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As of November 30, 2005, 27% of our employees were engaged in our research and developmentactivities. Over recent fiscal years research and development expenses have risen approximately at thelevel of increase in revenue and we expect this trend to continue, reflecting our continuing commitmentto developing products based on advanced technologies and designs.Selling, General and AdministrativeSelling, general, and administrative expenses include expenses related to salaries, bonuses andother labor costs for senior management and sales, marketing, and administrative employees, marketresearch and consulting fees, commissions to sales representatives, information technology costs, othermarketing and sales activities and exchange gains and losses arising on the retranslation of U.K. pounddenominated assets and liabilities. Our selling, general and administrative expenses have increased overrecent fiscal years as we have grown our business. To the extent our business continues to grow wewould expect this trend to continue and in addition, following our initial public offering, we haveincurred additional expenses in connection with operating as a public company, particularly an increasein directors and officers’ insurance expense of approximately $1.5 million per annum. As our businesscontinues to grow we expect these expenses to continue to increase approximately in line with ourrevenues although, as discussed above, this can be affected in any fiscal year by the effect of significantchanges in exchange rates.Provision for Income TaxesWe are subject to taxation primarily in the United Kingdom, the United States and Malaysia. Afterexcluding equity compensation expense, over 90% of our income before income taxes in the last threefiscal years has arisen in the United Kingdom or Malaysia. Substantially all of our Malaysian operationsbenefit from ‘‘high-tech pioneer’’ status which provides us with a zero tax rate provided that we meetcertain requirements. For the major part of our operations in Malaysia, this status is due to expire inMarch 2007 and our overall tax rate will rise after this date unless further tax incentives are granted.As of November 30, 2005, we had a loss carryforward of $22.6 million in the United Kingdom and as aresult of these loss carryforwards have not been required to make any significant U.K. tax payments inrecent fiscal years.As of November 30, 2005, we recorded a deferred tax asset of $24.0 million. Of this amount,$14.6 million relates to a loss carryforward and other tax and accounting timing differences in theUnited Kingdom. Of the remaining balance $5.2 million relates to non-cash equity compensationexpense as described in the next paragraph and $3.7 million relates to net operating loss carryforwardsrecorded in connection with our acquisition of nStor.As a result of the recording of a non-cash equity compensation expense in our 2004 fiscal yearrelated to our IPO we recorded an additional deferred tax asset of $12.3 million relating to shareoptions granted to U.K. employees. As of November 30, 2005, as a result of employees exercising shareoptions, $7.1 million of this amount had been added to U.K. loss carryforwards. This tax benefitprimarily relates to a U.K. tax deduction which is obtained when these share options are exercised,calculated as the excess of the market price on date of exercise over the exercise price. The recordingof this deferred tax asset resulted in an overall benefit for income taxes of $6.2 million in our 2004fiscal year.As a result of actual and projected taxable income in the United Kingdom increasing significantly,the valuation allowance relating primarily to the U.K. loss carryforwards was released at the end of our2003 fiscal year and this resulted in a $13.7 million income tax benefit.Tax payments in our 2005 fiscal year amounted to $1.7 million and, due to the beneficial Malaysiantax status and U.K. tax losses, these tax payments related primarily to our U.S. operations. We do notanticipate a significant change in the level of our tax payments in our 2006 fiscal year. The tax expense43