MIPS Technologies (MIPS)

(b) Management’s Report on Internal Control over Financial Reporting

Our management is responsible for establishing and maintaining adequate internal control over financial reporting, as defined in Rule 13a-15(f) under the Exchange Act. Internal control over financial reporting is designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with U.S. generally accepted accounting principles. Internal control over financial reporting is a process that involves human diligence and compliance and is subject to lapses in judgment and breakdowns resulting from human failures. Internal control over financial reporting also can be circumvented by collusion or improper management override. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. It is possible to design safeguards to reduce, though not eliminate, this risk. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

Our management evaluated the effectiveness of our internal control over financial reporting using the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”) in Internal Control—Integrated Framework. Based on this evaluation, our management identified the following material weakness in our internal control over financial reporting. A material weakness is a deficiency, or combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of the company’s annual or interim financial statements will not be prevented or detected on a timely basis.

The material weakness pertains to controls relating to the process of accounting for income taxes. Specifically, controls relating to the oversight and review of the tax provision by qualified personnel experienced in the application of tax rules, regulations and related accounting, and timely consultation with experts were ineffective. As a result of lack of oversight and review, errors were identified by our auditors in income tax expense and deferred tax assets and liabilities as of June 30, 2008. These errors were corrected in the consolidated financial statements as of and for the year ended June 30, 2008.

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As a result of the material weakness described above, management believes that, as of June 30, 2008, our internal control over financial reporting was not effective based on the criteria in Internal Control—Integrated Framework. Our management’s assessment of and conclusion on the effectiveness of internal control over financial reporting did not include the internal controls of Chipidea Microelectrónica S.A. (Chipidea), which was acquired on August 27, 2007. As allowed pursuant to guidance from the Securities and Exchange Commission, the evaluation of internal control over financial reporting of Chipidea has been excluded. Chipidea, which is included in the 2008 consolidated financial statements of MIPS Technologies, Inc. constituted 46% and 28% of total assets and total revenue, respectively, as of and for the year ended June 30, 2008.

Our internal control over financial reporting as of June 30, 2008, has been audited by Ernst & Young LLP, an independent registered public accounting firm, who expressed an adverse opinion on the effectiveness of internal controls over financial reporting as stated in their report which is included below.

(b)
Management’s Report on Internal Control over Financial Reporting

FACE="Times New Roman" SIZE="2">Our management is responsible for establishing and maintaining adequate internal control over financial reporting, as defined in Rule 13a-15(f) under the Exchange Act. Internal control over financial reporting is
designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with U.S. generally accepted accounting principles. Internal control over
financial reporting is a process that involves human diligence and compliance and is subject to lapses in judgment and breakdowns resulting from human failures. Internal control over financial reporting also can be circumvented by collusion or
improper management override. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. It is possible to design safeguards to reduce, though not eliminate, this risk. Also, projections
of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

(b) Management’s Report on Internal Control over Financial Reporting

Our management is responsible for establishing and maintaining adequate internal control over financial reporting, as defined in Rule 13a-15(f) under the Exchange Act. Internal control over financial reporting is designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with U.S. generally accepted accounting principles. Internal control over financial reporting is a process that involves human diligence and compliance and is subject to lapses in judgment and breakdowns resulting from human failures. Internal control over financial reporting also can be circumvented by collusion or improper management override. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. It is possible to design safeguards to reduce, though not eliminate, this risk. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

Our management evaluated the effectiveness of our internal control over financial reporting using the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”) in Internal Control—Integrated Framework. Based on this evaluation, our management identified the following material weakness in our internal control over financial reporting. A material weakness is a deficiency, or combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of the company’s annual or interim financial statements will not be prevented or detected on a timely basis.

The material weakness pertains to controls relating to the process of accounting for income taxes. Specifically, controls relating to the oversight and review of the tax provision by qualified personnel experienced in the application of tax rules, regulations and related accounting, and timely consultation with experts were ineffective. As a result of this material weakness, errors were identified by our auditors in income tax expense and deferred tax assets and liabilities in the 2007 consolidated financial statements. These errors were corrected in the consolidated financial statements as of and for the year ended June 30, 2007.

As a result of the material weakness described above, management believes that, as of June 30, 2007, our internal control over financial reporting was not effective based on the criteria in Internal Control—Integrated Framework.

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Our internal control over financial reporting as of June 30, 2007, has been audited by Ernst & Young LLP, an independent registered public accounting firm, who expressed an adverse opinion on the effectiveness of internal controls over financial reporting as stated in their report which is included below.

(c) Management’s Report on Internal Control over Financial Reporting

Our management is responsible for establishing and maintaining adequate internal control over financial reporting, as defined in Rule 13a-15(f) under the Exchange Act. Internal control over financial reporting is designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with U.S. generally accepted accounting principles. Internal control over financial reporting is a process that involves human diligence and compliance and is subject to lapses in judgment and breakdowns resulting from human failures. Internal control over financial reporting also can be circumvented by collusion or improper management override. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. It is possible to design safeguards to reduce, though not eliminate, this risk. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

Our management evaluated the effectiveness of our internal control over financial reporting using the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”) in Internal Control—Integrated Framework. Based on this evaluation, our management identified the following two material weaknesses in our internal control over financial reporting.

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The first material weakness pertains to controls relating to the process of accounting for a complex non-routine transaction. During preparation of the restated financial statements an error was identified in the consolidated financial statements for the three months ended September 30, 2005 in the calculation of the fair value of the options that were the subject of a settlement with former employees in Denmark. Specifically, controls relating to the oversight and review of complex non-routine transactions, including timely consultation with experts and related documentation considerations, were not adequate to ensure that the assumptions used in the determination of the fair value calculation were properly determined. The error was identified after June 30, 2006 and the consolidated financial statements for three months ended September 30, 2005 were restated to correct the error. The adjustment affected the reported amount of research and development expenses and additional paid in capital.

The second material weakness pertains to controls relating to the process of accounting for income taxes. During the preparation of the restated financial statements, errors were identified in income tax expense and deferred tax assets and liabilities in the consolidated financial statements for each of the three years ended June 30, 2006 as a result of ineffective controls relating to the oversight and review of the tax provision, including a lack of timely reconciliations of certain tax accounts and review of those reconciliations performed by qualified personnel experienced in the application of tax rules, regulations and related accounting, and timely consultation with experts and related documentation considerations. These errors were identified after June 30, 2006 and were corrected in the restated consolidated financial statements for each of the two years ended June 30, 2005 and the consolidated financial statements for the year ended June 30, 2006.

Management has concluded that the above control deficiencies represent material weaknesses in internal control over financial reporting. A material weakness is a control deficiency, or combination of control deficiencies, that results in a more than remote likelihood that a material misstatement of the annual or interim financial statements will not be prevented or detected. As a result of the material weaknesses described above, management believes that, as of June 30, 2006, our internal control over financial reporting was not effective based on the criteria in Internal Control—Integrated Framework.

Management’s assessment of effectiveness of our internal control over financial reporting as of June 30, 2006, has been audited by Ernst & Young LLP, an independent registered public accounting firm, as stated in their report which is included below.

(b) Management’s Report on Internal Control over Financial Reporting

Our management is responsible for establishing and maintaining adequate internal control over financial reporting, as defined in Rule 13a-15(f) under the Exchange Act. Internal control over financial reporting is designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with U.S. generally accepted accounting principles. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

Our management evaluated the effectiveness of our internal control over financial reporting using the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission in Internal

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Control—Integrated Framework. Based on this evaluation, our management concluded that our internal control over financial reporting was effective as of June 30, 2005.

Management’s assessment of effectiveness of our internal control over financial reporting as of June 30, 2005, has been audited by Ernst & Young LLP, an independent registered public accounting firm, as stated in their report which is included below.