Pericom Semiconductor (PSEM)

Inventories consist of:

The Company considers raw material inventory obsolete and it writes it off if the raw material has not moved in 365 days. The Company considers assembled devices excessive and writes them off if the quantity of assembled devices in inventory is in excess of the greater of the quantity shipped in the previous twelve months, the quantity in backlog or the quantity forecasted to be shipped in the following twelve months. In certain circumstances, management will determine, based on expected usage or other factors, that inventory considered excess by these guidelines should not be written off. As of June 30, 2007, the Company had $8,316,000 of written-off inventory as compared to $8,543,000 at July 1, 2006. The Company attributes this overall reduction of approximately $227,000 in obsolete inventory between the fiscal year ended June 30, 2007 and the fiscal year ended July 1, 2006 to physically scrapping products that were previously written-off, partially offset by additional write-offs.

Inventories consist of (in thousands):

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The reduction in net inventories during the nine months ended March 31, 2007 is due to a combination of tightening of supply and a continued concerted effort to reduce inventory levels to a lower level in fiscal 2007. Additionally reserves were taken against inventory that became excess or obsolete. Raw material inventory is considered obsolete and is fully reserved if it has not moved in 365 days. By part number, the quantity of assembled devices in inventory that is in excess of the greater of the quantity forecasted to be shipped in the next twelve months, the quantity shipped in the previous twelve months or the quantity in backlog are considered obsolete and reserved. In certain circumstances, management will determine, based on expected usage or other factors, that inventory considered obsolete by these guidelines should not be reserved. At March 31, 2007 $9.6 million of inventory on hand had been reserved as compared with $8.5 million at July 1, 2006.

During the three months ended March 31, 2007 and April 1, 2006, gross profit benefited as a result of the sale of inventory of $356,000 and $841,000, respectively, that had been previously identified as excess and written down to zero. In addition, during the nine months ended March 31, 2007 and April 1, 2006, gross profit benefited as a result from the sale of inventory of $1.2 million and $2.2 million, respectively, that had been previously identified as excess and fully reserved.

Inventories consist of (in thousands):

The reduction in net inventories during the six month period ended December 30, 2006 is due to a combination of tightening of supply and a continued concerted effort to reduce inventory levels to a lower level in fiscal 2007 as well as reserving inventory that has become excess and obsolete. Raw material inventory is considered obsolete and written off if it has not moved in 365 days. By part number, the

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quantity of assembled devices in inventory that is in excess of the greater of the quantity forecasted to be shipped in the next twelve months, the quantity shipped in the previous twelve months or the quantity in backlog are considered obsolete and reserved. In certain circumstances, management will determine, based on expected usage or other factors, that inventory considered obsolete by these guidelines should not be reserved. To date as of December 30, 2006 $9.2 million of inventory on hand had been reserved as compared with $8.5 million at July 1, 2006.

During the three months ended December 30, 2006 and December 31, 2005, gross profit benefited as a result of the sale of inventory of $356,000 and $653,000, respectively, that had been previously identified as excess and written down to zero. In addition, during the six month periods ended December 30, 2006 and December 31, 2005 gross profit benefited as a result from the sale of inventory of $886,000 and $1,384,000, respectively, that had been previously identified as excess and written down to zero.

Inventories consist of (in thousands):

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Raw material inventory is considered obsolete and written off if it has not moved in 270 days. By part number, the quantity of assembled devices in inventory that is in excess of the greater of the quantity shipped in the previous twelve months or the quantity in backlog are considered obsolete and reserved. In certain circumstances, management will determine, based on expected usage or other factors, that inventory considered obsolete by these guidelines should not be reserved. To date as of September 30, 2006 $8.6 million of inventory on hand had been reserved as compared with $8.5 million at July 1, 2006.

During the three months ended September 30, 2006 and October 1, 2005, gross profit benefited as a result of the sale of inventory of $529,517 and $731,000, respectively, that had been previously identified as excess and written down to zero.

Inventories consist of (in thousands):

Raw material inventory is considered obsolete and written off if it has not moved in 270 days. By part number, the quantity of assembled devices in inventory that is in excess of the greater of the quantity shipped in the previous twelve months or the quantity in backlog are considered obsolete and written off. In certain circumstances, management will determine, based on expected usage or other factors, that inventory considered obsolete by these guidelines should not be written off. To date as of July 1, 2006 $8,543,000 of inventory on hand had been reserved as compared with $9,186,000 at July 2, 2005. This overall reduction of approximately $643,000 to inventory reserved for the twelve month period ended July 1, 2006 can primarily be attributed to products that were previously reserved being written off or scrapped.

Inventories consist of (in thousands):

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Raw material inventory is considered obsolete and written off if it has not moved in 270 days. By part number, the quantity of assembled devices in inventory that is in excess of the greater of the quantity shipped in the previous twelve months or the quantity in backlog are considered obsolete and reserved. In certain circumstances, management will determine, based on expected usage or other factors, that inventory considered obsolete by these guidelines should not be reserved. To date as of April 1, 2006 $8.8 million of inventory on hand had been reserved as compared with $9.2 million at July 2, 2005. This overall reduction of approximately $400,000 to inventory reserved for the nine month period ended April 1, 2006 can primarily be attributed to products that were previously reserved being written off and or scrapped.

During the three months ended April 1, 2006 and March 26, 2005, gross profit benefited as a result of the sale of inventory of $841,000 and $632,000, respectively, that had been previously identified as excess and written down to zero. In addition, during the nine month periods ended April 1, 2006 and March 26, 2005 gross profit benefited as a result of the sale of inventory of approximately $2.2 million and $1.8 million, respectively.

Inventories consist of (in thousands):

Raw material inventory is considered obsolete and written off if it has not moved in 270 days. By part number, the quantity of assembled devices in inventory that is in excess of the greater of the quantity shipped in the previous twelve months or the quantity in backlog are considered obsolete and written off. In certain circumstances, management will determine, based on expected usage or other factors, that inventory considered obsolete by these guidelines should not be written off. To date as of December 31, 2005 $8,150,000 of inventory on hand had been written off as compared with $9,186,000 at July 2, 2005. This overall reduction to inventory of approximately $1 million reserved for the three and six month period ended December 31, 2005 can primarily be attributed to products that were previously reserved being scrapped.

During the three months ended December 31, 2005 and December 25, 2004, gross profit and gross margin benefited as a result of the sale of inventory of $653,000 and $778,000, respectively, that had been previously identified as excess and written down to zero. In addition, during the six month periods ended December 31, 2005 and December 25, 2004 gross profit and gross margin benefited as a result of the sale of inventory of $1,384,000 and $931,000, respectively.

Inventories consist of (in thousands):

Raw material inventory is considered obsolete and written off if it has not moved in 270 days. By part number, the quantity of assembled devices in inventory that is in excess of the greater of the quantity shipped in the previous twelve months or the quantity in backlog are considered obsolete and written off. In certain circumstances, management will determine, based on expected usage or other factors, that inventory considered obsolete by these guidelines should not be written off. At October 1, 2005 $9,135,000 of inventory on hand had been written off as compared with $9,186,000 at July 2, 2005.

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During the three months ended October 1, 2005 and September 25, 2004, gross profit and gross margin benefited as a result of the sale of inventory of $731,000 and $266,000, respectively, that had been previously identified as excess and written down to zero.

Inventories consist of (in thousands):

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Raw material inventory is considered obsolete and written off if it has not moved in 270 days. By part number, the quantity of assembled devices in inventory that is in excess of the greater of the quantity shipped in the previous twelve months or the quantity in backlog are considered obsolete and written off. In certain circumstances, management will determine, based on expected usage or other factors, that inventory considered obsolete by these guidelines should not be written off. At July 2, 2005 $9,186,000 of inventory on hand had been written off as compared with $8,110,000 at June 26, 2004. During the twelve months ended July 2, 2005 the Company wrote off $1,044,000 of inventory related to a product end-of-life program.

During the twelve months ended July 2, 2005, and June 26, 2004, gross profit and gross margin benefited as a result of the sale of inventory of $491,000 and $487,000, respectively, which had been previously identified as obsolete and written down to zero.

Inventories consist of (in thousands):

63

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Raw material inventory is considered obsolete and written off if it has not moved in 270 days. By part number, the quantity of assembled devices in inventory that is in excess of the greater of the quantity shipped in the previous twelve months or the quantity in backlog are considered obsolete and written off. In certain circumstances, management will determine, based on expected usage or other factors, that inventory considered obsolete by these guidelines should not be written off. At July 2, 2005 $9,186,000 of inventory on hand had been written off as compared with $8,110,000 at June 26, 2004. During the twelve months ended July 2, 2005 the Company wrote off $1,044,000 of inventory related to a product end-of-life program.

During the twelve months ended July 2, 2005, and June 26, 2004, gross profit and gross margin benefited as a result of the sale of inventory of $491,000 and $487,000, respectively, which had been previously identified as obsolete and written down to zero.

Inventories consist of (in thousands):

Raw material inventory is considered obsolete and written off if it has not moved in 270 days. By part number, the quantity of assembled devices in inventory that is in excess of the greater of the quantity shipped in the previous twelve months or the quantity in backlog are considered obsolete and written off. In certain circumstances, management will determine, based on expected usage or other factors, that inventory considered obsolete by these guidelines should not be written off. At March 31, 2005 $9,353,000 of inventory on hand had been written off as compared with $8,110,000 at June 30, 2004. During the three months ended December 31, 2004 the Company wrote off $1,044,000 of inventory related to a product end-of-life program.

During the three months ended March 31, 2005, and March 31, 2004, gross profit and gross margin benefited as a result of the sale of inventory of $632,000 and $656,000, respectively, that had been previously identified as excess and written down to zero. During the nine months ended March 31, 2005, and March 31, 2004, gross profit and gross margin benefited as a result of the sale of inventory of $1,781,000 and $1,851,000, respectively, that had been previously identified as excess and written down to zero.

Inventories consist of (in thousands):

Raw material inventory is considered obsolete and written off if it has not moved in 270 days. By part number, the quantity of assembled devices in inventory that is in excess of the greater of the quantity shipped in the previous twelve months or the quantity in backlog are considered obsolete and written off. In certain circumstances, management will determine, based on expected usage or other factors, that inventory

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considered obsolete by these guidelines should not be written off. At December 31, 2004 $9,804,000 of inventory on hand had been written off as compared with $8,110,000 at June 30, 2004. During the three months ended December 31, 2004 the Company wrote off $1,044,000 of inventory related to a product end-of-life program.

During the three months ended December 31, 2004, and December 31, 2003, gross profit and gross margin benefited as a result of the sale of inventory of $778,000 and $460,000, respectively, that had been previously identified as excess and written down to zero. During the six months ended December 31, 2004, and December 31, 2003, gross profit and gross margin benefited as a result of the sale of inventory of $931,000 and $1,149,000, respectively, that had been previously identified as excess and written down to zero.