INFINEON TECHNOLOGIES AG

QUARTERLY REPORT

FOR THE THREE MONTHS ENDED

DECEMBER 31, 2006

INDEX

Overview Of Financial Results

Fiscal First Quarter 2007

      For the fiscal first quarter 2007, Infineon Technologies AG’s revenues were Euro 2.13 billion, decreasing 7 percent sequentially but increasing 27 percent year-on-year. Revenues of Infineon excluding Qimonda were Euro 958 million, decreasing 9 percent from Euro 1.06 billion in the prior quarter and 4 percent from Euro 996 million in the same quarter last year. As expected, revenues in both the Communication Solutions and the Automotive, Industrial & Multimarket segments declined.

      Infineon group’s EBIT increased to Euro 216 million in the fiscal first quarter 2007, up from Euro 30 million in the prior quarter and negative Euro 122 million in the same quarter last year. Infineon excluding Qimonda incurred an EBIT loss of Euro 9 million in the fiscal first quarter 2007. Net charges in the fiscal first quarter 2007 were insignificant. EBIT loss for Infineon excluding Qimonda was Euro 174 million in the prior quarter, including charges of Euro 164 million, mainly resulting from the IPO of Qimonda and the insolvency of BenQ Mobile’s German subsidiary. Before these charges, the fourth quarter 2006 EBIT loss excluding Qimonda would have been Euro 11 million.

      Infineon group’s net income was Euro 120 million in the fiscal first quarter 2007, compared to net loss of Euro 36 million in the previous quarter and Euro 183 million in the same quarter last year.

      Basic and diluted earnings per share in the fiscal first quarter 2007 increased to Euro 0.16 and Euro 0.15, respectively, from basic and diluted loss per share of Euro 0.05 in the previous quarter and Euro 0.25 in the same quarter last year.

Segments’ Fiscal First Quarter 2007 Performance and Outlook

Revenues

      Segment revenue developments during the fiscal first quarter 2007 as compared to the previous quarter and the fiscal first quarter 2006 were as follows:

      In the fiscal first quarter 2007, the Automotive, Industrial & Multimarket segment performed slightly better than originally anticipated. It reported revenues of Euro 710 million, a 4 percent decrease compared to the prior quarter and a 9 percent increase compared to the same quarter last year. As anticipated, seasonal effects and weak U.S. car production led to a decline in revenues in the automotive business. The industrial & multimarket and security & ASIC businesses in total remained flat as expected.

      Fiscal first quarter revenues in the Communication Solutions segment were Euro 236 million, a 21 percent decrease from the prior quarter and a 29 percent decrease from the same quarter last year. The decrease in revenues during the first quarter was in line with expectations, reflecting the anticipated large decline of revenues from BenQ Mobile following the insolvency of its German subsidiary. In addition, the wireless business saw the typical start of the seasonally weaker period. Revenues in the broadband access business remained broadly flat relative to the prior quarter.

      Qimonda achieved revenues of Euro 1.17 billion in the fiscal first quarter 2007, decreasing 5 percent from the prior quarter but increasing 73 percent from the same quarter last year.

      In Corporate and Eliminations, EBIT loss in the fiscal first quarter 2007 was Euro 4 million. Net charges in the fiscal first quarter 2007 were insignificant. EBIT loss in the prior quarter was Euro 121 million, and included charges of Euro 86 million, mainly in connection with the IPO of Qimonda, restructuring measures in some of the company’s production facilities, and impairments of long-lived assets. EBIT loss in the same quarter last year was Euro 31 million.

Expenses

      Expenditures for Research and Development in the fiscal first quarter totaled Euro 292 million, decreasing sequentially from Euro 303 million, primarily due to a decrease in research and development expenses in the Communication Solutions and Qimonda segments. As a percentage of revenues, research and development expenses increased sequentially to 14 percent from 13 percent.

      Expenses for SG&A (Selling, General & Administrative) in the fiscal first quarter decreased to Euro 172 million or 8 percent of revenues, in comparison to Euro 219 million or 10 percent of revenues in the prior quarter. The decrease was primarily related to charges incurred in the previous quarter in connection with the insolvency of BenQ’s German subsidiary.

Liquidity

      Free cash flow, representing cash flows from operating and investing activities excluding purchases or sales of marketable securities, decreased significantly in the fiscal first quarter 2007 to Euro 16 million from Euro 194 million in the previous quarter. The primary reasons for the decrease were lower cash flows provided by operating activities, which decreased from Euro 427 million in the previous quarter to Euro 318 million in the fiscal first quarter 2007, and cash flows used in investing activities excluding purchases or sales of marketable securities, which increased from Euro 233 million in the previous quarter to Euro 302 million in the fiscal first quarter. Gross cash position as of December 31, 2006, representing cash and cash equivalents and marketable securities, remained substantially unchanged at Euro 2.7 billion. In addition, net cash position, defined as gross cash position

Outlook for the Fiscal Second Quarter 2007

      In the fiscal second quarter 2007, Infineon expects revenues and EBIT for its businesses excluding Qimonda, and prior to inclusion of charges, to remain at least flat compared to the fiscal first quarter.

      Infineon expects a return to growth in its Automotive, Industrial & Multimarket segment in the fiscal second quarter 2007. The company foresees a slight increase in revenues quarter-on-quarter and an improved EBIT margin. With improving seasonality, the company anticipates that revenues in its automotive business will increase compared to the fiscal first quarter, despite continued weakness in the U.S. car market. Results in its industrial & multimarket and security & ASIC businesses are expected to remain broadly on the same level as in the previous quarter.

      In the fiscal second quarter 2007, Infineon expects revenues and EBIT of the Communication Solutions segment to remain broadly unchanged compared to the previous quarter. Continued customer ramp-ups in the company’s mobile phone platform business are likely to offset the typical seasonal decline in the wireless business. In the broadband access business, revenues are anticipated to remain stable. Implemented measures for cost reductions in the mobile platform business are likely to contribute to EBIT improvements in the fiscal third quarter 2007.

      Qimonda expects its bit production to grow between 8 to 12 percent in the fiscal second quarter 2007. Qimonda expects this bit growth to be based on improved productivity as a result of the continued conversion of capacities to 90-nanometer-technology and smaller technologies. Qimonda also expects to maintain its share of bit-shipments for use in non-PC applications significantly above 50 percent in the second fiscal quarter and for its full 2007 fiscal year.

      In the fiscal second quarter 2007, Infineon expects revenues and EBIT in Other Operating Segments and Corporate and Eliminations before charges to remain broadly unchanged relative to the previous quarter. The company currently expects that charges in connection with the restructuring of its baseband operations following the insolvency of BenQ Mobile’s German subsidiary will be recorded in the second quarter, rather than the first quarter as originally expected. The company is still implementing measures aimed at lowering the overall level of charges while maintaining the targeted savings, and currently expects that these charges will be significantly lower than the Euro 30 million originally anticipated. The Corporate and Eliminations segment will continue to reflect intra-group elimination of sales between Infineon and Qimonda.

Infineon Technologies AG and Subsidiaries

Condensed Consolidated Statements of Operations (Unaudited)

For the three months ended December 31, 2005 and 2006

(in millions, except for per share data)

See accompanying notes to the unaudited condensed consolidated financial statements.

Condensed Consolidated Balance Sheets (Unaudited)

September 30, 2006 and December 31, 2006

See accompanying notes to the unaudited condensed consolidated financial statements.

Infineon Technologies AG and Subsidiaries

Consolidated Statements of Shareholders’ Equity

for the three months ended December 31, 2005 and 2006

(in millions of euro, except for share data)

See accompanying notes to the unaudited condensed consolidated financial statements.

Condensed Consolidated Statements of Cash Flows (Unaudited)

For the three months ended December 31, 2005 and 2006

See accompanying notes to the unaudited condensed consolidated financial statements.

Notes to the Unaudited Condensed Consolidated Financial Statements

(euro in millions, except where otherwise stated)

1.     Basis of Presentation

      The accompanying condensed consolidated financial statements of Infineon Technologies AG and its subsidiaries (“Infineon” or the “Company”) as of and for the three months ended December 31, 2005 and 2006, have been prepared in accordance with accounting principles generally accepted in the United States of America (U.S. GAAP). Accordingly, certain information and footnote disclosures normally included in annual financial statements have been condensed or omitted. In addition, although the condensed consolidated balance sheet as of September 30, 2006 was derived from audited financial statements, it does not include all disclosures required by U.S. GAAP. In the opinion of management, the accompanying condensed consolidated financial statements contain all adjustments necessary to present fairly the financial position, results of operations and cash flows of the interim periods presented. All such adjustments are of a normal recurring nature. The results of operations for any interim period are not necessarily indicative of results for the full fiscal year. The accompanying condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements for the year ended September 30, 2006. The accounting policies applied in preparing the accompanying condensed consolidated financial statements are consistent with those for the year ended September 30, 2006 (see note 2).

      The preparation of the accompanying condensed consolidated financial statements requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent amounts and liabilities at the date of the financial statements and reported amounts of revenues and expenses during the reporting periods. Actual results could differ materially from those estimates.

      All amounts herein are shown in millions of euro (“€”) other than percentages, shares, per share amounts or where otherwise stated. The accompanying condensed consolidated balance sheet as of December 31, 2006, and the condensed consolidated statements of operations and cash flows for the three months then ended are also presented in U.S. dollars (“$”), solely for the convenience of the reader, at the rate of one euro = $1.3197, the U.S. Federal Reserve noon buying rate on December 29, 2006.

2.     Recent Accounting Pronouncements

      In May 2005, the Financial Accounting Standards Board (“FASB”) issued Statement of Accounting Standards (“SFAS”) No. 154, “Accounting Changes and Error Corrections”. SFAS No. 154 replaces Accounting Principles Board (“APB”) Opinion No. 20, “Accounting Changes”, and SFAS No. 3, “Reporting Accounting Changes in Interim Financial Statements”, and changes the requirements for the accounting and reporting of a change in accounting principle. The Company adopted SFAS No. 154 on October 1, 2006. The adoption of SFAS No. 154 did not have a significant impact on the Company’s consolidated financial position or results of operations.

      In July 2006, the FASB issued Interpretation No. 48, “Accounting for Income Tax Uncertainties”, which defines the threshold for recognizing the benefits of tax return positions in the financial statements as “more-likely-than-not” to be sustained by the taxing authority. The recently issued literature also provides guidance on the derecognition, measurement and classification of income tax uncertainties, along with any related interest and penalties. Interpretation No. 48 also includes guidance concerning accounting for income tax uncertainties in interim periods and increases the level of disclosures associated with any recorded income tax uncertainties. Interpretation No. 48 is effective for fiscal years beginning after December 15, 2006. The differences between the amounts recognized in the statements of financial position prior to the adoption of Interpretation No. 48 and the amounts reported after adoption will be accounted for as a cumulative-effect adjustment recorded to the beginning balance of retained earnings. The Company is in the process of determining the impact, if any, that the adoption of Interpretation No. 48 will have on its consolidated financial position and results of operations.

      In September 2006, the FASB released SFAS No. 157, “Fair Value Measurements”, which provides guidance for using fair value to measure assets and liabilities. SFAS No. 157 defines fair value, establishes a framework for measuring fair value in generally accepted accounting principles, and expands disclosures about fair value measurements. The standard also responds to investors’ requests

Notes to the Unaudited Condensed Consolidated Financial Statements

(euro in millions, except where otherwise stated)

for more information about the extent to which companies measure assets and liabilities at fair value, the information used to measure fair value, and the effect that fair value measurements have on earnings. SFAS No. 157 will apply whenever another standard requires (or permits) assets or liabilities to be measured at fair value. The standard does not expand the use of fair value to any new circumstances. SFAS No. 157 is effective for financial statements issued for fiscal years beginning after November 15, 2007, and interim periods within those fiscal years. SFAS No. 157 is effective for the Company for fiscal years beginning after October 1, 2008, and interim periods within those fiscal years. The Company is in the process of evaluating the impact that the adoption of SFAS No. 157 will have on its consolidated financial position and results of operations.

      In September 2006, the FASB issued SFAS No. 158 “Employer’s Accounting for Defined Benefit Pension and Other Postretirement Plans — an amendment of FASB Statements No. 87, 88, 106, and 132(R)”, which requires an employer to recognize the overfunded or underfunded status of a defined benefit postretirement plan (other than a multiemployer plan) as an asset or liability in its statement of financial position and to recognize changes in that funded status in the year in which the changes occur through comprehensive income of a business entity or changes in unrestricted net assets of a not-for-profit organization (“Recognition Provision”). SFAS No. 158 also requires an employer to measure the funded status of a plan as of the date of its year-end statement of financial position, with limited exceptions (“Measurement Date Provision”). The Company currently measures the funded status of its plans annually on June 30. The Recognition Provision of SFAS No. 158 is effective for the Company as of the end of the fiscal year ending September 30, 2007, and the Measurement Date Provision is effective for the Company as of the end of the fiscal year ending September 30, 2009. The Company does not expect the change in the annual measurement date to September 30 to have a significant impact on its consolidated financial position and results of operations. As of September 30, 2006 the application of the Recognition Provision of SFAS No. 158 would have resulted in an increase in other long-term liabilities of €66, a recognized pension asset of €2, and an increase in accumulated other comprehensive loss of €60.

      In September 2006, the Securities and Exchange Commission (“SEC”) issued Staff Accounting Bulletin (“SAB”) No. 108, “Considering the Effects of Prior Year Misstatements when Quantifying Misstatements in Current Year Financial Statements”. SAB No. 108 provides interpretive guidance on how the effects of prior-year uncorrected misstatements should be considered when quantifying misstatements in the current year financial statements. SAB No. 108 requires registrants to quantify misstatements using both an income statement (“rollover”) and balance sheet (“iron curtain”) approach and evaluate whether either approach results in a misstatement that, when all relevant quantitative and qualitative factors are considered, is material. If prior year errors that had been previously considered immaterial are now considered material based on either approach, no restatement is required so long as management properly applied its previous approach and all relevant facts and circumstances were considered. If prior years are not restated, the cumulative effect adjustment is recorded in opening accumulated earnings (deficit) as of the beginning of the year of adoption. SAB No. 108 is effective for fiscal years ending on or after November 15, 2006, with earlier adoption encouraged. The Company does not expect that the adoption of SAB No. 108 will have a significant impact on its consolidated financial position and results of operations.

3.     Restructuring

      During October 2006, following the insolvency of one of the Company’s largest mobile phone customers, BenQ Mobile GmbH & Co OHG, the Company announced restructuring plans to downsize its workforce. As a result of measures undertaken by the Company, the number of employees to be impacted by the restructuring is expected to be substantially lower than initially estimated. The exact amount of the restructuring charges can not be estimated at this time due to the early stage of the negotiations with works councils.

Notes to the Unaudited Condensed Consolidated Financial Statements

(euro in millions, except where otherwise stated)

      The development of the restructuring liability is as follows:

4.     Income Taxes

      Income (loss) before income taxes and minority interest is attributable to the following geographic locations:

      Income tax expense is as follows:

      In the three months ended December 31, 2005 and 2006, respectively, the tax expense of the Company is affected by lower foreign tax rates and valuation allowances in certain jurisdictions where the Company had incurred a cumulative loss over a three-year period. Additionally, in the three months ended December 31, 2006, the positive results of Qimonda in Germany lead to current tax expense as the tax loss carry forwards related to the Qimonda segment have been retained by Infineon Technologies AG in connection with the formation of Qimonda.

      At December 31, 2006, the Company had in Germany tax loss carry-forwards of €2,693 (relating to both trade and corporate tax, plus an additional loss carry-forward applicable only to trade tax of €1,447); in other jurisdictions the Company had tax loss carry-forwards of €201 and tax effected credit carry-forwards of €125. Such tax loss carry-forwards and tax effected credit carry-forwards are generally limited to use by the particular entity that generated the loss or credit and do not expire under current law. The benefit for tax credits is accounted for on the flow-through method when the individual legal entity is entitled to the claim.

      Pursuant to SFAS No. 109 “Accounting for Income Taxes” the Company has assessed its deferred tax asset and the need for a valuation allowance. Such an assessment considers whether it is more likely than not that some portion or all of the deferred tax assets may not be realized. The assessment requires considerable judgment on the part of management, with respect to, among other factors,

Notes to the Unaudited Condensed Consolidated Financial Statements

(euro in millions, except where otherwise stated)

benefits that could be realized from available tax strategies and future taxable income, as well as other positive and negative factors. The ultimate realization of deferred tax assets is dependent upon the Company’s ability to generate the appropriate character of future taxable income sufficient to utilize loss carry-forwards or tax credits before their expiration. Since the Company had incurred a cumulative loss in certain tax jurisdictions over a three-year period as of December 31, 2006, the impact of forecasted future taxable income is excluded from such an assessment, pursuant to the provisions of SFAS No. 109. For these tax jurisdictions, the assessment was therefore only based on the benefits that could be realized from available tax strategies and the reversal of temporary differences in future periods.

5.     Earnings (Loss) Per Share

      Basic earnings (loss) per share (“EPS”) is calculated by dividing net income (loss) by the weighted average number of ordinary shares outstanding during the period. Diluted EPS is calculated by dividing net income by the sum of the weighted average number of ordinary shares outstanding plus all additional ordinary shares that would have been outstanding if potentially dilutive instruments or ordinary share equivalents had been issued.

      The computation of basic and diluted EPS is as follows (shares in million):

      The weighted average of potentially dilutive instruments that were excluded from the diluted earnings (loss) per share computations, because the exercise price was greater than the average market price of the ordinary shares during the period or were otherwise not dilutive, include 41.0 million and 43.3 million shares underlying employee stock options for the three months ended December 31, 2005 and 2006, respectively. Additionally, 86.5 million and 18.1 million ordinary shares issuable upon the conversion of the subordinated convertible notes for the three months ended December 31, 2005 and 2006, respectively, were not included in the computation of diluted earnings (loss) per share as their impact would have been antidilutive.

6.     Trade Accounts Receivable, net

      Trade accounts receivable, net consist of the following:

Notes to the Unaudited Condensed Consolidated Financial Statements

(euro in millions, except where otherwise stated)

7.     Inventories

      Inventories consist of the following:

8.     Long-term Investments

      The agreement governing the joint venture with Nanya Technology Corporation (“Nanya”) allows Infineon to transfer its shares in Inotera to Qimonda. However, under Taiwanese law, Infineon’s shares in Inotera are subject to a compulsory restriction on transfer (lock-up) as a result of Inotera’s initial public offering (“IPO”). Infineon may only transfer these shares to Qimonda gradually over the four years following Inotera’s IPO. The Company has sought an exemption from this restriction that would permit the immediate transfer of all of these shares to Qimonda. In connection with the Formation, Infineon and Qimonda entered into a trust agreement under which Infineon holds shares in Inotera in trust for Qimonda until the shares can legally be transferred. This trust agreement provides for Infineon to transfer the shares to Qimonda as and when the transfer restrictions expire or Infineon receives an exemption from the statutory lock-up. During October 2006, the Taiwanese authorities granted an exemption to the Company to transfer the shares, which is expected to be finalized during the three months ending March 31, 2007.

      Hwa-Keng Investment Corp., a Taiwanese company was formed for the purpose of facilitating the distribution of Inotera shares to Inotera’s employees. As a result of the Inotera IPO, Hwa-Keng’s business purpose has been fulfilled and therefore Hwa-Keng Investment Corp. has been dissolved. The dissolution did not have a significant financial impact on the Company.

      In December 2005, the Company further amended its agreements with International Business Machines Corporation (“IBM”) in respect of ALTIS Semiconductor S.N.C. (“ALTIS”), and extended its product purchase agreement with ALTIS through 2009. Pursuant to the December 2005 amendment, the Company granted to IBM an option to require the Company to acquire four-fifths of IBM’s 50% interest in the joint venture (or a total of 40% of the outstanding shares of ALTIS) at any time after April 1, 2006 and prior to January 1, 2009. In connection with the exercise of such option, IBM would be required to make a payment to the Company to settle the respective interests of the parties. In addition, the Company granted to IBM a second option to require the Company to acquire up to four-fifths of IBM’s 50% interest in the joint venture (or a total of 40% of the outstanding shares of ALTIS) in increments of 10% after April 1, 2006 and prior to January 1, 2009. The amendment also permits IBM to sell its interest in ALTIS to a third party meeting certain specified criteria.

      Under the December 2005 amendment, the Company and IBM also agreed a number of administrative matters regarding the governance and management of ALTIS, as well as related cost-allocation and accounting matters. The Company and IBM continue to evaluate the future business model of ALTIS, and have agreed that they will reach a decision on this matter no later than January 1, 2009. As previously agreed, the Company will increase the percentage of the output of ALTIS that it purchases from 87.5% in 2006 to 100% in 2007 and beyond.

      The Company evaluated the amendment in accordance with FASB Interpretation No. 46 (revised December 2003), “Consolidation of Variable Interest Entities — an interpretation of ARB No. 51” and concluded that it held an interest in a variable interest entity in which the Company is determined to be the primary beneficiary. Accordingly, the Company began to fully consolidate ALTIS following the December 19, 2005 amendment, whereby IBM’s 50% ownership interest has been reflected as a minority interest.

Notes to the Unaudited Condensed Consolidated Financial Statements

(euro in millions, except where otherwise stated)

      The following table summarizes the elimination of the investment in ALTIS as previously accounted for under the equity method of accounting, and the Company’s initial consolidation of ALTIS during first quarter of the 2006 fiscal year:

      On November 13, 2006 Qimonda sold its investment in Ramtron International Corp., Colorado, USA (“Ramtron”) in a private placement. As a result of the sale, Qimonda recorded a gain of €2 during the three months ended December 31, 2006.

9.     Trade Accounts Payable

      Trade accounts payable consist of the following:

Notes to the Unaudited Condensed Consolidated Financial Statements

(euro in millions, except where otherwise stated)

10.     Debt

      Debt consists of the following:

      The Company has established independent financing arrangements with several financial institutions, in the form of both short- and long-term credit facilities, which are available for anticipated funding purposes.

11.     Stock-based Compensation

      Effective October 1, 2005, the Company adopted SFAS No. 123 (revised 2004) “Share-Based Payments” under the modified prospective application method. Under this application, the Company records stock-based compensation expense for all awards granted on or after the date of adoption and for the portion of previously granted awards that remained unvested at the date of adoption. Stock-based compensation cost is measured at the grant date, based on the fair value of the award, and is recognized as expense over the period during which the employee is required to provide service in exchange for the award.

Notes to the Unaudited Condensed Consolidated Financial Statements

(euro in millions, except where otherwise stated)

     Infineon Stock Option Plans

      A summary of the status of the Infineon stock option plans as of December 31, 2006, and changes during the three months then ended is presented below (options in millions, exercise prices in euro, intrinsic value in millions of euro):

      Options with an aggregated fair value of €47 and €31 vested during the three months ended December 31, 2005 and 2006, respectively.

      Changes in Infineon’s unvested options for the three months ended December 31, 2006 are summarized as follows (options in millions, fair value in euro, intrinsic value in millions of euro):

      The fair value of each option grant was estimated on the grant date using the Black-Scholes option-pricing model. Prior to the adoption of SFAS No. 123 (revised 2004), Infineon relied on historical volatility measures when estimating the fair value of stock options granted to employees. Following the implementation of SFAS No. 123 (revised 2004), Infineon uses a combination of implied volatilities from traded options on Infineon’s ordinary shares and historical volatility when estimating the fair value of stock options granted to employees, as it believes that this methodology better reflects the expected future volatility of its stock. The expected life of options granted is estimated based on historical experience. Beginning on the date of adoption of SFAS No. 123 (revised 2004), forfeitures are estimated based on historical experience; prior to the date of adoption, forfeitures were recorded as they occurred. The risk-free rate is based on treasury note yields at the time of grant for the estimated life of the option. Infineon has not made any dividend payments during three months ended December 31, 2006 nor does it have plans to pay dividends in the foreseeable future.

Notes to the Unaudited Condensed Consolidated Financial Statements

(euro in millions, except where otherwise stated)

      The following weighted-average assumptions were used in the fair value calculation:

      As of December 31, 2006, there was a total of €20 in unrecognized compensation expense related to unvested stock options of Infineon which is expected to be recognized over a weighted-average period of 1.66 years.

     Qimonda’s Stock Option Plan

      On November 24, 2006, Qimonda granted 1.9 million stock options to its employees. The option rights may be exercised within six years after their grant date, but not before the expiration of a vesting period that will be at least three years. The exercise of each option is subject to the condition that the performance of the Qimonda’s ADSs on the New York Stock Exchange exceeds that of the Philadelphia Semiconductor Index on at least three consecutive days on at least one occasion during the life of the option.

      A summary of the status of the Qimonda stock option plan as of December 31, 2006, and changes during the three months then ended is presented below (options in millions, exercise prices in US-$, fair value in euro):

      The fair value of each option grant is estimated on the grant date using a Monte Carlo simulation-based option-pricing model. This model accounts for vesting conditions relating to the Philadelphia Semiconductor Index and its impact on fair value. Following the implementation of SFAS No. 123 (revised 2004), Qimonda uses a combination of implied and historical volatilities from traded options on Qimonda’s peer group when estimating the fair value of stock options granted to employees, as it believes that this methodology better reflects the expected future volatility of its stock. The peer group is a group of publicly listed companies deemed to reflect fundamentals of the Qimonda’s stock. Forfeitures are estimated based on historical experience. The expected life and expected vesting period of options granted are estimated based on the simulation. The risk-free rate is based on treasury note yields at the time of grant for the estimated life of the option.

Notes to the Unaudited Condensed Consolidated Financial Statements

(euro in millions, except where otherwise stated)

      The following weighted average assumptions were used in the fair value calculation:

      As of December 31, 2006, there was a total of €5 in unrecognized compensation expense related to unvested stock options of Qimonda which is expected to be recognized over a remaining total period of 2.90 years.

     Stock-Based Compensation Expense

      Stock-based compensation expense was allocated as follows:

      The amount of stock-based compensation expense which was capitalized and remained in inventories for the three months ended December 31, 2005 and 2006 was immaterial. Stock-based compensation expense does not reflect any income tax benefits, since stock options are granted in tax jurisdictions where the expense is not deductible for tax purposes. In addition, stock-based compensation expense did not have a significant cash flow effect during the three months ended December 31, 2006, since no material exercises of stock options occurred during the period.

12.     Other Comprehensive Loss

      The changes in the components of other comprehensive loss are as follows:

Notes to the Unaudited Condensed Consolidated Financial Statements

(euro in millions, except where otherwise stated)

13.     Related Parties

      The Company has transactions in the normal course of business with Associated and Related Companies (“Related Parties”). The Company purchases certain of its raw materials, especially chipsets, from, and sells certain of its products to, Related Parties. Purchases and sales to Related Parties are generally based on market prices or manufacturing cost plus a mark-up.

      Transactions between the Company and ALTIS subsequent to the consolidation of ALTIS during the first quarter of the 2006 fiscal year are no longer reflected as Related Party transactions (see note 8).

      On April 3, 2006, Siemens disposed of its remaining shareholding in the Company. Transactions between the Company and Siemens subsequent to this date are no longer reflected as Related Party transactions.

      Related Party receivables consist of the following:

      Related Party payables consist of the following:

      Transactions with Related Parties are as follows: