LEGAL PROCEEDINGS

Nazomi. In May 2002, Nazomi Communications, Inc. (``Nazomi``) filed suit

against ARM alleging willful infringement of Nazomi`s US Patent No. 6,332,215.

ARM answered Nazomi`s complaint in July 2002 denying infringement. ARM moved

for summary judgment and a ruling that the technology does not infringe

Nazomi`s patent. The United States District Court for the Northern District of

California granted ARM`s motion, and Nazomi appealed the District Court`s

ruling. On September 7, 2004, the Court of Appeals for the Federal Circuit

heard the appeal and issued its decision on April 11, 2005. Because, in the

opinion of the Court of Appeals for the Federal Circuit, the District Court did

not construe the disputed claim term in sufficient detail for appellate review,

the Court of Appeals for the Federal Circuit remanded the dispute back to the

District Court for further analysis. A supplementary ``Markman`` hearing to

assist in a more detailed claim construction analysis was held on October 11,

2005 and we are presently awaiting the ruling of the District Court. Based on

legal advice received to date, ARM has no cause to believe that the effect of

the original ruling by the District Court will not be upheld.

ARM`s license agreements with its licensees often include provisions

which, subject to the satisfaction of certain conditions, require ARM to

indemnify its licensees if the licensed technology infringes the intellectual

property rights of a third party. The following proceedings, in which products

incorporating ARM`s processor designs have been accused of patent infringement,

are subject to such indemnification provisions.

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Motorola/Freescale. STMicroelectronics, Inc. had accused Motorola, Inc.

(``Motorola``) (STMicroelectronics, Inc v. Motorola, Inc., United States District

Court, Eastern District of Texas, Sherman Division, Civil Action No. 4:03CV276)

of infringing several of its patents. Motorola counterclaimed with allegations

that STMicroelectronics, Inc. and STMicroelectronics N.V. infringe several

Motorola patents, including Motorola`s US Patent No. 5,084,814 (the ``814

Patent``). Motorola alleged that products based on ARM`s processor designs

infringe the 814 Patent. ARM has been closely involved in the defense of this

litigation to the extent that it concerns the 814 Patent and is confident that

the subject technology does not infringe the 814 patent. ARM has been informed

that the parties to the litigation have agreed upon the final terms of

settlement of this litigation. The terms of the settlement are not known to

ARM. ARM believes that it has now fully satisfied its indemnification

obligations with respect to this litigation. Motorola also accused Analog

Devices, Inc. (Motorola, Inc. v. Analog Devices, Inc., United States District

Court, Eastern District of Texas, Beaumont Division, Civil Action No.

1:03-CV-0131) of infringing several of its patents including Motorola`s 814

Patent. Motorola alleged that products based on ARM`s processor designs

infringe the 814 Patent. ARM has been informed by Motorola that this litigation

between Analog Devices, Inc. and Motorola has been settled. The terms of the

settlement have not been disclosed to ARM.

On November 4, 2004, ARM entered into an agreement with Freescale

Semiconductor, Inc. (``Freescale``) which, subject to certain exceptions and

conditions, will permit ARM to license a broad range of ARM developed

technology on the understanding that Freescale will not assert any of the

patents in its substantial patent portfolio (which includes the 814 Patent)

against such technology. Freescale was formed by a spin-off from Motorola and

comprised business activities relating to microprocessors previouly conducted

by Motorola. In consideration for the substantial benefit to ARM and its

licensees of this agreement, ARM will pay Freescale $13.3 million in four

equal, semi-annual installments over the next two years.

Technology Properties Limited, Inc. On October 24, 2005 Technology

Properties Limited, Inc. (``TPL``) filed suit against Fujitsu Limited et al.

(including ARM`s licensees Fujitsu, Matsushita, NEC and Toshiba) (Technology

Properties Limited, Inc., v. Fujitsu Limited et al, No.2:05-cv-00494) in the

Eastern District of Texas alleging willful infringement of TPL`s US patents

6,598,148, 5,809,336 and 5,784,584. It was reported on March 2, 2006, that

Fujitsu had entered into a settlement agreement with TPL but the proceedings

continue with respect to the other defendants. Following a detailed analysis of

the relevant patent claims ARM does not believe that any of the claims are

infringed by any ARM technology.