Taipei, Taiwan, August 25, 2006 – System General Corp. (Stock code 6280) today announced it’s audited semi-annual financial statement ending June 30, 2006. Net revenue was NT$594 millions, gross profit was NT$303 millions, after-tax net income was NT$91 millions, and the after-tax EPS of common stock reached NT$1.63.

The net revenue of System General in the first six months of 2006 was hit by an on going ITC patent investigation, decreased by 2.1% when compared to the same period last year. The resulting revenue of NT$594 millions still yielded a gross margin of 51%, equal to the same period of the previous year, regardless of the fact that operating expenses were 30.5% higher due to the impact of the lawsuit and new products from R&D. Total operating income was NT$104 millions, with after-tax net income reaching NTD91 millions and EPS calculated at NT$1.63 per share for common stock.

In January, since System General had a hearing for the ITC patent infringement litigation between System General and Power Integrations (PI) (ITC-337-TA-541), the actual legal expense in that period was higher than before. The total lawsuit expense in the first and second quarters of 2006 was in the region of NT$45 millions. In order to offset this, safeguard customer’s rights and pursue future business growth, System General invested heavily in R&D to develop new products. The progress of new product development is on schedule and will realize profits gradually in the foreseeable future. By combining lawsuit expense and R&D expenditure, the operating expense ratio in the first 6 months of 2006 reached 33.6%.

Moving toward the end of the year, the prognosis is more optimistic. The lead up to the fourth quarter will be a transitional period, with gross margin hit by the accreditation and pilot test production, expense derived from assisting customers to convert to new products, and the revision of some sales products portfolios. The reduction in cost of some IC products will also have an impact. This short-term transition will be eclipsed by the introduction of new products, and the evolution and promotion of new product applications. In the fourth quarter, new products will be exempt from the negative impact of the ITC patent investigation case.

2006H1 Profit and Loss of SG: