonably approve; and

•

the arrangement is not one that would more properly be sanctioned under some other provision of the Companies Law.

When a takeover offer is made and accepted by holders of 90.0% of the shares within four months, the offerer may, within a two-month period, require the holders of the remaining shares to transfer such shares on the terms of the offer. An objection may be made to the Grand Court of the Cayman Islands but is unlikely to succeed unless there is evidence of fraud, bad faith or collusion.

If the arrangement and reconstruction are thus approved, any dissenting shareholders would have no rights comparable to appraisal rights, which would otherwise ordinarily be available to dissenting shareholders of U.S. corporations, providing rights to receive payment in cash for the judicially determined value of the shares.

Shareholder Suits

Our Cayman Islands counsel is not aware of any reported class action or derivative action having been brought in a Cayman Islands court. In principle, we will normally be the proper plaintiff and a derivative action may not be brought by a minority shareholder. However, based on English authorities, which would in all likelihood be of persuasive authority in the Cayman Islands, exceptions to the foregoing principle apply in circumstances in which:

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a company is acting or proposing to act illegally or beyond the scope of its authority;

•

the act complained of, although not beyond the scope of its authority, could be effected duly if authorized by more than a simple majority vote which has not been obtained; and

•

those who control the company are perpetrating a “fraud on the minority.”

Under Delaware law, a stockholder may bring a derivative action on behalf of the corporation to enforce the rights of the corporation. Delaware law expressly authorizes stockholder derivative suits on the condition that the stockholder either held the stock at the time of the transaction of which the stockholder complains, or acquired the stock thereafter by operation of law and continues to hold it throughout the duration of the suit. An individual may also commence a class action suit on behalf of himself and other similarly situated stockholders where the requirements for maintaining a class action under Delaware law have been met. A plaintiff instituting a derivative suit is required to serve a demand on the corporation before bringing suit, unless such demand would be futile.

Corporate Governance

Cayman Islands laws do not restrict transactions with directors, requiring only that directors exercise a duty of care and owe a fiduciary duty to the companies for which they serve. Under our memorandum and articles of association, subject to any separate requirement for audit committee approval under the applicable rules of The Nasdaq Stock Market, Inc. or unless disqualified by the chairman of the relevant board meeting, so long as a director discloses the nature of his interest in any contract or arrangement in which he is interested, such a director may vote in respect of any contract or proposed contract or arrangement in which such director is interested and may be counted in the quorum at such meeting.

Indemnification

Cayman Islands law does not limit the extent to which a company’s articles of association may provide for indemnification of officers and directors, except to the extent any such provision may be held by the Cayman Islands courts to be contrary to public policy, such as to provide indemnification against civil fraud or the consequences of committing a crime. Our articles of association provide for the indemnification of our directors, auditors and other officers against all losses or liabilities incurred or sustained by him or her as a director, auditor or other officer of our company in defending any proceedings, whether civil or criminal, in which judgment is given in his or her favor, or in which he or she is acquitted provided that this indemnity shall not extend to any matter in respect of any fraud or dishonesty which may attach to any of said persons.

Shareholder Proposals

The Companies Law does not provide shareholders any right to bring business before a meeting or requisition a general meeting. Our articles of association provide that the directors shall on a members requisition forthwith proceed to convene an extraordinary general meeting of the company. A members requisition is a requisition of shareholders of the company holding at the date of deposit of the requisition not less than 10% in par value of the capital of the company as at that date carries the right of voting at general meetings of the company.

Approval of Corporate Matters by Written Consent

The Companies Law allows a special resolution to be passed in writing if signed by all the shareholders and authorized by the articles of association.

Calling of Special Shareholders Meetings

The Companies Law does not have provisions governing the proceedings of shareholders meetings which are usually provided in the articles of association.

Staggered Board of Directors

The Companies Law does not contain statutory provisions that require staggered board arrangements for a Cayman Islands company. Such provisions, however, may validly be provided for in the articles of association, and we have provided for a staggered board of directors in our articles of association. Pursuant to such provision, one-third of the current members of our board is required to stand for re-election each year.

Issuance of Preferred Stock

The Companies Law allows shares to be, issued with preferred, deferred or other special rights, whether in. regard to dividends, voting, return of share capital or otherwise. Our articles of association provide that the directors may allot, issue, grant options over or otherwise dispose of shares (including fractions of a share) with or without preferred, deferred or other special rights or restrictions, in one or more series, whether with regard to dividend rights, dividend rates, conversion rights, voting rights, rights and terms of redemption and liquidation preferences or otherwise and to such persons, at such times and on such other terms as they think proper.

Anti-takeover Provisions

The Companies Law does not prevent companies from adopting a wide range of defensive measures, such as staggered boards, blank check preferred stock, removal of directors only for cause and provisions that restrict the rights of shareholders to call meetings and submit shareholder proposals. Our articles of association contain the following provisions which may be regarded as defensive measures: (i) a staggered board of directors and (ii) shareholders right to requisition a general meeting so that only the shareholders holding not less than 10% in par value of the capital of the company as at that date may requisition a general meeting.

Alteration of Capital

We may from time to time by ordinary resolution:

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increase the share capital by such sum as the resolution shall prescribe and with such rights, priorities and privileges annexed thereto, as the Company in general meeting may determine;

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consolidate and divide all or any of its share capital into shares of larger amount than its existing shares;

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by subdivision of its existing shares or any of them divide the whole or any part of its share capital into shares of smaller amount than is fixed by the Memorandum of Association or into shares without par value; and

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cancel any shares that at the date of the passing of the resolution have not been taken or agreed to be taken by any person.

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

C. Material Contracts

See Exhibits 10.1 and 10.2, to our Registration Statement on Form F-1 (File No. 333-129208) filed with the Commission on October 24, 2005. Other than such contracts, we have not entered into any material contracts outside the ordinary course of our business within the two years preceding the date of this annual report.

D. Exchange Controls

Foreign Currency Exchange

Pursuant to the Administrative Regulations on Foreign Exchange amended by the State Council on January 14, 1997 and effective as of the same date and various further regulations issued by the Sate Administration of Foreign exchange (the “SAFE”), Renminbi can be freely converted into foreign currency and remitted out of China through a designated foreign exchange bank for current account transactions, such as payment for purchase of goods and services. However, evidence in the form of contracts, invoices and in some cases government registration certificates, must be presented to the bank. For capital account transactions, such as equity investments and loans, conversion of foreign currency into Renminbi, or Renminbi into foreign currency, and remittance thereof into or out of China requires approval by SAFE or its local office.

Within China, all payments must be made in Renminbi. Unless otherwise approved, Chinese companies must repatriate foreign currency payments received from abroad into China. Foreign invested enterprises, such as Actions Semiconductor (Zhuhai), are allowed to retain foreign currency in accounts with designated foreign exchange banks, subject to a maximum amount set by SAFE.

Dividend Distribution

The principal regulations governing distribution of dividends by wholly foreign owned enterprises include the Wholly Foreign-owned Enterprise Law amended by SCNPC on October 31, 2000 and effective as of the same date, and its Implementing Rules amended by the State Council on April 12, 2001 and effective as of the same date.

Under these regulations, a foreign invested enterprise in China may pay dividends only out of its accumulated distributable profits, if any, determined in accordance with its articles of association, and the accounting standards and regulations in China. In particular, each of our principle PRC subsidiaries, Actions Semiconductor (Zhuhai) and Artek Microelectronics (Shenzhen), as wholly foreign owned enterprises, is required to provide for a reserve fund and a staff and workers’ bonus fund, and to set aside at least 10% (up to an aggregate amount equal to half of its registered capital) of its after-tax profits each year.

E. Taxation

Cayman Islands Taxation

The following discussion of the material Cayman Islands tax consequences of an investment in our ordinary shares or ADSs is directly based on the advice of Maples and Calder as to Cayman Islands law. However, it does not consider any investor’s particular circumstances, and does not consider tax consequences other than those arising under Cayman Islands law.

The Cayman Islands currently have no exchange control restrictions and no income, corporate or capital gains tax, estate duty, inheritance tax, gift tax or withholding tax applicable to us or to any holder of ADS or of ordinary shares. Accordingly, any payment of dividends or any other distribution made on the ordinary shares will not be subject to taxation in the Cayman Islands, no Cayman Islands withholding tax will be required on such payments to any shareholder and gains derived from the sale of ordinary shares will not be subject to Cayman Islands capital gains tax. The Cayman Islands are not party to any double taxation treaties.

The Company has obtained an undertaking from the Governor-in-Cabinet of the Cayman Islands that, in accordance with section 6 of the Tax Concessions Law (1999 Revision) of the Cayman Islands, for a period of 20 years from August 9, 2005, no law which is enacted in the Cayman Islands imposing any tax to be levied on profits, income, gains or appreciations will apply to us or our operation and, in addition, that no tax to be levied on profits, income, gains or appreciations or which is in the nature of the estate duty or inheritance tax will be payable (i) on or in respect of our shares, debentures, or other obligations, or (ii) by way of withholding in whole or in part of a payment of dividend or other distribution of income or capital by us.

United States Federal Income Taxation

The following is a summary of the material United States federal tax consequences relating to the purchase, ownership, and disposition of the ordinary shares or ADSs. The information provided below is based on the United States Internal Revenue Code of 1986, as amended, or the Code, Treasury Regulations, proposed Treasury Regulations, Internal Revenue Service, or the IRS, published rulings and court decisions, all as of the date hereof. These authorities may change, possibly on a retroactive basis, or the IRS might interpret the existing authorities differently. In either case, the tax consequences of purchasing, owning or disposing of ordinary shares or ADSs could differ from those described below. We do not intend to obtain a ruling from the IRS with respect to the tax consequences of acquiring or holding the ordinary shares or ADSs.

This description is general in nature and does not discuss all aspects of U.S. federal income taxation that may be relevant to a particular investor in light of the investor’s particular circumstances, or to certain types of investors subject to special treatment under U.S. federal income tax laws, such as:

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banks or financial institutions;

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life insurance companies;

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tax-exempt organizations;

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dealers in securities or foreign currencies;

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traders in securities that elect to apply a mark-to-market method of accounting;

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shareholders that actually or constructively hold 10% or more of the total combined voting power of all of the classes of our stock entitled to vote;

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persons holding ordinary shares or ADSs as part of a position in a “straddle” or as part of a “hedging,” “conversion” or “integrated” transaction for U.S. federal income tax purposes;

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persons subject to the alternative minimum tax provisions of the Code; and

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persons that have a “functional currency” other than the U.S. dollar.

This description generally applies to purchasers of the ordinary shares or ADSs as capital assets. This description does not consider the effect of any foreign, state, local or other tax laws that may be applicable to particular investors.

Investors considering the purchase of ordinary shares or ADSs should consult their own tax advisors regarding the application of the U.S. federal income tax laws to their particular situations and the consequences of U.S. federal estate or gift tax laws, foreign, state, or local laws, and tax treaties.

U.S. Holders

As used herein, the term “U.S. Holder” means a beneficial owner of ordinary shares or ADSs that is:

•

a citizen or resident of the U.S. for U.S. federal income tax purposes;

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a corporation or other entity taxable as a corporation for U.S. federal income tax purposes organized in or under the laws of the U.S. or any political subdivision thereof;

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

•

a trust, if such trust validly elects to be treated as a U.S. person for U.S. federal income tax purposes, or if (a) a court within the U.S. can exercise primary supervision over its administration and (b) one or more U.S. persons have the authority to control all of the substantial decisions of such trust.

If a partnership (including any entity treated as a partnership for U.S. tax purposes) is a beneficial owner of the ordinary shares or ADSs, the U.S. tax treatment of a partner in the partnership will generally depend on the status of the partner and the activities of the partnership. A holder of the ordinary shares or ADSs that is a partnership and partners in such partnership should consult their tax advisors about the U.S. federal income tax consequences of holding and disposing of the ordinary shares or ADSs.

For U.S. federal income tax purposes, U.S. Holders of ADSs will be treated as the beneficial owners of the underlying shares represented by the ADSs. Accordingly, no gain or loss will be recognized upon the exchange of ADSs for the holder’s proportionate interest in the shares, a holder’s tax basis in the withdrawn shares will be the same as its tax basis in the ADSs surrendered in exchange therefor, and the holding period in the withdrawn shares will include the period during which the holder held the surrendered ADSs.

If you are not a U.S. Holder, the following subsection does not apply to you and you should refer to “Non-U.S. Holders” below.

Taxation of Dividends and Other Distributions on Ordinary Shares or ADSs

Subject to the passive foreign investment company rules discussed below, all distributions to a U.S. Holder with respect to the U.S. Holder’s ordinary shares or ADSs, other than certain pro rata distributions of our shares, will be includible in the U.S. Holder’s gross income as ordinary dividend income when received, but only to the extent that the distribution is paid out of our current or accumulated earnings and profits. For this purpose, earnings and profits will be computed under U.S. federal income tax principles. The dividends will not be eligible for the dividends-received deduction allowed to corporations. To the extent that the amount of the distribution exceeds our current and accumulated earnings and profits, it will be treated first as a tax-free return of capital to the extent of the U.S. Holder’s tax basis in the U.S. Holder’s ordinary shares or ADSs, and to the extent the amount of the distribution exceeds the U.S. Holder’s tax basis, the excess will be taxed as capital gain.

If you are an individual U.S. Holder, dividends paid to you in taxable years beginning before January 1, 2009 from a “qualified foreign corporation” will be taxable to you at a maximum tax rate of 15% provided that you meet certain holding period and other requirements. A non-United States corporation (other than a passive foreign investment company) generally will be considered to be a qualified foreign corporation (i) if it is eligible for the benefits of a comprehensive tax treaty with the United States which the Secretary of Treasury of the United States determines is satisfactory for purposes of this provision and which includes an exchange of information program or (ii) with respect to any dividend it pays on shares (or ADSs backed by such shares) which is readily tradable on an established securities market in the United States. There is currently no such tax treaty in effect between the United States and the Cayman Islands. Our ADSs have been quoted on the Nasdaq Global Market under the Symbol “ACTS” since November 30, 2005. Each ADS represents six ordinary shares.

Dividends paid with respect to our ordinary shares could cease to be qualified dividend income if our ordinary shares or ADSs are delisted from The Nasdaq Global Market and do not subsequently become regularly traded on The Nasdaq SmallCap Market or other qualified exchange or market or if we are treated as a passive foreign investment company.

Dividends paid in Renminbi will be included in each U.S. Holder’s income as a U.S. dollar amount based on the spot rate in effect on the date that the U.S. Holder (or, in the case of a U.S. Holder of ADSs, the Depositary) receives the dividend, regardless of whether the payment is converted into U.S. dollars. If the U.S. Holder (or the Depositary) does not receive U.S. dollars on the date the dividend is distributed, the U.S. Holder will be required to include either gain or loss in income when the U.S. Holder (or the Depositary) later exchanges the Renminbi for U.S. dollars. The gain or loss will be equal to the difference between the U.S. dollar value of the amount that the U.S. Holder includes in income when the dividend is received and the amount that the U.S. Holder receives on the exchange of the Renminbi for U.S. dollars. The gain or loss generally will be ordinary income or loss from United States sources. If we distribute non-cash property as a dividend, the U.S. Holder will generally include in income an amount equal to the fair market value, in U.S. dollars, of the property on the date that it is distributed. Dividends will constitute foreign source income for foreign tax credit limitation purposes. The rules relating to the foreign tax credit are complex and U.S. Holders should consult their tax advisors to determine the foreign tax credit implications of owning the ordinary shares or ADSs.

Taxation of Disposition of Ordinary Shares or ADSs

Subject to the passive foreign investment company rules discussed below, a U.S. Holder will recognize taxable gain or loss on any sale or exchange of ordinary shares or ADSs equal to the difference between the amount realized (in U.S. dollars) for the ordinary shares or ADSs and the U.S. Holder’s tax basis (in U.S. dollars) in the ordinary shares or ADSs. The gain or loss recognized generally will be capital gain or loss. Capital gain of an individual U.S. Holder that is recognized before January 1, 2009 generally is taxed at a maximum tax rate of 15% if the property giving rise to the capital gain is held for more than one year. The deductibility of capital loss is subject to limitations.

Any gain or loss that a U.S. Holder recognizes will generally be treated as United States source income or loss for purposes of foreign tax credit limitations, unless it is attributable to an office or other fixed place of business outside the U.S. and certain other conditions are met.

Passive Foreign Investment Company

A company is considered a passive foreign investment company, or PFIC, for any taxable year if either:

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at least 75% of its gross income is passive income; or

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at least 50% of the value of its assets (based on an average of the quarterly values of the assets during a taxable year) is attributable to assets that produce or are held for the production of passive income.

For the purpose of applying the income and asset tests described above, we will be treated as owning our proportionate share of the assets and earning our proportionate share of the income of any other corporation if we own, directly or indirectly, 25% or more (by value) of the stock of such corporation.

We believe we likely will be classified as a PFIC, for U.S. federal income tax purposes, for calendar year 2007 and in future years. The determination of whether or not we are classified as a PFIC is a factual determination that is made annually based on the categories and amounts of income that we earn and the categories and valuation of our assets (including goodwill), all of which are subject to change. There is no assurance as to the categories of assets in which we may invest. Moreover, in calculating goodwill, the valuation of our assets may be based on our anticipated total market value, determined with reference to the market price of our ordinary shares or ADSs.

Assuming we are classified as a PFIC for 2007 or in any other future taxable year, you would be subject to special rules generally intended to reduce or eliminate any benefits from the deferral of United States federal income tax that a U.S. Holder could derive from investing in a non-United States company that does not distribute all of its earnings on a current basis. In such event, you may be subject to tax at ordinary income tax rates on (i) any gain recognized on the sale of the ordinary shares or ADSs and (ii) any “excess distribution” paid on ordinary shares or ADSs (generally, a distribution in excess of 125% of the average annual distributions paid by us in the three preceding taxable years). In addition, you may be subject to an interest charge on such gain or excess distribution. Finally, the 15% maximum rate on our dividends would not apply if we are or become a PFIC.

Assuming we are a PFIC, you would generally be able to avoid the “excess distribution” rules described above by making a timely so-called “mark-to-market” election with respect to your ADSs and ordinary shares provided our ADSs and ordinary shares are “marketable.” If you made this election in a timely fashion, you would recognize as ordinary income or ordinary loss the difference between the fair market value of your ADSs and ordinary shares on the first day of any taxable year and their value on the last day of that taxable year. Any ordinary income resulting from this election would generally be taxed at ordinary income rates and would not be eligible for the reduced rate of tax applicable to qualified dividend income. Any ordinary losses would be limited to the extent of the net amount of previously included income as a result of the mark-to-market election, if any. Your basis in the ADSs and ordinary shares would be adjusted to reflect any such income or loss.

We do not intend to provide you with the information you would need to make or maintain a so-called “Qualified Electing Fund” or “QEF” election. Accordingly, if we were a PFIC in any year you would not be able to avoid the “excess distribution” rules described above by making such an election with respect to your ADSs and ordinary shares.

You are urged to consult your tax advisor regarding the potential tax consequences to you assuming we are or become a PFIC, as well as any elections that may be available to you to mitigate such consequences.

Non-U.S. Holders

A Non-U.S. Holder generally will not be subject to U.S. federal income tax on dividends paid by us with respect to our ordinary shares or ADSs unless the income is effectively connected with the Non-U.S. Holder’s conduct of a trade or business in the United States. In such cases, you generally will be taxed in the same manner as a U.S. Holder.

A Non-U.S. Holder generally will not be subject to U.S. federal income tax on any gain attributable to a sale or other disposition of our ordinary shares or ADSs unless such gain is effectively connected with the Non-U.S. Holder’s conduct of a trade or business within the United States or the Non-U.S. Holder is a natural person who is present in the United States for 183 days or more and certain other conditions exist. In the first case, the Non- U.S. Holder will be taxed in the same manner as a U.S. Holder. In the second case, the Non-U.S. Holder will be subject to U.S. federal income tax at a rate of 30% on the amount by which such Non-U.S. Holder’s U.S.-source capital gains exceed such U.S.-source capital loss.

Dividends and gains that are effectively connected with a Non-U.S. Holder’s conduct of a trade or business in the United States generally will be subject to tax in the same manner as they would be if the Non-U.S. Holder were a U.S. Holder, except that the passive foreign investment company rules will not apply. Effectively connected dividends and gains received by a corporate Non-U.S. Holder may also be subject to an additional branch profits tax at a 30% rate or a lower tax treaty rate.

Information Reporting and Backup Withholding

In general, information reporting requirements will apply to dividends in respect of our ordinary shares or ADSs or the proceeds received on the sale, exchange or redemption of our ordinary shares or ADSs paid within the United States (and, in certain cases, outside the United States) to U.S. Holders other than certain exempt recipients, such as corporations, and backup withholding tax may apply to such amounts if the U.S. Holder fails to provide an accurate taxpayer identification number (or otherwise establishes, in the manner provided by law, an exemption from backup withholding) or to report interest and dividends required to be shown on the U.S. Holder’s U.S. federal income tax returns. The amount of any backup withholding from a payment to a U.S. Holder will be allowed as credit against the U.S. Holder’s U.S. federal income tax liability provided that the appropriate returns are filed.

A Non-U.S. Holder generally may eliminate the requirement for information reporting and backup withholding by providing certification of its foreign status to the payor, under penalties of perjury, on IRS Form W-8BEN.

F. Dividends and paying agents

Not applicable.

G. Statement by experts

Not applicable.

H. Documents on display

We file annual reports with and furnish other information to the SEC as may be applicable from time to time. You may read and copy any documents filed or furnished by Actions at the SEC’s public reference room in Washington, D.C. Please call the SEC at 1-800-SEC-0330 for further information on the public reference room.

I. Subsidiary Information

Not applicable.

ITEM 11. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Interest Rate Risk.

Our exposure to market risk for changes in interest rates relates primarily to the interest income generated by our cash deposits in banks. We have not used derivative financial instruments in our investment portfolio to hedge interest rate risks or otherwise. Interest-earning instruments carry a degree of interest rate risk. However, historically we have not been exposed to material risks due to changes in interest rates. Our future interest income may fluctuate in line with the changes in interest rates.

Foreign Exchange Risk.

Our reporting currency is the U.S. dollar and virtually all of our sales are denominated in U.S. dollars. Our operating expenses and substantially all of our assets and liabilities are denominated in Renminbi. As a result, we are exposed to foreign exchange risk, and our results of operations may be negatively impacted by fluctuations in the exchange rate between the U.S. dollar and Renminbi. If the Renminbi appreciates against the U.S. dollar, our operating expenses will increase and, as a consequence, our operating margins and net income will likely decline. Since July 2005 the Renminbi is no longer pegged solely to the U.S. dollar. Instead, it was reported to be pegged against a basket of currencies, determined by the People’s Bank of China, against which it can rise or fall by as much as 0.3% each day. This volatility range was further expanded by the Peoples’s Bank of China by 0.5% each day since May 21, 2007. If the Renminbi had been 1% and 5% less valuable against the U.S. dollar than the actual rate as of December 31, 2007 which was used in preparing our audited financial statements as of and for the year ended December 31, 2007, our net asset value, as presented in U.S. dollars, would have been reduced by US$1.5 and US$7.1 million, respectively. Conversely, if the Renminbi had been 1% and 5% more valuable against the U.S. dollar as of that date, then our net asset value would have increased by US$1.5 and US$7.9 million, respectively.

We have experienced de minimis foreign exchange gains or losses in 2006 and a gain of US$ 5.2 million in 2007. In addition, we have recognized foreign currency translation adjustments of approximately US$3.2 and US$5.2 million in 2006 and 2007, respectively.

ITEM 12. DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES

Not applicable.

PART II

ITEM 13. DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES

None.

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

We received net proceeds of approximately US$43.6 million from our initial public offering in November 2005, where we offered 6,000,000 American Depositary Shares, or ADSs, and certain of our shareholders offered an additional 3,000,000 ADSs. Each ADS represents six ordinary shares. As of March 31, 2008, we have used approximately US$22.8 million for capital expenditure including acquiring additional engineering tools, software and other intangible assets, and leasing a piece of land from the Zhuhai Bureau of Land Resources to set up our new corporate headquarters.

ITEM 15. CONTROLS AND PROCEDURES

We maintain a set of disclosure controls and procedures designed to ensure that information required to be disclosed by us in reports that we file or submit under the U.S. Securities Exchange Act of 1934, as amended, is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and terms.

Disclosure control and procedures. Pursuant to Rules 13a-14(c) of the Securities Exchange Act of 1934, as amended. An evaluation was carried out under the supervision and with the participation of our Chief Executive Officer and Chief Financial Officer of the effectiveness of our disclosure controls procedures. Based on that evaluation, the Chief Executive Officer and Chief Financial Officer concluded that these disclosure controls and procedures were effective as of December 31, 2007.

Management’s Annual Report on Internal Control Over Financial Reporting. Management is responsible for establishing and maintaining adequate internal control over financial reporting. Our internal control over financial reporting is a process designed under the supervision of our Chief Executive Officer and Chief Financial Officer to provide reasonable assurance regarding the reliability of financial reporting and the preparation of our financial statements for external reporting purposes in accordance with U.S. GAAP. Our internal control over financial reporting includes policies and procedures that pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect transactions and dispositions of assets; provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with U.S. GAAP, and that receipts and expenditures are being made only in accordance with authorizations of our management and directors; and provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of our assets that could have a material effect on our financial statements. As of December 31, 2007, management conducted an assessment of the effectiveness of our internal control over financial reporting based on the framework established in Internal Control Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Based on this assessment, management has determined that our internal control over financial reporting as of December 31, 2007 is effective.

Changes in Internal Control Over Financial Reporting. During 2007, no change to our internal control over financial reporting occurred that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

Attestation Report of the Registered Public Accounting Firm

The effectiveness of internal control over financial reporting as of December 31, 2007 has been audited by Deloitte Touche Tohmatsu, an independent registered public accounting firm with a report to the shareholders and the Board of Directors of the Company as below:

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

TO THE BOARD OF DIRECTORS AND SHAREHOLDERS OF

ACTIONS SEMICONDUCTOR CO., LTD.

We have audited the internal control over financial reporting of Actions Semiconductor Co., Ltd. and its subsidiaries (the "Group") as of December 31, 2007, based on the criteria established in Internal Control - Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission. The Group's management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management's Report on Internal Control Over Financial Reporting. Our responsibility is to express an opinion on the Group's internal control over financial reporting based on our audit.

We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.

A company's internal control over financial reporting is a process designed by, or under the supervision of, the company's principal executive and principal financial officers, or persons performing similar functions, and effected by the company's board of directors, management, and other personnel to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company's internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company's assets that could have a material effect on the financial statements.

Because of the inherent limitations of internal control over financial reporting, including the possibility of collusion or improper management override of controls, material misstatements due to error or fraud may not be prevented or detected on a timely basis. Also, projections of any evaluation of the effectiveness of the internal control over financial reporting to future periods are subject to the risk that the controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

In our opinion, the Group maintained, in all material respects, effective internal control over financial reporting as of December 31, 2007, based on the criteria established in Internal Control - Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission.

We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated financial statements and the related financial statement schedule of the Group as of and for the year ended December 31, 2007 and our report dated April 21, 2008 expressed an unqualified opinion on those financial statements and the related financial statement schedule.

Deloitte Touche Tohmatsu

Hong Kong

April 21, 2008

ITEM 16A. AUDIT COMMITTEE FINANCIAL EXPERT

Our board of directors has determined that Mr. Lin, Yu-Hsin Casper, the chairman of our audit committee and an independent, non-executive director, is a “financial expert” as defined under the applicable rules of the SEC issued pursuant to Section 407 of the Sarbanes-Oxley Act of 2002.

ITEM 16B. CODE OF ETHICS

We have adopted a Code of Ethics that applies to all of our directors, officers and employees. We have never granted a waiver for non-compliance with the policies and procedures set forth in the code of ethics for any director, officer or employee of our company or any of our subsidiaries.

A copy of our Code of Ethics is available at our website at www.action-semi.com

ITEM 16C. PRINCIPAL ACCOUNTANT FEES AND SERVICES

The table below summarizes the fees that we paid or accrued for services provided by Deloitte Touche Tohmatsu for the years ended December 31, 2006, and 2007.

	For the year ended December 31,
	2006		%			2007		%
	(thousands)					(thousands)
Audit Fees	US$	664		74.5	%	US$	615		99.7	%
Audit Related Fees		225		25.3	%		Nil		-
Tax Fees		2		0.2	%		2		0.3	%
All Other Fees		Nil		-			Nil		-
Total	US$	891		100.0	%	US$	617		100.0	%

Audit Fees. This category includes the audit of our annual financial statements and services that are normally provided by Deloitte Touche Tohmatsu in connection with statutory and regulatory filings or engagements for those fiscal years.

Audit-Related Fees. Audit related fees consist of fees billed for the professional services rendered in connection with our registered offering and private placement for the fiscal years ended December 31, 2006 and 2007, respectively.

Tax Fees. This category consists of professional services rendered by the Deloitte Touche Tohmatsu for tax compliance and tax advice. The services for the fees disclosed under this category include tax return preparation and technical tax advice.

All other Fees. There were no other fees billed by Deloitte Touche Tohmatsu for the fiscal years ended December 31, 2006 and 2007, respectively.

All non-audit services need to be pre-approved by the Audit Committee on a case-by-case basis. Accordingly, we have not established any pre-approval policies and procedures. All audit and non-audit services performed by the Deloitte Touche Tohmatsu were pre-approved by the Audit Committee.

ITEM 16D. EXEMPTIONS FROM THE LISTING STANDARDS FOR AUDIT COMMITTEES

Not applicable.

ITEM 16E. PURCHASES OF EQUITY SECURITIES BY THE ISSUER AND AFFILIATED PURCHASERS.

In May 2007, our board of directors authorized a program to repurchase up to 8 million of our American Depositary Shares (ADSs) representing 48 million ordinary shares. Any shares acquired will be used in connection with our employee benefit plans and other general corporate purposes. We may repurchase shares in the open market or through privately negotiated transactions. The timing and actual number of ADSs repurchased will depend upon market conditions and other factors, in accordance with Securities and Exchange Commission requirements. This repurchase program has a term that will expire on December 31, 2008.

The following table sets forth our share repurchase activities as of March 31, 2008.

Period	Total Number of ADSs purchased		Average Price Paid per ADS		Total Number of Shares Purchased		Maximum Number of Shares that May Yet Be Purchased Under the Plan
2007		1,303,647	US$	5.09		1,303,647		6,696,353
January		—		—		—		—
February		—		—		—		—
March		—		—		—		—
April		—		—		—		—
May		163,311		6.13		163,311		7,836,689
June		—		—		163,311		7,836,689
July		387,600		5.17		550,911		7,449,089
August		162,780		4.85		713,691		7,286,309
September		—		—		713,691		7,286,309
October		—		—		713,691		7,286,309
November		589,956		4.82		1,303,647		6,696,353
December						1,303,647		6,696,353
2008		148,476	US$	3.49		1,452,123		6,547,877
January		38,027		3.30		1,341,674		6,658,326
February		110,449		3.56		1,452,123		6,547,877
March		—		—		1,452,123		6,547,877

PART III

ITEM 17. FINANCIAL STATEMENTS

The Company has elected to provide the financial statements and related information specified in Item 18 in lieu of Item 17.

ITEM 18. FINANCIAL STATEMENTS

See Item 19(a) for a list of financial statements filed under Item 18.

ITEM 19. EXHIBITS

	Page
(a) List of Financial Statements

Report of Independent Registered Public Accounting Firm	F-2

Consolidated Balance Sheets as of December 31, 2006 and 2007	F-5

Consolidated Statements of Operations for the years ended December 31, 2005, 2006 and 2007	F-6

Consolidated Statements of Shareholders’ Equity and Comprehensive Income for the years ended December 31, 2005, 2006 and 2007	F-7

Consolidated Statements of Cash Flows for the years ended December 31, 2005, 2006 and 2007	F-8

Notes to Consolidated Financial Statements	F-9

Schedule 1 - Actions Semiconductor Co., Ltd. - condensed financial information as of December 31, 2006 and 2007	F-31

(b) List of Exhibits

See Item 19(a) and Exhibits, which are incorporated by reference to the Registrant’s Registration Statement on Form F-1 (File No. 333-129208) filed with the Commission on October 24, 2005.

Exhibit 8.1	List of Subsidiaries.

Exhibit 12.1	Certification by the Chief Executive Officer in accordance with Section 302 of the Sarbanes-Oxley Act of 2002

Exhibit 12.2	Certification by the Chief Financial Officer in accordance with Section 302 of the Sarbanes-Oxley Act of 2002

Exhibit 13.1	Certification by the Chief Executive Officer and Chief Financial Officer required by 18 U.S.C.ss.1350.

SIGNATURES

The registrant hereby certifies that it meets all of the requirements for filing on Form 20-F and that it has duly caused and authorized the undersigned to sign this annual report on its behalf.

Actions Semiconductor Co., Ltd.

By:	/s/ PEI-FEN (PATRICIA) CHOU
Name:	Pei-Fen (Patricia) Chou
Title:	Chief Financial Officer

Date: April 21, 2008

Title of each class		Name of quotation system on which registered
American Depositary Shares, each representing Six Ordinary Shares, par value US$0.000001 per share		Nasdaq—Global Market System

Ordinary Shares, par value US$0.000001 per share		Nasdaq—Global Market System*

Per U.S. dollar	High		Low
2005		RMB 8.0702		RMB 8.2765
2006		7.8041		8.0702
2007		7.2946		7.8127
First Quarter		7.7232		7.8127
Second Quarter		7.6120		7.7345
Third Quarter		7.4928		7.6181
Fourth Quarter		7.2946		7.5158
October		7.4682		7.5158
November		7.3800		7.4582
December		7.2946		7.4120
2008
First Quarter		7.0105		7.2946
January		7.1818		7.2946
February		7.1100		7.1973
March		7.0105		7.1110
April (through April 21, 2008)		6.9840		7.0185

	For the year ended December 31,
	2003			2004			2005			2006			2007
	(thousands, except per share and share data)
Revenues:
System-on-a-chip products	US$	4,319		US$	55,236		US$	149,369		US$	170,129		US$	116,320
Semiconductor product testing services		1,242			2,021			253			99			308
Total net revenues		5,561			57,257			149,622			170,228			116,628
Cost of revenues:
System-on-a-chip products		(2,868	)		(25,565	)		(60,518	)		(75,853	)		(56,687	)
Semiconductor product testing services		(793	)		(1,575	)		(68	)		(58	)		(231	)
Total cost of revenues		(3,661	)		(27,140	)		(60,586	)		(75,911	)		(56,918	)
Gross profit		1,900			30,117			89,036			94,317			59,710
Other operating income		118			128			1,122			1,634			392
Operating expenses:
Research and development		(1,139	)		(2,400	)		(7,825	)		(9,773	)		(12,381	)
General and administrative		(331	)		(769	)		(8,968	)		(8,663	)		(10,485	)
Selling and marketing		(417	)		(594	)		(1,375	)		(1,626	)		(1,880	)
Total operating expenses		(1,887	)		(3,763	)		(18,168	)		(20,062	)		(24,746	)
Income (loss) from operations		131			26,482			71,990			75,889			35,356
Other income		—			—			—			—			11,570
Interest income		2			28			1,148			4,876			7,162
Interest expenses		—			—			(77	)		(160	)		(82	)
Income (loss) before income taxes, equity in net loss of an affiliate and minority interest		133			26,510			73,061			80,605			54,006
Income taxes(expense) credit		—			(25	)		526			(5,984	)		(2,202	)
Equity in net loss of an affiliate		—			—			—			(156	)		179
Minority Interests		—			—			18			96			220
Net income (loss)	US$	133		US$	26,485		US$	73,605		US$	74,561		US$	52,203

	For the year ended December 31,
	2003		2004		2005		2006		2007
	(thousands, except per share and share data)
Net income per share:
Basic and diluted	US$	—	US$	0.055	US$	0.152	US$	0.144	US$	0.102
Net income per ADS:
Basic and diluted	US$	0.002	US$	0.331	US$	0.914	US$	0.867	US$	0.610
Dividend declared per share		—		—	US$	0.041		—		—
Weighted-average shares used in computation:
Basic and diluted		480,000,000		480,000,000		483,000,000		516,000,000		513,588,069

	At December 31,
	2003		2004		2005		2006		2007
	(thousands)
Cash and cash equivalents	US$	2,438	US$	32,013	US$	108,896	US$	137,778	US$	72,054
Time deposits		—		—		23,172		45,713		2,613
Restricted cash		—		—		2,478		—		1,782
Marketable securities		—		—		—		20,531		165,317
Accounts receivable, net		10		3,529		8,025		5,859		6,046
Notes receivable		—		1,825		1,722		2,154		372
Inventories		1,069		5,018		7,023		6,280		12,542
Prepaid expenses and other current assets		660		1,328		1,973		6,413		2,479
Amount due from an affiliate		—		—		—		133		—
Deferred tax assets		—		—		528		662		739
Income tax recoverable		—		—		11		—		—
Total current assets		4,177		43,713		153,828		225,523		263,944
Investment in an affiliate		—		—		500		1,469
Other investments		—		—		—		—		7,760
Rental deposits		16		24		11		52		79
Deposit paid for acquisition of property, plant and equipment		—		—		—		91		27
Property, plant and equipment, net		646		1,411		2,360		5,309		6,436
Land use right		—		—		—		1,440		1,509
Acquired intangible assets, net		25		14		1,889		3,787		5,849
Total assets	US$	4,864	US$	45,162	US$	158,588	US$	237,671	US$	285,604
Total current liabilities		969		13,900		27,307		28,165		24,921
Other liabilities		—		145		124		—		686
Total liabilities		969		14,045		27,431		28,165		25,607
Minority interests		—		—		582		486		204
Total shareholders’ equity		3,895		31,117		130,575		209,020		259,793
Total liabilities & shareholders’ equity	$	4,864	$	45,162	$	158,588	$	237,671	$	285,604

CERTAIN DEFINED TERMS			4

FORWARD-LOOKING STATEMENTS			4

PART I			5

ITEM 1. IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERS			5

ITEM 2. OFFER STATISTICS AND EXPECTED TIMETABLE			5

ITEM 3. KEY INFORMATION			5

	A.	Selected Financial Data	5
	B.	Capitalization and Indebtedness	7
	C.	Reasons for the Offer and Use of Proceeds	7
	D.	Risk Factors	7

ITEM 4. INFORMATION ON THE COMPANY			21

	A.	History and Development of the Company	21
	B.	Business Overview	22
	C.	Organizational Structure	31
	D.	Property, Plant and Equipment	32

ITEM 5. OPERATING AND FINANCIAL REVIEW AND PROSPECTS			32

	A.	Operating Results	32
	B.	Liquidity and Capital Resources	38
	C.	Research and Development, Patents and Licenses, etc.	42
	D.	Trend Information	43
	E.	Off-balance Sheet Arrangements	44
	F.	Tabular Disclosure of Contractual Obligations	45

ITEM 6. DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES			45

	A.	Directors and Senior Management	45
	B.	Compensation	46
	C.	Board Practices	48
	D.	Employees	48
	E.	Share ownership	48

ITEM 7. MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS			48

	A.	Major Shareholders	48
	B.	Related Party Transactions	49
	C.	Interests of Experts and Counsel	50

ITEM 8. FINANCIAL INFORMATION			51

	A.	Consolidated Statements and Other Financial Information	51
	B.	Significant Changes	52

ITEM 9. THE OFFER AND LISTING			52

	A.	Offer and Listing Details	52
	B.	Plan of Distribution	52
	C.	Markets	52
	D.	Selling Shareholders	52
	E.	Dilution	52
	F.	Expense of the Issue	52

ITEM 10. ADDITIONAL INFORMATION			53

	A.	Share Capital	53
	B.	Memorandum and Articles of Association	53
	C.	Material Contracts	61
	D.	Exchange Controls	61
	E.	Taxation	61
	F.	Dividends and paying agents	65
	G.	Statement by experts	65
	H.	Documents on display	65
	I.	Subsidiary Information	65

ITEM 11. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK			65

ITEM 12. DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES			65

PART II			66

ITEM 13. DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES			66

ITEM 14. MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE OF PROCEEDS			66

ITEM 15. CONTROLS AND PROCEDURES			66

ITEM 16A. AUDIT COMMITTEE FINANCIAL EXPERT			68

ITEM 16B. CODE OF ETHICS			68

ITEM 16C. PRINCIPAL ACCOUNTANT FEES AND SERVICES			68

ITEM 16D. EXEMPTIONS FROM THE LISTING STANDARDS FOR AUDIT COMMITTEES			68

ITEM 16E. PURCHASES OF EQUITY SECURITIES BY THE ISSUER AND AFFILIATED PURCHASERS.			68

PART III			69

ITEM 17. FINANCIAL STATEMENTS			69

ITEM 18. FINANCIAL STATEMENTS			69

ITEM 19. EXHIBITS			69

CONTENTS		PAGE(S)

Reports of Independent Registered Public Accounting Firm		F - 2

Consolidated Balance Sheets as of December 31, 2006 and 2007		F - 5

Consolidated Statements of Operations for the years ended
December 31, 2005, 2006 and 2007		F - 6

Consolidated Statements of Shareholders' Equity and Comprehensive Income
for the years ended December 31, 2005, 2006 and 2007		F - 7

Consolidated Statements of Cash Flows for the years ended
December 31, 2005, 2006 and 2007		F - 8

Notes to the Consolidated Financial Statements		F - 9

Schedule 1 - Actions Semiconductor Co., Ltd. - condensed financial information		F - 31
as of December 31, 2006 and 2007

	At December 31,
	2006		2007
ASSETS
Current assets:
Cash and cash equivalents	$	137,778	$	72,054
Time deposits		45,713		2,613
Restricted cash		-		1,782
Marketable securities		20,531		165,317
Accounts receivable, net		5,859		6,046
Notes receivable		2,154		372
Inventories		6,280		12,542
Prepaid expenses and other current assets		6,413		2,479
Amount due from an affiliate		133		-
Deferred tax assets		662		739
Total current assets		225,523		263,944

Investment in an affiliate		1,469		-
Other investments		-		7,760
Rental deposits		52		79
Property, plant and equipment, net		5,309		6,436
Land use right		1,440		1,509
Acquired intangible assets, net		3,787		5,849
Deposit paid for acquisition of property, plant and equipment		91		27
TOTAL ASSETS	$	237,671	$	285,604
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable	$	15,715	$	12,334
Accrued expenses and other current liabilities		9,490		9,435
Amounts due to shareholders		10		-
Other liabilities		692		884
Short-term bank loan		-		1,519
Income tax payable		2,258		749
Total current liabilities		28,165		24,921

Other liabilities		-		686
Total liabilities		28,165		25,607
Minority interest		486		204
Commitments and contingencies (Note 16)

Shareholders' equity:
Ordinary shares of par value $0.000001:
2,000,000,000 shares authorized
508,178,118 (2006: 516,000,000) shares issued and outstanding	$	1	$	1
Additional paid-in capital		50,341		43,679
Accumulated other comprehensive income		4,396		9,628
Retained earnings		154,282		206,485
Total shareholders' equity		209,020		259,793
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY	$	237,671	$	285,604

	Year ended December 31,
	2005			2006			2007
Revenues:
System-on-a-chip products	$	149,369		$	170,129		$	116,320
Semiconductor product testing services		253			99			308
Total net revenues		149,622			170,228			116,628
Cost of revenues:
System-on-a-chip products		(60,518	)		(75,853	)		(56,687	)
Semiconductor product testing services		(68	)		(58	)		(231	)
Total cost of revenues		(60,586	)		(75,911	)		(56,918	)
Gross profit		89,036			94,317			59,710
Other operating income		1,122			1,634			392
Operating expenses:
Research and development		(7,825	)		(9,773	)		(12,381	)
General and administrative		(8,968	)		(8,663	)		(10,485	)
Selling and marketing		(1,375	)		(1,626	)		(1,880	)
Total operating expenses		(18,168	)		(20,062	)		(24,746	)
Income from operations		71,990			75,889			35,356
Other income		-			-			11,570
Interest income		1,148			4,876			7,162
Interest expense		(77	)		(160	)		(82	)
Income before income taxes, equity in
net (loss) income of an affiliate and
minority interests		73,061			80,605			54,006
Income tax (expense) credit		526			(5,984	)		(2,202	)
Equity in net (loss) income of an affiliate		-			(156	)		179
Minority interests		18			96			220
Net income	$	73,605		$	74,561		$	52,203

Net income per share: Basic and diluted	$	0.152		$	0.144		$	0.102

Dividend declared per share	$	0.041		$	-		$	-

Weighted-average shares used in computation:
Basic and diluted		483,000,000			516,000,000			513,588,069

									Accumulated		Accumulated
									other		(deficit)
	Ordinary shares					Additional			comprehensive		retained						Comprehensive
	Number			Amount		paid-in capital			income		earnings			Total			income

Balance at January 1, 2005		480,000,000		$	-	$	5,000		$	1	$	26,116		$	31,117

Issue of shares upon the initial public
offering, net of offering expenses		36,000,000			1		44,629			-		-			44,630			-
Dividend		-			-		-			-		(20,000	)		(20,000	)		-
Foreign currency translation adjustments		-			-		-			1,223		-			1,223			1,223
Net income		-			-		-			-		73,605			73,605			73,605

Balance at December 31, 2005		516,000,000		$	1	$	49,629		$	1,224	$	79,721		$	130,575		$	74,828

Reversal of overprovision of
capitalized offering expenses		-			-		712			-		-			712			-
Foreign currency translation adjustments		-			-		-			3,172		-			3,172			3,172
Net income		-			-		-			-		74,561			74,561			74,561

Balance at December 31, 2006		516,000,000		$	1	$	50,341		$	4,396	$	154,282		$	209,020		$	77,733

Repurchase of ordinary shares		(7,821,882	)		-		(6,662	)		-		-			(6,662	)		-
Foreign currency translation adjustments		-			-		-			5,231		-			5,231			5,231
Unrealised gains on other investments		-			-		-			1		-			1			1
Net income		-			-		-			-		52,203			52,203			52,203

Balance at December 31, 2007		508,178,118		$	1	$	43,679		$	9,628	$	206,485		$	259,793		$	57,435

	Place and date of	Attributable equity
Name of Company	incorporation/establishment	interest held	Principal activities

Actions Semiconductor Co., Ltd.	Republic of Mauritius	100%	Investment holding
("Actions Semiconductor Mauritius")	("Mauritius")
	November 16, 2001

Actions Semiconductor Co., Ltd.	PRC	100%	Design and manu-
("Actions Semiconductor Zhuhai")	November 17, 2001		facture of system-
			on-a-chip products

Actions Technology (HK) Company	Hong Kong	100%	Trading of system-on-
Limited ("Actions Hong Kong")	January 13, 1999		a-chip products

Actions Enterprise (HK) Co., Ltd.	Hong Kong	100%	Investment holding
	September 6, 2007

Actions Microelectronics Co., Ltd.	Hong Kong	100%	Trading of system-on-
	August 17, 2007		a-chip products

Artek Microelectrics Co., Ltd.	The BVI	100%	Investment holding
("Artek Microelectrics BVI")	December 28, 2005

Beijing Actions North	PRC	80%	Research and
Microelectronics Co., Ltd.	December 13, 2005		development
("Beijing Actions")

Buildings	20 years
Leasehold improvements	Shorter of the lease terms or 3 years
Furniture, fixtures and equipment	5 years
Motor vehicles	5 years
Plant and machinery	3 to 5 years

	Net revenues
	Year ended December 31,
	2005		2006		2007

Customer A		26%		24%		16%
Customer B		17%		12%		-
Customer C		13%		11%		-
Customer D		12%		10%		10%
Customer E		-		-		12%
Customer F		-		-		13%
		68%		57%		51%

	Accounts receivable
	At December 31,
	2006		2007

Customer A		33%		21%
Customer B		-		-
Customer C		17%		13%
Customer D		17%		12%
Customer E		-		16%
Customer F		-		18%
		67%		80%