UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                                   Form 10-K/A


[X]     ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
        ACT OF 1934

        For the fiscal year ended December 31, 2005

                                       OR

[ ]     TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
        EXCHANGE ACT OF 1934

        For the transition period from ____ to _____

        Commission file number:  1-3247

                              CORNING INCORPORATED
             (Exact name of registrant as specified in its charter)

               NEW YORK                                 16-0393470
     (State or other jurisdiction           (I.R.S. Employer Identification No.)
   of incorporation or organization)

   ONE RIVERFRONT PLAZA, CORNING, NY                      14831
(Address of principal executive offices)                (Zip Code)

                                  607-974-9000
              (Registrant's telephone number, including area code)

                                     [None]
   (Former name, former address and former fiscal year, if changed since last
                                    report)

           Securities registered pursuant to Section 12(b) of the Act:

     Title of each class               Name of each exchange on which registered
-----------------------------          -----------------------------------------
Common Stock, $0.50 par value                  New York Stock Exchange
         per share                               SWX Swiss Exchange

        Securities registered pursuant to Section 12(g) of the Act: None

Indicate by check mark if the  registrant is a well-known  seasoned  issuer,  as
defined in Rule 405 of the Securities Act.
                                  Yes X   No ____

Indicate  by  check  mark if the  registrant  is not  required  to file  reports
pursuant to Section 13 or Section 15(d) of the Exchange Act.
                                  Yes ___ No X

Indicate by check mark whether the registrant (1) has filed all reports required
to be  filed by  Section  13 or 15(d) of the  Exchange  Act of 1934  during  the
preceding 12 months (or for such shorter period that the registrant was required
to file such reports),  and (2) has been subject to such filing requirements for
the past 90 days.
                                  Yes X   No ____

Indicate by check mark if disclosure of delinquent  filers  pursuant to Item 405
of Regulation  S-K is not contained  herein,  and will not be contained,  to the
best of registrant's  knowledge,  in definitive proxy or information  statements
incorporated  by reference  in Part III of this Form 10-K/A or any  amendment of
this Form 10-K/A.  X
                  ---

Indicate by check mark whether the registrant is a large  accelerated  filer, an
accelerated  filer, or a  non-accelerated  filer. See definition of "accelerated
filer and large accelerated filer" in Rule 12b-2 of the Exchange Act.
Large accelerated filer [X]    Accelerated filer [ ]   Non-accelerated filer [ ]







Indicate by check mark whether the  registrant is a shell company (as defined in
Rule 12b-2 of the Exchange Act).
                                  Yes ___ No X

As of June 30, 2005, the aggregate market value of the registrant's common stock
held by  non-affiliates of the registrant was $23 billion based on the $16.62 as
reported on the New York Stock Exchange.

There were 1,545,982,974 shares of Corning's common stock issued and outstanding
as of January 31, 2006.

                       DOCUMENTS INCORPORATED BY REFERENCE

Portions of the Registrant's definitive Proxy Statement dated February 27, 2006,
and  filed  for  the  Registrant's  2005  Annual  Meeting  of  Shareholders  are
incorporated into Part III, as specifically set forth in Part III.






                                Explanatory Note

On April 25, 2006, Corning Incorporated (Corning) filed a Current Report on Form
8-K with the  Securities  and Exchange  Commission in which it announced that it
was restating its previously issued consolidated financial statements to correct
errors in its accounting  for Corning's  asbestos  settlement  liability and the
accounting for its investment in Pittsburgh  Corning Europe from March 31, 2003,
through December 31, 2005.  Corning also changed the classification of accretion
on a portion of the  asbestos  settlement  liability  from  interest  expense to
asbestos  settlement  expense in its statement of  operations  for the same time
period.  Corning  is filing  this  Amendment  No. 1 on Form  10-K/A to amend its
Annual  Report on Form 10-K for the year ended  December 31, 2005 (the  Original
Filing), which was originally filed on February 24, 2006.

As more fully  described in Note 2 (Restatement of Previously  Issued  Financial
Statements) to the consolidated  financial  statements in this Form 10-K/A,  the
cumulative effect of these adjustments to Corning's  December 31, 2005,  balance
sheet was to increase its  investments  in  affiliate  companies by $32 million,
increase other accrued liabilities by $154 million, increase accumulated deficit
by $123  million,  and increase  accumulated  other  comprehensive  income by $1
million.

The restatement  adjustments had the following impact on Corning's  reported net
income  and  earnings  per  share as  follows  (in  millions,  except  per share
amounts):

                                              Year ended December 31,
                                       --------------------------------------
                                         2005           2004           2003
                                         ----           ----           ----
As reported:
Net income (loss)                      $   585       $  (2,165)     $   (223)
Basic earnings (loss) per share        $  0.40       $   (1.56)     $  (0.18)
Diluted earnings (loss) per share      $  0.38       $   (1.56)     $  (0.18)

As restated:
Net income (loss)                      $   585       $  (2,231)     $   (280)
Basic earnings (loss) per share        $  0.40       $   (1.61)     $  (0.22)
Diluted earnings (loss) per share      $  0.38       $   (1.61)     $  (0.22)

Increase in net loss                                 $     (66)     $    (57)
Increase in basic loss per share                     $   (0.05)     $  (0.04)
Increase in diluted loss per share                   $   (0.05)     $  (0.04)

As a result of the restatement,  the Company's  previously  issued  consolidated
financial  statements for the period from March 31, 2003,  through  December 31,
2005,  including those contained in the following  filings,  should no longer be
relied upon:  Annual Report on Form 10-K for the fiscal year ended  December 31,
2005;  Quarterly Reports on Form 10-Q for the quarters ended September 30, 2005,
June 30, 2005 and March 31, 2005.

Refer to Note 2 (Restatement of Previously  Issued Financial  Statements) to the
consolidated   financial   statements   in  this  Form  10-K/A  for   additional
information.

In connection  with the  restatement,  Corning  concluded that certain  material
weaknesses existed in its internal control over financial reporting. See Part II
- Item 9A "Controls and Procedures."

This Form 10-K/A amends and restates only certain  information  in Items 1 and 3
of Part I, Items 6, 7, and 9A of Part II, and Item 15 of Part IV of the Original
Filing. In addition,  Item 15 of Part IV of the Original Filing has been amended
to include an updated consent of our independent  registered  public  accounting
firm and  certifications  executed  as of the date of this Form  10-K/A from our
Chief Executive  Officer and Chief Financial Officer as required by Sections 302
and 906 of the Sarbanes-Oxley  Act of 2002, and an updated  Computation of Ratio
of  Earnings to Fixed  Charges.  Our  Computation  of Ratio of Earnings to Fixed
Charges,  consent of our independent  registered public accounting firm, and the
certifications  of the Chief Executive  Officer and Chief Financial  Officer are
attached to this Form 10-K/A as exhibits 12, 23, 31.1, 31.2, and 32.

Except for the amended and restated  information,  this Form 10-K/A includes all
of the  information  contained in the Original  Filing,  and no attempt has been
made in this Form 10-K/A to modify or update the  disclosures  presented  in the
Original  Filing,  except as required to reflect the effects of the restatement.
This Form 10-K/A continues to describe conditions as of the date of the Original
Filing,  and the disclosures  contained  herein have not been updated to reflect
events,  results, or developments that occurred after the Original Filing, or to
modify or update  those  disclosures  affected  by  subsequent  events.  Forward
looking  statements made in the Original Filing have not been revised to reflect
events,  results or developments  that have become known to us after the date of
the Original  Filing  (other than the  restatement),  and such  forward  looking
statements should be read in their historical context.






                                     PART I


Corning Incorporated and its consolidated subsidiaries are hereinafter sometimes
referred to as "the Company," "the Registrant," "Corning," or "we."

This report contains  forward-looking  statements that involve a number of risks
and  uncertainties.  These  statements  relate to our future plans,  objectives,
expectations and estimates and may contain words such as "believes,"  "expects,"
"anticipates,"  "estimates,"  "forecasts,"  or similar  expressions.  Our actual
results  could differ  materially  from what is expressed or  forecasted  in our
forward-looking  statements.  Some of the factors that could contribute to these
differences  include those discussed under  "Forward-Looking  Statements," "Risk
Factors,"  "Management's  Discussion  and  Analysis of Financial  Condition  and
Results of Operations," and elsewhere in this report.

Item 1.  Business
-----------------

General

Corning traces its origins to a glass business  established in 1851. The present
corporation was  incorporated in the State of New York in December 1936, and its
name was changed from Corning Glass Works to Corning  Incorporated  on April 28,
1989.

Corning  is  a  global,  technology-based  corporation  that  operates  in  four
reportable   business  segments:   Display   Technologies,   Telecommunications,
Environmental Technologies and Life Sciences.

Display Technologies Segment

Corning's Display  Technologies segment manufactures glass substrates for active
matrix  liquid  crystal  displays  (LCDs),  that are used  primarily in notebook
computers,   flat  panel  desktop  monitors,  and  LCD  televisions.   Corning's
facilities in Kentucky,  Japan and Taiwan and those of Samsung Corning Precision
Glass Co., Ltd.  (Samsung Corning  Precision,  which is 50% owned by Corning) in
South Korea develop,  manufacture and supply high quality glass substrates using
a proprietary fusion  manufacturing  process and technology  expertise.  Samsung
Electronics  Co., Ltd. has a 43% interest in Samsung  Corning  Precision,  which
sells glass to LCD panel  manufacturers in Korea.  Another  shareholder owns the
remaining 7% interest in Samsung Corning Precision.  Panel  manufacturers in the
other leading  LCD-producing  areas of the world, Japan,  Taiwan,  Singapore and
China, are supplied by Corning.

Corning  has been a leader  to  market  with new  large-generation  sized  glass
substrates  used by our customers in the  production of larger LCDs for monitors
and television.  We are recognized for providing  product  innovations that help
our customers produce larger,  lighter,  thinner and higher-resolution  displays
more  affordably.  Glass  substrates  are  currently  available  in  sizes up to
Generation  6 (1500mm x 1800mm),  and  Generations  7 (1870mm x 2200mm)  and 7.5
(1950mm x 2250mm) were introduced from Samsung Corning  Precision in 2005. Large
substrates  allow LCD  manufacturers  to produce  larger and a greater number of
panels from each substrate.  The larger size leads to economies of scale for LCD
manufacturers  and is expected to help lower display prices for consumers in the
future.  At the end of 2005,  approximately  76% of Corning and Samsung  Corning
Precision's volume of LCD glass was Generation 5 (1100mm x 1250mm) and higher.

Corning's  proprietary fusion manufacturing process was invented by the Company.
It is the  cornerstone of Corning's  technology  leadership in the LCD industry.
The  automated  process  yields high quality  glass  substrates  with  excellent
dimensional  stability and uniformity - essential  attributes for the production
of increasingly  larger,  high performance active matrix LCDs.  Corning's fusion
process is scalable and has proven to be among the most  effective  processes in
producing large size substrates.

LCD  glass  manufacturing  is  a  highly  capital  intensive  business.  Corning
continues to make significant  investments to expand its LCD glass facilities in
response to anticipated  customer demand.  The environment is very  competitive.
Important success attributes include efficient manufacturing, access to capital,
technology know-how, and patents.

Patent  protection and proprietary  trade secrets are important to the segment's
operations.  The  segment  has a growing  portfolio  of patents  relating to its
products,  technologies and  manufacturing  processes.  Reference is made to the
material under the heading "Patents and Trademarks" for information  relating to
patents and trademarks.

The Display Technologies segment represented 38% of Corning's sales for 2005.






Telecommunications Segment

The  Telecommunications  segment  produces optical fiber and cable, and hardware
and equipment products for the worldwide  telecommunications  industry.  Corning
invented the world's  first  low-loss  optical  fiber more than 30 years ago. It
offers a range of optical  fiber  technology  products  and  enhancements  for a
variety  of  applications,  including  premises,  fiber-to-the-premises  access,
metropolitan,   long-haul  and  submarine  networks.  Corning  makes  and  sells
InfiniCor(R)  fibers for local area networks,  data centers and central offices;
NexCor(R) fiber for converged services networks;  SMF-28e(R) single mode optical
fiber that provides  additional  transmission  wavelengths in  metropolitan  and
access networks;  MetroCor(R) fiber products for metropolitan networks;  LEAF(R)
optical fiber for long-haul,  regional and metropolitan networks; and Vascade(R)
submarine  optical  fibers for use in undersea  networks.  Corning has two large
optical  fiber  manufacturing  facilities  in  North  Carolina,  as  well  as  a
controlling interest in Shanghai Fiber Optics Co., Ltd. in China. As a result of
lowered  demand for optical  fiber  products,  in 2002  Corning  mothballed  its
optical fiber manufacturing  facility in Concord, North Carolina and transferred
certain  capabilities  to  its  Wilmington,  North  Carolina  facility.  Corning
believes that the Concord facility can be returned to productive capacity within
six to nine months of a decision to reopen.

A significant portion of Corning's optical fiber is sold to subsidiaries such as
Corning Cable Systems LLC (Corning Cable  Systems),  Corning Cable Systems GmbH,
and  Norddeutsche  Seekabelwerke  GmbH & Co., KG (NSW).  Optical fiber is cabled
prior to being  sold in cable  form.  The  remaining  fiber  production  is sold
directly to end users or third party cablers around the world. Corning's cabling
operations  include large  facilities in North  Carolina and Germany and smaller
regional locations or equity affiliates.

Corning's hardware and equipment products include cable assemblies,  fiber optic
hardware, fiber optic connectors,  optical components and couplers, closures and
pedestals,   splice  and  test  equipment  and  other  accessories  for  optical
connectivity.  For copper  connectivity,  Corning's  products include subscriber
demarcation,  connection and protection devices,  xDSL (different  variations of
DSL) passive solutions and outside plant  enclosures.  Each of the product lines
may be  combined  in  Corning's  fiber-to-the-premises  solutions.  Corning  has
manufacturing  operations for hardware and equipment  products in North Carolina
and Texas, as well as Europe, Mexico, China, and the Caribbean.  Corning Gilbert
Inc.  offers  products  for the cable  television  industry,  including  coaxial
connectors and associated tools.  Corning Gilbert has  manufacturing  operations
for coaxial  connectors  and associated  assembly  tools in Arizona,  Mexico and
Denmark.

Patent protection is important to the segment's  operations.  The segment has an
extensive  portfolio  of patents  relating  to its  products,  technologies  and
manufacturing  processes.  The segment  licenses certain of its patents to third
parties and generates  revenue from these licenses,  but such royalty revenue is
not currently material to the business.  Corning is also licensed to use certain
patents owned by others,  and such licenses are also  important to the segment's
operations.  Reference  is made to the material  under the heading  "Patents and
Trademarks" for information relating to the Company's patents and trademarks.

The Telecommunications segment represented 35% of Corning's sales for 2005.

Environmental Technologies Segment

Corning's  environmental products include ceramic technologies and solutions for
emissions and pollution control in mobile and stationary applications around the
world,  including gasoline and diesel substrate and filter products. In response
to new and tightening emission control obligations around the world, Corning has
continued to develop more efficient  substrate  products with higher density and
greater surface area. Corning manufactures these products in New York, Virginia,
China,  Germany and South Africa.  Cormetech  Inc., 50% owned by Corning and 50%
owned by  Mitsubishi  Heavy  Industries  Ltd.  of  Japan,  manufactures  ceramic
environmental  substrate products at its North Carolina and Tennessee facilities
for use in power  plants.  Corning is  investing  in new ceramic  substrate  and
filter  technologies  for diesel emission  control device  products,  with a new
production  facility in New York to produce such  products  for diesel  vehicles
worldwide.  Corning sells its ceramic substrate and filter products worldwide to
manufacturers of emission control systems who then sell to automotive and diesel
engine  manufacturers.  Although our sales are to the emission  control  systems
manufacturers,  the use of Corning  substrates and filters is generally required
by the specifications of the automotive and diesel engine manufacturers.

Patent protection is important to the segment's  operations.  The segment has an
extensive  portfolio  of patents  relating  to its  products,  technologies  and
manufacturing  processes.  The segment is also  licensed to use certain  patents
owned  by  others,  and  such  licenses  are  also  important  to the  segment's
operations.  Reference  is made to the material  under the heading  "Patents and
Trademarks" for information relating to the Company's patents and trademarks.

The Environmental  Technologies  segment  represented 13% of Corning's sales for
2005.






Life Sciences Segment

Life Sciences  laboratory products include microplate  products,  coated slides,
filter  plates for genomics  sample  preparation,  plastic cell culture  dishes,
flasks,  cryogenic vials,  roller bottles,  mass cell culture  products,  liquid
handling instruments,  Pyrex(R) glass beakers, pipettors,  serological pipettes,
centrifuge  tubes and  laboratory  filtration  products.  Corning sells products
under 3 primary brands:  Corning,  Costar and Pyrex.  Corning manufactures these
products  in Maine,  New York,  United  Kingdom  and  Mexico  and  markets  them
worldwide,    primarily   through   distributors,    to   government   entities,
pharmaceutical and biotechnology  companies,  hospitals,  universities and other
research facilities.

Patent  protection is important to the segment's  operations,  particularly  for
some of its emerging  products.  The segment has a growing  portfolio of patents
relating  to its  products,  technologies  and  manufacturing  processes.  Brand
recognition,  through some well known  trademarks,  is important to the segment.
Reference is made to the material under the heading "Patents and Trademarks" for
information relating to the Company's patents and trademarks.

The Life Sciences  segment  represented  approximately 6% of Corning's sales for
2005.

Other Products

Other products made by Corning include  semiconductor  optics,  ophthalmic glass
and plastic products,  technical  products,  such as polarizing glass, glass for
high   temperature   applications   and  machinable   glass  ceramic   products.
Semiconductor optics manufactured by Corning include:  high-performance  optical
material products;  optical-based metrology instruments;  and optical assemblies
for applications in the global semiconductor  industry.  Corning's semiconductor
optics  products are  manufactured  in New York.  Other specialty glass products
include glass lens and window  components and assemblies.  Other specialty glass
products are made in New York,  Virginia,  United  Kingdom and France or sourced
from China.  Corning's  Eurokera and Keraglass equity ventures with Saint Gobain
Vitrage S.A. of France  manufacture  smooth  cooktop  glass/ceramic  products in
France, China, and South Carolina.

Corning owns a 50% interest in Samsung Corning Company,  Ltd. (Samsung Corning),
a producer of glass panels and funnels for cathode ray tubes for televisions and
computer monitors,  with manufacturing  facilities in Korea, Germany,  China and
Malaysia.  Samsung Electronics Company,  Ltd. owns the remaining 50% interest in
Samsung Corning.

Other products represented approximately 8% of Corning's sales for 2005.

We manufacture and process products at more than 47 plants and 15 countries.

Additional  explanation  regarding Corning and our four segments is presented in
Management's  Discussion  and Analysis of Financial  Condition  under  Operating
Review  and  Results  of  Operations  and Note 19  (Operating  Segments)  to the
Consolidated Financial Statements.

Corporate Investments

Corning and The Dow Chemical Company (Dow Chemical) each own half of Dow Corning
Corporation  (Dow  Corning),  an equity  company in Michigan  that  manufactures
silicone products worldwide.  Dow Corning emerged from its Chapter 11 bankruptcy
proceedings  during  2004.  Dow  Corning's  sales  were  $3.9  billion  in 2005.
Additional discussion about Dow Corning appears in the Legal Proceedings section
and Dow Corning's  financial  statements  are attached in Item 15.  Exhibits and
Financial Statement Schedules.

Corning and PPG Industries, Inc. each own half of Pittsburgh Corning Corporation
(PCC), an equity company in Pennsylvania  that  manufactures  glass products for
architectural   and  industrial  uses.  PCC  filed  for  Chapter  11  bankruptcy
reorganization  in April 2000.  Additional  discussion  about PCC appears in the
Legal Proceedings  section.  Corning also owns half of Pittsburgh Corning Europe
N.V., a Belgian corporation that manufactures glass products for industrial uses
primarily in Europe.

Additional  information  about  corporate  investments  is  presented  in Note 8
(Investments) to the consolidated financial statements.

Competition

Corning  competes  across  all of its  product  lines with many large and varied
manufacturers,  both domestic and foreign.  Some of these competitors are larger
than Corning,  and some have broader product lines.  Corning strives to maintain
its position through technology and product innovation.  For the future, Corning
believes  its  competitive  advantage  lies in its  commitment  to research  and
development,  and its commitment to quality.  There is no assurance that Corning
will be able to maintain its market position or competitive advantage.






Display Technologies Segment

Corning is the largest worldwide  producer of glass substrates for active matrix
LCD displays.  That market  position  remained  relatively  stable over the past
year.  Corning  believes it has  competitive  advantages in LCD glass  substrate
products from  investing in new  technologies,  offering a consistent  source of
reliable supply and using its proprietary  fusion  manufacturing  process.  This
process  allows us to deliver  glass that is larger,  thinner and  lighter  with
exceptional  surface quality.  Asahi Glass,  Nippon Electric Glass and NH Techno
are Corning's  principal  competitors in display glass substrates.  In addition,
new entrants are seeking to expand their presence in this business.

Telecommunications Segment

Competition  within the  telecommunications  equipment industry is intense among
several significant companies.  Corning is a leading competitor in the segment's
principal  product lines which include  optical fiber and cable and hardware and
equipment.  Price  and  new  product  innovations  are  significant  competitive
factors. The competitive landscape has experienced  increasing competition based
upon pricing in all  geographical  markets.  These  competitive  conditions  are
likely to persist.

Corning is the largest  producer of optical fiber and cable products,  but faces
significant  competition  due to continued  excess capacity in the market place,
price  pressure and new product  innovations.  Corning  believes its large scale
manufacturing experience,  fiber process, technology leadership and intellectual
property  assets yield cost advantages  relative to several of its  competitors.
The primary competing producers of optical fiber and cable products are Furukawa
OFS, Alcoa, Fujikura, Sumitomo, Prysmian Communications and Draka Comteq.

For hardware and  equipment  products,  significant  competitors  are 3M Company
(3M), Tyco Electronics, Furukawa OFS, CommScope, and ADC Communications.

Environmental Technologies Segment

For  worldwide  automotive  ceramic  substrate  products,  Corning has a leading
market position that has remained  relatively stable over the past year. Corning
believes its competitive  advantage in automotive ceramic substrate products for
catalytic   converters  is  based  upon  global  presence,   customer   service,
engineering  design  services and product  innovation.  The heavy duty and light
duty  diesel  vehicle  market   opportunities  are  still  emerging.   Corning's
Environmental  Technologies products face principal competition from NGK, Denso,
Ibiden and Emitec.

Life Sciences Segment

Corning is a leading supplier of glass and plastic science laboratory  products,
with a growing  plastics  products  market presence in North America and Europe,
and a solid laboratory glass products market presence. Corning seeks to maintain
competitive  advantages by emphasizing  product quality,  product  availability,
supply chain  efficiency,  a wide product line and superior product  attributes.
For laboratory products, Schott Glaswerke,  Kimble, Greiner and Becton Dickinson
are  the  principal  worldwide   competitors.   Corning  also  faces  increasing
competition  from  certain   distributors  that  have  backward   integrated  or
introduced private label products.

Other Products

Corning is a leading  supplier of materials and products for lithography  optics
in the  semiconductor  industry  and that market  position  remained  relatively
stable  during the past year.  Corning  seeks to compete by  providing  superior
optical quality, leading optical designs and a local Corning presence supporting
its customers.  For Corning's  semiconductor optical material products,  general
specialty   glass/glass  ceramic  products  and  ophthalmic   products,   Schott
Glaswerke, Shin-Etsu Quartz Products, Hoya and Heraeus are the main competitors.

Samsung  Corning is a leading  producer of cathode ray tube glass  products  for
conventional televisions.  Its relative competitive position has remained stable
over  the past  year,  although  there  has been a  significant  decline  in the
industry  as  end-market  customers  have  turned  to  flat  panel  displays  or
projection  technologies.  Samsung  Corning  seeks to maintain  its  competitive
advantage  through  customer  support,  logistics  expertise  and a  lower  cost
manufacturing  structure.  Nippon Electric Glass, Asahi, and various other Asian
manufacturers  compete with Samsung Corning.  Samsung Corning is also pursuing a
diversification  strategy to  mitigate  the impact of the decline in the cathode
ray tube glass.

Raw Materials

Corning's  production  of specialty  glasses,  ceramics,  and related  materials
requires  significant  quantities of energy,  certain precious metals, and batch
materials.




Although energy shortages have not been a problem  recently,  the cost of energy
has increased.  Corning has achieved  flexibility through important  engineering
changes  to take  advantage  of  low-cost  energy  sources  in most  significant
processes. Specifically, many of Corning's principal manufacturing processes can
now be operated with natural gas, propane, oil or electricity,  or a combination
of these energy sources.

As to resources (ores, minerals,  polymers, and processed chemicals) required in
manufacturing  operations,   availability  appears  to  be  adequate.  Corning's
suppliers  from time to time may  experience  capacity  limitations in their own
operations,  or may  eliminate  certain  product  lines;  nevertheless,  Corning
believes it has adequate programs to ensure a reliable supply of batch chemicals
and raw materials.  For many products,  Corning has alternate glass compositions
that would allow  operations to continue  without  interruption  in the event of
specific materials shortages.

Certain key materials and  proprietary  equipment used in the  manufacturing  of
products are currently  sole sourced or available  only from a limited number of
suppliers.  Any future difficulty in obtaining sufficient and timely delivery of
components could result in delays or reductions in product shipments,  or reduce
Corning's gross margins.

Patents and Trademarks

Inventions by members of Corning's research and engineering staff have been, and
continue to be, important to the Company's growth.  Patents have been granted on
many of these inventions in the United States and other countries. Some of these
patents have been licensed to other manufacturers,  including companies in which
Corning has equity  investments.  Many of the earlier  patents have now expired,
but  Corning  continues  to  seek  and  obtain  patents   protecting  its  newer
innovations.  In 2005, Corning was granted over 170 patents in the U.S. and over
325 patents in countries outside the U.S.

Each business  segment  possesses its own patent portfolio that provides certain
competitive  advantages  in  protecting  Corning's   innovations.   Corning  has
historically  enforced,  and will continue to enforce, its intellectual property
rights. At the end of 2005, Corning and its wholly owned subsidiaries owned over
5,500  unexpired  patents in various  countries  of which  about 2,600 were U.S.
patents.  Between 2006 and 2008,  approximately 7% of these patents will expire,
while at the same time  Corning  intends to seek  patents  protecting  its newer
innovations.  Worldwide,  Corning has over 2,600 patent applications in process,
with about 900 in process in the U.S. Corning believes that its patent portfolio
will  continue  to  provide a  competitive  advantage  in  protecting  Corning's
innovation,  although  Corning's  competitors  in  each  of its  businesses  are
actively seeking patent protection as well.

The Display  Technologies  segment has over 260 patents in various  countries of
which over 90 were U.S.  patents.  No one patent is considered  material to this
business  segment.  Some of the  important  issued U.S.  patents in this segment
include  patents  relating  to glass  compositions  and  methods for the use and
manufacture of glass substrates for display  applications.  There is no group of
important  Display  Technology  segment  patents set to expire  between 2006 and
2008.

The  Telecommunications  segment has over 2,300 patents in various  countries of
which over 1,000 were U.S. patents. No one patent is considered material to this
business  segment.  Some of the  important  issued U.S.  patents in this segment
include:  (i) patents  relating to optical fiber products  including  dispersion
compensating  fiber, low loss optical fiber and high data rate optical fiber and
processes and equipment for  manufacturing  optical fiber including  methods for
making  optical  fiber  preforms  and methods for  drawing,  cooling and winding
optical  fiber;  (ii)  patents  relating to  packaging of lasers and designs for
optical  switch  products;  (iii) patents  relating to optical fiber ribbons and
methods  for making  such  ribbon,  fiber  optic  cable  designs and methods for
installing  optical fiber cable;  and (iv) patents relating to optical fiber and
electrical  connectors  and  associated  methods  of  manufacture.  While  a few
particular  U.S.  patents  will expire in 2006,  there is no group of  important
Telecommunications segment patents set to expire between 2006 and 2008.

The Environmental Technologies segment has over 575 patents in various countries
of which over 270 were U.S.  patents.  No one patent is  considered  material to
this business segment. Some of the important issued U.S. patents in this segment
include patents relating to cellular ceramic honeycomb  products,  together with
ceramic batch and binder  system  compositions,  honeycomb  extrusion and firing
processes,  and honeycomb  extrusion  dies and  equipment  for the  high-volume,
low-cost  manufacture  of  such  products.   There  is  no  group  of  important
Environmental segment patents set to expire between 2006 and 2008.

The Life  Sciences  segment has over 200 patents in various  countries  of which
over 75 were U.S. patents. No one patent is considered material to this business
segment.  Some of the  important  issued U.S.  patents in this  segment  include
patents  relating  to  methods  and  apparatus  for the  manufacture  and use of
scientific laboratory equipment including nucleic acid arrays, multiwell plates,
and cell  culture  products  as well as  equipment  for label  independent  drug
discovery.  There is no group of important Life Sciences  segment patents set to
expire between 2006 and 2008.

Many of these  patents are used in Corning's  operations or are licensed for use
by others,  and Corning is licensed to use patents owned by others.  Corning has
entered into cross licensing  arrangements with some major competitors,  but the
scope  of  such  licenses  has  been  limited  to  specific   product  areas  or
technologies.





Corning's  principal   trademarks  include  the  following:   Corning,   Celcor,
Discovering Beyond Imagination,  DuraTrap,  Eagle2000,  Epic, Flame of Discovery
Design, HPFS, LEAF, Pyrex, SMF-28e, Steuben, Lanscape and Vycor.

Protection of the Environment

Corning  has a program to ensure  that its  facilities  are in  compliance  with
state, federal and foreign pollution-control  regulations. This program resulted
in capital and operating expenditures during the past several years. In order to
maintain  compliance with such regulations,  capital  expenditures for pollution
control in continuing  operations were approximately $19 million in 2005 and are
estimated to be $26 million in 2006.

Corning's 2005 operating  results from  continuing  operations were charged with
approximately  $42 million for  depreciation,  maintenance,  waste  disposal and
other operating  expenses  associated with pollution  control.  Corning believes
that its compliance program will not place it at a competitive disadvantage.

Document Availability

A copy of Corning's  2005 Annual Report on Form 10-K/A filed with the Securities
and Exchange  Commission  is available  upon  written  request to Ms.  Denise A.
Hauselt,   Secretary  and  Assistant  General  Counsel,   Corning  Incorporated,
HQ-E2-10, Corning, NY 14831. The Annual Report on Form 10-K/A, quarterly reports
on Form 10-Q,  current  reports on Form 8-K, and amendments  pursuant to Section
13(a) or 15(d) of the  Exchange Act and other  filings are  available as soon as
reasonably  practicable after such material is electronically filed or furnished
to the SEC,  and can be  accessed  electronically  free of charge,  through  the
Investor  Relations  category  of the  Corning  home  page  on the  Internet  at
www.corning.com.

Item 1A.  Risk Factors
----------------------

Set forth below are some of the  principal  risks and  uncertainties  that could
cause our actual business results to differ materially from any  forward-looking
statements contained in this Report. Future results could be materially affected
by general industry and market conditions,  changes in laws or accounting rules,
general economic and political conditions, including a global economic slowdown,
fluctuation of interest rates or currency exchange rates,  terrorism,  political
unrest  or  international  conflicts,  political  instability  or  major  health
concerns,   natural   disasters  or  other   disruptions  of  expected  business
conditions.  These  risk  factors  should  be  considered  in  addition  to  our
cautionary comments concerning forward-looking statements in this Annual Report.

Our  sales  could be  negatively  impacted  if one or more of our key  customers
substantially reduce orders for our products

     Corning's  ten  largest  customers  account  for  about  50% of our  sales.
However,  no  individual  customer  accounts  for more than 10% of  consolidated
sales.

     A relatively  small number of customers  accounted for a high percentage of
net sales in each of our reportable operating segments. For 2005, five customers
of the Display Technologies  segment,  each of which accounted for more than 10%
of  segment  net  sales,  accounted  for  75% of  total  segment  sales.  In the
Telecommunications segment, two customers, each of which accounted for more than
10% of this  segment's  net sales,  accounted  for 29% of total segment sales in
2005. In the Environmental  Technologies segment, three customers, each of which
accounted for more than 10% of segment sales,  represented  76% of total segment
sales for 2005. In the Life Sciences segment, one distributor  accounted for 53%
of this segment's sales in 2005.

     Samsung  Corning  Precision's  sales  were also  concentrated,  with  three
customers accounting for 98% of sales in 2005.

     Although the sale of LCD glass  substrates has increased in 2005, there can
be no assurance that this positive  trend will  continue.  Our customers are LCD
panel and color filter makers.  As they switch to larger size glass, the pace of
their orders may be uneven while they adjust their  manufacturing  processes and
facilities.  Additionally,  consumer  preferences for panels of differing sizes,
price, or other factors,  may lead to pauses in market growth from time to time.
Our  customers  may not be able to  maintain  profitable  operations  or  access
sufficient  capital to fund  ongoing and future  planned  expansions,  which may
limit their pace of orders to us. Emerging  technologies could replace our glass
substrates for certain applications resulting in a decline in demand for our LCD
products.

     Our  Telecommunications  segment  customers'  purchases of our products are
affected  by  their  capital  expansion  plans,   general  market  and  economic
uncertainty and regulatory  changes,  including  broadband policy.  Sales in the
Telecommunications  segment are expected to be impacted by Verizon Communication
Inc. (Verizon) fiber-to-the-premises deployments. Our sales will be dependent on
Verizon's  planned targets for homes passed and connected.  Changes in Verizon's
deployment plan could adversely affect future sales.





     In the Environmental  Technologies segment,  sales of our ceramic substrate
and filter  products for automotive and diesel  emissions and pollution  control
are expected to fluctuate with vehicle production.  Changes in governmental laws
and regulations for air quality and emission  controls may also influence future
sales.  Sales in our Environmental  Technologies  segment are to four catalyzers
and emission system component manufacturers. Our customers sell these systems to
automotive original equipment manufacturers and diesel engine manufacturers.

     Sales in our Life  Science  segment  were  historically  through  two large
distributors to government entities, pharmaceutical and biotechnology companies,
hospitals,  universities and other research facilities.  During 2005, we did not
renew the contract with one large distributor and transitioned the sales through
this  distributor to our remaining  primary  distributor  and other existing and
developing channels.  This change has and may continue to adversely impact sales
volumes in the short term. In 2005, our remaining primary distributor  accounted
for 53% of total segment sales.

If the  markets for our  products  do not  develop and expand as we  anticipate,
demand for our products may decline,  which would negatively  impact our results
of operations and financial performance

     The  markets  for  our  products  are  characterized  by  rapidly  changing
technologies, evolving industry or government standards and frequent new product
introductions.  Our success is expected to depend,  in substantial  part, on the
successful  introduction of new products,  or upgrades of current products,  and
our ability to compete with new  technologies  and products of other  suppliers.
The  following  factors  related to our products and markets,  if not  achieved,
could have an adverse impact on our results of operations:

     .    our ability to introduce leading products such as glass substrates for
          liquid  crystal  displays,  optical  fiber and cable and  hardware and
          equipment,  and  environmental  substrate  products  that can  command
          competitive prices in the marketplace;
     .    our ability to achieve a favorable sales mix of large generation sizes
          of liquid crystal display glass;
     .    our  ability  to  develop  new  products  in  response  to  government
          regulations  and laws,  particularly  diesel  filter  products  in the
          Environmental Technologies segment;
     .    continued strong demand for notebook computers and LCD monitors;
     .    the rate of growth in purchases of LCD  televisions  to replace  other
          technologies; and
     .    the rate of growth  of the  fiber-to-the-premises  build-out  in North
          America.

We face pricing pressures in each of our leading businesses that could adversely
affect our results of operations and financial performance

     We face pricing  pressure in each of our leading  businesses as a result of
intense competition, emerging new technologies, or over-capacity.  While we will
work toward reducing our costs to offset pricing  pressures,  we may not be able
to achieve proportionate reductions in costs. As a result of overcapacity in the
Telecommunications  segment,  we anticipate pricing pressures will continue into
2006  and  beyond.  Increased  pricing  pressure  may  develop  in  our  Display
Technologies  segment as our competitors  strive to expand  production of larger
generation substrates.

We face risks related to our international operations and sales

     We have customers and significant  operations,  including manufacturing and
sales,  located  outside the U.S.  We have large  manufacturing  operations  for
liquid crystal display glass substrates in Taiwan and the  Asia-Pacific  region,
including  equity  investments  in companies  operating in South Korea that make
glass  substrates for the LCD market.  All of our Display segment  customers are
located in the Asia-Pacific region. As a result of these and other international
operations, we face a number of risks, including:

          .    geographical concentration of our factories and operations;
          .    major health concerns;
          .    difficulty of managing global operations;
          .    difficulty in protecting intellectual property;
          .    tariffs,  duties and other trade barriers including  anti-dumping
               duties;
          .    undeveloped legal systems;
          .    political and economic instability in foreign markets, and
          .    foreign currency risk.

     Any of these  items  could  cause  our  sales  and/or  profitability  to be
significantly reduced.





We face risks due to foreign currency fluctuations

     Because we have  significant  customers  and  operations  outside the U.S.,
fluctuations in foreign currencies,  especially the Japanese yen, the New Taiwan
dollar,  the Korean  won,  and the euro,  affect  our sales and  profit  levels.
Foreign exchange rates may make our products less competitive in countries where
local currencies decline in value relative to the dollar and Japanese yen. Sales
in our Display  Technologies  segment,  representing 38% of Corning's sales, are
denominated   in  Japanese  yen.  The  expected  sales  growth  of  the  Display
Technologies  segment  will  increase  our  exposure to  currency  fluctuations.
Although we hedge significant  transaction and balance sheet currency exposures,
we do not hedge  translation risk and thus changes in exchange rates (especially
the  yen)  may  significantly  impact  our  reported  revenues  and  results  of
operations.

If the  financial  condition of our customers  declines,  our credit risks could
increase

     Although we have a rigorous  process to  administer  credit and believe our
reserve is  adequate,  we have  experienced,  and in the future may  experience,
losses as a result of our inability to collect our accounts  receivable.  If our
customers fail to meet their payment  obligations to us, including  deposits due
under  long-term  purchase  and supply  agreements  in our Display  Technologies
segment,  we could experience reduced cash flows and losses in excess of amounts
reserved.  Some  customers  of  our  Display  Technologies  segment  are  thinly
capitalized and/or marginally profitable. In our Environmental products segment,
the U.S. auto customers and certain of their suppliers have  encountered  credit
downgrades or, in the case of Delphi Corporation,  bankruptcy. These factors may
result in an inability to collect receivables or a possible loss in business. As
of December 31, 2005, reserves for trade receivables  totaled  approximately $24
million.

If we do not  successfully  adjust  our  manufacturing  volumes  and fixed  cost
structure,  or achieve  manufacturing  yields or sufficient product reliability,
our operating results could suffer, and we may not achieve  profitability levels
anticipated

     We are investing  heavily in additional  manufacturing  capacity of certain
businesses,  principally  including  liquid  crystal  display  glass and  diesel
emission  substrates and filters.  The speed of constructing  the new facilities
presents  challenges.  We may face  technical  and  process  issues in moving to
commercial  production.  There can be no assurance  that Corning will be able to
pace  its  capacity  expansion  to  the  actual  demand.  It  is  possible  that
manufacturing capacity may exceed customer demand during certain periods.

     The  manufacturing  of our  products  involves  highly  complex and precise
processes, requiring production in highly controlled and dust-free environments.
Changes  in  our  manufacturing   processes  could   significantly   reduce  our
manufacturing   yields  and  product  reliability.   In  some  cases,   existing
manufacturing  may be  insufficient to achieve the volume or requirements of our
customers. We will need to develop new manufacturing processes and techniques to
achieve  targeted  volume,  pricing and cost levels that will permit  profitable
operations.  While we  continue to fund  projects  to improve our  manufacturing
techniques and  processes,  we may not achieve  satisfactory  cost levels in our
manufacturing activities that will fully satisfy our margin targets.

Our future  operating  results  depend on our ability to  purchase a  sufficient
amount of materials,  parts, and manufacturing  equipment components to meet the
demands of our customers

     Our ability to meet  customer  demand  depends,  in part, on our ability to
obtain timely and adequate delivery of materials,  parts and components from our
suppliers.   We  may  experience  shortages  that  could  adversely  affect  our
operations.  Although we work closely with our suppliers to avoid these types of
shortages,  there can be no assurances that we will not encounter these problems
in  the  future.  Furthermore,  certain  of  our  components  and  manufacturing
equipment are available only from a single source or limited sources. We may not
be  able  to  find  alternate  sources  in  a  timely  manner.  A  reduction  or
interruption  in supplies,  or a  significant  increase in the price of supplies
could have a material adverse effect on our businesses.

We have incurred, and may in the future incur,  restructuring and other charges,
the amounts of which are difficult to predict accurately

     We have recorded several charges for  restructuring,  impairment of assets,
and the  write-off of cost and equity based  investments.  It is possible we may
record  additional  charges  for  restructuring  or other asset  impairments  if
additional  actions become necessary to align costs to a reduced level of demand
or other factors impacting our businesses.

We have  incurred,  and may in the future incur,  goodwill and other  intangible
asset impairment charges

     At December 31, 2005,  Corning had goodwill and other intangible  assets of
$338 million.  While we believe the  estimates  and judgments  about future cash
flows used in the goodwill  impairment  tests are reasonable,  we cannot provide
assurance  that future  impairment  charges will not be required if the expected
cash flow estimates as projected by management do not occur.





We may be limited in our ability to obtain  additional  capital on  commercially
reasonable terms

     Although we believe  existing cash,  short-term  investments  and borrowing
capacity,  collectively,  provide adequate  resources to fund ongoing  operating
requirements,  we may be  required  to  seek  additional  financing  to  compete
effectively in our markets.  Our public debt ratings affect our ability to raise
capital and the cost of such  capital.  Our ratings as of February 17, 2006 were
BBB- from both Fitch,  Inc. and Standard & Poor's, a division of the McGraw-Hill
Companies, Inc. and Baa3 from Moody's Investors Service, a subsidiary of Moody's
Corporation.  Any  downgrades  may increase our  borrowing  costs and affect our
ability to access the capital markets.

     We are subject under our revolving  credit facility to financial  covenants
that  require us to  maintain  two ratios  including  total debt to capital  and
interest  coverage,  as  defined  under the  revolving  credit  facility.  These
covenants  limit our  ability  to borrow  funds.  Future  losses or  significant
charges would materially affect these ratios,  and may reduce the amounts we are
able to borrow under our revolving credit facility.

If our products or materials purchased from our suppliers experience performance
issues, our business will suffer

     Our business  depends on the  production of products of  consistently  high
quality.  Our products,  components and materials  purchased from our suppliers,
are  typically  tested for  quality.  These  testing  procedures  are limited to
evaluating  our products under likely and  foreseeable  failure  scenarios.  For
various reasons, our products, including materials purchased from our suppliers,
may fail to perform as expected.  In some cases, product redesigns or additional
expense may be required to correct a defect.  A significant or systemic  product
failure could result in customer relations  problems,  lost sales, and financial
damages.

We face competition in most of our businesses

     We  expect  that  we  will  face  additional   competition   from  existing
competitors, low cost manufacturers and new entrants. We must invest in research
and   development,   expand  our   engineering,   manufacturing   and  marketing
capabilities,  and continue to improve  customer service and support in order to
remain competitive. We cannot provide assurance that we will be able to maintain
or improve our competitive position.

We may experience difficulties in enforcing our intellectual property rights and
we may be subject to claims of infringement of the intellectual  property rights
of others

     We may encounter  difficulties  in  protecting  our  intellectual  property
rights or obtaining  rights to  additional  intellectual  property  necessary to
permit us to continue or expand our  businesses.  We cannot  assure you that the
patents that we hold or may obtain will provide  meaningful  protection  against
our  competitors.  Litigation  may be  necessary  to  enforce  our  intellectual
property  rights.  Litigation is  inherently  uncertain and the outcome is often
unpredictable.  Other  companies  hold  patents  on  technologies  used  in  our
industries  and are  aggressively  seeking to expand,  enforce and license their
patent portfolios.

     The  intellectual  property  rights of others could  inhibit our ability to
introduce new products.  We are, and may in the future be,  subject to claims of
intellectual  property  infringement or misappropriation that may result in loss
of revenue,  require us to incur substantial  costs, or lead to monetary damages
or injunctive  relief against us. We cannot assure you as to the outcome of such
claims.

Current or future  litigation  may harm our  financial  condition  or results of
operations

     Pending,   threatened   or  future   litigation   is  subject  to  inherent
uncertainties. Our financial condition or results of operations may be adversely
affected by unfavorable outcomes, expenses and costs exceeding amounts estimated
or  insured.  In  particular,  we have been  named as a  defendant  in  numerous
lawsuits  alleging  personal  injury from exposure to asbestos.  As described in
Legal  Proceedings,  our  negotiations  with  the  representatives  of  asbestos
claimants  have  produced  a  tentative   settlement   through  a  PCC  Plan  of
Reorganization,  but certain cases may still be litigated. The final approval of
the tentative settlement is subject to a number of uncertainties. Final approval
of a global settlement through the PCC bankruptcy process may impact the results
of operations for the period in which such costs, if any, are recognized.  Total
charges of $818 million have been incurred through  December 31, 2005;  however,
additional charges are possible due to the potential fluctuation in the price of
our common  stock,  other  adjustments  in the  proposed  settlement,  and other
litigation factors.





We face risks through our equity method  investments in companies that we do not
control

     Corning's net income includes  significant equity in earnings of associated
companies.  For the year ended December 31, 2005, we recognized  $611 million of
equity  earnings,  of which $661 million came from our two largest  investments:
Dow Corning  Corporation  (which makes  silicone  products) and Samsung  Corning
Precision Glass Co., Ltd.  (which makes liquid crystal  display glass).  Samsung
Corning Precision Glass Co., Ltd. (Samsung Corning  Precision) is located in the
Asia-Pacific  region and is  subject to  political  geographic  risks  mentioned
above. Our equity  investments may not continue to perform at the same levels as
in recent  years.  In the third  quarter of 2005,  we  recognized  equity losses
associated with Samsung Corning Co., Ltd. (our 50% equity method investment that
makes glass panels and funnels for  conventional  televisions),  which  recorded
significant  fixed  asset  and other  impairment  charges.  As the  conventional
television market will be negatively  impacted by strong growth in the LCD glass
market,  it is  reasonably  possible  that Samsung  Corning Co.,  Ltd. may incur
additional  restructuring  or impairment  charges or net operating losses in the
future.

We may not have adequate insurance coverage for claims against us

     We face the risk of loss  resulting  from  product  liability,  securities,
fiduciary liability,  intellectual property, antitrust,  contractual,  warranty,
fraud and other lawsuits, whether or not such claims are valid. In addition, our
product  liability,   fiduciary,   directors  and  officers,  property,  natural
catastrophe and comprehensive general liability insurance may not be adequate to
cover such claims or may not be available to the extent we expect. Our insurance
costs  have  increased  and  may  increase  further.  We may  not be able to get
adequate  insurance  coverage in the future at  acceptable  costs.  A successful
claim that  exceeds or is not covered by our  policies  could  require us to pay
substantial  sums. Some of the carriers in our excess insurance  programs are in
liquidation  and may not be able to respond if we should  have  claims  reaching
into excess layers.  The financial health of other insurers may deteriorate.  In
addition,  we may not be able to obtain adequate  insurance coverage for certain
risk such as political risk, terrorism or war.

The Company has material weaknesses in internal control over financial reporting
and cannot assure you that additional material weaknesses will not be identified
in the future.  Our failure to implement and maintain effective internal control
over financial reporting could result in material misstatements in the financial
statements.

     Management has identified  material weaknesses in our internal control over
financial  reporting that resulted in the  restatement  of the Company's  annual
consolidated  financial  statements for the years ended December 31, 2005, 2004,
and 2003 and the  quarterly  consolidated  financial  statements  for the  three
quarterly  periods in the years ended  December 31, 2005 and 2004. See "Item 9A.
Controls and Procedures."

     The material  weaknesses in the Company's  internal  control over financial
reporting  during  the  periods  related  to  ineffective  controls  over 1) the
valuation   of  its  asbestos   settlement   charges  and  the   valuation   and
reconciliation of the related  liability related to the 2003 Pittsburgh  Corning
Corporation Asbestos Litigation Bankruptcy  Settlement,  and 2) the completeness
and accuracy of its equity investments.

     Additionally,  these control deficiencies could result in a misstatement of
our investments and equity in earnings of associated companies that would result
in a  material  misstatement  to the annual or  interim  consolidated  financial
statements that would not be prevented or detected.

     We cannot assure you that  additional  material  weaknesses in our internal
control over  financial  reporting  will not be  identified  in the future.  Any
failure to maintain or  implement  required  new or  improved  controls,  or any
difficulties  that may be encountered in their  implementation,  could result in
additional significant deficiencies or material weaknesses, cause the Company to
fail  to  meet  its  periodic  reporting   obligations  or  result  in  material
misstatements in the Company's financial statements. Any such failure could also
adversely  affect the  results of  periodic  management  evaluations  and annual
auditor reports  regarding the  effectiveness of the Company's  internal control
over financial reporting required under Section 404 of the Sarbanes-Oxley Act of
2002 and the rules  promulgated  under  Section 404.  The  existence of material
weaknesses could result in errors in our financial  statements that could result
in a restatement of financial statements.

Other

Additional  information  in  response  to Item 1 is found in Note 19  (Operating
Segments) to the consolidated financial statements and selected financial data.

Item 1B.  Unresolved Staff Comments
-----------------------------------

None.







Item 2.  Properties
-------------------

We operate approximately 47 manufacturing plants and processing  facilities,  of
which approximately one half are located in the U.S. We own substantially all of
our executive and corporate  buildings,  which are located in Corning, New York.
We also own  substantially all of our manufacturing and research and development
facilities and more than half of our sales and administrative facilities.

For the years ended 2005,  2004 and 2003,  we invested a total of $2.8  billion,
primarily in facilities outside the U.S. in our Display Technologies segment. Of
the $1.6 billion spent in 2005, $1.3 billion was for facilities outside the U.S.

Manufacturing, sales and administrative, and research and development facilities
at  consolidated  locations have an aggregate  floor space of  approximately  22
million square feet. Distribution of this total area follows:
-------------------------------------------------------------------------------
(million square feet)              Total              Domestic          Foreign
-------------------------------------------------------------------------------

Manufacturing                       17                    9               8
Sales and administrative             4                    2               2
Research and development             1                    1
-------------------------------------------------------------------------------

Total                               22                   12              10
-------------------------------------------------------------------------------

Total assets and capital  expenditures by operating segment are included in Note
19 (Operating Segments) to the Consolidated  Financial  Statements.  Information
concerning lease commitments is included in Note 14 (Commitments,  Contingencies
and Guarantees) to the Consolidated Financial Statements.

During 2005, we continued the restructuring  program that closed or consolidated
certain  smaller  manufacturing  facilities.  Throughout  2006 we expect to have
excess  manufacturing  capacity in our  Telecommunications  segment and will not
utilize a portion of space in the  facilities  listed above.  The largest unused
portion is our optical fiber manufacturing  facility in Concord,  North Carolina
that has been  mothballed  until  fiber  demand  rebounds.  We believe  that the
Concord  facility  can be returned  to  productive  capacity  within six to nine
months of a decision to do so.

Item 3.  Legal Proceedings
--------------------------

Environmental Litigation. Corning has been named by the Environmental Protection
Agency (the  Agency)  under the  Superfund  Act, or by state  governments  under
similar state laws, as a potentially  responsible  party at 11 active  hazardous
waste sites.  Under the Superfund Act, all parties who may have  contributed any
waste to a hazardous  waste site,  identified  by such  Agency,  are jointly and
severally liable for the cost of cleanup unless the Agency agrees otherwise.  It
is Corning's policy to accrue for its estimated  liability  related to Superfund
sites and other  environmental  liabilities related to property owned by Corning
based on expert analysis and continual  monitoring by both internal and external
consultants.  Corning has accrued $13 million  (undiscounted)  for its estimated
liability for  environmental  cleanup and litigation at December 31, 2005. Based
upon the  information  developed to date,  management  believes that the accrued
reserve is a reasonable estimate of the Company's liability and that the risk of
an additional loss in an amount materially higher than that accrued is remote.

Dow Corning Bankruptcy. Corning and The Dow Chemical Company (Dow Chemical) each
own 50% of the common stock of Dow Corning Corporation (Dow Corning),  which was
in  reorganization  proceedings  under  Chapter 11 of the U.S.  Bankruptcy  Code
between May 1995 and June 2004. Dow Corning filed for  bankruptcy  protection to
address   pending   and  claimed   liabilities   arising   from  many   thousand
breast-implant  product  lawsuits.  On June 1, 2004,  Dow Corning  emerged  from
Chapter 11 with a Plan of  Reorganization  (the  Plan)  which  provided  for the
settlement  or other  resolution  of implant  claims and  includes  releases for
Corning and Dow Chemical as  shareholders in exchange for  contributions  to the
Plan.

Under  the terms of the Plan,  Dow  Corning  has  established  and is  funding a
Settlement Trust and a Litigation Facility to provide a means for tort claimants
to settle or litigate  their  claims.  Dow Corning has paid  approximately  $1.6
billion (inclusive of insurance) to the Settlement Trust and subject to a number
of conditions, may pay up to an additional $1.6 billion ($710 million after-tax)
over 16 years.  Certain commercial creditors continue to pursue an appeal to the
U.S.  Court  of  Appeals  of the  Sixth  Circuit  seeking  from Dow  Corning  an
additional  sum of  approximately  $80 million for interest at default rates and
enforcement  costs. The appeal was argued on July 27, 2005. Corning believes the
risk of loss to Dow Corning (net of amounts reserved) is remote.

In addition,  Dow Corning has received a statutory notice of deficiency from the
United States  Internal  Revenue  Service  asserting tax  deficiencies  totaling
approximately  $65 million  relating  to its federal  income tax returns for the
1995 and 1996 calendar  years.  This matter is pending before the U.S.  District
Court in Michigan.  Dow Corning has also received a proposed adjustment from the
IRS (approximately  $117 million) with respect to its federal income tax returns
for the 1997, 1998 and 1999 calendar years. Dow Corning is vigorously contesting
these deficiencies and proposed adjustments which it believes are excessive.






In 1995,  Corning  fully  impaired its  investment in Dow Corning upon its entry
into  bankruptcy  proceedings and did not recognize net equity earnings from the
second quarter of 1995 through the end of 2002. Corning began recognizing equity
earnings  in the  first  quarter  of 2003  when  management  concluded  that its
emergence  from  bankruptcy  protection  was  probable.  Corning  considers  the
difference  between the carrying  value of its investment in Dow Corning and its
50% share of Dow  Corning's  equity to be  permanent.  This  difference  is $249
million. Subject to future rulings by the bankruptcy court and potential changes
in estimated bankruptcy-related liabilities, it is possible that Dow Corning may
record bankruptcy-related charges in the future. Corning received $45 million in
dividends from Dow Corning in 2005.

Pittsburgh Corning Corporation.  Corning and PPG Industries, Inc. (PPG) each own
50% of the capital stock of Pittsburgh Corning  Corporation (PCC). Over a period
of more than two decades,  PCC and several other  defendants  have been named in
numerous  lawsuits  involving  claims alleging  personal injury from exposure to
asbestos. On April 16, 2000, PCC filed for Chapter 11 reorganization in the U.S.
Bankruptcy Court for the Western District of Pennsylvania.  As of the bankruptcy
filing, PCC had in excess of 140,000 open claims and had insufficient  remaining
insurance  and assets to deal with its alleged  current and future  liabilities.
More  than  100,000  additional  claims  have  been  filed  with PCC  after  its
bankruptcy filing. As a result of PCC's bankruptcy  filing,  Corning recorded an
after-tax  charge of $36 million in 2001 to fully impair its  investment  in PCC
and  discontinued  recognition  of  equity  earnings.  At the time PCC filed for
bankruptcy  protection,  there were approximately  12,400 claims pending against
Corning in state court lawsuits  alleging various theories of liability based on
exposure to PCC's asbestos products and typically requesting monetary damages in
excess of one million  dollars per claim.  Corning has defended  those claims on
the basis of the separate  corporate  status of PCC and the absence of any facts
supporting  claims of direct  liability  arising from PCC's  asbestos  products.
Corning  is  also   currently   named  in   approximately   11,000  other  cases
(approximately  43,500  claims)  alleging  injuries  from  asbestos  and similar
amounts  of  monetary  damages  per  claim.  Those  cases  have been  covered by
insurance  without  material impact to Corning to date.  Asbestos  litigation is
inherently  difficult,  and past  trends in  resolving  these  claims may not be
indicators of future outcomes.

In the  bankruptcy  court in April 2000,  PCC obtained a preliminary  injunction
against the prosecution of asbestos  actions arising from PCC's products against
its two  shareholders  to  afford  the  parties  a  period  of time in  which to
negotiate a plan of reorganization for PCC (the PCC Plan).

On May 14, 2002,  PPG announced that it had agreed with certain of its insurance
carriers and  representatives  of current and future  asbestos  claimants on the
terms of a  settlement  arrangement  applicable  to claims  arising  from  PCC's
products.

On  March  28,  2003,  we  announced  that we had  reached  agreement  with  the
representatives  of asbestos  claimants  for the  settlement  of all current and
future  asbestos  claims against us and Pittsburgh  Corning  Corporation  (PCC),
which might arise from PCC products or operations.  The proposed settlement,  if
the plan is approved and becomes  effective,  will require Corning to relinquish
its equity interest in PCC, contribute its equity interest in Pittsburgh Corning
Europe N.V.  (PCE), a Belgian  corporation,  and contribute 25 million shares of
Corning common stock.  Corning also agreed to make cash payments with a value of
$131  million,  in March  2003,  over six years from the  effective  date of the
settlement.  In addition,  Corning will assign policy  rights or proceeds  under
primary  insurance  from 1962 through 1984, as well as rights to proceeds  under
certain  excess  insurance,  most of which  falls  within the  period  from 1962
through 1973. In return for these  contributions,  Corning  expects to receive a
release  and  an  injunction  channeling  asbestos  claims  against  it  into  a
settlement trust under the PCC Plan.

Corning  recorded an initial  charge of $392 million in the period  ending March
31,  2003 to reflect the  settlement  terms.  However,  the  asbestos  liability
requires adjustment to fair value based upon movements in Corning's common stock
price  prior to the  contribution  of the shares to the trust and changes in the
estimated fair value of the other components of the settlement offer.  Beginning
with the first quarter of 2003 and through  December 31, 2005,  Corning recorded
total net  charges of $818  million  to  reflect  the  initial  settlement,  the
movement in Corning's  common  stock price since March 31, 2003,  and changes in
the estimated fair value of the other components of the settlement offer.

Two of Corning's  primary  insurers and several  excess  insurers have commenced
litigation for a declaration of the rights and  obligations of the parties under
insurance  policies,  including  rights that may be  affected by the  settlement
arrangement  described  above.  Corning is  vigorously  contesting  these cases.
Management is unable to predict the outcome of this insurance litigation.

The PCC Plan received a favorable vote from creditors in March 2004. Hearings to
consider  objections to the Plan were held in the Bankruptcy  Court in May 2004.
The  parties  filed  post-hearing  briefs and made final oral  arguments  to the
Bankruptcy  Court in November 2004.  The Bankruptcy  Court allowed an additional
round of briefing to address current case law  developments and heard additional
oral  arguments on March 16, 2005. In mid-April  2005, the proponents of the PCC
Plan requested that the court rule on the pending objections.  If the Bankruptcy
Court does not approve the PCC Plan in its current form, changes to the Plan are
probable  as it is likely  that the Court  will  allow  the  proponents  time to
propose  amendments.   The  outcome  of  these  proceedings  is  uncertain,  and
confirmation  of the current  Plan or any amended Plan is subject to a number of
contingencies.  However, apart from the quarterly  mark-to-market  adjustment in
the value of the 25 million  shares of Corning stock,  management  believes that
the likelihood of a material adverse impact to Corning's financial statements is
remote.






Astrium. In December of 2000, Astrium,  SAS and Astrium,  Ltd. filed a complaint
for negligence in the U.S. District Court for the Central District of California
against TRW, Inc., Pilkington Optronics Inc., Corning NetOptix, Inc. (NetOptix),
OFC Corporation  and Optical Filter  Corporation  claiming  damages in excess of
$150 million.  The complaint alleges that certain cover glasses for solar arrays
used to generate  electricity  from solar energy on satellites sold by Astrium's
corporate  successor  were  negligently  coated by NetOptix or its  subsidiaries
(prior to  Corning's  acquisition  of NetOptix) in such a way that the amount of
electricity  the satellite can produce and their  effective life were materially
reduced.  NetOptix  has denied  that the  coatings  produced  by NetOptix or its
subsidiaries  caused the damage alleged in the complaint,  or that it is legally
liable for any damages that  Astrium may have  experienced.  In April 2002,  the
Court granted motions for summary  judgment by NetOptix and other  defendants to
dismiss  the  negligence  claims,  but  permitted  plaintiffs  to add  fraud and
negligent  misrepresentation  claims  against  all  defendants  and a breach  of
warranty claim against NetOptix and its subsidiaries. In October 2002, the Court
again  granted  defendants'  motions  for summary  judgment  and  dismissed  the
negligent misrepresentation and breach of warranty claims. The intentional fraud
claims were dismissed against all non-settling  defendants on February 25, 2003.
On March 19, 2003,  Astrium  appealed all of the Court's  rulings  regarding the
various summary judgment motions to the Ninth Circuit Court of Appeals. Briefing
is expected to be completed in early 2006. A hearing for oral argument should be
set  for  2006.  Recognizing  that  the  outcome  of  litigation  is  uncertain,
management  believes  that the  likelihood  of a  materially  adverse  impact to
Corning's financial statements is remote.

Grand Jury Investigation of Conventional  Cathode Ray Television Glass Business.
In August 2003,  Corning  Asahi Video  Products  Company (CAV) was served with a
federal grand jury document  subpoena  related to pricing,  bidding and customer
practices  involving  conventional  cathode ray  television  glass  picture tube
components.  A number of employees or former  employees  have received a related
subpoena.  CAV is a general  partnership,  51% owned by Corning and 49% owned by
Asahi Glass America,  Inc. CAV's only  manufacturing  facility in State College,
Pennsylvania  closed in the first half of 2003 due to  declining  sales.  CAV is
cooperating  with  the  government  investigation.  Management  is not  able  to
estimate  the  likelihood  that any  charges  will be  filed as a result  of the
investigation.

Tax  Matters.  Corning has not been  required to pay any penalty to the Internal
Revenue Service (IRS) for failing to make  disclosures  required with respect to
certain  transactions  that the IRS has  identified  as  abusive  or that have a
significant tax avoidance purpose under section 6707A(e) of the Internal Revenue
Code.

Seoul  Guarantee  Insurance Co. and other  creditors  against  Samsung Group and
affiliates.  As of December 31, 2005,  Samsung Corning Precision Glass Co., Ltd.
(Samsung Corning  Precision) and Samsung Corning Co. Ltd. (Samsung Corning) were
two of approximately  thirty co-defendants in a lawsuit filed by Seoul Guarantee
Insurance Co. and 14 other  creditors  (SGI and Creditors) for alleged breach of
an agreement that  approximately  thirty affiliates of the Samsung group entered
into with SGI and  Creditors  in September  1999.  The lawsuit is pending in the
courts of Korea.  According to the agreement,  the Samsung  affiliates agreed to
sell 3.5 million  shares of Samsung Life  Insurance  Co., Ltd. (SLI) by December
31, 2000,  which were  transferred  to SGI and Creditors in connection  with the
petition for court  receivership  of Samsung Motor Inc. In the lawsuit,  SGI and
Creditors  allege that, in the event that the proceeds of sale of the SLI shares
is less than 2.45 trillion Korean won (approximately $2.42 billion), the Samsung
affiliates  allegedly  agreed to compensate SGI and Creditors for the shortfall,
by other means, including Samsung affiliates' purchase of equity or subordinated
debentures  to be issued by SGI and  Creditors.  Any excess  proceeds  are to be
distributed  to the Samsung  affiliates.  As of December 31, 2005, the shares of
Samsung Life  Insurance  Co., Ltd. have not been sold. The suit asks for damages
of approximately $4.68 billion plus penalty interest.  Samsung Corning Precision
and Samsung Corning  combined  guarantees  should represent no more than 3.1% of
the Samsung  affiliates'  total financial  obligation.  Although noting that the
outcome of these matters is  uncertain,  Samsung  Corning  Precision and Samsung
Corning  have stated  that these  matters are not likely to result in a material
ultimate loss to their financial statements.  No claim in these matters has been
asserted against Corning Incorporated.

Item 4.  Submission of Matters to a Vote of Security Holders
------------------------------------------------------------

None.





                                     PART II


Item 5. Market for Registrant's  Common Equity,  Related Stockholder Matters and
--------------------------------------------------------------------------------
Issuer Purchases of Equity Securities
-------------------------------------

(a)  Corning  Incorporated common stock is listed on the New York Stock Exchange
     and the SWX Swiss  Exchange.  In  addition,  it is  traded  on the  Boston,
     Midwest, Pacific and Philadelphia stock exchanges. Common stock options are
     traded on the Chicago Board Options Exchange. The abbreviated ticker symbol
     for Corning Incorporated is "GLW."

The following table sets forth the high and low sales price of Corning's  common
stock as reported on the Composite Tape.
-------------------------------------------------------------------------------
                                First        Second        Third       Fourth
                               Quarter       Quarter      Quarter      Quarter
-------------------------------------------------------------------------------
2005
-------------------------------------------------------------------------------
Price range
   High                       $  12.40     $  17.08     $  21.95      $ 21.62
   Low                        $  10.61     $  10.97     $  16.03      $ 16.61
-------------------------------------------------------------------------------
2004
-------------------------------------------------------------------------------
Price range
   High                       $  13.89     $  13.19     $  13.03      $ 12.96
   Low                        $  10.00     $  10.08     $   9.29      $ 10.16
-------------------------------------------------------------------------------

     As of December 31, 2005, there were approximately  26,900 record holders of
     common stock and approximately 630,000 beneficial shareholders.

     Corning discontinued the payment of dividends on our common stock in 2001.

     The  section  entitled  "Equity   Compensation  Plan  Information"  in  our
     definitive  Proxy  Statement for our 2006 annual meeting of shareholders to
     be held on April 27,  2006,  is  incorporated  by  reference in this Annual
     Report on Form 10-K/A.

(b)  Not applicable.

(c)  This table  provides  information  about our  purchases of our common stock
     during the fiscal fourth quarter of 2005:



Issuer Purchases of Equity Securities*
------------------------------------------------------------------------------------------------------------------------------------
                                          Total              Average             Total Number of              Approximate Dollar
                                         Number               Price            Shares Purchased as           Value of Shares that
                                        of Shares           Paid per            Part of Publicly             May Yet Be Purchased
Period                                 Purchased**           Share**             Announced Plan*                Under the Plan*
------------------------------------------------------------------------------------------------------------------------------------
                                                                                                          
October 1-31, 2005                         1,046             $19.30                    0                              $0
November 1-30, 2005                      159,649             $19.92                    0                              $0
December 1-31, 2005                       15,409             $20.30                    0                              $0
------------------------------------------------------------------------------------------------------------------------------------
Total                                    176,104             $19.95                    0                              $0
------------------------------------------------------------------------------------------------------------------------------------


*    During the quarter  ended  December  31,  2005,  we did not have a publicly
     announced  program for repurchase of shares of our common stock and did not
     repurchase our common stock in open-market  transactions  outside of such a
     program.

**   This column  reflects the following  transactions  during the fiscal fourth
     quarter of 2005: (i) the deemed surrender to us of 174,899 shares of common
     stock to pay the exercise price and to satisfy tax withholding  obligations
     in connection  with the exercise of employee  stock  options,  and (ii) the
     surrender to us of 1,205 shares of common stock to satisfy tax  withholding
     obligations  in connection  with the vesting of restricted  stock issued to
     employees.








Item 6.  Selected Financial Data (Unaudited)
--------------------------------------------



(In millions, except per share amounts and number of employees)
------------------------------------------------------------------------------------------------------------------------------------
                                                                                Years ended December 31,
                                                       -----------------------------------------------------------------------------
                                                           2005           2004            2003
                                                        (Restated)     (Restated)      (Restated)        2002           2001
------------------------------------------------------------------------------------------------------------------------------------
                                                                                                       
Results of Operations

Net sales                                               $   4,579       $   3,854      $   3,090       $  3,164       $   6,047
Research, development and engineering expenses          $     443       $     355      $     344       $    483       $     622
Equity in earnings of associated companies, net of
  impairments                                           $     611       $     454      $     216       $    116       $     148
Income (loss) from continuing operations                $     585       $  (2,251)     $    (280)      $ (1,780)      $  (5,532)
Income from discontinued operations                                            20                           478              34
------------------------------------------------------------------------------------------------------------------------------------
Net income (loss) (1)                                   $     585       $  (2,231)     $    (280)      $ (1,302)      $  (5,498)
------------------------------------------------------------------------------------------------------------------------------------

Basic earnings (loss) per common share from (1):
    Continuing operations                               $    0.40       $  (1.62)      $   (0.22)      $  (1.85)      $   (5.93)
    Discontinued operations                                                 0.01                           0.46            0.04
------------------------------------------------------------------------------------------------------------------------------------
    Basic earnings (loss) per common share              $    0.40       $  (1.61)      $   (0.22)      $  (1.39)      $   (5.89)
------------------------------------------------------------------------------------------------------------------------------------
Diluted earnings (loss) per common share from (1):
    Continuing operations                               $    0.38       $  (1.62)      $   (0.22)      $  (1.85)      $   (5.93)
    Discontinued operations                                                 0.01                           0.46            0.04
------------------------------------------------------------------------------------------------------------------------------------
    Diluted earnings (loss) per common share            $    0.38       $  (1.61)      $   (0.22)      $  (1.39)      $   (5.89)
------------------------------------------------------------------------------------------------------------------------------------
Common dividends declared                                                                                             $    0.12
Shares used in computing per share amounts:
    Basic earnings (loss) per common share                  1,464           1,386          1,274          1,030             933
    Diluted earnings (loss) per common share                1,535           1,386          1,274          1,030             933
------------------------------------------------------------------------------------------------------------------------------------

Financial Position

Working capital                                         $   1,490       $     804      $   1,077       $  2,145       $   2,113
Total assets                                            $  11,207       $   9,736      $  10,816       $ 11,406       $  12,793
Long-term debt                                          $   1,789       $   2,214      $   2,668       $  3,963       $   4,463
Shareholders' equity                                    $   5,487       $   3,701      $   5,411       $  4,691       $   5,414
------------------------------------------------------------------------------------------------------------------------------------

Selected Data

Capital expenditures                                    $   1,553       $     857      $     366       $    357       $   1,741
Depreciation and amortization                           $     512       $     523      $     517       $    661       $   1,060
Number of employees (2)                                    26,000          24,700         20,600         23,200          30,300
------------------------------------------------------------------------------------------------------------------------------------


Reference should be made to the Notes to consolidated  financial  statements and
Management's  Discussion  and  Analysis of  Financial  Condition  and Results of
Operations.

(1)  Corning adopted SFAS No. 142,  "Goodwill and Other Intangible Assets" (SFAS
     142) on January  1,  2002.  Pursuant  to SFAS 142,  goodwill  was no longer
     amortized  after the adoption.  For 2001, the adjusted net loss,  excluding
     the  amortization  of goodwill was $5,153.  For 2001, the basic and diluted
     loss  from   continuing   operations   per  common  share,   excluding  the
     amortization of goodwill,  was $5.56.  The basic and diluted  earnings from
     discontinued  operations per common share,  excluding the  amortization  of
     goodwill was $0.04.
(2)  Amounts do not include employees of discontinued operations.







Item 7. Management's  Discussion and Analysis of Financial Condition and Results
--------------------------------------------------------------------------------
of Operations
-------------

Overview

We  continued  to focus on three  significant  priorities  in 2005:  protect our
financial  health,  improve  profitability,  and invest in our  future.  We made
significant progress on all three in 2005.

Financial Health

During 2005, we strengthened our balance sheet and delivered positive cash flows
from operating activities. The following are key accomplishments for 2005:

..    As part of a debt  reduction  program,  we  reduced  the net  amount of our
     outstanding  debt by $885 million  through a combination of retirements and
     scheduled repayments.
..    All three rating agencies upgraded our ratings to investment grade.
..    We  received  $457  million in  deposits  against  orders  relating  to our
     multi-year  supply  agreements  with customers in the Display  Technologies
     segment.  These  agreements  have helped us to meet the rapid growth of the
     liquid crystal display (LCD) market.
..    We generated  sufficient cash flows from operating  activities to cover our
     capital expenditures.

We ended  2005  with $2.4  billion  in cash,  cash  equivalents  and  short-term
investments. This represents an increase of $553 million from December 31, 2004.
In the first quarter of 2005, we entered into a new  revolving  credit  facility
with a group of banks.  This  facility,  which  continues  through  March  2010,
provides us access to a $975 million unsecured  multi-currency revolving line of
credit.  We believe we have  sufficient  liquidity for the next several years to
fund operations, capital expenditures and scheduled debt repayments.

Profitability

For the year ended December 31, 2005, we generated net income of $585 million or
$0.38 per share  compared to a net loss of $2,231 million or $1.61 per share for
2004.

We recorded restructuring, impairment, and other charges and credits in 2005 and
2004  which  affect  the   comparability  of  those  years.   Refer  to  Note  4
(Restructuring,  Impairment  and Other  Charges and  (Credits)),  Note 7 (Income
Taxes),  and Note 8 (Investments) to the consolidated  financial  statements for
additional information.

Investing in our future

We remain  committed to investing in research,  development,  and engineering to
drive  innovation.  We are  investing in a wide variety of  technologies  with a
focus on glass substrates for active matrix LCDs,  diesel filters and substrates
in response to tightening emissions control standards, and the optical fiber and
cable and hardware and equipment that will enable fiber-to-the-premises.

Our research,  development  and engineering  expenditures  have increased by $88
million or 25% compared to 2004. We believe our spending  levels are adequate to
support our growth strategies.

We also  remain  committed  to  investing  in  manufacturing  capacity  to match
increased  demand in our  businesses.  Our capital  expenditures  are  primarily
focused on  expanding  manufacturing  capacity for LCD glass  substrates  in the
Display   Technologies   segment  and  diesel  products  in  the   Environmental
Technologies  segment.  Total capital expenditures for 2005 were $1,553 million,
of which $1,250 million was directed toward our Display Technologies segment and
$171 million was invested in our Environmental Technologies segment primarily in
anticipation of the emerging market for diesel emission control systems.

We expect our 2006  capital  spending to be in the range of $1.3 billion to $1.5
billion,  of which $900  million to $1.1  billion  will be  directed  toward our
Display  Technologies  segment and  approximately  $200 million will be directed
toward our Environmental Technologies segment.







Restatement of Prior Period Financial Statements

The Company's management and its audit committee  concluded,  on April 21, 2006,
that  the  Company  would  restate  previously  issued  consolidated   financial
statements to properly account for the asbestos settlement charges and liability
and for its investment in and equity earnings of Pittsburgh Corning Europe (PCE)
from March 31, 2003,  through  December  31, 2005.  The Company also changed the
classification  of  accretion  on a portion of the  liability to be paid in cash
from interest expense to asbestos settlement charge for the same time period.

The  cumulative  effect of these  adjustments  to Corning's  balance sheet as of
December 31, 2005, resulted in an increase in investments in affiliate companies
of $32 million,  an increase to other accrued  liabilities  of $154 million,  an
increase to accumulated deficit of $123 million,  and an increase to accumulated
other comprehensive income of $1 million.

The  cumulative  effect of these  adjustments  to Corning's  balance sheet as of
December 31, 2004, resulted in an increase in investments in affiliate companies
of $26 million,  an increase to other accrued  liabilities  of $141 million,  an
increase to accumulated deficit of $123 million,  and an increase to accumulated
other comprehensive income of $8 million.

The  cumulative  effect of these  adjustments  to Corning's  balance sheet as of
December 31, 2003, resulted in an increase in investments in affiliate companies
of $11 million, an increase in deferred income taxes of $53 million, an increase
to other accrued liabilities of $117 million, an increase to accumulated deficit
of $57 million,  and an increase to accumulated other comprehensive income of $4
million.

To correct these  errors,  the Company has restated its  consolidated  financial
statements  and, on May 9, 2006,  filed an amended  Annual Report on Form 10-K/A
for the fiscal year ended  December 31, 2005. In addition,  on May 9, 2006,  the
company  filed amended  reports on Form 10-Q/A for the quarters  ended March 31,
2005,  June 30, 2005,  and September 31, 2005, to restate the financial  periods
provided for those quarterly periods.

All  information  in  this  document  reflects  the  impact  of the  restatement
described in Note 2 (Restatement  of Prior Period  Financial  Statements) to the
consolidated financial statements.








RESULTS OF CONTINUING OPERATIONS



Selected highlights from our continuing operations follow (dollars in millions):
------------------------------------------------------------------------------------------------------------------------------------
                                                                                                                   % Change
                                                                   2005           2004         2003         ------------------------
                                                                (Restated)     (Restated)   (Restated)      05 vs. 04     04 vs. 03
------------------------------------------------------------------------------------------------------------------------------------
                                                                                                            
Net sales                                                       $  4,579        $ 3,854      $ 3,090             19           25

Gross margin                                                    $  1,984        $ 1,415      $   849             40           67
  (gross margin %)                                                    43%            37%          27%

Selling, general and administrative expenses                    $    756        $   653      $   599             16            9
  (as a % of revenues)                                                17%            17%          19%

Research, development and engineering expenses                  $    443        $   355      $   344             25            3
  (as a % of revenues)                                                10%             9%          11%

Restructuring, impairment and other charges and (credits)       $    (38)       $ 1,789      $   111           (102)       1,512
  (as a % of revenues)                                                (1)%           46%           4%

Asbestos settlement                                             $    218        $    65      $   535            235          (88)
  (as a % of revenues)                                                 5%             2%          17%

Income (loss) from continuing operations before income taxes    $    559        $(1,604)     $  (876)          (135)          83
  (as a % of revenues)                                                12%           (42)%        (28)%

(Provision) benefit for income taxes                            $   (578)       $(1,084)     $   307            (47)        (453)
  (as a % of revenues)                                               (13)%          (28)%         10%

Equity in earnings of associated companies, net of impairments  $    611        $   454      $   216             35          110
  (as a % of revenues)                                                13%            12%           7%

Income (loss) from continuing operations                        $    585        $(2,251)     $  (280)          (126)         704
  (as a % of revenues)                                                13%           (58)%         (9)%
------------------------------------------------------------------------------------------------------------------------------------


Net Sales

The net sales  increase  in 2005 was the  result of a  significant  increase  in
demand for LCD glass substrates in our Display  Technologies  segment and modest
gains in demand  for  products  in our  Telecommunications  segment  to  support
fiber-to-the-premises  projects and our  Environmental  segment due to increased
sales of diesel filters. Net sales for our Life Sciences segment declined due to
changes in the  distribution  channels.  Movements in foreign exchange rates did
not significantly impact the comparison of net sales between 2005 and 2004.

The net  sales  increase  in 2004 was the  result  of  strong  demand  for glass
substrates  in  our  Display  Technologies  segment,  demand  for  hardware  and
equipment products in our  Telecommunications  segment,  and improvements across
the majority of our other businesses.  These  improvements were partially offset
by the 2003 exit of our photonic technologies and U.S.  conventional  television
glass  businesses.  Movements in foreign exchange rates,  did not  significantly
impact the comparison of net sales between 2004 and 2003.

Reflecting  the  growth in our  Display  Technologies  segment,  net sales  into
international  markets continue to increase at a faster rate than those into the
U.S.  market.  For  2005,  2004,  and 2003,  sales  into  international  markets
accounted for 71%, 65%, and 60% of net sales, respectively.

Gross Margin

As a percentage of net sales,  gross margin improved 6 percentage points in 2005
when compared to 2004. The  improvement in overall gross margin dollars and as a
percentage  of net sales was driven by increased  volume,  improved mix of large
generation  glass, and  manufacturing  efficiencies in our Display  Technologies
segment.

For 2004, as a percentage of net sales,  gross margin  improved by 10 percentage
points  versus  2003.  The  improvement  was  driven by net sales  growth in the
Display   Technologies   segment   of  87%,   operating   efficiencies   in  our
Telecommunications  segment,  and the 2003 exit of the  conventional  television
glass business.






Cost of Sales

The types of expenses included in the cost of sales line item are: raw materials
consumption,  including  direct  and  indirect  materials;  salaries,  wages and
benefits;     depreciation    and    amortization;     production     utilities;
production-related purchasing; warehousing (including receiving and inspection);
repairs and maintenance; inter-location inventory transfer costs; production and
warehousing  facility property insurance;  rent for production  facilities;  and
other production overhead.

Selling, General and Administrative Expenses

The increase in selling,  general and administrative  expenses for both 2005 and
2004, when compared to the previous years,  was primarily driven by increases in
compensation  costs.  As  a  percent  of  net  sales,   selling,   general,  and
administrative expenses were comparable for 2005 and 2004.

The types of  expenses  included  in the  selling,  general  and  administrative
expenses line item are: salaries, wages and benefits; travel; sales commissions;
professional  fees; and depreciation and amortization,  utilities,  and rent for
administrative facilities.

Research, Development and Engineering Expenses

Research,  development and engineering  expenditures increased by $88 million in
2005.  The majority of the increase in 2005  expenditures  related to our growth
initiatives including glass substrates for LCDs, diesel filter and substrates in
response to  tightening  emissions  control  standards,  as well as  exploratory
projects  to  support  future  growth.   Expenditures  on  Display  Technologies
projects,  Environmental  Technologies  projects,  and  Life  Sciences  projects
increased when compared with 2004.

Restructuring, Impairment and Other Charges and (Credits)

Corning recorded  significant net charges in 2004 which affect the comparability
of our  results  for 2005,  2004,  and 2003.  A summary of the net  charges  and
credits  for  all  years  presented  is  provided  in the  following  table  (in
millions):


----------------------------------------------------------------------------------------------------------------
                                                                        For the years ended December 31,
                                                                ----------------------------------------------
                                                                   2005               2004              2003
----------------------------------------------------------------------------------------------------------------
                                                                                              
Impairment of goodwill                                                              $  1,420
Impairment of long-lived assets other than goodwill
     Assets to be disposed of by sale or abandonment            $      6                 302           $    41
     Assets to be held and used                                                           24
Reversal of currency translation adjustment                          (84)
Accelerated depreciation                                                                  37                12
Loss on sale of businesses                                                                12                13
Impairment of available-for-sale securities                           25                                     4
Restructuring charges and (credits)                                   15                  (6)               41
                                                                --------            --------           -------
Total restructuring, impairment other charges and (credits)     $    (38)           $  1,789           $   111
----------------------------------------------------------------------------------------------------------------


     Impairment of Goodwill
     ----------------------

     2004 Impairment Charge

     Pursuant to SFAS No. 142,  "Goodwill and Other  Intangible  Assets,"  (SFAS
     142)  goodwill  is  required  to be tested for  impairment  annually at the
     reporting unit level. In addition, goodwill should be tested for impairment
     between annual tests if an event occurs or circumstances  change that would
     more likely than not reduce the fair value of the reporting  unit below its
     related carrying value. In the third quarter of 2004, we identified certain
     factors  that  caused us to lower our  estimates  and  projections  for the
     long-term revenue growth of the Telecommunications segment, which indicated
     that the fair value of the  Telecommunications  segment  reporting unit was
     less than its carrying  value.  We performed an interim  impairment test of
     the  Telecommunications  segment goodwill in the third quarter of 2004 and,
     as a result,  recorded an impairment charge of $1,420 million to reduce the
     carrying  value of goodwill to its implied fair value at September 30, 2004
     of $117 million.

     Impairment of Long-Lived Assets Other Than Goodwill
     ---------------------------------------------------

     Given our restructuring actions and the market conditions facing certain of
     our  businesses,  at various  times  throughout  2003 to 2005, we performed
     evaluations of the  recoverability  of our held for use  long-lived  assets
     other  than  goodwill.  When an  impairment  evaluation  was  required,  we
     developed  expected future cash flows against which to compare the carrying
     value of the asset group being evaluated. If our projections indicated that
     our long lived assets were not  recoverable  through future cash flows,  we
     were then  required to estimate  the fair value of the  long-lived  assets,
     which were limited to  property,  plant and  equipment,  using the expected
     cash flow approach as a measure of fair value.






     2005 Impairment Charge

     Assets to be disposed of by sale or abandonment

     In 2005, we recorded $6 million of charges  related to adjustments to prior
     year restructuring reserves for our Telecommunications segment.

     2004 Impairment Charge

     Assets to be disposed of by sale or abandonment

     These charges comprise the following:
     .    Telecommunications  segment: In 2004, we recorded a net charge of $344
          million to impair plant and equipment related to certain facilities to
          be disposed of or  shutdown.  Approximately  $332  million of this net
          charge  was  comprised  of the  partially  completed  sections  of our
          Concord,  N.C.  optical  fiber  facility.  As a result of our  lowered
          outlook,  we have permanently  abandoned this construction in progress
          as we no longer  believe the demand for optical fiber will warrant the
          investment necessary to complete this facility. We have mothballed and
          will continue to depreciate the separate  previously-operated  portion
          of the Concord fiber facility.

     .    Other  businesses:  We recorded net credits of $42 million,  primarily
          for  gains on the sale of assets  CAV sold to a third  party in China.
          This  represented  proceeds  in excess of assumed  salvage  values for
          assets   previously   impaired.   This   represented  the  substantial
          completion of the sale of CAV's assets.

     Assets to be held and used

     Due to our decision to  permanently  abandon  certain  assets and lower our
     long-term outlook for the Telecommunications segment in 2004, we determined
     that an event of impairment had occurred in our Telecommunications  segment
     which  required  us to test the  segment's  long-lived  assets  other  than
     goodwill for  impairment.  As a result of this  impairment  evaluation,  we
     recorded a $24 million  impairment  charge in the third  quarter of 2004 to
     write-down certain assets to fair value.

     2003 Impairment Charge

     Assets to be disposed of by sale or abandonment

     These charges comprise the following:
     .    Telecommunications  segment:  We  recorded  charges of $24  million to
          impair plant and equipment  related to the shutdown of a cabling plant
          and the final exit of the photonic technologies  business. The charges
          were more than  offset by a $61  million  credit  related to  previous
          restructuring plans,  primarily the result of our decision not to exit
          two of the cable sites previously marked for shutdown in 2002.

     .    Other  businesses:  We  recorded  charges  of $78  million,  primarily
          related to our decision to shutdown  CAV, and the closure of our North
          Brookfield semiconductor materials plant.

     Other Credits
     -------------

     2005 Reversal of Currency Translation Adjustment

     In 2003,  Corning  sold its photonic  business  operations  to Avanex.  The
     photonics business was the sole operation of Corning O.T.I. S.r.l. (OTI), a
     wholly-owned Italian subsidiary of Corning,  whose results were included in
     Corning's  Telecommunications  segment.  Subsequent  to  the  sale  of  the
     operating  assets of OTI to  Avanex,  Corning  began  liquidating  OTI.  In
     October  2005,  the  assets  of OTI  were  determined  to be  substantially
     liquidated.  As a result of the substantial  liquidation,  OTI's cumulative
     translation account was reversed, resulting in a gain of $84 million in the
     fourth quarter.

     Accelerated Depreciation
     ------------------------

     2004 Accelerated Depreciation

     We recorded $37 million of accelerated  depreciation  relating to the final
     shutdown  of  our  semiconductor   materials   manufacturing   facility  in
     Charleston,  South  Carolina,  which we announced in the fourth  quarter of
     2003.






     2003 Accelerated Depreciation

     We recorded  $12  million of  accelerated  depreciation  as a result of our
     decision to shutdown our semiconductor  materials manufacturing facility in
     Charleston, South Carolina by March 31, 2004.

     Loss on Sale of Businesses
     --------------------------

     2004 Loss on Sale of Business

     On  September  1,  2004 we  completed  the sale of our  frequency  controls
     business,  which was part of the  Telecommunications  segment, for net cash
     proceeds of $80  million.  We  recorded a loss on the sale of $14  million,
     which  included  an  allocation  of $30  million of the  Telecommunications
     segment goodwill.  The frequency controls business had 2003 annual sales of
     $76 million.

     2003 Loss on Sale of Business

     In the third quarter of 2003, we recorded a $13 million loss on the sale of
     a significant portion of our photonic technologies business, which was part
     of our Telecommunications segment.

     Impairment of Available for Sale Securities
     -------------------------------------------

     2005 Impairment Charge

     In 2005,  we recorded  impairment  charges of $25 million for an other than
     temporary decline in the fair value of our investment in Avanex Corporation
     (Avanex)  below its  adjusted  cost  basis.  Our  investment  in Avanex was
     accounted  for  as an  available-for-sale  security  under  SFAS  No.  115,
     "Accounting for Certain  Investments in Debt and Equity  Securities"  (SFAS
     115). In the fourth quarter of 2005, we completed the sale of our shares of
     Avanex.

     2003 Impairment Charge

     In 2003, we recorded a $5 million charge for other than temporary  declines
     in certain cost investments in the Telecommunications segment, subsequently
     sold these  investments  for $4 million in cash, and reported the resulting
     $1 million gain as a credit to restructuring actions.

     Restructuring Actions
     ---------------------

     2005 Restructuring Actions

     Corning  recorded  net  restructuring  charges of $15 million in 2005 which
     included the following:

     .    A charge of $30 million comprising severance costs for a restructuring
          plan in the Telecommunications  segment to continue to reduce costs in
          this segment.
     .    Net credits to prior year  restructuring  plans  totaling  $15 million
          primarily for revisions to plans related to the shutdown of CAV and to
          our specialty materials business.

     2004 Restructuring Actions

     There were no significant restructuring actions taken during 2004, nor were
     there  any   significant   revisions  to  estimates   used  in  prior  year
     restructuring plans.

     2003 Restructuring Actions

     Corning  recorded net  restructuring  charges of $41 million in 2003. Major
     actions approved and initiated in 2003 included the following:

     .    The shutdown of CAV.
     .    The  exit of our  photonics  products  within  the  Telecommunications
          segment.
     .    Credits to prior year restructuring plans, primarily the result of our
          decision not to exit two small cabling sites previously identified for
          shutdown in 2002.
     .    The  shutdown  of  two  of  our  specialty   materials   manufacturing
          facilities in North Brookfield and Charleston, South Carolina.






Legal Settlement - Asbestos

On  March  28,  2003,  we  announced  that we had  reached  agreement  with  the
representatives  of  current  and  future  asbestos  claimants  on a  settlement
arrangement  that  was  thereafter  incorporated  into  the  Pittsburgh  Corning
Corporation (PCC) plan of reorganization (the PCC Plan). This settlement remains
subject  to a number of  contingencies,  including  approval  by the  Bankruptcy
Court.  If the PCC Plan is approved and becomes  effective,  our settlement will
require Corning to relinquish its equity interest in PCC,  contribute its equity
interest in Pittsburgh  Corning  Europe N.V.  (PCE),  and  contribute 25 million
shares of Corning  common  stock.  The common stock and other  components of the
settlement will be marked-to-market each quarter until the PCC Plan is approved,
thus  resulting  in  adjustments  to  income  and the  settlement  liability  as
appropriate.  Corning will also make cash  payments of $152 million (net present
value as of December 31, 2005) in six installments  beginning one year after the
plan is effective.  In addition,  we will assign  insurance policy proceeds from
our  primary  insurance  and a portion  of our excess  insurance  as part of the
settlement.  Two of Corning's  primary insurers and several excess insurers have
commenced  litigation  for a declaration  of the rights and  obligations  of the
parties under insurance  policies,  including rights that may be affected by the
settlement  arrangement  described above. Corning is vigorously contesting these
cases. Management is unable to predict the outcome of this insurance litigation.

The PCC Plan received a favorable vote from creditors in March 2004. Hearings to
consider  objections  to the PCC Plan were held in the  Bankruptcy  Court in May
2004.  The parties  filed  post-hearing  briefs and made oral  arguments  to the
Bankruptcy  Court in November 2004.  The Bankruptcy  Court allowed an additional
round of briefing to address current case law  developments and heard additional
oral  arguments on March 16, 2005. In mid-April  2005, the proponents of the PCC
Plan requested that the court rule on the pending objections.  If the Bankruptcy
Court does not approve the PCC Plan in its current form, changes to the Plan are
probable  as it is likely  that the Court  will  allow  the  proponents  time to
propose  amendments.   The  outcome  of  these  proceedings  is  uncertain,  and
confirmation  of the current  Plan or any amended Plan is subject to a number of
contingencies.  However, apart from the quarterly  mark-to-market  adjustment in
the value of the 25 million  shares of Corning stock,  management  believes that
the likelihood of a material adverse impact to Corning's financial statements is
remote.

The  following  summarizes  the  charges  we  have  recorded  for  the  asbestos
settlement (in millions):
--------------------------------------------------------------------------------
                                               For the years ended December 31,
                                             -----------------------------------
                                                2005         2004        2003
                                             (Restated)   (Restated)  (Restated)
--------------------------------------------------------------------------------

Initial settlement charge                                              $  392
Fair market value adjustment
  for other components                        $    21       $  32          28
Mark-to-market common stock                       197          33         115
                                              -------       -----      ------
Asbestos settlement                           $   218       $  65      $  535
--------------------------------------------------------------------------------

See Legal Proceedings for a history of this matter.

Income (Loss) From Continuing Operations Before Income Taxes

In  addition  to the  drivers  identified  under  Gross  Margin,  Restructuring,
Impairment  and Other  Charges and (Credits)  and Asbestos  Settlement,  we also
retired a significant amount of our outstanding debentures during 2005, 2004 and
2003 that resulted in the following  (losses) gains for the  respective  periods
(in millions):
--------------------------------------------------------------------------------
                                          2005            2004          2003
--------------------------------------------------------------------------------
(Loss) gain on retirement of debt         (16)            (36)           19
--------------------------------------------------------------------------------

Movements in currency exchange rates did not have a significant impact on income
(loss) from continuing operations for the years presented.

Provision (Benefit) for Income Taxes

Our provision  (benefit) for income taxes and the related  effective  income tax
(benefit) rates were as follows (in millions):
--------------------------------------------------------------------------------
                                             For the years ended December 31,
                                          --------------------------------------
                                             2005          2004         2003
                                          (Restated)    (Restated)    (Restated)
--------------------------------------------------------------------------------
Provision (benefit) for income taxes       $   578        $ 1,084      $(307)
Effective income tax (benefit) rate          103.4%          67.6%       (35)%
--------------------------------------------------------------------------------






The  effective  income  tax  (benefit)  rate  for  2005  differed  from the U.S.
statutory rate of 35% primarily due to an increase in income tax expense of $525
million  resulting  from an  increase  in  Corning's  valuation  allowance.  The
increase in the valuation  allowance was the result of our  conclusion  that the
sale of an appreciated asset was no longer prudent and, as such, no longer meets
the criteria in SFAS No. 109, "Accounting for Income Taxes" (SFAS No. 109) for a
viable tax planning  strategy.  The difference  between the effective income tax
(benefit) rate for 2004 and the U.S.  statutory rate of 35% was primarily due to
increases in the valuation  allowance  against certain  domestic (U.S.  federal,
state  and  local)  and  foreign  deferred  tax  assets,  and the  write-off  of
nondeductible goodwill.

For 2005, the tax provision reflected the following items:

..    The impact of our inability to record tax benefits on net operating  losses
     generated in the U.S. and certain foreign jurisdictions;
..    An increase in our valuation allowance of $525 million;
..    The benefit of a worthless stock deduction (and a corresponding increase in
     our  valuation  allowance)  for the loss on our  investment in the photonic
     technologies  business  associated with the Pirelli  acquisition  which was
     completed  in December  2000 and was  substantially  impaired in the second
     quarter of 2001;
..    The  benefit  of tax  holidays  and  investment  credits  in Taiwan and tax
     holidays in China and South Africa;
..    The benefit from the reversal of tax contingency  liabilities following the
     conclusion of Internal Revenue Service (IRS) examinations; and
..    An $82  million  credit  primarily  for the tax effect of  eliminating  our
     minimum pension liability for the domestic qualified plan.

In 2004, significant events occurred which required us to increase our valuation
allowances against certain U.S. and German deferred tax assets.  Refer to Note 4
(Restructuring,  Impairment  and Other  Charges and  (Credits))  for  additional
information on these events and the related charges.  Accordingly,  we increased
our  valuation  allowance by $1.2 billion in the third quarter of 2004 to reduce
our net deferred tax assets to  approximately  $530  million.  At that time,  we
believed  that it was more likely than not that we could  realize the  remaining
net deferred tax assets  through a tax planning  strategy  involving the sale of
our investment in Dow Corning  Corporation  (DCC), a  non-strategic  appreciated
asset, if we were faced with expiring net operating loss carryforwards.

During 2005,  DCC's  performance was much stronger than expected and DCC resumed
paying a dividend;  both of which are expected to continue in the future. Due to
this improved  performance,  DCC now provides strong  financial,  geographic and
market balance to Corning's portfolio of businesses,  the profitability of which
has  become  more  concentrated  due to the  success  of the  display  operating
segment.  As a result, we now consider DCC to be a strategic  investment and can
no longer  assert that a potential tax planning  strategy  involving the sale of
DCC would be prudent,  as required by FAS 109.  Therefore,  we no longer believe
that it is more likely than not that we would realize the remaining net deferred
tax assets.  Accordingly,  we have  increased  our  valuation  allowance by $525
million to fully reserve our net U.S.  deferred tax assets in the fourth quarter
of 2005.

We expect to  maintain a valuation  allowance  on future tax  benefits  until an
appropriate  level of  profitability,  primarily  in the U.S.  and  Germany,  is
sustained  or we are able to develop tax planning  strategies  that enable us to
conclude  that it is more  likely  than not that a portion of our  deferred  tax
assets would be realizable.  Until then, our tax provision will include only the
net tax expense  attributable  to certain  foreign  operations.  Refer to Note 7
(Income  Taxes)  to  the  consolidated   financial   statements  for  additional
information.

During  the third  quarter of 2005,  Corning  filed its 2004  consolidated  U.S.
Federal  income tax  return,  which  included  a $3.9  billion  worthless  stock
deduction for the loss on our investment in the photonic  technologies  business
associated  with the Pirelli  acquisition.  This  acquisition  was  completed in
December  2000 and was  substantially  impaired  in the second  quarter of 2001.
Prior to the third  quarter of 2005,  we did not record a deferred tax asset for
this item as the ultimate  realization  of such  deduction  was  uncertain,  and
consistent with the requirements of SFAS No. 5, "Accounting for  Contingencies,"
recognition of an asset prior to the time management  determines the realization
of the asset is probable is  prohibited.  On September 2, 2005,  Corning and the
Commissioner  of the IRS entered into a closing  agreement under section 7121 of
the  Internal  Revenue Code of 1986 which  provides  that Corning is entitled to
this worthless stock  deduction.  We recorded a $1.5 billion  deferred tax asset
for this item in the third quarter, which was concurrently offset by a valuation
allowance of an equal amount due to our current inability to record tax benefits
for U.S. net operating losses.

Certain  foreign  subsidiaries  in China,  South  Africa,  Korea and  Taiwan are
operating  under  tax  holiday  arrangements.  The  nature  and  extent  of such
arrangements  vary,  and the benefits of such  arrangements  phase out in future
years  (2006 to 2009)  according  to the  specific  terms and  schedules  of the
relevant taxing  jurisdictions.  The impact of the tax holidays on our effective
rate is a reduction  in the rate of 8.6%,  1.2%,  and 0.5% for 2005,  2004,  and
2003, respectively.






Equity in Earnings of Associated Companies, Net of Impairments

The following provides a summary of equity earnings of associated companies, net
of impairments (in millions):
--------------------------------------------------------------------------------
                                 2005               2004             2003
                              (Restated)        (Restated)        (Restated)
--------------------------------------------------------------------------------

Samsung Corning Precision      $     408        $     277         $     144
Dow Corning                          253              116                82
Samsung Corning                     (112)              32               (39)
All other                             62               29                29
                               ---------        ---------         ---------
Total equity earnings          $     611        $     454         $     216
--------------------------------------------------------------------------------

The 2005 and 2004 increases in equity earnings of associated  companies,  net of
impairments,  are  primarily  due to strong  sales and earnings  performance  at
Samsung  Precision,  our 50% owned South Korea-based  manufacturer of LCD glass,
and at Dow Corning, our 50% owned U.S. based manufacturer of silicone products.

In addition to the above,  equity in earnings of  associated  companies,  net of
impairments,  included the following  restructuring  and impairment  charges and
other credits:

..    In 2005, Samsung Corning incurred  impairment and other charges as a result
     of a decline in the  projected  operating  results for its cathode ray tube
     (CRT) glass  business.  The charge,  which included  certain  manufacturing
     assets and severance and exit costs,  reduced  Corning's equity earnings by
     $106  million  in the  third  quarter.  As  Samsung  Corning  executes  its
     restructuring plan over the next several quarters, additional severance and
     shutdown  costs may be  required.  We expect our share of these  charges to
     approximate $30 million.  None of the charges is expected to result in cash
     expenditures by Corning.
..    In 2005, Dow Corning  recorded a gain on the issuance of subsidiary  stock.
     Our equity earnings included $11 million related to this gain.
..    In 2004 and 2003,  Corning  incurred charges of $35 million and $7 million,
     respectively, to impair equity method investments in the Telecommunications
     segment to their estimated fair value.
..    In 2004, Dow Corning recorded charges related to restructuring  actions and
     adjustments  to  interest   liabilities  recorded  on  its  emergence  from
     bankruptcy.  Our equity  earnings  included  $21  million  related to these
     charges.
..    In 2003, Samsung Corning Co., Ltd. recorded asset impairment  charges.  Our
     equity earnings included $66 million related to these charges.

Income (Loss) From Continuing Operations

As a result of the above,  the income (loss) from continuing  operations and per
share data was as follows (in millions, except per share amounts):


------------------------------------------------------------------------------------------------------------------------------------
                                                                                  For the years ended December 31,
                                                                           --------------------------------------------
                                                                              2005              2004            2003
                                                                           (Restated)        (Restated)       Restated)
------------------------------------------------------------------------------------------------------------------------------------
                                                                                                     
Income (loss) from continuing operations                                   $     585         $(2,251)         $  (280)
Basic earnings (loss) per common share from continuing operations          $    0.40         $ (1.62)         $ (0.22)
Diluted earnings (loss) per common share from continuing operations        $    0.38         $ (1.62)         $ (0.22)
Shares used in computing basic per share amounts                               1,464           1,386            1,274
Shares used in computing diluted per share amounts                             1,535           1,386            1,274
------------------------------------------------------------------------------------------------------------------------------------


RESULTS OF DISCONTINUED OPERATIONS

In the  third  quarter  of  2004,  Corning  and 3M  reached  a final  settlement
agreement  for funds held in escrow  associated  with the 2002 sale of Corning's
precision  lens  business to 3M. As a result,  we  recognized a $20 million gain
upon receipt of the proceeds in 2004.







OPERATING SEGMENTS

Our   reportable    operating    segments    include    Display    Technologies,
Telecommunications,   Environmental   Technologies,   and  Life  Sciences.   The
Environmental   Technologies   reportable  segment  is  an  aggregation  of  our
Automotive and Diesel  operating  segments,  as these two segments share similar
economic  characteristics,  products,  customer types,  production processes and
distribution methods. The following provides a brief description of the products
and markets served by each reportable segment:

..    Display  Technologies - manufactures  liquid crystal display glass for flat
     panel displays;
..    Telecommunications - manufactures optical fiber and cable, and hardware and
     equipment components for the worldwide telecommunications industry;
..    Environmental  Technologies - manufactures  ceramic  substrates and filters
     for automobile and diesel applications; and
..    Life Sciences - manufactures  glass and plastic  consumables for scientific
     applications.

We prepared the financial results for our reportable segments on a basis that is
consistent  with  the  manner  in  which we  internally  disaggregate  financial
information to assist in making  internal  operating  decisions.  We include the
earnings of equity  affiliates  that are closely  associated  with our operating
segments in the  respective  segment's  net income.  We have  allocated  certain
common  expenses  among  segments  differently  than we  would  for  stand-alone
financial  information  prepared in accordance with GAAP. These expenses include
interest,  taxes  and  corporate  functions.  Segment  net  income  may  not  be
consistent with measures used by other companies. The accounting policies of our
reportable segments are the same as those applied in the consolidated  financial
statements.

On January 1, 2006, Corning changed its measurement of segment profit or loss as
follows:
..    We removed the net impact of financing  costs,  such as interest expense on
     debt  instruments and interest costs  associated  with benefit plans,  from
     reportable  segments and included  these  amounts in Corporate  unallocated
     expense.
..    We changed  the  allocation  method for taxes to more  closely  reflect the
     company's current tax position.
..    We  removed  the  impact  of  non-cash  stock  compensation   expense  from
     reportable  segments  and  included  this amount in  Corporate  unallocated
     expense.
..    We  removed  the  allocation  of  exploratory  research,   development  and
     engineering  expense from reportable segments and included these amounts in
     Corporate unallocated expense.
..    We changed certain other allocation methods for corporate functions.

The following  discussion  reflects segment information as reported for 2005 and
has not been restated to reflect the changes to segment performance  measurement
made  effective  January  1,  2006.  Refer to Note 20  (Subsequent  Events)  for
additional information on the change in segment profit or loss measurement.

Display Technologies

The  following  table  provides  net  sales  and  other  data  for  the  Display
Technologies segment (dollars in millions):


------------------------------------------------------------------------------------------------------------------------------------
                                                                                                                 % Change
                                                                                                          ----------------------
                                                     2005              2004             2003              05 vs. 04    04 vs. 03
------------------------------------------------------------------------------------------------------------------------------------
                                                                                                            
Net sales                                          $   1,742         $  1,113         $     595               57            87
Income before equity earnings                      $     679         $    258         $      91              163           184
Equity earnings of associated companies            $     416         $    288         $     144               44           100
Net income                                         $   1,095         $    546         $     235              101           132
------------------------------------------------------------------------------------------------------------------------------------


2005 vs. 2004

The 2005 sales increase  reflects the continued  overall growth of the LCD glass
substrate market.  During 2005, glass substrate volumes (measured in square feet
of glass sold)  increased  approximately  64%  compared  with the same period in
2004. Weighted average selling prices decreased 2% compared to 2004. Included in
this weighted  average were selling price declines that were offset by increases
in the market demand for large-size glass  substrates  (generation 5 and above),
which carry a higher selling price per square foot. For 2005,  large-size  glass
substrates  accounted for 69% of total sales  volumes,  compared to 46% in 2004.
Although sales of the Display  Technologies  segment are denominated in Japanese
yen,  movements in the U.S.  dollar - Japanese yen exchange  rate did not have a
significant impact on the comparability of sales.

For 2005, the key drivers for the increase in income before equity earnings were
higher volumes, ongoing improvements in manufacturing efficiencies,  and a lower
effective  tax  rate.  Movements  in  currency  exchange  rates  did not  have a
significant impact on income before equity earnings.  The increase in our equity
earnings from Samsung Corning Precision was largely driven by higher volumes and
ongoing improvements in manufacturing efficiencies.






The Display Technologies  segment has a concentrated  customer base comprised of
LCD panel and color filter makers primarily located in Japan and Taiwan. For the
year ended December 31, 2005, AU Optronics Corporation,  Chi Mei Optoelectronics
Corporation,  Dai Nippon  Printing Co., Ltd.,  Sharp  Corporation,  and Hannstar
Display  Corporation,  each of which  accounted for more than 10% of segment net
sales,  accounted for 75% of total segment sales.  In addition,  Samsung Corning
Precision's  sales are concentrated  across a small number of its customers.  In
2005, sales to three LCD panel makers located in Korea, Samsung Electronics Co.,
Ltd., LG Phillips LCD Co., and Dong Woo STI,  accounted for 98% of total Samsung
Corning Precision sales.

In 2005 and 2004,  Corning and several customers entered into long-term purchase
and supply  agreements  in which the Display  Technologies  segment  will supply
large-size glass substrates to the customers over periods of up to six years. As
part of the agreements,  these customers agreed to make advance cash deposits to
Corning for a portion of the contracted glass to be purchased. In 2005 and 2004,
we received a total of $457 million and $204 million,  respectively, of deposits
against orders.

In the event the customers do not make all customer deposit installment payments
or elect not to purchase  the agreed  upon  quantities  of  product,  subject to
specific  conditions  outlined in the  agreements,  Corning  may retain  certain
amounts of the  customer  deposits.  If Corning  does not  deliver  agreed  upon
product  quantities,  subject to specific conditions outlined in the agreements,
Corning may be  required to return  certain  amounts of the  customer  deposits.
Refer to Note 1 (Summary of Significant  Accounting Policies) and Note 11 (Other
Liabilities) to the consolidated financial statements for further information.

In  the  ordinary  course  of  business,  Corning  will  continue  to  negotiate
multi-year  supply  agreements  with its large  customers  where feasible but we
believe  it  is  unlikely  that  we  will  negotiate  agreements  which  require
additional deposits.

Corning is investing  heavily to expand capacity to meet  increasing  demand for
LCD  glass  substrates.  In 2005,  capital  spending  was $1.25  billion  and is
expected to be $900  million to $1.1 billion in 2006.  Capital  spending in 2006
will be used  mainly to  expand  manufacturing  facilities  in  Tainan,  Taiwan,
Taichung, Taiwan, and Shizuoka, Japan.

2004 vs. 2003

The 2004 sales increase is largely  reflective of the overall LCD-market growth.
During 2004, glass substrate  volumes  increased  approximately  65%. Sales also
benefited from modest average price increases,  primarily the result of a change
in product mix as the market trended toward large size glass. Sales benefited by
approximately  10% from a weakening of the U.S.  dollar against the Japanese yen
compared to 2003.

For 2004, the key drivers for the increase in income before equity earnings were
the impact of incremental volumes and efficiencies realized through the shift in
production toward large size glass  substrates.  The increase in equity earnings
were  driven  by the same  factors  as  those  identified  for our  wholly-owned
business.

Outlook:
We expect to see a  continuation  of the overall  industry  growth and the trend
toward  large  size  substrates.  We  continue  to see  positive  trends  in the
penetration  rates  of LCD  glass  into  the  end-markets  (notebook  computers,
monitors and televisions),  and increasing demand for the large size substrates.
However,  we expect the growth of LCD glass to be more heavily influenced by the
penetration of LCD in the television end market. We anticipate the volume growth
in the LCD market to be over 40% in 2006.  We expect the market volume for large
size  glass  substrates  (Generation  5.5 and  higher) to grow more than 150% in
2006. As a result of the expected  growth in large size  substrates,  we believe
our total  glass  volume  will grow  faster than the overall LCD market in 2006.
This market  growth is expected to occur at varying  rates in the  principal LCD
markets of Japan,  Taiwan  and Korea.  Sales of our  wholly-owned  business  are
primarily  to panel  manufacturers  in Japan and Taiwan with  customers in Korea
being serviced by Samsung  Corning  Precision.  The actual growth rates in these
markets will impact our sales and earnings performance.

For  2006,  we  anticipate   price  declines  that  are  more  significant  than
experienced in previous years as competitors  bring on additional  capacity.  In
the third  quarter of 2005,  we began  production  at our new  Taichung,  Taiwan
manufacturing facility. The ramp-up of production and our ability to efficiently
start up  operations  may  impact  profitability  the  first  half of  2006.  In
addition, we are beginning to see increased amounts of larger-sized glass in the
marketplace  from  competitors.  There can be no assurance  that the  end-market
rates of growth will continue at the high rates  experienced in recent  quarters
or that we will be able to  pace  our  capacity  expansions  to  actual  demand.
Although we believe we can continue to reduce our manufacturing costs, there can
be no assurance that the rate of cost declines will offset price declines in any
given period.  While the industry has grown rapidly,  consumer  preferences  for
panels of  differing  sizes,  or price or other  factors,  may lead to pauses in
market growth, and it is possible that glass  manufacturing  capacity may exceed
demand  from time to time.  In  addition,  changes  in foreign  exchange  rates,
principally   the  Japanese   yen,   will  continue  to  impact  the  sales  and
profitability of this segment.






Telecommunications

The following table provides net sales and other data for the Telecommunications
segment (dollars in millions):


------------------------------------------------------------------------------------------------------------------------------------
                                                                                                            % Change
                                                                                                      ----------------------
                                                 2005              2004             2003              05 vs. 04    04 vs. 03
------------------------------------------------------------------------------------------------------------------------------------
                                                                                                   
Net sales:
   Optical fiber and cable                     $    834         $     755         $    760                10          (1)
   Hardware and equipment                           789               784              612                 1          28
   Photonic technologies                                                                54                --          --
                                               --------         ---------         --------

     Total net sales                           $  1,623         $   1,539         $  1,426                 5           8
                                               ========         =========         ========

Net income (loss)                              $     36         $  (1,893)        $   (169)             (102)     (1,020)
------------------------------------------------------------------------------------------------------------------------------------


2005 vs. 2004

Results for the  Telecommunications  segment  reflected a solid  performance  in
2005.  The net sales  increase was largely  driven by sales in North America and
Europe.  Stronger North American volumes and sales of the hardware and equipment
business  were  largely  the  result  of  sales  to  Verizon  to  support  their
fiber-to-the  premises project.  Excluding the impact of the frequency  controls
business,  a hardware and equipment  manufacturer  sold in September  2004,  net
sales for the Telecommunications  segment increased 10% in 2005 when compared to
the previous  year.  Movements in exchange  rates did not  significantly  impact
sales for either 2005 or 2004.

For the Telecommunications  segment, net income in 2005 and the net loss in 2004
were impacted by restructuring,  impairment, and other charges and (credits). In
2005,  we recorded net after-tax  credits of $47 million  related to these items
and in 2004, we recorded  after-tax charges of $1,798 million.  Refer to Results
of Continuing Operations for a detailed discussion of these charges.

The  Telecommunications  segment continues to have a concentrated customer base.
For the year ended  December 31, 2005,  two customers of the  Telecommunications
segment,  each of which  accounted  for  more  than 10% of  segment  net  sales,
represented 29% of total segment sales. For 2005 and 2004, Verizon accounted for
17% and 13%, respectively, of total segment net sales.

2004 vs. 2003

During 2004 fiber  volumes  grew at 18% while  pricing  declined by 9% from 2003
levels.   The  primary   driver  for  the  2004  sales   growth  was   Verizon's
fiber-to-the-premises  project  in  North  America,  with  the  largest  benefit
realized in our hardware and equipment products.

Offsetting this sales performance were the following items:
..    During 2003 we  completed  the sale and exit of our  photonic  technologies
     business.
..    On  September  1,  2004,  we sold our  frequency  controls  business.  This
     business had annual sales of $76 million in 2003.
..    Sales in Japan were down in 2004,  largely due to 2003  projects  that were
     not repeated in 2004.

Movements in foreign  currency  exchange  rates,  primarily the Japanese yen and
euro, did not have a significant impact on 2004 sales compared to 2003. In 2004,
the   Chinese   Ministry  of  Commerce   issued  an   anti-dumping   preliminary
determination  asserting that Corning had dumped optical fiber into China during
2002 and 2003 and imposed a 16% duty on Corning's  optical  fiber  imports which
Corning later  contested.  Although the Ministry of Commerce,  in December 2004,
concluded that Corning had not dumped optical fiber into China,  and removed the
duty, Corning's market share in China was negatively impacted.

The increased net loss for 2004 is primarily attributable to the goodwill, fixed
asset and equity method  investments  impairment  charges  recorded in the third
quarter of 2004.  Refer to  Results  of  Continuing  Operations  for  additional
information on these charges.

Outlook:
For the Telecommunications  segment, we expect sales in 2006 to remain even with
2005 as volume  gains are  offset by price  declines.  We expect  the  worldwide
telecommunications  industry  market  to  remain  stable  particularly  in North
America.  Sales  volumes  will  largely  be  dependent  on the  continuation  of
Verizon's  fiber-to-the-premises  project and cable and hardware  and  equipment
sales to private networks.  Changes in the expected Verizon  deployment plan, or
additional  reductions  in  their  inventory  levels  of   fiber-to-the-premises
products, could also affect the sales level. Should these plans not occur at the
pace anticipated our sales and earnings would be adversely affected.






Environmental Technologies

The  following  table  provides  net sales and other data for the  Environmental
Technologies segment (dollars in millions):


------------------------------------------------------------------------------------------------------------------------------------
                                                                                                            % Change
                                                                                                      ----------------------
                                                 2005              2004             2003              05 vs. 04    04 vs. 03
------------------------------------------------------------------------------------------------------------------------------------
                                                                                                       
Net sales:
   Automotive                                  $    482         $     479         $    430                 1           11
   Diesel                                            98                69               46                42           50
                                               --------         ---------         --------
     Total net sales                           $    580         $     548         $    476                 6           15
                                               ========         =========         ========

Net (loss) income                              $    (26)        $       4         $      9              (750)         (56)
------------------------------------------------------------------------------------------------------------------------------------


2005 vs. 2004

The 2005  increase  in net sales was the  result of  continued  growth in diesel
products sales in response to tightening  emissions control standards around the
world. Diesel products sales growth is currently driven, in part, by demand from
retrofit markets,  particularly in Korea. In the first half of 2005, we received
letters  of  intent  and  other   expressions   of  intent  from  diesel  engine
manufacturers  to supply  filters  for their 2007 model year  platforms.  We are
continuing  to negotiate  with several  diesel engine  manufacturers  to develop
supply agreements. Negotiations are likely to continue through the first half of
2006.  For automotive  products,  sales in 2005 were flat when compared to prior
year.

The 2005  decrease  in net  income  compared  to 2004  resulted  primarily  from
increased operating expenses primarily to support our emerging diesel products.

Movements in exchange rates did not significantly impact net sales or net income
of this segment in 2005 when compared to 2004.

The Environmental  Technologies segment sells to a concentrated customer base of
manufacturers  of  catalyzers  and emission  control  systems,  who then sell to
automotive  and  diesel  engine  manufacturers.  Although  our  sales are to the
emission  control systems  manufacturers,  the use of our substrates and filters
are generally required by the specifications of the automotive and diesel engine
manufacturers.  For 2005,  three  customers  of the  Environmental  Technologies
segment,  each of which  accounted  for  more  than 10% of  segment  net  sales,
accounted for 76% of total segment sales.

2004 vs. 2003

The 2004  increase  in net  sales was  primarily  the  result of demand  for our
automotive and diesel ceramic filters and substrates. Volumes for our automotive
products were up slightly from 2003 and sales benefited from a higher mix of our
thin-wall and ultra thin-wall  substrates,  which allow engine  manufacturers to
meet their  emissions  control  requirements  in a more cost  effective  manner.
Diesel  products  sales  growth was  primarily  driven by demand  from  retrofit
markets,  although we experienced a softening in Asian  retrofit  markets in the
second  half of 2004.  Movements  in exchange  rates did not have a  significant
impact on sales or net income for 2004 compared to 2003.

The 2004 decline in net income is primarily the result of increased  development
costs and plant start-up costs to support our emerging  diesel  products.  These
costs offset the gross margin  benefits of increased  volumes and the higher mix
of premium automotive products.

Outlook:
We expect sales to increase in 2006. For automotive  products,  we expect to see
stable demand based on anticipated  worldwide auto production.  Although volumes
are  anticipated to be stable,  a slowdown in auto  production,  particularly in
North America,  could adversely  impact our growth  projections.  Diesel product
sales are expected to grow as diesel engine manufacturers ramp up production for
the 2007 model years.  The growth rate of diesel  product  sales in 2006 is very
dependent on the emission  standards for heavy duty engines in the United States
continuing  to be in place.  The net loss for the segment is expected to be only
slightly lower in 2006 as we continue to spend heavily on research,  development
and engineering for diesel products.






Life Sciences

The  following  table  provides  net sales and other data for the Life  Sciences
segment (dollars in millions):


------------------------------------------------------------------------------------------------------------------------------------
                                                                                                            % Change
                                                                                                      ----------------------
                                                 2005              2004             2003              05 vs. 04    04 vs. 03
------------------------------------------------------------------------------------------------------------------------------------
                                                                                                       
Net sales                                      $    282         $     304         $    281                (7)           8

Net (loss) income                              $    (25)        $      12         $     14              (308)         (14)
------------------------------------------------------------------------------------------------------------------------------------


2005 vs. 2004

The  decrease in net sales is due largely to volume  decreases  as a result of a
change in our  distribution  channel that was made in early 2005. Prior to 2005,
approximately  56% of the Life Sciences segment sales were to two  distributors,
who  in  turn  sold  to  end-users  such  as  pharmaceutical  and  biotechnology
companies,   government  entities,  academic  institutions  and  other  research
facilities.  As a  result  of a  change  in  business  strategy  by  one  of the
distributors,  Corning did not renew the distribution  agreement.  Approximately
30% of Life Sciences 2004 sales were made through this distributor. We have been
successful in  transitioning  the majority of the sales through this distributor
to our remaining primary distributor and other existing and developing channels.
As  anticipated,  however,  the change had a negative impact on sales volumes in
2005. Approximately 53% of 2005 sales continued to be made through the remaining
primary distributor.

The net loss in 2005 was due to lower  sales and higher  operating  expenses  to
implement  the  change in  distribution  channels  and to  support  new  product
development  efforts.  Movement  in  foreign  exchange  rates  did  not  have  a
significant  impact  on the  comparability  of this  segment's  net sales or net
income for 2005 and 2004.

2004 vs. 2003

The 2004 increase in net sales is primarily due to volume  increases  across the
majority of our product lines. Demand from research,  development and production
end-users  remained steady for 2004,  which  represented an improvement over the
industry-wide softness experienced in 2003. Movements in foreign exchange rates,
primarily the Euro, did not have a significant impact on sales for 2004 compared
to 2003.

The 2004  decrease  in net  income  is  largely  attributable  to  gross  margin
improvements  resulting  from the increase in sales  volume being  substantially
offset  by new  product  development  costs.  In  addition,  in 2003 net  income
benefited  from a gain  recognized on the  disposition  of a minor product line.
Movement in exchange rates did not significantly impact net income.

Outlook:
Sales for 2006 are expected to increase modestly as we continue to regain volume
and due to price  increases in the first  quarter of 2006. We expect a lower net
loss for 2006 as a result of higher sales and a reduction in operating  expenses
offset  somewhat  by a  slightly  higher  level  of  research,  development  and
engineering spending.

Unallocated and Other

The following table provides net sales and other data (dollars in millions):


------------------------------------------------------------------------------------------------------------------------------------
                                                                                                            % Change
                                                 2005              2004             2003              ----------------------
                                              (Restated)        (Restated)       (Restated)           05 vs. 04    04 vs. 03
------------------------------------------------------------------------------------------------------------------------------------
                                                                                                       
Conventional video components                                   $       3         $     65              (100)         (95)
Other businesses                               $    352               347              247                 1           40
                                               --------         ---------         --------
     Total net sales                           $    352         $     350         $    312                 1           12
                                               ========         =========         ========

Net (loss) income                              $   (495)        $    (900)        $   (369)              (45)         144
------------------------------------------------------------------------------------------------------------------------------------


Unallocated and Other includes all other operating segments that do not meet the
quantitative  threshold  for  separate  reporting  (e.g.  Specialty  Materials),
certain corporate  investments (e.g. Dow Corning,  Samsung Corning and Steuben),
discontinued operations, and unallocated expenses.  Unallocated expenses include
research and other expenses related to new business development; gains or losses
on  repurchases  and  retirement  of  debt;  charges  related  to  the  asbestos
litigation;  restructuring  and  impairment  charges  related  to the  corporate
research and  development or staff  organizations;  and charges for increases in
our  tax  valuation  allowance.   Unallocated  and  Other  also  represents  the
reconciliation   between  the  totals  for  the  reportable   segments  and  our
consolidated total.






Sales in this  segment for 2005 were even with last year.  The 2004  increase in
net sales is primarily  attributable to improvements in our Specialty  Materials
segment.  The decrease in Conventional Video Components sales for 2004 is due to
our 2003 decision, along with our partner, to shutdown CAV.

Refer to  Restructuring,  Impairment,  and Other  Charges and  (Credits),  Legal
Settlement-Asbestos,  and Provision (Benefit) for Income Taxes for a description
of the key drivers of net income (loss) for 2005 vs. 2004 and 2004 vs. 2003.

LIQUIDITY AND CAPITAL RESOURCES

Financing Activities

During 2005, we had a number of significant financing transactions.  In separate
transactions,  we redeemed  or  repurchased  $958  million of  debentures  for a
combination  of $579 million cash and 37 million shares of Corning common stock,
resulting  in an  increase  to  equity of $388  million.  We  recognized  losses
totaling $16 million  associated  with the debt  redemptions.  In  addition,  we
issued $100 million of senior unsecured notes for proceeds of approximately  $99
million and we  completed a common stock  offering of 20 million  shares for net
proceeds of approximately $323 million. We also contributed 10 million shares of
Corning common stock to our U.S. pension plan resulting in an increase to equity
of $199 million. As a result of these transactions,  and our operating cash flow
in excess of capital  expenditures,  we ended the year with cash and  short-term
investments in excess of debt on our balance sheet.

Refer to Note 12 (Debt) to the  consolidated  financial  statements  for further
information.

In the first  quarter  of 2005 we  entered a written  agreement  with a group of
banks on a new revolving credit facility. The new facility provides us access to
a $975 million unsecured  multi-currency revolving line of credit and expires in
March 2010. The facility includes two financial covenants,  a leverage ratio and
an interest coverage ratio, both of which we are in compliance and also includes
restrictions  on the  declaration of dividends.  Concurrent  with the closing of
this credit  facility,  we terminated our previous $2 billion  revolving line of
credit that was set to expire in August 2005.

Customer Deposits

Certain  customers  of  our  Display  Technologies  segment  have  entered  into
long-term  supply  agreements and agreed to make advance cash deposits to secure
supply of large-size  glass  substrates.  The deposits  will be reduced  through
future product purchases, thus reducing operating cash flows in later periods as
credits are applied for cash deposits received in earlier periods.

Customer  deposits  have been or will be received in the  following  periods (in
millions):
--------------------------------------------------------------------------------
                                                     Estimated 2006
                               2004       2005         and Beyond         Total
--------------------------------------------------------------------------------

Customer deposits received     $204       $457            $278            $939
--------------------------------------------------------------------------------

The majority of the remaining  customer  deposits will be received through 2006.
In 2005, we issued $29 million in credit memoranda. These credit amounts are not
included in the above amounts, and were applied against customer receivables.

In 2006,  we  expect  to issue  credits  approximately  equal to the  amount  of
deposits expected to be received in 2006.

Capital Spending

Capital  spending  totaled $1.6 billion,  $857 million and $366 million in 2005,
2004 and 2003,  respectively.  Capital spending  activity in 2005, 2004 and 2003
primarily included expansion of LCD capacity in the Display Technologies segment
and new capacity for diesel products in the Environmental  Technologies segment.
Our 2006 capital spending program is expected to be in the range of $1.3 billion
to $1.5  billion,  of which  $900  million  to $1.1  billion  will be to  expand
manufacturing  capacity  for LCD glass  substrates  in the Display  Technologies
segment.  These expenditures  primarily relate to previously announced expansion
plans for our existing  manufacturing  facilities in Tainan,  Taiwan,  Taichung,
Taiwan, and Shizuoka,  Japan.  Additionally,  approximately $200 million will be
directed toward our Environmental  Technologies  segment to support the emerging
diesel emissions control products.

Restructuring

During 2005,  2004 and 2003, we made payments of $25 million,  $85 million,  and
$233 million,  respectively,  related to employee severance and other exit costs
resulting from restructuring  actions. Cash payments for employee-related  costs
will be  substantially  completed  by the end of 2007,  while  payments for exit
activities will be substantially completed by the end of 2010.






Key Balance Sheet Data

At December 31, 2005, cash, cash equivalents and short-term  investments totaled
$2.4 billion, compared with $1.9 billion at December 31, 2004. The increase from
December 31, 2004,  was  primarily  due to operating  cash flows at $1.9 billion
which included $428 million of customer  deposits (net of credits issued) offset
by $1.6 billion of capital spending.  Net financing activities generated cash of
approximately $147 million.

Balance sheet and working  capital  measures are provided in the following table
(dollars in millions):
--------------------------------------------------------------------------------
                                                           As of December 31,
                                                       -------------------------
                                                         2005           2004
                                                       (Restated)     (Restated)
--------------------------------------------------------------------------------

Working capital                                        $  1,490       $    804
Working capital, excluding cash, cash equivalents,
  and short-term investments                           $   (944)      $ (1,077)
Current ratio                                             1.6:1          1.3:1
Trade accounts receivable, net of allowances           $    629       $    585
Days sales outstanding                                       49             52
Inventories                                            $    570       $    535
Inventory turns                                             4.7            4.9
Days payable outstanding                                     89             67
Long-term debt                                         $  1,789       $  2,214
Total debt to total capital                                 25%            42%
--------------------------------------------------------------------------------

Credit Ratings

As of February 17, 2006, our credit ratings were as follows:
-------------------------------------------------------------------------------
RATING AGENCY                       Rating                     Outlook
Last Update                     Long-Term Debt               Last Update
-------------------------------------------------------------------------------

Fitch                                BBB-                      Stable
    April 27, 2005                                         April 27, 2005

Standard & Poor's                    BBB-                      Stable
    April 27, 2005                                         April 27, 2005

Moody's                              Baa3                      Stable
    September 20, 2005                                   September 20, 2005
-------------------------------------------------------------------------------

Management Assessment of Liquidity

Our major source of funding for 2006 and beyond will be our existing  balance of
cash, cash equivalents and short-term investments. From time to time we may also
issue debt or equity  securities to raise  additional  cash to fund a portion of
our capital  expenditures  related to our growth businesses.  We believe we have
sufficient   liquidity   for  the  next  several   years  to  fund   operations,
restructuring,  the  asbestos  settlement,  research  and  development,  capital
expenditures and scheduled debt repayments.

Off Balance Sheet Arrangements

Off balance sheet arrangements are transactions, agreements or other contractual
arrangements  with an  unconsolidated  entity that Corning has an  obligation to
that are not recorded in our consolidated financial statements.

Corning's off balance sheet arrangements include the following:
..    guarantee  contracts that require  applying the  measurement  provisions of
     FASB issued  Interpretation No. 45, "Guarantor's  Accounting and Disclosure
     Requirements for Guarantees,  Including Indirect Guarantees of Indebtedness
     of Others" (FIN 45), and
..    variable interests held in certain unconsolidated entities.

FIN 45 requires a company,  at the time a guarantee  is issued,  to  recognize a
liability for the fair value or market value of the  obligation  it assumes.  In
the normal  course of our  business,  we do not  routinely  provide  significant
third-party  guarantees.  Generally,  third-party guarantees provided by Corning
are  limited to certain  financial  guarantees,  including  stand-by  letters of
credit and performance  bonds,  and the incurrence of contingent  liabilities in
the form of purchase  price  adjustments  related to attainment  of  milestones.
These   guarantees  have  various  terms,  and  none  of  these  guarantees  are
individually significant.






Refer to Note 14 (Commitments, Contingencies and Guarantees) to the consolidated
financial statements for additional information.

Corning has variable  interests in three variable  interest  entities from which
Corning leases transportation equipment.

For  variable  interest  entities,  we assess the terms of our  interest  in the
entity to determine if we are the primary  beneficiary as prescribed by FIN 46R,
Consolidation of Variable  Interest  Entities,  an  Interpretation of Accounting
Research  Bulletin  No. 51,  Revised  (FIN 46R).  The primary  beneficiary  of a
variable  interest  entity is the party that  absorbs a majority of the entity's
expected losses,  receives a majority of its expected residual returns, or both,
as a result of holding variable interests, which are the ownership, contractual,
or other  pecuniary  interests in an entity that change with changes in the fair
value of the entity's net assets excluding  variable  interests.  We consolidate
one variable interest entity in which we are the primary beneficiary.

Corning leases certain transportation equipment from a Trust that qualifies as a
variable  interest  entity  under FIN 46R.  The sole  purpose of this  entity is
leasing  transportation  equipment  to  Corning.  Since  Corning is the  primary
beneficiary of this entity, the financial  statements of the entity are included
in Corning's consolidated financial statements.

Corning leases certain transportation  equipment from two additional Trusts that
qualify as variable  interest entities under FIN 46R. Corning is not the primary
beneficiary  of these  entities.  The sole  purpose of the  entities  is leasing
transportation  equipment  to  Corning.  Corning  has been  involved  with these
entities as lessee since the inception of the Trusts.

Refer to Note 1 (Summary of Significant Accounting Policies) to the consolidated
financial statements for additional information.

Corning  does  not  have  retained   interest  in  assets   transferred   to  an
unconsolidated entity that serve as credit,  liquidity or market risk support to
that entity.

SFAS No. 133 requires that all derivative instruments be recorded on the balance
sheet at fair market value. SFAS No. 133,  paragraph 11(a) states that contracts
that are indexed to an entity's own stock and  classified  in the  shareholders'
equity  section of the  consolidated  financial  statements  are not  considered
derivative  instruments  and are  therefore  excluded  from the  balance  sheet.
Although  Corning  has  contracts  that  are  indexed  to our own  stock,  these
contracts are not  classified  within the  shareholders'  equity  section of the
consolidated  financial  statements  and  therefore  are  considered  derivative
instruments and are accounted for as such.

Contractual Obligations



The amounts of our obligations follow (in millions):
------------------------------------------------------------------------------------------------------------------------------------
                                                                   Amount of commitment and contingency expiration per period
                                                                   ----------------------------------------------------------
                                                                   Less than    1 to 2     2 to 3      3 to 4     5 years and
                                                          Total     1 year       years      years       years     thereafter
------------------------------------------------------------------------------------------------------------------------------------
                                                                                                  
Performance bonds and guarantees                       $    112    $    36      $    2    $     1                   $    73
Credit facilities for equity companies                      165                                        $   15           150
Stand-by letters of credit (1)                               47         47
Loan guarantees                                              15                                                          15
------------------------------------------------------------------------------------------------------------------------------------
Subtotal of commitment expirations per period          $    339    $    83      $    2    $     1      $   15       $   238
------------------------------------------------------------------------------------------------------------------------------------

Purchase obligations                                        219        180          33          2           2             2
Capital expenditure obligations (2)                         328        328
Total debt (3)                                            1,792         18          22         21         169         1,562
Minimum rental commitments                                  228         39          51         41          19            78
Interest on long-term debt (4)                            1,185        110         109        109         104           753
------------------------------------------------------------------------------------------------------------------------------------
Subtotal of contractual obligation payments
  due by period                                        $  3,752    $   675      $  215    $   173      $  294       $ 2,395
------------------------------------------------------------------------------------------------------------------------------------

Total commitments and contingencies                    $  4,091    $   758      $  217    $   174      $  309       $ 2,633
------------------------------------------------------------------------------------------------------------------------------------


(1)  At December 31, 2005,  $34 million of the $47 million was included in other
     accrued liabilities on our consolidated balance sheets.
(2)  Capital   expenditure   obligations,   primarily  related  to  our  Display
     Technologies segment expansions, are included on our balance sheet.
(3)  At December 31,  2005,  $1,807  million was included on our balance  sheet.
     Amounts above are stated at their maturity value.
(4)  The estimate of interest payments assumes interest is paid through the date
     of  maturity/expiration of the related debt, based upon stated rates in the
     respective debt instruments.






We have provided financial guarantees and contingent  liabilities in the form of
stand-by  letters of credit  and  performance  bonds,  some of which do not have
fixed or scheduled expiration dates. We have agreed to provide a credit facility
related to Dow Corning as noted above and discussed in Note 8 (Investments)  and
Note  14  (Commitments,  Contingencies,  and  Guarantees)  to  the  consolidated
financial  statements.  The funding of the Dow Corning  credit  facility will be
required only if Dow Corning is not otherwise able to meet its scheduled funding
obligations  in its  confirmed  Bankruptcy  Plan.  We  believe  the  significant
majority of these  guarantees  and  contingent  liabilities  will expire without
being funded.

Pensions

We have a number of defined benefit pension plans covering  certain domestic and
international  employees.  Our largest  single  pension plan is  Corning's  U.S.
qualified  plan.  At  December  31,  2005,  this plan  accounted  for 81% of our
consolidated defined benefit pension plans' projected benefit obligation and 91%
of the related plans' assets.  In 2004,  although  global  equities had positive
returns, interest rates continued to decline. As a result, at December 31, 2004,
the  accumulated  benefit  obligation  (ABO)  for  our  domestic  qualified  and
non-qualified  plans and several  international plans exceeded the fair value of
related plan assets,  requiring Corning to record an additional  minimum pension
liability in accordance with SFAS No. 87, "Employers'  Accounting for Pensions."
However,  in 2005,  due  primarily  to  contributions  of  Corning  stock to the
domestic  qualified  pension  plan,  the fair  value of this  plan's  assets  at
December 31, 2005 exceeded the ABO and,  accordingly,  Corning  eliminated  this
plan's minimum pension liability.

Refer to Note 13  (Employee  Retirement  Plans)  to the  consolidated  financial
statements for additional information.

Balances of these non-cash adjustments follow (in millions):
--------------------------------------------------------------------------------
                                                              December 31,
                                                        ------------------------
                                                          2005           2004
--------------------------------------------------------------------------------
Additional minimum pension liability                    $   55           $ 417
Intangible assets                                            3              42
Other accumulated comprehensive loss, pre-tax               52             375
Other accumulated comprehensive loss, after-tax             40             273
--------------------------------------------------------------------------------

We have  traditionally  contributed  to the U.S.  qualified  pension  plan on an
annual  basis  in  excess  of the IRS  minimum  requirements,  and as a  result,
mandatory  contributions  are not expected to be required for this plan until at
least 2008.  For 2005, we issued and  contributed  10 million  shares of Corning
common stock with a value of approximately  $199 million to our domestic pension
plan.  In 2004,  we  contributed  $40  million  to our  U.S.  pension  plan.  We
anticipate  making voluntary  contributions of approximately $35 million in cash
to our domestic and international pension plans in 2006.

ENVIRONMENT

We have been named by the  Environmental  Protection  Agency under the Superfund
Act,  or by  state  governments  under  similar  state  laws,  as a  potentially
responsible party for 11 active hazardous waste sites.  Under the Superfund Act,
all  parties  who may have  contributed  any waste to a  hazardous  waste  site,
identified  by such  Agency,  are jointly and  severally  liable for the cost of
cleanup unless the Agency agrees  otherwise.  It is our policy to accrue for the
estimated   liability  related  to  Superfund  sites  and  other   environmental
liabilities  related  to  property  owned  and  operated  by us based on  expert
analysis and continual monitoring by both internal and external consultants.  We
have  accrued  approximately  $13  million   (undiscounted)  for  the  estimated
liability for environmental cleanup and related litigation at December 31, 2005.
Based upon the information developed to date, we believe that the accrued amount
is a reasonable  estimate of our  liability  and that the risk of an  additional
loss in an amount materially higher than that accrued is remote.

CRITICAL ACCOUNTING POLICIES AND ESTIMATES

The  preparation  of  financial  statements  requires us to make  estimates  and
assumptions  that affect amounts  reported  therein.  The  estimates,  including
future  projections of performance and relevant discount rates, that required us
to make difficult, subjective or complex judgments follow.

Impairment of goodwill

SFAS 142 requires us to make certain difficult, subjective and complex judgments
on a number of matters,  including  assumptions  and estimates used to determine
the fair value of our reporting units, which are the same as our segments.

We measure fair value on the basis of discounted expected future cash flows. Our
estimates are based upon our historical  experience,  our current knowledge from
our commercial  relationships,  and available external  information about future
trends.






Telecommunications

Results for the  Telecommunications  segment in 2005 were moderate as pricing in
the  telecommunications  industry continues to decline.  We expect the worldwide
telecommunications  industry  market  to  remain  stable  particularly  in North
America,  and fiber  volumes to  increase  modestly  and  pricing  pressures  to
continue.

For our 2005 impairment  test, we used a discount rate of 13% in our calculation
of fair value of the expected  future cash flows.  The results of our 2005 tests
indicated that goodwill was not impaired. The results would not have changed had
we used a discount  rate of 12.5% or 13.5%.  In 2004,  an  impairment  charge of
$1,420  million was recorded.  We used a 12.5% discount rate for our 2004 annual
impairment test. Had we used a discount rate of 12%, the impairment charge would
have been  approximately  $90 million lower. Had we used a discount rate of 13%,
the impairment charge would have been approximately $80 million higher. Terminal
value of the business  assumes a growth in perpetuity of 3%. Business cash flows
are also used to value  intangible  and  tangible  assets  which  determine  the
implied  value of reporting  unit  goodwill.  The discount rate applied to these
cash flows  represents  a  telecommunications  weighted  average cost of capital
based upon current debt and equity activity of 12 public companies  representing
a cross section of worldwide  competitors of the reporting  unit.  Growth in the
Telecommunications  segment is dependent  upon  Corning's  success in delivering
results in fiber-to-the-premises applications. Increased fiber price pressure or
lack of  fiber-to-the-premises  penetration may precipitate  additional goodwill
charges in the future.

Specialty Materials

Our  discounted  cash  flow  test for this  reporting  unit  assumes a growth in
perpetuity  of 3%.  The  discount  rate  applied  to the  forecasted  cash flows
represents  weighed  average cost of capital  based upon current debt and equity
activity of seven public  companies  representing  a cross  section of worldwide
competitors  of the reporting  unit. For the 2005 and 2004  impairment  tests we
used a risk adjusted discount rate of 13% and 12% in our calculation of the fair
value of the expected future cash flows,  respectively.  The results of our 2005
and 2004 tests  indicated that goodwill was not impaired.  The results would not
have changed had we used a discount rate of 12.5% or 13.5% for 2005 and 11.5% or
12.5% for 2004.

Impairment of assets held for use

SFAS No. 144,  "Accounting for the Impairment or Disposal of Long-Lived Assets,"
requires us to assess the  recoverability  of the carrying  value of  long-lived
assets when an event of impairment  has occurred.  We must exercise  judgment in
assessing  whether  an  event  of  impairment  has  occurred.  For  purposes  of
recognition and measurement of an impairment  loss, a long-lived asset or assets
is grouped  with  other  assets and  liabilities  at the lowest  level for which
identifiable  cash  flows are  largely  independent  of the cash  flows of other
assets and liabilities.  We must exercise judgment in assessing the lowest level
for which  identifiable cash flows are largely  independent of the cash flows of
other  assets and  liabilities.  In certain  circumstances,  we  concluded  that
locations or businesses  which share  production  along the supply chain must be
combined  in  order to  appropriately  identify  cash  flows  that  are  largely
independent of the cash flows of other assets and liabilities.

Once  it has  been  judged  that  an  impairment  has  occurred,  an  impairment
assessment  requires  exercise of judgment  in  assessing  the future use of and
projected value to be derived from the impaired assets to be held and used. This
may require judgment in estimating future cash flows and relevant discount rates
and terminal  values in estimating the current fair value of the impaired assets
to be held and used.

In 2004,  based on our decision to permanently  abandon certain assets and lower
our  outlook  for the  Telecommunications  segment,  we  determined  an event of
impairment  had  occurred in our  Telecommunications  segment.  We  performed an
impairment test on the segment's  long-lived  assets, and recorded a $24 million
charge to write-down certain assets to their fair value.

In 2003,  we concluded  events of impairment  had occurred in our  semiconductor
materials product line, which is part of the specialty  materials  segment,  and
performed  an  impairment  test.  The  results  of our test  indicated  that our
long-lived assets held for use were not impaired.

Restructuring charges and impairments resulting from restructuring actions

SFAS  No.  146,   "Accounting  for  Costs   Associated  with  Exit  or  Disposal
Activities,"  requires us to assess whether and when a  restructuring  event has
occurred  and in  which  periods  charges  related  to  such  events  should  be
recognized.  We must  estimate  costs  of plans to  restructure  including,  for
example,  employee  termination  costs.  Restructuring  charges  require  us  to
exercise  judgment  about the  expected  future of our  businesses,  of portions
thereof,  their  profitability,  cash  flows and in certain  instances  eventual
outcome.  The judgment  involved can be difficult,  subjective  and complex in a
number of areas  including  assumptions  and estimates  used in  estimating  the
future profitability and cash flows of our businesses.






Restructuring  events  often  give rise to  decisions  to  dispose of or abandon
certain  assets or asset  groups  which,  as a  result,  require  impairment  in
accordance  with SFAS 144.  SFAS 144  requires us to carry  assets to be sold or
abandoned  at the lower of cost or fair  value.  We must  exercise  judgment  in
assessing the fair value of the assets to be sold or abandoned.

During 2004 and 2003, we recorded  write-downs of property,  plant and equipment
as a result of decisions to exit facilities, primarily in the Telecommunications
segment. Assets impaired were primarily equipment,  construction in progress and
buildings,  which were sold or abandoned.  We used  information  available  from
recent auctions of  telecommunications  equipment to estimate salvage value when
measuring impairment.  The estimated salvage values were very low, primarily due
to the depressed market for  telecommunications  related equipment.  The salvage
values of  property  impaired  were also  estimated  to be  minimal  as  certain
facilities  will be abandoned and not sold.  It is possible that actual  results
will differ from assumptions and require adjustments to reserves.

Valuation allowances for deferred income taxes

SFAS 109,  "Accounting for Income Taxes" requires us to exercise  judgment about
our future  results in assessing the  realizability  of our deferred tax assets.
Inherent  in this  estimation  process,  especially  since we are in a net gross
deferred tax asset position,  in part due to prior year net operating losses, is
the  requirement  for us to estimate future book taxable income and possible tax
planning  strategies.  These estimates require us to exercise judgment about our
future  results  and the  prudence  and  feasibility  of possible  tax  planning
strategies. As more fully discussed in Note 7 (Income Taxes), Corning determined
that a tax planning strategy  considered  previously to be prudent was no longer
prudent. As such, a $525 million adjustment was recorded in 2005 to increase the
valuation allowance to fully reserve our U.S. deferred tax assets.

If we sustain an appropriate level of  profitability,  primarily in the U.S. and
Germany,  or if we are able to develop tax planning  strategies,  adjustments to
these allowances will be required and may affect future net income.

Probability of litigation outcomes

SFAS  No.  5,  "Accounting  for  Contingencies,"  (SFAS 5)  requires  us to make
judgments  about  future  events  that  are  inherently  uncertain.   In  making
determinations  of likely  outcomes  of  litigation  matters,  we  consider  the
evaluation of outside counsel  knowledgeable about each matter, as well as known
outcomes in case law. See Legal Proceedings for a detailed discussion of the key
litigation  matters we face. The most significant  matter involving  judgment is
the PCC  asbestos  liability.  There are a number of  factors  bearing  upon our
potential  liability,  including the inherent complexity of a Chapter 11 filing,
our history of success in  defending  ourselves  against  asbestos  claims,  our
assessment  of the  strength of our  corporate  veil  defenses,  our  continuing
dialogue with our insurance  carriers and the  claimants'  representatives,  and
other  factors.  We have reached a tentative  settlement  on PCC as disclosed in
Legal  Proceedings  and  Note  8  (Investments)  to the  Consolidated  Financial
Statements.  The settlement is subject to a number of  contingencies,  including
approval by the bankruptcy court and resolution of any appeals.

Other possible liabilities

SFAS 5 and other similarly  focused  accounting  literature  requires us to make
judgments  about  future  events  that  are  inherently  uncertain.   In  making
determinations  of likely  outcomes of certain  matters,  including  certain tax
planning  matters  and  environmental  matters,  these  judgments  require us to
consider events and actions that are outside our control in determining  whether
probable or possible liabilities require accrual or disclosure.

Pension and other postretirement employee benefits (OPEB)

Pension and OPEB costs and  obligations  are  dependent on  assumptions  used in
calculating such amounts.  These assumptions include discount rates, health care
cost trend  rates,  benefits  earned,  interest  cost,  expected  return on plan
assets,  mortality  rates,  and other factors.  In accordance with GAAP,  actual
results that differ from the  assumptions  are  accumulated  and amortized  over
future  periods and,  therefore,  generally  affect  recognized  expense and the
recorded  obligation  in future  periods.  While  management  believes  that the
assumptions used are appropriate, differences in actual experience or changes in
assumptions may affect Corning's  pension and other  postretirement  obligations
and future expense.

As of December 31, 2005, the Projected Benefit Obligation (PBO) for U.S. pension
plans was $2,202  million and the minimum  pension  liability  charges to equity
with respect to U.S. pension plans was $22 million, net of tax.






The following  information  illustrates  the  sensitivity to a change in certain
assumptions for U.S. pension plans:


----------------------------------------------------------------------------------------------------------------------
                                                                                                     Effect on
                                                               Effect on 2006                     December 31, 2005
        Change in Assumption                               Pre-Tax Pension Expense                       PBO
----------------------------------------------------------------------------------------------------------------------
                                                                                             
25 basis point decrease in discount rate                        +$4.0 million                      +$63 million
25 basis point increase in discount rate                      -$(4.0) million                      -$62 million
25 basis point decrease in expected return on assets            +$4.8 million
25 basis point increase in expected return on assets          -$(4.8) million
----------------------------------------------------------------------------------------------------------------------


The above sensitivities reflect the impact of changing one assumption at a time.
It should be noted that economic  factors and conditions  often affect  multiple
assumptions simultaneously and the effects of changes in key assumptions are not
necessarily linear.

These  changes  in  assumptions  would  have  no  effect  on  Corning's  funding
requirements.  In addition,  at December 31, 2005, a 25 basis point  decrease in
the discount rate would decrease  stockholders' equity by $2 million before tax;
a 25 basis point  increase in the  discount  rate would  increase  stockholders'
equity by $2 million.  With a 25 basis  point  decrease  in the  discount  rate,
certain  pension  plans  would  become  Accumulated   Benefit  Obligation  (ABO)
underfunded  resulting in a significantly  larger impact on equity compared to a
25 basis point increase in the discount rate. In addition, the impact of greater
than a 25 basis point decrease in discount rate would not be proportional to the
first 25 basis point decrease in the discount rate.

The following table illustrates the sensitivity to a change in the discount rate
assumption related to Corning's U.S. OPEB plans:


----------------------------------------------------------------------------------------------------------------------
                                                               Effect on 2006                        Effect on
                                                                Pre-Tax OPEB                      December 31, 2005
        Change in Assumption                                       Expense                              APBO
----------------------------------------------------------------------------------------------------------------------
                                                                                             
25 basis point decrease in discount rate                        +$1 million                        +$24 million
25 basis point increase in discount rate                        -$1 million                        -$24 million
----------------------------------------------------------------------------------------------------------------------


The above sensitivities reflect the impact of changing one assumption at a time.
It should be noted that economic  factors and conditions  often affect  multiple
assumptions simultaneously and the effects of changes in key assumptions are not
necessarily linear.

Revenue Recognition

In certain instances, revenue recognition is based on estimates of fair value of
deliverables as well as estimates of product returns, allowances,  discounts and
other  factors.   While   management   believes  that  the  estimates  used  are
appropriate, differences in actual experience or changes in estimates may affect
Corning's future results.

Stock Compensation

Stock based  compensation  expense and  disclosures are dependent on assumptions
used in calculating such amounts.  These assumptions  include risk-free discount
rates,  expected  term  of the  stock  based  compensation  instrument  granted,
volatility of stock and option prices, expected time between grant date and date
of  exercise,  attrition,  performance,  and other  factors.  These  assumptions
require us to exercise  judgment.  Our estimates of these assumptions  typically
are based upon our historical  experience and also  currently  available  market
place data. While management believes that the assumptions used are appropriate,
differences in actual  experience or changes in assumptions may affect Corning's
future stock based compensation expense and disclosures.

NEW ACCOUNTING STANDARDS

Refer to Note 1 (Summary of Significant Accounting Policies) to the consolidated
financials statements.






FORWARD-LOOKING STATEMENTS

The  statements  in this Annual Report on Form 10-K/A,  in reports  subsequently
filed by Corning  with the  Securities  and Exchange  Commission  (SEC) on Forms
10-Q,  Forms 8-K, and related  comments by management  which are not  historical
facts  or  information   and  contain  words  such  as  "believes,"   "expects,"
"anticipates,"   "estimates,"   "forecasts,"   and   similar   expressions   are
forward-looking  statements.  These forward-looking statements involve risks and
uncertainties that may cause the actual outcome to be materially different. Such
risks and uncertainties include, but are not limited to:

-    global economic and political conditions;
-    tariffs, import duties and currency fluctuations;
-    product demand and industry capacity;
-    competitive products and pricing;
-    sufficiency of manufacturing capacity and efficiencies;
-    availability and costs of critical components and materials;
-    new product development and commercialization;
-    order activity and demand from major customers;
-    fluctuations in capital spending by customers;
-    possible  disruption in commercial  activities  due to terrorist  activity,
     armed conflict, political instability or major health concerns;
-    facility expansions and new plant start-up costs;
-    effect of regulatory and legal developments;
-    capital resource and cash flow activities;
-    ability to pace capital spending to anticipated  levels of customer demand,
     which may fluctuate;
-    interest costs;
-    credit rating and ability to obtain  financing and capital on  commercially
     reasonable terms;
-    adequacy and availability of insurance;
-    financial risk management;
-    capital spending;
-    acquisition and divestiture activities;
-    rate of technology change;
-    level of excess or obsolete inventory;
-    ability to enforce patents;
-    adverse litigation;
-    product and components performance issues;
-    stock price fluctuations;
-    the  rate  of  substitution  by  end-users  purchasing  LCDs  for  notebook
     computers, desktop monitors and televisions;
-    a downturn in demand for LCD glass substrates;
-    customer  ability,  most notably in the Display  Technologies  segment,  to
     maintain   profitable   operations  and  obtain  financing  to  fund  their
     manufacturing expansions;
-    fluctuations in supply chain inventory levels;
-    equity company activities,  principally at Dow Corning Corporation, Samsung
     Corning Precision, and Samsung Corning;
-    movements in foreign exchange rates,  primarily the Japanese yen, Euro, and
     Korean won; and
-    other risks detailed in Corning's SEC filings.






Item 7A.  Quantitative and Qualitative Disclosures About Market Risks
---------------------------------------------------------------------

We operate and conduct  business in many foreign  countries  and as a result are
exposed to  movements  in foreign  currency  exchange  rates.  Our  exposure  to
exchange rate effects includes:

..    exchange  rate  movements  on  financial   instruments   and   transactions
     denominated in foreign currencies which impact earnings, and
..    exchange  rate  movements   upon   conversion  of  net  assets  in  foreign
     subsidiaries  for which the  functional  currency  is not the U.S.  dollar,
     which impact our net equity.

Our most significant foreign currency exposure is the Japanese yen and to a much
lesser extent the Korean won, the Taiwan  dollar,  and the Euro. We  selectively
enter  into  foreign  exchange  forward  and  option  contracts  with  durations
generally  15 months  or less to hedge our  exposure  to  exchange  rate risk on
foreign  source  income and  purchases.  These  hedges are  scheduled  to mature
coincident with the timing of the underlying  foreign  currency  commitments and
transactions.  The objective of these  contracts is to neutralize  the impact of
exchange  rate  movements on our operating  results.  We also enter into foreign
exchange forward contracts when situations arise where our foreign  subsidiaries
or Corning enter into lending  situations,  generally on an intercompany  basis,
denominated  in currencies  other than their local  currency.  We do not hold or
issue derivative  financial  instruments for trading purposes.  In 2005, Corning
began using derivative  instruments  (forwards) to limit the exposure to foreign
currency  fluctuations  associated with certain monetary assets and liabilities.
These  derivative  instruments  are not  designated as hedging  instruments  for
accounting  purposes  and,  as such,  are  referred to as  undesignated  hedges.
Changes in the fair value of undesignated  hedges,  along with foreign  currency
gains and losses arising from the underlying monetary assets or liabilities, are
recorded in current  period  earnings in the other income,  net component in the
consolidated statement of operations.

Equity in  earnings of  associated  companies  has  historically  contributed  a
significant amount to our income from continuing operations.  Equity in earnings
of associated  companies,  net of impairments  was $611 million in 2005 and $454
million  in 2004  with  foreign-based  affiliates  comprising  over  43% of this
amount.  Equity  earnings  from Samsung  Corning and Samsung  Corning  Precision
totaled  $296  million  for  2005 and  $309  million  for  2004.  Exchange  rate
fluctuations  and actions taken by  management of these  entities can affect the
earnings of these companies.

We use a  sensitivity  analysis  to assess the market risk  associated  with our
foreign currency  exchange risk.  Market risk is defined as the potential change
in fair value of assets and  liabilities  resulting from an adverse  movement in
foreign  currency  exchange  rates.  At December 31,  2005,  we had open forward
contracts,  open  option  contracts,  and foreign  denominated  debt with values
exposed to exchange rate  movements,  all of which were  designated as hedges at
December 31, 2005. A 10% adverse  movement in quoted foreign  currency  exchange
rates could result in a loss in fair value of these instruments of $138 million.
Specific  to the  Japanese  yen, a 10% adverse  movement in quoted yen  exchange
rates could result in a loss in fair value of these instruments of $75 million.

As we derive approximately 70% of our net sales from outside the U.S., our sales
and net income could be affected if the U.S. dollar significantly strengthens or
weakens against foreign currencies,  most notably the Japanese yen and Euro. Our
outlooks included in Management's  Discussion and Analysis assume exchange rates
during 2006 remain  constant at January  2006  levels.  A plus or minus 10 point
movement  in the U.S.  dollar - Japanese  yen  exchange  rate would  result in a
change  to 2005 net  sales of  approximately  $200  million  and net  income  of
approximately $130 million. A plus or minus 10 point movement in the U.S. dollar
- Euro exchange rate would result in a change to 2005 net sales of approximately
$50 million but would have a negligible effect on net income.

Interest Rate Risk Management

It is our policy to  conservatively  manage our  exposure to changes in interest
rates.  Our policy  prescribes that total variable rate debt will not exceed 35%
of the total debt portfolio at anytime.  At December 31, 2005, our  consolidated
debt portfolio contained less than 1% of variable rate instruments.

Item 8.  Financial Statements and Supplementary Data
----------------------------------------------------

See Item 15 (a) 1.

Item  9.  Changes  in and  Disagreements  with  Accountants  on  Accounting  and
--------------------------------------------------------------------------------
Financial Disclosure
--------------------

None.






Item 9A.  Controls and Procedures
---------------------------------

(a)  Restatement

As discussed in Note 2 to the  consolidated  financial  statements  contained in
this Amendment,  management of the Company has amended its Annual Report on Form
10-K for the year ended  December  31,  2005,  to restate the  Company's  annual
consolidated  financial  statements for the years ended December 31, 2005, 2004,
and 2003 and its quarterly  consolidated  financial  statements  for each of the
quarters in the years ended  December 31, 2005 and 2004.  The  determination  to
restate  these  consolidated  financial  statements  was  made  as a  result  of
management's  identification  of errors related to the  accounting  treatment of
certain  items  related  to the 2003  Pittsburgh  Corning  Corporation  Asbestos
Litigation Bankruptcy Settlement ("the Settlement"). Specifically, between March
31, 2003, and December 31, 2005, the following errors occurred:

..    Corning's  asbestos  settlement  charges and the related  liability for the
     asbestos  settlement  did not reflect the  estimated  fair value at initial
     recognition or subsequent  changes in fair value, of certain  components of
     the proposed settlement offer. As a result, asbestos settlement charges for
     the  years  2005,  2004,  and 2003 were  understated  by $13  million,  $24
     million, and $117 million, respectively.
..    Corning  incorrectly  suspended  recording  equity  earnings of  Pittsburgh
     Corning  Europe,  N.V.  between March 31, 2003, and December 31, 2005. As a
     result,  equity in earnings  of  affiliated  companies  for the years 2005,
     2004, and 2003 was understated by $13 million, $11 million, and $7 million,
     respectively.
..    Accretion  on  the  cash  portion  of the  asbestos  settlement  offer  was
     incorrectly recorded as interest expense resulting in both an overstatement
     of interest expense and an  understatement of asbestos  settlement  expense
     for the years  2005,  2004,  and 2003,  by $8 million,  $8 million,  and $5
     million, respectively.

In  the  restated  consolidated   financial  statements,   the  higher  asbestos
settlement  charges  are  tax-effected  in 2003 and the first  half of 2004.  As
Corning provided a valuation allowance on most of its deferred tax assets in the
third  quarter of 2004,  that  quarter  reflects an  increase  in the  valuation
allowance  of $55  million  for the  deferred  tax assets  related to the higher
asbestos settlement charges.

(b)  Evaluation of disclosure controls and procedures

Management is responsible for establishing and maintaining  adequate  disclosure
controls and  procedures  for Corning.  Management is also  responsible  for the
assessment of the effectiveness of disclosure controls and procedures.

Disclosure  controls and  procedures  mean  controls and other  procedures of an
issuer that are designed to ensure that information  required to be disclosed by
the issuer in the reports that it files or submits under the Securities Exchange
Act of 1934, as amended (the "Exchange Act") is recorded, processed, summarized,
and  reported,  within the time periods  specified in the SEC's rules and forms.
Corning's  disclosure  controls  and  procedures  include,  without  limitation,
controls  and  procedures  designed  to ensure that  information  required to be
disclosed by Corning in the reports that it files or submits  under the Exchange
Act is accumulated and communicated to Corning's management, including Corning's
principal  executive  and  principal   financial  officers,   or  other  persons
performing similar functions, as appropriate to allow timely decisions regarding
required disclosure.

As a result of the restatement discussed above, management of the Company, under
the supervision and with the participation of the Company's  principal executive
and financial  officers,  has re-evaluated  the  effectiveness of our disclosure
controls and procedures (as defined in Rules  13a-15(e) and 15d-15(e)  under the
Exchange Act ) as of December 31, 2005. Based upon this  re-evaluation  and as a
result of the material weaknesses  discussed below under "Management's Report on
Internal Control Over Financial  Reporting  (Restated)," the Company's principal
executive and principal financial  officers,  have concluded that its disclosure
controls and procedures were not effective as of December 31, 2005.

(c)  Management's Report on Internal Control Over Financial Reporting (Restated)

Management is responsible for  establishing  and maintaining  adequate  internal
control over  financial  reporting for Corning as defined in Rules 13a-15(f) and
15d-15(f)  under  the  Exchange  Act.  Management  is also  responsible  for the
assessment of the effectiveness of internal control over financial reporting.



Corning's  internal  control over financial  reporting is a process  designed to
provide reasonable  assurance  regarding the reliability of financial  reporting
and the preparation of financial  statements for external purposes in accordance
with accounting  principles  generally accepted in the United States of America.
Corning's internal control over financial  reporting includes those policies and
procedures  that (i) pertain to the  maintenance  of records that, in reasonable
detail,  accurately  and fairly reflect the  transactions  and  dispositions  of
Corning's  assets;  (ii) provide  reasonable  assurance  that  transactions  are
recorded  as  necessary  to  permit  preparation  of  financial   statements  in
accordance with accounting principles generally accepted in the United States of
America,  and that Corning's  receipts and  expenditures  are being made only in
accordance with authorizations of Corning's management and directors;  and (iii)
provide  reasonable  assurance  regarding  prevention  or  timely  detection  of
unauthorized  acquisition,  use, or disposition  of Corning's  assets that could
have a material  effect on the  financial  statements.  Because of its  inherent
limitations, internal control over financial reporting may not prevent or detect
misstatements.  Also,  projections of any evaluation of  effectiveness to future
periods are subject to the risk that controls may become  inadequate  because of
changes in  conditions,  or that the degree of compliance  with the policies and
procedures may deteriorate.

A  material  weakness  is a control  deficiency,  or a  combination  of  control
deficiencies,  that  results  in more than a remote  likelihood  that a material
misstatement of the annual or interim financial statements will not be prevented
or detected.  Management  determined  that the  following  control  deficiencies
constitute  material  weaknesses in internal control over financial reporting at
December 31, 2005:

     (i)  The Company did not maintain  effective controls over the valuation of
          its asbestos  settlement  charges and the valuation and reconciliation
          of the related  liability  pertaining to the 2003  Pittsburgh  Corning
          Corporation   (PCC)   Asbestos   Litigation   Bankruptcy   Settlement.
          Specifically,  the  Company  did not  maintain  effective  controls to
          ensure that certain components of the liability,  which may be settled
          by contributing  the Company's  equity interest in Pittsburgh  Corning
          Europe,  N.V. and  assignment  of rights to insurance  proceeds,  were
          appropriately  recorded  at fair  value  rather  than  book  value  as
          required by generally  accepted  accounting  principles.  This control
          deficiency  resulted  in the  restatement  of our annual  consolidated
          financial  statements for the years ended December 31, 2005, 2004, and
          2003 and the quarterly  consolidated  financial statements for each of
          the three  quarterly  periods in the years ended December 31, 2005 and
          2004.  Additionally,   this  control  deficiency  could  result  in  a
          misstatement of our asbestos  settlement charges and related liability
          that would result in a material  misstatement to the annual or interim
          consolidated  financial  statements  that  would not be  prevented  or
          detected.

     (ii) The Company did not maintain  effective controls over the completeness
          and accuracy of its equity investments.  Specifically, the Company did
          not maintain  effective controls to ensure that earnings of its equity
          investments  were  accurately  and completely  recorded.  This control
          deficiency  resulted  in the  restatement  of our annual  consolidated
          financial  statements for the years ended December 31, 2005, 2004, and
          2003 and the quarterly  consolidated  financial statements for each of
          the three  quarterly  periods in the years ended December 31, 2005 and
          2004.  Additionally,   this  control  deficiency  could  result  in  a
          misstatement  of our  investments and equity in earnings of associated
          companies that would result in a material  misstatement  to the annual
          or  interim  consolidated  financial  statements  that  would  not  be
          prevented or detected.

In making our assessment of the effectiveness of internal control over financial
reporting,  we used the  criteria  set  forth  by the  Committee  of  Sponsoring
Organizations  of  the  Treadway   Commission  (COSO)  in  "Internal  Control  -
Integrated Framework."

In the  Company's  original  filing  of its 2005  Annual  Report  on Form  10-K,
management concluded that the Company maintained effective internal control over
financial  reporting as of December 31, 2005.  However,  in connection  with the
restatement  discussed  in  Note 2 to  the  consolidated  financial  statements,
management,  under the supervision and with the  participation  of the Company's
principal executive and financial officers,  has subsequently concluded that the
material weaknesses in internal control over financial reporting described above
existed as of  December  31,  2005.  As a result of these  material  weaknesses,
management  has concluded that the Company did not maintain  effective  internal
control over financial reporting as of December 31, 2005 based upon the criteria
set forth in  "Internal  Control  -  Integrated  Framework"  issued by the COSO.
Accordingly,  management  has  restated  its  report on  internal  control  over
financial reporting.

Management's  assessment of the effectiveness of the Company's  internal control
over  financial   reporting  as  of  December  31,  2005  has  been  audited  by
PricewaterhouseCoopers LLP, an independent registered public accounting firm, as
stated in their report which is included herein.

(d)  Changes in internal control over financial reporting

No changes in the Company's  internal control over financial  reporting occurred
during the quarter ended December 31, 2005 that have materially affected, or are
reasonably  likely to materially  affect,  the Company's  internal  control over
financial reporting.



(e)  Plan for  Remediation  of Material  Weaknesses

Regarding the material weaknesses described above, the Company is in the process
of  taking  steps to ensure  that the  material  weaknesses  are  remediated  by
implementing  enhanced  control  procedures  within the Accrued  Litigation  and
Investments in Affiliates  areas and  anticipates  the control  deficiencies  in
these areas can be remediated on or before September 30, 2006.

We believe the steps  described  below,  some of which have  already been taken,
will remediate the material weaknesses described above.

..    We have  enhanced the  procedures  and  documentation  associated  with the
     reconciliation of our PCC Asbestos Litigation  liability in order to ensure
     that  all  components  are  included  in the  evaluation  process  and  are
     accounted for in accordance with generally accepted accounting principles.
..    We have augmented the resources in our Accounting  Services department that
     will enable us to have a stronger segregation of duties associated with the
     reconciliation of the PCC Asbestos  Litigation  liability account to ensure
     1) the analysis and  preparation  of the  reconciliation  and 2) a detailed
     review of this work is done by separate  individuals who have the requisite
     skill set and training.
..    We are in the process of updating our key controls  within the  Investments
     in Affiliates cycle to specifically  address 1) our ability to achieve full
     inclusion of all less than 100% owned entities in our  accounting  analysis
     of  Investments  in  Affiliates  and 2) to  ensure  proper  monitoring  and
     accounting for these entities.
..    We  are  in  the  process  of  improving  our   investments  in  affiliates
     reconciliation  procedures  and  documentation  in order to  ensure  1) the
     analysis and preparation of the  reconciliation and 2) a detailed review of
     the  reconciliation is done by separate  individuals who have the requisite
     skill set and training.


Item 9B.  Other Information
---------------------------

None.





                                    PART III


Item 10.  Directors and Executive Officers of the Registrant
------------------------------------------------------------

Directors of the Registrant
---------------------------

The section  entitled  "Nominees for Election as  Directors"  in our  Definitive
Proxy  Statement  relating to our annual meeting of  shareholders  to be held on
April 27, 2006,  is  incorporated  by  reference  in this Annual  Report on Form
10-K/A.

Audit Committee and Audit Committee Financial Expert
----------------------------------------------------

Corning has an Audit  Committee  and has  identified  at least one member of the
Audit Committee as the Audit Committee  Financial Expert.  See sections entitled
"Matters  Relating to Directors - Board  Committees"  and "Corporate  Governance
Matters" in our  definitive  Proxy  Statement  relating to our annual meeting of
shareholders to be held on April 27, 2006,  which are  incorporated by reference
in this Annual Report on Form 10-K/A.







                      Executive Officers of the Registrant


James R. Houghton   Chairman of the Board
Mr.  Houghton joined Corning in 1962. He was elected a vice president of Corning
and general manager of the Consumer  Products Division in 1968, vice chairman in
1971,  chairman of the executive  committee and chief strategic  officer in 1980
and chairman and chief executive officer in April 1983,  retiring in April 1996.
Mr.  Houghton was the  non-executive  Chairman of the Board of Corning from June
2001 to April 2002.  Mr.  Houghton  came out of retirement in April 2002 when he
was elected Chairman and Chief Executive officer,  he retired as chief executive
officer  effective  April 28,  2005 and  continues  as  chairman of the board of
Corning.  Mr. Houghton is a director of Metropolitan  Life Insurance Company and
Exxon Mobil Corporation.  He is a trustee of the Metropolitan Museum of Art, the
Pierpont  Morgan  Library  and the  Corning  Museum of Glass and a member of the
Harvard  Corporation.  Mr.  Houghton  has been a member  of  Corning's  Board of
Directors since 1969. Age 70.

Wendell P. Weeks   President and Chief Executive Officer
Mr. Weeks joined Corning in 1983 and has served in various accounting,  business
development,  and business manager positions.  He was named a vice president and
deputy general manager of the Opto-Electronics Components Business in 1995, vice
president and general  manager of  Telecommunications  Products in 1996,  senior
vice  president  in 1997,  senior vice  president of  Opto-Electronics  in 1998,
executive vice president of Optical Communications in 1999, president of Corning
Optical Technologies in 2001 and became President in 2002. Mr. Weeks was elected
to his current  position on April 28,  2005.  Mr. Weeks is a director of Merck &
Co.,  Inc.  Mr. Weeks has been a member of  Corning's  Board of Directors  since
2000. Age 46.

James B. Flaws   Vice Chairman and Chief Financial Officer
Mr.  Flaws  joined  Corning in 1973 and served in a variety  of  controller  and
business  management  positions.  Mr. Flaws was elected  assistant  treasurer of
Corning in 1993,  vice  president and  controller in 1997 and vice  president of
finance and treasurer in May 1997,  senior vice  president  and chief  financial
officer in December 1997,  executive vice president and chief financial  officer
in 1999 and to his  current  position  in 2002.  Mr.  Flaws is a director of Dow
Corning Corporation. Mr. Flaws has been a member of Corning's Board of Directors
since 2000. Age 57.

Peter F. Volanakis   Chief Operating Officer
Mr. Volanakis joined Corning in 1982 and  subsequently  held various  marketing,
development and commercial positions in several divisions. He was named managing
director  Corning GmbH in 1992,  executive vice president of CCS Holding,  Inc.,
formerly known as Siecor Corporation, in 1995, senior vice president of Advanced
Display Products in 1997,  executive vice president of Display  Technologies and
Life  Sciences  in 1999 and  president  of  Corning  technologies  in 2001.  Mr.
Volanakis was elected to his current  position on April 28, 2005. Mr.  Volanakis
is a director of Dow Corning  Corporation.  Mr.  Volanakis  has been a member of
Corning's Board of Directors since 2000. Age 50.

Kirk P. Gregg   Executive Vice President and Chief Administrative Officer
Mr. Gregg joined Corning in 1993 as director of Executive  Compensation.  He was
named vice  president of  Executive  Resources  and  Employee  Benefits in 1994,
senior  vice  president,  administration  in  December  1997 and to his  current
position in 2002. Prior to joining Corning,  Mr. Gregg was with General Dynamics
Corporation as corporate director,  Key Management Programs, and was responsible
for executive  compensation and benefits,  executive development and recruiting.
Age 46.

Joseph A. Miller   Executive Vice President and Chief Technology Officer
Dr. Miller joined Corning in 2001 as senior vice president and chief  technology
officer.  He was  appointed  to his current  position in 2002.  Prior to joining
Corning,  Dr. Miller was with E.I. DuPont de Nemours,  Inc.,  where he served as
chief technology  officer and senior vice president for research and development
since 1994. He began his career with DuPont in 1966. Dr. Miller is a director of
Wilson Greatbatch Technologies and Dow Corning Corporation. Age 64.

Pamela C. Schneider   Senior Vice President and Operations Chief of Staff
Ms.  Schneider  joined  Corning  in  1986 as  senior  financial  analyst  in the
Controllers  Division. In 1988 she became manager of internal audit. In 1990 she
was named controller and in 1991 chief financial  officer of Corning Asahi Video
Products  Company.  In January 1993,  she was appointed vice president and chief
financial  officer  and in 1995 vice  president  for Corning  Consumer  Products
Company.  In  1997,  she  was  named  vice  president  and in 1999  senior  vice
president,  Human Resources and Diversity Officer for Corning. Ms. Schneider was
appointed to her present position in April 2002. Age 51.

Katherine A. Asbeck   Senior Vice President - Finance
Ms. Asbeck joined Corning in 1991 as director of  accounting.  She was appointed
assistant  controller  in 1993,  designated  chief  accounting  officer in 1994,
elected vice president and controller in 1997 and senior vice president in 2001.
She was  elected to her  current  position  in  October  2005.  Ms.  Asbeck is a
director of Samsung Corning Co., Ltd. Age 49.






William D. Eggers   Senior Vice President and General Counsel
Mr. Eggers joined Corning in 1997 as vice president and deputy general  counsel.
He was elected senior vice  president and general  counsel in February 1998. Mr.
Eggers was a Partner with the Rochester firm of Nixon, Hargrave, Devans & Doyle,
LLP, before joining Corning. Mr. Eggers is a director of Chemung Financial Corp.
Age 61.

Mark S. Rogus   Senior Vice President and Treasurer
Mr.  Rogus  joined  Corning  in 1996 as  manager of  corporate  finance.  He was
appointed  assistant treasurer in 1999, vice president and treasurer in 2000 and
was elected to his current position in 2004. Prior to joining Corning, Mr. Rogus
held various  business  development  positions at Wachovia  Bank. Mr. Rogus is a
director of Cormetech, Inc. Age 46.

Larry Aiello Jr.   President and Chief Executive Officer - Corning Cable Systems
Mr.  Aiello  joined  Corning  in  1973  and  served  in  several   positions  in
manufacturing  from 1975 to 1981.  He was named  manager-Domestic  Accounting in
1981,  controller-Telecommunications Products Division in 1984, director-Control
and Analysis in 1987 and assistant controller and director in 1989. He was named
division  vice  president  and   director-Business   Development  and  Planning,
Opto-Electronics  Group in 1990,  general  manager-Component  Products  Group in
1992, vice president and controller,  Corning  Incorporated in 1993, senior vice
president-International and president-Corning International Corporation in 1997,
senior vice president and chief of staff-Corning Optical  Communications in 2000
and to his current position in 2002. Age 56.

Robert B. Brown   Executive Vice President, Environmental Technologies
Mr. Brown joined  Corning in 1972 and served in a variety of  manufacturing  and
engineering  positions.  He was appointed division vice  president-manufacturing
and engineering,  Telecommunications  Products  Division in 1995, vice president
manufacturing  and  engineering,  Opto-Electronics  in  1999,  president-Corning
Lasertron in February  2000,  vice  president and general  manager-Amplification
Products in December 2000, vice president and general manager - Optical Fiber in
April 2002, to senior vice president and general manager - Telecommunications in
2003, as senior vice president and general manager - Environmental  Technologies
in January 2005, and to his current position in August 2005. Age 55.

Robert L. Ecklin   Executive  Vice  President,  Environmental  Technologies  and
                   Strategic Growth
Mr.  Ecklin  joined  Corning  in 1961  and  served  in a  variety  of  U.S.  and
international  manufacturing and engineering managerial positions.  He was named
vice president of Corning Engineering in 1982,  president of Corning Engineering
in 1983, vice president of Business  Development in 1986, general manager of the
Industrial Products Division in 1989 and senior vice president of the Industrial
Products  Division in 1990. He was  appointed  executive  vice  president of the
Environmental  Products  Division in 1999,  executive  vice  president,  Optical
Communications  in 2001 and to his listed position in 2002 and retired effective
December 31, 2005.  Mr. Ecklin is a director of Pittsburgh  Corning  Corporation
and Macdermid Incorporated. Age 67.

Donald B. McNaughton   Senior  Vice  President -  International  and   Strategic
                       Ventures
Mr.  McNaughton  joined  Corning in 1989 and  served in a variety of  managerial
positions.  He was named general  manager,  Display  Technologies and president,
Display Technologies Asia in 2000, vice president,  Display in 2002, senior vice
president,  Display in 2003, and to his current  position in September 2005. Mr.
McNaughton  is a director of Samsung  Corning  Co.,  Ltd.,  and Samsung  Corning
Precision Glass Co., Ltd. Age 46.

Lawrence D. McRae   Senior Vice President, Strategy and Corporate Development
Mr.  McRae  joined  Corning in 1985 and served in various  financial,  sales and
marketing positions.  He was appointed vice  president-Corporate  Development in
2000,  senior vice  president-Corporate  Development  in 2003 and most recently,
senior vice  president-Strategy  and Corporate  Development in October 2005. Mr.
McRae is on the board of directors of Dow Corning Corporation. Age 47.

Eric S. Musser   Vice President and General Manager, Optical Fiber
Mr. Musser joined Corning in 1986 and held various  manufacturing,  planning and
quality  positions.  He assumed the role of President  for Corning  Lasertron in
2000,   became  Corning's   director  of  Manufacturing   Operations,   Photonic
Technologies in 2002, then division vice president,  Development and Engineering
in 2003, and was elected to his current position in January 2005. Age 46.

Jane D. Poulin  Division Vice President and Chief Accounting Officer
Ms. Poulin joined Corning in September 2005. Prior to joining  Corning,  she was
an Associate Chief  Accountant in the Office of the Chief Accountant of the U.S.
Securities  and  Exchange  Commission  from June  2000 to  September  2005.  She
previously  served as corporate  controller at a privately held manufacturer and
was an audit senior manager at Ernst & Young LLP. Age 43.

Tony Tripeny   Vice President and Corporate Controller
Mr. Tripeny became the corporate accounting manager for Corning Cable Systems in
1985.  After  serving  in other  financial  functions,  he was  appointed  chief
financial  officer of Corning  Cable  Systems in 2000.  In 2003, he became group
controller  for  Corning's   Telecommunications   business,  and  division  vice
president and  operations  controller of Corning in 2004, and was elected to his
current position in October 2005. Age 46.






Compliance with Section 16(a) of the Exchange Act
-------------------------------------------------

The section entitled "Section 16(a) Beneficial  Ownership Reporting  Compliance"
in our Definitive Proxy Statement relating to our annual meeting of shareholders
to be held on April 27, 2006, is incorporated by reference in this Annual Report
on Form 10-K/A.

Code of Ethics
--------------

Our  Board of  Directors  adopted  the Code of Ethics  for the  Chief  Executive
Officer  and  Financial  Executives  and the Code of Conduct for  Directors  and
Executive Officers which supplements the Code of Conduct governing all employees
and directors  that has been in existence for more than ten years.  During 2005,
no  amendments  to or waivers of the  provisions of the Code of Ethics were made
with respect to any of our directors or executive  officers.  A copy of the Code
of       Ethics      is       available       on      our       website       at
www.corning.com/inside_corning/corporate_governance/downloads.aspx. We will also
provide a copy of the Code of Ethics to shareholders without charge upon written
request to Ms. Denise A.  Hauselt,  Secretary  and  Assistant  General  Counsel,
Corning  Incorporated,  HQ-E2-10,  Corning,  NY 14831.  We will disclose  future
amendments  to, or waivers from,  the Code of Ethics on our website  within four
business days following the date of such amendment or waiver.

Item 11.  Executive Compensation
--------------------------------

The  sections  entitled  "Executive  Compensation,"  "Option  SAR Grants in Last
Fiscal Year,"  "Aggregated  Option/SAR  Exercises in Last Fiscal Year and Fiscal
Year-End Option/SAR Values" and "Pension Plan" in our definitive Proxy Statement
relating to the annual meeting of shareholders to be held on April 27, 2006, are
incorporated by reference in this Annual Report on Form 10-K/A.

Item 12.  Security  Ownership of Certain  Beneficial  Owners and  Management and
--------------------------------------------------------------------------------
Related Stockholder Matters
---------------------------

The sections  entitled  "Security  Ownership of Certain  Beneficial  Owners" and
"Equity  Compensation  Plan  Information,"  in our  definitive  Proxy  Statement
relating to the annual meeting of shareholders to be held on April 27, 2006, are
incorporated by reference in this Annual Report on Form 10-K/A.

Item 13.  Certain Relationships and Related Transactions
--------------------------------------------------------

The section  entitled "Other Matters - Certain  Business  Relationships"  in our
definitive Proxy Statement  relating to the annual meeting of shareholders to be
held on April 27, 2006,  is  incorporated  by reference in this Annual Report on
Form 10-K/A.

Item 14.  Principal Accounting Fees and Services
------------------------------------------------

The section  entitled  "Independent  Registered  Public  Accounting Firm" in our
definitive Proxy Statement  relating to the annual meeting of shareholders to be
held on April 27, 2006,  is  incorporated  by reference in this Annual Report on
Form 10-K/A.

The information required by this item is incorporated herein by reference to the
information  contained  under the caption "Audit and Non-Audit Fees" in our 2006
Proxy Statement.

Our  independent  auditor,  PricewaterhouseCoopers  LLP  ("PwC"),  has  recently
notified  the Audit  Committee  of  Corning's  Board of  Directors  (the  "Audit
Committee") that certain non-audit work performed by its network firms in Europe
and China raised questions regarding PwC's independence with respect to its role
as Corning's independent auditor.

Network firms of PwC performed  certain VAT tax  representation  and  remittance
services for Corning entities in Europe and paid government charges on behalf of
Corning in China.  The payment of the taxes or fees, and the handling of company
funds by an outside  auditor is not  permitted  under SEC  auditor  independence
rules.  Unremitted  amounts for a VAT refund due Corning as of December 31, 2005
were approximately $50,000. The fee paid to tax authorities on behalf of Corning
was $120.

Based upon PwC's disclosure, Corning evaluated PwC's non-audit services provided
to Corning  during the relevant time periods and did not identify any additional
non-audit  services that may compromise PwC's  independence for purposes herein.
Corning  and PwC  continue  to  evaluate  and review  processes  relevant to the
maintenance of PwC's independence.

PwC has concluded that its objectivity and impartiality were unaffected by these
services and therefore its independence  has not been impaired.  This conclusion
is based upon the nature of services and the fact that none of its personnel who
were involved in providing these tax services or remitting  amounts on Corning's
behalf  performed any audit or  audit-related  services for Corning.  In January
2006, PwC issued its  Independence  Standards  Board Standard No. 1 independence
letter to the Audit  Committee  of our Board of Directors  and therein  reported
that it is independent  under applicable  standards in connection with its audit
opinion  for the  financial  statements  contained  in this  report.  The  Audit
Committee has  discussed  with PwC its  independence  from Corning and concurred
with  PwC that its  independence  was not  impaired  by the  provision  of these
services.







                                     PART IV

Item 15.  Exhibits and Financial Statement Schedules
----------------------------------------------------
(a) Documents filed as part of this report:
                                                                            Page
                                                                            ----
    1.  Financial statements.................................................55

    2.  Financial Statement Schedule:
          (i) Valuation Accounts and Reserves...............................107
          See separate  index to financial  statements  and financial  statement
          schedules


(b) Exhibits filed as part of this report:

    3 (i) 1    Restated  Certificate  of  Incorporation  dated December 6, 2000,
               filed  with the  Secretary  of State of the  State of New York on
               January 22, 2001  (Incorporated  by  reference to Exhibit 3(i) of
               Corning's  Annual Report on Form 10-K for the year ended December
               31, 2000).

    3 (i) 2    Certificate of Amendment to Restated Certificate of Incorporation
               filed  with the  Secretary  of State of the  State of New York on
               August 5, 2002  (Incorporated  by  reference  to Exhibit  99.1 to
               Corning's Form 8-K filed on August 7, 2002).

    3 (ii) 1   Bylaws of Corning effective as of December 6, 2000  (Incorporated
               by reference to Exhibit 3(ii) of Corning's  Annual Report on Form
               10-K for the year ended December 31, 2000).

    3 (ii) 2   Amendment  to  Article  III,  Section  9, of  Bylaws  of  Corning
               effective  as of February 5, 2003  (Incorporated  by reference to
               Exhibit  3(ii)2 of Corning's  Annual  Report on Form 10-K for the
               year ended December 31, 2003).

    4          Rights   Agreement   of   Corning   dated  as  of  June  5,  1996
               (Incorporated  by reference  to Exhibit 1 to  Corning's  Form 8-K
               filed on July 10, 1996).

    10.1       1994  Employee  Equity  Participation  Program  (Incorporated  by
               reference to Exhibit 1 of Corning Proxy Statement, Definitive 14A
               filed  March 16,  1994 for  April  28,  1994  Annual  Meeting  of
               Shareholders).

    10.2       1998 Variable  Compensation  Plan  (Incorporated  by reference to
               Exhibit 1 of Corning Proxy Statement,  Definitive 14A filed March
               9, 1998 for April 30, 1998 Annual Meeting of Shareholders).

    10.3       1998  Worldwide  Employee Share  Purchase Plan  (Incorporated  by
               reference to Exhibit 2 of Corning Proxy Statement, Definitive 14A
               filed  March  9,  1998 for  April  30,  1998  Annual  Meeting  of
               Shareholders).

    10.4       1998  Employee  Equity  Participation  Program  (Incorporated  by
               reference to Exhibit 3 of Corning Proxy Statement, Definitive 14A
               filed  March  9,  1998 for  April  30,  1998  Annual  Meeting  of
               Shareholders).

    10.5       2002  Worldwide  Employee Share  Purchase Plan  (Incorporated  by
               reference to Exhibit 1 of Corning Proxy Statement, Definitive 14A
               filed  March  7,  2002 for  April  25,  2002  Annual  Meeting  of
               Shareholders).

    10.6       2000 Employee  Equity  Participation  Program and 2003 Amendments
               (Incorporated   by  reference  to  Exhibit  1  of  Corning  Proxy
               Statement, Definitive 14A filed March 10, 2003 for April 24, 2003
               Annual Meeting of Shareholders).

    10.7       2003 Variable  Compensation  Plan  (Incorporated  by reference to
               Exhibit 2 of Corning Proxy Statement,  Definitive 14A filed March
               10, 2003 for April 24, 2003 Annual Meeting of Shareholders).

    10.8       2003  Equity Plan for  Non-Employee  Directors  (Incorporated  by
               reference to Exhibit 3 of Corning Proxy Statement, Definitive 14A
               filed  March 10,  2003 for  April  24,  2003  Annual  Meeting  of
               Shareholders).

    10.9       Form of Officer Severance  Agreement dated as of February 1, 2004
               between  Corning  Incorporated  and  each of the  following  four
               individuals:   James  B.  Flaws,  James  R.  Houghton,  Peter  F.
               Volanakis  and Wendell P. Weeks  (Incorporated  by  reference  to
               Exhibit 10.1 of Corning's 10-Q filed May 4, 2004).

    10.10      Officer Severance  Agreement dated as of February 1, 2004 between
               Corning  Incorporated and Joseph A. Miller, Jr.  (Incorporated by
               reference to Exhibit 10.2 of Corning's 10-Q filed May 4, 2004).

    10.11      Change In Control  Agreement dated as of February 1, 2004 between
               Corning  Incorporated  and  James R.  Houghton  (Incorporated  by
               reference to Exhibit 10.3 of Corning's 10-Q filed May 4, 2004).

    10.12      Form of  Amendment  dated as of  February  1,  2004 to  Change In
               Control  Agreement  dated as of October 4, 2000  between  Corning
               Incorporated  and the following two  individuals:  James B. Flaws
               and Peter F. Volanakis (Incorporated by reference to Exhibit 10.4
               of Corning's 10-Q filed May 4, 2004).






    10.13      Form of Change In Control  Amendment  dated as of October 4, 2000
               between Corning  Incorporated  and the following two individuals:
               James B. Flaws and Peter F. Volanakis  (Incorporated by reference
               to Exhibit 10.5 of Corning's 10-Q filed May 4, 2004).

    10.14      Amendment  dated as of  February  1, 2004 to  Change  In  Control
               Agreement dated as of June 1, 2001 between  Corning  Incorporated
               and Joseph A. Miller,  Jr.  (Incorporated by reference to Exhibit
               10.6 of Corning's 10-Q filed May 4, 2004).

    10.15      Change In  Control  Agreement  dated as of June 1,  2001  between
               Corning  Incorporated and Joseph A. Miller, Jr.  (Incorporated by
               reference to Exhibit 10.7 of Corning's 10-Q filed May 4, 2004).

    10.16      Amendment  dated as of  February  1, 2004 to  Change  In  Control
               Agreement dated as of April 23, 2002 between Corning Incorporated
               and Wendell P. Weeks  (Incorporated  by reference to Exhibit 10.8
               of Corning's 10-Q filed May 4, 2004).

    10.17      Change In Control  Agreement  dated as of April 23, 2002  between
               Corning  Incorporated  and  Wendell  P.  Weeks  (Incorporated  by
               reference to Exhibit 10.9 of Corning's 10-Q filed May 4, 2004).

    10.18      Form of Corning  Incorporated  Incentive Stock Plan Agreement for
               Restricted  Stock  Grants  (Incorporated  by reference to Exhibit
               10.1 of Corning's 10-Q filed October 28, 2004).

    10.19      Form of Corning  Incorporated  Incentive Stock Plan Agreement for
               Restricted Stock Retention  Grants  (Incorporated by reference to
               Exhibit 10.2 of Corning's 10-Q filed October 28, 2004).

    10.20      Form of Corning  Incorporated  Incentive  Stock Option  Agreement
               (Incorporated  by reference  to Exhibit  10.3 of  Corning's  10-Q
               filed October 28, 2004).

    10.21      Form of Corning Incorporated Non-Qualified Stock Option Agreement
               (Incorporated  by reference  to Exhibit  10.4 of  Corning's  10-Q
               filed October 28, 2004).

    10.22      2005  Employee  Equity  Participation  Program  (Incorporated  by
               reference to Exhibit I of Corning Proxy Statement, Definitive 14A
               filed  March  1,  2005 for  April  28,  2005  Annual  Meeting  of
               Shareholders).

    10.23      Five-Year  Revolving Credit  Agreement with Citibank,  N.A.; J.P.
               Morgan  Chase  Bank,  N.A.;  Bank  of  America,   N.A.;  Bank  of
               Tokyo-Mitsubishi,  Ltd.;  Wachovia  Bank,  National  Association;
               Barclays  Bank PLC; and Deutsche  Bank A.G. New York Branch dated
               March 17,  2005  (Incorporated  by  reference  to  Exhibit  10 of
               Corning's Form 10-Q filed April 26, 2005).

    12         Computation  of Ratio of Earnings to Combined  Fixed  Charges and
               Preferred Dividends.

    14         Corning  Incorporated  Code of Ethics for Chief Executive Officer
               and  Senior  Financial  Officer  (Incorporated  by  reference  to
               Appendix H-3 of Corning's 2006 definitive Proxy Statement).

    21         Subsidiaries of the Registrant at December 31, 2005.

    23         Consent of Independent Registered Public Accounting Firm.

    24         Powers of Attorney.

    31.1       Certification  Pursuant  to  Rule  13a-15(e)  and  15d-15(e),  As
               Adopted  Pursuant  to Section  302 of the  Sarbanes-Oxley  Act of
               2002.

    31.2       Certification  Pursuant  to  Rule  13a-15(e)  and  15d-15(e),  As
               Adopted  Pursuant  to Section  302 of the  Sarbanes-Oxley  Act of
               2002.

    32         Certification  Pursuant  to 18 U.S.C.  Section  1350,  As Adopted
               Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

(c) Financial Statement Schedules
    1. Quarterly Operating Results...........................................108
    2. Financial Statements of Dow Corning Corporation for the years
       ended December 31, 2005, 2004 and 2003................................109
    3. Financial Statements of Samsung Corning Precision Glass Co., Ltd.
       for the years ended December 31, 2005, 2004 and 2003..................146







Signatures

Pursuant to the requirements of Sections 13 or 15(d) of the Securities  Exchange
Act of 1934,  the  Registrant  has duly  caused  this report to be signed on its
behalf by the undersigned, thereunto duly authorized.



Corning Incorporated
                                                                                                          
By               /s/ Wendell P. Weeks              President and Chief Executive Officer                              May 9, 2006
       ----------------------------------------    and Director
                  (Wendell P. Weeks)

Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following  persons on behalf of the  Registrant and
in the capacities and on the date indicated.

                                                   Capacity                                                              Date

                      *
-----------------------------------------------    Chairman of the Board of Directors                              February 24, 2006
             (James R. Houghton)


                      *
-----------------------------------------------    Vice Chairman and Chief Financial Officer                       February 24, 2006
              (James B. Flaws)


                      *
-----------------------------------------------    Senior Vice President, Finance                                  February 24, 2006
            (Katherine A. Asbeck)


                      *
-----------------------------------------------    Director                                                        February 24, 2006
             (John Seely Brown)


                      *
-----------------------------------------------    Director                                                        February 24, 2006
              (James B. Flaws)


                      *
-----------------------------------------------    Director                                                        February 24, 2006
                (Gordon Gund)


                      *
-----------------------------------------------    Director                                                        February 24, 2006
             (John M. Hennessy)


                      *
-----------------------------------------------    Director                                                        February 24, 2006
             (Jeremy R. Knowles)


                      *
-----------------------------------------------    Director                                                        February 24, 2006
             (James J. O'Connor)


                      *
-----------------------------------------------    Director                                                        February 24, 2006
             (Deborah D. Rieman)


                      *
-----------------------------------------------    Director                                                        February 24, 2006
              (H. Onno Ruding)









                      *
-----------------------------------------------    Director                                                        February 24, 2006
           (William D. Smithburg)


                      *
-----------------------------------------------    Director                                                        February 24, 2006
            (Hansel E. Tookes II)


                      *
-----------------------------------------------    Director                                                        February 24, 2006
            (Peter F. Volanakis)


                      *
-----------------------------------------------    Director                                                        February 24, 2006
             (Padmasree Warrior)




*By              /s/ William D. Eggers
       ----------------------------------------
         (William D. Eggers, Attorney-in-fact)










                              Corning Incorporated
                               2005 Annual Report
         Index to Financial Statements and Financial Statement Schedules


                                                                            Page

Report of Independent Registered Public Accounting Firm......................53
Consolidated Statements of Operations........................................55
Consolidated Balance Sheets..................................................56
Consolidated Statements of Cash Flows........................................57
Consolidated Statements of Changes in Shareholders' Equity...................58
Notes to Consolidated Financial Statements
         1        Summary of Significant Accounting Policies.................59
         2.       Restatement of Previously Issued Financial Statements......65
         3.       Discontinued Operation.....................................68
         4.       Restructuring, Impairment and Other Charges and (Credits)..69
         5.       Short-Term Investments.....................................71
         6.       Inventories................................................72
         7.       Income Taxes...............................................72
         8.       Investments................................................75
         9.       Property, Net of Accumulated Depreciation..................81
         10.      Goodwill and Other Intangible Assets.......................81
         11.      Other Liabilities..........................................83
         12.      Debt.......................................................84
         13.      Employee Retirement Plans..................................86
         14.      Commitments, Contingencies, and Guarantees.................91
         15.      Hedging Activities.........................................92
         16.      Shareholders' Equity.......................................94
         17.      Earnings (Loss) Per Common Share...........................96
         18.      Stock Compensation Plans...................................97
         19.      Operating Segments.........................................99
         20.      Subsequent Events.........................................104


Financial Statement Schedule
         II.      Valuation Accounts and Reserves...........................107

Quarterly Operating Results.................................................108

Financial Statements of Dow Corning Corporation for the years ended
December 31, 2005, 2004 and 2003............................................109

Financial Statements of Samsung Corning Precision Glass Co., Ltd. for the
years ended December 31, 2005, 2004 and 2003................................146






REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM





To the Board of Directors and Shareholders of Corning Incorporated:

We have  completed  integrated  audits of Corning  Incorporated's  2005 and 2004
consolidated  financial  statements  and of its internal  control over financial
reporting  as of  December  31,  2005,  and an audit  of its  2003  consolidated
financial  statements  in accordance  with the  standards of the Public  Company
Accounting Oversight Board (United States).  Our opinions,  based on our audits,
are presented below.

Consolidated financial statements and financial statement schedule
------------------------------------------------------------------

In our  opinion,  the  consolidated  financial  statements  listed  in the index
appearing under item 15(a)(1)  present  fairly,  in all material  respects,  the
financial position of Corning  Incorporated and its subsidiaries at December 31,
2005 and 2004, and the results of their operations and their cash flows for each
of the three years in the period  ended  December  31, 2005 in  conformity  with
accounting  principles  generally  accepted in the United States of America.  In
addition,  in our opinion,  the financial statement schedule listed in the index
appearing under Item 15(a)(2)  presents fairly,  in all material  respects,  the
information  set  forth  therein  when  read in  conjunction  with  the  related
consolidated  financial  statements.  These  financial  statements and financial
statement  schedule are the  responsibility  of the  Company's  management.  Our
responsibility  is to  express  an opinion  on these  financial  statements  and
financial  statement  schedule  based on our audits.  We conducted our audits of
these  statements  in  accordance  with  the  standards  of the  Public  Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material  misstatement.  An audit of financial statements
includes  examining,  on a test  basis,  evidence  supporting  the  amounts  and
disclosures in the financial  statements,  assessing the  accounting  principles
used and  significant  estimates made by management,  and evaluating the overall
financial  statement  presentation.   We  believe  that  our  audits  provide  a
reasonable basis for our opinion.

As discussed in Note 2 to the  consolidated  financial  statements and Note 1 on
the financial statement  schedule,  the Company has restated its 2005, 2004, and
2003 consolidated financial statements and its 2005 and 2004 financial statement
schedule.

Internal control over financial reporting
-----------------------------------------

Also, we have audited management's  assessment,  included in Management's Report
on Internal  Control  Over  Financial  Reporting  appearing  under Item 9A, that
Corning  Incorporated did not maintain effective internal control over financial
reporting  as of December  31,  2005,  because the Company (i) did not  maintain
effective controls over the valuation of its asbestos settlement charges and the
valuation and  reconciliation of the related liability and (ii) did not maintain
effective controls over the completeness and accuracy of its equity investments,
based on criteria  established in Internal Control - Integrated Framework issued
by the Committee of Sponsoring  Organizations of the Treadway Commission (COSO).
The Company's  management is  responsible  for  maintaining  effective  internal
control over financial  reporting and for its assessment of the effectiveness of
internal  control over financial  reporting.  Our  responsibility  is to express
opinions on management's  assessment and on the  effectiveness  of the Company's
internal control over financial reporting based on our audit.

We  conducted  our  audit  of  internal  control  over  financial  reporting  in
accordance with the standards of the Public Company  Accounting  Oversight Board
(United States).  Those standards  require that we plan and perform the audit to
obtain  reasonable  assurance  about  whether  effective  internal  control over
financial  reporting  was  maintained  in all  material  respects.  An  audit of
internal control over financial reporting includes obtaining an understanding of
internal control over financial reporting,  evaluating management's  assessment,
testing  and  evaluating  the design and  operating  effectiveness  of  internal
control,  and performing such other  procedures as we consider  necessary in the
circumstances.  We believe that our audit  provides a  reasonable  basis for our
opinions.

A company's  internal control over financial  reporting is a process designed to
provide reasonable  assurance  regarding the reliability of financial  reporting
and the preparation of financial  statements for external purposes in accordance
with generally accepted accounting principles. A company's internal control over
financial  reporting  includes those policies and procedures that (i) pertain to
the  maintenance  of records that, in reasonable  detail,  accurately and fairly
reflect  the  transactions  and  dispositions  of the  assets  of  the  company;
(ii) provide reasonable assurance that transactions are recorded as necessary to
permit preparation of financial statements in accordance with generally accepted
accounting  principles,  and that receipts and  expenditures  of the company are
being made only in accordance with authorizations of management and directors of
the company;  and (iii) provide  reasonable  assurance  regarding  prevention or
timely  detection  of  unauthorized  acquisition,  use,  or  disposition  of the
company's assets that could have a material effect on the financial statements.




Because of its inherent  limitations,  internal control over financial reporting
may not prevent or detect misstatements.  Also, projections of any evaluation of
effectiveness to future periods are subject to the risk that controls may become
inadequate  because of changes in  conditions,  or that the degree of compliance
with the policies or procedures may deteriorate.

A  material  weakness  is  a  control  deficiency,  or  combination  of  control
deficiencies,  that  results  in more than a remote  likelihood  that a material
misstatement of the annual or interim financial statements will not be prevented
or detected. The following material weaknesses have been identified and included
in management's assessment at December 31, 2005:

     (i)  The Company did not maintain  effective controls over the valuation of
          its asbestos  settlement  charges and the valuation and reconciliation
          of the related  liability  pertaining to the 2003  Pittsburgh  Corning
          Corporation Asbestos Litigation Bankruptcy  Settlement.  Specifically,
          the Company did not maintain effective controls to ensure that certain
          components of the liability,  which may be settled by contributing the
          Company's  equity  interest in  Pittsburgh  Corning  Europe,  N.V. and
          assignment  of  rights  to  insurance  proceeds,   were  appropriately
          recorded at fair value rather than book value as required by generally
          accepted  accounting  principles.  This control deficiency resulted in
          the  restatement  of  the  Company's  annual  consolidated   financial
          statements for the years ended  December 31, 2005,  2004, and 2003 and
          the quarterly  consolidated financial statements for each of the three
          quarterly  periods  in the years  ended  December  31,  2005 and 2004.
          Additionally,  this control  deficiency could result in a misstatement
          of the asbestos  settlement  charges and related  liability that would
          result  in  a   material   misstatement   to  the  annual  or  interim
          consolidated  financial  statements  that  would not be  prevented  or
          detected.

     (ii) The Company did not maintain  effective controls over the completeness
          and accuracy of its equity investments.  Specifically, the Company did
          not maintain  effective controls to ensure that earnings of its equity
          investments  were  accurately  and completely  recorded.  This control
          deficiency  resulted  in  the  restatement  of  the  Company's  annual
          consolidated  financial  statements  for the years ended  December 31,
          2005,  2004,  and  2003  and  the  quarterly   consolidated  financial
          statements for each of the three quarterly  periods in the years ended
          December  31, 2005 and 2004.  Additionally,  this  control  deficiency
          could result in a misstatement  of investments  and equity in earnings
          of affiliated  companies that would result in a material  misstatement
          to the annual or interim consolidated  financial statements that would
          not be prevented or detected.

These material weaknesses were considered in determining the nature, timing, and
extent of audit tests  applied in our audit of the 2005  consolidated  financial
statements,  and  our  opinion  regarding  the  effectiveness  of the  Company's
internal  control over financial  reporting does not affect our opinion on those
consolidated financial statements.

Management  and we previously  concluded that the Company  maintained  effective
internal  control over  financial  reporting  as of December 31, 2005.  However,
management has subsequently  determined that the material  weaknesses  described
above  existed as of December  31,  2005.  Accordingly,  Management's  Report on
Internal  Control Over Financial  Reporting has been restated and our opinion on
internal control over financial  reporting,  as presented  herein,  is different
from that expressed in our previous report.

In our  opinion,  management's  assessment  that  Corning  Incorporated  did not
maintain effective internal control over financial  reporting as of December 31,
2005, is fairly stated, in all material respects,  based on criteria established
in Internal  Control - Integrated  Framework  issued by the COSO.  Also,  in our
opinion, because of the effect of the material weaknesses described above on the
achievement of the objectives of the control criteria,  Corning Incorporated has
not  maintained  effective  internal  control  over  financial  reporting  as of
December  31,  2005,  based  on  criteria  established  in  Internal  Control  -
Integrated Framework issued by the COSO.



/s/ PricewaterhouseCoopers LLP
New York, New York
February 24, 2006, except for Note 2 to the consolidated  financial  statements,
Note 1 on the  financial  statement  schedule,  and the matter  discussed in the
penultimate  paragraph of Management's Report on Internal Control Over Financial
Reporting, as to which the date is May 9, 2006








Consolidated Statements of Operations                                                  Corning Incorporated and Subsidiary Companies
------------------------------------------------------------------------------------------------------------------------------------

                                                                                           For the years ended December 31,
------------------------------------------------------------------------------------------------------------------------------------
                                                                                        2005             2004              2003
(In millions, except per share amounts)                                              (Restated)       (Restated)        (Restated)
------------------------------------------------------------------------------------------------------------------------------------
                                                                                                              
Net sales                                                                            $   4,579       $   3,854         $   3,090
Cost of sales                                                                            2,595           2,439             2,241
                                                                                     ---------------------------------------------

Gross margin                                                                             1,984           1,415               849

Operating expenses:
   Selling, general and administrative expenses                                            756             653               599
   Research, development and engineering expenses                                          443             355               344
   Amortization of purchased intangibles                                                    13              38                37
   Restructuring, impairment and other charges and (credits) (Note 4)                      (38)          1,789               111
   Asbestos settlement (Note 8)                                                            218              65               535
                                                                                     ---------------------------------------------

Operating income (loss)                                                                    592          (1,485)             (777)

Interest income                                                                             61              25                32
Interest expense                                                                          (108)           (133)             (149)
(Loss) gain on repurchases and retirement of debt, net (Note 12)                           (16)            (36)               19
Other income (expense), net                                                                 30              25                (1)
                                                                                     ---------------------------------------------

Income (loss) from continuing operations before income taxes                               559          (1,604)             (876)
(Provision) benefit for income taxes (Note 7)                                             (578)         (1,084)              307
                                                                                     ---------------------------------------------

Loss before minority interests and equity earnings                                         (19)         (2,688)             (569)
Minority interests                                                                          (7)            (17)               73
Equity in earnings of associated companies, net of impairments (Note 8)                    611             454               216
                                                                                     ---------------------------------------------

Income (loss) from continuing operations                                                   585          (2,251)             (280)
Income from discontinued operation (Note 3)                                                                 20
                                                                                     ---------------------------------------------

Net income (loss)                                                                    $     585       $  (2,231)        $    (280)
                                                                                     =============================================

Basic earnings (loss) per common share (Note 17):
  Continuing operations                                                              $    0.40       $   (1.62)        $   (0.22)
  Discontinued operation                                                                                  0.01
                                                                                     ---------------------------------------------
Basic earnings (loss) per common share                                               $    0.40       $   (1.61)        $   (0.22)
                                                                                     =============================================

Diluted earnings (loss) per common share (Note 17):
   Continuing operations                                                             $    0.38       $   (1.62)        $   (0.22)
   Discontinued operation                                                                                 0.01
                                                                                     ---------------------------------------------
Diluted earnings (loss) per common share                                             $    0.38       $   (1.61)        $   (0.22)
                                                                                     =============================================

The  accompanying  notes are an integral  part of these  consolidated  financial
statements.







Consolidated Balance Sheets                                                            Corning Incorporated and Subsidiary Companies
------------------------------------------------------------------------------------------------------------------------------------

                                                                                                        December 31,
------------------------------------------------------------------------------------------------------------------------------------
                                                                                                 2005                  2004
(In millions, except share and per share amounts)                                             (Restated)            (Restated)
------------------------------------------------------------------------------------------------------------------------------------
                                                                                                              
Assets

Current assets:
  Cash and cash equivalents                                                                   $   1,342             $   1,009
  Short-term investments, at fair value                                                           1,092                   872
                                                                                              ----------------------------------
    Total cash, cash equivalents and short-term investments                                       2,434                 1,881
  Trade accounts receivable, net of doubtful accounts and allowances - $24 and $30                  629                   585
  Inventories (Note 6)                                                                              570                   535
  Deferred income taxes (Note 7)                                                                     44                    94
  Other current assets                                                                              183                   188
                                                                                              ----------------------------------
    Total current assets                                                                          3,860                 3,283

Investments (Note 8)                                                                              1,729                 1,510
Property, net of accumulated depreciation - $3,632 and $3,532 (Note 9)                            4,675                 3,941
Goodwill and other intangible assets, net (Note 10)                                                 338                   398
Deferred income taxes (Note 7)                                                                       10                   440
Other assets                                                                                        595                   166
                                                                                              ----------------------------------

Total Assets                                                                                  $  11,207             $   9,770
                                                                                              ==================================

Liabilities and Shareholders' Equity

Current liabilities:
  Current portion of long-term debt (Note 12)                                                 $      18             $     478
  Accounts payable                                                                                  690                   682
  Other accrued liabilities (Note 11)                                                             1,662                 1,319
                                                                                              ----------------------------------
    Total current liabilities                                                                     2,370                 2,479

Long-term debt (Note 12)                                                                          1,789                 2,214
Postretirement benefits other than pensions (Note 13)                                               593                   600
Other liabilities (Note 11)                                                                         925                   747
                                                                                              ----------------------------------
    Total liabilities                                                                             5,677                 6,040
                                                                                              ----------------------------------

Commitments and contingencies (Note 14)
Minority interests                                                                                   43                    29
                                                                                              ----------------------------------
Shareholders' equity (Note 16):
  Preferred stock - Par value $100.00 per share; Shares authorized: 10 million
      Series C mandatory convertible preferred stock - Shares issued: 5.75 million;
      Shares outstanding:  0 and 637 thousand                                                                              64
  Common stock - Par value $0.50 per share; Shares authorized: 3.8 billion
      Shares issued: 1,552 million and 1,424 million                                                776                   712
  Additional paid-in capital                                                                     11,548                10,363
  Accumulated deficit                                                                            (6,847)               (7,432)
  Treasury stock, at cost; Shares held: 16 million                                                 (168)                 (162)
  Accumulated other comprehensive income                                                            178                   156
                                                                                              ----------------------------------
    Total shareholders' equity                                                                    5,487                 3,701
                                                                                              ----------------------------------

Total Liabilities and Shareholders' Equity                                                    $  11,207             $   9,770
                                                                                              ==================================

The  accompanying  notes are an integral  part of these  consolidated  financial
statements.

Certain   amounts  for  2004  were   reclassified   to  conform  with  the  2005
presentation.






Consolidated Statements of Cash Flows                                                  Corning Incorporated and Subsidiary Companies
------------------------------------------------------------------------------------------------------------------------------------

                                                                                            For the years ended December 31,
------------------------------------------------------------------------------------------------------------------------------------
                                                                                             2005         2004         2003
(In millions)                                                                             (Restated)   (Restated)   (Restated)
------------------------------------------------------------------------------------------------------------------------------------
                                                                                                           
Cash Flows from Operating Activities:
   Net income (loss)                                                                     $     585     $ (2,231)    $    (280)
   Adjustments to reconcile net income (loss)
     to net cash provided by operating activities:
     Depreciation                                                                              499          485           480
     Amortization of purchased intangibles                                                      13           38            37
     Asbestos settlement                                                                       218           65           535
     Gain on sale of discontinued operation                                                                 (20)
     Restructuring, impairment and other (credits) and charges                                 (38)       1,789           111
     Loss (gain) on repurchases and retirement of debt                                          16           36           (19)
     Stock compensation charges                                                                 29            8             1
     Undistributed earnings of associated companies                                           (310)        (314)         (104)
     Deferred taxes                                                                            425        1,000          (316)
     Interest expense on convertible debentures                                                (23)           4            18
     Restructuring payments                                                                    (25)         (85)         (233)
     Decrease (increase) in restricted cash                                                     22           34            (3)
     Income tax refund                                                                                                    191
     Customer deposits, net                                                                    428          204
     Employee benefit payments less than (in excess of) expense                                 34          (19)         (142)
     Changes in certain working capital items:
       Trade accounts receivable                                                               (77)         (40)
       Inventories                                                                             (62)         (68)          108
       Other current assets                                                                      6           (7)           49
       Accounts payable and other current liabilities, net of restructuring payments           113          143          (219)
     Other, net                                                                                 86          (13)          (81)
                                                                                         -------------------------------------
Net cash provided by operating activities                                                    1,939        1,009           133
                                                                                         -------------------------------------

Cash Flows from Investing Activities:
   Capital expenditures                                                                     (1,553)        (857)         (366)
   Acquisitions of businesses, net of cash acquired                                                                        (6)
   Net proceeds from sale of businesses                                                                     100             9
   Net proceeds from sale or disposal of assets                                                 18           49            46
   Short-term investments - acquisitions                                                    (1,668)      (1,685)       (2,122)
   Short-term investments - liquidations                                                     1,452        1,389         2,557
   Other, net                                                                                   39           12             9
                                                                                         -------------------------------------
Net cash (used in) provided by investing activities                                         (1,712)        (992)          127
                                                                                         -------------------------------------

Cash Flows from Financing Activities:
   Net repayments of short-term borrowings and current portion of long-term debt              (451)        (115)         (181)
   Proceeds from issuance of long-term debt, net                                               147          442
   Retirements of long-term debt                                                              (102)        (154)       (1,189)
   Proceeds from issuance of common stock, net                                                 365           42           657
   Proceeds from the exercise of stock options                                                 202           49             9
   Other, net                                                                                  (14)           1            (4)
                                                                                         -------------------------------------
Net cash provided by (used in) financing activities                                            147          265          (708)
                                                                                         -------------------------------------
Effect of exchange rate changes on cash                                                        (41)          39            60
                                                                                         -------------------------------------
Net increase (decrease) in cash and cash equivalents                                           333          321          (388)
Cash and cash equivalents at beginning of year                                               1,009          688         1,076
                                                                                         -------------------------------------

Cash and cash equivalents at end of year                                                 $   1,342     $  1,009     $     688
                                                                                         =====================================


The  accompanying  notes are an integral  part of these  consolidated  financial
statements.






Consolidated Statements of Changes in Shareholders' Equity                             Corning Incorporated and Subsidiary Companies
------------------------------------------------------------------------------------------------------------------------------------
(In millions)

                                                                                                          Accumulated
                                    Series C             Additional                                          other          Total
                                    Preferred   Common     paid-in   Unearned    Accumulated  Treasury   comprehensive  shareholders
                                      stock      stock     capital compensation    deficit      stock    income (loss)     equity
------------------------------------------------------------------------------------------------------------------------------------
                                                                                                 
Balance, December 31, 2002            $ 155     $ 634     $ 9,697     $  (2)      $(4,921)     $ (702)      $  (170)     $  4,691

Net loss                                                                             (280)                                   (280)
Foreign currency translation adjustment                                                                         243           243
Minimum pension liability adjustment                                                                             26            26
Net unrealized gain on investments
   (net of tax of $2 million)                                                                                     1             1
Other comprehensive income                                                                                        2             2
                                                                                                                         ----------
Total comprehensive income                                                                                                     (8)
                                                                                                                         ----------

Series C preferred stock conversions    (70)       18          52
Shares issued in equity offerings                  47         571                                                             618
Shares issued to benefit plans                                (37)                                 65                          28
Shares issued in debt retirements                              12                                  65                          77
Other, net                                          2          22       (17)                       (2)                          5
                                      ---------------------------------------------------------------------------------------------
Balance, December 31, 2003 (Restated) $  85     $ 701     $10,317     $ (19)      $(5,201)     $ (574)      $   102      $  5,411

Net loss                                                                           (2,231)                                 (2,231)
Foreign currency translation adjustment                                                                         178           178
Minimum pension liability adjustment                                                                           (126)         (126)
Net unrealized gain on investments                                                                                8             8
Other comprehensive loss                                                                                         (6)           (6)
                                                                                                                         ----------
Total comprehensive loss                                                                                                   (2,177)
                                                                                                                         ----------

Series C preferred stock conversions    (21)        5          16
Shares issued to benefit plans                                  5                                  36                          41
Shares issued in debt retirements                             (11)                                379                         368
Other, net                                          6          82       (27)                       (3)                         58
                                      ---------------------------------------------------------------------------------------------
Balance, December 31, 2004 (Restated) $  64     $ 712     $10,409     $ (46)      $(7,432)     $ (162)      $   156      $  3,701

Net income                                                                            585                                     585
Foreign currency translation
  adjustment                                                                                                   (171)         (171)
Reversal of foreign currency
   translation adjustment                                                                                       (84)          (84)
Minimum pension liability adjustment                                                                            246           246
Net loss on investments                                                                                         (13)          (13)
Unrealized derivative gain on
   cash flow hedges                                                                                              23            23
Reclassification adjustments on
   cash flow hedges                                                                                              21            21
                                                                                                                         ----------
Total comprehensive income                                                                                                    607
                                                                                                                         ----------

Series C preferred stock conversions    (64)       16          48
Shares issued in equity offerings                  10         313                                                             323
Shares issued to benefit plans                     20         493       (37)                        1                         477
Shares issued in debt retirements                  18         370                                                             388
Other, net                                                     (2)                                 (7)                         (9)
                                      ---------------------------------------------------------------------------------------------
Balance, December 31, 2005 (Restated) $   0     $ 776     $11,631     $ (83)      $(6,847)     $ (168)      $   178      $  5,487
                                      =============================================================================================


The  accompanying  notes are an integral  part of these  consolidated  financial
statements.








                                                                                    
Notes to Consolidated Financial Statements                                             Corning Incorporated and Subsidiary Companies
------------------------------------------------------------------------------------------------------------------------------------


1.   Summary of Significant Accounting Policies

Organization

Corning  Incorporated  is a  provider  of  high-performance  glass for  computer
monitors and other information display applications; optical fiber and cable and
hardware and equipment  products for the  telecommunications  industry;  ceramic
substrates  for gasoline and diesel engines in automotive and heavy duty vehicle
markets;  scientific  laboratory  products  for  the  scientific  community  and
specialized  polymer products for biotechnology  applications;  advanced optical
materials for the semiconductor industry and the scientific community; and other
technologies.  In these notes,  the terms  "Corning,"  "Company," "we," "us," or
"our" mean Corning Incorporated and subsidiary companies.

Basis of Presentation and Principles of Consolidation

Our  consolidated   financial   statements  were  prepared  in  conformity  with
accounting  principles generally accepted in the United States of America (GAAP)
and include the assets, liabilities, revenues and expenses of all majority-owned
subsidiaries over which Corning exercises control and, when applicable, entities
for which Corning has a controlling financial interest.

For  variable  interest  entities,  we assess the terms of our  interest  in the
entity to determine if we are the primary  beneficiary as prescribed by FIN 46R,
Consolidation of Variable  Interest  Entities,  an  Interpretation of Accounting
Research  Bulletin  No. 51,  Revised  (FIN 46R).  The primary  beneficiary  of a
variable  interest  entity is the party that  absorbs a majority of the entity's
expected losses,  receives a majority of its expected residual returns, or both,
as a result of holding variable interests, which are the ownership, contractual,
or other  pecuniary  interests in an entity that change with changes in the fair
value of the entity's net assets excluding  variable  interests.  We consolidate
one variable interest entity in which we are the primary beneficiary.

The equity method of accounting is used for investments in associated  companies
which are not  controlled  by Corning  and in which our  interest  is  generally
between 20% and 50% and we have significant influence over the entity. Our share
of  earnings  or losses of  associated  companies,  in which at least 20% of the
voting  securities  is owned and we have  significant  influence but not control
over the entity, is included in consolidated operating results.

We use the cost method to account for our  investments  in companies  that we do
not control  and for which we do not have the  ability to  exercise  significant
influence over  operating and financial  policies.  In accordance  with the cost
method, these investments are recorded at cost or fair value, as appropriate.

All material intercompany  accounts,  transactions and profits are eliminated in
consolidation.

Certain prior year amounts have been reclassified to conform to the current-year
presentation,  including  the  classification  of  auction  rate  securities  as
available-for-sale  securities,  which are reported as  short-term  investments,
instead  of cash  equivalents.  These  reclassifications  had no  impact  on our
results of operations or changes in shareholders' equity.

Use of Estimates

The  preparation  of  financial  statements  in  conformity  with GAAP  requires
management to make estimates and assumptions that affect amounts reported in the
consolidated  financial statements and related notes.  Significant estimates and
assumptions in these consolidated financial statements include restructuring and
other  charges  and  credits,   allowances  for  doubtful  accounts  receivable,
estimates of fair value associated with goodwill and long-lived asset impairment
tests,  estimates of the fair value of assets held for  disposal,  environmental
and legal liabilities,  income taxes and deferred tax valuation allowances,  and
the  determination  of discount and other rate assumptions for pension and other
postretirement  employee  benefit  expenses.  Due  to the  inherent  uncertainty
involved in making  estimates,  actual results reported in future periods may be
different from these estimates.

Revenue Recognition

Revenue  for sales of goods is  recognized  when a firm  sales  agreement  is in
place,  delivery has occurred and  collectibility  of the fixed or  determinable
sales price is  reasonably  assured.  If customer  acceptance of products is not
reasonably  assured,  sales are recorded only upon formal  customer  acceptance.
Sales  of  goods  typically  do not  include  multiple  product  and/or  service
elements.

At the time revenue is  recognized,  allowances  are recorded,  with the related
reduction  to revenue,  for  estimated  product  returns,  allowances  and price
discounts  based  upon  historical  experience  and  related  terms of  customer
arrangements.  Where  we have  offered  product  warranties,  we also  establish
liabilities for estimated  warranty costs based upon  historical  experience and
specific  warranty  issues.  Warranty  liabilities  are adjusted when experience
indicates an expected settlement will differ from initial estimates.






1.   Summary of Significant Accounting Policies (continued)

Research and Development Costs

Research and development costs are charged to expense as incurred.  Research and
development  costs  totaled $348  million in 2005,  and $289 million in 2004 and
2003.

Foreign Currency Translation and Transactions

The determination of the functional currency for Corning's foreign  subsidiaries
is made based on the appropriate  economic factors. For most foreign operations,
the local currencies are generally  considered to be the functional  currencies.
Prior to 2005,  non-U.S.  operations which did not use the local currency as the
functional currency used the U.S. dollar.  Effective January 1, 2005, our Taiwan
subsidiary changed its functional currency from the new Taiwan dollar (its local
currency) to the Japanese yen due to the increased  significance of Japanese yen
based transactions of that subsidiary.  As a result of this change in functional
currency,  exchange  rate gains and losses are  recognized  on  transactions  in
currencies  other than the Japanese yen and included in income for the period in
which the exchange rates changed.

For foreign subsidiary functional currency financial  statements,  balance sheet
accounts are translated at current  exchange rates,  and statement of operations
accounts are  translated  at average  exchange  rates for the year.  Translation
gains and losses are  recorded  as a separate  component  of  accumulated  other
comprehensive income (loss) in shareholders'  equity. The effects of remeasuring
non-functional  currency assets and liabilities into the functional currency are
included in current earnings.

Stock-Based Compensation

Pursuant  to  Statement  of  Financial  Accounting  Standards  (SFAS)  No.  123,
"Accounting for Stock-Based  Compensation"  (SFAS 123), we apply the recognition
and measurement  principles of Accounting Principles Board Opinion (APB) No. 25,
"Accounting  for Stock Issued to  Employees"  (APB 25), to our stock options and
other stock-based  compensation  plans.  These plans are more fully described in
Note 18 (Stock Compensation Plans).

In accordance  with APB 25, stock option  compensation  expense is recognized in
earnings based on the excess, if any, of the quoted market price of the stock at
the  grant  date of the  award or other  measurement  date  over the  amount  an
employee  must pay to acquire the stock.  The exercise  price for stock  options
granted to employees equals or exceeds the fair market value of our common stock
at the date of grant.

The following  table  illustrates  the effect on income  (loss) from  continuing
operations  and  income  (loss)  per  share if we had  applied  the  fair  value
recognition  provisions of SFAS 123 to stock-based  employee  compensation.  The
estimated   fair  value  of  each  Corning   option  is  calculated   using  the
Black-Scholes  option-pricing  model  through  November  30,  2005.  For options
granted  after that  time,  the fair value is  estimated  using a  lattice-based
option valuation model.



(In millions, except per share amounts):
------------------------------------------------------------------------------------------------------------------------------------
                                                                                     Years ended December 31,
                                                                           ---------------------------------------------
                                                                              2005              2004             2003
                                                                           (Restated)        (Restated)       (Restated)
------------------------------------------------------------------------------------------------------------------------------------
                                                                                                     
Income (loss) from continuing operations - as reported                     $     585         $ (2,251)        $    (280)
Add:  Stock-based employee compensation expense
  determined under APB 25, included in reported income
  (loss) from continuing operations, net of tax                                   37               11                 1
Less:  Stock-based employee compensation expense
  determined under fair value based method, net of tax                           (68)            (168)             (162)
------------------------------------------------------------------------------------------------------------------------------------
Income (loss) from continuing operations - pro forma                       $     554         $ (2,408)        $    (441)

Earnings (loss) per common share from continuing operations:
    Basic - as reported                                                    $    0.40         $  (1.62)        $   (0.22)
    Basic - pro forma                                                      $    0.38         $  (1.74)        $   (0.35)

    Diluted - as reported                                                  $    0.38         $  (1.62)        $   (0.22)
    Diluted - pro forma                                                    $    0.36         $  (1.74)        $   (0.35)
------------------------------------------------------------------------------------------------------------------------------------






1.   Summary of Significant Accounting Policies (continued)

On December 1, 2004, Corning's  Compensation Committee of the Board of Directors
considered and adopted a proposal that  accelerated  the vesting of all unvested
underwater  options held by active employees.  Unvested  underwater options were
defined as options  granted prior to December 1, 2004 with a grant price greater
than $12.70.  Approximately  7 million  stock  options or 5 percent of Corning's
outstanding stock options were  accelerated.  This action was one of a series of
actions taken to manage Corning's  anticipated future  compensation cost for all
forms of equity  incentives  within an acceptable range once SFAS 123 (revised),
"Share-Based  Payment" (SFAS 123R) is adopted.  Other actions included  reducing
the use of stock options for all  employees,  increasing  the use of performance
shares in the  executive  plan,  and reviewing  the cost  considerations  of the
global employee share purchase program. As a result of the accelerated  vesting,
the 2004 "stock-based  employee compensation expense determined under fair value
based  method,  net of tax" amount  above  includes  $13 million of  incremental
expense relating to these accelerated options.

Cash and Cash Equivalents

Cash  equivalents   consist  of  highly  liquid  investments  that  are  readily
convertible  into cash. We consider  securities with  contractual  maturities of
three  months or less,  when  purchased,  to be cash  equivalents.  The carrying
amount of these  securities  approximates  fair value because of the  short-term
maturity of these instruments.



Supplemental disclosure of cash flow information follows (in millions):
------------------------------------------------------------------------------------------------------------------------------------
                                                                                     Years ended December 31,
                                                                           ---------------------------------------------
                                                                              2005             2004              2003
------------------------------------------------------------------------------------------------------------------------------------
                                                                                                      
Non-cash transactions:
    Retirement of short-term borrowings                                                       $   26
    Retirement of debt in exchange for stock                                $   388           $  368           $    77
    Pension contribution                                                    $   199
    Issued credit memoranda for settlement of customer receivables          $    29
Cash paid for interest and income taxes:
    Interest                                                                $   126           $  129           $   124
    Income taxes, net of refunds received                                   $   140           $   64           $  (145)
------------------------------------------------------------------------------------------------------------------------------------


Short-Term Investments

Our   short-term   investments   consist  of  debt   securities   classified  as
available-for-sale,  which are  stated  at  estimated  fair  value.  These  debt
securities include U.S. treasury notes, state and municipal bonds,  asset-backed
securities,  auction rate  securities,  corporate  bonds,  commercial  paper and
certificates of deposit. These investments are on deposit with a major financial
institution.  Unrealized  gains and  losses,  net of tax,  are  computed  on the
first-in first-out basis and are reported as a separate component of accumulated
other  comprehensive  income  (loss) in  shareholders'  equity  until  realized.
Realized gains and losses are recorded in other income (expense), net.

Allowance for Doubtful Accounts

The Company's  allowance for doubtful  accounts is determined based on a variety
of factors that affect the potential  collectibility of the related receivables,
including  length of time  receivables  are past due,  customer  credit ratings,
financial  stability of customers,  specific  one-time  events and past customer
history.  In  addition,  in  circumstances  where the Company is made aware of a
specific  customer's  inability to meet its  financial  obligations,  a specific
allowance is established. The majority of accounts are individually evaluated on
a regular basis and appropriate  reserves are established as deemed  appropriate
based  on  the  above  criteria.  The  remainder  of the  reserve  is  based  on
management's  estimates and takes into consideration  historical trends,  market
conditions and the composition of the Company's customer base.

Environmental Liabilities

The Company accrues for its environmental investigation,  remediation, operating
and maintenance costs when it is probable that a liability has been incurred and
the amount can be reasonably  estimated.  For  environmental  matters,  the most
likely  cost to be  incurred  is accrued  based on an  evaluation  of  currently
available  facts  with  respect  to  each  individual  site,  current  laws  and
regulations and prior remediation experience.  For sites with multiple potential
responsible  parties  (PRP's),  the Company  considers its likely  proportionate
share of the anticipated  remediation costs and the ability of the other parties
to fulfill their obligations in establishing a provision for those costs.  Where
no amount within a range of estimates is more likely to occur than another,  the
minimum is accrued. When future liabilities are determined to be reimbursable by
insurance  coverage,  an accrual is recorded for the  potential  liability and a
receivable  is recorded  related to the insurance  reimbursement.  The uncertain
nature inherent in such remediation and the possibility  that initial  estimates
may not reflect the final outcome could result in additional costs.





1.   Summary of Significant Accounting Policies (continued)

Inventories

Inventories  are  stated at the  lower of cost  (first-in,  first-out  basis) or
market.

Property, Net of Accumulated Depreciation

Land,  buildings and equipment  are recorded at cost.  Depreciation  is based on
estimated useful lives of properties using the straight-line  method.  Except as
described in Note 4 (Restructuring,  Impairment and Other Charges and (Credits))
related to accelerated  depreciation  arising from restructuring  programs,  the
estimated useful lives range from 20 to 40 years for buildings and 3 to 20 years
for equipment.

Included in the subcategory of equipment are the following types of assets:
--------------------------------------------------------------------------------
Asset type                                                  Range of useful life
--------------------------------------------------------------------------------

Computer hardware and software                                 3 years
Manufacturing equipment                                        3 to 15 years
Furniture and fixtures                                         5 to 7 years
Transportation equipment                                       20 years
--------------------------------------------------------------------------------

Included  in  manufacturing  equipment  are  certain  components  of  production
equipment that are coated with or constructed of precious  metals.  These metals
have an indefinite useful life as they are returned to their elemental state and
reused or sold.

Goodwill and Other Intangible Assets

Goodwill is the excess of cost of an acquired  entity over the amounts  assigned
to assets acquired and liabilities assumed in a business  combination.  Goodwill
is tested for impairment annually in the fourth quarter,  and will be tested for
impairment between annual tests if an event occurs or circumstances  change that
more  likely  than not would  indicate  the  carrying  amount  may be  impaired.
Impairment  testing for  goodwill is done at a reporting  unit level.  Reporting
units are either one level below the operating  segment level or an  aggregation
of two or more  reporting  units  within  the  same  operating  segment  if such
reporting units share similar economic characteristics.  Goodwill relates and is
assigned  directly to a specific  reporting  unit. An impairment  loss generally
would be recognized when the carrying amount of the reporting  unit's net assets
exceeds the estimated fair value of the reporting unit. The estimated fair value
of a reporting unit is determined  using a discounted cash flow analysis.  Refer
to Note 4  (Restructuring,  Impairment and Other Charges and (Credits)) and Note
10 (Goodwill and Other Intangible Assets) for additional information.

Other intangible assets include patents,  trademarks and other intangible assets
acquired from an independent  party. Such intangible assets have a definite life
and are amortized on a straight-line  basis with estimated  useful lives ranging
from 5 to 20 years.

Impairment of Long-Lived Assets

We  review  the  recoverability  of our  long-lived  assets,  such as plant  and
equipment and intangible assets,  when events or changes in circumstances  occur
that  indicate  that the  carrying  value of the asset or asset group may not be
recoverable.  The  assessment of possible  impairment is based on our ability to
recover the carrying value of the asset or asset group from the expected  future
pre-tax cash flows  (undiscounted  and without interest  charges) of the related
operations.  We assess the  recoverability  of the carrying  value of long-lived
assets at the  lowest  level  for  which  identifiable  cash  flows are  largely
independent  of the cash flows of other  assets and  liabilities.  If these cash
flows  are  less  than the  carrying  value of such  asset  or asset  group,  an
impairment loss is measured based on the difference between estimated fair value
and carrying  value.  Assets to be disposed are  written-down  to the greater of
their  fair  value or  salvage  value.  Fair  values  are  based on  assumptions
concerning  the amount and timing of  estimated  future  cash flows and  assumed
discount rates, reflecting varying degrees of perceived risk.

Treasury Stock

Shares of common stock  repurchased by us are recorded at cost as treasury stock
and result in a reduction of shareholders'  equity in the  consolidated  balance
sheets.  From time to time,  treasury shares may be reissued as contributions to
our employee  benefit plans and for the retirement or conversion of certain debt
instruments.  When  shares  are  reissued,  we use an  average  cost  method for
determining  cost.  The  difference  between  the  cost  of the  shares  and the
reissuance price is added or deducted from additional paid-in capital.





1.   Summary of Significant Accounting Policies (continued)

Income Taxes

The Company  accounts for income taxes in accordance with Statement of Financial
Accounting  Standards No. 109, "Accounting for Income Taxes" ("SFAS 109"), which
establishes  financial  accounting  and  reporting  standards  for the effect of
income taxes.  The objective of accounting  for income taxes is to recognize the
amount of taxes payable or refundable  for the current year and the deferred tax
liabilities and assets for the future tax  consequences of events that have been
recognized  in the  entity's  financial  statements.  The  Company is subject to
income  taxes in the United  States and in numerous  foreign  jurisdictions.  No
provision  is made for U.S.  income taxes on the  undistributed  earnings of its
wholly owned foreign  subsidiaries  because  substantially all such earnings are
indefinitely  reinvested in those companies.  Provision for the tax consequences
of distributions,  if any, from consolidated foreign subsidiaries is recorded in
the year the  distribution  is  declared.  Significant  judgment  is required in
determining the Company's worldwide income tax position as well as its effective
tax rate.

The Company has provided for potential liabilities due in various jurisdictions.
Judgment is required in determining the worldwide income tax expense  provision.
In the  ordinary  course of global  business,  there are many  transactions  and
calculations  where  the  ultimate  tax  outcome  is  uncertain.  Some of  these
uncertainties  arise as a consequence of cost  reimbursement  arrangements among
related  entities.  SFAS 109 requires us to exercise  judgment  about our future
results in assessing the  realizability of our deferred tax assets.  Inherent in
this  estimation  process,  especially  since we are in a net gross deferred tax
asset  position,  in  part  due to  prior  year  net  operating  losses,  is the
requirement  for us to estimate  future book  taxable  income and  possible  tax
planning strategies. Although the Company believes its estimates are reasonable,
no assurance  can be given that the final tax outcome of these  matters will not
be  different  than  that  which  is  reflected  in the  historical  income  tax
provisions and accruals.  Such  differences  could have a material impact on the
Company's income tax provision and operating results in the period in which such
determination is made.

Fair Value of Financial Instruments

Management believes that the carrying values of financial instruments, including
cash and cash equivalents, short-term investments, accounts receivable, accounts
payable,  and  accrued  liabilities  approximate  fair  value as a result of the
short-term maturities of these instruments.

Derivative Instruments

We participate in a variety of foreign  exchange  forward  contracts and foreign
exchange option contracts  entered into in connection with the management of our
exposure to fluctuations in foreign exchange and interest rates. These financial
exposures are managed in accordance with corporate policies and procedures.

All derivatives are recorded at fair value on the balance sheet.  Changes in the
fair  value of  derivatives  designated  as cash flow  hedges  and hedges of net
investments   in  foreign   operations   are  recorded  in   accumulated   other
comprehensive  income  (loss).   Amounts,   related  to  cash  flow  hedges  are
reclassified  from  accumulated  other  comprehensive  income  (loss)  when  the
underlying hedged item impacts earnings.  This  reclassification  is recorded in
the same line item of the  consolidated  statement  of  operations  as where the
effects  of the  hedged  item are  recorded,  typically  sales or cost of sales.
Changes in the fair value of  derivatives  designated  as fair value  hedges are
recorded  currently  in  earnings  offset  to  the  extent  the  derivative  was
effective, by the change in the fair value of the hedged item. Corning currently
does not have any fair value  hedges.  Changes in the fair value of  derivatives
not designated as hedging  instruments are recorded currently in earnings in the
other income line of the consolidated statement of operations.

We have issued foreign  currency  denominated debt that has been designated as a
hedge of the net investment in a foreign operation. The effective portion of the
changes  in fair  value  of the  debt  is  reflected  as a  component  of  other
comprehensive  income  (loss)  as  part  of  the  foreign  currency  translation
adjustment.

Variable Interest Entities

Corning leases certain transportation equipment from a Trust that qualifies as a
variable  interest  entity  under FIN 46R.  The sole  purpose of this  entity is
leasing  transportation  equipment  to  Corning.  Since  Corning is the  primary
beneficiary of this entity, the financial  statements of the entity are included
in  Corning's  consolidated  financial  statements.   The  entity's  assets  are
primarily  comprised  of fixed  assets  which are  collateral  for the  entity's
borrowings.  These assets,  amounting to  approximately  $29.5 million and $30.4
million as of  December  31,  2005 and 2004,  respectively,  are  classified  as
long-term assets in the consolidated balance sheet.

Corning leases certain transportation  equipment from two additional Trusts that
qualify as variable  interest entities under FIN 46R. Corning is not the primary
beneficiary  of these  entities.  The sole  purpose of the  entities  is leasing
transportation  equipment  to  Corning.  Corning  has been  involved  with these
entities as lessee since the inception of the Trusts. Lease revenue generated by
these  Trusts was $1.5  million,  $1.6  million,  and $1.3 million for the years
ended December 31, 2005, 2004 and 2003, respectively. Corning's maximum exposure
to loss  as a  result  of its  involvement  with  the  Trusts  is  estimated  at
approximately  $16.6  million and $17.3  million at December  31, 2005 and 2004,
respectively.





1.   Summary of Significant Accounting Policies (continued)

New Accounting Standards

In November 2004, the FASB issued SFAS No. 151,  "Inventory Costs - An Amendment
of ARB No. 43,  Chapter 4" (SFAS  151).  SFAS 151 amends ARB No. 43,  Chapter 4,
"Inventory  Pricing," to clarify that abnormal amounts of idle facility expense,
freight,  handling costs, and wasted material (spoilage) should be recognized as
current-period charges. Additionally, SFAS 151 requires that allocation of fixed
production  overheads to the costs of conversion be based on the normal capacity
of the  production  facilities.  Corning is required to adopt SFAS 151 effective
January 1, 2006.  Corning  does not  expect the  adoption  of SFAS 151 to have a
material  impact  on  its  consolidated  results  of  operations  and  financial
condition.

In December  2004,  the FASB issued SFAS No. 123  (revised  2004),  "Share-Based
Payment"  (SFAS  123(R)),  which  replaces SFAS 123 and  supercedes APB 25. SFAS
123(R)  requires all  share-based  payments to  employees,  including  grants of
employee  stock  options,  to be recognized in the financial  statements at fair
value.  Under SFAS 123(R),  Corning must  determine the  appropriate  fair value
model to be used for valuing  share-based  payments,  the attribution method for
compensation cost, and the transition method to be used at date of adoption.  We
will  implement the  provisions of SFAS 123(R) on January 1, 2006  following the
"prospective  adoption" transition method. This adoption method requires Corning
to begin expensing share-based payments effective January 1, 2006. Prior periods
will not be restated.

Corning grants  restricted shares and stock options that are subject to specific
vesting conditions (e.g., three-year cliff vesting). The awards specify that the
employee will continue to vest in the award after retirement  without  providing
any  additional  service.  Corning has  historically  accounted for this type of
arrangement by  recognizing  compensation  cost over the nominal  vesting period
and, if the employee  retires before the end of the vesting period,  recognizing
any remaining  unrecognized  compensation  cost at the date of  retirement  (the
"nominal vesting period approach").

SFAS 123(R)  specifies that an award is vested when the employee's  retention of
the  award  is  no  longer  contingent  on  providing  subsequent  service  (the
"non-substantive  vesting period approach").  This would be the case for Corning
awards that vest when  employees  retire and are granted to retirement  eligible
employees.  Effective  January  1,  2006,  related  compensation  cost  must  be
recognized  immediately for awards granted to retirement  eligible  employees or
over the  period  from the  grant  date to the date  retirement  eligibility  is
achieved, if that is expected to occur during the nominal vesting period.

We  will  continue  to  follow  the  nominal  vesting  period  approach  for any
share-based  awards granted prior to adopting SFAS 123(R) and the  corresponding
remaining  portion of unvested  outstanding  awards after  adopting SFAS 123(R).
Upon adoption of SFAS 123(R), we will apply the  non-substantive  vesting period
approach  to new grants  that have  retirement  eligibility  provisions.  Had we
applied  the   non-substantive   vesting  period   approach  in  prior  periods,
stock-based  compensation cost would have been $16 million and $7 million higher
for 2005 and 2004, respectively, for stock options and restricted share awards.

Our current estimate is that our pretax and after-tax  stock-based  compensation
expense  will  increase  by $60  million to $70  million in 2006 and beyond as a
result of adopting SFAS 123(R).  This amount includes  approximately $15 million
related to the impact of applying the non-substantive vesting period approach.

In December 2004, the FASB issued SFAS No. 153, "Exchanges in Nonmonetary Assets
- an amendment of APB Opinion No. 29" (SFAS 153) which became  effective in July
2005.   This  Statement   amends  APB  No.  29,   "Accounting   for  Nonmonetary
Transactions," by eliminating an exception for nonmonetary  exchanges of similar
productive  assets and  replacing it with a general  exception  for exchanges of
nonmonetary assets that do not have commercial  substance.  Corning adopted SFAS
153 prospectively,  on July 1, 2005, as required. The impact of SFAS 153 was not
material  to  Corning's   consolidated   results  of  operations  and  financial
condition.

In  March  2005,  the  FASB  issued   Interpretation  No.  47,  "Accounting  for
Conditional  Asset Retirement  Obligations - an interpretation of FASB Statement
No.  143" (FIN 47),  which  clarifies  the term  "conditional  asset  retirement
obligation" used in SFAS No. 143, "Accounting for Asset Retirement Obligations,"
and specifically when an entity would have sufficient  information to reasonably
estimate the fair value of an asset retirement  obligation.  Corning adopted FIN
47  effective  December  31,  2005.  The  impact of FIN 47 was not  material  to
Corning's consolidated results of operations and financial condition.

In May  2005,  the FASB  issued  SFAS No.  154,  "Accounting  Changes  and Error
Corrections"  (SFAS  154),  which  replaces  APB  Opinion  No.  20,  "Accounting
Changes,"  (APB 20) and SFAS No. 3,  "Reporting  Accounting  Changes  in Interim
Financial  Statements." SFAS 154 changes the requirements for the accounting for
and reporting of a change in accounting principle. Upon the adoption of SFAS 154
beginning January 1, 2006, Corning will apply the standard's guidance to changes
in accounting methods as required.  Corning does not expect the adoption of SFAS
154 will have a material  impact on its  consolidated  results of operations and
financial condition.






2.   Restatement of Previously Issued Financial Statements

The Company's management and its audit committee  concluded,  on April 21, 2006,
that we would restate previously issued  consolidated  financial  statements for
each of the three years ended  December 31,  2005,  to correct for errors in the
accounting  for the asbestos  settlement  liability  and for our  investment  in
Pittsburgh  Corning Europe N.V. (PCE) from March 31, 2003,  through December 31,
2005.  We also  changed  the  classification  of  accretion  on a portion of the
liability  from  interest  expense  to  asbestos   settlement   expense  in  our
consolidated statements of operations for the same time period.

On  March  28,  2003,  we  announced  that we had  reached  agreement  with  the
representatives  of asbestos  claimants  for the  settlement  of all current and
future asbestos claims against Corning and Pittsburgh Corning Corporation (PCC),
which might arise from PCC products or operations.  The proposed settlement,  if
the plan is approved and becomes  effective,  will require Corning to relinquish
our  equity  interest  in PCC,  contribute  our  equity  interest  in  PCE,  and
contribute 25 million  shares of Corning  common  stock.  We also agreed to make
cash payments with a value of $131 million,  in March 2003,  over six years from
the effective  date of the settlement and to assign  insurance  policy  proceeds
from our primary  insurance and a portion of our excess insurance at the time of
the settlement.

Between March 31, 2003, and December 31, 2005, the following  accounting  errors
occurred:

..    Corning's  asbestos  settlement  charges and the related  liability for the
     asbestos  settlement  did not reflect the  estimated  fair value at initial
     recognition or subsequent  changes in fair value, of certain  components of
     the proposed settlement offer. As a result, asbestos settlement charges for
     the  years  2005,  2004,  and 2003 were  understated  by $13  million,  $24
     million, and $117 million, respectively.
..    Corning  incorrectly  suspended  recording  equity  earnings of PCE between
     March 31, 2003,  and December 31, 2005. As a result,  equity in earnings of
     associated  companies for the years 2005, 2004, and 2003 was understated by
     $13 million, $11 million, and $7 million, respectively.
..    Accretion  on  the  cash  portion  of the  asbestos  settlement  offer  was
     incorrectly recorded as interest expense resulting in both an overstatement
     of interest expense and an  understatement of asbestos  settlement  expense
     for the years  2005,  2004,  and 2003,  by $8 million,  $8 million,  and $5
     million, respectively.

In the restated  financial  statements,  the higher asbestos  settlement charges
have been tax-effected in 2003 and the first half of 2004. As Corning provided a
valuation  allowance on most of its deferred tax assets in the third  quarter of
2004,  that  quarter  reflects  an increase in the  valuation  allowance  of $55
million for the deferred tax assets  related to the higher  asbestos  settlement
charges.

The  cumulative  effect of these  adjustments  to Corning's  balance sheet as of
December 31, 2005, resulted in an increase in investments in affiliate companies
of $32 million,  an increase to other accrued  liabilities  of $154 million,  an
increase to accumulated deficit of $123 million,  and an increase to accumulated
other comprehensive income of $1 million.

The  cumulative  effect of these  adjustments  to Corning's  balance sheet as of
December 31, 2004, resulted in an increase in investments in affiliate companies
of $26 million,  an increase to other accrued  liabilities  of $141 million,  an
increase to accumulated deficit of $123 million,  and an increase to accumulated
other comprehensive income of $8 million.

The  cumulative  effect of these  adjustments  to Corning's  balance sheet as of
December 31, 2003, resulted in an increase in investments in affiliate companies
of $11 million, an increase in deferred income taxes of $53 million, an increase
to other accrued liabilities of $117 million, an increase to accumulated deficit
of $57 million,  and an increase to accumulated other comprehensive income of $4
million.






2.   Restatement of Previously Issued Financial Statements (continued)

The impacts of the restatement adjustments on Corning's financial statements are
as follows:



                      Consolidated Statements of Operations
                         Summary of Restatement Impacts
                (Audited; in millions, except per share amounts)
------------------------------------------------------------------------------------------------------------------------------------
                                                                                                For the year ended
                                                                                                 December 31, 2005
                                                                                ----------------------------------------------------
                                                                                Previously
                                                                                 Reported          Adjustments        As Restated
                                                                                ----------         -----------        -----------
                                                                                                              
Operating expenses:
  Asbestos settlement                                                            $    197          $      21           $     218

Operating income (loss)                                                               613                (21)                592

Interest expense                                                                      116                 (8)                108

Income (loss) from before income taxes                                                572                (13)                559
Provision for income taxes                                                           (578)                                  (578)
                                                                                 --------          ---------           ---------
Loss before minority interests and equity earnings                                     (6)               (13)                (19)

Equity in earnings of associated companies, net of impairments                        598                 13                 611

Net income                                                                       $    585                              $     585

Basic earnings per common share                                                  $   0.40                              $    0.40
Diluted earnings per common share                                                $   0.38                              $    0.38
------------------------------------------------------------------------------------------------------------------------------------




------------------------------------------------------------------------------------------------------------------------------------
                                                                                                For the year ended
                                                                                                 December 31, 2004
                                                                                ----------------------------------------------------
                                                                                Previously
                                                                                 Reported          Adjustments        As Restated
                                                                                ----------         -----------        -----------
                                                                                                              
Operating expenses:
  Asbestos settlement                                                            $     33          $      32           $      65

Operating loss                                                                     (1,453)               (32)             (1,485)

Interest expense                                                                      141                 (8)                133

Loss before income taxes                                                           (1,580)               (24)             (1,604)
Provision for income taxes                                                         (1,031)               (53)             (1,084)
                                                                                 ---------         ----------          ---------
Loss before minority interests and equity earnings                                 (2,611)               (77)             (2,688)

Equity in earnings of associated companies, net of impairments                        443                 11                 454

Loss from continuing operations                                                  $ (2,185)         $     (66)          $  (2,251)

Net (loss)                                                                       $ (2,165)         $     (66)          $  (2,231)

Basic loss per common share from continuing operations                           $  (1.57)         $   (0.05)          $   (1.62)
Basic loss per common share                                                      $  (1.56)         $   (0.05)          $   (1.61)
Diluted loss per common share from continuing operations                         $  (1.57)         $   (0.05)          $   (1.62)
Diluted loss per common share                                                    $  (1.56)         $   (0.05)          $   (1.61)
------------------------------------------------------------------------------------------------------------------------------------




------------------------------------------------------------------------------------------------------------------------------------
                                                                                                For the year ended
                                                                                                 December 31, 2003
                                                                                ----------------------------------------------------
                                                                                Previously
                                                                                 Reported          Adjustments        As Restated
                                                                                ----------         -----------        -----------
                                                                                                              
Operating expenses:
  Asbestos settlement                                                            $    413          $     122           $     535

Operating loss                                                                       (655)              (122)               (777)

Interest expense                                                                      154                 (5)                149

Loss before income taxes                                                             (759)              (117)               (876)
Benefit for income taxes                                                              254                 53                 307
                                                                                 --------          ---------           ---------
Loss before minority interests and equity earnings                                   (505)               (64)               (569)

Equity in earnings of associated companies, net of impairments                        209                  7                 216

Net (loss)                                                                       $   (223)         $     (57)          $    (280)

Basic loss per common share                                                      $  (0.18)         $   (0.04)          $   (0.22)
Diluted loss per common share                                                    $  (0.18)         $   (0.04)          $   (0.22)
------------------------------------------------------------------------------------------------------------------------------------





2.   Restatement of Previously Issued Financial Statements (continued)



                           Consolidated Balance Sheets
                         Summary of Restatement Impacts
                             (Audited; in millions)
------------------------------------------------------------------------------------------------------------------------------------
                                                                                              As of December 31, 2005
                                                                                ----------------------------------------------------
                                                                                Previously
                                                                                 Reported          Adjustments        As Restated
                                                                                ----------         -----------        -----------
                                                                                                             
Investments                                                                     $   1,697            $    32          $    1,729

 Total Assets                                                                   $  11,175            $    32          $   11,207

Other accrued liabilities                                                       $   1,508            $   154          $    1,662
  Total current liabilities                                                     $   2,216            $   154          $    2,370
    Total liabilities                                                           $   5,523            $   154          $    5,677

Accumulated deficit                                                             $  (6,724)           $  (123)         $   (6,847)
Accumulated other comprehensive income                                          $     177            $     1          $      178
    Total shareholders' equity                                                  $   5,609            $  (122)         $    5,487

Total Liabilities and Shareholders' Equity                                      $  11,175            $    32          $   11,207
------------------------------------------------------------------------------------------------------------------------------------




------------------------------------------------------------------------------------------------------------------------------------
                                                                                              As of December 31, 2004
                                                                                ----------------------------------------------------
                                                                                Previously
                                                                                 Reported          Adjustments       As Restated (a)
                                                                                ----------         -----------       ---------------
                                                                                                             

Investments                                                                     $   1,484            $    26          $    1,510

 Total Assets                                                                   $   9,744            $    26          $    9,770

Other accrued liabilities                                                       $   1,178            $   141          $    1,319
  Total current liabilities                                                     $   2,338            $   141          $    2,479
    Total liabilities                                                           $   5,899            $   141          $    6,040

Accumulated deficit                                                             $  (7,309)           $  (123)         $   (7,432)
Accumulated other comprehensive income                                          $     148            $     8          $      156
    Total shareholders' equity                                                  $   3,816            $  (115)         $    3,701

Total Liabilities and Shareholders' Equity                                      $   9,744            $    26          $    9,770
------------------------------------------------------------------------------------------------------------------------------------


(a)  Includes  a  reclassification   of  approximately  $32  million  for  gross
     presentation   of  certain   deferred   tax  assets  and   liabilities   by
     jurisdiction.





2.   Restatement of Previously Issued Financial Statements (continued)


                      Consolidated Statements of Cash Flows
                         Summary of Restatement Impacts
                             (Audited; in millions)
------------------------------------------------------------------------------------------------------------------------------------
                                                                                                For the year ended
                                                                                                 December 31, 2005
                                                                                ----------------------------------------------------
                                                                                Previously
                                                                                 Reported          Adjustments        As Restated
                                                                                ----------         -----------        -----------
                                                                                                              
Cash Flows from Operating Activities:
Net income                                                                       $    585                              $     585
Adjustments to reconcile loss from continuing operations to net
  cash provided by operating activities:
      Asbestos settlement charge                                                      197          $      21                 218
      Equity in earnings of associated companies in excess of
        dividends received                                                           (297)               (13)               (310)
      Other, net                                                                       94                 (8)                 86
Net cash provided by operating activities                                        $  1,939                              $   1,939
------------------------------------------------------------------------------------------------------------------------------------




------------------------------------------------------------------------------------------------------------------------------------
                                                                                                For the year ended
                                                                                                 December 31, 2004
                                                                                ----------------------------------------------------
                                                                                Previously
                                                                                 Reported          Adjustments        As Restated
                                                                                ----------         -----------        -----------
                                                                                                              
Cash Flows from Operating Activities:
Net loss                                                                         $ (2,165)         $     (66)          $  (2,231)
Adjustments to reconcile loss from continuing operations to net
  cash provided by operating activities:
      Asbestos settlement charge                                                       33                 32                  65
      Equity in earnings of associated companies in excess of
        dividends received                                                           (303)               (11)               (314)
      Deferred tax provision                                                          947                 53               1,000
      Other, net                                                                       (5)                (8)                (13)
Net cash provided by operating activities                                        $  1,009                              $   1,009
------------------------------------------------------------------------------------------------------------------------------------




------------------------------------------------------------------------------------------------------------------------------------
                                                                                                For the year ended
                                                                                                 December 31, 2003
                                                                                ----------------------------------------------------
                                                                                Previously
                                                                                 Reported          Adjustments        As Restated
                                                                                ----------         -----------        -----------
                                                                                                              
Cash Flows from Operating Activities:
Net loss                                                                         $   (223)         $     (57)          $    (280)
Adjustments to reconcile loss from continuing operations to net
  cash provided by operating activities:
      Asbestos settlement charge                                                      413                122                 535
      Equity in earnings of associated companies in excess of
        dividends received                                                            (97)                (7)               (104)
      Deferred tax benefit                                                           (263)               (53)               (316)
      Other, net                                                                       (1)                (5)                 (6)
Net cash provided by operating activities                                        $    133                              $     133
------------------------------------------------------------------------------------------------------------------------------------


3.   Discontinued Operation

In the third  quarter  of 2004,  Corning  and 3M  Company  (3M)  reached a final
settlement  agreement for funds held in escrow  associated with the 2002 sale of
Corning's  precision  lens  business  to 3M. As a result,  we  recognized  a $20
million  gain upon  receipt of the  proceeds  in 2004.  This gain is included in
income  from  discontinued  operation  in the  2004  consolidated  statement  of
operations.






4.   Restructuring, Impairment and Other Charges and (Credits)

2005 Actions

Corning  recorded  net credits of $38 million in 2005.  A summary of the charges
and credits follows:
..    We  recorded a credit of $84 million  for the  reversal  of the  cumulative
     translation  account  of  O.T.I.  S.r.l.  (OTI),  a  wholly-owned   foreign
     subsidiary of Corning,  upon OTI's substantial  liquidation.  The photonics
     business in Milan, Italy, was the sole operation of OTI, whose results were
     included in Telecommunications  segment.  Subsequent to Corning's agreement
     to sell its photonics business operations to Avanex Corporation (Avanex) in
     2003,  Corning  began  liquidating  OTI. In October  2005,  the assets were
     substantially  liquidated  and OTI's  cumulative  translation  account  was
     reversed.
..    We recorded a charge of $30 million which was comprised of severance  costs
     for a restructuring plan in the  Telecommunications  segment to continue to
     reduce costs in this segment.
..    We  recorded   net  credit   adjustments   of  $9  million  to  prior  year
     restructuring  plans which  included  charges of $8 million  related to our
     Telecommunications segment and credits of $17 million for businesses in our
     Unallocated and Other segment.
..    We recorded  impairment  charges of $25  million in the  Telecommunications
     segment  for an other  than  temporary  decline  in the  fair  value of our
     investment  in Avanex  below its adjusted  cost basis.  Our  investment  in
     Avanex was accounted for as an  available-for-sale  security under SFAS No.
     115,  "Accounting  for Certain  Investments in Debt and Equity  Securities"
     (SFAS 115).  In the fourth  quarter of 2005,  we completed  the sale of our
     remaining shares of Avanex.



The following table summarizes the restructuring,  impairment, and other charges
and (credits) as of and for the year ended December 31, 2005 (in millions):
------------------------------------------------------------------------------------------------------------------------------------
                                                    Year ended December 31, 2005
                                                   --------------------------------------
                                     Reserve at                   Revisions       Net                      Reserve at
                                     January 1,    Charges/      to existing   charges/        Cash         Dec. 31,
                                        2005       (credits)        plans     (reversals)    payments         2005
------------------------------------------------------------------------------------------------------------------------------------
                                                                                          
Restructuring:
Employee related costs                 $   18       $    30       $    (1)      $   29        $ (11)        $     36
Other charges (credits)                    77                         (14)         (14)         (14)              49
                                       -----------------------------------------------------------------------------
     Total restructuring charges       $   95       $    30       $   (15)      $   15        $ (25)        $     85
                                       -----------------------------------------------------------------------------

Impairment of long-lived assets:
Impairment of available-for-sale
  securities                                        $    25                     $   25
Assets to be disposed of by sale
  or abandonment                                                  $     6            6
                                                    ------------------------------------
     Total impairment charges                       $    25       $     6       $   31
                                                    ------------------------------------

Reversal of currency translation
  adjustment                                        $   (84)                    $  (84)
                                                    ------------------------------------

Total restructuring, impairment and
  other charges and (credits)                       $   (29)      $    (9)      $  (38)
------------------------------------------------------------------------------------------------------------------------------------


Cash payments for employee-related costs will be substantially  completed by the
end of 2007, while payments for exit activities will be substantially  completed
by the end of 2010.

The  following   table   summarizes   the  net  charge   (reversals)   for  2005
restructuring,  impairment, and other charges and (credits) by operating segment
(in millions):
--------------------------------------------------------------------------------
                                  Telecom-       Unallocated
                                munications       and Other           Total
--------------------------------------------------------------------------------

Net credit                        $  (47)          $  9               $ (38)
--------------------------------------------------------------------------------






4.   Restructuring, Impairment and Other Charges and (Credits) (continued)

2004 Actions

Corning  recorded  net  charges  of $1,789  million  in 2004.  A summary  of the
significant charges and credits follows:
..    We recorded a charge of $1,420  million to impair a significant  portion of
     our Telecommunications segment goodwill balance. Refer to Note 10 (Goodwill
     and Other Intangible Assets) for additional information on this charge.
..    We  recorded  a $350  million  charge to  impair  certain  fixed  assets in
     accordance with SFAS No. 144, "Accounting for the Impairment or Disposal of
     Long-Lived  Assets" (SFAS 144). This charge primarily  relates to our third
     quarter  decision to  permanently  abandon  approximately  $332  million of
     construction  in progress at our optical  fiber  manufacturing  facility in
     Concord,  North  Carolina that had been stopped in 2002. As a result of our
     lowered outlook for the  Telecommunications  segment,  we have  permanently
     abandoned this  construction in progress as we no longer believe the demand
     for optical  fiber will warrant the  investment  necessary to complete this
     facility.
..    We  recorded  an asset  held for use  impairment  charge of $24  million to
     impair  certain fixed assets and  intangible  assets other than goodwill in
     accordance  with SFAS  144.  Due to our  decision  to  permanently  abandon
     certain   fixed   assets   and  lower  our   long-term   outlook   for  the
     Telecommunications  segment, we determined that an event of impairment,  as
     defined by SFAS 144, had occurred in our  Telecommunications  segment which
     required us to test the segment's long-lived assets other than goodwill for
     impairment.  We estimated the fair value of the long-lived assets using the
     discounted  cash flow  approach as a measure of fair value.  As a result of
     our impairment  evaluation,  we recorded an impairment charge to write-down
     certain assets to their estimated fair values.
..    We recorded a gain of $33 million  related to proceeds in excess of assumed
     salvage  values for assets of Corning  Asahi Video  Products  Company (CAV)
     that were  previously  impaired  but later sold to a Henan Anyang CPT Glass
     Bulb Group,  Electronic  Glass Co., Ltd. (Henan Anyang),  located in China.
     This represented the substantial completion of the sale of CAV's assets.
..    We recorded $37 million of accelerated  depreciation  relating to the final
     shutdown  of  our  semiconductor   materials   manufacturing   facility  in
     Charleston,  South  Carolina,  which we announced in the fourth  quarter of
     2003.
..    We  recorded a loss of $14  million on the sale of our  frequency  controls
     business  for net cash  proceeds of $80  million.  The  frequency  controls
     business,  which was part of our  Telecommunications  segment,  had  annual
     sales of $76 million.
..    We  recorded  net credits of $25 million  related to  adjustments  to prior
     period restructuring, impairment, and other charges.



The  following  table  summarizes  the  charges,  credits  and  balances  of the
restructuring  liabilities  as of and for the year ended  December  31, 2004 (in
millions):
------------------------------------------------------------------------------------------------------------------------------------
                                                        Year ended December 31, 2004
                                                    -------------------------------------
                                     Reserve at                   Revisions       Net                      Reserve at
                                     January 1,                  to existing   charges/        Cash         Dec. 31,
                                        2004        Charges         plans     (reversals)    payments         2004
------------------------------------------------------------------------------------------------------------------------------------
                                                                                          
Restructuring:
Employee related costs                 $   78                                                 $ (60)        $     18
Exit costs                                108       $     2       $    (8)      $    (6)        (25)              77
                                       -----------------------------------------------------------------------------
     Total restructuring charges       $  186       $     2       $    (8)      $    (6)      $ (85)        $     95
                                       -----------------------------------------------------------------------------

Impairment of long-lived assets:
Goodwill                                            $ 1,420                     $ 1,420
Assets to be disposed of by sale
  or abandonment                                        350       $   (48)          302
Asset to be held and used                                24                          24
                                                    ------------------------------------
     Total impairment charges                       $ 1,794       $   (48)      $ 1,746
                                                    ------------------------------------

Other:
Accelerated depreciation                            $    37                     $    37
Loss on sale of business                                 14       $    (2)           12
                                                    ------------------------------------
     Total other charges                            $    51       $    (2)      $    49
                                                    ------------------------------------

Total restructuring, impairment and
  other charges and (credits)                       $ 1,847       $   (58)      $ 1,789
------------------------------------------------------------------------------------------------------------------------------------


In 2004,  net  charges  (reversals)  for  restructuring,  impairment,  and other
actions  totaled  $1,798 million for the  Telecommunications  segment and were a
credit of $9 million for the Unallocated and Other segment.





4.   Restructuring, Impairment and Other Charges and (Credits) (continued)

2003 Actions

Corning recorded net charges of $111 million in 2003. Major actions approved and
initiated in 2003 included the following:
..    The shutdown of CAV.
..    The   exit   of   our   photonic    technologies    products   within   the
     Telecommunications  segment,  which  included the sale of certain assets to
     Avanex.
..    Credits  to prior year  restructuring  plans,  primarily  the result of our
     decision not to exit two cabling  sites  previously  marked for shutdown in
     2002.
..    The shutdown of two of our specialty materials manufacturing  facilities in
     North Brookfield and Charleston, South Carolina.



The  following  table  summarizes  the  charges,  credits  and  balances  of the
restructuring  liabilities  as of and for the year ended  December  31, 2003 (in
millions):
------------------------------------------------------------------------------------------------------------------------------------
                                                        Year ended December 31, 2003
                                                    -------------------------------------
                                     Reserve at                   Reversals       Net                                   Reserve at
                                     January 1,                  to existing   charges/      Non-cash         Cash       Dec. 31,
                                        2003        Charges         plans     (reversals)      uses         payments       2003
------------------------------------------------------------------------------------------------------------------------------------
                                                                                                   
Restructuring:
Employee related costs                 $  273       $    90       $   (63)      $   27        $ (27)        $  (195)    $    78
Exit costs                                132            37           (23)          14                          (38)        108
                                       ----------------------------------------------------------------------------------------
     Total restructuring charges       $  405       $   127       $   (86)      $   41        $ (27)        $  (233)    $   186
                                       ----------------------------------------------------------------------------------------

Impairment of long-lived assets:
Assets to be disposed of by sale
  or abandonment                                    $    40       $   (61)      $  (21)
Assets to be held and used                               62                         62
Cost investments                                          5            (1)           4
                                                    ------------------------------------
     Total impairment charges                       $   107       $   (62)      $   45
                                                    ------------------------------------

Other:
Accelerated depreciation                            $    12                     $   12
Loss on Avanex transaction                               13                         13
                                                    ------------------------------------
     Total other charges                            $    25                     $   25
                                                    ------------------------------------

Total restructuring, impairment and
  other charges and (credits)                       $   259       $  (148)      $  111
------------------------------------------------------------------------------------------------------------------------------------


In 2003,  net  charges  (reversals)  for  restructuring,  impairment,  and other
actions  were a credit of $36 million for the  Telecommunications  segment and a
charge of $147  million for  Unallocated  and Other.  The  headcount  reductions
associated with 2003 restructuring  plans totaled 975 for U.S. hourly employees,
750 for U.S. salaried employees, and 250 for non-U.S. employees.

As of December 31, 2004, all of the 1,975 employees from the 2003  restructuring
plans had been separated.

5.   Short-Term Investments

The  following is a summary of the fair value of  available-for-sale  securities
(in millions):
--------------------------------------------------------------------------------
                                                            December 31,
                                                    ----------------------------
                                                       2005            2004
--------------------------------------------------------------------------------
Bonds, notes and other securities
    U.S. government and agencies                    $     259        $     85
    States and municipalities                              77             216
    Asset-backed securities                               374             245
    Commercial paper                                       57              20
    Other debt securities                                 325             306
--------------------------------------------------------------------------------
      Total short-term investments                  $   1,092        $    872
--------------------------------------------------------------------------------

Gross  unrealized  gains and losses were  insignificant at December 31, 2005 and
2004.





5.   Short-Term Investments (continued)

The following table summarizes the contractual  maturities of available-for-sale
securities at December 31, 2005 (in millions):
--------------------------------------------------------------------------------
Less than one year                                                    $     375
Due in 1-5 years                                                            379
Due in 5-10 years                                                            23
Due after 10 years                                                          315
--------------------------------------------------------------------------------
     Total                                                            $   1,092
--------------------------------------------------------------------------------

Proceeds  from sales and  maturities  of  short-term  investments  totaled  $1.5
billion, $1.4 billion and $2.6 billion in 2005, 2004 and 2003, respectively. The
gross realized gains and losses related to sales of short-term  investments were
insignificant in 2005, 2004 and 2003.

6.   Inventories

Inventories comprise the following (in millions):
--------------------------------------------------------------------------------
                                                              December 31,
                                                      --------------------------
                                                         2005           2004
--------------------------------------------------------------------------------
Finished goods                                        $     135       $     136
Work in process                                             198             172
Raw materials and accessories                               124             139
Supplies and packing materials                              113              88
--------------------------------------------------------------------------------
Total inventories                                     $     570       $     535
--------------------------------------------------------------------------------

7.   Income Taxes

Income  (loss)  from  continuing  operations  before  income  taxes  follows (in
millions):
--------------------------------------------------------------------------------
                                              Years ended December 31,
                                     -------------------------------------------
                                         2005          2004          2003
                                      (Restated)    (Restated)    (Restated)
--------------------------------------------------------------------------------

U.S. companies                       $    (213)      $  (1,578)    $  (1,044)
Non-U.S. companies                         772             (26)          168
--------------------------------------------------------------------------------
Income (loss) from continuing
  operations before income taxes     $     559       $  (1,604)    $    (876)
--------------------------------------------------------------------------------

The current and deferred  amounts of the  provision  (benefit)  for income taxes
follow (in millions):
--------------------------------------------------------------------------------
                                                Years ended December 31,
                                       -----------------------------------------
                                           2005          2004          2003
                                        (Restated)    (Restated)    (Restated)
--------------------------------------------------------------------------------
Current:
   Federal                             $     (14)      $     (20)    $     (11)
   State and municipal                                        (7)           (3)
   Foreign                                   167             111            23
Deferred:
   Federal                                   443             593          (304)
   State and municipal                                       227           (31)
   Foreign                                   (18)            180            19
--------------------------------------------------------------------------------
Provision (benefit) for income taxes   $     578       $   1,084     $    (307)
--------------------------------------------------------------------------------

Amounts are  reflected  in the  preceding  tables  based on the  location of the
taxing authorities.

We  do  not  provide  income  taxes  on  the  post-1992   earnings  of  domestic
subsidiaries that we expect to recover tax-free without significant cost. Income
taxes have been provided for post-1992 unremitted earnings of domestic corporate
joint ventures that we do not expect to recover tax-free. Unremitted earnings of
domestic  subsidiaries  and corporate  joint ventures that arose in fiscal years
beginning on or before December 31, 1992 have been indefinitely  reinvested.  We
currently  provide  income  taxes on the  earnings of foreign  subsidiaries  and
associated  companies to the extent  these  earnings  are  currently  taxable or
expected to be remitted.  As of December 31, 2005,  taxes have not been provided
on approximately $2.2 billion of accumulated  foreign unremitted  earnings which
are expected to remain invested indefinitely.

The  American  Jobs  Creation  Act of 2004 (the  "Act") was  signed  into law on
October 22, 2004. The Act  introduced a special  one-time (for 2004 or 2005) 85%
dividends  received  deduction for certain  repatriated  foreign  earnings.  Our
remittance  plans did not change as a result of this provision.  Our accumulated
foreign unremitted earnings are expected to remain invested indefinitely.





7.   Income Taxes (continued)

The Act also provided for the repeal of the  extraterritorial  income tax regime
(through reduced benefits in 2005 and 2006, with full repeal effective for 2007)
and the allowance of a deduction for qualified  domestic  production  activities
(phased in over the years 2005 to 2009 and fully effective in 2010).  Neither of
these changes is expected to have a significant impact on our effective tax rate
or U.S.  tax  liabilities  because  of our loss  position  in the  U.S.  and the
resulting valuation allowances against our U.S. deferred tax assets.



Reconciliation  of the U.S.  statutory income tax rate to our effective tax rate
for continuing operations follows:
------------------------------------------------------------------------------------------------------------------------------------
                                                                                                Years ended December 31,
                                                                                     -----------------------------------------------
                                                                                        2005            2004           2003
                                                                                     (Restated)      (Restated)     (Restated)
------------------------------------------------------------------------------------------------------------------------------------
                                                                                                             
Statutory U.S. income tax (benefit) rate                                                35.0%          (35.0)%        (35.0)%
State income benefit, net of federal benefit                                            (1.9)           (2.4)          (5.1)
Nondeductible goodwill and other expenses                                                0.3            27.0            0.5
Worthless stock deductions                                                            (272.7)           (0.2)
Tax holidays                                                                            (8.9)           (1.2)          (0.5)
Investment & other tax credits                                                         (12.7)           (0.6)          (0.3)
Rate difference on foreign earnings                                                     10.2             2.5            1.3
Reversal of tax contingency liabilities                                                 (2.5)
Minimum pension obligation                                                             (14.6)
Currency translation adjustment                                                         (5.2)
Valuation allowances                                                                   374.0            78.9            4.3
Other items, net                                                                         2.4            (1.4)          (0.2)
------------------------------------------------------------------------------------------------------------------------------------
Effective income tax (benefit) rate                                                    103.4%           67.6%         (35.0)%
------------------------------------------------------------------------------------------------------------------------------------


For 2005, the tax provision reflected the following items:

..    The impact of our inability to record tax benefits on net operating  losses
     generated in the U.S. and certain foreign jurisdictions;
..    An increase in our valuation  allowance as a result of the conclusion  that
     the sale of an  appreciated  asset was no longer  prudent and, as such,  no
     longer meets the criteria for a tax planning strategy;
..    The benefit of a worthless stock deduction (and a corresponding increase in
     our  valuation  allowance)  for the loss on our  investment in the photonic
     technologies  business  associated with the Pirelli  acquisition  which was
     completed  in December  2000 and was  substantially  impaired in the second
     quarter of 2001;
..    The  benefit  of tax  holidays  and  investment  credits  in Taiwan and tax
     holidays in China and South Africa;
..    The benefit from the reversal of tax contingency  liabilities following the
     conclusion of Internal Revenue Service (IRS) examinations; and
..    The tax  effect  of  eliminating  our  minimum  pension  liability  for the
     domestic qualified plan.

In 2004, significant events occurred which required us to increase our valuation
allowances against certain U.S. and German deferred tax assets.  Refer to Note 4
(Restructuring,  Impairment  and Other  Charges and  (Credits))  for  additional
information on these events and the related charges.  Accordingly,  we increased
our  valuation  allowance by $1.2 billion in the third quarter of 2004 to reduce
our net deferred tax assets to  approximately  $530  million.  At that time,  we
believed  that it was more likely than not that we could  realize the  remaining
net deferred tax assets  through a tax planning  strategy  involving the sale of
our investment in Dow Corning  Corporation  (DCC), a  non-strategic  appreciated
asset, if we were faced with expiring net operating loss carryforwards.

During 2005,  DCC's  performance was much stronger than expected and DCC resumed
paying a dividend;  both of which are expected to continue in the future. Due to
this improved  performance,  DCC now provides strong  financial,  geographic and
market balance to Corning's portfolio of businesses,  the profitability of which
has  become  more  concentrated  due to the  success  of the  display  operating
segment.  As a result, we now consider DCC to be a strategic  investment and can
no longer  assert that a potential tax planning  strategy  involving the sale of
DCC would be prudent,  as required by FAS 109.  Therefore,  we no longer believe
that it is more likely than not that we would realize the remaining net deferred
tax assets.  Accordingly,  we have  increased  our  valuation  allowance by $525
million to fully reserve our net U.S.  deferred tax assets in the fourth quarter
of 2005.

As a result of the elimination of the minimum pension liability for the domestic
qualified  plan,  $82 million tax benefit  from the minimum  pension  liability,
previously  included  in  other  comprehensive  income,  was  reflected  in  our
provision for income taxes in the fourth quarter of 2005.





7.   Income Taxes (continued)

During  the third  quarter of 2005,  Corning  filed its 2004  consolidated  U.S.
Federal  income tax  return,  which  included  a $3.9  billion  worthless  stock
deduction for the loss on our investment in the photonic  technologies  business
associated  with the Pirelli  acquisition.  This  acquisition  was  completed in
December  2000 and was  substantially  impaired  in the second  quarter of 2001.
Prior to the third  quarter of 2005,  we did not record a deferred tax asset for
this item as the ultimate  realization  of such  deduction  was  uncertain,  and
consistent with the requirements of SFAS No. 5, "Accounting for  Contingencies,"
recognition of an asset prior to the time management  determines the realization
of the asset is probable is  prohibited.  On September 2, 2005,  Corning and the
Commissioner  of the IRS entered into a closing  agreement under section 7121 of
the  Internal  Revenue Code of 1986 which  provides  that Corning is entitled to
this worthless stock  deduction.  We recorded a $1.5 billion  deferred tax asset
for this item in the third quarter, which was concurrently offset by a valuation
allowance of an equal amount due to our current inability to record tax benefits
for U.S. net operating losses.

We expect to  maintain a valuation  allowance  on future tax  benefits  until an
appropriate  level of  profitability  is  sustained,  primarily  in the U.S. and
Germany,  or there are tax planning  strategies that would enable us to conclude
that it is more  likely  than not that a portion of the  deferred  tax  benefits
would be realizable. Until then, our tax provision will include only the net tax
expense attributable to certain foreign operations.

Certain  foreign  subsidiaries  in China,  South Africa and Taiwan are operating
under tax holiday arrangements. The nature and extent of such arrangements vary,
and the benefits of such  arrangements  phase out in future years (2006 to 2009)
according  to  the  specific   terms  and  schedules  of  the  relevant   taxing
jurisdictions.  The  impact  of the  tax  holidays  on our  effective  rate is a
reduction  in the  rate of  8.9%,  1.2%,  and 0.5% for  2005,  2004,  and  2003,
respectively.

We establish tax contingency  liabilities when,  despite our belief that our tax
returns are fully supportable,  it is probable that certain positions may not be
sustained  through the income tax audit process.  These liabilities are analyzed
on a quarterly basis and adjusted based upon changes in facts and circumstances,
such as reviews of  intercompany  transfer  pricing  practices,  the progress of
income tax audits, new case law and emerging  legislation.  In the third quarter
of 2005, in conjunction with our reassessment process, we recorded a tax benefit
of $14 million following the conclusion of an IRS examination for the years 2001
and 2002. We continue to believe that our recorded tax  contingency  liabilities
are  adequate  for all open years,  based on our  assessment  of the  previously
mentioned  factors.  However,  since tax laws and  regulations  are  subject  to
interpretation,   the  final   results  of  income  tax  audits   could   differ
significantly  from what we have  reflected in our income tax accounts and could
have a material  effect on our tax provision,  net income and/or cash flows in a
future  period or periods  in which such a  conclusion  is  reached.  Due to the
complexity  involved in these  matters we are not able to estimate  the range of
reasonably possible losses in excess of amounts recorded.

The tax effects of temporary  differences  and  carryforwards  that gave rise to
significant  portions of the  deferred  tax assets and  liabilities  follows (in
millions):
--------------------------------------------------------------------------------
                                                         December 31,
                                           -------------------------------------
                                              2005                       2004
                                           (Restated)                 (Restated)
--------------------------------------------------------------------------------

Loss and tax credit carryforwards          $  2,723                    $ 1,189
Capitalized research and development            176                        207
Restructuring reserves                          230                        237
Postretirement medical and life benefits        248                        243
Inventory                                        51                         35
Intangible and other assets                      86                         98
Other accrued liabilities                       340                        218
Other employee benefits                                                     97
Other                                                                       86
--------------------------------------------------------------------------------
Gross deferred tax assets                     3,854                      2,410
Valuation allowance                          (3,672)                    (1,747)
--------------------------------------------------------------------------------
Deferred tax assets                             182                        663
--------------------------------------------------------------------------------
Fixed assets                                    (80)                      (131)
Other employee benefits                         (67)
Other                                            (7)
--------------------------------------------------------------------------------
Deferred tax liabilities                       (154)                      (131)
--------------------------------------------------------------------------------
Net deferred tax assets                    $     28                    $   532
--------------------------------------------------------------------------------

Based on our estimated 2005  consolidated  U.S.  Federal income tax return to be
filed,  Corning has net operating loss  carryforwards of ($5.1) billion for U.S.
Federal  income tax purposes.  These  operating  losses will expire in 2022 $0.1
billion, 2023 $0.6 billion, 2024 $4.2 billion and 2025 $0.2 billion.






8.   Investments



Investments comprise the following (in millions):
------------------------------------------------------------------------------------------------------------------------------------
                                                                                             December 31,
                                                                                     -------------------------------
                                                                   Ownership           2005                2004
                                                                 Interest (1)       (Restated)          (Restated)
                                                                 ------------       ----------          ----------
                                                                                                 
Associated companies accounted for under the equity method
     Samsung Corning Precision Glass Co., Ltd.                        50%            $    859             $    572
     Dow Corning Corporation                                          50%                 473                  324
     Samsung Corning Co., Ltd.                                        50%                 231                  365
     All other                                                      25%-51%               162                  188
                                                                                     --------             --------
                                                                                        1,725                1,449
Other investments (2)                                                                       4                   61
                                                                                     --------             --------
Total                                                                                $  1,729             $  1,510
------------------------------------------------------------------------------------------------------------------------------------


(1)  Amounts  reflect  Corning's  direct  ownership  interests in the respective
     associated companies. Corning does not control any of such entities. In the
     cases where  Corning  owns over 50% of the voting  stock of another  entity
     accounted for by the equity method,  Corning does not have control  because
     the other equity owner has significant participatory rights.
(2)  Amounts  reflect $53 million of  available-for-sale  securities at December
     31, 2004 stated at market value.






8.   Investments (continued)

Associated Companies at Equity



The financial position and results of operations of these investments follow (in
millions):
------------------------------------------------------------------------------------------------------------------------------------
                                                                         For the years ended December 31,
                                                                 --------------------------------------------------
                                                                    2005               2004                2003
                                                                 (Restated)          (Restated)          (Restated)
------------------------------------------------------------------------------------------------------------------------------------
                                                                                                
Statement of Operations:
     Net sales                                                   $  6,979            $  6,146            $ 4,971
     Gross profit                                                $  2,866            $  2,341            $ 1,649
     Net income                                                  $  1,250            $  1,036            $   505
     Corning's equity in earnings of affiliated companies (1)(2) $    611            $    454            $   216

Related Party Transactions:
     Corning sales to equity company affiliates                  $    133            $    127            $   115
     Corning purchases from equity company affiliates            $    106            $    106            $    48

------------------------------------------------------------------------------------------------------------------------------------
                                                                          December 31,
                                                                 ------------------------------
                                                                    2005               2004
------------------------------------------------------------------------------------------------------------------------------------
Balance Sheet:
     Current assets                                              $  3,596            $  2,779
     Noncurrent assets                                           $  5,023            $  5,426
     Short-term borrowings, including current portion
       of long-term debt                                         $     88            $     75
     Other current liabilities                                   $  1,520            $  1,442
     Long-term debt                                              $    153            $    252
     Other long-term liabilities                                 $  2,676            $  2,777
     Minority interest                                           $    223            $    245

Related Party Transactions:
     Balances due from equity company affiliates                 $     34            $     23
     Balances due to equity company affiliates                   $     45            $     15

------------------------------------------------------------------------------------------------------------------------------------
                                                                         For the years ended December 31,
                                                                 --------------------------------------------------
                                                                    2005               2004                2003
------------------------------------------------------------------------------------------------------------------------------------
Dividends received from affiliated companies                     $    301            $    140            $   112

Royalty income from affiliated companies                         $     75            $     47            $    25

------------------------------------------------------------------------------------------------------------------------------------


(1)  Equity in  earnings  shown  above  and in the  consolidated  statements  of
     operations are net of amounts recorded for income tax.
(2)  Amounts include the following restructuring and impairment charges:
     .    In 2005,  Dow Corning  Corporation  recorded a gain on the issuance of
          subsidiary  stock. Our equity earnings included $11 million related to
          this gain.
     .    In 2005,  Samsung Corning  recorded  charges to restructure and impair
          certain  manufacturing  assets.  Our  equity  earnings  included  $106
          million related to these charges.
     .    In  2004,  Dow  Corning   Corporation   recorded  charges  related  to
          restructuring actions and adjustments to interest liabilities recorded
          on its emergence from  bankruptcy.  Our equity  earnings  included $21
          million related to these charges.
     .    In 2004  and  2003,  Corning  recorded  $35  million  and $7  million,
          respectively,  of charges to impair equity method  investments  in the
          Telecommunications segment to their estimated fair value.
     .    In 2003, Samsung Corning Co., Ltd. recorded asset impairment  charges.
          Our equity earnings included $66 million related to these charges.

We have  contractual  agreements  with  several  of our equity  investees  which
include sales, purchasing, licensing and technology agreements.

At December 31, 2005,  approximately  $1,516 million of equity in  undistributed
earnings of equity companies was included in our accumulated deficit.





8.   Investments (continued)

A discussion and summarized results of Corning's significant investees at
December 31, 2005 follows:



Samsung Corning Precision Glass Co., Ltd. (Samsung Corning Precision)
---------------------------------------------------------------------
Samsung Corning Precision is a South Korea-based  manufacturer of liquid crystal
display glass for flat panel  displays.  Samsung Corning  Precision's  financial
position and results of operations follow (in millions):
------------------------------------------------------------------------------------------------------------------------------------
                                                                         For the years ended December 31,
                                                                 --------------------------------------------------
                                                                    2005               2004                2003
------------------------------------------------------------------------------------------------------------------------------------
                                                                                                
Statement of Operations:
     Net sales                                                   $  1,660            $  1,097            $   590
     Gross profit                                                $  1,234            $    820            $   424
     Net income                                                  $    848            $    561            $   295
     Corning's equity in earnings of Samsung Corning Precision   $    408            $    277            $   144

Related Party Transactions:
     Corning sales to Samsung Corning Precision (1)              $    116            $     96            $    68
     Corning purchases from Samsung Corning Precision            $     71            $     76            $    26

------------------------------------------------------------------------------------------------------------------------------------
                                                                          December 31,
                                                                 -----------------------------
                                                                    2005              2004
------------------------------------------------------------------------------------------------------------------------------------
Balance Sheet:
     Current assets                                              $    400            $    200
     Noncurrent assets                                           $  1,848            $  1,506
     Short-term borrowings, including current portion
       of long-term debt                                         $     57            $     54
     Other current liabilities                                   $    359            $    368
     Long-term debt                                              $     28            $     97
     Other long-term liabilities                                 $     86            $     45

------------------------------------------------------------------------------------------------------------------------------------
                                                                        For the years ended December 31,
                                                                 --------------------------------------------------
                                                                    2005              2004                 2003
------------------------------------------------------------------------------------------------------------------------------------
Dividends received from Samsung Corning Precision                $    156            $     71            $    33

Royalty income from Samsung Corning Precision                    $     65            $     42            $    22

------------------------------------------------------------------------------------------------------------------------------------


(1)  Corning  purchases  machinery  and  equipment on behalf of Samsung  Corning
     Precision to support its capital expansion  initiatives.  The machinery and
     equipment are transferred to Samsung  Corning  Precision at our cost basis,
     resulting in no revenue or gain being recognized on the transaction.

Balances  due to and from  Samsung  Corning  Precision  were $41 million and $18
million  at  December  31,  2005  and  $12  million  and  $4  million  at  2004,
respectively.

As of December 31, 2005, Samsung Corning Precision and Samsung Corning Co., Ltd.
were two of  approximately  thirty  co-defendants  in a  lawsuit  filed by Seoul
Guarantee  Insurance Co. and 14 other  creditors.  Refer to Samsung Corning Co.,
Ltd. section of this note for additional information.

In  February  2006,  Corning  made a capital  contribution  to  Samsung  Corning
Precision  in the amount of $77 billion  Korean won  (approximately  $75 million
USD).





8.   Investments (continued)

Samsung Corning Co., Ltd. (Samsung Corning)
-------------------------------------------
Samsung Corning is a South Korea-based  manufacturer of glass panels and funnels
for cathode ray tube (CRT) television and display monitors. In the third quarter
of 2005,  Samsung Corning incurred  impairment and other charges of $212 million
as a result of a decline in the  projected  operating  results for its CRT glass
business.  The charge, which included certain manufacturing assets and severance
and exit costs,  reduced  Corning's equity earnings by $106 million in the third
quarter.  None of the  charges is  expected  to result in cash  expenditures  by
Corning.

As of  December  31,  2005,  Corning's  investment  in Samsung  Corning was $231
million.  Corning has determined that a separate impairment of its investment in
Samsung  Corning was not  necessary  in 2005.  We will  continue to monitor this
investment as it is possible an impairment may be required in the future.

In 2003,  Samsung Corning recorded a significant  asset impairment  charge,  our
portion of which was $66 million after tax.



Samsung  Corning's  financial  position  and  results of  operations  follow (in
millions):
------------------------------------------------------------------------------------------------------------------------------------
                                                                         For the years ended December 31,
                                                                 --------------------------------------------------
                                                                    2005               2004                2003
------------------------------------------------------------------------------------------------------------------------------------
                                                                                                
Statement of Operations:
     Net sales                                                   $    823            $  1,019            $   895
     Gross profit                                                $     87            $    245            $   199
     Net (loss) income                                           $   (249)           $     94            $   (74)
     Corning's equity in (losses) earnings of Samsung Corning    $   (112)           $     32            $   (39)

------------------------------------------------------------------------------------------------------------------------------------
                                                                          December 31,
                                                                 -----------------------------
                                                                    2005              2004
------------------------------------------------------------------------------------------------------------------------------------
Balance Sheet:
     Current assets                                              $    345            $    425
     Noncurrent assets                                           $    391            $    652
     Other current liabilities                                   $    154            $    163
     Long-term debt                                              $     48            $     47
     Other long-term liabilities                                 $     24            $     56
     Minority interest                                           $     45            $     73

------------------------------------------------------------------------------------------------------------------------------------
                                                                         For the years ended December 31,
                                                                 --------------------------------------------------
                                                                    2005               2004                2003
------------------------------------------------------------------------------------------------------------------------------------
Dividends received from Samsung Corning                          $     22            $     18            $    29

------------------------------------------------------------------------------------------------------------------------------------


As of December 31, 2005,  Samsung Corning Precision and Samsung Corning were two
of  approximately  thirty  co-defendants  in a lawsuit filed by Seoul  Guarantee
Insurance Co. and 14 other  creditors  (SGI and Creditors) for alleged breach of
an agreement that  approximately  thirty affiliates of the Samsung group entered
into with SGI and  Creditors  in September  1999.  The lawsuit is pending in the
courts of Korea.  According to the agreement,  the Samsung  affiliates agreed to
sell 3.5 million  shares of Samsung Life  Insurance  Co., Ltd. (SLI) by December
31, 2000,  which were  transferred  to SGI and Creditors in connection  with the
petition for court  receivership  of Samsung Motor Inc. In the lawsuit,  SGI and
Creditors  allege that, in the event that the proceeds of sale of the SLI shares
is less than 2.45 trillion Korean won (approximately $2.42 billion), the Samsung
affiliates  allegedly  agreed to compensate SGI and Creditors for the shortfall,
by other means, including Samsung affiliates' purchase of equity or subordinated
debentures  to be issued by SGI and  Creditors.  Any excess  proceeds  are to be
distributed  to the Samsung  affiliates.  As of December 31, 2005, the shares of
Samsung Life  Insurance  Co., Ltd. have not been sold. The suit asks for damages
of  approximately  $4.68  billion  plus penalty  interest.  SCP and SCC combined
guarantees  should represent no more than 3.1% of the Samsung  affiliates' total
financial  obligation.  Although  noting  that the  outcome of these  matters is
uncertain,  Samsung Corning Precision and Samsung Corning have stated that these
matters are not likely to result in a material  ultimate loss to their financial
statements. No claim in these matters has been asserted against Corning.







8.   Investments (continued)

Dow Corning Corporation (Dow Corning)
-------------------------------------
Dow Corning is a U.S. based manufacturer of silicone products.  In 1995, Corning
fully  impaired its  investment  of Dow Corning  upon its entry into  bankruptcy
proceedings and did not recognize net equity earnings from the second quarter of
1995 through the end of 2002.  Corning began recognizing  equity earnings in the
first  quarter  of 2003  when  management  concluded  that  its  emergence  from
bankruptcy protection was probable. Dow Corning emerged from bankruptcy in 2004.
See  discussion  below for  additional  information  and for a  history  of this
matter.  Corning  considers  the  difference  between the carrying  value of its
investment  in Dow  Corning  and its 50%  share of Dow  Corning's  equity  to be
permanent. This difference is $249 million.



Dow Corning's financial position and results of operations follow (in millions):
------------------------------------------------------------------------------------------------------------------------------------
                                                                         For the years ended December 31,
                                                                 --------------------------------------------------
                                                                    2005               2004                2003
------------------------------------------------------------------------------------------------------------------------------------
                                                                                                
Statement of Operations:
     Net sales                                                   $  3,878            $  3,373            $ 2,873
     Gross profit                                                $  1,312            $  1,036            $   820
     Net income                                                  $    507            $    238            $   177
     Corning's equity in earnings of Dow Corning                 $    253            $    116            $    82

------------------------------------------------------------------------------------------------------------------------------------
                                                                          December 31,
                                                                 -----------------------------
                                                                    2005              2004
------------------------------------------------------------------------------------------------------------------------------------
Balance Sheet:
     Current assets                                              $  2,575            $  1,828
     Noncurrent assets                                           $  2,573            $  2,988
     Short-term borrowings, including current portion
       of long-term debt                                         $     22            $     14
     Other current liabilities                                   $    911            $    764
     Long-term debt                                              $     39            $     60
     Other long-term liabilities                                 $  2,554            $  2,660
     Minority interest                                           $    179            $    172

------------------------------------------------------------------------------------------------------------------------------------
                                                                         For the years ended December 31,
                                                                 --------------------------------------------------
                                                                    2005               2004                2003
------------------------------------------------------------------------------------------------------------------------------------
Dividends received from Dow Corning                              $     45

------------------------------------------------------------------------------------------------------------------------------------


Corning and The Dow Chemical  Company (Dow  Chemical) each own 50% of the common
stock of Dow Corning,  which was in reorganization  proceedings under Chapter 11
of the U.S. Bankruptcy Code between May 1995 and May 2004. Dow Corning filed for
bankruptcy  protection to address pending and claimed  liabilities  arising from
many thousand  breast-implant  product  lawsuits each of which typically  sought
damages in excess of $1 million.  On November 8, 1998,  Dow Corning and the Tort
Claimants Committee jointly filed a revised Plan of Reorganization  (Joint Plan)
which provided for the settlement or other  resolution of implant claims.  After
review and approvals by the Bankruptcy Court and the U.S.  District Court of the
Eastern District of Michigan, and an appeal, the District Court on April 2, 2004
entered an order  establishing  June 1, 2004 as the effective  date of the Joint
Plan.

Under the terms of the Joint Plan, Dow Corning has  established and is funding a
Settlement Trust and a Litigation Facility to provide a means for tort claimants
to settle or  litigate  their  claims.  Of the  approximately  $3.2  billion  of
required funding,  Dow Corning has paid approximately $1.6 billion (inclusive of
insurance)  and expects to pay up to an  additional  $1.6 billion  ($710 million
after-tax) over 16 years. Corning and Dow Chemical have each agreed to provide a
credit  facility  to Dow  Corning  of up to $150  million  ($300  million in the
aggregate),  subject to the terms and  conditions  stated in the Joint Plan.  As
required by the Joint Plan,  Dow Corning has fully  satisfied  (or reserved for)
the claims of its  commercial  creditors  in  accordance  with a March 31,  2004
ruling of the District Court determining the amount of pendency interest allowed
on the $810 million in principal owing on such claims.  In the second quarter of
2004, Dow Corning recorded a $47 million adjustment to its interest  liabilities
relating to this matter,  of which Corning  recognized $14 million in its second
quarter equity in earnings of associated companies, net of impairments.  Certain
commercial  creditors  have appealed that ruling to the U.S. Court of Appeals of
the Sixth Circuit  seeking from Dow Corning an additional  sum of  approximately
$80  million  for  interest  at default  rates and  enforcement  costs.  Corning
believes  the risk of material  loss to Dow Corning  (net of sums  reserved)  is
remote.






8.   Investments (continued)

In addition,  Dow Corning has received a statutory notice of deficiency from the
United States  Internal  Revenue  Service  asserting tax  deficiencies  totaling
approximately  $65 million  relating  to its federal  income tax returns for the
1995 and 1996 calendar  years.  This matter is pending before the U.S.  District
Court in Michigan.  Dow Corning has also received a proposed adjustment from the
IRS (approximately  $117 million) with respect to its federal income tax returns
for the 1997, 1998 and 1999 calendar years. Dow Corning is vigorously contesting
these deficiencies and proposed adjustments which it believes are excessive.

The Joint Plan includes releases for Corning and Dow Chemical as shareholders in
exchange  for  contributions  to the Joint  Plan.  Although  claims  against the
shareholders  were included in several thousand state and federal lawsuits filed
pre-bankruptcy,  alleging  injuries arising from Dow Corning's implant products,
Corning  was awarded  summary  judgment  in federal  court and in several  state
jurisdictions.  The remaining  claims  against  Corning will be channeled by the
Joint Plan into facilities  established by the Joint Plan.  Management  believes
that the  likelihood  of a  materially  adverse  impact to  Corning's  financial
statements arising from these remaining shareholder claims is remote.

Pittsburgh Corning Corporation (PCC)
------------------------------------
Corning and PPG Industries,  Inc. (PPG) each own 50% of the common stock of PCC.
Over a period of more than two decades,  PCC and several other  defendants  have
been named in numerous  lawsuits  involving claims alleging personal injury from
exposure to asbestos. On April 16, 2000, PCC filed for Chapter 11 reorganization
in the U.S. Bankruptcy Court for the Western District of Pennsylvania. As of the
bankruptcy filing, PCC had in excess of 140,000 open claims and had insufficient
remaining  insurance  and  assets to deal with its  alleged  current  and future
liabilities.  More than 100,000 additional claims have been filed with PCC after
its bankruptcy filing. As a result of PCC's bankruptcy filing,  Corning recorded
an after-tax charge of $36 million in 2001 to fully impair its investment in PCC
and  discontinued  recognition  of  equity  earnings.  At the time PCC filed for
bankruptcy  protection,  there were approximately  12,400 claims pending against
Corning in state court lawsuits  alleging various theories of liability based on
exposure to PCC's asbestos products and typically requesting monetary damages in
excess of one million  dollars per claim.  Corning has defended  those claims on
the basis of the separate  corporate  status of PCC and the absence of any facts
supporting  claims of direct  liability  arising from PCC's  asbestos  products.
Corning  is  also   currently   named  in   approximately   11,300  other  cases
(approximately  42,800  claims)  alleging  injuries  from  asbestos  and similar
amounts  of  monetary  damages  per  claim.  Those  cases  have been  covered by
insurance  without  material impact to Corning to date.  Asbestos  litigation is
inherently  difficult,  and past  trends in  resolving  these  claims may not be
indicators of future outcomes.

In the  bankruptcy  court,  PCC in April 2000 obtained a preliminary  injunction
against the prosecution of asbestos  actions arising from PCC's products against
its two  shareholders  to afford  the  parties a period of time (the  Injunction
Period) in which to negotiate a plan of reorganization for PCC (PCC Plan).

On May 14, 2002,  PPG announced that it had agreed with certain of its insurance
carriers and  representatives  of current and future  asbestos  claimants on the
terms of a  settlement  arrangement  applicable  to claims  arising  from  PCC's
products.

On  March  28,  2003,  we  announced  that we had  reached  agreement  with  the
representatives  of asbestos  claimants  for the  settlement  of all current and
future  asbestos  claims against us and Pittsburgh  Corning  Corporation  (PCC),
which might arise from PCC products or operations.  The proposed settlement,  if
the plan is approved and becomes  effective,  will require Corning to relinquish
its equity interest in PCC, contribute its equity interest in Pittsburgh Corning
Europe N.V.  (PCE), a Belgian  corporation,  and contribute 25 million shares of
Corning common stock.  Corning also agreed to make cash payments with a value of
$131  million,  in March  2003,  over six years from the  effective  date of the
settlement  and to assign  certain  insurance  policy  proceeds from its primary
insurance and a portion of its excess insurance at the time of the settlement.

The PCC Plan received a favorable vote from creditors in March 2004. Hearings to
consider  objections  to the PCC Plan were held in the  Bankruptcy  Court in May
2004.  The parties  filed  post-hearing  briefs and made oral  arguments  to the
Bankruptcy  Court in November 2004.  The Bankruptcy  Court allowed an additional
round of briefing to address current case law  developments and heard additional
oral  arguments on March 16, 2005. In mid-April  2005, the proponents of the PCC
Plan requested that the court rule on the pending objections.  If the Bankruptcy
Court does not approve the PCC Plan in its current form, changes to the Plan are
probable  as it is likely  that the Court  will  allow  the  proponents  time to
propose  amendments.   The  outcome  of  these  proceedings  is  uncertain,  and
confirmation  of the current  Plan or any amended Plan is subject to a number of
contingencies.  However, apart from the quarterly  mark-to-market  adjustment in
the value of the 25 million  shares of Corning stock,  management  believes that
the likelihood of a material adverse impact to Corning's financial statements is
remote.

As discussed in Note 2  (Restatement  of Prior Period  Financial  Statements) we
have  restated  prior  period  financial  statements  to correct the  accounting
related to the asbestos settlement.

For the year  ended  2005,  we  recorded  asbestos  settlement  expense  of $218
million,  including  $197  million  reflecting  the  increase  in the  value  of
Corning's  common stock from  December  31, 2004 to December  31, 2005,  and $21
million  to adjust  the  estimated  fair  value of the other  components  of the
proposed asbestos settlement.





8.   Investments (continued)

If the book value of the assets to be  contributed  to the  asbestos  settlement
remains lower than the carrying value of the asbestos  settlement  liability,  a
gain would be recognized at the time of the settlement.

For the year ended 2004, we recorded asbestos settlement expense of $65 million,
including $33 million  reflecting the increase in the value of Corning's  common
stock from December 31, 2003 to December 31, 2004, and $32 million to adjust the
estimated  fair  value  of  the  other  components  of  the  proposed   asbestos
settlement.

For the year  ended  2003,  we  recorded  asbestos  settlement  expense  of $535
million,  including an initial expense of $392 million,  $115 million reflecting
the  increase in the value of  Corning's  common  stock from  January 1, 2003 to
December 31,  2003,  and $28 million to adjust the  estimated  fair value of the
other components of the proposed asbestos settlement.

Since March 28,  2003,  we have  recorded  total net charges of $818  million to
reflect the initial  settlement  liability and  subsequent  adjustments  for the
change in the fair value of the components of the liability.

The fair value of the liability  expected to be settled by  contribution  of our
investment  in PCE, the fair value of 25 million  shares of our common stock and
assigned insurance  proceeds (in aggregate  totaling $667 million,  $456 million
and $399 million at December 31, 2005, 2004 and 2003  respectively)  is recorded
in other accrued  liabilities in our consolidated  balance sheets. As the timing
of this  obligation's  settlement will depend on future judicial  rulings (i.e.,
controlled by a third party and not Corning),  this portion of the PCC liability
is  considered a "due on demand"  obligation.  Accordingly,  this portion of the
obligation  has been  classified  as a  current  liability,  even  though  it is
possible  that the  contribution  could be made beyond one year.  The  remaining
portion of the settlement  liability (totaling $152 million,  $144 million,  and
$136 million at December 31, 2005, 2004 and 2003 respectively), representing the
net present  value of the cash  payments,  is recorded in the other  liabilities
component in our consolidated balance sheets.

9.   Property, Net of Accumulated Depreciation

Property, net follows (in millions):
--------------------------------------------------------------------------------
                                                             December 31,
                                                   -----------------------------
                                                      2005               2004
--------------------------------------------------------------------------------
Land                                               $     70            $     76
Buildings                                             1,999               1,943
Equipment                                             5,177               4,569
Construction in progress                              1,061                 885
--------------------------------------------------------------------------------
                                                      8,307               7,473
Accumulated depreciation                             (3,632)             (3,532)
--------------------------------------------------------------------------------
Total                                              $  4,675            $  3,941
--------------------------------------------------------------------------------

Approximately  $27  million,  $22 million and $9 million of interest  costs were
capitalized as part of property, net in 2005, 2004 and 2003, respectively.

10.  Goodwill and Other Intangible Assets

Goodwill



The change in the carrying  amount of goodwill  for the year ended  December 31,
2005, by segment follows (in millions):
------------------------------------------------------------------------------------------------------------------------------------
                                        Telecommunications            Display Technologies          Other (1)            Total
------------------------------------------------------------------------------------------------------------------------------------
                                                                                                          
Balance at January 1, 2004                  $   1,576                       $      9               $    150           $   1,735
Impairment                                     (1,420)                                                                   (1,420)
Divestitures                                      (30)                                                                      (30)
Foreign currency translation & other               (3)                                                                       (3)
------------------------------------------------------------------------------------------------------------------------------------
Balance at December 31, 2004                $     123                       $      9               $    150           $     282
------------------------------------------------------------------------------------------------------------------------------------

Foreign currency translation & other        $      (5)                                                                $      (5)
------------------------------------------------------------------------------------------------------------------------------------
Balance at December 31, 2005                $     118                       $      9               $    150           $     277
------------------------------------------------------------------------------------------------------------------------------------


(1)  This balance relates to our Specialty Materials operating segment.





10.  Goodwill and Other Intangible Assets (continued)

2005 Assessment
---------------
Our  annual  goodwill  recoverability  assessment  is  completed  in the  fourth
quarter,  as it is traditionally  based on our annual strategic planning process
that runs from June to October. This process includes reviewing expectations for
the long-term  growth of our businesses and forecasting  future cash flows.  The
results of our impairment  tests indicated that the fair value of each reporting
unit exceeded its book value.

2004 Assessment
---------------
In the third quarter of 2004, we identified  certain  factors  during our annual
strategic planning process that caused us to lower our estimates and projections
for the  long-term  revenue  growth  of the  Telecommunications  segment,  which
indicated  that  it was  more  likely  than  not  that  the  fair  value  of the
Telecommunications  segment  reporting unit was less than its carrying value. As
such, we performed an interim impairment test of the Telecommunications  segment
goodwill in the third  quarter of 2004,  the results of which were reviewed with
Corning's Board of Directors on October 6, 2004.

Although we were experiencing stronger than expected volume in this segment, the
improved  demand was from a narrow band of customers,  and we saw few signs of a
broader recovery in overall demand, mix of premium products, and pricing for our
products. The lack of industry  consolidations,  increased competitive pressures
in the industry,  and revised  estimates of future customer demand for the types
of products  expected to be deployed  caused us to change our  assessment of the
future pace of recovery.  The primary  estimates and  forecasts  that caused the
change in our  outlook  and  reduced  the fair  value of the  Telecommunications
segment from that measured in 2003 were:

..    Revised estimates of future pricing for fiber and cable;
..    Revised estimates of demand for premium fiber product; and
..    Revised estimates for the long-term worldwide market volume growth.

We estimated the fair value of the Telecommunications segment using a discounted
cash flow model based on our current  estimates for the long-term  growth of the
Telecommunications   segment,   and  concluded   that  the  fair  value  of  the
Telecommunications  segment  was  below its  carrying  amount.  Accordingly,  we
recorded an impairment  charge of $1,420 million to reduce the carrying value of
goodwill to its implied fair value. The goodwill  impairment charge was included
in restructuring, impairment and other charges and (credits) on the consolidated
statement of operations. We updated our Telecommunications segment goodwill test
in the fourth  quarter of 2004.  The result of the test  concluded that the fair
value of the reporting unit exceeded its book value at that time.

We performed a goodwill  impairment test for our Specialty  Materials  reporting
unit in the fourth quarter of 2004. The result of this impairment test indicated
that the fair value of our reporting unit exceeded its book value.

As  discussed  in  Note 4  (Restructuring,  Impairment  and  Other  Charges  and
(Credits)), in the third quarter of 2004, we completed the sale of our frequency
controls business, which was part of the Telecommunications segment. As required
by SFAS No. 142, "Goodwill and Other Intangible  Assets," we allocated a portion
of the Telecommunications segment goodwill balance to the carrying amount of the
frequency  controls business in determining the loss on disposal.  The amount of
goodwill to be included in that  carrying  amount was based on the relative fair
value of the business to be disposed  and the portion of the  Telecommunications
segment to be retained.  The amount of goodwill  allocated to the carrying value
of frequency controls business was $30 million.

2003 Assessment
---------------
We performed goodwill impairment tests for our  Telecommunications and Specialty
Materials  segment reporting units in the fourth quarter of 2003. The results of
our  impairment  tests  indicated  that the fair  value of each  reporting  unit
exceeded its book value.

In the third  quarter we  completed  the sale of certain  photonic  technologies
assets, which was part of the Telecommunications segment. We allocated a portion
of the Telecommunications segment goodwill balance to the carrying amount of the
photonic technologies assets in determining the loss on disposal.  The amount of
goodwill allocated to the photonic technologies assets was $21 million.





10.  Goodwill and Other Intangible Assets (continued)

Other Intangible Assets



The carrying amount of other intangible assets follows (in millions):
------------------------------------------------------------------------------------------------------------------------------------
                                                                                 December 31,
                                                 -------------------------------------------------------------------------------
                                                               2005                                        2004
                                                 ----------------------------------          -----------------------------------
                                                             Accumulated                                Accumulated
                                                  Gross     Amortization     Net              Gross    Amortization      Net
------------------------------------------------------------------------------------------------------------------------------------
                                                                                                     
Amortized intangible assets:
     Patents and trademarks                      $  143       $    88      $    55           $  148       $   79       $    69
     Non-competition agreements                     111           111                           118          116             2
     Other                                            4             1            3                4            1             3
                                                 -------------------------------------------------------------------------------
         Total amortized intangible assets          258           200           58              270          196            74
                                                 -------------------------------------------------------------------------------

Unamortized intangible assets:
     Intangible pension assets                        3                          3               42                         42
                                                 -------------------------------------------------------------------------------
Total                                            $  261       $   200      $    61           $  312       $  196       $   116
------------------------------------------------------------------------------------------------------------------------------------


Amortized  intangible  assets are  primarily  related to the  Telecommunications
segment.  Amortization expense related to these intangible assets is expected to
be  approximately  $11  million  in 2006 and  2007,  $10  million  in 2008,  and
insignificant thereafter.

As a result of the  elimination of the minimum  pension  liability for Corning's
U.S.  qualified  plan, the related  intangible  pension asset of $39 million was
reversed in 2005.

11.  Other Liabilities

Other accrued liabilities follow (in millions):
--------------------------------------------------------------------------------
                                                         December 31,
                                            ------------------------------------
                                               2005                      2004
                                            (Restated)                (Restated)
--------------------------------------------------------------------------------
Current liabilities:
   Wages and employee benefits               $    325                 $    291
   Asbestos settlement                            667                      456
   Income taxes                                   165                      155
   Customer deposits                              164                       18
   Other current liabilities                      341                      399
--------------------------------------------------------------------------------
Other accrued liabilities                    $  1,662                 $  1,319
--------------------------------------------------------------------------------

Non-current liabilities:
   Asbestos settlement                       $    152                 $    144
   Customer deposits                              431                      197
   Other non-current liabilities                  342                      406
--------------------------------------------------------------------------------
Other liabilities                            $    925                 $    747
--------------------------------------------------------------------------------

Asbestos Settlement

The current liability  represents the cost of our investment in PCE and the fair
value of the 25 million  shares of Corning common stock as of December 31, 2005,
which  will be  contributed  to the PCC Plan when it becomes  effective.  As the
timing  of the  settlement  of the  obligation  under  this  portion  of the PCC
liability is outside of Corning's  control,  it is  considered a "due on demand"
obligation. Accordingly, this portion of the obligation has been classified as a
current  liability,  even though it is possible that the  contribution  could be
made in 2007 or later.  The  non-current  liability  represents  the net present
value of cash payments as of December 31, 2005, which will be contributed to the
PCC Plan in six installments beginning one year after the PCC Plan is effective.
Refer  to  Note 8  (Investments)  for  additional  information  on the  asbestos
settlement.





11.  Other Liabilities (continued)

Customer Deposits

In 2005 and 2004, several of Corning's customers entered into long-term purchase
and supply  agreements  in which  Corning's  Display  Technologies  segment will
supply  large-size glass substrates to these customers over periods of up to six
years.  As part of the agreements,  these customers  agreed to make advance cash
deposits to Corning for a portion of the contracted glass to be purchased.

Upon  receipt  of the cash  deposits  made by  customers,  we record a  customer
deposit liability. This liability is reduced at the time of future product sales
over the life of the  agreements.  As product is shipped to a customer,  Corning
recognizes  revenue at the  selling  price and issues  credit  memoranda  for an
agreed  amount of the  customer  deposit  liability.  The credit  memoranda  are
applied against customer  receivables  resulting from the sale of product,  thus
reducing  operating cash flows in later periods as these credits are applied for
cash deposits received in earlier periods.

Customer  deposits  have been or will be received in the  following  periods (in
millions):
--------------------------------------------------------------------------------
                                                       Estimated 2006
                                   2004      2005        and Beyond       Total
--------------------------------------------------------------------------------

Gross customer deposits received   $204      $457           $278          $939
--------------------------------------------------------------------------------

The majority of customer  deposits  will be received  through  2006. In 2005, we
began issuing  credit  memoranda  which totaled $29 million for the year.  These
credits are not included (netted) in the above amounts.

Customer deposit  liabilities were $595 million and $215 million at December 31,
2005  and  2004,   respectively,   of  which  $164   million  and  $18  million,
respectively,  were recorded in the current portion of other accrued liabilities
in our consolidated balance sheets.

In the event customers do not make all customer deposit installment  payments or
elect not to purchase the agreed upon quantities of product, subject to specific
conditions outlined in the agreements, Corning may retain certain amounts of the
customer deposits.  If Corning does not deliver agreed upon product  quantities,
subject to  specific  conditions  outlined  in the  agreements,  Corning  may be
required to return certain amounts of customer deposits.

12.  Debt



(In millions):
------------------------------------------------------------------------------------------------------------------------------------
                                                                                                  December 31,
                                                                                     ------------------------------------
                                                                                       2005                       2004
------------------------------------------------------------------------------------------------------------------------------------

                                                                                                         
Current portion of long-term debt                                                    $     18                  $    478
------------------------------------------------------------------------------------------------------------------------------------

Long-term debt
    Euro notes, 5.625%, due 2005                                                                               $    189
    Debentures, 7%, due 2007, net of unamortized discount of
      $15 million in 2004                                                                                            85
    Convertible notes, 4.875%, due 2008                                                                              96
    Convertible debentures, 3.5%, due 2008                                                                          297
    Zero coupon convertible debentures, 2%, due 2015, redeemable
      and callable in 2005                                                                                          272
    Notes, 6.3%, due 2009                                                            $    150                       150
    Euro notes, 6.25%, due 2010                                                           355                       408
    Debentures, 6.75%, due 2013                                                           100                       100
    Debentures, 5.90%, due 2014                                                           200                       200
    Debentures, callable, 6.05%, due 2015                                                 100
    Debentures, 6.20%, due 2016                                                           200                       200
    Debentures, 8.875%, due 2016                                                           81                        81
    Debentures, 8.875%, due 2021                                                           82                        82
    Medium-term notes, average rate 8.1%, due through 2025                                175                       175
    Debentures, 6.85%, due 2029                                                           150                       150
    Other, average rate 2.9%, due through 2015                                            214                       207
------------------------------------------------------------------------------------------------------------------------------------
    Total long-term debt                                                                1,807                     2,692
    Less current portion of long-term debt                                                 18                       478
------------------------------------------------------------------------------------------------------------------------------------
    Long-term debt                                                                   $  1,789                  $  2,214
------------------------------------------------------------------------------------------------------------------------------------





12.  Debt (continued)

At December 31, 2005 and 2004, the weighted-average  interest rate on short-term
borrowings was 2.2% and 2.3%, respectively.

Based on borrowing rates currently  available to us for loans with similar terms
and  maturities,  the fair value of long-term  debt was $1.9 billion at December
31, 2005, and $2.8 billion at December 31, 2004.

The  following  table shows debt  maturities  by year at  December  31, 2005 (in
millions):
--------------------------------------------------------------------------------

2006         2007          2008          2009           2010         Thereafter
--------------------------------------------------------------------------------
$18          $22           $21           $169           $384           $1,178
--------------------------------------------------------------------------------

In the first quarter of 2005, we completed negotiations with a group of banks on
a new  revolving  credit  facility.  Concurrent  with the closing of this credit
facility,  we terminated  our previous $2 billion  revolving line of credit that
was set to expire in August 2005. The new facility  provides us access to a $975
million unsecured  multi-currency  revolving line of credit and expires in March
2010. The facility includes two financial  covenants,  including a leverage test
(debt to capital ratio) and an interest  coverage ratio  (calculated on the most
recent four  quarters)  and also  includes  restriction  on the  declaration  of
dividends. As of December 31, 2005, we were in compliance with these covenants.

Debt Retirements



During  the  years  ended  December  31,  2005,  2004 and  2003,  we  retired  a
significant  portion of our  outstanding  notes and debentures as part of a debt
reduction  program.   The  debt  was  retired  through  a  combination  of  cash
repurchases  and  exchanges  for  Corning  common  stock.  The  following  table
summarizes the activities related to our debt retirements (in millions):
------------------------------------------------------------------------------------------------------------------------------------
                                                            Book Value of           Cash          Shares
                                                         Debentures Retired         Paid          Issued          Gain (Loss)
------------------------------------------------------------------------------------------------------------------------------------
                                                                                                      
2005 activity:
   Convertible debentures, 3.5%, due 2008                    $    297             $     2             31
   Euro notes, 5.625%, due 2005                                   189                 189
   Oak 4 7/8% Subordinated notes, due 2008                         96                                  6
   Debentures, 7% due 2007                                         88                 100                         $   (12)
   Zero coupon convertible debentures, 2%, due 2015               277                 277 (1)                          (4)
   Other Loans payable                                             11                  11
------------------------------------------------------------------------------------------------------------------------------------
Total 2005 activity                                          $    958             $   579             37          $   (16)
------------------------------------------------------------------------------------------------------------------------------------

2004 activity:
   Convertible debentures, 3.5%, due 2008                    $    368             $    37             38          $   (36)
   Zero coupon convertible debentures, 2%, due 2015               119                 117
   Other Loans payable                                            115                 115
------------------------------------------------------------------------------------------------------------------------------------
Total 2004 activity                                          $    602             $   269             38          $   (36)
------------------------------------------------------------------------------------------------------------------------------------

2003 activity:
   Zero coupon convertible debentures, 2%, due 2015          $  1,239             $ 1,121              6          $    20
   Euro notes, 5.625%, due 2005                                    67                  68                              (1)
   Other Loans payable                                            181                 181
------------------------------------------------------------------------------------------------------------------------------------
Total 2003 activity                                          $  1,487             $ 1,370              6          $    19
------------------------------------------------------------------------------------------------------------------------------------


(1)  The zero coupon convertible debentures cash payment includes $23 million of
     interest.

Issuance of Long-Term Debt

In the second quarter of 2005, we issued $100 million of 6.05% senior  unsecured
notes for net proceeds of  approximately  $99 million.  The notes mature on June
15,  2015.  We may redeem the  debentures  at any time.  The $100  million  debt
issuance,  along  with a common  stock  offering  of 20  million  shares for net
proceeds  of  approximately  $323  million,  were issued  under our  existing $5
billion  universal shelf  registration  statement that became effective in March
2001. At December 31, 2005, our remaining  capacity under the shelf registration
statement was approximately $2.1 billion.





12.  Debt (continued)

In the first  quarter of 2004,  we issued $400 million of  debentures,  of which
$200 million aggregate  principal amount of 5.90% notes mature on March 15, 2014
and $200 million  aggregate  principal amount of 6.20% notes mature on March 15,
2016. These debentures were issued under our existing $5 billion universal shelf
registration  statement,  which became  effective in March 2001. We realized net
proceeds of  approximately  $396 million from the issuance of these  debentures,
which  was  used to fund  debt  repurchases,  capital  expenditures  and cost of
operations.

In 2004,  Corning  entered into a 10-year loan agreement with a Japanese bank to
fund  certain  capital  expansion  activities  in  Japan.  An  initial  loan  of
approximately  $46 million,  bearing  interest at 2.6%,  was received in 2004. A
final loan of approximately $48 million,  bearing interest at 2.1%, was received
in  January  2005.  The loans  will  amortize  equally  from  July 2006  through
maturity.

13.  Employee Retirement Plans

Defined Benefit Plans

We  have  defined   benefit   pension  plans  covering   certain   domestic  and
international  employees.  Our  funding  policy  has  been  to  contribute,   as
necessary,  an amount in excess of the minimum  requirements in order to achieve
the company's  long-term funding targets.  In 2005, we issued and contributed 10
million  shares of Corning  common  stock,  with a value of  approximately  $199
million,  to our domestic  defined  benefit  plan.  In 2004, we made a voluntary
incremental  contribution  of $52  million  to our  domestic  and  international
pension plans.

We use a December 31 measurement  date for our domestic  defined  benefit plans.
The  measurement  dates  for our  foreign  defined  benefit  pension  plans  are
September 30 and December 31.

In 2000,  we amended our U.S.  pension  plan to include a cash  balance  pension
feature.  All salaried and non-union  hourly employees hired before July 1, 2000
were given the choice of staying in the existing  plan or  participating  in the
cash balance plan beginning January 1, 2001. Salaried employees hired after July
1, 2000  automatically  became  participants in the new cash balance plan. Under
the cash balance plan,  employee accounts are credited monthly with a percentage
of  eligible  pay based on age and years of  service.  Benefits  are 100% vested
after five years of service.

Corning and certain of its domestic subsidiaries also offer postretirement plans
that provide health care and life  insurance  benefits for retirees and eligible
dependents.  Certain  employees  may  become  eligible  for such  postretirement
benefits upon reaching  retirement  age. Prior to January 1, 2003, our principal
retiree  medical plans  required  retiree  contributions  each year equal to the
excess of medical cost increases over general  inflation  rates.  In response to
rising health care costs, effective January 1, 2003, we changed our cost-sharing
approach for retiree medical coverage. For current retirees (including surviving
spouses) and active employees eligible for the salaried retiree medical program,
we are placing a "cap" on the amount we will  contribute  toward retiree medical
coverage in the future. The cap will equal 150% of our 2001 contributions toward
retiree medical benefits. Once our contributions toward salaried retiree medical
costs reach this cap,  impacted  retirees  will have to pay the excess amount in
addition to their regular contributions for coverage.





13.  Employee Retirement Plans (continued)



Obligations and Funded Status
-----------------------------
The change in benefit  obligation  and funded status of our employee  retirement
plans follow (in millions):
------------------------------------------------------------------------------------------------------------------------------------
                                                                  Pension Benefits              Postretirement Benefits
                                                              ------------------------         ------------------------
December 31,                                                    2005             2004           2005             2004
------------------------------------------------------------------------------------------------------------------------------------
                                                                                                   
Change in Benefit Obligation
Benefit obligation at beginning of year                       $  2,365        $  2,095         $  767          $   829
Service cost                                                        46              42             10                8
Interest cost                                                      132             132             44               46
Plan participants' contributions                                     2               2              5                4
Amendments                                                                                         48
Curtailment gain                                                    (1)             (4)
Special termination benefits                                                         1
Actuarial losses (gains)                                           194             228             68              (49)
Benefits paid                                                     (155)           (155)           (68)             (71)
Foreign currency translation                                       (39)             24
------------------------------------------------------------------------------------------------------------------------------------
Benefit obligation at end of year                                2,544           2,365            874              767
------------------------------------------------------------------------------------------------------------------------------------

Change in Plan Assets
Fair value of plan assets at beginning of year                   1,978           1,839
Actual gain on plan assets                                         218             225
Employer contributions                                             217              52
Plan participants' contributions                                     2               2
Benefits paid                                                     (155)           (155)
Foreign currency translation                                       (22)             15
------------------------------------------------------------------------------------------------------------------------------------
Fair value of plan assets at end of year                         2,238           1,978
------------------------------------------------------------------------------------------------------------------------------------

Unfunded status                                                   (306)           (387)          (874)            (767)
Unrecognized transition asset                                       (1)             (1)
Unrecognized prior service cost (credit)                            37              44            (19)             (72)
Unrecognized actuarial loss                                        623             537            235              176
------------------------------------------------------------------------------------------------------------------------------------
Recognized asset (liability)                                  $    353        $    193         $ (658)         $  (663)
------------------------------------------------------------------------------------------------------------------------------------

Amounts recognized in the consolidated balance
 sheets consist of:
   Prepaid benefit cost                                       $    456        $    287
   Accrued benefit liability                                      (103)            (94)        $ (658)         $  (663)
   Additional minimum liability                                    (56)           (417)
   Intangible asset                                                  3              42
   Accumulated other comprehensive loss                             53             375
------------------------------------------------------------------------------------------------------------------------------------
Recognized asset (liability)                                  $    353        $    193         $ (658)         $  (663)
------------------------------------------------------------------------------------------------------------------------------------


The  accumulated  benefit  obligation for defined benefit pension plans was $2.0
billion and $2.3 billion at December 31, 2005 and 2004, respectively.

The  following  information  is presented  for pension plans where the projected
benefit  obligation  as of December 31, 2005 and 2004 exceeded the fair value of
plan assets (in millions):
--------------------------------------------------------------------------------
                                                              December 31,
                                                       -------------------------
                                                         2005            2004
--------------------------------------------------------------------------------

Projected benefit obligation                           $ 2,544         $  2,365
Fair value of plan assets                                2,238            1,978
--------------------------------------------------------------------------------





13.  Employee Retirement Plans (continued)

The following  information is presented for pension plans where the  accumulated
benefit  obligation  as of December 31, 2005 and 2004 exceeded the fair value of
plan assets (in millions):
--------------------------------------------------------------------------------
                                                               December 31,
                                                        ------------------------
                                                          2005            2004
--------------------------------------------------------------------------------

Accumulated benefit obligation                          $   220         $  2,076
Fair value of plan assets                                     7            1,798
--------------------------------------------------------------------------------



The components of net periodic benefit expense for our employee retirement plans
follow (in millions):
------------------------------------------------------------------------------------------------------------------------------------
                                                          Pension Benefits                     Postretirement Benefits
                                                  --------------------------------       ---------------------------------
Years ended December 31,                           2005         2004        2003           2005         2004         2003
------------------------------------------------------------------------------------------------------------------------------------
                                                                                                  
Service cost                                      $   46       $    42     $    33       $    10       $    8       $   9
Interest cost                                        132           132         126            43           46          48
Expected return on plan assets                      (154)         (147)       (146)
Amortization of net loss                              29            21           9             9            7           5
Amortization of prior service cost (credit)            7             9           9            (4)          (6)         (6)
------------------------------------------------------------------------------------------------------------------------------------
Net periodic benefit expense                          60            57          31            58           55          56
------------------------------------------------------------------------------------------------------------------------------------

Discontinued operation
Curtailment loss (gain)                                1            (1)          9                                     (5)
Special termination benefits                           1             1          15                                     10
------------------------------------------------------------------------------------------------------------------------------------

Total expense                                     $   62       $    57     $    55       $    58       $   55       $  61
------------------------------------------------------------------------------------------------------------------------------------


Additional information on our pension plan follows (in millions):
--------------------------------------------------------------------------------
                                                            Pension Benefits
                                                        ------------------------
                                                           2005          2004
--------------------------------------------------------------------------------
(Decrease) increase in minimum liability included
  in other comprehensive income (loss), after tax       $ (221) (1)    $ 126 (1)
--------------------------------------------------------------------------------

(1)  Includes $12 million after-tax  increase in minimum  liability  included in
     other comprehensive income related to an investment accounted for under the
     equity method.

In 2005,  Corning used a specific bond  matching/spot rate yield curve model for
estimating the appropriate discount rate for pension and postretirement  benefit
assumptions.  This model develops a hypothetical yield curve and associated spot
rate curve to discount the plan's  projected  benefit payments and match payment
durations.  Once the present value of projected  benefit payments is calculated,
the suggested  discount rate is equal to the level rate that results in the same
present value. The yield curve is based on actual  high-quality  corporate bonds
across  the full  maturity  spectrum.  The  curve is  developed  from  yields on
approximately  550-600 Moody's  Aa-graded,  non-callable  bonds. The highest and
lowest 10th percentile  yields are excluded from the curve in order to eliminate
outliers  in the bond  population.  We  believe  such  method  provides a better
estimate of the pension and postretirement benefit discount rates.

Prior  to 2005,  Corning  used a  benchmark  index  technique  to  establish  an
appropriate  discount rate. The Moody's Aa Corporate Bond Index was the starting
point for previous years' discount rate assumptions. It was then adjusted upward
to restate the rate from a semi-annual  coupon basis to an annual  discount rate
basis. The composite duration of the cash flows for our benefits  obligation was
comparable to the Moody's Aa  benchmark.  This method was  consistently  applied
since the adoption of FAS 87 in 1988 and FAS 106 in 2002.





13.  Employee Retirement Plans (continued)

Measurement of  postretirement  benefit expense is based on assumptions  used to
value the postretirement benefit obligation at the beginning of the year.



The  weighted-average  assumptions  used to  determine  benefit  obligations  at
December 31 follow:
------------------------------------------------------------------------------------------------------------------------------------
                                                          Pension Benefits                                Postretirement Benefits
                                     -------------------------------------------------------------   ------------------------------
                                               Domestic                       International                      Domestic
                                     ----------------------------     ----------------------------   ------------------------------
                                      2005       2004       2003       2005       2004       2003       2005       2004       2003
------------------------------------------------------------------------------------------------------------------------------------
                                                                                                   
Discount rate                         5.50%      5.75%      6.25%      4.52%      5.21%      5.29%      5.50%      5.75%      6.25%
Rate of compensation increase         4.50%      4.50%      4.50%      3.73%      3.58%      3.34%      4.50%      4.50%      4.50%
------------------------------------------------------------------------------------------------------------------------------------




The weighted-average assumptions used to determine net periodic benefit cost for
years ended December 31 follow:
------------------------------------------------------------------------------------------------------------------------------------
                                                          Pension Benefits                                Postretirement Benefits
                                     -------------------------------------------------------------   ------------------------------
                                               Domestic                       International                      Domestic
                                     ----------------------------     ----------------------------   ------------------------------
                                      2005       2004       2003       2005       2004       2003       2005       2004       2003
------------------------------------------------------------------------------------------------------------------------------------
                                                                                                   
Discount rate                         5.75%      6.25%      6.75%      5.27%      5.33%      5.79%      5.75%      6.25%      6.75%
Expected return on plan assets        8.50%      8.50%      8.50%      7.22%      7.41%      7.95%
Rate of compensation increase         4.50%      4.50%      4.50%      3.42%      3.42%      3.89%      4.50%      4.50%      4.50%
------------------------------------------------------------------------------------------------------------------------------------


The expected rate of return on plan assets was  determined  based on the current
interest rate  environment  and  historical  market  premiums  relative to fixed
income  rates of  equity  and  other  asset  classes  and  adjusted  for  active
management of certain portions of the portfolio.

--------------------------------------------------------------------------------
Assumed Health Care Trend Rates at December 31               2005          2004
--------------------------------------------------------------------------------
Health care cost trend rate assumed for next year             10%            9%
Rate that the cost trend rate gradually declines to            5%            5%
Year that the rate reaches the ultimate trend rate           2010          2009
--------------------------------------------------------------------------------



Assumed  health care cost trend rates have a  significant  effect on the amounts
reported  for the health care plans.  A  one-percentage-point  change in assumed
health care cost trend rates would have the following effects (in millions):
------------------------------------------------------------------------------------------------------------------------------------
                                                        One-Percentage-Point           One-Percentage-Point
                                                              Increase                       Decrease
------------------------------------------------------------------------------------------------------------------------------------
                                                                                       
Effect on annual total of service and interest cost           $     4.0                      $   (3.3)
Effect on postretirement benefit obligation                   $    47.5                      $  (42.3)
------------------------------------------------------------------------------------------------------------------------------------


Medicare Prescription Drug, Improvement and Modernization Act of 2003
---------------------------------------------------------------------
In December 2003, the Medicare Prescription Drug,  Improvement and Modernization
Act of 2003 (the Act) was passed which expands Medicare to include an outpatient
prescription  drug benefit beginning in 2006. In May 2004, the FASB issued Staff
Position (FSP) No. FAS 106-2, "Accounting and Disclosure Requirements Related to
the Medicare Prescription Drug,  Improvement and Modernization Act of 2003" (FSP
No.  106-1),  which  provides  guidance on how companies  should account for the
impact  of  the  Act on its  postretirement  health  care  plans.  To  encourage
employers to retain or provide  postretirement drug benefits,  beginning in 2006
the federal  government will provide  non-taxable  subsidy payments to employers
that  sponsor  prescription  drug  benefits  to retirees  that are  "actuarially
equivalent"  to  the  Medicare   benefit.   Corning  has  determined   that  its
postretirement  health care plans'  prescription  drug benefits are  actuarially
equivalent to Medicare Part D benefits to be provided  under the Act.  Effective
in the third  quarter of 2004,  Corning  prospectively  adopted  the  accounting
guidance of FSP No. 106-2, which reduced our postretirement health care and life
insurance plans'  accumulated  postretirement  benefit obligation by $73 million
and the related  annual  expense by $10 million.  For 2004,  our  postretirement
benefit expense decreased $5 million  reflecting the adoption of this accounting
guidance.





13.  Employee Retirement Plans (continued)

Plan Assets
-----------
The  weighted-average  asset allocation for domestic and  international  pension
plans at December  31, 2005 and  December  31,  2004 by asset  category  were as
follows:
--------------------------------------------------------------------------------
                                                         Plan Assets
                                                       At December 31,
                                                  -------------------------
                                                   2005              2004
--------------------------------------------------------------------------------

Equity Securities                                    40%               50%
Fixed Income Securities                              42%               35%
Real Estate                                           5%                7%
Other                                                13%                8%
                                                    ----              ----
    Total                                           100%              100%
--------------------------------------------------------------------------------

The total fair value of domestic  plan  assets at  December  31, 2005 was $2,040
million and the expected long-term rate of return on these assets was 8.5%.

We have an investment policy for domestic and international pension plans with a
primary objective to adequately provide for both the growth and liquidity needed
to support all current and future  benefit  payment  obligations.  For  domestic
plans, the investment strategy is to invest in a diversified portfolio of assets
which are expected to satisfy the above  objective and produce both absolute and
risk adjusted  returns  competitive  with a benchmark that for domestic plans is
60% Russell 3000 Index, 20% Lehman Long  Government/Credit  Index and 20% Lehman
Long Credit Index. For international  plans, the investment strategy is the same
as for domestic  plans and the  benchmark is a composite of 50% equities and 50%
fixed  income  indexes.   The  strategy  includes  the  following  target  asset
allocation:
--------------------------------------------------------------------------------
                                                 Domestic         International
--------------------------------------------------------------------------------
Equity Securities                                  39%                 48%
Fixed Income Securities                            40%                 49%
Real Estate                                         6%
Other                                              15%                  3%
--------------------------------------------------------------------------------
    Total                                         100%                100%
--------------------------------------------------------------------------------

A tactical allocation mandate, which is part of the overall investment strategy,
allows the actual  domestic  allocation  in equity  securities  to be reduced by
maximum of 6% relative to the total based on market valuations.

Equity  securities  include  Corning  common  stock in the amount of $11 million
(0.5% of total  plan  assets)  and $7  million  (0.4% of total  plan  assets) at
December 31, 2005 and 2004, respectively.

Cash Flow Data
--------------
We anticipate  making voluntary  contributions  of approximately  $35 million in
cash to our domestic and international pension plans in 2006.



The following  reflects the gross benefit payments which are expected to be paid
for the domestic and international plans and the gross amount of annual Medicare
Part D federal subsidy expected to be received (in millions):
------------------------------------------------------------------------------------------------------------------------
                                              Expected Benefit Payments
                                    -------------------------------------------    Expected Federal Subsidy Payments
                                    Pension Benefits   Postretirement Benefits        Post Retirement Benefits
-----------------------------------------------------------------------------------------------------------------------
                                                                                      
2006                                    $  153                $  76                            $  6
2007                                    $  150                $  81                            $  7
2008                                    $  149                $  84                            $  8
2009                                    $  147                $  87                            $  8
2010                                    $  148                $  90                            $  9
Years 2011-2015                         $  781                $ 475                            $ 49
-----------------------------------------------------------------------------------------------------------------------


Other Benefit Plans

We  offer  defined   contribution   plans  covering  employees  meeting  certain
eligibility   requirements.   On  January  1,  2003,  we  reduced  our  matching
contributions  to the domestic Corning  Incorporated  Investment Plan by 2.5% of
pay for all salaried employees.  This reduction was temporary,  and we increased
our contributions to prior levels effective January 1, 2004. Total  consolidated
defined  contribution plan expense was $34 million,  $28 million and $24 million
for the years ended December 31, 2005, 2004 and 2003, respectively.





14.  Commitments, Contingencies, and Guarantees

FASB  issued  Interpretation  No. 45,  "Guarantor's  Accounting  and  Disclosure
Requirements for Guarantees,  Including  Indirect  Guarantees of Indebtedness of
Others"  (FIN 45),  requires a company,  at the time a guarantee  is issued,  to
recognize a liability  for the fair value or market value of the  obligation  it
assumes.  In the normal  course of our  business,  we do not  routinely  provide
significant third-party guarantees.  Generally,  third-party guarantees provided
by Corning  are  limited to certain  financial  guarantees,  including  stand-by
letters  of credit and  performance  bonds,  and the  incurrence  of  contingent
liabilities in the form of purchase price  adjustments  related to attainment of
milestones.  These  guarantees have various terms,  and none of these guarantees
are individually significant.

Minimum rental commitments under leases outstanding at December 31, 2005 follow
(in millions):
--------------------------------------------------------------------------------

2006       2007         2008         2009        2010        2011 and thereafter
--------------------------------------------------------------------------------

$39        $51          $41          $19         $16               $62
--------------------------------------------------------------------------------

Total rental  expense was $67 for 2005, $54 million for 2004 and $66 million for
2003.

The ability of certain  subsidiaries and associated  companies to transfer funds
is limited by provisions of foreign government regulations, affiliate agreements
and certain loan agreements.  At December 31, 2005, the amount of equity subject
to such restrictions for consolidated  subsidiaries totaled $208 million.  While
this  amount  is  legally   restricted,   it  does  not  result  in  operational
difficulties since we have generally permitted subsidiaries to retain a majority
of equity to support their growth programs.  In addition, we have provided other
financial guarantees and contingent  liabilities in the form of stand-by letters
of credit and  performance  bonds.  We have agreed to provide a credit  facility
related to Dow Corning as discussed in Note 8 (Investments).  The funding of the
Dow  Corning  credit  facility  will  be  required  only if Dow  Corning  is not
otherwise  able to meet  its  scheduled  funding  obligations  in its  confirmed
Bankruptcy Plan. The purchase  obligations  primarily represent raw material and
energy-related take-or-pay contracts. We believe a significant majority of these
guarantees and contingent liabilities will expire without being funded.



The amounts of our obligations follow (in millions):
------------------------------------------------------------------------------------------------------------------------------------
                                                                   Amount of commitment and contingency expiration per period
                                                                   -----------------------------------------------------------
                                                                   Less than    1 to 2      2 to 3      3 to 4     5 years and
                                                         Total      1 year       years       years       years     thereafter
------------------------------------------------------------------------------------------------------------------------------------
                                                                                                   
Performance bonds and guarantees                       $    112    $    36      $    2      $    1                   $     73
Credit facilities for equity companies                      165                                         $   15            150
Stand-by letters of credit (1)                               47         47
Loan guarantees                                              15                                                            15
------------------------------------------------------------------------------------------------------------------------------------
Subtotal of commitment expirations per period          $    339    $    83      $    2      $    1      $   15       $    238
------------------------------------------------------------------------------------------------------------------------------------

Purchase obligations                                        219        180          33           2           2              2
Capital expenditure obligations (2)                         328        328
Total debt (3)                                            1,792         18          22          21         169          1,562
Minimum rental commitments                                  228         39          51          41          19             78
Interest on long-term debt (4)                            1,185        110         109         109         104            753
------------------------------------------------------------------------------------------------------------------------------------
Subtotal of contractual obligation payments
  due by period                                        $  3,752    $   675      $  215      $  173      $  294       $  2,395
------------------------------------------------------------------------------------------------------------------------------------

Total commitments and contingencies                    $  4,091    $   758      $  217      $  174      $  309       $  2,633
------------------------------------------------------------------------------------------------------------------------------------


(1)  At December 31, 2005,  $34 million of the $47 million was included in other
     accrued liabilities on our consolidated balance sheets.
(2)  Capital   expenditure   obligations,   primarily  related  to  our  Display
     Technologies segment expansions, are included on our balance sheet.
(3)  At December 31,  2005,  $1,807  million was included on our balance  sheet.
     Amounts above are stated at their maturity value.
(4)  The estimate of interest payments assumes interest is paid through the date
     of  maturity/expiration of the related debt, based upon stated rates in the
     respective debt instruments.

Corning  is  a  defendant   in  various   lawsuits,   including   environmental,
product-related  suits,  the Dow  Corning and PCC  matters  discussed  in Note 8
(Investments), and is subject to various claims which arise in the normal course
of business.  In the opinion of  management,  the ultimate  disposition of these
matters  will not have a  material  adverse  effect  on  Corning's  consolidated
financial position, liquidity or results of operations.





14.  Commitments, Contingencies, and Guarantees (continued)

We have been named by the  Environmental  Protection  Agency under the Superfund
Act,  or by  state  governments  under  similar  state  laws,  as a  potentially
responsible party for 11 active hazardous waste sites.  Under the Superfund Act,
all  parties  who may have  contributed  any waste to a  hazardous  waste  site,
identified  by such  Agency,  are jointly and  severally  liable for the cost of
cleanup unless the Agency agrees  otherwise.  It is our policy to accrue for the
estimated   liability  related  to  Superfund  sites  and  other   environmental
liabilities  related  to  property  owned  and  operated  by us based on  expert
analysis and continual monitoring by both internal and external consultants.  We
have  accrued  approximately  $13  million   (undiscounted)  for  the  estimated
liability for environmental cleanup and related litigation at December 31, 2005.
Based upon the information developed to date, we believe that the accrued amount
is a reasonable  estimate of our  liability  and that the risk of an  additional
loss in an amount materially higher than that accrued is remote.

15.  Hedging Activities

We operate and conduct  business in many foreign  countries  and as a result are
exposed to  movements  in foreign  currency  exchange  rates.  Our  exposure  to
exchange rate effects includes:

..    exchange  rate  movements  on  financial   instruments   and   transactions
     denominated in foreign currencies which impact earnings, and
..    exchange  rate  movements   upon   conversion  of  net  assets  in  foreign
     subsidiaries  for which the  functional  currency  is not the U.S.  dollar,
     which impact our net equity.

Our most significant  foreign currency exposures relate to Japan,  Korea, Taiwan
and western  European  countries.  We  selectively  enter into foreign  exchange
forward and option contracts with durations generally 15 months or less to hedge
our exposure to exchange rate risk on foreign source income and  purchases.  The
hedges are  scheduled  to mature  coincident  with the timing of the  underlying
foreign currency commitments and transactions.  The objective of these contracts
is to neutralize the impact of exchange rate movements on our operating results.

We engage in foreign currency hedging activities to reduce the risk that changes
in exchange  rates will adversely  affect the eventual net cash flows  resulting
from the sale of  products  to foreign  customers  and  purchases  from  foreign
suppliers.  The hedge contracts  reduce the exposure to fluctuations in exchange
rate movements  because the gains and losses  associated  with foreign  currency
balances  and  transactions  are  generally  offset with gains and losses of the
hedge  contracts.  Because the impact of movements in foreign  exchange rates on
the value of hedge contracts  offsets the related impact on the underlying items
being hedged,  these  financial  instruments  help alleviate the risk that might
otherwise result from currency exchange rate fluctuations.

The following table  summarizes the notional  amounts and respective fair values
of Corning's derivative financial instruments, which mature at varying dates, at
December 31, 2005 (in millions):
--------------------------------------------------------------------------------
                                            Notional Amount          Fair Value
--------------------------------------------------------------------------------
Foreign exchange forward contracts             $829                    $11
Foreign exchange option contracts              $374                    $10
--------------------------------------------------------------------------------

The  forward  and option  contracts  we use in  managing  our  foreign  currency
exposures contain an element of risk in that the counterparties may be unable to
meet the terms of the agreements. However, we minimize this risk by limiting the
counterparties   to  a  diverse  group  of   highly-rated   major  domestic  and
international   financial  institutions  with  which  we  have  other  financial
relationships.   We  are   exposed   to   potential   losses  in  the  event  of
non-performance by these counterparties; however, we do not expect to record any
losses  as a result  of  counterparty  default.  We do not  require  and are not
required to place collateral for these financial instruments.

In the second  quarter  of 2005,  Corning  began  using  derivative  instruments
(forwards)  to limit the exposure to foreign  currency  fluctuations  associated
with certain monetary assets and liabilities.  These derivative  instruments are
not designated as hedging  instruments for accounting purposes and, as such, are
referred to as  undesignated  hedges.  Changes in the fair value of undesignated
hedges  are  recorded  in  current  period  earnings  in the other  income,  net
component,  along with the foreign  currency  gains and losses  arising from the
underlying  monetary assets or  liabilities,  in the  consolidated  statement of
operations.  At December  31,  2005,  the  notional  amount of the  undesignated
derivatives was $366 million.

Cash Flow Hedges
----------------

Corning has cash flow hedges that relate to foreign  exchange forward and option
contracts.  The  critical  terms of each cash flow  hedge are  identical  to the
critical  terms of the hedged  item.  Therefore,  Corning  utilizes the critical
terms test under SFAS 133,  "Accounting  for Derivative  Instruments and Hedging
Activities"  (SFAS  133),  and  the  presumption  is  that  there  is  no  hedge
ineffectiveness  as long as the critical  terms of the hedge and the hedged item
do not change.  During the life of each hedge,  the critical  terms of the hedge
and the hedged item did not change.  We did not have any gain or loss from hedge
ineffectiveness.  We did not exclude any  components  of a hedge's  gain or loss
from the assessment of hedge effectiveness.





15.  Hedging Activities (continued)

Corning defers net gains and losses from cash flow hedges into accumulated other
comprehensive  income (loss) on the consolidated  balance sheet, until such time
as the hedged item impacts earnings. At that time Corning reclassifies net gains
and losses  from cash flow  hedges  into the same line item of the  consolidated
statement of  operations  as where the effects of the hedged item are  recorded,
typically  sales or cost of sales.  Amounts are  reclassified  from  accumulated
other  comprehensive  income  (loss) when the  underlying  hedged  item  impacts
earnings.  At  December  31,  2005,  the  amount  of net  gains  expected  to be
reclassified into earnings within the next 12 months is $22 million.

Fair Value Hedges
-----------------

In March and April of 2002,  we entered into three  interest rate swaps that are
fair value hedges and  economically  exchanged a notional amount of $275 million
of fixed rate long-term debt to floating rate debt.  Under the terms of the swap
agreements,  we paid the counterparty a floating rate that is indexed to the six
month LIBOR rate and received  the fixed rates of 8.3% to 8.875%,  which are the
stated  interest rates on the long-term debt  instruments.  As a result of these
transactions, Corning was exposed to the impact of interest rate changes.

Each fair value hedge (swap) had  identical  terms to the critical  terms of the
hedged item. Therefore,  Corning utilized the short-cut method allowed under FAS
133  which  presumes  that  there  is no  hedge  ineffectiveness  as long as the
critical  terms of the hedge and the hedged item do not change.  During the life
of each  hedge,  the  critical  terms of the hedge and the  hedged  item did not
change. We did not have any gain or loss from hedge ineffectiveness.  We did not
exclude any  components  of a hedge's gain or loss from the  assessment of hedge
ineffectiveness.

In 2004 and 2003, we  terminated  the interest  rate swap  agreements  described
above.  The  termination  of these swaps resulted in gains of $5 million in 2004
and $15 million in 2003 which we will  amortize  to  earnings as a reduction  of
interest expense over the remaining life of the debt. The cash proceeds from the
termination  of the swaps  total $8 million in 2004 and $17  million in 2003 and
are  included in the  financing  section of our  consolidated  statement of cash
flows.

Corning  records net gains and losses from fair value  hedges into the same line
item of the  consolidated  statement of  operations  as where the effects of the
hedged item are recorded.

Net Investment in Foreign Operations
------------------------------------

We have issued foreign  currency  denominated debt that has been designated as a
hedge of the net investment in a foreign operation. The effective portion of the
changes  in fair  value  of the  debt  is  reflected  as a  component  of  other
accumulated  comprehensive  income  (loss)  as  part  of  the  foreign  currency
translation  adjustment.  Net  losses  included  in the  cumulative  translation
adjustment  at December 31, 2005 and 2004,  were $107 million and $166  million,
respectively.






16.  Shareholders' Equity



The  following  table  presents  changes  in capital  stock for the period  from
January 1, 2003 to December 31, 2005 (in millions):
------------------------------------------------------------------------------------------------------------------------------------
                                                Series C Preferred Stock          Common Stock                  Treasury Stock
------------------------------------------------------------------------------------------------------------------------------------
                                                 Shares      Par Value         Shares      Par Value         Shares         Cost
------------------------------------------------------------------------------------------------------------------------------------
                                                                                                      
Balance at December 31, 2002                        2        $    155          1,267        $  634              (70)    $    (702)
   Shares issued in equity offerings                                              95            47
   Conversion of preferred stock                   (1)            (70)            35            18
   Shares issued to benefit plans                                                                                 6            65
   Shares issued in debt retirement                                                                               6            65
   Other                                                                           4             2                             (2)
------------------------------------------------------------------------------------------------------------------------------------
Balance at December 31, 2003 (Restated)             1        $     85          1,401        $  701              (58)    $    (574)
------------------------------------------------------------------------------------------------------------------------------------

   Conversion of preferred stock                                  (21)            11             5
   Shares issued to benefit plans                                                                                 4            36
   Shares issued in debt retirement                                                                              38           379
   Other                                                                          12             6                             (3)
------------------------------------------------------------------------------------------------------------------------------------
Balance at December 31, 2004 (Restated)             1        $     64          1,424        $  712              (16)    $    (162)
------------------------------------------------------------------------------------------------------------------------------------

   Shares issued in equity offerings                                              20            10
   Conversion of preferred stock                   (1)            (64)            32            16
   Shares issued to benefit plans                                                 39            20                              1
   Shares issued in debt retirement                                               37            18
   Other                                                                                                                       (7)
------------------------------------------------------------------------------------------------------------------------------------
Balance at December 31, 2005 (Restated)                                        1,552        $  776              (16)    $    (168)
------------------------------------------------------------------------------------------------------------------------------------


Preferred Stock

We have designated 2.4 million shares as Series A Junior Participating Preferred
Stock for which no shares have been issued. In June 1996, the Board of Directors
approved the renewal of the Preferred Share Purchase Right Plan,  which entitles
shareholders  to  purchase  0.01 of a share of  Series  A  Junior  Participating
Preferred Stock upon the occurrence of certain events.  In addition,  the rights
entitle shareholders to purchase shares of common stock at a 50% discount in the
event a person or group  acquires 20% or more of our  outstanding  common stock.
The preferred  share purchase  rights became  effective July 15, 1996 and expire
July 15, 2006.

On the mandatory conversion date of August 16, 2005, the remaining shares of our
7.00% Series C Mandatory Convertible Preferred Stock were converted into Corning
common  stock at a  conversion  rate of 50.813  shares of common  stock for each
preferred share.  Upon conversion of the preferred  shares, we issued 31 million
shares  of  Corning  common  stock  resulting  in an  increase  to equity of $62
million.  The Series C mandatory  convertible  preferred stock had a liquidation
preference of $100 per share, plus accrued and unpaid dividends.





16.  Shareholders' Equity (continued)

Accumulated Other Comprehensive Income (Loss)



Components  of  accumulated  other   comprehensive   income  (loss)  follow  (in
millions):
------------------------------------------------------------------------------------------------------------------------------------
                                                                                                        Net
                                                                                            Net      unrealized
                                                            Foreign       Minimum       unrealized      gains       Accumulated
                                                           currency       pension         gains      (losses) on      other
                                                          translation    liability      (losses) on   cash flow    comprehensive
                                                          adjustment    adjustment      investments    hedges     (loss) income
------------------------------------------------------------------------------------------------------------------------------------
                                                                                                       
December 31, 2002                                          $    9        $   (173)     $     2         $   (8)        $  (170)
    Foreign currency translation adjustment (net of
      tax of $38 million)                                     243                                                         243
    Minimum pension liability adjustment (net of
      tax of $(18) million) (1)                                                26                                          26
    Net unrealized gain on investments
      (net of tax of $3 million)                                                             1                              1
    Unrealized derivative loss on cash flow hedges
      (net of tax of $4 million)                                                                          (30)            (30)
    Reclassification adjustments on cash flow hedges
      (net of tax of $4 million)                                                                           32              32
------------------------------------------------------------------------------------------------------------------------------------
Balance at December 31, 2003 (Restated)                    $  252        $   (147)     $     3         $   (6)        $   102
------------------------------------------------------------------------------------------------------------------------------------

    Foreign currency translation adjustment (2)               178                                                         178
    Minimum pension liability adjustment (1)(2)                              (126)                                       (126)
    Net unrealized gain on investments (2)                                                   8                              8
    Unrealized derivative loss on cash flow hedges (2)                                                    (19)            (19)
    Reclassification adjustments on cash flow hedges (2)                                                   13              13
------------------------------------------------------------------------------------------------------------------------------------
Balance at December 31, 2004 (Restated)                    $  430        $   (273)     $    11         $  (12)        $   156
------------------------------------------------------------------------------------------------------------------------------------

    Foreign currency translation adjustment (2)              (255)                                                       (255)
    Minimum pension liability adjustment (1)(3)                               246                                         246
    Net unrealized loss on investments (4)                                                 (13)                           (13)
    Unrealized derivative gain on cash flow hedges (2)                                                     23              23
    Reclassification adjustments on cash flow hedges (2)                                                   21              21
------------------------------------------------------------------------------------------------------------------------------------
Balance at December 31, 2005 (Restated)                    $  175        $    (27)     $    (2)        $   32         $   178
------------------------------------------------------------------------------------------------------------------------------------


(1)  Includes adjustments from Dow Corning.
(2)  Zero tax  effect for 2004 and 2005.  Refer to Note 7 (Income  Taxes) for an
     explanation of Corning's tax paying position.
(3)  Net of tax effect of $84 million in 2005.
(4)  Net of tax effect of $2 million in 2005.







17.  Earnings (Loss) Per Common Share

Basic  earnings  (loss) per common share is computed by dividing  income  (loss)
attributable  to common  shareholders by the  weighted-average  number of common
shares  outstanding  for the period.  Diluted  earnings  (loss) per common share
assumes the issuance of common shares for all  potentially  dilutive  securities
outstanding.  Since we reported a loss from  continuing  operations  in 2004 and
2003, the diluted loss per common share is the same as the basic loss per common
share, as any potentially  dilutive  securities would reduce the loss per common
share from continuing operations.



The  reconciliation  of the amounts  used to compute  basic and diluted loss per
common share from continuing  operations follows (in millions,  except per share
amounts):
------------------------------------------------------------------------------------------------------------------------------------
                                                                  For the years ended December 31,
                                 --------------------------------------------------------------------------------------------------
                                          2005 (Restated)                  2004 (Restated)                  2003 (Restated)
                                 ------------------------------    ------------------------------      ----------------------------
                                            Weighted-     Per                 Weighted-     Per                Weighted-       Per
                                             Average     Share                 Average     Share                Average       Share
                                   Income    Shares     Amount       Loss      Shares     Amount       Loss     Shares       Amount
------------------------------------------------------------------------------------------------------------------------------------
                                                                                                  
Basic earnings (loss)
  per common share                 $  585     1,464      $0.40    $ (2,251)     1,386     $(1.62)      $(280)    1,274       $(0.22)

Effect of dilutive securities:
  Stock compensation awards                      41
  7% mandatory convertible
    preferred stock (1)                          20
  3.5% convertible debentures           3        10
------------------------------------------------------------------------------------------------------------------------------------

Diluted Earnings (Loss)
  Per Common Share                 $  588     1,535      $0.38    $ (2,251)     1,386     $(1.62)      $(280)    1,274      $(0.22)
------------------------------------------------------------------------------------------------------------------------------------


(1)  On the mandatory  conversion date of August 16, 2005, the remaining  shares
     of our 7.00% Series C Mandatory  Convertible Preferred Stock were converted
     into Corning  common stock at a conversion  rate of 50.813 shares of common
     stock for each preferred share. Upon conversion of the preferred shares, we
     issued 31 million shares of Corning  common stock  resulting in an increase
     to equity of $62 million.



The following  potential  common shares were  excluded from the  calculation  of
diluted loss per common share due to their anti-dilutive  effect or, in the case
of stock  options,  because  their  exercise  price was greater than the average
market price for the periods presented (in millions):
------------------------------------------------------------------------------------------------------------------------------------
                                                                     For the years ended December 31,
                                                              --------------------------------------------
                                                                 2005              2004              2003
------------------------------------------------------------------------------------------------------------------------------------
                                                                                            
Potential common shares excluded from the calculation
  of diluted loss per share:
     Stock options                                                                  34                19
     7% mandatory convertible preferred stock (1)                                   36                65
     3.5% convertible debentures                                                    41                69
     4.875% convertible notes (2)                                   4                6                 6
     Zero coupon convertible debentures                             2                3                10
------------------------------------------------------------------------------------------------------------------------------------
     Total                                                          6              120               169
------------------------------------------------------------------------------------------------------------------------------------

Stock options excluded from the calculation of diluted
  loss per share because the exercise
  price was greater than the average
  market price of the common shares                                47               59                76
------------------------------------------------------------------------------------------------------------------------------------


(1)  On the mandatory  conversion date of August 16, 2005, the remaining  shares
     of our 7.00% Series C Mandatory  Convertible Preferred Stock were converted
     into Corning  common stock at a conversion  rate of 50.813 shares of common
     stock for each preferred share. Upon conversion of the preferred shares, we
     issued 31 million shares of Corning  common stock  resulting in an increase
     to equity of $62 million.
(2)  In the third quarter of 2005,  substantially all holders of our $96 million
     outstanding  Oak 4 7/8%  subordinated  notes elected to convert their notes
     into Corning  common stock.  The  conversion  ratio was 64.41381  shares of
     Corning common stock for each $1,000  principal  amount of notes.  Upon the
     conversion  of these notes,  we issued 6 million  shares of Corning  common
     stock resulting in an increase to equity of $95 million.






18.  Stock Compensation Plans

At December 31, 2005, our stock compensation programs are in accordance with the
2005 Employee Equity Participation Program and 2003 Equity Plan for Non-Employee
Directors  Program.  Any ungranted shares from prior years will be available for
grant in the  current  year.  At  December  31,  2005,  111  million  shares are
available  under these  programs for 2006.  Any remaining  shares  available for
grant, but not yet granted, will be carried over and used in the following year.

Stock Option Plans

Our stock option plans  provide  non-qualified  and  incentive  stock options to
purchase  authorized but unissued or treasury  shares at the market price on the
grant date and generally  become  exercisable in  installments  from one to five
years from the grant date. The maximum term of non-qualified and incentive stock
options is 10 years from the grant date.

Changes in the status of outstanding options follow:
-------------------------------------------------------------------------------
                                               Number               Weighted-
                                              of Shares              Average
                                           (in thousands)        Exercise Price
-------------------------------------------------------------------------------

Options outstanding January 1, 2003            97,327                $ 26.47
Options granted under plans                    40,953                $  5.85
Options exercised                              (1,547)               $  6.75
Options terminated                             (1,381)               $ 16.26
-------------------------------------------------------------------------------
Options outstanding December 31, 2003         135,352                $ 20.58
-------------------------------------------------------------------------------

Options granted under plans                    13,625                $ 11.98
Options exercised                              (8,401)               $  6.15
Options terminated                             (1,553)               $ 27.49
-------------------------------------------------------------------------------
Options outstanding December 31, 2004         139,023                $ 20.43
-------------------------------------------------------------------------------

Options granted under plans                    10,141                $ 14.87
Options exercised                             (24,360)               $  8.72
Options terminated                             (4,300)               $ 39.23
-------------------------------------------------------------------------------
Options outstanding December 31, 2005         120,504                $ 21.67
Options exercisable at December 31, 2005       97,015                $ 24.55
-------------------------------------------------------------------------------
Options exercisable at December 31, 2004      108,126                $ 24.22
Options exercisable at December 31, 2003       72,867                $ 27.47
-------------------------------------------------------------------------------

The  weighted-average  fair value of options granted was $6.18 in 2005, $4.99 in
2004 and $3.82 in 2003.



The  following  table  summarizes  information  about our stock  option plans at
December 31, 2005:
------------------------------------------------------------------------------------------------------------------------------------
                                            Options Outstanding                                   Options Exercisable
------------------------------------------------------------------------------------------------------------------------------------
                             Number          Weighted-Average                                Number
                         Outstanding at          Remaining           Weighted-           Exercisable at           Weighted-
       Range of         December 31, 2005    Contractual Life         Average           December 31, 2005          Average
    Exercise Prices      (in thousands)          in Years         Exercise Price         (in thousands)        Exercise Price
------------------------------------------------------------------------------------------------------------------------------------
                                                                                                   
   $   1.54 to 3.80          11,761                5.4               $  3.28                  4,157               $  2.36
   $   4.06 to 6.93          15,775                7.0               $  4.79                 13,674               $  4.85
   $   7.08 to 9.95          24,049                6.1               $  8.44                 23,846               $  8.45
   $ 10.05 to 15.87          27,255                7.7               $ 12.66                 16,521               $ 13.02
   $ 16.02 to 29.58          14,087                6.1               $ 20.20                 11,275               $ 20.06
   $ 30.01 to 59.35          11,518                4.7               $ 46.86                 11,483               $ 46.86
   $ 60.24 to 74.09          15,566                4.6               $ 69.31                 15,566               $ 69.31
   $76.03 to 111.00             493                4.7               $ 92.23                    493               $ 92.23
------------------------------------------------------------------------------------------------------------------------------------
                            120,504                6.3               $ 21.67                 97,015               $ 24.55
------------------------------------------------------------------------------------------------------------------------------------





18.  Stock Compensation Plans (continued)

Incentive Stock Plans

The Corning  Incentive  Stock Plan permits  stock grants,  either  determined by
specific performance goals or issued directly, in most instances, subject to the
possibility  of  forfeiture  and without  cash  consideration.  Shares under the
Incentive Stock Plan are generally granted at-the-money,  contingently vest over
a period of 1 to 10 years, and have contractual lives of 1 to 10 years.

In 2005,  2004 and 2003,  grants  of  2,726,000  shares,  3,051,000  shares  and
1,842,000 shares, respectively,  were made under this plan. The weighted-average
price of the  grants  was  $17.70 in 2005,  $12.57  in 2004 and  $10.61 in 2003,
respectively.  A  total  of  7.6  million  shares  issued  remained  subject  to
forfeiture at December 31, 2005.

We apply APB 25 accounting for our stock-based compensation plans.  Compensation
expense is recorded for awards of shares or share rights over the period earned.
Compensation  expense of $37 million, $5 million and $1 million, net of tax, was
recorded in 2005, 2004 and 2003, respectively.

SFAS 123  requires  that reload  options be treated as separate  grants from the
related  original option grants.  Under our reload program,  upon exercise of an
option,  employees may tender  unrestricted shares owned at the time of exercise
to pay the  exercise  price and  related tax  withholding,  and receive a reload
option  covering  the same number of shares  tendered  for such  purposes at the
market  price on the date of exercise.  The reload  options vest in one year and
are only granted in certain circumstances according to the original terms of the
option being exercised. The existence of the reload feature results in a greater
number of options being measured.

For  purposes of SFAS 123  disclosure,  the fair value of each  option  grant is
estimated  on the date of grant  using the  Black-Scholes  option-pricing  model
through  November 30, 2005. For options  granted after that time, the fair value
is estimated using a lattice-based option valuation model.

The following are weighted-average  inputs for the Black-Scholes  option-pricing
model used for grants under our stock plans  through  November 2005 and in 2004,
and 2003, respectively:
--------------------------------------------------------------------------------
                                       2005             2004              2003
--------------------------------------------------------------------------------
Expected life in years                   4                4                 5
Risk free interest rate                3.8%             3.4%              2.9%
Expected volatility                     50%              50%               79%
--------------------------------------------------------------------------------

During 2004,  Corning  updated its  analysis of the  historical  stock  exercise
behavior of its employees, among other relevant factors, and determined that the
best estimate of the stock  options'  expected term granted in 2004 was 4 years,
compared  to our  previous  expected  term  estimate  of 5 years.  Additionally,
Corning  used a 10-year  mean  reversion  analysis,  as allowed by SFAS 123,  to
determine  the  volatility  assumption  also used to estimate  the fair value of
options  granted  in 2004.  Prior  to 2004,  Corning  used  historical  trailing
volatility for a period equal to the expected term of our stock options. Corning
believes  a mean  reversion  analysis  provides  a  better  estimate  of  future
volatility expectations.

The  lattice-based  valuation model,  used to estimate the fair values of option
and  restricted   stock  grants  after  November  30,  2005,   incorporates  the
assumptions (including ranges of assumptions) noted in the table below. Expected
volatilities are based on implied  volatilities from traded options on Corning's
stock, historical volatility of Corning's stock, and other factors.

In  estimating  option grant fair value under the lattice  based model,  Corning
uses historical data to estimate future option exercise and employee termination
within the valuation  model and separate  groups of employees  that have similar
historical  exercise behavior are considered  separately for valuation purposes.
The expected  term of options  granted is derived  using a regression  model and
represents  the  period  of  time  that  options  granted  are  expected  to  be
outstanding.  The range given below  results  from  certain  groups of employees
exhibiting  different  behavior.  The  risk-free  rate for  periods  within  the
contractual  life of the  option is based on the U.S.  Treasury  yield  curve in
effect at the time of grant.





18.  Stock Compensation Plans (continued)

The following inputs for the lattice-based  valuation model were used for option
grants under our Stock Option Plans since December 1, 2005:
--------------------------------------------------------------------------------
                                                2005
--------------------------------------------------------------------------------
Expected volatility                            37-53%
Weighted-average volatility                      49%
Expected dividends                                0
Expected term (in years)                       3.7-4.9
Risk-free rate                                1.0-9.7%
Expected time to exercise (in years)           2.5-3.6
Pre-vesting departure rate                       3%
Post vesting departure rates                   10-16%
--------------------------------------------------------------------------------

The fair value of each  restricted  stock grant under the Incentive  Stock Plans
after  November  30, 2005 was  estimated  on the date of grant using the lattice
valuation model and for performance  based grants assumes that performance goals
will be achieved.  The  assumptions  for annual  departure  probability  used in
estimating  Incentive Stock grant fair values are the same as those noted in the
table above  related to grants  under our Stock Option  Plans,  for stock issued
since December 1, 2005.  The expected term for grants under the Incentive  Stock
Plans is 1 to 10 years.

Worldwide Employee Share Purchase Plan

In  addition to the Stock  Option  Plan and  Incentive  Stock  Plans,  we have a
Worldwide Employee Share Purchase Plan (WESPP).  Under the WESPP,  substantially
all  employees  can elect to have up to 10% of their  annual  wages  withheld to
purchase our common stock.  The purchase  price of the stock is 85% of the lower
of the beginning-of-quarter or end-of-quarter closing market price.

19.  Operating Segments

Corning conducts its worldwide operations through operating segments,  which are
defined  as  components  of  an  enterprise   about  which  separate   financial
information  is  available  that is evaluated  regularly by the chief  operating
decision maker, or decision making group, in deciding how to allocate  resources
and in assessing  performance.  Our Chief Operating Decision Making group (CODM)
is comprised of the president  and chief  executive  officer,  vice chairman and
chief financial officer, chief operating officer, executive vice president-chief
administrative officer,  executive vice president-chief  technology officer, and
senior vice president and operations chief of staff.

Our reportable operating segments follow:

..    Display  Technologies - manufactures  liquid crystal display glass for flat
     panel displays;
..    Telecommunications  - manufactures optical fiber and cable and hardware and
     equipment components for the telecommunications industry;
..    Environmental  Technologies - manufactures  ceramic  substrates and filters
     for automobile and diesel applications; and
..    Life Sciences - manufactures  glass and plastic  consumables for scientific
     applications.

The  Environmental  Technologies  reportable  segment is an  aggregation  of our
Automotive and Diesel  operating  segments,  as these two segments share similar
economic  characteristics,  products,  customer types,  production processes and
distribution methods.

All other  operating  segments that do not meet the  quantitative  threshold for
separate reporting (e.g., Specialty Materials, Ophthalmic and Conventional Video
Components),  certain  corporate  investments  (e.g.  Dow Corning and  Steuben),
discontinued  operations,  and unallocated  expenses  (including other corporate
items)  have been  grouped as  "Unallocated  and  Other."  Unallocated  expenses
include:  gains or losses on repurchases and retirement of debt; charges related
to the asbestos litigation;  restructuring and impairment charges related to the
corporate  research  and  development  or staff  organizations;  and charges for
increases in our tax valuation allowance.  Unallocated and Other also represents
the  reconciliation  between  the totals  for the  reportable  segments  and our
consolidated operating results.

We prepared the financial results for our reportable segments on a basis that is
consistent  with  the  manner  in  which we  internally  disaggregate  financial
information to assist in making  internal  operating  decisions.  We include the
earnings of equity  affiliates  that are closely  associated  with our operating
segments in the  respective  segment's  net income.  We have  allocated  certain
common  expenses  among  segments  differently  than we  would  for  stand-alone
financial  information  prepared in accordance with GAAP. These expenses include
interest,  taxes  and  corporate  functions.  Segment  net  income  may  not  be
consistent with measures used by other companies. The accounting policies of our
reportable segments are the same as those applied in the consolidated  financial
statements.  Revenue  attributed to geographic areas is based on the location of
the customer.





19.  Operating Segments (continued)

Geographic Concentration

A  significant  amount of  specialized  manufacturing  capacity  for our Display
Technologies segment is concentrated in Asia. It is at least reasonably possible
that the use of a facility  located outside of an entity's home country could be
disrupted. Due to the specialized nature of the assets, it would not be possible
to find replacement  capacity quickly.  Accordingly,  loss of the facility could
produce a near-term  severe impact to our display  business and the company as a
whole.


------------------------------------------------------------------------------------------------------------------------------------
                                                                                           Restated
                                                        ----------------------------------------------------------------------------
                                                           Display     Telecom-    Environmental    Life   Unallocated  Consolidated
                                                        Technologies  munications  Technologies   Sciences  and Other       Total
------------------------------------------------------------------------------------------------------------------------------------
                                                                                                       
For the year ended December 31, 2005 (Restated)
Net sales                                                 $ 1,742      $ 1,623       $    580     $    282   $    352    $  4,579
Depreciation (1)                                          $   186      $   172       $     72     $     21   $     48    $    499
Amortization of purchased intangibles                                  $    13                                           $     13
Research, development and engineering expenses (2)        $   121      $    96       $    114     $     53   $     59    $    443
Restructuring, impairment and other charges
  and (credits) (8)                                                    $   (47)                              $      9    $    (38)
Interest expense (3)                                      $    55      $    30       $     20     $      4   $     (1)   $    108
(Provision) benefit for income taxes (9)                  $  (151)     $     4       $      7     $      6   $   (444)   $   (578)
Income (loss) before minority interests and equity
  (losses) earnings (4)                                   $   679      $    29       $    (26)    $    (25)  $   (676)   $    (19)
Minority interests (5)                                                       2                                     (9)         (7)
Equity in earnings of associated companies,
  net of impairments (6)                                      416            5                                    190         611
------------------------------------------------------------------------------------------------------------------------------------
Net income (loss)                                         $ 1,095      $    36       $    (26)    $    (25)  $   (495)   $    585
------------------------------------------------------------------------------------------------------------------------------------
Investment in associated companies, at equity             $   860      $    11       $     31                $    823    $  1,725
Segment assets (7)                                        $ 3,626      $ 1,153       $    726     $    137   $  5,565    $ 11,207
Capital expenditures                                      $ 1,250      $    43       $    171     $     17   $     72    $  1,553
------------------------------------------------------------------------------------------------------------------------------------

For the year ended December 31, 2004 (Restated)
Net sales                                                 $ 1,113      $ 1,539       $    548     $    304   $    350    $  3,854
Depreciation (1)                                          $   131      $   204       $     65     $     22   $     63    $    485
Amortization of purchased intangibles                                  $    37                               $      1    $     38
Research, development and engineering expenses (2)        $    83      $    90       $     87     $     38   $     57    $    355
Restructuring, impairment and other charges and (credits)              $ 1,798                               $     (9)   $  1,789
Interest expense (3)                                      $    52      $    50       $     22     $      5   $      4    $    133
(Provision) benefit for income taxes                      $  (146)     $    29                    $     (6)  $   (961)   $ (1,084)
Income (loss) before minority interests and equity
  (losses) earnings (4)                                   $   258      $(1,862)      $      3     $     12   $ (1,099)   $ (2,688)
Minority interests (5)                                                       2                                    (19)        (17)
Equity in earnings of associated companies,
  net of impairments (6)                                      288          (33)             1                     198         454
Income from discontinued operations                                                                                20          20
------------------------------------------------------------------------------------------------------------------------------------
Net income (loss)                                         $   546      $(1,893)      $      4     $     12   $   (900)   $ (2,231)
------------------------------------------------------------------------------------------------------------------------------------
Investment in associated companies, at equity             $   582      $    23       $     31                $    813    $  1,449
Segment assets (7)                                        $ 2,470      $ 1,341       $    587     $    123   $  5,249    $  9,770
Capital expenditures                                      $   640      $    32       $    124     $     11   $     50    $    857
------------------------------------------------------------------------------------------------------------------------------------

For the year ended December 31, 2003 (Restated)
Net sales                                                 $   595      $ 1,426       $    476     $    281   $    312    $  3,090
Depreciation (1)                                          $   110      $   246       $     80     $     38   $      6    $    480
Amortization of purchased intangibles                                  $    37                                           $     37
Research, development and engineering expenses (2)        $    55      $   120       $     87     $     28   $     54    $    344
Restructuring, impairment and other charges and (credits)              $   (36)                              $    147    $    111
Interest expense (3)                                      $    39      $    75       $     19     $      5   $     11    $    149
(Provision) benefit for income taxes                      $   (45)     $    78       $     (5)    $     (7)  $    286    $    307
Income (loss) before minority interests and equity
  (losses) earnings (4)                                   $    91      $  (158)      $      9     $     14   $   (525)   $   (569)
Minority interests (5)                                                                                             73          73
Equity in earnings of associated companies,
  net of impairments (6)                                      144          (11)                                    83         216
------------------------------------------------------------------------------------------------------------------------------------
Net income (loss)                                         $   235      $  (169)      $      9     $     14   $   (369)   $   (280)
------------------------------------------------------------------------------------------------------------------------------------
Investment in associated companies, at equity             $   299      $    59       $     30                $    601    $    989
Segment assets (7)                                        $ 1,297      $ 1,848       $    485     $    111   $  7,075    $ 10,816
Capital expenditures                                      $   251      $    15       $     69     $      7   $     24    $    366
------------------------------------------------------------------------------------------------------------------------------------






19.  Operating Segments (continued)

(1)  Depreciation   expense  for  Corning's   reportable  segments  includes  an
     allocation  of   depreciation  of  corporate   property  not   specifically
     identifiable to a segment.  Related depreciable assets are not allocated to
     segment assets.
(2)  Non-direct research,  development and engineering expenses are allocated to
     segments based upon direct project spending for each segment.
(3)  Interest  expense is allocated to segments based on a percentage of segment
     net operating assets.
(4)  Many of Corning's  administrative  and staff  functions  are performed on a
     centralized  basis.  Where  practicable,  Corning charges these expenses to
     segments  based upon the extent to which each  business  uses a centralized
     function. Other staff functions, such as corporate finance, human resources
     and legal are allocated to segments, primarily as a percentage of sales.
(5)  Minority  interests  include the following  restructuring,  impairment  and
     other charges and (credits):
     .    In 2004, gains from the sale of assets of Corning Asahi Video (CAV) in
          excess of assumed  salvage value of $17 million,  and reversals of CAV
          severance reserves of $2 million.
     .    In 2003,  impairment  charges  for  long-lived  assets of CAV and exit
          costs of $57 million.
(6)  Equity in earnings of associated companies, net of impairments includes the
     following restructuring and impairment charges:
     .    In 2004 and 2003, charges of $35 million and $7 million, respectively,
          to impair equity method investments in the Telecommunications  segment
          to their estimated fair value.
     .    In  2004,  Dow  Corning   Corporation   recorded  charges  related  to
          restructuring actions and adjustments to interest liabilities recorded
          on its emergence from  bankruptcy.  Our equity  earnings  included $21
          million related to these charges.
     .    In  2005  and  2003,   charges  of  $106   million  and  $66  million,
          respectively,  to reflect  our share of Samsung  Corning  Co.,  Ltd.'s
          asset impairment charges.
(7)  Segment  assets  include  inventory,  accounts  receivable,   property  and
     associated equity companies and cost investments.
(8)  Restructuring,  impairment  and other  charges and (credits)  includes:  in
     2005,  an  impairment  charge of $25 million  for the  other-than-temporary
     decline in our  investment  in Avanex  below its cost basis;  a loss of $16
     million associated with the redemption or retirement of debt.
(9)  (Provision) benefit for income taxes includes,  in 2005, a net $443 million
     charge  to tax  expense  which  included  a $525  million  increase  to our
     valuation   allowance  against  deferred  tax  assets  resulting  from  our
     conclusion that the sale of an appreciated asset no longer met the criteria
     established by SFAS No. 109,  "Accounting  for Income Taxes" (SFAS No. 109)
     for a viable tax planning  strategy  offset by an $82 million credit to tax
     expense  primarily  related to the tax impact of  eliminating  the  minimum
     pension liability associated with our domestic defined benefit plan.

Each of our reportable segments is concentrated across a relatively small number
of  customers.  For the year ended  December  31,  2005,  five  customers of the
Display  Technologies  segment,  each of which  accounted  for more  than 10% of
segment  net  sales,   accounted  for  75%  of  total  segment  sales.   In  the
Telecommunications segment, two customers, each of which accounted for more than
10% of this  segment's  net sales,  accounted  for 29% of total segment sales in
2005. In the Environmental  Technologies segment, three customers, each of which
accounted for more than 10% of segment sales,  represented  76% of total segment
sales in 2005. In the Life Sciences segment,  one customer  accounted for 53% of
this segment's sales for 2005.



A  reconciliation  of reportable  segment net income (loss) to consolidated  net
income (loss) follows (in millions):
------------------------------------------------------------------------------------------------------------------------------------
                                                                                     Years ended December 31,
                                                                      -------------------------------------------------------
                                                                       2005 Restated       2004 Restated       2003 Restated
------------------------------------------------------------------------------------------------------------------------------------
                                                                                                       
Net income (loss) of reportable segments                                 $  1,080            $ (1,331)          $      89
Non-reportable operating segments net (loss) income (1)                      (100)                 16                (139)
Unallocated amounts:
    Non-segment loss and other (2)                                            (13)                 (5)                (46)
    Non-segment restructuring, impairment and
       other (charges) and credits                                            (25)                  4                 (13)
    Asbestos settlement                                                      (218)                (65)               (535)
    Interest income                                                            61                  25                  32
    (Loss) gain on repurchases of debt                                        (16)                (36)                 19
    (Provision) benefit for income taxes (3)                                 (451)               (986)                223
    Minority interests
    Equity in earnings of associated companies, net of impairments (4)        267                 127                  90
    Income from discontinued operations                                                            20
                                                                         --------            --------           ---------
Net income (loss)                                                        $    585            $ (2,231)          $    (280)
------------------------------------------------------------------------------------------------------------------------------------


(1)  Non-reportable operating segments net (loss) income includes the results of
     non-reportable operating segments.
(2)  Non-segment  loss and other includes the results of non-segment  operations
     and other corporate activities.
(3)  (Provision)  benefit  for  income  taxes  includes  taxes  associated  with
     non-segment  restructuring,  impairment and other charges (credits) as well
     as $525 million and $937 million for the impact of establishing a valuation
     allowance   against   certain   deferred  tax  assets  in  2005  and  2004,
     respectively, and offset by an $82 million benefit primarily for the impact
     of eliminating the minimum pension liability of our domestic qualified plan
     in 2005.
(4)  Equity in earnings of associated  companies,  net of  impairments  includes
     amounts   derived  from  corporate   investments,   primarily  Dow  Corning
     Corporation.

The following  table provides net sales for the  Telecommunications  segment (in
millions):
--------------------------------------------------------------------------------
                                                Years ended December 31,
                                        ---------------------------------------
                                          2005            2004           2003
--------------------------------------------------------------------------------
Net sales:
   Optical fiber and cable              $    834       $     755       $    760
   Hardware and equipment                    789             784            612
   Photonic technologies                                                     54
                                        --------       ---------       --------
     Total net sales                    $  1,623       $   1,539       $  1,426
--------------------------------------------------------------------------------





19.  Operating Segments (continued)

The  following  table  provides  net  sales for the  Environmental  Technologies
segment (in millions):
--------------------------------------------------------------------------------
                                                Years ended December 31,
                                        ---------------------------------------
                                          2005            2004           2003
--------------------------------------------------------------------------------
Net sales:
   Automotive                           $    482       $     479       $    430
   Diesel                                     98              69             46
                                        --------       ---------       --------
     Total net sales                    $    580       $     548       $    476
--------------------------------------------------------------------------------

The following table provides net sales for the Unallocated and Other segment (in
millions):
--------------------------------------------------------------------------------
                                                Years ended December 31,
                                        ---------------------------------------
                                          2005            2004           2003
--------------------------------------------------------------------------------
Net sales:
   Conventional video components                       $       3       $     65
   Other businesses                     $    352             347            247
                                        --------       ---------       --------
     Total net sales                    $    352       $     350       $    312
--------------------------------------------------------------------------------

A reconciliation of reportable segment assets to consolidated assets follows (in
millions):
--------------------------------------------------------------------------------
                                                  Years ended December 31,
                                           ------------------------------------
                                             2005          2004          2003
                                          (Restated)    (Restated)    (Restated)
--------------------------------------------------------------------------------
Total assets of reportable segments        $  5,642     $   4,521      $  3,741
Non-reportable operating segments assets        772           724           673
Unallocated amounts:
    Current assets (1)                        2,682         2,171         1,751
    Investments (2)                             332           433           285
    Property, net (3)                           836           886           973
    Other non-current assets (4)                943         1,035         3,393
                                           --------     ---------      --------
Total assets                               $ 11,207     $   9,770      $ 10,816
--------------------------------------------------------------------------------

(1)  Includes current corporate assets,  primarily cash, short-term  investments
     and deferred taxes.
(2)  Represents corporate investments in associated companies,  at both cost and
     equity (primarily Dow Corning Corporation).
(3)  Represents corporate property not specifically identifiable to an operating
     segment.
(4)  Includes non-current corporate assets, pension assets and deferred taxes.





19.  Operating Segments (continued)



Information concerning principal geographic areas was as follows (in millions):
------------------------------------------------------------------------------------------------------------------------------------
                                           2005 (Restated)                 2004 (Restated)                  2003 (Restated)
------------------------------------------------------------------------------------------------------------------------------------
                                        Net        Long-lived            Net       Long-lived            Net        Long-lived
                                       Sales       Assets (1)           Sales      Assets (1)           Sales       Assets (1)
------------------------------------------------------------------------------------------------------------------------------------
                                                                                                  
North America
   United States                     $ 1,339        $  3,400          $ 1,337      $   2,982         $   1,222      $   4,435
   Canada                                107                              120                               88             70
   Mexico                                 56             114               43             23                65             72
------------------------------------------------------------------------------------------------------------------------------------
       Total North America             1,502           3,514            1,500          3,005             1,375          4,577
------------------------------------------------------------------------------------------------------------------------------------

Asia Pacific
   Japan                                 688             541              540            511               382            349
   Taiwan                              1,230           1,696              705            985               322            231
   China                                 144              74              101             73               134            191
   Korea                                  53           1,092               60            938                55            620
   Other                                 155               3              174              8               150             22
------------------------------------------------------------------------------------------------------------------------------------
       Total Asia Pacific              2,270           3,406            1,580          2,515             1,043          1,413
------------------------------------------------------------------------------------------------------------------------------------

Europe
   Germany                               261             159              274            212               198            295
   France                                 43             105               40            124                42            133
   United Kingdom                         81              69               65             80                74             67
   Italy                                  30                               38                               36            268
   Other                                 265              68              236             58               194             88
------------------------------------------------------------------------------------------------------------------------------------
       Total Europe                      680             401              653            474               544            851
------------------------------------------------------------------------------------------------------------------------------------

Latin America
   Brazil                                 19               3               19              3                17              2
   Other                                  16                               12                               11              1
------------------------------------------------------------------------------------------------------------------------------------
       Total Latin America                35               3               31              3                28              3
------------------------------------------------------------------------------------------------------------------------------------

All Other                                 92              13               90             18               100
------------------------------------------------------------------------------------------------------------------------------------
       Total                         $ 4,579        $  7,337          $ 3,854      $   6,015         $   3,090      $   6,844
------------------------------------------------------------------------------------------------------------------------------------


(1)  Long-lived  assets  primarily  include  investments,  plant and  equipment,
     goodwill and other intangible assets.






20.  Subsequent Events

On January 1, 2006, Corning changed its measurement of segment profit or loss
for the following items:
..    We removed the net impact of financing  costs,  such as interest expense on
     debt  instruments and interest costs  associated  with benefit plans,  from
     reportable  segments and included  these  amounts in Corporate  unallocated
     expense.
..    We changed  the  allocation  method for taxes to more  closely  reflect the
     company's current tax position.
..    We  removed  the  impact  of  non-cash  stock  compensation   expense  from
     reportable  segments  and  included  this amount in  Corporate  unallocated
     expense.
..    We  removed  the  allocation  of  exploratory  research,   development  and
     engineering expense from the reportable segments and included these amounts
     in Corporate unallocated expense.
..    We  changed  certain  other  expense   allocation   methods  for  Corporate
     functions.

The following provides historical segment  information  reflecting these changes
in the  measurement  of  segment  profit  or loss  for  2005,  2004 and 2003 and
quarterly information for 2005.

Our reportable operating segments follow:

..    Display  Technologies - manufactures  liquid crystal display glass for flat
     panel displays;
..    Telecommunications  - manufactures optical fiber and cable and hardware and
     equipment components for the telecommunications industry;
..    Environmental  Technologies - manufactures  ceramic  substrates and filters
     for automobile and diesel applications; and
..    Life Sciences - manufactures  glass and plastic  consumables for scientific
     applications.

The  Environmental  Technologies  reportable  segment is an  aggregation  of our
Automotive and Diesel  operating  segments,  as these two segments share similar
economic  characteristics,  products,  customer types,  production processes and
distribution methods.

All other  operating  segments that do not meet the  quantitative  threshold for
separate reporting have been grouped as "Other Segments."





20.  Subsequent Events (continued)



Restated Segment Information (in millions)
------------------------------------------------------------------------------------------------------------------------------------
                                                           Display     Telecom-    Environmental     Life       Other
                                                        Technologies  munications  Technologies    Sciences   Segments      Total
------------------------------------------------------------------------------------------------------------------------------------
                                                                                                       
For the year ended December 31, 2005 (Restated)
Net sales                                                 $ 1,742      $ 1,623       $    580     $    282   $    352    $  4,579
Depreciation (1)                                          $   185      $   180       $     70     $     20   $     35    $    490
Amortization of purchased intangibles                                  $    13                                           $     13
Research, development and engineering expenses (2)        $   107      $    76       $    102     $     40   $     28    $    353
Restructuring, impairment and other charges and
  (credits) (before-tax and minority interest)                         $   (47)                              $    (16)   $    (63)
Income tax provision                                      $  (122)     $   (15)      $     (5)    $     (2)  $     (3)   $   (147)
Earnings (loss) before minority interest and equity
  earnings (loss) (3)                                     $   823      $    61       $     15     $     (4)  $     19    $    914
Minority interests (4)                                                 $     2                               $     (9)   $     (7)
Equity in earnings (loss) of associated companies (5)     $   416      $     5                               $    (76)   $    345
------------------------------------------------------------------------------------------------------------------------------------
Net income (loss)                                         $ 1,239      $    68       $     15     $     (4)  $    (66)   $  1,252
------------------------------------------------------------------------------------------------------------------------------------
Investment in associated companies, at equity             $   860      $    11       $     31                $    296    $  1,198
Segment assets (6)                                        $ 3,626      $ 1,153       $    726     $    137   $    573    $  6,215
Capital expenditures                                      $ 1,250      $    43       $    171     $     17   $     25    $  1,506
------------------------------------------------------------------------------------------------------------------------------------

For the year ended December 31, 2004 (Restated)
Net sales                                                 $ 1,113      $ 1,539       $    548     $    304   $    350    $  3,854
Depreciation (1)                                          $   129      $   209       $     63     $     20   $     51    $    472
Amortization of purchased intangibles                                  $    37                                           $     37
Research, development and engineering expenses (2)        $    70      $    69       $     76     $     27   $     32    $    274
Restructuring, impairment and other charges and
  (credits) (before-tax and minority interest)                         $ 1,798                               $     (6)   $  1,792
Income tax (provision) benefit                            $   (71)     $   (25)      $    (40)    $    (30)  $     12    $   (154)
Earnings (loss) before minority interest and equity
  earnings (loss) (3)                                     $   429      $(1,843)      $     20     $     16   $    (23)   $ (1,401)
Minority interests (4)                                                 $     2                               $    (18)   $    (16)
Equity in earnings (loss) of associated companies (5)     $   288      $   (33)      $      1                $     72    $    328
------------------------------------------------------------------------------------------------------------------------------------
Income (loss) from continuing operations                  $   717      $(1,874)      $     21     $     16   $     30    $ (1,090)
Discontinued operations                                                                                      $     20    $     20
------------------------------------------------------------------------------------------------------------------------------------
Net income (loss)                                         $   717      $(1,874)      $     21     $     16   $     50    $ (1,070)
------------------------------------------------------------------------------------------------------------------------------------
Investment in associated companies, at equity             $   582      $    23       $     31                $    441    $  1,077
Segment assets (6)                                        $ 2,470      $ 1,341       $    587     $    123   $    724    $  5,245
Capital expenditures                                      $   640      $    32       $    124     $     11   $     26    $    833
------------------------------------------------------------------------------------------------------------------------------------

For the year ended December 31, 2003 (Restated)
Net sales                                                 $   595      $ 1,426       $    476     $    281   $    312    $  3,090
Depreciation (1)                                          $    97      $   245       $     55     $     21   $     52    $    470
Amortization of purchased intangibles                                  $    37                                           $     37
Research, development and engineering expenses (2)        $    48      $   108       $     74     $     20   $     41    $    291
Restructuring, impairment and other charges and
  (credits) (before-tax and minority interest)                         $   (36)                              $    133    $     97
Income tax (provision) benefit                            $   (69)     $    68       $    (22)    $    (15)  $     70    $     32
Earnings (loss) before minority interest and equity
  earnings (loss) (3)                                     $   130      $  (108)      $     43     $     31   $   (190)   $    (94)
Minority interests (4)                                                                                       $     75    $     75
Equity in earnings (loss) of associated companies (5)     $   144      $   (11)                              $     (7)   $    126
------------------------------------------------------------------------------------------------------------------------------------
Net income (loss)                                         $   274      $  (120)      $     43     $     31   $   (122)   $    106
------------------------------------------------------------------------------------------------------------------------------------
Investment in associated companies, at equity             $   299      $    59       $     30                $    383    $    771
Segment assets (6)                                        $ 1,297      $ 1,848       $    485     $    111   $    720    $  4,461
Capital expenditures                                      $   251      $    15       $     69     $      7   $     23    $    365
------------------------------------------------------------------------------------------------------------------------------------






20.  Subsequent Events (continued)

(1)  Depreciation   expense  for  Corning's   reportable  segments  includes  an
     allocation  of   depreciation  of  corporate   property  not   specifically
     identifiable to a segment.
(2)  Research,  development,  and engineering  expenses  includes direct project
     spending which is identifiable to a segment.
(3)  Many of Corning's  administrative  and staff  functions  are performed on a
     centralized  basis.  Where  practicable,  Corning charges these expenses to
     segments  based upon the extent to which each  business  uses a centralized
     function. Other staff functions, such as corporate finance, human resources
     and legal are allocated to segments, primarily as a percentage of sales.
(4)  Minority  interests  included  the impact of the  following  restructuring,
     impairment, and other charges (credits):
     .    In 2004, gains from the sale of assets of Corning Asahi Video (CAV) in
          excess of assumed  salvage value of $17 million,  and reversals of CAV
          severance reserves of $2 million.
     .    In 2003,  impairment  charges  for  long-lived  assets of CAV and exit
          costs of $57 million.
(5)  Equity in earnings of associated companies, net of impairments includes the
     following restructuring and impairment charges:
     .    In 2004 and 2003, charges of $35 million and $7 million, respectively,
          to impair equity method investments in the Telecommunications  segment
          to their estimated fair value.
     .    In 2005 and 2003,  $106  million  and $66  million,  respectively,  to
          reflect our share of Samsung  Corning  Co.,  Ltd.'s  asset  impairment
          charges.
(6)  Segment  assets  include  inventory,  accounts  receivable,   property  and
     associated equity companies and cost investments.

A  reconciliation  of reportable  segment net income (loss) to consolidated  net
income (loss) follows (in millions):
--------------------------------------------------------------------------------
                                                   Years ended December 31,
                                           -------------------------------------
                                              2005          2004         2003
                                           (Restated)    (Restated)   (Restated)
--------------------------------------------------------------------------------
Net income (loss) of reportable segments    $  1,318     $  (1,120)    $    228
Non-reportable segments                          (66)           50         (122)
Unallocated amounts:
    Net financing costs (1)                      (93)         (164)        (150)
    Stock-based compensation expense             (37)          (11)          (1)
    Exploratory research                         (77)          (68)         (43)
    Corporate contributions                      (24)          (17)         (24)
    Equity in earnings of associated
      companies, net of impairments (2)          266           127           89
    Asbestos settlement (3)                     (218)          (65)        (535)
    Other corporate items (4)                   (484)         (963)         278
                                            --------     ---------     --------
Net income (loss)                           $    585     $  (2,231)    $   (280)
--------------------------------------------------------------------------------

(1)  Net financing costs include interest expense, interest income, and interest
     costs and investment gains associated with benefit plans.
(2)  Equity in earnings of associated companies,  net of impairments  represents
     equity in earnings of Dow Corning  Corporation which includes the following
     items:
     .    In 2005,  a gain of $11  million  which  represents  our  share of Dow
          Corning's gain on the issuance of subsidiary stock.
     .    In 2004,  charges of $21  million  which  represents  our share of Dow
          Corning's charges related to restructuring  actions and adjustments to
          interest liabilities recorded on its emergence from bankruptcy.
(3)  In 2005, 2004, and 2003, the asbestos settlement includes $197 million, $33
     million,  and $115  million,  respectively,  to  reflect  the  movement  in
     Corning's common stock price in each year and $21 million, $32 million, and
     $28 million,  respectively, to adjust the estimated fair value of the other
     components  of the  proposed  asbestos  settlement.  In 2003,  Corning also
     recorded a charge of $392 million to reflect the initial liability based on
     the terms of the  settlement  agreement.  See Note 8  (Investments)  to the
     consolidated financial statements.
(4)  Other corporate items include the tax impact of the unallocated amounts and
     the following significant items:
     .    In   2005,   an   impairment   charge   of   $25   million   for   the
          other-than-temporary  decline in our  investment  in Avanex  below its
          cost basis;  a loss of $16 million  associated  with the redemption or
          retirement  of debt;  a net $443 million  charge to tax expense  which
          included a $525 million  increase to our valuation  allowance  against
          deferred tax assets  resulting from our conclusion that the sale of an
          appreciated  asset no longer met the criteria  established by SFAS No.
          109,  "Accounting  for Income  Taxes"  (SFAS No. 109) for a viable tax
          planning  strategy  offset by an $82  million  credit  to tax  expense
          primarily related to the tax impact of eliminating the minimum pension
          liability associated with our domestic defined benefit plan.
     .    In 2004,  a $992  million  charge  to tax  expense  as a result of the
          company's  decision  to  provide  a  valuation   allowance  against  a
          significant  portion  of its  deferred  tax  assets  and a loss of $36
          million  associated  with the  retirement  of  significant  portion of
          Corning's long-term debt.

A reconciliation of reportable segment net assets to consolidated net assets
follows (in millions):
-------------------------------------------------------------------------------
                                                Years ended December 31,
                                       ---------------------------------------
                                          2005            2004           2003
                                       (Restated)      (Restated)     (Restated)
-------------------------------------------------------------------------------
Total assets of reportable segments     $   5,642      $   4,521       $  3,741
Non-reportable segments                       573            724            720
Unallocated amounts:
    Current assets (1)                      2,682          2,171          1,754
    Investments (2)                           531            433            285
    Property, net (3)                         836            886            932
    Other non-current assets (4)              943          1,035          3,384
                                        ---------      ---------       --------
Total assets                            $  11,207      $   9,770       $ 10,816
-------------------------------------------------------------------------------

(1)  Includes current corporate assets,  primarily cash, short-term  investments
     and deferred taxes.
(2)  Represents corporate investments in associated companies,  at both cost and
     equity (primarily Dow Corning Corporation).
(3)  Represents corporate property not specifically identifiable to an operating
     segment.
(4)  Includes non-current corporate assets, pension assets and deferred taxes.







Corning Incorporated and Subsidiary Companies
Schedule II - Valuation Accounts and Reserves
(in millions)





------------------------------------------------------------------------------------------------------------------------------------

                                                     Balance at                           Net Deductions         Balance at
Year ended December 31, 2005 (Restated)          Beginning of Period      Additions          and Other          End of Period
------------------------------------------------------------------------------------------------------------------------------------
                                                                                                      
Doubtful accounts and allowances                     $     30             $      3             $   9              $    24
Deferred tax assets valuation allowance (1)          $  1,747             $  2,030             $ 105              $ 3,672
Accumulated amortization of
  purchased intangible assets                        $    196             $     13             $   9              $   200
Reserves for accrued costs of
  business restructuring                             $     95             $     30             $  40              $    85
------------------------------------------------------------------------------------------------------------------------------------




------------------------------------------------------------------------------------------------------------------------------------

                                                     Balance at                           Net Deductions         Balance at
Year ended December 31, 2004 (Restated)          Beginning of Period      Additions          and Other          End of Period
------------------------------------------------------------------------------------------------------------------------------------
                                                                                                      
Doubtful accounts and allowances                     $     38             $      4             $  12              $    30
Deferred tax assets valuation allowance (1)          $    469             $  1,278                                $ 1,747
Accumulated amortization of
  purchased intangible assets                        $    147             $     49                                $   196
Reserves for accrued costs of
  business restructuring                             $    186             $      2             $  93              $    95
------------------------------------------------------------------------------------------------------------------------------------





------------------------------------------------------------------------------------------------------------------------------------

                                                     Balance at                           Net Deductions         Balance at
Year ended December 31, 2003 (Restated)          Beginning of Period      Additions          and Other          End of Period
------------------------------------------------------------------------------------------------------------------------------------
                                                                                                      
Doubtful accounts and allowances                     $     59             $      5             $  26              $    38
Deferred tax assets valuation allowance              $    417             $     52                                $   469
Accumulated amortization of
  purchased intangible assets                        $    104             $     43                                $   147
Reserves for accrued costs of
  business restructuring                             $    405             $    127             $ 346              $   186
------------------------------------------------------------------------------------------------------------------------------------


(1)  The deferred tax assets valuation allowance has been restated to reflect an
     increase in the valuation  allowance for the deferred tax assets related to
     the higher  asbestos  settlement  charges;  as  discussed  in Note 2 to the
     consolidated financial statements.






QUARTERLY OPERATING RESULTS
(unaudited)



(In millions, except per share amounts)
------------------------------------------------------------------------------------------------------------------------------------
                                                                      First       Second        Third       Fourth         Total
2005 (Restated)                                                      Quarter      Quarter      Quarter      Quarter        Year
------------------------------------------------------------------------------------------------------------------------------------
                                                                                                         
Net sales                                                          $  1,050      $ 1,141      $   1,188    $   1,200    $   4,579
Gross margin                                                       $    429      $   483      $     545    $     527    $   1,984
Restructuring, impairment and other charges and (credits)          $     19      $    (1)     $      28    $     (84)   $     (38)
Asbestos settlement                                                $    (12)     $   143      $      73    $      14    $     218
(Loss) income from continuing operations before income
   taxes, minority interests and equity earnings                   $    101      $    38      $     156    $     264    $     559
(Provision) benefit for income taxes                                    (19)         (44)           (28)        (487)        (578)
Minority interests                                                       (1)          (5)            (2)           1           (7)
Equity in earnings of associated companies, net of impairments          169          176             77          189          611
------------------------------------------------------------------------------------------------------------------------------------
Net (loss) income                                                  $    250      $   165      $     203    $     (33)   $     585
------------------------------------------------------------------------------------------------------------------------------------

Basic (loss) earnings per common share                             $   0.18      $  0.11      $    0.14    $   (0.02)   $    0.40
Diluted (loss) earnings per common share                           $   0.17      $  0.11      $    0.13    $   (0.02)   $    0.38
------------------------------------------------------------------------------------------------------------------------------------




------------------------------------------------------------------------------------------------------------------------------------
                                                                      First       Second        Third       Fourth         Total
2004 (Restated)                                                      Quarter      Quarter      Quarter      Quarter        Year
------------------------------------------------------------------------------------------------------------------------------------
                                                                                                         
Net sales                                                          $    844      $   971      $   1,006    $   1,033    $   3,854
Gross margin                                                       $    300      $   346      $     404    $     365    $   1,415
Restructuring, impairment and other charges and (credits)          $     34      $   (34)     $   1,794    $      (5)   $   1,789
Asbestos settlement                                                $     22      $    52      $     (45)   $      36    $      65
(Loss) income from continuing operations before income
   taxes, minority interests and equity earnings                   $    (65)     $    33      $  (1,622)   $      50    $  (1,604)
(Provision) benefit for income taxes                                     13          (23)        (1,040)         (34)      (1,084)
Minority interests                                                                   (11)            (3)          (3)         (17)
Equity in earnings of associated companies, net of impairments          108          110             99          137          454
------------------------------------------------------------------------------------------------------------------------------------
Income (loss) from continuing operations                           $     56      $   109      $  (2,566)   $     150    $  (2,251)
Income from discontinued operations (1)                                                              20                        20
------------------------------------------------------------------------------------------------------------------------------------
Net (loss) income                                                  $     56      $   109      $  (2,546)   $     150    $  (2,231)
------------------------------------------------------------------------------------------------------------------------------------

Basic (loss) earnings per common share from:
   Continuing operations                                           $   0.04      $  0.08      $   (1.83)   $    0.11    $   (1.62)
   Discontinued operations                                                                         0.01                      0.01
------------------------------------------------------------------------------------------------------------------------------------
Basic (loss) earnings per common share                             $   0.04      $  0.08      $   (1.82)   $    0.11    $   (1.61)
------------------------------------------------------------------------------------------------------------------------------------

Diluted (loss) earnings per common share from:
   Continuing operations                                           $   0.04      $  0.07      $   (1.83)   $    0.10    $   (1.62)
   Discontinued operations                                                                         0.01                      0.01
------------------------------------------------------------------------------------------------------------------------------------
Diluted (loss) earnings per common share                           $   0.04      $  0.07      $   (1.82)   $    0.10    $   (1.61)
------------------------------------------------------------------------------------------------------------------------------------


(1)  Discontinued  operations are described in Note 3 (Discontinued  Operations)
     to the Consolidated Financial Statements.


















  DOW CORNING CORPORATION
    AND SUBSIDIARIES
  CONSOLIDATED FINANCIAL STATEMENTS
  For the Year Ended December 31, 2005







                             DOW CORNING CORPORATION
                                AND SUBSIDIARIES

                   INDEX TO CONSOLIDATED FINANCIAL STATEMENTS




                                                                           Page
                                                                           ----

Report of Independent Registered Public Accounting Firm                     111


Consolidated Statements of Income for the years ended
  December 31, 2005, 2004 and 2003                                          112


Consolidated Balance Sheets at December 31, 2005 and 2004                   113


Consolidated Statements of Cash Flows for the years ended
  December 31, 2005, 2004 and 2003                                          115


Consolidated Statements of Stockholders' Equity for the
  years ended December 31, 2005, 2004 and 2003                              116


Consolidated Statements of Comprehensive Income for the
  years ended December 31, 2005, 2004 and 2003                              117


Notes to the Consolidated Financial Statements                              118


Supplementary Data for the years ended December 31, 2005 and 2004:
         Quarterly Financial Information                                    145










Report of Independent Registered Public Accounting Firm

PricewaterhouseCoopers LLP





To the Stockholders and
Board of Directors of
Dow Corning Corporation

In our opinion,  the  accompanying  consolidated  balance sheets and the related
consolidated  statements  of  income,  cash  flows,   stockholders'  equity  and
comprehensive  income present fairly,  in all material  respects,  the financial
position of Dow Corning  Corporation  and its  subsidiaries at December 31, 2005
and 2004,  and the results of their  operations and their cash flows for each of
the three  years in the  period  ended  December  31,  2005 in  conformity  with
accounting principles generally accepted in the United States of America.  These
financial  statements are the  responsibility of the Company's  management.  Our
responsibility  is to express an opinion on these financial  statements based on
our audits.  We conducted our audits of these  statements in accordance with the
standards of the Public  Company  Accounting  Oversight  Board (United  States).
Those standards  require that we plan and perform the audit to obtain reasonable
assurance   about  whether  the  financial   statements  are  free  of  material
misstatement.  An audit includes examining, on a test basis, evidence supporting
the  amounts  and  disclosures  in  the  financial  statements,   assessing  the
accounting  principles  used and significant  estimates made by management,  and
evaluating the overall  financial  statement  presentation.  We believe that our
audits provide a reasonable basis for our opinion.



/s/ PricewaterhouseCoopers LLP
Detroit, Michigan
February 9, 2006







                    DOW CORNING CORPORATION AND SUBSIDIARIES
                        CONSOLIDATED STATEMENTS OF INCOME
                   (in millions, except for per share amounts)





                                                                                    Year ended December 31,
                                                                                2005         2004         2003
                                                                                ----         ----         ----
                                                                                               
Net Sales                                                                    $3,878.7     $3,372.6      $2,872.5

Operating Costs and Expenses:
     Cost of sales                                                             2,567.2      2,336.7      2,052.7
     Marketing and administrative expenses                                       556.2        549.7        479.0
     Restructuring costs                                                           -           44.0          -
                                                                             ---------    ---------     --------
              Total operating costs and expenses                               3,123.4      2,930.4      2,531.7

Operating Income                                                                 755.3        442.2        340.8

     Interest income                                                              22.8         17.4         31.8
     Interest expense                                                             (3.9)       (97.8)       (93.6)
     Gain on issuance of subsidiary stock                                         21.2          -            -
     Other nonoperating income (expense), net                                     16.9         20.1         (1.7)
                                                                             ---------    ---------     --------

Income before Income Taxes and Minority Interests                                812.3        381.9        277.3

     Income tax provision                                                        253.8        125.2         94.3
     Minority interests' share in income                                          52.0         18.4          6.4
                                                                             ---------    ---------     --------

Net Income                                                                   $   506.5    $   238.3     $  176.6
                                                                             =========    =========     ========

Weighted-Average Common Shares Outstanding
  (basic and diluted)                                                              2.5          2.5          2.5

Net Income per Share (basic and diluted)                                     $  202.60    $   95.32     $  70.64
                                                                             =========    =========     ========

Dividends Declared per Common Share                                          $   36.00    $     -       $    -
                                                                             =========    =========     ========


              (See Notes to the Consolidated Financial Statements)








                    DOW CORNING CORPORATION AND SUBSIDIARIES
                           CONSOLIDATED BALANCE SHEETS
                          (in millions of U.S. dollars)





ASSETS
------
                                                                     December 31, 2005          December 31, 2004
                                                                     -----------------          -----------------
                                                                                             
Current Assets:
         Cash and cash equivalents                                       $     137.6               $     322.0
         Marketable securities                                               1,081.8                     298.5
         Accounts receivable (net of allowance for doubtful
            accounts of $8.2 in 2005 and $11.7 in 2004)                        517.4                     511.3
         Anticipated implant insurance receivable                               47.2                      30.8
         Notes and other receivables                                           110.6                     114.5
         Inventories                                                           506.6                     425.0
         Deferred income taxes                                                 123.8                     101.2
         Other current assets                                                   49.8                      25.0
                                                                         -----------               -----------
                  Total current assets                                       2,574.8                   1,828.3
                                                                         -----------               -----------

Property, Plant and Equipment                                                4,573.3                   4,805.6
Less - Accumulated Depreciation                                             (3,249.8)                 (3,382.7)
                                                                         -----------               -----------
                  Net property, plant and equipment                          1,323.5                   1,422.9
                                                                         -----------               -----------

Other Assets:
         Marketable securities                                                   8.8                      57.3
         Anticipated implant insurance receivable                              218.2                     277.0
         Deferred income taxes                                                 750.3                     929.0
         Intangible assets (net of accumulated amortization
            of $15.7 in 2005 and $12.6 in 2004)                                103.1                      81.4
         Goodwill                                                               66.1                      75.9
         Restricted investments                                                 25.9                      55.8
         Other                                                                  74.1                      88.8
                                                                         -----------               -----------
                  Total other assets                                         1,246.5                   1,565.2
                                                                         -----------               -----------
Total Assets                                                             $   5,144.8               $   4,816.4
                                                                         ===========               ===========


              (See Notes to the Consolidated Financial Statements)








                    DOW CORNING CORPORATION AND SUBSIDIARIES
                           CONSOLIDATED BALANCE SHEETS
                          (in millions of U.S. dollars)





LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
                                                                     December 31, 2005          December 31, 2004
                                                                     -----------------          -----------------
                                                                                             
Current Liabilities:
         Short-term borrowings and current maturities of
            long-term debt                                               $      22.3               $      13.9
         Trade accounts payable                                                309.7                     278.4
         Accrued payrolls and employee benefits                                210.4                     171.9
         Accrued taxes                                                         116.4                     102.1
         Accrued interest                                                       66.4                      63.5
         Current portion of implant reserve                                     57.8                      50.0
         Other current liabilities                                             150.0                     150.3
                                                                         -----------               -----------
                  Total current liabilities                                    933.0                     830.1
                                                                         -----------               -----------

Other Liabilities:
         Long-term debt                                                         39.3                      60.2
         Implant reserve                                                     1,755.7                   1,834.9
         Employee benefits                                                     547.2                     565.7
         Co-insurance payable                                                   36.2                      46.8
         Deferred revenue                                                      103.4                       -
         Other noncurrent liabilities                                          111.0                     160.7
                                                                         -----------               -----------
                  Total other liabilities                                    2,592.8                   2,668.3
                                                                         -----------               -----------

Minority Interest in Consolidated Subsidiaries                                 178.6                     171.6
                                                                         -----------               -----------

Stockholders' Equity:
         Common stock ($5.00 par value - 2,500,000 shares
            authorized, issued and outstanding)                                 12.5                      12.5
         Retained earnings                                                   1,514.8                   1,098.3
         Accumulated other comprehensive income (loss):
              Cumulative translation adjustment                                 35.1                     170.6
              Minimum pension liability                                       (131.1)                   (135.8)
              Other equity adjustments                                           9.1                       0.8
                                                                         -----------               -----------
                  Total accumulated other comprehensive income (loss)          (86.9)                     35.6
                                                                         -----------               -----------

                  Total stockholders' equity                                 1,440.4                   1,146.4
                                                                         -----------               -----------

Total Liabilities and Stockholders' Equity                               $   5,144.8               $   4,816.4
                                                                         ===========               ===========


              (See Notes to the Consolidated Financial Statements)









                    DOW CORNING CORPORATION AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                          (in millions of U.S. dollars)



                                                                                    Year ended December 31,
                                                                                2005         2004         2003
                                                                                ----         ----         ----
                                                                                               
CASH FLOWS FROM OPERATING ACTIVITIES:
     Net income                                                              $   506.5    $   238.3     $  176.6
     Depreciation and amortization                                               211.6        210.6        243.9
     Changes in deferred revenue                                                 111.4          -            -
     Other, net                                                                   83.9         93.3        (49.3)
     Changes in operating assets and liabilities
         Changes in accounts and notes receivable                                (33.2)       (10.5)        26.1
         Changes in accounts payable                                              21.2        (36.7)       (13.4)
         Changes in inventory                                                   (107.2)        37.2         (4.9)
         Changes in other operating assets and liabilities                        76.6        163.7          7.4
                                                                             ---------    ---------     --------
              Cash provided by operating activities                              870.8        695.9        386.4
                                                                             ---------    ---------     --------

CASH FLOWS FROM INVESTING ACTIVITIES:
     Capital expenditures                                                       (200.5)      (109.4)       (77.4)
     Acquisitions of businesses, net of cash received                              -          (92.0)       (42.6)
     Proceeds from sales and maturities of securities                          3,379.1      4,529.8      3,243.2
     Purchases of securities                                                  (4,113.3)    (3,645.0)    (3,815.7)
     Other, net                                                                    2.2         (1.3)         6.7
                                                                             ---------    ---------     --------
              Cash provided by (used in) investing activities                   (932.5)       682.1       (685.8)
                                                                             ---------    ---------     --------

CASH FLOWS FROM FINANCING ACTIVITIES:
     Long-term borrowings                                                          -           12.0          2.8
     Payments on long-term debt                                                  (11.1)        (9.3)       (16.9)
     Net change in short-term borrowings                                           7.4         (2.1)         4.2
     Distributions to minority interests                                         (58.2)        (3.8)        (8.3)
     Cash received from minority interests                                        48.6          -            -
     Dividends paid to stockholders                                              (90.0)         -            -
                                                                             ---------    ---------     --------
              Cash used in financing activities                                 (103.3)        (3.2)       (18.2)
                                                                             ---------    ---------     --------

CASH FLOWS RELATED TO REORGANIZATION ACTIVITIES:
     Reorganization costs                                                         (3.4)        (7.2)        (5.4)
     Implant reserve and other payments                                          (40.3)      (505.7)        (6.4)
     Release of insurance proceeds                                                 -          207.4        (29.4)
     Payments under co-insurance arrangement                                      (2.1)       (30.8)        (5.3)
     Implant insurance reimbursements                                             42.4        128.5         29.4
     Payments on long-term debt                                                    -         (273.7)         -
     Payments of notes payable                                                     -         (375.0)         -
     Payments of interest                                                          -         (673.8)         -
                                                                             ---------    ---------     --------
              Cash used in reorganization activities                              (3.4)    (1,530.3)       (17.1)
                                                                             ---------    ---------     --------

EFFECT OF EXCHANGE RATE CHANGES ON CASH                                          (16.0)        15.5         33.4
                                                                             ---------    ---------     --------

CHANGES IN CASH AND CASH EQUIVALENTS:
     Net decrease in cash and cash equivalents                                  (184.4)      (140.0)      (301.3)
     Cash and cash equivalents at beginning of year                              322.0        462.0        763.3
                                                                             ---------    ---------     --------

              Cash and cash equivalents at end of year                       $   137.6    $   322.0     $  462.0
                                                                             =========    =========     ========


              (See Notes to the Consolidated Financial Statements)







                    DOW CORNING CORPORATION AND SUBSIDIARIES
                 CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
                          (in millions of U.S. dollars)



                                                                                    Year ended December 31,
                                                                                2005         2004         2003
                                                                                ----         ----         ----
                                                                                               
Common Stock ($5.00 par value - 2,500,000 shares authorized,
   issued and outstanding)
         Balance at beginning and end of year                                $    12.5    $    12.5     $   12.5
                                                                             ---------    ---------     --------

Retained Earnings
         Balance at beginning of year                                          1,098.3        860.0        683.4
         Net income                                                              506.5        238.3        176.6
         Common stock dividends declared                                         (90.0)         -            -
                                                                             ---------    ---------     --------
         Balance at end of year                                                1,514.8      1,098.3        860.0
                                                                             ---------    ---------     --------

Accumulated Other Comprehensive Income (Loss)
         Cumulative translation adjustment balance at beginning of year          170.6        110.1        (39.6)
         Translation adjustments                                                (136.8)        60.2        161.5
         Income tax benefit (provision)                                            1.3          0.3        (11.8)
                                                                             ---------    ---------     --------
         Balance at end of year                                                   35.1        170.6        110.1
                                                                             ---------    ---------     --------

         Additional minimum pension liability balance at beginning of year      (135.8)      (143.8)      (117.9)
         (Increase) decrease in minimum pension liability                          3.2          8.4        (33.5)
         Income tax benefit (provision)                                            1.5         (0.4)         7.6
                                                                             ---------    ---------     --------
         Balance at end of year                                                 (131.1)      (135.8)      (143.8)
                                                                             ---------    ---------     --------

         Other equity adjustments balance at beginning of year                     0.8          3.7          2.4
         Change in unrealized gain (loss) on cash flow hedges                     14.2         (2.1)         0.8
         Change in unrealized gain (loss) on available-for-sale securities        (1.4)        (2.3)         1.4
         Income tax benefit (provision)                                           (4.5)         1.5         (0.9)
                                                                             ---------    ---------     --------
         Balance at end of year                                                    9.1          0.8          3.7
                                                                             ---------    ---------     --------

Total Accumulated Other Comprehensive Income (Loss)                              (86.9)        35.6        (30.0)
                                                                             ---------    ---------     --------

              Stockholders' Equity                                           $ 1,440.4    $ 1,146.4     $  842.5
                                                                             =========    =========     ========


              (See Notes to the Consolidated Financial Statements)








                    DOW CORNING CORPORATION AND SUBSIDIARIES
                 CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
                          (in millions of U.S. dollars)




                                                                           Year ended December 31,
                                                                   2005             2004              2003
                                                                   ----             ----              ----
                                                                                          
Net Income                                                      $   506.5         $  238.3         $   176.6

Other Comprehensive Income (Loss):
         Foreign currency translation adjustments
              (net of tax of $(1.3), $0.2, $(11.8))                (135.5)            60.5             149.7

         Unrealized net gain (loss) on available-for-sale
              securities (net of tax of $0.4, $1.5, $(0.9))          (1.0)            (0.8)              0.5

         Net gain (loss) on cash flow hedges
              (net of tax of $(4.9), $0, $0)                          9.3             (2.1)              0.8

         (Increase) decrease in minimum pension liability
              (net of tax of $1.5, $(0.4), $7.7)                      4.7              8.0             (25.9)
                                                                ---------         --------         ---------

Other comprehensive income (loss), net of tax                      (122.5)            65.6             125.1
                                                                ---------         --------         ---------

Comprehensive Income                                            $   384.0         $  303.9         $   301.7
                                                                =========         ========         =========


              (See Notes to the Consolidated Financial Statements)











                    DOW CORNING CORPORATION AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



TABLE OF CONTENTS
-----------------

Note                                                                     Page
----                                                                     ----

  1    BUSINESS AND BASIS OF PRESENTATION                                 119

  2    SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES                         119

  3    ACQUISITIONS AND DIVESTITURES                                      124

  4    GLOBAL RESTRUCTURING                                               125

  5    UNRESTRICTED INVESTMENTS                                           125

  6    INVENTORIES                                                        126

  7    INCOME TAXES                                                       127

  8    DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES                      129

  9    PROPERTY, PLANT AND EQUIPMENT                                      129

 10    GOODWILL AND OTHER INTANGIBLE ASSETS                               130

 11    RESTRICTED ASSETS                                                  131

 12    NOTES PAYABLE AND CREDIT FACILITIES                                132

 13    DEFERRED REVENUE                                                   132

 14    LONG-TERM DEBT                                                     133

 15    PENSION AND OTHER POSTRETIREMENT BENEFITS                          134

 16    PROCEEDING UNDER CHAPTER 11                                        139

 17    COMMITMENTS AND CONTINGENCIES                                      141

 18    RELATED PARTY TRANSACTIONS                                         143





                    DOW CORNING CORPORATION AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                (in millions of U.S. dollars except where noted)

NOTE 1 - BUSINESS AND BASIS OF PRESENTATION
-------------------------------------------

Business
--------

     Dow Corning Corporation ("Dow Corning") was incorporated in 1943 by Corning
Glass Works, now Corning Incorporated ("Corning"),  and The Dow Chemical Company
("Dow Chemical") for the purpose of developing and producing  polymers and other
materials based on silicon chemistry.  Dow Corning operates in various countries
around the world  through  numerous  wholly owned or majority  owned  subsidiary
corporations  (hereinafter,  the consolidated  operations of Dow Corning and its
subsidiaries will be referred to as the "Company").

     Dow Corning built its business based on silicon  chemistry.  Silicon is one
of the most abundant elements in the world.  Most of Dow Corning's  products are
based  on  polymers  known as  silicones,  which  have a  silicon-oxygen-silicon
backbone. Through various chemical processes, Dow Corning manufactures silicones
that have an extremely  wide variety of  characteristics,  in forms ranging from
fluids,  gels,  greases  and  elastomeric  materials  to resins and other  rigid
materials.  Silicones  combine the temperature and chemical  resistance of glass
with the versatility of plastics.  Regardless of form or application,  silicones
generally possess such qualities as electrical resistance, resistance to extreme
temperatures,   resistance  to  deterioration   from  aging,  water  repellency,
lubricating  characteristics,  relative chemical and physiological inertness and
resistance to ultraviolet radiation.

     The Company engages primarily in the discovery, development, manufacturing,
marketing  and  distribution  of  silicon-based  materials  and  offers  related
services.  Since its  inception,  Dow Corning has been  engaged in a  continuous
program of basic and applied research on silicon-based  materials to develop new
products and processes,  to improve and refine  existing  products and processes
and to develop new applications for existing products.  The Company manufactures
over 7,000 products and serves approximately 25,000 customers worldwide, with no
single customer accounting for more than three percent of the Company's sales in
any of the past three years.  Principal United States  manufacturing  plants are
located in Kentucky and Michigan.  Principal  foreign  manufacturing  plants are
located in Belgium,  China, France,  Germany,  Japan, South Korea and the United
Kingdom. The Company operates research and development  facilities in the United
States,  Belgium,  China,  Germany,  Ireland,  Japan, South Korea and the United
Kingdom.  The Company  also  operates  technical  service  centers in the United
States,  Belgium,  Brazil,  China,  Germany,  Japan, South Korea, Taiwan and the
United  Kingdom.  Dow Corning's  average  employment for 2005 was  approximately
8,900 persons.

     The consolidated  financial  statements include the accounts of the Company
and its subsidiaries. Certain prior year items have been reclassified to conform
to the 2005 presentation.

Bankruptcy Proceedings
----------------------

     On May 15, 1995, the Company voluntarily filed for protection under Chapter
11 of the U.S.  Bankruptcy Code with the U.S.  Bankruptcy  Court for the Eastern
District of Michigan, Northern Division in order to resolve the Company's breast
implant liabilities and related matters. The Company emerged from its Chapter 11
proceeding  on June 1,  2004.  Upon  emergence  from the  Company's  Chapter  11
proceeding, the Company was not subject to "fresh start" reporting as defined in
SOP 90-7. See Note 16 for further information on this matter.

NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
---------------------------------------------------

Principles of Consolidation
---------------------------

     The consolidated  financial  statements include the accounts of Dow Corning
and  all  of  its  wholly  owned  and  majority   owned   domestic  and  foreign
subsidiaries.  The  Company's  interests  in 20% to 50% owned  subsidiaries  are
carried on the equity basis and are included  under the caption  "Other Assets -
Other"  in  the  consolidated  balance  sheets.  Intercompany  transactions  and
balances have been eliminated in consolidation.

Cash and Cash Equivalents
-------------------------

     Cash  equivalents  include all highly liquid  investments  with an original
maturity  of ninety days or less.  The  carrying  amounts  for cash  equivalents
approximate their fair market values.

Inventories
-----------

     The value of inventories is determined using lower of cost or market as the
basis.  Produced  goods  are  valued  using  a  first-in,  first-out  cost  flow
methodology,  while purchased materials and supplies are valued using an average
cost flow methodology. See Note 6 for further information.





NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
---------------------------------------------------

Property and Depreciation
-------------------------

     Property, plant and equipment is carried at cost less any impairment and is
depreciated  principally using accelerated  methods over estimated useful lives.
Upon  retirement  or other  disposal,  the asset  cost and  related  accumulated
depreciation  are  removed  from  the  accounts  and the net  amount,  less  any
proceeds,  is charged or credited  to income.  If an asset is  determined  to be
impaired,  either based on value or a shortened life, the carrying amount of the
asset is reduced to its fair  value and the  difference  is charged to income in
the period incurred.

     The Company  capitalizes the costs of  internal-use  software in accordance
with American  Institute of Certified Public  Accountants  Statement of Position
No. 98-1,  "Accounting for the Costs of Computer Software  Developed or Obtained
for Internal Use." Amounts  capitalized during the years ended December 31, 2005
and 2004 were $4.2 and $5.8,  respectively.  As of  December  31, 2005 and 2004,
unamortized software costs were $4.6 and $6.2, respectively.

     Expenditures  for  maintenance  and repairs are charged  against  income as
incurred.  Expenditures that significantly  increase asset value,  extend useful
asset lives or adapt property to a new or different use are capitalized.

     The Company follows the policy of  capitalizing  interest as a component of
the cost of capital assets  constructed  for its own use. See Note 9 for further
information.

Marketable Securities
---------------------

     The Company  accounts  for  investments  in debt and equity  securities  in
conformity with Statement of Financial  Accounting  Standards  ("SFAS") No. 115,
"Accounting for Certain Investments in Debt and Equity Securities." SFAS No. 115
requires  the use of fair value  accounting  for  trading or  available-for-sale
securities, while retaining the use of the amortized cost method for investments
in debt  securities that the Company has the positive intent and ability to hold
to  maturity.  Investments  in debt and equity  securities  are  included in the
captions   "Marketable   securities"   and   "Restricted   investments"  in  the
consolidated balance sheets. All such investments are considered to be available
for  sale.  If the  decline  in fair  value of an  investment  in debt or equity
securities is determined to be other than temporary,  the carrying amount of the
asset is reduced to its fair value,  and the  difference is charged to income in
the period incurred. See Notes 5 and 11 for further information.

Credit Risk
-----------

     Financial instruments that potentially subject the Company to concentration
of credit risk consist principally of cash,  investments,  derivative  financial
instruments and trade  receivables.  The Company's  policies limit the amount of
credit exposure to any single counterparty for cash and investments. The Company
uses  major  financial  institutions  with  high  credit  ratings  to  engage in
transactions  involving  investments  and  derivative  instruments.  The Company
minimizes  credit risk in its  receivables  from  customers  through its sale of
products to a wide variety of customers and markets in locations  throughout the
world.  The Company  performs  ongoing  credit  evaluations of its customers and
generally  does not require  collateral.  The  Company  maintains  reserves  for
potential  credit  losses,   and  historically  such  losses  have  been  within
expectations.  Management believes the risk of incurring material losses related
to credit risk is remote,  and any losses would be  immaterial  to  consolidated
financial results.

Intangibles
-----------

     Intangible  assets of the Company include  goodwill,  patents and licenses,
and other assets acquired by the Company that are separable and measurable apart
from goodwill. Goodwill,  representing the excess of cost over the fair value of
net assets of businesses  acquired,  is tested for impairment in accordance with
SFAS No. 142,  "Goodwill and Other Intangible  Assets." Other intangible  assets
with finite lives are amortized on a  straight-line  basis over their  estimated
useful lives. See Note 10 for further information.

Revenue
-------

     The Company recognizes  revenue in accordance with the U.S.  Securities and
Exchange  Commission's  Staff  Accounting  Bulletin  ("SAB") No.  104,  "Revenue
Recognition in Financial  Statements." The Company  recognizes revenue only when
persuasive evidence of an arrangement exists,  delivery has occurred or services
have been  rendered,  the price to the  customer  is fixed or  determinable  and
collectibility  is reasonably  assured.  Generally,  revenue is recognized  when
title and risk of loss  transfer to the  customer  for  products  and as work is
performed  for  professional  services.  Amounts  billed to a customer in a sale
transaction  related to shipping  costs are  classified as revenue.  The Company
reduces revenue for product  returns,  allowances and price  discounts.  Amounts
billed to customers in excess of amounts  recognized  as revenue are reported as
deferred revenue in the consolidated balance sheets.





NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
---------------------------------------------------

Shipping Costs
--------------

     Shipping costs are primarily comprised of payments to third party shippers.
The Company records shipping costs incurred as a component of "Cost of sales" in
the consolidated statements of income. Shipping costs totaled $113.9, $94.3, and
$76.6 for the years ended December 31, 2005, 2004 and 2003, respectively.

Research and Development Costs
------------------------------

     Research and development  costs are charged to operations when incurred and
are included in "Cost of sales" in the consolidated  statements of income. These
costs  totaled  $182.3 in 2005,  $181.4 in 2004,  and  $162.5 in 2003,  and were
comprised primarily of labor costs, outside services and depreciation.

Income Taxes
------------

     The Company  accounts for income taxes in conformity with the provisions of
SFAS No. 109,  "Accounting for Income Taxes." SFAS No. 109 requires a company to
recognize  deferred  tax  assets and  liabilities  for the  expected  future tax
consequences  of events  that  have been  recognized  in a  company's  financial
statements  or  tax  returns.  Under  this  method,   deferred  tax  assets  and
liabilities  are  determined  based  on the  difference  between  the  financial
statement carrying amounts and tax bases of assets and liabilities using enacted
tax  rates in  effect in the years in which  the  differences  are  expected  to
reverse.  The Company records a valuation  allowance on deferred tax assets when
appropriate  to reflect the  expected  future tax  benefits to be  realized.  In
determining  the appropriate  valuation  allowance,  certain  judgments are made
relating  to   recoverability   of  deferred   tax  assets,   use  of  tax  loss
carryforwards,  level of  expected  future  taxable  income  and  available  tax
planning  strategies.  These judgments are routinely reviewed by management.  At
December 31, 2005 and 2004,  the Company had net deferred tax asset  balances of
$869.1 and $983.3,  respectively,  after valuation  allowances of $1.6 and $3.1,
respectively. For additional information, see Note 7.

Currency Translation
--------------------

     The value of the U.S. dollar fluctuates against foreign  currencies.  Since
the Company  does  business in many  countries,  these  fluctuations  affect the
Company's consolidated financial position and results of operations. The Company
accounts  for  these  fluctuations  in  accordance  with SFAS No.  52,  "Foreign
Currency Translation."

     Subsidiaries in Europe and Japan  translate  their assets and  liabilities,
stated in their  functional  currency,  into U.S.  dollars at  current  exchange
rates,  that is,  the  rates in effect  at the end of the  period.  The gains or
losses that result from this process affect "Cumulative  translation adjustment"
in the stockholders' equity section of the consolidated balance sheets.  Changes
in the functional currency value of monetary assets and liabilities  denominated
in foreign currencies are recognized in the caption,  "Other nonoperating income
(expense),  net" in the  consolidated  statements  of income.  The  revenues and
expenses of these non-U.S.  subsidiaries are translated into U.S. dollars at the
average exchange rates that prevailed during the period. Therefore, the reported
U.S. dollar results included in the  consolidated  statement of income fluctuate
from period to period, depending on the value of the U.S. dollar against foreign
currencies.

     For  non-U.S.  subsidiaries  outside of Europe  and  Japan,  where the U.S.
dollar is the functional currency,  inventories,  property,  plant and equipment
and other non-monetary assets,  together with their related elements of expense,
are translated at historical rates of exchange. All other assets and liabilities
are translated at current  exchange  rates.  All other revenues and expenses are
translated at average  exchange  rates.  Translation  gains and losses for these
subsidiaries  are  recognized  in  the  caption,   "Other   nonoperating  income
(expense), net" in the consolidated statements of income.

Derivative Financial Instruments
--------------------------------

     The Company uses derivative  financial  instruments to reduce the impact of
changes in foreign exchange rates on its earnings, cash flows and fair values of
assets and  liabilities.  In  addition,  the Company uses  derivative  financial
instruments  to reduce the impact of changes in natural gas and other  commodity
prices on its  earnings  and cash  flows.  The Company  enters  into  derivative
financial  contracts based on analysis of specific and known economic exposures.
The  Company's  policy  prohibits  holding  or  issuing   derivative   financial
instruments  for  trading  or  speculative  purposes.  The types of  instruments
typically used are forward contracts,  but may also include option  combinations
and purchased option contracts.





NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
---------------------------------------------------

     The Company  recognizes all derivatives as "Other current assets" or "Other
current  liabilities" in the  consolidated  balance sheets at fair value. On the
date the  derivative  instrument is entered into, if the Company is  designating
the instrument as a hedge, the Company designates the derivative as either (1) a
hedge of the  exposure  to changes in the fair  value of a  recognized  asset or
liability or an unrecognized firm commitment (fair value hedge),  (2) a hedge of
the exposure to variability in cash flows of a forecasted transaction (cash flow
hedge), or (3) a hedge of the foreign currency exposure of a net investment in a
foreign operation.  Changes in the fair value of a derivative that is designated
as and meets all the required  criteria  for a fair value hedge,  along with the
gain or loss on the hedged asset or liability that is attributable to the hedged
risk,  are recorded in current period  earnings.  Changes in the fair value of a
derivative that is designated as and meets all the required  criteria for a cash
flow hedge are  recorded in other  comprehensive  income and  reclassified  into
earnings as the  underlying  hedged item affects  earnings.  Changes in the fair
value of a derivative or non-derivative  that is designated as and meets all the
required  criteria  for a  hedge  of a net  investment  are  recorded  in  other
comprehensive  income.  Changes  in the fair value of a  derivative  that is not
designated as a hedge are recorded immediately in earnings.

     The majority of currency derivative instruments entered into by the Company
are not designated as hedging instruments.  Contracts used to hedge the exposure
to foreign  currency  fluctuations  associated with certain  monetary assets and
liabilities  are not  designated as hedging  instruments.  Net foreign  currency
(gains) and losses recognized in income, which include changes in the fair value
of such currency  derivatives  as well as foreign  exchange  gains and losses on
monetary assets and liabilities of the Company, amounted to ($1.5) in 2005, $1.7
in 2004,  and  $5.7 in 2003.  In  addition,  the  income  tax  provision  in the
consolidated  statements of operations includes net foreign currency (gains) and
losses from currency  derivatives of ($0.3),  $2.7, and $6.3 for 2005, 2004, and
2003, respectively, which when considered together with the related tax benefits
and gains from underlying exposures,  had the effect of decreasing  (increasing)
the income tax provision by $(2.0),  $1.0,  and ($0.1) in 2005,  2004, and 2003,
respectively. See Note 7 for further information.

     Where  an  instrument  is  designated  as a  hedge,  the  Company  formally
documents all relationships between the hedging instruments and hedged items, as
well as its risk-management objective and strategy for undertaking various hedge
transactions. This process includes relating all derivatives that are designated
as fair value or cash flow  hedges to  specific  assets and  liabilities  on the
balance sheet or to specific firm  commitments or forecasted  transactions.  The
Company also  formally  assesses,  both at the  inception of the hedge and on an
ongoing basis, whether each derivative is highly effective in offsetting changes
in fair  values or cash flows of the hedged  item.  If it is  determined  that a
derivative is not highly effective as a hedge, or if a derivative ceases to be a
highly  effective  hedge,  the Company will  discontinue  hedge  accounting with
respect to that derivative prospectively.

Litigation
----------

     The Company is subject to legal  proceedings  and claims arising out of the
normal course of business.  The Company routinely assesses the likelihood of any
adverse  judgments or outcomes to these  matters,  as well as ranges of probable
losses.  A  determination  of the amount of the reserves  required,  if any, for
these  contingencies  is made after analysis of each known issue and an analysis
of  historical  claims  experience  for incurred but not reported  matters.  The
Company  expenses these legal costs,  including those expected to be incurred in
connection with a loss contingency,  as incurred. The Company has an active risk
management  program  consisting of numerous insurance policies secured from many
carriers.  These  policies  provide  coverage  that is utilized to mitigate  the
impact, if any, of certain of the legal  proceedings.  The required reserves may
change in the future due to new developments in each matter. See Notes 16 and 17
for further information.

Environmental Matters
---------------------

     The  Company  determines  the costs of  environmental  remediation  for its
facilities,  facilities  formerly  owned by the  Company  and third  party waste
disposal   facilities   based  on   evaluations  of  current  law  and  existing
technologies. Inherent uncertainties exist in these evaluations primarily due to
unknown  conditions,  changing  governmental  regulations  and  legal  standards
regarding liability, and evolving technologies.  The Company records a charge to
earnings for environmental matters when it is probable that a liability has been
incurred  and the  Company's  costs can be  reasonably  estimated.  The recorded
liabilities  are adjusted  periodically  as remediation  efforts  progress or as
additional  technical or legal information  becomes  available.  The Company had
accrued  obligations  of $2.9 at December  31,  2005 and 2004 for  environmental
remediation and restoration costs.  Management  believes that any costs incurred
in  excess  of those  accrued  will not have a  material  adverse  impact on the
Company's consolidated financial position or results of operations.

Issuance of Shares by Subsidiaries
----------------------------------

     Gains or losses arising from the issuance of shares by subsidiaries  due to
changes  in the  Company's  proportionate  share  of the  value  of the  issuing
subsidiary's  equity are recorded in the  consolidated  statements  of income as
"Other nonoperating income (expense), net" pursuant to SAB Topic 5H, "Accounting
for Sales of Stock by a Subsidiary."





NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
---------------------------------------------------

New Accounting Standards
------------------------

     On September  15,  2005,  the  Emerging  Issues Task Force  ("EITF") of the
Financial  Accounting  Standards  Board  ("FASB")  reached a consensus  on Issue
04-13,   "Accounting  for  Purchases  and  Sales  of  Inventory  with  the  Same
Counterparty."  EITF 04-13 describes the  circumstances  under which two or more
inventory  transactions with the same counterparty  should be viewed as a single
nonmonetary transaction, and describes the circumstances under which nonmonetary
exchanges of inventory  within the same line of business should be recognized at
fair value. EITF 04-13 will be effective for transactions completed in reporting
periods beginning after March 15, 2006. The Company is currently  evaluating the
applicability of EITF 04-13 to the Company's inventory transactions.

     On June 8, 2005, the FASB issued FASB Staff Position ("FSP") No. FAS 143-1,
"Accounting  for  Electronic  Equipment  Waste  Obligations."  FSP No. FAS 143-1
addresses the accounting for asset waste  obligations  associated with Directive
2002/96/EC  on Waste  Electrical  and  Electronic  Equipment  ("the  Directive")
adopted by the European Union. Under the Directive,  commercial users of certain
electronic  equipment  have an  obligation  to ensure  proper  disposal  of such
equipment until the equipment is sold or otherwise  disposed.  FSP No. FAS 143-1
requires such obligations to be accounted for as an asset retirement  obligation
by applying the  provisions of SFAS No. 143,  "Accounting  for Asset  Retirement
Obligations,"  and  FASB   Interpretation   ("FIN")  No.  47,   "Accounting  for
Conditional Asset Retirement Obligations." The Company adopted FSP No. FAS 143-1
during the three months  ended June 30, 2005.  The adoption of FSP No. FAS 143-1
did not have a material impact on the Company's  consolidated financial position
or results of operations.

     In May 2005,  the FASB issued SFAS No. 154,  "Accounting  Changes and Error
Corrections."  SFAS No.  154  supersedes  Accounting  Principles  Board  ("APB")
Opinion No. 20,  "Accounting  Changes,"  and SFAS No. 3,  "Reporting  Accounting
Changes in Interim  Financial  Statements."  SFAS No. 154 requires all voluntary
changes in accounting principle because of preferability or any change resulting
from the issuance of an accounting  pronouncement that does not include detailed
transition instructions to be handled by retrospective application, unless it is
impracticable to determine the effect on prior period financial statements. SFAS
No. 154 is effective for fiscal years  beginning  after  December 15, 2005.  The
Company plans to adopt SFAS No. 154 effective  January 1, 2006.  The adoption of
SFAS  No.  154 is not  expected  to  have a  material  impact  on the  Company's
consolidated financial position or results of operations.

     In March 2005,  the FASB  issued FIN No. 47,  "Accounting  for  Conditional
Asset Retirement  Obligations."  FIN No. 47 clarifies that the term "conditional
asset  retirement  obligation"  as used in SFAS No. 143,  "Accounting  for Asset
Retirement  Obligations,"  refers  to a legal  obligation  to  perform  an asset
retirement  activity  in which  the  timing  and/or  method  of  settlement  are
conditional  on a future  event that may or may not be within the control of the
Company.  FIN No. 47 is  effective  no later than the end of fiscal years ending
after  December  15,  2005.  The  Company  adopted FIN No. 47 in the three month
period  ended  December  31,  2005.  The  adoption  of FIN No. 47 did not have a
material impact on the Company's  consolidated  financial position or results of
operations.

     In December  2004,  the Financial  FASB issued SFAS No. 153,  "Exchanges of
Nonmonetary Assets - an amendment of Accounting Principles Board ("APB") Opinion
No. 29." APB No. 29 requires that  exchanges of  nonmonetary  assets be measured
based on the fair value of the assets exchanged,  with certain exceptions.  SFAS
No. 153 amends APB No. 29 to eliminate the exception for  nonmonetary  exchanges
of similar  productive  assets and includes a general exception for exchanges of
nonmonetary  assets that do not have  commercial  substance.  The  Statement  is
effective for fiscal years  beginning  after June 15, 2005. The Company plans to
adopt SFAS No. 153 on January 1, 2006 and does not expect its adoption to have a
material effect on future consolidated results.

     On October 22,  2004,  the  American  Jobs  Creation Act of 2004 (the "Jobs
Creation  Act")  became law in the United  States.  In December  2004,  the FASB
issued FSP Nos. FAS 109-1 and FAS 109-2,  which  provide  guidance on accounting
and disclosure related to the Jobs Creation Act. FSP No. FAS 109-1, "Application
of FASB Statement No. 109,  Accounting for Income Taxes, to the Tax Deduction on
Qualified  Production  Activities  Provided by the American Jobs Creation Act of
2004," requires the qualified production activities deduction provided for under
the Jobs Creation Act to be accounted  for as a special  deduction in accordance
with SFAS No. 109. FSP No. FAS 109-2,  "Accounting  and Disclosure  Guidance for
the Foreign  Earnings  Repatriation  Provision within the American Jobs Creation
Act of 2004," provides  accounting and disclosure  requirements for the one-time
dividends  received  deduction on the  repatriation of certain foreign  earnings
under the Jobs Creation Act. See Note 7 for further information.

     In  November  2004,  the FASB issued SFAS No.  151,  "Inventory  Costs,  an
Amendment of Accounting  Research  Bulletin ("ARB") No. 43, Chapter 4." SFAS No.
151  amends  Chapter  4 of ARB No.  43,  "Inventory  Pricing,"  to  clarify  the
accounting  for abnormal  amounts of idle facility  expense,  freight,  handling
costs and wasted material.  The Statement  requires such costs to be recorded as
charges  in the period  incurred,  and also  requires  the  allocation  of fixed
production  overheads to the costs of conversion be based on the normal capacity
of the  production  facilities.  SFAS No. 151 is  effective  for annual  periods
beginning after June 15, 2005. The Company plans to adopt SFAS No. 151 effective
January  1, 2006 and does not  expect  the  adoption  of SFAS No.  151 to have a
material effect on future consolidated results.





NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
---------------------------------------------------

     In  January  2004,  the FASB  issued FSP No.  FAS  106-1,  "Accounting  and
Disclosure  Requirements Related to the Medicare Prescription Drug,  Improvement
and  Modernization Act of 2003." This FSP was superseded in June 2004 by FSP No.
FAS 106-2 of the same title.  These FSP's provide guidance on the accounting for
and disclosure of the effects of the Medicare Prescription Drug, Improvement and
Modernization  Act of 2003 (the  "Act").  The Act  expands  Medicare  to provide
prescription  drug benefits to eligible  enrollees and contains  provisions that
apply to  employers  who sponsor  postretirement  health care plans that provide
prescription drug benefits.  Beginning in 2006, sponsors of postretirement plans
that provide a prescription drug benefit that is "actuarially equivalent" to the
benefit provided by Medicare will receive a subsidy from the federal government.
The Company  adopted FSP No. FAS 106-1  effective April 30, 2004 and FSP No. FAS
106-2  effective  July 1, 2004.  The Company has  determined  that the  benefits
provided under its postretirement health care plan are "actuarially  equivalent"
with those provided under the Act. The adoption of FSP No. FAS 106-1 and FSP No.
FAS 106-2 did not have a material impact on the Company's consolidated financial
statements.  See Note 15 for further  information related to the impact of these
FSP's.

Use of Estimates
----------------

     The  preparation  of financial  statements  in conformity  with  accounting
principles  generally accepted in the United States requires  management to make
estimates  and  assumptions  that  affect  the  reported  amounts  of assets and
liabilities,  the reported amounts of revenues and expenses during the reporting
period and  disclosure of contingent  assets and  liabilities at the date of the
financial statements. Actual results could differ from those estimates.

NOTE 3 - ACQUISITIONS AND DIVESTITURES
--------------------------------------

     On April 1, 2005,  the Company  consolidated  its Japanese  operations in a
transaction involving Dow Corning Asia Ltd. ("DCAL"), a wholly-owned subsidiary,
Dow Corning  Toray  Silicone Co. Ltd.  ("DCTS"),  a subsidiary  owned 65% by the
Company, and Toray Industries, Inc. ("TI"), an independent company that owns the
35% minority  interest in DCTS. The Company  contributed  property,  plant,  and
equipment, working capital, and other net assets of DCAL valued at $90.0 to DCTS
in exchange for additional  shares of DCTS.  DCTS recorded the  contribution  of
assets at the Company's  historical carrying value. In addition,  TI contributed
cash of $48.6 to DCTS in exchange for additional shares of DCTS. Upon completion
of the transaction, DCTS was renamed Dow Corning Toray Company Ltd. ("DCT"), and
the Company retained a 65% ownership interest in DCT. However,  because the fair
value per share  issued to TI exceeded the value per share issued to the Company
based upon the carrying  value of the assets  contributed  by DCAL,  the Company
recognized  a pre-tax  gain of  $21.2.  This  gain is  reported  in the "Gain on
issuance of subsidiary  stock" line in the Company's  consolidated  statement of
income.

     On September 30, 2004, the Company,  through DCTS, purchased the net assets
of the Silicone Division of Nippon Unicar Co., Ltd.  ("NUC").  NUC is located in
Tokyo, Japan and is a manufacturer of specialty chemicals and silicone products.
The net  assets  were  purchased  by DCTS for cash of  approximately  $92.0  and
consisted  primarily of working capital items,  intangible  assets and property,
plant and  equipment.  The Company  recorded $3.0 of goodwill as a result of the
transaction.  The results of operations for the acquisition were included in the
consolidated  statement  of income  beginning  in the three month  period  ended
December 31, 2004. Purchase accounting for this acquisition was finalized during
the three month period ended December 31, 2004.

     On September 2, 2004, the Company,  through its wholly owned subsidiary Dow
Corning  Enterprises,  Inc.  ("DCEI"),  sold its 50%  ownership  interest in SDC
Technologies  Inc.  ("SDC")  for  $10.0.  The  Company   recognized  a  gain  of
approximately  $7.1  on  the  sale.  SDC  is  a  California-based  developer  of
proprietary,  high-performance  coating  systems for application to plastics and
glass.

     On July 1, 2003, DCEI purchased 20% of the outstanding  stock of DC Dongjue
Silicone Group Company Ltd. ("DCDSG"),  bringing DCEI's total ownership of DCDSG
to 60%.  Previously,  in November 2001, DCEI and New Energy Chemicals Group Ltd.
formed DCDSG as a corporate  joint venture.  At that time, DCEI was the minority
interest shareholder,  owning 25% of the outstanding stock and the joint venture
was  accounted  for on an equity  basis.  In January  2003,  DCEI  increased its
ownership to 40%. The July 1, 2003  purchase  resulted in an aggregate  purchase
price of $6.4,  of which  $4.6 was  recognized  as  goodwill.  The  Company  has
consolidated the results of DCDSG in the consolidated financial statements since
July 1, 2003.

     On June 16, 2003,  the Company  purchased all of the  outstanding  stock of
Simcala, Inc. ("Simcala"), a silicon metal manufacturer located near Montgomery,
Alabama.  The  consideration  paid for the stock  was  approximately  $15.5.  In
addition,  immediately  prior to the transaction  closing,  Simcala redeemed the
stock of its executive management for consideration of approximately $1.5. Also,
Dow Corning provided  intercompany loans of approximately $13.3 to Simcala, $7.1
of which was for the purpose of retiring Simcala's  outstanding debt and $6.2 of
which was for the purpose of securing  Simcala's  obligations  under outstanding
industrial  development revenue bonds.  Purchase accounting for this acquisition
was finalized during the three month period ended June 30, 2004.

     On February 27, 2003, the Company purchased substantially all of the assets
of Tyco Electronics,  Inc., a wholly owned subsidiary of Tyco International Inc.
for a purchase  price of $9.4.  Tyco  Electronics,  Inc.'s  primary  facility is
located in Menlo Park, California. The transaction resulted in goodwill of $0.6.





NOTE 3 - ACQUISITIONS AND DIVESTITURES (Continued)
--------------------------------------

     On January 23,  2003,  DCEI  purchased  substantially  all of the assets of
Sterling  Semiconductor,  Inc., a wholly owned subsidiary of Uniroyal Technology
Corporation,  for a purchase price of $11.5. On December 4, 2002, DCEI purchased
substantially  all of the  assets  of GAN  Semiconductor,  Inc.,  of  Sunnyvale,
California  for a purchase  price of $4.9.  Included in the purchase was $2.9 of
in-process research and development,  which was charged to "Other" expense.  The
transaction  resulted  in goodwill of $0.3.  Dow  Corning has  consolidated  the
assets acquired from GAN Semiconductor, Inc. and Sterling Semiconductor, Inc. in
Midland, Michigan, forming Dow Corning Compound Semiconductor Solutions, LLC.

NOTE 4 - GLOBAL RESTRUCTURING
-----------------------------

     The Company implemented a restructuring  program during 2004, consisting of
separation of employees and the withdrawal of certain fixed assets from service.
During the year ended December 31, 2004, the Company incurred pre-tax expense of
$34.9  primarily  for one-time  termination  benefits  related to the  workforce
reduction of  approximately  212 employees.  Results for the year ended December
31,  2004 also  included  a pre-tax  charge of $2.7 for  non-cash  restructuring
activity related to curtailment and special  termination  benefits.  See Note 15
for additional  information  regarding the global workforce  reduction effect on
defined benefit pension plans and the U.S.  retiree medical plan.  Additionally,
the  Company  recorded  charges  of  $6.4  related  to  the  impairment  of  its
manufacturing site located in Yamakita,  Japan, and classified the related fixed
assets as  long-lived  assets to be  disposed  of by sale.  These  restructuring
charges  were  reported  in the  "Restructuring  costs"  line  in the  Company's
consolidated statement of income for the year ended December 31, 2004.

     As of December 31, 2005, the Company's liability for restructuring had been
reduced to zero.  The  restructuring  activity for the years ended  December 31,
2005 and 2004 is illustrated in the following table:

     Year Ended December 31, 2005              Year Ended December 31, 2004
--------------------------------------   --------------------------------------

Beginning of year balance      $  5.4    Beginning of year balance        $   -
Restructuring charges               -    Restructuring charges             44.0
Cash payments                    (3.8)   Cash payments                    (29.5)
Non-cash adjustments             (1.6)   Non-cash adjustments              (9.1)
                               ------                                     -----
  Balance - December 31, 2005  $    -       Balance - December 31, 2004   $ 5.4
                               ======                                     =====

NOTE 5 - UNRESTRICTED INVESTMENTS
---------------------------------

     The  carrying  amounts  of  unrestricted  investments  reflected  under the
caption  "Marketable  securities" in the current and noncurrent  sections of the
consolidated  balance sheets at December 31, 2005 and 2004 totaled  $1,090.6 and
$355.8,  respectively.  These unrestricted  investments  consist  principally of
obligations  backed by the U. S. Government or one of its agencies and corporate
and municipal issue bonds.  These investments have been classified as "available
for sale" in  conformity  with SFAS No.  115.  The  Company  does not  invest in
securities that are below investment  grade. Fair values are determined based on
quoted market prices or, if quoted  market prices are not  available,  on market
prices of  comparable  instruments.  For purposes of computing  realized gain or
loss on the disposition of unrestricted investments, the specific identification
method is used.

     The Company  reviews all marketable  securities to determine if any decline
in value is other than temporary.  The analysis  includes a review of the amount
and duration of the decline in value of a security and a comparison  between the
amount and  duration of the decline in value of the security and that of similar
securities in the same market sector.  The Company has reviewed the  investments
that have a gross unrealized loss as of December 31, 2005 and has concluded that
the decline in value is not other than temporary.






NOTE 5 - UNRESTRICTED INVESTMENTS (Continued)
---------------------------------

     The amortized cost, gross unrealized gains,  gross unrealized  losses,  and
market value of the  unrestricted  investments  consisted of the following as of
December 31, 2005 and 2004:



                                                                          December 31, 2005
                                                       ------------------------------------------------
                                                                       Gross        Gross
                                                        Amortized   Unrealized   Unrealized     Market
                                                          Cost         Gains      (Losses)       Value
                                                       ---------    ----------   ----------    --------
                                                                                   
Debt Securities:
        U.S. government agency obligations             $    50.0     $    -       $   (0.4)    $   49.6
        Corporate bonds                                    102.6          -           (0.4)       102.2
        Municipal bonds                                    934.5          -            -          934.5
                                                       ---------     --------     --------     --------

Total Debt Securities                                   $1,087.1     $    -       $   (0.8)    $1,086.3
                                                        --------     --------     --------     --------

Foreign Equity Securities                                    2.1          2.2          -            4.3
                                                       ---------     --------     --------     --------

Total Marketable Securities                             $1,089.2     $    2.2     $   (0.8)    $1,090.6
                                                        ========     ========     ========     ========

                                                                          December 31, 2004
                                                        -----------------------------------------------
                                                                       Gross        Gross
                                                        Amortized   Unrealized   Unrealized     Market
                                                          Cost         Gains      (Losses)       Value
                                                       ---------    ----------   ----------    --------
Debt Securities:
        U.S. government agency obligations             $    60.0     $    -       $   (0.8)    $   59.2
        Corporate bonds                                     68.8          -           (0.2)        68.6
        Municipal bonds                                    224.8          -            -          224.8
                                                       ---------     --------     --------     --------

Total Debt Securities                                  $   353.6     $    -       $   (1.0)    $  352.6
                                                       ---------     --------     --------     --------

Foreign Equity Securities                                    1.5          1.7          -            3.2
                                                       ---------     --------     --------     --------

Total Marketable Securities                            $   355.1     $    1.7     $   (1.0)    $  355.8
                                                       =========     ========     ========     ========



     The contractual  maturities of the debt securities included in unrestricted
investments consisted of the following at December 31, 2005 and 2004:

                                                   2005                2004
                                                   ----                ----

Mature in one year or less                        $1,081.8           $   288.5
Mature after one year through five years               4.5                64.1
Mature after five years                                -                   -
                                                 ---------           ---------

Total debt securities                            $1,086.3            $   352.6
                                                 ========            =========

NOTE 6 - INVENTORIES
--------------------

     The value of inventories is determined using lower of cost or market as the
basis.  Produced goods are valued using a first-in,  first-out  (FIFO) cost flow
methodology,  while purchased materials and supplies are valued using an average
cost flow methodology.

     The following  table  provides a breakdown of  inventories  at December 31,
2005 and 2004.

                                     December 31, 2005         December 31, 2004
                                     -----------------         -----------------

       Produced goods                    $  400.3                 $   329.5
       Purchased materials                   74.1                      61.8
       Maintenance and supplies              32.2                      33.7
                                         --------                 ---------

       Total Inventory                   $  506.6                 $   425.0
                                         ========                 =========





NOTE 6 - INVENTORIES (Continued)
--------------------

     Produced goods include both  work-in-process and finished goods. Due to the
nature of the Company's  operations,  it is  impractical  to classify  inventory
between  work-in-process  and  finished  goods  as such  classifications  can be
interchangeable for certain  inventoriable items.  Purchased materials primarily
consist of the  Company's  raw material  inventories.  Maintenance  and supplies
included  in  inventory  primarily  represent  spare  component  parts  that are
critical to the Company's manufacturing processes.

NOTE 7 - INCOME TAXES
---------------------

     The  components of income before income taxes and minority  interests as of
December 31, 2005, 2004 and 2003 are as follows:



                                                                   2005           2004           2003
                                                                   ----           ----           ----
                                                                                      
Income Before Income Taxes and Minority Interests:
      Domestic                                                  $   550.1       $  215.6       $  148.1
      Foreign                                                       262.2          166.3          129.2
                                                                ---------       --------       --------

Total Income Before Income Taxes and Minority Interests         $   812.3       $  381.9       $  277.3
                                                                =========       ========       ========


     The  components of the income tax  provision as of December 31, 2005,  2004
and 2003 are as follows:



                                                                       2005
                                                   --------------------------------------------
                                                    Current          Deferred           Total
                                                   ---------         --------         ---------
                                                                             
Provision (Credit) for Income Taxes:
      Domestic                                     $    98.8         $   62.8         $   161.6
      Foreign                                           64.1             28.1              92.2
                                                   ---------         --------         ---------

Total Provision (Credit) for Income Taxes          $   162.9         $   90.9         $   253.8
                                                   =========         ========         =========

                                                                       2004
                                                   --------------------------------------------
                                                    Current          Deferred           Total
                                                   ---------         --------         ---------
Provision (Credit) for Income Taxes:
      Domestic                                     $    71.9         $   15.8         $    87.7
      Foreign                                           50.5            (13.0)             37.5
                                                   ---------         --------         ---------

Total Provision (Credit) for Income Taxes          $   122.4         $    2.8         $   125.2
                                                   =========         ========         =========

                                                                       2003
                                                   --------------------------------------------
                                                    Current          Deferred           Total
                                                   ---------         --------         ---------
Provision (Credit) for Income Taxes:
      Domestic                                     $    25.7         $   24.9         $    50.6
      Foreign                                           45.3             (1.6)             43.7
                                                   ---------         --------         ---------

Total Provision (Credit) for Income Taxes          $    71.0         $   23.3         $    94.3
                                                   =========         ========         =========






NOTE 7 - INCOME TAXES (Continued)
---------------------

     The tax effects of the principal  temporary  differences as of December 31,
2005 and 2004  giving  rise to  deferred  tax  assets  and  liabilities  were as
follows:

                                                            2005         2004
                                                            ----         ----
Deferred Tax Assets:
      Implant costs                                       $  586.3    $   619.5
      Accruals and other                                      67.0        138.1
      Postretirement benefit obligations                     192.7        183.1
      Inventories                                             28.8         28.5
      Long-term debt                                          31.7         22.2
      Tax loss carryforwards                                 160.6        192.8
                                                          --------    ---------

Total Deferred Tax Assets                                  1,067.1      1,184.2

Deferred Tax Liabilities:
      Property, plant and equipment                         (196.4)      (197.8)
                                                          --------    ---------

Net Deferred Tax Asset Prior to Valuation Allowance          870.7        986.4

Less:  Valuation Allowance                                    (1.6)        (3.1)
                                                          --------    ---------

Net Deferred Tax Asset                                    $  869.1    $   983.3
                                                          ========    =========

     Management  believes  that it is more likely than not that the net deferred
tax asset will be realized. This belief is based on criteria established in SFAS
No. 109. The criteria that  management  considered in making this  determination
were  historical  and projected  operating  results,  the ability to utilize tax
planning  strategies  and the period of time over which the tax  benefits can be
utilized.

     Tax effected  operating loss carryforwards at December 31, 2005 amounted to
$160.6 compared to $192.8 at the end of 2004. All of the tax effected  operating
loss  carryforwards  are  subject to  expiration  in 2007 or have an  indefinite
carryforward period. Substantially all tax effected operating loss carryforwards
were generated by the Company's  subsidiary in the United  Kingdom.  There is an
unlimited  carryforward  of net  operating  losses  in the  United  Kingdom  and
management  has determined  that no valuation  allowance is needed for these net
operating losses.

     The valuation allowance of $1.6 is attributable to the inability to utilize
net operating  loss  carryforwards  from the Company's  subsidiaries  of $0.5 in
Australia,  and $1.1 in Ireland. The operating loss carryforward in Australia is
subject to expiration in 2007. The operating loss carryforward in Ireland has an
indefinite carryforward period.

     Cash paid during the year for income taxes,  net of refunds  received,  was
$156.8 in 2005, $103.7 in 2004 and $66.5 in 2003.

     The income tax provision at the effective  rate differs from the income tax
provision  at the United  States  federal  statutory  tax rate in effect  during
December 31, 2005,  2004 and 2003 for the reasons  illustrated  in the following
table:



                                                            2005           2004            2003
                                                            ----           ----            ----
                                                                               
Income Tax Provision at Statutory Rate                    $  284.3       $   133.6      $    97.0

Foreign provisions and related items                           0.4           (11.5)          (0.4)
Extra territorial income                                     (14.7)           (7.2)          (5.9)
Domestic manufacturing deduction                              (4.8)            -              -
U.S. tax effect of foreign earnings and dividends            (21.2)           12.3           (2.5)
State income taxes                                            27.4             1.1            3.2
Tax exempt interest income                                    (4.7)           (1.9)          (2.2)
Other, net                                                   (12.9)           (1.2)           5.1
                                                          --------       ---------      ---------

Total Income Tax Provision at Effective Rate              $  253.8       $   125.2      $    94.3
                                                          ========       =========      =========

Effective Rate                                               31.2%           32.8%          34.0%
                                                          ========       =========      =========





NOTE 7 - INCOME TAXES (Continued)
---------------------

     The Company has completed its  evaluation of FSP No. FAS 109-2 with respect
to  all  foreign  subsidiaries.  As  of  December  31,  2005,  the  Company  had
repatriated  approximately  $246.7 of earnings from eleven foreign  subsidiaries
under  this  provision.   The  total  net  tax  expense  associated  with  these
remittances was  approximately  $12.7.  Income of $4.5 was recognized during the
year ended  December 31, 2005,  and expense of $17.2 was  recognized  during the
year ended December 31, 2004, as the result of these remittances.

     During the year ended  December 31, 2005,  the Company  recorded a deferred
income  tax  asset of $9.8 on  $46.4  of  undistributed  earnings  that  will be
repatriated  in the  foreseeable  future.  In addition,  the Company  recorded a
deferred  income tax liability of $1.1 on $10.9 of  undistributed  earnings that
are not considered to be permanently reinvested. As of December 31, 2005, income
and remittance taxes have not been recorded on $166.2 of undistributed  earnings
of foreign  subsidiaries,  either because any taxes on dividends would be offset
substantially  by foreign tax credits or because the Company intends to reinvest
those earnings indefinitely.

NOTE 8 - DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES
------------------------------------------------------

     The  Company  uses  forward  exchange  contracts  and  options to hedge the
exposure to foreign  currency  fluctuations  associated  with  certain  monetary
assets and liabilities. Changes in the fair value of these items are recorded in
earnings to offset the foreign  exchange gains and losses of the monetary assets
and liabilities. The maturities of these contracts and options do not exceed one
year.  The carrying  amounts,  which  represent  fair values,  of these  forward
contracts  and  options  were net  unrealized  gains of $5.3 and net  unrealized
losses of $19.1 at December 31, 2005 and 2004,  respectively.  The fair value of
the Company's  forward  exchange  contracts and options is based  principally on
quoted  market  prices.  The  results  of  these  hedges  are  reflected  in the
consolidated statements of income as "Other nonoperating income (expense), net."
Cash flows from such  derivatives  are a component of cash flows from  operating
activities in the consolidated statements of cash flows.

     The Company also uses forward  contracts  and options to hedge the exposure
to changes in the prices of  commodities,  primarily  natural  gas. The carrying
amounts,  which  represent fair values,  of these forward  contracts and options
were net  unrealized  gains  of  $13.5 as of  December  31,  2005.  The  forward
contracts  and  options  outstanding  at  December  31,  2005  hedge  forecasted
transactions  expected to occur within the next 27 months.  Net unrealized gains
and losses on these contracts are recorded as a component of "Accumulated  other
comprehensive income (loss)" in the Company's balance sheet until the underlying
hedged item impacts  earnings.  Net gains of $10.1 ($6.4 after tax) are expected
to be reclassified  from Accumulated  other  comprehensive  income (loss) to the
consolidated  statements of income as "Cost of sales" during the next 12 months.
Cash flows from such  derivatives  are a component of cash flows from  operating
activities in the consolidated statements of cash flows.

     Forward  exchange  options are also used to hedge specific firm commitments
or forecasted  transactions  by locking in exchange  rates for such  anticipated
cash flows. Gains and losses on these instruments are recorded as a component of
other comprehensive  income until the forecasted  transaction occurs. There were
no outstanding instruments at December 31, 2005 designated as hedges of specific
firm commitments or forecasted transactions.  At December 31, 2004, the carrying
amounts of such options, which represent fair values, were net unrealized losses
of $0.1.

NOTE 9 - PROPERTY, PLANT AND EQUIPMENT
--------------------------------------

     The following  table provides a breakdown of property,  plant and equipment
balances at December 31, 2005 and 2004:



                                         Estimated Useful
                                           Life (Years)              2005             2004
                                           ------------         -----------       -----------
                                                                         
Land                                             -              $      94.0       $    100.0
Land improvements                              11-20                  130.8            140.0
Buildings                                      10-33                  802.0            790.3
Machinery and equipment                        3-25                 3,428.6          3,724.8
Construction-in-progress                         -                    117.9             50.5
                                                                -----------       ----------
Total property, plant and equipment                                 4,573.3          4,805.6
                                                                -----------       ----------

Accumulated depreciation                                           (3,249.8)        (3,382.7)
                                                                -----------       ----------
Net property, plant and equipment                               $   1,323.5       $  1,422.9
                                                                ===========       ==========






NOTE 9 - PROPERTY, PLANT AND EQUIPMENT (Continued)
--------------------------------------

     The Company recorded  depreciation expense of $206.2, $207.9 and $242.5 for
the years ended  December 31, 2005,  2004 and 2003,  respectively.  In the first
quarter of 2004,  the  Company  changed its  estimate  of the  service  lives of
certain  depreciable  assets to  increase  the useful  economic  life beyond the
original  service life assigned to these assets.  The Company made this decision
based on design factors,  which were confirmed by actual  operating  experience.
The change in accounting  estimate reduced expenses by approximately  $6.4 ($4.0
net of tax) for the year ended December 31, 2004.

     The amount of interest  capitalized  as a component  of the cost of capital
assets constructed for the years ended December 31, 2005, 2004 and 2003 was $4.3
($2.7 after tax), $3.1 ($2.0 after tax) and $6.6 ($4.2 after tax), respectively.

NOTE 10 - GOODWILL AND OTHER INTANGIBLE ASSETS
----------------------------------------------

     As of December 31, 2005 and 2004,  the gross and net amounts of  intangible
assets, excluding goodwill were:

                                                     2005
                                 ---------------------------------------------
                                    Gross                               Net
                                  Carrying        Accumulated         Carrying
                                   Amount         Amortization         Amount
                                 ---------        ------------       ---------
Patents and licenses             $    10.9         $    (1.9)        $    9.0
Customer/Distributor
     relationships                    19.9              (3.6)            16.3
Completed technology                  12.5              (1.2)            11.3
Pension intangible asset              57.9               -               57.9
Other                                 17.6              (9.0)             8.6
                                 ---------         ---------         --------

     Total                       $   118.8         $   (15.7)        $  103.1
                                 =========         =========         ========


                                                     2004
                                 ---------------------------------------------
                                    Gross                               Net
                                  Carrying        Accumulated         Carrying
                                   Amount         Amortization         Amount
                                 ---------        ------------       ---------

Patents and licenses             $    11.8         $    (1.8)        $   10.0
Customer/Distributor
     relationships                    17.9              (0.6)            17.3
Completed technology                  14.5              (0.3)            14.2
Pension intangible asset              20.5               -               20.5
Other                                 29.4             (10.0)            19.4
                                 ---------         ---------         --------

     Total                       $    94.1         $   (12.7)        $   81.4
                                 =========         =========         ========

     The  Company  recorded  amortization  expense  related to these  intangible
assets of $5.4,  $2.7 and $1.4 for the years ended  December 31, 2005,  2004 and
2003, respectively.  The estimated aggregate amortization expense to be recorded
in each of the next five succeeding years is as follows:

                    2006              $5.0
                    2007              $5.0
                    2008              $4.9
                    2009              $4.8
                    2010              $3.3

     The changes in the carrying amount of goodwill for the years ended December
31, 2005 and 2004 are as follows:

                                   2005             2004
                                   ----             ----

Beginning balance                $  75.9           $ 67.8
Change from acquisitions             -                3.0
Translation                         (9.8)             5.1
                                 -------           ------

Total ending balance             $  66.1           $ 75.9
                                 =======           ======





NOTE 10 - GOODWILL AND OTHER INTANGIBLE ASSETS (Continued)
----------------------------------------------

     The Company tests the carrying value of goodwill for  impairment  annually,
as required by SFAS No. 142, "Goodwill and Other Intangible Assets." The Company
completed  its tests for  impairment  of goodwill  during the three month period
ended  September 30, 2005.  No  impairments  were  identified as a result of the
tests performed.

     In the three month period ended  September 30, 2004,  the Company  acquired
the Silicone  Division of NUC (see Note 3). The Company  assigned the  following
amounts and estimated useful lives to the intangible  assets  identified in this
transaction:

                                                                Weighted-
                                            Amount               Average
                                           Assigned            Life (Years)
                                           --------            ------------

Customer/Distributor relationships          $  17.9                 7.0
Completed technology                           14.5                14.0
Patents                                         5.9                14.0
                                            -------                ----

     Total                                  $  38.3                10.7
                                                                   ====

     None of the intangible  assets acquired from NUC have significant  residual
value.  The  amount  assigned  to  the  intangible  assets  is  amortized  on  a
straight-line basis over the applicable  estimated useful lives. No research and
development  assets were acquired from NUC as part of the transaction.  Goodwill
of $3.0 was recognized by the Company from the NUC acquisition.

NOTE 11 - RESTRICTED ASSETS
---------------------------

     The composition of restricted  investments as of December 31, 2005 and 2004
are as follows:

                                                               2005        2004
                                                               ----        ----
     Restricted Securities:
              U.S. government obligations                    $   1.2     $  3.0
              U.S. government agency obligations                 5.7        7.2
              Mortgage-backed and asset-backed securities        2.3        2.8
              Corporate bonds                                    7.6        9.7
              Foreign bonds                                      1.1        -
              Foreign bank deposit                               0.8        1.8
              Money market funds                                 7.2       31.3
                                                             -------     ------

     Total Restricted Securities                             $  25.9     $ 55.8
                                                             =======     ======


     The  contractual  maturities of restricted  securities at December 31, 2005
and 2004 are as follows:

                                                               2005        2004
                                                               ----        ----

     Mature in one year or less                              $  10.4     $ 37.4
     Mature after one year through five years                    7.2        9.0
     Mature after five years                                     8.3        9.4
                                                             -------     ------

     Total restricted securities                             $  25.9     $  5.8
                                                             =======     ======

     Restricted  assets consist  principally  of obligations  backed by the U.S.
Government or one of its agencies and corporate and municipal issue bonds, which
have been  classified as "available  for sale" in conformity  with SFAS No. 115.
The  aggregate  carrying  value  of  the  marketable  securities  classified  as
restricted assets approximates the fair market value. Fair values are determined
based on quoted market prices or, if quoted market prices are not available,  on
market prices of comparable instruments. For purposes of computing realized gain
or loss on the  disposition of restricted  assets,  the specific  identification
method is used.  Restricted  assets  are  included  in the  caption  "Restricted
investments" in the "Other Assets" section of the consolidated balance sheets.

     The  Company  has  Letters  of  Credit  outstanding  of $23.1  and $28.7 at
December  31,  2005 and 2004,  respectively,  for which the  Company has legally
restricted  funds  to  serve as  collateral  for the  purpose  of  reducing  the
effective cost of those letters of credit. As of December 31, 2005 and 2004, the
Company had $24.4 and $30.3, respectively,  of funds restricted to support these
obligations. In addition, the Company had foreign bank deposits of $0.8 and $1.8
at December 31, 2005 and 2004, respectively, included in restricted assets.





NOTE 11 - RESTRICTED ASSETS (Continued)
---------------------------

     In order to comply with certain environmental  regulations,  as of December
31,  2005 and 2004,  the  Company  maintained  $0.7 and $23.7,  respectively  in
certain trusts in order to provide financial assurance for the potential payment
of aggregate  estimated closure,  post-closure,  corrective action and potential
liability  costs  associated  with the  operation  of  hazardous  waste  storage
facilities  at certain plant sites (see Note 17 for further  discussion).  Those
amounts are included in the caption "Restricted investments" in the consolidated
balance sheets.

NOTE 12 - NOTES PAYABLE AND CREDIT FACILITIES
---------------------------------------------

     Notes payable include amounts  outstanding under short-term lines of credit
and were  $11.7  and $5.6 at  December  31,  2005 and  2004,  respectively.  The
carrying amounts of these short-term borrowings approximated their fair value.

     DCT  maintains  an accounts  receivable  securitization  facility  with its
primary  bank.  The  discount  rate under  this  facility  is TIBOR plus  0.25%.
Pursuant to this  facility,  DCT has sold  accounts  receivable in the amount of
$129.6 to such bank in exchange for $129.6  during 2005,  and $197.7 was sold to
such bank in exchange  for $197.6 in 2004.  Under the  facility,  DCT retains no
interest in the accounts receivable.  However, it maintains insurance to protect
95% of the receivables liquidated under the program; premiums for such insurance
of $0.3 and $0.2 were paid in 2005 and 2004,  respectively.  As of December  31,
2005 and 2004,  $0.0 and $27.3,  respectively,  remained  outstanding  under the
facility.

     On December 16, 2004, the Company entered into a $500.0 unsecured revolving
credit agreement with a syndicate of commercial banks, which expires on December
16, 2009. This agreement  replaced the $500.0 364-day revolving credit agreement
dated June 1, 2004. The new revolving  credit  agreement allows for borrowing in
various  currencies  for  general  corporate  purposes  of the  Company  and its
subsidiaries. These credit facilities require the payment of commitment fees. As
of December 31, 2005, these credit lines were unused.

     In addition, the Company had unused and committed credit facilities for use
by foreign  subsidiaries  at December  31, 2005 and 2004 with  various  U.S. and
foreign banks totaling $107.9 and $130.3, respectively.  These credit facilities
require  the payment of  commitment  fees.  The  Company  intends to renew these
facilities at their  respective  maturities.  These  facilities are available in
support of working capital requirements.

NOTE 13 - DEFERRED REVENUE
--------------------------

     During  the  year  ended  December  31,  2005,   the  Company,   through  a
consolidated  subsidiary,  entered into long-term  product sales agreements with
certain customers.  Under these agreements,  customers are obligated to purchase
minimum  quantities of product at specified prices. The product sales agreements
have an aggregate  value of $2,150.7  and extend over 10 years with  delivery to
customers  commencing on January 1, 2006. Revenue associated with the agreements
will  be  recognized  using  the  average  sales  price  over  the  life  of the
agreements.   Differences  between  amounts  invoiced  to  customers  under  the
agreements and the amounts  recognized using the average price  methodology will
be reported as deferred revenue in the consolidated balance sheets.

     Under  the  agreements,  customers  were  required  to make  non-refundable
advanced cash payments of $111.4 during 2005 and are required to make additional
advanced  payments of $111.4  during 2006.  The amounts are recorded as deferred
revenue and will be  recognized  as income  ratably on a per  kilogram  basis as
products are shipped over the life of the agreements.  In the event that certain
product delivery timelines are not met, subject to specific  conditions outlined
in the agreements,  customers may be entitled to damages up to the amount of the
advanced cash payments. As of December 31, 2005, $111.4 in advanced payments had
been received,  of which $8.0 of deferred  revenue has been classified as "Other
current liabilities" and $103.4 has been classified as "Deferred revenue" in the
consolidated  balance  sheets.  The advanced  payments  received during the year
ended  December  31,  2005 have been  classified  as cash flows  from  operating
activities on the consolidated statements of cash flows.






NOTE 14 - LONG-TERM DEBT
------------------------

     Long-term debt at December 31, 2005 and 2004 consisted of the following:

                                                            2005           2004
                                                            ----           ----
Long-Term Debt
      Fixed rate note due 2005
           6.50% at December 31, 2004                    $   -           $  2.8
      Fixed rate note due 2006
           4.70% at December 31, 2005                        7.3            8.6
      Variable rate notes due 2007
           2.98% at December 31, 2005                        1.2            2.2
      Fixed rate notes due 2007
           5.85% at December 31, 2005                        2.5            9.4
      Fixed rate note due 2015
           6.36% at December 31, 2004                        -             11.2
      Variable rate bonds due 2019
           4.41% at December 31, 2005                        5.5            5.8
      Other obligations and capital leases
           5.39-6.40% at December 31, 2005                  33.5           28.5
                                                         -------         ------

Total Long-Term Debt                                        50.0           68.5
      Less - payments due within one year                   10.7            8.3
                                                         -------         ------

Total Long-Term Debt Due after one year                  $  39.3         $ 60.2
                                                         =======         ======

     The fair value of the Company's  long-term debt,  including the portion due
within one year,  approximated  its book value of $50.0 at December 31, 2005. At
December 31, 2004, the fair value of the long-term  debt,  including the portion
due within one year, approximated the book value of $68.5.

     Annual aggregate maturities of the long-term debt of the Company are: $10.7
in 2006,  $3.6 in  2007,  $1.7 in 2008,  $1.8 in  2009,  $2.0 in 2010 and  $30.2
thereafter.

     Cash paid during the year for interest was $5.1 in 2005, $679.3 in 2004 and
$5.4 in 2003.  Cash paid for interest in 2004  includes the payment of $673.8 in
accrued interest on pre-petition debt, payables,  and other liabilities upon the
Company's emergence from Chapter 11 in June 2004.






NOTE 15 - PENSION AND OTHER POSTRETIREMENT BENEFITS
---------------------------------------------------

     The Company  maintains  defined benefit employee  retirement plans covering
most  domestic  and certain  non-U.S.  employees.  The Company  also has various
defined   contribution  and  savings  plans  covering  certain  employees.   The
components of pension  expense for the Company's  domestic and foreign plans are
set forth below for the years ended December 31, 2005, 2004 and 2003:



                                                                U.S. Plans                    Non-U.S. Plans
                                                      ------------------------------    ---------------------------
                                                        2005       2004       2003      2005       2004       2003
                                                        ----       ----       ----      ----       ----       ----
                                                                                          
Defined Benefit Plans:
     Service cost                                     $ 23.7     $ 20.2     $ 19.7    $ 17.9     $ 17.2     $ 14.3
     Interest cost on projected benefit obligations     59.8       58.7       58.6      24.2       22.5       19.0
     Expected return on plan assets                    (54.5)     (51.2)     (55.7)    (23.8)     (23.0)     (18.6)
     Net amortization of losses                         19.1       17.0        9.9       6.1        4.9        2.6
     Curtailments, settlements and
        special termination benefits                     -          5.2        -        (0.2)       2.0        -
                                                     -------    -------    -------    ------     ------     -------

Total Pension Expense                                 $ 48.1     $ 49.9     $ 32.5    $ 24.2     $ 23.6     $ 17.3
                                                      ======     ======     ======    ======     ======     ======

                                                                  Total
                                                      ----------------------------
                                                        2005       2004       2003
                                                        ----       ----       ----
Defined Benefit Plans:
     Service cost                                     $ 41.6     $ 37.4     $ 34.0
     Interest cost on projected benefit obligations     84.0       81.2       77.6
     Expected return on plan assets                    (78.3)     (74.2)     (74.3)
     Net amortization of losses                         25.2       21.9       12.5
     Curtailments, settlements and
        special termination benefits                    (0.2)       7.2        -
                                                     -------    -------    -------

Total Pension Expense                                 $ 72.3     $ 73.5     $ 49.8
                                                      ======     ======     ======


     The Company made matching  contributions under various defined contribution
plans of $16.8,  $17.0 and $18.9 for the years ended December 31, 2005, 2004 and
2003, respectively.

     During the year ended December 31, 2005, the Company terminated the defined
benefit  plan of a Japanese  subsidiary.  Upon the plan  termination,  employees
became  participants  in the defined  benefit plan of DCT. The plan  termination
resulted in a net gain from curtailment and settlement of $0.2.

     On April 5, 2004, Dow Corning announced a global workforce reduction, which
was primarily the result of internal  restructuring.  The Company  accounted for
the  workforce  reduction  under  the  guidelines  of SFAS No.  88,  "Employers'
Accounting for Settlements and Curtailments of Defined Benefit Pension Plans and
for Termination  Benefits." During the year ended December 31, 2004, the Company
recognized  pre-tax  charges  related to its defined  benefit  plans of $2.7 for
special  termination  benefits and the effect of curtailment.  In addition,  the
Company accounted for the effects of the workforce reduction on its U.S. Retiree
Medical Plan by  recognizing  a pre-tax  charge of $0.7 for special  termination
benefits and pre-tax income of $0.7 for curtailment.

     The Company settled a portion of its obligation under defined benefit plans
during 2004 through lump sum payments to participants  and annuity  arrangements
with third-party financial institutions.  The reduction in these obligations was
accounted  for as  settlements  under  SFAS No. 88 and  resulted  in  settlement
expense of $4.5 from early recognition of unrealized actuarial losses.






NOTE 15 - PENSION AND OTHER POSTRETIREMENT BENEFITS (Continued)
---------------------------------------------------

     The majority of the Company's  defined benefit  employee  retirement  plans
have a measurement  date of December 31 of the  applicable  year.  The following
table   reconciles  the  defined  benefit  plans'  funded  status  with  amounts
recognized in the Company's consolidated balance sheets at December 31, 2005 and
2004, respectively as part of other assets and other long-term liabilities:



                                                    U.S. Plans            Non-U.S. Plans               Total
                                              ---------------------    --------------------    --------------------
                                                 2005       2004          2005      2004         2005        2004
                                              ---------- ----------    ---------  ---------    ---------  ----------
                                                                                        
Net Accrued Pension Liability:
     Projected benefit obligation in
                 excess of plan assets        $  (336.0) $  (351.9)    $ (227.2)  $ (189.5)    $ (563.2)  $ (541.4)
     Unrecognized net loss                        274.9      254.1        175.1      152.6        450.0      406.7
     Unrecognized prior service costs              37.6       19.7         15.3        1.7         52.9       21.4
     Unrecognized net transition obligation         -          -            0.5        1.0          0.5        1.0
     Minimum pension liability                   (137.2)    (146.4)      (122.2)     (82.9)      (259.4)    (229.3)
     Intangible asset                              45.7       19.7         12.2        0.8         57.9       20.5
                                              ---------  ---------     --------   --------     --------   --------

Net Accrued Pension Liability                 $  (115.0) $  (204.8)    $ (146.3)  $ (116.3)    $ (261.3)  $ (321.1)
                                              =========  =========     ========   ========     ========   ========


     The projected benefit obligation,  accumulated benefit obligation, and fair
value  of plan  assets  for  defined  benefit  plans  with  accumulated  benefit
obligations  in excess of plan assets for the years ended  December 31, 2005 and
2004 are as follows:



                                                    U.S. Plans            Non-U.S. Plans               Total
                                              ---------------------    --------------------    --------------------
                                                 2005       2004          2005      2004         2005        2004
                                              ---------- ----------    ---------  ---------    ---------  ----------
                                                                                        
Projected benefit obligation                  $1,093.5   $1,026.6      $  512.1   $  465.0     $1,605.6   $1,491.6
Accumulated benefit obligation                   918.0      899.1         351.7      403.3      1,269.7    1,302.4
Fair value of plan assets                        757.3      674.8         296.4      285.1      1,053.7      959.9


     The  following  table  provides a  reconciliation  of beginning  and ending
balances of the projected benefit obligation as of December 31, 2005 and 2004:



                                                    U.S. Plans            Non-U.S. Plans               Total
                                              ---------------------    --------------------    --------------------
                                                 2005       2004          2005      2004         2005        2004
                                              ---------- ----------    ---------  ---------    ---------  ----------
                                                                                        
Projected Benefit Obligation:
       Projected benefit obligation,
                beginning of year            $1,026.7    $   968.2     $   518.8  $   450.0    $1,545.5   $1,418.2
       Service cost                              23.7         20.2          17.9       17.2        41.6       37.4
       Interest cost                             59.8         58.7          24.2       22.5        84.0       81.2
       Actuarial losses                          24.2         45.5          85.1       12.8       109.3       58.3
       Foreign currency exchange
                rate changes                      -            -           (57.4)      36.1       (57.4)      36.1
       Benefits paid and settlements            (61.9)       (72.9)        (27.3)     (21.0)      (89.2)     (93.9)
       Curtailments and special
                termination benefits              -           (1.4)         (1.4)      (1.2)       (1.4)      (2.6)
       Plan amendments                           21.0          8.4          15.5        -          36.5        8.4
       Other                                      -            -             2.4        2.4         2.4        2.4
                                            ---------    ---------     ---------  ---------    --------   --------

Projected benefit obligation,
     end of year                            $1,093.5     $1,026.7      $   577.8  $   518.8    $1,671.3   $1,545.5
                                            ========     ========      =========  =========    ========   ========





NOTE 15 - PENSION AND OTHER POSTRETIREMENT BENEFITS (Continued)
---------------------------------------------------

     The following table provides a  reconciliation  of the beginning and ending
balances of the fair value of plan assets as of December 31, 2005 and 2004:



                                                    U.S. Plans            Non-U.S. Plans               Total
                                              ---------------------    --------------------    --------------------
                                                 2005       2004          2005      2004         2005        2004
                                              ---------- ----------    ---------  ---------    ---------  ----------
                                                                                        
Fair Value of Plan Assets:
       Fair value of plan assets,
                beginning of year             $   674.8  $   614.9     $   329.2  $   270.7    $1,004.0   $  885.6
       Actual return on plan assets                41.9       64.0          61.1       28.5       103.0       92.5
       Foreign currency exchange
                rate changes                        -          -           (38.4)      23.4       (38.4)      23.4
       Employer contributions                     102.5       68.8          16.4       24.9       118.9       93.7
       Participant contributions                    -          -             2.0        2.0         2.0        2.0
       Benefits paid and settlements              (61.9)     (72.9)        (27.3)     (21.0)      (89.2)     (93.9)
       Other                                        -          -             -          0.7          -         0.7
                                              ---------  ---------     ---------  ---------    ---------  --------

Fair value of plan assets,
     end of year                              $   757.3  $   674.8     $   343.0  $   329.2    $1,100.3   $1,004.0
                                              =========  =========     =========  =========    ========   ========


     For the United  States  defined  benefit  plan, as of December 31, 2005 and
2004, the fair value of plan assets included 65% of equity securities and 35% of
debt  securities.  The  plan  targets  an  asset  allocation  of  60-70%  equity
securities and 30-40% debt  securities.  The plan's  expected  long-term rate of
return is primarily based on historical returns of similarly diversified passive
portfolios and expected results from active investment management.

     Given the relatively  long horizon of the Company's  aggregate  obligation,
its investment strategy is to improve and maintain the funded status of its U.S.
and  non-U.S.  plans  over  time  without  exposure  to  excessive  asset  value
volatility.  The Company manages this risk primarily by maintaining actual asset
allocations  between  equity and fixed income  securities for the plans within a
specified range of its target asset allocation. In addition, the Company ensures
that  diversification  across various investment  subcategories within each plan
are also maintained within specified ranges.

     All of the  Company's  pension  assets are  managed  by outside  investment
managers  and  held in  trust  by  third-party  custodians.  The  selection  and
oversight of these outside service providers is the responsibility of investment
committees and their  advisors.  The selection of specific  securities is at the
discretion of the investment  manager and is subject to the provisions set forth
by written  investment  management  agreements  and  related  policy  guidelines
regarding permissible investments and risk control practices.

     The Company's funding policy is to contribute to defined benefit plans when
pension laws and economics either require or encourage  funding.  Of the defined
benefit plans  maintained  by the Company,  the U.S.  plans  covering the parent
company are the largest plans.  Contributions  to the U.S. defined benefit plans
for  the  year  ended  December  31,  2005  totaled  $102.5.   Contributions  of
approximately $55.0 are planned for the U.S. plans in 2006.

     Of the defined  contribution  and savings plans  maintained by the Company,
the U.S. plan covering the parent company is the largest plan. Employer matching
contributions for the U.S. defined contribution plan for the year ended December
31,  2005  totaled  $11.4.   The  Company  expects  to  make   contributions  of
approximately $12.0 during 2006.






NOTE 15 - PENSION AND OTHER POSTRETIREMENT BENEFITS (Continued)
---------------------------------------------------

     The  weighted-average  assumptions used to determine the benefit obligation
and to  determine  the net  benefit  costs  are  shown in the  following  table.
Discount rates and rates of increase in future  compensation  are weighted based
upon the projected  benefit  obligations of the respective  plans.  The expected
long-term  rate of return on plan assets is weighted  based on total plan assets
for  each  plan  at year  end.  The  long-term  rate of  return  on plan  assets
assumption  is determined  considering  historical  returns and expected  future
asset allocation and returns for each plan.



                                                 Benefit Obligations at December 31
                               ----------------------------------------------------------------------
                                     U.S. Plans             Non-U.S. Plans                 Total
                                 ----------------           ---------------           ---------------
                                  2005       2004           2005       2004           2005       2004
                                  ----       ----           ----       ----           ----       ----
                                                                               
Discount rate                     5.75%      6.00%          4.40%      5.05%          5.28%      5.68%
Rate of increase in future
   compensation levels            4.25%      4.25%          4.10%      4.10%          4.20%      4.20%
Expected long-term rate of
   return on plan assets          8.50%      8.75%          6.96%      7.13%          8.02%      8.22%

                                      Net Periodic Pension Cost for the Year Ended December 31
                               ----------------------------------------------------------------------
                                     U.S. Plans             Non-U.S. Plans                 Total
                                 ----------------           ---------------           ---------------
                                  2005       2004           2005       2004           2005       2004
                                  ----       ----           ----       ----           ----       ----

Discount rate                     6.00%      6.25%          5.05%      4.97%          5.68%      5.85%
Rate of increase in future
   compensation levels            4.25%      4.25%          4.10%      4.06%          4.20%      4.19%
Expected long-term rate of
   return on plan assets          8.75%      8.75%          7.13%      7.10%          8.22%      8.24%


     The Company uses a bond mapping  analysis,  which matches cash flows from a
hypothetical  portfolio of corporate bonds against the estimated  future benefit
payments of the U.S.  defined benefit plans, to arrive at an effective  discount
rate.  The  discount  rates  for  non-U.S.  defined  benefit  plans are based on
benchmark  rate  indices  specific to the  respective  countries  and  durations
similar to those of the plans' liabilities.

     The Company  expects to pay  benefits  under its defined  benefit  plans in
future periods as detailed in the following  table.  The expected  benefits have
been  estimated  based on the same  assumptions  used to measure  the  Company's
benefit obligation as of December 31, 2005 and include benefits  attributable to
future employee service.

                                     Estimated Future Benefit Payments
                          ------------------------------------------------------
                          U.S. Plans          Non-U.S. Plans             Total
                          ----------          --------------          ---------

              2006        $    60.0             $    17.3             $    77.3
              2007             59.2                  19.5                  78.7
              2008             58.9                  22.6                  81.5
              2009             58.8                  22.3                  81.1
              2010             59.2                  23.3                  82.5
       2011 - 2015            320.5                 136.7                 457.2

     In addition to providing  pension benefits,  the Company,  primarily in the
United States, provides certain health care and life insurance benefits for most
retired employees.  The cost of providing these benefits to retirees outside the
United  States is not  significant.  Net  periodic  postretirement  benefit cost
includes the following  components for the years ended  December 31, 2005,  2004
and 2003:



                                                          2005             2004              2003
                                                       ---------         ---------        ---------
                                                                                 
Net Periodic Postretirement Benefit Cost:
     Service cost                                      $     4.8         $     4.4        $     3.9
     Interest cost                                          16.3              15.9             18.2
     Amortization of prior service benefits                 (5.6)             (4.6)            (0.8)
     Amortization of actuarial losses                        3.9               2.3              1.2
     Other                                                   1.7               -                -
                                                       ---------         ---------        ---------

Total Net Periodic Postretirement Benefit Cost         $    21.1         $    18.0        $    22.5
                                                       =========         =========        =========





NOTE 15 - PENSION AND OTHER POSTRETIREMENT BENEFITS (Continued)
---------------------------------------------------

     The following table presents a  reconciliation  of the beginning and ending
balances as of  December  31,  2005 and 2004 of the  accumulated  postretirement
benefit  obligation,   as  well  as  the  accrued  postretirement  benefit  cost
recognized  in the  Company's  consolidated  balance  sheets  as part  of  other
long-term liabilities.



                                                                              2005             2004
                                                                           ---------         --------
                                                                                       
Accumulated Postretirement Benefit Obligation:
       Accrued postretirement benefit obligation at beginning of year      $   281.8         $  267.3
       Service cost                                                              4.8              4.4
       Interest cost                                                            16.3             15.9
       Actuarial loss (gain)                                                    (9.1)            20.6
       Curtailment and special termination benefits                              -                0.4
       Plan change                                                             (12.2)            (7.9)
       Benefits paid                                                           (19.7)           (18.9)
                                                                           ---------         --------

Accumulated Postretirement Benefit Obligation at End of Year                   261.9            281.8

       Unrecognized prior service benefit                                       49.2             42.5
       Unrecognized net loss                                                   (70.4)           (85.1)
                                                                           ---------         --------

  Total Accrued Postretirement Benefit Obligation                          $   240.7         $  239.2
                                                                           =========         ========


     The  Company  adopted  FSP  No.  FAS  106-1,   "Accounting  and  Disclosure
Requirements  Related  to  the  Medicare  Prescription  Drug,   Improvement  and
Modernization  Act of 2003,"  effective April 30, 2004. FSP No. FAS 106-2 of the
same title superseded this FSP in June 2004. The adoption of these FSP's reduced
the accumulated  post  retirement  benefit  obligation  related to the Company's
retiree health care and life insurance  benefit plans by $6.1 at April 30, 2004.
In addition,  the adoption of these FSP's reduced the net periodic  benefit cost
recognized for these plans by $0.5 during the year ended December 31, 2004.

     The  health  care  cost  trend  rate  used  in  measuring  the  accumulated
postretirement  benefit obligation was 10.0% in 2005 and was assumed to decrease
gradually  to 5.0% in 2011 and remain at that  level  thereafter.  For  retirees
under age 65, plan features limit the health care cost trend rate  assumption to
a maximum  of 8.0% for years 1994 and  later.  The  health  care cost trend rate
assumption  has a significant  effect on the amounts  reported.  Increasing  the
assumed health care cost trend rate by one  percentage  point in each year would
increase  the  accumulated  postretirement  benefit  obligation  by 2.7% and the
aggregate  of  the  service  and  interest  cost   components  of  net  periodic
postretirement benefit cost for 2005 by 5.4%. Decreasing the assumed health care
cost  trend  rates by one  percentage  point in each  year  would  decrease  the
accumulated  postretirement  benefit obligation by 2.4% and the aggregate of the
service and interest cost components of net periodic postretirement benefit cost
for 2005 by 6.3%.

     The  discount  rate  used in  determining  the  accumulated  postretirement
benefit   obligation  was  5.75%  and  6.0%  at  December  31,  2005  and  2004,
respectively.

     The Company  funds most of the cost of the  postretirement  health care and
life insurance benefits as incurred.  Benefit payments to retirees totaled $19.7
for the year ended December 31, 2005. The Company expects to pay future benefits
under its postretirement health care and life insurance benefit plan as detailed
in the following table.  The expected  payments have been estimated based on the
same   assumptions  used  to  measure  the  Company's   postretirement   benefit
obligations as of December 31, 2005.

                     Estimated Future
                      Postretirement
                     Benefit Payments
                     ----------------

          2006           $   20.2
          2007               20.2
          2008               20.1
          2009               20.1
          2010               20.0
   2011 - 2015               99.2






NOTE 16 - PROCEEDING UNDER CHAPTER 11
-------------------------------------

     Prior to 1992,  the  Company  was  engaged in the  manufacture  and sale of
silicone gel breast implants and the raw material  components of those products.
In January 1992,  the Company ceased  production of these  products  following a
request by the United States Food and Drug  Administration  that breast  implant
producers  voluntarily  halt the sale of silicone gel breast  implants.  Between
1991 and 1995, the Company  experienced a substantial  increase in the number of
lawsuits against the Company relating to breast implants.

     By May 1995, the Company was named in thousands of lawsuits filed by, or on
behalf of,  individuals  who claim to have, or have had, breast  implants.  As a
result, on May 15, 1995 (the "Filing Date"),  the Company  voluntarily filed for
protection under Chapter 11 of the U.S.  Bankruptcy Code (the "Bankruptcy Code")
with the U.S.  Bankruptcy Court for the Eastern  District of Michigan,  Northern
Division  (the  "Bankruptcy  Court") in order to resolve  the  Company's  breast
implant  liabilities  and related  matters (the  "Chapter 11  Proceeding").  The
Company  emerged from the Chapter 11 Proceeding on June 1, 2004 (the  "Effective
Date")  and  is   currently  in  the  process  of   implementing   its  plan  of
reorganization.

Plan of Reorganization
----------------------

     In 1999,  the Company,  with the Committee of Tort  Claimants,  a committee
appointed  in  the  Chapter  11  Proceeding  to  represent   products  liability
claimants,   filed  a  joint  plan  of   reorganization   (the  "Joint  Plan  of
Reorganization")  and a related  disclosure  statement.  In November  1999,  the
Bankruptcy  Court issued an order  confirming the Joint Plan of  Reorganization.
The Joint Plan of  Reorganization  became  effective on the Effective  Date. The
Joint Plan of  Reorganization  provides  funding  for the  resolution  of breast
implant  and other  products  liability  litigation  covered  by the  Chapter 11
Proceeding  through several settlement options or through litigation and for the
satisfaction of commercial creditor claims.

Breast Implant and Other Products Liability Claims
--------------------------------------------------

     Products liability claims to be resolved by settlement will be administered
by a settlement  facility (the "Settlement  Facility"),  and products  liability
claims to be resolved by  litigation  will be defended by a litigation  facility
(the "Litigation  Facility").  Products liability claimants choosing to litigate
their claims will be required to pursue their claims through  litigation against
the Litigation  Facility.  Under the Joint Plan of  Reorganization,  the present
value of the total  amount of  payments  by the  Company  committed  to  resolve
products  liability  claims  will not  exceed  $2.35  billion  valued  as of the
Effective  Date.  Of this  amount,  no more than $400.0 will be used to fund the
Litigation Facility.  Payments made by the Company will be placed in a trust and
withdrawn by the Settlement  Facility to pay eligible settling  claimants and to
cover  the  Settlement  Facility's  operating  expenses.  Amounts  will  also be
withdrawn  from the trust as necessary to fund the  resolution of claims via the
Litigation Facility and the operational expenses of the Litigation Facility.

Funding the Settlement and Litigation Facilities
------------------------------------------------

     The Company  has an  obligation  to fund the  Settlement  Facility  and the
Litigation  Facility  (collectively,  the  "Facilities")  over a 16-year period,
commencing at the Effective Date. The Company  anticipates  that it will be able
to meet its remaining payment obligations to the Facilities  utilizing cash flow
from operations, insurance proceeds and/or prospective borrowings. Under certain
circumstances,  the  Company  will also  have  access  to a  ten-year  unsecured
revolving credit commitment,  established by Dow Chemical and Corning, to assist
in the timely funding of the  Facilities.  During the first five years after the
Effective Date, the maximum aggregate amount available to the Company under this
revolving credit commitment is $300.0,  thereafter decreasing by $50.0 per year.
Borrowings under this revolving credit  commitment will only be permitted in the
event that the Company is unable to meet its remaining  obligations  to fund the
Facilities.  As of  December  31,  2005,  the  Company had not drawn any amounts
against the revolving credit commitment.

     Funds  will be paid by the  Company  (a) to the  Settlement  Facility  with
respect to products  liability  claims, as such claims are processed and allowed
by the Settlement Facility,  and (b) via the Settlement Facility with respect to
products  liability claims processed  through the Litigation  Facility,  as such
claims are resolved.  Insurance  settlements are paid by the Company's  insurers
directly  to the  Settlement  Facility on behalf of the  Company.  The amount of
funds paid by or on behalf of the Company  are  subject to annual and  aggregate
funding  limits.  The  Company has made  payments of $1,424.2 to the  Settlement
Facility through December 31, 2005.

     Based on  funding  agreements  relating  to the  amount  and  timing of the
Company's  remaining  payment  obligations  to the Settlement  Facility,  future
payments to the Settlement  Facility will be made on a periodic basis until such
payment  obligations are met. These funding agreements  restrict the application
of  payments  made by the  Company in  advance  of their due dates  (the  "Early
Payments").  Under these funding agreements, the Company receives credit for the
future value equivalent,  at the due date of the scheduled payment  obligations,
of the Early Payments  using a discount rate of 7%. The actual  amounts  payable
and the  timing  of such  payments  by the  Company  are  uncertain  and will be
affected  by,  among  others,  the  rate at which  claims  are  resolved  by the
Facilities,  the rate at which  insurance  proceeds  are received by the Company
from its  insurers and the degree to which the Company  receives  credit for the
future value  equivalent of Early  Payments.  The ultimate  amount of additional
future  value  equivalent  credit  is  subject  to  confirmation  by the  claims
administrator of the Settlement Facility.





NOTE 16 - PROCEEDING UNDER CHAPTER 11 (Continued)
-------------------------------------

Insurance
---------

     The Company had a  substantial  amount of  unexhausted  products  liability
insurance  coverage with respect to breast implant lawsuits and claims.  Many of
the Company's insurers reserved the right to deny coverage, in whole or in part.
Litigation  between  the  Company  and  its  insurers  ("Litigating   Insurers")
regarding  coverage for products  liability was conducted between 1993 and 1999,
and  resulted  in  judicial  rulings  substantially  in favor  of the  Company's
position (the  "Insurance  Litigation").  A majority of the Litigating  Insurers
have reached settlements with the Company. The Company is continuing  settlement
negotiations with the remaining Litigating Insurers and other insurers that were
not  involved in the  Insurance  Litigation.  In  addition,  certain  previously
settling  insurers have claimed a reimbursement  right with respect to a portion
of previously paid insurance proceeds.

Insurance Allocation Agreement between the Company and Dow Chemical
-------------------------------------------------------------------

     A number of the products  liability  insurance  policies relevant to claims
against the  Company  name the Company  and Dow  Chemical  as  co-insureds  (the
"Shared Insurance Assets").  A portion of the Shared Insurance Assets may, under
certain  conditions,  become  payable by the  Company to Dow  Chemical  under an
insurance allocation agreement, as amended, between the Company and Dow Chemical
(the "Insurance Allocation  Agreement").  The Insurance Allocation Agreement was
reached  between Dow Chemical and the Company in order to resolve issues related
to the amount of the Shared  Insurance  Assets  that would be  available  to the
Company for  resolution of its products  liability  claims.  Under the Insurance
Allocation Agreement, 25% of certain of the Shared Insurance Assets will be paid
by the Company to Dow Chemical  subsequent to the Effective Date.  However,  the
amount of Shared  Insurance  Assets that will be payable to Dow  Chemical by the
Company under the Insurance  Allocation  Agreement will not exceed approximately
$285.0. In addition, a portion of any such amounts paid to Dow Chemical,  to the
extent not used by Dow Chemical to pay certain products  liability claims,  will
be  paid  over  to the  Company  after  the  expiration  of a  17.5-year  period
commencing  on the  Effective  Date.  Furthermore,  the  Company  recognized  an
obligation  of $35.0 to Dow Chemical  related to additional  insurance  coverage
under which the Company and Dow Chemical are co-insureds. The Company previously
recorded an estimate of amounts of insurance  proceeds  payable or to be paid to
Dow Chemical  (the  "Co-insurance  payable").  As a result of certain  insurance
settlements and an amendment to the Insurance  Allocation  Agreement between the
Company and Dow Chemical,  as of December 31, 2005, the Co-insurance payable has
been reduced to $46.8.

Commercial Creditor Issues
--------------------------

     The Joint Plan of  Reorganization  provides  funding to satisfy  commercial
creditor claims,  including accrued interest.  The Joint Plan of Reorganization,
as amended pursuant to a May 21, 2004 ruling of the U.S.  District Court for the
Eastern District of Michigan (the "District  Court"),  provides that each of the
Company's  commercial  creditors (the "Commercial  Creditors")  would receive in
cash the sum of (a) an amount equal to the principal  amount of their claims and
(b)  interest on such  claims.  As of December  31,  2005,  the Company has paid
approximately  $1.5 billion in principal and the undisputed  portion of interest
payable to the Commercial Creditors of the Company.

     The  actual  amount  of  interest  that  will  ultimately  be paid to these
Commercial Creditors is uncertain due to pending litigation in the U.S. Court of
Appeals for the Sixth Circuit (the "Court of Appeals").  As previously  reported
between 1999 and 2004, there have been a number of Bankruptcy Court and District
Court  rulings  related to the interest rate that should be applied to claims of
the  Commercial  Creditors  from the Filing  Date  through  the  Effective  Date
("Pendency Interest").  The Commercial Creditors and the Company disagree on the
interpretation  and  application  of these  rulings to  determine  the amount of
Pendency  Interest.  This  disagreement  is currently  the subject of appeals by
certain  Commercial  Creditors,  the Committee of Unsecured  Creditors,  and the
Company to the Court of Appeals.

     The Company's  position is that non-default  rates of interest for floating
rate  obligations  should be determined  in accordance  with the formulas in the
relevant contracts,  except that the aggregate amount of interest cannot be less
than that resulting  from the  application of a fixed rate of 6.28% through June
1, 2004. The undisputed  interest  portion was calculated by application of this
position (the "Undisputed  Portion").  As of September 29, 2004, the position of
certain Commercial Creditors, joined by the Committee of Unsecured Creditors, is
that, in addition to the Undisputed Portion,  interest in excess of $140.0, plus
an unquantified  amount of certain fees, costs and expenses,  should be added to
the claims filed by holders of the fixed and floating  rate  obligations.  As of
December  31,  2005 and 2004,  the amount of  interest  included  in the caption
"Accrued  interest"  recorded in the consolidated  balance sheets related to the
Company's  potential  obligation to pay  additional  interest to its  Commercial
Creditors in the Chapter 11 Proceeding  was $66.3 and $63.5,  respectively.  The
Court of Appeals heard oral arguments regarding this issue on July 27, 2005. The
Company  is  uncertain  as to when the Court of  Appeals  will  issue its ruling
regarding Pendency Interest.

Reorganization Costs
--------------------

     The Company has incurred and will continue to incur costs  associated  with
(a) the matters  related to the Chapter 11  Proceeding  that will be resolved by
the District Court and the Court of Appeals,  and (b) the  implementation of the
Joint Plan of  Reorganization.  The aggregate  amount of these costs,  which are
being  expensed as  incurred,  are recorded in the caption  "Other  nonoperating
income (expense),  net" in the consolidated  statements of income. For the years
ended  December 31, 2005,  2004 and 2003,  the  Company's  reorganization  costs
included legal expenses of $2.0, $5.1 and $3.9, respectively, and administrative
expenses of $1.4, $2.1 and $1.5, respectively.





NOTE 17 - COMMITMENTS AND CONTINGENCIES
---------------------------------------

Chapter 11 Related Matters
--------------------------

Insurance Receivable
--------------------

     Of the total  "Anticipated  implant  insurance  receivable" of $265.4 as of
December 31, 2005, $55.2 related to insurance that has not yet been settled with
certain  of  the  Litigating  Insurers,  which  are  subject  to  the  Insurance
Litigation rulings, and $210.2 represented amounts to be received by the Company
pursuant to settlements with other of the Company's insurance  carriers.  Of the
total  "Anticipated  implant insurance  receivable" of $307.8 as of December 31,
2004,  $73.5 related to insurance  that has not yet been settled with certain of
the  Litigating  Insurers and $234.3  represented  amounts to be received by the
Company pursuant to settlements with other of the Company's insurance carriers.

     The principal  uncertainties  that exist with respect to the realization of
the  "Anticipated  implant  insurance  receivable"  include the ultimate cost of
resolving implant litigation and claims, the results of settlement  negotiations
with  insurers,  and the extent to which  insurers  may become  insolvent in the
future.  Management  believes  that,  while  uncertainties  regarding this asset
continue to exist, these  uncertainties are not reasonably likely to result in a
material  adverse  change to the  Company's  financial  position  or  results of
operations, and that it is probable that this asset will ultimately be realized.
This belief is further supported by the fact that the Company received insurance
recoveries of $1,310.8  from  September 1, 1994 through  December 31, 2005,  and
entered into settlements with certain insurers for future reimbursement.

Implant Reserve
---------------

     As of December 31, 2005 and 2004, the Company's  "Implant reserve" recorded
in the consolidated balance sheets was $1,813.5 and $1,884.9,  respectively,  to
reflect the Company's estimated  remaining  obligation to fund the resolution of
breast   implant   claims   pursuant  to  the  Company's   Chapter  11  plan  of
reorganization  and other breast implant litigation related matters (see Note 16
for further discussion).  During the years ended December 31, 2005 and 2004, the
Company  recorded  $21.0  and  $12.1,   respectively,   in  the  caption  "Other
nonoperating  income  (expense),  net" to reflect a credit for the future  value
equivalent  credit of Early Payments from restricted  insurance  proceeds to the
Settlement Facility of $346.3 and $306.0, respectively.

Accrued Interest
----------------

     As of December  31, 2005 and 2004,  the amount of interest  included in the
caption "Accrued interest"  recorded in the consolidated  balance sheets related
to the  Company's  potential  obligation  to  pay  interest  to  the  Commercial
Creditors in the Chapter 11 Proceeding  was $66.3 and $63.5,  respectively.  The
actual amount of interest that will be paid to these  creditors is uncertain and
will  ultimately  be  resolved  through  continued  proceedings  in the Court of
Appeals (see Note 16 for further  discussion).  The Company's  results reflected
interest  expense  for  the  amount  of  interest  potentially  payable  to  the
Commercial  Creditors  of $3.1 ($2.0 after tax) and $95.5  ($60.2 after tax) for
the years ended December 31, 2005 and 2004, respectively.

Co-Insurance Payable
--------------------

     As of  December  31,  2005 and 2004,  the amount  payable  pursuant  to the
"Insurance Allocation Agreement" recorded in the consolidated balance sheets was
$46.8 and $48.9, respectively.  Of the total amount payable, $10.6 and $2.1 were
recorded as "Other current liabilities" in the consolidated balance sheets as of
December  31, 2005 and 2004,  respectively.  As of  December  31, 2005 and 2004,
$36.2 and  $46.8,  respectively,  were  included  in the  caption  "Co-insurance
payable" in the Company's  consolidated  balance sheets (see Note 16 for further
discussion).

Tax Matters
-----------

     In May 1999,  the Company  received a Statutory  Notice of Deficiency  (the
"Notice") from the United States Internal  Revenue Service  ("IRS").  The Notice
asserts tax deficiencies totaling  approximately $65.3 relating to the Company's
consolidated  federal  income tax returns for the 1995 and 1996 calendar  years.
Management believes that the deficiencies  asserted by the IRS are excessive and
is  vigorously  contesting  the IRS' claims.  Management  anticipates  that this
matter will be resolved by the District  Court which retains  jurisdiction  over
items that  occurred  during the Chapter 11  Proceeding  and believes  that such
resolution will not have a material adverse impact on the Company's consolidated
financial  position  or  results  of  operations.  The  Company  is  engaged  in
discussions with the IRS in an effort to resolve this matter.

     In August 2004, the Company  received a Notice of Proposed  Adjustment (the
"Adjustment Notice") from the IRS related to the Company's  consolidated federal
income tax returns  for the 1997,  1998,  and 1999  calendar  years.  If the IRS
prevails with respect to the issues  identified in the  Adjustment  Notice,  the
amount  of  a  resulting  tax  deficiency  would  total  approximately   $116.9.
Management believes that the deficiencies  asserted by the IRS are excessive and
is  vigorously  contesting  the  IRS'  claims.   Management  believes  that  the
resolution  of the issues  identified in the  Adjustment  Notice will not have a
material  adverse  impact on the Company's  consolidated  financial  position or
results of operations.





NOTE 17 - COMMITMENTS AND CONTINGENCIES (Continued)
---------------------------------------

Risks and Uncertainties
-----------------------

     While the Company  does not  anticipate  a need to further  revise  amounts
recorded in its consolidated  financial  statements for these Chapter 11 related
matters,  as  additional  facts  and  circumstances  develop,  it  is  at  least
reasonably  possible  that  amounts  recorded  in  the  Company's   consolidated
financial statements may be revised. Future revisions, if required, could have a
material effect on the Company's  financial position or results of operations in
the period or periods in which such  revisions are recorded.  Since any specific
future  developments,  and the impact  such  developments  might have on amounts
recorded in the Company's consolidated financial statements, are unknown at this
time, an estimate of possible future adjustments cannot be made.

Environmental Matters
---------------------

     The Company had been advised by the United States Environmental  Protection
Agency  ("EPA") or by similar state and non-U.S.  national  regulatory  agencies
that the Company,  together  with others,  is a  Potentially  Responsible  Party
("PRP") with respect to a portion of the cleanup costs and other related matters
involving a number of  abandoned  hazardous  waste  disposal  sites.  Management
believes  that there are 16 sites at which the Company may have some  liability,
although management expects to settle the Company's liability for eight of these
sites for de minimis amounts. Based upon preliminary estimates by the EPA or the
PRP groups formed with respect to these sites, the aggregate liabilities for all
PRP's at those sites at which management believes the Company may have more than
a de  minimis  liability  is $5.8.  Management  cannot  estimate  the  aggregate
liability  for all PRP's at all of the  sites at which  management  expects  the
Company has a de minimis liability.

     The Company records accruals for environmental  matters when it is probable
that a liability  has been  incurred and the  Company's  costs can be reasonably
estimated.  The amount accrued for environmental matters as of December 31, 2005
and 2004, was $2.9. In addition,  receivables  of $0.1 for probable  third-party
recoveries have been recorded related to these environmental matters.

     As additional facts and  circumstances  develop,  it is at least reasonably
possible that either the accrued liability or the recorded receivable related to
environmental matters may be revised.  While there are a number of uncertainties
with respect to the  Company's  estimate of its ultimate  liability  for cleanup
costs at these  hazardous  waste disposal  sites,  management  believes that any
costs  incurred  in excess of those  accrued  will not have a  material  adverse
impact  on  the  Company's   consolidated   financial  position  or  results  of
operations.  This opinion is based upon the number of  identified  PRP's at each
site, the number of such PRP's that are believed by management to be financially
capable of paying  their  share of the  ultimate  liability,  and the portion of
waste sent to the sites for which management  believes the Company might be held
responsible based on available records.

     As a result of financial provisions recorded with respect to breast implant
liabilities,  the  Company  has been  unable to meet  certain  federal and state
environmental  statutory financial ratio tests.  Consequently,  in order for the
Company to continue to operate  hazardous  waste  storage  facilities at certain
plant sites,  the states involved have required the Company to establish  trusts
to provide for aggregate estimated closure, post-closure,  corrective action and
potential liability costs. Interest on the funds held in trust will be available
to the Company under certain  circumstances,  and the amount required to be held
in trust may vary annually. During the year ended December 31, 2005, the Company
satisfied the financial  ratio  requirements  specified by the State of Michigan
and  $23.2  reverted  to  the  Company.  Funds  of  $0.7  remain  restricted  in
environmental  trusts to fulfill requirements in other states as of December 31,
2005. At such time as the Company satisfies the above referenced financial ratio
tests,  or the Company no longer needs or closes the permitted  facilities,  the
funds then remaining in these trusts will revert to the Company.

Other Regulatory Matters
------------------------

     Companies that manufacture and sell chemical  products may experience risks
under current or future laws and  regulations,  which may result in  significant
costs and liabilities.  The Company routinely conducts health, toxicological and
environmental  tests of its  products.  The Company  cannot  predict what future
legal, regulatory or other actions, if any, may be taken regarding the Company's
products or the  consequences  of their  production and sale. Such actions could
result in significant  losses,  and there can be no assurance  that  significant
losses would not be incurred. However, based on currently available information,
the  Company's  management  does not believe that any such actions  would have a
material  adverse  effect on the  Company's  financial  condition  or results of
operations.

Leases
------

     The Company leases certain real and personal property under agreements that
generally  require  the  Company to pay for  maintenance,  insurance  and taxes.
Rental  expense was $34.3 in 2005,  $32.2 in 2004 and $35.2 in 2003. The minimum
future  rental  payments  required  under  noncancellable  operating  leases  at
December 31, 2005, in the aggregate,  are $121.8 including the following amounts
due in each of the next five years:  2006 - $36.2,  2007 - $29.8,  2008 - $22.1,
2009 - $8.3 and 2010 - $7.2.





NOTE 17 - COMMITMENTS AND CONTINGENCIES (Continued)
---------------------------------------

Guarantees
----------

     Guarantees arise during the ordinary course of business from  relationships
with  customers,  employees  and  nonconsolidated  affiliates  when the  Company
undertakes an obligation to guarantee the performance of others (via delivery of
cash or other  assets) if specified  triggering  events  occur.  Non-performance
under a contract by the guaranteed party triggers the obligation of the Company.
The maximum amount of potential  future  payments  under such  guarantees of the
Company was $6.3 and $7.9 at December 31, 2005 and 2004, respectively, primarily
related to guarantees of housing loan  obligations  of certain  employees of the
Company's  subsidiaries in Japan. Such guarantees have various  expiration dates
and typically span  approximately  20 years. The Company's  estimated  potential
obligation under these guarantees is not material to the consolidated  financial
statements  and no liability  has been  recorded on the  Company's  consolidated
balance sheets for the years ended December 31, 2005 and 2004.

     The Company also has guarantees  related to its  performance  under certain
operating lease arrangements and the residual value of leased assets. If certain
operating  leases are terminated by the Company,  it guarantees a portion of the
residual value loss, if any, incurred by the lessors in disposing of the related
assets.  Expiration dates vary, and certain leases contain renewal options.  The
maximum amount of future payments the Company was potentially  obligated to make
for guarantees of residual values of leased assets was $3.8 and $5.3 at December
31, 2005 and 2004,  respectively.  Management  believes that, based on facts and
circumstances,  the Company's estimated potential  obligation under its residual
value lease guarantees is not material to the Company's  consolidated  financial
statements  and as  such,  no  liability  has  been  recorded  on the  Company's
consolidated balance sheets for the years ended December 31, 2005 and 2004.

Warranties
----------

     In the normal course of business to facilitate  sales of its products,  the
Company has issued  product  warranties,  and it has entered into  contracts and
purchase orders that often contain  standard terms and conditions that typically
include a warranty.  The  Company's  warranty  activities do not have a material
impact  on  the  Company's   consolidated   financial  position  or  results  of
operations.

NOTE 18 - RELATED PARTY TRANSACTIONS
------------------------------------

     The  Company has  transactions  in the normal  course of business  with its
shareholders,  Dow Chemical and Corning,  and their  affiliates.  The  following
tables  summarize  related  party  transactions  and balances with the Company's
shareholders.

                                                Year Ended December 31,
                                         2005            2004            2003
                                       ---------       --------        ---------
Sales to Dow Chemical                  $     9.5       $    8.6        $     8.2
Sales to Corning                             8.7            7.4              7.5
Purchases from Dow Chemical                 61.9           54.6             44.9

                                             December 31,
                                         2005            2004
                                       ---------       --------
Accounts Receivable from Dow Chemical  $     1.6       $    1.2
Accounts Receivable from Corning             0.6            0.8
Accounts Payable to Dow Chemical             5.1            4.2

     In addition, non-wholly owned subsidiaries of the Company have transactions
in the normal course of business with their minority shareholders. The following
tables  summarize   related  party   transactions  and  balances  between  these
non-wholly owned subsidiaries and their minority owners.

                                                  Year Ended December 31,
                                            2005           2004          2003
                                          ---------      --------      ---------
Sales to minority owners                  $   162.1      $   80.1      $    63.1
Purchases from minority owners                 10.3           7.3            6.6

                                                December 31,
                                            2005           2004
                                          ---------      --------
Accounts receivable from minority owners  $    34.1      $   26.5
Accounts payable to minority owners             4.1           3.0




NOTE 18 - RELATED PARTY TRANSACTIONS (Continued)
------------------------------------

     Management  believes  the costs of such  purchases  and the prices for such
sales were  competitive  with purchases from other  suppliers and sales to other
customers.

     In  addition,  DCT loans excess  funds to its  minority  shareholder  Toray
Industries,  Inc. The amount of loans  receivable  at December 31, 2005 and 2004
was $5.9 and $29.3,  respectively.  These  balances  are  included in "Notes and
other receivables" in the consolidated balance sheets.  Management believes that
interest earned from this loan arrangement is at rates  commensurate with market
rates for companies of similar credit standing.








                     DOW CORNING CORPORATION AND SUBSIDIARES
              SUPPLEMENTARY DATA - QUARTERLY FINANCIAL INFORMATION

               YEARS ENDED DECEMBER 31, 2005 AND 2004 (Unaudited)

                   (in millions of dollars except share data)






Quarter Ended:                                 March 31        June 30        September 30         December 31
                                               --------        -------        ------------         -----------
                                                                                       
2005
         Net sales                             $  982.5       $ 1,007.1         $  946.4           $   942.7
         Gross profit                             345.8           357.5            318.5               289.7
         Net income                               135.9           154.2            116.4               100.0
         Net income per share                     54.36           61.68            46.56               40.00
         Dividends declared per share                 -           12.00                -               24.00

2004
         Net sales                             $  814.3       $   851.9         $  829.7           $   876.7
         Gross profit                             229.5           278.4            262.5               265.5
         Net income                                52.2            35.7             79.9                70.5
         Net income per share                     20.88           14.28            31.96               28.20
         Dividends declared per share                 -               -                -                   -



















  SAMSUNG CORNING PRECISION
  GLASS CO., LTD.

  As of December 31, 2005 and 2004 and for the
  years ended December 31, 2005, 2004 and 2003









SAMSUNG CORNING PRECISION GLASS CO., LTD.
Contents
As of December 31, 2005 and 2004
And for the years ended December 31, 2005, 2004 and 2003
--------------------------------------------------------------------------------


                                                                 Page(s)
Report of Independent Registered Public Accounting Firm.............148

Financial Statements

Balance Sheets......................................................149

Statements of Income................................................150

Statements of Cash Flows............................................151

Notes to Financial Statements...................................152-160








             Report of Independent Registered Public Accounting Firm



To the Board of Directors and Shareholders of
Samsung Corning Precision Glass Co., Ltd.


In our opinion,  the accompanying  balance sheets and the related  statements of
income and cash flows present fairly,  in all material  respects,  the financial
position  of Samsung  Corning  Precision  Glass Co.,  Ltd.  (the  "Company")  at
December 31, 2005 and December 31, 2004,  and the results of its  operations and
its cash flows for each of the three  years in the  period  ended  December  31,
2005, in conformity  with accounting  principles  which, as described in Note 2,
are  generally  accepted  in the  United  States  of  America.  These  financial
statements   are  the   responsibility   of  the   Company's   management;   our
responsibility  is to express an opinion on these financial  statements based on
our audits.  We conducted our audits of these  statements in accordance with the
standards of the Public  Company  Accounting  Oversight  Board (United  States).
Those standards  require that we plan and perform the audit to obtain reasonable
assurance   about  whether  the  financial   statements  are  free  of  material
misstatement.  An audit includes examining, on a test basis, evidence supporting
the  amounts  and  disclosures  in  the  financial  statements,   assessing  the
accounting  principles  used and significant  estimates made by management,  and
evaluating the overall  financial  statement  presentation.  We believe that our
audits provide a reasonable basis for our opinion.







/s/ Samil PricewaterhouseCoopers
Seoul, Korea
January 13, 2006






SAMSUNG CORNING PRECISION GLASS CO., LTD.
Balance Sheets
December 31, 2005 and 2004
(in thousands, except share and per share amounts)
------------------------------------------------------------------------------------------------------------------------------------

                                                                                2005               2004
                                                                                         
Assets
Current assets
     Cash and cash equivalents                                               $   162,749       $    45,315
     Accounts and notes receivable
        Customers, net of allowance for doubtful accounts
           of $1,898 and $1,200                                                   77,965            68,432
        Related parties                                                          110,098            50,364
     Inventories                                                                  27,338            17,518
     Prepaid value added tax                                                      17,834            15,517
     Other current assets                                                          4,227             2,374
                                                                             -----------       -----------
                 Total current assets                                            400,211           199,520

Property, plant and equipment, net                                             1,819,808         1,478,075
Other non-current assets                                                          27,841            27,567
                                                                             -----------       -----------
                 Total assets                                                $ 2,247,860       $ 1,705,162
                                                                             ===========       ===========

Liabilities and Stockholders' Equity
Current liabilities
     Current portion of long-term debt                                       $    56,877       $    24,844
     Short-term borrowings                                                             -            28,783
     Accounts payable
        Trade accounts payable                                                     7,910             3,559
        Non-trade accounts payable                                                46,886           119,939
        Related parties                                                          136,294           115,074
     Income taxes payable                                                        126,019           108,003
     Accrued bonus payable                                                        31,085            18,422
     Other current liabilities                                                    10,621             3,771
                                                                             -----------       -----------
                 Total current liabilities                                       415,692           422,395
Long-term debt                                                                    28,396            97,040
Accrued severance benefits, net                                                    7,155             5,508
Deferred income tax liabilities                                                   78,506            38,813
                                                                             -----------       -----------
                 Total liabilities                                               529,749           563,756
                                                                             -----------       -----------
Commitments and contingencies
Stockholders' equity
     Preferred stock: par value $8.51 per share, 153,190 shares authorized,
        41,000 shares issued and outstanding                                         349               349
     Common stock: par value $8.35 per share, 3,640,000 shares authorized,
        2,400,000 shares issued and outstanding                                   20,040            20,040
     Retained earnings                                                         1,528,270           995,695
     Accumulated other comprehensive income                                      169,452           125,322
                                                                             -----------       -----------
                 Total stockholders' equity                                    1,718,111         1,141,406
                                                                             -----------       -----------
                 Total liabilities and stockholders' equity                  $ 2,247,860       $ 1,705,162
                                                                             ===========       ===========


   The accompanying notes are an integral part of these financial statements.







SAMSUNG CORNING PRECISION GLASS CO., LTD.
Statements of Income
Years ended December 31, 2005, 2004 and 2003
(in thousands)
------------------------------------------------------------------------------------------------------------------------------------



                                                                2005              2004             2003

                                                                                      
Net sales
     Related parties                                        $   876,182      $   525,527       $   290,958
     Other                                                      784,099          571,324           299,179
                                                            -----------      -----------       -----------
                                                              1,660,281        1,096,851           590,137
Cost of sales                                                   426,535          276,599           166,570
                                                            -----------      -----------       -----------
Gross profit                                                  1,233,746          820,252           423,567
Selling and administrative expenses                              54,023           38,050            28,527
Research and development expenses                                39,386           30,706             8,120
Royalty expenses to related parties                              81,233           52,260            27,649
                                                            -----------      -----------       -----------
Operating income                                              1,059,104          699,236           359,271
Other income (expense):
     Interest income                                              4,432            3,006             2,380
     Interest expense                                            (4,112)          (2,365)           (1,430)
     Foreign exchange gain (loss), net                           14,070            7,498            (3,177)
     Donations                                                  (15,124)          (5,333)           (2,532)
     Other income (expense), net                                    128             (690)              191
                                                            -----------      -----------       -----------
Income before income taxes                                    1,058,498          701,352           354,703
Provision for income taxes                                      210,895          140,715            59,936
                                                            -----------      -----------       -----------
Net income                                                  $   847,603      $   560,637       $   294,767
                                                            ===========      ===========       ===========


   The accompanying notes are an integral part of these financial statements.






SAMSUNG CORNING PRECISION GLASS CO., LTD.
Statements of Cash Flows
Years ended December 31, 2005, 2004 and 2003
(in thousands)
------------------------------------------------------------------------------------------------------------------------------------



                                                                2005              2004             2003

                                                                                      
Cash flows from operating activities
Net income                                                  $   847,603      $   560,637       $   294,767
Adjustments to reconcile net income to net cash
  provided by operating activities
     Depreciation                                               183,341          111,077            53,076
     Foreign exchange (gain) loss, net                          (13,155)          (8,373)            5,163
     Deferred income tax expense                                 31,488           20,619             9,948
     Other, net                                                   3,218            3,819             1,385
     Changes in operating assets and liabilities
        Trading securities                                            -                -            62,925
  Accounts and notes receivable                                 (67,059)         (41,745)          (32,785)
        Inventories                                              (9,202)            (981)           (2,252)
        Prepaid VAT and other current assets                     (3,123)           1,614           (12,810)
        Accounts payable and other current liabilities           59,029           63,406            39,812
                                                            -----------      -----------       -----------
  Net cash provided by operating activities                   1,032,140          710,073           419,229
                                                            -----------      -----------       -----------

Cash flows from investing activities
     Purchases of property, plant and equipment                (559,184)        (661,541)         (309,836)
     Refund of leasehold deposits                                 1,574           (7,091)           (4,796)
     Other, net                                                  (1,132)          (2,219)           (2,224)
                                                            ------------     -----------       -----------
Net cash used in investing activities                          (558,742)        (670,851)         (316,856)
                                                            ------------     -----------       -----------

Cash flows from financing activities
     Net decrease in short-term borrowings                      (29,296)          14,089            13,064
     Proceeds from issuance of long-term debt                         -           91,183                 -
     Repayment of long-term debt                                (25,287)         (25,229)           (5,705)
     Payment of cash dividend                                  (315,028)        (147,668)          (64,159)
                                                            ------------     -----------       -----------
Net cash used in financing activities                          (369,611)         (67,625)          (56,800)
                                                            ------------     -----------       -----------

Effect of exchange rate changes on cash
  and cash equivalents                                           13,647            6,790            (5,627)
                                                            -----------      -----------       -----------
Net increase (decrease) in cash
  and cash equivalents                                          117,434          (21,613)           39,946

Cash and cash equivalents
Beginning of year                                                45,315           66,928            26,982
                                                            -----------      -----------       -----------
End of year                                                 $   162,749      $    45,315       $    66,928
                                                            ===========      ===========       ===========

Supplemental cash flow information
Cash paid for interest                                      $     3,857      $     2,275       $       750
Cash paid for income taxes                                      160,865           65,325            25,027


   The accompanying notes are an integral part of these financial statements.






SAMSUNG CORNING PRECISION GLASS CO., LTD.
Notes to Financial Statements
--------------------------------------------------------------------------------


1.   Organization and Nature of Operations

     Samsung Corning  Precision Glass Co., Ltd. (the "Company") was incorporated
     on April 20,  1995 under the laws of the  Republic  of Korea in  accordance
     with a joint venture  agreement  between Corning  Incorporated  ("Corning")
     located in the U.S.A. and domestic companies in Korea.

     As of December 31, 2005, the issued and outstanding number of common shares
     of the Company is 2,400,000, 50% of which are owned by Corning Hungary Data
     Services Limited Liability Company,  42.6% by Samsung Electronics Co., Ltd.
     and 7.4% by another domestic shareholder.

     The Company operates in one business segment,  the production and marketing
     of  precision  flat glass  substrates.  Glass  substrates  provided  by the
     Company  are used to make  TFT-LCD  (Thin-Film  Transistor  Liquid  Crystal
     Display)  panels for notebook  computers,  LCD monitors,  LCD TVs and other
     handheld  devices  such  as  digital  cameras,  PDAs  and  navigators.  The
     Company's  major  customers  are  Korean LCD panel  makers  such as Samsung
     Electronics  Co.,  Ltd., LG Philips LCD Co., Ltd. and BOE Hydis  Technology
     Co., Ltd. The Company's  current  market is primarily  limited to companies
     incorporated in Korea.

2.   Summary of Significant Accounting Policies

     The  accompanying  financial  statements  are presented in accordance  with
     accounting  principles  generally  accepted in the United States of America
     ("U.S. GAAP").  Significant  accounting policies followed by the Company in
     the  preparation of the  accompanying  financial  statements are summarized
     below.

     Basis of Presentation
     The  accounting  records of the Company are expressed in Korean Won and are
     maintained in accordance  with the laws and  regulations of the Republic of
     Korea.

     Foreign Currencies
     The Company  operates  primarily  in Korean Won,  its local and  functional
     currency. The Company has chosen the U.S. Dollar as its reporting currency.
     In accordance with the Statement of Financial Accounting Standards ("SFAS")
     No. 52,  Foreign  Currency  Translation,  revenues and  expenses  have been
     translated into U.S. Dollars at average  exchange rates  prevailing  during
     the period.  Assets and  liabilities  have been  translated at the exchange
     rates on the balance sheet date.  Equity  accounts have been  translated at
     historical  rates.  The resulting  translation gain or loss adjustments are
     recorded  directly  as  a  separate  component  of  stockholders'   equity.
     Transaction  gains or losses that arise from exchange rate  fluctuations on
     transactions  denominated in a currency other than the functional  currency
     are included in the income  statement as incurred.  Assets and  liabilities
     denominated in currencies other than the functional currency are translated
     at the exchange  rates at the balance  sheet date and the related  exchange
     gains or losses are recorded in the statement of income.

     Revenue Recognition
     The  Company  derives  its revenue  from the sale of  precision  flat glass
     substrates  to its  customers,  primarily  located  in Korea.  The  Company
     recognizes its revenue when persuasive  evidence of an arrangement  exists,
     the products or the services have been delivered and all risks of ownership
     have  been  transferred  to the  customer,  the  sales  price  is  fixed or
     determinable,  and  collectibility  is reasonably  assured.  This typically
     occurs upon delivery of the products to the  customers,  as the majority of
     the customers are large Korean  manufacturers  of LCD panels who enter into
     general  supply  agreements  with the  Company  and place  large  orders of
     products for delivery on a regular basis.  Sales revenue is recorded net of
     discounts and rebates.

     Use of Estimates
     The  preparation of the financial  statements in conformity  with U.S. GAAP
     requires  management to make estimates and assumptions  that affect amounts
     reported in the accompanying financial statements and disclosures. The most
     significant  estimates  and  assumptions  relate  to  the  useful  life  of
     property,  plant  and  equipment,   allowance  for  uncollectible  accounts
     receivable,  contingent  liabilities,  inventory  valuation,  impairment of
     long-lived  assets and allocated  expenses.  Although  these  estimates are
     based on management's best knowledge of current events and actions that the
     Company may undertake in the future,  actual  results may be different from
     those estimates.

     Financial Instruments
     The  amounts   for  cash  and  cash   equivalents,   short-term   financial
     instruments,  accounts receivable,  certain other assets, accounts payable,
     certain accrued and other  liabilities,  short-term loan and long-term debt
     are  reported at their fair value due to their short  maturities  or market
     interest rates. Obligations due to or receivables from related parties have
     no ascertainable fair value as no market exists for such instruments.





SAMSUNG CORNING PRECISION GLASS CO., LTD.
Notes to Financial Statements
--------------------------------------------------------------------------------


     Cash and Cash Equivalents
     Cash and cash  equivalents  include cash,  demand  deposits and  short-term
     investments  with an original  maturity of three months or less at the time
     of acquisition.

     Inventories
     Inventories  are  stated at the lower of cost or  market,  with cost  being
     determined by the weighted-average method, which approximates the first-in,
     first-out method.

     Property and Depreciation
     Property,  plant and equipment ("PP&E") are stated at cost less accumulated
     depreciation. Depreciation is computed using the straight-line method based
     on the following estimated useful lives:

     Buildings                                              From 20 to 40 years
     Machinery and equipment                                From 1.5 to 8 years
     Vehicle, tools, furniture and fixtures                 From 2 to 8 years

     Expenditures that enhance the value or materially extend the useful life of
     the  facilities  are  capitalized  as  additions  to  property,  plant  and
     equipment.  Costs of normal,  recurring or periodic repairs and maintenance
     activities are charged to expense as incurred.

     Impairment of Long-Lived Assets
     Long-lived assets are reviewed for impairment whenever events or changes in
     circumstances  indicate  that the  carrying  amount  of an asset may not be
     recoverable.  Recoverability  of assets to be held and used is  measured by
     comparing  the carrying  amount of an asset or asset group  against  future
     undiscounted  cash flows  expected to be generated  from the asset or asset
     group.  If the sum of the  expected  future  cash  flows  is less  than the
     carrying amount of the asset or asset group, an impairment loss equates the
     difference between the estimated fair value and the carrying value.

     Accrued Severance Benefits
     Employees and  directors  with at least one year of service are entitled to
     receive a lump-sum  payment upon  termination of their  employment with the
     Company,  based on their  length of service  and rate of pay at the time of
     termination. Accrued severance benefits represent the amount which would be
     payable  assuming all  employees  and  directors  were to  terminate  their
     employment with the Company as of the balance sheet date.

     The Company has funds  deposited  at the Korean  National  Pension  Fund in
     accordance  with  National  Pension  Funds Law.  The use of the  deposit is
     restricted  to the  payment of  severance  benefits.  Accordingly,  accrued
     severance  benefits in the accompanying  balance sheet are presented net of
     this deposit.

     In addition, accrued severance benefits are funded at approximately 60% and
     57% as of  December  31,  2005  and  2004,  respectively,  through  a group
     severance  insurance  plan and are  presented  as a deduction  from accrued
     severance benefits.

     Research and Development Costs
     Research and  development  expenditures  which include costs in relation to
     new product,  development,  research,  process  improvement and product use
     technology are expensed as incurred and included in operating expenses.

     Income Taxes and Investment Tax Credit
     The Company  recognizes  deferred income taxes for  anticipated  future tax
     consequences  resulting from temporary differences between amounts reported
     for financial  reporting  and income tax purposes.  Deferred tax assets and
     liabilities are computed on the said temporary  differences by applying the
     enacted  statutory tax rates  applicable to the years when such differences
     are expected to reverse. Deferred tax assets are recognized when it is more
     likely than not that they will be realized.  The total income tax provision
     includes the current tax expense under the applicable tax  regulations  and
     the change in the balance of deferred tax assets and liabilities during the
     year.

     The Company is eligible to use investment tax credits that are  temporarily
     allowed for qualified plant and equipment expenditures.  The investment tax
     credit is recognized as a reduction of tax expense in the year in which the
     qualified plant and equipment expenditure is incurred.





SAMSUNG CORNING PRECISION GLASS CO., LTD.
Notes to Financial Statements
--------------------------------------------------------------------------------


     Derivative Instruments
     The Company has entered into foreign exchange  forward  contracts to manage
     its exposure to the  fluctuations in foreign exchange rates. The risk being
     hedged is the  fluctuation in future cash flows from the Company's sales as
     a result of the  changes in exchange  rate  between  the  Japanese  Yen and
     Korean  Won.  The  Company's   foreign  exchange   forward   contracts  are
     denominated  in Japanese Yen and for periods  consistent  with the terms of
     the underlying  sales  transactions,  generally one year or less. Since the
     Company's  foreign exchange forward contracts are made in the normal course
     of business and not speculative in nature, they are designated as cash flow
     hedging instruments.

     All derivative instruments are recorded at fair value. Effective changes in
     the fair  value  of the  derivative  instruments  designated  as cash  flow
     hedging instruments are recorded in accumulated other comprehensive  income
     (or loss).  Amounts are reclassified from accumulated  other  comprehensive
     income (or loss) when the underlying hedged  transactions  impact earnings.
     If the  transaction  being hedged  fails to occur,  the gain or loss on the
     associated financial  instruments are recorded immediately in earnings.  As
     of  December  31,  2005 and 2004,  there were no  outstanding  balances  of
     forward foreign exchange contracts.

     Cash  flows  associated  with the  derivative  instruments  are  classified
     consistent with the cash flows from the transactions being hedged.

     Recent Accounting Pronouncements
     In November 2004, the Financial  Accounting  Standard Board ("FASB") issued
     SFAS No. 151,  Inventory  Costs,  which  amends the guidance in ARB No. 43,
     Chapter 4,  Inventory  Pricing,  to clarify  the  accounting  for  abnormal
     amounts of idle  facility  expense,  freight,  handling  costs,  and wasted
     material  (spoilage).  This standard  requires  items such as idle facility
     expense,  excessive  spoilage,  double freight,  and rehandling costs to be
     recognized as current-period  charges. In addition,  this standard requires
     allocation of fixed  production  overheads to the costs of conversion to be
     based on the normal capacity of the production  facilities.  The provisions
     of this standard are effective for inventory  costs incurred  during fiscal
     years  beginning  after  June 15,  2005.  The  Company  does not expect the
     adoption  of  SFAS  No.  151 to have a  material  impact  on its  financial
     position or results of operations.

     In May 2005,  the FASB issued SFAS No.  154,  Accounting  Changes and Error
     Corrections,  a replacement of APB Opinion No. 20, Accounting Changes,  and
     SFAS No. 3, Reporting  Accounting Changes in Interim Financial  Statements.
     SFAS No. 154 changes the  requirements for the accounting for and reporting
     of a change in accounting principle.  Previously, most voluntary changes in
     accounting  principles were required  recognition  via a cumulative  effect
     adjustment  within  net income of the  period of the  change.  SFAS No. 154
     requires retrospective  application to prior periods' financial statements,
     unless it is impracticable to determine either the period-specific  effects
     or the  cumulative  effect of the  change.  SFAS No. 154 is  effective  for
     accounting  changes made in fiscal years beginning after December 15, 2005;
     however,  the Statement  does not change the  transition  provisions of any
     existing  accounting  pronouncements.  The  Company  does  not  expect  the
     adoption  of  SFAS  No.  154 to have a  material  effect  on its  financial
     position or results of operations.

3.   Inventories

     Inventories consist of the following:

     (in thousands)                                 2005             2004

     Finished goods                            $     9,357       $    6,570
     Semi-finished goods                            11,628            4,009
     Raw materials                                   3,035            2,920
     Auxiliary materials                             3,318            4,019
                                               -----------       ----------
                                               $    27,338       $   17,518
                                               ===========       ==========





SAMSUNG CORNING PRECISION GLASS CO., LTD.
Notes to Financial Statements
--------------------------------------------------------------------------------


4.   Property, Plant and Equipment

     Property, plant and equipment comprise the following:

     (in thousands)                                  2005             2004

     Building                                   $   643,140       $  413,274
     Machinery and equipment                        997,468          590,778
     Vehicle, tools, furniture and fixtures          85,222           56,501
                                                -----------       ----------
                                                  1,725,830        1,060,553
     Less: accumulated depreciation                (329,726)        (212,129)
                                                -----------       ----------
                                                  1,396,104          848,424
     Land                                            51,057           49,501
     Construction-in-progress                       372,647          580,150
                                                -----------       ----------
                                                $ 1,819,808       $1,478,075
                                                ===========       ==========






SAMSUNG CORNING PRECISION GLASS CO., LTD.
Notes to Financial Statements
--------------------------------------------------------------------------------


5.   Transactions with Related Parties

     In the normal course of business, the Company sells its products to Samsung
     Electronics  Co., Ltd.,  Corning and Samsung  Corning Co., Ltd.  ("SSC",  a
     Korean-based company in which Samsung and Corning each own a 50% interest),
     purchases  semi-finished goods from Corning and purchases  property,  plant
     and equipment from Samsung affiliates and Corning. In addition, the Company
     pays a 5% royalty on net sales  amounts of certain  products to Corning and
     Corsam  Glasstec  R&D  Center,  in  which  Corning  and SSC  each own a 50%
     interest.  A summary  of these  transactions  and  related  receivable  and
     payable balances as of December 31 is as follows:




                  2005                                                    Cost &
     (in thousands)                          Sales (1)   Purchases (2)   Expenses   Receivables    Payables
                                                                                  
     Samsung affiliates
     Samsung Electronics Co., Ltd.          $   800,703   $         -  $    12,514  $    69,217  $     3,000
     Samsung Corporation                             32        92,052          686            -        7,932
     Samsung Engineering Co., Ltd.                    -       120,305          573            -       93,802
     Others                                         467        30,304       33,362          203       11,553
                                            -----------   -----------  -----------  -----------  -----------
                                                801,202       242,661       47,135       69,420      116,287
     Corning                                     71,199       115,645       68,568       40,559       17,698
     Samsung Corning Co., Ltd.                    3,781             -        6,858          119          666
     Corsam Glasstec R&D Center                       -             -       16,247            -        1,643
                                            -----------   -----------  -----------  -----------  -----------
                                            $   876,182   $   358,306  $   138,808  $   110,098  $   136,294
                                            ===========   ===========  ===========  ===========  ===========


                  2004                                                    Cost &
     (in thousands)                          Sales (1)   Purchases (2)   Expenses   Receivables    Payables
     Samsung affiliates
     Samsung Electronics Co., Ltd.          $   441,146   $    25,652  $     5,970  $    37,800  $    25,384
     Samsung Corporation                             18        97,466           34            4       33,624
     Samsung Engineering Co., Ltd.                    -       118,962            -            -       44,656
     Others                                         394        11,638       26,581          158        5,336
                                            -----------   -----------  -----------  -----------  -----------
                                                441,558       253,718       32,585       37,962      109,000
     Corning                                     76,327        95,811       41,808       11,533        4,256
     Samsung Corning Co., Ltd.                    7,642           114        6,360          869          754
     Corsam Glasstec R&D Center                       -             -       10,452            -        1,064
                                            -----------   -----------  -----------  -----------  -----------
                                            $   525,527   $   349,643  $    91,205  $    50,364  $   115,074
                                            ===========   ===========  ===========  ===========  ===========


                  2003                                                    Cost &
     (in thousands)                          Sales (1)   Purchases (2)   Expenses   Receivables    Payables
     Samsung affiliates
     Samsung Electronics Co., Ltd.          $   260,355   $     2,763  $       717  $    22,384  $     8,469
     Samsung Corporation                             14        86,354          123           11       48,154
     Samsung Engineering Co., Ltd.                    -        77,940            8            -       41,660
     Others                                         375         2,887       13,317          128        2,758
                                            -----------   -----------  -----------  -----------  -----------
                                                260,744       169,944       14,165       22,523      101,041
     Corning                                     25,934        67,976       22,119        4,759       14,064
     Samsung Corning Co., Ltd.                    4,280         6,283        6,015          220          644
     Corsam Glasstec R&D Center                       -             -        5,530            -        3,250
                                            -----------   -----------  -----------  -----------  -----------
                                            $   290,958   $   244,203  $    47,829  $    27,502  $   118,999
                                            ===========   ===========  ===========  ===========  ===========


     (1) Gain and loss on foreign exchange forward contracts are included.
     (2) Purchases of property, plant and equipment are included.





SAMSUNG CORNING PRECISION GLASS CO., LTD.
Notes to Financial Statements
--------------------------------------------------------------------------------


6.   Long-term Debt

     Long-term debt at December 31, 2005 and 2004 consists of the following:



                                                             Annual
     (in thousands)                                       interest rate               2005         2004
                                                                                        
     Foreign currency debt
         Facilities finance, due through 2005             Libor + 2.5%              $       -    $     584

     Floating Rate Notes issued,
                     due through 2005                     Libor + 0.77%                     -       24,260
                     due through 2007                     Libor + 0.60%                85,273       97,040
                                                                                    ---------    ---------
                                                                                       85,273      121,884
                                                Less: Current maturities              (56,877)     (24,844)
                                                                                    ---------    ---------
                                                                                    $  28,396    $  97,040
                                                                                    =========    =========

     The schedules of principal payments of long-term debt are as follows:

     For the year ending December 31                 (in thousands)

     2006                                            $    56,877
     2007                                                 28,396
                                                     -----------
                                                     $    85,273

     The Floating  Rate Notes issued in 2005  includes a covenant  requiring the
     Company  to  maintain  its  total  liabilities  to not  exceed  170% of its
     tangible net worth as defined in the related  agreement.  Another  covenant
     requires  Samsung  affiliates  to  directly  maintain  at least  30% of the
     aggregate  issued  and  outstanding   common  shares  of  the  Company  and
     management control of the Company.

7.   Income Taxes

     Income tax expense consists of the following:



     (in thousands)                                2005                2004                2003
                                                                             
     Current                                   $   179,407        $   120,096         $    49,988
     Deferred                                       31,488             20,619               9,948
                                               -----------        -----------         -----------
                                               $   210,895        $   140,715         $    59,936
                                               ===========        ===========         ===========


     The following  table  reconciles the expected  amount of income tax expense
     based on  statutory  rates to the actual  amount of taxes  recorded  by the
     Company:



     (in thousands)                                2005                2004                2003
                                                                             
     Income before taxes                       $ 1,058,498        $   701,352         $   354,703
     Statutory tax rate                              27.5%              29.7%               29.7%
                                               -----------        -----------         -----------
     Expected taxes at statutory rate              291,087            208,302             105,347
     Permanent differences
     - Tax exemption for foreign
        investment                                 (71,555)           (51,199)            (34,575)
     - Tax rate changes                              7,892              5,640                (792)
     - Tax credits, net of surtax effect           (13,733)           (21,495)             (9,931)
     - Others, net                                  (2,796)              (533)               (113)
                                               ------------       -----------         -----------
     Income tax expense                        $    210,895       $   140,715         $    59,936
                                               ============       ===========         ===========
     Effective tax rate                              19.92%             20.1%               16.9%
                                               ============       ===========         ===========






SAMSUNG CORNING PRECISION GLASS CO., LTD.
Notes to Financial Statements
--------------------------------------------------------------------------------


     The statutory  tax rate is 27.5% for 2005 and 29.7% for 2004 and 2003,  but
     the  applicable  tax rate is 20.74%,  22.40% and 19.95% for 2005,  2004 and
     2003,  respectively,  due to tax exemption  benefits for a foreign invested
     company under the Korean Tax Preference Control Law ("TPCL"). In accordance
     with the TPCL and the  approval  of the Korean  government,  the Company is
     exempted  fully  from the  corporate  income  taxes on the  taxable  income
     arising  from  the  sales  of  manufactured  goods  in  proportion  to  the
     percentage of qualified  foreign  shareholder's  equity for seven years and
     50% exemption for the subsequent three years. The 100% exemption expired in
     2003 and the 50% exemption expired in 2005.

     As a  result  of the  revision  of the  Korean  Corporation  Tax  Law,  the
     statutory  tax rate  applicable  from the  beginning of 2005 was reduced to
     27.5%. The Company recognized its deferred tax assets and liabilities as of
     December  31, 2005 and 2004 based on the revised tax rate and the  expiring
     schedule of tax exemption for foreign investment.

     Significant components of deferred income tax assets and liabilities are as
     follows:

     (in thousands)                                2005                2004
     Deferred income tax assets
     Inventories                              $     1,504         $       446
     Accrued bonus payables                           994                   -
     Other                                            293                 278
                                              -----------         -----------
                                                    2,791                 724
                                              -----------         -----------
     Deferred income tax liabilities
     Property, plant and equipment            $   (76,792)        $   (35,187)
     Reserve for technology development            (3,893)             (4,218)
     Other                                              -                 (11)
                                              -----------         -----------
                                                  (80,685)            (39,416)
                                              -----------         -----------
     Deferred income tax liabilities, net     $   (77,894)        $   (38,692)
                                              ===========         ===========

8.   Stockholders' Equity

     The components of and changes in stockholders' equity are as follows:



     (in thousands)                                             2005            2004           2003
                                                                                 
     Preferred Stock                                        $       349    $       349    $       349
                                                            ===========    ===========    ===========

     Common Stock                                           $    20,040    $    20,040    $    20,040
                                                            ===========    ===========    ===========

     Retained Earnings:
     Balance at the beginning of year                       $   995,695    $   582,726    $   352,118
     Net income                                                 847,603        560,637        294,767
     Dividends paid to preferred shareholders                    (3,678)        (2,488)        (1,081)
     Dividends paid to common shareholders                     (311,350)      (145,180)       (63,078)
                                                            -----------    -----------    -----------
     Balance at end of year                                 $ 1,528,270    $   995,695    $   582,726
                                                            ===========    ===========    ===========

     Accumulated Other Comprehensive
     (Income) Loss:
     Balance at the beginning of year                       $   125,322    $    (4,230)   $       612
     Foreign currency translation adjustment                     44,130        129,552         (4,842)
                                                            -----------    -----------    -----------
     Balance at end of year                                 $   169,452    $   125,322    $    (4,230)
                                                            ===========    ===========    ===========

     Total Stockholders' Equity                             $ 1,718,111    $ 1,141,406    $   598,885
                                                            ===========    ===========    ===========






SAMSUNG CORNING PRECISION GLASS CO., LTD.
Notes to Financial Statements
--------------------------------------------------------------------------------


     Total comprehensive income is as follows:



     (in thousands)                                             2005            2004           2003
                                                                                 
     Net income                                             $   847,603    $   560,637    $   294,767
     Foreign currency translation adjustment                     44,130        129,552         (4,842)
                                                            -----------    -----------    -----------
     Total comprehensive income                             $   891,733    $   690,189    $   289,925
                                                            ===========    ===========    ===========


     Preferred Stock
     There were 41,000 shares of non-voting  preferred stock with a par value of
     $8.51 issued and  outstanding as of December 31, 2005 and 2004.  Each share
     is entitled to non-cumulative  dividends at the rate of 5% on par value. In
     addition,  if the dividend  ratio of common stock exceeds that of preferred
     stock,  the  additional  dividend on  preferred  stock may be declared by a
     resolution of the general shareholders' meeting.

     Retained Earnings
     Retained  earnings  as of  December  31,  2005  and 2004  comprised  of the
     following:



     (in thousands)                                               2005                 2004
                                                                            
     Appropriated
     Legal reserve                                           $      9,733         $      9,733
     Reserve for business development                              30,800               30,800
     Reserve for research and manpower development                 14,164               11,600
     Voluntary reserve                                              4,157                4,157
                                                             ------------         ------------
                                                                   58,854               56,290
     Unappropriated                                             1,469,416              939,405
                                                             ------------         ------------
                                                             $  1,528,270         $    995,695
                                                             ============         ============


     Legal Reserve
     The  Commercial  Code of the  Republic  of Korea  requires  the  Company to
     appropriate a portion of the retained  earnings as a legal reserve equal to
     a minimum of 10% of its cash dividends until such reserve equals 50% of its
     capital  stock.  The reserve is not  available  for  dividends,  but may be
     transferred to capital stock or used to reduce accumulated deficit, if any,
     through resolution by the Company's shareholders.

     Reserve for Business Development
     Pursuant to the Corporate  Income Tax Law of Korea,  the Company is allowed
     to appropriate a portion of the retained earnings as a reserve for business
     development.  This  reserve  is not  available  for  dividends,  but may be
     transferred to capital stock or used to reduce accumulated deficit, if any,
     through resolution by the Company's shareholders.

     Reserve for Research and Manpower Development
     Pursuant to the former Korean Tax  Exemption and Reduction  Control Law and
     the Korean Tax Preference  Control Law, the Company  appropriates a portion
     of  the   retained   earnings  as  a  reserve  for  research  and  manpower
     development.  This reserve is not available for dividends  until it is used
     for the specified purpose or reversed.

     Voluntary Reserve
     The Company appropriates a certain portion of retained earnings pursuant to
     shareholder resolution as a voluntary reserve. This reserve may be reversed
     and transferred to  unappropriated  retained  earnings by the resolution of
     shareholders and may be distributed as dividends after reversal.

9.   Commitments and Contingencies

     Credit Facilities
     The Company has overdraft  facilities up to $5,432  thousand,  general loan
     facilities up to $49,378 thousand and trade financing facility up to $5,000
     thousand with local banks as of December 31, 2005. As of December 31, 2005,
     there are no outstandings under credit facilities.





SAMSUNG CORNING PRECISION GLASS CO., LTD.
Notes to Financial Statements
--------------------------------------------------------------------------------


     Business and Credit Risk Concentration
     The Company sells its products on a credit basis to its customers including
     certain  related  parties.   Management  estimates  the  collectibility  of
     accounts  receivable based on the financial  condition of the customers and
     prevailing economic trends.  Based on management's  estimates,  the Company
     established  allowances for doubtful  accounts  receivable which management
     believes  are  adequate.  Concentrations  of credit  risk with  respect  to
     accounts  receivable are limited to the credit  worthiness of the Company's
     customers.  Four of the five major  customers  of the Company are  domestic
     TFT-LCD makers incorporated in Korea and another is a domestic Color-Filter
     maker  incorporated in Korea.  Trade accounts  receivables  from these five
     major  customers are 83% and 90% of total trade accounts  receivable of the
     Company as of December 31, 2005 and 2004,  respectively,  and revenues from
     these five major customers constitute 94%, 90% and 95% of total revenues of
     the  Company  for the  years  ended  December  31,  2005,  2004  and  2003,
     respectively.

     In addition,  a  substantial  portion of the  Company's  long-term  debt is
     denominated  in foreign  currencies,  giving rise to financial  exposure to
     fluctuations in currency exchange rates.

     Pending Litigation
     As of December 31, 2005, the Company is a  co-defendant  in a lawsuit filed
     by Seoul Guarantee  Insurance Co. and 14 other creditors (the  "Creditors")
     for  alleged  breach of an  agreement  that the  Company  and thirty  other
     Samsung affiliates  (collectively  "Samsung  affiliates") entered into with
     the  Creditors  in September  1999.  According  to the  Agreement,  Samsung
     affiliates agreed to sell 3.5 million shares of Samsung Life Insurance Co.,
     Ltd.  ("SLI") by December 31, 2000, which were transferred to the Creditors
     in  connection  with the petition for court  receivership  of Samsung Motor
     Inc.  ("SMI").  In the event  that the sales  proceeds  fall short of $2.42
     billion, Samsung affiliates have agreed to compensate the Creditors for the
     shortfall,  by other means, including Samsung affiliates'  participation in
     any  equity  offering  or  subordinated  debentures  to be  issued  by  the
     Creditors.  Any excess proceeds over $2.42 billion are to be distributed to
     Samsung affiliates.

     As of December  31,  2005,  the shares of SLI have not been sold.  The suit
     asks for  actual  and  punitive  damages  of  $4.68  billion  plus  penalty
     interest.

     The  Company  believes  that  although  the  outcome  of these  matters  is
     uncertain,  they  would not  result  in a  material  ultimate  loss for the
     Company.  Accordingly,  no provision for potential losses arising from this
     claim is reflected in the accompanying financial statements.

10.  Subsequent event (Unaudited)

     In the Board of Directors meeting and Extraordinary  General  Shareholder's
     meeting on January  17,  2006,  the  Company  resolved  to issue 15 million
     shares of common stock at W10,000 per share on February 2, 2006.








                              Item 15(b) Exhibit 21
                  Corning Incorporated and Subsidiary Companies

    Subsidiaries of the Registrant as of December 31, 2005 are listed below:

CCS Holdings, Inc.                                              Delaware
CCS Technology, Inc.                                            Delaware
Corning (Australia) Partnership Holdings, GP                    Australia
Corning (Shanghai) Co., Ltd.                                    China
Corning Asahi Video Products Company (Partnership)              Delaware
Corning Cabelcon A/S                                            Denmark
Corning Cable Systems International Ltd.                        Cayman Islands
Corning Cable Systems LLC                                       North Carolina
Corning Cable Systems Brand, Inc.                               Delaware
Corning Cable Systems Polska Sp. Z o.o.                         Poland
Corning Costar Holding, LLC                                     Delaware
Corning Display Technologies Taiwan Co., Ltd.                   Taiwan
Corning Gilbert Inc.                                            Delaware
Corning Holding GmbH                                            Germany
Corning Hungary Data Services, LLC                              Hungary
Corning International Corporation                               Delaware
Corning International Holding, LLC                              Delaware
Corning International KK                                        Japan
Corning Japan KK                                                Japan
Corning Limited                                                 United Kingdom
Corning Mauritius                                               Mauritius
Corning NetOptix, Inc.                                          Delaware
Corning Noble Park, LLC                                         Australia
Corning Oak Holding Inc.                                        Delaware
Corning Products South Africa (Pty) Ltd.                        South Africa
Corning Property Management Corporation                         Delaware
Corning S.A.S.                                                  France
Corning Specialty Materials Inc.                                Delaware
Corning Treasury Services Limited                               Ireland
Corning Tropel Corporation                                      Delaware
Costar Europe Ltd.                                              Delaware
Optical Fiber Corporation                                       Delaware

Companies  accounted  for under the equity  method as of  December  31, 2005 are
listed below:

Advanced Cable Systems Corporation                              Japan
Cormetech, Inc.                                                 Delaware
Dow Corning Corporation                                         Michigan
Eurokera North America, Inc.                                    Delaware
Eurokera S.N.C.                                                 France
Keraglass S.N.C.                                                France
Pittsburgh Corning Europe N.V.                                  Belgium
Samsung Corning Co., Ltd.                                       Korea
Samsung Corning Precision Glass Co., Ltd.                       Korea

Summary financial information on Corning's equity basis companies is included in
Note 8 (Investments)  to the  Consolidated  Financial  Statements in this Annual
Report on Form 10-K/A.  Certain subsidiaries,  which considered in the aggregate
as a single subsidiary,  that would not constitute a significant subsidiary, per
Regulation S-X,  Article 1, as of December 31, 2005, have been omitted from this
exhibit.







                              Item 15(c) Exhibit 12

                  Corning Incorporated and Subsidiary Companies
 Computation of Ratio of Earnings (Losses) to Combined Fixed Charges and Preferred Dividends:
                          (In millions, except ratios)


                                                                                        Fiscal Years ended
                                                                  --------------------------------------------------------------
                                                                   Dec. 31,     Dec. 31,     Dec. 31,
                                                                     2005         2004         2003       Dec. 31,     Dec. 31,
                                                                  (Restated)   (Restated)   (Restated)      2002         2001
                                                                  ----------   ----------   ----------    ---------    ---------
                                                                                                        
Income (loss) from continuing operations before
  taxes on income                                                 $     559     $ (1,604)    $   (876)    $ (2,720)    $ (6,161)
Adjustments:
    Distributed income of equity investees                              302          139          112           83           73
    Amortization of capitalized interest                                  4            5            6            9           10
    Fixed charges net of capitalized interest                           130          151          171          207          191
                                                                  ---------     --------     --------     --------     --------

Earnings (loss) before taxes and fixed charges as adjusted        $     995     $ (1,309)    $   (587)    $ (2,421)    $ (5,887)
                                                                  =========     ========     ========     ========     ========

Fixed charges:
    Interest incurred                                             $     132     $    151     $    153     $    186     $    202
    Portion of rent expense which represents an appropriate
      interest factor                                                    22           18           22           28           30
    Amortization of debt costs                                            3            4            5            6            8
                                                                  ---------     --------     --------     --------     --------

Total fixed charges                                                     157          173          180          220          240
Capitalized interest                                                    (27)         (22)          (9)         (13)         (49)
                                                                  ---------     --------     --------     --------     --------

Total fixed charges net of capitalized interest                   $     130     $    151     $    171     $    207     $    191
                                                                  =========     ========     ========     ========     ========

Preferred dividends:
    Preferred dividend requirement                                                                        $    128     $      1
    Ratio of pre-tax income to income before minority interest
      and equity earnings
                                                                                                          --------     --------
    Pre-tax preferred dividend requirement                                                                     128            1

Total fixed charges                                               $     157     $    173     $    180          220          240
                                                                  ---------     --------     --------     --------     --------

Fixed charges and pre-tax preferred dividend requirement          $     157     $    173     $    180     $    348     $    241
                                                                  =========     ========     ========     ========     ========

Ratio of earnings to fixed charges                                     6.3x         *            *            *            *
                                                                  =========     ========     ========     ========     ========

Ratio of earnings to combined fixed charges and preferred
  dividends                                                            6.3x         *            *            *            *
                                                                  =========     ========     ========     ========     ========


*    Loss before taxes and fixed  charges as adjusted  were  inadequate to cover
     total fixed charges by  approximately  $1,458  million and $650 million and
     inadequate   to  cover  fixed  charges  and  pre-tax   preferred   dividend
     requirement  by  approximately  $1,458 million and $650 million at December
     31, 2004 and 2003, respectively.






                              Item 15(c) Exhibit 23

            CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM




We  hereby  consent  to the  incorporation  by  reference  in  the  Registration
Statements on Forms S-3 (Nos.  333-41244,  333-57082,  and 333-100302) and Forms
S-8  (Nos.  33-55345,  33-58193,  333-24337,  333-26049,  333-26151,  333-41246,
333-61975,  333-61983,  333-91879,  333-95963,  333-60480, 333-82926, 333-87128,
333-106265, and 333-109405) of Corning Incorporated of our report dated February
24, 2006, except for Note 2 of the consolidatd financial  statements,  Note 1 on
the financial  statement  schedule,  and the matter discussed in the penultimate
paragraph of Management's  Report on Internal Control Over Financial  Reporting,
as to which  the date is May 9,  2006,  relating  to the  financial  statements,
financial  statement schedule,  management's  assessment of the effectiveness of
internal  control over  financial  reporting and the  effectiveness  of internal
control over financial reporting, which appears in this Form 10-K/A.



/s/ PricewaterhouseCoopers LLP
New York, New York
May 9, 2006







                                                                    EXHIBIT 31.1

   CERTIFICATION OF CHIEF EXECUTIVE OFFICER PURSUANT TO SECTION 302(a) OF THE
                           SARBANES-OXLEY ACT OF 2002

I, Wendell P. Weeks, certify that:

1.   I have reviewed  this  amendment to annual report on Form 10-K/A of Corning
     Incorporated;

2.   Based on my knowledge, this report does not contain any untrue statement of
     a material  fact or omit to state a  material  fact  necessary  to make the
     statements made, in light of the circumstances  under which such statements
     were made,  not  misleading  with  respect  to the  period  covered by this
     report;

3.   Based on my  knowledge,  the  financial  statements,  and  other  financial
     information  included  in  this  report,  fairly  present  in all  material
     respects the financial  condition,  results of operations and cash flows of
     the registrant as of, and for, the periods presented in this report;

4.   The  registrant's  other  certifying  officer  and  I are  responsible  for
     establishing and maintaining disclosure controls and procedures (as defined
     in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have:

     (a)  Designed  such  disclosure  controls  and  procedures,  or caused such
          disclosure   controls  and   procedures  to  be  designed   under  our
          supervision,  to ensure  that  material  information  relating  to the
          registrant,  including its consolidated subsidiaries, is made known to
          us by others within those entities,  particularly during the period in
          which this report is being prepared;

     (b)  Paragraph  omitted  in  accordance  with SEC  transition  instructions
          contained in SEC Release 34-47986;

     (c)  Evaluated the  effectiveness of the registrant's  disclosure  controls
          and procedures and presented in this report our conclusions  about the
          effectiveness of the disclosure controls and procedures, as of the end
          of the period covered by this report based on such evaluation; and

     (d)  Disclosed  in this  report  any  change in the  registrant's  internal
          control  over  financial  reporting  (as defined in Exchange Act Rules
          13a-15(f) and  15d-15(f))  that occurred  during the period covered by
          the annual  report  that has  materially  affected,  or is  reasonably
          likely to materially  affect,  the registrant's  internal control over
          financial reporting; and

5.   The registrant's  other certifying  officer and I have disclosed,  based on
     our most recent evaluation of internal control over financial reporting, to
     the registrant's auditors and the audit committee of the registrant's board
     of directors (or persons performing the equivalent functions):

     (a)  All significant  deficiencies and material weaknesses in the design or
          operation  of internal  control  over  financial  reporting  which are
          reasonably  likely to  adversely  affect the  registrant's  ability to
          record, process, summarize and report financial information; and

     (b)  Any fraud, whether or not material,  that involves management or other
          employees who have a  significant  role in the  registrant's  internal
          control over financial reporting.

Date: May 9, 2006


/s/   Wendell P. Weeks
      --------------------------------------------
      Wendell P. Weeks
      President and Chief Executive Officer
      (Principal Executive Officer)







                                                                    EXHIBIT 31.2

   CERTIFICATION OF CHIEF FINANCIAL OFFICER PURSUANT TO SECTION 302(a) OF THE
                           SARBANES-OXLEY ACT OF 2002

I, James B Flaws, certify that:

1.   I have reviewed  this  amendment to annual report on Form 10-K/A of Corning
     Incorporated;

2.   Based on my knowledge, this report does not contain any untrue statement of
     a material  fact or omit to state a  material  fact  necessary  to make the
     statements made, in light of the circumstances  under which such statements
     were made,  not  misleading  with  respect  to the  period  covered by this
     report;

3.   Based on my  knowledge,  the  financial  statements,  and  other  financial
     information  included  in  this  report,  fairly  present  in all  material
     respects the financial  condition,  results of operations and cash flows of
     the registrant as of, and for, the periods presented in this report;

4.   The  registrant's  other  certifying  officer  and  I are  responsible  for
     establishing and maintaining disclosure controls and procedures (as defined
     in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have:

     (a)  Designed  such  disclosure  controls  and  procedures,  or caused such
          disclosure   controls  and   procedures  to  be  designed   under  our
          supervision,  to ensure  that  material  information  relating  to the
          registrant,  including its consolidated subsidiaries, is made known to
          us by others within those entities,  particularly during the period in
          which this report is being prepared;

     (b)  Paragraph  omitted  in  accordance  with SEC  transition  instructions
          contained in SEC Release 34-47986;

     (c)  Evaluated the  effectiveness of the registrant's  disclosure  controls
          and procedures and presented in this report our conclusions  about the
          effectiveness of the disclosure controls and procedures, as of the end
          of the period covered by this report based on such evaluation; and

     (d)  Disclosed  in this  report  any  change in the  registrant's  internal
          control  over  financial  reporting  (as defined in Exchange Act Rules
          13a-15(f) and  15d-15(f))  that occurred  during the period covered by
          the annual  report  that has  materially  affected,  or is  reasonably
          likely to materially  affect,  the registrant's  internal control over
          financial reporting; and

5.   The registrant's  other certifying  officer and I have disclosed,  based on
     our most recent evaluation of internal control over financial reporting, to
     the registrant's auditors and the audit committee of the registrant's board
     of directors (or persons performing the equivalent functions):

     (a)  All significant  deficiencies and material weaknesses in the design or
          operation  of internal  control  over  financial  reporting  which are
          reasonably  likely to  adversely  affect the  registrant's  ability to
          record, process, summarize and report financial information; and

     (b)  Any fraud, whether or not material,  that involves management or other
          employees who have a  significant  role in the  registrant's  internal
          control over financial reporting.

Date: May 9, 2006


/s/   James B. Flaws
      --------------------------------------------
      James B. Flaws
      Vice Chairman and Chief Financial Officer
      (Principal Financial Officer)





                                                                      EXHIBIT 32

                    CERTIFICATION OF CHIEF EXECUTIVE OFFICER
                                   PURSUANT TO
                             18 U.S.C. SECTION 1350,
                             AS ADOPTED PURSUANT TO
                  SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002


The  undersigned,  Wendell P. Weeks,  President and Chief  Executive  Officer of
Corning Incorporated (the "Company") and James B. Flaws, Vice Chairman and Chief
Financial  Officer,  certify,  pursuant to 18 U.S.C.  Section  1350,  as adopted
pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

(1)  the amendment to Annual Report of the Company on Form 10-K/A for the annual
     period ended  December 31, 2005 fully  complies  with the  requirements  of
     Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2)  that  information  contained in such Form 10-K/A  fairly  presents,  in all
     material respects, the financial condition and results of operations of the
     Company.


Date: May 9, 2006



/s/   Wendell P. Weeks
      --------------------------------------------
      Wendell P. Weeks
      President and Chief Executive Officer


/s/   James B. Flaws
      --------------------------------------------
      James B. Flaws
      Vice Chairman and Chief Financial Officer







                              CORNING INCORPORATED

                           --------------------------

                                POWER OF ATTORNEY

                           --------------------------


     KNOW ALL BY THESE PRESENTS, that the undersigned director and/or officer of
Corning  Incorporated,  a New York corporation (the "Corporation"),  does hereby
make, constitute and appoint Katherine A. Asbeck, William D. Eggers and James B.
Flaws  and  each  or  any  one  of  them,  the  undersigned's  true  and  lawful
attorneys-in-fact,  with power of  substitution,  for the undersigned and in the
undersigned's name, place and stead, to sign and affix the undersigned's name as
director  and/or officer of the  Corporation to (1) a Form 10-K,  Annual Report,
pursuant to the  Securities  Exchange Act of 1934,  as amended (the "1934 Act"),
for the fiscal year ended December 31, 2005, or other applicable form, including
any  and  all  exhibits,  schedules,  amendments,   supplements  and  supporting
documents  thereto,  to be filed by the  Corporation  with  the  Securities  and
Exchange Commission (the "SEC"), as required under the 1934 Act; (2) one or more
Registration  Statements,  on Form  S-8,  or  other  applicable  forms,  and all
amendments,  including  post-effective  amendments,  thereto, to be filed by the
Corporation  with  the  SEC  in  connection  with  the  registration  under  the
Securities  Act of 1933,  as amended  (the "1933  Act"),  of  securities  of the
Corporation,  and to  file  the  same,  with  all  exhibits  thereto  and  other
supporting documents,  with the SEC; and (3) one or more Registration Statements
on Form S-3, or other  applicable  forms,  establishing a universal  shelf under
Rule 415 of the 1933 Act,  and any and all  amendments  or  supplements  thereto
(including post-effective  amendments),  or any Registration Statements relating
to the same offering of securities that are filed pursuant to Rule 462(b) of the
1933 Act, and to file the same, with all exhibits  thereto and other  supporting
documents, with the SEC.

     IN WITNESS WHEREOF,  the undersigned has subscribed these presents this 1st
of February, 2006.




                                /S/ JOHN SEELY BROWN
                                -----------------------------------
                                John Seely Brown








                              CORNING INCORPORATED

                           --------------------------

                                POWER OF ATTORNEY

                           --------------------------


     KNOW ALL BY THESE PRESENTS, that the undersigned director and/or officer of
Corning  Incorporated,  a New York corporation (the "Corporation"),  does hereby
make, constitute and appoint Katherine A. Asbeck, William D. Eggers and James B.
Flaws  and  each  or  any  one  of  them,  the  undersigned's  true  and  lawful
attorneys-in-fact,  with power of  substitution,  for the undersigned and in the
undersigned's name, place and stead, to sign and affix the undersigned's name as
director  and/or officer of the  Corporation to (1) a Form 10-K,  Annual Report,
pursuant to the  Securities  Exchange Act of 1934,  as amended (the "1934 Act"),
for the fiscal year ended December 31, 2005, or other applicable form, including
any  and  all  exhibits,  schedules,  amendments,   supplements  and  supporting
documents  thereto,  to be filed by the  Corporation  with  the  Securities  and
Exchange Commission (the "SEC"), as required under the 1934 Act; (2) one or more
Registration  Statements,  on Form  S-8,  or  other  applicable  forms,  and all
amendments,  including  post-effective  amendments,  thereto, to be filed by the
Corporation  with  the  SEC  in  connection  with  the  registration  under  the
Securities  Act of 1933,  as amended  (the "1933  Act"),  of  securities  of the
Corporation,  and to  file  the  same,  with  all  exhibits  thereto  and  other
supporting documents,  with the SEC; and (3) one or more Registration Statements
on Form S-3, or other  applicable  forms,  establishing a universal  shelf under
Rule 415 of the 1933 Act,  and any and all  amendments  or  supplements  thereto
(including post-effective  amendments),  or any Registration Statements relating
to the same offering of securities that are filed pursuant to Rule 462(b) of the
1933 Act, and to file the same, with all exhibits  thereto and other  supporting
documents, with the SEC.

     IN WITNESS WHEREOF,  the undersigned has subscribed these presents this 1st
of February, 2006.




                                /S/ JAMES B. FLAWS
                                -----------------------------------
                                James B. Flaws










                              CORNING INCORPORATED

                           --------------------------

                                POWER OF ATTORNEY

                           --------------------------


     KNOW ALL BY THESE PRESENTS, that the undersigned director and/or officer of
Corning  Incorporated,  a New York corporation (the "Corporation"),  does hereby
make, constitute and appoint Katherine A. Asbeck, William D. Eggers and James B.
Flaws  and  each  or  any  one  of  them,  the  undersigned's  true  and  lawful
attorneys-in-fact,  with power of  substitution,  for the undersigned and in the
undersigned's name, place and stead, to sign and affix the undersigned's name as
director  and/or officer of the  Corporation to (1) a Form 10-K,  Annual Report,
pursuant to the  Securities  Exchange Act of 1934,  as amended (the "1934 Act"),
for the fiscal year ended December 31, 2005, or other applicable form, including
any  and  all  exhibits,  schedules,  amendments,   supplements  and  supporting
documents  thereto,  to be filed by the  Corporation  with  the  Securities  and
Exchange Commission (the "SEC"), as required under the 1934 Act; (2) one or more
Registration  Statements,  on Form  S-8,  or  other  applicable  forms,  and all
amendments,  including  post-effective  amendments,  thereto, to be filed by the
Corporation  with  the  SEC  in  connection  with  the  registration  under  the
Securities  Act of 1933,  as amended  (the "1933  Act"),  of  securities  of the
Corporation,  and to  file  the  same,  with  all  exhibits  thereto  and  other
supporting documents,  with the SEC; and (3) one or more Registration Statements
on Form S-3, or other  applicable  forms,  establishing a universal  shelf under
Rule 415 of the 1933 Act,  and any and all  amendments  or  supplements  thereto
(including post-effective  amendments),  or any Registration Statements relating
to the same offering of securities that are filed pursuant to Rule 462(b) of the
1933 Act, and to file the same, with all exhibits  thereto and other  supporting
documents, with the SEC.

     IN WITNESS WHEREOF,  the undersigned has subscribed these presents this 1st
of February, 2006.




                                /S/ GORDON GUND
                                -----------------------------------
                                Gordon Gund








                              CORNING INCORPORATED

                           --------------------------

                                POWER OF ATTORNEY

                           --------------------------


     KNOW ALL BY THESE PRESENTS, that the undersigned director and/or officer of
Corning  Incorporated,  a New York corporation (the "Corporation"),  does hereby
make, constitute and appoint Katherine A. Asbeck, William D. Eggers and James B.
Flaws  and  each  or  any  one  of  them,  the  undersigned's  true  and  lawful
attorneys-in-fact,  with power of  substitution,  for the undersigned and in the
undersigned's name, place and stead, to sign and affix the undersigned's name as
director  and/or officer of the  Corporation to (1) a Form 10-K,  Annual Report,
pursuant to the  Securities  Exchange Act of 1934,  as amended (the "1934 Act"),
for the fiscal year ended December 31, 2005, or other applicable form, including
any  and  all  exhibits,  schedules,  amendments,   supplements  and  supporting
documents  thereto,  to be filed by the  Corporation  with  the  Securities  and
Exchange Commission (the "SEC"), as required under the 1934 Act; (2) one or more
Registration  Statements,  on Form  S-8,  or  other  applicable  forms,  and all
amendments,  including  post-effective  amendments,  thereto, to be filed by the
Corporation  with  the  SEC  in  connection  with  the  registration  under  the
Securities  Act of 1933,  as amended  (the "1933  Act"),  of  securities  of the
Corporation,  and to  file  the  same,  with  all  exhibits  thereto  and  other
supporting documents,  with the SEC; and (3) one or more Registration Statements
on Form S-3, or other  applicable  forms,  establishing a universal  shelf under
Rule 415 of the 1933 Act,  and any and all  amendments  or  supplements  thereto
(including post-effective  amendments),  or any Registration Statements relating
to the same offering of securities that are filed pursuant to Rule 462(b) of the
1933 Act, and to file the same, with all exhibits  thereto and other  supporting
documents, with the SEC.

     IN WITNESS WHEREOF,  the undersigned has subscribed these presents this 1st
of February, 2006.




                                /S/ JOHN M. HENNESSY
                                -----------------------------------
                                John M. Hennessy








                              CORNING INCORPORATED

                           --------------------------

                                POWER OF ATTORNEY

                           --------------------------


     KNOW ALL BY THESE PRESENTS, that the undersigned director and/or officer of
Corning  Incorporated,  a New York corporation (the "Corporation"),  does hereby
make, constitute and appoint Katherine A. Asbeck, William D. Eggers and James B.
Flaws  and  each  or  any  one  of  them,  the  undersigned's  true  and  lawful
attorneys-in-fact,  with power of  substitution,  for the undersigned and in the
undersigned's name, place and stead, to sign and affix the undersigned's name as
director  and/or officer of the  Corporation to (1) a Form 10-K,  Annual Report,
pursuant to the  Securities  Exchange Act of 1934,  as amended (the "1934 Act"),
for the fiscal year ended December 31, 2005, or other applicable form, including
any  and  all  exhibits,  schedules,  amendments,   supplements  and  supporting
documents  thereto,  to be filed by the  Corporation  with  the  Securities  and
Exchange Commission (the "SEC"), as required under the 1934 Act; (2) one or more
Registration  Statements,  on Form  S-8,  or  other  applicable  forms,  and all
amendments,  including  post-effective  amendments,  thereto, to be filed by the
Corporation  with  the  SEC  in  connection  with  the  registration  under  the
Securities  Act of 1933,  as amended  (the "1933  Act"),  of  securities  of the
Corporation,  and to  file  the  same,  with  all  exhibits  thereto  and  other
supporting documents,  with the SEC; and (3) one or more Registration Statements
on Form S-3, or other  applicable  forms,  establishing a universal  shelf under
Rule 415 of the 1933 Act,  and any and all  amendments  or  supplements  thereto
(including post-effective  amendments),  or any Registration Statements relating
to the same offering of securities that are filed pursuant to Rule 462(b) of the
1933 Act, and to file the same, with all exhibits  thereto and other  supporting
documents, with the SEC.

     IN WITNESS WHEREOF,  the undersigned has subscribed these presents this 1st
of February, 2006.




                                /S/ JAMES R. HOUGHTON
                                -----------------------------------
                                James R. Houghton








                              CORNING INCORPORATED

                           --------------------------

                                POWER OF ATTORNEY

                           --------------------------


     KNOW ALL BY THESE PRESENTS, that the undersigned director and/or officer of
Corning  Incorporated,  a New York corporation (the "Corporation"),  does hereby
make, constitute and appoint Katherine A. Asbeck, William D. Eggers and James B.
Flaws  and  each  or  any  one  of  them,  the  undersigned's  true  and  lawful
attorneys-in-fact,  with power of  substitution,  for the undersigned and in the
undersigned's name, place and stead, to sign and affix the undersigned's name as
director  and/or officer of the  Corporation to (1) a Form 10-K,  Annual Report,
pursuant to the  Securities  Exchange Act of 1934,  as amended (the "1934 Act"),
for the fiscal year ended December 31, 2005, or other applicable form, including
any  and  all  exhibits,  schedules,  amendments,   supplements  and  supporting
documents  thereto,  to be filed by the  Corporation  with  the  Securities  and
Exchange Commission (the "SEC"), as required under the 1934 Act; (2) one or more
Registration  Statements,  on Form  S-8,  or  other  applicable  forms,  and all
amendments,  including  post-effective  amendments,  thereto, to be filed by the
Corporation  with  the  SEC  in  connection  with  the  registration  under  the
Securities  Act of 1933,  as amended  (the "1933  Act"),  of  securities  of the
Corporation,  and to  file  the  same,  with  all  exhibits  thereto  and  other
supporting documents,  with the SEC; and (3) one or more Registration Statements
on Form S-3, or other  applicable  forms,  establishing a universal  shelf under
Rule 415 of the 1933 Act,  and any and all  amendments  or  supplements  thereto
(including post-effective  amendments),  or any Registration Statements relating
to the same offering of securities that are filed pursuant to Rule 462(b) of the
1933 Act, and to file the same, with all exhibits  thereto and other  supporting
documents, with the SEC.

     IN WITNESS WHEREOF,  the undersigned has subscribed these presents this 1st
of February, 2006.




                                /S/ JAMES J. O'CONNOR
                                -----------------------------------
                                James J. O'Connor








                              CORNING INCORPORATED

                           --------------------------

                                POWER OF ATTORNEY

                           --------------------------


     KNOW ALL BY THESE PRESENTS, that the undersigned director and/or officer of
Corning  Incorporated,  a New York corporation (the "Corporation"),  does hereby
make, constitute and appoint Katherine A. Asbeck, William D. Eggers and James B.
Flaws  and  each  or  any  one  of  them,  the  undersigned's  true  and  lawful
attorneys-in-fact,  with power of  substitution,  for the undersigned and in the
undersigned's name, place and stead, to sign and affix the undersigned's name as
director  and/or officer of the  Corporation to (1) a Form 10-K,  Annual Report,
pursuant to the  Securities  Exchange Act of 1934,  as amended (the "1934 Act"),
for the fiscal year ended December 31, 2005, or other applicable form, including
any  and  all  exhibits,  schedules,  amendments,   supplements  and  supporting
documents  thereto,  to be filed by the  Corporation  with  the  Securities  and
Exchange Commission (the "SEC"), as required under the 1934 Act; (2) one or more
Registration  Statements,  on Form  S-8,  or  other  applicable  forms,  and all
amendments,  including  post-effective  amendments,  thereto, to be filed by the
Corporation  with  the  SEC  in  connection  with  the  registration  under  the
Securities  Act of 1933,  as amended  (the "1933  Act"),  of  securities  of the
Corporation,  and to  file  the  same,  with  all  exhibits  thereto  and  other
supporting documents,  with the SEC; and (3) one or more Registration Statements
on Form S-3, or other  applicable  forms,  establishing a universal  shelf under
Rule 415 of the 1933 Act,  and any and all  amendments  or  supplements  thereto
(including post-effective  amendments),  or any Registration Statements relating
to the same offering of securities that are filed pursuant to Rule 462(b) of the
1933 Act, and to file the same, with all exhibits  thereto and other  supporting
documents, with the SEC.

     IN WITNESS WHEREOF,  the undersigned has subscribed these presents this 1st
of February, 2006.




                                /S/ JEREMY R. KNOWLES
                                -----------------------------------
                                Jeremy R. Knowles








                              CORNING INCORPORATED

                           --------------------------

                                POWER OF ATTORNEY

                           --------------------------


     KNOW ALL BY THESE PRESENTS, that the undersigned director and/or officer of
Corning  Incorporated,  a New York corporation (the "Corporation"),  does hereby
make, constitute and appoint Katherine A. Asbeck, William D. Eggers and James B.
Flaws  and  each  or  any  one  of  them,  the  undersigned's  true  and  lawful
attorneys-in-fact,  with power of  substitution,  for the undersigned and in the
undersigned's name, place and stead, to sign and affix the undersigned's name as
director  and/or officer of the  Corporation to (1) a Form 10-K,  Annual Report,
pursuant to the  Securities  Exchange Act of 1934,  as amended (the "1934 Act"),
for the fiscal year ended December 31, 2005, or other applicable form, including
any  and  all  exhibits,  schedules,  amendments,   supplements  and  supporting
documents  thereto,  to be filed by the  Corporation  with  the  Securities  and
Exchange Commission (the "SEC"), as required under the 1934 Act; (2) one or more
Registration  Statements,  on Form  S-8,  or  other  applicable  forms,  and all
amendments,  including  post-effective  amendments,  thereto, to be filed by the
Corporation  with  the  SEC  in  connection  with  the  registration  under  the
Securities  Act of 1933,  as amended  (the "1933  Act"),  of  securities  of the
Corporation,  and to  file  the  same,  with  all  exhibits  thereto  and  other
supporting documents,  with the SEC; and (3) one or more Registration Statements
on Form S-3, or other  applicable  forms,  establishing a universal  shelf under
Rule 415 of the 1933 Act,  and any and all  amendments  or  supplements  thereto
(including post-effective  amendments),  or any Registration Statements relating
to the same offering of securities that are filed pursuant to Rule 462(b) of the
1933 Act, and to file the same, with all exhibits  thereto and other  supporting
documents, with the SEC.

     IN WITNESS WHEREOF,  the undersigned has subscribed these presents this 1st
of February, 2006.




                                /S/ DEBORAH D. RIEMAN
                                -----------------------------------
                                Deborah D. Rieman








                              CORNING INCORPORATED

                           --------------------------

                                POWER OF ATTORNEY

                           --------------------------


     KNOW ALL BY THESE PRESENTS, that the undersigned director and/or officer of
Corning  Incorporated,  a New York corporation (the "Corporation"),  does hereby
make, constitute and appoint Katherine A. Asbeck, William D. Eggers and James B.
Flaws  and  each  or  any  one  of  them,  the  undersigned's  true  and  lawful
attorneys-in-fact,  with power of  substitution,  for the undersigned and in the
undersigned's name, place and stead, to sign and affix the undersigned's name as
director  and/or officer of the  Corporation to (1) a Form 10-K,  Annual Report,
pursuant to the  Securities  Exchange Act of 1934,  as amended (the "1934 Act"),
for the fiscal year ended December 31, 2005, or other applicable form, including
any  and  all  exhibits,  schedules,  amendments,   supplements  and  supporting
documents  thereto,  to be filed by the  Corporation  with  the  Securities  and
Exchange Commission (the "SEC"), as required under the 1934 Act; (2) one or more
Registration  Statements,  on Form  S-8,  or  other  applicable  forms,  and all
amendments,  including  post-effective  amendments,  thereto, to be filed by the
Corporation  with  the  SEC  in  connection  with  the  registration  under  the
Securities  Act of 1933,  as amended  (the "1933  Act"),  of  securities  of the
Corporation,  and to  file  the  same,  with  all  exhibits  thereto  and  other
supporting documents,  with the SEC; and (3) one or more Registration Statements
on Form S-3, or other  applicable  forms,  establishing a universal  shelf under
Rule 415 of the 1933 Act,  and any and all  amendments  or  supplements  thereto
(including post-effective  amendments),  or any Registration Statements relating
to the same offering of securities that are filed pursuant to Rule 462(b) of the
1933 Act, and to file the same, with all exhibits  thereto and other  supporting
documents, with the SEC.

     IN WITNESS WHEREOF,  the undersigned has subscribed these presents this 1st
of February, 2006.




                                /S/ H. ONNO RUDING
                                -----------------------------------
                                H. Onno Ruding







                              CORNING INCORPORATED

                           --------------------------

                                POWER OF ATTORNEY

                           --------------------------


     KNOW ALL BY THESE PRESENTS, that the undersigned director and/or officer of
Corning  Incorporated,  a New York corporation (the "Corporation"),  does hereby
make, constitute and appoint Katherine A. Asbeck, William D. Eggers and James B.
Flaws  and  each  or  any  one  of  them,  the  undersigned's  true  and  lawful
attorneys-in-fact,  with power of  substitution,  for the undersigned and in the
undersigned's name, place and stead, to sign and affix the undersigned's name as
director  and/or officer of the  Corporation to (1) a Form 10-K,  Annual Report,
pursuant to the  Securities  Exchange Act of 1934,  as amended (the "1934 Act"),
for the fiscal year ended December 31, 2005, or other applicable form, including
any  and  all  exhibits,  schedules,  amendments,   supplements  and  supporting
documents  thereto,  to be filed by the  Corporation  with  the  Securities  and
Exchange Commission (the "SEC"), as required under the 1934 Act; (2) one or more
Registration  Statements,  on Form  S-8,  or  other  applicable  forms,  and all
amendments,  including  post-effective  amendments,  thereto, to be filed by the
Corporation  with  the  SEC  in  connection  with  the  registration  under  the
Securities  Act of 1933,  as amended  (the "1933  Act"),  of  securities  of the
Corporation,  and to  file  the  same,  with  all  exhibits  thereto  and  other
supporting documents,  with the SEC; and (3) one or more Registration Statements
on Form S-3, or other  applicable  forms,  establishing a universal  shelf under
Rule 415 of the 1933 Act,  and any and all  amendments  or  supplements  thereto
(including post-effective  amendments),  or any Registration Statements relating
to the same offering of securities that are filed pursuant to Rule 462(b) of the
1933 Act, and to file the same, with all exhibits  thereto and other  supporting
documents, with the SEC.

     IN WITNESS WHEREOF,  the undersigned has subscribed these presents this 1st
of February, 2006.




                                /S/ EUGENE C. SIT
                                -----------------------------------
                                Eugene C. Sit









                              CORNING INCORPORATED

                           --------------------------

                                POWER OF ATTORNEY

                           --------------------------


     KNOW ALL BY THESE PRESENTS, that the undersigned director and/or officer of
Corning  Incorporated,  a New York corporation (the "Corporation"),  does hereby
make, constitute and appoint Katherine A. Asbeck, William D. Eggers and James B.
Flaws  and  each  or  any  one  of  them,  the  undersigned's  true  and  lawful
attorneys-in-fact,  with power of  substitution,  for the undersigned and in the
undersigned's name, place and stead, to sign and affix the undersigned's name as
director  and/or officer of the  Corporation to (1) a Form 10-K,  Annual Report,
pursuant to the  Securities  Exchange Act of 1934,  as amended (the "1934 Act"),
for the fiscal year ended December 31, 2005, or other applicable form, including
any  and  all  exhibits,  schedules,  amendments,   supplements  and  supporting
documents  thereto,  to be filed by the  Corporation  with  the  Securities  and
Exchange Commission (the "SEC"), as required under the 1934 Act; (2) one or more
Registration  Statements,  on Form  S-8,  or  other  applicable  forms,  and all
amendments,  including  post-effective  amendments,  thereto, to be filed by the
Corporation  with  the  SEC  in  connection  with  the  registration  under  the
Securities  Act of 1933,  as amended  (the "1933  Act"),  of  securities  of the
Corporation,  and to  file  the  same,  with  all  exhibits  thereto  and  other
supporting documents,  with the SEC; and (3) one or more Registration Statements
on Form S-3, or other  applicable  forms,  establishing a universal  shelf under
Rule 415 of the 1933 Act,  and any and all  amendments  or  supplements  thereto
(including post-effective  amendments),  or any Registration Statements relating
to the same offering of securities that are filed pursuant to Rule 462(b) of the
1933 Act, and to file the same, with all exhibits  thereto and other  supporting
documents, with the SEC.

     IN WITNESS WHEREOF,  the undersigned has subscribed these presents this 1st
of February, 2006.




                                /S/ WILLIAM D. SMITHBURG
                                -----------------------------------
                                William D. Smithburg







                              CORNING INCORPORATED

                           --------------------------

                                POWER OF ATTORNEY

                           --------------------------


     KNOW ALL BY THESE PRESENTS, that the undersigned director and/or officer of
Corning  Incorporated,  a New York corporation (the "Corporation"),  does hereby
make, constitute and appoint Katherine A. Asbeck, William D. Eggers and James B.
Flaws  and  each  or  any  one  of  them,  the  undersigned's  true  and  lawful
attorneys-in-fact,  with power of  substitution,  for the undersigned and in the
undersigned's name, place and stead, to sign and affix the undersigned's name as
director  and/or officer of the  Corporation to (1) a Form 10-K,  Annual Report,
pursuant to the  Securities  Exchange Act of 1934,  as amended (the "1934 Act"),
for the fiscal year ended December 31, 2005, or other applicable form, including
any  and  all  exhibits,  schedules,  amendments,   supplements  and  supporting
documents  thereto,  to be filed by the  Corporation  with  the  Securities  and
Exchange Commission (the "SEC"), as required under the 1934 Act; (2) one or more
Registration  Statements,  on Form  S-8,  or  other  applicable  forms,  and all
amendments,  including  post-effective  amendments,  thereto, to be filed by the
Corporation  with  the  SEC  in  connection  with  the  registration  under  the
Securities  Act of 1933,  as amended  (the "1933  Act"),  of  securities  of the
Corporation,  and to  file  the  same,  with  all  exhibits  thereto  and  other
supporting documents,  with the SEC; and (3) one or more Registration Statements
on Form S-3, or other  applicable  forms,  establishing a universal  shelf under
Rule 415 of the 1933 Act,  and any and all  amendments  or  supplements  thereto
(including post-effective  amendments),  or any Registration Statements relating
to the same offering of securities that are filed pursuant to Rule 462(b) of the
1933 Act, and to file the same, with all exhibits  thereto and other  supporting
documents, with the SEC.

     IN WITNESS WHEREOF,  the undersigned has subscribed these presents this 1st
of February, 2006.




                                /S/ HANSEL E. TOOKES II
                                -----------------------------------
                                Hansel E. Tookes II






                              CORNING INCORPORATED

                           --------------------------

                                POWER OF ATTORNEY

                           --------------------------


     KNOW ALL BY THESE PRESENTS, that the undersigned director and/or officer of
Corning  Incorporated,  a New York corporation (the "Corporation"),  does hereby
make, constitute and appoint Katherine A. Asbeck, William D. Eggers and James B.
Flaws  and  each  or  any  one  of  them,  the  undersigned's  true  and  lawful
attorneys-in-fact,  with power of  substitution,  for the undersigned and in the
undersigned's name, place and stead, to sign and affix the undersigned's name as
director  and/or officer of the  Corporation to (1) a Form 10-K,  Annual Report,
pursuant to the  Securities  Exchange Act of 1934,  as amended (the "1934 Act"),
for the fiscal year ended December 31, 2005, or other applicable form, including
any  and  all  exhibits,  schedules,  amendments,   supplements  and  supporting
documents  thereto,  to be filed by the  Corporation  with  the  Securities  and
Exchange Commission (the "SEC"), as required under the 1934 Act; (2) one or more
Registration  Statements,  on Form  S-8,  or  other  applicable  forms,  and all
amendments,  including  post-effective  amendments,  thereto, to be filed by the
Corporation  with  the  SEC  in  connection  with  the  registration  under  the
Securities  Act of 1933,  as amended  (the "1933  Act"),  of  securities  of the
Corporation,  and to  file  the  same,  with  all  exhibits  thereto  and  other
supporting documents,  with the SEC; and (3) one or more Registration Statements
on Form S-3, or other  applicable  forms,  establishing a universal  shelf under
Rule 415 of the 1933 Act,  and any and all  amendments  or  supplements  thereto
(including post-effective  amendments),  or any Registration Statements relating
to the same offering of securities that are filed pursuant to Rule 462(b) of the
1933 Act, and to file the same, with all exhibits  thereto and other  supporting
documents, with the SEC.

     IN WITNESS WHEREOF,  the undersigned has subscribed these presents this 1st
of February, 2006.




                                /S/ PETER F. VOLANAKIS
                                -----------------------------------
                                Peter F. Volanakis








                              CORNING INCORPORATED

                           --------------------------

                                POWER OF ATTORNEY

                           --------------------------


     KNOW ALL BY THESE PRESENTS, that the undersigned director and/or officer of
Corning  Incorporated,  a New York corporation (the "Corporation"),  does hereby
make, constitute and appoint Katherine A. Asbeck, William D. Eggers and James B.
Flaws  and  each  or  any  one  of  them,  the  undersigned's  true  and  lawful
attorneys-in-fact,  with power of  substitution,  for the undersigned and in the
undersigned's name, place and stead, to sign and affix the undersigned's name as
director  and/or officer of the  Corporation to (1) a Form 10-K,  Annual Report,
pursuant to the  Securities  Exchange Act of 1934,  as amended (the "1934 Act'),
for the fiscal year ended December 31, 2005, or other applicable form, including
any  and  all  exhibits,  schedules,  amendments,   supplements  and  supporting
documents  thereto,  to be filed by the  Corporation  with  the  Securities  and
Exchange Commission (the "SEC"), as required under the 1934 Act; (2) one or more
Registration  Statements,  on Form  S-8,  or  other  applicable  forms,  and all
amendments,  including  post-effective  amendments,  thereto, to be filed by the
Corporation  with  the  SEC  in  connection  with  the  registration  under  the
Securities  Act of 1933,  as amended  (the "1933  Act"),  of  securities  of the
Corporation,  and to  file  the  same,  with  all  exhibits  thereto  and  other
supporting documents,  with the SEC; and (3) one or more Registration Statements
on Form S-3, or other  applicable  forms,  establishing a universal  shelf under
Rule 415 of the 1933 Act,  and any and all  amendments  or  supplements  thereto
(including post-effective  amendments),  or any Registration Statements relating
to the same offering of securities that are filed pursuant to Rule 462(b) of the
1933 Act, and to file the same, with all exhibits  thereto and other  supporting
documents, with the SEC.

     IN WITNESS WHEREOF,  the undersigned has subscribed these presents this 1st
of February, 2006.




                                /S/ PADMASREE WARRIOR
                                -----------------------------------
                                Padmasree Warrior







                              CORNING INCORPORATED

                           --------------------------

                                POWER OF ATTORNEY

                           --------------------------


     KNOW ALL BY THESE PRESENTS, that the undersigned director and/or officer of
Corning  Incorporated,  a New York corporation (the "Corporation"),  does hereby
make, constitute and appoint Katherine A. Asbeck, William D. Eggers and James B.
Flaws  and  each  or  any  one  of  them,  the  undersigned's  true  and  lawful
attorneys-in-fact,  with power of  substitution,  for the undersigned and in the
undersigned's name, place and stead, to sign and affix the undersigned's name as
director  and/or officer of the  Corporation to (1) a Form 10-K,  Annual Report,
pursuant to the  Securities  Exchange Act of 1934,  as amended (the "1934 Act"),
for the fiscal year ended December 31, 2005, or other applicable form, including
any  and  all  exhibits,  schedules,  amendments,   supplements  and  supporting
documents  thereto,  to be filed by the  Corporation  with  the  Securities  and
Exchange Commission (the "SEC"), as required under the 1934 Act; (2) one or more
Registration  Statements,  on Form  S-8,  or  other  applicable  forms,  and all
amendments,  including  post-effective  amendments,  thereto, to be filed by the
Corporation  with  the  SEC  in  connection  with  the  registration  under  the
Securities  Act of 1933,  as amended  (the "1933  Act"),  of  securities  of the
Corporation,  and to  file  the  same,  with  all  exhibits  thereto  and  other
supporting documents,  with the SEC; and (3) one or more Registration Statements
on Form S-3, or other  applicable  forms,  establishing a universal  shelf under
Rule 415 of the 1933 Act,  and any and all  amendments  or  supplements  thereto
(including post-effective  amendments),  or any Registration Statements relating
to the same offering of securities that are filed pursuant to Rule 462(b) of the
1933 Act, and to file the same, with all exhibits  thereto and other  supporting
documents, with the SEC.

     IN WITNESS WHEREOF,  the undersigned has subscribed these presents this 1st
of February, 2006.




                                /S/ WENDELL P. WEEKS
                                -----------------------------------
                                Wendell P. Weeks








The following  exhibits are included only in copies of the 2005 Annual Report on
Form  10-K  filed  with  Securities  and  Exchange  Commission  ("SEC")  or  are
incorporated  by reference  herein.  Any document  incorporated  by reference is
identified by a  parenthetical  reference to the SEC filing which  included such
document.


3 (i) 1   Restated  Certificate of  Incorporation  dated December 6, 2000, filed
          with the  Secretary  of State of the State of New York on January  22,
          2001  (Incorporated  by reference to Exhibit 3(i) of Corning's  Annual
          Report on Form 10-K for the year ended December 31, 2000).

3 (i) 2   Certificate  of Amendment  to Restated  Certificate  of  Incorporation
          filed with the  Secretary  of State of the State of New York on August
          5, 2002  (Incorporated  by reference to Exhibit 99.1 to Corning's Form
          8-K filed on August 7, 2002).

3 (ii) 1  Bylaws of Corning  effective as of December 6, 2000  (Incorporated  by
          reference to Exhibit 3(ii) of Corning's Annual Report on Form 10-K for
          the year ended December 31, 2000).

3 (ii) 2  Amendment to Article III, Section 9, of Bylaws of Corning effective as
          of February 5, 2003  (Incorporated  by reference to Exhibit  3(ii)2 of
          Corning's  Annual Report on Form 10-K for the year ended  December 31,
          2003).

4         Rights Agreement of Corning dated as of June 5, 1996  (Incorporated by
          reference to Exhibit 1 to Corning's Form 8-K filed on July 10, 1996).

10.1      1994 Employee Equity Participation  Program (Incorporated by reference
          to Exhibit 1 of Corning Proxy  Statement,  Definitive  14A filed March
          16, 1994 for April 28, 1994 Annual Meeting of Shareholders).

10.2      1998 Variable  Compensation Plan (Incorporated by reference to Exhibit
          1 of Corning Proxy  Statement,  Definitive 14A filed March 9, 1998 for
          April 30, 1998 Annual Meeting of Shareholders).

10.3      1998 Worldwide Employee Share Purchase Plan (Incorporated by reference
          to Exhibit 2 of Corning Proxy Statement, Definitive 14A filed March 9,
          1998 for April 30, 1998 Annual Meeting of Shareholders).

10.4      1998 Employee Equity Participation  Program (Incorporated by reference
          to Exhibit 3 of Corning Proxy Statement, Definitive 14A filed March 9,
          1998 for April 30, 1998 Annual Meeting of Shareholders).

10.5      2002 Worldwide Employee Share Purchase Plan (Incorporated by reference
          to Exhibit 1 of Corning Proxy Statement, Definitive 14A filed March 7,
          2002 for April 25, 2002 Annual Meeting of Shareholders).

10.6      2000  Employee  Equity  Participation   Program  and  2003  Amendments
          (Incorporated  by reference to Exhibit 1 of Corning  Proxy  Statement,
          Definitive  14A filed March 10, 2003 for April 24, 2003 Annual Meeting
          of Shareholders).

10.7      2003 Variable  Compensation Plan (Incorporated by reference to Exhibit
          2 of Corning Proxy Statement,  Definitive 14A filed March 10, 2003 for
          April 24, 2003 Annual Meeting of Shareholders).

10.8      2003 Equity Plan for Non-Employee Directors (Incorporated by reference
          to Exhibit 3 of Corning Proxy  Statement,  Definitive  14A filed March
          10, 2003 for April 24, 2003 Annual Meeting of Shareholders).

10.9      Form of  Officer  Severance  Agreement  dated as of  February  1, 2004
          between   Corning   Incorporated   and  each  of  the  following  four
          individuals: James B. Flaws, James R. Houghton, Peter F. Volanakis and
          Wendell  P.  Weeks  (Incorporated  by  reference  to  Exhibit  10.1 of
          Corning's 10-Q filed May 4, 2004).

10.10     Officer  Severance  Agreement  dated as of  February  1, 2004  between
          Corning  Incorporated  and  Joseph A.  Miller,  Jr.  (Incorporated  by
          reference to Exhibit 10.2 of Corning's 10-Q filed May 4, 2004).

10.11     Change In  Control  Agreement  dated as of  February  1, 2004  between
          Corning Incorporated and James R. Houghton  (Incorporated by reference
          to Exhibit 10.3 of Corning's 10-Q filed May 4, 2004).

10.12     Form of  Amendment  dated as of  February 1, 2004 to Change In Control
          Agreement dated as of October 4, 2000 between Corning Incorporated and
          the following two  individuals:  James B. Flaws and Peter F. Volanakis
          (Incorporated by reference to Exhibit 10.4 of Corning's 10-Q filed May
          4, 2004).

10.13     Form of  Change  In  Control  Amendment  dated as of  October  4, 2000
          between Corning Incorporated and the following two individuals:  James
          B. Flaws and Peter F. Volanakis  (Incorporated by reference to Exhibit
          10.5 of Corning's 10-Q filed May 4, 2004).



10.14     Amendment dated as of February 1, 2004 to Change In Control  Agreement
          dated as of June 1, 2001 between  Corning  Incorporated  and Joseph A.
          Miller,  Jr.  (Incorporated  by reference to Exhibit 10.6 of Corning's
          10-Q filed May 4, 2004).

10.15     Change In Control  Agreement  dated as of June 1, 2001 between Corning
          Incorporated and Joseph A. Miller,  Jr.  (Incorporated by reference to
          Exhibit 10.7 of Corning's 10-Q filed May 4, 2004).

10.16     Amendment dated as of February 1, 2004 to Change In Control  Agreement
          dated as of April 23, 2002 between Corning Incorporated and Wendell P.
          Weeks  (Incorporated  by reference  to Exhibit 10.8 of Corning's  10-Q
          filed May 4, 2004).

10.17     Change In Control Agreement dated as of April 23, 2002 between Corning
          Incorporated  and  Wendell  P. Weeks  (Incorporated  by  reference  to
          Exhibit 10.9 of Corning's 10-Q filed May 4, 2004).

10.18     Form of  Corning  Incorporated  Incentive  Stock  Plan  Agreement  for
          Restricted Stock Grants  (Incorporated by reference to Exhibit 10.1 of
          Corning's 10-Q filed October 28, 2004).

10.19     Form of  Corning  Incorporated  Incentive  Stock  Plan  Agreement  for
          Restricted  Stock  Retention  Grants  (Incorporated  by  reference  to
          Exhibit 10.2 of Corning's 10-Q filed October 28, 2004).

10.20     Form  of  Corning   Incorporated   Incentive  Stock  Option  Agreement
          (Incorporated  by reference  to Exhibit  10.3 of Corning's  10-Q filed
          October 28, 2004).

10.21     Form of Corning  Incorporated  Non-Qualified  Stock  Option  Agreement
          (Incorporated  by reference  to Exhibit  10.4 of Corning's  10-Q filed
          October 28, 2004).

10.22     2005 Employee Equity Participation  Program (Incorporated by reference
          to Exhibit I of Corning Proxy Statement, Definitive 14A filed March 1,
          2005 for April 28, 2005 Annual Meeting of Shareholders).

10.23     Five-Year Revolving Credit Agreement with Citibank,  N.A.; J.P. Morgan
          Chase Bank,  N.A.; Bank of America,  N.A.;  Bank of  Tokyo-Mitsubishi,
          Ltd.;  Wachovia  Bank,  National  Association;  Barclays Bank PLC; and
          Deutsche Bank A.G. New York Branch dated March 17, 2005  (Incorporated
          by  reference  to Exhibit 10 of  Corning's  Form 10-Q filed  April 26,
          2005).

14        Corning  Incorporated  Code of Ethics for Chief Executive  Officer and
          Senior Financial Officer (Incorporated by reference to Appendix H-3 of
          Corning's 2006 definitive Proxy Statement).

24        Powers of Attorney.


Copies of these  exhibits  may be  obtained  by writing to Ms.  Denise  Hauselt,
assistant  general  counsel and secretary,  Corning  Incorporated,  MP-HQ-E2-10,
Corning, New York 14831.