Zyxel Communications Announces Fund Lending to Affiliated Company Zyxel Technology Corp.

1. Factual Date: 115/07/06

2. Recipient of Fund Lending: (1) Company Name: Zyxel Technology Corp. (2) Relationship with Lending Company: Sister Company (3) Lending Limit (in thousand NT$): 454,704 (4) Previous Outstanding Balance (in thousand NT$): 0 (5) Amount of New Lending (in thousand NT$): 400,000 (6) Whether the Board Authorized the Chairman to Make Multiple or Revolving Loans to the Same Recipient: No (7) Outstanding Balance as of Factual Date (in thousand NT$): 400,000 (8) Reason for New Lending: Short-term liquidity support

3. Collateral Provided by Recipient: (1) Description: No collateral required (2) Value (in thousand NT$): 0

4. Recipient's Latest Financial Statements: (1) Capital (in thousand NT$): 724,500 (2) Accumulated Profits/Losses (in thousand NT$): 780,565

5. Interest Calculation Method: Market annual interest rate of 2% plus interest

6. Repayment Terms: (1) Conditions: Repayment in full at maturity or early repayment allowed (2) Date: One year from the actual disbursement date

7. Total Outstanding Fund Lending as of Factual Date (in thousand NT$): 4,721,641

8. Ratio of Outstanding Fund Lending to the Net Worth in the Latest Financial Statements of the Publicly Issued Company: 39.98%

9. Source of Lending Funds: The subsidiary itself

10. Other Matters to be Disclosed: None