According to the Company’s Form 10-Q for the fiscal quarter ended June 30, 2005,
in April 2005, the Company and its insurers funded the settlement fund following the court’s preliminary approval of the settlement. Of the total amount, the Company’s insurers paid approximately $31 million. The settlement received final court approval in June 2005, and the litigation has been dismissed with prejudice.

Earlier, in April 2001, a series of similar federal complaints were filed against the Company and certain of its executive officers and directors. The complaints were consolidated into a single proceeding in the U.S. District Court for the Southern District of California. In re Applied Micro Circuits Corp. Securities Litigation, lead case number 01-CV-0649-K(AB). The consolidated federal complaint alleged violations of the Securities Exchange Act of 1934 and was brought as a shareholder class action. In January 2005, the parties entered into a Memorandum of Understanding pursuant to which the Company agreed to pay $60 million to settle the litigation.

The original complaint charges Applied Micro and certain of its officers and directors with misrepresenting the company's operations and prospects. Taking advantage of the inflation in Applied Micro's stock caused by their own statements, the Applied Mico insiders sold almost $100 million worth of their own Applied Micro stock at artificially inflated prices of as much as $87 per share. On 02/05/2001, after the close of the market, the truth about Applied Micro's operations and sudden filings by its officers to sell their personal holdings came under fire from analysts. Defendants were forced to disclose that in fact Applied Micro was experiencing large order cancellations with its OC-12, OC-48 and OC-192 products. This news sent Applied Micro's shares plummeting from $70 per share to as low as $53 per share on 02/06/2001.