Cypress Semiconductor (CY)

Publicly-Traded Company:

During fiscal 2005, the Company invested $4.0 million in Simtek Corporation (“Simtek”), a publicly-traded semiconductor company specializing in non-volatile static random access memory products and technology, in exchange for 6.7 million shares of Simtek’s common stock. In addition, the Company received warrants to purchase 5.1 million shares of Simtek’s common stock. The warrants are exercisable at $0.78 and have a ten-year term. Of the $4.0 million investment in Simtek, the Company allocated $2.4 million to the common stock investment and $1.6 million to the warrants based on the relative fair values of these instruments at the date of investment.

Under SFAS No. 115, “Accounting for Certain Investments in Debt and Equity Securities,” the common stock investment is classified as long-term available-for-sale securities and is being carried at fair value with the resulting unrealized gains or losses recorded in “Accumulated other comprehensive income (loss)” in the Consolidated Balance Sheets. If the carrying value of the investment exceeds its fair value and the decline in

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CYPRESS SEMICONDUCTOR CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

value is determined to be other-than-temporary, the Company writes down the value of the investment and establish a new cost basis. During fiscal 2005, the Company wrote down the value of the investment and recorded an impairment charge of $0.4 million. As of January 1, 2006, the fair value of the investment was $2.0 million.

As the warrants have a cashless exercise feature, they are classified as derivatives under SFAS No. 133, “Accounting for Derivative Instruments and Hedging Activities.” The warrants are being marked to market value at the end of each reporting period with the resulting gains or losses recognized in the Consolidated Statements of Operations. As of January 1, 2006, the fair value of the warrants was $1.3 million and the Company recorded a loss of $0.3 million associated with the changes in fair value of the warrants during fiscal 2005.