INTEL CORPORATION

2200 Mission College Blvd.

Santa Clara, CA 95054-1549

(408) 765-8080

March 28, 2006

Dear Stockholder:

      We will hold our 2006 Annual Stockholders’ Meeting at 8:30 a.m. Pacific Time on May 17, 2006 at the Santa Clara Convention Center in Santa Clara, California, and we look forward to your attendance either in person or by proxy. For your convenience, we are pleased to offer a live webcast of the annual meeting at www.intc.com.

      If you received your annual meeting materials by mail, the notice of annual meeting, proxy statement and proxy card from our Board of Directors are enclosed. If you received your annual meeting materials via e-mail, the e-mail contains voting instructions and links to the annual report and the proxy statement on the Internet, which are both available at www.intel.com/intel/annualreports/2005.

      We encourage you to conserve natural resources, as well as significantly reduce printing and mailing costs, by signing up for electronic delivery of our stockholder communications. For more information, see “Electronic Delivery of Our Stockholder Communications” in the proxy statement.

      At this year’s annual meeting, the agenda includes the annual election of directors; amendment of Intel’s Second Restated Certificate of Incorporation (“Certificate of Incorporation”) to repeal the fair price provision and to repeal the supermajority vote provisions; ratification of our independent registered public accounting firm; approval of the 2006 Equity Incentive Plan; and approval of the 2006 Stock Purchase Plan. The Board of Directors recommends that you vote FOR election of the director nominees and FOR each of the proposals on the agenda. Please refer to the proxy statement for detailed information on each of the proposals and the annual meeting.

      Your Intel stockholder vote is important. Each share of our stock that you own represents one vote. If you do not vote your shares, you will not have a say in the important issues to be voted on at the annual meeting. As discussed further in the proxy statement, the election of each director requires the majority of the votes cast with respect to the director; the proposals to repeal the fair price provision and to repeal the supermajority vote provisions require the vote of 66²/3% of the outstanding shares of common stock; and each other proposal included in this year’s proxy statement requires the majority of votes present or represented by proxy at the annual meeting. Many of our stockholders do not vote, so the stockholders who do vote influence the outcome of the election in greater proportion than their percentage ownership of Intel. In addition, banks and brokers that have not received voting instructions from their clients cannot vote on their clients’ behalf on the proposals approving the 2006 Equity Incentive Plan and approving the 2006 Stock Purchase Plan, which further reduces the number of votes cast. For these reasons, we strongly urge you to cast your vote.

      If you have any questions concerning the annual meeting or the proposals, please contact our Investor Relations department at (408) 765-1480. For questions regarding your stock ownership, you may contact our transfer agent, Computershare Investor Services, LLC, by e-mail through their web site at www.computershare.com/contactus or by phone at (800) 298-0146 (within the U.S. and Canada) or (312) 360-5123 (outside the U.S. and Canada). You can view your Intel stock holdings electronically and perform other transactions by enrolling in Computershare’s Investor Centre at www.computershare.com. For questions related to voting, you may contact D. F. King & Co., Inc., our proxy solicitors, at (800) 859-8509 (within the U.S. and Canada) or (212) 269-5550 (outside the U.S. and Canada).

Sincerely yours,

Craig R. Barrett

Chairman of the Board

INTEL CORPORATION

Notice of Annual Stockholders’ Meeting

May 17, 2006

8:30 a.m. Pacific Time

Dear Stockholder:

      You are cordially invited to attend our 2006 Annual Stockholders’ Meeting, which will be held at 8:30 a.m. Pacific Time on May 17, 2006 at the Santa Clara Convention Center, Santa Clara, California. Doors will open at 8:00 a.m. Driving directions and a map are on the back cover of the proxy statement that follows this notice. For your convenience, we are pleased to offer a live webcast of the annual meeting at www.intc.com. For further details, see “Attending the Annual Meeting” in the proxy statement.

      We are holding the annual meeting for the following purposes:

      The proxy statement fully describes these items. We have not received notice of other matters that may be properly presented at the annual meeting.

      Only stockholders of record at the close of business on March 20, 2006 will be entitled to vote at the annual meeting and any postponements or adjournments of the meeting. For 10 days prior to the annual meeting, a list of stockholders entitled to vote will be available for inspection at our principal executive offices, 2200 Mission College Blvd., Santa Clara, California 95054-1549. If you would like to view the stockholder list, please call our Investor Relations department at (408) 765-1480 to schedule an appointment.

      To ensure that your vote is recorded promptly, please vote as soon as possible, even if you plan to attend the annual meeting. Most stockholders have three options for submitting their votes prior to the annual meeting: (1) via the Internet, (2) by phone or (3) by mail. For further details, see “Submitting and Revoking Your Proxy” in the proxy statement. If you have Internet access, we encourage you to record your vote on the Internet. It is convenient, and it saves your company significant postage and processing costs.

TABLE OF CONTENTS

ELECTRONIC DELIVERY OF OUR STOCKHOLDER COMMUNICATIONS

If you received your annual meeting materials by mail, we strongly encourage you to conserve natural resources, as well as significantly reduce your company’s printing and mailing costs, by signing up to receive your stockholder communications via e-mail. With electronic delivery, we will notify you via e-mail as soon as the annual report and the proxy statement are available on the Internet, and you can easily submit your stockholder votes online. Electronic delivery can also help reduce the number of bulky documents in your personal files and eliminate duplicate mailings. To sign up for electronic delivery:

Your electronic delivery enrollment will be effective until you cancel it. If you have questions about electronic delivery, please call our Investor Relations department at (408) 765-1480.

ATTENDING THE ANNUAL MEETING

We are pleased to offer two options for participating in our 2006 annual meeting: (1) viewing a live webcast at www.intc.com or (2) attending in person. We will hold the annual meeting at 8:30 a.m. Pacific Time on Wednesday, May 17, 2006 at the Santa Clara Convention Center, Santa Clara, California, located at the corner of Great America Parkway and Tasman Drive. Driving directions and a map to the Convention Center are on the back cover of this proxy statement. When you arrive at the Convention Center, signs will direct you to the appropriate meeting rooms. Please note that the doors to the meeting rooms will not open until 8:00 a.m., and due to security measures, all bags will be subject to search, and all persons who attend the meeting will be subject to a metal detector and/or a hand wand search. We will be unable to admit anyone who does not comply with these security procedures. We will not permit the use of cameras (including cell phones with photographic capabilities) and other recording devices in the meeting hall. If you choose to view the webcast, go to www.intc.com shortly before the meeting time, and follow the instructions for downloading the webcast. During the webcast, you will be able to submit questions by following the instructions on the web site. If you miss the annual meeting, you can view a replay of the webcast at www.intc.com until June 16, 2006. You need not attend the annual meeting in order to vote.

INTEL CORPORATION

2200 Mission College Blvd.

Santa Clara, CA 95054-1549

PROXY STATEMENT

Our Board of Directors (“Board”) solicits your proxy for the 2006 Annual Stockholders’ Meeting to be held at 8:30 a.m. Pacific Time on Wednesday, May 17, 2006 at the Santa Clara Convention Center in Santa Clara, California, and at any postponement or adjournment of the meeting, for the purposes set forth in “Notice of Annual Stockholders’ Meeting.”

Record Date and Share Ownership

Only stockholders of record at the close of business on March 20, 2006 will be entitled to vote at the annual meeting. The majority of the shares of common stock outstanding on the record date must be present in person or by proxy to have a quorum. As of the close of business on February 24, 2006, we had 5,816,460,583 outstanding shares of common stock. We made copies of this proxy statement available to stockholders beginning on March 28, 2006.

Submitting and Revoking Your Proxy

If you complete and submit your proxy, the persons named as proxies will vote the shares represented by your proxy in accordance with your instructions. If you submit a proxy card but do not fill out the voting instructions on the proxy card, the persons named as proxies will vote the shares represented by your proxy as follows:

In addition, if other matters are properly presented for voting at the annual meeting, the persons named as proxies will vote on such matters in accordance with their best judgment. We have not received notice of other matters that may be properly presented for voting at the annual meeting.

Your stockholder vote is important. Many of our stockholders do not vote, so the stockholders who do vote influence the outcome of the election in greater proportion than their percentage ownership of Intel. In addition, banks and brokers that have not received voting instructions from their clients cannot vote on their clients’ behalf on the proposals approving the 2006 Equity Incentive Plan and approving the 2006 Stock Purchase Plan, further reducing the number of votes cast. Therefore, it is important that you vote your shares.

To ensure that your vote is recorded promptly, please vote as soon as possible, even if you plan to attend the annual meeting in person. Most stockholders have three options for submitting their votes prior to the annual meeting: (1) via the Internet, (2) by phone or (3) by mail. If you have Internet access, we encourage you to record your vote on the Internet. It is convenient, and it saves your company significant postage and processing costs. In addition, when you vote via the Internet or by phone prior to the meeting date, your vote is recorded immediately and there is no risk that postal delays will cause your vote to arrive late and therefore not be counted. If you attend the annual meeting and are a

registered holder (that is, your shares are not held through a bank or brokerage firm and you appear on our stock register as having shares issued in your name), you may also submit your vote in person, and any previous votes that you submitted, whether by Internet, phone or mail, will be superseded by the vote that you cast at the annual meeting. At this year’s annual meeting, the polls will close at 10:00 a.m. Pacific Time; any further votes will not be accepted after that time. We intend to announce preliminary results at the annual meeting and publish final results on our Investor Relations web site at www.intc.com shortly after the meeting and also in our quarterly report on Form 10-Q for the second quarter of fiscal 2006. If you have any questions about submitting your vote, call our Investor Relations department at (408) 765-1480.

If you are a registered holder, you may revoke your proxy at any time prior to the close of the polls at 10:00 a.m. Pacific Time on May 17, 2006 by: (1) submitting a later-dated vote in person at the annual meeting, via the Internet, by telephone or by mail, or (2) delivering instructions to our Corporate Secretary prior to the annual meeting via e-mail at corporate.secretary@intel.com, by fax to (408) 653-8050 or by mail to Cary Klafter, Corporate Secretary, Intel Corporation, at M/ S SC4-203, 2200 Mission College Blvd., Santa Clara, California 95054-1549. If you hold shares through a bank or brokerage firm, you must contact that firm to revoke any prior voting instructions.

If you participate in the Intel Stock Fund through our 401(k) Savings Plan for current and former employees, your proxy will serve as a voting instruction for Fidelity Management Trust Company, the plan’s trustee. If Fidelity does not receive voting instructions for shares in your plan account, Fidelity will vote those shares in the same proportion as other plan participants’ shares for which it has received voting instructions. You must submit your voting instructions for your Intel Stock Fund shares to Fidelity by May 12, 2006 to allow Fidelity time to receive your voting instructions and vote on behalf of the plan.

Votes Required to Adopt Proposals

Each share of our common stock outstanding on the record date will be entitled to one vote on each of the 11 director nominees and one vote on each other matter. Directors receiving the majority of votes cast (number of shares voted “for” a director must exceed the number of votes cast “against” that director) will be elected as a director, provided that if the number of nominees exceeds the number of directors to be elected (a situation we do not anticipate), the directors shall be elected by a plurality of the shares present in person or by proxy at any such meeting and entitled to vote on the election of directors. Approval of the amendments of the Certificate of Incorporation to repeal the fair price provision and to repeal the supermajority vote provisions requires the affirmative vote of 66²/3% of the outstanding shares of common stock. Ratification of the appointment of our independent registered public accounting firm, approval of the 2006 Equity Incentive Plan and approval of the 2006 Stock Purchase Plan will each require the affirmative vote of the majority of the shares of common stock present or represented by proxy with respect to such proposal.

For the election of directors (provided the number of nominees does not exceed the number of directors to be elected), each director must receive the majority of the votes cast with respect to that director. Shares not present at the meeting and shares voting “abstain” have no effect on the election of directors. For the approval of the proposals amending the Certificate of Incorporation, the ratification of the independent registered public accounting firm, the approval of the 2006 Equity Incentive Plan and the approval of the 2006 Stock Purchase Plan, abstentions are treated as shares present or represented and voting, so abstaining has the same effect as a negative vote. Broker non-votes on a proposal (shares held by brokers that do not have discretionary authority to vote on the matter and have not received voting instructions from their clients) are not counted or deemed to be present or represented for the purpose of determining whether stockholders have approved that proposal. Please note that banks and brokers that have not received voting instructions from their clients cannot vote on their clients’ behalf on the proposals approving the 2006 Equity Incentive Plan and approving the 2006 Stock Purchase Plan, but may vote their clients’ shares on the election of directors, approval of the proposals amending the Certificate of Incorporation and the ratification of Ernst & Young LLP as our independent registered public accounting firm.

PROPOSAL 1: ELECTION OF DIRECTORS

Our nominees for the election of directors at the annual meeting include nine independent directors, as defined in the applicable rules for companies traded on The NASDAQ Stock Market* (“NASDAQ”), and two members of our senior management. Each director serves a one-year term, as described below, with all directors subject to annual election. At the recommendation of the Corporate Governance and Nominating Committee, the Board of Directors (“Board”) has nominated the persons listed below to serve as directors for the term beginning at the annual meeting on May 17, 2006.

Unless proxy cards are otherwise marked, the persons named as proxies will vote all proxies received FOR the election of each nominee named in this section.

If any director nominee is unable or unwilling to serve as a nominee at the time of the annual meeting, the persons named as proxies may vote for a substitute nominee designated by the present Board to fill the vacancy or for the balance of the nominees, leaving a vacancy. Alternatively, the Board may reduce the size of the Board. The Board has no reason to believe that any of the following nominees will be unwilling or unable to serve if elected as a director. Such persons have been nominated to serve until the next annual meeting following the 2006 annual meeting or until their successors, if any, are elected or appointed. This section contains the names and biographical information for each of the nominees.

Director Changes in 2005. At the 2005 annual meeting, Andrew S. Grove retired from the Board. Craig R. Barrett succeeded Dr. Grove as Chairman of the Board, and Paul S. Otellini succeeded Dr. Barrett as Chief Executive Officer. In July 2005, the Board elected James D. Plummer to the Board.

Adoption of Majority Vote Standard for Election of Directors. In January 2006, the Board approved an amendment to Intel’s Bylaws to require directors to be elected by the majority of the votes cast with respect to such director in uncontested elections (number of shares voted “for” a director must exceed the number of votes cast “against” that director). In a contested election (a situation in which the number of nominees exceeds the number of directors to be elected), the standard for election of directors will be a plurality of the shares represented in person or by proxy at any such meeting and entitled to vote on the election of directors. If a nominee who is serving as a director is not elected at the annual meeting, under Delaware law the director would continue to serve on the Board as a “holdover director.” However, under our Bylaws, any director who fails to be elected must offer to tender his or her resignation to the Board. The Corporate Governance and Nominating Committee would then make a recommendation to the Board whether to accept or reject the resignation, or whether other action should be taken. The Board will act on the Corporate Governance and Nominating Committee’s recommendation and publicly disclose its decision and the rationale behind it within 90 days from the date the election results are certified. The director who tenders his or her resignation will not participate in the Board’s decision. If a nominee who was not already serving as a director is not elected at the annual meeting, under Delaware law that nominee would not become a director and would not continue to serve on the Board as a “holdover director.” In 2006, all nominees for the election of directors are currently serving on the Board.

Recommendation of the Board

The Board recommends that you vote “FOR” the election of each of the following nominees.

Intel stock ownership information for these individuals is shown under the heading “Security Ownership of Certain Beneficial Owners and Management” and is based on information furnished by the respective individuals.

Director Emeritus

The Board has elected Gordon Moore as Chairman Emeritus and Director Emeritus. We do not have any other directors emeriti. Dr. Moore is invited to attend Board and Board committee meetings, but he does not have voting rights. Director emeritus is an unpaid position. We will reimburse Dr. Moore for his attendance-related expenses, although he has not to date requested any reimbursement.

THE BOARD, BOARD COMMITTEES AND MEETINGS

Corporate governance is typically defined as the system that allocates duties and authority among a company’s stockholders, board of directors and management. The stockholders elect the board and vote on extraordinary matters; the board is the company’s governing body, responsible for hiring, overseeing and evaluating management, particularly the chief executive officer; and management runs the company’s day-to-day operations. Our Board currently consists of 11 directors. The Board believes that there should be a substantial majority of independent directors on the Board. The Board also believes that it is useful and appropriate to have members of management, including the Chief Executive Officer (“CEO”), as directors. The current Board members include nine independent directors and two members of our senior management. The Board also has one director emeritus who may participate in Board meetings but does not vote.

“Independent” Directors. Each of our directors other than Craig R. Barrett and Paul S. Otellini qualifies as “independent” in accordance with the published listing requirements of NASDAQ. The NASDAQ independence definition includes a series of objective tests, such as that the director is not an employee of the company and has not engaged in various types of business dealings with the company. In addition, as further required by NASDAQ rules, the Board has made a subjective determination as to each independent director that no relationships exist which, in the opinion of the Board, would interfere with the exercise of independent judgment in carrying out the responsibilities of a director. In making these determinations, the directors reviewed and discussed information provided by the directors and the company with regard to each director’s business and personal activities as they may relate to Intel and Intel’s management.

In addition, as required by NASDAQ rules, the members of the Audit Committee each qualify as “independent” under special standards established by the U.S. Securities and Exchange Commission (“SEC”) for members of audit committees. The Audit Committee also includes at least one independent member who is determined by the Board to meet the qualifications of an “audit committee financial expert” in accordance with SEC rules, including that the person meets the relevant definition of an “independent director.” E. John P. Browne is the independent director who has been determined to be an audit committee financial expert. Stockholders should understand that this designation is a disclosure requirement of the SEC related to Lord Browne’s experience and understanding with respect to certain accounting and auditing matters. The designation does not impose upon Lord Browne any duties, obligations or liability that are greater than are generally imposed on him as a member of the Audit Committee and the Board, and his designation as an audit committee financial expert pursuant to this SEC requirement does not affect the duties, obligations or liability of any other member of the Audit Committee or the Board. The Board has also determined that each Audit Committee member has sufficient knowledge in reading and understanding the company’s financial statements to serve on the Audit Committee.

Board Responsibilities and Structure. The primary responsibilities of the Board are oversight, counseling and direction to our management in the long-term interests of the company and our stockholders. The Board’s detailed responsibilities

include: (a) selecting and regularly evaluating the performance of the CEO and other senior executives; (b) planning for succession with respect to the position of CEO and monitoring management’s succession planning for other senior executives; (c) reviewing and, where appropriate, approving our major financial objectives and strategic and operating plans, business risks and actions; (d) overseeing the conduct of our business to evaluate whether the business is being properly managed; and (e) overseeing the processes for maintaining our integrity with regard to our financial statements and other public disclosures and compliance with law and ethics. The Board has instructed our CEO, working with our other executive officers, to manage our business in a manner consistent with our standards and practices, and in accordance with any specific plans, instructions or directions of the Board. The CEO and management are responsible for seeking the advice and, in appropriate situations, the approval of the Board with respect to extraordinary actions that we may undertake.

The Board’s general policy, based on experience, is that the positions of Chairman of the Board and CEO should be held by separate persons as an aid in the Board’s oversight of management. In addition, the Board has an independent director designated as the Lead Independent Director. The general authority and responsibilities of the Lead Independent Director are established in a written charter adopted by the Board, and include presiding at all meetings of the Board when the Chairman is not present; serving as a liaison between the Chairman and the independent directors; approving the information, agenda and meeting schedules sent to the Board; calling meetings of the independent directors; and being available for consultation and communication with stockholders.

The Board and its committees meet throughout the year on a set schedule, and also hold special meetings and act by written consent from time to time as appropriate. Board agendas include regularly scheduled sessions for the independent directors to meet without management present, and the Board’s Lead Independent Director leads those sessions. Board members have access to all of our employees outside of Board meetings, and the Board has a program that encourages each director to visit different Intel sites and events worldwide on a regular basis and meet with local management at those sites and events.

Board Committees and Charters. The Board has delegated various responsibilities and authority to different Board committees, as described in this section of the proxy statement and in the committee charters. Committees regularly report on their activities and actions to the full Board. The Board currently has, and appoints the members of, standing Audit, Compensation, Corporate Governance and Nominating, Executive and Finance Committees. In addition, the Finance Committee has the authority to appoint the members of the Retirement Plans Investment Policy Committee, and there are Board members serving on that committee. Each member of the Audit, Compensation, Corporate Governance and Nominating, and Finance Committees is an independent director as defined by NASDAQ standards. Each of the Board committees has a written charter approved by the Board, and each committee conducts an annual evaluation of the committee’s performance. Copies of each charter, including the charter describing the position of Lead Independent Director, are posted on our Investor Relations web site at www.intc.com under the “Governance/ Responsibility” section and the “Other Corporate Documents” tab. Each committee has the authority to engage outside experts, advisors and counsel to the extent it considers appropriate to assist the committee in its work. The current members of the committees are identified in the following table.

Audit Committee. The Audit Committee assists the Board in its general oversight of our financial reporting, internal controls and audit functions, and is directly responsible for the appointment, retention, compensation and oversight of the work of our independent registered public accounting firm. In 2005, the Audit Committee held nine meetings. The responsibilities and activities of the Audit Committee are described in greater detail in “Report of the Audit Committee” and the Audit Committee’s charter.

Compensation Committee. The Compensation Committee reviews and determines salaries, performance-based incentives and other matters relating to executive compensation, and administers our stock option plans, including reviewing and granting stock options to our executive officers. The Compensation Committee also reviews and determines various other company compensation policies and matters. The Compensation Committee held five meetings in 2005 and also regularly acts by written consent. For more information, see “Report of the Compensation Committee on Executive Compensation.”

Corporate Governance and Nominating Committee. The Corporate Governance and Nominating Committee (“Committee”) reviews and reports to the Board on a periodic basis with regard to matters of corporate governance and corporate social responsibility, such as environmental, workplace or stakeholder issues. The Committee also reviews and assesses the effectiveness of the Board’s Guidelines on Significant Corporate Governance Issues (“Guidelines”), makes recommendations to the Board regarding proposed revisions to the Guidelines, and makes recommendations to the Board regarding the size and composition of the Board. In addition, the Committee makes recommendations to the Board regarding the agendas for our annual meetings, reviews stockholder proposals and makes recommendations to the Board for action on such proposals, and reviews and makes recommendations concerning compensation for the independent directors. The Committee held three meetings in 2005.

The Committee is responsible for reviewing with the Board, from time to time, the appropriate skills and characteristics required of Board members in the context of the current makeup of the Board. This assessment includes issues of diversity in numerous factors such as age; understanding of and experience in manufacturing, technology, finance and marketing; and international experience and culture. These factors, and others as considered useful by the Committee, are reviewed in the context of an assessment of the perceived needs of the Board at a particular point in time. As a result, the priorities and emphasis of the Committee and of the Board may change from time to time to take into account changes in business and other trends, and the portfolio of skills and experience of current and prospective Board members. The Committee establishes procedures for the nomination process, recommends candidates for election to the Board and also nominates officers for election by the Board.

Consideration of new Board nominee candidates typically involves a series of internal discussions, review of information concerning candidates and interviews with selected candidates. Board members or employees typically suggest candidates for nomination to the Board. In 2005, we did not employ a search firm or pay fees to other third parties in connection with seeking or evaluating Board nominee candidates. James D. Plummer, who first joined our Board in July 2005, was initially suggested as a candidate to the Board by an executive officer of the company other than the CEO. The Committee will consider candidates proposed by stockholders, and has from time to time received unsolicited candidate proposals from stockholders. The Committee evaluates candidates proposed by stockholders using the same criteria as for other candidates. A stockholder seeking to recommend a prospective nominee for the Committee’s consideration should submit the candidate’s name and qualifications to our Corporate Secretary via e-mail at corporate.secretary@intel.com, by fax to (408) 653-8050 or by mail to Cary Klafter, Corporate Secretary, Intel Corporation, M/ S SC4-203, 2200 Mission College Blvd., Santa Clara, California 95054-1549.

Executive Committee. The Executive Committee may exercise the authority of the Board between Board meetings, except to the extent that the Board has delegated authority to another committee or to other persons, and except as limited by applicable law. The Executive Committee held one meeting in 2005.

Finance Committee. The Finance Committee reviews and recommends matters related to our capital structure, including the issuance of debt and equity securities; our cash and dividend policy and dividend declarations; banking arrangements, including investment of corporate cash; and management of the corporate debt structure. In addition, the Finance Committee reviews and approves finance and other cash management transactions whose authorization is not otherwise approved by the Board or delegated to our management. During 2005, the Finance Committee held two meetings.

Retirement Plans Investment Policy Committee. The Finance Committee appoints the members of the Retirement Plans Investment Policy Committee, which is responsible for adopting and amending investment policies for our U.S. employee retirement plans. The members of this committee also include company officers.

Attendance at Board, Committee and Annual Stockholders’ Meetings. The Board held eight meetings in 2005. We expect each director to attend each meeting of the Board and the committees on which he or she serves, and also expect them to attend the annual meeting. In 2005, each director attended the 2005 Annual Stockholders’ Meeting, each meeting of the Board and each committee meeting on which he or she served, with the exception of E. John P. Browne, who missed two meetings of the Board, and John L. Thornton, who missed one meeting of the Board. All directors attended at least 75% of the meetings of the Board and the committees on which he or she served.

We have a policy, and an approval process, that generally limits each of our employees to serving on no more than one organization’s board of directors as a personal, non-Intel activity. The approval process considers both the time

commitment involved and the potential for business conflicts between Intel and the other organization. This policy is applicable to our two management directors and our other officers.

Communications from Stockholders to the Board. The Board recommends that stockholders initiate any communications with the Board in writing and send them in care of our Corporate Secretary. Stockholders can send communications by e-mail to corporate.secretary@intel.com, by fax to (408) 653-8050 or by mail to Cary Klafter, Corporate Secretary, Intel Corporation, M/ S SC4-203, 2200 Mission College Blvd., Santa Clara, California 95054-1549. This centralized process will assist the Board in reviewing and responding to stockholder communications in an appropriate manner. The name of any specific intended Board recipient should be noted in the communication. The Board has instructed our Corporate Secretary to forward such correspondence only to the intended recipients; however, the Board has also instructed our Corporate Secretary, prior to forwarding any correspondence, to review such correspondence and, in his discretion, not to forward certain items if he deems them to be of a commercial or frivolous nature or otherwise inappropriate for the Board’s consideration. In such cases, our Corporate Secretary may forward some of that correspondence elsewhere in the company for review and possible response.

CORPORATE GOVERNANCE GUIDELINES

The Board has adopted a set of Guidelines on Significant Corporate Governance Issues (“Guidelines”). The Corporate Governance and Nominating Committee is responsible for overseeing the Guidelines and periodically reviews them and makes recommendations to the Board concerning corporate governance matters. The Board may periodically amend the Guidelines and may waive, suspend or repeal any of the Guidelines at any time, with or without public notice, as it determines necessary or appropriate in the exercise of the Board’s judgment or fiduciary duties. We have posted the Guidelines on our Investor Relations web site at www.intc.com under the “Governance/ Responsibility” section.

Among other matters, the Guidelines include the following items concerning the Board:

The “Governance/ Responsibility” section of our Investor Relations web site at www.intc.com also includes our Corporate Business Principles and Principles for Responsible Business. Our Corporate Business Principles is our code-of-ethics document for all employees and also applies to our independent directors with regard to their Intel-related activities. In addition to the Corporate Business Principles, we have adopted Principles for Responsible Business, which are intended to succinctly express our commitment to ethical and legal business practices on a worldwide basis. We discuss most of those topics in greater detail in our Corporate Business Principles, and we cover other topics in other company policies and practices.

Directors and officers are encouraged to be Intel stockholders through their participation in our equity incentive and employee stock purchase plans. The Board has established stock ownership guidelines for our independent directors and corporate officers to help ensure that they each maintain an equity stake in Intel, and by doing so, appropriately link their interests with those of our other stockholders. These stock ownership guidelines provide that within a five-year period following appointment or election, the covered individuals should attain and hold an investment position (not including unexercised stock options) of no less than a specified number of shares of our stock. For officers, this is approximately three to five times the sum of their annual baseline total cash compensation, depending on the officer’s scope of responsibilities. For non-employee directors, the guideline is 10,000 shares. With limited exceptions, directors and officers may not invest in, purchase, or otherwise receive or write derivatives of our securities, such as puts and calls on our securities, or enter into any “short sales” or “short positions” with respect to our securities. A short position is one in which the holder will profit if the market price of the securities either remains the same or decreases. We consider it inappropriate and contrary to the interests of Intel and our stockholders for directors and officers to take such investment positions.

Policy on poison pills. In 2001, a stockholder submitted a request to us regarding the approval process for adopting stockholders’ rights plans (also known as “poison pills”). We do not have a poison pill and are not presently considering the adoption of such a device. Following consideration of the stockholder’s request, the Board included in the Guidelines a statement of policy that it shall seek and obtain stockholder approval before adopting any poison pill, provided, however, that the Board may revise or repeal this policy without prior public notice, and the Board may thereafter determine to act on its own to adopt a poison pill if, under the circumstances, the Board in the exercise of its fiduciary responsibilities, including the majority of the independent members of the Board, deems it to be in the best interests of our stockholders to adopt a poison pill without the delay in adoption that would come from the time reasonably anticipated to seek stockholder approval. If the Board adopts a poison pill without prior stockholder approval, the Board will submit the poison pill to an advisory vote by the company’s stockholders within 12 months from the date the Board adopts the pill. If the company’s stockholders fail to approve the poison pill, the Board may elect to terminate, retain or modify the poison pill in the exercise of its fiduciary responsibilities. The Board has directed the Corporate Governance

and Nominating Committee to review this policy statement on an annual basis and to report to the Board on any recommendations that it may have concerning the policy. The Corporate Governance and Nominating Committee last reported to the Board on this policy in January 2006.

DIRECTORS’ COMPENSATION

The general policy of the Board is that compensation for independent directors should be a mix of cash and equity-based compensation. Intel does not pay employee directors for Board service in addition to their regular employee compensation. The Board’s Corporate Governance Guidelines provide that independent directors may not receive consulting, advisory or other compensatory fees from Intel in addition to their Board compensation. To the extent practicable, independent directors affiliated with Intel’s service providers ensure that their compensation from such providers does not include amounts connected to Intel’s payments.

The Corporate Governance and Nominating Committee (“Committee”), which consists solely of independent directors, has the primary responsibility to review and consider any revisions to directors’ compensation. In accordance with the Committee’s recommendations, the Board determined the non-employee directors’ compensation effective July 2005 as follows:

The table below details the compensation earned by Intel’s non-employee directors in 2005.

The table below provides information on the outstanding equity awards at fiscal year-end for directors.

Intel does not pay meeting fees. Intel reimburses the directors for their travel and related expenses in connection with attending Board meetings and Board-related activities, such as Intel site visits and sponsored events, as well as continuing-education programs. Each director is given a notebook computer for his or her personal use, and is also offered the use of other equipment employing Intel technology, such as consumer electronics devices using Intel^® Viiv^tm technology. The director receives a “tax gross-up” payment at an assumed 35% federal income tax rate in the event that the provision of this equipment is considered taxable income. Directors’ charitable contributions to schools and universities that meet the guidelines of Intel’s employee charitable matching gift program are eligible for matching funds in an amount up to $10,000 per year.

In accordance with Intel’s 2004 Equity Incentive Plan, option grants to independent directors may not exceed 30,000 shares per director per year, and the option exercise price must be at least equal to the market value on the date of grant. On July 20, 2005, Intel granted each independent director an option to purchase a total of 19,000 shares at an exercise price of $27.15 per share. Dr. Plummer received a prorated portion of options totaling 15,000 on this date for his service to the Board starting in July 2005. Directors’ options vest in full one year from the date of grant. Intel’s share ownership guideline requires that non-employee directors hold 10,000 shares of Intel common stock within five years of being elected to the Board.

The Committee and the Board have approved a new 2006 Equity Incentive Plan (“2006 EIP”) for which Intel is seeking stockholder approval at the annual meeting (see “Proposal 5: Approval of the 2006 Equity Incentive Plan”). The 2006 EIP authorizes stock options, stock appreciation rights, restricted stock or restricted stock unit awards to directors. Beginning in 2006, the Committee expects to recommend the use of restricted stock units in addition to stock options for directors.

Intel has a deferred compensation plan that allows the independent directors to defer up to 100% of their cash compensation and receive an investment return on the deferred funds as if the funds were invested in Intel common stock. Plan participants must irrevocably elect to receive the deferred funds either in a lump sum or in equal annual installments over five years or 10 years, and either to begin receiving distributions at retirement or at the earlier of retirement and a date specified at the time of the election, which cannot be less than 24 months from the election date. This deferred compensation is Intel’s unsecured obligation. Dr. Shaw and Ambassador Barshefsky participated in the deferred compensation plan with respect to their cash payments for 2005, and they and other directors have participated in prior years.

In 1998, the Board terminated its retirement program for independent directors. Independent directors serving at the time of termination were vested with the number of years served, and will receive an annual benefit equal to the annual retainer fee in effect at the time of payment, to be paid beginning upon the director’s departure from the Board and continuing for the lesser of the number of years served as an independent director or the life of the director.

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

To our knowledge, the following table sets forth information regarding ownership of our common stock on February 24, 2006 by (i) each of our directors, our director emeritus and named executive officers, (ii) one holder of more than 5% of our common stock, and (iii) all of our directors, our director emeritus and executive officers as a group. Except as otherwise indicated and subject to applicable community property laws, each owner has sole voting and investment powers with respect to the securities listed.

STOCK PRICE PERFORMANCE GRAPH

This section includes a line graph comparing the cumulative total stockholder return on our common stock with the cumulative total return of the Dow Jones Technology Index and the Standard & Poor’s 500 Index for the five fiscal years ended December 31, 2005. The graph and table assume that $100 was invested on December 29, 2000 (the last day of trading for the fiscal year ended December 30, 2000) in each of our common stock, the Dow Jones Technology Index and the S&P 500 Index, and that all dividends were reinvested. Dow Jones and Company, Inc. and Standard & Poor’s Compustat Services, Inc. furnished this data. Cumulative total stockholder returns for our common stock, the Dow Jones Technology Index and the S&P 500 Index are based on our fiscal year.

Comparison of Five-Year Cumulative Return for Intel, the Dow Jones Technology Index and the S&P 500 Index

REPORT OF THE COMPENSATION COMMITTEE ON EXECUTIVE COMPENSATION

The Compensation Committee (“Committee”) administers Intel’s executive officer compensation program. Currently, Intel has 12 officers designated by the Board of Directors (“Board”) as executive officers. Intel’s executive officers have the broadest job responsibilities and policy-making authority in the company. The Committee reviews and determines all executive officers’ compensation, administers Intel’s equity incentive plans (including reviewing and approving grants to Intel’s executive officers), makes recommendations with respect to stockholder proposals related to compensation matters and generally consults with management regarding employee compensation programs. The Committee’s charter reflects these responsibilities, and the Committee and the Board periodically review and revise the charter. The Board determines the Committee’s membership, which is composed entirely of independent directors. The Committee meets at scheduled times during the year, and it also considers and takes action by written consent. The Committee chairman reports on Committee actions and recommendations at Board meetings.

Intel’s Legal department, its Corporate Secretary, and the Compensation and Benefits Group in Intel’s Human Resources (“HR”) department support the Committee in its work and in some cases act pursuant to delegated authority to fulfill various functions in administering Intel’s compensation programs. In addition, the Committee has the authority in its discretion to engage the services of outside advisors, experts and others to assist the Committee. During 2005, the Committee engaged the services of Prof. Brian Hall of the Harvard Business School to meet with and advise the Committee with respect to executive compensation philosophy, equity compensation and Committee process. Prof. Hall is continuing his work with the Committee in 2006.

Compensation Philosophy

The overall compensation philosophy of the Committee and of Intel’s management is that total compensation should be tied to individual performance, should vary with Intel’s performance in achieving financial and non-financial objectives, and any long-term incentive compensation should be closely aligned with stockholders’ interests. The Committee and Intel’s management believe that the proportion of compensation at risk should rise as an employee’s level of responsibility increases. This philosophy is reflected in the company’s key strategic compensation design priorities: pay-for-performance, employee retention, cost management, egalitarian treatment of employees, alignment with stockholders’ interests and continued focus on corporate governance. Intel’s employees, including executive officers, are employed at will, without employment agreements, severance payment arrangements or payment arrangements that would be triggered by a “change in control” of Intel.

Total compensation for the majority of Intel employees, including executive officers, consists of the following components:

Determining Executive Compensation

A substantial amount of the Committee’s annual cycle of work relates to the determination of compensation for Intel’s executive officers, including the CEO. In the first quarter of the year, the Committee makes determinations of base cash compensation (“Base Salary”) and equity grants for executive officers, and following the end of the year, the Committee makes determinations of Incentive Cash Payments. The Incentive Cash Payments are determined taking into account the year’s financial results, individual performance reviews and scoring of progress to corporate business goals. The Committee’s process for determining compensation also includes a review of Intel’s executive compensation programs and practices, and an analysis, for each Intel executive, of all elements of compensation. The Committee compares these compensation components separately and in the aggregate to compensation at companies that Intel uses as its “peer groups” for compensation analysis purposes (the peer groups are also sometimes referred to in this report as the “market”). The peer groups consist of a cross-industry subset of Fortune 100 companies as well as a technology industry subset of companies generally considered comparable to Intel, most of which are included in the Dow Jones Technology Index. The compensation of executive officers is also compared with the compensation of other Intel employees for internal pay equity purposes.

In determining Base Salary and Incentive Cash Payments for executive officers, the Committee reviews company and individual performance information and peer group executive compensation information derived from compensation surveys. The Committee also reviews the total remuneration that each of Intel’s executive officers could potentially receive in each of the next 10 years, under scenarios of continuing employment with the company or upon retirement from the company. For this review, total remuneration includes all aspects of the executive officer’s total cash compensation (Base Salary plus incentive) from continuing employment, the future value of equity under varying stock price growth assumptions and including as applicable the impact of accelerated vesting upon retirement, the value of any deferred compensation and profit sharing retirement benefits, and the value of healthcare benefits.

Section 162(m) of the Internal Revenue Code of 1986, as amended (“Tax Code”) places a limit of $1,000,000 on the amount of compensation that Intel may deduct in any one year with respect to its CEO and each of the next four most highly compensated executive officers. Certain performance-based compensation approved by stockholders is not subject to the deduction limit. Intel’s Executive Officer Incentive Plan (“EOIP”), which is the cash incentive payment plan, and Intel’s 2004 Equity Incentive Plan (“2004 Plan”) have each been approved by stockholder vote; as a result, cash payments and stock options awarded under these plans are qualified so that awards under such plans constitute performance-based compensation not subject to Section 162(m) of the Tax Code. However, to maintain flexibility in compensating Intel’s executive officers in a manner designed to promote varying corporate goals, it is not a policy of the Committee that all executive compensation must be deductible.

Base Salary

The Committee establishes Intel’s executive officers’ Base Salaries at levels that it believes are below the 25th percentile of the peer group companies. When the Committee determines the executive officers’ Base Salaries during the first quarter of the year, the Committee takes into account each officer’s level and amount of responsibility at the company. In general, executive officers with the highest level and amount of responsibility have the lowest percentage of their cash compensation fixed as Base Salary and the highest percentage of their cash compensation subject to variable performance-based standards.

Performance-Based Compensation

The Committee and Intel’s management believe that employees in higher ranks should have a higher proportion of their total compensation delivered through pay-for-performance cash incentives and long-term equity compensation; as a result, their compensation will be more significantly correlated, both upward and downward, to Intel’s financial performance and stock price performance. We believe that Intel’s executive officers have more “compensation risk” than the executives of its peer groups because of these correlations. Intel’s higher-than-market cash compensation variability is closely linked to annual financial results, delivering lower-than-market total cash compensation in times of poor financial performance. Conversely, in times of excellent performance, Intel’s compensation variability yields higher total cash compensation, rewarding its employees for excellent performance. The goal of the cash program is to pay higher-than-market average compensation over periods of sustained excellent performance. The Incentive Cash Payments are not directly linked to Intel’s stock price performance.

Key drivers in Intel’s broad-based and executive incentive cash programs are revenue, operating income and net income. In 2005, revenue, operating income and net income were up 13.5%, 19.3% and 15.3%, respectively, compared to 2004. Partly because of those results, 2005 was the first year since 2000 for which aggregate total cash compensation to executive officers was above average relative to the market.

Through 2005, Intel’s goal was that total cash compensation (Base Salaries plus Incentive Cash Payments) should approximate the average of its peer groups, with the potential for higher than average total cash compensation when Intel performs well. Beginning in 2006, company management and the Committee (with respect to executive officers) decided that total cash compensation levels for all employees, including executive officers, should be at the 65th percentile of peer group companies with similar performance, and at the 75th percentile when company performance generally exceeds that of the peer group companies. In 2005, Intel paid some of its executives higher-than-market average cash compensation, based on their individual performance in addition to Intel’s overall performance. Intel paid other executives lower-than-market average total cash compensation based on their being relatively new to their positions or because of their individual performance.

Executive Officer Incentive Plan

Incentive Cash Payments are made under the EOIP, which is an annual cash-based pay-for-performance incentive program covering executive officers, and is designed to motivate and reward them for their contributions to Intel’s performance by making a large portion of their cash compensation variable and dependent upon Intel’s annual financial performance. Mechanically, each executive officer has an “Incentive Baseline Amount” determined annually by the

Committee, and that Incentive Baseline Amount is multiplied at year-end under a formula. The result of that multiplication is the maximum that the officer might receive as his or her Incentive Cash Payment for the year. The Committee reviews those amounts and determines if it wants to pay them or reduce them in the Committee’s discretion; the amounts cannot be increased beyond the maximum limits under the formula.

The EOIP formula for determining the maximum Incentive Cash Payments is: (1) the executive officer’s Incentive Baseline Amount, times (2) Intel’s EPS as calculated under the EOIP (“Plan EPS”) times (3) a “Performance Factor” number that is set each year by the Committee, all of which are further explained below. In addition, (4) the EOIP has a cap limiting each individual’s Incentive Cash Payment to a maximum annual limit of $5,000,000, and (5) the Committee may in its discretion reduce the amounts to be paid below those calculated by the formula. During the first quarter of each year, the Committee determines a separate Incentive Baseline Amount for each EOIP participant and sets a common Performance Factor for the EOIP formula. After the end of each year, the Committee determines the Incentive Cash Payments to be paid under the EOIP for that year when the Plan EPS is known. It is expected that the Incentive Cash Payment will be greater than the Incentive Baseline Amount, because of the intended multiplier effect of the formula. From year to year, the incentive payments are much more affected by the pay-for-performance effect of the multiplier than by any adjustment in the Incentive Baseline Amount determined by the Committee.

The EOIP does not specify criteria that the Committee must use in exercising its discretion to reduce payments, and it does not require the Committee to make any reductions. The Committee has often reduced the Incentive Cash Payments below what the EOIP formula would allow, and it did so for the 2005 payments. In five of the past six years, the Committee has used its discretion to set the EOIP payments lower than the maximum payment amounts derived by the EOIP formula. The actual Incentive Cash Payments determined by the Committee used multipliers equal to those used by Intel with its broad-based cash incentive plan, and this was done to further the goal of egalitarianism in administration of the compensation programs. In the past few years, the multipliers used by the Committee for EOIP purposes ranged from 1.66 to 4.59, and were intended to generally reflect the changes in reported financial results and progress to corporate goals for those periods. For the 2005 payments, the multiplier was 3.76. This substantial variability in payments, in relation to Intel’s reported diluted earnings per share, can be seen in the following graph.

In the EOIP formula, Plan EPS is not necessarily earnings per share for financial reporting purposes. Plan EPS is defined as the greater of Intel’s operating income or Intel’s net income, in each case, divided by Intel’s weighted average common shares outstanding, assuming dilution. Operating income does not include gains or losses on equity securities or interest and other income that Intel earned, and does not include a deduction for interest expense and income taxes; as a result, Plan EPS based on operating income generally exceeds Plan EPS based on net income.

The Committee may adjust the calculation of operating income or its net income for Plan EPS purposes based on criteria described in the EOIP and selected by the Committee in its discretion. These adjustments are established by the Committee during the first quarter of the year and for 2005 excluded asset write-downs of such significance as to require mention in Intel’s financial statements; amortization of intangibles in connection with merger and acquisition activity, and in-process research and development costs; charges related to settlements of litigation, settlements with any tax authorities or claims judgments that are of such significance as to require mention in Intel’s financial statements;

accruals for reorganization and/or restructuring programs that are of such significance as to require mention in Intel’s financial statements; and charges for any extraordinary non-recurring items as described in Accounting Principles Board Opinion No. 30 that are of such significance as to require mention in Intel’s financial statements.

The Performance Factor is also set by the Committee during the first quarter of the year. When determining the Performance Factor, the Committee considers Intel’s past financial performance, Intel’s internal estimates of current-year financial performance, and the competitiveness of Intel’s executive officers’ Base Salary and Incentive Baseline Amounts compared to the peer groups.

For 2005, the Committee set individual Incentive Baseline Amounts ranging from $125,000 to $750,000 for each of Intel’s executive officers and set the Performance Factor as 3.43 for the 2005 performance period, a 15% increase from 2004. The 2005 financial results yielded an adjusted net income per share of $1.45⁽¹⁾. In addition, the 2005 financial results yielded a Plan EPS based on operating income of $1.96⁽²⁾, which exceeded the adjusted net income per share of $1.45, so that the Plan EPS value for purposes of the EOIP formula was $1.96.

As noted above, the Committee exercised its discretion in January 2006 to reduce the 2005 Incentive Cash Payments below what would have been allowed under the EOIP formula. The Committee’s determination resulted in a 54% average reduction from the EOIP formula calculation.

Semiannual Cash Incentive

The Committee and Intel’s management also link cash compensation to Intel’s financial performance through a company-wide, semiannual cash incentive plan that calculates payouts based on Intel’s corporate profitability. Under this plan, executive officers and other eligible employees each receive 0.55 day of pay (calculated based on eligible earnings for the six-month period, including one-half of Incentive Baseline Amounts as applicable) for every two percentage points of corporate pretax margin (pretax profit as a percentage of revenue), or a payment expressed as days of pay based on 4% of net income divided by the current value of a worldwide day of pay, whichever is greater. Payments are made in the first and third quarters of each year based on corporate performance for the preceding two quarters. An additional day of pay will also be paid for each six-month period if Intel achieves certain customer satisfaction goals under its Customer Excellence Program; however, Intel did not achieve these goals in 2005. Plan payments earned in 2005 totaled 17.8 days of pay per employee, up from 16.9 days in 2004.

Long-Term Equity Incentive Plans

Executive officers and other employees realize long-term incentive compensation through equity grants. To reward and retain employees in 2005, the Committee and Intel used stock options as the sole long-term incentive vehicle. During 2005, the Committee reviewed the use and value of the equity program with respect to executive officer programs, and company management in consultation with the Committee reviewed the use and value of the equity program with respect to broad-based employee programs, and decided to introduce, beginning in 2006, the use of restricted stock units (“RSUs”) in addition to stock options. Due to Intel’s strong belief in the egalitarian treatment of employees, the company plans to continue to grant equity to the broad-based employee population. Beginning in 2006, the majority of Intel’s employees will receive RSUs instead of stock option grants, and the remaining eligible employees, including executive officers, will receive equity grants that are a mix of RSUs and stock options. As an employee’s level of responsibility increases, the percentage of stock options will become a greater portion of the equity grant, equating to more at-risk compensation for higher level executives. The use of RSUs will assist in maintaining the Board’s long-term goal that equity grants not exceed an average annual dilution rate of 2% against a backdrop of increasing headcount, while providing an equity vehicle that allows Intel to attract, motivate and retain the employee talent considered critical for achieving corporate goals.

In May 2004, Intel’s stockholders approved the 2004 Plan. The 2004 Plan had a duration of two years, and the 2004 Plan was re-approved by the stockholders in 2005 to extend the term for an additional year. It has been Intel’s announced plan to annually ask its stockholders to amend the 2004 Plan to extend the term by an additional year, providing stockholders with more frequent opportunities to review Intel’s use of equity compensation and the opportunity to approve Intel’s equity incentive plan. Under the 2004 Plan, Intel’s directors, executives and broad employee base are

eligible to receive stock options, restricted shares or units, stock appreciation rights and performance-based awards should the Committee determine that it is appropriate to do so.

The Committee and the Board have approved a new 2006 Equity Incentive Plan (“2006 EIP”) for which Intel is seeking stockholder approval at the annual meeting (see “Proposal 5: Approval of the 2006 Equity Incentive Plan”). If the 2006 EIP is approved by stockholders, the 2004 Plan will be terminated with regard to any new grants.

As of December 31, 2005, substantially all of the company’s employees were participating in one of Intel’s stock option plans. The Committee has a policy that in any one year Intel may not grant more than 5% of the shares subject to all options granted in that year to the Chief Executive Officer and the next four most highly compensated executive officers (“listed officers”). In 2005, only 1.4% of the options were granted to listed officers; for the period 2001 to 2005, only 1.5% of all options that Intel granted went to listed officers (top six for 2004). (See the “Option Grants in Last Fiscal Year” table under the heading “Executive Compensation.”)

Equity grants are a key element of Intel’s market-competitive total compensation package. Most equity grants are made on an annual basis in connection with the annual performance-review and compensation-adjustment cycle. In general, equity grants vest in 25% increments beginning one year from the date of grant. Stock options are granted at a price equal to the market value of Intel stock on the date of grant. For all employees including executives, Intel uses pre-established quarterly dates for the formal granting of equity during the year, with limited exceptions; these dates typically occur shortly following publication of Intel’s quarterly earnings releases.

For Intel’s executive officers, the Committee uses a combination of annual equity grants (as described above) that are targeted to be below market average in amount, and special long-term retention equity grants, which in combination with the annual grants are intended to approximate the market average. The special long-term retention grants are generally granted to an executive every seven years and vest in 25% increments typically beginning five years from the grant date. Beginning in 2006, these special long-term retention equity grants will also be a mix of RSUs and stock options, and will be granted at approximately four-year intervals. In 2005, the Committee awarded both annual and long-term retention stock option grants to selected executive officers. The Committee based individual grant amounts on factors such as relative job scope, expected future contributions to the growth and development of the company, the value of past awards, the Committee’s evaluation of 10-year potential total remuneration scenarios and competitiveness of grants relative to Intel’s peer groups.

Employee Stock Purchase Plan

Intel also has a tax-qualified employee stock purchase plan, generally available to all employees including executive officers, which allows participants to acquire Intel stock at a discount price. This plan has a six-month look-back and allows participants to buy Intel stock at a 15% discount to the market price with up to 10% of their salary and incentives (subject to IRS limits), with the objective of allowing employees to profit when the value of Intel stock increases over time. Under applicable tax law, no plan participant may purchase more than $25,000 in market value (based on the market value of Intel stock on the last trading day prior to the beginning of the enrollment period for each subscription period) of Intel stock in any calendar year.

Stock Ownership Guidelines

Because the Committee believes in linking the interests of management and stockholders, the Board has set stock ownership guidelines for Intel’s executive officers. The ownership guidelines specify a number of shares that Intel’s executive officers must accumulate and hold within five years of the later of the effective date of the guidelines or the date of appointment as an officer. The specific share requirements range from 35,000 to 250,000, with the higher guidelines applicable to executive officers having the highest levels of responsibility. Each of our listed officers satisfied these ownership guidelines in 2005.

Retirement Plans

Intel offers retirement benefits to its U.S. employees through tax-qualified plans including an employee-funded 401(k) Savings Plan, a discretionary company-funded Profit Sharing Retirement Plan and a company-funded Pension Plan. Intel refers to these tax-qualified plans collectively as the Sheltered Employee Retirement Plan (“SERP”). Intel also has a non-tax-qualified supplemental deferred compensation plan for certain highly compensated employees (“SERPLUS”). For employees outside the U.S., Intel offers similar retirement benefits consistent with local market practices.

The Committee allows for the participation of the executive officers in these plans, and the terms governing the retirement benefits under these plans for the executive officers are the same as those available for other eligible employees in the U.S. The plans differ, as described below, but each plan (other than the Pension Plan) results in

individual participant balances that reflect a combination of: (1) a differing annual amount contributed by the company or the employee, or the employee deferring a portion of his or her cash compensation; (2) the annual contributions and/or deferred amounts being invested either at the direction of the company or the employee (the same investment choices are available to all participants); and (3), as in (2), the continuing reinvestment of the investment returns until the accounts are paid out. This means that similarly situated employees, including Intel’s executive officers, may have materially different account balances because of a combination of factors: the number of years that the person has participated in the plan; the amount of money contributed, or compensation deferred, at the election of the participant from year to year; and the investments chosen by the participant with regard to those plans providing for participant investment direction. Except with respect to the Pension Plan, these plans do not involve any guaranteed minimum returns or above-market returns; the investment returns are dependent upon actual investment results. When determining annual compensation for executive officers, the Committee reviews the individuals’ retirement plan balances and payout projections over a 10-year period.

The 401(k) Savings Plan provides a long-term savings vehicle that allows for pretax contributions by Intel employees and tax-deferred earnings. Employees may generally contribute up to 50% of eligible annual pay to the 401(k) Savings Plan, not to exceed the annual IRS limit of $14,000 for 2005. Employees at least 50 years of age by the end of 2005 were eligible to make additional 401(k) catch-up contributions to a maximum of $4,000. Employees direct their own investments in the 401(k) Savings Plan.

The Profit Sharing Retirement Plan is a defined contribution plan designed to accumulate retirement funds for Intel’s employees, including executive officers, and to allow Intel to make contributions or allocations to those funds. The Profit Sharing Retirement Plan features a discretionary cash contribution determined annually by the Committee for executive officers, and by the CEO for other employees. Intel’s contributions made under the plan vest beginning after three years of service in 20% annual increments until the employee is 100% vested after seven years. Additional company contributions made after the seven-year period are immediately vested. For 2005, Intel’s discretionary contributions (including allocation of forfeitures) to the Profit Sharing Retirement Plan for all eligible U.S. employees, including executive officers, equaled 8% of eligible salary (which included annual and semiannual incentive payments as applicable). Intel invests all of its contributions to the Profit Sharing Retirement Plan in a diversified portfolio.

The Pension Plan is a defined benefit plan designed to provide participants with retirement income as determined by a pension formula based on final average pay, Social Security covered compensation and length of service upon separation not to exceed 35 years. The Pension Plan has two components: a “floor offset” plan and a Qualified Supplemental Employee Retirement Plan (“QSERP”). The floor offset plan provides pension benefits only if a participant’s Profit Sharing Retirement Plan account balance does not provide a minimum level of retirement income, in which case the floor offset makes up the difference. The Profit Sharing Retirement Plan balance for each of Intel’s executive officers is above this minimum; therefore, none of those individuals would receive any payments from the floor offset if they retired today. The QSERP is a tax-qualified arrangement that provides pension benefits that offset certain non-qualified deferred compensation liabilities.

SERPLUS participants can elect to defer their salary and their year-end Incentive Cash Payment without regard to the Tax Code limitations applicable to the tax-qualified plans. SERPLUS salary deferrals commence on the first paycheck of the new year following the year of enrollment. Participants direct the investment of their deferrals in SERPLUS among notional investment options which are the same investment options that are available in the 401(k) Savings Plan; thus, there is no guaranteed rate of return from Intel. Upon enrollment, participants make a one-time irrevocable distribution election, from among several distribution options, to be effective following separation from employment. SERPLUS also has a profit sharing component that credits contributions on behalf of eligible employees that could not be credited to their individual accounts under the Profit Sharing Retirement Plan because of Tax Code limitations, particularly that found in Section 401(a)(17) governing maximum eligible compensation. SERPLUS amounts representing the profit sharing component are subject to the same vesting and investment provisions as under the Profit Sharing Retirement Plan. For 2005, where Tax Code limits applied, Intel allocated the excess, up to 8% of eligible salary and annual and semiannual incentive payments, to SERPLUS for eligible employees, including executive officers. A portion of the accrued benefits in SERPLUS is offset by the benefits provided through the QSERP portion of the Pension Plan. All deferral and credit balances in SERPLUS in excess of the QSERP offset are unfunded obligations of Intel, including increases and decreases to participants’ account balances based on the performance of the notional investments of those balances.

Personal Benefits

The Committee supports the goal of Intel’s management to maintain an egalitarian culture in its facilities and operations. Intel’s officers are not entitled to operate under different standards than other employees. Intel does not provide its

officers with reserved parking spaces or separate dining or other facilities, nor does Intel have programs for providing personal-benefit perquisites to officers, such as permanent lodging or defraying the cost of personal entertainment or family travel. Intel’s office-building layouts are cubicle-based for all employees, including officers. Employees do not each have the same access to business equipment, transportation, accommodation or other support services, but it is intended that these resources be allocated for appropriate business purposes and not as a form of informal compensation. Company-provided air and other travel for Intel’s officers is for business purposes only. Intel’s company-owned aircraft hold approximately 40 passengers and are used in regularly scheduled shuttle routes between Intel’s major U.S. facility locations, and Intel’s use of non-commercial aircraft on a time-share or rental basis is limited to appropriate business-only travel. Intel’s healthcare, insurance, and other welfare and employee-benefit programs are the same for all eligible employees, including executive officers. Intel shares the cost of health and welfare benefits with its employees, a cost that is dependent on the level of benefits coverage that each employee elects. Intel’s employee loan programs are not available to Intel’s executive officers. Intel has no outstanding loans of any kind to any of its executive officers, and since 2002, federal law has prohibited Intel from making any new loans to its executive officers. Intel expects its officers to be role models under its Corporate Business Principles, which are applicable to all employees.

Company Performance and CEO Compensation

The Committee believes that the pay-for-performance goals of the executive compensation program are exemplified in the compensation of Intel’s CEO, Paul Otellini. In setting compensation levels for our CEO, the Committee considers comparative compensation information from Intel’s peer groups for the prior year. However, consistent with the Committee’s general practice and discretionary authority, Mr. Otellini’s 2005 salary and individual pay-for-performance Incentive Baseline Amount were not tied directly to the comparative compensation data but set at levels believed to be below the average of Intel’s peer groups. In June 2005 when Mr. Otellini took over as CEO, the Committee set his Base Salary at the 15th percentile of the technology peer group, with the expectation that actual cash compensation for the year would be closer to or ahead of the market average depending on company performance as reflected in the operation of the EOIP cash incentive formula. Mr. Otellini’s Base Salary for 2005 was $550,000 per year, effective January 1, 2005. In addition to Base Salary, Mr. Otellini’s Incentive Baseline Amount for 2005 under the EOIP was set at $600,000. Effective June 1, 2005, following his promotion to CEO, his Base Salary increased to $650,000 per year, and his Incentive Baseline Amount was increased to $750,000. Under the EOIP, Mr. Otellini’s actual Incentive Cash Payment for 2005 (paid in 2006) was $2,585,000, which with his Base Salary aggregated to the 58th percentile of the technology peer group.

In February 2005, the Committee granted Mr. Otellini a long-term retention stock option grant to purchase 400,000 shares. This grant vests in 25% annual increments beginning four years from the date of grant and expires 10 years from the grant date. In April 2005, the Committee awarded Mr. Otellini 500,000 stock options, which become exercisable in 2006 through 2009 in 25% annual increments. These stock options expire seven years from the grant date. In 2005, Intel also contributed $16,800 to Mr. Otellini’s account under the Profit Sharing Retirement Plan and allocated $141,727 to Mr. Otellini’s account under the SERPLUS plan. In general, Mr. Otellini’s retirement plan accounts are available to Mr. Otellini only upon retirement or termination from Intel as an employee, or upon disability or death.

In November 2004, the Board of Directors elected Craig R. Barrett as Chairman of the Board, effective as of the 2005 annual meeting. Dr. Barrett served as Intel’s CEO until that time. In February 2005, the Committee determined the salary and other compensation arrangements for Dr. Barrett, setting his Base Salary for 2005 at $610,000 and his Incentive Baseline Amount for 2005 under the EOIP at $700,000. Under the EOIP, Dr. Barrett’s actual Incentive Cash Payment for 2005 (paid in 2006) was $2,632,000. Dr. Barrett also received a stock option grant to purchase 250,000 shares in April 2005 in connection with Intel’s annual stock option grant program. As noted above, annual stock option grants vest in 25% annual increments beginning one year from the date of grant.

In January 2006, the Committee determined the 2006 salary and other compensation arrangements of Mr. Otellini. The Committee set Mr. Otellini’s Base Salary for 2006 at $700,000 per year, effective as of January 1, 2006. In addition to Base Salary, Mr. Otellini’s Incentive Baseline Amount for 2006 under the EOIP was set at $800,000. The Committee also intends to grant Mr. Otellini a stock option grant to purchase 520,000 shares and a 45,000 RSU grant in April 2006 in connection with Intel’s annual equity grant program. Both annual stock option grants and RSU awards vest in 25% annual increments beginning one year from the date of grant.

The Committee is pleased to submit this report to Intel’s stockholders.

CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

Our Policies. It is our policy that all employees must avoid any activity that is or has the appearance of being hostile, adverse or competitive with Intel, or that interferes with the proper performance of their duties, responsibilities or loyalty to Intel. These policies are included in our Corporate Business Principles, which cover our directors, executive officers and other employees. Each director and executive officer is instructed to always inform our Board when confronted with any situation that may be perceived as a conflict of interest, even if the person does not believe that the situation would violate our Corporate Business Principles. If in a particular circumstance the Board concludes that there is or may be a perceived conflict of interest, the Board will instruct our Legal department to work with our relevant business units to determine if there is a conflict of interest. Any waivers to these conflict rules with regard to a director or executive officer require the prior approval of the Board or the Audit Committee.

NASDAQ Rules. NASDAQ rules defining “independent” director status also govern conflict of interest situations. As discussed above, each of our directors other than Dr. Barrett and Mr. Otellini qualifies as “independent” in accordance with the NASDAQ rules. The NASDAQ rules include a series of objective tests that would not allow a director to be considered independent if the director has or has had certain employment, business or family relationships with the company. The NASDAQ independence definition also includes a requirement that the Board review the relations between each independent director and the company on a subjective basis. In accordance with that review, the Board has made a subjective determination as to each independent director that no relationships exist that, in the opinion of the Board, would interfere with the exercise of independent judgment in carrying out the responsibilities of a director. In making these determinations, the directors reviewed and discussed information provided by the directors and Intel with regard to each director’s business and personal activities as they may relate to Intel and our management.

SEC Rules. In addition to the Intel and NASDAQ policies and rules described above, the SEC has specific disclosure requirements covering certain types of transactions involving Intel and a director or executive officer or persons and entities affiliated with them. There were three such transactions in 2005 that require disclosure. We retained the law firm of Wilmer Cutler Pickering Hale and Dorr LLP (“Wilmer Cutler”) to perform legal services in 2005. Charlene Barshefsky, one of our directors, is Senior International Partner of this firm. We began using Wilmer Cutler before Ambassador Barshefsky was elected to the Board. In accordance with our Corporate Business Principles, Ambassador Barshefsky’s compensation from Wilmer Cutler does not include amounts connected to payments we made to the law firm. Due to Ambassador Barshefsky’s affiliation with Wilmer Cutler, the Board has established a special process which requires that use of that firm is subject to the prior approval of the Chief Executive Officer, the Audit Committee and the Board. In addition, family members of a former director and an officer are employed by Intel: the son-in-law of former director Andrew S. Grove is employed as an attorney in Intel’s Legal department and the brother-in-law of Robert Baker, an executive officer, is employed as an industrial engineer. In 2005, Dr. Grove’s son-in-law received cash compensation of $137,000 and was granted options to purchase 2,000 shares of common stock under our equity plan. In 2005, Mr. Baker’s brother-in-law received cash compensation of $163,000 and was granted options to purchase 2,000 shares of common stock under our equity plan. They are also eligible to participate in Intel’s stock purchase plan and other health and welfare benefit plans on terms available to Intel employees generally.

Except as noted above, we have not engaged in any transaction, or series of similar transactions, since the beginning of 2005, or any currently proposed transaction, or series of similar transactions, to which Intel or any of its subsidiaries was or is to be a party, in which the amount involved exceeds $60,000 and in which any of our directors, executive officers, nominees for election as a director, beneficial owners of more than 5% of our common stock or members of their immediate family had, or will have, a direct or indirect material interest.

In addition, none of the following persons has been indebted to Intel or its subsidiaries at any time since the beginning of 2005: any of our directors or executive officers; any nominee for election as a director; any member of the immediate family of any of our directors, executive officers or nominees for director; any corporation or organization of which any of our directors, executive officers or nominees is an executive officer or partner or is, directly or indirectly, the beneficial owner of 10% or more of any class of equity securities (except trade debt entered into in the ordinary course of business); and any trust or other estate in which any of the directors, executive officers or nominees for director has a substantial beneficial interest or for which such person serves as a trustee or in a similar capacity.

Business Relationships. We are a large business organization with worldwide operations, and we engage in thousands of purchase, sale and other transactions annually. We have various types of business arrangements with corporations and other organizations in which one of our directors, executive officers or nominees for director may also be a director, trustee or investor, or have some other direct or indirect relationship. We would usually enter into these arrangements in the ordinary course of our business, and they typically would involve Intel receiving or providing some good or service on a non-exclusive basis and at arms-length negotiated rates or in accordance with regulated price schedules. We do not

believe that in any material circumstance either Intel or the other corporation or organization is a sole-source supplier to the other with regard to the relevant good or service. We also do not believe that in any case the director, executive officer or nominee for director receives any compensation from the other corporation or organization that is directly linked to the revenue or profits of the Intel-related business. Any revenue or profits from Intel-related business may, of course, be indirectly reflected in the overall revenue or profits of the other corporation or organization, which in turn may affect the individual’s overall compensation or the value of his or her investments in the corporation or organization.

Under our Intel Capital program, we make equity investments in companies around the world to further our strategic objectives and support our key business initiatives, including investments through our Intel Capital program. We generally focus on investing in companies and initiatives to stimulate growth in the digital economy, create new business opportunities for us and expand global markets for our products. The investments may support, among other things, our product initiatives, emerging trends in the technology industry or worldwide Internet deployment. This strategic investment program helps advance our overall mission to be the preeminent provider of silicon chips and platform solutions to the worldwide digital economy. Many of our investments are in private companies, including development-stage companies with little or no revenue from current product offerings. We invest in companies that develop software, hardware or services supporting our technologies. Any one or more of these companies may be a supplier, vendor, customer, joint-venture partner or investment of a corporation or other organization with which one of our directors, executive officers or nominees for director, or one of their family members, is affiliated.

We have a corporate charitable donations program and have established the Intel Foundation for similar activity. Our charitable activities focus primarily on pre-collegiate mathematics, science and computer-related programs on a worldwide basis. We have a program whereby we will match certain charitable donations of individual employees up to $10,000 per employee per year. Directors and executive officers are eligible to participate in this matching program on the same terms as our other employees. It is possible that through this matching program and/or other parts of our corporate donation programs or the Intel Foundation we may make charitable contributions to organizations at which one of our directors, executive officers or nominees for director, or one of their family members, is a director, trustee, consultant or employee.

COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION

All members of the Compensation Committee during 2005 were independent directors, and none of them were our employees or former employees. During 2005, none of our executive officers served on the compensation committee (or equivalent), or the board of directors, of another entity whose executive officer(s) served on our Compensation Committee or Board of Directors.

EXECUTIVE COMPENSATION

The following tables set forth the annual compensation for our Chief Executive Officer and our four other most highly compensated executive officers in 2005 (“listed officers”).

Summary Compensation Table

Option Grants in Last Fiscal Year

Aggregated Option Exercises in Last Fiscal Year and Fiscal Year-End Option Values

Pension Plan Table

The table above illustrates the estimated annual benefits payable in the form of a straight-life annuity upon retirement at age 65 under the Pension Plan to persons in the specified compensation and years of service classifications. Compensation includes regular earnings and most cash incentives. However, maximum eligible compensation for 2005 is $210,000, in accordance with Section 401(a)(17) of the Internal Revenue Code of 1986, as amended (“Tax Code”). This amount is subject to cost-of-living adjustments in accordance with Section 415(d) of the Tax Code. The Employee Retirement Income Security Act of 1974 limits the amount of benefits that may be paid under pension plans qualified under the Tax Code. The amounts shown are subject to reduction to the extent that they exceed such limits.

The majority of our officers, including the listed officers, are not expected to receive a pension benefit upon separation. The Pension Plan provides for minimum pension benefits determined by a participant’s years of service credited under the plan and final average compensation (taking into account the participant’s Social Security wage base), reduced by the participant’s balance in the Profit Sharing Retirement Plan. If the pension benefit exceeds the participant’s balance in the Profit Sharing Retirement Plan, the participant will receive a combination of pension and profit sharing amounts equal to the pension benefit. However, the participant will receive only the benefit from the Profit Sharing Retirement Plan if that benefit is greater than the value of the pension benefit. Historically, we have contributed 8% to 12.5% of participants’ eligible compensation to the Profit Sharing Retirement Plan on an annual basis, which has caused the value of our employees’ Profit Sharing Retirement Plan accounts to typically exceed their Pension Plan benefits, resulting in no payments being made from the Pension Plan.

For each listed officer, the years of credited service as of year-end 2005 under the Pension Plan are: Dr. Barrett (31), Mr. Otellini (31), Mr. Bryant (24), Mr. Maloney (23) and Mr. Sodhani (24). Credited service equals the actual number of years that the listed officers have been fully employed at Intel; our listed officers do not receive extra or bonus credits for this purpose.

Employment Contracts, Change in Control Arrangements and Other Potential Post-Employment Arrangements

All of our employees, including our executive officers, are employed at will and do not have employment agreements. From time to time, we have implemented voluntary separation programs to encourage headcount reduction in particular parts of the company, and these programs have offered separation payments to departing employees. However, executive officers have not historically been eligible for any of these programs, nor do we retain executive officers following retirement on a part-time or consultancy basis. In 2002, we received a request from a stockholder to adopt a policy that, absent stockholder approval by vote, we would not pay severance to a departing executive officer in excess of 2.99 times that officer’s most recent annual salary and cash incentives. We have no practice of making such payments, nor do we have any plans to do so in the future, but the stockholder still requested that we adopt the policy so as to cover any such payments that we might make in the future. Following discussions with the stockholder, the Board adopted a policy that we will seek stockholder approval for future severance agreements with senior executives that provide benefits in an amount exceeding three times the executive’s base compensation. For this purpose, “future severance agreements” means any such agreements that we may enter into after adoption of this policy by the Board in February 2003, and includes employment agreements containing severance provisions, retirement agreements, and agreements renewing, modifying or extending such agreements, but does not include retirement plans, deferred compensation plans, early retirement programs, or similar plans or programs available to more than 50 employees on reasonably similar terms. “Senior executive” means any of our top five most highly compensated executives in the calendar year preceding termination of employment, and any executive listed in the compensation table in our annual proxy statement in any of the five years preceding termination of employment. “Benefits” include lump-sum cash payments (such as payments in lieu of medical and other benefits) and the estimated present value of periodic retirement payments, fringe benefits and consulting fees (including reimbursable expenses) to be paid to the executive. “Benefits” do not include settlement of a legal obligation, such as a cash payment in exchange for the surrender of vested stock options, or payments to settle pending or threatened litigation. “Base compensation” shall be determined consistent with federal regulations under Tax Code Section 280G, and generally means the executive’s average W-2 compensation over the five full calendar years preceding termination of employment. The Board may in its discretion revise or terminate this policy in the future, but will at that time publicly disclose any such action on its part.

We do not have employment agreements or change in control arrangements with our executive officers, but the standard terms of our compensation plans include several provisions that become effective upon resignation, retirement, death, disability or other termination from Intel in addition to those of the Pension Plan described above. These provisions affect all similarly situated employees who are participants in these plans; they are not special provisions for executive officers.

Equity Incentive Plans

Under our equity incentive plans (including the 2006 Equity Incentive Plan as proposed), upon termination of employment (other than death, disability, retirement or discharge for misconduct), the option holder has 90 days to exercise options that had vested on or prior to the date of termination. Upon death, the option holder’s estate may exercise the option (including amounts that had not vested) for a period of 365 days. Similarly, upon termination due to disability, the option holder may exercise the option (including amounts that had not vested) for a period of 365 days. Upon retirement (other than for long-term retention grants), the option holder has 365 days to exercise vested options. In addition, if the option holder is 60 years of age or older, the option holder will receive an additional year of vesting

for every five years of service to Intel. Alternatively, if upon retirement an option holder’s age plus years of service to Intel equal or exceed 75, the option holder would receive an additional year of vesting. Long-term retention grants do not receive accelerated vesting, and the option holder may only exercise the vested portion of the option for a period of 90 days from the date of termination. If an option holder has committed misconduct (including embezzlement, fraud, dishonesty, nonpayment of any obligation owed to Intel, breach of fiduciary duty or deliberate disregard of Intel rules resulting in loss, damage or injury to Intel, or if the option holder makes unauthorized disclosure of any Intel trade secret or confidential information, engages in any conduct constituting unfair competition, induces any customer to breach a contract with Intel or induces any principal for whom Intel acts as agent to terminate such agency relationship), the Compensation Committee (subject to approval of the Board) may determine that the option holder or his or her estate may not exercise any portion of the officer’s stock option (including vested portions).

SERPLUS

A participant is 100% vested in the value of the participant’s deferrals of salary and bonus under the tax-qualified Sheltered Employee Retirement Plan (“SERP”). Intel also has a non-tax-qualified supplemental deferred compensation plan for certain highly compensated employees (“SERPLUS”). Intel’s contributions to the participant’s SERPLUS account (representing the profit sharing component in excess of the Tax Code limit of $16,800 in 2005) are subject to the same vesting provisions as the Profit Sharing Retirement Plan. After three years of service, Intel’s contributions vest in 20% annual increments, until the participant is 100% vested after seven years of service. Intel’s contributions also vest in full upon death, disability or reaching the age of 60, regardless of years of service. All listed officers are fully vested in the value of Intel’s contributions, as they each have more than seven years of service.

Profit Sharing Retirement Plan

After three years of service, Intel’s contributions vest in 20% annual increments, until the participant is 100% vested after seven years of service. Intel’s contributions also vest in full upon death, disability or reaching the age of 60, regardless of years of service. All listed officers are fully vested in the value of Intel’s contributions, as they each have more than seven years of service to Intel.

401(k) Savings Plan

Intel does not match the participant’s contributions to his or her 401(k) Savings Plan. Each participant is always fully vested in the value of his or her contributions under the plan.

Employee Stock Purchase Plan

Upon termination of employment, all amounts in the participant’s account are paid to the participant.

Medical Benefits

The Intel Retiree Medical Program, which consists of the Intel Retiree Medical Plan (“IRMP”) and the Sheltered Employee Retirement Medical Account (“SERMA”), is designed to provide access to medical coverage for eligible U.S. Intel retirees (including executives) and their eligible spouses or domestic partners. Upon retirement, Intel establishes a SERMA, an interest-earning account, and provides a one-time credit of $1,500 for each year of service to eligible retirees that may be used to offset the cost of coverage under the IRMP. The goal of the IRMP is to provide access to coverage for eligible retirees age 65 and over (Medicare eligible) and eligible early retirees unable to purchase health insurance coverage elsewhere. All of the IRMP’s costs, minus co-payments and deductibles, are passed to the enrolled IRMP members. The IRMP includes medical coverage, mental health benefits, chiropractic benefits, a prescription drug program and vision benefits. It does not include dental coverage. IRMP benefits will vary depending on Medicare eligibility. Non-retirement post-employment coverage is made available as required by law, with the premiums paid by the participant.

Our Board, in its continuing review of corporate governance matters, and after careful consideration and upon recommendation of the Corporate Governance and Nominating Committee, has concluded that it is in the best interests of the company’s stockholders to propose an amendment to the company’s Second Restated Certificate of Incorporation (“Certificate of Incorporation”) to repeal the fair price provision and to request stockholder approval of that amendment. A fair price provision is an anti-takeover measure designed to help companies defend against certain kinds of tender offers, known as coercive, two-tiered tender offers. In this type of takeover, a potential acquirer will offer one price for the shares needed to gain control of a target company and then offer a lower price or other less favorable consideration for the remaining shares, thereby creating pressure for stockholders to tender their shares for the tender offer price, regardless of their value. Standard fair price provisions encourage a potential acquirer to negotiate with a company’s board of directors by requiring the potential acquirer to pay a “fair price” for all shares as determined under a specified formulation, unless the acquirer’s offer has satisfied specified board or stockholder approval requirements. Section 203 of the Delaware General Corporation Law (“DGCL”) contains provisions that provide similar protection to those under Article 10. When Article 10 of our Certificate of Incorporation was adopted in 1989, the status of Section 203 of the DGCL was uncertain due to litigation that has since been resolved. The Board believes the protection afforded by Section 203 of the DGCL is sufficient, and that a separate provision in the Certificate of Incorporation is no longer necessary. The Board has adopted resolutions approving and declaring the advisability of the amendment to our Certificate of Incorporation to repeal in its entirety the fair price provision currently set forth in Article 10 of the Certificate of Incorporation, subject to stockholder approval. The Board has separately proposed to repeal other provisions of the Certificate of Incorporation, as discussed below in “Proposal 3: Amendment of the Company’s Second Restated Certificate of Incorporation to Repeal the Supermajority Vote Provisions.” The amendments to the Certificate of Incorporation proposed under Proposal 2 and Proposal 3 are set forth in Exhibit A, with deletions indicated by strikeout and additions indicated by underline, and reflecting conforming changes in the numbering and cross-references in the Certificate of Incorporation that will be made to the extent stockholders approve the amendments. The current provisions and proposed amendment described below are qualified in their entirety by reference to the actual text as set forth in Exhibit A.

Article 10 of our Certificate of Incorporation currently provides that the vote of at least 66²/3% of the combined voting power of all outstanding shares entitled to vote in the election of directors is required to approve certain transactions (defined as “business combination” transactions) with an interested stockholder unless the business combination is approved by the majority of the company’s disinterested directors (generally directors not affiliated, associated or nominated by an interested stockholder) or the five “fair price” requirements are met. Under Article 10, an “interested stockholder” generally is defined to include any beneficial owner (or any affiliate or associate thereof) of 5% or more of the outstanding shares entitled to vote in the election of directors. The five “fair price” requirements applicable to business combination transactions not approved by the majority of the company’s disinterested directors, or by the requisite vote of the company’s stockholders, follow:

Section 203 of the DGCL contains provisions that are similar, but not identical, to those under Article 10 in the event that an interested stockholder proposes a business combination with the company. Specifically, Section 203 would prohibit the company from engaging in a business combination with an interested stockholder for a period of three years following the date on which the stockholder became an interested stockholder unless:

Section 203 defines an “interested stockholder” to include a person (or any affiliate or associate thereof) who beneficially owns 15% or more of the outstanding voting stock of a corporation (in contrast to the 5% threshold set by Article 10).

Both Article 10 and Section 203 are designed to protect the company and its stockholders against coercive, two-tiered tender offers. However, the five “fair price” conditions under Article 10 have no corollary under, and thus are more burdensome to an interested stockholder than, the requirements of Section 203. There are four other significant differences between the provisions:

Article 10 was adopted when Intel re-incorporated from California to Delaware in 1989. At that time, Section 203 was relatively new and under challenge in various lawsuits. The Board believes that Section 203 is sufficient to protect Intel stockholders from coercive, two-tiered tender offers and that Article 10 is no longer necessary or appropriate.

Vote Necessary to Approve the Amendment and Effectiveness

The affirmative vote of the holders of 66²/3% of the outstanding shares of all stock entitled to vote at the annual meeting is required for approval of Proposal 2. Shares not present at the meeting and shares voting “abstain” effectively count as votes against the amendment. If Proposal 2 is approved, the amendment to the Certificate of Incorporation will become effective upon filing of the Third Restated Certificate of Incorporation with the Delaware Secretary of State. Because an abstention on this proposal is not an affirmative vote, it will have the same effect as a vote against this proposal. Therefore, it is important that you vote your shares.

Recommendation of the Board

The Board of Directors recommends that you vote “FOR” the proposal to amend the company’s Second Restated Certificate of Incorporation to repeal Article 10 (the fair price provision) in its entirety.

Our Board, in its continuing review of corporate governance matters, and after careful consideration and upon recommendation of the Corporate Governance and Nominating Committee, has concluded that it is in the best interests of the company’s stockholders to propose an amendment to the company’s Second Restated Certificate of Incorporation (“Certificate of Incorporation”) to repeal the supermajority vote provisions, and to request stockholder approval of that amendment. Our Certificate of Incorporation currently contains three supermajority vote provisions (provisions that require more than a simple majority for approval): (a) Article 7, addressing stockholder approval of a compromise or arrangement between Intel and its creditors or stockholders, (b) Article 10, containing a fair price provision that can be overridden by a supermajority vote and (c) Article 12, containing a supermajority vote requirement to amend certain provisions of the Certificate of Incorporation. The Board has adopted resolutions approving and declaring the advisability of an amendment to our Certificate of Incorporation subject to stockholder approval to (i) repeal Article 7 in its entirety and (ii) repeal Article 12 in its entirety. The Board has separately proposed to repeal Article 10 in its entirety, as discussed above in “Proposal 2: Amendment of the Company’s Second Restated Certificate of Incorporation to Repeal the Fair Price Provision.” The amendments to the Certificate of Incorporation proposed under Proposal 2 and Proposal 3 are set forth in Exhibit A, with deletions indicated by strikeout and additions indicated by underline, and reflecting conforming changes in the numbering and cross-references in the Certificate of Incorporation that will be made to the extent stockholders approve the amendments. The current provisions and proposed amendments described below are qualified in their entirety by reference to the actual text as set forth in Exhibit A.

Although the incidence of supermajority vote requirements is fairly high in American corporations, many investors and others have begun to view these provisions as conflicting with principles of good corporate governance. Recognizing that supermajority vote requirements can be beneficial in some circumstances, our Board has determined that there nevertheless are arguments for repealing the supermajority vote requirements. For example, a supermajority vote requirement can limit the stockholders’ ability to effect change, in that such a requirement essentially provides a veto to a large minority of stockholders. Moreover, providing a lower threshold for stockholder votes can increase the ability of stockholders to participate effectively in Intel’s corporate governance. Accordingly, upon reviewing the supermajority vote provisions in the company’s Certificate of Incorporation, and weighing the advantages and disadvantages of such provisions, the Board has concluded that it is in the best interests of our stockholders to repeal the supermajority vote requirements of Article 7 and Article 12.

The current supermajority vote provisions in the Certificate of Incorporation are as follows:

The supermajority vote provisions contained in Articles 7 and 12 of the Certificate of Incorporation were included in our original certificate of incorporation when we re-incorporated in Delaware from California in 1989. Article 12 is substantially similar to provisions contained in the company’s previous Articles of Incorporation, as amended, as a California corporation. Article 7 is a Delaware-specific provision and was not included in the previous Articles of Incorporation.

Vote Necessary to Approve the Amendment and Effectiveness

The affirmative vote of the holders of 66²/3% of the outstanding shares of all stock entitled to vote at the annual meeting is required for approval of Proposal 3. Shares not present at the meeting and shares voting “abstain” effectively count as votes against the amendment. Under the Certificate of Incorporation, the affirmative vote of the holders of 66²/3% of the outstanding shares of all stock entitled to vote at the annual meeting is required for approval of the amendments to Article 12. Although the affirmative vote of the holders of the majority of the outstanding shares of common stock entitled to vote at the annual meeting, assuming a quorum is present, is necessary for approval of the amendment to repeal Article 7, the company has proposed to repeal this provision in conjunction with the other amendments set forth in Proposal 3, and therefore will repeal Article 7 only if Proposal 3 is approved by the affirmative vote of the holders of 66²/3% of the outstanding shares of all stock entitled to vote at the annual meeting. If Proposal 3 is approved, the amendments to the Certificate of Incorporation will become effective upon filing the Third Restated Certificate of Incorporation with the Delaware Secretary of State. Because an abstention on this proposal is not an affirmative vote, it will have the same effect as a vote against this proposal. Therefore, it is important that you vote your shares.

Recommendation of the Board

The Board of Directors recommends that you vote “FOR” the proposal to amend the company’s Second Restated Certificate of Incorporation to repeal the supermajority vote provisions.

REPORT OF THE AUDIT COMMITTEE

The ultimate responsibility for good corporate governance rests with our Board, whose primary role is providing oversight, counseling and direction to Intel’s management in the best long-term interests of the company and its stockholders. The Audit Committee has been established for the purpose of overseeing Intel’s accounting and financial reporting processes, and audits of Intel’s annual financial statements and internal control over financial reporting.

The Audit Committee is made up solely of independent directors, as defined in the applicable NASDAQ and SEC rules, and it operates under a written charter adopted by the Board, a copy of which is posted on our web site at www.intc.com. Intel intends for the composition of the Audit Committee, and the attributes of its members and its responsibilities, as reflected in its charter, to be in accordance with applicable requirements for corporate audit committees. The Audit Committee reviews and assesses the adequacy of its charter on an annual basis.

As described more fully in its charter, the purpose of the Audit Committee is to assist the Board in its general oversight of Intel’s financial reporting, internal controls and audit functions. Management is responsible for the preparation, presentation and integrity of Intel’s financial statements; accounting and financial reporting principles; internal controls; and procedures designed to reasonably assure compliance with accounting standards, applicable laws and regulations. Intel has a full-time Internal Audit department that reports to the Audit Committee and to management. This department is responsible for objectively reviewing and evaluating the adequacy, effectiveness and quality of Intel’s system of internal controls relating, for example, to the reliability and integrity of Intel’s financial information and the safeguarding of Intel’s assets. Ernst & Young LLP, Intel’s independent registered public accounting firm, is responsible for performing an independent audit of Intel’s consolidated financial statements in accordance with generally accepted auditing standards and expressing opinions on management’s assessment of the effectiveness of Intel’s internal control over financial reporting and their own assessment of the effectiveness of Intel’s internal control over financial reporting. In accordance with law, the Audit Committee has ultimate authority and responsibility to select, compensate, evaluate and, when appropriate, replace Intel’s independent audit firm. The Audit Committee has the authority to engage its own outside advisors, including experts in particular areas of accounting, as it determines appropriate, apart from counsel or advisors hired by management.

Audit Committee members are not professional accountants or auditors, and their functions are not intended to duplicate or to certify the activities of management and the independent audit firm; nor can the Audit Committee certify that the independent audit firm is “independent” under applicable rules. The Audit Committee serves a board-level oversight role, in which it provides advice, counsel and direction to management and to the auditors on the basis of the information it receives; discussions with management and the auditors; and the experience of the Audit Committee’s members in business, financial and accounting matters.

The Audit Committee has an agenda for the year that includes reviewing Intel’s financial statements, internal control over financial reporting and audit matters. The Audit Committee meets each quarter with Ernst & Young, Intel’s Chief Audit Executive and management to review Intel’s interim financial results before the publication of Intel’s quarterly earnings press releases. Management’s and the independent audit firm’s presentations to and discussions with the Audit Committee cover various topics and events that may have significant financial impact and/or are the subject of discussions between management and the independent audit firm. In addition, the Audit Committee generally oversees Intel’s internal compliance programs. In accordance with law, the Audit Committee is responsible for establishing procedures for the receipt, retention and treatment of complaints received by Intel regarding accounting, internal accounting controls or auditing matters, including the confidential, anonymous submission by Intel’s employees, received through established procedures, of any concerns regarding questionable accounting or auditing matters.

Among other matters, the Audit Committee monitors the activities and performance of Intel’s internal auditors and independent registered public accounting firm, including the audit scope, external audit fees, auditor independence matters and the extent to which the independent audit firm may be retained to perform non-audit services. Intel’s independent audit firm has provided the Audit Committee with the written disclosures and the letter required by Independence Standards Board Standard No. 1, “Independence Discussions with Audit Committees,” and the Audit Committee has discussed with the independent audit firm and management that firm’s independence.

The Audit Committee has reviewed and discussed with management its assessment and report on the effectiveness of Intel’s internal control over financial reporting as of December 31, 2005, which it made using the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission in Internal Control–Integrated Framework. The Audit Committee has also reviewed and discussed with Ernst & Young its attestation report on management’s assessment of internal control over financial reporting, and its review and report on Intel’s internal control over financial

reporting. Intel published these reports in its Annual Report on Form 10-K for the year ended December 31, 2005, which Intel filed with the SEC on February 27, 2006.

In accordance with Audit Committee policy and the requirements of law, the Audit Committee pre-approves all services to be provided by Ernst & Young. Pre-approval includes audit services, audit-related services, tax services and other services. In some cases, the full Audit Committee provides pre-approval for up to a year related to a particular defined task or scope of work and subject to a specific budget. In other cases, the chairman of the Audit Committee has the delegated authority from the Audit Committee to pre-approve additional services, and the chairman then communicates such pre-approvals to the full Audit Committee. To avoid potential conflicts of interest, the law prohibits a publicly traded company from obtaining certain non-audit services from its independent audit firm. Intel obtains these services from other service providers as needed. The Audit Committee has been reducing the scope and amount of permissible non-audit services obtained from Ernst & Young and obtaining other providers for those services. This activity continued in 2005 and will continue in 2006. For more information about fees paid to Ernst & Young for services in fiscal years 2004 and 2005, see “Proposal 4: Ratification of Selection of Independent Registered Public Accounting Firm.”

The Audit Committee has reviewed and discussed the consolidated financial statements for fiscal year 2005 with management and Ernst & Young; management represented to the Audit Committee that Intel’s consolidated financial statements were prepared in accordance with U.S. generally accepted accounting principles; and Ernst & Young represented that their presentations included the matters required to be discussed with the independent registered public accounting firm by Statement on Auditing Standards No. 61, as amended, “Communication with Audit Committees.” This review included a discussion with management of the quality, not merely the acceptability, of Intel’s accounting principles, the reasonableness of significant estimates and judgments, and the clarity of disclosure in Intel’s financial statements, including the disclosures related to critical accounting estimates. In reliance on these reviews and discussions, and the reports of Ernst & Young, the Audit Committee has recommended to the Board, and the Board has approved, the inclusion of the audited financial statements in Intel’s Annual Report on Form 10-K for the year ended December 31, 2005, which Intel filed with the SEC on February 27, 2006.

Ernst & Young LLP has been our independent audit firm since our incorporation in 1968, and the Audit Committee has selected Ernst & Young as our independent audit firm for the fiscal year ending December 30, 2006. Among other matters, the Audit Committee concluded that current requirements for audit partner rotation, auditor independence through limitation of services and other regulations affecting the audit engagement process substantially assist in supporting auditor independence despite the long-term nature of Ernst & Young’s services to us. In accordance with applicable regulations on partner rotation, Ernst & Young’s primary engagement partner for our audit was changed for 2005, and the concurring/reviewing partner for our audit was changed in 2004.

As a matter of good corporate governance, the Audit Committee has determined to submit its selection of the independent audit firm to our stockholders for ratification. In the event that this selection of Ernst & Young is not ratified by the majority of the shares of common stock present or represented at the annual meeting and entitled to vote on the matter, the Audit Committee will review its future selection of an independent registered public accounting firm.

Representatives of Ernst & Young attended all meetings of the Audit Committee in 2005. The Audit Committee pre-approves and reviews audit and non-audit services performed by Ernst & Young as well as the fees charged by Ernst & Young for such services. In its pre-approval and review of non-audit service fees, the Audit Committee considers, among other factors, the possible effect of the performance of such services on the auditors’ independence. To avoid potential conflicts of interest in maintaining auditor independence, the law prohibits a publicly traded company from obtaining certain non-audit services from its independent registered public accounting firm. In 2004 and 2005, we did not obtain any of these prohibited services from Ernst & Young. We use Deloitte & Touche LLP, KPMG LLP and PricewaterhouseCoopers LLP for these types of non-audit services. For additional information concerning the Audit Committee and its activities with Ernst & Young, see “The Board, Board Committees and Meetings” and “Report of the Audit Committee.”

We expect that a representative of Ernst & Young will attend the annual meeting, and the representative will have an opportunity to make a statement if he or she so chooses. The representative will also be available to respond to appropriate questions from stockholders.

Fees Paid to Ernst & Young LLP

The following table shows the fees that we paid or accrued for audit and other services provided by Ernst & Young LLP for fiscal years 2005 and 2004. All figures are net of Value Added Tax and other similar taxes assessed by certain non-U.S. jurisdictions on the amount billed by Ernst & Young. All of the services described in the following fee table were approved in conformity with the Audit Committee’s pre-approval process.

Audit Fees ($12,459,000; $11,167,000). This category includes the audit of our annual financial statements, the audit of management’s assessment of our internal control over financial reporting, and Ernst & Young’s own audit of our internal control over financial reporting, review of financial statements included in our Form 10-Q quarterly reports, and services that are normally provided by the independent registered public accounting firm in connection with statutory and regulatory filings or engagements for those fiscal years. This category also includes advice on accounting matters that arose during, or as a result of, the audit or the review of interim financial statements, statutory audits required by non-U.S. jurisdictions and the preparation of an annual “management letter” on internal control matters.

Audit-Related Fees ($663,000; $743,000). This category consists of assurance and related services provided by Ernst & Young that are reasonably related to the performance of the audit or review of our financial statements and are not reported above under “Audit Fees.” The services for the fees disclosed under this category include benefit plan audits, consents issued in connection with SEC filings, review procedures, and letters provided to underwriters in connection with the issuance of debt securities in 2005.

Tax Fees ($127,000; $1,305,000). This category consists of tax services generally for tax compliance and tax preparation. In 2005, $98,000 was for tax compliance and preparation services rendered by Ernst & Young, including the preparation of original and amended tax returns, claims for refunds, support during income tax audits or inquiries, and tax payment planning in certain overseas jurisdictions. The remaining $29,000 was for tax advice and transfer pricing studies.

All Other Fees ($123,000; $135,000). This category consists of fees for the following: an audit of an investment fund owned by Intel and a group of corporations that manufacture and/or use 64-bit Itanium^®-based systems (as the managing partner of the fund, we are responsible for coordinating the fund’s financial audit), agreed-upon procedures for a research and development grant program audit in Ireland, agreed-upon procedures as required by the State of California for companies handling hazardous waste materials, translation services for certain statutory financial filings outside the U.S., agreed-upon procedures for a tax certification report as required by authorities in India; and an annual subscription fee to Ernst & Young for accounting literature.

Recommendation of the Board

The Board of Directors recommends that you vote “FOR” the ratification of the appointment of Ernst & Young as our independent registered public accounting firm for 2006.

PROPOSAL 5: APPROVAL OF THE 2006 EQUITY INCENTIVE PLAN

The Board is requesting that our stockholders vote in favor of approving the 2006 Equity Incentive Plan (“2006 EIP”), which was adopted by the Board on February 23, 2006. If approved, the two-year 2006 EIP will replace the 2004 Equity Incentive Plan (“2004 Plan”) in advance of its expiration and will become the sole plan for providing stock-based incentive compensation to eligible employees and non-employee directors. The Board has chosen to adopt the 2006 EIP rather than extend the 2004 Plan, primarily to clarify our use of restricted stock units (“RSUs”) in 2006 in addition to stock options. The Board believes that our 2006 EIP is in the best interest of stockholders and Intel, as it will continue to provide employee and stockholder alignment; maintain our broad-based equity program; and help attract, motivate and retain employees. The following summary of certain major features of the 2006 EIP is qualified in its entirety by reference to the actual text of the 2006 EIP, set forth as Exhibit B.

We are seeking approval of the following for the 2006 EIP:

Background on Equity Compensation at Intel

Intel has a long history of linking employee actions, behaviors and compensation to our long-term stock performance. For more than 25 years, we have been granting stock options to our officers and other key employees. In 1997, we expanded the eligibility of our stock option program to cover essentially all full-time and part-time employees, which is what Intel refers to as broad-based. Intel strongly believes in our broad-based equity program and grants equity to more than 90% of our employees annually. While we grant employee equity quarterly, we make most of our grants in the second quarter of each year as part of our company-wide employee performance evaluation process. In 2005, Intel granted 118.6 million options under the 2004 Plan of which 1.7 million options, or 1.4%, were awarded to Intel’s CEO and four most highly compensated executive officers (“listed officers”); 167,000 options, or 0.2%, were awarded to Intel’s non-employee directors; and the remaining 116.7 million options, or 98.4%, were awarded to Intel’s broad-based employee population. We believe that share-based compensation should not be limited to executive officers, and that all employees should be aligned with our stockholders and have their actions, behaviors and compensation linked to Intel’s long-term stock performance. To better ensure this practice, the Compensation Committee (“Committee”) instituted a policy that limits grants to our listed officers to no more than 5% of the total options granted in any one year. Over the last five years, on average we awarded 1.5% of all equity grants to our listed officers (1.4% in 2005).

Intel also sets a limit on dilution, which is total equity awards granted less cancellations, divided by shares outstanding at the beginning of the year. Intel’s long-term goal is to limit the average annual dilution from our equity programs to less than 2%. Over the last five years, the average annual dilution from stock options was 1.7% (1.3% in 2005). Intel manages our long-term dilution goal by limiting the number of shares we grant annually, commonly referred to as burn rate (total equity awards granted, divided by shares outstanding at the beginning of the year). Over the last five years, Intel’s annual burn rate has averaged 2.3% (1.9% in 2005). While Intel’s 2005 dilution and burn rate have declined from their five-year average, both of these metrics have increased from 2003 to 2005, primarily as a result of our growing headcount. An additional metric that Intel uses to measure the cumulative impact of our stock program is overhang (equity outstanding but not exercised, plus equity available to be granted, divided by equity outstanding at the end of the year). Over the last five years, Intel’s overhang has averaged 22.5% (19.2% in 2005). Intel’s 2005 overhang is less than our five-year average, primarily as a result of reducing the term of our equity plan. A shorter term allows for a smaller pool of shares available to be granted, which reduces overhang.

The use of broad-based equity has long been a significant component of our overall compensation philosophy and is one that we plan to continue. Our philosophy is built on the principles that equity compensation should align employees’ actions and behaviors with stockholders’ interests; be market-competitive; be able to attract, motivate and retain the best employees; and support Intel’s belief in a broad-based approach. We believe that we have been successful in achieving this alignment through the use of fixed-price stock options that reward employees only upon improved stock price performance. Looking to the future, the ability to maintain our long-term average dilution goal of 2% against a backdrop of increasing headcount, while maintaining our ability to attract, motivate and retain employees, has required us to explore the use of various equity vehicles. We have determined that the introduction of RSUs in combination with stock options will help us manage dilution while retaining our use of broad-based equity. By introducing RSUs, we will require fewer shares under the 2006 EIP than were requested for the 2004 Plan. Because all of our equity awards under the 2004 Plan were in the form of stock options, we originally reserved 240 million shares under the 2004 Plan for a term of two years (and, with stockholder approval, we added a year and an additional 130 million shares in 2005). In this proposal, we are requesting that 175 million shares be made available for a term of two years. This represents a 27% drop in the amount of shares requested for the 2006 EIP from the 2004 Plan, despite Intel’s increasing headcount. The 175 million shares will result in an average annual burn rate of about 1.5%.

An RSU is a promise to deliver a full-value share of stock at a specific time in the future subject to vesting requirements. The value of an RSU to an employee is determined by multiplying the number of RSUs by the price of Intel stock. As the price of Intel stock fluctuates, so does the value of the employee’s RSU grant; this allows for employee and stockholder alignment with both increases and decreases in Intel’s stock price. RSUs also provide for more stable value than stock options; RSUs provide value to employees with both increases and decreases in stock price, while options provide value to employees only with an increase in stock price. Because RSUs are more likely to deliver actual economic value to recipients, we are granting fewer RSUs than the number of options we used to grant.

Intel’s non-exempt employees through our lower level exempt employees will receive RSUs exclusively. By changing our equity grants for non-exempt and lower level exempt employees, Intel can maintain a broad-based equity program with fewer shares, provide more stable value from these grants, and continue to provide employee and stockholder alignment.

Intel will also continue to use stock options. For our mid-level exempt employees through our CEO, Intel will utilize a combination of RSUs and options. As employees’ responsibilities increase within the organization, they will receive a higher proportion of their equity compensation in the form of stock options and therefore have a higher percentage of their total compensation at risk. This compensation at risk provides management with a strong incentive to improve the company’s performance.

Intel will also continue to use equity to recognize the outstanding achievement of our employees via special recognition programs. We are requesting the ability to use up to 100,000 shares for employee recognition stock awards having no minimum vesting period; these awards are typically granted in small amounts of 100 to 150 shares per recipient and vest immediately. We are also requesting the ability to use up to 7 million shares for executive long-term retention grants; these awards have a longer vesting schedule and a maximum life of 10 years.

For the 2006 EIP, the Board recommends the approval of 175 million shares of which a maximum of 80 million shares can be awarded as restricted stock or RSUs. We strongly believe that our stock programs and emphasis on employee stock ownership have been integral to our success. We believe that our broad-based equity program has enhanced our ability to attract, motivate and retain the employee talent critical to attaining long-term improved company performance and stockholder returns. Therefore, we consider approval of the 2006 EIP vital to our future success, as it will enable Intel to continue offering equity awards to our employees.

Equity Compensation Plan Information

The 2006 EIP will replace our stockholder-approved 2004 Plan. If the 2006 EIP is approved by stockholders, we will cancel all shares not subject to previously granted awards, and no further awards will be granted under the 2004 Plan. Information as of December 31, 2005 regarding equity compensation plans approved and not approved by stockholders is summarized in the following table (shares in millions):

The 1997 Stock Option Plan (“1997 Plan”) provided for the grant of stock options to employees other than officers and directors. The 1997 Plan, which was not approved by stockholders, was terminated as to future grants when the 2004 Plan was approved by stockholders in May 2004. The 1997 Plan is administered by the Committee, which has the power to determine matters relating to outstanding option awards under the 1997 Plan, including conditions of vesting and exercisability. Options granted under the 1997 Plan expire no later than 10 years from the grant date. Options granted prior to 2003 under the 1997 Plan generally vest in five years, and options granted under the 1997 Plan in 2003 and 2004 generally vest in increments over four or five years from the date of grant. Certain grants to key employees have delayed vesting, generally beginning six years from the date of grant.

Purpose of the 2006 EIP

As set forth herein, the 2006 EIP will allow us to make broad-based grants of stock options, restricted stock, RSUs and Stock Appreciation Rights (“SARs”), any of which may or may not require the satisfaction of performance objectives, to employees and to non-employee directors through June 30, 2008. The purpose of these equity awards is to attract, motivate and retain talented employees and non-employee directors, further align employee and stockholder interests, continue to closely link employee compensation with company performance, and maintain a culture based on employee stock ownership.

Key Terms

The following is a summary of the key provisions of the 2006 EIP, as set forth and stated herein.

Eligibility

Only employees of Intel and its subsidiaries and our non-employee directors are eligible to receive awards under the 2006 EIP. The Committee determines which employees will participate in the 2006 EIP, and the Board determines the terms of grants to non-employee directors. As of February 24, 2006, there were approximately 103,000 employees and nine non-employee directors eligible to participate in the 2006 EIP.

Awards

The 2006 EIP allows the grant of stock options, SARs, restricted stock or RSUs, any or all of which may be made contingent upon the achievement of performance criteria. Subject to plan limits, the Committee has the discretionary authority to determine the size of awards to employees. The use of performance-based requirements will be considered in the context of our total compensation program and the significant level of pay-for-performance requirements already incorporated into our compensation practices.

Non-Employee Director Awards

Each year, non-employee directors may receive award(s) for a number of shares established by the Board, but no more than 30,000 shares annually. Subject to limits in the plan terms applicable to awards under both the 2004 Plan and the 2006 EIP, the Board has the discretion to determine the form and terms of awards to non-employee directors. We granted each non-employee director options for 19,000 shares in 2005, except for Dr. Plummer, to whom we awarded a prorated grant of 15,000 stock options in accordance with his appointment in July 2005.

Vesting and Exercise of Stock Options and SARs

The exercise price of stock options granted under the 2006 EIP may not be less than the market value (the average of the high and low market price) of the common stock on the date of grant. For example, on February 24, 2006, the average of the highest and lowest quoted sales prices of our common stock was $20.36 per share, which would have been the grant price for any stock options granted on that date. The option term may not be longer than seven years in the case of stock options vesting in full in less than five years, and may not be longer than 10 years in the case of stock options vesting in full in five or more years (long-term executive retention grants). The Committee (or, for non-employee director awards, the Board) will determine when each stock option becomes exercisable, including the establishment of performance vesting criteria, if any, provided that no stock option may be exercised less than one year from the date of grant (except upon the death, disability or retirement of the participant). We may require, prior to issuing common stock under the 2006 EIP, that the participant remit an amount in cash or common stock sufficient to satisfy tax withholding requirements. SARs are generally subject to the same terms and limitations under the 2006 EIP as stock options.

Vesting of Restricted Stock and RSUs

The Committee (or, for non-employee director awards, the Board) may make the grant, issuance, retention and/or vesting of restricted stock and RSUs contingent upon continued employment with Intel, the passage of time, or such performance criteria and the level of achievement versus such criteria as it deems appropriate. Except in the case of death, disability or retirement of the participant, vesting of restricted stock and RSUs that is contingent upon the achievement of performance objectives shall be based on performance over a period of not less than one year, and awards that are contingent upon continued employment or the passage of time shall not fully vest in less than pro rata

installments over three years from the date of grant. Notwithstanding the limitations of the preceding sentence, up to 100,000 shares shall be available for use as employee recognition stock awards having no minimum vesting period.

Dividends

Unless otherwise provided by the Committee, no adjustment shall be made in shares issuable under awards due to cash dividends that may be paid or other rights that may be issued to the holders of shares prior to their issuance under any award. The Committee shall specify whether dividends or dividend equivalent amounts shall be paid to any participant with respect to the shares subject to any award that have not vested or been issued, or that are subject to any restrictions or conditions on the record date for dividends. As of December 31, 2005, no dividend equivalents had ever been issued.

Eligibility Under Section 162(m)

Stockholder approval of the 2006 EIP is designed to constitute approval of the plan’s material features for purposes of Section 162(m) of the Tax Code. Awards may, but need not, include performance criteria that satisfy Section 162(m). To the extent that awards are intended to qualify as “performance-based compensation” under Section 162(m), the performance criteria will be based on stock price appreciation (in the case of options or SARs) or on one or more of the other factors set forth in Section 10(b) of the 2006 EIP (which may be adjusted as provided in the plan), applied either individually, alternatively or in any combination, to either the company as a whole or to a business unit or subsidiary, either individually, alternatively or in any combination, and measured either annually or cumulatively over a period of years, on an absolute basis or relative to a pre-established target, to previous years’ results or to a designated comparison group, in each case as specified by the Committee in the award.

To the extent that an award under the 2006 EIP is designated as a “performance award,” but is not intended to qualify as performance-based compensation under Section 162(m), the performance criteria can include the achievement of strategic objectives as determined by the Board.

Notwithstanding satisfaction of any performance criteria, to the extent specified at the time of grant of an award, the number of shares of common stock, stock options or other benefits granted, issued, retainable and/or vested under an award due to satisfaction of performance criteria may be reduced by the Committee on the basis of such further considerations as the Committee in its sole discretion determines.

Transferability

Awards granted under the 2006 EIP are transferable only by will or the laws of descent and distribution, or to the extent otherwise determined by the Committee. The Committee has sole discretion to permit the transfer of an award.

Administration

The Committee, which is made up entirely of independent directors, administers the 2006 EIP. The Committee will select the employees who receive awards, determine the number of shares covered thereby, and, subject to the terms and limitations expressly set forth in the 2006 EIP, establish the terms, conditions and other provisions of the grants. The Committee may interpret the 2006 EIP and establish, amend and rescind any rules relating to the 2006 EIP. The Committee may delegate to a committee of one or more directors the ability to grant awards and take certain other actions with respect to participants who are not executive officers, and may delegate certain administrative or ministerial functions under the 2006 EIP to an officer or officers. The Committee has delegated authority to a committee consisting of the CEO to grant awards to non-executive employees within limits and a budget pre-approved by the Committee.

Amendments Requiring Stockholder Approval

The Board may terminate, amend or suspend the 2006 EIP, provided that no action may be taken by the Board (except those described in “Adjustments” below) without stockholder approval to:

Adjustments

In the event of a stock dividend, recapitalization, stock split, combination of shares, extraordinary dividend of cash or assets, reorganization, or exchange of our common stock or any similar event affecting our common stock, the Committee shall adjust the number and kind of shares available for grant under the 2006 EIP, and subject to the various limitations set forth in the 2006 EIP, the number and kind of shares subject to outstanding awards under the 2006 EIP, and the exercise or settlement price of outstanding stock options and of other awards.

The impact of a merger or other reorganization of Intel on outstanding stock options, SARs, restricted stock and RSUs granted under the 2006 EIP shall be specified in the agreement related to the merger or reorganization, subject to the limitations and restrictions set forth in the 2006 EIP. Such agreement may provide for, among other things, assumption of outstanding awards, accelerated vesting or accelerated expiration of outstanding awards, or settlement of outstanding awards in cash.

U.S. Tax Consequences

The federal tax rules applicable to the 2006 EIP under the Tax Code are summarized below. This summary does not include the tax laws of any municipality, state or foreign country in which a participant resides. Stock option grants under the 2006 EIP may be intended to qualify as incentive stock options under Section 422 of the Tax Code or may be non-qualified stock options governed by Section 83 of the Tax Code. Generally, no federal income tax is payable by a participant upon the grant of a stock option, and no deduction is taken by the company. Under current tax laws, if a participant exercises a non-qualified stock option, he or she will have taxable income equal to the difference between the market price of the common stock on the exercise date and the stock option grant price. We will be entitled to a corresponding deduction on our income tax return. A participant will have no taxable income upon exercising an incentive stock option after the applicable holding periods have been satisfied (except that alternative minimum tax may apply), and we will receive no deduction when an incentive stock option is exercised. The treatment for a participant of a disposition of shares acquired through the exercise of an option depends on how long the shares were held and on whether the shares were acquired by exercising an incentive stock option or a non-qualified stock option. We may be entitled to a deduction in the case of a disposition of shares acquired under an incentive stock option before the applicable holding periods have been satisfied.

Restricted stock is also governed by Section 83 of the Tax Code. Generally, no taxes are due when the award is initially made, but the award becomes taxable when it is no longer subject to a “substantial risk of forfeiture” (it becomes vested or transferable). Income tax is paid on the value of the stock or units at ordinary rates when the restrictions lapse, and then at capital gain rates when the shares are sold.

The American Jobs Creation Act of 2004 added Section 409A to the Tax Code, generally effective January 1, 2005. The IRS has issued proposed regulations which, in part, give employers until the end of 2006 to effect Section 409A implementation in almost all circumstances. Section 409A covers most programs that defer the receipt of compensation to a succeeding year. It provides rules for elections to defer (if any) and for timing of payouts. There are significant penalties placed on the individual employee for failure to comply with Section 409A. However, it does not impact Intel’s ability to deduct deferred compensation.

Section 409A applies to RSUs, performance units and performance shares. Grants under such plans will continue to be taxed at vesting but will be subject to new limits on plan terms governing when vesting may occur. If grants under such plans do not allow employees to elect further deferral on vesting or on distribution, under the proposed regulations no negative impact should attach to the grants. However, further guidance from the IRS is expected and could change the way such plans must be governed.

Section 409A does not apply to incentive stock options, non-qualified stock options (that are not discounted) and restricted stock provided there is no deferral of income beyond the vesting date. Section 409A also does not cover SARs if the SARs are issued by a public company on its traded stock, the exercise price is not less than the fair market value of the underlying stock on the date of grant, the rights are settled in such stock and no features defer the recognition of income beyond the exercise date.

As described above, awards granted under the 2006 EIP may qualify as “performance-based compensation” under Section 162(m) of the Tax Code. To qualify, options and other awards must be granted under the 2006 EIP by a

committee consisting solely of two or more “outside directors” (as defined under Section 162 regulations) and satisfy the 2006 EIP’s limit on the total number of shares that may be awarded to any one participant during any calendar year. In addition, for awards other than options and stock-settled SARs to qualify, the grant, issuance, vesting or retention of the award must be contingent upon satisfying one or more of the performance criteria set forth in Section 10(b) of the 2006 EIP, as established and certified by a committee consisting solely of two or more “outside directors.”

For a discussion of our executive compensation philosophy, see “Report of the Compensation Committee on Executive Compensation.”

Recommendation of the Board

The Board of Directors recommends that you vote “FOR” the approval of the 2006 Equity Incentive Plan.

PROPOSAL 6: APPROVAL OF THE 2006 STOCK PURCHASE PLAN

The Board requests that our stockholders vote in favor of approving the 2006 Stock Purchase Plan (“2006 SPP”), which was adopted by the Board on February 23, 2006. If approved, the five-year 2006 SPP will replace our existing 1976 Stock Participation Plan (“1976 Plan”) approved for a maximum of 944 million shares and set to expire on August 31, 2006. Stock purchase plans offer eligible employees the opportunity to acquire stock through periodic payroll deductions that are applied toward the purchase of stock, at a discount from the current market price. The primary purpose of these plans is to provide employees with the opportunity to acquire an ownership stake in their companies through participation in a payroll deduction-based employee stock purchase plan. We believe that the 2006 SPP is in the best interest of stockholders, as it enhances broad-based employee stock ownership; enables Intel to attract, motivate and retain the best employees with a market-competitive benefit; and does so at a reasonable cost to stockholders. The following summary of the 2006 SPP is qualified in its entirety by reference to the actual text of the 2006 SPP, set forth as Exhibit C.

We are seeking approval of the following for the 2006 SPP:

Background on Stock Purchase Plans at Intel

The 1976 Plan was adopted by the Board on February 18, 1976 and was last approved by Intel’s stockholders on May 21, 1991. The 1976 Plan was last amended by the Board on July 2, 2000 to reflect a two-for-one stock split, which increased the maximum number of shares available under the plan to 944 million shares of common stock.

Employees have been participating in our stock purchase plan for more than 30 years. Even though participation is voluntary and requires that employees make contributions through payroll deductions, in the subscription period ended February 2006, more than 71% of Intel’s eligible employees participated (approximately 69,000 participants out of 97,000 eligible employees). A direct result of this high participation level is an increase in broad-based ownership, with 99.9% of the shares issued going to non-Section 16 officers in 2005.

The 2006 SPP will largely continue the design of the 1976 Plan. Intel’s 2006 SPP would allow employees to purchase stock twice a year at the end of each six-month subscription period. The purchase price is the lower of 85% of the fair market value of the stock on either the last trading day before the beginning of the enrollment period or the last day of the subscription period. Employees will be able to contribute up to 10% of their annual salary, but will not be able to purchase more than $25,000 in value in any calendar year. The majority of companies with which we compete for talent offer stock purchase programs to their employees.

In 2005, 19.6 million shares (18.4 million in 2004 and 23.8 million in 2003) were issued from the stock purchase plan, resulting in an annual dilution cost of 0.3% (0.3% in 2004 and 0.4% in 2003). Annual dilution equals shares issued divided by the beginning of the year’s shares outstanding.

We believe that by providing employees with the opportunity to purchase stock and increase their stock ownership, the incentive to think and act as stockholders is strengthened. In order to continue this alignment, we are requesting the approval of 240 million shares of common stock under the 2006 SPP with an expiration of August 31, 2011. We expect the approval of 240 million shares under the 2006 SPP, when combined with the cancellation of all remaining shares under the 1976 Plan, to result in an approximate 4% dilution over the life of the plan. We are recommending a plan term of five years and one month to allow stockholders more frequent opportunities to vote on our stock purchase plan while maintaining a reasonable five-year life for this program.

At Intel, we strongly believe in broad-based employee stock ownership and the importance of the 2006 SPP in producing this result to further stockholder alignment. We believe that the continued ability to offer this highly valued, market-competitive program is critical to attract, motivate and retain the employee talent needed for Intel’s success.

Key Terms

The key terms of the 2006 Stock Purchase Plan as proposed are summarized below.

Eligibility

Employees of Intel and certain of its subsidiaries are eligible to participate in the 2006 SPP. The subsidiaries whose employees are entitled to participate may be changed from time to time by the Compensation Committee (“Committee”). Employees of Intel who were employed on the last day on which stock is traded before an enrollment period begins, and who regularly work 20 hours or more per week and five months or more per year, are eligible to participate in the 2006 SPP. The Committee may establish administrative rules requiring that employment commence some minimum period (not to exceed 30 days) before an enrollment period begins. As of February 24, 2006, approximately 106,000 employees were eligible to participate in the 2006 SPP.

Employees are not eligible to participate in the 2006 SPP if they would immediately after such purchase own (directly or indirectly) stock, which when added to shares that the employees may purchase under outstanding options, amounts to 5% or more of the total combined voting power or value of all classes of stock of Intel. Employees may not purchase stock under the 2006 SPP in any one calendar year in an amount which, when added to stock the employees are entitled to purchase under similar plans, if any, exceeds $25,000 in market value (determined when rights to participate arise).

Enrollment and Participation

An eligible employee who wants to enroll and participate in the 2006 SPP must file a completed subscription agreement (which includes a payroll deduction agreement) with Intel during an enrollment period. The subscription agreement authorizes Intel to withhold automatically a percentage of the participant’s regular earnings through regular payroll deductions, and the amount of the deduction is credited to a 2006 SPP account in the participant’s name on Intel’s books during the subscription period. The minimum deduction allowed is 2% of regular earnings, and the maximum deduction is 10% of regular earnings (or such other percentages as the Committee may establish from time to time before an enrollment period begins), but employees will not be able to purchase more than $25,000 in value in any calendar year. No interest shall be paid or credited with respect to such payroll deductions.

Participants may change their rate of contribution for the next subscription period by filing a new subscription agreement during the applicable enrollment period. If a participant has not followed such procedures to change the rate of contribution, the rate of contribution shall continue at the originally elected rate throughout the subscription period and future subscription periods. Notwithstanding the foregoing, to the extent necessary to comply with Section 423(b)(8) of the Internal Revenue Code of 1986, as amended (“Tax Code”), for a given calendar year, the Committee may reduce a participant’s payroll deductions to zero percent at any time during a subscription period scheduled to end during such calendar year. Participants may decrease, but may not increase, their rate of contribution once during any subscription period by filing an amended subscription agreement.

Enrollment Periods

The enrollment period, with respect to a given subscription period, is the period beginning on February 1 and August 1 and ending on February 19 and August 19, respectively. The duration and timing of enrollment periods may be changed or modified by the Committee.

Subscription Periods

The 2006 SPP shall generally be implemented by a series of six-month subscription periods, with new subscription periods commencing on each February 20 and August 20, and ending on the last trading day in the six-month periods ending on the following August 19 and February 19, respectively, or on such other date as the Committee shall determine. The Committee shall have the authority to change the frequency and/or duration of subscription periods (including the commencement dates thereof) with respect to future subscription periods if such change is announced at least 30 days prior to the beginning of the applicable enrollment period.

Purchase of Stock

On the last day of each subscription period, all participants will purchase the number of whole shares obtained by dividing the aggregate amount in their 2006 SPP accounts by the purchase price for that subscription period. No fractional shares will be credited or issued. The purchase price for a subscription period will be 85% of the “market value” of the common stock on the last trading day occurring before the first day of the enrollment period or 85% of the “market value” of the stock on the last day of the subscription period if that value is lower. “Market value” is the average of the highest and lowest selling price reported on the applicable date. The Committee may change the percentage of market value applied to determine the purchase price with respect to any future subscription period, but not to below 85%, and the Committee may determine with respect to any future subscription period that the purchase price will be a percentage of the market value of the stock on the last day of the subscription period. If the aggregate number of shares subscribed for in any subscription period exceeds the number of shares that remain available for sale under the 2006 SPP, the number of shares each participant may purchase will be proportionately reduced. Subject to the other limitations in the 2006 SPP, no participant may purchase more than 72,000 shares in a subscription period. If the number of shares to be credited to a participant’s 2006 SPP account in a subscription period exceeds this limit, the participant’s 2006 SPP account will be credited with the maximum number of shares permissible, and the remaining amount will be refunded in cash.

Transferability

Participants may not assign their subscription or other rights under the 2006 SPP to any other person, and any attempted assignment will be void.

Withdrawal

During a subscription period, participants may withdraw from participation in the 2006 SPP at any time before the last 48 hours of such subscription period by giving notice to Intel. Upon withdrawal from participation, the balance in the participant’s 2006 SPP account will be refunded to him or her in cash without interest, his or her right to participate in the current subscription period will be automatically terminated, and no further payroll deductions for the purchase of stock will be made during the subscription period. The Committee may change the rules pertaining to the timing of withdrawals, limiting the frequency with which participants may withdraw and re-enroll in the 2006 SPP, and may impose a waiting period on participants who want to re-enroll following withdrawal.

Administration

The Committee, which is made up entirely of independent directors, will administer the 2006 SPP. The Committee may interpret the 2006 SPP and establish, amend and rescind any rules related to the 2006 SPP. The Committee may construe and interpret the provisions and supervise the administration of the 2006 SPP, make factual determinations relevant to 2006 SPP entitlements and take all action in connection with administration of the 2006 SPP. The Committee may delegate to a sub-committee or to an officer or officers of Intel the administration of the 2006 SPP.

Adjustments

The number of shares subject to the 2006 SPP, and the number of shares subject to, and the purchase price of, outstanding rights to purchase shares, will be proportionately adjusted in the event of changes in the outstanding stock of Intel by reason of stock dividends, stock splits, consolidations, recapitalizations, reorganizations or similar events.

Sub-plans

The Committee may adopt rules, procedures or sub-plans applicable to particular subsidiaries or employees in particular locations that allow for participation in the 2006 SPP in a manner that may not comply with the requirements of Section 423 of the Tax Code.

Amendment and Termination of the 2006 SPP

The Board may amend, modify or terminate the 2006 SPP at any time without notice, provided that no amendment may be adopted without the approval of the stockholders that would increase the total number of shares subject to the 2006 SPP (except for recapitalization) or adopt other amendments for which stockholder approval is required under applicable law. Unless terminated sooner by the Board, the 2006 SPP will automatically terminate on August 31, 2011.

U.S. Tax Consequences

The federal tax rules applicable to the 2006 SPP under the Tax Code are summarized below. This summary does not include the tax laws of any municipality, state or foreign country in which a participant resides. Upon stockholder approval of the 2006 SPP, the plan is intended to qualify as an “employee stock purchase plan” under the provisions of Section 423 of the Tax Code. No taxable income is recognized by a participant either at the time a right is granted to purchase stock under the 2006 SPP or at the time shares are purchased thereunder.

If a participant does not dispose of shares acquired under the 2006 SPP before two years after the “date of grant” (which for each subscription period is the last day on which stock is traded before the enrollment period preceding that subscription period), upon such qualifying disposition the lesser of (a) the excess of the amount realized on sale of the stock over the purchase price or (b) 15% of the market value of the shares on the date of grant will be subject to federal income tax. Federal long-term capital gain tax will apply to the excess, if any, of the sale’s proceeds on the date of disposition over the sum of the purchase price and the amount of ordinary income recognized upon disposition. If qualifying disposition produces a loss (the value of the shares on the date of disposition is less than the purchase price), no ordinary income will be recognized and federal long-term capital gain loss will apply, provided that the disposition involves certain unrelated parties.

If a participant disposes of the shares earlier than two years after the date of grant, upon such disqualifying disposition the difference between the purchase price and the market value of the shares on the date of purchase (the last day of a subscription period) will be taxed to the participant as ordinary income and will be deductible by Intel. The excess, if any, of the sale proceeds over the market value of the shares on the date of purchase will be taxed as long-term or short-term capital gain, depending on the holding period. Intel is not entitled to a deduction for amounts taxed as ordinary income or capital gains to a participant, except to the extent that ordinary income is recognized by a participant upon a disposition of shares earlier than two years after the date of grant.

Recommendation of the Board

The Board of Directors recommends that you vote “FOR” approval of the 2006 Stock Purchase Plan.

ADDITIONAL MEETING INFORMATION

Meeting Proposals. There are no other matters that the Board intends to present, or has reason to believe others will present, at the annual meeting. If other matters are properly presented for voting at the annual meeting, the persons named as proxies will vote in accordance with their best judgment on such matters.

Proxy Solicitation. We will bear the expense of soliciting proxies, and we have retained D. F. King & Co., Inc. to solicit proxies for a fee of $20,000 plus a reasonable amount to cover expenses. Certain of our directors, officers and other employees, without additional compensation, may also solicit proxies personally or in writing, by telephone, e-mail or otherwise. We are required to request that brokers and nominees who hold stock in their names furnish our proxy material to the beneficial owners of the stock, and we must reimburse such brokers and nominees for the expenses of doing so in accordance with certain statutory fee schedules. We currently estimate that this reimbursement will cost us more than $4 million. The actual amount will depend on variables such as the number of proxy materials, the number of stockholders receiving electronic delivery and postage cost. See “Electronic Delivery of Our Stockholder Communications” for information on how you can help us reduce printing and mailing costs.

Inspector of Elections. Computershare Investor Services, LLC has been engaged as our independent inspector of elections to tabulate stockholder votes for the 2006 annual meeting.

OTHER MATTERS

Section 16(a) Beneficial Ownership Reporting Compliance. Section 16(a) of the Securities Exchange Act of 1934, as amended (“Exchange Act”), requires our directors and executive officers, among others, to file with the SEC and NASDAQ an initial report of ownership of our stock on Form 3 and reports of changes in ownership on Form 4 or Form 5. Persons subject to Section 16 are required by SEC regulations to furnish us with copies of all Section 16(a) forms that they file. Under SEC rules, certain forms of indirect ownership and ownership of company stock by certain family members are covered by these reporting requirements. As a matter of practice, our administrative staff assists our executive officers and directors in preparing initial ownership reports and reporting ownership changes, and typically files these reports on their behalf.

Based solely on a review of the copies of such forms in our possession, and on written representations from certain reporting persons, we believe that during fiscal 2005 all of our executive officers and directors filed the required reports on a timely basis under Section 16(a).

2007 Stockholder Proposals or Nominations. From time to time, our stockholders submit proposals that they believe should be voted on at the annual meeting or recommend persons who they believe should be nominated for election to the Board. Pursuant to Rule 14a-8 under the Exchange Act, some stockholder proposals may be eligible for inclusion in our 2007 proxy statement. Any such stockholder proposals must be submitted, along with proof of ownership of our stock in accordance with Rule 14a-8(b)(2), to our principal executive offices, in care of our Corporate Secretary, via e-mail at corporate.secretary@intel.com, by fax to (408) 653-8050 or by mail to Cary Klafter, Intel Corporation, M/S SC4-203, 2200 Mission College Blvd., Santa Clara, California 95054-1549. Failure to deliver a proposal by one of these means may result in it not being deemed timely received. We must receive all submissions no later than November 28, 2006. We strongly encourage any stockholder interested in submitting a proposal to contact our Corporate Secretary in advance of this deadline to discuss the proposal, and stockholders may want to consult knowledgeable counsel with regard to the detailed requirements of applicable securities laws. Submitting a stockholder proposal does not guarantee that we will include it in our proxy statement. The Corporate Governance and Nominating Committee reviews all stockholder proposals and makes recommendations to the Board for action on such proposals. For information on recommending individuals for consideration as nominees, see “The Board, Board Committees and Meetings.”

Alternatively, under our Bylaws, if a stockholder does not want to submit a proposal for the 2007 annual meeting for inclusion in our proxy statement under Rule 14a-8, or intends to nominate a person as a candidate for election to the Board directly (rather than through our Corporate Governance and Nominating Committee), the stockholder may submit the proposal or nomination not less than 45 days or more than 120 days prior to the anniversary of the date on which we first mailed our proxy materials for the 2006 annual meeting, unless the date of the 2007 annual meeting is advanced by more than 30 days or delayed (other than as a result of adjournment) by more than 30 days from the anniversary of the 2006 annual meeting. For our 2007 annual meeting, we must receive such proposals and nominations no earlier than November 28, 2006 and no later than February 11, 2007. If the date of the 2007 annual meeting is advanced by more than 30 days or delayed (other than as a result of adjournment) by more than 30 days from the anniversary of the 2006 annual meeting, the stockholder must submit any such proposal or nomination no later than the close of business on the later of the 60th day prior to the 2007 annual meeting or the 10th day following the day on

which public announcement of the date of such meeting is first made. The stockholder’s submission must be made by a registered stockholder on its behalf or on behalf of the beneficial owner of the shares and must include certain information specified in our Bylaws concerning the proposal or nominee, as the case may be, and information as to the stockholder’s ownership of our stock. We will not entertain any proposals or nominations at the annual meeting that do not meet these requirements. If the stockholder does not also comply with the requirements of Rule 14a-4(c)(2) under the Exchange Act, we may exercise discretionary voting authority under proxies that we solicit to vote in accordance with our best judgment on any such stockholder proposal or nomination. To make a submission or to request a copy of our Bylaws, stockholders should contact our Corporate Secretary via e-mail at corporate.secretary@intel.com, by fax to (408) 653-8050 or by mail to Cary Klafter, Intel Corporation, M/S SC4-203, 2200 Mission College Blvd., Santa Clara, California 95054-1549. Our Bylaws are also available on our web site at www.intel.com/intel/finance/docs/bylaws.pdf. We strongly encourage stockholders to seek advice from knowledgeable counsel before submitting a proposal or a nomination.

Financial Statements. Our financial statements for the year ended December 31, 2005 are included in our 2005 Annual Report to Stockholders, which we are sending to our stockholders at the same time as this proxy statement. We encourage our stockholders to conserve natural resources, as well as reduce mailing and printing costs, by signing up for electronic delivery of our stockholder communications. For more information, see “Electronic Delivery of Our Stockholder Communications.” If you have not received or had access to the annual report, please call our Investor Relations department at (408) 765-1480, and we will send a copy to you. Our annual report and this proxy statement are available on the Internet at www.intel.com/intel/annualreports/2005.

COMMUNICATING WITH US

From time to time, we receive inquiries from stockholders asking how they can communicate with us. The following communication options are available.

If you would like to receive information about us, you may use one of the following methods:

If you would like to contact us, call our Investor Relations department at (408) 765-1480, or send correspondence to Intel Corporation, Attn: Investor Relations, M/S RN5-24, 2200 Mission College Blvd., Santa Clara, California 95054-1549. If you would like to communicate with our Board of Directors, please see the procedures described in “Communications from Stockholders to the Board” under the heading “The Board, Board Committees and Meetings.”

STOCKHOLDERS SHARING THE SAME LAST NAME AND ADDRESS

In accordance with notices that we sent to certain stockholders, we are sending only one copy of our annual report and proxy statement to stockholders who share the same last name and address, unless they have notified us that they want to continue receiving multiple copies. This practice, known as “householding,” is designed to reduce duplicate mailings and save significant printing and postage costs as well as natural resources.

If you received a householded mailing this year and you would like to have additional copies of our annual report and/or proxy statement mailed to you, or you would like to opt out of this practice for future mailings, please submit your request to our Corporate Secretary via e-mail at corporate.secretary@intel.com, by fax to (408) 653-8050 or by mail to Cary Klafter, Intel Corporation, M/S SC4-203, 2200 Mission College Blvd., Santa Clara, California 95054-1549, or call our Investor Relations department at (408) 765-1480. We will promptly send additional copies of the annual report and/or proxy statement upon receipt of such request. You may also contact us if you received multiple copies of the annual meeting materials and would prefer to receive a single copy in the future.

Unfortunately, householding for bank and brokerage accounts is limited to accounts within the same bank or brokerage firm. For example, if you and your spouse share the same last name and address, and you and your spouse each have two accounts containing Intel stock at two different brokerage firms, your household will receive two copies of our annual meeting materials— one from each brokerage firm. To reduce the number of duplicate sets of annual meeting materials that your household receives, you may want to enroll some or all of your accounts in our electronic delivery program. See “Electronic Delivery of Our Stockholder Communications.”

Santa Clara, California

March 28, 2006

Intel, Intel logo, Intel Viiv and Itanium are trademarks or registered trademarks of Intel Corporation or its subsidiaries in the United States and other countries.

*Other names and brands may be claimed as the property of others.

EXHIBIT A

INTEL CORPORATION

THIRD AMENDED AND RESTATED CERTIFICATE OF INCORPORATION

INTEL CORPORATION, a corporation organized and existing under the laws of the State of Delaware, hereby certifies as follows:

      FIRST: The name of the corporation is Intel Corporation.

      SECOND: The original Certificate of Incorporation of the corporation was filed with the Secretary of State of Delaware on March 1, 1989, and the original name of the corporation was Intel Delaware Corporation. The first Restated Certificate of Incorporation of the corporation was filed with the Secretary of State of Delaware on May 11, 1993. The second Restated Certificate of Incorporation of the corporation was filed with the Secretary of State of Delaware on March 13, 2003.

      THIRD: Pursuant to Section 245 of the General Corporation Law of the State of Delaware, the provisions of the Certificate of Incorporation as heretofore amended and supplemented are hereby restated and integrated into the single instrument which is hereinafter set forth, and which is entitled “Third Second Restated Certificate of Incorporation of Intel Corporation,” without further amendment and without any discrepancy between the provisions of the Certificate of Incorporation as heretofore amended and supplemented and the provisions of such single instrument as hereinafter set forth.

      FOURTH: The Board of Directors of the corporation has duly adopted this Third Second Restated Certificate of Incorporation pursuant to the provisions of Section 245 of the General Corporation Law of the State of Delaware in the form set forth as follows:

EXHIBIT B

INTEL CORPORATION

2006 EQUITY INCENTIVE PLAN

EFFECTIVE MAY 17, 2006

The purpose of this Intel Corporation 2006 Equity Incentive Plan (the “Plan”) is to advance the interests of Intel Corporation, a Delaware corporation, and its Subsidiaries (hereinafter collectively “Intel” or the “Corporation”), by stimulating the efforts of employees who are selected to be participants on behalf of Intel, aligning the long-term interests of participants with those of stockholders, heightening the desire of participants to continue in working toward and contributing to the success of Intel, assisting Intel in competing effectively with other enterprises for the services of new employees necessary for the continued improvement of operations, and to attract, motivate and retain the best available individuals for service to the Corporation. This Plan permits the grant of stock options, stock appreciation rights, restricted stock and restricted stock units, each of which shall be subject to such conditions based upon continued employment, passage of time or satisfaction of performance criteria as shall be specified pursuant to the Plan.

Awards under the Plan may be granted to any person who is an employee or Outside Director of the Corporation. Outside Directors may be granted Awards only pursuant to Section 9 of the Plan. The status of the Chairman of the Board of Directors as an employee or Outside Director shall be determined by the Committee. Any person designated by the Corporation as an independent contractor shall not be treated as an employee and shall not be eligible for Awards under the Plan.

Each Outside Director may be granted Awards (each an “Outside Director Award”) each fiscal year for up to 30,000 Shares, as determined by the Board of Directors. Notwithstanding anything to the contrary in this Plan, the foregoing limitation shall be subject to adjustment under Section 11. The number of Shares subject to each Outside Director Award, or the formula pursuant to which such number shall be determined, the type or types of Awards included in the Outside Director Awards, the date of grant and the vesting, expiration and other terms applicable to such Outside Director Awards shall be specified from time to time by the Board of Directors, subject to the terms of this Plan, including the terms specified in Section 8. If the Board of Directors reasonably believes that an Outside Director has committed an act of misconduct as specified in Section 8(a)(v) or 8(b)(vi), the Board of Directors may suspend the Outside Director’s right to exercise any Stock Option or SAR and/or the vesting of any Restricted Stock or Restricted Stock Unit Award pending a determination of whether an act of misconduct has been committed. If the Board of Directors determines that an Outside Director has committed an act of misconduct, neither the Outside Director nor his or her estate shall be entitled to exercise any Stock Option or SAR whatsoever and shall forfeit any unvested Restricted Stock or Restricted Stock Unit Award.

In the event that the Committee determines in its discretion that the listing or qualification of the Shares available for issuance under the Plan on any securities exchange or quotation or trading system or under any applicable law or governmental regulation is necessary as a condition to the issuance of such Shares, a Stock Option or SAR may not be exercised in whole or in part and a Restricted Stock or Restricted Stock Unit Award shall not vest or be settled unless such listing, qualification, consent or approval has been unconditionally obtained.

The Board of Directors may amend, alter or discontinue the Plan and the Board or the Committee may to the extent permitted by the Plan amend any agreement or other document evidencing an Award made under this Plan, provided, however, that the Corporation shall submit for stockholder approval any amendment (other than an amendment pursuant to the adjustment provisions of Section 11) required to be submitted for stockholder approval by NASDAQ or that otherwise would:

In addition, no such amendment or alteration shall be made which would impair the rights of any Participant, without such Participant’s consent, under any Award theretofore granted, provided that no such consent shall be required with respect to any amendment or alteration if the Committee determines in its sole discretion that such amendment or alteration either (i) is required or advisable in order for the Corporation, the Plan or the Award to satisfy or conform to any law or regulation or to meet the requirements of any accounting standard, or (ii) is not reasonably likely to significantly diminish the benefits provided under such Award, or that any such diminishment has been adequately compensated.

To the extent required by applicable federal, state, local or foreign law, the Committee may and/or a Participant shall make arrangements satisfactory to the Corporation for the satisfaction of any withholding tax obligations that arise with respect to any Stock Option, SAR, Restricted Stock or Restricted Stock Unit Award, or any sale of Shares. The Corporation shall not be required to issue Shares or to recognize the disposition of such Shares until such obligations are satisfied. To the extent permitted or required by the Committee, these obligations may or shall be satisfied by having the Corporation withhold a portion of the Shares of stock that otherwise would be issued to a Participant under such Award or by tendering Shares previously acquired by the Participant.

16. NON-EXCLUSIVITY OF PLAN

Neither the adoption of this Plan by the Board of Directors nor the submission of this Plan to the shareholders of the Corporation for approval shall be construed as creating any limitations on the power of the Board of Directors or the Committee to adopt such other incentive arrangements as either may deem desirable, including, without limitation, the granting of stock options, stock appreciation rights, restricted stock or restricted stock units otherwise than under this Plan, and such arrangements may be either generally applicable or applicable only in specific cases.

This Plan, the grant and exercise of Awards thereunder, and the obligation of the Corporation to sell, issue or deliver Shares under such Awards, shall be subject to all applicable federal, state and local laws, rules and regulations and to such approvals by any governmental or regulatory agency as may be required. The Corporation shall not be required to register in a Participant’s name or deliver any Shares prior to the completion of any registration or qualification of such Shares under any federal, state or local law or any ruling or regulation of any government body which the Committee shall determine to be necessary or advisable. To the extent the Corporation is unable to or the Committee deems it infeasible to obtain authority from any regulatory body having jurisdiction, which authority is deemed by the Corporation’s counsel to be necessary or advisable for the lawful issuance and sale of any Shares hereunder, the Corporation shall be relieved of any liability with respect to the failure to issue or sell such Shares as to which such requisite authority shall not have been obtained. No Stock Option shall be exercisable and no Shares shall be issued and/or transferable under any other Award unless a registration statement with respect to the Shares underlying such Stock Option is effective and current or the Corporation has determined that such registration is unnecessary.

The Corporation shall not be liable to a Participant or other persons as to: (a) the non-issuance or sale of Shares as to which the Corporation has been unable to obtain from any regulatory body having jurisdiction the authority deemed by the Corporation’s counsel to be necessary to the lawful issuance and sale of any Shares hereunder; and (b) any tax consequence expected, but not realized, by any Participant or other person due to the receipt, exercise or settlement of any Stock Option or other Award granted hereunder.

EXHIBIT C

INTEL CORPORATION

2006 STOCK PURCHASE PLAN

The purpose of the Plan is to provide an opportunity for Employees of Intel Corporation, a Delaware corporation (“Intel”) and its Participating Subsidiaries (collectively Intel and its Participating Subsidiaries shall be referred to as the “Company”), to purchase Common Stock of Intel and thereby to have an additional incentive to contribute to the prosperity of the Company. It is the intention of the Company that the Plan (excluding any sub-plans thereof except as expressly provided in the terms of such sub-plan) qualify as an “Employee Stock Purchase Plan” under Section 423 of the U.S. Internal Revenue Code of 1986, as amended (the “Code”), and the Plan shall be administered in accordance with this intent. In addition, the Plan authorizes the grant of options pursuant to sub-plans or special rules adopted by the Committee designed to achieve desired tax or other objectives in particular locations outside of the United States or to achieve other business objectives in the determination of the Committee, which sub-plans shall not be required to comply with the requirements of Section 423 of the Code or all of the specific provisions of the Plan, including but not limited to terms relating to eligibility, Subscription Periods or Purchase Price.

The Plan shall generally be implemented by a series of six (6) month Subscription Periods with new Subscription Periods commencing on each February 20 and August 20 and ending on the last Trading Day in the six (6) month periods ending on the following August 19 and February 19, respectively, or on such other date as the Committee shall determine, and continuing thereafter until the Plan is terminated pursuant to Section 14 hereof. The first Subscription Period shall commence on August 21, 2006 and shall end on the last Trading Day on or before February 19, 2007. The Committee shall have the authority to change the frequency and/or duration of Subscription Periods (including the commencement dates thereof) with respect to future Subscription Periods if such change is announced at least thirty (30) days prior to the scheduled occurrence of the first Commencement Date to be affected thereafter.