DELTA NETWORKS, INC.


(incorporated in the Cayman Islands with limited liability)
(Stock code: 722)
REVISION OF ANNUAL CAPS IN RESPECT OF
CONTINUING CONNECTED TRANSACTIONS WITH DEI GROUP

As disclosed in the Prospectus, the transactions contemplated under (i) the
agreement for DEI Group’s use of the Company’s premises and sharing of services
at the Company’s Dongguan manufacturing facility and (ii) the agreement for the
Company’s use of research and development center operated by DEI Group in
Shanghai constitute non-exempt continuing connected transactions of the
Company which are subject to reporting and announcement requirements and
exempt from independent shareholders’ approval requirement under Chapter 14A
the Listing Rules.
As the original annual cap for the Dongguan Transactions for 2007 will be
exceeded and the original annual cap for the Shanghai Transactions for 2007 is
exceeded, the Company proposes to revise such original annual caps from
HK$8,279,660 to HK$10,140,000 in respect of the Dongguan Transactions and
from HK$7,710,988 to HK$11,700,000 in respect of the Shanghai Transactions. As
each of the relevant percentage ratios of each of the Dongguan Transactions and
the Shanghai Transactions is on an annual basis less than 2.5%, both the Dongguan
Transactions and the Shanghai Transactions are still subject to reporting and
announcement requirements and exempt from independent shareholders’ approval
requirement under Rule 14A.34 of the Listing Rules. Pursuant to Rule 14A.36, the
Company is also required to re-comply with the applicable requirements under
Rules 14A.35(3) and (4) of the Listing Rules.
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The Company currently intends to terminate the two above mentioned agreements
before the end of December 2007. Further announcement will be made by the
Company upon the termination of the two agreements.
Reference is made to the Prospectus in relation to, among other things, certain
continuing connected transactions between the Company and DEI Group.
BACKGROUND

As disclosed in the Prospectus, prior to the listing of the Company on the Stock
Exchange, the Company entered into (i) an agreement with DEI Dongguan in respect
of the Dongguan Transactions; and (ii) an agreement with Delta Video in respect of
the Shanghai Transactions. Both the Dongguan Transactions and the Shanghai
Transactions constitute continuing connected transactions of the Company which are
subject to reporting and announcement requirements and exempt from independent
shareholders’ approval requirement under Chapter 14A of the Listing Rules. The
Stock Exchange had on 12 June 2007 granted to the Company a waiver from strict
compliance with the announcement requirement under the Listing Rules in relation to
these transactions.
REVISION OF ANNUAL CAPS

In relation to the Dongguan Transactions, due to the expansion of DEI Dongguan’s
production capacity, DEI Group has increased the sharing of certain services at the
Company’s Dongguan manufacturing facilities. Accordingly, based on the unaudited
management accounts of the Group for the period from 1 January 2007 to 31 October
2007, the fee paid by DEI Group to us in respect of the Dongguan Transactions
amounted to approximately US$1,000,000 (equivalent to approximately
HK$7,800,000) and is likely to exceed the original annual cap of HK$8,279,660 in
respect of the Dongguan Transactions for 2007.
In relation to the Shanghai Transactions, the original annual cap of HK$7,710,988 is
based on an estimation of the total fees payable by us to Delta Video for
approximately ten months only as it was originally expected that the Shanghai
Subsidiary would be established by the end of October 2007 and the Shanghai
Transactions would be terminated thereafter. However, there is an unexpected delay
in obtaining the relevant approvals for the establishment of the Shanghai Subsidiary,
which is now expected to take place by the end of December 2007, and hence a
corresponding delay in the transfer of the equipment and relevant staff from the
research and development centre of DEI in Shanghai to the Shanghai Subsidiary.
Accordingly, despite the monthly monitoring of the annual caps of the Company’s
continuing connected transactions performed by the Company’s staff and with the
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continued growth of the Company’s business for the ten months ended 31 October
2007, the fee paid by the Company to Delta Video in respect of the Shanghai
Transactions for the period from 1 January 2007 to 31 October 2007 amounted to
approximately US$1,100,000 (equivalent to approximately HK$8,580,000) and has
slightly exceeded the original annual cap of HK$7,710,988 in respect of the Shanghai
Transactions for 2007.
In view of the above, the board of directors of the Company wishes to revise the
original annual cap for each of the Dongguan Transactions and the Shanghai
Transactions for the year ending 31 December 2007 as follows:
Category Transactions
Original annual
cap for 2007
Revised annual
cap for 2007
Dongguan
Transactions
DEI Group’s use of
provisions of the
Company’s premises and
sharing of services at the
Company’s Dongguan
manufacturing facility
US$1,060,000
(equivalent to
approximately
HK$8,279,660)
US$1,300,000
(equivalent to
approximately
HK$10,140,000)
Shanghai
Transactions
The Company’s use of the
research center operated
by DEI Group in
Shanghai
US$987,196
(equivalent to
approximately
HK$7,710,988)
US$1,500,000
(equivalent to
approximately
HK$11,700,000)
The revised annual caps of the Dongguan Transactions and the Shanghai Transactions
for the year ending 31 December 2007 are estimated by the directors of the Company
with reference to the actual amounts of the transactions for the first ten months ended
31 October 2007 and the estimated amounts for the two months ending 31 December
2007 on a pro-rata basis. Accordingly, the directors (including the independent
non-executive directors) of the Company consider (i) the Dongguan Transactions and
the Shanghai Transactions to be on normal commercial terms and in the ordinary and
usual course of business of the Company and (ii) the terms (including the revised
annual caps) of the Dongguan Transactions and the Shanghai Transactions to be fair
and reasonable and in the interest of the shareholders of the Company as a whole.
The fees payable by DEI Dongguan to us pursuant to the Dongguan Transactions are
settled by cash on a quarterly basis whereas the fees payable by us to Delta Video
pursuant to the Shanghai Transactions are settled by cash on a monthly basis.
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REASONS FOR, AND BENEFITS, OF ENTERING INTO THE DONGGUAN
TRANSACTIONS AND THE SHANGHAI TRANSACTIONS

The Company and DEI Dongguan entered into the Dongguan Transactions because
the Company considers that there is a higher utilization to lease the premises than to
leave it vacant and it is able to generate additional income from such arrangement.
As disclosed in the Prospectus, DEI Dongguan does not require the premises after the
end of 2007 and the Company will terminate the agreement relating to the Dongguan
Transactions upon its expiry on 31 December 2007.
The Company and Delta Video entered into the Shanghai Transactions because the
Company does not have a direct presence in Shanghai and does not own a research
and development facility in Shanghai. The use of DEI’s research and development
facility in Shanghai allows the Company to have access to additional research and
development staff based in the PRC. Accordingly, the Company has entered into a
three-year agreement with Delta Video in respect of the Shanghai Transactions at the
time of listing. With the establishment of the Shanghai Subsidiary by the end of
December 2007, the Company expects that the arrangement of using DEI’s research
and development staff and their equipment will be terminated and the equipment and
relevant staff will be transferred to the Shanghai Subsidiary. The Company also
intends to lease another premises from a separate entity after the establishment of the
Shanghai Subsidiary. In this regard, subject to completion of the relevant registration
procedures in relation to the establishment of the Shanghai Subsidiary, the Company
intends to terminate the agreement in respect of the Shanghai Transactions before the
end of December 2007.
Further announcement will be made by the Company upon the termination of the two
above mentioned agreements.
IMPLICATIONS UNDER THE LISTING RULES

As mentioned above, the Dongguan Transactions and the Shanghai Transactions
constitute continuing connected transactions of the Company under Chapter 14A of
the Listing Rules. DEI owns the entire share capital of DNHL, which in turn owns
59.51% of the Company’s share capital as at date of this announcement. DNHL is the
substantial shareholder and connected person of the Company and DEI, as the
holding company of DNHL, is its associate and therefore also a connected person of
the company. Subsidiaries of DEI (other than the DNI Group), including DEI
Dongguan and Delta Video, are also connected persons of the Company.
As the original annual cap for the Dongguan Transactions for 2007 will be exceeded
and the original annual cap for the Shanghai Transactions for 2007 is exceeded, the
Company proposes to revise such original annual caps to the revised annual caps set
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out above. As each of the relevant percentage ratios of each of the Dongguan
Transactions and the Shanghai Transactions is on an annual basis less than 2.5%, both
the Dongguan Transactions and the Shanghai Transactions are still subject to
reporting and announcement requirements and exempt from independent
shareholders’ approval requirements under Rule 14A.34 of the Listing Rules.
Pursuant to Rule 14A.36, the Company is also required to re-comply with the
applicable requirements under Rules 14A.35(3) and (4) of the Listing Rules.
INFORMATION ABOUT THE COMPANY AND DEI GROUP

The Company is principally engaged in design and manufacture of a wide range of
networking products, including Ethernet switches, broadband access products,
wireless adaptors and routers.
DEI is principally engaged in design and manufacture of a wide range of power
management products, visual displays products, component and automotive products,
including switching power supplies, DC/DC converters, AC/DC adapters, digital
projectors, telecom and networking components. Its shares are listed on the Taiwan
Stock Exchange.
DEFINITIONS

In this announcement the following words have the following meanings unless the
context requires otherwise:
“Company” Delta Networks, Inc. ( ), an
exempted company incorporated in the Cayman Islands
with limited liability
“DEI” Delta Electronics, Inc. ( ), a
company incorporated in Taiwan whose shares are listed
on the Taiwan Stock Exchange
“DEI Group” DEI and its subsidiaries (other than the DNI Group)
“DEI Dongguan” Delta Electronics Industrial (Dongguan) Co., Ltd., a
company incorporated in the PRC and a subsidiary of
DEI
“Delta Video” Delta Video Display System (Wujiang) Ltd., a company
incorporated in the PRC and a subsidiary of DEI
“DNI Group” the Company and its subsidiaries
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“DNHL” Delta Networks Holding Limited, a company
incorporated in the Cayman Islands and a subsidiary of
DEI
“Dongguan
Transactions”
the transactions entered into between the Company and
DEI Dongguan for DEI Dongguan’s use of the
Company’s premises and sharing of services at the
Company’s Dongguan manufacturing facility
“Listing Rules” the Rules Governing the Listing of Securities on The
Stock Exchange of Hong Kong Limited
“PRC” the People’s Republic of China. Geographical reference
in this announcement to the PRC excludes Hong Kong,
the Macau Special Administrative Region of the PRC
and Taiwan
“Shanghai Subsidiary” the subsidiary to be established by the Company in
Shanghai, the PRC before the end of 2007
“Prospectus” the prospectus of the Company dated 22 June 2007
“RMB” Renminbi, the lawful currency of the PRC
“Shanghai
Transactions”
the transactions entered into between the Company and
Delta Video in relation to the use by the Company of the
equipment and staff at the research center operated by
DEI Group and the lease from DEI Group the existing
premises for such research and development work
“Stock Exchange” The Stock Exchange of Hong Kong Limited
By order of the Board
DELTA NETWORKS, INC.

Cheng An, Victor
Executive Director
Taipei, Taiwan
21 November 2007
As at the date of this announcement, the executive directors of the Company are Mr. Liang Ker Uon,
Sam and Mr. Cheng An, Victor; the non-executive directors are Mr. Cheng Chung Hua, Bruce and
Mr. Hai Ing-Jiunn, Yancey; the independent non-executive directors are Mr. Zue Wai To, Victor,
Mr. Liu Chung Laung and Mr. Shen Bing.

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