Background
On October 25th, 2005, Taiwan’s United Daily News morning edition newspaper released an article claiming that Accton Technology Corporation was misrepresenting its financial results and was misleading its investors through its accounting practices.This was based on a Europe Convertible Bonds (ECB) transaction made between Accton Technology Corporation (Accton) and its subsidiary, Accton Century BVI (AC-BVI) in 2001.Two additional evening articles followed on October 25th, 2005.The first in the China Times Express, and the second in United Daily News, both articles contained Accton’s rebuttal to the claims made in the morning edition of United Daily News.

On October 26th, 2005, three additional articles were released. The first contained a detailed explanation by Accton in Taiwan’s Economics News.United Daily News and Commercial News carried releases by the Taiwan Stock Exchange (TSE) informing the public that they had reviewed the acquisitions, and found no wrong doing with Accton’s accounting practices, nor Accton misleading its investors.

Explanation of Events

In August 2001, Accton issued $70 Million US worth of ECB to the market.On August 15th, 2001, Accton posted on the TSE that it was guaranteeing a $10 Million US loan from a bank for its 100% owned subsidiary, AC-BVI.On August 16th, 2001, AC-BVI purchased $10.06 Million US of Accton issued ECB.As a result of the attacks of September 11, 2001, AC-BVI sold all of its Accton issued ECB for $10.06 Million US to a third party on September 28th, 2001.AC-BVI then repaid the $10 Million US loan to the bank.

Accton did not post on the TSE the purchase and sale of the Accton issued ECB by AC-BVI.As a result of not posting these transactions, Accton was fined 50,000 NT$ ($1,565 US) by TSE in September 2005.In order to correct this oversight, Accton posted these transactions on the TSE on September 16, 2005.Until 2002, subsidiaries of Taiwan companies were legally allowed to purchase corporate bonds from their parent companies.After 2002, the TSE revised its regulations, and currently subsidiaries are not allowed to purchase corporate bonds from their holding companies.

If there are any further questions regarding this event by the investor community, or Accton’s customers, please feel free to contact Accton for additional information.