Tower Semiconductor Ltd. ("Tower" or the Company) is an Israeli company that manufactures integrated circuits using specialty process technologies.

As previously reported by the Company’s FORM 20-F for the Fiscal Year Ended December 31, 2003, in July 2003, the Company and several of its directors and shareholders were named as Defendants in a securities class action Complaint filed in the United States District Court for the Southern District of New York. The Plaintiffs have asserted claims arising under the Securities Exchange Act of 1934, alleging misstatements and omissions made by the Defendants in materials sent to our shareholders with respect to the approval of an amendment to the investment agreements with Tower's Fab 2 investors. The Plaintiffs seek damages in unspecified amounts, which could be substantial, and unspecified rescissory relief. In January 2004, the Defendants filed a motion to dismiss the Plaintiffs' Complaint on both substantive and procedural grounds; as of the date of this annual report, the presiding court did not render an immediate decision to this motion to dismiss the Plaintiffs' Complaint.

In a press release dated August 22, 2004, Tower (NASDAQ: TSEM - News; TASE: TSEM) announced that the class action filed in the United States District Court for the Southern District of New York on behalf of the shareholders of Tower, against Tower and certain of its directors and shareholders, asserting claims arising under Sections 14(a) and 20(a) of the Securities Exchange Act of 1934 and Rule 14a-9 promulgated thereunder has been dismissed in its entirety. The Court accepted the motion to dismiss filed on behalf of the Tower Defendants and noted that Tower's status as a foreign private issuer exempts it, its directors and controlling shareholders from liability under the proxy rules of Section 14(a) of the Securities Exchange Act.

According to a press release dated June 6, 2006, Tower announced that the United States Court of Appeals for the Second Circuit affirmed the August 2004 decision of the United States District Court for the Southern District of New York to dismiss the class action suit filed in July 2003 against the Company and certain directors and shareholders.