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<SEC-DOCUMENT>0001021231-04-000337.txt : 20040512
<SEC-HEADER>0001021231-04-000337.hdr.sgml : 20040512
<ACCEPTANCE-DATETIME>20040512151207
ACCESSION NUMBER:		0001021231-04-000337
CONFORMED SUBMISSION TYPE:	6-K
PUBLIC DOCUMENT COUNT:		6
CONFORMED PERIOD OF REPORT:	20040423
FILED AS OF DATE:		20040512

FILER:

	COMPANY DATA:	
		COMPANY CONFORMED NAME:			STMICROELECTRONICS NV
		CENTRAL INDEX KEY:			0000932787
		STANDARD INDUSTRIAL CLASSIFICATION:	SEMICONDUCTORS & RELATED DEVICES [3674]
		IRS NUMBER:				000000000
		STATE OF INCORPORATION:			P7
		FISCAL YEAR END:			1231

	FILING VALUES:
		FORM TYPE:		6-K
		SEC ACT:		1934 Act
		SEC FILE NUMBER:	001-13546
		FILM NUMBER:		04799126

	BUSINESS ADDRESS:	
		STREET 1:		39 CHEMIN DU CHAMP DES FILLES
		STREET 2:		1228 PLAN-LES-OUATES
		CITY:			GENEVA
		STATE:			V8
		ZIP:			00000
		BUSINESS PHONE:		011 41 22 929 2929

	MAIL ADDRESS:	
		STREET 1:		39 CHEMIN DU CHAMP DES FILLES
		STREET 2:		1228 PLAN-LES-OUATES
		CITY:			GENEVA
		STATE:			V8
		ZIP:			00000

	FORMER COMPANY:	
		FORMER CONFORMED NAME:	SGS THOMSON MICROELECTRONICS NV
		DATE OF NAME CHANGE:	19950310
</SEC-HEADER>
<DOCUMENT>
<TYPE>6-K
<SEQUENCE>1
<FILENAME>b74898x-6k.htm
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    <title>Prepared and filed by St Ives Burrups</title>
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 <p>&nbsp;</p>
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 <p align="center"><font size="2" face="Arial"><b><font size="4">SECURITIES AND
         EXCHANGE COMMISSION</font><br>
  Washington, D.C. 20549</b></font></p>
 <p align="center"><font size="5" face="Arial"><b>FORM 6-K</b></font></p>
 <p align="center"><font size="2" face="Arial"><b>REPORT OF FOREIGN PRIVATE ISSUER<br>
  PURSUANT TO RULE 13a-16 or 15d-16 OF<br>
  THE SECURITIES EXCHANGE ACT OF 1934</b></font></p>
 <p align="center"><font size="2" face="Arial"><b>Report on Form 6-K dated May
       12, 2004</b></font></p>
 <hr align="center" width="150" size="2" noshade>
 <p align="center"><font size="5" face="Arial"><b>STMicroelectronics N.V.<br>
 </b></font><font size="2" face="Arial">(Name of Registrant)</font></p>
 <p align="center"><font size="2" face="Arial">39, Chemin du Champ-des-Filles<br>
  1228 Plan-les-Ouates, Geneva, Switzerland<br>
  (Address of Principal Executive Offices)</font></p>
 <hr align="center" width="150" size="2" noshade>
 <p align="left"><font size="2" face="Arial">Indicate by check mark whether the
     registrant files or will file annual reports under cover of Form&nbsp;20-F
     or Form 40-F:</font></p>
 <p align="center"><font size="2" face="Arial">Form 20-F <img src="tickedbox.gif" width="12" height="12">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Form
     40-F&nbsp;<img src="emptybox.gif" width="12" height="12"></font></p>
 <p align="left"><font size="2" face="Arial">Indicate by check mark if the registrant
     is submitting the Form 6-K in paper as permitted by Regulation S-T Rule
     101(b)(7):</font></p>
 <p align="center"><font size="2" face="Arial">Yes&nbsp;<img src="emptybox.gif" width="12" height="12">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;No&nbsp;<img src="tickedbox.gif" width="12" height="12"></font></p>
 <p align="left"><font size="2" face="Arial">Indicate by check mark whether the
     registrant by furnishing the information contained in this form is also
     thereby furnishing the information to the Commission pursuant to Rule 12g3-2(b)
     under the Securities Exchange Act of 1934:</font></p>
 <p align="center"><font size="2" face="Arial">Yes&nbsp;<img src="emptybox.gif" width="12" height="12">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;No <img src="tickedbox.gif" width="12" height="12"></font></p>
 <p align="left"><font size="2" face="Arial">If &#8220;Yes&#8221; is marked,
     indicate below the file number assigned to the registrant in connection
     with Rule 12g3-2(b): 82- __________</font></p>
 <p align="left"><font size="2" face="Arial">&nbsp;Enclosure: STMicroelectronics
     N.V.&#8217;s First Quarter 2004: </font></p>
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     <td align="left" width="3%"><font size="2" face="Arial">&#149;</font></td>
     <td align="left"><font size="2" face="Arial">Operating and Financial Review
         and Prospects;</font></td>
   </tr>
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     <td align="left"></td>
     <td align="left"><font size="2" face="Arial">&#149;</font></td>
     <td align="left"><font size="2" face="Arial">Unaudited Interim Consolidated
         Statements of Income, Balance Sheets, Statements of Cash Flow, and Statements
         of Changes in Shareholders' Equity and related Notes; and </font></td>
   </tr>
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     <td align="left"></td>
     <td align="left"><font size="2" face="Arial">&#149;</font></td>
     <td align="left"><font size="2" face="Arial">Certifications pursuant to
         Sections 302 and 906 of the Sarbanes-Oxley Act of 2002, submitted to
         the Commission on a voluntary basis.</font></td>
   </tr>
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<page>
 <p align="center"><font size="2" face="Arial"><b>OPERATING AND FINANCIAL REVIEW AND PROSPECTS </b></font></p>
<p align="left"><font size="2" face="Arial"><b>Overview</b></font></p>
<div style="text-indent:3%">
<p align="left"><font size="2" face="Arial"><i>The
        following discussion should be read in conjunction with our Unaudited
        Interim Consolidated Statements of Income, Balance Sheets, Statements
        of Cash Flow and Statements of Changes in Shareholders' Equity and Notes
      thereto included elsewhere in this Form 6-K. The following discussion contains
      statements of future expectations and other forward-looking statements
      within
      the
      meaning
        of Section 27A of the Securities Act of 1933,  or Section 21E of the
      Securities Exchange Act of 1934, each as amended, particularly
        in the section &quot;&#151; Business Outlook&quot;.  Our actual results
        may differ significantly from those projected in the forward-looking
        statements.
        For a discussion of factors that might cause future actual results to
        differ materially from our recent results or those projected in the forward-looking
        statements, in addition to the factors set forth below, see
&quot;Cautionary Note Regarding Forward-Looking Statements&quot; and &quot;Item
3. Key Information&#151;Risk Factors&quot;, included in our annual report on
Form 20-F for the year ended December 31, 2003 as filed with the U.S. Securities
and Exchange Commission on May 4, 2004 (the &quot;Form 20-F&quot;), as they
may be updated in our SEC submissions from time to time. We assume no obligation
to update the forward-looking statements or such risk factors.</i></font></p>
</div><p align="left"><font size="2" face="Arial"><b><i>Critical Accounting Policies Using Significant Estimates</i></b></font></p>
<div style="text-indent:3%">
<p align="left"><font size="2" face="Arial">The preparation of our Consolidated
    Financial Statements in accordance with accounting principles generally accepted
    in the United States (&quot;U.S. GAAP&quot;) requires us to make estimates and assumptions
    that have a significant impact on the results we report in our Consolidated
    Financial
    Statements. Some of our accounting policies require us to make difficult
    and subjective judgments that can affect the reported amounts of assets and
    liabilities and the reported amounts of net revenue and expenses during the
    reporting period. The primary areas that require significant estimates and
    judgments by management include, but are not limited to, sales returns and
    allowances, allowances for doubtful accounts, inventory reserves, warranty
    costs, evaluation of the impact of litigation and claims, valuation of acquired
    intangibles, goodwill, investments and tangible assets as well as the impairment
    of their related carrying values, restructuring charges, other special charges,
    and assumptions used in calculating pension obligations, deferred income
    tax assets and liabilities and valuation allowances and provisions for specifically
    identified income tax exposures. We base our estimates and assumptions on
    historical experience and on various other factors such as market trends
    and business plans that we believe to be reasonable under the circumstances,
    the results of which form the basis for making judgments about the carrying
    values of assets and liabilities. While we regularly evaluate our
estimates and assumptions, our actual results may&nbsp;differ materially and
adversely from our estimates. To the extent there are material differences between
the actual results and these estimates, our future results of operations could
be significantly affected.</font></p>
</div><div style="text-indent:3%"><p align="left"><font size="2" face="Arial">We believe the following critical accounting policies require us to make significant judgments and estimates in the preparation of our Consolidated Financial Statements.</font></p>
</div><table width="100%" cellspacing="0" cellpadding="0" border="0">
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<td width="3%"><font size="2" face="Arial">&nbsp;</font></td>
<td align="left"><font size="2" face="Arial"><b>Revenue recognition</b>. Our policy is to recognize revenues from sales of products to our customers when the rights and risks of ownership of the goods are passed to our customers, which usually occurs at the time of shipment.  We determine the amount of reported revenues based on certain judgments or estimates and this amount of reported revenue may vary if we elect to make different judgments or estimates.  A portion of our </font></td>
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<p align="center"><font face="Arial" size="2">1</font></p>
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<td align="left"><font size="2" face="Arial">sales is made to distributors who
    participate in certain programs common in the semiconductor industry whereby
    the distributors are allowed to return merchandise or receive potential price
    reductions on existing stock on hand under certain circumstances. Provisions
    are made at the time of sale for estimated product returns and price protection,
    which may&nbsp;occur
    under the contractual terms agreed with these customers. These provisions
    are based on the latest historical data and expected evolution of market
    prices. If market conditions differ from our assumptions, this could have
    an impact on future periods; in particular, if market conditions were to
    deteriorate, net revenues could be reduced due to higher product returns
    and price reductions
at the time these adjustments occur.</font></td>
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  <td>&nbsp;</td>
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<td width="3%"><font size="2" face="Arial">&nbsp;</font></td>
<td align="left"><font size="2" face="Arial">Our customers return our products from time to time for technical reasons.  In some cases, these returned products are reworked and shipped back to customers.  We analyze the status of product returns and record provisions accordingly.  </font></td>
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  <td>&nbsp;</td>
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<td width="3%"><font size="2" face="Arial">&nbsp;</font></td>
<td align="left"><font size="2" face="Arial">We maintain an allowance for doubtful
    accounts for potential estimated losses resulting from our customers' inability
    to make required payments. We base our estimates on historical collection
    trends. In 2003 and in the first quarter of 2004, we recorded a provision
    of 1.0% of total receivables. In addition, we are required to evaluate our
    customers'
    credit ratings from time to time and take an additional provision for any
    specific account that we estimate as doubtful. Although we have determined
    that our most significant customers are creditworthy, if the financial condition
    of our customers were to deteriorate, resulting in an impairment of their
    ability to make payments, additional allowances could be required.</font></td>
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  <td>&nbsp;</td>
  <td align="left">&nbsp;</td>
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<td width="3%"><font size="2" face="Arial">&nbsp;</font></td>
<td align="left"><font size="2" face="Arial"><b>Goodwill and purchased intangible assets</b>. The purchase method of accounting for acquisitions requires extensive use of estimates and judgments to allocate the purchase price to the fair value of the net tangible and intangible assets acquired, including in-process research and development, which is expensed immediately.  Goodwill and intangible assets deemed to have indefinite lives are no longer amortized but are subject to annual impairment tests.  The amounts and useful lives assigned to other intangible assets impact future amortization.  If the assumptions and estimates used to allocate the purchase price are not correct or if business conditions change, purchase price adjustments or future asset impairment charges could be required.
 At March 27, 2004, the value of goodwill amounted to $260 million.</font></td>
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  <td>&nbsp;</td>
  <td align="left">&nbsp;</td>
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<td width="3%"><font size="2" face="Arial">&nbsp;</font></td>
<td align="left"><font size="2" face="Arial"><b>Impairment of goodwill</b>. Since January&nbsp;1, 2002, goodwill acquired in business combinations has no longer been amortized and is subject to an impairment test to be performed on an annual basis or more frequently if indicators of impairment exist, in order to assess the recoverability of its carrying value.  Goodwill subject to potential impairment is tested at a level of reporting referred to as a reporting unit.  We define our reporting units at an individual business level, which is one level below the four semiconductor product groups described in Note 29 of the Consolidated Financial Statements included in our Form 20-F.  Potential impairment exists when the fair value of each reporting unit for which goodwill is allocated is lower
than the total carrying amount of relevant net assets allocated to such reporting unit.  In determining the fair value of a reporting unit, we usually estimate the expected discounted future cash flows associated with the reporting unit and allocate the fair value of a reporting unit to all of the assets and liabilities of that unit, including goodwill.  If the carrying amount of reporting unit </font></td>
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<p align="center"><font face="Arial" size="2">2</font></p>
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<td align="left"><font size="2" face="Arial">goodwill exceeds its implied fair
    value, an impairment loss is recognized in an amount equal to that excess.
    Significant management judgments and estimates are required and used in the
    forecasts of future operating results that are used in the discounted cash
    flow method of valuation, including: the applicable industry's sales volume
    forecast and selling price evolution, the reporting unit's market penetration,
    the market acceptance of certain new technologies and costs evaluation. Our
    evaluations are based on financial plans updated with the latest available
    projections of semiconductor market evolution, our sales expectations and
    our costs evaluation and are consistent with the plans and estimates that
    we use to manage our business. It is possible, however, that the plans and
    estimates used may be incorrect, and future adverse changes in market conditions
    or operating results of acquired businesses not in line with our estimates
    may&nbsp;require impairment of certain goodwill.</font></td>
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<td width="3%"><font size="2" face="Arial">&nbsp;</font></td>
<td align="left"><font size="2" face="Arial"><b>Intangible assets subject to amortization</b>. Intangible assets subject to amortization include the cost of technologies and licenses purchased from third parties, internally developed software that is capitalized and purchased software.  These are amortized over a period ranging from three to seven years.  The carrying value of intangible assets subject to amortization is evaluated whenever changes in circumstances indicate that the carrying amount may&nbsp;not be recoverable.  In assessing recoverability, we estimate the expected discounted future cash flows associated with the intangible assets and compare this to their carrying value.  An impairment loss is recognized for the excess of the carrying amount over the fair value.
Significant management judgments and estimates are required and used in the forecasts of future operating results that are used in the discounted cash flow method of valuation, including: the applicable industry's sales volume forecast and selling price evolution, our market penetration, the market acceptance of certain new technologies and costs evaluation.  Our evaluations are based on financial plans updated with the latest available projections of the semiconductor market evolution and our sales expectations and are consistent with the plans and estimates that we use to manage our business.  It is possible, however, that the plans and estimates used may be incorrect and that future adverse changes in market conditions or operating results of businesses acquired not in line with our
estimates may therefore require impairment of certain intangible assets. At March 27, 2004, the value of intangible assets amounted to $312 million.</font></td>
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  <td>&nbsp;</td>
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<td width="3%"><font size="2" face="Arial">&nbsp;</font></td>
<td align="left"><font size="2" face="Arial"><b>Property, plant and equipment</b>. Our business requires substantial investments in technologically advanced manufacturing facilities, which can quickly become significantly underutilized or obsolete as a result of rapid changes in demand and ongoing technological evolution.</font></td>
</tr>
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  <td>&nbsp;</td>
  <td align="left">&nbsp;</td>
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<td width="3%"><font size="2" face="Arial">&nbsp;</font></td>
<td align="left"><font size="2" face="Arial">We estimate the useful life of our manufacturing equipment, which is the largest component of our long-lived assets, to be six years.  This estimate is based on our experience with using equipment over time.  Depreciation expense is a major element of our manufacturing cost structure.  We begin to depreciate new equipment when it is put into use.</font></td>
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<p align="center"><font face="Arial" size="2">3</font></p>
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<td align="left"><font size="2" face="Arial">We assess the carrying value of our property, plant and equipment whenever changes in circumstances indicate their carrying amount may&nbsp;not be recoverable. In assessing recoverability, we estimate the expected future cash flows associated with the tangible asset or group of assets and compare this to their carrying value. Significant estimates used in determining the undiscounted future cash flows include the industry evolution, the utilization of our fabrication facilities and the ability to upgrade such facilities, changes in selling price and the adoption of new technologies. Potential impairment exists when the carrying value of a tangible asset exceeds the future cash flows expected to be generated by the use of the asset and its
eventual disposition.  In such case, an impairment charge is recognized for the excess of the carrying value over the fair value. We mainly use the discounted expected cash flow technique to estimate fair value.  Our evaluations are based on financial plans updated with the latest projections of the semiconductor market and of our sales expectations, from which we derive the future production needs and loading of our manufacturing facilities, and are consistent with the plans and estimates that we use to manage our business. These plans are highly variable due to the high volatility of the semiconductor business and therefore subject to continuous modifications. If the future evolution differs from the basis of our plans, both in terms of market evolution and production allocation to our
manufacturing plants, this could require a further review of the carrying amount of our tangible assets resulting in a potential impairment loss. Factors we consider important which could trigger an impairment review include: significant negative industry trends, significant underutilization of the assets, and significant changes in how we use the assets in our plants.</font></td>
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  <td>&nbsp;</td>
  <td align="left">&nbsp;</td>
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<td width="3%"><font size="2" face="Arial">&nbsp;</font></td>
<td align="left"><font size="2" face="Arial"><b>Inventory</b>. The inventory is stated at the lower of cost or net realizable value. Cost is computed by adjusting standard cost to approximate actual manufacturing costs on a quarterly basis; the cost is therefore dependent on our manufacturing performance. In the case of underutilization of our manufacturing facilities, we estimate the costs associated with the excess capacity which are not included in the valuation of inventories but charged directly to cost of sales.</font></td>
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  <td>&nbsp;</td>
  <td align="left">&nbsp;</td>
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<td width="3%"><font size="2" face="Arial">&nbsp;</font></td>
<td align="left"><font size="2" face="Arial">The valuation of inventory requires us also to estimate obsolete or excess inventory as well as inventory that is not of saleable quality.  Provisions for obsolescence and excess inventory are estimated based on order backlog and the previous quarter's sales and production plans.  To the extent that future negative market conditions generate order backlog cancellations and declining sales, and if future conditions are less favorable than the projected revenue assumptions, we could be required to record additional inventory write-down charges, which would have a negative impact on our gross margin.</font></td>
</tr>
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  <td>&nbsp;</td>
  <td align="left">&nbsp;</td>
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<td width="3%"><font size="2" face="Arial">&nbsp;</font></td>
<td align="left"><font size="2" face="Arial"><b>Restructuring charges</b>. We
    have undertaken, and we may&nbsp;continue to undertake, significant restructuring
    initiatives, which have required us to develop formalized plans for the exiting
    or disposing of certain activities. We recognize the fair value of a liability
    for costs associated with an exit or disposal activity when a probable liability
    exists and it can be reasonably estimated. We record estimated charges for
    on-going benefit arrangements such as severance and outplacement costs, and
    other restructuring costs meeting the criteria for a liability as described
    above. Given the significance of, and the timing of the execution of such
    activities, the process is complex and involves periodic reviews of estimates
    made at the time the original decisions were taken. As we are operating in
    a highly cyclical industry, we continue to evaluate the business evolution
    and in case of stronger or new initiatives which may include production curtailment
    or closure of other manufacturing facilities, we may be required to take
    additional charges as well as to change estimates of amounts previously recorded.
    The potential impact of these changes could be material and have a material
    adverse effect on our results of operations or financial condition. In the
    first quarter of 2004, the amount of restructuring charges and other related
    closure costs was $33 million pre-tax.</font></td>
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  <td>&nbsp;</td>
  <td align="left">&nbsp;</td>
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</table>
<p align="center"><font face="Arial" size="2">4</font></p>
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<td align="left"><font size="2" face="Arial"><b>Income taxes</b>. We are required to make estimates and judgments in determining income tax expense for financial statements purposes. These estimates and judgments occur in the calculation of certain tax assets and liabilities and provisions. </font></td>
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  <td>&nbsp;</td>
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<td width="3%"><font size="2" face="Arial">&nbsp;</font></td>
<td align="left"><font size="2" face="Arial">We are required to assess the likelihood to recover our deferred tax assets.  If recovery is not likely, we are required to increase our provision for taxes by recording a valuation allowance against the deferred tax assets that we estimate will not ultimately be recoverable.  As of March 27, 2004 we believed that all of the deferred tax assets, net of valuation allowances, as recorded on our balance sheet would ultimately be recovered.  However, should there be a change in our ability to recover our deferred tax assets or in our estimates of the valuation allowance, this could have an impact on our future tax provision in the periods in which these changes could occur. </font></td>
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  <td>&nbsp;</td>
  <td align="left">&nbsp;</td>
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<tr valign="top">
<td width="3%"><font size="2" face="Arial">&nbsp;</font></td>
<td align="left"><font size="2" face="Arial">In addition, the calculation of our tax liabilities involves dealing with uncertainties in the application of complex tax regulations. We recognize liabilities for anticipated tax audit issues based on our estimate of whether and to the extent that additional taxes will be due. If we ultimately determine that payment of the amounts is unnecessary, we reverse the liability and recognize a tax benefit during the period in which we determine that the liability is no longer necessary.  We record an additional charge in our provision for taxes in the period in which we determine that the recorded tax liability is less than we expect the ultimate assessment to be.</font></td>
</tr>
<tr valign="top">
  <td>&nbsp;</td>
  <td align="left">&nbsp;</td>
</tr>
</table>
<table width="100%" cellspacing="0" cellpadding="0" border="0">
<tr valign="top">
<td width="3%"><font size="2" face="Arial">&nbsp;</font></td>
<td align="left"><font size="2" face="Arial"><b>Patent and other intellectual property litigation or claims</b>. We have from time to time received, and may&nbsp;in the future receive, communications alleging possible infringements of patents and similar intellectual property rights of others.  We constantly monitor, with the support of our outside attorneys when deemed necessary or advisable, the chances of such intellectual property claims being successfully asserted.  We record a provision when we estimate that the claim could successfully be asserted in a court of law, when the loss is considered probable and in the absence of a valid offset or counterclaim. In the event of litigation which is adversely determined with respect to our interests, or in the event we need to change our
evaluation of a potential third-party intellectual property claim based on new evidence or communications, this could have a material adverse effect on our results of operations or financial condition at the time it were to materialize.</font></td>
</tr>
<tr valign="top">
  <td>&nbsp;</td>
  <td align="left">&nbsp;</td>
</tr>
</table>
<table width="100%" cellspacing="0" cellpadding="0" border="0">
<tr valign="top">
<td width="3%"><font size="2" face="Arial">&nbsp;</font></td>
<td align="left"><font size="2" face="Arial"><b>Other claims</b>. We are subject to the possibility of various loss contingencies arising in the ordinary course of business.  These include, but are not limited to: warranty costs on our products not covered by insurance, breach of contract claims, tax claims and claims for environmental damages. When determining loss contingencies, we consider the likelihood of a loss of an asset or the incurrence of a liability, as well as our ability to reasonably estimate the amount of such loss or liability.  An estimated loss is recorded when it is probable that a liability has been incurred and the amount of the loss can be reasonably estimated. We regularly reevaluate any losses and claims and determine whether they need to be readjusted based on the
current information available to us.  We will record a provision when we estimate that the claim could successfully be asserted.  In the event of litigation that is adversely determined with respect to our interests, or in the event we need to change our evaluation of a potential third-party claim based on new evidence or communications, this could have a material adverse effect on our results of operations or financial condition at the time it were to materialize.</font></td>
</tr>
</table>
<p align="center"><font face="Arial" size="2">5</font></p>
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<page>
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<p align="left"><font size="2" face="Arial"><b><i>Fiscal Year </i></b></font></p>
<div style="text-indent:3%">
<p align="left"><font size="2" face="Arial">Our fiscal year starts at January
    1, the first quarter lasting until the Saturday ending the thirteenth week
    of
    the year. Second and third quarters last, respectively, from the 14th week
    to the 26th week and from the 27th week to the 39th week. The fourth quarter
    covers from the beginning of the 40th week through December 31. Consequently,
    the first quarter this year lasted 87 days, or shorter than the fourth quarter
    2003 (97 days) and shorter than the second and third quarters 2003 (both
    91 days).</font></p>
</div>
<p align="left"><font size="2" face="Arial"><b><i>Business Overview </i></b></font></p>
<div style="text-indent:3%"><p align="left"><font size="2" face="Arial">The total available market is defined as the &quot;TAM&quot;, while the serviceable available market, the &quot;SAM&quot;, is defined as the market for products produced by us (which consists of the TAM and excludes PC motherboard major devices such as microprocessors (&quot;MPU&quot;), dynamic random access memories (&quot;DRAMs&quot;), and optoelectronics devices). </font></p>
</div><div style="text-indent:3%">
<p align="left"><font size="2" face="Arial">In
      2003, semiconductor industry revenues improved driven by a more favorable
      economic environment. According to the most recently published estimates
    of industry data, the semiconductor industry experienced a year-over-year
      revenues increase of approximately 18.3% for the TAM and of approximately
      19.0% for the SAM. Calculated on a comparable basis, that is without information
      with respect to actuators which was not included in the indicators before
      2003, the TAM and the SAM both increased 16.8%. </font></p>
</div><div style="text-indent:3%"><p align="left"><font size="2" face="Arial">The favorable conditions continued in the 2004 first quarter with a strong demand persisting in the semiconductor industry. Based upon preliminary industry estimates, in the first quarter of 2004, semiconductor industry revenue increased year-over-year by approximately 32.3% for the TAM to reach an estimated value of $48.8 billion, and by approximately 30.4% for the SAM, to reach an estimated $32.9 billion. On a sequential basis, in the first quarter of 2004, the TAM increased by 1.5% and the SAM by 2.0%. </font></p>
</div><div style="text-indent:3%"><p align="left"><font size="2" face="Arial">On a year-over-year basis, our net revenue showed a marked improvement, and the overall market demand partially offset the seasonality that generally affects our first quarter revenue performance.  However, based on the preliminary industry estimates, our revenue improvement was below the level registered by the TAM and the SAM. Net revenues for the first quarter were $2,029 million, 25.4% above the $1,618 million reported for last year's first quarter, and 4.0% below the $2,113 million reported for the prior quarter.  Our  first quarter 2004 results were negatively impacted by some shipment delays at the end of the period, part of which were customer-related and part of which resulted from short-term production
bottleneck issues. For the first time, our first quarter revenues exceeded $2 billion.</font></p>
</div><div style="text-indent:3%">
<p align="left"><font size="2" face="Arial">Our
      year-over-year revenue for the first quarter of 2004 benefited from strong
      gains in all key product families and applications. On a sequential basis,
      modest revenue increases were posted by Micro and Memories and Discretes;
      Automotive was up approximately 10% and other applications showing sequential
    increase included: Wireline, Printers, Imaging and Industrial. Flash memory
    product
      sales were $277 million, flat with the fourth quarter 2003 levels and up
      83% from the last year's first quarter.</font></p>
</div><p align="center"><font face="Arial" size="2">6</font></p>
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<div style="text-indent:3%">
<p align="left"><font size="2" face="Arial">Our gross margin was 35.4%, as compared
    to 35.0% reported for the last year's first quarter and 36.0% for the prior
    quarter. </font></p>
</div><div style="text-indent:3%">
<p align="left"><font size="2" face="Arial">Our research and development expenses
    increased in both absolute dollars and as a percentage of revenues in the
    first quarter 2004, reaching the level of $363 million, reflecting an acceleration
    of our investments in new product development, which is likely to continue
    for the next several quarters; in the first quarter of 2004 we added 450
    engineers to our research and development staff. </font></p>
</div><div style="text-indent:3%">
<p align="left"><font size="2" face="Arial">Our
      profitability for the period was negatively impacted by a lower gross margin
      than that in the fourth quarter of 2003, the further weakening of the U.S.
      dollar exchange rate against the other major international currencies and
      higher operating expenses, mainly in research and development activities
      and selling, general and administrative expenditures. Additionally our
      first quarter earnings were penalized by impairment, restructuring charges
      and other related closure costs of $33 million relating to our previously
      announced 150mm restructuring plan. Our operating income in the first quarter
      of 2004 was $80 million, a 47.6% decrease compared to the $153 million
    in the fourth quarter 2003. In the first quarter of 2004, operating income
    decreased 35.5%, as compared to $124 million for the first quarter of 2003.
    Operating income in the first quarter of 2004 was penalized by
    a weaker U.S.
    dollar, lower selling prices, lower other income and higher provisions for
    restructuring charges.</font></p>
</div><div style="text-indent:3%">
<p align="left"><font size="2" face="Arial">In the first quarter of 2004 we continued
    to invest to upgrade and expand our manufacturing capacity, which was at
    84% of our wafer fabs line capacity during the period. Our capital expenditures
    were $321 million compared to $256 million in the first quarter of 2003.
    We have totally financed capital investments with net cash generated from
    operating
    activities. See &#8220;Liquidity and Capital Resources&#8212;Liquidity&#8221;.
    At March 27, 2004 we registered a further improvement in our financial position
    which
    resulted
    in a net financial
    position
    of $131
    million.
    Our total financial debt was $3.0 billion, of which $2.6 billion was long-term
    debt and $0.4 billion was the current portion of long-term debt. These amounts
    include a reclassification of $370 milion from long-term debt to current
    portion, effected after our press release on April 21, 2004 and related to
    our 2010
    convertible bonds. See &quot;Liquidity
    and Capital Resources&#8212;Capital
    Resources&quot; in this Form 6-K for
    a definition and reconciliation of net financial position, which is not a
    U.S. GAAP measure.</font></p>
</div><p align="left"><font size="2" face="Arial"><b><i>Business Outlook </i></b></font></p>
<div style="text-indent:3%">
<p align="left"><font size="2" face="Arial">In the short-term, we are expecting
    to report a strong sequential increase in revenues and gross margin in the
    second quarter of 2004. Based upon backlog data and order flow, we anticipate
    that our second quarter revenues will increase from 6% to 12% on a sequential
    basis to a range between $2,150 million and $2,270 million, which translates
    into a year-over-year increase of between 26% and 33%. We believe that the
    market applications that would drive this increase would include Automotive,
    Consumer and Industrial. In addition, Flash memory product sales are expected
    to post a solid sequential increase. </font></p>
</div><div style="text-indent:3%">
<p align="left"><font size="2" face="Arial">Importantly, our second quarter gross
    margin is expected to be approximately 37%, benefiting from higher revenue
    levels, manufacturing efficiencies, an improved pricing environment and more
    favorable U.S. dollar exchange rates.</font></p>
</div><p align="center"><font face="Arial" size="2">7</font></p>
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<div style="text-indent:3%">
<p align="left"><font size="2" face="Arial">We have noted market indicators suggesting
    that order rates for our products will continue strong throughout 2004. In
    response to current industry dynamics, and reflecting our longer term view
    of our market positioning, we have decided to increase 2004 capital expenditures
    to approximately $2.2 billion, up from the $1.6 billion that we initially
    budgeted. Approximately two thirds of this amount will be allocated to leading-edge
    technologies and research and development programs. For more information
    please refer to &quot;Liquidity and Capital Resources&#8212;Financial Outlook&quot; in
    this Form 6-K. </font></p>
</div><div style="text-indent:3%"><p align="left"><font size="2" face="Arial">Based on our current visibility of favorable market conditions and assuming no further deterioration of the U.S. dollar versus euro exchange rate from the current rate of $1.20 per &euro;1.00,
      we expect 2004 to be a year of progressive improvement in revenues and
      profitability for us. Therefore we are allocating our resources in order
      to maximize our competitive position while making investments in technology,
      product development, and customer service and support. </font></p>
</div><p align="left"><font size="2" face="Arial"><b><i>Other Developments </i></b></font></p>
<div style="text-indent:3%">
<p align="left"><font size="2" face="Arial" align="left"> On March 5, 2004, we
    formed UPEK, Inc., a new joint-venture company, with Sofinova Capital IV,
    incorporated in the United States of America, as
    a
    spin-off
    of our TouchChip
    business. UPEK, Inc. was initially capitalized with the transfer of our business,
    personnel and technology assets related to our fingerprint biometrics business,
    formerly known as our TouchChip Business Unit (accounted for as &quot;Others&quot; in
    &quot;Segment Information&quot;  below), for a 48% interest estimated to be equivalent
    to $10 million. Sofinova Capital
    IV contributed
    $11 million
    in cash for a 52% interest.  </font></p>
</div>
<div style="text-indent:3%">
<p align="left"><font size="2" face="Arial">             On
      March 15, 2004, we announced that our Supervisory Board had approved the
      recommendation of our President and Chief Executive Officer for his succession
      and will propose that Mr. Carlo Bozotti be appointed as the sole member
      of the Managing Board and President and Chief Executive Officer, subject
      to the approval by our shareholders at their 2005 annual general meeting
      of shareholders. As part of the succession plan, the Supervisory Board,
      upon proposal of Mr. Bozotti, will endorse the appointment of Mr. Alain
      Dutheil as Chief Operating Officer reporting to the President and Chief
      Executive Officer. Both Mr. Bozotti and Mr. Dutheil are currently Executive
    Officers of our company.</font></p>
</div><div style="text-indent:3%">
<p align="left"><font size="2" face="Arial">At our Annual General Meeting held
    on April 23, 2004, our shareholders approved all the proposed resolutions,
    including the distribution of a cash dividend of $0.12 per share, increasing
    from the $0.08 level of the prior year's cash dividend per share payment. </font></p>
</div><p align="left"><font size="2" face="Arial"><b><i>Results of Operations</i></b></font></p>

<p align="left"><font size="2" face="Arial"><b><i>Segment information</i></b></font></p>
<div style="text-indent:3%"><p align="left"><font size="2" face="Arial">We operate in two business areas: Semiconductors and Subsystems.</font></p>
</div><div style="text-indent:3%">
<p align="left"><font size="2" face="Arial">In the Semiconductors business area,
    we design, develop, manufacture and market a broad range of products, including
    discrete, memories and standard commodity components, application-specific
    integrated circuits (&quot;ASICSs&quot;), full custom devices and semicustom
    devices and application-specific standard products (&quot;ASSPs&quot;) for
    analog, digital, and mixed-signal applications. In addition, following the
    acquisition of Incard we started the full chain manufacturing of Smart card
    products, which include the production and sale of both silicon chips as
    in the past and of cards. Our principal resource allocation decisions based
    on the </font></p>
</div><p align="center"><font face="Arial" size="2">8</font></p>
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<p align="left"><font size="2" face="Arial">Semiconductors business area are
    for ongoing expenditures on research and development and capital investments
    in front-end and back-end manufacturing facilities. We manage our semiconductor
    products in four segments, following our four main products groups: Telecommunications,
    Peripherals and Automotive; Discrete and Standard ICs; Memory Products and
    Consumer and Microcontroller (collectively referred to as the &quot;Groups&quot;).
    Revenues and operating results of the Smart card products are included in
    Memory Products. We manage our revenues and internal operating income performance
based on these segments.</font></p>
<div style="text-indent:3%"><p align="left"><font size="2" face="Arial">In the Subsystems business area, we design, develop, manufacture and market subsystems and modules for the telecom, automotive and industrial markets including mobile phone accessories, battery chargers, ISDN power supplies and in-vehicle equipment for electronic toll payment. Based on its immateriality to our business as a whole, the Subsystems segment does not meet the requirements for a reportable segment as defined in Statement of Financial Accounting Standards No. 131, <i>Disclosures about Segments of an Enterprise and Related Information</i> (&#147;FAS 131&#148;).</font></p>
</div><div style="text-indent:3%">
<p align="left"><font size="2" face="Arial">The following tables present our
    consolidated net revenues and consolidated operating income by semiconductor
    product segment. For the computation of the Groups' internal financial measurements,
    we are
    using certain internal rules of allocation for the costs not directly chargeable
    to the Groups, including cost of sales, selling, general and administrative
    expenses and a significant part of research and development expenses. Additionally,
    in compliance with our internal policies, certain items of costs are not
    charged to the Groups, including impairment, restructuring charges and other
    related closure costs, start-up costs of new manufacturing facilities, some
    strategic and special research and development programs or other corporate
sponsored initiatives, certain corporate level operating expenses, as well as
    certain other miscellaneous charges.</font></p>
</div><p align="center"><font face="Arial" size="2">9</font></p>
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<page>
<a name="p?"></a>

<table width="100%" cellspacing="0" cellpadding="0" border="0">
<tr align="center" valign="top">
<td><font size="1"> &nbsp;</font></td>
<td><font size="1">&nbsp;</font></td>
<td><font size="1">&nbsp;</font></td>
<td colspan="4"><font size="1" face="Arial"><b>(unaudited)</b></font></td>
<td><font size="1">&nbsp;</font></td>
</tr>
<tr align="center" valign="top">
<td><font size="1">&nbsp;</font></td>
<td><font size="1">&nbsp;</font></td>
<td><hr noshade size="1"></td>
<td colspan="4"><hr noshade size="1"></td>
<td><font size="1">&nbsp;</font></td>
</tr>
<tr align="center" valign="top">
<td><font size="1">&nbsp;</font></td>
<td><font size="1">&nbsp;</font></td>
<td><font size="1">&nbsp;</font></td>
<td colspan="4"><font size="1" face="Arial"><b>Three Months Ended</b></font></td>
<td><font size="1">&nbsp;</font></td>
</tr>
<tr align="center" valign="top">
<td><font size="1">&nbsp;</font></td>
<td><font size="1">&nbsp;</font></td>
<td><hr noshade size="1"></td>
<td colspan="4"><hr noshade size="1"></td>
<td><font size="1">&nbsp;</font></td>
</tr>
<tr align="center" valign="top">
<td><font size="1">&nbsp;</font></td>
<td width="2%"><font size="1">&nbsp;</font></td>
<td width="1%"><font size="1">&nbsp;</font></td>
<td width="8%"><font size="1" face="Arial"><b>March 27, 2004</b></font></td>
<td width="2%"><font size="1">&nbsp;</font></td>
<td width="1%"><font size="1">&nbsp;</font></td>
<td width="8%"><font size="1" face="Arial"><b>March 29, 2003</b></font></td>
<td width="2%"><font size="1">&nbsp;</font></td>
</tr>
<tr align="center" valign="top">
<td><font size="1">&nbsp;</font></td>
<td><font size="1">&nbsp;</font></td>
<td><hr noshade size="1"></td>
<td><hr noshade size="1"></td>
<td><font size="1">&nbsp;</font></td>
<td><hr noshade size="1"></td>
<td><hr noshade size="1"></td>
<td><font size="1">&nbsp;</font></td>
</tr>
<tr align="center" valign="top">
<td><font size="1">&nbsp;</font></td>
<td><font size="1">&nbsp;</font></td>
<td><font size="1">&nbsp;</font></td>
<td colspan="4"><font size="1" face="Arial"><b>(in millions)</b></font></td>
<td><font size="1">&nbsp;</font></td>
</tr>
<tr valign="top">
<td align="left"><font size="2" face="Arial"><b>Net revenues by product group:</b></font></td>
<td align="left">&nbsp;</td>
<td align="right">&nbsp;</td>
<td align="left"><font size="2" face="Arial">&nbsp;</font></td>
<td align="left">&nbsp;</td>
<td align="right">&nbsp;</td>
<td align="left"><font size="2" face="Arial">&nbsp;</font></td>
<td align="left">&nbsp;</td>
</tr>
<tr valign="top" bgcolor="#eeeeee">
<td align="left"><font size="2" face="Arial">&nbsp;&nbsp;&nbsp;Telecommunications, Peripherals and Automotive</font></td>
<td align="left">&nbsp;</td>
<td align="right"><font size="2" face="Arial"><b>$</b></font></td>
<td align="right"><font size="2" face="Arial"> <b>840</b></font></td>
<td align="left">&nbsp;</td>
<td align="right"><font size="2" face="Arial">$</font></td>
<td align="right"><font size="2" face="Arial"> 785</font></td>
<td align="left">&nbsp;</td>
</tr>
<tr valign="top">
<td align="left"><font size="2" face="Arial">&nbsp;&nbsp;&nbsp;Discrete and Standard ICs</font></td>
<td align="left">&nbsp;</td>
<td align="right">&nbsp;</td>
<td align="right"><font size="2" face="Arial"><b>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;356</b></font></td>
<td align="left">&nbsp;</td>
<td align="right">&nbsp;</td>
<td align="right"><font size="2" face="Arial">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;272</font></td>
<td align="left">&nbsp;</td>
</tr>
<tr valign="top" bgcolor="#eeeeee">
<td align="left"><font size="2" face="Arial">&nbsp;&nbsp;&nbsp;Memory Products</font></td>
<td align="left">&nbsp;</td>
<td align="right">&nbsp;</td>
<td align="right"><font size="2" face="Arial"><b>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;452</b></font></td>
<td align="left">&nbsp;</td>
<td align="right">&nbsp;</td>
<td align="right"><font size="2" face="Arial">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;262</font></td>
<td align="left">&nbsp;</td>
</tr>
<tr valign="top">
<td align="left"><font size="2" face="Arial">&nbsp;&nbsp;&nbsp;Consumer and Microcontroller</font></td>
<td align="left">&nbsp;</td>
<td align="right">&nbsp;</td>
<td align="right"><font size="2" face="Arial"><b>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;364</b></font></td>
<td align="left">&nbsp;</td>
<td align="right">&nbsp;</td>
<td align="right"><font size="2" face="Arial">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;283</font></td>
<td align="left">&nbsp;</td>
</tr>
<tr valign="top" bgcolor="#eeeeee">
<td align="left"><font size="2" face="Arial">&nbsp;&nbsp;&nbsp;Others<sup>(1)</sup></font></td>
<td align="left">&nbsp;</td>
<td align="right">&nbsp;</td>
<td align="right"><font size="2" face="Arial"><b>17</b></font></td>
<td align="left">&nbsp;</td>
<td align="right">&nbsp;</td>
<td align="right"><font size="2" face="Arial">16</font></td>
<td align="left">&nbsp;</td>
</tr>
<tr valign="top">
<td></td>
<td></td>
<td><hr noshade size="1"></td>
<td><hr noshade size="1"></td>
<td></td>
<td><hr noshade size="1"></td>
<td><hr noshade size="1"></td>
<td></td>
</tr>
<tr valign="top" bgcolor="#eeeeee">
<td align="left"><font size="2" face="Arial"><b>Total consolidated net revenues</b></font></td>
<td align="left">&nbsp;</td>
<td align="right"><font size="2" face="Arial"><b>$</b></font></td>
<td align="right"><font size="2" face="Arial"> <b>2,029</b></font></td>
<td align="left">&nbsp;</td>
<td align="right"><font size="2" face="Arial"><b>$</b></font></td>
<td align="right"><font size="2" face="Arial"> <b>1,618</b></font></td>
<td align="left">&nbsp;</td>
</tr>
<tr valign="top">
<td></td>
<td></td>
<td><hr noshade size="2"></td>
<td><hr noshade size="2"></td>
<td></td>
<td><hr noshade size="2"></td>
<td><hr noshade size="2"></td>
<td></td>
</tr>
</table>
<table width="100%" cellspacing="0" cellpadding="0" border="0">
<tr valign="top">
<td><hr align="left" width="100" size="1" noshade>
</td>
</tr>
</table>
<table width="100%" cellspacing="0" cellpadding="0" border="0">
<tr valign="top">
<td width="3%"><font size="1" face="Arial">(1)</font></td>
<td>
<font size="1" face="Arial">Includes revenues from sales of subsystems and other products not allocated to product groups.</font></td>
</tr>
<tr valign="top">
  <td>&nbsp;</td>
  <td>&nbsp;</td>
</tr>
</table>
<table width="100%" cellspacing="0" cellpadding="0" border="0">
<tr valign="top">
<td align="left"><font size="1" face="Arial"> &nbsp;</font></td>
<td align="left"><font size="1">&nbsp;</font></td>
<td align="right"><font size="1">&nbsp;</font></td>
<td colspan="4" align="center"><font size="1" face="Arial"><b>(unaudited)</b></font></td>
<td align="left"><font size="1">&nbsp;</font></td>
</tr>
<tr valign="top">
<td><font size="1">&nbsp;</font></td>
<td><font size="1">&nbsp;</font></td>
<td><hr noshade size="1"></td>
<td colspan="4"><hr noshade size="1"></td>
<td><font size="1">&nbsp;</font></td>
</tr>
<tr valign="top">
<td align="left"><font size="1" face="Arial">&nbsp;</font></td>
<td align="left"><font size="1">&nbsp;</font></td>
<td align="right"><font size="1">&nbsp;</font></td>
<td colspan="4" align="center"><font size="1" face="Arial"><b>Three Months Ended</b></font></td>
<td align="left"><font size="1">&nbsp;</font></td>
</tr>
<tr valign="top">
<td><font size="1">&nbsp;</font></td>
<td><font size="1">&nbsp;</font></td>
<td><hr noshade size="1"></td>
<td colspan="4"><hr noshade size="1"></td>
<td><font size="1">&nbsp;</font></td>
</tr>
<tr valign="top">
<td align="left"><font size="1" face="Arial">&nbsp;</font></td>
<td align="left"><font size="1">&nbsp;</font></td>
<td align="right"><font size="1">&nbsp;</font></td>
<td width="8%" align="center"><font size="1" face="Arial"><b>March 27, 2004</b></font></td>
<td align="left"><font size="1">&nbsp;</font></td>
<td align="right"><font size="1">&nbsp;</font></td>
<td width="8%" align="center"><font size="1" face="Arial"><b>March 29, 2003</b></font></td>
<td align="left"><font size="1">&nbsp;</font></td>
</tr>
<tr valign="top">
<td><font size="1">&nbsp;</font></td>
<td><font size="1">&nbsp;</font></td>
<td><hr noshade size="1"></td>
<td width="8%"><hr noshade size="1"></td>
<td><font size="1">&nbsp;</font></td>
<td><hr noshade size="1"></td>
<td width="8%"><hr noshade size="1"></td>
<td><font size="1">&nbsp;</font></td>
</tr>
<tr valign="top">
<td align="left"><font size="1" face="Arial">&nbsp;</font></td>
<td align="left"><font size="1">&nbsp;</font></td>
<td align="right"><font size="1">&nbsp;</font></td>
<td colspan="4" align="center"><font size="1" face="Arial"><b>(in millions)</b></font></td>
<td align="left"><font size="1">&nbsp;</font></td>
</tr>
<tr valign="top">
<td align="left"><font size="2" face="Arial"><b>Operating income (loss)  by product group:</b></font></td>
<td align="left" width="2%">&nbsp;</td>
<td width="1%" align="right">&nbsp;</td>
<td width="8%" align="left"><font size="2" face="Arial">&nbsp;</font></td>
<td width="2%" align="left">&nbsp;</td>
<td width="1%" align="right">&nbsp;</td>
<td width="8%" align="left"><font size="2" face="Arial">&nbsp;</font></td>
<td width="2%" align="left">&nbsp;</td> </tr>
<tr valign="top" bgcolor="#eeeeee">
<td align="left"><font size="2" face="Arial">&nbsp;&nbsp;&nbsp;Telecommunications, Peripherals and Automotive</font></td>
<td align="left">&nbsp;</td>
<td align="right"><font size="2" face="Arial">$</font></td>
<td width="8%" align="right"><font size="2" face="Arial"> <b>114</b></font></td>
<td align="left">&nbsp;</td>
<td align="right"><font size="2" face="Arial">$</font></td>
<td width="8%" align="right"><font size="2" face="Arial"> 139</font></td>
<td align="left">&nbsp;</td>
</tr>
<tr valign="top">
<td align="left"><font size="2" face="Arial">&nbsp;&nbsp;&nbsp;Discrete and Standard ICs</font></td>
<td align="left">&nbsp;</td>
<td align="right">&nbsp;</td>
<td width="8%" align="right"><font size="2" face="Arial">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<b>51</b></font></td>
<td align="left">&nbsp;</td>
<td align="right">&nbsp;</td>
<td width="8%" align="right"><font size="2" face="Arial">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;23</font></td>
<td align="left">&nbsp;</td>
</tr>
<tr valign="top" bgcolor="#eeeeee">
<td align="left"><font size="2" face="Arial">&nbsp;&nbsp;&nbsp;Memory Products</font></td>
<td align="left">&nbsp;</td>
<td align="right">&nbsp;</td>
<td width="8%" align="right"><font size="2" face="Arial">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<b>5</b></font></td>
<td align="left">&nbsp;</td>
<td align="right">&nbsp;</td>
<td width="8%" align="right"><font size="2" face="Arial">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(26</font></td>
<td align="left"><font size="2" face="Arial">)</font></td>
</tr>
<tr valign="top">
<td align="left"><font size="2" face="Arial">&nbsp;&nbsp;&nbsp;Consumer and Microcontroller</font></td>
<td align="left">&nbsp;</td>
<td align="right">&nbsp;</td>
<td width="8%" align="right"><font size="2" face="Arial"><b>18</b></font></td>
<td align="left">&nbsp;</td>
<td align="right">&nbsp;</td>
<td width="8%" align="right"><font size="2" face="Arial">12</font></td>
<td align="left">&nbsp;</td>
</tr>
<tr valign="top">
<td></td>
<td></td>
<td><hr noshade size="1"></td>
<td width="8%"><hr noshade size="1"></td>
<td></td>
<td><hr noshade size="1"></td>
<td width="8%"><hr noshade size="1"></td>
<td></td>
</tr>
<tr valign="top" bgcolor="#eeeeee">
<td align="left"><font size="2" face="Arial">&nbsp;&nbsp;&nbsp;Total operating income of product groups</font></td>
<td align="left">&nbsp;</td>
<td align="right">&nbsp;</td>
<td width="8%" align="right"><font size="2" face="Arial"><b>            188</b></font></td>
<td align="left">&nbsp;</td>
<td align="right">&nbsp;</td>
<td width="8%" align="right"><font size="2" face="Arial">           148</font></td>
<td align="left">&nbsp;</td>
</tr>
<tr valign="top">
<td align="left"><font size="2" face="Arial">&nbsp;&nbsp;&nbsp;Others<sup>(1)</sup></font></td>
<td align="left">&nbsp;</td>
<td align="right">&nbsp;</td>
<td width="8%" align="right"><font size="2" face="Arial"><b>        (108</b></font></td>
<td align="left"><font size="2" face="Arial">)</font></td>
<td align="right">&nbsp;</td>
<td width="8%" align="right"><font size="2" face="Arial">(24</font></td>
<td align="left"><font size="2" face="Arial">)</font></td>
</tr>
<tr valign="top">
<td></td>
<td></td>
<td><hr noshade size="1"></td>
<td width="8%"><hr noshade size="1"></td>
<td></td>
<td><hr noshade size="1"></td>
<td width="8%"><hr noshade size="1"></td>
<td></td>
</tr>
<tr valign="top" bgcolor="#eeeeee">
<td align="left"><font size="2" face="Arial"><b>Total consolidated operating
      income </b></font></td>
<td align="left">&nbsp;</td>
<td align="right"><font size="2" face="Arial"><b>$</b></font></td>
<td width="8%" align="right"><font size="2" face="Arial"> <b>80</b></font></td>
<td align="left">&nbsp;</td>
<td align="right"><font size="2" face="Arial"><b>$</b></font></td>
<td width="8%" align="right"><font size="2" face="Arial"> <b>124</b></font></td>
<td align="left">&nbsp;</td>
</tr>
<tr valign="top">
<td></td>
<td></td>
<td><hr noshade size="2"></td>
<td width="8%"><hr noshade size="2"></td>
<td></td>
<td><hr noshade size="2"></td>
<td width="8%"><hr noshade size="2"></td>
<td></td>
</tr>
</table>
<table width="100%" cellspacing="0" cellpadding="0" border="0">
<tr valign="top">
<td><hr align="left" width="100" size="1" noshade>
</td>
</tr>
</table>
<table width="100%" cellspacing="0" cellpadding="0" border="0">
<tr valign="top">
<td width="3%"><font size="1" face="Arial">(1)</font></td>
<td>
<font size="1" face="Arial">Operating income of &quot;Others&quot; includes items such as impairment, restructuring charges and other related closure costs, start-up costs, and other unallocated expenses such as: strategic or special research and development programs, certain corporate level operating expenses, certain patent claims and litigations, and other costs that are not allocated to the product groups, as well as operating earnings or losses of the Subsystems and Other Products Group.</font></td>
</tr>
<tr valign="top">
  <td>&nbsp;</td>
  <td>&nbsp;</td>
</tr>
<tr valign="top">
  <td>&nbsp;</td>
  <td>&nbsp;</td>
</tr>
</table>
<table width="100%" cellspacing="0" cellpadding="0" border="0">
<tr valign="top">
<td align="left"><font size="1" face="Arial"> &nbsp;</font></td>
<td align="left"><font size="1">&nbsp;</font></td>
<td align="right"><font size="1">&nbsp;</font></td>
<td colspan="4" align="center"><font size="1" face="Arial"><b>(unaudited)</b></font></td>
<td align="left"><font size="1">&nbsp;</font></td>
</tr>
<tr valign="top">
<td><font size="1">&nbsp;</font></td>
<td><font size="1">&nbsp;</font></td>
<td><hr noshade size="1"></td>
<td colspan="4"><hr noshade size="1"></td>
<td><font size="1">&nbsp;</font></td>
</tr>
<tr valign="top">
<td align="left"><font size="1" face="Arial">&nbsp;</font></td>
<td align="left"><font size="1">&nbsp;</font></td>
<td align="right"><font size="1">&nbsp;</font></td>
<td colspan="4" align="center"><font size="1" face="Arial"><b>Three Months Ended</b></font></td>
<td align="left"><font size="1">&nbsp;</font></td>
</tr>
<tr valign="top">
<td><font size="1">&nbsp;</font></td>
<td><font size="1">&nbsp;</font></td>
<td><hr noshade size="1"></td>
<td colspan="4"><hr noshade size="1"></td>
<td><font size="1">&nbsp;</font></td>
</tr>
<tr valign="top">
<td align="left"><font size="1" face="Arial">&nbsp;</font></td>
<td align="left"><font size="1">&nbsp;</font></td>
<td align="right"><font size="1">&nbsp;</font></td>
<td width="8%" align="center"><font size="1" face="Arial"><b>March 27, 2004</b></font></td>
<td align="left"><font size="1">&nbsp;</font></td>
<td align="right"><font size="1">&nbsp;</font></td>
<td width="8%" align="center"><font size="1" face="Arial"><b>March 29, 2003</b></font></td>
<td align="left"><font size="1">&nbsp;</font></td>
</tr>
<tr valign="top">
<td><font size="1">&nbsp;</font></td>
<td><font size="1">&nbsp;</font></td>
<td><hr noshade size="1"></td>
<td width="8%"><hr noshade size="1"></td>
<td><font size="1">&nbsp;</font></td>
<td><hr noshade size="1"></td>
<td width="8%"><hr noshade size="1"></td>
<td><font size="1">&nbsp;</font></td>
</tr>
<tr valign="top">
<td align="left"><font size="1" face="Arial">&nbsp;</font></td>
<td align="left"><font size="1">&nbsp;</font></td>
<td align="right"><font size="1">&nbsp;</font></td>
<td colspan="4" align="center"><font size="1" face="Arial"><b>(in millions)</b></font></td>
<td align="left"><font size="1">&nbsp;</font></td>
</tr>
<tr valign="top">
<td align="left"><font size="2" face="Arial"><b>Reconciliation to consolidated operating income:</b></font></td>
<td align="left" width="2%">&nbsp;</td>
<td width="1%" align="right">&nbsp;</td>
<td width="8%" align="left"><font size="2" face="Arial">&nbsp;</font></td>
<td width="2%" align="left">&nbsp;</td>
<td width="1%" align="right">&nbsp;</td>
<td width="8%" align="left"><font size="2" face="Arial">&nbsp;</font></td>
<td width="2%" align="left">&nbsp;</td> </tr>
<tr valign="top" bgcolor="#eeeeee">
<td align="left"><font size="2" face="Arial">Total operating income of product groups</font></td>
<td align="left">&nbsp;</td>
<td align="right"><font size="2" face="Arial">$</font></td>
<td width="8%" align="right"><font size="2" face="Arial"> <b>188</b></font></td>
<td align="left">&nbsp;</td>
<td align="right"><font size="2" face="Arial">$</font></td>
<td width="8%" align="right"><font size="2" face="Arial"> 148</font></td>
<td align="left">&nbsp;</td>
</tr>
<tr valign="top">
<td align="left"><font size="2" face="Arial">&nbsp;&nbsp;&nbsp;Strategic and other research and development programs</font></td>
<td align="left">&nbsp;</td>
<td align="right">&nbsp;</td>
<td width="8%" align="right"><font size="2" face="Arial">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<b>(29</b></font></td>
<td align="left"><font size="2" face="Arial"><b>)</b></font></td>
<td align="right">&nbsp;</td>
<td width="8%" align="right"><font size="2" face="Arial">           (10</font></td>
<td align="left"><font size="2" face="Arial">)</font></td>
</tr>
<tr valign="top" bgcolor="#eeeeee">
<td align="left"><font size="2" face="Arial">&nbsp;&nbsp;&nbsp;Start-up costs</font></td>
<td align="left">&nbsp;</td>
<td align="right">&nbsp;</td>
<td width="8%" align="right"><font size="2" face="Arial">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<b>(23</b></font></td>
<td align="left"><font size="2" face="Arial"><b>)</b></font></td>
<td align="right">&nbsp;</td>
<td width="8%" align="right"><font size="2" face="Arial">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(8</font></td>
<td align="left"><font size="2" face="Arial">)</font></td>
</tr>
<tr valign="top">
<td align="left"><font size="2" face="Arial">&nbsp;&nbsp;&nbsp;Impairment, restructuring charges and other related closure costs</font></td>
<td align="left">&nbsp;</td>
<td align="right">&nbsp;</td>
<td width="8%" align="right"><font size="2" face="Arial">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<b>(33</b></font></td>
<td align="left"><font size="2" face="Arial"><b>)</b></font></td>
<td align="right">&nbsp;</td>
<td width="8%" align="right"><font size="2" face="Arial">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<b>&#151;</b></font></td>
<td align="left">&nbsp;</td>
</tr>
<tr valign="top" bgcolor="#eeeeee">
<td align="left"><font size="2" face="Arial">&nbsp;&nbsp;&nbsp;Subsystems</font></td>
<td align="left">&nbsp;</td>
<td align="right">&nbsp;</td>
<td width="8%" align="right"><font size="2" face="Arial">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<b>&#151;</b></font></td>
<td align="left">&nbsp;</td>
<td align="right">&nbsp;</td>
<td width="8%" align="right"><font size="2" face="Arial">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2</font></td>
<td align="left">&nbsp;</td>
</tr>
<tr valign="top">
<td align="left"><font size="2" face="Arial">&nbsp;&nbsp;&nbsp;Other non-allocated provisions</font></td>
<td align="left">&nbsp;</td>
<td align="right">&nbsp;</td>
<td width="8%" align="right"><font size="2" face="Arial"><b>(23</b></font></td>
<td align="left"><font size="2" face="Arial"><b>)</b></font></td>
<td align="right">&nbsp;</td>
<td width="8%" align="right"><font size="2" face="Arial">(8</font></td>
<td align="left"><font size="2" face="Arial">)</font></td>
</tr>
<tr valign="top">
<td></td>
<td></td>
<td><hr noshade size="1"></td>
<td width="8%"><hr noshade size="1"></td>
<td></td>
<td><hr noshade size="1"></td>
<td width="8%"><hr noshade size="1"></td>
<td></td>
</tr>
<tr valign="top" bgcolor="#eeeeee">
<td align="left"><font size="2" face="Arial">          &nbsp;&nbsp;&nbsp;Others</font></td>
<td align="left">&nbsp;</td>
<td align="right">&nbsp;</td>
<td width="8%" align="right"><font size="2" face="Arial"><b>(108</b></font></td>
<td align="left"><font size="2" face="Arial"><b>)</b></font></td>
<td align="right">&nbsp;</td>
<td width="8%" align="right"><font size="2" face="Arial">(24</font></td>
<td align="left"><font size="2" face="Arial">)</font></td>
</tr>
<tr valign="top">
<td></td>
<td></td>
<td><hr noshade size="1"></td>
<td width="8%"><hr noshade size="1"></td>
<td></td>
<td><hr noshade size="1"></td>
<td width="8%"><hr noshade size="1"></td>
<td></td>
</tr>
<tr valign="top" bgcolor="#eeeeee">
<td align="left"><font size="2" face="Arial"><b>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total consolidated operating income</b></font></td>
<td align="left">&nbsp;</td>
<td align="right"><font size="2" face="Arial"><b>$</b></font></td>
<td width="8%" align="right"><font size="2" face="Arial"> <b>80</b></font></td>
<td align="left">&nbsp;</td>
<td align="right"><font size="2" face="Arial"><b>$</b></font></td>
<td width="8%" align="right"><font size="2" face="Arial"> <b>124</b></font></td>
<td align="left">&nbsp;</td>
</tr>
<tr valign="top">
<td></td>
<td></td>
<td><hr noshade size="2"></td>
<td width="8%"><hr noshade size="2"></td>
<td></td>
<td><hr noshade size="2"></td>
<td width="8%"><hr noshade size="2"></td>
<td></td>
</tr>
</table>
<p align="center"><font face="Arial" size="2">10</font></p>
<hr noshade align="center" width="100%" size="2">
<div style="page-break-before:always"></div>
<page>
<a name="p?"></a>

<p align="left"><font size="2" face="Arial"><b><i>Net revenues by location of order shipment, by customers' region of origin and by product family</i></b></font></p>
<div style="text-indent:3%">
  <p align="left"><font size="2" face="Arial">The table below sets forth information
      on our net revenues by location of order shipment, by customers' region
      of origin and by product family:</font></p>
</div>
<table width="100%" cellspacing="0" cellpadding="0" border="0">
<tr valign="top">
<td align="left"><font size="1"> &nbsp;</font></td>
<td align="left"><font size="1">&nbsp;</font></td>
<td align="right"><font size="1">&nbsp;</font></td>
<td colspan="4" align="center"><font size="1" face="Arial"><b>(unaudited)</b></font></td>
<td align="left"><font size="1">&nbsp;</font></td>
</tr>
<tr valign="top">
<td><font size="1">&nbsp;</font></td>
<td><font size="1">&nbsp;</font></td>
<td><hr noshade size="1"></td>
<td colspan="4"><hr noshade size="1"></td>
<td><font size="1">&nbsp;</font></td>
</tr>
<tr valign="top">
<td align="left"><font size="1">&nbsp;</font></td>
<td align="left"><font size="1">&nbsp;</font></td>
<td align="right"><font size="1">&nbsp;</font></td>
<td colspan="4" align="center"><font size="1" face="Arial"><b>Three Months Ended</b></font></td>
<td align="left"><font size="1">&nbsp;</font></td>
</tr>
<tr valign="top">
<td><font size="1">&nbsp;</font></td>
<td><font size="1">&nbsp;</font></td>
<td><hr noshade size="1"></td>
<td colspan="4"><hr noshade size="1"></td>
<td><font size="1">&nbsp;</font></td>
</tr>
<tr valign="top">
<td align="left"><font size="1">&nbsp;</font></td>
<td align="left" width="2%"><font size="1">&nbsp;</font></td>
<td width="1%" align="right"><font size="1">&nbsp;</font></td>
<td width="8%" align="center"><font size="1" face="Arial"><b>March 27, 2004</b></font></td>
<td width="2%" align="left"><font size="1">&nbsp;</font></td>
<td width="1%" align="right"><font size="1">&nbsp;</font></td>
<td width="8%" align="center"><font size="1" face="Arial"><b>March 29, 2003</b></font></td>
<td width="2%" align="left"><font size="1">&nbsp;</font></td>
</tr>
<tr valign="top">
<td><font size="1">&nbsp;</font></td>
<td><font size="1">&nbsp;</font></td>
<td><hr noshade size="1"></td>
<td width="8%"><hr noshade size="1"></td>
<td><font size="1">&nbsp;</font></td>
<td><hr noshade size="1"></td>
<td width="8%"><hr noshade size="1"></td>
<td><font size="1">&nbsp;</font></td>
</tr>
<tr valign="top">
<td align="left"><font size="1">&nbsp;</font></td>
<td align="left"><font size="1">&nbsp;</font></td>
<td align="right"><font size="1">&nbsp;</font></td>
<td colspan="4" align="center"><font size="1" face="Arial"><b>(in millions)</b></font></td>
<td align="left"><font size="1">&nbsp;</font></td>
</tr>
<tr valign="top">
<td align="left"><font size="2" face="Arial"><b>Net Revenues by Location of Order Shipment:<sup>(1)</sup></b></font></td>
<td align="left">&nbsp;</td>
<td align="right">&nbsp;</td>
<td width="8%" align="left"><font size="2" face="Arial">&nbsp;</font></td>
<td align="left">&nbsp;</td>
<td align="right">&nbsp;</td>
<td width="8%" align="left"><font size="2" face="Arial">&nbsp;</font></td>
<td align="left">&nbsp;</td>
</tr>
<tr valign="top" bgcolor="#eeeeee">
<td align="left"><font size="2" face="Arial">&nbsp;&nbsp;&nbsp;Europe</font></td>
<td align="left">&nbsp;</td>
<td align="right"><font size="2" face="Arial">$</font></td>
<td width="8%" align="right"><font size="2" face="Arial"> <b>555</b></font></td>
<td align="left">&nbsp;</td>
<td align="right"><font size="2" face="Arial">$</font></td>
<td width="8%" align="right"><font size="2" face="Arial"> 470</font></td>
<td align="left">&nbsp;</td>
</tr>
<tr valign="top">
<td align="left"><font size="2" face="Arial">&nbsp;&nbsp;&nbsp;North America</font></td>
<td align="left">&nbsp;</td>
<td align="right">&nbsp;</td>
<td width="8%" align="right"><font size="2" face="Arial">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<b>302</b></font></td>
<td align="left">&nbsp;</td>
<td align="right">&nbsp;</td>
<td width="8%" align="right"><font size="2" face="Arial">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;228</font></td>
<td align="left">&nbsp;</td>
</tr>
<tr valign="top" bgcolor="#eeeeee">
<td align="left"><font size="2" face="Arial">&nbsp;&nbsp;&nbsp;Asia/Pacific</font></td>
<td align="left">&nbsp;</td>
<td align="right">&nbsp;</td>
<td width="8%" align="right"><font size="2" face="Arial">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<b>854</b></font></td>
<td align="left">&nbsp;</td>
<td align="right">&nbsp;</td>
<td width="8%" align="right"><font size="2" face="Arial">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;702</font></td>
<td align="left">&nbsp;</td>
</tr>
<tr valign="top">
<td align="left"><font size="2" face="Arial">&nbsp;&nbsp;&nbsp;Japan</font></td>
<td align="left">&nbsp;</td>
<td align="right">&nbsp;</td>
<td width="8%" align="right"><font size="2" face="Arial">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<b>87</b></font></td>
<td align="left">&nbsp;</td>
<td align="right">&nbsp;</td>
<td width="8%" align="right"><font size="2" face="Arial">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;72</font></td>
<td align="left">&nbsp;</td>
</tr>
<tr valign="top" bgcolor="#eeeeee">
<td align="left"><font size="2" face="Arial">&nbsp;&nbsp;&nbsp;Emerging Markets</font></td>
<td align="left">&nbsp;</td>
<td align="right">&nbsp;</td>
<td width="8%" align="right"><font size="2" face="Arial"><b>231</b></font></td>
<td align="left">&nbsp;</td>
<td align="right">&nbsp;</td>
<td width="8%" align="right"><font size="2" face="Arial">146</font></td>
<td align="left">&nbsp;</td>
</tr>
<tr valign="top">
<td></td>
<td></td>
<td><hr noshade size="1"></td>
<td width="8%"><hr noshade size="1"></td>
<td></td>
<td><hr noshade size="1"></td>
<td width="8%"><hr noshade size="1"></td>
<td></td>
</tr>
<tr valign="top" bgcolor="#eeeeee">
<td align="left"><font size="2" face="Arial">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<b>Total</b></font></td>
<td align="left">&nbsp;</td>
<td align="right"><font size="2" face="Arial"><b>$</b></font></td>
<td width="8%" align="right"><font size="2" face="Arial"> <b> 2,029</b></font></td>
<td align="left">&nbsp;</td>
<td align="right"><font size="2" face="Arial"><b>$</b></font></td>
<td width="8%" align="right"><font size="2" face="Arial"> <b>1,618</b></font></td>
<td align="left">&nbsp;</td>
</tr>
<tr valign="top">
<td></td>
<td></td>
<td><hr noshade size="2"></td>
<td width="8%"><hr noshade size="2"></td>
<td></td>
<td><hr noshade size="2"></td>
<td width="8%"><hr noshade size="2"></td>
<td></td>

</tr>
<tr valign="top">
<td align="left"><font size="2" face="Arial"><b>Net Revenues by Customers' Region of Origin:<sup>(1)</sup></b></font></td>
<td align="left">&nbsp;</td>
<td align="right">&nbsp;</td>
<td width="8%" align="left"><font size="2" face="Arial">&nbsp;</font></td>
<td align="left">&nbsp;</td>
<td align="right">&nbsp;</td>
<td width="8%" align="left"><font size="2" face="Arial">&nbsp;</font></td>
<td align="left">&nbsp;</td>
</tr>
<tr valign="top" bgcolor="#eeeeee">
<td align="left"><font size="2" face="Arial">&nbsp;&nbsp;&nbsp;Europe</font></td>
<td align="left">&nbsp;</td>
<td align="right"><font size="2" face="Arial"><b>$</b></font></td>
<td width="8%" align="right"><font size="2" face="Arial"> <b>925</b></font></td>
<td align="left">&nbsp;</td>
<td align="right"><font size="2" face="Arial">$</font></td>
<td width="8%" align="right"><font size="2" face="Arial"> 720</font></td>
<td align="left">&nbsp;</td>
</tr>
<tr valign="top">
<td align="left"><font size="2" face="Arial">&nbsp;&nbsp;&nbsp;North America</font></td>
<td align="left">&nbsp;</td>
<td align="right">&nbsp;</td>
<td width="8%" align="right"><font size="2" face="Arial"><b>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;593</b></font></td>
<td align="left">&nbsp;</td>
<td align="right">&nbsp;</td>
<td width="8%" align="right"><font size="2" face="Arial">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;493</font></td>
<td align="left">&nbsp;</td>
</tr>
<tr valign="top" bgcolor="#eeeeee">
<td align="left"><font size="2" face="Arial">&nbsp;&nbsp;&nbsp;Asia/Pacific</font></td>
<td align="left">&nbsp;</td>
<td align="right">&nbsp;</td>
<td width="8%" align="right"><font size="2" face="Arial"><b>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;320</b></font></td>
<td align="left">&nbsp;</td>
<td align="right">&nbsp;</td>
<td width="8%" align="right"><font size="2" face="Arial">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;247</font></td>
<td align="left">&nbsp;</td>
</tr>
<tr valign="top">
<td align="left"><font size="2" face="Arial">&nbsp;&nbsp;&nbsp;Japan</font></td>
<td align="left">&nbsp;</td>
<td align="right">&nbsp;</td>
<td width="8%" align="right"><font size="2" face="Arial"><b>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;120</b></font></td>
<td align="left">&nbsp;</td>
<td align="right">&nbsp;</td>
<td width="8%" align="right"><font size="2" face="Arial">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;109</font></td>
<td align="left">&nbsp;</td>
</tr>
<tr valign="top" bgcolor="#eeeeee">
<td align="left"><font size="2" face="Arial">&nbsp;&nbsp;&nbsp;Emerging Markets</font></td>
<td align="left">&nbsp;</td>
<td align="right">&nbsp;</td>
<td width="8%" align="right"><font size="2" face="Arial"><b>71</b></font></td>
<td align="left">&nbsp;</td>
<td align="right">&nbsp;</td>
<td width="8%" align="right"><font size="2" face="Arial">49</font></td>
<td align="left">&nbsp;</td>
</tr>
<tr valign="top">
<td></td>
<td></td>
<td><hr noshade size="1"></td>
<td width="8%"><hr noshade size="1"></td>
<td></td>
<td><hr noshade size="1"></td>
<td width="8%"><hr noshade size="1"></td>
<td></td>
</tr>
<tr valign="top" bgcolor="#eeeeee">
<td align="left"><font size="2" face="Arial">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<b>Total</b></font></td>
<td align="left">&nbsp;</td>
<td align="right"><font size="2" face="Arial"><b>$</b></font></td>
<td width="8%" align="right"><font size="2" face="Arial"> <b>2,029</b></font></td>
<td align="left">&nbsp;</td>
<td align="right"><font size="2" face="Arial"><b>$</b></font></td>
<td width="8%" align="right"><font size="2" face="Arial"> <b>1,618</b></font></td>
<td align="left">&nbsp;</td>
</tr>
<tr valign="top">
<td></td>
<td></td>
<td><hr noshade size="2"></td>
<td width="8%"><hr noshade size="2"></td>
<td></td>
<td><hr noshade size="2"></td>
<td width="8%"><hr noshade size="2"></td>
<td></td>
</tr>
<tr valign="top">
<td align="left"><font size="2" face="Arial"><b>Net Revenues by Product Family:</b></font></td>
<td align="left">&nbsp;</td>
<td align="right">&nbsp;</td>
<td width="8%" align="left"><font size="2" face="Arial">&nbsp;</font></td>
<td align="left">&nbsp;</td>
<td align="right">&nbsp;</td>
<td width="8%" align="left"><font size="2" face="Arial">&nbsp;</font></td>
<td align="left">&nbsp;</td>
</tr>
<tr valign="top" bgcolor="#eeeeee">
<td align="left"><font size="2" face="Arial">&nbsp;&nbsp;&nbsp;Differentiated Products</font></td>
<td align="left">&nbsp;</td>
<td align="right"><font size="2" face="Arial"><b>$</b></font></td>
<td width="8%" align="right"><font size="2" face="Arial"> <b>1,371</b></font></td>
<td align="left">&nbsp;</td>
<td align="right"><font size="2" face="Arial">$</font></td>
<td width="8%" align="right"><font size="2" face="Arial"> 1,132</font></td>
<td align="left">&nbsp;</td>
</tr>
<tr valign="top">
<td align="left"><font size="2" face="Arial">&nbsp;&nbsp;&nbsp;Standard &amp; Commodities</font></td>
<td align="left">&nbsp;</td>
<td align="right">&nbsp;</td>
<td width="8%" align="right"><font size="2" face="Arial"><b>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;97</b></font></td>
<td align="left">&nbsp;</td>
<td align="right">&nbsp;</td>
<td width="8%" align="right"><font size="2" face="Arial">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;88</font></td>
<td align="left">&nbsp;</td>
</tr>
<tr valign="top" bgcolor="#eeeeee">
<td align="left"><font size="2" face="Arial">&nbsp;&nbsp;&nbsp;Micro &amp; Memories</font></td>
<td align="left">&nbsp;</td>
<td align="right">&nbsp;</td>
<td width="8%" align="right"><font size="2" face="Arial"><b>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;289</b></font></td>
<td align="left">&nbsp;</td>
<td align="right">&nbsp;</td>
<td width="8%" align="right"><font size="2" face="Arial">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;199</font></td>
<td align="left">&nbsp;</td>
</tr>
<tr valign="top">
<td align="left"><font size="2" face="Arial">&nbsp;&nbsp;&nbsp;Discretes</font></td>
<td align="left">&nbsp;</td>
<td align="right">&nbsp;</td>
<td width="8%" align="right"><font size="2" face="Arial"><b>272</b></font></td>
<td align="left">&nbsp;</td>
<td align="right">&nbsp;</td>
<td width="8%" align="right"><font size="2" face="Arial">199</font></td>
<td align="left">&nbsp;</td>
</tr>
<tr valign="top">
<td></td>
<td></td>
<td><hr noshade size="1"></td>
<td width="8%"><hr noshade size="1"></td>
<td></td>
<td><hr noshade size="1"></td>
<td width="8%"><hr noshade size="1"></td>
<td></td>
</tr>
<tr valign="top" bgcolor="#eeeeee">
<td align="left"><font size="2" face="Arial">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<b>Total</b></font></td>
<td align="left">&nbsp;</td>
<td align="right"><font size="2" face="Arial"><b>$</b></font></td>
<td width="8%" align="right"><font size="2" face="Arial"> <b>2,029</b></font></td>
<td align="left">&nbsp;</td>
<td align="right"><font size="2" face="Arial"><b>$</b></font></td>
<td width="8%" align="right"><font size="2" face="Arial"> <b>1,618</b></font></td>
<td align="left">&nbsp;</td>
</tr>
<tr valign="top">
<td></td>
<td></td>
<td><hr noshade size="2"></td>
<td width="8%"><hr noshade size="2"></td>
<td></td>
<td><hr noshade size="2"></td>
<td width="8%"><hr noshade size="2"></td>
<td></td>
</tr>
</table>
<table width="100%" cellspacing="0" cellpadding="0" border="0">
<tr valign="top">
<td><hr align="left" width="100" size="1" noshade>
</td>
</tr></table>
<table width="100%" cellspacing="0" cellpadding="0" border="0">
<tr valign="top">
<td width="3%"><font size="1" face="Arial"><sup>(1)</sup></font></td>
<td align="left">
<font size="1" face="Arial"> Net revenues by location of order shipment are classified
by location of customer invoiced. For example, products ordered by U.S.-based
companies to be invoiced to Asia/Pacific affiliates are classified as Asia/Pacific
revenues. In 2002, we started to classify the sales by customers' region of origin.
As an example of revenues classified by customers' region of origin, products
ordered by U.S.-based companies to be invoiced to Asia/Pacific affiliates are
classified as North America revenues. </font></td>
</tr>
</table>
<p align="center"><font face="Arial" size="2">11</font></p>
<hr noshade align="center" width="100%" size="2">
<div style="page-break-before:always"></div>
<page>
<a name="p?"></a>

<table width="100%" cellspacing="0" cellpadding="0" border="0">
<tr valign="top">
<td width="3%"><font size="2" face="Arial">&nbsp;</font></td>
<td align="left"><font size="2" face="Arial">The following table sets forth certain financial data from our consolidated statements of income, expressed in each case as a percentage of net revenues:</font></td>
</tr>
<tr valign="top">
  <td>&nbsp;</td>
  <td align="left">&nbsp;</td>
</tr>
</table>
<table width="100%" cellspacing="0" cellpadding="0" border="0">
<tr valign="top">
<td align="left"><font size="1" face="Arial"> &nbsp;</font></td>
<td align="left"><font size="1">&nbsp;</font></td>
<td align="right"><font size="1">&nbsp;</font></td>
<td colspan="4" align="center"><font size="1" face="Arial"><b>(unaudited)</b></font></td>
<td align="left"><font size="1">&nbsp;</font></td>
</tr>
<tr valign="top">
<td><font size="1">&nbsp;</font></td>
<td><font size="1">&nbsp;</font></td>
<td><hr noshade size="1"></td>
<td colspan="4"><hr noshade size="1"></td>
<td><font size="1">&nbsp;</font></td>
</tr>
<tr valign="top">
<td align="left"><font size="1" face="Arial">&nbsp;</font></td>
<td align="left"><font size="1">&nbsp;</font></td>
<td align="right"><font size="1">&nbsp;</font></td>
<td colspan="4" align="center"><font size="1" face="Arial"><b>Three Months Ended</b></font></td>
<td align="left"><font size="1">&nbsp;</font></td>
</tr>
<tr valign="top">
<td><font size="1">&nbsp;</font></td>
<td><font size="1">&nbsp;</font></td>
<td><hr noshade size="1"></td>
<td colspan="4"><hr noshade size="1"></td>
<td><font size="1">&nbsp;</font></td>
</tr>
<tr valign="top">
<td align="left"><font size="1" face="Arial">&nbsp;</font></td>
<td align="left"><font size="1">&nbsp;</font></td>
<td align="right"><font size="1">&nbsp;</font></td>
<td width="8%" align="center"><font size="1" face="Arial"><b>March 27, 2004</b></font></td>
<td align="left"><font size="1">&nbsp;</font></td>
<td align="right"><font size="1">&nbsp;</font></td>
<td width="8%" align="center"><font size="1" face="Arial"><b>March 29, 2003</b></font></td>
<td align="left"><font size="1">&nbsp;</font></td>
</tr>
<tr valign="top">
<td></td>
<td></td>
<td><hr noshade size="1"></td>
<td width="8%"><hr noshade size="1"></td>
<td></td>
<td><hr noshade size="1"></td>
<td width="8%"><hr noshade size="1"></td>
<td></td>
</tr>
<tr valign="top" bgcolor="#eeeeee">
<td align="left"><font size="2" face="Arial">Net sales</font></td>
<td width="2%" align="left">&nbsp;</td>
<td width="1%" align="right">&nbsp;</td>
<td width="8%" align="right"><font size="2" face="Arial">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;100.0</font></td>
<td width="2%" align="left"><font size="2" face="Arial"><b>%</b></font></td>
<td width="1%" align="right">&nbsp;</td>
<td width="8%" align="right"><font size="2" face="Arial">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;99.9</font></td>
<td width="2%" align="left"><font size="2" face="Arial">%</font></td>
</tr>
<tr valign="top">
<td align="left"><font size="2" face="Arial">Other revenues</font></td>
<td align="left">&nbsp;</td>
<td align="right">&nbsp;</td>
<td width="8%" align="right"><font size="2" face="Arial">&#151;</font></td>
<td align="left">&nbsp;</td>
<td align="right">&nbsp;</td>
<td width="8%" align="right"><font size="2" face="Arial">0.1</font></td>
<td align="left">&nbsp;</td>
</tr>
<tr valign="top">
<td></td>
<td></td>
<td><hr noshade size="1"></td>
<td width="8%"><hr noshade size="1"></td>
<td></td>
<td><hr noshade size="1"></td>
<td width="8%"><hr noshade size="1"></td>
<td></td>
</tr>
<tr valign="top" bgcolor="#eeeeee">
<td align="left"><font size="2" face="Arial"><b>Net revenues</b></font></td>
<td align="left">&nbsp;</td>
<td align="right">&nbsp;</td>
<td width="8%" align="right"><font size="2" face="Arial"><b>100.0</b></font></td>
<td align="left">&nbsp;</td>
<td align="right">&nbsp;</td>
<td width="8%" align="right"><font size="2" face="Arial"><b>100.0</b></font></td>
<td align="left">&nbsp;</td>
</tr>
<tr valign="top">
<td></td>
<td></td>
<td><hr noshade size="2"></td>
<td width="8%"><hr noshade size="2"></td>
<td></td>
<td><hr noshade size="2"></td>
<td width="8%"><hr noshade size="2"></td>
<td></td>
</tr>
<tr valign="top" bgcolor="#eeeeee">
<td align="left"><font size="2" face="Arial">Cost of sales</font></td>
<td align="left">&nbsp;</td>
<td align="right">&nbsp;</td>
<td width="8%" align="right"><font size="2" face="Arial"><b>(64.6</b></font></td>
<td align="left"><font size="2" face="Arial"><b>)</b></font></td>
<td align="right">&nbsp;</td>
<td width="8%" align="right"><font size="2" face="Arial">(65.0</font></td>
<td align="left"><font size="2" face="Arial">)</font></td>
</tr>
<tr valign="top">
<td></td>
<td></td>
<td><hr noshade size="1"></td>
<td width="8%"><hr noshade size="1"></td>
<td></td>
<td><hr noshade size="1"></td>
<td width="8%"><hr noshade size="1"></td>
<td></td>
</tr>
<tr valign="top" bgcolor="#eeeeee">
<td align="left"><font size="2" face="Arial"><b>Gross profit</b></font></td>
<td align="left">&nbsp;</td>
<td align="right">&nbsp;</td>
<td width="8%" align="right"><font size="2" face="Arial"><b>35.4</b></font></td>
<td align="left">&nbsp;</td>
<td align="right">&nbsp;</td>
<td width="8%" align="right"><font size="2" face="Arial"><b>35.0</b></font></td>
<td align="left">&nbsp;</td>
</tr>
<tr valign="top">
<td></td>
<td></td>
<td><hr noshade size="2"></td>
<td width="8%"><hr noshade size="2"></td>
<td></td>
<td><hr noshade size="2"></td>
<td width="8%"><hr noshade size="2"></td>
<td></td>
</tr>
<tr valign="top" bgcolor="#eeeeee">
<td align="left"><font size="2" face="Arial">Selling, general and administrative</font></td>
<td align="left">&nbsp;</td>
<td align="right">&nbsp;</td>
<td width="8%" align="right"><font size="2" face="Arial">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(11.3</font></td>
<td align="left"><font size="2" face="Arial">)</font></td>
<td align="right">&nbsp;</td>
<td width="8%" align="right"><font size="2" face="Arial">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(10.8</font></td>
<td align="left"><font size="2" face="Arial">)</font></td>
</tr>
<tr valign="top">
<td align="left"><font size="2" face="Arial">Research and development</font></td>
<td align="left">&nbsp;</td>
<td align="right">&nbsp;</td>
<td width="8%" align="right"><font size="2" face="Arial">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(17.9</font></td>
<td align="left"><font size="2" face="Arial">)</font></td>
<td align="right">&nbsp;</td>
<td width="8%" align="right"><font size="2" face="Arial">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(17.5</font></td>
<td align="left"><font size="2" face="Arial">)</font></td>
</tr>
<tr valign="top" bgcolor="#eeeeee">
<td align="left"><font size="2" face="Arial">Other income and expenses, net</font></td>
<td align="left">&nbsp;</td>
<td align="right">&nbsp;</td>
<td width="8%" align="right"><font size="2" face="Arial">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(0.6</font></td>
<td align="left"><font size="2" face="Arial">)</font></td>
<td align="right">&nbsp;</td>
<td width="8%" align="right"><font size="2" face="Arial">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1.0</font></td>
<td align="left">&nbsp;</td>
</tr>
<tr valign="top">
<td align="left"><font size="2" face="Arial">Impairment, restructuring charges and other related closure costs</font></td>
<td align="left">&nbsp;</td>
<td align="right">&nbsp;</td>
<td width="8%" align="right"><font size="2" face="Arial">(1.6</font></td>
<td align="left"><font size="2" face="Arial">)</font></td>
<td align="right">&nbsp;</td>
<td width="8%" align="right"><font size="2" face="Arial">&#151;</font></td>
<td align="left">&nbsp;</td>
</tr>
<tr valign="top">
<td></td>
<td></td>
<td><hr noshade size="1"></td>
<td width="8%"><hr noshade size="1"></td>
<td></td>
<td><hr noshade size="1"></td>
<td width="8%"><hr noshade size="1"></td>
<td></td>
</tr>
<tr valign="top" bgcolor="#eeeeee">
<td align="left"><font size="2" face="Arial"><b>Operating income </b></font></td>
<td align="left">&nbsp;</td>
<td align="right">&nbsp;</td>
<td width="8%" align="right"><font size="2" face="Arial"><b>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;4.0</b></font></td>
<td align="left">&nbsp;</td>
<td align="right">&nbsp;</td>
<td width="8%" align="right"><font size="2" face="Arial"><b>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;7.7</b></font></td>
<td align="left">&nbsp;</td>
</tr>
<tr valign="top">
<td align="left"><font size="2" face="Arial">Interest expense, net</font></td>
<td align="left">&nbsp;</td>
<td align="right">&nbsp;</td>
<td width="8%" align="right"><font size="2" face="Arial">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(0.2</font></td>
<td align="left"><font size="2" face="Arial">)</font></td>
<td align="right">&nbsp;</td>
<td width="8%" align="right"><font size="2" face="Arial">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(1.2</font></td>
<td align="left"><font size="2" face="Arial">)</font></td>
</tr>
<tr valign="top" bgcolor="#eeeeee">
<td align="left"><font size="2" face="Arial">Equity in loss of joint venture</font></td>
<td align="left">&nbsp;</td>
<td align="right">&nbsp;</td>
<td width="8%" align="right"><font size="2" face="Arial">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#151;</font></td>
<td align="left">&nbsp;</td>
<td align="right">&nbsp;</td>
<td width="8%" align="right"><font size="2" face="Arial">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#151;</font></td>
<td align="left">&nbsp;</td>
</tr>
<tr valign="top">
<td align="left"><font size="2" face="Arial">Loss on extinguishment of convertible debt</font></td>
<td align="left">&nbsp;</td>
<td align="right">&nbsp;</td>
<td width="8%" align="right"><font size="2" face="Arial">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#151;</font></td>
<td align="left">&nbsp;</td>
<td align="right">&nbsp;</td>
<td width="8%" align="right"><font size="2" face="Arial">        (0.5</font></td>
<td align="left"><font size="2" face="Arial">)</font></td>
</tr>
<tr valign="top" bgcolor="#eeeeee">
<td align="left"><font size="2" face="Arial"><b>Income before income taxes and minority interests</b></font></td>
<td align="left">&nbsp;</td>
<td align="right">&nbsp;</td>
<td width="8%" align="right"><font size="2" face="Arial"><b>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;3.8</b></font></td>
<td align="left">&nbsp;</td>
<td align="right">&nbsp;</td>
<td width="8%" align="right"><font size="2" face="Arial"><b>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;6.0</b></font></td>
<td align="left">&nbsp;</td>
</tr>
<tr valign="top">
<td align="left"><font size="2" face="Arial">Income tax benefit (expense)</font></td>
<td align="left">&nbsp;</td>
<td align="right">&nbsp;</td>
<td width="8%" align="right"><font size="2" face="Arial">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#151;</font></td>
<td align="left">&nbsp;</td>
<td align="right">&nbsp;</td>
<td width="8%" align="right"><font size="2" face="Arial">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(1.0</font></td>
<td align="left"><font size="2" face="Arial">)</font></td>
</tr>
<tr valign="top" bgcolor="#eeeeee">
<td align="left"><font size="2" face="Arial"><b>Income before minority interests</b></font></td>
<td align="left">&nbsp;</td>
<td align="right">&nbsp;</td>
<td width="8%" align="right"><font size="2" face="Arial"><b>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;3.8</b></font></td>
<td align="left">&nbsp;</td>
<td align="right">&nbsp;</td>
<td width="8%" align="right"><font size="2" face="Arial"><b>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;5.0</b></font></td>
<td align="left">&nbsp;</td>
</tr>
<tr valign="top">
<td align="left"><font size="2" face="Arial">Minority interests</font></td>
<td align="left">&nbsp;</td>
<td align="right">&nbsp;</td>
<td width="8%" align="right"><font size="2" face="Arial">&#151;</font></td>
<td align="left">&nbsp;</td>
<td align="right">&nbsp;</td>
<td width="8%" align="right"><font size="2" face="Arial">(0.1</font></td>
<td align="left"><font size="2" face="Arial">)</font></td>
</tr>
<tr valign="top">
<td></td>
<td></td>
<td><hr noshade size="1"></td>
<td width="8%"><hr noshade size="1"></td>
<td></td>
<td><hr noshade size="1"></td>
<td width="8%"><hr noshade size="1"></td>
<td></td>
</tr>
<tr valign="top" bgcolor="#eeeeee">
<td align="left"><font size="2" face="Arial"><b>Net income</b></font></td>
<td align="left">&nbsp;</td>
<td align="right">&nbsp;</td>
<td width="8%" align="right"><font size="2" face="Arial"><b>      3.8</b></font></td>
<td align="left"><font size="2" face="Arial"><b>%</b></font></td>
<td align="right">&nbsp;</td>
<td width="8%" align="right"><font size="2" face="Arial"><b>4.9</b></font></td>
<td align="left"><font size="2" face="Arial"><b>%</b></font></td>
</tr>
<tr valign="top">
<td></td>
<td></td>
<td><hr noshade size="2"></td>
<td width="8%"><hr noshade size="2"></td>
<td></td>
<td><hr noshade size="2"></td>
<td width="8%"><hr noshade size="2"></td>
<td></td>
</tr>
</table>
<p align="left"><font size="2" face="Arial"><b>First Quarter 2004 vs. First Quarter 2003 </b></font></p>
<div style="text-indent:3%"><p align="left"><font size="2" face="Arial">During the first quarter of 2004, our net revenues increased 25.4% compared to the first quarter of 2003, and decreased 4.0% compared to the fourth quarter of 2003. </font></p>
</div><div style="text-indent:3%">
<p align="left"><font size="2" face="Arial"><i>Net revenues</i>.&nbsp;&nbsp;&nbsp;&nbsp;Net
    revenues increased by 25.4% to $2,029 million in the first quarter of 2004
    from $1,618 million in the first quarter of 2003, and decreased 4.0% compared
    to $2,113 million in the fourth quarter of 2003. On a year-over-year basis,
    the increase in our net revenues in the first quarter of 2004 was primarily
    driven by a significant increase in our sales volumes and also by improved
    product mix, while our selling prices declined by approximately 5% in the
    first quarter of 2004 as compared to the first quarter of 2003, due to the
    continued pricing pressure registered on the market during last year.
    On a sequential basis, pricing pressure tended to decrease since prices,
    in particular for commodity and standard products, were firming up. Overall,
    compared to the fourth quarter of 2003, selling prices decreased by approximately
    1% in the first quarter of 2004.</font></p>
</div><div style="text-indent:3%">
<p align="left"><font size="2" face="Arial">The Telecommunications, Peripherals
    and Automotive Groups' (&quot;TPA&quot;)
      net revenues increased by 7% compared to the first quarter of 2003 primarily
      as a result of an increase in sales of computer peripherals and automotive
      and audio, while sales in the Telecommunications Division declined approximately
    1% mainly due to declining average selling prices. The increase in sales
    in
    computer
    peripherals
    was
      generated by volume, while in auto and audio the increase was mainly due
      to improved product mix. The Discrete and Standard ICs Group's (&quot;DSG&quot;)
      net revenues increased by approximately 31% due mainly to an increase in
      volumes of transistors and discrete devices, and also </font></p>
</div><p align="center"><font face="Arial" size="2">12</font></p>
<hr noshade align="center" width="100%" size="2">
<div style="page-break-before:always"></div>
<page>
<a name="p?"></a>

<p align="left"><font size="2" face="Arial">due to a more favorable product mix.
    The Memory Products Group's (&quot;MPG&quot;) net revenues increased by approximately
    72% as a result of a significant improvement in product mix and a strong
    increase in volumes of Flash products in particular but also of EEPROM; in
    addition there was the contribution of $26 million of additional sales generated
    by the acquisition of the Incard and Proton businesses, both of which were
    realized in the second quarter of 2003. The Consumer and Microcontrollers
    Groups' (&quot;CMG&quot;) net revenues increased approximately 29% due to
    a strong increase in sales volumes in most of its business units and mainly
    in the
    Set-Top Box, Imaging and Displays TV Divisions. All product groups experienced
    declines in selling
prices. </font></p>
<div style="text-indent:3%">
<p align="left"><font size="2" face="Arial">During
      the first quarter of 2004, we maintained our focus on differentiated ICs,
      which accounted for approximately 68% of our net revenues, compared to
      70% in the first quarter of 2003. Such products foster close relationships
      with customers, resulting in early knowledge of their evolving requirements
      and opportunities to access their markets for other products. Analog ICs
      (including mixed-signal ICs), the majority of which are also differentiated
      ICs, accounted for approximately 45% of our net revenues in the first quarter
      of 2004 compared to approximately 53% one year ago, while discrete devices
      accounted for approximately 13% of our net revenues in the first quarter
      of 2004 compared to approximately 12% in the first quarter of 2003. In
      recent years, these families of products, in particular analog ICs, have
      experienced less volatility in sales growth rates and average selling prices
      than the overall semiconductor industry. The difficult competitive environment
      in the semiconductor market in more recent years, however, has led to price
      pressures in these product families as well. </font></p>
</div><div style="text-indent:3%">
<p align="left"><font size="2" face="Arial">In the first quarter of 2004, approximately
    46% of our revenues came from customers of Europe region origin; 29% from
    North America; 16% from Asia/Pacific; 6% from Japan; and 3% from Emerging
    Markets. All regions posted solid year-over-year revenue gains; Emerging
    Markets, Asia/Pacific, Europe and North America were the best performers,
    increasing 42%, 29%, 28% and 20% respectively, while Japan increased 10%.
    As an example of revenues classified by customers' region of origin, products
    ordered by U.S.-based companies to be invoiced to Asia/Pacific affliates
    are classified as North America revenues.</font></p>
</div><div style="text-indent:3%"><p align="left"><font size="2" face="Arial">During the 2004 first quarter, we had several large customers, with the largest one accounting for approximately 15.2% of our revenues. Our top ten original equipment manufacturers (&quot;OEM&quot;) customers accounted for approximately 43% of our net revenues for the period. </font></p>
</div><div style="text-indent:3%">
<p align="left"><font size="2" face="Arial"><i>Gross profit</i>.&nbsp;&nbsp;&nbsp;&nbsp;Our
    gross profit was $718 million in the first quarter of 2004, 26.8% above first
    quarter of 2003 gross profit of $566 million, and a 5.5% sequential decrease
    from the prior quarter's $760 million. As a percentage of net revenues,
    gross margin was 35.4% slightly improving compared to 35.0% reported for
    the last year's first quarter, however below the 36.0% of the fourth quarter
    of 2003. The improvement in the first quarter of 2004 compared to the first
    quarter of 2003 was mainly due to volume increases, overall improved manufacturing
    performances and product mix which were exceeding the negative impact of
    the strong price pressure and of the year-over-year significant drop of the
value of the U.S. dollar versus the major currencies in which we have our major
    activities. The impact of changes in foreign exchange rates on gross profit
    in the first quarter of 2004 compared to the first quarter of 2003 was estimated
    to be negative since the negative impact on our cost of sales generated by
    the weaker U.S. dollar was greater than the favorable impact on net revenues.
    See &quot;&#151;Impact of Changes in Exchange Rates&quot; in this Form 6-K.</font></p>
</div><p align="center"><font face="Arial" size="2">13</font></p>
<hr noshade align="center" width="100%" size="2">
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<page>
<a name="p?"></a>

<div style="text-indent:3%"><p align="left"><font size="2" face="Arial"><i>Selling, general and administrative expenses</i>.&nbsp;&nbsp;&nbsp;&nbsp;Selling, general and administrative expenses increased 32% from $174 million in the first quarter of 2003 to $230 million in the first quarter of 2004. This increase was largely due to the depreciation of the U.S. dollar, to the enhanced spending in marketing activities in line with our program to accelerate revenues increase and to various general expenses associated with the activities' increase. As a percentage of net revenues, selling, general and administrative expenses slightly increased from 10.8% in the first quarter of 2003 to 11.3% in the first quarter of 2004. </font></p>
</div><div style="text-indent:3%">
<p align="left"><font size="2" face="Arial"><i>Research and development expenses</i>.&nbsp;&nbsp;&nbsp;&nbsp;Research
      and development expenses increased 28%, from $283 million in the first
      quarter of 2003 to $363 million in the first quarter of 2004. This increase
      resulted primarily from the impact of U.S. dollar decline and to greater
      spending reflecting an acceleration of our investments in product design
      and technology for our core activities. Additional expenses were also generated
      by the expansion of our activities in new emerging markets and as a result
      of the integration of recent acquisitions. We continued to invest heavily
      in research and development during the first quarter of 2004, and we increased
      our research and development staff by approximately 1,360 people during
      the last twelve months. We continue to allocate significant resources to
      strengthen our market position in key applications, reflecting our commitment
      to customer service and continuing innovation. Our reported research and
      development expenses are mainly in the areas of product design, technology
      and development and do not include marketing design center costs, which
      are accounted for as selling expenses, or process engineering, pre-production
      and process-transfer costs, which are accounted for as cost of sales. As
      a percentage of net revenues, research and development expenses increased
      from 17.5% in the first quarter of 2003 to 17.9% in the first quarter of
      2004. </font></p>
</div><div style="text-indent:3%">
<p align="left"><font size="2" face="Arial"><i>Other income and expenses, net.</i>&nbsp;&nbsp;&nbsp;&nbsp;Other
      income and expenses, net include, among other items, income from funds
      received through government agencies for research and development expenses,
      the cost of new plant start-ups, as well as foreign currency gains and
      losses, the costs of certain activities relating to intellectual property
      and gains or losses from sales of assets. In the first quarter of 2004,
      the net effect of these items resulted in an expense of $12 million compared
      to an income of $15 million in the first quarter of 2003. This increase
      in expense was primarily due to, among several miscellaneous items, significantly
      higher start-up costs, higher patent claim costs and lower income from
      research and development funding. The main items included in the first
      quarter of 2004 balance were: as income, $16 million income for research
    and development funding and $4 million as gain on sales of non-current assets;
      as expense, $23 million for start-up costs mainly related to our new 300mm
      fabrication facilities in Crolles 2 and Catania M6 and to our 150mm Singapore
      plant, $6 million for patent claim costs and $4 million for other miscellaneous
      expenses. In the first quarter of 2003, the net income was mainly the result
      of: as income, $19 million from research and development funding; as expense,
      $8 million for start-up costs.</font></p>
</div><div style="text-indent:3%">
<p align="left"><font size="2" face="Arial"><i>Impairment, restructuring charges
      and other related closure costs</i>.&nbsp;&nbsp;&nbsp;&nbsp;In the first
      quarter of 2004, we recorded a $33 million charge for impairment, restructuring
      charges and
      other related closure costs, of which $31 million related to our 150mm
      restructuring plan. There was no charge recorded in the first quarter of
      2003. </font></p>
</div><p align="center"><font face="Arial" size="2">14</font></p>
<hr noshade align="center" width="100%" size="2">
<div style="page-break-before:always"></div>
<page>
<a name="p?"></a>

<div style="text-indent:3%">
<p align="left"><font size="2" face="Arial"><i>Operating income</i>.&nbsp;&nbsp;&nbsp;&nbsp;Operating
      income decreased from $124 million in the first quarter of 2003 to $80
      million in the first quarter of 2004. This year-over-year decrease was
      caused by the following main factors: the decline of the U.S. dollar exchange
      rate, the decrease of our selling prices, the $33 million for restructuring
      charges and other related closure costs, and the increased start-up costs.
      The impact of changes in foreign exchange rates on operating income in
      the first quarter of 2004 compared to the first quarter of 2003 was estimated
      to be significantly unfavorable since the depreciation of the U.S. dollar
      versus the euro and other currencies negatively impacted cost of sales
      and operating expenses, and these negative currency impacts were significantly
      higher than the favorable impact on net revenues. See &quot;Impact of Changes
      in Exchange Rates&quot;. </font></p>
</div><div style="text-indent:3%">
<p align="left"><font size="2" face="Arial">In the first quarter of 2004, the
    operating income of our Telecommunications, Peripherals and Automotive Groups
    decreased
    to $114 million from $139 million in the first quarter of 2003 mainly due
    to an increase in research and development expenses. The operating income
    of our Discrete and Standard ICs Group improved to $51 million from $23 million
    in the first quarter of 2003 mainly driven by the 31% increase in sales.
    The operating income of our Consumer and Microcontroller Groups increased
    to $18 million from $12 million in the first quarter of 2003, while Memory
    Product Group, driven by a 72% sales' increase and a more favorable product
    mix, registered an operating income of $5 million recovering from the $26
    million
operating loss in the first quarter of 2003. </font></p>
</div><table width="100%" cellspacing="0" cellpadding="0" border="0">
  <tr valign="top">
    <td align="left"><font size="1"> &nbsp;</font></td>
    <td colspan="5" align="center"><font size="1" face="Arial"><b>(unaudited)</b></font><font size="1">&nbsp;</font></td>
  </tr>
  <tr valign="top">
    <td align="left"><font size="1">&nbsp;</font></td>
    <td colspan="5" align="center"><font size="1" face="Arial"><b>Three&nbsp;Months&nbsp;Ended</b></font><font size="1">&nbsp;</font></td>
  </tr>
  <tr valign="top">
    <td align="left"><font size="1">&nbsp;</font></td>
    <td colspan="5" align="center"><hr size="1" noshade>
    </td>
  </tr>
  <tr valign="top">
    <td align="left"><font size="1">&nbsp;</font></td>
    <td colspan="2" align="center"><font size="1" face="Arial"><b>March&nbsp;27,&nbsp;2004</b></font></td>
    <td align="left"><font size="1">&nbsp;</font></td>
    <td colspan="2" align="center"><font size="1" face="Arial"><b>March&nbsp;29,&nbsp;2003</b></font></td>
  </tr>
  <tr valign="top">
    <td align="left"><font size="1">&nbsp;</font></td>
    <td align="center"><hr size="1" noshade>
    </td>
    <td align="center"><hr size="1" noshade>
    </td>
    <td align="left"><font size="1">&nbsp;</font></td>
    <td align="center"><hr size="1" noshade>
    </td>
    <td align="center"><hr size="1" noshade>
    </td>
  </tr>
  <tr valign="top">
    <td align="left"><font size="1">&nbsp;</font></td>
    <td colspan="5" align="center"><b><font size="1" face="Arial">&nbsp;(as a
          percentage of net revenues)</font></b></td>
  </tr>
<tr valign="top">
<td align="left"><font size="2" face="Arial"><b>Operating income (loss) by product
      group:</b></font></td>
<td align="left"></td>
<td align="left">&nbsp;</td>
<td width="2%" align="right">&nbsp;</td>
<td align="left"></td>
<td align="left">&nbsp;</td>
</tr>
<tr valign="top" bgcolor="#eeeeee">
<td align="left"><div style="margin-left:3%"><font size="2" face="Arial">Telecommunications, Peripherals and Automotive<sup>(1)</sup></font></div></td>
<td width="9%" align="right"><font size="2" face="Arial"> 13.6</font></td>
<td width="7%" align="left"><font size="2" face="Arial">%</font></td>
<td width="2%" align="right">&nbsp;</td>
<td width="9%" align="right"><font size="2" face="Arial">&nbsp; 17.7</font></td>
<td width="7%" align="left"><font size="2" face="Arial">%</font></td>
</tr>
<tr valign="top">
<td align="left"><div style="margin-left:3%"><font size="2" face="Arial">Discrete and Standard ICs<sup>(1)</sup></font></div></td>
<td align="right"><font size="2" face="Arial"> 14.3</font></td>
<td align="left">&nbsp;</td>
<td align="right">&nbsp;</td>
<td align="right"><font size="2" face="Arial"> 8.5</font></td>
<td align="left">&nbsp;</td>

</tr>
<tr valign="top" bgcolor="#eeeeee">
<td align="left"><div style="margin-left:3%"><font size="2" face="Arial">Memory Products<sup>(1)</sup></font></div></td>
<td align="right"><font size="2" face="Arial">   1.1   </font></td>
<td align="left">&nbsp;</td>
<td align="right">&nbsp;</td>
<td align="right"><font size="2" face="Arial"> (9.9</font></td>
<td align="left"><font size="2" face="Arial">)</font></td>
</tr>
<tr valign="top">
<td align="left"><div style="margin-left:3%"><font size="2" face="Arial">Consumer and Microcontroller<sup>(1)</sup></font></div></td>
<td align="right"><font size="2" face="Arial">   4.9</font></td>
<td align="left">&nbsp;</td>
<td align="right">&nbsp;</td>
<td align="right"><font size="2" face="Arial"> 4.2</font></td>
<td align="left">&nbsp;</td>

</tr>
<tr valign="top" bgcolor="#eeeeee">
<td align="left"><div style="margin-left:3%"><font size="2" face="Arial">Total operating income of product groups</font></div></td>
<td align="right"><font size="2" face="Arial">    9.3</font></td>
<td align="left">&nbsp;</td>
<td align="right">&nbsp;</td>
<td align="right"><font size="2" face="Arial">&nbsp; 9.2</font></td>
<td align="left">&nbsp;</td>
</tr>
<tr valign="top">
<td align="left"><div style="margin-left:3%"><font size="2" face="Arial">Others<sup>(2)</sup></font></div></td>
<td align="right"><font size="2" face="Arial">  (5.3</font></td>
<td align="left"><font size="2" face="Arial">)</font></td>
<td align="right">&nbsp;</td>
<td align="right"><font size="2" face="Arial">&nbsp; (1.5</font></td>
<td align="left"><font size="2" face="Arial">)</font></td>

</tr>
<tr valign="top" bgcolor="#eeeeee">
<td align="left"><div style="margin-left:3%"><font size="2" face="Arial"><b>Total operating income<sup>(3)</sup></b></font></div></td>
<td align="right"><font size="2" face="Arial"><b>   4.0</b></font></td>
<td align="left"><font size="2" face="Arial"><b>%</b></font></td>
<td align="right">&nbsp;</td>
<td align="right"><font size="2" face="Arial">&nbsp;<b> 7.7</b></font></td>
<td align="left"><font size="2" face="Arial"><b>%</b></font></td>
</tr>
<tr valign="top">
<td align="left"></td>
<td align="left"><hr size="2" noshade></td>
<td align="left"><hr size="2" noshade></td>
<td align="right">&nbsp;</td>
<td align="left"><hr size="2" noshade></td>
<td align="left"><hr size="2" noshade></td>

</tr>
</table>
<table width="100%" cellspacing="0" cellpadding="0" border="0">
<tr valign="top">
<td><hr align="left" width="100" size="1" noshade>
</td>
</tr></table><table width="100%" cellspacing="0" cellpadding="0" border="0">
<tr valign="baseline">
<td width="3%"><font size="1" face="Arial">(1)</font></td>
<td>
<font size="1" face="Arial">
As a percentage of net revenues per product group.
</font></td>
</tr>
</table>
<table width="100%" cellspacing="0" cellpadding="0" border="0">
<tr valign="baseline">
<td width="3%"><font size="1" face="Arial">(2)</font></td>
<td>
<font size="1" face="Arial">
As a percentage of total net revenues. Includes operating income from sales of
subsystems and other income (costs) not allocated to product groups.
</font></td>
</tr>
</table>
<table width="100%" cellspacing="0" cellpadding="0" border="0">
<tr valign="baseline">
<td width="3%"><font size="1" face="Arial">(3)</font></td>
<td>
<font size="1" face="Arial">
As a percentage of total net revenues.
</font></td>
</tr>
</table>
<div style="text-indent:3%">
<p align="left"><font size="2" face="Arial"><i>Interest expense, net</i>.&nbsp;&nbsp;Interest
      expense, net decreased significantly from $18 million in the first quarter
      of 2003 to $4 million in the first quarter of 2004 due to the decrease
      in interest expense mainly caused by the repurchase of 2010 convertible
    bonds made in 2003 and our improved financial position generated by a favorable
      cash flow. Interest expenses also included fixed charges mainly related
      to amortization of issuing expenses incurred for our outstanding convertible
      bonds.</font></p>
</div><p align="center"><font face="Arial" size="2">15</font></p>
<hr noshade align="center" width="100%" size="2">
<div style="page-break-before:always"></div>
<page>
<a name="p?"></a>

<div style="text-indent:3%">
<p align="left"><font size="2" face="Arial"><i>Loss on extinguishment of convertible
      debt.</i>&nbsp;&nbsp;In the first quarter of 2003, we registered a one-time
      pre-tax charge of $8 million related to the repurchase of approximately
      $429 million of the aggregate principal amount at maturity of our Zero
      Coupon Convertible Notes due 2010. This charge included the price paid
      in excess of the bonds' accreted value and the write-off of the related
      offering expenses. No repurchase occurred and no charge was reported in
      the first quarter of 2004.</font></p>
</div><div style="text-indent:3%">
<p align="left"><font size="2" face="Arial"><i>Income tax benefit (expense).</i>&nbsp;&nbsp;In
      the first quarter of 2004 we registered an income tax benefit of $1 million
      compared to an expense of $18 million in the first quarter of 2003. This
      tax benefit was due to the posting of $13 million tax benefit computed
      on our deferred tax liability after a local ruling granted a more favorable
      tax rate going-forward in one of our jurisdictions. Without this one time
      benefit, the effective tax rate was 15% in the first quarter of 2004 compared
      to 18% in the first quarter of 2003. Our tax rate is variable and depends
      on changes in the level of operating profits within various local jurisdictions
      and on changes in the applicable taxation rates of these jurisdictions,
      as well as changes in estimated tax provisions due to new events. We currently
      enjoy certain tax benefits in some countries; as such, benefits may not
      be available in the future due to changes in the local jurisdictions, and
  our effective tax rate could increase in the coming years.</font></p>
</div>
<div style="text-indent:3%">
  <p align="left"><font size="2" face="Arial"><i>Net income.</i>&nbsp;&nbsp;&nbsp;&nbsp;For
      the first quarter of 2004 we had net income of $77 million compared to
      $79 million for the first quarter of 2003 and $144
      million for the fourth quarter of 2003. Diluted earnings per share for
      the first quarter of 2004 were $0.08, compared to diluted earnings of $0.09
      per share for the first quarter of 2003 and diluted earnings of $0.16 per
      share for
      the fourth quarter of 2003. </font></p>
</div>
<p align="left"><font size="2" face="Arial"><b>Impact of Changes in Exchange Rates</b></font></p>
<div style="text-indent:3%">
  <p align="left"><font size="2" face="Arial">Our results of operations and financial
      condition can be significantly affected by changes in exchange rates between
      the U.S. dollar and other currencies where we maintain our operations,
      particularly the euro, the Japanese yen and other Asian currencies.</font></p>
</div>
<div style="text-indent:3%">
  <p align="left"><font size="2" face="Arial">Historically, the reference currency
      for the semiconductor industry is the U.S. dollar, and product prices are
      mainly denominated in U.S. dollars. Revenues for certain of our products
      (primarily dedicated products sold in Europe and Japan) that are quoted
      in currencies other than the U.S. dollar, however, are directly affected
      by fluctuations in the value of the U.S. dollar. Revenues for all other
      products, which are either quoted in U.S. dollars and billed in U.S. dollars
      or translated into local currencies for payment, tend not to be affected
      significantly by fluctuations in exchange rates, except to the extent that
      there is a lag between changes in currency rates and adjustments in the
      local currency equivalent price paid for such products. As a result of
      the currency variations, the appreciation of the euro compared to the U.S.
      dollar increases our level of revenues when reported in U.S. dollars.</font></p>
</div>
<p align="center"><font face="Arial" size="2">16</font></p>
<hr noshade align="center" width="100%" size="2">
<div style="page-break-before:always"></div>
<page>
<a name="p?"></a>

<div style="text-indent:3%">
  <p align="left"><font size="2" face="Arial">Certain significant costs incurred
      by us, such as manufacturing, labor costs and depreciation charges, selling,
      general and administrative expenses, and research and development expenses,
      are incurred in the currency of the jurisdictions in which our operations
      are located, and most of our operations are located in the euro zone or
      other currencies areas. Currency exchange rate fluctuations affect our
      results of operations because our reporting currency is the U.S. dollar,
      while we receive a limited part of our revenues, and more importantly,
      incur the majority of our costs, in currencies other than the U.S. dollar.
      In 2003, the U.S. dollar declined significantly in value, particularly
      against the euro, causing us to report higher expenses and negatively impacting
      both our gross margin and operating income. Our Unaudited Interim Statement
      of Income for the first quarter of 2004 includes income and expense items
      translated at the average exchange rate for the period. The average rate
      of the euro to the U.S. dollar was &euro;1 for $1.260 in the first quarter
      of 2004 and was &euro;1 for $1.074 in the first quarter of 2003. A continuation
      in the decline of the U.S. dollar compared to the other major currencies,
      which affect our operations, would negatively impact our expenses, margins
      and profitability.</font></p>
</div>
<div style="text-indent:3%">
  <p align="left"><font size="2" face="Arial">Our principal strategy to reduce
      the risks associated with exchange rate fluctuations has been to balance
      as much as possible the proportion of sales to our customers denominated
      in U.S. dollars with the amount of raw materials, labor, purchases and
      services denominated in U.S. dollars, thereby reducing the potential exchange
      rate impact of certain variable costs relative to revenues. However, there
      is no guarantee that we will be capable of reaching a complete balance,
      and, consequently, our result of operations could be impacted by significant
      fluctuations in exchange rates. In addition, in order to avoid potential
      exchange rate risks on our commercial transactions, from time to time we
      may purchase or sell forward foreign currency exchange contracts and currency
      options to cover currency risk in payables or receivables. We have not
      experienced significant gains or losses as a result of exchange coverage
      activities. Our management strategies to reduce exchange rate risks have
      served to mitigate, but not eliminate, the positive or negative impact
      of exchange rate fluctuations. The introduction of the euro effective January
      1, 1999 has served to reduce the number of currencies whose exchange rate
      fluctuations versus the U.S. dollar may impact our results, thus making
      our exposure to exchange rate fluctuations more concentrated.</font></p>
</div>
<div style="text-indent:3%">
  <p align="left"><font size="2" face="Arial">Assets and liabilities of subsidiaries
      are, for consolidation purposes, translated into U.S. dollars at the period-end
      exchange rate. Income and expenses are translated at the average exchange
      rate for the period. The balance sheet impact of such translation adjustments
      has been, and may be expected to be, significant from period to period.
      Adjustments resulting from the translation are recorded directly in shareholders'
      equity, and are shown as &quot;accumulated other comprehensive income (loss)&quot; in
      the consolidated statements of changes in shareholders' equity. At March
      27, 2004, our outstanding indebtedness was denominated principally in U.S.
      dollars and, to a limited extent, in euro and in Singapore dollars.</font></p>
</div>
<div style="text-indent:3%">
  <p align="left"><font size="2" face="Arial">For a more detailed discussion,
      see &quot;Key Information&#151;Risk Factors&#151;Our financial results
      can be adversely affected by fluctuations in exchange rates, principally
      in the value of the U.S. dollar&quot; as set forth in our Form 20-F filed
      with the Securities and Exchange Commission on May 4, 2004.</font></p>
</div>
<p align="center"><font face="Arial" size="2">17</font></p>
<hr noshade align="center" width="100%" size="2">
<div style="page-break-before:always"></div>
<page>
<a name="p?"></a>

<p align="left"><font size="2" face="Arial"><b>Liquidity and Capital Resources</b></font></p>
<div style="text-indent:3%">
  <p align="left"><font size="2" face="Arial">Treasury activities are regulated
      by our policies, which define procedures, objectives and controls. The
      policies focus on the management of our financial risk in terms of exposure
      to currency rates and interest rates. Our objectives are to neutralize
      our exposure to changes in exchange rates, to optimize the use of credit
      facilities and funds available, and to obtain the best possible market
      conditions for our financial and treasury operations. Our treasury controls
      include systematic reporting to senior management and are subject to internal
      audits. Most of our treasury activities are centralized, with any local
      treasury activities subject to oversight from our head treasury office.
      All of our cash and cash equivalents are held in U.S. dollars and are placed
      with financial institutions rated &quot;A-&quot; or higher. Marginal amounts
      are held in other currencies. Foreign currency operations and hedging transactions
      are performed only to cover commercial positions. See &quot;&#150;Quantitative
      and Qualitative Disclosures about Market Risk&quot; in our Form 20-F.</font></p>
</div>
<div style="text-indent:3%">
  <p align="left"><font size="2" face="Arial">At March 27, 2004, cash and cash
      equivalents totaled $2,103 million, compared to $2,998 million at December
      31, 2003, and marketable securities totaled $1,030 million at March 27,
      2004, compared to $0 million at December 31, 2003. In the first quarter
      of 2004, we invested $1,030 million of existing cash in credit-linked deposits
      issued by several primary banks in order to maximize the return on available
      cash. These credit-linked deposits are reinvested by the banks in underlying
      debt instruments (&quot;reference debt&quot;) that have been issued by
      different financial institutions with a minimum rating of &quot;BBB+&quot;.
      Interest on these instruments is paid quarterly and the interest rate is
      fixed every three months based on the LIBOR rate of the U.S. dollar plus
      a spread. Interest is payable through the final maturity of these instruments
      scheduled to occur before the 2004 year-end, unless suspended by credit
      default of the reference debt. Additionally, the carrying value of the
      instruments depends on the non-default of the reference debt. The principal
      will be repaid at final maturity unless a default occurs, where repayment
      of principal is reduced based on the decline in value of the defaulted
      debt. </font></p>
</div>
<p align="left"><font size="2" face="Arial"><b><i>Liquidity</i></b></font></p>
<div style="text-indent:3%">
  <p align="left"><font size="2" face="Arial"><i>Net cash from operating activities</i>.
      The major source of cash during the first quarter of 2004, as in prior
      periods, was cash provided by operating activities. Our net cash from operating
      activities totaled $552 million in the first quarter of 2004, increasing
      compared to $423 million in the first quarter of 2003. This improvement
      was due to a higher amount of depreciation and amortization and from more
      favorable changes in assets and liabilities. Changes in our first quarter
      2004 operating assets and liabilities were the result of: (i) $125 million
      in cash used, due to the increase in our trade accounts receivable generated
      by a higher level of revenues, while trade receivables generated net cash
      of $50 million in the first quarter of 2003; (ii) $44 million of cash generated
      by the decrease in inventory compared to $35 million net cash used to build
      up inventories in the first quarter of 2003, and (iii) $169 million of
      net cash provided by an increase in trade payables due to increased levels
      of purchases. As of March 27, 2004, no trade receivables had been sold
      to financial institutions. Inventory turns based on cost of sales improved
      to 4.9, equivalent to approximately 75 days of inventory. </font></p>
</div>
<div style="text-indent:3%">
  <p align="left"><font size="2" face="Arial"><i>Net cash used in investing activities</i>.
      Net cash used in investing activities was $1,367 million in the first quarter
      of 2004, compared to $1,369 million in the first quarter of 2003. The purchase
      of marketable securities as short-term investments was the major use of
      cash in investing activities and accounted for $1,030 million in the first
      quarter of 2004, while they were $1,100 million in the first quarter of
      2003. Excluding marketable securities, cash used in </font></p>
</div>
<p align="center"><font face="Arial" size="2">18</font></p>
<hr noshade align="center" width="100%" size="2">
<div style="page-break-before:always"></div>
<page>
<a name="p?"></a>

<p align="left"><font size="2" face="Arial">investing activities was $337 million
    in the first quarter of 2004, increasing from $269 million in the first
    quarter of 2003, due to the increase in payments for purchase of tangible
    assets. In the first quarter of 2004, such purchases amounted to $321 million
    compared to $256 million in the first quarter of 2003. Cash used for investments
    in intangible and financial assets and payments for acquisitions were not
    material in the period.</font></p>
<div style="text-indent:3%">
  <p align="left"><font size="2" face="Arial"><i>Net operating cash flow.</i> We
      define net operating cash flow as net cash from operating activities minus
      net cash used in investing activities excluding payment for purchase of
      and proceeds from the sale of marketable securities. We believe net operating
      cash flow provides useful information for investors because it measures
      our capacity to generate cash from our operating activities to sustain
      our investments for our operating activities. Net operating cash flow is
      not a U.S. GAAP measure and does not represent total cash flow since it
      does not include the cash flows generated by or used in financing activities.
      In addition, our definition of net operating cash flow may differ from
      definitions used by other companies. Net operating cash flow is determined
      as follows from our Unaudited Interim Consolidated Statements of Cash Flows:</font></p>
</div>
<table width="100%" cellspacing="0" cellpadding="0" border="0">
<tr valign="top">
<td align="left"><font size="1" face="Arial"> &nbsp;</font></td>
<td align="left"><font size="1">&nbsp;</font></td>
<td align="right"><font size="1">&nbsp;</font></td>
<td colspan="4" align="center"><font size="1" face="Arial"><b>(unaudited)</b></font></td>
<td align="left"><font size="1">&nbsp;</font></td>
</tr>
<tr valign="top">
<td><font size="1">&nbsp;</font></td>
<td><font size="1">&nbsp;</font></td>
<td><hr noshade size="1"></td>
<td colspan="4"><hr noshade size="1"></td>
<td><font size="1">&nbsp;</font></td>
</tr>
<tr valign="top">
<td align="left"><font size="1" face="Arial">&nbsp;</font></td>
<td align="left"><font size="1">&nbsp;</font></td>
<td align="right"><font size="1">&nbsp;</font></td>
<td colspan="4" align="center"><font size="1" face="Arial"><b>Three Months Ended</b></font></td>
<td align="left"><font size="1">&nbsp;</font></td>
</tr>
<tr valign="top">
<td><font size="1">&nbsp;</font></td>
<td><font size="1">&nbsp;</font></td>
<td><hr noshade size="1"></td>
<td colspan="4"><hr noshade size="1"></td>
<td><font size="1">&nbsp;</font></td>
</tr>
<tr valign="top">
<td align="left"><font size="1" face="Arial">&nbsp;</font></td>
<td align="left"><font size="1">&nbsp;</font></td>
<td align="right"><font size="1">&nbsp;</font></td>
<td width="8%" align="center"><font size="1" face="Arial"><b>March 27, 2004</b></font></td>
<td align="left"><font size="1">&nbsp;</font></td>
<td align="right"><font size="1">&nbsp;</font></td>
<td width="8%" align="center"><font size="1" face="Arial"><b>March 29, 2003</b></font></td>
<td align="left"><font size="1">&nbsp;</font></td>
</tr>
<tr valign="top">
<td><font size="1">&nbsp;</font></td>
<td><font size="1">&nbsp;</font></td>
<td><hr noshade size="1"></td>
<td width="8%"><hr noshade size="1"></td>
<td><font size="1">&nbsp;</font></td>
<td><hr noshade size="1"></td>
<td width="8%"><hr noshade size="1"></td>
<td><font size="1">&nbsp;</font></td>
</tr>
<tr valign="top">
<td align="left"><font size="1" face="Arial">&nbsp;</font></td>
<td align="left"><font size="1">&nbsp;</font></td>
<td align="right"><font size="1">&nbsp;</font></td>
<td colspan="4" align="center"><font size="1" face="Arial"><b>(in millions)</b></font></td>
<td align="left"><font size="1">&nbsp;</font></td>
</tr>
<tr valign="top" bgcolor="#eeeeee">
<td align="left"><font size="2" face="Arial">Net cash from operating activities</font></td>
<td width="2%" align="left">&nbsp;</td>
<td width="1%" align="right"><font size="2" face="Arial"><b>$</b></font></td>
<td width="8%" align="right"><font size="2" face="Arial">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<b>552</b></font></td>
<td width="2%" align="left">&nbsp;</td>
<td width="1%" align="right"><font size="2" face="Arial"><b>$</b></font></td>
<td width="8%" align="right"><font size="2" face="Arial">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;423</font></td>
<td width="2%" align="left">&nbsp;</td>
</tr>
<tr valign="top">
<td align="left"><font size="2" face="Arial">Net cash used in investing activities</font></td>
<td align="left">&nbsp;</td>
<td align="right">&nbsp;</td>
<td width="8%" align="right"><font size="2" face="Arial">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<b>(1,367</b></font></td>
<td align="left"><font size="2" face="Arial"><b>)</b></font></td>
<td align="right">&nbsp;</td>
<td width="8%" align="right"><font size="2" face="Arial">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(1,369</font></td>
<td align="left"><font size="2" face="Arial">)</font></td>
</tr>
<tr valign="top" bgcolor="#eeeeee">
<td align="left"><font size="2" face="Arial">Payment for purchase of and proceeds
    from sale of marketable securities</font></td>
<td align="left">&nbsp;</td>
<td align="right">&nbsp;</td>
<td width="8%" align="right"><font size="2" face="Arial">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<b>1,030</b></font></td>
<td align="left">&nbsp;</td>
<td align="right">&nbsp;</td>
<td width="8%" align="right"><font size="2" face="Arial">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1,100</font></td>
<td align="left">&nbsp;</td>
</tr>
<tr valign="top">
<td></td>
<td></td>
<td><hr noshade size="1"></td>
<td width="8%"><hr noshade size="1"></td>
<td></td>
<td><hr noshade size="1"></td>
<td width="8%"><hr noshade size="1"></td>
<td></td>
</tr>
<tr valign="top" bgcolor="#eeeeee">
<td align="left"><div style="margin-left:3%"><font size="2" face="Arial"><b>Net operating cash flow</b></font></div></td>
<td align="left">&nbsp;</td>
<td align="right"><font size="2" face="Arial"><b>$</b></font></td>
<td width="8%" align="right"><font size="2" face="Arial"> <b>215</b></font></td>
<td align="left">&nbsp;</td>
<td align="right"><font size="2" face="Arial"><b>$</b></font></td>
<td width="8%" align="right"><font size="2" face="Arial"> <b>154</b></font></td>
<td align="left">&nbsp;</td>
</tr>
<tr valign="top">
<td></td>
<td></td>
<td><hr noshade size="2"></td>
<td width="8%"><hr noshade size="2"></td>
<td></td>
<td><hr noshade size="2"></td>
<td width="8%"><hr noshade size="2"></td>
<td></td>
</tr>
</table>
<div style="text-indent:3%">
  <p align="left"><font size="2" face="Arial">We generated a net operating cash
      flow of $215 million in the first quarter of 2004, compared to a net operating
      cash flow of $154 million in the first quarter of 2003. This improvement
      resulted mainly from the increase in net cash from operating activities.</font></p>
</div>
<div style="text-indent:3%">
  <p align="left"><font size="2" face="Arial"><i>Net cash used in financing activities</i>.
      Net cash used in financing activities was $77 million in the first quarter
      of 2004 while it was $358 million in the first quarter of 2003. This variation
      is mainly due to the repayment of long-term debt, which was $364 million
      in the first quarter of 2003, mainly related to the repurchase of part
      of our 2010 convertible bonds. </font></p>
</div>
<p align="left"><font size="2" face="Arial"><b><i>Capital Resources</i></b></font></p>
<div style="text-indent:3%">
  <p align="left"><font size="2" face="Arial"><i>Net financial position</i>.
      We define our net financial position as the difference between our total
      cash position (cash, cash equivalents and marketable securities) net of
      total financial debt (bank overdrafts, current portion of long-term debt
      and long-term debt). We believe our net financial position provides useful
      information for investors because it measures our capital resources based
      on cash, cash equivalents or marketable securities and the total level
      of our financial indebtedness. Net financial position is not a U.S. GAAP
      measure.The net financial position is determined as follows from our Unaudited
      Interim
      Consolidated
      Balance
      Sheet
      as at
      March 27, 2004 and our Audited Consolidated Balance Sheet as at December
      31, 2003:</font></p>
</div>
<p align="center"><font face="Arial" size="2">19</font></p>
<hr noshade align="center" width="100%" size="2">
<div style="page-break-before:always"></div>
<page>
<a name="p?"></a>

<table width="100%" cellspacing="0" cellpadding="0" border="0">
<tr valign="top">
<td align="left"><font size="1" face="Arial"> &nbsp;</font></td>
<td align="left"><font size="1">&nbsp;</font></td>
<td align="right"><font size="1">&nbsp;</font></td>
<td colspan="4" align="center"><font size="1" face="Arial"><b>As at</b></font></td>
<td align="left"><font size="1">&nbsp;</font></td>
</tr>
<tr valign="top">
<td><font size="1">&nbsp;</font></td>
<td><font size="1">&nbsp;</font></td>
<td><hr noshade size="1"></td>
<td colspan="4"><hr noshade size="1"></td>
<td><font size="1">&nbsp;</font></td>
</tr>
<tr valign="top">
<td align="left"><font size="1" face="Arial">&nbsp;</font></td>
<td align="left"><font size="1">&nbsp;</font></td>
<td align="right"><font size="1">&nbsp;</font></td>
<td width="8%" align="center"><font size="1" face="Arial"><b>March 27,  2004</b></font></td>
<td align="left"><font size="1">&nbsp;</font></td>
<td align="right"><font size="1">&nbsp;</font></td>
<td width="8%" align="center"><font size="1" face="Arial"><b>December 31, 2003</b></font></td>
<td align="left"><font size="1">&nbsp;</font></td>
</tr>
<tr valign="top">
<td><font size="1">&nbsp;</font></td>
<td><font size="1">&nbsp;</font></td>
<td><hr noshade size="1"></td>
<td width="8%"><hr noshade size="1"></td>
<td><font size="1">&nbsp;</font></td>
<td><hr noshade size="1"></td>
<td width="8%"><hr noshade size="1"></td>
<td><font size="1">&nbsp;</font></td>
</tr>
<tr valign="top">
<td align="left"><font size="1" face="Arial">&nbsp;</font></td>
<td align="left"><font size="1">&nbsp;</font></td>
<td align="right"><font size="1">&nbsp;</font></td>
<td width="8%" align="center"><font size="1" face="Arial"><b><i>(unaudited)</i></b></font></td>
<td align="left"><font size="1">&nbsp;</font></td>
<td align="right"><font size="1">&nbsp;</font></td>
<td width="8%" align="center"><font size="1" face="Arial"><b><i>(audited)</i></b></font></td>
<td align="left"><font size="1">&nbsp;</font></td>
</tr>
<tr valign="top">
<td align="left"><font size="1" face="Arial">&nbsp;</font></td>
<td align="left"><font size="1">&nbsp;</font></td>
<td align="right"><font size="1">&nbsp;</font></td>
<td colspan="4" align="center"><font size="1" face="Arial"><b>(in millions)</b></font></td>
<td align="left"><font size="1">&nbsp;</font></td>
</tr>
<tr valign="top" bgcolor="#eeeeee">
<td align="left"><font size="2" face="Arial">Cash and cash equivalents</font></td>
<td width="2%" align="left">&nbsp;</td>
<td width="1%" align="right"><font size="2" face="Arial">$</font></td>
<td width="8%" align="right"><font size="2" face="Arial"> <b>2,103</b></font></td>
<td width="2%" align="left">&nbsp;</td>
<td width="1%" align="right"><font size="2" face="Arial">$</font></td>
<td width="8%" align="right"><font size="2" face="Arial"> 2,998</font></td>
<td width="2%" align="left">&nbsp;</td>
</tr>
<tr valign="top">
<td align="left"><font size="2" face="Arial">Marketable securities</font></td>
<td align="left">&nbsp;</td>
<td align="right">&nbsp;</td>
<td width="8%" align="right"><font size="2" face="Arial"><b>1,030</b></font></td>
<td align="left">&nbsp;</td>
<td align="right">&nbsp;</td>
<td width="8%" align="right"><font size="2" face="Arial">&#151;</font></td>
<td align="left">&nbsp;</td>
</tr>
<tr valign="top">
<td></td>
<td></td>
<td><hr noshade size="1"></td>
<td width="8%"><hr noshade size="1"></td>
<td></td>
<td><hr noshade size="1"></td>
<td width="8%"><hr noshade size="1"></td>
<td></td>
</tr>
<tr valign="top" bgcolor="#eeeeee">
<td align="left"><font size="2" face="Arial">Total cash position</font></td>
<td align="left">&nbsp;</td>
<td align="right">&nbsp;</td>
<td width="8%" align="right"><font size="2" face="Arial">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<b>3,133</b></font></td>
<td align="left">&nbsp;</td>
<td align="right">&nbsp;</td>
<td width="8%" align="right"><font size="2" face="Arial">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2,998</font></td>
<td align="left">&nbsp;</td>
</tr>
<tr valign="top">
<td align="left"><font size="2" face="Arial">Bank overdrafts</font></td>
<td align="left">&nbsp;</td>
<td align="right">&nbsp;</td>
<td width="8%" align="right"><font size="2" face="Arial">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<b>(4</b></font></td>
<td align="left"><font size="2" face="Arial"><b>)</b></font></td>
<td align="right">&nbsp;</td>
<td width="8%" align="right"><font size="2" face="Arial">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(45</font></td>
<td align="left"><font size="2" face="Arial">)</font></td>
</tr>
<tr valign="top" bgcolor="#eeeeee">
<td align="left"><font size="2" face="Arial">Current portion of long-term debt</font></td>
<td align="left">&nbsp;</td>
<td align="right">&nbsp;</td>
<td width="8%" align="right"><font size="2" face="Arial">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<b>(443</b></font></td>
<td align="left"><font size="2" face="Arial"><b>)</b></font></td>
<td align="right">&nbsp;</td>
<td width="8%" align="right"><font size="2" face="Arial">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(106</font></td>
<td align="left"><font size="2" face="Arial">)</font></td>
</tr>
<tr valign="top">
<td align="left"><font size="2" face="Arial">Long-term debt</font></td>
<td align="left">&nbsp;</td>
<td align="right">&nbsp;</td>
<td width="8%" align="right"><font size="2" face="Arial">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<b>(2,555</b></font></td>
<td align="left"><font size="2" face="Arial"><b>)</b></font></td>
<td align="right">&nbsp;</td>
<td width="8%" align="right"><font size="2" face="Arial">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(2,944</font></td>
<td align="left"><font size="2" face="Arial">)</font></td>
</tr>
<tr valign="top" bgcolor="#eeeeee">
<td align="left"><font size="2" face="Arial">Total financial debt</font></td>
<td align="left">&nbsp;</td>
<td align="right">&nbsp;</td>
<td width="8%" align="right"><font size="2" face="Arial"><b>(3,002</b></font></td>
<td align="left"><font size="2" face="Arial"><b>)</b></font></td>
<td align="right">&nbsp;</td>
<td width="8%" align="right"><font size="2" face="Arial">(3,095</font></td>
<td align="left"><font size="2" face="Arial">)</font></td>
</tr>
<tr valign="top">
<td></td>
<td></td>
<td><hr noshade size="1"></td>
<td width="8%"><hr noshade size="1"></td>
<td></td>
<td><hr noshade size="1"></td>
<td width="8%"><hr noshade size="1"></td>
<td></td>
</tr>
<tr valign="top" bgcolor="#eeeeee">
<td align="left"><font size="2" face="Arial"><b>Net financial position</b></font></td>
<td align="left">&nbsp;</td>
<td align="right"><font size="2" face="Arial"><b>$</b></font></td>
<td width="8%" align="right"><font size="2" face="Arial"> <b>131</b></font></td>
<td align="left">&nbsp;</td>
<td align="right"><font size="2" face="Arial"><b>$</b></font></td>
<td width="8%" align="right"><font size="2" face="Arial"> <b>(97</b></font></td>
<td align="left"><font size="2" face="Arial"><b>)</b></font></td>
</tr>
<tr valign="top">
<td></td>
<td></td>
<td><hr noshade size="2"></td>
<td width="8%"><hr noshade size="2"></td>
<td></td>
<td><hr noshade size="2"></td>
<td width="8%"><hr noshade size="2"></td>
<td></td>
</tr>
</table>
<div style="text-indent:3%">
  <p align="left"><font size="2" face="Arial">As of March 27, 2004 the net financial
      position was positive at $131 million, while it was
      negative at $97 million as of December 31, 2003. This net financial position
      mainly reflects the $215 million favorable net operating cash flow of the
      first quarter 2004, but also includes non-monetary charges in our cash
      and in our debt balance such as interest on zero coupon bonds or exchange
      translation. </font></p>
</div>
<div style="text-indent:3%">
  <p align="left"><font size="2" face="Arial">At March 27, 2004, the aggregate
      amount of our long-term debt was approximately $2,555 million, of which
      $804 million consisted of Zero Coupon Subordinated Convertible Liquid Yield
      Option<sup>&#153;</sup> Notes due 2009 (our &quot;2009 bonds&quot;) and
      $1,379 million of Zero Coupon Senior Convertible Bonds due 2013 (our &quot;2013 bonds&quot;). These amounts include a reclassification
      of $370 million from long-term debt to current portion, effected after
      our press release on April 21, 2004 and related to our 2010 convertible
      bonds. Additionally, the aggregate amount of our short-term credit facilities
      was approximately
      $1,151 million,
      under
      which approximately $1,147 million of indebtedness was outstanding.</font></p>
</div>
<div style="text-indent:3%">
  <p align="left"><font size="2" face="Arial">As of March 27, 2004, we had the
      following credit ratings on our convertible debt<b>: </b></font></p>
</div>
<table width="100%" cellspacing="0" cellpadding="0" border="0">
<tr valign="top">
<td align="left"><font size="1"> &nbsp;</font></td>
<td align="left" width="2%"><font size="1">&nbsp;</font></td>
<td width="1%" align="right"><font size="1">&nbsp;</font></td>
<td width="10%" align="center"><font size="1" face="Arial"><b>Moody's Investors<br>
  Service</b></font></td>
<td width="2%" align="left"><font size="1">&nbsp;</font></td>
<td width="1%" align="right"><font size="1">&nbsp;</font></td>
<td width="10%" align="center"><font size="1" face="Arial"><b>Standard &amp; <br>
  Poor's</b></font></td>
<td width="2%" align="left"><font size="1">&nbsp;</font></td>
</tr>
<tr valign="top">
<td><font size="1">&nbsp;</font></td>
<td><font size="1">&nbsp;</font></td>
<td><font size="1">&nbsp;</font></td>
<td width="8%"><hr noshade size="1"></td>
<td><font size="1">&nbsp;</font></td>
<td><font size="1">&nbsp;</font></td>
<td width="8%"><hr noshade size="1"></td>
<td><font size="1">&nbsp;</font></td>
</tr>
<tr valign="top" bgcolor="#eeeeee">
<td align="left"><font size="2" face="Arial">LYONs due 2009</font></td>
<td align="left">&nbsp;</td>
<td align="right">&nbsp;</td>
<td width="8%" align="right"><font size="2" face="Arial">Baa1</font></td>
<td align="right">&nbsp;</td>
<td align="right">&nbsp;</td>
<td width="8%" align="right"><font size="2" face="Arial">BBB+</font></td>
<td align="left">&nbsp;</td>
</tr>
<tr valign="top">
<td align="left"><font size="2" face="Arial">Zero Coupon Senior Convertible Bonds due 2010</font></td>
<td align="left">&nbsp;</td>
<td align="right">&nbsp;</td>
<td width="8%" align="right"><font size="2" face="Arial">A3</font></td>
<td align="right">&nbsp;</td>
<td align="right">&nbsp;</td>
<td width="8%" align="right"><font size="2" face="Arial">A-</font></td>
<td align="left">&nbsp;</td>
</tr>
<tr valign="top" bgcolor="#eeeeee">
<td align="left"><font size="2" face="Arial">Zero Coupon Senior  Convertible
    Bonds due 2013</font></td>
<td align="left">&nbsp;</td>
<td align="right">&nbsp;</td>
<td width="8%" align="right"><font size="2" face="Arial">A3</font></td>
<td align="right">&nbsp;</td>
<td align="right">&nbsp;</td>
<td width="8%" align="right"><font size="2" face="Arial">A-</font></td>
<td align="left">&nbsp;</td>
</tr>
</table>
<div style="text-indent:3%">
  <p align="left"><font size="2" face="Arial">In the event of a downgrade of
      these ratings, we believe we would continue to have access to sufficient
      capital resources.</font></p>
</div>
<p align="center"><font face="Arial" size="2">20</font></p>
<hr noshade align="center" width="100%" size="2">
<div style="page-break-before:always"></div>
<page>
<a name="p?"></a>

<p align="left"><font size="2" face="Arial"><b><i>Contractual Obligations, Commitments and Contingencies</i></b></font></p>
<div style="text-indent:3%">
  <p align="left"><font size="2" face="Arial">Our contractual obligations, commitments
      and contingencies as of March 27, 2004 were as follows:</font></p>
</div>
<table width="100%" cellspacing="0" cellpadding="0" border="0">
<tr valign="top">
<td align="left"><font size="1" face="Arial"> &nbsp;</font></td>
<td align="left"><font size="1">&nbsp;</font></td>
<td align="right"><font size="1">&nbsp;</font></td>
<td colspan="22" align="center"><font size="1" face="Arial"><b>Payments due by period</b></font></td>
<td align="left"><font size="1">&nbsp;</font></td>
</tr>
<tr valign="top">
  <td align="left">&nbsp;</td>
  <td align="left">&nbsp;</td>
  <td colspan="23" align="right"><hr align="left" size="1" noshade></td>
  <td align="left">&nbsp;</td>
</tr>
<tr valign="top" bgcolor="">
<td align="left"><b><font size="1" face="Arial">&nbsp;</font></b></td>
<td align="left"><b><font size="1">&nbsp;</font></b></td>
<td colspan="2" align="right"><b><font size="1">&nbsp;</font><font size="1" face="Arial">Total</font></b></td>
<td align="left"><b><font size="1">&nbsp;</font></b></td>
<td colspan="2" align="right"><b><font size="1">&nbsp;</font><font size="1" face="Arial">2004</font></b></td>
<td align="left"><b><font size="1">&nbsp;</font></b></td>
<td colspan="2" align="right"><b><font size="1">&nbsp;</font><font size="1" face="Arial">2005</font></b></td>
<td align="left"><b><font size="1">&nbsp;</font></b></td>
<td colspan="2" align="right"><b><font size="1">&nbsp;</font><font size="1" face="Arial">2006</font></b></td>
<td align="left"><b><font size="1">&nbsp;</font></b></td>
<td colspan="2" align="right"><b><font size="1">&nbsp;</font><font size="1" face="Arial">2007</font></b></td>
<td align="left"><b><font size="1">&nbsp;</font></b></td>
<td colspan="2" align="right"><b><font size="1">&nbsp;</font><font size="1" face="Arial">2008</font></b></td>
<td align="left"><b><font size="1">&nbsp;</font></b></td>
<td colspan="2" align="right"><b><font size="1">&nbsp;</font><font size="1" face="Arial">2009</font></b></td>
<td align="left"><b><font size="1">&nbsp;</font></b></td>
<td colspan="2" align="right"><b><font size="1">&nbsp;</font><font size="1" face="Arial">Thereafter</font></b></td>
<td align="left"><b><font size="1">&nbsp;</font></b></td>
</tr>
<tr valign="top" bgcolor="">
  <td align="left">&nbsp;</td>
  <td align="left">&nbsp;</td>
  <td colspan="2" align="right"><hr align="left" size="1" noshade></td>
  <td align="left">&nbsp;</td>
  <td colspan="2" align="right"><hr align="left" size="1" noshade></td>
  <td align="left">&nbsp;</td>
  <td colspan="2" align="right"><hr align="left" size="1" noshade></td>
  <td align="left">&nbsp;</td>
  <td colspan="2" align="right"><hr align="left" size="1" noshade></td>
  <td align="left">&nbsp;</td>
  <td colspan="2" align="right"><hr align="left" size="1" noshade></td>
  <td align="left">&nbsp;</td>
  <td colspan="2" align="right"><hr align="left" size="1" noshade></td>
  <td align="left">&nbsp;</td>
  <td colspan="2" align="right"><hr align="left" size="1" noshade></td>
  <td align="left">&nbsp;</td>
  <td colspan="2" align="right"><hr align="left" size="1" noshade></td>
  <td align="left">&nbsp;</td>
</tr>
<tr valign="top">
<td align="left"><font size="1" face="Arial">&nbsp;</font></td>
<td align="left"><font size="1">&nbsp;</font></td>
<td align="right"><font size="1">&nbsp;</font></td>
<td colspan="22" align="center"><font size="1" face="Arial"><b>(in millions)</b></font></td>
<td align="left"><font size="1">&nbsp;</font></td>
</tr>
<tr valign="top" bgcolor="#eeeeee">
<td align="left"><font size="2" face="Arial">Capital leases</font></td>
<td width="2%" align="left">&nbsp;</td>
<td width="3%" align="right"><b><font size="2" face="Arial">$</font></b></td>
<td width="4%" align="right"><b><font size="2" face="Arial">     34</font></b></td>
<td width="2%" align="left">&nbsp;</td>
<td width="3%" align="right"><font size="2" face="Arial">$</font></td>
<td width="4%" align="right"><font size="2" face="Arial">     3</font></td>
<td width="2%" align="left">&nbsp;</td>
<td width="3%" align="right"><font size="2" face="Arial">$</font></td>
<td width="4%" align="right"><font size="2" face="Arial">     5</font></td>
<td width="2%" align="left">&nbsp;</td>
<td width="3%" align="right"><font size="2" face="Arial">$</font></td>
<td width="4%" align="right"><font size="2" face="Arial">     5</font></td>
<td width="2%" align="left">&nbsp;</td>
<td width="3%" align="right"><font size="2" face="Arial">$</font></td>
<td width="4%" align="right"><font size="2" face="Arial">     5</font></td>
<td width="2%" align="left">&nbsp;</td>
<td width="3%" align="right"><font size="2" face="Arial">$</font></td>
<td width="4%" align="right"><font size="2" face="Arial">     5</font></td>
<td width="2%" align="left">&nbsp;</td>
<td width="3%" align="right"><font size="2" face="Arial">$</font></td>
<td width="4%" align="right"><font size="2" face="Arial">     5</font></td>
<td width="2%" align="left">&nbsp;</td>
<td width="3%" align="right"><font size="2" face="Arial">$</font></td>
<td width="4%" align="right"><font size="2" face="Arial">     6</font></td>
<td width="2%" align="left">&nbsp;</td>
</tr>
<tr valign="top">
<td align="left"><font size="2" face="Arial">Operating leases<sup>(1)</sup></font></td>
<td align="left">&nbsp;</td>
<td align="right">&nbsp;</td>
<td align="right"><b><font size="2" face="Arial">180</font></b></td>
<td align="left">&nbsp;</td>
<td align="right">&nbsp;</td>
<td align="right"><font size="2" face="Arial">24</font></td>
<td align="left">&nbsp;</td>
<td align="right">&nbsp;</td>
<td align="right"><font size="2" face="Arial">25</font></td>
<td align="left">&nbsp;</td>
<td align="right">&nbsp;</td>
<td align="right"><font size="2" face="Arial">21</font></td>
<td align="left">&nbsp;</td>
<td align="right">&nbsp;</td>
<td align="right"><font size="2" face="Arial">17</font></td>
<td align="left">&nbsp;</td>
<td align="right">&nbsp;</td>
<td align="right"><font size="2" face="Arial">15</font></td>
<td align="left">&nbsp;</td>
<td align="right">&nbsp;</td>
<td align="right"><font size="2" face="Arial">10</font></td>
<td align="left">&nbsp;</td>
<td align="right">&nbsp;</td>
<td align="right"><font size="2" face="Arial">68</font></td>
<td align="left">&nbsp;</td>
</tr>
<tr valign="top" bgcolor="#eeeeee">
<td align="left"><font size="2" face="Arial">Purchase commitments<sup>(2)</sup></font></td>
<td align="left">&nbsp;</td>
<td align="right">&nbsp;</td>
<td align="right"><b><font size="2" face="Arial">1,555</font></b></td>
<td align="left">&nbsp;</td>
<td align="right">&nbsp;</td>
<td align="right"><font size="2" face="Arial">1,442</font></td>
<td align="left">&nbsp;</td>
<td align="right">&nbsp;</td>
<td align="right"><font size="2" face="Arial">96</font></td>
<td align="left">&nbsp;</td>
<td align="right">&nbsp;</td>
<td align="right"><font size="2" face="Arial">17</font></td>
<td align="left">&nbsp;</td>
<td align="right">&nbsp;</td>
<td align="left"><font size="2" face="Arial">&nbsp;</font></td>
<td align="left">&nbsp;</td>
<td align="right">&nbsp;</td>
<td align="left"><font size="2" face="Arial">&nbsp;</font></td>
<td align="left">&nbsp;</td>
<td align="right">&nbsp;</td>
<td align="left"><font size="2" face="Arial">&nbsp;</font></td>
<td align="left">&nbsp;</td>
<td align="right">&nbsp;</td>
<td align="left"><font size="2" face="Arial">&nbsp;</font></td>
<td align="left">&nbsp;</td>
</tr>
<tr valign="top">
<td align="left"><font size="2" face="Arial">Contingent obligations<sup>(3)</sup></font></td>
<td align="left">&nbsp;</td>
<td align="right">&nbsp;</td>
<td align="right"><b><font size="2" face="Arial">1</font></b></td>
<td align="left">&nbsp;</td>
<td align="right">&nbsp;</td>
<td align="right"><font size="2" face="Arial">1</font></td>
<td align="left">&nbsp;</td>
<td align="right">&nbsp;</td>
<td align="left"><font size="2" face="Arial">&nbsp;</font></td>
<td align="left">&nbsp;</td>
<td align="right">&nbsp;</td>
<td align="left"><font size="2" face="Arial">&nbsp;</font></td>
<td align="left">&nbsp;</td>
<td align="right">&nbsp;</td>
<td align="left"><font size="2" face="Arial">&nbsp;</font></td>
<td align="left">&nbsp;</td>
<td align="right">&nbsp;</td>
<td align="left"><font size="2" face="Arial">&nbsp;</font></td>
<td align="left">&nbsp;</td>
<td align="right">&nbsp;</td>
<td align="left"><font size="2" face="Arial">&nbsp;</font></td>
<td align="left">&nbsp;</td>
<td align="right">&nbsp;</td>
<td align="left"><font size="2" face="Arial">&nbsp;</font></td>
<td align="left">&nbsp;</td>
</tr>
<tr valign="top" bgcolor="">
  <td align="left">&nbsp;</td>
  <td align="left">&nbsp;</td>
  <td colspan="2" align="right"><hr align="left" size="1" noshade></td>
  <td align="left">&nbsp;</td>
  <td colspan="2" align="right"><hr align="left" size="1" noshade></td>
  <td align="left">&nbsp;</td>
  <td colspan="2" align="right"><hr align="left" size="1" noshade></td>
  <td align="left">&nbsp;</td>
  <td colspan="2" align="right"><hr align="left" size="1" noshade></td>
  <td align="left">&nbsp;</td>
  <td colspan="2" align="right"><hr align="left" size="1" noshade></td>
  <td align="left">&nbsp;</td>
  <td colspan="2" align="right"><hr align="left" size="1" noshade></td>
  <td align="left">&nbsp;</td>
  <td colspan="2" align="right"><hr align="left" size="1" noshade></td>
  <td align="left">&nbsp;</td>
  <td colspan="2" align="right"><hr align="left" size="1" noshade></td>
  <td align="left">&nbsp;</td>
</tr> <tr valign="top" bgcolor="#eeeeee">
<td align="left"><font size="2" face="Arial"><b>Total</b> </font></td>
<td align="left">&nbsp;</td>
<td align="right"><b><font size="2" face="Arial">$</font></b></td>
<td align="right"><b><font size="2" face="Arial">1,770</font></b></td>
<td align="left">&nbsp;</td>
<td align="right"><b><font size="2" face="Arial">$</font></b></td>
<td align="right"><b><font size="2" face="Arial">1,470</font></b></td>
<td align="left">&nbsp;</td>
<td align="right"><b><font size="2" face="Arial">$</font></b></td>
<td align="right"><b><font size="2" face="Arial">126</font></b></td>
<td align="left">&nbsp;</td>
<td align="right"><b><font size="2" face="Arial">$</font></b></td>
<td align="right"><b><font size="2" face="Arial">43</font></b></td>
<td align="left">&nbsp;</td>
<td align="right"><b><font size="2" face="Arial">$</font></b></td>
<td align="right"><b><font size="2" face="Arial">22</font></b></td>
<td align="left">&nbsp;</td>
<td align="right"><b><font size="2" face="Arial">$</font></b></td>
<td align="right"><b><font size="2" face="Arial">20</font></b></td>
<td align="left">&nbsp;</td>
<td align="right"><b><font size="2" face="Arial">$</font></b></td>
<td align="right"><b><font size="2" face="Arial">15</font></b></td>
<td align="left">&nbsp;</td>
<td align="right"><b><font size="2" face="Arial">$</font></b></td>
<td align="right"><b><font size="2" face="Arial">74</font></b></td>
<td align="left">&nbsp;</td>
</tr>
<tr valign="top" bgcolor="">
  <td align="left">&nbsp;</td>
  <td align="left">&nbsp;</td>
  <td colspan="2" align="right"><hr align="left" size="2" noshade></td>
  <td align="left">&nbsp;</td>
  <td colspan="2" align="right"><hr align="left" size="2" noshade></td>
  <td align="left">&nbsp;</td>
  <td colspan="2" align="right"><hr align="left" size="2" noshade></td>
  <td align="left">&nbsp;</td>
  <td colspan="2" align="right"><hr align="left" size="2" noshade></td>
  <td align="left">&nbsp;</td>
  <td colspan="2" align="right"><hr align="left" size="2" noshade></td>
  <td align="left">&nbsp;</td>
  <td colspan="2" align="right"><hr align="left" size="2" noshade></td>
  <td align="left">&nbsp;</td>
  <td colspan="2" align="right"><hr align="left" size="2" noshade></td>
  <td align="left">&nbsp;</td>
  <td colspan="2" align="right"><hr align="left" size="2" noshade></td>
  <td align="left">&nbsp;</td>
</tr> </table>
<table width="100%" cellspacing="0" cellpadding="0" border="0">
<tr valign="top">
<td><hr align="left" width="100" size="1" noshade>
</td>
</tr></table><table width="100%" cellspacing="0" cellpadding="0" border="0">
<tr valign="top">
<td width="3%"><font size="1" face="Arial">(1)</font></td>
<td align="left">
<font size="1" face="Arial"> Operating leases are mainly related to building leases.</font></td>
</tr>
</table>
<table width="100%" cellspacing="0" cellpadding="0" border="0">
<tr valign="top">
<td width="3%"><font size="1" face="Arial">(2)</font></td>
<td align="left">
<font size="1" face="Arial"> Purchase obligations primarily include commitments for the purchase of equipment, purchase contracts for outsourced foundry wafers and for the purchase of software licenses.</font></td>
</tr>
</table>
<table width="100%" cellspacing="0" cellpadding="0" border="0">
<tr valign="top">
<td width="3%"><font size="1" face="Arial">(3)</font></td>
<td align="left">
<font size="1" face="Arial"> Contingent obligations related to an additional contractual amount which could be paid for a future capital increase in the joint venture with Hitachi, Ltd. </font></td>
</tr>
</table>
<p>
<div style="text-indent:3%">
  <p align="left"><font size="2" face="Arial">Our contractual obligations, commitments
      and contingencies, including other obligations, as of March 27, 2004 can
      be further broken down as follows:</font></p>
</div>
<table width="100%" cellspacing="0" cellpadding="0" border="0">
<tr valign="top">
<td align="left"><font size="1"> &nbsp;</font></td>
<td width="2%" align="left"><font size="1">&nbsp;</font></td>
<td colspan="2" align="center"><font size="1" face="Arial"><b>As of March<br>
  27, 2004</b></font></td>
<td width="2%" align="left"><font size="1">&nbsp;</font></td>
</tr>
<tr valign="top">
<td><font size="1">&nbsp;</font></td>
<td width="2%"><font size="1">&nbsp;</font></td>
<td width="1%"><hr noshade size="1"></td>
<td width="8%"><hr noshade size="1"></td>
<td width="2%"><font size="1">&nbsp;</font></td>
</tr>
<tr valign="top">
<td align="left"><font size="1">&nbsp;</font></td>
<td width="2%" align="left"><font size="1">&nbsp;</font></td>
<td colspan="2" align="center"><font size="1">&nbsp;</font><font size="1" face="Arial"><b>(in millions)</b></font></td>
<td width="2%" align="left"><font size="1">&nbsp;</font></td>
</tr>
<tr valign="top" bgcolor="#eeeeee">
<td align="left"><font size="2" face="Arial">Capital leases</font></td>
<td width="2%" align="left">&nbsp;</td>
<td width="1%" align="right"><font size="2" face="Arial"><b>$</b></font></td>
<td width="8%" align="right"><font size="2" face="Arial">  <b>34</b></font></td>
<td width="2%" align="left">&nbsp;</td>
</tr>
<tr valign="top" bgcolor="">
<td align="left"><font size="2" face="Arial">Minimum payments for future leases (from 2004 to 2009 and thereafter)</font></td>
<td width="2%" align="left">&nbsp;</td>
<td width="1%" align="right">&nbsp;</td>
<td width="8%" align="right"><font size="2" face="Arial"><b>180</b></font></td>
<td width="2%" align="left">&nbsp;</td>
</tr>
<tr valign="top" bgcolor="#eeeeee">
<td align="left"><font size="2" face="Arial">Equipment purchase</font></td>
<td width="2%" align="left">&nbsp;</td>
<td width="1%" align="right">&nbsp;</td>
<td width="8%" align="right"><font size="2" face="Arial"><b>1,115</b></font></td>
<td width="2%" align="left">&nbsp;</td>
</tr>
<tr valign="top" bgcolor="">
<td align="left"><font size="2" face="Arial">Foundry purchase</font></td>
<td width="2%" align="left">&nbsp;</td>
<td width="1%" align="right">&nbsp;</td>
<td width="8%" align="right"><font size="2" face="Arial"><b>271</b></font></td>
<td width="2%" align="left">&nbsp;</td>
</tr>
<tr valign="top" bgcolor="#eeeeee">
<td align="left"><font size="2" face="Arial">Software, technology licenses and design</font></td>
<td width="2%" align="left">&nbsp;</td>
<td width="1%" align="right">&nbsp;</td>
<td width="8%" align="right"><font size="2" face="Arial"><b>169</b></font></td>
<td width="2%" align="left">&nbsp;</td>
</tr>
<tr valign="top" bgcolor="">
<td align="left"><font size="2" face="Arial">Other obligations </font></td>
<td width="2%" align="left">&nbsp;</td>
<td width="1%" align="right">&nbsp;</td>
<td width="8%" align="right"><font size="2" face="Arial"><b>72</b></font></td>
<td width="2%" align="left">&nbsp;</td>
</tr>
<tr valign="top" bgcolor="">
  <td align="left">&nbsp;</td>
  <td align="left">&nbsp;</td>
  <td align="right"><hr noshade size="1"></td>
  <td align="right"><hr noshade size="1"></td>
  <td align="left">&nbsp;</td>
</tr>
<tr valign="top" bgcolor="#eeeeee">
<td align="left"><font size="2" face="Arial"><b>Total</b></font></td>
<td width="2%" align="left">&nbsp;</td>
<td width="1%" align="right"><font size="2" face="Arial"><b>$</b></font></td>
<td width="8%" align="right"><font size="2" face="Arial"><b>1,841</b></font></td>
<td width="2%" align="left">&nbsp;</td>
</tr>
</table>
<div style="text-indent:3%">
  <p align="left"><font size="2" face="Arial">Other than those described above,
      there are no material off-balance sheet obligations, contractual obligations
      or other commitments.</font></p>
</div>
<p align="left"><font size="2" face="Arial"><b><i>Financial Outlook</i></b></font></p>
<div style="text-indent:3%">
  <p align="left"><font size="2" face="Arial">In response to the favorable current
      industry dynamics, we have decided to increase our capital expenditures
      to approximately $2.2 billion, from the $1.6 billion that we initially
      budgeted. Approximately two-thirds of this amount will be allocated to
      leading-edge technologies and research and development programs. As of
      March 27, 2004, we had $1,115 million in outstanding commitments for purchases
      of equipment for delivery in 2004 and 2005. The most significant of our
      2004 capital expenditure projects are expected to be (i) the expansion
      of our 200mm and 150mm front-end facilities in Singapore; (ii) the expansion
      of the 200mm front-end plant in Rousset, France; (iii) the facilitation
      of our 300mm wafer manufacturing fabrication facility and the expansion
      of our 200mm wafer fab in Catania, Italy; (iv) the upgrading of the 200mm
      front-end facility and the first phase of the conversion to 200mm of our
      150mm in Agrate, Italy; (v) the completion of the first phase of the joint
      project with Philips </font></p>
</div>
<p align="center"><font face="Arial" size="2">21</font></p>
<hr noshade align="center" width="100%" size="2">
<div style="page-break-before:always"></div>
<page>
<a name="p?"></a>

<p align="left"><font size="2" face="Arial">Semiconductors International B.V.
    and Motorola towards the full production for the 300mm pilot line in Crolles,
    France; (vi) the expansion of our 200mm wafer fabrication facility in Phoenix,
    USA and consignment of equipment for capacity dedicated to us at a third
    party wafer supplier; and (vii) increases in back-end capacity in Malaysia,
    Singapore, Morocco, Malta and Shenzhen. We will continue to monitor our level
    of capital
    spending, however, taking into consideration factors such as trends in the
    semiconductor industry, capacity utilization and announced additions. We
    expect to have significant capital requirements in the coming years and intend
    to continue to devote a substantial portion of our net revenues to research
    and development. We plan to fund our capital requirements from cash provided
    by operations, available funds and available support from third parties (including
    state support), and may have recourse to borrowings under available credit
    lines and, to the extent necessary or attractive based on market conditions
    prevailing at the time, the issuing of debt or additional equity securities.
    A substantial deterioration of our economic results and consequently of our
    profitability could generate a deterioration of the cash generated by our
    operating activities. Therefore, there can be no assurance that, in future
    periods, we will generate the same level of cash as in the previous years
    to fund our capital expenditures for expansion plans, our working capital
    requirements, research and development and industrialization
costs.</font></p>
<div style="text-indent:3%">
  <p align="left"><font size="2" face="Arial">In addition, pursuant to the terms
      of the 2009 and 2010 bonds, we have agreed to purchase, at the option of
      the holder, any outstanding 2009 bond for cash or shares on September 22,
      2004 and any outstanding residual 2010 bond for cash on January 17, 2005.
      At March 27, 2004 $804 million was outstanding under our 2009 Bonds and
      $370 million was outstanding under our 2010 Bonds. During the first quarter
      of 2004, we did not repurchase any of our common shares or of our convertible
      bonds. There can be no assurance that additional financing will be available
      as necessary, or that any such financing, if available, will be on terms
      acceptable to us. However, we believe that our cash generated from operations,
      existing funds, available support from third parties, and additional borrowings
      will be sufficient to meet our anticipated needs for liquidity through
      at least 2004.</font></p>
</div>
<p align="left"><font size="2" face="Arial"><b>Impact of Recently Issued U.S. Accounting Standards</b></font></p>
<div style="text-indent:3%">
  <p align="left"><font size="2" face="Arial">In 2003, we adopted Financial Accounting
      Standards Board Interpretation No. 46 <i>Consolidation of Variable Interest
      Entities, an Interpretation of ARB No. 51</i> (revised 2003) and the related
      FASB Staff Positions (collectively &quot;FIN 46&quot;). We identify VIEs
      as entities where our financial risk or reward is not consistent with the
      equity ownership. An entity is considered a VIE if any of the following
      factors are present: the equity investment in the entity is insufficient
      to finance the operations of that entity without additional subordinated
      financial support from other parties; the equity investors of the entity
      lack decision-making rights; an equity investor holds voting rights that
      are disproportionately low in relation to the actual economics of the investor's
      relationship with the entity and substantially all of the entity's activities
      involve or are conducted on behalf of that investor; other parties protect
      the equity investors from expected losses; or parties, other than the equity
      holders, hold the right to receive the entity's expected residual returns,
      or the equity investors' rights to expect residual returns is capped. The
      primary beneficiary of a VIE is the party that absorbs the majority of
      the entity's expected losses, receives the majority of its expected residual
      returns, or both as a result of holding variable interests. Assets, liabilities,
      and the non-controlling interest of newly consolidated VIEs generally are
      initially measured at their fair values with any resulting loss reported
      immediately as an extraordinary item or resulting gain as a reduction of
      the amounts assigned to assets in the same manner as if the consolidation
      resulted from a business combination. </font></p>
</div>
<p align="center"><font face="Arial" size="2">22</font></p>
<hr noshade align="center" width="100%" size="2">
<div style="page-break-before:always"></div>
<page>
<a name="p?"></a>

<div style="text-indent:3%">
  <p align="left"><font size="2" face="Arial">We have identified the following
      VIEs under the existing contracts and disclosed the arrangements in the
      Unaudited Interim Consolidated Financial Statements at March 27, 2004:</font></p>
</div>
<table width="100%" cellspacing="0" cellpadding="0" border="0">
<tr valign="top">
<td width="3%"></td>
<td width="3%"><font size="2" face="Arial">&#149;</font></td>
<td>
<font size="2" face="Arial">a joint venture established with Dai Nippon for the development and production of photomask in which we have a 19% stake, </font></td>
</tr>
</table>
<table width="100%" cellspacing="0" cellpadding="0" border="0">
<tr valign="top">
<td width="3%"></td>
<td width="3%"><font size="2" face="Arial">&#149;</font></td>
<td>
<font size="2" face="Arial">the joint venture in SuperH, Inc. with Hitachi, Ltd., where we own 44% and have commitments for future capital increases, and,</font></td>
</tr>
</table>
<table width="100%" cellspacing="0" cellpadding="0" border="0">
<tr valign="top">
<td width="3%"></td>
<td width="3%"><font size="2" face="Arial">&#149;</font></td>
<td>
<font size="2" face="Arial">the new company, UPEK, Inc., formed in 2004 as a
venture-backed spin-off of our TouchChip business, in which we have a 48% stake.</font></td>
</tr>
</table>
<div style="text-indent:3%">
  <p align="left"><font size="2" face="Arial">We have determined that for all
      these VIEs we are not the primary beneficiary, and we continue to account
      for the investments under the cost method, for the venture with Dai Nippon,
      and the equity method, for the SuperH, Inc. and UPEK, Inc. arrangements.</font></p>
</div>
<div style="text-indent:3%">
  <p align="left"><font size="2" face="Arial">In May 2003, the Financial Accounting
      Standards Board issued Statement of Financial Accounting Standards No.
      150, <i>Accounting for Certain Instruments with Characteristics of Both
      Liabilities and Equity</i> (&quot;FAS 150&quot;). FAS 150 specifies that &quot;freestanding&quot; financial
      instruments within its scope embody obligations of the issuer and therefore,
      the issuer must classify such instruments as liabilities. FAS 150 is effective
      for all instruments entered into or modified after May 31, 2003. For all
      other instruments, FAS 150 is effective for the first interim period beginning
      after June 15, 2003. We adopted FAS 150 in the second quarter of 2003 and
      determined that it has had no material effect on our financial position
      or results of operations.</font></p>
</div>
<div style="text-indent:3%">
  <p align="left"><font size="2" face="Arial">In 2003, the Emerging Issues Task
      Force issued EITF Issue No. 00-21, <i>Accounting for Revenue Arrangements
      with Multiple Deliverables </i>(&#147;EITF 00-21&#148;), to address certain aspects
      of the accounting by a vendor for arrangements under which it will perform
      multiple revenue-generating activities. In some arrangements, the different
      revenue-generating activities (deliverables) are sufficiently separable,
      and there exists sufficient evidence of their fair values to separately
      account for some or all of the deliverables. EITF 00-21 applies to all
      contractual arrangements (whether written, oral, or implied) entered into
      after June 15, 2003 under which a vendor will perform multiple revenue-generating
      activities. In addition, EITF 00-21 should only be applied in those situations
      where higher-level generally accepted accounting principles do not exist
      that specify the appropriate accounting. We adopted EITF 00-21 in the third
      quarter of 2003, and management determined that EITF 00-21 has had no material
      effect on our financial position or results of operations. </font></p>
</div>
<div style="text-indent:3%">
  <p align="left"><font size="2" face="Arial">In December 2003, the Financial
      Accounting Standards Board issued Statement of Financial Accounting Standards
      No. 132 (revised 2003), <i>Employers' Disclosures about Pensions and Other
      Postretirement Benefits, an amendment of FASB Statements Nos. 87, 88, and
      106, and a revision of FASB Statement No. 132</i> (&#147;FAS 132 revised&#148;). This
      Statement revises employers' disclosures about pension plans and other
      postretirement benefit plans. It does not change the measurement or recognition
      of those plans required by FASB Statements No. 87, <i>Employers' Accounting
      for Pensions</i>, No. 88, <i>Employers' Accounting for Settlements and
      Curtailments of Defined Benefit Pension Plans and for Termination Benefits</i>,
      and No. 106, <i>Employers' Accounting for Postretirement Benefits Other
      Than Pensions</i>. FAS 132 revised requires </font></p>
</div>
<p align="center"><font face="Arial" size="2">23</font></p>
<hr noshade align="center" width="100%" size="2">
<div style="page-break-before:always"></div>
<page>
<a name="p?"></a>

<p align="left"><font size="2" face="Arial">additional disclosures about the
    assets, obligations, cash flows, and net periodic benefit cost of defined
    benefit pension plans and other postretirement benefit plans. The statement
    is generally effective for 2003 calendar year-end financial statements, with
    a delayed effective date for certain disclosures for foreign plans. We adopted
    FAS 132 revised in the fourth quarter of 2003 and included all immediately
    required disclosures at December 31, 2003. We have evaluated the required
    disclosures for our foreign plans and have included the additional information
in our Unaudited Interim Financial Statements as at March 27, 2004. </font></p>
<p align="left"><font size="2" face="Arial"><b>Backlog and Customers </b></font></p>
<div style="text-indent:3%">
  <p align="left"><font size="2" face="Arial">Our backlog (including frame orders)
      decreased significantly in 2001 from the levels of 2000, reflecting the
      most severe downturn in the semiconductor industry. Starting in 2002 we
      steadily registered an increase in the backlog (including frame orders)
      compared to 2001 in line with the progressive recovery of the semiconductor
      industry. Our backlog continued to increase in 2003 compared to 2002, driven
      mainly by a strong increase in volumes while selling prices were declining.
      We entered 2004 with a backlog (including frame orders) approximately 30%
      higher than we had entering 2003. Our new order booking rate (including
      new frame orders) continued to be strong in the first quarter of 2004.
      During the first quarter of 2004, we had several large customers, with
      the Nokia group of companies being the largest and accounting for 15.2%
      of our revenues. Total original equipment manufacturers (&quot;OEMs&quot;)
      accounted for approximately 80% of our net revenues, of which the top-ten
      OEM customers accounted for approximately 43%. Distributors accounted for
      approximately 20% of our net revenues. We have no assurance that the Nokia
      group of companies, or any other customer, will continue to generate revenues
      for us at the same levels. If we were to lose one or more of our key customers,
      or if they were to significantly reduce their bookings, or fail to meet
      their payment obligations, our operating results and financial condition
      could be adversely affected.</font></p>
</div>
<p align="left"><font size="2" face="Arial"><b>Changes to Our Share Capital,
Stock Option Grants and Other Matters</b></font></p>
<div style="text-indent:3%">
  <p align="left"><font size="2" face="Arial">The following table sets forth
      changes to our share capital as of March 27, 2004:</font></p>
</div>
<table width="100%" cellspacing="0" cellpadding="0" border="0">
<tr valign="bottom">
<td align="left"><font size="1" face="Arial"><b>Year</b></font></td>
<td width="1%" align="left"><font size="1"> &nbsp;</font></td>
<td width="15%" align="center"><font size="1" face="Arial"><b>Transaction</b></font></td>
<td width="1%" align="left"><font size="1">&nbsp;</font></td>
<td width="8%" align="center"><font size="1" face="Arial"><b>Number<br>
  of shares</b></font></td>
<td width="1%" align="left"><font size="1">&nbsp;</font></td>
<td width="8%" align="center"><font size="1" face="Arial"><b>Nominal<br>value<br>(euro)</b></font></td>
<td width="1%" align="left"><font size="1">&nbsp;</font></td>
<td width="9%" align="center"><font size="1" face="Arial"><b>Cumulative<br>amount of<br>capital<br>(euro)</b></font></td>
<td width="1%" align="left"><font size="1">&nbsp;</font></td>
<td width="9%" align="center"><font size="1" face="Arial"><b>Cumulative<br>number of</b> <b>shares</b></font></td>
<td width="1%" align="left"><font size="1">&nbsp;</font></td>
<td width="8%" align="center"><font size="1" face="Arial"><b>Nominal</b> <b>value of</b> <b>increase/</b> <b>reduction<br>
  in capital</b></font></td>
<td width="1%" align="left"><font size="1">&nbsp;</font></td>
<td width="8%" align="center"><font size="1" face="Arial"><b>Amount<br>of issue<br>premium<br>(euro)</b></font></td>
<td width="1%" align="left"><font size="1">&nbsp;</font></td>
<td width="9%" align="center"><font size="1" face="Arial"><b>Cumulative&#151;issue<br>premium<br>(euro)</b></font></td>
<td width="2%" align="left"><font size="1">&nbsp;</font></td>
</tr>
<tr valign="top">
<td><hr noshade size="1"></td>
<td><font size="1">&nbsp;</font></td>
<td><hr noshade size="1"></td>
<td><font size="1">&nbsp;</font></td>
<td><hr noshade size="1"></td>
<td><font size="1">&nbsp;</font></td>
<td><hr noshade size="1"></td>
<td><font size="1">&nbsp;</font></td>
<td><hr noshade size="1"></td>
<td><font size="1">&nbsp;</font></td>
<td><hr noshade size="1"></td>
<td><font size="1">&nbsp;</font></td>
<td><hr noshade size="1"></td>
<td><font size="1">&nbsp;</font></td>
<td><hr noshade size="1"></td>
<td><font size="1">&nbsp;</font></td>
<td><hr noshade size="1"></td>
<td><font size="1">&nbsp;</font></td>
</tr>
<tr valign="top" bgcolor="#eeeeee">
<td align="left"><font size="2" face="Arial">December 31, 2003</font></td>
<td align="left">&nbsp;</td>
<td align="left"><font size="2" face="Arial">Exercise of options </font></td>
<td align="left">&nbsp;</td>
<td align="right"><font size="2" face="Arial">634,261</font></td>
<td align="left">&nbsp;</td>
<td align="right"><font size="2" face="Arial">1.04</font></td>
<td align="left">&nbsp;</td>
<td align="right"><font size="2" face="Arial">938,880,523</font></td>
<td align="left">&nbsp;</td>
<td align="right"><font size="2" face="Arial">902,769,734</font></td>
<td align="left">&nbsp;</td>
<td align="right"><font size="2" face="Arial">659,631</font></td>
<td align="left">&nbsp;</td>
<td align="right"><font size="2" face="Arial">4,458,391</font></td>
<td align="left">&nbsp;</td>
<td align="right"><font size="2" face="Arial">1,693,579,662</font></td>
<td align="left">&nbsp;</td>
</tr>
<tr valign="top">
<td align="left"><font size="2" face="Arial">March 27, 2004</font></td>
<td align="left">&nbsp;</td>
<td align="left"><font size="2" face="Arial">Exercise of options </font></td>
<td align="left">&nbsp;</td>
<td align="right"><font size="2" face="Arial">1,964,551</font></td>
<td align="left">&nbsp;</td>
<td align="right"><font size="2" face="Arial">1.04</font></td>
<td align="left">&nbsp;</td>
<td align="right"><font size="2" face="Arial">940,923,656</font></td>
<td align="left">&nbsp;</td>
<td align="right"><font size="2" face="Arial">904,734,285</font></td>
<td align="left">&nbsp;</td>
<td align="right"><font size="2" face="Arial">2,043,133</font></td>
<td align="left">&nbsp;</td>
<td align="right"><font size="2" face="Arial">9,048,811</font></td>
<td align="left">&nbsp;</td>
<td align="right"><font size="2" face="Arial">1,702,628,473</font></td>
<td align="left">&nbsp;</td>
</tr>
</table>
<p align="center"><font face="Arial" size="2">24</font></p>
<hr noshade align="center" width="100%" size="2">
<div style="page-break-before:always"></div>
<page>
<a name="p?"></a>

<p align="left"><font size="2" face="Arial">The following table summarizes the amount of stock options authorized to be granted exercised, cancelled and outstanding as of March 27, 2003.</font></p>
<table width="100%" cellspacing="0" cellpadding="0" border="0">
<tr valign="top">
<td align="left"><font size="1" face="Arial"> &nbsp;</font></td>
<td align="left"><font size="1">&nbsp;</font></td>
<td align="right"><font size="1">&nbsp;</font></td>
<td colspan="4" align="center"><font size="1" face="Arial"><b>Employees</b></font></td>
<td align="left"><font size="1">&nbsp;</font></td>
<td align="right"><font size="1">&nbsp;</font></td>
<td colspan="7" align="center"><font size="1" face="Arial"><b>Supervisory Board</b></font></td>
<td align="left"><font size="1">&nbsp;</font></td>
<td align="right"><font size="1">&nbsp;</font></td>
<td align="left"><font size="1" face="Arial">&nbsp;</font></td>
<td align="left"><font size="1">&nbsp;</font></td>
</tr>
<tr valign="top">
  <td align="left">&nbsp;</td>
  <td align="left">&nbsp;</td>
  <td align="right">&nbsp;</td>
  <td colspan="4" align="center"><hr size="1" noshade>
</td>
  <td align="left"><hr size="1" noshade></td>
  <td align="right"><hr size="1" noshade></td>
  <td colspan="7" align="center"><hr size="1" noshade></td>
  <td align="left"><hr size="1" noshade></td>
  <td align="right"><hr size="1" noshade></td>
  <td align="left"><hr size="1" noshade></td>
  <td align="left"><hr size="1" noshade></td>
</tr>
<tr valign="top" bgcolor="">
<td align="left"><font size="1" face="Arial">&nbsp;</font></td>
<td align="left"><font size="1">&nbsp;</font></td>
<td align="right"><font size="1">&nbsp;</font></td>
<td align="right"><font size="1" face="Arial"><b>1995 Plan</b></font></td>
<td align="left"><font size="1">&nbsp;</font></td>
<td align="right"><font size="1">&nbsp;</font></td>
<td align="right"><font size="1" face="Arial"><b>2001 Plan</b></font></td>
<td align="left"><font size="1">&nbsp;</font></td>
<td align="right"><font size="1">&nbsp;</font></td>
<td align="right"><font size="1" face="Arial"><b>1996</b></font></td>
<td align="left"><font size="1">&nbsp;</font></td>
<td align="right"><font size="1">&nbsp;</font></td>
<td align="right"><font size="1" face="Arial"><b>1999</b></font></td>
<td align="left"><font size="1">&nbsp;</font></td>
<td align="right"><font size="1">&nbsp;</font></td>
<td align="right"><font size="1" face="Arial"><b>2002</b></font></td>
<td align="left"><font size="1">&nbsp;</font></td>
<td align="right"><font size="1">&nbsp;</font></td>
<td align="right"><font size="1" face="Arial"><b>Total</b></font></td>
<td align="left"><font size="1">&nbsp;</font></td>
</tr>
<tr valign="top">
  <td align="left">&nbsp;</td>
  <td align="left">&nbsp;</td>
  <td align="right">&nbsp;</td>
  <td colspan="4" align="center"><hr size="1" noshade>
</td>
  <td align="left"><hr size="1" noshade></td>
  <td align="right"><hr size="1" noshade></td>
  <td colspan="7" align="center"><hr size="1" noshade></td>
  <td align="left"><hr size="1" noshade></td>
  <td align="right"><hr size="1" noshade></td>
  <td align="left"><hr size="1" noshade></td>
  <td align="left"><hr size="1" noshade></td>
</tr>
<tr valign="top" bgcolor="#eeeeee">
<td align="left"><font size="2" face="Arial">Remaining amount authorized</font></td>
<td width="2%" align="left"><font size="2">&nbsp;</font></td>
<td width="1%" align="right"><font size="2">&nbsp;</font></td>
<td width="8%" align="right"><font size="2" face="Arial">0</font></td>
<td width="2%" align="left"><font size="2">&nbsp;</font></td>
<td width="1%" align="right"><font size="2">&nbsp;</font></td>
<td width="8%" align="right"><font size="2" face="Arial">26,291,783</font></td>
<td width="2%" align="left"><font size="2">&nbsp;</font></td>
<td width="1%" align="right"><font size="2">&nbsp;</font></td>
<td width="8%" align="right"><font size="2" face="Arial">0</font></td>
<td width="2%" align="left"><font size="2">&nbsp;</font></td>
<td width="1%" align="right"><font size="2">&nbsp;</font></td>
<td width="8%" align="right"><font size="2" face="Arial">0</font></td>
<td width="2%" align="left"><font size="2">&nbsp;</font></td>
<td width="1%" align="right"><font size="2">&nbsp;</font></td>
<td width="8%" align="right"><font size="2" face="Arial">132,000</font></td>
<td width="2%" align="left"><font size="2">&nbsp;</font></td>
<td width="1%" align="right"><font size="2">&nbsp;</font></td>
<td width="8%" align="right"><font size="2" face="Arial">26,423,783</font></td>
<td width="2%" align="left"><font size="2">&nbsp;</font></td>
</tr>
<tr valign="top">
<td align="left"><font size="2" face="Arial">Amount exercised</font></td>
<td align="left"><font size="2">&nbsp;</font></td>
<td align="right"><font size="2">&nbsp;</font></td>
<td align="right"><font size="2" face="Arial">9,196,514</font></td>
<td align="left"><font size="2">&nbsp;</font></td>
<td align="right"><font size="2">&nbsp;</font></td>
<td align="right"><font size="2" face="Arial">3,950</font></td>
<td align="left"><font size="2">&nbsp;</font></td>
<td align="right"><font size="2">&nbsp;</font></td>
<td align="right"><font size="2" face="Arial">253,000</font></td>
<td align="left"><font size="2">&nbsp;</font></td>
<td align="right"><font size="2">&nbsp;</font></td>
<td align="right"><font size="2" face="Arial">18,000</font></td>
<td align="left"><font size="2">&nbsp;</font></td>
<td align="right"><font size="2">&nbsp;</font></td>
<td align="right"><font size="2" face="Arial">0</font></td>
<td align="left"><font size="2">&nbsp;</font></td>
<td align="right"><font size="2">&nbsp;</font></td>
<td align="right"><font size="2" face="Arial">9,471,464</font></td>
<td align="left"><font size="2">&nbsp;</font></td>
</tr>
<tr valign="top" bgcolor="#eeeeee">
<td align="left"><font size="2" face="Arial">Amount cancelled</font></td>
<td align="left"><font size="2">&nbsp;</font></td>
<td align="right"><font size="2">&nbsp;</font></td>
<td align="right"><font size="2" face="Arial">2,083,165</font></td>
<td align="left"><font size="2">&nbsp;</font></td>
<td align="right"><font size="2">&nbsp;</font></td>
<td align="right"><font size="2" face="Arial">1,700,936</font></td>
<td align="left"><font size="2">&nbsp;</font></td>
<td align="right"><font size="2">&nbsp;</font></td>
<td align="right"><font size="2" face="Arial">72,000</font></td>
<td align="left"><font size="2">&nbsp;</font></td>
<td align="right"><font size="2">&nbsp;</font></td>
<td align="right"><font size="2" face="Arial">63,000</font></td>
<td align="left"><font size="2">&nbsp;</font></td>
<td align="right"><font size="2">&nbsp;</font></td>
<td align="right"><font size="2" face="Arial">24,000</font></td>
<td align="left"><font size="2">&nbsp;</font></td>
<td align="right"><font size="2">&nbsp;</font></td>
<td align="right"><font size="2" face="Arial">3,943,101</font></td>
<td align="left"><font size="2">&nbsp;</font></td>
</tr>
<tr valign="top">
<td align="left"><font size="2" face="Arial">Amount outstanding</font></td>
<td align="left"><font size="2">&nbsp;</font></td>
<td align="right"><font size="2">&nbsp;</font></td>
<td align="right"><font size="2" face="Arial">20,282,262</font></td>
<td align="left"><font size="2">&nbsp;</font></td>
<td align="right"><font size="2">&nbsp;</font></td>
<td align="right"><font size="2" face="Arial">33,708,217</font></td>
<td align="left"><font size="2">&nbsp;</font></td>
<td align="right"><font size="2">&nbsp;</font></td>
<td align="right"><font size="2" face="Arial">75,500</font></td>
<td align="left"><font size="2">&nbsp;</font></td>
<td align="right"><font size="2">&nbsp;</font></td>
<td align="right"><font size="2" face="Arial">342,000</font></td>
<td align="left"><font size="2">&nbsp;</font></td>
<td align="right"><font size="2">&nbsp;</font></td>
<td align="right"><font size="2" face="Arial">240,000</font></td>
<td align="left"><font size="2">&nbsp;</font></td>
<td align="right"><font size="2">&nbsp;</font></td>
<td align="right"><font size="2" face="Arial">54,647,979</font></td>
<td align="left"><font size="2">&nbsp;</font></td>
</tr>
</table>
<div style="text-indent:3%">
  <p align="left"><font size="2" face="Arial">As of April 23, 2004 the Supervisory
      Board was authorized to grant 12,235,490 options at an exercise price of
      $22.71.</font></p>
</div>
<p align="left"><font size="2" face="Arial"><b>Disclosure Controls and Procedures</b></font></p>
<div style="text-indent:3%">
  <p align="left"><font size="2" face="Arial">Our Chief Executive Officer and
      Chief Financial Officer, after evaluating the effectiveness of our disclosure
      controls and procedures
      (as defined in Exchange Act Rule 13a-14(c)) as of the end of the period
      covered by this report, have concluded that, as of such date, our disclosure
      controls and procedures were effective
      to
      ensure
      that material information relating to our company was made known to them
      by others within our company, particularly during the period when this
      Form 6-K was being prepared.</font></p>
  <p align="left"><font size="2" face="Arial">There were no significant changes
      in our internal controls over financial reporting or in other factors that
      could significantly affect these controls during the period covered by
      this report, nor were there any significant deficiencies or material
      weaknesses in our internal controls requiring corrective actions.</font></p>
</div>
<p align="left"><font size="2" face="Arial"><b>Other Reviews</b></font></p>
<div style="text-indent:3%">
  <p align="left"><font size="2" face="Arial">We have sent this report to our
      Audit Committee, which had an opportunity to raise questions with our management
      and independent auditors before we submitted it to the Securities and Exchange
      Commission.</font></p>
</div>
<p align="left"><font size="2" face="Arial"><b>Cautionary Note Regarding Forward-Looking
Statements</b></font></p>
<div style="text-indent:3%">
  <p align="left"><font size="2" face="Arial">Some of the statements contained
      in the &quot;Overview&#151;Business Outlook&quot; and in the &quot;Liquidity
      and Capital Resources&#151;Financial Outlook&quot; that are not historical
      facts are statements of future expectations and other forward-looking statements
      (within the meaning of Section 27A of the Securities Act of 1933 or Section
      21E of the Securities Exchange Act of 1934, each as amended) that are based
      on management's current views and assumptions and involve known and unknown
      risks and uncertainties that could cause actual results, performance or
      events to differ materially from those in such statements due to, among
      other factors:</font></p>
</div>
<table width="100%" cellspacing="0" cellpadding="0" border="0">
<tr valign="top">
<td width="3%"><font size="2" face="Arial">&nbsp;</font></td>
<td width="3%"><font size="2" face="Arial">&#149;</font></td>
<td align="left">
<font size="2" face="Arial"> the demand and pricing trends for semiconductor products in the key application markets served by our products;</font></td>
</tr>
<tr valign="top">
  <td>&nbsp;</td>
  <td>&nbsp;</td>
  <td align="left">&nbsp;</td>
</tr>
</table>
<table width="100%" cellspacing="0" cellpadding="0" border="0">
<tr valign="top">
<td width="3%"><font size="2" face="Arial">&nbsp;</font></td>
<td width="3%"><font size="2" face="Arial">&#149;</font></td>
<td align="left">
<font size="2" face="Arial"> a strong weakening of the U.S. dollar compared to the euro exchange rate, from the current rate of approximately $1.20 per &euro;1.00, as well as between the U.S. dollar and the currencies of the other major countries in which we currently have our operating infrastructure;</font></td>
</tr>
<tr valign="top">
  <td>&nbsp;</td>
  <td>&nbsp;</td>
  <td align="left">&nbsp;</td>
</tr>
</table>
<table width="100%" cellspacing="0" cellpadding="0" border="0">
<tr valign="top">
<td width="3%"><font size="2" face="Arial">&nbsp;</font></td>
<td width="3%"><font size="2" face="Arial">&#149;</font></td>
<td align="left">
<font size="2" face="Arial"> the timely migration of 150mm production from high-cost areas and, more generally, the successful implementation of our restructuring plan of our manufacturing activities;</font></td>
</tr>
</table>
<p align="center"><font face="Arial" size="2">25</font></p>
<hr noshade align="center" width="100%" size="2">
<div style="page-break-before:always"></div>
<page>
<a name="p?"></a>

<table width="100%" cellspacing="0" cellpadding="0" border="0">
<tr valign="top">
<td width="3%"><font size="2" face="Arial">&nbsp;</font></td>
<td width="3%"><font size="2" face="Arial">
&#149;
</font></td>
<td align="left">
<font size="2" face="Arial"> the timely development and volume production of new manufacturing technologies in leading-edge fabs in time to meet the demand of our customers;</font></td>
</tr>
<tr valign="top">
  <td>&nbsp;</td>
  <td>&nbsp;</td>
  <td align="left">&nbsp;</td>
</tr>
</table>
<table width="100%" cellspacing="0" cellpadding="0" border="0">
<tr valign="top">
<td width="3%"><font size="2" face="Arial">&nbsp;</font></td>
<td width="3%"><font size="2" face="Arial">
&#149;
</font></td>
<td align="left">
<font size="2" face="Arial"> the intensively competitive and cyclical nature of the semiconductor industry, and our ability to compete in products and prices in such an environment;</font></td>
</tr>
<tr valign="top">
  <td>&nbsp;</td>
  <td>&nbsp;</td>
  <td align="left">&nbsp;</td>
</tr>
</table>
<table width="100%" cellspacing="0" cellpadding="0" border="0">
<tr valign="top">
<td width="3%"><font size="2" face="Arial">&nbsp;</font></td>
<td width="3%"><font size="2" face="Arial">
&#149;
</font></td>
<td align="left">
<font size="2" face="Arial"> our ability to develop, manufacture and market innovative products in a rapidly changing technological environment;</font></td>
</tr>
<tr valign="top">
  <td>&nbsp;</td>
  <td>&nbsp;</td>
  <td align="left">&nbsp;</td>
</tr>
</table>
<table width="100%" cellspacing="0" cellpadding="0" border="0">
<tr valign="top">
<td width="3%"><font size="2" face="Arial">&nbsp;</font></td>
<td width="3%"><font size="2" face="Arial">
&#149;
</font></td>
<td align="left">
<font size="2" face="Arial"> changes in the economic, social, political and health conditions in the countries in which we and our key customers operate; and</font></td>
</tr>
<tr valign="top">
  <td>&nbsp;</td>
  <td>&nbsp;</td>
  <td align="left">&nbsp;</td>
</tr>
</table>
<table width="100%" cellspacing="0" cellpadding="0" border="0">
<tr valign="top">
<td width="3%"><font size="2" face="Arial">&nbsp;</font></td>
<td width="3%"><font size="2" face="Arial">
&#149;
</font></td>
<td align="left">
<font size="2" face="Arial"> the anticipated benefits of research and development alliances and cooperative activities.</font></td>
</tr>
<tr valign="top">
  <td>&nbsp;</td>
  <td>&nbsp;</td>
  <td align="left">&nbsp;</td>
</tr>
</table>
<table width="100%" cellspacing="0" cellpadding="0" border="0">
<tr valign="top">
<td colspan="3"><font size="2" face="Arial">&nbsp;</font><font size="2" face="Arial">&nbsp;</font><font size="2" face="Arial">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Certain such forward-looking statements can be identified by the use of forward-looking terminology such as &quot;believes&quot;, &quot;expects&quot;, &quot;may&quot;, &quot;are expected to&quot;, &quot;will&quot;, &quot;will continue&quot;, &quot;should&quot;, &quot;would be&quot;, &quot;seeks&quot; or &quot;anticipates&quot; or similar expressions or the negative thereof or other variations thereof or comparable terminology, or by discussions of strategy, plans or intentions.  Some of these risk factors are set forth and are discussed in more detail in &quot;Item 3. Key Information&#151;Risk Factors&quot; included in our Form 20-F and as updated from time to time in our SEC filings.  Should one or more of these
risks or uncertainties materialize, or should underlying assumptions prove incorrect, actual results may vary materially from those described in this offering memorandum as anticipated, believed or expected.  We do not intend, and do not assume any obligation, to update any industry information or forward-looking statements set forth in this interim report to reflect subsequent events or circumstances.</font></td>
</tr>
<tr valign="top">
  <td width="3%">&nbsp;</td>
  <td width="3%">&nbsp;</td>
  <td align="left">&nbsp;</td>
</tr>
</table>
<table width="100%" cellspacing="0" cellpadding="0" border="0">
<tr valign="top">
<td><font size="2" face="Arial">&nbsp;</font><font size="2" face="Arial">&nbsp;</font><font size="2" face="Arial">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Unfavorable changes in the above or other factors listed under &quot;Risk Factors&quot; from time to time in our SEC filings, including in our Form 20-F, could have a material effect on our business or financial condition.</font></td>
</tr>
</table>
<p align="center"><font face="Arial" size="2">26</font></p>
<hr noshade align="center" width="100%" size="2">
<div style="page-break-before:always"></div>
<page>
<a name="contents"></a>
<table width="100%" border="0" cellspacing="0" cellpadding="0">
  <tr align="center">
    <td colspan="3"><font face="Arial" size="2"><b>STMICROELECTRONICS N.V.</b></font></td>
  </tr>
  <tr>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td align="right">&nbsp;</td>
  </tr>
  <tr>
    <td colspan="3" align="center"><font face="Arial" size="2"><b>UNAUDITED INTERIM
          CONSOLIDATED FINANCIAL STATEMENTS</b></font></td>
  </tr>
  <tr>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td align="right"><font face="Arial" size="2"><b>Pages</b></font></td>
  </tr>
  <tr>
    <td><a href="#pf2"><font face="Arial" size="2">Consolidated Statements of Income for the
        Three Months Ended March 27, 2004 and March 29,
        2003 (unaudited)</font></a></td>
    <td width="2%"><a href="#pf2"></a></td>
    <td width="8%" align="right"><a href="#pf2"><font face="Arial" size="2">F-2</font></a></td>
  </tr>
  <tr>
    <td><a href="#pf3"><font face="Arial" size="2">Consolidated Balance Sheets as of  March
        27, 2004 (unaudited) and December 31, 2003 (audited)</font></a></td>
    <td><a href="#pf3"></a></td>
    <td align="right"><a href="#pf3"><font face="Arial" size="2">F-3</font></a></td>
  </tr>
  <tr>
    <td><a href="#pf4"><font face="Arial" size="2">Consolidated Statements of Cash Flows for
        the Three Months Ended March 27, 2004 and March
        29, 2003 (unaudited)</font></a></td>
    <td><a href="#pf4"></a></td>
    <td align="right"><a href="#pf4"><font face="Arial" size="2">F-4</font></a></td>
  </tr>
  <tr>
    <td><a href="#pf5"><font face="Arial" size="2">Consolidated Statements of
    Changes in Shareholders&#8217; Equity</font></a></td>
    <td><a href="#pf5"></a></td>
    <td align="right"><a href="#pf5"><font face="Arial" size="2">F-5</font></a></td>
  </tr>
  <tr>
    <td><a href="#pf6"><font face="Arial" size="2">Notes to Interim Consolidated Financial Statements
        (unaudited)</font></a></td>
    <td><a href="#pf6"></a></td>
    <td align="right"><a href="#pf6"><font face="Arial" size="2">F-6</font></a></td>
  </tr>
</table>
<p align="center"><font face="Arial" size="2">F-1</font></p>
<hr noshade align="center" width="100%" size="2">
<div style="page-break-before:always"></div>
<page>
<p><a name="pf2"></a></p>
<p><font size="2" face="Arial"><a href="#contents">Back to Contents</a></font></p>


<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr>
    <td><font face="Arial" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top">
    <td align="center"><font face="Arial" size="2"><b>STMICROELECTRONICS N.V.</b></font></td>
  </tr>
</table>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr valign="top">
    <td align="center">&nbsp;</td>
  </tr>
  <tr valign="top">
    <td align="center"><font face="Arial" size="2"><b>CONSOLIDATED STATEMENTS OF INCOME</b></font></td>
  </tr>
</table>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr valign="bottom">
    <td><font size="1">&nbsp;</font></td>
    <td><font size="1">&nbsp;</font></td>
    <td colspan="5" align="center" valign="bottom"><font size="1">&nbsp;</font></td>
    <td><font size="1">&nbsp;</font></td>
  </tr>
  <tr valign="bottom">
    <td><font face="Arial" size="1">&nbsp;</font></td>
    <td><font face="Arial" size="1">&nbsp;</font></td>
    <td colspan="5" align="center" valign="bottom"><font face="Arial" size="1"><b>Three
          Months Ended </b>
          <hr noshade size="1">
    </font></td>
    <td><font face="Arial" size="1">&nbsp;</font></td>
  </tr>
  <tr valign="top">
    <td><font face="Arial" size="1">&nbsp;</font></td>
    <td><font face="Arial" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="Arial" size="1">&nbsp;</font></td>
    <td align="center" valign="bottom"><font face="Arial" size="1"><b>(Unaudited)</b></font></td>
    <td><font face="Arial" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="Arial" size="1">&nbsp;</font></td>
    <td align="center" valign="bottom"><font face="Arial" size="1"><b>(Unaudited)</b></font></td>
    <td><font face="Arial" size="1">&nbsp;</font></td>
  </tr>
  <tr valign="top">
    <td><font face="Arial" size="1">&nbsp;</font></td>
    <td><font face="Arial" size="1">&nbsp;</font></td>
    <td><font face="Arial" size="1">
      <hr noshade size="1">
    </font></td>
    <td><font face="Arial" size="1">
      <hr noshade size="1">
    </font></td>
    <td><font face="Arial" size="1">&nbsp;</font></td>
    <td><font face="Arial" size="1">
      <hr noshade size="1">
    </font></td>
    <td><font face="Arial" size="1">
      <hr noshade size="1">
    </font></td>
    <td><font face="Arial" size="1">&nbsp;</font></td>
  </tr>
  <tr valign="top">
    <td><font face="Arial" size="1">&nbsp;</font></td>
    <td><font face="Arial" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="Arial" size="1">&nbsp;</font></td>
    <td align="center" valign="bottom"><font face="Arial" size="1"><b>March 27,</b></font></td>
    <td><font face="Arial" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="Arial" size="1">&nbsp;</font></td>
    <td align="center" valign="bottom"><font face="Arial" size="1"><b>March 29,</b></font></td>
    <td><font face="Arial" size="1">&nbsp;</font></td>
  </tr>
  <tr valign="top">
    <td><font face="Arial" size="1">&nbsp;</font></td>
    <td><font face="Arial" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="Arial" size="1">&nbsp;</font></td>
    <td align="center" valign="bottom"><font face="Arial" size="1"><b>2004</b></font></td>
    <td><font face="Arial" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="Arial" size="1">&nbsp;</font></td>
    <td align="center" valign="bottom"><font face="Arial" size="1"><b>2003</b></font></td>
    <td><font face="Arial" size="1">&nbsp;</font></td>
  </tr>
  <tr valign="top">
    <td><font face="Arial" size="1">&nbsp;</font></td>
    <td><font face="Arial" size="1">&nbsp;</font></td>
    <td><font face="Arial" size="1">
      <hr noshade size="1">
    </font></td>
    <td><font face="Arial" size="1">
      <hr noshade size="1">
    </font></td>
    <td><font face="Arial" size="1">
      <hr noshade size="1">
    </font></td>
    <td><font face="Arial" size="1">
      <hr noshade size="1">
    </font></td>
    <td><font face="Arial" size="1">
      <hr noshade size="1">
    </font></td>
    <td><font face="Arial" size="1">&nbsp;</font></td>
  </tr>
  <tr valign="top">
    <td><font size="1">&nbsp;</font></td>
    <td><font size="1">&nbsp;</font></td>
    <td colspan="5" align="center"><font face="Arial" size="1"><b>(in millions
          of U.S. dollars,<br>
    except per share data)</b></font></td>
    <td><font size="1">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="Arial" size="2">Net sales</font></div></td>
    <td width="2%"><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom" width="1%"><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom" width="8%"><font face="Arial" size="2">2,028</font></td>
    <td width="2%"><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom" width="1%"><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom" width="8%"><font face="Arial" size="2">1,617</font></td>
    <td width="2%"><font face="Arial" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="Arial" size="2">Other revenues</font></div></td>
    <td><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="Arial" size="2">1</font></td>
    <td><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="Arial" size="2">1</font></td>
    <td><font face="Arial" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><font face="Arial" size="2">&nbsp;</font></td>
    <td><font face="Arial" size="2">&nbsp;</font></td>
    <td><font face="Arial" size="2"><hr noshade size="1"></font></td>
    <td><font face="Arial" size="2"><hr noshade size="1"></font></td>
    <td><font face="Arial" size="2">&nbsp;</font></td>
    <td><font face="Arial" size="2"><hr noshade size="1"></font></td>
    <td><font face="Arial" size="2"><hr noshade size="1"></font></td>
    <td><font face="Arial" size="2">&nbsp;</font></td>
  </tr>

  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="Arial" size="2"><b>Net revenues</b></font></div></td>
    <td><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="Arial" size="2"><b>2,029</b></font></td>
    <td><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="Arial" size="2"><b>1,618</b></font></td>
    <td><font face="Arial" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="Arial" size="2">Cost of sales</font></div></td>
    <td><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="Arial" size="2">(1,311</font></td>
    <td valign="bottom"><font face="Arial" size="2">)</font></td>
    <td align="right" valign="bottom"><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="Arial" size="2">(1,052</font></td>
    <td valign="bottom"><font face="Arial" size="2">)</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><font face="Arial" size="2">&nbsp;</font></td>
    <td><font face="Arial" size="2">&nbsp;</font></td>
    <td><font face="Arial" size="2"><hr noshade size="1"></font></td>
    <td><font face="Arial" size="2"><hr noshade size="1"></font></td>
    <td><font face="Arial" size="2">&nbsp;</font></td>
    <td><font face="Arial" size="2"><hr noshade size="1"></font></td>
    <td><font face="Arial" size="2"><hr noshade size="1"></font></td>
    <td><font face="Arial" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="Arial" size="2"><b>Gross profit</b></font></div></td>
    <td><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="Arial" size="2"><b>718</b></font></td>
    <td><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="Arial" size="2"><b>566</b></font></td>
    <td><font face="Arial" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="Arial" size="2">Selling, general and administrative</font></div></td>
    <td><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="Arial" size="2">(230</font></td>
    <td valign="bottom"><font face="Arial" size="2">)</font></td>
    <td align="right" valign="bottom"><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="Arial" size="2">(174</font></td>
    <td valign="bottom"><font face="Arial" size="2">)</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="Arial" size="2">Research and development</font></div></td>
    <td><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="Arial" size="2">(363</font></td>
    <td valign="bottom"><font face="Arial" size="2">)</font></td>
    <td align="right" valign="bottom"><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="Arial" size="2">(283</font></td>
    <td valign="bottom"><font face="Arial" size="2">)</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="Arial" size="2">Other income and expenses, net</font></div></td>
    <td><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="Arial" size="2">(12</font></td>
    <td valign="bottom"><font face="Arial" size="2">)</font></td>
    <td align="right" valign="bottom"><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="Arial" size="2">15</font></td>
    <td><font face="Arial" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="Arial" size="2">Impairment, restructuring charges and other related closure costs</font></div></td>
    <td><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="Arial" size="2">(33</font></td>
    <td valign="bottom"><font face="Arial" size="2">)</font></td>
    <td align="right" valign="bottom"><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="Arial" size="2">0</font></td>
    <td><font face="Arial" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><font face="Arial" size="2">&nbsp;</font></td>
    <td><font face="Arial" size="2">&nbsp;</font></td>
    <td><font face="Arial" size="2"><hr noshade size="1"></font></td>
    <td><font face="Arial" size="2"><hr noshade size="1"></font></td>
    <td><font face="Arial" size="2">&nbsp;</font></td>
    <td><font face="Arial" size="2"><hr noshade size="1"></font></td>
    <td><font face="Arial" size="2"><hr noshade size="1"></font></td>
    <td><font face="Arial" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="Arial" size="2">Total
          operating expenses</font></div></td>
    <td><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="Arial" size="2">(638</font></td>
    <td valign="bottom"><font face="Arial" size="2">)</font></td>
    <td align="right" valign="bottom"><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="Arial" size="2">(442</font></td>
    <td valign="bottom"><font face="Arial" size="2">)</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><font face="Arial" size="2">&nbsp;</font></td>
    <td><font face="Arial" size="2">&nbsp;</font></td>
    <td><font face="Arial" size="2"><hr noshade size="1"></font></td>
    <td><font face="Arial" size="2"><hr noshade size="1"></font></td>
    <td><font face="Arial" size="2">&nbsp;</font></td>
    <td><font face="Arial" size="2"><hr noshade size="1"></font></td>
    <td><font face="Arial" size="2"><hr noshade size="1"></font></td>
    <td><font face="Arial" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="Arial" size="2"><b>Operating
            income</b></font></div></td>
    <td><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="Arial" size="2"><b>80</b></font></td>
    <td><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="Arial" size="2"><b>124</b></font></td>
    <td><font face="Arial" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="Arial" size="2">Interest expense, net</font></div></td>
    <td><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="Arial" size="2">(4</font></td>
    <td valign="bottom"><font face="Arial" size="2">)</font></td>
    <td align="right" valign="bottom"><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="Arial" size="2">(18</font></td>
    <td valign="bottom"><font face="Arial" size="2">)</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="Arial" size="2">Loss on extinguishment of convertible debt</font></div></td>
    <td><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="Arial" size="2">0</font></td>
    <td><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="Arial" size="2">(8</font></td>
    <td valign="bottom"><font face="Arial" size="2">)</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><font face="Arial" size="2">&nbsp;</font></td>
    <td><font face="Arial" size="2">&nbsp;</font></td>
    <td><font face="Arial" size="2"><hr noshade size="1"></font></td>
    <td><font face="Arial" size="2"><hr noshade size="1"></font></td>
    <td><font face="Arial" size="2">&nbsp;</font></td>
    <td><font face="Arial" size="2"><hr noshade size="1"></font></td>
    <td><font face="Arial" size="2"><hr noshade size="1"></font></td>
    <td><font face="Arial" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="Arial" size="2"><b>Income
    before income taxes and minority interests</b></font></div></td>
    <td><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="Arial" size="2"><b>76</b></font></td>
    <td><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="Arial" size="2"><b>98</b></font></td>
    <td><font face="Arial" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="Arial" size="2">Income tax benefit (expense)</font></div></td>
    <td><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="Arial" size="2">1</font></td>
    <td><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="Arial" size="2">(18</font></td>
    <td valign="bottom"><font face="Arial" size="2">)</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><font face="Arial" size="2">&nbsp;</font></td>
    <td><font face="Arial" size="2">&nbsp;</font></td>
    <td><font face="Arial" size="2"><hr noshade size="1"></font></td>
    <td><font face="Arial" size="2"><hr noshade size="1"></font></td>
    <td><font face="Arial" size="2">&nbsp;</font></td>
    <td><font face="Arial" size="2"><hr noshade size="1"></font></td>
    <td><font face="Arial" size="2"><hr noshade size="1"></font></td>
    <td><font face="Arial" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="Arial" size="2"><b>Income before
    minority interests</b></font></div></td>
    <td><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="Arial" size="2"><b>77</b></font></td>
    <td><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="Arial" size="2"><b>80</b></font></td>
    <td><font face="Arial" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="Arial" size="2">Minority interests</font></div></td>
    <td><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="Arial" size="2">0</font></td>
    <td><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="Arial" size="2">(1</font></td>
    <td valign="bottom"><font face="Arial" size="2">)</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><font face="Arial" size="2">&nbsp;</font></td>
    <td><font face="Arial" size="2">&nbsp;</font></td>
    <td><font face="Arial" size="2"><hr noshade size="1"></font></td>
    <td><font face="Arial" size="2"><hr noshade size="1"></font></td>
    <td><font face="Arial" size="2">&nbsp;</font></td>
    <td><font face="Arial" size="2"><hr noshade size="1"></font></td>
    <td><font face="Arial" size="2"><hr noshade size="1"></font></td>
    <td><font face="Arial" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="Arial" size="2"><b>Net income</b></font></div></td>
    <td><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="Arial" size="2"><b>77</b></font></td>
    <td><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="Arial" size="2"><b>79</b></font></td>
    <td><font face="Arial" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><font face="Arial" size="2">&nbsp;</font></td>
    <td><font face="Arial" size="2">&nbsp;</font></td>
    <td><hr noshade size="2"></td>
    <td><hr noshade size="2"></td>
    <td><font face="Arial" size="2">&nbsp;</font></td>
    <td><hr noshade size="2"></td>
    <td><hr noshade size="2"></td>
    <td><font face="Arial" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="Arial" size="2"><b>Earnings per
    share (basic)</b></font></div></td>
    <td><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="Arial" size="2"><b>0.09</b></font></td>
    <td><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="Arial" size="2"><b>0.09</b></font></td>
    <td><font face="Arial" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="Arial" size="2"><b>Earnings per
    share (diluted)</b></font></div></td>
    <td><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="Arial" size="2"><b>0.08</b></font></td>
    <td><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="Arial" size="2"><b>0.09</b></font></td>
    <td><font face="Arial" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="Arial" size="2"><b>Number of
            weighted average shares used in calculating diluted earnings per
            share</b></font></div></td>
    <td><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="Arial" size="2"><b>938.7</b></font></td>
    <td><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="Arial" size="2"><b>891.1</b></font></td>
    <td><font face="Arial" size="2">&nbsp;</font></td>
  </tr>
</table>
<p align="center"><font face="Arial" size="2">The accompanying notes are an integral
part of these Unaudited Interim Consolidated Financial Statements.</font></p>
<p align="center"><font face="Arial" size="2">F-2</font></p>
<hr noshade align="center" width="100%" size="2">
<div style="page-break-before:always"></div>
<page>
<a name="pf3"></a>
<p><font size="2" face="Arial"><a href="#contents">Back to Contents</a></font></p>


<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr valign="bottom">
    <td align="center"><font face="Arial" size="2"><b>STMICROELECTRONICS N.V.</b></font></td>
  </tr>
</table>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr valign="top">
    <td align="center">&nbsp;</td>
  </tr>
  <tr valign="top">
    <td align="center"><font face="Arial" size="2"><b>CONSOLIDATED BALANCE SHEETS</b></font></td>
  </tr>
</table>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr valign="bottom">
    <td width="76%"><font size="1">&nbsp;</font></td>
    <td><font size="1">&nbsp;</font></td>
    <td colspan="5" align="center" valign="bottom"><font size="1">&nbsp;</font></td>
    <td align="center" valign="bottom"><font size="1">&nbsp;</font></td>
  </tr>
  <tr valign="bottom">
    <td><font size="1">&nbsp;</font></td>
    <td><font size="1">&nbsp;</font></td>
    <td colspan="5" align="center" valign="bottom"><font face="Arial" size="1"><b>As
          at</b></font></td>
    <td align="center" valign="bottom"><font size="1">&nbsp;</font></td>
  </tr>
  <tr valign="bottom">
    <td><font size="1">&nbsp;</font></td>
    <td><font size="1">&nbsp;</font></td>
    <td colspan="5" align="center" valign="bottom"> <font face="Arial" size="1">
      <hr noshade size="1">
    </font></td>
    <td align="center" valign="bottom">&nbsp;</td>
  </tr>
  <tr valign="bottom">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="Arial" size="1">&nbsp;</font></div>
    </td>
    <td><font face="Arial" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="Arial" size="1">&nbsp;</font></td>
    <td align="center" valign="bottom"><font face="Arial" size="1"><b>March 27,</b></font></td>
    <td><font face="Arial" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="Arial" size="1">&nbsp;</font></td>
    <td align="center" valign="bottom"><font face="Arial" size="1"><b>December
          31,</b></font></td>
    <td><font face="Arial" size="1">&nbsp;</font></td>
  </tr>
  <tr valign="top">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="Arial" size="1">&nbsp;</font></div>
    </td>
    <td><font face="Arial" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="Arial" size="1">&nbsp;</font></td>
    <td align="center" valign="bottom"><font face="Arial" size="1"><b>2004</b></font></td>
    <td><font face="Arial" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="Arial" size="1">&nbsp;</font></td>
    <td align="center" valign="bottom"><font face="Arial" size="1"><b>2003</b></font></td>
    <td><font face="Arial" size="1">&nbsp;</font></td>
  </tr>
  <tr valign="top">
    <td><font face="Arial" size="1">&nbsp;</font></td>
    <td><font face="Arial" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="Arial" size="1">&nbsp;</font></td>
    <td align="center" valign="bottom"><font face="Arial" size="1"><b>(Unaudited)</b></font></td>
    <td><font face="Arial" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="Arial" size="1">&nbsp;</font></td>
    <td align="center" valign="bottom"><font face="Arial" size="1"><b>(Audited)</b></font></td>
    <td><font face="Arial" size="1">&nbsp;</font></td>
  </tr>
  <tr valign="top">
    <td><font face="Arial" size="1">&nbsp;</font></td>
    <td><font face="Arial" size="1">&nbsp;</font></td>
    <td><font face="Arial" size="1">
      <hr noshade size="1">
    </font></td>
    <td><font face="Arial" size="1">
      <hr noshade size="1">
    </font></td>
    <td><hr noshade size="1">
    </td>
    <td><font face="Arial" size="1">
      <hr noshade size="1">
    </font></td>
    <td><font face="Arial" size="1">
      <hr noshade size="1">
    </font></td>
    <td><font face="Arial" size="1">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><font size="1">&nbsp;</font></td>
    <td><font size="1">&nbsp;</font></td>
    <td colspan="5" align="center"><font face="Arial" size="1"><b>(in millions
          of U.S. dollars)</b></font></td>
    <td align="center">&nbsp;</td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="Arial" size="2"><b>ASSETS</b></font></div></td>
    <td width="2%"><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" width="1%"><font face="Arial" size="2">&nbsp;</font></td>
    <td width="8%"><font face="Arial" size="2">&nbsp;</font></td>
    <td width="2%"><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" width="1%"><font face="Arial" size="2">&nbsp;</font></td>
    <td width="8%"><font face="Arial" size="2">&nbsp;</font></td>
    <td width="2%"><font face="Arial" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="Arial" size="2"><b>Current assets:</b></font></div></td>
    <td><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right"><font face="Arial" size="2">&nbsp;</font></td>
    <td><font face="Arial" size="2">&nbsp;</font></td>
    <td><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right"><font face="Arial" size="2">&nbsp;</font></td>
    <td><font face="Arial" size="2">&nbsp;</font></td>
    <td><font face="Arial" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="Arial" size="2">Cash and cash equivalents</font></div></td>
    <td><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="Arial" size="2">2,103</font></td>
    <td><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="Arial" size="2">2,998</font></td>
    <td><font face="Arial" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="Arial" size="2">Marketable securities</font></div></td>
    <td><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="Arial" size="2">1,030</font></td>
    <td><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="Arial" size="2">0</font></td>
    <td><font face="Arial" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="Arial" size="2">Trade accounts receivable</font></div></td>
    <td><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="Arial" size="2">1,398</font></td>
    <td><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="Arial" size="2">1,272</font></td>
    <td><font face="Arial" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="Arial" size="2">Inventories</font></div></td>
    <td><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="Arial" size="2">1,071</font></td>
    <td><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="Arial" size="2">1,129</font></td>
    <td><font face="Arial" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="Arial" size="2">Deferred tax assets</font></div></td>
    <td><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="Arial" size="2">104</font></td>
    <td><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="Arial" size="2">106</font></td>
    <td><font face="Arial" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="Arial" size="2">Other receivables and assets</font></div></td>
    <td><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="Arial" size="2">605</font></td>
    <td><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="Arial" size="2">616</font></td>
    <td><font face="Arial" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><font face="Arial" size="2">&nbsp;</font></td>
    <td><font face="Arial" size="2">&nbsp;</font></td>
    <td><font face="Arial" size="2"><hr noshade size="1"></font></td>
    <td><font face="Arial" size="2"><hr noshade size="1"></font></td>
    <td><font face="Arial" size="2">&nbsp;</font></td>
    <td><font face="Arial" size="2"><hr noshade size="1"></font></td>
    <td><font face="Arial" size="2"><hr noshade size="1"></font></td>
    <td><font face="Arial" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="text-indent:6%"><font face="Arial" size="2"><b>Total current assets</b></font></div></td>
    <td><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="Arial" size="2"><b>6,311</b></font></td>
    <td><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="Arial" size="2"><b>6,121</b></font></td>
    <td><font face="Arial" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="Arial" size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</font></div></td>
    <td><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right"><font face="Arial" size="2">&nbsp;</font></td>
    <td><font face="Arial" size="2">&nbsp;</font></td>
    <td><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right"><font face="Arial" size="2">&nbsp;</font></td>
    <td><font face="Arial" size="2">&nbsp;</font></td>
    <td><font face="Arial" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="Arial" size="2">Goodwill</font></div></td>
    <td><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="Arial" size="2">260</font></td>
    <td><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="Arial" size="2">267</font></td>
    <td><font face="Arial" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="Arial" size="2">Other intangible assets, net</font></div></td>
    <td><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="Arial" size="2">312</font></td>
    <td><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="Arial" size="2">325</font></td>
    <td><font face="Arial" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="Arial" size="2">Property, plant and equipment, net</font></div></td>
    <td><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="Arial" size="2">6,447</font></td>
    <td><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="Arial" size="2">6,620</font></td>
    <td><font face="Arial" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="Arial" size="2">Long-term deferred tax assets</font></div></td>
    <td><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="Arial" size="2">43</font></td>
    <td><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="Arial" size="2">45</font></td>
    <td><font face="Arial" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="Arial" size="2">Investments and other non-current assets</font></div></td>
    <td><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="Arial" size="2">104</font></td>
    <td><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="Arial" size="2">99</font></td>
    <td><font face="Arial" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><font face="Arial" size="2">&nbsp;</font></td>
    <td><font face="Arial" size="2">&nbsp;</font></td>
    <td><font face="Arial" size="2"><hr noshade size="1"></font></td>
    <td><font face="Arial" size="2"><hr noshade size="1"></font></td>
    <td><font face="Arial" size="2">&nbsp;</font></td>
    <td><font face="Arial" size="2"><hr noshade size="1"></font></td>
    <td><font face="Arial" size="2"><hr noshade size="1"></font></td>
    <td><font face="Arial" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td bgcolor="#eeeeee"><font size="2">&nbsp;</font></td>
    <td><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="Arial" size="2"><b>7,166</b></font></td>
    <td><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="Arial" size="2"><b>7,356</b></font></td>
    <td><font face="Arial" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><font face="Arial" size="2">&nbsp;</font></td>
    <td><font face="Arial" size="2">&nbsp;</font></td>
    <td><font face="Arial" size="2">
      <hr noshade size="1">
    </font></td>
    <td><font face="Arial" size="2">
      <hr noshade size="1">
    </font></td>
    <td><font face="Arial" size="2">&nbsp;</font></td>
    <td><font face="Arial" size="2">
      <hr noshade size="1">
    </font></td>
    <td><font face="Arial" size="2">
      <hr noshade size="1">
    </font></td>
    <td><font face="Arial" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="text-indent:6%"><font face="Arial" size="2"><b>Total assets</b></font></div></td>
    <td><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="Arial" size="2"><b>13,477</b></font></td>
    <td><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="Arial" size="2"><b>13,477</b></font></td>
    <td><font face="Arial" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><font face="Arial" size="2">&nbsp;</font></td>
    <td><font face="Arial" size="2">&nbsp;</font></td>
    <td><font face="Arial" size="2"><hr noshade size="1"></font></td>
    <td><font face="Arial" size="2"><hr noshade size="1"></font></td>
    <td><font face="Arial" size="2">&nbsp;</font></td>
    <td><font face="Arial" size="2"><hr noshade size="1"></font></td>
    <td><font face="Arial" size="2"><hr noshade size="1"></font></td>
    <td><font face="Arial" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="Arial" size="2"><b>LIABILITIES AND SHAREHOLDERS&#146; EQUITY</b></font></div></td>
    <td><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right"><font face="Arial" size="2">&nbsp;</font></td>
    <td><font face="Arial" size="2">&nbsp;</font></td>
    <td><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right"><font face="Arial" size="2">&nbsp;</font></td>
    <td><font face="Arial" size="2">&nbsp;</font></td>
    <td><font face="Arial" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="Arial" size="2"><b>Current liabilities:</b></font></div></td>
    <td><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right"><font face="Arial" size="2">&nbsp;</font></td>
    <td><font face="Arial" size="2">&nbsp;</font></td>
    <td><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right"><font face="Arial" size="2">&nbsp;</font></td>
    <td><font face="Arial" size="2">&nbsp;</font></td>
    <td><font face="Arial" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="Arial" size="2">Bank overdrafts</font></div></td>
    <td><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="Arial" size="2">4</font></td>
    <td><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="Arial" size="2">45</font></td>
    <td><font face="Arial" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="Arial" size="2">Current portion of long-term debt</font></div></td>
    <td><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="Arial" size="2">443</font></td>
    <td><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="Arial" size="2">106</font></td>
    <td><font face="Arial" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="Arial" size="2">Trade accounts payable</font></div></td>
    <td><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="Arial" size="2">1,230</font></td>
    <td><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="Arial" size="2">1,044</font></td>
    <td><font face="Arial" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="Arial" size="2">Other payables and accrued liabilities</font></div></td>
    <td><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="Arial" size="2">686</font></td>
    <td><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="Arial" size="2">693</font></td>
    <td><font face="Arial" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="Arial" size="2">Deferred tax liabilities</font></div></td>
    <td><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="Arial" size="2">8</font></td>
    <td><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="Arial" size="2">10</font></td>
    <td><font face="Arial" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="Arial" size="2">Accrued income tax</font></div></td>
    <td><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="Arial" size="2">160</font></td>
    <td><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="Arial" size="2">179</font></td>
    <td><font face="Arial" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><font face="Arial" size="2">&nbsp;</font></td>
    <td><font face="Arial" size="2">&nbsp;</font></td>
    <td><font face="Arial" size="2"><hr noshade size="1"></font></td>
    <td><font face="Arial" size="2"><hr noshade size="1"></font></td>
    <td><font face="Arial" size="2">&nbsp;</font></td>
    <td><font face="Arial" size="2"><hr noshade size="1"></font></td>
    <td><font face="Arial" size="2"><hr noshade size="1"></font></td>
    <td><font face="Arial" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="text-indent:6%"><font face="Arial" size="2"><b>Total current liabilities</b></font></div></td>
    <td><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="Arial" size="2"><b>2,531</b></font></td>
    <td><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="Arial" size="2"><b>2,077</b></font></td>
    <td><font face="Arial" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="Arial" size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</font></div></td>
    <td><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right"><font face="Arial" size="2">&nbsp;</font></td>
    <td><font face="Arial" size="2">&nbsp;</font></td>
    <td><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right"><font face="Arial" size="2">&nbsp;</font></td>
    <td><font face="Arial" size="2">&nbsp;</font></td>
    <td><font face="Arial" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="Arial" size="2">Long-term debt</font></div></td>
    <td><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="Arial" size="2">2,555</font></td>
    <td><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="Arial" size="2">2,944</font></td>
    <td><font face="Arial" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="Arial" size="2">Reserves for pension and termination indemnities</font></div></td>
    <td><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="Arial" size="2">236</font></td>
    <td><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="Arial" size="2">236</font></td>
    <td><font face="Arial" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="Arial" size="2">Long-term deferred tax liabilities</font></div></td>
    <td><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="Arial" size="2">35</font></td>
    <td><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="Arial" size="2">37</font></td>
    <td><font face="Arial" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="Arial" size="2">Other non-current liabilities</font></div></td>
    <td><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="Arial" size="2">38</font></td>
    <td><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="Arial" size="2">38</font></td>
    <td><font face="Arial" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><font face="Arial" size="2">&nbsp;</font></td>
    <td><font face="Arial" size="2">&nbsp;</font></td>
    <td><font face="Arial" size="2"><hr noshade size="1"></font></td>
    <td><font face="Arial" size="2"><hr noshade size="1"></font></td>
    <td><font face="Arial" size="2">&nbsp;</font></td>
    <td><font face="Arial" size="2"><hr noshade size="1"></font></td>
    <td><font face="Arial" size="2"><hr noshade size="1"></font></td>
    <td><font face="Arial" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><font size="2">&nbsp;</font></td>
    <td><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="Arial" size="2"><b>2,864</b></font></td>
    <td><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="Arial" size="2"><b>3,255</b></font></td>
    <td><font face="Arial" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="text-indent:6%"><font face="Arial" size="2"><b>Total liabilities</b></font></div></td>
    <td><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="Arial" size="2"><b>5,395</b></font></td>
    <td><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="Arial" size="2"><b>5,332</b></font></td>
    <td><font face="Arial" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="Arial" size="2">Commitment and contingencies</font></div></td>
    <td><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right"><font face="Arial" size="2">&nbsp;</font></td>
    <td><font face="Arial" size="2">&nbsp;</font></td>
    <td><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right"><font face="Arial" size="2">&nbsp;</font></td>
    <td><font face="Arial" size="2">&nbsp;</font></td>
    <td><font face="Arial" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="Arial" size="2">Minority interests</font></div></td>
    <td><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="Arial" size="2">45</font></td>
    <td><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="Arial" size="2">45</font></td>
    <td><font face="Arial" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="Arial" size="2">Common Stock </font></div></td>
    <td>&nbsp;</td>
    <td align="right" valign="bottom">&nbsp;</td>
    <td align="right" valign="bottom">&nbsp;</td>
    <td>&nbsp;</td>
    <td align="right" valign="bottom">&nbsp;</td>
    <td align="right" valign="bottom">&nbsp;</td>
    <td>&nbsp;</td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:9%; text-indent:-3%"><font face="Arial" size="2">&#8226;&nbsp;&nbsp;(preferred
    stock: 540,000,000 shares authorized, not issued;</font></div></td>
    <td><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="Arial" size="2">1,150</font></td>
    <td><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="Arial" size="2">1,146</font></td>
    <td><font face="Arial" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:9%; text-indent:-3%"><font face="Arial" size="2">&#8226;&nbsp;&nbsp;common
          stock: Euro 1.04 nominal value, 1,200,000,000 shares authorized, 904,734,285
    shares issued, 891,334,285 shares outstanding)</font></div></td>
    <td><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right"><font face="Arial" size="2">&nbsp;</font></td>
    <td><font face="Arial" size="2">&nbsp;</font></td>
    <td><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right"><font face="Arial" size="2">&nbsp;</font></td>
    <td><font face="Arial" size="2">&nbsp;</font></td>
    <td><font face="Arial" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="Arial" size="2">Capital surplus</font></div></td>
    <td><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="Arial" size="2">1,915</font></td>
    <td><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="Arial" size="2">1,905</font></td>
    <td><font face="Arial" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="Arial" size="2">Accumulated result</font></div></td>
    <td><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="Arial" size="2">4,851</font></td>
    <td><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="Arial" size="2">4,774</font></td>
    <td><font face="Arial" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="Arial" size="2">Accumulated other comprehensive income (loss)</font></div></td>
    <td><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="Arial" size="2">469</font></td>
    <td><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="Arial" size="2">623</font></td>
    <td><font face="Arial" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="Arial" size="2">Treasury stock</font></div></td>
    <td><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="Arial" size="2">(348</font></td>
    <td valign="bottom"><font face="Arial" size="2">)</font></td>
    <td align="right" valign="bottom"><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="Arial" size="2">(348</font></td>
    <td valign="bottom"><font face="Arial" size="2">)</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><font face="Arial" size="2">&nbsp;</font></td>
    <td><font face="Arial" size="2">&nbsp;</font></td>
    <td><font face="Arial" size="2"><hr noshade size="1"></font></td>
    <td><font face="Arial" size="2"><hr noshade size="1"></font></td>
    <td><font face="Arial" size="2">&nbsp;</font></td>
    <td><font face="Arial" size="2"><hr noshade size="1"></font></td>
    <td><font face="Arial" size="2"><hr noshade size="1"></font></td>
    <td><font face="Arial" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="text-indent:6%"><font face="Arial" size="2"><b>Shareholders&#146; equity</b></font></div></td>
    <td><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="Arial" size="2"><b>8,037</b></font></td>
    <td><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="Arial" size="2"><b>8,100</b></font></td>
    <td><font face="Arial" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><font face="Arial" size="2">&nbsp;</font></td>
    <td><font face="Arial" size="2">&nbsp;</font></td>
    <td><font face="Arial" size="2"><hr noshade size="1"></font></td>
    <td><font face="Arial" size="2"><hr noshade size="1"></font></td>
    <td><font face="Arial" size="2">&nbsp;</font></td>
    <td><font face="Arial" size="2"><hr noshade size="1"></font></td>
    <td><font face="Arial" size="2"><hr noshade size="1"></font></td>
    <td><font face="Arial" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="text-indent:6%"><font face="Arial" size="2"><b>Total liabilities and shareholders&#146; equity</b></font></div></td>
    <td><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="Arial" size="2"><b>13,477</b></font></td>
    <td><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="Arial" size="2"><b>13,477</b></font></td>
    <td><font face="Arial" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><font face="Arial" size="2">&nbsp;</font></td>
    <td><font face="Arial" size="2">&nbsp;</font></td>
    <td><hr noshade size="2"></td>
    <td><hr noshade size="2"></td>
    <td><font face="Arial" size="2">&nbsp;</font></td>
    <td><hr noshade size="2"></td>
    <td><hr noshade size="2"></td>
    <td><font face="Arial" size="2">&nbsp;</font></td>
  </tr>
</table>
<p align="center"><font face="Arial" size="2">The accompanying notes are an integral
part of these Unaudited Interim Consolidated Financial Statements.</font></p>
<p align="center"><font face="Arial" size="2">F-3</font></p>
<hr noshade align="center" width="100%" size="2">
<div style="page-break-before:always"></div>
<page>
<a name="pf4"></a>
<p><font size="2" face="Arial"><a href="#contents">Back to Contents</a></font></p>


<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr valign="bottom">
    <td align="center"><font face="Arial" size="2"><b>STMICROELECTRONICS N.V.</b></font></td>
  </tr>
</table>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr valign="top">
    <td align="center">&nbsp;</td>
  </tr>
  <tr valign="top">
    <td align="center"><font face="Arial" size="2"><b>CONSOLIDATED STATEMENTS
          OF CASH FLOWS</b></font></td>
  </tr>
  <tr>
    <td><font size="1">&nbsp;</font></td>
  </tr>
</table>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr valign="bottom">
    <td><font face="Arial" size="1">&nbsp;</font></td>
    <td><font face="Arial" size="1">&nbsp;</font></td>
    <td colspan="5" align="center" valign="bottom"><font face="Arial" size="1"><b>Three
          Months Ended </b>
          <hr noshade size="1">
    </font></td>
    <td><font face="Arial" size="1">&nbsp;</font></td>
  </tr>
  <tr valign="top">
    <td><font face="Arial" size="1">&nbsp;</font></td>
    <td><font face="Arial" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="Arial" size="1">&nbsp;</font></td>
    <td align="center" valign="bottom"><font face="Arial" size="1"><b>March 27,</b></font></td>
    <td><font face="Arial" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="Arial" size="1">&nbsp;</font></td>
    <td align="center" valign="bottom"><font face="Arial" size="1"><b>March 29,</b></font></td>
    <td><font face="Arial" size="1">&nbsp;</font></td>
  </tr>
  <tr valign="top">
    <td><font face="Arial" size="1">&nbsp;</font></td>
    <td><font face="Arial" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="Arial" size="1">&nbsp;</font></td>
    <td align="center" valign="bottom"><font face="Arial" size="1"><b>2004</b></font></td>
    <td><font face="Arial" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="Arial" size="1">&nbsp;</font></td>
    <td align="center" valign="bottom"><font face="Arial" size="1"><b>2003</b></font></td>
    <td><font face="Arial" size="1">&nbsp;</font></td>
  </tr>
  <tr valign="top">
    <td><font face="Arial" size="1">&nbsp;</font></td>
    <td><font face="Arial" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="Arial" size="1">&nbsp;</font></td>
    <td align="center" valign="bottom"><font face="Arial" size="1"><b>(Unaudited)</b></font></td>
    <td><font face="Arial" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="Arial" size="1">&nbsp;</font></td>
    <td align="center" valign="bottom"><font face="Arial" size="1"><b>(Unaudited)</b></font></td>
    <td><font face="Arial" size="1">&nbsp;</font></td>
  </tr>
  <tr valign="top">
    <td><font face="Arial" size="1">&nbsp;</font></td>
    <td><font face="Arial" size="1">&nbsp;</font></td>
    <td><font face="Arial" size="1">
      <hr noshade size="1">
    </font></td>
    <td><font face="Arial" size="1">
      <hr noshade size="1">
    </font></td>
    <td> <font face="Arial" size="1">
      <hr noshade size="1">
    </font></td>
    <td><font face="Arial" size="1">
      <hr noshade size="1">
    </font></td>
    <td><font face="Arial" size="1">
      <hr noshade size="1">
    </font></td>
    <td><font face="Arial" size="1">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><font size="1">&nbsp;</font></td>
    <td><font size="1">&nbsp;</font></td>
    <td colspan="5" align="center"><font face="Arial" size="1"><b>(in millions
          of U.S. dollars)</b></font></td>
    <td><font size="1">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="Arial" size="2"><b>Cash flows from operating activities:</b></font></div></td>
    <td width="2%"><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" width="1%"><font face="Arial" size="2">&nbsp;</font></td>
    <td width="8%"><font face="Arial" size="2">&nbsp;</font></td>
    <td width="2%"><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" width="1%"><font face="Arial" size="2">&nbsp;</font></td>
    <td width="8%"><font face="Arial" size="2">&nbsp;</font></td>
    <td width="2%"><font face="Arial" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:3%"><font face="Arial" size="2">Net income</font></div></td>
    <td><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="Arial" size="2">77</font></td>
    <td><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="Arial" size="2">79</font></td>
    <td><font face="Arial" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:3%"><font face="Arial" size="2">Items to reconcile net income and cash flow from operating activities:</font></div></td>
    <td><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right"><font face="Arial" size="2">&nbsp;</font></td>
    <td><font face="Arial" size="2">&nbsp;</font></td>
    <td><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right"><font face="Arial" size="2">&nbsp;</font></td>
    <td><font face="Arial" size="2">&nbsp;</font></td>
    <td><font face="Arial" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:6%"><font face="Arial" size="2">Depreciation and amortization</font></div></td>
    <td><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="Arial" size="2">421</font></td>
    <td><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="Arial" size="2">370</font></td>
    <td><font face="Arial" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:6%"><font face="Arial" size="2">Amortization of discount on convertible debt</font></div></td>
    <td><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="Arial" size="2">11</font></td>
    <td><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="Arial" size="2">22</font></td>
    <td><font face="Arial" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:6%"><font face="Arial" size="2">Loss on extinguishment of convertible debt</font></div></td>
    <td><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="Arial" size="2">0</font></td>
    <td><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="Arial" size="2">8</font></td>
    <td><font face="Arial" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:6%"><font face="Arial" size="2">Other non-cash items</font></div></td>
    <td><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="Arial" size="2">(3</font></td>
    <td valign="bottom"><font face="Arial" size="2">)</font></td>
    <td align="right" valign="bottom"><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="Arial" size="2">(4</font></td>
    <td valign="bottom"><font face="Arial" size="2">)</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:6%"><font face="Arial" size="2">Minority interest in net income of subsidiaries</font></div></td>
    <td><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="Arial" size="2">0</font></td>
    <td><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="Arial" size="2">1</font></td>
    <td><font face="Arial" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:6%"><font face="Arial" size="2">Deferred income tax</font></div></td>
    <td><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="Arial" size="2">(3</font></td>
    <td valign="bottom"><font face="Arial" size="2">)</font></td>
    <td align="right" valign="bottom"><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="Arial" size="2">(9</font></td>
    <td valign="bottom"><font face="Arial" size="2">)</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:6%"><font face="Arial" size="2">Impairment, restructuring charges and other related closure costs, net of cash payments</font></div></td>
    <td><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="Arial" size="2">23</font></td>
    <td><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="Arial" size="2">0</font></td>
    <td><font face="Arial" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:3%"><font face="Arial" size="2">Changes in assets and liabilities:</font></div></td>
    <td><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right"><font face="Arial" size="2">&nbsp;</font></td>
    <td><font face="Arial" size="2">&nbsp;</font></td>
    <td><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right"><font face="Arial" size="2">&nbsp;</font></td>
    <td><font face="Arial" size="2">&nbsp;</font></td>
    <td><font face="Arial" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:6%"><font face="Arial" size="2">Trade receivables</font></div></td>
    <td><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="Arial" size="2">(125</font></td>
    <td valign="bottom"><font face="Arial" size="2">)</font></td>
    <td align="right" valign="bottom"><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="Arial" size="2">50</font></td>
    <td><font face="Arial" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:6%"><font face="Arial" size="2">Inventories</font></div></td>
    <td><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="Arial" size="2">44</font></td>
    <td><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="Arial" size="2">(35</font></td>
    <td valign="bottom"><font face="Arial" size="2">)</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:6%"><font face="Arial" size="2">Trade payables</font></div></td>
    <td><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="Arial" size="2">169</font></td>
    <td><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="Arial" size="2">(9</font></td>
    <td valign="bottom"><font face="Arial" size="2">)</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:6%"><font face="Arial" size="2">Other assets and liabilities, net</font></div></td>
    <td><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="Arial" size="2">(62</font></td>
    <td valign="bottom"><font face="Arial" size="2">)</font></td>
    <td align="right" valign="bottom"><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="Arial" size="2">(50</font></td>
    <td valign="bottom"><font face="Arial" size="2">)</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><font face="Arial" size="2">&nbsp;</font></td>
    <td><font face="Arial" size="2">&nbsp;</font></td>
    <td><font face="Arial" size="2"><hr noshade size="1"></font></td>
    <td><font face="Arial" size="2"><hr noshade size="1"></font></td>
    <td><font face="Arial" size="2">&nbsp;</font></td>
    <td><font face="Arial" size="2"><hr noshade size="1"></font></td>
    <td><font face="Arial" size="2"><hr noshade size="1"></font></td>
    <td><font face="Arial" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="Arial" size="2"><b>Net cash from operating activities</b></font></div></td>
    <td><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="Arial" size="2"><b>552</b></font></td>
    <td><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="Arial" size="2"><b>423</b></font></td>
    <td><font face="Arial" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="Arial" size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</font></div></td>
    <td><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right"><font face="Arial" size="2">&nbsp;</font></td>
    <td><font face="Arial" size="2">&nbsp;</font></td>
    <td><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right"><font face="Arial" size="2">&nbsp;</font></td>
    <td><font face="Arial" size="2">&nbsp;</font></td>
    <td><font face="Arial" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="Arial" size="2"><b>Cash flows from investing activities:</b></font></div></td>
    <td><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right"><font face="Arial" size="2">&nbsp;</font></td>
    <td><font face="Arial" size="2">&nbsp;</font></td>
    <td><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right"><font face="Arial" size="2">&nbsp;</font></td>
    <td><font face="Arial" size="2">&nbsp;</font></td>
    <td><font face="Arial" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:3%"><font face="Arial" size="2">Payment for purchases of tangible assets</font></div></td>
    <td><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="Arial" size="2">(321</font></td>
    <td valign="bottom"><font face="Arial" size="2">)</font></td>
    <td align="right" valign="bottom"><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="Arial" size="2">(256</font></td>
    <td valign="bottom"><font face="Arial" size="2">)</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:3%"><font face="Arial" size="2">Payment for purchase of marketable securities</font></div></td>
    <td><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="Arial" size="2">(1,030</font></td>
    <td valign="bottom"><font face="Arial" size="2">)</font></td>
    <td align="right" valign="bottom"><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="Arial" size="2">(1,100</font></td>
    <td valign="bottom"><font face="Arial" size="2">)</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:3%"><font face="Arial" size="2">Investment in intangible and financial assets</font></div></td>
    <td><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="Arial" size="2">(13</font></td>
    <td valign="bottom"><font face="Arial" size="2">)</font></td>
    <td align="right" valign="bottom"><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="Arial" size="2">(13</font></td>
    <td valign="bottom"><font face="Arial" size="2">)</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:3%"><font face="Arial" size="2">Payment for acquisitions, net of cash received</font></div></td>
    <td><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="Arial" size="2">(3</font></td>
    <td valign="bottom"><font face="Arial" size="2">)</font></td>
    <td align="right" valign="bottom"><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="Arial" size="2">0</font></td>
    <td><font face="Arial" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><font face="Arial" size="2">&nbsp;</font></td>
    <td><font face="Arial" size="2">&nbsp;</font></td>
    <td><font face="Arial" size="2"><hr noshade size="1"></font></td>
    <td><font face="Arial" size="2"><hr noshade size="1"></font></td>
    <td><font face="Arial" size="2">&nbsp;</font></td>
    <td><font face="Arial" size="2"><hr noshade size="1"></font></td>
    <td><font face="Arial" size="2"><hr noshade size="1"></font></td>
    <td><font face="Arial" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="Arial" size="2"><b>Net cash used in investing activities</b></font></div></td>
    <td><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="Arial" size="2"><b>(1,367</b></font></td>
    <td valign="bottom"><font face="Arial" size="2"><b>)</b></font></td>
    <td align="right" valign="bottom"><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="Arial" size="2"><b>(1,369</b></font></td>
    <td valign="bottom"><font face="Arial" size="2"><b>)</b></font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="Arial" size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</font></div></td>
    <td><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right"><font face="Arial" size="2">&nbsp;</font></td>
    <td><font face="Arial" size="2">&nbsp;</font></td>
    <td><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right"><font face="Arial" size="2">&nbsp;</font></td>
    <td><font face="Arial" size="2">&nbsp;</font></td>
    <td><font face="Arial" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="Arial" size="2"><b>Cash flows from financing activities:</b></font></div></td>
    <td><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right"><font face="Arial" size="2">&nbsp;</font></td>
    <td><font face="Arial" size="2">&nbsp;</font></td>
    <td><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right"><font face="Arial" size="2">&nbsp;</font></td>
    <td><font face="Arial" size="2">&nbsp;</font></td>
    <td><font face="Arial" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:3%"><font face="Arial" size="2">Repayment of long-term debt</font></div></td>
    <td><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="Arial" size="2">(50</font></td>
    <td valign="bottom"><font face="Arial" size="2">)</font></td>
    <td align="right" valign="bottom"><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="Arial" size="2">(364</font></td>
    <td valign="bottom"><font face="Arial" size="2">)</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:3%"><font face="Arial" size="2">Increase (decrease) in short-term facilities</font></div></td>
    <td><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="Arial" size="2">(41</font></td>
    <td valign="bottom"><font face="Arial" size="2">)</font></td>
    <td align="right" valign="bottom"><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="Arial" size="2">7</font></td>
    <td><font face="Arial" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:3%"><font face="Arial" size="2">Capital increase</font></div></td>
    <td><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="Arial" size="2">14</font></td>
    <td><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="Arial" size="2">0</font></td>
    <td><font face="Arial" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:3%"><font face="Arial" size="2">Other financing activities</font></div></td>
    <td><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="Arial" size="2">0</font></td>
    <td><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="Arial" size="2">(1</font></td>
    <td valign="bottom"><font face="Arial" size="2">)</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><font face="Arial" size="2">&nbsp;</font></td>
    <td><font face="Arial" size="2">&nbsp;</font></td>
    <td><font face="Arial" size="2"><hr noshade size="1"></font></td>
    <td><font face="Arial" size="2"><hr noshade size="1"></font></td>
    <td><font face="Arial" size="2">&nbsp;</font></td>
    <td><font face="Arial" size="2"><hr noshade size="1"></font></td>
    <td><font face="Arial" size="2"><hr noshade size="1"></font></td>
    <td><font face="Arial" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="Arial" size="2"><b>Net
            cash used in financing activities</b></font></div></td>
    <td><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="Arial" size="2"><b>(77</b></font></td>
    <td valign="bottom"><font face="Arial" size="2"><b>)</b></font></td>
    <td align="right" valign="bottom"><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="Arial" size="2"><b>(358</b></font></td>
    <td valign="bottom"><font face="Arial" size="2"><b>)</b></font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:3%"><font face="Arial" size="2">Effect of changes in exchange rates</font></div></td>
    <td><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="Arial" size="2">(3</font></td>
    <td valign="bottom"><font face="Arial" size="2">)</font></td>
    <td align="right" valign="bottom"><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="Arial" size="2">1</font></td>
    <td><font face="Arial" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><font face="Arial" size="2">&nbsp;</font></td>
    <td><font face="Arial" size="2">&nbsp;</font></td>
    <td><font face="Arial" size="2"><hr noshade size="1"></font></td>
    <td><font face="Arial" size="2"><hr noshade size="1"></font></td>
    <td><font face="Arial" size="2">&nbsp;</font></td>
    <td><font face="Arial" size="2"><hr noshade size="1"></font></td>
    <td><font face="Arial" size="2"><hr noshade size="1"></font></td>
    <td><font face="Arial" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="Arial" size="2"><b>Net cash decrease</b></font></div></td>

    <td><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="Arial" size="2"><b>(895</b></font></td>
    <td valign="bottom"><font face="Arial" size="2"><b>)</b></font></td>
    <td align="right" valign="bottom"><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="Arial" size="2"><b>(1,303</b></font></td>
    <td valign="bottom"><font face="Arial" size="2"><b>)</b></font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><font face="Arial" size="2">&nbsp;</font></td>
    <td><font face="Arial" size="2">&nbsp;</font></td>
    <td><hr noshade size="2"></td>
    <td><hr noshade size="2"></td>
    <td><font face="Arial" size="2">&nbsp;</font></td>
    <td><hr noshade size="2"></td>
    <td><hr noshade size="2"></td>
    <td><font face="Arial" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="Arial" size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</font></div></td>
    <td><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right"><font face="Arial" size="2">&nbsp;</font></td>
    <td><font face="Arial" size="2">&nbsp;</font></td>
    <td><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right"><font face="Arial" size="2">&nbsp;</font></td>
    <td><font face="Arial" size="2">&nbsp;</font></td>
    <td><font face="Arial" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="Arial" size="2">Cash and cash equivalents at beginning of the period</font></div></td>
    <td><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="Arial" size="2">2,998</font></td>
    <td><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="Arial" size="2">2,562</font></td>
    <td><font face="Arial" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="Arial" size="2">Cash and cash equivalents at end of the period</font></div></td>
    <td><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="Arial" size="2">2,103</font></td>
    <td><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="Arial" size="2">1,259</font></td>
    <td><font face="Arial" size="2">&nbsp;</font></td>
  </tr>
</table>
<p align="center"><font face="Arial" size="2">The accompanying notes are an integral
part of these Unaudited Interim Consolidated Financial Statements.</font></p>
<p align="center"><font face="Arial" size="2">F-4</font></p>
<hr noshade align="center" width="100%" size="2">
<div style="page-break-before:always"></div>
<page>

<a name="pf5"></a>
<p><font size="2" face="Arial"><a href="#contents">Back to Contents</a></font></p>


<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr valign="bottom">
    <td align="center"><font face="Arial" size="2"><b>STMICROELECTRONICS N.V.</b></font></td>
  </tr>
  <tr valign="bottom">
    <td>&nbsp;</td>
  </tr>
  <tr valign="bottom">
    <td align="center"><font face="Arial" size="2"><b>CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS&#146; EQUITY</b></font></td>
  </tr>
 <tr>
    <td>&nbsp;</td>
  </tr>
</table>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr valign="bottom">
    <td><div style="margin-left:3%; text-indent:-3%"></div></td>
    <td><font face="Arial" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="Arial" size="1">&nbsp;</font></td>
    <td align="center" valign="bottom"><font face="Arial" size="1"><b>Common</b><br>
<b>Stock</b></font></td>
    <td><font face="Arial" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="Arial" size="1">&nbsp;</font></td>
    <td align="center" valign="bottom"><font face="Arial" size="1"><b>Capital</b><br>
<b>Surplus</b></font></td>
    <td><font face="Arial" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="Arial" size="1">&nbsp;</font></td>
    <td align="center" valign="bottom"><font face="Arial" size="1"><b>Treasury</b><br>
<b>Stock</b></font></td>
    <td><font face="Arial" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="Arial" size="1">&nbsp;</font></td>
    <td align="center" valign="bottom"><font face="Arial" size="1"><b>Accumulated</b><br>
<b>Result</b></font></td>
    <td><font face="Arial" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="Arial" size="1">&nbsp;</font></td>
    <td align="center" valign="bottom"><font face="Arial" size="1"><b>Accumulated</b><br>
<b>Other</b><br>
<b>Comprehensive</b><br>
<b>income (loss)</b></font></td>
    <td><font face="Arial" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="Arial" size="1">&nbsp;</font></td>
    <td align="center" valign="bottom"><font face="Arial" size="1"><b>Shareholders&#146;</b><br>
<b>Equity</b></font></td>
    <td><font face="Arial" size="1">&nbsp;</font></td>
  </tr>
  <tr valign="top">
    <td><font face="Arial" size="1">&nbsp;</font></td>
    <td><font face="Arial" size="1">&nbsp;</font></td>
    <td><font face="Arial" size="1"><hr noshade size="1"></font></td>
    <td><font face="Arial" size="1"><hr noshade size="1"></font></td>
    <td><font face="Arial" size="1">
      <hr noshade size="1">
    </font></td>
    <td><font face="Arial" size="1"><hr noshade size="1"></font></td>
    <td><font face="Arial" size="1"><hr noshade size="1"></font></td>
    <td><font face="Arial" size="1">
      <hr noshade size="1">
    </font></td>
    <td><font face="Arial" size="1"><hr noshade size="1"></font></td>
    <td><font face="Arial" size="1"><hr noshade size="1"></font></td>
    <td><font face="Arial" size="1">
      <hr noshade size="1">
    </font></td>
    <td><font face="Arial" size="1"><hr noshade size="1"></font></td>
    <td><font face="Arial" size="1"><hr noshade size="1"></font></td>
    <td><font face="Arial" size="1">
      <hr noshade size="1">
    </font></td>
    <td><font face="Arial" size="1"><hr noshade size="1"></font></td>
    <td><font face="Arial" size="1"><hr noshade size="1"></font></td>
    <td><font face="Arial" size="1">
      <hr noshade size="1">
    </font></td>
    <td><font face="Arial" size="1"><hr noshade size="1"></font></td>
    <td><font face="Arial" size="1"><hr noshade size="1"></font></td>
    <td><font face="Arial" size="1">&nbsp;</font></td>
  </tr>
  <tr valign="top">
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td colspan="17" align="center"><font face="Arial" size="1"><b>(in millions
          of U.S. dollars, except per share amounts)</b></font></td>
    <td>&nbsp;</td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="Arial" size="2"><b>Balance as of December 31, 2002 (audited)</b></font></div></td>
    <td width="2%"><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom" width="1%"><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom" width="8%"><font face="Arial" size="2">1,144</font></td>
    <td width="2%"><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom" width="1%"><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom" width="8%"><font face="Arial" size="2">1,864</font></td>
    <td width="2%"><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom" width="1%"><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom" width="8%"><font face="Arial" size="2">(348</font></td>
    <td valign="bottom" width="2%"><font face="Arial" size="2">)</font></td>
    <td align="right" valign="bottom" width="1%"><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom" width="8%"><font face="Arial" size="2">4,592</font></td>
    <td width="2%"><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom" width="1%"><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom" width="8%"><font face="Arial" size="2">(258</font></td>
    <td valign="bottom" width="2%"><font face="Arial" size="2">)</font></td>
    <td align="right" valign="bottom" width="1%"><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom" width="8%"><font face="Arial" size="2">6,994</font></td>
    <td width="2%"><font face="Arial" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><font face="Arial" size="2">&nbsp;</font></td>
    <td><font face="Arial" size="2">&nbsp;</font></td>
    <td><hr noshade size="2">
    </td>
    <td><hr noshade size="2">
    </td>
    <td><font face="Arial" size="2">&nbsp;</font></td>
    <td><hr noshade size="2">
    </td>
    <td><hr noshade size="2">
    </td>
    <td><font face="Arial" size="2">&nbsp;</font></td>
    <td><hr noshade size="2">
    </td>
    <td><hr noshade size="2">
    </td>
    <td><font face="Arial" size="2">&nbsp;</font></td>
    <td><hr noshade size="2">
    </td>
    <td><hr noshade size="2">
    </td>
    <td><font face="Arial" size="2">&nbsp;</font></td>
    <td><hr noshade size="2">
    </td>
    <td><hr noshade size="2">
    </td>
    <td><font face="Arial" size="2">&nbsp;</font></td>
    <td><hr noshade size="2">
    </td>
    <td><hr noshade size="2">
    </td>
    <td><font face="Arial" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="Arial" size="2">Capital increase</font></div></td>
    <td><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="Arial" size="2">2</font></td>
    <td><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="Arial" size="2">41</font></td>
    <td><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="Arial" size="2">&nbsp;</font></td>
    <td><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="Arial" size="2">&nbsp;</font></td>
    <td><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="Arial" size="2">&nbsp;</font></td>
    <td><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="Arial" size="2">43</font></td>
    <td><font face="Arial" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="Arial" size="2">Comprehensive income:</font></div></td>
    <td><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right"><font face="Arial" size="2">&nbsp;</font></td>
    <td><font face="Arial" size="2">&nbsp;</font></td>
    <td><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right"><font face="Arial" size="2">&nbsp;</font></td>
    <td><font face="Arial" size="2">&nbsp;</font></td>
    <td><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right"><font face="Arial" size="2">&nbsp;</font></td>
    <td><font face="Arial" size="2">&nbsp;</font></td>
    <td><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right"><font face="Arial" size="2">&nbsp;</font></td>
    <td><font face="Arial" size="2">&nbsp;</font></td>
    <td><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right"><font face="Arial" size="2">&nbsp;</font></td>
    <td><font face="Arial" size="2">&nbsp;</font></td>
    <td><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right"><font face="Arial" size="2">&nbsp;</font></td>
    <td><font face="Arial" size="2">&nbsp;</font></td>
    <td><font face="Arial" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:3%"><font face="Arial" size="2">Net Income</font></div></td>
    <td><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="Arial" size="2">&nbsp;</font></td>
    <td><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="Arial" size="2">&nbsp;</font></td>
    <td><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="Arial" size="2">&nbsp;</font></td>
    <td><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="Arial" size="2">253</font></td>
    <td><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="Arial" size="2">&nbsp;</font></td>
    <td><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="Arial" size="2">253</font></td>
    <td><font face="Arial" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:3%"><font face="Arial" size="2">Other comprehensive income, net of tax</font></div></td>
    <td><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="Arial" size="2">&nbsp;</font></td>
    <td><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="Arial" size="2">&nbsp;</font></td>
    <td><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="Arial" size="2">&nbsp;</font></td>
    <td><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="Arial" size="2">&nbsp;</font></td>
    <td><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="Arial" size="2">881</font></td>
    <td><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="Arial" size="2">881</font></td>
    <td><font face="Arial" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><font size="2">&nbsp;</font></td>
    <td><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="Arial" size="2">&nbsp;</font></td>
    <td><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="Arial" size="2">&nbsp;</font></td>
    <td><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="Arial" size="2">&nbsp;</font></td>
    <td><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="Arial" size="2">&nbsp;</font></td>
    <td><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="Arial" size="2">&nbsp;</font></td>
    <td><font face="Arial" size="2">&nbsp;</font></td>
    <td colspan="2" valign="bottom"><font face="Arial" size="2"><hr noshade size="1"></font></td>
    <td><font face="Arial" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="Arial" size="2">Comprehensive income</font></div></td>
    <td><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="Arial" size="2">&nbsp;</font></td>
    <td><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="Arial" size="2">&nbsp;</font></td>
    <td><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="Arial" size="2">&nbsp;</font></td>
    <td><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="Arial" size="2">&nbsp;</font></td>
    <td><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="Arial" size="2">&nbsp;</font></td>
    <td><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="Arial" size="2">1,134</font></td>
    <td><font face="Arial" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="Arial" size="2">Dividends, $0.08 per share</font></div></td>
    <td><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="Arial" size="2">&nbsp;</font></td>
    <td><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="Arial" size="2">&nbsp;</font></td>
    <td><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="Arial" size="2">&nbsp;</font></td>
    <td><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="Arial" size="2">(71</font></td>
    <td valign="bottom"><font face="Arial" size="2">)</font></td>
    <td align="right" valign="bottom"><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="Arial" size="2">&nbsp;</font></td>
    <td><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="Arial" size="2">(71</font></td>
    <td valign="bottom"><font face="Arial" size="2">)</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><font face="Arial" size="2">&nbsp;</font></td>
    <td><font face="Arial" size="2">&nbsp;</font></td>
    <td><font face="Arial" size="2"><hr noshade size="1"></font></td>
    <td><font face="Arial" size="2"><hr noshade size="1"></font></td>
    <td><font face="Arial" size="2">&nbsp;</font></td>
    <td><font face="Arial" size="2"><hr noshade size="1"></font></td>
    <td><font face="Arial" size="2"><hr noshade size="1"></font></td>
    <td><font face="Arial" size="2">&nbsp;</font></td>
    <td><font face="Arial" size="2"><hr noshade size="1"></font></td>
    <td><font face="Arial" size="2"><hr noshade size="1"></font></td>
    <td><font face="Arial" size="2">&nbsp;</font></td>
    <td><font face="Arial" size="2"><hr noshade size="1"></font></td>
    <td><font face="Arial" size="2"><hr noshade size="1"></font></td>
    <td><font face="Arial" size="2">&nbsp;</font></td>
    <td><font face="Arial" size="2"><hr noshade size="1"></font></td>
    <td><font face="Arial" size="2"><hr noshade size="1"></font></td>
    <td><font face="Arial" size="2">&nbsp;</font></td>
    <td><font face="Arial" size="2"><hr noshade size="1"></font></td>
    <td><font face="Arial" size="2"><hr noshade size="1"></font></td>
    <td><font face="Arial" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="Arial" size="2"><b>Balance as of December 31, 2003 (audited)</b></font></div></td>
    <td><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="Arial" size="2"><b>1,146</b></font></td>
    <td><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="Arial" size="2"><b>1,905</b></font></td>
    <td><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="Arial" size="2"><b>(348</b></font></td>
    <td valign="bottom"><font face="Arial" size="2"><b>)</b></font></td>
    <td align="right" valign="bottom"><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="Arial" size="2"><b>4,774</b></font></td>
    <td><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="Arial" size="2"><b>623</b></font></td>
    <td><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="Arial" size="2"><b>8,100</b></font></td>
    <td><font face="Arial" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><font face="Arial" size="2">&nbsp;</font></td>
    <td><font face="Arial" size="2">&nbsp;</font></td>
    <td><hr noshade size="2"></td>
    <td><hr noshade size="2"></td>
    <td><font face="Arial" size="2">&nbsp;</font></td>
    <td><hr noshade size="2"></td>
    <td><hr noshade size="2"></td>
    <td><font face="Arial" size="2">&nbsp;</font></td>
    <td><hr noshade size="2"></td>
    <td><hr noshade size="2"></td>
    <td><font face="Arial" size="2">&nbsp;</font></td>
    <td><hr noshade size="2"></td>
    <td><hr noshade size="2"></td>
    <td><font face="Arial" size="2">&nbsp;</font></td>
    <td><hr noshade size="2"></td>
    <td><hr noshade size="2"></td>
    <td><font face="Arial" size="2">&nbsp;</font></td>
    <td><hr noshade size="2"></td>
    <td><hr noshade size="2"></td>
    <td><font face="Arial" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="Arial" size="2">Capital increase</font></div></td>
    <td><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="Arial" size="2"><b>4</b></font></td>
    <td><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="Arial" size="2"><b>10</b></font></td>
    <td><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="Arial" size="2">&nbsp;</font></td>
    <td><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="Arial" size="2">&nbsp;</font></td>
    <td><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="Arial" size="2">&nbsp;</font></td>
    <td><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="Arial" size="2"><b>14</b></font></td>
    <td><font face="Arial" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="Arial" size="2">Comprehensive income:</font></div></td>
    <td><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right"><font face="Arial" size="2">&nbsp;</font></td>
    <td><font face="Arial" size="2">&nbsp;</font></td>
    <td><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right"><font face="Arial" size="2">&nbsp;</font></td>
    <td><font face="Arial" size="2">&nbsp;</font></td>
    <td><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right"><font face="Arial" size="2">&nbsp;</font></td>
    <td><font face="Arial" size="2">&nbsp;</font></td>
    <td><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right"><font face="Arial" size="2">&nbsp;</font></td>
    <td><font face="Arial" size="2">&nbsp;</font></td>
    <td><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right"><font face="Arial" size="2">&nbsp;</font></td>
    <td><font face="Arial" size="2">&nbsp;</font></td>
    <td><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right"><font face="Arial" size="2">&nbsp;</font></td>
    <td><font face="Arial" size="2">&nbsp;</font></td>
    <td><font face="Arial" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:3%"><font face="Arial" size="2">Net Income</font></div></td>
    <td><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="Arial" size="2">&nbsp;</font></td>
    <td><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="Arial" size="2">&nbsp;</font></td>
    <td><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="Arial" size="2">&nbsp;</font></td>
    <td><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="Arial" size="2"><b>77</b></font></td>
    <td><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="Arial" size="2">&nbsp;</font></td>
    <td><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="Arial" size="2"><b>77</b></font></td>
    <td><font face="Arial" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:3%"><font face="Arial" size="2">Other comprehensive income (loss), net of tax</font></div></td>
    <td><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="Arial" size="2">&nbsp;</font></td>
    <td><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="Arial" size="2">&nbsp;</font></td>
    <td><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="Arial" size="2">&nbsp;</font></td>
    <td><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="Arial" size="2">&nbsp;</font></td>
    <td><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="Arial" size="2"><b>(154</b></font></td>
    <td valign="bottom"><font face="Arial" size="2"><b>)</b></font></td>
    <td align="right" valign="bottom"><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="Arial" size="2"><b>(154</b></font></td>
    <td valign="bottom"><font face="Arial" size="2"><b>)</b></font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><font size="2">&nbsp;</font></td>
    <td><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="Arial" size="2">&nbsp;</font></td>
    <td><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="Arial" size="2">&nbsp;</font></td>
    <td><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="Arial" size="2">&nbsp;</font></td>
    <td><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="Arial" size="2">&nbsp;</font></td>
    <td><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="Arial" size="2">&nbsp;</font></td>
    <td><font face="Arial" size="2">&nbsp;</font></td>
    <td colspan="2" valign="bottom"><font face="Arial" size="2"><hr noshade size="1"></font></td>
    <td><font face="Arial" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="Arial" size="2">Comprehensive income (loss)</font></div></td>
    <td><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="Arial" size="2">&nbsp;</font></td>
    <td><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="Arial" size="2">&nbsp;</font></td>
    <td><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="Arial" size="2">&nbsp;</font></td>
    <td><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="Arial" size="2">&nbsp;</font></td>
    <td><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="Arial" size="2">&nbsp;</font></td>
    <td><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="Arial" size="2"><b>(77</b></font></td>
    <td valign="bottom"><font face="Arial" size="2"><b>)</b></font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><font face="Arial" size="2">&nbsp;</font></td>
    <td><font face="Arial" size="2">&nbsp;</font></td>
    <td><font face="Arial" size="2">
      <hr noshade size="1">
    </font></td>
    <td><font face="Arial" size="2">
      <hr noshade size="1">
    </font></td>
    <td><font face="Arial" size="2">&nbsp;</font></td>
    <td><font face="Arial" size="2">
      <hr noshade size="1">
    </font></td>
    <td><font face="Arial" size="2">
      <hr noshade size="1">
    </font></td>
    <td><font face="Arial" size="2">&nbsp;</font></td>
    <td><font face="Arial" size="2">
      <hr noshade size="1">
    </font></td>
    <td><font face="Arial" size="2">
      <hr noshade size="1">
    </font></td>
    <td><font face="Arial" size="2">&nbsp;</font></td>
    <td><font face="Arial" size="2">
      <hr noshade size="1">
    </font></td>
    <td><font face="Arial" size="2">
      <hr noshade size="1">
    </font></td>
    <td><font face="Arial" size="2">&nbsp;</font></td>
    <td><font face="Arial" size="2">
      <hr noshade size="1">
    </font></td>
    <td><font face="Arial" size="2">
      <hr noshade size="1">
    </font></td>
    <td><font face="Arial" size="2">&nbsp;</font></td>
    <td><font face="Arial" size="2">
      <hr noshade size="1">
    </font></td>
    <td><font face="Arial" size="2">
      <hr noshade size="1">
    </font></td>
    <td><font face="Arial" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="Arial" size="2"><b>Balance as of March 27, 2004 (unaudited)</b></font></div></td>
    <td><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="Arial" size="2"><b>1,150</b></font></td>
    <td><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="Arial" size="2"><b>1,915</b></font></td>
    <td><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="Arial" size="2"><b>(348</b></font></td>
    <td valign="bottom"><font face="Arial" size="2"><b>)</b></font></td>
    <td align="right" valign="bottom"><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="Arial" size="2"><b>4,851</b></font></td>
    <td><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="Arial" size="2"><b>469</b></font></td>
    <td><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="Arial" size="2"><b>8,037</b></font></td>
    <td><font face="Arial" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><font face="Arial" size="2">&nbsp;</font></td>
    <td><font face="Arial" size="2">&nbsp;</font></td>
    <td><hr noshade size="2"></td>
    <td><hr noshade size="2"></td>
    <td><font face="Arial" size="2">&nbsp;</font></td>
    <td><hr noshade size="2"></td>
    <td><hr noshade size="2"></td>
    <td><font face="Arial" size="2">&nbsp;</font></td>
    <td><hr noshade size="2"></td>
    <td><hr noshade size="2"></td>
    <td><font face="Arial" size="2">&nbsp;</font></td>
    <td><hr noshade size="2"></td>
    <td><hr noshade size="2"></td>
    <td><font face="Arial" size="2">&nbsp;</font></td>
    <td><hr noshade size="2"></td>
    <td><hr noshade size="2"></td>
    <td><font face="Arial" size="2">&nbsp;</font></td>
    <td><hr noshade size="2"></td>
    <td><hr noshade size="2"></td>
    <td><font face="Arial" size="2">&nbsp;</font></td>
  </tr>
</table>
<p align="center"><font face="Arial" size="2">The accompanying notes are an integral
part of these Unaudited Interim Consolidated Financial Statements.</font></p>
<p align="center"><font face="Arial" size="2">F-5</font></p>
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<p align="center"><font face="Arial" size="2"><b>STMicroelectronics N.V.</b></font></p>
<p align="center"><font face="Arial" size="2"><b>Notes to Interim Consolidated
      Financial Statements (unaudited)</b></font></p>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr valign="bottom">
    <td><div align="left"><font face="Arial" size="2"><b>1. Description of Business</b></font></div></td>
  </tr>
</table>
<p align="left"><font face="Arial" size="2">STMicroelectronics N.V. (the &#147;Company&#148;) is registered in The Netherlands with its statutory domicile in Amsterdam. The Company was formed in 1987 with the name of SGS-THOMSON Microelectronics by the combination of the semiconductor business of SGS Microelettronica
 (then owned by Societ&agrave; Finanziaria Telefonica (S.T.E.T.), an Italian corporation) and the non-military business of Thomson Semiconducteurs (then owned by Thomson-CSF, a French corporation) whereby each company contributed their respective semiconductor businesses in
 exchange for a 50% interest in the Company.</font></p>
<p align="left"><font face="Arial" size="2">The Company is a global independent semiconductor company that designs, develops, manufactures and markets a broad range of semiconductor integrated circuits (&#147;ICs&#148;) and discrete devices. The Company offers a diversified product portfolio and develops products for a wide range
 of market applications, including automotive products, computer peripherals, telecommunications systems, consumer products, industrial automation and control systems. Within its diversified portfolio, the Company has focused on developing products that leverage its technological
 strengths in creating customized, system-level solutions with high-growth digital and mixed-signal content.</font></p>
<p align="left"><font face="Arial" size="2">The Company&#146;s products are manufactured and designed using a broad range of manufacturing processes and proprietary design methods. The Company uses all of the prevalent function-oriented process technologies, including complementary metal oxide silicon (&#147;CMOS&#148;), bipolar
 and nonvolatile memory technologies. In addition, by combining basic processes, the Company has developed advanced systems-oriented technologies that enable it to produce differentiated and application-specific products, including BiCMOS technologies (bipolar and CMOS) for
 mixed-signal applications, BCD technologies (bipolar, CMOS and diffused metal oxide silicon (DMOS)) for intelligent power applications and embedded memory technologies. This broad technology portfolio, a cornerstone of its strategy for many years, enables the Company to meet
 the increasing demand for &#147;system-on-a-chip&#148; solutions. Complementing this depth and diversity of process and design technology is its broad intellectual property portfolio that the Company uses to enter into important patent cross-licensing agreements with other major semiconductor
 companies.</font></p>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr valign="bottom">
    <td><div align="left"><font face="Arial" size="2"><b>2. Fiscal Year</b></font></div></td>
  </tr>
</table>
<p align="left"><font face="Arial" size="2">The Company&#146;s fiscal year ends on December 31. Interim periods are established for accounting purposes on a thirteen-week basis. In 2004, the Company&#146;s first quarter ended on March 27, its second quarter will end on June 26, its third quarter on September 25 and its fourth quarter on
 December 31.</font></p>
<p align="center"><font face="Arial" size="2">F-6</font></p>
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<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr valign="bottom">
    <td><div align="left"><font face="Arial" size="2"><b>3. Basis of Presentation</b></font></div></td>
  </tr>
</table>
<p align="left"><font face="Arial" size="2">The accompanying Unaudited Interim
    Consolidated Financial Statements of the Company have been prepared in conformity
    with
    accounting principles generally accepted in the United States of America
    (&#147;U.S. GAAP&#148;), consistent in all material respects with those applied
    for the year ended  December 31, 2003. The interim financial information
    is unaudited but reflects all normal adjustments which are, in the opinion
    of management, necessary to provide a fair statement of results for the period
    presented. The results of operations for the interim period are not necessarily

 indicative of the results to be expected for the entire year.</font></p>
<p align="left"><font face="Arial" size="2">All balances and values in the current and prior periods are in millions of dollars, except share and per-share amounts.</font></p>
<p align="left"><font face="Arial" size="2">Certain prior year amounts have been
    reclassified to conform to the current year presentation. The accompanying
    Unaudited Interim Consolidated Financial Statements do not include certain
    footnotes and financial presentation normally required under accounting principles
    generally accepted in the United States. Therefore, these interim financial
    statements should be read in conjunction with the Consolidated Financial
    Statements in the Company&#146;s Annual Report on Form 20-F for the year
    ended December 31, 2003.</font></p>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr valign="bottom">
    <td><div align="left"><font face="Arial" size="2"><b>4. Use of Estimates</b></font></div></td>
  </tr>
</table>
<p align="left"><font face="Arial" size="2">The preparation of financial statements in accordance with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of net revenue and expenses during
 the reporting period. The primary areas that require significant estimates and judgments by management include, but are not limited to, sales returns and allowances, allowances for doubtful accounts, inventory reserves, warranty costs, evaluation of the impact of litigation and claims,
 valuation of acquired intangibles, goodwill, investments and tangible assets as well as the impairment of their related carrying values, restructuring charges, other special charges, and assumptions used in calculating pension obligations, deferred income tax assets and liabilities and
 valuation allowances and provisions for specifically identified income tax exposures. The Company bases the estimates and assumptions on historical experience and on various other factors such as market trends and business plans that it believes to be reasonable under the
 circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities. The actual results experienced by the Company could differ materially and adversely from management&#146;s estimates. To the extent there are material differences
 between the estimates and the actual results, future results of operations could be significantly affected.</font></p>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr valign="bottom">
    <td><div align="left"><font face="Arial" size="2"><b>5. Recent Accounting
            Pronouncements</b></font></div></td>
  </tr>
</table>
<p align="left"><font face="Arial" size="2">In 2003, the Company adopted Financial Accounting Standards Board Interpretation No. 46 <i>Consolidation of Variable Interest Entities, an Interpretation of ARB No. 51</i> (revised 2003) and the related FASB Staff Positions (collectively &#147;FIN 46&#148;). The Company identifies VIEs as entities
 where the Company&#146;s financial risk or reward is not consistent with the equity ownership.</font></p>
<p align="center"><font face="Arial" size="2">F-7</font></p>
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<p align="left"><font face="Arial" size="2">An entity is considered a VIE if any of the following factors are present: the equity investment in the entity is insufficient to finance the operations of that entity without additional subordinated financial support from other parties; the equity investors of the entity lack decision-making
 rights; an equity investor holds voting rights that are disproportionately low in relation to the actual economics of the investor&#146;s relationship with the entity and substantially all of the entity&#146;s activities involve or are conducted on behalf of that investor; other parties protect the equity
 investors from expected losses; or parties, other than the equity holders, hold the right to receive the entity&#146;s expected residual returns, or the equity investors&#146; rights to expect residual returns is capped. The primary beneficiary of a VIE is the party that absorbs the majority of the entity&#146;s
 expected losses, receives the majority of its expected residual returns, or both as a result of holding variable interests. Assets, liabilities, and the non-controlling interest of newly consolidated VIEs generally are initially measured at their fair values with any resulting loss reported
 immediately as an extraordinary item or resulting gain as a reduction of the amounts assigned to assets in the same manner as if the consolidation resulted from a business combination.</font></p>
<p align="left"><font face="Arial" size="2">The Company has identified the following
    VIEs under the existing contracts and disclosed the arrangements in the Unaudited
    Interim Consolidated Financial Statements at March 27, 2004:</font></p>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr valign="top">
    <td width="3%">&nbsp;</td>
    <td width="3%"><font face="Arial" size="2">&#149;</font></td>
    <td><div align="left"><font face="Arial" size="2">a joint venture established with Dai Nippon for the development and production of photomask in which the Company has a 19% stake,</font></div></td>
  </tr>
</table>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr>
    <td>&nbsp;</td>
    <td><font face="Arial" size="2">&nbsp;</font></td>
    <td><font face="Arial" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top">
    <td width="3%">&nbsp;</td>
    <td width="3%"><font face="Arial" size="2">&#149;</font></td>
    <td><div align="left"><font face="Arial" size="2">the joint venture in SuperH, Inc. with Hitachi, Ltd., where the Company owns 44% and has commitments for future capital increases and,</font></div></td>
  </tr>
</table>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr>
    <td>&nbsp;</td>
    <td><font face="Arial" size="2">&nbsp;</font></td>
    <td><font face="Arial" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top">
    <td width="3%">&nbsp;</td>
    <td width="3%"><font face="Arial" size="2">&#149;</font></td>
    <td><div align="left"><font face="Arial" size="2">the new company, UPEK,
          Inc., formed in 2004 as a venture-backed spin-off of the Company&#146;s
          TouchChip business, in which the Company has a 48% stake.</font></div></td>
  </tr>
</table>
<p align="left"><font face="Arial" size="2">The Company has determined that for
    all these VIEs it is not the primary beneficiary and continues to account
    for the investments under the cost method, for the venture with Dai Nippon,
    and the equity method, for the SuperH, Inc. and UPEK, Inc. arrangements.</font></p>
<p align="left"><font face="Arial" size="2">In May 2003, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 150, <i>Accounting for Certain Instruments with Characteristics of Both Liabilities and Equity</i> (&#147;FAS 150&#148;). FAS 150 specifies that &#147;freestanding&#148; financial instruments
 within its scope embody obligations of the issuer and therefore, the issuer must classify such instruments as liabilities. FAS 150 is effective for all instruments entered into or modified after May 31, 2003. For all other instruments, FAS 150 is effective for the first interim period beginning
 after June 15, 2003. The Company adopted FAS 150 in the second quarter of 2003 and determined that it has had no material effect on its financial position or results of operations.</font></p>
<p align="left"><font face="Arial" size="2">In 2003, the Emerging Issues Task Force issued EITF Issue No. 00-21, <i>Accounting for Revenue Arrangements with Multiple Deliverables </i>(&#147;EITF 00-21&#148;), to address certain aspects of the accounting by a vendor for arrangements under which it will perform multiple revenue-generating
 activities. In some arrangements, the different revenue-generating activities (deliverables) are sufficiently separable, and there exists sufficient evidence of their fair values to separately account for some or all of the deliverables. EITF 00-21 applies to all contractual arrangements
 (whether written, oral, or implied) entered into after June 15, 2003 under which a vendor will perform multiple revenue-generating activities. In addition, EITF 00-21 should only be applied in those situations where higher-level generally accepted accounting principles do not exist that
 specify the appropriate accounting. The Company adopted EITF 00-21 in the third quarter of 2003, and management determined that EITF 00-21 has had no material effect on the Company&#146;s financial position or results of operations.</font></p>
<p align="center"><font face="Arial" size="2">F-8</font></p>
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<p align="left"><font face="Arial" size="2">In December 2003, the Financial Accounting
    Standards Board issued Statement of Financial Accounting Standards No. 132
    (revised 2003), <i>Employers&#146; Disclosures about Pensions and Other Postretirement
    Benefits, an amendment of FASB Statements No. 87, 88, and 106, and a revision
     of FASB Statement No. 132 </i>(&#147;FAS 132 revised&#148;). This Statement
     revises employers&#146; disclosures about pension plans and other postretirement
     benefit plans. It does not change the measurement or recognition of those
     plans required by FASB Statements No. 87, <i>Employers&#146; Accounting
     for  Pensions</i>, No. 88, <i>Employers&#146; Accounting for Settlements
     and Curtailments of Defined Benefit Pension Plans and for Termination Benefits</i>,
     and No. 106, <i>Employers&#146; Accounting for Postretirement Benefits Other
     Than Pensions</i>.
 FAS 132 revised requires additional disclosures about the assets, obligations,
 cash flows, and net periodic benefit cost of defined benefit pension plans and
 other postretirement benefit plans. The statement is generally effective for
 2003 calendar year-end financial statements, with a delayed effective date for
 certain disclosures for foreign plans.
 The Company adopted FAS 132 revised in the fourth quarter of 2003 and included
 all immediately required disclosures at December 31, 2003. The Company has evaluated
 the required disclosures for its foreign plans and has included the additional
 information in its Unaudited Consolidated Interim Financial Statements as at
     March 27, 2004.</font></p>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr valign="bottom">
    <td><div align="left"><font face="Arial" size="2"><b>6. Business combinations</b></font></div></td>
  </tr>
</table>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr>
    <td><font face="Arial" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top">
    <td><div align="left"><i><font face="Arial" size="2">Proton World International</font></i></div></td>
  </tr>
</table>
<p align="left"><font face="Arial" size="2">On April 24, 2003 the Company completed the acquisition of Proton World International N.V. (PWI), a leading Smart card software company established in Belgium, which specializes in high-security, payment and identification Smart card systems. The original cash consideration for
 the purchase of PWI was &euro;37 million (approximately $41 million). The terms of the agreement require the Company to pay additional royalty payments of up to $25 million, based on achieving future sales targets over the next ten years. This contingency has not been resolved yet and
 therefore no additional consideration has been recorded as of March 27, 2004. The acquisition was conducted to significantly extend the Company&#146;s know-how and participation in the Smart card value chain. In July 2003, the computation of purchase price contractual adjustments was
 finalized resulting in a reduction of the provisional price of approximately $3 million. Purchase price allocation resulted in recording assumed liabilities net of current and tangible assets of $5 million, and intangible assets including $8 million for core technologies, $1 million for
 customers&#146; relationships, $1 million for trademarks and $33 million in goodwill. The core technologies have an estimated useful life of seven years, the customers&#146; relationship of four years and the trademarks of one year.</font></p>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr valign="bottom">
    <td><div align="left"><i><font face="Arial" size="2">Tioga Technologies</font></i></div></td>
  </tr>
</table>
<p align="left"><font face="Arial" size="2">On April 28, 2003 the Company finalized the purchase of the assets and liabilities of Tioga Technologies Ltd., a company based in Israel. The cash consideration for this acquisition was $12 million. The acquisition was made to further strengthen the strategic positioning of the Company
 in the areas of its Digital Subscriber Line technology. Purchase price allocation resulted in recording assumed liabilities net of current and tangible assets by $2 million and intangible assets including $8 million for core technologies and $6 million in goodwill. The core technologies have
 an estimated useful life of five years.</font></p>
<p align="center"><font face="Arial" size="2">F-9</font></p>
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<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr valign="bottom">
    <td><div align="left"><i><font face="Arial" size="2">Incard</font></i></div></td>
  </tr>
</table>
<p align="left"><font face="Arial" size="2">On June 2, 2003 the Company completed the acquisition of the business of Incard S.p.A, a company based in Italy, for an original cash consideration of approximately $89 million plus approximately $2 million in acquisition-related taxes and fees. The acquisition of Incard was
 performed to complement the purchase of PWI by extending the Company&#146;s know-how and customer basis in the Smart card value chain. The acquisition will also allow the Company to offer a much wider range of solutions to meet the multiple needs of the evolving Smart card market.
 On September 26, 2003 the computation of purchase price contractual adjustments was finalized resulting in a price reduction of approximately $7 million. The purchase agreement also provides certain future price adjustments contingent upon future events that have not yet occurred.
 Purchase price allocation resulted in the booking of $32 million of tangible and current assets net of assumed liabilities, and intangible assets including $15 million for core technologies, $4 million for customers&#146; relationships, $3 million for trademarks and $30 million in goodwill. The
 core technologies have an estimated useful life of seven years, the customers&#146; relationships of four years and the trademarks of three years.</font></p>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr valign="bottom">
    <td><div align="left"><i><font face="Arial" size="2">Synad Technologies</font></i></div></td>
  </tr>
</table>
<p align="left"><font face="Arial" size="2">On December 18, 2003, the Company completed the acquisition of Synad Technologies Ltd., a wireless-LAN chip developer based in the United Kingdom. The cash consideration for this acquisition was $55 million, plus approximately $1 million in acquisition-related taxes and fees, of
 which $53 million was paid as of December 31, 2003 and $3 million was paid during the first quarter of 2004. The acquisition was conducted to strengthen the Company&#146;s broadband access portfolio and add wireless networking capabilities to its wide range of highly integrated cost-
 effective application platforms. Purchase price allocation, defined during the first quarter of 2004, resulted in recording $2 million of tangible and current assets net of assumed liabilities, and intangible assets including $17 million for core technologies and $33 million in goodwill as at
 March 27, 2004. The Company also recorded in the fourth quarter 2003 an expense of approximately $4 million for in-process research and development as certain of the acquired technologies cannot be capitalized since they did not reach technological feasibility. The core technologies
 have an estimated useful life of five years.</font></p>
<p align="left"><font face="Arial" size="2">For PWI, Incard and Synad, the purchase price allocation is based on a third party independent appraisal and makes reference to the future business assumptions made by the Company. For Tioga, the allocation is based on the contractual values, which the Company believes to reflect the
 fair market value. Such assumptions may be revised, as the Company obtains further knowledge of the acquired companies, which could result in revisions to the purchase price allocation within one year of the acquisitions.</font></p>
<p align="left"><font face="Arial" size="2">The pro forma information below assumes that PWI and Tioga, both acquired in April 2003, Incard, acquired in June 2003, and Synad, acquired in December 2003, had been purchased at the beginning of 2003. The year 2003 has been adjusted to incorporate the results of PWI, Tioga,
 Incard and Synad beginning on January 1, 2003. Such information is presented by the Company based on its best knowledge of the acquired companies. This is shown for informational purposes only and is not necessarily indicative of the results of future operations or results that would
 have been achieved had the acquisitions taken place as of the beginning of 2003.</font></p>
<p align="center"><font face="Arial" size="2">F-10</font></p>
<hr noshade align="center" width="100%" size="2">
<div style="page-break-before:always"></div>
<page>
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<p><font size="2" face="Arial"><a href="#contents">Back to Contents</a></font></p>


<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="text-indent:3%"><i><font face="Arial" size="2">Pro forma Statements of Income</font></i></div></td>
    <td width="2%"><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" width="1%"><font face="Arial" size="2">&nbsp;</font></td>
    <td width="8%"><font face="Arial" size="2">&nbsp;</font></td>
    <td width="2%"><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" width="1%"><font face="Arial" size="2">&nbsp;</font></td>
    <td width="8%"><font face="Arial" size="2">&nbsp;</font></td>
    <td width="2%"><font face="Arial" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td colspan="5" align="center" valign="bottom"><font face="Arial" size="2"><b><font size="1">(Unaudited)</font></b><br>
            <hr noshade size="1">
    </font></td>
    <td>&nbsp;</td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><font size="2">&nbsp;</font></td>
    <td><font face="Arial" size="2">&nbsp;</font></td>
    <td colspan="5" align="center" valign="bottom"><font face="Arial" size="2"><b><font size="1">Three
            Months ended</font></b><br>
<hr noshade size="1"></font></td>
    <td><font face="Arial" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><font size="2">&nbsp;</font></td>
    <td><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="Arial" size="2">&nbsp;</font></td>
    <td align="center" valign="bottom"><font face="Arial" size="1"><b>March 27,<br>
    2004</b></font></td>
    <td>&nbsp;</td>
    <td align="right" valign="bottom"><font face="Arial" size="2">&nbsp;</font></td>
    <td align="center" valign="bottom"><font face="Arial" size="1"><b>March 29,<br>
    2003</b></font></td>
    <td><font face="Arial" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><font face="Arial" size="2">&nbsp;</font></td>
    <td><font face="Arial" size="2">&nbsp;</font></td>
    <td><font face="Arial" size="2"><hr noshade size="1"></font></td>
    <td><font face="Arial" size="2"><hr noshade size="1"></font></td>
    <td><font face="Arial" size="2">&nbsp;</font></td>
    <td><font face="Arial" size="2"><hr noshade size="1"></font></td>
    <td><font face="Arial" size="2"><hr noshade size="1"></font></td>
    <td><font face="Arial" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td colspan="5" align="center"><b><font face="Arial" size="1">(in millions of
        U.S. dollars,<br>
except per share amounts)</font></b></td>
    <td>&nbsp;</td>
  </tr>
   <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="Arial" size="2">Net revenues</font></div></td>
    <td width="2%"><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom" width="1%"><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom" width="8%"><font face="Arial" size="2"><b>2,029</b></font></td>
    <td width="2%"><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom" width="1%"><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom" width="8%"><font face="Arial" size="2">1,644</font></td>
    <td width="2%"><font face="Arial" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="Arial" size="2">Gross profit</font></div></td>
    <td><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="Arial" size="2"><b>718</b></font></td>
    <td><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="Arial" size="2">579</font></td>
    <td><font face="Arial" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="Arial" size="2">Operating expenses</font></div></td>
    <td><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="Arial" size="2"><b>(638</b></font></td>
    <td valign="bottom"><font face="Arial" size="2"><b>)</b></font></td>
    <td align="right" valign="bottom"><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="Arial" size="2">(452</font></td>
    <td valign="bottom"><font face="Arial" size="2">)</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="Arial" size="2">Operating income</font></div></td>
    <td><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="Arial" size="2"><b>80</b></font></td>
    <td><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="Arial" size="2">127</font></td>
    <td><font face="Arial" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="Arial" size="2">Net income</font></div></td>
    <td><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="Arial" size="2"><b>77</b></font></td>
    <td><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="Arial" size="2">85</font></td>
    <td><font face="Arial" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:6%"><font face="Arial" size="2">Earnings per share (basic)</font></div></td>
    <td><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="Arial" size="2"><b>0.09</b></font></td>
    <td><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="Arial" size="2">0.10</font></td>
    <td><font face="Arial" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:6%"><font face="Arial" size="2">Earnings per share (diluted)</font></div></td>
    <td><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="Arial" size="2"><b>0.08</b></font></td>
    <td><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="Arial" size="2">0.10</font></td>
    <td><font face="Arial" size="2">&nbsp;</font></td>
  </tr>
 <tr>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
  </tr>
</table>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr valign="top" bgcolor="#ffffff">
    <td width="76%">&nbsp;</td>
    <td>&nbsp;</td>
    <td align="right">&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td align="right">&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="text-indent:3%"><i><font face="Arial" size="2">As reported Statements of Income</font></i></div></td>
    <td width="2%"><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" width="1%"><font face="Arial" size="2">&nbsp;</font></td>
    <td width="8%"><font face="Arial" size="2">&nbsp;</font></td>
    <td width="2%"><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" width="1%"><font face="Arial" size="2">&nbsp;</font></td>
    <td width="8%"><font face="Arial" size="2">&nbsp;</font></td>
    <td width="2%"><font face="Arial" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td colspan="5" align="center" valign="bottom"><font face="Arial" size="2"><b><font face="Arial" size="2"><b><font size="1">(Unaudited)</font></b></font></b><br>
          <hr noshade size="1">
    </font></td>
    <td>&nbsp;</td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><font size="2">&nbsp;</font></td>
    <td>&nbsp;</td>
    <td colspan="5" align="center" valign="bottom"><font face="Arial" size="2"><b><font size="1">Three Months ended</font></b><br>
<hr noshade size="1"></font></td>
    <td>&nbsp;</td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><font size="2">&nbsp;</font></td>
    <td>&nbsp;</td>
    <td align="right" valign="bottom"><font face="Arial" size="2">&nbsp;</font></td>
    <td align="center" valign="bottom"><div align="center"><font face="Arial" size="1"><b>March
            27,<br>
    2004</b></font></div></td>
    <td><div align="center"><font face="Arial" size="2">&nbsp;</font></div></td>
    <td align="right" valign="bottom"><div align="center"><font face="Arial" size="2">&nbsp;</font></div></td>
    <td align="center" valign="bottom"><div align="center"><font face="Arial" size="1"><b>March
            29,<br>
    2003</b></font></div></td>
    <td><font face="Arial" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><font face="Arial" size="2">&nbsp;</font></td>
    <td><font face="Arial" size="2">&nbsp;</font></td>
    <td><font face="Arial" size="2"><hr noshade size="1"></font></td>
    <td><font face="Arial" size="2"><hr noshade size="1"></font></td>
    <td><font face="Arial" size="2">&nbsp;</font></td>
    <td><font face="Arial" size="2"><hr noshade size="1"></font></td>
    <td><font face="Arial" size="2"><hr noshade size="1"></font></td>
    <td><font face="Arial" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td colspan="5" align="center"><b><font face="Arial" size="1">(in millions of U.S. dollars,<br>
except per share amounts)</font></b></td>
    <td>&nbsp;</td>
  </tr>
   <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="Arial" size="2">Net revenues</font></div></td>
    <td width="2%"><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom" width="1%"><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom" width="8%"><font face="Arial" size="2"><b>2,029</b></font></td>
    <td width="2%"><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom" width="1%"><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom" width="8%"><font face="Arial" size="2">1,618</font></td>
    <td width="2%"><font face="Arial" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="Arial" size="2">Gross profit</font></div></td>
    <td><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="Arial" size="2"><b>718</b></font></td>
    <td><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="Arial" size="2">566</font></td>
    <td><font face="Arial" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="Arial" size="2">Operating expenses</font></div></td>
    <td><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="Arial" size="2"><b>(638</b></font></td>
    <td valign="bottom"><font face="Arial" size="2"><b>)</b></font></td>
    <td align="right" valign="bottom"><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="Arial" size="2">(442</font></td>
    <td valign="bottom"><font face="Arial" size="2">)</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="Arial" size="2">Operating income </font></div></td>
    <td><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="Arial" size="2"><b>80</b></font></td>
    <td><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="Arial" size="2">124</font></td>
    <td><font face="Arial" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="Arial" size="2">Net income</font></div></td>
    <td><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="Arial" size="2"><b>77</b></font></td>
    <td><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="Arial" size="2">79</font></td>
    <td><font face="Arial" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:6%"><font face="Arial" size="2">Earnings per share (basic)</font></div></td>
    <td><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="Arial" size="2"><b>0.09</b></font></td>
    <td><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="Arial" size="2">0.09</font></td>
    <td><font face="Arial" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:6%"><font face="Arial" size="2">Earnings per share (diluted)</font></div></td>
    <td><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="Arial" size="2"><b>0.08</b></font></td>
    <td><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="Arial" size="2">0.09</font></td>
    <td><font face="Arial" size="2">&nbsp;</font></td>
  </tr>
</table>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr>
    <td><font face="Arial" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top">
    <td><font size="2">&nbsp;</font></td>
  </tr>
</table>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr valign="bottom">
    <td><font face="Arial" size="2"><b>7. Other Income
    and Expenses, Net</b></font></td>
    <td><font size="2">&nbsp;</font></td>
    <td colspan="5" align="center" valign="bottom"><font size="2">&nbsp;</font></td>
    <td><font size="2">&nbsp;</font></td>
  </tr>
  <tr valign="bottom">
    <td>&nbsp;</td>
    <td><font size="2">&nbsp;</font></td>
    <td colspan="5" align="center" valign="bottom"><font size="2">&nbsp;</font></td>
    <td><font size="2">&nbsp;</font></td>
  </tr>
  <tr valign="bottom">
    <td valign="top"><font face="Arial" size="2">Other
    income and expenses, net consist of the following:</font></td>
    <td><font face="Arial" size="1">&nbsp;</font></td>
    <td colspan="5" align="center" valign="bottom"><font face="Arial" size="1"><b>(Unaudited) </b><hr noshade size="1"></font></td>
    <td><font face="Arial" size="1">&nbsp;</font></td>
  </tr>
  <tr valign="top">
    <td><font face="Arial" size="1">&nbsp;</font></td>
    <td><font face="Arial" size="1">&nbsp;</font></td>
    <td colspan="5" align="center" valign="bottom"><font face="Arial" size="1"><b>Three months ended </b><hr noshade size="1"></font></td>
    <td><font face="Arial" size="1">&nbsp;</font></td>
  </tr>
  <tr valign="top">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="Arial" size="1"></font></div></td>
    <td><font face="Arial" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="Arial" size="1">&nbsp;</font></td>
    <td align="center" valign="bottom"><font face="Arial" size="1"><b>March 27,</b></font></td>
    <td><font face="Arial" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="Arial" size="1">&nbsp;</font></td>
    <td align="center" valign="bottom"><font face="Arial" size="1"><b>March 29,</b></font></td>
    <td><font face="Arial" size="1">&nbsp;</font></td>
  </tr>
  <tr valign="top">
    <td><font face="Arial" size="1">&nbsp;</font></td>
    <td><font face="Arial" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="Arial" size="1">&nbsp;</font></td>
    <td align="center" valign="bottom"><font face="Arial" size="1"><b>2004</b></font></td>
    <td><font face="Arial" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="Arial" size="1">&nbsp;</font></td>
    <td align="center" valign="bottom"><font face="Arial" size="1"><b>2003</b></font></td>
    <td><font face="Arial" size="1">&nbsp;</font></td>
  </tr>
  <tr valign="top">
    <td><font face="Arial" size="1">&nbsp;</font></td>
    <td><font face="Arial" size="1">&nbsp;</font></td>
    <td><font face="Arial" size="1"><hr noshade size="1"></font></td>
    <td><font face="Arial" size="1"><hr noshade size="1"></font></td>
    <td><font face="Arial" size="1">&nbsp;</font></td>
    <td><font face="Arial" size="1"><hr noshade size="1"></font></td>
    <td><font face="Arial" size="1"><hr noshade size="1"></font></td>
    <td><font face="Arial" size="1">&nbsp;</font></td>
  </tr>
  <tr valign="top">
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td colspan="5" align="center"><font face="Arial" size="1"><b>(In millions of U.S dollars)</b></font></td>
    <td>&nbsp;</td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="Arial" size="2">Research and development funding</font></div></td>
    <td width="2%"><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom" width="1%"><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom" width="8%"><font face="Arial" size="2"><b>16</b></font></td>
    <td width="2%"><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom" width="1%"><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom" width="8%"><font face="Arial" size="2">19</font></td>
    <td width="2%"><font face="Arial" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="Arial" size="2">Start-up costs</font></div></td>
    <td><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="Arial" size="2"><b>(23</b></font></td>
    <td valign="bottom"><font face="Arial" size="2"><b>)</b></font></td>
    <td align="right" valign="bottom"><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="Arial" size="2">(8</font></td>
    <td valign="bottom"><font face="Arial" size="2">)</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="Arial" size="2">Exchange gain, net</font></div></td>
    <td><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="Arial" size="2"><b>1</b></font></td>
    <td><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="Arial" size="2">7</font></td>
    <td><font face="Arial" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="Arial" size="2">Patent claim costs</font></div></td>
    <td><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="Arial" size="2"><b>(6</b></font></td>
    <td valign="bottom"><font face="Arial" size="2"><b>)</b></font></td>
    <td align="right" valign="bottom"><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="Arial" size="2">(2</font></td>
    <td valign="bottom"><font face="Arial" size="2">)</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="Arial" size="2">Gain on sale of non-current assets</font></div></td>
    <td><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="Arial" size="2"><b>4</b></font></td>
    <td><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="Arial" size="2">&#8212;</font></td>
    <td><font face="Arial" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="Arial" size="2">Other non-recurring, net</font></div></td>
    <td><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="Arial" size="2"><b>(4</b></font></td>
    <td valign="bottom"><font face="Arial" size="2"><b>)</b></font></td>
    <td align="right" valign="bottom"><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="Arial" size="2">(1</font></td>
    <td valign="bottom"><font face="Arial" size="2">)</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="Arial" size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</font></div></td>
    <td><font face="Arial" size="2">&nbsp;</font></td>
    <td><font face="Arial" size="1">
      <hr noshade size="1">
    </font></td>
    <td><font face="Arial" size="1">
      <hr noshade size="1">
    </font></td>
    <td><font face="Arial" size="1">&nbsp;</font></td>
    <td><font face="Arial" size="1">
      <hr noshade size="1">
    </font></td>
    <td><font face="Arial" size="1">
      <hr noshade size="1">
    </font></td>
    <td><font face="Arial" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:6%; text-indent:-3%"><b><font face="Arial" size="2">Total</font></b></div></td>
    <td><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="Arial" size="2"><b>(12</b></font></td>
    <td valign="bottom"><font face="Arial" size="2"><b>)</b></font></td>
    <td align="right" valign="bottom"><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="Arial" size="2">15</font></td>
    <td><font face="Arial" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><font face="Arial" size="2">&nbsp;</font></td>
    <td><font face="Arial" size="2">&nbsp;</font></td>
    <td><hr noshade size="2"></td>
    <td><hr noshade size="2"></td>
    <td><font face="Arial" size="2">&nbsp;</font></td>
    <td><hr noshade size="2"></td>
    <td><hr noshade size="2"></td>
    <td><font face="Arial" size="2">&nbsp;</font></td>
  </tr>
</table>
<p align="left"><font face="Arial" size="2">&nbsp;</font></p>
<p align="center"><font face="Arial" size="2">F-11</font></p>
<hr noshade align="center" width="100%" size="2">
<div style="page-break-before:always"></div>
<page>
<a name="pf7"></a>
<p><font size="2" face="Arial"><a href="#contents">Back to Contents</a></font></p>


<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr valign="bottom">
    <td><div align="left"><font face="Arial" size="2"><b>8. Impairment, Restructuring
            Charges and Other Related Closure Costs</b></font></div></td>
  </tr>
</table>
<p align="left"><font face="Arial" size="2">During the third quarter of 2003, the Company finalized a plan to restructure its 150mm fab operations and part of its back-end operations in order to improve cost competitiveness.</font></p>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr valign="bottom">
    <td><div align="left"><i><font face="Arial" size="2">150mm fab operations</font></i></div></td>
  </tr>
</table>
<p align="left"><font face="Arial" size="2">The 150mm restructuring plan focuses
    on cost reduction by migrating a large part of European and U.S. 150mm production
    to Singapore and by upgrading production to a finer geometry 200mm wafer
    fab. The plan includes the discontinuation of the production of Rennes (France),
    the  closure as soon as operationally feasible of the 150mm wafer pilot line
    in Castelletto (Italy), and the downsize by approximately one-half of the
    150mm wafer fab in Carrollton, Texas. Furthermore, the 150mm wafer fab production
    in Agrate (Italy) and Rousset (France) will be gradually
 phased-out in favor of 200mm wafer ramp-ups at existing facilities in these
    locations, which will be expanded or upgraded to accommodate additional finer
    geometry wafer capacity.</font></p>
<p align="left"><font face="Arial" size="2">During the first quarter of 2004, the Company recorded restructuring charges of $31 million for its 150mm fab operations, relating mainly to the discontinuation of the production of Rennes, for which the exit plan was communicated to employees in March. At communication date, the
 Company recorded $24 million corresponding to involuntary termination benefits and charges related to the transfer of employees to other sites of the Company. In addition, the Company registered $5 million of other charges related to the closure of Rennes and $1 million for transfer
 and decontamination costs in the United States and Europe.</font></p>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr valign="bottom">
    <td><div align="left"><i><font face="Arial" size="2">Back-end operations</font></i></div></td>
  </tr>
</table>
<p align="left"><font face="Arial" size="2">During the first quarter of 2004, transfer costs amounting to $1 million were registered for back-end sites in Morocco. No other major restructuring charges or other related closures costs were incurred in the first quarter of 2004 relating to back-end operations.</font></p>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr valign="bottom">
    <td><div align="left"><i><font face="Arial" size="2">Other restructuring charges</font></i></div></td>
  </tr>
</table>
<p align="left"><font face="Arial" size="2">Amounts totaling $1 million were paid by the Company in the first quarter of 2004 for voluntary termination benefits.</font></p>
<p align="center"><font face="Arial" size="2">F-12</font></p>
<hr noshade align="center" width="100%" size="2">
<div style="page-break-before:always"></div>
<page>
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<p><font size="2" face="Arial"><a href="#contents">Back to Contents</a></font></p>


<p align="left"><font face="Arial" size="2">Impairment, restructuring charges and other related closure costs incurred in 2004 are summarized as follows:</font></p>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr valign="bottom">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="Arial" size="1"><b>Quarter ended March 27, 2004</b></font></div></td>
    <td><font face="Arial" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="Arial" size="1">&nbsp;</font></td>
    <td align="center" valign="bottom"><font face="Arial" size="1"><b>Impairment</b></font></td>
    <td><font face="Arial" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="Arial" size="1">&nbsp;</font></td>
    <td align="center" valign="bottom"><font face="Arial" size="1"><b>Restructuring charges</b></font></td>
    <td><font face="Arial" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="Arial" size="1">&nbsp;</font></td>
    <td align="center" valign="bottom"><font face="Arial" size="1"><b>Other related closure costs</b></font></td>
    <td><font face="Arial" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="Arial" size="1">&nbsp;</font></td>
    <td align="center" valign="bottom"><font face="Arial" size="1"><b>Total impairment, restructuring
 charges and other related
 closure costs</b></font></td>
    <td><font face="Arial" size="1">&nbsp;</font></td>
  </tr>
  <tr valign="top">
    <td><font face="Arial" size="1">&nbsp;</font></td>
    <td><font face="Arial" size="1">&nbsp;</font></td>
    <td><font face="Arial" size="1"><hr noshade size="1"></font></td>
    <td><font face="Arial" size="1"><hr noshade size="1"></font></td>
    <td><font face="Arial" size="1">&nbsp;</font></td>
    <td><font face="Arial" size="1"><hr noshade size="1"></font></td>
    <td><font face="Arial" size="1"><hr noshade size="1"></font></td>
    <td><font face="Arial" size="1">&nbsp;</font></td>
    <td><font face="Arial" size="1"><hr noshade size="1"></font></td>
    <td><font face="Arial" size="1"><hr noshade size="1"></font></td>
    <td><font face="Arial" size="1">&nbsp;</font></td>
    <td><font face="Arial" size="1"><hr noshade size="1"></font></td>
    <td><font face="Arial" size="1"><hr noshade size="1"></font></td>
    <td><font face="Arial" size="1">&nbsp;</font></td>
  </tr>
  <tr valign="top">
    <td bgcolor="#eeeeee"><div style="margin-left:3%; text-indent:-3%"><font face="Arial" size="2">150mm fab operations</font></div></td>
    <td width="2%" bgcolor="#eeeeee"><font face="Arial" size="2">&nbsp;</font></td>
    <td width="1%" align="right" valign="bottom" bgcolor="#eeeeee"><font face="Arial" size="2">&nbsp;</font></td>
    <td width="8%" align="right" valign="bottom" bgcolor="#eeeeee"><font face="Arial" size="2">&#8212;</font></td>
    <td width="2%" bgcolor="#eeeeee"><font face="Arial" size="2">&nbsp;</font></td>
    <td width="1%" align="right" valign="bottom" bgcolor="#eeeeee"><font face="Arial" size="2">&nbsp;</font></td>
    <td width="8%" align="right" valign="bottom" bgcolor="#eeeeee"><font face="Arial" size="2">(25</font></td>
    <td width="2%" valign="bottom" bgcolor="#eeeeee"><font face="Arial" size="2">)</font></td>
    <td width="1%" align="right" valign="bottom" bgcolor="#eeeeee"><font face="Arial" size="2">&nbsp;</font></td>
    <td width="8%" align="right" valign="bottom" bgcolor="#eeeeee"><font face="Arial" size="2">(6</font></td>
    <td width="2%" valign="bottom" bgcolor="#eeeeee"><font face="Arial" size="2">)</font></td>
    <td width="1%" align="right" valign="bottom" bgcolor="#eeeeee"><font face="Arial" size="2">&nbsp;</font></td>
    <td width="8%" align="right" valign="bottom" bgcolor="#eeeeee"><font face="Arial" size="2">(31</font></td>
    <td width="2%" valign="bottom" bgcolor="#eeeeee"><font face="Arial" size="2">)</font></td>
  </tr>
  <tr valign="top">
    <td bgcolor="#ffffff"><div style="margin-left:3%; text-indent:-3%"><font face="Arial" size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</font></div></td>
    <td bgcolor="#ffffff"><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" bgcolor="#ffffff"><font face="Arial" size="2">&nbsp;</font></td>
    <td bgcolor="#ffffff"><font face="Arial" size="2">&nbsp;</font></td>
    <td bgcolor="#ffffff"><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" bgcolor="#ffffff"><font face="Arial" size="2">&nbsp;</font></td>
    <td bgcolor="#ffffff"><font face="Arial" size="2">&nbsp;</font></td>
    <td bgcolor="#ffffff"><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" bgcolor="#ffffff"><font face="Arial" size="2">&nbsp;</font></td>
    <td bgcolor="#ffffff"><font face="Arial" size="2">&nbsp;</font></td>
    <td bgcolor="#ffffff"><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" bgcolor="#ffffff"><font face="Arial" size="2">&nbsp;</font></td>
    <td bgcolor="#ffffff"><font face="Arial" size="2">&nbsp;</font></td>
    <td bgcolor="#ffffff"><font face="Arial" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="Arial" size="2">Back-end operations</font></div></td>
    <td><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="Arial" size="2">&#8212;</font></td>
    <td><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="Arial" size="2">&#8212;</font></td>
    <td><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="Arial" size="2">(1</font></td>
    <td valign="bottom"><font face="Arial" size="2">)</font></td>
    <td align="right" valign="bottom"><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="Arial" size="2">(1</font></td>
    <td valign="bottom"><font face="Arial" size="2">)</font></td>
  </tr>
  <tr valign="top">
    <td bgcolor="#ffffff"><div style="margin-left:3%; text-indent:-3%"><font face="Arial" size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</font></div></td>
    <td bgcolor="#ffffff"><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" bgcolor="#ffffff"><font face="Arial" size="2">&nbsp;</font></td>
    <td bgcolor="#ffffff"><font face="Arial" size="2">&nbsp;</font></td>
    <td bgcolor="#ffffff"><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" bgcolor="#ffffff"><font face="Arial" size="2">&nbsp;</font></td>
    <td bgcolor="#ffffff"><font face="Arial" size="2">&nbsp;</font></td>
    <td bgcolor="#ffffff"><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" bgcolor="#ffffff"><font face="Arial" size="2">&nbsp;</font></td>
    <td bgcolor="#ffffff"><font face="Arial" size="2">&nbsp;</font></td>
    <td bgcolor="#ffffff"><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" bgcolor="#ffffff"><font face="Arial" size="2">&nbsp;</font></td>
    <td bgcolor="#ffffff"><font face="Arial" size="2">&nbsp;</font></td>
    <td bgcolor="#ffffff"><font face="Arial" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top">
    <td bgcolor="#eeeeee"><div style="margin-left:3%; text-indent:-3%"><font face="Arial" size="2">Other</font></div></td>
    <td bgcolor="#eeeeee"><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom" bgcolor="#eeeeee"><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom" bgcolor="#eeeeee"><font face="Arial" size="2">&#8212;</font></td>
    <td bgcolor="#eeeeee"><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom" bgcolor="#eeeeee"><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom" bgcolor="#eeeeee"><font face="Arial" size="2">(1</font></td>
    <td valign="bottom" bgcolor="#eeeeee"><font face="Arial" size="2">)</font></td>
    <td align="right" valign="bottom" bgcolor="#eeeeee"><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom" bgcolor="#eeeeee"><font face="Arial" size="2">&#8212;</font></td>
    <td bgcolor="#eeeeee"><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom" bgcolor="#eeeeee"><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom" bgcolor="#eeeeee"><font face="Arial" size="2">(1</font></td>
    <td valign="bottom" bgcolor="#eeeeee"><font face="Arial" size="2">)</font></td>
  </tr>
  <tr valign="top">
    <td bgcolor="#ffffff"><div style="margin-left:3%; text-indent:-3%"><font face="Arial" size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</font></div></td>
    <td bgcolor="#ffffff"><font face="Arial" size="2">&nbsp;</font></td>
    <td bgcolor="#ffffff"><font face="Arial" size="1">
      <hr noshade size="1">
    </font></td>
    <td bgcolor="#ffffff"><font face="Arial" size="1">
      <hr noshade size="1">
    </font></td>
    <td bgcolor="#ffffff"><font face="Arial" size="1">&nbsp;</font></td>
    <td bgcolor="#ffffff"><font face="Arial" size="1">
      <hr noshade size="1">
    </font></td>
    <td bgcolor="#ffffff"><font face="Arial" size="1">
      <hr noshade size="1">
    </font></td>
    <td bgcolor="#ffffff"><font face="Arial" size="1">&nbsp;</font></td>
    <td bgcolor="#ffffff"><font face="Arial" size="1">
      <hr noshade size="1">
    </font></td>
    <td bgcolor="#ffffff"><font face="Arial" size="1">
      <hr noshade size="1">
    </font></td>
    <td bgcolor="#ffffff"><font face="Arial" size="1">&nbsp;</font></td>
    <td bgcolor="#ffffff"><font face="Arial" size="1">
      <hr noshade size="1">
    </font></td>
    <td bgcolor="#ffffff"><font face="Arial" size="1">
      <hr noshade size="1">
    </font></td>
    <td bgcolor="#ffffff"><font face="Arial" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top">
    <td bgcolor="#eeeeee"><div style="margin-left:6%; text-indent:-3%"><font face="Arial" size="2"><b>Total</b></font></div></td>
    <td bgcolor="#eeeeee"><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom" bgcolor="#eeeeee"><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom" bgcolor="#eeeeee"><font face="Arial" size="2">&#8212;</font></td>
    <td bgcolor="#eeeeee"><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom" bgcolor="#eeeeee"><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom" bgcolor="#eeeeee"><font face="Arial" size="2">(26</font></td>
    <td valign="bottom" bgcolor="#eeeeee"><font face="Arial" size="2">)</font></td>
    <td align="right" valign="bottom" bgcolor="#eeeeee"><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom" bgcolor="#eeeeee"><font face="Arial" size="2">(7</font></td>
    <td valign="bottom" bgcolor="#eeeeee"><font face="Arial" size="2">)</font></td>
    <td align="right" valign="bottom" bgcolor="#eeeeee"><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom" bgcolor="#eeeeee"><font face="Arial" size="2">(33</font></td>
    <td valign="bottom" bgcolor="#eeeeee"><font face="Arial" size="2">)</font></td>
  </tr>
  <tr valign="top">
    <td bgcolor="#ffffff"><font face="Arial" size="2">&nbsp;</font></td>
    <td bgcolor="#ffffff"><font face="Arial" size="2">&nbsp;</font></td>
    <td bgcolor="#ffffff"><font face="Arial" size="2"><hr noshade size="2">
    </font></td>
    <td bgcolor="#ffffff"><font face="Arial" size="2"><hr noshade size="2">
    </font></td>
    <td bgcolor="#ffffff"><font face="Arial" size="2">&nbsp;</font></td>
    <td bgcolor="#ffffff"><font face="Arial" size="2"><hr noshade size="2">
    </font></td>
    <td bgcolor="#ffffff"><font face="Arial" size="2"><hr noshade size="2">
    </font></td>
    <td bgcolor="#ffffff"><font face="Arial" size="2">&nbsp;</font></td>
    <td bgcolor="#ffffff"><font face="Arial" size="2"><hr noshade size="2">
    </font></td>
    <td bgcolor="#ffffff"><font face="Arial" size="2"><hr noshade size="2">
    </font></td>
    <td bgcolor="#ffffff"><font face="Arial" size="2">&nbsp;</font></td>
    <td bgcolor="#ffffff"><font face="Arial" size="2"><hr noshade size="2">
    </font></td>
    <td bgcolor="#ffffff"><font face="Arial" size="2"><hr noshade size="2">
    </font></td>
    <td bgcolor="#ffffff"><font face="Arial" size="2">&nbsp;</font></td>
  </tr>
</table>
<p align="left"><font face="Arial" size="2">The total impairment and restructuring
    costs for the front-end and back-end reorganization is estimated to be approximately
    $350 million pre-tax (or $240 million after-tax) of which $238 million has
    been incurred to date, $205 million in 2003 and $33 million in the first
    quarter of 2004. The restructuring plan and related manufacturing initiatives
    are expected to
    be substantially
    completed
    over the  next several quarters. The total actual costs that the Company
    will incur may differ from these estimates based on the timing required to
    complete all these actions, the number of people involved, the agreed termination
    benefits and the costs associated with the transfer of equipment,
 products and processes.</font></p>
<p align="left"><font face="Arial" size="2">In 2004, total cash outlays for the restructuring plan amounted to $10 million.</font></p>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr valign="bottom">
    <td><div align="left"><font face="Arial" size="2"><b>9. Interest expense,
            net</b></font></div></td>
  </tr>
</table>
<p align="left"><font face="Arial" size="2">Interest expense, net consists of
    the following:</font></p>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr valign="bottom">
    <td><div style="margin-left:3%; text-indent:-3%"><font size="1"></font></div>
    </td>
    <td><font face="Arial" size="1">&nbsp;</font></td>
    <td colspan="5" align="center" valign="bottom"><font face="Arial" size="1"><b>(Unaudited) </b>
          <hr noshade size="1">
    </font></td>
    <td><font face="Arial" size="1">&nbsp;</font></td>
  </tr>
  <tr valign="top">
    <td><font face="Arial" size="1">&nbsp;</font></td>
    <td><font face="Arial" size="1">&nbsp;</font></td>
    <td colspan="5" align="center" valign="bottom"><font face="Arial" size="1"><b>Three
          months ended </b>
          <hr noshade size="1">
    </font></td>
    <td><font face="Arial" size="1">&nbsp;</font></td>
  </tr>
  <tr valign="top">
    <td><font face="Arial" size="1">&nbsp;</font></td>
    <td><font face="Arial" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="Arial" size="1">&nbsp;</font></td>
    <td align="center" valign="bottom"><font face="Arial" size="1"><b>March 27,</b></font></td>
    <td><font face="Arial" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="Arial" size="1">&nbsp;</font></td>
    <td align="center" valign="bottom"><font face="Arial" size="1"><b>March 29,</b></font></td>
    <td><font face="Arial" size="1">&nbsp;</font></td>
  </tr>
  <tr valign="top">
    <td><font face="Arial" size="1">&nbsp;</font></td>
    <td><font face="Arial" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="Arial" size="1">&nbsp;</font></td>
    <td align="center" valign="bottom"><font face="Arial" size="1"><b>2004</b></font></td>
    <td><font face="Arial" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="Arial" size="1">&nbsp;</font></td>
    <td align="center" valign="bottom"><font face="Arial" size="1"><b>2003</b></font></td>
    <td><font face="Arial" size="1">&nbsp;</font></td>
  </tr>
  <tr valign="top">
    <td><font face="Arial" size="1">&nbsp;</font></td>
    <td><font face="Arial" size="1">&nbsp;</font></td>
    <td><font face="Arial" size="1">
      <hr noshade size="1">
    </font></td>
    <td><font face="Arial" size="1">
      <hr noshade size="1">
    </font></td>
    <td><font face="Arial" size="1">&nbsp;</font></td>
    <td><font face="Arial" size="1">
      <hr noshade size="1">
    </font></td>
    <td><font face="Arial" size="1">
      <hr noshade size="1">
    </font></td>
    <td><font face="Arial" size="1">&nbsp;</font></td>
  </tr>
  <tr valign="top">
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td colspan="5" align="center"><font face="Arial" size="1"><b>(in millions
          of U.S dollars)</b></font></td>
    <td>&nbsp;</td>
  </tr>
  <tr valign="top">
    <td bgcolor="#eeeeee"><div style="margin-left:3%; text-indent:-3%"><font face="Arial" size="2">Income</font></div></td>
    <td width="2%" bgcolor="#eeeeee"><font face="Arial" size="2">&nbsp;</font></td>
    <td width="1%" align="right" valign="bottom" bgcolor="#eeeeee"><font face="Arial" size="2">&nbsp;</font></td>
    <td width="8%" align="right" valign="bottom" bgcolor="#eeeeee"><font face="Arial" size="2"><b>11</b></font></td>
    <td width="2%" bgcolor="#eeeeee"><font face="Arial" size="2">&nbsp;</font></td>
    <td width="1%" align="right" valign="bottom" bgcolor="#eeeeee"><font face="Arial" size="2">&nbsp;</font></td>
    <td width="8%" align="right" valign="bottom" bgcolor="#eeeeee"><font face="Arial" size="2">9</font></td>
    <td width="2%" bgcolor="#eeeeee"><font face="Arial" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top">
    <td bgcolor="#ffffff"><div style="margin-left:3%; text-indent:-3%"><font face="Arial" size="2">Expense</font></div></td>
    <td bgcolor="#ffffff"><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom" bgcolor="#ffffff"><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom" bgcolor="#ffffff"><font face="Arial" size="2"><b>(15</b></font></td>
    <td valign="bottom" bgcolor="#ffffff"><font face="Arial" size="2"><b>)</b></font></td>
    <td align="right" valign="bottom" bgcolor="#ffffff"><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom" bgcolor="#ffffff"><font face="Arial" size="2">(27</font></td>
    <td valign="bottom" bgcolor="#ffffff"><font face="Arial" size="2">)</font></td>
  </tr>
  <tr valign="top">
    <td bgcolor="#ffffff"><div style="margin-left:3%; text-indent:-3%"><font face="Arial" size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</font></div></td>
    <td bgcolor="#ffffff"><font face="Arial" size="2">&nbsp;</font></td>
    <td bgcolor="#ffffff"><font face="Arial" size="1">
      <hr noshade size="1">
    </font></td>
    <td bgcolor="#ffffff"><font face="Arial" size="1">
      <hr noshade size="1">
    </font></td>
    <td bgcolor="#ffffff"><font face="Arial" size="1">&nbsp;</font></td>
    <td bgcolor="#ffffff"><font face="Arial" size="1">
      <hr noshade size="1">
    </font></td>
    <td bgcolor="#ffffff"><font face="Arial" size="1">
      <hr noshade size="1">
    </font></td>
    <td bgcolor="#ffffff"><font face="Arial" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top">
    <td bgcolor="#eeeeee"><div style="margin-left:6%; text-indent:-3%"><b><font face="Arial" size="2">Total</font></b></div></td>
    <td bgcolor="#eeeeee"><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom" bgcolor="#eeeeee"><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom" bgcolor="#eeeeee"><font face="Arial" size="2"><b>(4</b></font></td>
    <td valign="bottom" bgcolor="#eeeeee"><font face="Arial" size="2"><b>)</b></font></td>
    <td align="right" valign="bottom" bgcolor="#eeeeee"><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom" bgcolor="#eeeeee"><font face="Arial" size="2">(18</font></td>
    <td valign="bottom" bgcolor="#eeeeee"><font face="Arial" size="2">)</font></td>
  </tr>
  <tr valign="top">
    <td bgcolor="#ffffff"><font face="Arial" size="2">&nbsp;</font></td>
    <td bgcolor="#ffffff"><font face="Arial" size="2">&nbsp;</font></td>
    <td bgcolor="#ffffff"><hr noshade size="2"></td>
    <td bgcolor="#ffffff"><hr noshade size="2"></td>
    <td bgcolor="#ffffff"><font face="Arial" size="2">&nbsp;</font></td>
    <td bgcolor="#ffffff"><hr noshade size="2"></td>
    <td bgcolor="#ffffff"><hr noshade size="2"></td>
    <td bgcolor="#ffffff"><font face="Arial" size="2">&nbsp;</font></td>
  </tr>
</table>
<p align="left"><font face="Arial" size="2">Interest expenses also included fixed
    charges mainly related to amortization of issuance costs
    incurred for the Company&#146;s outstanding convertible bonds.</font></p>
<p align="center"><font face="Arial" size="2">F-13</font></p>
<hr noshade align="center" width="100%" size="2">
<div style="page-break-before:always"></div>
<page>
<a name="pf9"></a>
<p><font size="2" face="Arial"><a href="#contents">Back to Contents</a></font></p>


<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr valign="bottom">
    <td><div align="left"><font face="Arial" size="2"><b>10. Loss on extinguishment
            of convertible debt</b></font></div></td>
  </tr>
</table>
<p align="left"><font face="Arial" size="2">In the first quarter of 2003, the
    Company repurchased on the market approximately $429 million aggregate principal
    amount at maturity of its 3.75% Zero Coupon Senior Convertible Bonds due
    2010. The total cash amount paid was approximately $328 million. The repurchased
 convertible bonds were equivalent to 3,996,136 shares and have been cancelled.</font></p>
<p align="left"><font face="Arial" size="2">In relation to this repurchase, the
    Company recorded in the first quarter of 2003 a one-time non-operating pre-tax
    charge of $8 million, of which $6 million related to the price paid in excess
    of the repurchased convertible bonds accreted value and $2 million related
 to the write-off of the related bond issuance costs.</font></p>
<p align="left"><font face="Arial" size="2">No repurchase of convertible debt occurred in the first quarter of 2004.</font></p>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr valign="bottom">
    <td><div align="left"><font face="Arial" size="2"><b>11. Cash Equivalents</b></font></div></td>
  </tr>
</table>
<p align="left"><font face="Arial" size="2">All highly liquid investments purchased
with an original maturity of 90 days or less are considered to be cash equivalents.</font></p>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr valign="bottom">
    <td><div align="left"><font face="Arial" size="2"><b>12. Marketable Securities</b></font></div></td>
  </tr>
</table>
<p align="left"><font face="Arial" size="2">Marketable securities totaled $1,030
    million as at March 27, 2004. In the first quarter of 2004 the Company invested
    $1,030 million of existing cash in credit-linked deposits issued by several
    primary banks in order to maximize the return on available cash. These credit-linked
    deposits  are reinvested by the banks in underlying debt instruments (&#147;reference
    debt&#148;) that have been issued by different banks with a minimum rating
    of &#147;BBB+&#148;. Interest on these instruments is paid quarterly and
    the interest rate is fixed every three months based on the LIBOR rate of
    the U.S.  dollar plus a spread. Interest is payable through the final maturity
    of these instruments scheduled to occur before the 2004 year-end, unless
    suspended by credit default of the reference debt. Additionally, the carrying
    value of the instruments depends on the non-default of the
 reference debt. The principal will be repaid at final maturity unless a default
    occurs, where repayment of principal is reduced based on the decline in value
    of the defaulted debt.</font></p>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr valign="bottom">
    <td><div align="left"><font face="Arial" size="2"><b>13. Inventories</b></font></div></td>
  </tr>
</table>
<p align="left"><font face="Arial" size="2">Inventories are stated at the lower of cost or net realizable value. Cost is computed by adjusting standard cost to approximate actual manufacturing costs on a quarterly basis; the cost is therefore dependent on the Company manufacturing performance. In the case of underutilization of its
 manufacturing facilities, the costs associated with the excess capacity are not included in the valuation of inventories but charged directly to cost of sales.</font></p>
<p align="left"><font face="Arial" size="2">Provisions for obsolescence are estimated for uncommitted inventories based on the previous quarter sales, orders&#146; backlog and production plans.</font></p>
<p align="center"><font face="Arial" size="2">F-14</font></p>
<hr noshade align="center" width="100%" size="2">
<div style="page-break-before:always"></div>
<page>
<a name="pf10"></a>
<p><font size="2" face="Arial"><a href="#contents">Back to Contents</a></font></p>


<p align="left"><font face="Arial" size="2">Inventories, net of reserve consist of the following:</font></p>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr valign="bottom">
    <td>&nbsp;</td>
    <td><font face="Arial" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="Arial" size="1">&nbsp;</font></td>
    <td align="center" valign="bottom"><font face="Arial" size="1"><b>As at March 27, 2004</b></font></td>
    <td><font face="Arial" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="Arial" size="1">&nbsp;</font></td>
    <td align="center" valign="bottom"><font face="Arial" size="1"><b>As at December 31, 2003</b></font></td>
    <td><font face="Arial" size="1">&nbsp;</font></td>
  </tr>
  <tr valign="top">
    <td><font face="Arial" size="1">&nbsp;</font></td>
    <td><font face="Arial" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="Arial" size="1">&nbsp;</font></td>
    <td align="center" valign="bottom"><font face="Arial" size="1"><b>(unaudited)</b></font></td>
    <td><font face="Arial" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="Arial" size="1">&nbsp;</font></td>
    <td align="center" valign="bottom"><font face="Arial" size="1"><b>(audited)</b></font></td>
    <td><font face="Arial" size="1">&nbsp;</font></td>
  </tr>
  <tr valign="top">
    <td><font face="Arial" size="1">&nbsp;</font></td>
    <td><font face="Arial" size="1">&nbsp;</font></td>
    <td><font face="Arial" size="1"><hr noshade size="1"></font></td>
    <td><font face="Arial" size="1"><hr noshade size="1"></font></td>
    <td><font face="Arial" size="1">&nbsp;</font></td>
    <td><font face="Arial" size="1"><hr noshade size="1"></font></td>
    <td><font face="Arial" size="1"><hr noshade size="1"></font></td>
    <td><font face="Arial" size="1">&nbsp;</font></td>
  </tr>
  <tr valign="top">
    <td><font face="Arial" size="1">&nbsp;</font></td>
    <td><font face="Arial" size="1">&nbsp;</font></td>
    <td colspan="5" align="center" valign="bottom"><font face="Arial" size="1">&nbsp;<b>(in
          millions of U.S. dollars)</b></font></td>
    <td><font face="Arial" size="1">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="Arial" size="2">Raw materials</font></div></td>
    <td width="2%"><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom" width="1%"><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom" width="8%"><font face="Arial" size="2"><b>51</b></font></td>
    <td width="2%"><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom" width="1%"><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom" width="8%"><font face="Arial" size="2">50</font></td>
    <td width="2%"><font face="Arial" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="Arial" size="2">Work-in-process</font></div></td>
    <td><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="Arial" size="2"><b>722</b></font></td>
    <td><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="Arial" size="2">768</font></td>
    <td><font face="Arial" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="Arial" size="2">Finished products</font></div></td>
    <td><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="Arial" size="2"><b>298</b></font></td>
    <td><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="Arial" size="2">311</font></td>
    <td><font face="Arial" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td><font face="Arial" size="1">
      <hr noshade size="1">
    </font></td>
    <td><font face="Arial" size="1">
      <hr noshade size="1">
    </font></td>
    <td><font face="Arial" size="1">&nbsp;</font></td>
    <td><font face="Arial" size="1">
      <hr noshade size="1">
    </font></td>
    <td><font face="Arial" size="1">
      <hr noshade size="1">
    </font></td>
    <td>&nbsp;</td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:6%; text-indent:-3%"><font face="Arial" size="2"><b>Total</b></font></div></td>
    <td><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="Arial" size="2"><b>1,071</b></font></td>
    <td><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="Arial" size="2">1,129</font></td>
    <td><font face="Arial" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td><hr noshade size="2">
    </td>
    <td><hr noshade size="2">
    </td>
    <td><font face="Arial" size="2">&nbsp;</font></td>
    <td><hr noshade size="2">
    </td>
    <td><hr noshade size="2">
    </td>
    <td>&nbsp;</td>
  </tr>
</table>
<p align="left"><font face="Arial" size="2"><b>14. Warranty costs</b></font></p>
<p align="left"><font face="Arial" size="2">The Company&#146;s products typically carry a warranty in case of issue for a certain amount of time. The Company provides reserve for estimated product warranty cost based on the Company&#146;s historical experience at the time revenue is recognized and for any known product warranty
 issues if the loss is probable and can be reasonably estimated. In the first quarter of 2004, the Company booked an additional $1 million as warranty costs in cost of sales. Total provision amounted to $2 million as at March 27, 2004.</font></p>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr valign="bottom">
    <td><div align="left"><font face="Arial" size="2"><b>15. Goodwill and Other
            Intangible Assets</b></font></div></td>
  </tr>
</table>
<p align="left"><font face="Arial" size="2">Goodwill and other intangible assets consist of the following:</font></p>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr valign="bottom">
    <td>&nbsp;</td>
    <td><font face="Arial" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="Arial" size="1">&nbsp;</font></td>
    <td align="center" valign="bottom"><font face="Arial" size="1"><b>As at March 27, 2004</b></font></td>
    <td><font face="Arial" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="Arial" size="1">&nbsp;</font></td>
    <td align="center" valign="bottom"><font face="Arial" size="1"><b>As at December 31, 2003</b></font></td>
    <td><font face="Arial" size="1">&nbsp;</font></td>
  </tr>
  <tr valign="top">
    <td><font face="Arial" size="1">&nbsp;</font></td>
    <td><font face="Arial" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="Arial" size="1">&nbsp;</font></td>
    <td align="center" valign="bottom"><font face="Arial" size="1"><b>(unaudited)</b></font></td>
    <td><font face="Arial" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="Arial" size="1">&nbsp;</font></td>
    <td align="center" valign="bottom"><font face="Arial" size="1"><b>(audited)</b></font></td>
    <td><font face="Arial" size="1">&nbsp;</font></td>
  </tr>
  <tr valign="top">
    <td><font face="Arial" size="1">&nbsp;</font></td>
    <td><font face="Arial" size="1">&nbsp;</font></td>
    <td><font face="Arial" size="1"><hr noshade size="1"></font></td>
    <td><font face="Arial" size="1"><hr noshade size="1"></font></td>
    <td><font face="Arial" size="1">&nbsp;</font></td>
    <td><font face="Arial" size="1"><hr noshade size="1"></font></td>
    <td><font face="Arial" size="1"><hr noshade size="1"></font></td>
    <td><font face="Arial" size="1">&nbsp;</font></td>
  </tr>
  <tr valign="top">
    <td><font face="Arial" size="1">&nbsp;</font></td>
    <td><font face="Arial" size="1">&nbsp;</font></td>
    <td colspan="5" align="center" valign="bottom"><font face="Arial" size="1">&nbsp;<b>(in
    millions of U.S. dollars)</b></font></td>
    <td><font face="Arial" size="1">&nbsp;</font></td>
  </tr>
  <tr valign="top">
    <td bgcolor="#eeeeee"><div style="margin-left:3%; text-indent:-3%"><font face="Arial" size="2">Goodwill</font></div></td>
    <td width="2%" bgcolor="#eeeeee"><font face="Arial" size="2">&nbsp;</font></td>
    <td width="1%" align="right" valign="bottom" bgcolor="#eeeeee"><font face="Arial" size="2">&nbsp;</font></td>
    <td width="8%" align="right" valign="bottom" bgcolor="#eeeeee"><font face="Arial" size="2"><b>260</b></font></td>
    <td width="2%" bgcolor="#eeeeee"><font face="Arial" size="2">&nbsp;</font></td>
    <td width="1%" align="right" valign="bottom" bgcolor="#eeeeee"><font face="Arial" size="2">&nbsp;</font></td>
    <td width="8%" align="right" valign="bottom" bgcolor="#eeeeee"><font face="Arial" size="2">267</font></td>
    <td width="2%" bgcolor="#eeeeee"><font face="Arial" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top">
    <td bgcolor="#ffffff"><div style="margin-left:3%; text-indent:-3%"><font face="Arial" size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</font></div></td>
    <td bgcolor="#ffffff"><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" bgcolor="#ffffff"><font face="Arial" size="2">&nbsp;</font></td>
    <td bgcolor="#ffffff"><font face="Arial" size="2">&nbsp;</font></td>
    <td bgcolor="#ffffff"><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" bgcolor="#ffffff"><font face="Arial" size="2">&nbsp;</font></td>
    <td bgcolor="#ffffff"><font face="Arial" size="2">&nbsp;</font></td>
    <td bgcolor="#ffffff"><font face="Arial" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="Arial" size="2">Other intangible assets</font></div></td>
    <td><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="Arial" size="2"><b>312</b></font></td>
    <td><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="Arial" size="2">325</font></td>
    <td><font face="Arial" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top">
    <td bgcolor="#ffffff"><font face="Arial" size="2">&nbsp;</font></td>
    <td bgcolor="#ffffff"><font face="Arial" size="2">&nbsp;</font></td>
    <td bgcolor="#ffffff"><font face="Arial" size="2">
    <hr noshade size="1"></font></td>
    <td bgcolor="#ffffff"><font face="Arial" size="2">
    <hr noshade size="1"></font></td>
    <td bgcolor="#ffffff"><font face="Arial" size="2">&nbsp;</font></td>
    <td bgcolor="#ffffff"><font face="Arial" size="2">
    <hr noshade size="1"></font></td>
    <td bgcolor="#ffffff"><font face="Arial" size="2">
    <hr noshade size="1"></font></td>
    <td bgcolor="#ffffff"><font face="Arial" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top">
    <td bgcolor="#eeeeee"><div style="margin-left:6%; text-indent:-3%"><font face="Arial" size="2"><b>Total</b></font></div></td>
    <td bgcolor="#eeeeee"><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom" bgcolor="#eeeeee"><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom" bgcolor="#eeeeee"><font face="Arial" size="2"><b>572</b></font></td>
    <td bgcolor="#eeeeee"><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom" bgcolor="#eeeeee"><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom" bgcolor="#eeeeee"><font face="Arial" size="2">592</font></td>
    <td bgcolor="#eeeeee"><font face="Arial" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top">
    <td bgcolor="#ffffff"><font face="Arial" size="2">&nbsp;</font></td>
    <td bgcolor="#ffffff"><font face="Arial" size="2">&nbsp;</font></td>
    <td bgcolor="#ffffff"><hr noshade size="2"></td>
    <td bgcolor="#ffffff"><hr noshade size="2"></td>
    <td bgcolor="#ffffff"><font face="Arial" size="2">&nbsp;</font></td>
    <td bgcolor="#ffffff"><hr noshade size="2"></td>
    <td bgcolor="#ffffff"><hr noshade size="2"></td>
    <td bgcolor="#ffffff"><font face="Arial" size="2">&nbsp;</font></td>
  </tr>
</table>
<p align="left"><font face="Arial" size="2">As required by FAS 142, which was adopted by the Company during the first quarter of 2002, goodwill is no longer amortized. Other intangible assets include the cost of technologies, licenses purchased from third parties, and capitalized software either purchased from third parties or
 internally developed, which are amortized over a period ranging from three to seven years.</font></p>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr valign="bottom">
    <td><div align="left"><font face="Arial" size="2"><b>16. Investments and
            other non-current assets</b></font></div></td>
  </tr>
</table>
<p align="left"><font face="Arial" size="2">Investments and other non-current assets consist of the following:</font></p>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr valign="bottom">
    <td><font face="Arial" size="1">&nbsp;</font></td>
    <td><font face="Arial" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="Arial" size="1">&nbsp;</font></td>
    <td align="center" valign="bottom"><font face="Arial" size="1"><b>As at
          March 27, 2004</b></font></td>
    <td><font face="Arial" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="Arial" size="1">&nbsp;</font></td>
    <td align="center" valign="bottom"><font face="Arial" size="1"><b>As at December
          31, 2003</b></font></td>
    <td><font face="Arial" size="1">&nbsp;</font></td>
  </tr>
  <tr valign="top">
    <td><font face="Arial" size="1">&nbsp;</font></td>
    <td><font face="Arial" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="Arial" size="1">&nbsp;</font></td>
    <td align="center" valign="bottom"><font face="Arial" size="1"><b>(unaudited)</b></font></td>
    <td><font face="Arial" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="Arial" size="1">&nbsp;</font></td>
    <td align="center" valign="bottom"><font face="Arial" size="1"><b>(audited)</b></font></td>
    <td><font face="Arial" size="1">&nbsp;</font></td>
  </tr>
  <tr valign="top">
    <td><font face="Arial" size="1">&nbsp;</font></td>
    <td><font face="Arial" size="1">&nbsp;</font></td>
    <td><font face="Arial" size="1"><hr noshade size="1"></font></td>
    <td><font face="Arial" size="1"><hr noshade size="1"></font></td>
    <td><font face="Arial" size="1">&nbsp;</font></td>
    <td><font face="Arial" size="1"><hr noshade size="1"></font></td>
    <td><font face="Arial" size="1"><hr noshade size="1"></font></td>
    <td><font face="Arial" size="1">&nbsp;</font></td>
  </tr>
  <tr valign="top">
    <td><font face="Arial" size="1">&nbsp;</font></td>
    <td><font face="Arial" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="Arial" size="1">&nbsp;</font></td>
    <td colspan="4" align="center" valign="bottom"><font face="Arial" size="1">&nbsp;<b>(in
    millions of U.S. dollars)</b></font></td>
    <td><font face="Arial" size="1">&nbsp;</font></td>
  </tr>
  <tr valign="top">
    <td bgcolor="#eeeeee"><div style="margin-left:3%; text-indent:-3%"><font face="Arial" size="2">Investments</font></div></td>
    <td width="2%" bgcolor="#eeeeee"><font face="Arial" size="2">&nbsp;</font></td>
    <td width="1%" align="right" valign="bottom" bgcolor="#eeeeee"><font face="Arial" size="2">&nbsp;</font></td>
    <td width="8%" align="right" valign="bottom" bgcolor="#eeeeee"><font face="Arial" size="2"><b>40</b></font></td>
    <td width="2%" bgcolor="#eeeeee"><font face="Arial" size="2">&nbsp;</font></td>
    <td width="1%" align="right" valign="bottom" bgcolor="#eeeeee"><font face="Arial" size="2">&nbsp;</font></td>
    <td width="8%" align="right" valign="bottom" bgcolor="#eeeeee"><font face="Arial" size="2">38</font></td>
    <td width="2%" bgcolor="#eeeeee"><font face="Arial" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top">
    <td bgcolor="#ffffff"><div style="margin-left:3%; text-indent:-3%"><font face="Arial" size="2">Long-term deposits </font></div></td>
    <td bgcolor="#ffffff"><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom" bgcolor="#ffffff"><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom" bgcolor="#ffffff"><font face="Arial" size="2"><b>47</b></font></td>
    <td bgcolor="#ffffff"><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom" bgcolor="#ffffff"><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom" bgcolor="#ffffff"><font face="Arial" size="2">44</font></td>
    <td bgcolor="#ffffff"><font face="Arial" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top">
    <td bgcolor="#eeeeee"><div style="margin-left:3%; text-indent:-3%"><font face="Arial" size="2">Debt issuance costs, net</font></div></td>
    <td bgcolor="#eeeeee"><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom" bgcolor="#eeeeee"><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom" bgcolor="#eeeeee"><font face="Arial" size="2"><b>17</b></font></td>
    <td bgcolor="#eeeeee"><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom" bgcolor="#eeeeee"><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom" bgcolor="#eeeeee"><font face="Arial" size="2">17</font></td>
    <td bgcolor="#eeeeee"><font face="Arial" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top">
    <td bgcolor="#ffffff"><font face="Arial" size="2">&nbsp;</font></td>
    <td bgcolor="#ffffff"><font face="Arial" size="2">&nbsp;</font></td>
    <td bgcolor="#ffffff"><font face="Arial" size="2"><hr noshade size="1"></font></td>
    <td bgcolor="#ffffff"><font face="Arial" size="2"><hr noshade size="1"></font></td>
    <td bgcolor="#ffffff"><font face="Arial" size="2">&nbsp;</font></td>
    <td bgcolor="#ffffff"><font face="Arial" size="2"><hr noshade size="1"></font></td>
    <td bgcolor="#ffffff"><font face="Arial" size="2"><hr noshade size="1"></font></td>
    <td bgcolor="#ffffff"><font face="Arial" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top">
    <td bgcolor="#eeeeee"><div style="margin-left:6%; text-indent:-3%"><font face="Arial" size="2"><b>Total</b></font></div></td>
    <td bgcolor="#eeeeee"><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom" bgcolor="#eeeeee"><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom" bgcolor="#eeeeee"><font face="Arial" size="2"><b>104</b></font></td>
    <td bgcolor="#eeeeee"><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom" bgcolor="#eeeeee"><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom" bgcolor="#eeeeee"><font face="Arial" size="2">99</font></td>
    <td bgcolor="#eeeeee"><font face="Arial" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top">
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td bgcolor="#ffffff"><hr noshade size="2">
    </td>
    <td bgcolor="#ffffff"><hr noshade size="2">
    </td>
    <td bgcolor="#ffffff"><font face="Arial" size="2">&nbsp;</font></td>
    <td bgcolor="#ffffff"><hr noshade size="2">
    </td>
    <td bgcolor="#ffffff"><hr noshade size="2">
    </td>
    <td>&nbsp;</td>
  </tr>
</table>
<p align="left"><font face="Arial" size="2">&nbsp;</font></p>
<p align="center"><font face="Arial" size="2">F-15</font></p>
<hr noshade align="center" width="100%" size="2">
<div style="page-break-before:always"></div>
<page>
<a name="pf11"></a>
<p><font size="2" face="Arial"><a href="#contents">Back to Contents</a></font></p>


<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr valign="bottom">
    <td><div align="left"><i><font face="Arial" size="2">DNP Photomask Europe S.p.A</font></i></div></td>
  </tr>
</table>
<p align="left"><font face="Arial" size="2">The Company entered into a joint venture agreement in 2002 with Dai Nippon Printing Co, Ltd for the development and production of photomask in which the Company holds a 19% interest. The joint venture, DNP Photomask Europe S.p.A, was initially capitalized with the Company&#146;s
 contribution of &euro;2 million of cash. Dai Nippon Printing Co, Ltd contributed &euro;8 million of cash for an 81% interest. In the event of the liquidation of the joint-venture, the Company is required to repurchase the land at cost, and the facility at 10% of its net book value, if no suitable buyer
 is identified. At March 27, 2004, the Company&#146;s total contribution to the joint venture is $10 million. The Company continues to maintain its 19% ownership of the joint venture.</font></p>
<p align="left"><font face="Arial" size="2">The Company has identified the joint venture relationship as a Variable Interest Entity (VIE), but has determined that it is not the primary beneficiary of the VIE. The Company estimates that no future loss exposure will result from the joint venture.</font></p>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr valign="bottom">
    <td><div align="left"><i><font face="Arial" size="2">SuperH, Inc.</font></i></div></td>
  </tr>
</table>
<p align="left"><font face="Arial" size="2">During the third quarter of 2001, the Company and Renesas Technology Corp. (previously known as Hitachi Ltd.) formed a joint venture to develop and license RISC microprocessors. The joint venture, SuperH, Inc., was initially capitalized with the Company&#146;s contribution of $15
 million of cash plus internally developed technologies with an agreed intrinsic value of $14 million for a 44% interest. Hitachi, Ltd contributed $37 million of cash partially used to purchase internally developed technologies from Hitachi, for a 56% interest.</font></p>
<p align="left"><font face="Arial" size="2">During 2002, the Company contributed $5 million in cash to the SuperH joint venture. As a result of deteriorating market conditions and the inability of SuperH to meet its projected business plan objectives, at December 31, 2002, the Company wrote off the $4 million remaining book
 value of its investment in SuperH, Inc. and provisioned an additional $3 million for a capital contribution that the Company was committed to and did make in the first quarter of 2003. During the second and fourth quarters of 2003, the Company made an additional capital contribution of
 $2 million. As of March 27, 2004, the Company continues to maintain its 44% ownership of the joint venture.</font></p>
<p align="left"><font face="Arial" size="2">The Company is accounting for its
    share in the SuperH, Inc. joint venture under the equity method based on
    the actual results of the joint venture. At March 27, 2004, the accumulated
    losses
    of the joint venture exceeded the Company&#146;s total investment, and the
    investment was shown at a  zero carrying value.</font></p>
<p align="left"><font face="Arial" size="2">During the third quarter of 2003, the shareholders&#146; agreement was amended to require the Company to additionally contribute up to $3 million. The revised Shareholder agreement also stipulated to review any additional cash requirements in the second half of 2004, which could result in
 the Company being required to make a further capital investment of up to $1 million. Based on the continued inability of the joint venture to meet its projected business plan objectives, the Company has recorded an impairment charge of $3 million in the third quarter of 2003 for these
 required future capital contributions of which $1 million remains to be paid.</font></p>
<p align="center"><font face="Arial" size="2">F-16</font></p>
<hr noshade align="center" width="100%" size="2">
<div style="page-break-before:always"></div>
<page>
<a name="pf12"></a>
<p><font size="2" face="Arial"><a href="#contents">Back to Contents</a></font></p>


<p align="left"><font face="Arial" size="2">The Company has identified the joint venture relationship as a Variable Interest Entity (VIE), but has determined that it is not the primary beneficiary of the VIE. Pursuant the revised shareholders&#146; agreement, the Company estimates that no future loss exposure will result from the joint
 venture in addition to the provisions recorded.</font></p>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr valign="bottom">
    <td><div align="left"><i><font face="Arial" size="2">UPEK, Inc.</font></i></div></td>
  </tr>
</table>
<p align="left"><font face="Arial" size="2">During the first quarter of 2004,
    the Company and Sofinnova Capital IV FCPR formed a new company, UPEK Inc.,
    as a venture-backed spin-off of the Company&#146;s TouchChip business. UPEK,
    Inc. was initially capitalized with the Company&#146;s transfer of the business,
    personnel and  technology assets related to the fingerprint biometrics business,
    formerly known as the TouchChip Business Unit, for a 48% interest. Sofinnova
    Capital IV FCPR contributed $11 million of cash for a 52% interest. The Shareholder
    Agreement requires Sofinnova Capital IV FCPR to
 additionally contribute $9 million, within approximately 12 months based on
    today&#146;s
 visibility of the business, which will reduce the Company&#146;s ownership to
 33%.</font></p>
<p align="left"><font face="Arial" size="2">The Company is accounting for its share in UPEK, Inc. under the equity method based on the actual results of the entity. The Company has identified the joint venture relationship as a Variable Interest Entity (VIE), but has determined that it is not the primary beneficiary of the VIE.</font></p>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr valign="bottom">
    <td><div align="left"><font face="Arial" size="2"><b>17. Long-term Debt</b></font></div></td>
  </tr>
</table>
<p align="left"><font face="Arial" size="2">In the third quarter of 2003, the Company issued $1,400 million face value of negative-yield Zero Coupon Senior Convertible Bonds due 2013. The convertible debt represented $1,400 million of aggregate principal amount at issuance including the exercise in full of the option granted
 to the managers. The bonds constitute direct, un-subordinated and unsecured obligations, carry a zero coupon and have been issued at a price of 100% and are redeemable at maturity at 95.157% to produce a negative yield to maturity of 0.5% on a semi-annual basis. The bonds are
 convertible at any time by the holders at the rate of 29.9144 shares of the Company&#146;s common stock for each $1,000 principal amount of the bonds. The holders may redeem their convertible bonds for cash on July 5, 2013 at a price of $951.57 per one thousand dollar face value of the
 convertible bond.</font></p>
<p align="center"><font face="Arial" size="2">F-17</font></p>
<hr noshade align="center" width="100%" size="2">
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<p align="left"><font face="Arial" size="2">Long-term debt consists of the following:</font></p>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr valign="bottom">
    <td><div style="margin-left:3%; text-indent:-3%"><font size="1"><font size="1"></font></font></div>
    </td>
    <td><font face="Arial" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="Arial" size="1">&nbsp;</font></td>
    <td align="center" valign="bottom"><font face="Arial" size="1"><b>As at March
          27, 2004</b></font></td>
    <td><font face="Arial" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="Arial" size="1">&nbsp;</font></td>
    <td align="center" valign="bottom"><font face="Arial" size="1"><b>As at December
          31, 2003</b></font></td>
    <td><font face="Arial" size="1">&nbsp;</font></td>
  </tr>
  <tr valign="top">
    <td><font face="Arial" size="1">&nbsp;</font></td>
    <td><font face="Arial" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="Arial" size="1">&nbsp;</font></td>
    <td align="center" valign="bottom"><font face="Arial" size="1"><b>(unaudited)</b></font></td>
    <td><font face="Arial" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="Arial" size="1">&nbsp;</font></td>
    <td align="center" valign="bottom"><font face="Arial" size="1"><b>(audited)</b></font></td>
    <td><font face="Arial" size="1">&nbsp;</font></td>
  </tr>
  <tr valign="top">
    <td><font face="Arial" size="1">&nbsp;</font></td>
    <td><font face="Arial" size="1">&nbsp;</font></td>
    <td><font face="Arial" size="1">
      <hr noshade size="1">
    </font></td>
    <td><font face="Arial" size="1">
      <hr noshade size="1">
    </font></td>
    <td><font face="Arial" size="1">&nbsp;</font></td>
    <td><font face="Arial" size="1">
      <hr noshade size="1">
    </font></td>
    <td><font face="Arial" size="1">
      <hr noshade size="1">
    </font></td>
    <td><font face="Arial" size="1">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><font size="1">&nbsp;</font></td>
    <td><font size="1">&nbsp;</font></td>
    <td colspan="5" align="center"><font face="Arial" size="1"><b>(in millions
          of U.S dollars)</b></font></td>
    <td><font size="1">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="Arial" size="2">STMicroelectronics SA (France)</font></div></td>
    <td width="2%"><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" width="1%"><font face="Arial" size="2">&nbsp;</font></td>
    <td width="8%"><font face="Arial" size="2">&nbsp;</font></td>
    <td width="2%"><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" width="1%"><font face="Arial" size="2">&nbsp;</font></td>
    <td width="8%"><font face="Arial" size="2">&nbsp;</font></td>
    <td width="2%"><font face="Arial" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="Arial" size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</font></div></td>
    <td><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right"><font face="Arial" size="2">&nbsp;</font></td>
    <td><font face="Arial" size="2">&nbsp;</font></td>
    <td><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right"><font face="Arial" size="2">&nbsp;</font></td>
    <td><font face="Arial" size="2">&nbsp;</font></td>
    <td><font face="Arial" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:6%; text-indent:-3%"><font face="Arial" size="2">&#8212; 2.39% (weighted average) bank loans due 2006</font></div></td>
    <td><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="Arial" size="2"><b>124</b></font></td>
    <td><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="Arial" size="2">146</font></td>
    <td><font face="Arial" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:6%; text-indent:-3%"><font face="Arial" size="2">&#8212; 0.00% (weighted average) other bank loans</font></div></td>
    <td><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="Arial" size="2"><b>1</b></font></td>
    <td><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="Arial" size="2">1</font></td>
    <td><font face="Arial" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:6%; text-indent:-3%"><font face="Arial" size="2">&#8212; 4.79% (weighted average) capital leases </font></div></td>
    <td><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="Arial" size="2"><b>34</b></font></td>
    <td><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="Arial" size="2">37</font></td>
    <td><font face="Arial" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="Arial" size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</font></div></td>
    <td><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right"><font face="Arial" size="2">&nbsp;</font></td>
    <td><font face="Arial" size="2">&nbsp;</font></td>
    <td><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right"><font face="Arial" size="2">&nbsp;</font></td>
    <td><font face="Arial" size="2">&nbsp;</font></td>
    <td><font face="Arial" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="Arial" size="2">STMicroelectronics S.r.l. (Italy)</font></div></td>
    <td><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right"><font face="Arial" size="2">&nbsp;</font></td>
    <td><font face="Arial" size="2">&nbsp;</font></td>
    <td><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right"><font face="Arial" size="2">&nbsp;</font></td>
    <td><font face="Arial" size="2">&nbsp;</font></td>
    <td><font face="Arial" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="Arial" size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</font></div></td>
    <td><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right"><font face="Arial" size="2">&nbsp;</font></td>
    <td><font face="Arial" size="2">&nbsp;</font></td>
    <td><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right"><font face="Arial" size="2">&nbsp;</font></td>
    <td><font face="Arial" size="2">&nbsp;</font></td>
    <td><font face="Arial" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:6%; text-indent:-3%"><font face="Arial" size="2">&#8212; 7.35% bank loan due 2005 </font></div></td>
    <td><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="Arial" size="2"><b>2</b></font></td>
    <td><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="Arial" size="2">2</font></td>
    <td><font face="Arial" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:6%; text-indent:-3%"><font face="Arial" size="2">&#8212; 5.35% bank loan due 2006</font></div></td>
    <td><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="Arial" size="2"><b>18</b></font></td>
    <td><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="Arial" size="2">18</font></td>
    <td><font face="Arial" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:6%; text-indent:-3%"><font face="Arial" size="2">&#8212; 1.07% (weighted average) bank loans due 2009</font></div></td>
    <td><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="Arial" size="2"><b>70</b></font></td>
    <td><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="Arial" size="2">72</font></td>
    <td><font face="Arial" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:6%; text-indent:-3%"><font face="Arial" size="2">&#8212; 3.43% (weighted average) other bank loans</font></div></td>
    <td><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="Arial" size="2"><b>13</b></font></td>
    <td><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="Arial" size="2">14</font></td>
    <td><font face="Arial" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="Arial" size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</font></div></td>
    <td><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right"><font face="Arial" size="2">&nbsp;</font></td>
    <td><font face="Arial" size="2">&nbsp;</font></td>
    <td><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right"><font face="Arial" size="2">&nbsp;</font></td>
    <td><font face="Arial" size="2">&nbsp;</font></td>
    <td><font face="Arial" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="Arial" size="2">STMicroelectronics N.V. (The Netherlands)</font></div></td>
    <td><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right"><font face="Arial" size="2">&nbsp;</font></td>
    <td><font face="Arial" size="2">&nbsp;</font></td>
    <td><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right"><font face="Arial" size="2">&nbsp;</font></td>
    <td><font face="Arial" size="2">&nbsp;</font></td>
    <td><font face="Arial" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="Arial" size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</font></div></td>
    <td><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right"><font face="Arial" size="2">&nbsp;</font></td>
    <td><font face="Arial" size="2">&nbsp;</font></td>
    <td><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right"><font face="Arial" size="2">&nbsp;</font></td>
    <td><font face="Arial" size="2">&nbsp;</font></td>
    <td><font face="Arial" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:6%; text-indent:-3%"><font face="Arial" size="2">&#8212; 2.44% Liquid Yield Option Notes (LYONs) due 2009</font></div></td>
    <td><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="Arial" size="2"><b>804</b></font></td>
    <td><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="Arial" size="2">799</font></td>
    <td><font face="Arial" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:6%; text-indent:-3%"><font face="Arial" size="2">&#8212; 3.75% Convertible bonds due 2010</font></div></td>
    <td><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="Arial" size="2"><b>370</b></font></td>
    <td><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="Arial" size="2">366</font></td>
    <td><font face="Arial" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:6%; text-indent:-3%"><font face="Arial" size="2">&#8212; 0.50%
          Convertible bonds due 2013</font></div></td>
    <td><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="Arial" size="2"><b>1,379</b></font></td>
    <td><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="Arial" size="2">1,379</font></td>
    <td><font face="Arial" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="Arial" size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</font></div></td>
    <td><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right"><font face="Arial" size="2">&nbsp;</font></td>
    <td><font face="Arial" size="2">&nbsp;</font></td>
    <td><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right"><font face="Arial" size="2">&nbsp;</font></td>
    <td><font face="Arial" size="2">&nbsp;</font></td>
    <td><font face="Arial" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="Arial" size="2">STMicroelectronics PTE (Singapore)</font></div></td>
    <td><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right"><font face="Arial" size="2">&nbsp;</font></td>
    <td><font face="Arial" size="2">&nbsp;</font></td>
    <td><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right"><font face="Arial" size="2">&nbsp;</font></td>
    <td><font face="Arial" size="2">&nbsp;</font></td>
    <td><font face="Arial" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="Arial" size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</font></div></td>
    <td><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right"><font face="Arial" size="2">&nbsp;</font></td>
    <td><font face="Arial" size="2">&nbsp;</font></td>
    <td><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right"><font face="Arial" size="2">&nbsp;</font></td>
    <td><font face="Arial" size="2">&nbsp;</font></td>
    <td><font face="Arial" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:6%; text-indent:-3%"><font face="Arial" size="2">&#8212; 2.52% (weighted average) bank loans due 2007</font></div></td>
    <td><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="Arial" size="2"><b>148</b></font></td>
    <td><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="Arial" size="2">147</font></td>
    <td><font face="Arial" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:6%; text-indent:-3%"><font face="Arial" size="2">&#8212; 3.50% (weighted average) other bank loans</font></div></td>
    <td><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="Arial" size="2"><b>&#8212;</b></font></td>
    <td><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="Arial" size="2">1</font></td>
    <td><font face="Arial" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="Arial" size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</font></div></td>
    <td><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right"><font face="Arial" size="2">&nbsp;</font></td>
    <td><font face="Arial" size="2">&nbsp;</font></td>
    <td><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right"><font face="Arial" size="2">&nbsp;</font></td>
    <td><font face="Arial" size="2">&nbsp;</font></td>
    <td><font face="Arial" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="Arial" size="2">STMicroelectronics (others)</font></div></td>
    <td><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right"><font face="Arial" size="2">&nbsp;</font></td>
    <td><font face="Arial" size="2">&nbsp;</font></td>
    <td><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right"><font face="Arial" size="2">&nbsp;</font></td>
    <td><font face="Arial" size="2">&nbsp;</font></td>
    <td><font face="Arial" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:6%; text-indent:-3%"><font face="Arial" size="2">&#8212; 4.03% (weighted average) other bank loans</font></div></td>
    <td><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="Arial" size="2"><b>35</b></font></td>
    <td><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="Arial" size="2">68</font></td>
    <td><font face="Arial" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><font face="Arial" size="2">&nbsp;</font></td>
    <td><font face="Arial" size="2">&nbsp;</font></td>
    <td><font face="Arial" size="2"><hr noshade size="1"></font></td>
    <td><font face="Arial" size="2"><hr noshade size="1"></font></td>
    <td><font face="Arial" size="2">&nbsp;</font></td>
    <td><font face="Arial" size="2"><hr noshade size="1"></font></td>
    <td><font face="Arial" size="2"><hr noshade size="1"></font></td>
    <td><font face="Arial" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="Arial" size="2">Total long-term debt</font></div></td>
    <td><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="Arial" size="2"><b>2,998</b></font></td>
    <td><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="Arial" size="2">3,050</font></td>
    <td><font face="Arial" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="Arial" size="2">Less current portion</font></div></td>
    <td><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="Arial" size="2"><b>443</b></font></td>
    <td><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="Arial" size="2">106</font></td>
    <td><font face="Arial" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><font face="Arial" size="2">&nbsp;</font></td>
    <td><font face="Arial" size="2">&nbsp;</font></td>
    <td><font face="Arial" size="2"><hr noshade size="1"></font></td>
    <td><font face="Arial" size="2"><hr noshade size="1"></font></td>
    <td><font face="Arial" size="2">&nbsp;</font></td>
    <td><font face="Arial" size="2"><hr noshade size="1"></font></td>
    <td><font face="Arial" size="2"><hr noshade size="1"></font></td>
    <td><font face="Arial" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:6%; text-indent:-3%"><font face="Arial" size="2"><b>Total long-term debt, less current portion</b></font></div></td>
    <td><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="Arial" size="2"><b>2,555</b></font></td>
    <td><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="Arial" size="2">2,944</font></td>
    <td><font face="Arial" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><font face="Arial" size="2">&nbsp;</font></td>
    <td><font face="Arial" size="2">&nbsp;</font></td>
    <td><hr noshade size="2"></td>
    <td><hr noshade size="2"></td>
    <td><font face="Arial" size="2">&nbsp;</font></td>
    <td><hr noshade size="2"></td>
    <td><hr noshade size="2"></td>
    <td><font face="Arial" size="2">&nbsp;</font></td>
  </tr>
</table>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr>
    <td><font face="Arial" size="2">&nbsp;</font></td>
  </tr>
</table>
<p align="left"><font face="Arial" size="2"> These amounts include a reclassification
    of $370 million from long-term debt to current portion, effected after
    the Company&#8217;s press release on April 21, 2004 and related to the Company&#8217;s
    2010 convertible bonds. Pursuant
    to the terms of the 2009, 2010 and 2013 bonds, the Company has agreed to
    purchase, at the option
    of the holder, any outstanding 2009 bond on September
    22,
    2004, payable in cash or shares, at the Company's option, any outstanding
    residual 2010 bond for cash on January 17, 2005, and any outstanding 2013
    bond for cash on August 5, 2006. At March 27, 2004 $804 million was
    outstanding
    under
    our
    2009 bonds,
     $370
    million was outstanding under our 2010 bonds, and $1,379 million was outstanding
    under our 2013 bonds.</font></p>
<p align="center"><font face="Arial" size="2">F-18</font></p>
<hr noshade align="center" width="100%" size="2">
<div style="page-break-before:always"></div>
<page>
<a name="pf14"></a>
<p><font size="2" face="Arial"><a href="#contents">Back to Contents</a></font></p>
<p align="left"><font face="Arial" size="2"><b>18. Computation of Earnings Per
      Share</b></font></p>
<p align="left"><font face="Arial" size="2">Basic net earnings per share (&#147;EPS&#148;)
    is computed based on net income available to common shareholders using the
    weighted-average number of common shares outstanding during the reported
    period; the number of outstanding shares does not include treasury shares.
    Diluted EPS is computed using the weighted-average number of common shares
    and dilutive potential common shares outstanding during the period, such
    as stock issuable pursuant to the exercise of stock options outstanding and
    the conversion of convertible debt.</font></p>
<p align="left">&nbsp;</p>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr valign="bottom">
    <td><font face="Arial" size="1">&nbsp;</font></td>
    <td><font face="Arial" size="1">&nbsp;</font></td>
    <td colspan="5" align="center" valign="bottom"><font face="Arial" size="1"><b>Three Months Ended </b><hr noshade size="1"></font></td>
    <td><font face="Arial" size="1">&nbsp;</font></td>
  </tr>
  <tr valign="top">
    <td><font face="Arial" size="1">&nbsp;</font></td>
    <td><font face="Arial" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="Arial" size="1">&nbsp;</font></td>
    <td align="center" valign="bottom"><font face="Arial" size="1"><b> March 27,</b></font></td>
    <td><font face="Arial" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="Arial" size="1">&nbsp;</font></td>
    <td align="center" valign="bottom"><font face="Arial" size="1"><b>March 29,</b></font></td>
    <td><font face="Arial" size="1">&nbsp;</font></td>
  </tr>
  <tr valign="top">
    <td><font face="Arial" size="1">&nbsp;</font></td>
    <td><font face="Arial" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="Arial" size="1">&nbsp;</font></td>
    <td align="center" valign="bottom"><font face="Arial" size="1"><b>2004</b></font></td>
    <td><font face="Arial" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="Arial" size="1">&nbsp;</font></td>
    <td align="center" valign="bottom"><font face="Arial" size="1"><b>2003</b></font></td>
    <td><font face="Arial" size="1">&nbsp;</font></td>
  </tr>
  <tr valign="top">
    <td><font face="Arial" size="1">&nbsp;</font></td>
    <td><font face="Arial" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="Arial" size="1">&nbsp;</font></td>
    <td align="center" valign="bottom"><font face="Arial" size="1"><b>(unaudited)</b></font></td>
    <td><font face="Arial" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="Arial" size="1">&nbsp;</font></td>
    <td align="center" valign="bottom"><font face="Arial" size="1"><b>(unaudited)</b></font></td>
    <td><font face="Arial" size="1">&nbsp;</font></td>
  </tr>
  <tr valign="top">
    <td><font face="Arial" size="1">&nbsp;</font></td>
    <td><font face="Arial" size="1">&nbsp;</font></td>
    <td><font face="Arial" size="1"><hr noshade size="1"></font></td>
    <td><font face="Arial" size="1"><hr noshade size="1"></font></td>
    <td><font face="Arial" size="1">&nbsp;</font></td>
    <td><font face="Arial" size="1"><hr noshade size="1"></font></td>
    <td><font face="Arial" size="1"><hr noshade size="1"></font></td>
    <td><font face="Arial" size="1">&nbsp;</font></td>
  </tr>
  <tr valign="top">
    <td><font face="Arial" size="1">&nbsp;</font></td>
    <td><font face="Arial" size="1">&nbsp;</font></td>
    <td colspan="5" align="center" valign="bottom"><font face="Arial" size="1"><b>(in
    millions of U.S. dollars,<br>
    except per share amounts)</b></font></td>
    <td><font face="Arial" size="1">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:3%; text-indent:-3%"><b><font face="Arial" size="2">Basic EPS:</font></b></div></td>
    <td width="2%"><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" width="1%"><font face="Arial" size="2">&nbsp;</font></td>
    <td width="8%"><font face="Arial" size="2">&nbsp;</font></td>
    <td width="2%"><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" width="1%"><font face="Arial" size="2">&nbsp;</font></td>
    <td width="8%"><font face="Arial" size="2">&nbsp;</font></td>
    <td width="2%"><font face="Arial" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="Arial" size="2">Net income</font></div></td>
    <td><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="Arial" size="2"><b>77</b></font></td>
    <td><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="Arial" size="2">79</font></td>
    <td><font face="Arial" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="Arial" size="2">Weighted average shares outstanding</font></div></td>
    <td><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="Arial" size="2"><b>890,211,387</b></font></td>
    <td><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="Arial" size="2">887,552,314</font></td>
    <td><font face="Arial" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="Arial" size="2">EPS (basic)</font></div></td>
    <td><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="Arial" size="2"><b>0.09</b></font></td>
    <td><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="Arial" size="2">0.09</font></td>
    <td><font face="Arial" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:3%; text-indent:-3%"><b><font face="Arial" size="2">Diluted EPS:</font></b></div></td>
    <td><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right"><font face="Arial" size="2">&nbsp;</font></td>
    <td><font face="Arial" size="2">&nbsp;</font></td>
    <td><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right"><font face="Arial" size="2">&nbsp;</font></td>
    <td><font face="Arial" size="2">&nbsp;</font></td>
    <td><font face="Arial" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="Arial" size="2">Net income</font></div></td>
    <td><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="Arial" size="2"><b>77</b></font></td>
    <td><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="Arial" size="2">79</font></td>
    <td><font face="Arial" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="Arial" size="2">Interest expense on convertible debt, net of tax</font></div></td>
    <td><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="Arial" size="2"><b>1</b></font></td>
    <td><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="Arial" size="2">&#8212;</font></td>
    <td><font face="Arial" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="Arial" size="2">Net income, adjusted</font></div></td>
    <td><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="Arial" size="2"><b>78</b></font></td>
    <td><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="Arial" size="2">79</font></td>
    <td><font face="Arial" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="Arial" size="2">Weighted average shares outstanding</font></div></td>
    <td><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="Arial" size="2"><b>890,211,387</b></font></td>
    <td><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="Arial" size="2">887,552,314</font></td>
    <td><font face="Arial" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="Arial" size="2">Dilutive effect of stock options</font></div></td>
    <td><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="Arial" size="2"><b>6,563,534</b></font></td>
    <td><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="Arial" size="2">3,511,143</font></td>
    <td><font face="Arial" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="Arial" size="2">Dilutive effect of convertible debt</font></div></td>
    <td><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="Arial" size="2"><b>41,880,160</b></font></td>
    <td><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="Arial" size="2">&#8212;</font></td>
    <td><font face="Arial" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="Arial" size="2">Number of shares used in calculating EPS</font></div></td>
    <td><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="Arial" size="2"><b>938,655,081</b></font></td>
    <td><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="Arial" size="2">891,063,457</font></td>
    <td><font face="Arial" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:3%; text-indent:-3%"><b><font face="Arial" size="2">Diluted
    EPS</font></b></div></td>
    <td><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="Arial" size="2"><b>0.08</b></font></td>
    <td><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="Arial" size="2">0.09</font></td>
    <td><font face="Arial" size="2">&nbsp;</font></td>
  </tr>
</table>
<p align="left"><font face="Arial" size="2">As of March 27, 2004, common shares issued were 904,734,285 shares of which 13,400,000 shares owned by the Company as treasury stock.</font></p>
<p align="left"><font face="Arial" size="2">As of March 27, 2004, there were outstanding stock options exercisable into the equivalent of 54,647,979 common shares and the equivalent of 70,418,060 common shares for convertible debt.</font></p>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr valign="bottom">
    <td><div align="left"><font face="Arial" size="2"><b>19. Retirement plans</b></font></div></td>
  </tr>
</table>
<p align="left"><font face="Arial" size="2">The Company and its subsidiaries have a number of defined benefit pension plans covering employees in various countries. The plans provide for pension benefits, the amounts of which are calculated based on factors such as years of service and employee compensation levels. Eligibility
 is generally determined in accordance with local statutory requirements.</font></p>
<p align="center"><font face="Arial" size="2">F-19</font></p>
<hr noshade align="center" width="100%" size="2">
<div style="page-break-before:always"></div>
<page>
<a name="pf15"></a>
<p><font size="2" face="Arial"><a href="#contents">Back to Contents</a></font></p>
<p align="left"><font face="Arial" size="2">The components of the net periodic benefit cost include the following:</font></p>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr valign="bottom">
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td colspan="5" align="center" valign="bottom"><font face="Arial" size="1"><b>(Unaudited)</b>
        <hr noshade size="1">
    </font></td>
    <td>&nbsp;</td>
  </tr>
  <tr valign="bottom">
    <td><font face="Arial" size="1">&nbsp;</font></td>
    <td><font face="Arial" size="1">&nbsp;</font></td>
    <td colspan="5" align="center" valign="bottom"><font face="Arial" size="1"><b>Three Months ended </b><hr noshade size="1"></font></td>
    <td><font face="Arial" size="1">&nbsp;</font></td>
  </tr>
  <tr valign="top">
    <td><font face="Arial" size="1">&nbsp;</font></td>
    <td><font face="Arial" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="Arial" size="1">&nbsp;</font></td>
    <td align="center" valign="bottom"><font face="Arial" size="1"><b>March 27,<br>
    2004</b></font></td>
    <td><font face="Arial" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="Arial" size="1">&nbsp;</font></td>
    <td align="center" valign="bottom"><font face="Arial" size="1"><b>March 29,<br>
    2003</b></font></td>
    <td><font face="Arial" size="1">&nbsp;</font></td>
  </tr>
  <tr valign="top">
    <td><font face="Arial" size="1">&nbsp;</font></td>
    <td><font face="Arial" size="1">&nbsp;</font></td>
    <td><font face="Arial" size="1"><hr noshade size="1"></font></td>
    <td><font face="Arial" size="1"><hr noshade size="1"></font></td>
    <td><font face="Arial" size="1">&nbsp;</font></td>
    <td><font face="Arial" size="1"><hr noshade size="1"></font></td>
    <td><font face="Arial" size="1"><hr noshade size="1"></font></td>
    <td><font face="Arial" size="1">&nbsp;</font></td>
  </tr>
  <tr valign="top">
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td colspan="5" align="center"><font face="Arial" size="1"><b>(in millions of U.S dollars)</b></font></td>
    <td>&nbsp;</td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="Arial" size="2">Service cost</font></div></td>
    <td width="2%"><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom" width="1%"><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom" width="8%"><font face="Arial" size="2"><b>4</b></font></td>
    <td width="2%"><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom" width="1%"><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom" width="8%"><font face="Arial" size="2">3</font></td>
    <td width="2%"><font face="Arial" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="Arial" size="2">Interest cost</font></div></td>
    <td><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="Arial" size="2"><b>3</b></font></td>
    <td><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="Arial" size="2">2</font></td>
    <td><font face="Arial" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="Arial" size="2">Expected return on plan assets</font></div></td>
    <td><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="Arial" size="2"><b>(2</b></font></td>
    <td valign="bottom"><font face="Arial" size="2"><b>)</b></font></td>
    <td align="right" valign="bottom"><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="Arial" size="2">(2</font></td>
    <td valign="bottom"><font face="Arial" size="2">)</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="Arial" size="2">Amortization of net (gain) loss</font></div></td>
    <td><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="Arial" size="2"><b>1</b></font></td>
    <td><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="Arial" size="2">1</font></td>
    <td><font face="Arial" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><font face="Arial" size="2">&nbsp;</font></td>
    <td><font face="Arial" size="2">&nbsp;</font></td>
    <td><font face="Arial" size="2"><hr noshade size="1"></font></td>
    <td><font face="Arial" size="2"><hr noshade size="1"></font></td>
    <td><font face="Arial" size="2">&nbsp;</font></td>
    <td><font face="Arial" size="2"><hr noshade size="1"></font></td>
    <td><font face="Arial" size="2"><hr noshade size="1"></font></td>
    <td><font face="Arial" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:3%; text-indent:-3%"><b><font face="Arial" size="2">Net periodic benefit cost</font></b></div></td>
    <td><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="Arial" size="2"><b>6</b></font></td>
    <td><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="Arial" size="2">4</font></td>
    <td><font face="Arial" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><font face="Arial" size="2">&nbsp;</font></td>
    <td><font face="Arial" size="2">&nbsp;</font></td>
    <td><font face="Arial" size="2"><hr noshade size="2">
    </font></td>
    <td><font face="Arial" size="2"><hr noshade size="2">
    </font></td>
    <td><font face="Arial" size="2">&nbsp;</font></td>
    <td><font face="Arial" size="2"><hr noshade size="2">
    </font></td>
    <td><font face="Arial" size="2"><hr noshade size="2">
    </font></td>
    <td><font face="Arial" size="2">&nbsp;</font></td>
  </tr>
</table>
<p align="left"><font face="Arial" size="2">Employer contributions expected to
    be paid in 2004 are consistent with the amounts disclosed
    in the Consolidated Financial Statements for the year ended December 31,
    2003.</font></p>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr valign="bottom">
    <td><div align="left"><font face="Arial" size="2"><b>20. Fair value of stock-based
            compensation</b></font></div></td>
  </tr>
</table>
<p align="left"><font face="Arial" size="2">In December 2002, the Financial Accounting
    Standards Board issued Statement of Financial Accounting Standards No. 148, <i>Accounting
    for Stock-Based Compensation&#151;Transition and Disclosure&#151;an amendment
    of FASB Statement No. 123</i> (FAS 148). This statement provides
 alternative transition methods for voluntary changes to the fair value based
    method of accounting for stock-based employee compensation and amends the
    disclosure requirement of Statement 123 for annual and interim financial
    statements. Under the statement, the required interim  disclosures will be
    significantly similar to the annual disclosures. The transition provisions
    and annual disclosure requirements are effective for financial statements
    for fiscal years ending after December 31, 2002. The interim disclosure requirements
    are effective for financial reports
 containing condensed financial statements for interim periods beginning after
    December 15, 2002.</font></p>
<p align="left"><font face="Arial" size="2">At March 27, 2004, the Company has six stock-based employee and Supervisory Board compensation plans which are described in detail in Note 14 of the consolidated financial statements located at Item 18 of the Form 20-F. The Company applies the intrinsic-value-based method
 prescribed by Accounting Principles Board Opinion No. 25 <i>Accounting for Stock Issued to Employees </i>(APB 25), and related Interpretations, in accounting for stock-based awards to employees. No stock-based employee compensation cost is reflected in net income, as all options granted
 under those plans had an exercise price equal to the market value of the underlying common stock on the date of grant. Pro forma information regarding net income and earnings per share (EPS) is required by FAS 123 as if the Company had accounted for its stock-based awards to
 employees under the fair value method (which means to charge income statement for total stock-based employee compensation expense, net of related tax effects). As required by FAS 148, the Company has to disclose the impact on its earnings of the utilization of the fair-value for stock
 based compensation.</font></p>
<p align="center"><font face="Arial" size="2">F-20</font></p>
<hr noshade align="center" width="100%" size="2">
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<page>
<a name="pf16"></a>
<p><font size="2" face="Arial"><a href="#contents">Back to Contents</a></font></p>
<p align="left"><font face="Arial" size="2">The fair value of the Company&#146;s stock-based awards to employees was estimated using a Black-Scholes option-pricing model.</font></p>
<p align="left"><font face="Arial" size="2">The fair value was estimated using the following weighted-average assumptions:</font></p>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr valign="bottom">
    <td><font face="Arial" size="1">&nbsp;</font></td>
    <td><font face="Arial" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="Arial" size="1">&nbsp;</font></td>
    <td align="center" valign="bottom"><font face="Arial" size="1"><b>Three months ended March
 27, 2004</b></font></td>
    <td><font face="Arial" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="Arial" size="1">&nbsp;</font></td>
    <td align="center" valign="bottom"><font face="Arial" size="1"><b>Three months ended March
 29, 2003</b></font></td>
    <td><font face="Arial" size="1">&nbsp;</font></td>
  </tr>
  <tr valign="top">
    <td><font face="Arial" size="1">&nbsp;</font></td>
    <td><font face="Arial" size="1">&nbsp;</font></td>
    <td><font face="Arial" size="1"><hr noshade size="1"></font></td>
    <td><font face="Arial" size="1"><hr noshade size="1"></font></td>
    <td><font face="Arial" size="1">&nbsp;</font></td>
    <td><font face="Arial" size="1"><hr noshade size="1"></font></td>
    <td><font face="Arial" size="1"><hr noshade size="1"></font></td>
    <td><font face="Arial" size="1">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="Arial" size="2">Expected life (years)</font></div></td>
    <td width="2%"><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom" width="1%"><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom" width="8%"><font face="Arial" size="2"><b>6</b></font></td>
    <td width="2%"><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom" width="1%"><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom" width="8%"><font face="Arial" size="2">6</font></td>
    <td width="2%"><font face="Arial" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="Arial" size="2">Volatility</font></div></td>
    <td><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="Arial" size="2"><b>57.5</b></font></td>
    <td valign="bottom"><font face="Arial" size="2"><b>%</b></font></td>
    <td align="right" valign="bottom"><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="Arial" size="2">59.6</font></td>
    <td valign="bottom"><font face="Arial" size="2">%</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="Arial" size="2">Risk-free interest rate</font></div></td>
    <td><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="Arial" size="2"><b>3.4</b></font></td>
    <td valign="bottom"><font face="Arial" size="2"><b>%</b></font></td>
    <td align="right" valign="bottom"><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="Arial" size="2">2.7</font></td>
    <td valign="bottom"><font face="Arial" size="2">%</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="Arial" size="2">Dividend yield</font></div></td>
    <td><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="Arial" size="2"><b>0.45</b></font></td>
    <td valign="bottom"><font face="Arial" size="2"><b>%</b></font></td>
    <td align="right" valign="bottom"><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="Arial" size="2">0.35</font></td>
    <td valign="bottom"><font face="Arial" size="2">%</font></td>
  </tr>
</table>
<p align="left"><font face="Arial" size="2">The weighted average fair value of options granted during the first quarter of 2004 and the same period of 2003 was $14.72 and $10.57 respectively.</font></p>
<p align="left"><font face="Arial" size="2">The following table illustrates the effect on net income and earnings per share if the Company had applied the fair value recognition provisions of FAS 123 to employee stock-based compensation, which consists of applying the amortization of the fair-value of stock-based compensation
 over the vesting period.</font></p>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr valign="bottom">
    <td><font face="Arial" size="1">&nbsp;</font></td>
    <td><font face="Arial" size="1">&nbsp;</font></td>
    <td colspan="5" align="center" valign="bottom"><font face="Arial" size="1"><b>(unaudited) </b><hr noshade size="1"></font></td>
    <td><font face="Arial" size="1">&nbsp;</font></td>
  </tr>
  <tr valign="top">
    <td><font face="Arial" size="1">&nbsp;</font></td>
    <td><font face="Arial" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="Arial" size="1">&nbsp;</font></td>
    <td align="center" valign="bottom"><div align="center"><font face="Arial" size="1"><b>Three months ended March
   27, 2004</b></font></div></td>
    <td><div align="center"><font face="Arial" size="1">&nbsp;</font></div></td>
    <td align="right" valign="bottom"><div align="center"><font face="Arial" size="1">&nbsp;</font></div></td>
    <td align="right" valign="bottom"><div align="center"><font face="Arial" size="1"><b>Three months ended March
   29, 2003</b></font></div></td>
    <td><font face="Arial" size="1">&nbsp;</font></td>
  </tr>
  <tr valign="top">
    <td><font face="Arial" size="1">&nbsp;</font></td>
    <td><font face="Arial" size="1">&nbsp;</font></td>
    <td><font face="Arial" size="1"><hr noshade size="1"></font></td>
    <td><font face="Arial" size="1"><hr noshade size="1"></font></td>
    <td><font face="Arial" size="1">&nbsp;</font></td>
    <td><font face="Arial" size="1"><hr noshade size="1"></font></td>
    <td><font face="Arial" size="1"><hr noshade size="1"></font></td>
    <td><font face="Arial" size="1">&nbsp;</font></td>
  </tr>
  <tr valign="top">
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td colspan="5" align="center"><font face="Arial" size="1"><b>(in millions of
        U.S. dollars,<br>
except per share amounts)</b></font></td>
    <td>&nbsp;</td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="Arial" size="2">Net
          income, as reported</font></div></td>
    <td width="2%"><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom" width="1%"><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom" width="8%"><font face="Arial" size="2"><b>77</b></font></td>
    <td width="2%"><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom" width="1%"><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom" width="8%"><font face="Arial" size="2">79</font></td>
    <td width="2%"><font face="Arial" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="Arial" size="2">Deduct:</font></div></td>
    <td><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="Arial" size="2"><b>(41</b></font></td>
    <td valign="bottom"><font face="Arial" size="2"><b>)</b></font></td>
    <td align="right" valign="bottom"><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="Arial" size="2">(44</font></td>
    <td valign="bottom"><font face="Arial" size="2">)</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="Arial" size="2">Total stock-based employee compensation expense determined under FAS 123, net of related tax effects</font></div></td>
    <td><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right"><font face="Arial" size="2">&nbsp;</font></td>
    <td><font face="Arial" size="2">&nbsp;</font></td>
    <td><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right"><font face="Arial" size="2">&nbsp;</font></td>
    <td><font face="Arial" size="2">&nbsp;</font></td>
    <td><font face="Arial" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="Arial" size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</font></div></td>
    <td><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right"><font face="Arial" size="2">&nbsp;</font></td>
    <td><font face="Arial" size="2">&nbsp;</font></td>
    <td><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right"><font face="Arial" size="2">&nbsp;</font></td>
    <td><font face="Arial" size="2">&nbsp;</font></td>
    <td><font face="Arial" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="Arial" size="2">Net
          income, pro forma</font></div></td>
    <td><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="Arial" size="2"><b>36</b></font></td>
    <td><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="Arial" size="2">35</font></td>
    <td><font face="Arial" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="Arial" size="2">Earnings per share:</font></div></td>
    <td><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right"><font face="Arial" size="2">&nbsp;</font></td>
    <td><font face="Arial" size="2">&nbsp;</font></td>
    <td><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right"><font face="Arial" size="2">&nbsp;</font></td>
    <td><font face="Arial" size="2">&nbsp;</font></td>
    <td><font face="Arial" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:3%"><font face="Arial" size="2">Basic, as reported</font></div></td>
    <td><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="Arial" size="2"><b>0.09</b></font></td>
    <td><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="Arial" size="2">0.09</font></td>
    <td><font face="Arial" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:3%"><font face="Arial" size="2">Basic, pro forma</font></div></td>
    <td><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="Arial" size="2"><b>0.04</b></font></td>
    <td><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="Arial" size="2">0.04</font></td>
    <td><font face="Arial" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="Arial" size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</font></div></td>
    <td><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right"><font face="Arial" size="2">&nbsp;</font></td>
    <td><font face="Arial" size="2">&nbsp;</font></td>
    <td><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right"><font face="Arial" size="2">&nbsp;</font></td>
    <td><font face="Arial" size="2">&nbsp;</font></td>
    <td><font face="Arial" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:3%"><font face="Arial" size="2">Diluted, as reported</font></div></td>
    <td><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="Arial" size="2"><b>0.08</b></font></td>
    <td><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="Arial" size="2">0.09</font></td>
    <td><font face="Arial" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:3%"><font face="Arial" size="2">Diluted, pro forma</font></div></td>
    <td><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="Arial" size="2"><b>0.04</b></font></td>
    <td><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="Arial" size="2">0.04</font></td>
    <td><font face="Arial" size="2">&nbsp;</font></td>
  </tr>
</table>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr>
    <td><font face="Arial" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top">
    <td><div align="left"><font face="Arial" size="2"><b>21. Treasury Stock</b></font></div></td>
  </tr>
</table>
<p align="left"><font face="Arial" size="2">In 2002, the Company had repurchased 13,400,000 own shares, for a total amount of $348 million, which were reflected at cost as a reduction of the shareholders&#146; equity.</font></p>
<p align="left"><font face="Arial" size="2">As of March 27, 2004, none of the common shares repurchased had been transferred to employees under the employee stock option plan.</font></p>
<p align="left"><font face="Arial" size="2">During 2003 and during the first quarter of 2004, the Company did not repurchase any of its common shares.</font></p>
<p align="center"><font face="Arial" size="2">F-21</font></p>
<hr noshade align="center" width="100%" size="2">
<div style="page-break-before:always"></div>
<page>
<a name="pf17"></a>
<p><font size="2" face="Arial"><a href="#contents">Back to Contents</a></font></p>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr valign="bottom">
    <td><div align="left"><font face="Arial" size="2"><b>22. Dividends</b></font></div></td>
  </tr>
</table>
<p align="left"><font face="Arial" size="2">The annual general meeting of shareholders on March 12, 2003 decided the distribution of $0.08 per share as dividends. The dividend amount of $71 million was paid in the second quarter of 2003.</font></p>
<p align="left"><font face="Arial" size="2">The annual general meeting of shareholders on April 23, 2004 decided the distribution of $0.12 per share as dividends. The dividend amount of approximately $107 million will be paid in the second quarter 2004.</font></p>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr valign="bottom">
    <td><div align="left"><font face="Arial" size="2"><b>23. Contingencies</b></font></div></td>
  </tr>
</table>
<p align="left"><font face="Arial" size="2">The Company is subject to the possibility of loss contingencies arising in the ordinary course of business. These include but are not limited to: warranty cost on our products not covered by insurance, breach of contract claims, tax claims and provisions for specifically identified income
 tax exposures as well as claims for environmental damages. In determining loss contingencies, the Company considers the likelihood of a loss of an asset or the incurrence of a liability as well as the ability to reasonably estimate the amount of such loss or liability. An estimated loss is
 recorded when it is probable that a liability has been incurred and when the amount of the loss can be reasonably estimated. The Company regularly revaluates claims to determine whether they need to be readjusted based on the current information available to the Company. The
 Company will record a provision when it estimates that the claim could successfully be asserted. Changes in evaluations which are adversely determined with respects to the interests of the Company could have a material adverse effect on the results of operations or the financial position
 at the time it were to materialize.</font></p>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr valign="bottom">
    <td><div align="left"><font face="Arial" size="2"><b>24. Commitments and
            Contingencies</b></font></div></td>
  </tr>
</table>
<p align="left"><font face="Arial" size="2">The Company&#146;s contractual obligations, commitments and contingencies as of March 27, 2004 were as follows:</font></p>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr valign="bottom">
    <td><font face="Arial" size="1">&nbsp;</font></td>
    <td><font face="Arial" size="1">&nbsp;</font></td>
    <td colspan="15" align="center" valign="bottom"><font face="Arial" size="1"><b>Payment due by period </b><hr noshade size="1"></font></td>
    <td><font face="Arial" size="1">&nbsp;</font></td>
  </tr>
  <tr valign="top">
    <td><font face="Arial" size="1">&nbsp;</font></td>
    <td><font face="Arial" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><div align="center"><font face="Arial" size="1"><b>Total</b></font></div></td>
    <td><div align="center"><font face="Arial" size="1">&nbsp;</font></div></td>
    <td align="right" valign="bottom"><div align="center"><font face="Arial" size="1"><b>2004</b></font></div></td>
    <td><div align="center"><font face="Arial" size="1">&nbsp;</font></div></td>
    <td align="right" valign="bottom"><div align="center"><font face="Arial" size="1"><b>2005</b></font></div></td>
    <td><div align="center"><font face="Arial" size="1">&nbsp;</font></div></td>
    <td align="right" valign="bottom"><div align="center"><font face="Arial" size="1"><b>2006</b></font></div></td>
    <td><div align="center"><font face="Arial" size="1">&nbsp;</font></div></td>
    <td align="right" valign="bottom"><div align="center"><font face="Arial" size="1"><b>2007</b></font></div></td>
    <td><div align="center"><font face="Arial" size="1">&nbsp;</font></div></td>
    <td align="right" valign="bottom"><div align="center"><font face="Arial" size="1"><b>2008</b></font></div></td>
    <td><div align="center"><font face="Arial" size="1">&nbsp;</font></div></td>
    <td align="right" valign="bottom"><div align="center"><font face="Arial" size="1"><b>2009</b></font></div></td>
    <td><div align="center"><font face="Arial" size="1">&nbsp;</font></div></td>
    <td align="right" valign="bottom"><div align="center"><font face="Arial" size="1"><b>Thereafter</b></font></div></td>
    <td><font face="Arial" size="1">&nbsp;</font></td>
  </tr>
  <tr valign="top">
    <td><font face="Arial" size="1">&nbsp;</font></td>
    <td><font face="Arial" size="1">&nbsp;</font></td>
    <td><font face="Arial" size="1"><hr noshade size="1"></font></td>
    <td><font face="Arial" size="1">&nbsp;</font></td>
    <td><font face="Arial" size="1"><hr noshade size="1"></font></td>
    <td><font face="Arial" size="1">&nbsp;</font></td>
    <td><font face="Arial" size="1"><hr noshade size="1"></font></td>
    <td><font face="Arial" size="1">&nbsp;</font></td>
    <td><font face="Arial" size="1"><hr noshade size="1"></font></td>
    <td><font face="Arial" size="1">&nbsp;</font></td>
    <td><font face="Arial" size="1"><hr noshade size="1"></font></td>
    <td><font face="Arial" size="1">&nbsp;</font></td>
    <td><font face="Arial" size="1"><hr noshade size="1"></font></td>
    <td><font face="Arial" size="1">&nbsp;</font></td>
    <td><font face="Arial" size="1"><hr noshade size="1"></font></td>
    <td><font face="Arial" size="1">&nbsp;</font></td>
    <td><font face="Arial" size="1"><hr noshade size="1"></font></td>
    <td><font face="Arial" size="1">&nbsp;</font></td>
  </tr>
  <tr valign="top">
    <td><font face="Arial" size="1">&nbsp;</font></td>
    <td><font face="Arial" size="1">&nbsp;</font></td>
    <td colspan="15" align="center" valign="bottom"><font face="Arial" size="1"><b>(in
          millions of U.S. dollars)</b></font></td>
    <td><font face="Arial" size="1">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="Arial" size="2">Capital leases</font></div></td>
    <td width="2%"><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom" width="8%"><font face="Arial" size="2">34</font></td>
    <td width="2%"><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom" width="8%"><font face="Arial" size="2">3</font></td>
    <td width="2%"><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom" width="8%"><font face="Arial" size="2">5</font></td>
    <td width="2%"><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom" width="8%"><font face="Arial" size="2">5</font></td>
    <td width="2%"><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom" width="8%"><font face="Arial" size="2">5</font></td>
    <td width="2%"><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom" width="8%"><font face="Arial" size="2">5</font></td>
    <td width="2%"><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom" width="8%"><font face="Arial" size="2">5</font></td>
    <td width="2%"><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom" width="8%"><font face="Arial" size="2">6</font></td>
    <td width="2%"><font face="Arial" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="Arial" size="2">Operating leases<sup>(1)</sup></font></div></td>
    <td><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="Arial" size="2">180</font></td>
    <td><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="Arial" size="2">24</font></td>
    <td><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="Arial" size="2">25</font></td>
    <td><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="Arial" size="2">21</font></td>
    <td><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="Arial" size="2">17</font></td>
    <td><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="Arial" size="2">15</font></td>
    <td><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="Arial" size="2">10</font></td>
    <td><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="Arial" size="2">68</font></td>
    <td><font face="Arial" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="Arial" size="2">Purchase commitments<sup>(2)</sup></font></div></td>
    <td><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="Arial" size="2">1,555</font></td>
    <td><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="Arial" size="2">1,442</font></td>
    <td><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="Arial" size="2">96</font></td>
    <td><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="Arial" size="2">17</font></td>
    <td><font face="Arial" size="2">&nbsp;</font></td>
    <td><font face="Arial" size="2">&nbsp;</font></td>
    <td><font face="Arial" size="2">&nbsp;</font></td>
    <td><font face="Arial" size="2">&nbsp;</font></td>
    <td><font face="Arial" size="2">&nbsp;</font></td>
    <td><font face="Arial" size="2">&nbsp;</font></td>
    <td><font face="Arial" size="2">&nbsp;</font></td>
    <td><font face="Arial" size="2">&nbsp;</font></td>
    <td><font face="Arial" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="Arial" size="2">Contingent obligations<sup>(3)</sup></font></div></td>
    <td><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="Arial" size="2">1</font></td>
    <td><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="Arial" size="2">1</font></td>
    <td><font face="Arial" size="2">&nbsp;</font></td>
    <td><font face="Arial" size="2">&nbsp;</font></td>
    <td><font face="Arial" size="2">&nbsp;</font></td>
    <td><font face="Arial" size="2">&nbsp;</font></td>
    <td><font face="Arial" size="2">&nbsp;</font></td>
    <td><font face="Arial" size="2">&nbsp;</font></td>
    <td><font face="Arial" size="2">&nbsp;</font></td>
    <td><font face="Arial" size="2">&nbsp;</font></td>
    <td><font face="Arial" size="2">&nbsp;</font></td>
    <td><font face="Arial" size="2">&nbsp;</font></td>
    <td><font face="Arial" size="2">&nbsp;</font></td>
    <td><font face="Arial" size="2">&nbsp;</font></td>
    <td><font face="Arial" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="Arial" size="2">Total </font></div></td>
    <td><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="Arial" size="2">1,770</font></td>
    <td><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="Arial" size="2">1,470</font></td>
    <td><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="Arial" size="2">126</font></td>
    <td><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="Arial" size="2">43</font></td>
    <td><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="Arial" size="2">22</font></td>
    <td><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="Arial" size="2">20</font></td>
    <td><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="Arial" size="2">15</font></td>
    <td><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="Arial" size="2">74</font></td>
    <td><font face="Arial" size="2">&nbsp;</font></td>
  </tr>
</table>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr valign="top">
    <td width="100"><font face="Arial" size="2"><hr noshade size="1" align="left" width="100%"></font></td>
    <td><font face="Arial" size="2">&nbsp;</font></td>
  </tr>
</table>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr valign="top">
    <td width="3%"><font face="Arial" size="1">(1)</font></td>
    <td><div align="left"><font face="Arial" size="1">Operating leases are mainly related to building leases.</font></div></td>
  </tr>
</table>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr valign="top">
    <td width="3%"><font face="Arial" size="1">(2)</font></td>
    <td><div align="left"><font face="Arial" size="1">Purchase obligations primarily include commitments for the purchase of equipment, purchase contracts for outsourced foundry wafers and for the purchase of software licenses.</font></div></td>
  </tr>
</table>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr valign="top">
    <td width="3%"><font face="Arial" size="1">(3)</font></td>
    <td><div align="left"><font face="Arial" size="1">Contingent obligations related to an additional contractual amount which could be paid for a future capital increase in the joint venture with Hitachi, Ltd.</font></div></td>
  </tr>
</table>
<p align="center"><font face="Arial" size="2">F-22</font></p>
<hr noshade align="center" width="100%" size="2">
<div style="page-break-before:always"></div>
<page>
<a name="pf18"></a>
<p><font face="Arial" size="2"><a href="#contents">Back to Contents</a></font></p>
<p align="left"><font face="Arial" size="2">The Company&#146;s contractual obligations, commitments and contingencies, including other obligations as of March 27, 2004 can be further broken down as follows:</font></p>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr valign="bottom">
    <td><font face="Arial" size="1">&nbsp;</font></td>
    <td><font face="Arial" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="Arial" size="1">&nbsp;</font></td>
    <td align="center" valign="bottom"><font face="Arial" size="1"><b>As of March 27, 2004 </b><hr noshade size="1"></font></td>
    <td><font face="Arial" size="1">&nbsp;</font></td>
  </tr>
  <tr valign="top">
    <td><font face="Arial" size="1">&nbsp;</font></td>
    <td><font face="Arial" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="Arial" size="1">&nbsp;</font></td>
    <td align="center" valign="bottom"><font face="Arial" size="1"><b>(in millions of U.S. dollars)</b></font></td>
    <td><font face="Arial" size="1">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="Arial" size="2">Capital leases</font></div></td>
    <td width="2%"><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom" width="1%"><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom" width="8%"><font face="Arial" size="2">34</font></td>
    <td width="2%"><font face="Arial" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="Arial" size="2">Minimum payments for future leases (from 2004 to 2009 and thereafter)</font></div></td>
    <td><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="Arial" size="2">180</font></td>
    <td><font face="Arial" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="Arial" size="2">Equipment purchase</font></div></td>
    <td><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="Arial" size="2">1,115</font></td>
    <td><font face="Arial" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="Arial" size="2">Foundry purchase</font></div></td>
    <td><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="Arial" size="2">271</font></td>
    <td><font face="Arial" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="Arial" size="2">Software, technology licenses and design</font></div></td>
    <td><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="Arial" size="2">169</font></td>
    <td><font face="Arial" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="Arial" size="2">Other obligations</font></div></td>
    <td><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="Arial" size="2">72</font></td>
    <td><font face="Arial" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td align="right" valign="bottom">&nbsp;</td>
    <td align="right" valign="bottom"><font face="Arial" size="1">
      <hr noshade size="1">
    </font></td>
    <td>&nbsp;</td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="Arial" size="2">Total</font></div></td>
    <td><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="Arial" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="Arial" size="2">1,841</font></td>
    <td><font face="Arial" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td align="right" valign="bottom">&nbsp;</td>
    <td align="right" valign="bottom"><font face="Arial" size="1">
      <hr noshade size="2">
    </font></td>
    <td>&nbsp;</td>
  </tr>
</table>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr>
    <td>&nbsp;</td>
  </tr>
  <tr valign="top">
    <td><div align="left"><font face="Arial" size="2"><b>25. Legal proceedings</b></font></div></td>
  </tr>
</table>
<p align="left"><font face="Arial" size="2">The Company has from time to time
    received and may in the future receive communications alleging possible infringements,
    in particular in the case of patents and similar intellectual property rights
    of others. The Company records a provision when it estimates that the claim
    could be  successfully asserted in a court of law and the loss is considered
    probable. In the event of litigation, which is adversely determined with
    respect to its interests, or in the event the Company needs to change its
    evaluation on a potential third-party claim, based on new evidence or
 communications, these could have a material adverse effect on the results of
    operations or financial condition at the time it were to materialize.</font></p>
<p align="left"><font face="Arial" size="2">The Company is involved in various lawsuits, claims, investigations and proceeding incidental to the normal conduct of its operations, other than external patent utilization. These matters mainly include the risks associated with various investigations, claims from customers or other
 party and tax disputes. Legal costs associated with claims are expensed as incurred. The Company has accrued for these loss contingencies when the loss is probable and can be estimated. In the event of litigation which is adversely determined with respect to the Company&#146;s interests, or
 in the event the Company needs to change its evaluation of a potential third-party claim, based on new evidence or communications, these could have a material adverse effect on the results of operations or financial condition at the time it were to materialize.</font></p>
<p align="left"><font face="Arial" size="2">The Company is in discussion with several parties with respect to claims and litigations against the Company relating to possible infringements of patents and similar intellectual property rights of others. For the sum of such claims, the Company recorded in 2003 an accrual of $10
 million, which represents its best estimate of probable losses based on the information currently available to the Company.</font></p>
<p align="center"><font face="Arial" size="2">F-23</font></p>
<hr noshade align="center" width="100%" size="2">
<div style="page-break-before:always"></div>
<page>
<p><font face="Arial"><a name="p?"></a> </font> </p>
<p align="center"><font size="2" face="Arial"><b>SIGNATURES</b></font></p>
<p align="left"><font size="2" face="Arial">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Pursuant
    to the requirements of the Securities Exchange Act of 1934, STMicroelectronics
    N.V. has duly caused this report to be signed on its behalf by the undersigned,
    thereunto duly authorized.</font></p>
<p align="left"><font size="2" face="Arial">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</font></p>
<table width="100%" cellspacing="0" cellpadding="0" border="0">
  <tr valign="top">
    <td align="left">&nbsp;</td>
    <td align="left">&nbsp;</td>
    <td align="left">&nbsp;</td>
    <td align="left"><font size="2" face="Arial"><b>STMicroelectronics N.V.</b></font></td>
  </tr>
  <tr valign="top">
    <td align="left">&nbsp;</td>
    <td align="left">&nbsp;</td>
    <td align="left">&nbsp;</td>
    <td align="left">&nbsp;</td>
  </tr>
  <tr valign="top">
    <td align="left" width="5%"><font size="2" face="Arial">Date:</font></td>
    <td align="left" width="60%"><font size="2" face="Arial">May 12, 2004</font></td>
    <td align="left" width="8%"><font size="2" face="Arial">By:</font></td>
    <td align="left"><font size="2" face="Arial"><u>/s/ Pasquale Pistorio</u></font></td>
  </tr>
  <tr valign="top">
    <td align="left">&nbsp;</td>
    <td align="left">&nbsp;</td>
    <td align="left">&nbsp;</td>
    <td align="left">&nbsp;</td>
  </tr>
  <tr valign="top">
    <td align="left"><font size="2" face="Arial">&nbsp;</font></td>
    <td align="left"><font size="2" face="Arial">&nbsp;</font></td>
    <td align="left"><font size="2" face="Arial">Name:</font></td>
    <td align="left"><font size="2" face="Arial">Pasquale Pistorio</font></td>
  </tr>
  <tr valign="top">
    <td align="left"><font size="2" face="Arial">&nbsp;</font></td>
    <td align="left"><font size="2" face="Arial">&nbsp;</font></td>
    <td align="left"><font size="2" face="Arial">Title:</font></td>
    <td align="left"><font size="2" face="Arial">President and Chief Executive
        Officer</font></td>
  </tr>
</table>
<p align="left"><font size="2" face="Arial">&nbsp;Enclosure: STMicroelectronics
    N.V.&#8217;s First Quarter 2004: </font></p>
<table width="100%" cellspacing="0" cellpadding="0" border="0">
  <tr valign="top">
    <td align="left" width="4%"></td>
    <td align="left" width="2%"><font size="2" face="Arial">&#149;</font></td>
    <td align="left"><font size="2" face="Arial">Operating and Financial Review
        and Prospects;</font></td>
  </tr>
  <tr valign="top">
    <td align="left"></td>
    <td align="left"><font size="2" face="Arial">&#149;</font></td>
    <td align="left"><font size="2" face="Arial">Unaudited Interim Consolidated
        Statements of Income, Balance Sheets, Statements of Cash Flow, and Statements
        of Changes in Shareholders' Equity and related Notes; and </font></td>
  </tr>
  <tr valign="top">
    <td align="left"></td>
    <td align="left"><font size="2" face="Arial">&#149;</font></td>
    <td align="left"><font size="2" face="Arial">Certifications pursuant to Sections
        302 and 906 of the Sarbanes-Oxley Act of 2002, submitted to the Commission
        on a voluntary basis.</font></td>
  </tr>
</table>
<p>&nbsp;</p>
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<head><title>
Prepared and filed by St Ives Burrups
</title>
</head>
<body bgcolor="#FFFFFF"> <p align="right"><font size="2" face="sans-serif"><b>Exhibit
      12.1</b></font></p>

<hr noshade align="center" width="100%" size="2">
<div style="page-break-before:always"></div>
<div align="center"><b><font face="sans-serif"><page>
  </font>
  </b>
</div>
<p align="center"><b><font size="2" face="sans-serif">VOLUNTARY CERTIFICATION</font></b></p>
<p align="left"><font size="2" face="sans-serif">I, Pasquale Pistorio, certify that: </font></p>
<p align="left"><font size="2" face="sans-serif">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; I
have reviewed this report on Form 6-K of STMicroelectronics N.V.;</font></p>
<p align="left"><font size="2" face="sans-serif">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 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;</font></p>
<p align="left"><font size="2" face="sans-serif">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;3.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Based
    on my knowledge, the Unaudited Interim Consolidated Statements of Income,
    Balance Sheets, Statements of Cash Flow and Statements of Changes in
    Shareholders&#8217; Equity and related Notes, 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 company as of, and for, the periods presented in this report;</font></p>
<p align="left"><font size="2" face="sans-serif">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;4.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; The company&#8217;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 company and have:</font></p>
<table width="100%" cellspacing="0" cellpadding="0" border="0">
<tr valign="top">
<td width="3%"><font size="2" face="sans-serif">&nbsp;</font></td>
<td width="3%"><font size="2" face="sans-serif">a)</font></td>
<td align="left"><font face="sans-serif">
<font size="2"> 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 company, 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;</font></font></td>
</tr>
</table>
<table width="100%" cellspacing="0" cellpadding="0" border="0">
<tr valign="top">
  <td>&nbsp;</td>
  <td>&nbsp;</td>
  <td align="left">&nbsp;</td>
</tr>
<tr valign="top">
<td width="3%"><font size="2" face="sans-serif">&nbsp;</font></td>
<td width="3%"><font size="2" face="sans-serif">b)</font></td>
<td align="left"><font face="sans-serif">
<font size="2"> Evaluated the effectiveness of the company&#8217;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</font></font></td>
</tr>
</table>
<table width="100%" cellspacing="0" cellpadding="0" border="0">
<tr valign="top">
  <td>&nbsp;</td>
  <td>&nbsp;</td>
  <td align="left">&nbsp;</td>
</tr>
<tr valign="top">
<td width="3%"><font size="2" face="sans-serif">&nbsp;</font></td>
<td width="3%"><font size="2" face="sans-serif">c)</font></td>
<td align="left"><font face="sans-serif">
<font size="2"> Disclosed in this report any change in the company&#8217;s internal control over financial reporting that occurred during the period covered by the report that has materially affected, or is reasonably likely to materially affect, the company&#8217;s
internal control over financial reporting; and</font></font></td>
</tr>
</table>
<p align="left"><font size="2" face="sans-serif">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;5.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; The company&#8217;s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the company&#8217;s auditors and the audit committee of the company&#8217;s
board of directors (or persons performing the equivalent functions):</font></p>
<table width="100%" cellspacing="0" cellpadding="0" border="0">
<tr valign="top">
<td width="3%"><font size="2" face="sans-serif">&nbsp;</font></td>
<td width="3%"><font size="2" face="sans-serif">a)</font></td>
<td align="left"><font face="sans-serif">
<font size="2"> 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 company&#8217;s ability to record, process, summarize
and report financial information; and</font></font></td>
</tr>
</table>
<table width="100%" cellspacing="0" cellpadding="0" border="0">
<tr valign="top">
  <td>&nbsp;</td>
  <td>&nbsp;</td>
  <td align="left">&nbsp;</td>
</tr>
<tr valign="top">
<td width="3%"><font size="2" face="sans-serif">&nbsp;</font></td>
<td width="3%"><font size="2" face="sans-serif">b)</font></td>
<td align="left"><font face="sans-serif">
<font size="2"> Any fraud, whether or not material, that involves management
or other employees who have a significant role in the company&#8217;s internal
control over financial reporting.</font></font></td>
</tr>
</table>
<table width="100%" cellspacing="0" cellpadding="0" border="0">
<tr valign="top">
  <td align="left">&nbsp;</td>
  <td align="left">&nbsp;</td>
  <td align="left">&nbsp;</td>
</tr>
<tr valign="top">
<td align="left" width="60%"><font size="2" face="sans-serif">Date:&nbsp;May
    12, 2004</font></td>
<td align="left" width="4%"><font size="2" face="sans-serif">By:&nbsp;</font></td>
<td align="left"><font size="2" face="sans-serif"><u>/s/ Pasquale Pistorio</u></font><font face="sans-serif"><u></u></font></td>
</tr>
<tr valign="top">
  <td align="left">&nbsp;</td>
  <td align="left">&nbsp;</td>
  <td align="left">&nbsp;</td>
</tr>
<tr valign="top">
<td align="left"><font size="2" face="sans-serif">&nbsp;</font></td>
<td align="left"><font size="2" face="sans-serif">Name:</font></td>
<td align="left"><font size="2" face="sans-serif"><b>Pasquale Pistorio</b></font></td>
</tr>
<tr valign="top">
<td align="left"><font size="2" face="sans-serif">&nbsp;</font></td>
<td align="left"><font size="2" face="sans-serif">Title:</font></td>
<td align="left"><font size="2" face="sans-serif"><b>President and Chief Executive Officer</b></font></td>
</tr>
</table>
<p align="center">&nbsp;</p>
<hr noshade align="center" width="100%" size="2">
</body>
</html>

</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-12
<SEQUENCE>5
<FILENAME>b74898xex12-2.htm
<TEXT>
<html>
<head><title>
Prepared and filed by St Ives Burrups
</title>
</head>
<body bgcolor="#FFFFFF"> <p align="right"><font size="2" face="sans-serif"><b>Exhibit
      12.2</b></font></p>

<hr noshade align="center" width="100%" size="2">
<div style="page-break-before:always"></div>
<div align="center"><b><font face="sans-serif"><page>
  </font>
  </b>
</div>
<p align="center"><b><font size="2" face="sans-serif">VOLUNTARY CERTIFICATION </font></b></p>
<p align="left"><font size="2" face="sans-serif">I, Carlo Ferro, certify that: </font></p>
<p align="left"><font size="2" face="sans-serif">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; I
    have reviewed this report on Form 6-K of STMicroelectronics N.V.;</font></p>
<p align="left"><font size="2" face="sans-serif">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 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;</font></p>
<p align="left"><font size="2" face="sans-serif">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;3.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Based
    on my knowledge, the Unaudited Interim Consolidated Statements of Income,
    Balance Sheets, Statements of Cash Flow and Statements of Changes in Shareholders&#8217; Equity
    and related Notes, 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 company as of, and for, the periods presented
    in this report;</font></p>
<p align="left"><font size="2" face="sans-serif">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;4.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; The
    company&#8217;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 company and have:</font></p>
<table width="100%" cellspacing="0" cellpadding="0" border="0">
  <tr valign="top">
    <td width="3%"><font size="2" face="sans-serif">&nbsp;</font></td>
    <td width="3%"><font size="2" face="sans-serif">a)</font></td>
    <td align="left"><font face="sans-serif"> <font size="2"> 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 company, 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;</font></font></td>
  </tr>
</table>
<table width="100%" cellspacing="0" cellpadding="0" border="0">
  <tr valign="top">
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td align="left">&nbsp;</td>
  </tr>
  <tr valign="top">
    <td width="3%"><font size="2" face="sans-serif">&nbsp;</font></td>
    <td width="3%"><font size="2" face="sans-serif">b)</font></td>
    <td align="left"><font face="sans-serif"> <font size="2"> Evaluated the effectiveness
          of the company&#8217;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</font></font></td>
  </tr>
</table>
<table width="100%" cellspacing="0" cellpadding="0" border="0">
  <tr valign="top">
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td align="left">&nbsp;</td>
  </tr>
  <tr valign="top">
    <td width="3%"><font size="2" face="sans-serif">&nbsp;</font></td>
    <td width="3%"><font size="2" face="sans-serif">c)</font></td>
    <td align="left"><font face="sans-serif"> <font size="2"> Disclosed in this
          report any change in the company&#8217;s internal control over financial
          reporting that occurred during the period covered by the report that
          has materially affected, or is reasonably likely to materially affect,
          the company&#8217;s internal control over financial reporting; and</font></font></td>
  </tr>
</table>
<p align="left"><font size="2" face="sans-serif">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;5.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; The
    company&#8217;s other certifying officer and I have disclosed, based on our
    most recent evaluation of internal control over financial reporting, to the
    company&#8217;s auditors and the audit committee of the company&#8217;s board
    of directors (or persons performing the equivalent functions):</font></p>
<table width="100%" cellspacing="0" cellpadding="0" border="0">
  <tr valign="top">
    <td width="3%"><font size="2" face="sans-serif">&nbsp;</font></td>
    <td width="3%"><font size="2" face="sans-serif">a)</font></td>
    <td align="left"><font face="sans-serif"> <font size="2"> 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 company&#8217;s ability to record, process,
          summarize and report financial information; and</font></font></td>
  </tr>
</table>
<table width="100%" cellspacing="0" cellpadding="0" border="0">
  <tr valign="top">
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td align="left">&nbsp;</td>
  </tr>
  <tr valign="top">
    <td width="3%"><font size="2" face="sans-serif">&nbsp;</font></td>
    <td width="3%"><font size="2" face="sans-serif">b)</font></td>
    <td align="left"><font face="sans-serif"> <font size="2"> Any fraud, whether
          or not material, that involves management or other employees who have
          a significant role in the company&#8217;s internal control over financial
          reporting.</font></font></td>
  </tr>
</table>
<table width="100%" cellspacing="0" cellpadding="0" border="0">
  <tr valign="top">
    <td align="left">&nbsp;</td>
    <td align="left">&nbsp;</td>
    <td align="left">&nbsp;</td>
  </tr>
  <tr valign="top">
    <td align="left" width="60%"><font size="2" face="sans-serif">Date:&nbsp;&nbsp;May
        12, 2004</font></td>
    <td align="left" width="4%"><font size="2" face="sans-serif">By:</font></td>
    <td align="left"><font size="2" face="sans-serif"><u>/s/ Carlo Ferro </u></font></td>
  </tr>
  <tr valign="top">
    <td align="left">&nbsp;</td>
    <td align="left">&nbsp;</td>
    <td align="left">&nbsp;</td>
  </tr>
  <tr valign="top">
    <td align="left"><font size="2" face="sans-serif">&nbsp;</font></td>
    <td align="left"><font size="2" face="sans-serif">Name:</font></td>
    <td align="left"><font size="2" face="sans-serif"><b>Carlo Ferro </b></font></td>
  </tr>
  <tr valign="top">
    <td align="left"><font size="2" face="sans-serif">&nbsp;</font></td>
    <td align="left"><font size="2" face="sans-serif">Title:</font></td>
    <td align="left"><font size="2" face="sans-serif"><b>Corporate Vice President
          and Chief Financial Officer</b></font></td>
  </tr>
</table>
<p align="center">&nbsp;</p>
<hr noshade align="center" width="100%" size="2">
<table width="0">
  <tr>
    <td></td>
  </tr>
</table>
</body>
</html>

</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-13
<SEQUENCE>6
<FILENAME>b74898xex13-1.htm
<TEXT>
<html>
<head><title>
Prepared and filed by St Ives Burrups
</title>
</head>
<body bgcolor="#FFFFFF">
<p>
<div align="right"><font size="2" face="sans-serif"><b>Exhibit 13.1</b></font></div>
<p></p>
<hr noshade align="center" width="100%" size="2">
<div style="page-break-before:always"></div>
<font face="sans-serif"><page>
</font>
<p align="center"><font size="2" face="sans-serif">VOLUNTARY CERTIFICATION
    OF PASQUALE PISTORIO, PRESIDENT AND CHIEF EXECUTIVE OFFICER OF STMICROELECTRONICS
    N.V. AND CARLO FERRO, CORPORATE VICE PRESIDENT AND CHIEF FINANCIAL OFFICER
    OF STMICROELECTRONICS N.V., PURSUANT TO SECTION 18 U.S.C. SECTION 1350, AS
    ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002</font></p>
<p align="left"><font size="2" face="sans-serif">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In connection with the Report on Form 6-K of STMicroelectronics N.V. (the &#8220;Company&#8221;) for the period ending March 27, 2004, as submitted to the Securities and Exchange Commission on the date hereof (the &#8220;Report&#8221;),
the undersigned hereby certify that to the best of our knowledge: </font></p>
<p align="left"><font size="2" face="sans-serif">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; The
    Report fully complies with the requirements of Section 13(a) of the Securities
Exchange Act of 1934; and</font></p>
<p align="left"><font size="2" face="sans-serif">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; The
    information contained in the Report fairly presents, in all material respects,
the financial condition and results of operations of the Company.</font></p>
<table width="100%" cellspacing="0" cellpadding="0" border="0">
<tr valign="top">
<td align="left" width="60%"><font size="2" face="sans-serif">&nbsp;Date:  May
    12, 2004 </font></td>
<td align="left" width="4%"><font size="2" face="sans-serif">By:</font></td>
<td align="left"><font size="2" face="sans-serif"><u>/s/ Pasquale Pistorio</u></font></td>
</tr>
<tr valign="top">
  <td align="left"></td>
  <td align="left">&nbsp;</td>
  <td align="left">&nbsp;</td>
</tr>
<tr valign="top">
<td align="left"></td>
<td align="left"><font size="2" face="sans-serif">Name:&nbsp;&nbsp;</font></td>
<td align="left"><font size="2" face="sans-serif"><b>Pasquale Pistorio</b></font></td>
</tr>
<tr valign="top">
<td align="left"><font size="2" face="sans-serif">&nbsp;</font></td>
<td align="left"><font size="2" face="sans-serif">Title:&nbsp;&nbsp;</font></td>
<td align="left"><font size="2" face="sans-serif"><b>President and Chief Executive Officer</b></font></td>
</tr>
<tr valign="top">
<td height="20">&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td> </tr>
<tr valign="top">
<td align="left"><font size="2" face="sans-serif">&nbsp;Date:  May 12,
    2004 </font></td>
<td align="left"><font size="2" face="sans-serif">By:</font></td>
<td align="left"><font size="2" face="sans-serif"><u>/s/ Carlo Ferro</u></font></td>
</tr>
<tr valign="top">
  <td align="left">&nbsp;</td>
  <td align="left">&nbsp;</td>
  <td align="left">&nbsp;</td>
</tr>
<tr valign="top">
<td align="left"><font size="2" face="sans-serif">&nbsp;</font></td>
<td align="left"><font size="2" face="sans-serif">Name:&nbsp;&nbsp;</font></td>
<td align="left"><font size="2" face="sans-serif"><b>Carlo Ferro</b></font></td>
</tr>
<tr valign="top">
<td align="left"><font size="2" face="sans-serif">&nbsp;</font></td>
<td align="left"><font size="2" face="sans-serif">Title:&nbsp;&nbsp;</font></td>
<td align="left"><font size="2" face="sans-serif"><b>Corporate&nbsp;Vice&nbsp;President&nbsp;and<br>
  Chief Financial Officer</b></font></td>
</tr>
</table>
<p align="center">&nbsp;</p>
<hr noshade align="center" width="100%" size="2">
</body>
</html>

</TEXT>
</DOCUMENT>
</SEC-DOCUMENT>
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