-----BEGIN PRIVACY-ENHANCED MESSAGE-----
Proc-Type: 2001,MIC-CLEAR
Originator-Name: webmaster@www.sec.gov
Originator-Key-Asymmetric:
 MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen
 TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB
MIC-Info: RSA-MD5,RSA,
 Dtupy2UiACtHORjsV0RC8Z7omjmUEQxEh6EBhH40PurBB4LhufrAwO/e7vy7R9hf
 msD0zlpPFSLA1tgc6BW7Wg==

<SEC-DOCUMENT>0001021231-04-000537.txt : 20040730
<SEC-HEADER>0001021231-04-000537.hdr.sgml : 20040730
<ACCEPTANCE-DATETIME>20040730143048
ACCESSION NUMBER:		0001021231-04-000537
CONFORMED SUBMISSION TYPE:	6-K
PUBLIC DOCUMENT COUNT:		7
CONFORMED PERIOD OF REPORT:	20040730
FILED AS OF DATE:		20040730

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:		04941880

	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>b759550-6k.htm
<TEXT>
<html>
<head><title>
Prepared and filed by St Ives Burrups
</title>
</head>
<body bgcolor="#FFFFFF">








 <p>
 <table width="100%" border="0" cellspacing="0" cellpadding="0">
   <tr>
     <td height="4" valign="bottom" bgcolor="#000000"></td>
   </tr>
   <tr>
     <td height="2" valign="top"></td>
   </tr>
   <tr>
     <td height="1" valign="top" bgcolor="#000000"></td>
   </tr>
</table>
 <p align="center"><b><font face="Arial" size="4">SECURITIES AND EXCHANGE COMMISSION<br>
 </font></b><font size="2" face="Arial"><b>Washington, D.C. 20549 </b></font></p>
<p align="center"><b><font face="Arial" size="5">FORM 6-K </font></b></p>
<p align="center"><font size="2" face="Arial"><b>REPORT OF FOREIGN PRIVATE ISSUER<br>
</b></font><font size="2" face="Arial"><b>PURSUANT TO RULE 13a-16 or 15d-16 OF<br>
</b></font><font size="2" face="Arial"><b>THE SECURITIES EXCHANGE ACT OF 1934 </b></font></p>
<p align="center"><font size="2" face="Arial"><b>Report on Form 6-K dated [July] [&#149;], 2004<br>
</b></font><font size="2" face="Arial"><b>(Commission File No. 1-13546)</b></font></p>
<p align="center"><font size="2" face="Arial">This report on Form 6-K shall
      be incorporated <br>
  by reference in our Registration Statement on <br>
  Form S-8,
      as amended (File No. 333-109572) <br>
  to the extent not superseded
  by documents
      <br>
  or reports subsequently filed or submitted <br>
  by us under the Securities Act
      of 1933 or <br>
  the Securities Exchange Act of 1934, <br>
  in each case as amended</font></p>
<hr align="center" width="150" size="2" noshade>
<p align="center"><b><font face="Arial" size="5">STMicroelectronics N.V.<br>
</font></b><font face="Arial" size="2">(Name of Registrant) </font></p>
<p align="center"><font size="2" face="Arial">39, Chemin du Champ-des-Filles<br>
</font><font size="2" face="Arial">1228 Plan-les-Ouates, Geneva, Switzerland<br>
</font><font size="2" face="Arial">(Address of Principal Executive Offices)</font></p>
<hr align="center" width="150" size="2" noshade>
<div style="text-indent:3%"><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 20-F or Form 40-F.</font></p></div>
<p align="center"><font size="2" face="Arial">Form 20-F <img src="tickedbox.gif" width="12" height="12"> Form 40-F <img src="emptybox.gif" width="12" height="12"></font></p>
<div style="text-indent:3%"><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></div>
<p align="center"><font size="2" face="Arial">Yes <img src="emptybox.gif" width="12" height="12"> No <img src="tickedbox.gif" width="12" height="12"></font></p>
<div style="text-indent:3%"><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></div>
<p align="center"><font size="2" face="Arial">Yes <img src="emptybox.gif" width="12" height="12"> No <img src="tickedbox.gif" width="12" height="12"></font></p>
<div style="text-indent:3%"><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 </font><font size="2" face="Arial">Rule 12g3-2(b): 82-________</font></p></div>
<table width="100%" cellspacing="0" cellpadding="0" border="0">
<tr valign="top">
  <td><font size="2" face="Arial">Enclosure: STMicroelectronics N.V.&#8217;s First Half 2004:</font></td>
</tr>
<tr valign="top">
  <td>&nbsp;</td>
</tr>
</table>
<table width="100%" cellspacing="0" cellpadding="0" border="0">
<tr valign="top">
  <td width="3%">&nbsp;</td>
<td 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>
</table>
<table width="100%" cellspacing="0" cellpadding="0" border="0">
<tr valign="top">
  <td width="3%">&nbsp;</td>
<td width="3%"><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&#8217; Equity and related Notes for the three months and six months ended June&nbsp;26, 2004; and</font></td>
</tr>
</table>
<table width="100%" cellspacing="0" cellpadding="0" border="0">
<tr valign="top">
  <td width="3%">&nbsp;</td>
<td width="3%"><font size="2" face="Arial">&#149;</font></td>
<td align="left">
<font size="2" face="Arial"> Certifications pursuant to Sections 302 (Exhibits
12.1 and 12.2) and
906
(Exhibit 13.1) of the Sarbanes-Oxley Act of 2002, submitted to the Commission
on
a
voluntary
basis.</font></td>
</tr>
</table>
<p align="center">&nbsp;</p>
<table width="100%" border="0" cellpadding="0" cellspacing="0">
  <tr>
    <td height="1" valign="top" bgcolor="#000000"></td>
  </tr>
  <tr>
    <td height="2" valign="top" bgcolor="#FFFFFF"></td>
  </tr>
  <tr>
    <td height="4" valign="bottom" bgcolor="#000000"></td>
  </tr>
</table>
<div style="page-break-before:always"></div>
<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&#8217; Equity for the three months and six months ended
      June&nbsp;26, 2004 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 sections &#8220;</i>&#8212;<i>Critical
        Accounting Policies Using Significant Estimates&#8221;, &#8220;</i>&#8212;<i>Business
        Outlook&#8221; and &#8220;Liquidity and Capital Resources</i>&#8212;<i>Financial
Outlook&#8221;. 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 &#8220;Cautionary Note Regarding Forward-Looking Statements&#8221; and &#8220;Item
3. Key Information&#8212;Risk Factors&#8221;, 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 &#8220;Form 20-F&#8221;), 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 (&#8220;U.S. GAAP&#8221;) 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 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>
<div style="text-indent:3%"><p 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 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 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></p></div>
<div style="text-indent:3%"><p 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></p></div>
<p align="center"><font face="Arial" size="2">2</font></p>
<hr noshade align="center" width="100%" size="2">
<div style="page-break-before:always"></div>
<page>


<div style="text-indent:3%"><p align="left"><font size="2" face="Arial">We maintain an allowance for doubtful accounts for potential estimated losses resulting from our customers&#8217; inability to make required payments. We base our estimates on historical collection trends. In the first half of 2004 we recorded a provision of 1.0% of total receivables, which is equivalent to the provision recorded in 2003. In addition, we are required to evaluate our customers&#8217; 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></p></div>
<div style="text-indent:3%"><p 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 June 26, 2004, the value of goodwill amounted to $259 million.</font></p></div>
<div style="text-indent:3%"><p align="left"><font size="2" face="Arial"><b>Impairment of goodwill</b>. Since January 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 year-end 2003 consolidated financial statements included in our Form 20-F (&#8220;Consolidated Financial Statements&#8221; and in &#8220;Results of
Operations&#8212;Segment information&#8221; in this Form 6-K). 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 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&#8217;s sales volume forecast and selling price evolution, the reporting unit&#8217;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 evaluations 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 require impairment of certain goodwill.</font></p>
</div>
<div style="text-indent:3%"><p 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 not be recoverable. In assessing recoverability, we estimate the fair value by calculating 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 market 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 fair market valuation, including: the applicable industry&#8217;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 June 26, 2004, the value of intangible assets subject to amortization amounted to $302 million. </font></p></div>
<p align="center"><font face="Arial" size="2">3</font></p>
<hr noshade align="center" width="100%" size="2">
<div style="page-break-before:always"></div>
<page>


<div style="text-indent:3%">
<p 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></p>
</div>
<div style="text-indent:3%"><p 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></p></div>
<div style="text-indent:3%">
<p 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 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 prices and the
    adoption of new technologies. Potential impairment exists when the carrying
    value of a tangible asset exceeds the future discounted 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
    are 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></p>
</div>
<div style="text-indent:3%"><p align="left"><font size="2" face="Arial"><b>Inventory</b>. 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; cost is therefore dependent on our manufacturing performance. In the case of underutilization of our manufacturing facilities, we estimate the costs associated with excess capacity which are not included in the valuation of inventories but charged directly to cost of sales.</font></p></div>
<div style="text-indent:3%">
<p 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&#8217;s sales
    and production plans. To the extent that future negative market conditions
    generate order backlog cancellations and declining sales, or 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></p>
</div>
<div style="text-indent:3%">
<p align="left"><font size="2" face="Arial"><b>Restructuring charges</b>. We
    have undertaken, and we may 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
    ongoing 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  business conditions.
    If broader or new  initiatives, which
    could include production curtailment
    or closure of other manufacturing facilities were to be taken, we may be
    required to incur additional charges as well as to change estimates and
    timing of amounts
    previously
    recorded. The potential impact of these changes could have a material adverse
    effect on our results of operations or financial condition. In the second
    quarter and first half of 2004, the amount of restructuring charges and other
    related closure pre-tax costs amounted to  $12 million and $45
    million, respectively. Up to June 26, 2004,  we have already incurred
    approximately $250 million
    of the expected
    $350 million
pre-tax charges associated with the restructuring plan that was defined
    on October 22, 2003, and we are expecting to incur the remaining $100 million
    in the
    coming
    several quarters.</font></p>
</div>
<p align="center"><font face="Arial" size="2">4</font></p>
<hr noshade align="center" width="100%" size="2">
<div style="page-break-before:always"></div>
<page>


<div style="text-indent:3%"><p 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></p></div>
<div style="text-indent:3%"><p 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 June 26, 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, in our estimates of the valuation allowance or in the tax rates applicable in the various jurisdictions, this could have an impact on our future tax provision in the periods in which these changes could
occur. </font></p></div>
<div style="text-indent:3%"><p 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></p></div>
<div style="text-indent:3%"><p 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 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></p></div>
<div style="text-indent:3%">
<p 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
    or claims 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. 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></p>
</div>
<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 of 2004 lasted until Saturday, March 27, 2004. The second
    quarter of 2004 ended  on June
    26, 2004, and the third quarter of 2004 will end on September 25, 2004. The
    fourth quarter will cover the period from September 26  through
    December 31. </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 &#8220;TAM&#8221;, while the serviceable available market, the &#8220;SAM&#8221;, is defined as the market for products produced by us (which consists of the TAM and excludes PC motherboard major devices such as microprocessors (&#8220;MPU&#8221;), dynamic random access memories (&#8220;DRAMs&#8221;), 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 compared to 2002. 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>
<p align="center"><font face="Arial" size="2">5</font></p>
<hr noshade align="center" width="100%" size="2">
<div style="page-break-before:always"></div>
<page>


<div style="text-indent:3%">
<p align="left"><font size="2" face="Arial">Favorable industry conditions continued
    in the first half of 2004 with strong demand registered in  cellular phones,
    PCs and  consumer applications, both digital and analog. Based upon preliminary
    industry estimates,  first half 2004 semiconductor
    industry revenues increased  by approximately 35% for the TAM,
    and by approximately 32% for the SAM on a year-over-year basis. </font></p>
</div>
<div style="text-indent:3%">
<p align="left"><font size="2" face="Arial">Our first half 2004 net revenues
    also showed a marked improvement, but,
    based on
    the preliminary
    industry estimates set forth above, our revenue growth was below
    that of  the TAM and the SAM. Our net revenues for the
    first half of 2004 were $4,201 million, a 26.5% increase over the $3,321
    million
    reported
    for the first half of 2003. On a year-over-year basis, the strongest contributors
    to our revenues increase were Memories and Discrete Products, while Differentiated
    Products and Standard Products grew at a rate  below the Company&#146;s
    average. In terms of market segments, in the first half  of 2004, our
    year-over-year   revenue
    increase was mainly driven by
     Consumer,
    Industrial, Automotive and Telecommunications, while Computer registered
    a moderate increase.</font></p>
</div>
<div style="text-indent:3%">
<p align="left"><font size="2" face="Arial">Our second quarter  2004 revenues
    were $2,172 million, an increase of 27.6% over  revenues of $1,702 million
    reported in the second quarter of 2003. On a sequential basis, our second
    quarter 2004 revenues  increased by 7.0% from the  $2,029 million
    of
    the
    first
    quarter of 2004. Our second quarter 2004 revenues were within our expected
    range and could have been higher, had it not been for some order push-outs
    in the computer peripherals market and short-term testing bottlenecks affecting
    our ability to ship certain products. On a quarterly sequential basis,
    major revenue increases were posted by the Discrete and Standard ICs Group
    as well as by the Memory group. Our second quarter sequential revenue
    increase was
broad-based with four of our five targeted market segments showing
    quarter-over-quarter improvement. Automotive, Consumer and Industrial
    were the strongest
    contributors. Telecommunications, including wireless and networking, was
    up over 2004 first quarter levels; but softness in hard disk applications
    caused Computer  to post a moderate sequential decline. Flash memory
    product sales increased 9.7% sequentially to $304 million. </font></p>
</div>
<div style="text-indent:3%">
<p align="left"><font size="2" face="Arial">Our gross profit increased 13.2%
    sequentially on a 7.0% sequential revenue gain,
    therefore
    raising our
    profitability
    levels in the second quarter of 2004. Our gross margin was  37.4% in the
    second quarter of 2004, improving when compared to 35.7% reported for last
    year&#8217;s
    second quarter and 35.4% for the first quarter 2004. Gross margin benefited
    from higher fab utilization rates  and other manufacturing efficiencies. </font></p>
</div>
<div style="text-indent:3%">
<p align="left"><font size="2" face="Arial">Additionally,
      in the second quarter of 2004, as a percentage of net revenues, selling,
    general and administrative expenses decreased to 11.0% from 11.3% in the
    first
      quarter of 2004, and research and development expenses decreased to 17.7%
      from 17.9% in the first quarter of 2004.</font></p>
</div>
<div style="text-indent:3%">
<p align="left"><font size="2" face="Arial">Gross profit increase and cost control
    enabled us to report substantial sequential increases in operating and net
    income
    for
    the
    second quarter of 2004, while continuing to invest in technology, product
    development and worldwide marketing programs. Our profitability for the second
    quarter of 2004 improved compared to that of the first quarter of 2004, reflecting
    the benefit of a higher gross margin and lower  operating
    expenses as a percentage of net revenues. Our operating income in the second
    quarter of 2004 was $179 million, a 123.2% increase over the $80
    million reported in
    the
    first
    quarter
    2004.
    In the second quarter of 2004, operating income increased by 47.5%, from
    the  $121 million reported in  the second quarter of 2003.
</font></p>
</div>
<div style="text-indent:3%"><p align="left"><font size="2" face="Arial">In the second quarter of 2004 we continued to invest in upgrading and expanding our manufacturing capacity, mainly in our wafer fabrication facilities (known as &#8220;fabs&#8221;), where the factory utilization rate reached  91% of our wafer fab capacity at the end of the period. Our capital expenditures were $587 million in the second quarter of 2004 compared to $321 million in the first quarter of 2004. We financed all of our capital investments in the period with net cash generated from operating activities. See &#8220;Liquidity and Capital Resources&#8212;Liquidity&#8221;. At June 26, 2004 our financial position resulted in a net financial debt of $75 million. Our total financial debt was $2.8 billion, of which
$1.7 billion was long-term debt.  See &#8220;Liquidity and Capital Resources&#8212;Capital Resources&#8221; in this Form 6-K for a definition and reconciliation of net financial position, which is a non-GAAP financial 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">Based
      upon current visibility, we expect 2004 to continue to be a year of progressive
      improvements in revenues and profitability for us. For the third quarter
      of 2004, we anticipate that net revenues will increase by 2% to 8% on a
    sequential basis, which equates to a year-over-year increase of between 23%
    and 30%.
      This increase in revenues is expected to be driven by a broad range of
      applications, including: wireless, networking, data storage and most of
      the digital consumer and automotive applications that we serve. Additionally,
      sales of Flash memory products should continue to increase at a rate that
      exceeds our Company-wide average.</font></p>
</div>
<p align="center"><font face="Arial" size="2">6</font></p>
<hr noshade align="center" width="100%" size="2">
<div style="page-break-before:always"></div>
<page>


<div style="text-indent:3%">
<p align="left"><font size="2" face="Arial">Based on an average euro to U.S.
    dollar exchange rate of &euro;1.00 to $1.23, or 2.5% above that of the second
    quarter of 2004, the third quarter gross margin benefit from our expected
    sequential revenue increase is likely to be offset by the negative currency
    impact and
    the cost of technical problems which occurred at the end of the second quarter.
    Although these technical problems have been resolved, their effect and that
    of the currency fluctuation are expected to penalize third quarter gross
    margin by approximately 100 basis points. Given these factors, and assuming
    a modest sequential decline in prices, we anticipate that third quarter gross
    margin will approximate 37.5% plus or minus 50 basis points.</font></p>
</div>
<div style="text-indent:3%"><p align="left"><font size="2" face="Arial">Assuming a currency scenario similar to what we have used for the 2004 third quarter, currently available backlog data together with our expectations for a more favorable product mix and the resumption of manufacturing efficiencies, particularly associated with the migration to finer geometries, confirm our roadmap to reach gross margin of at least 40% in the fourth quarter of this year.</font></p></div>
<div style="text-indent:3%"><p align="left"><font size="2" face="Arial">Additionally, we should be competitively well positioned to fully optimize specific market opportunities in 2005, when we will have a significantly enhanced product portfolio addressing high-growth applications and an expanded customer base, plus the benefit of  an improved cost structure.</font></p></div>
<div style="text-indent:3%">
<p align="left"><font size="2" face="Arial">On October 22, 2003, we defined a
    manufacturing restructuring plan that was to be substantially completed within
    eighteen months. Customer service requirements during the recent period of
    tight capacities have caused the plan&#8217;s substantial completion date
    to be pushed back. Up to June 26, 2004,  we have already incurred
    approximately $250 million of the expected $350 million pre-tax charges associated
    with
    this
    restructuring plan and related manufacturing initiatives. We expect that
    an additional $20 million to $30 million in pre-tax charges will be incurred
    in the second half of 2004, with the remainder taken in 2005. In the second
    half of 2004, we will realize the first meaningful cost savings of this plan,
    which are expected to reach approximately $25 million for the period. In
    2005, these savings are expected to accelerate to $80 million with the full
    projected $120 million in annualized after-tax cost savings being realized
    in 2006.</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">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 &#8220;Others&#8221; in &#8220;Segment Information&#8221; 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. 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">In the second quarter of 2004, we paid $107 million in dividends pursuant to the decision taken by our shareholders at our Annual General Meeting held on April 23, 2004 ($0.12 per share, an increase from the $0.08 level of the prior year&#8217;s cash dividend per share payment). </font></p></div>
<div style="text-indent:3%"><p align="left"><font size="2" face="Arial">On May 28, 2004, we announced that, from May 21, 2004 through May 27, 2004, we repurchased an additional nominal amount of $121 million of our outstanding Zero Coupon Senior Convertible Bonds due 2010 (our &#8220;2010 Bonds&#8221;), in addition to the nominal amount of $186 million repurchased on May 19, 2004, for a total nominal aggregate amount repurchased of $307 million and for a total aggregate amount paid of approximately $244 million. As of June 26, 2004, we had repurchased a nominal amount of $1,980 million of our 2010 Bonds, representing 92.28% of the total nominal amount of 2010 Bonds originally issued. We also announced on June 8, 2004 that we would redeem all of our remaining outstanding 2010 Bonds on
July 9, 2004 for a total cash amount of $131 million. We have completed the sweep-up redemption of our 2010 Bonds.</font></p></div>
<p align="center"><font face="Arial" size="2">7</font></p>
<hr noshade align="center" width="100%" size="2">
<div style="page-break-before:always"></div>
<page>


<p align="left"><font size="2" face="Arial"><b>Results of Operations</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 Semiconductor business,
    we design, develop, manufacture and market a broad range of products, including
    discrete, memories and standard commodity components, application-specific
    integrated circuits (&#8220;ASICSs&#8221;), full custom devices and semicustom
    devices and application-specific standard products (&#8220;ASSPs&#8221;)
    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 includes the production and sale of both silicon chips
    as in the past and of cards. Our principal resource allocation decisions
    in the Semiconductor business area are for ongoing expenditures
    in research and development and capital investments in front-end and back-end
    manufacturing facilities. We manage our Semiconductor business in
    four segments, aligned with  four main product groups: Telecommunications,
    Peripherals
    and
    Automotive; Discrete and Standard ICs; Memory Products; and Consumer and
    Microcontroller (collectively referred to as the &#8220;Groups&#8221;). 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>
<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
    Telecommunications, 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>(&#8220;FAS 131&#8221;).</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&#8217; internal financial
    measurements, we use 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
    cost items 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, including starting-up marketing
    and design operations in targeted developing areas, certain corporate level
    operating expenses, as well as certain other miscellaneous charges.</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>
    <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>
    <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>
    <td align="right"><font size="1">&nbsp;</font></td>
    <td colspan="4" align="center"><font size="1" face="Arial"><b>Six 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>
    <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 align="center"><font size="1" face="Arial"><b>June 26, 2004</b></font></td>
    <td align="left"><font size="1">&nbsp;</font></td>
    <td align="right"><font size="1">&nbsp;</font></td>
    <td align="center"><font size="1" face="Arial"><b>June 28, 2003</b></font></td>
    <td align="left"><font size="1">&nbsp;</font></td>
    <td align="right"><font size="1">&nbsp;</font></td>
    <td align="center"><font size="1" face="Arial"><b>June 26, 2004</b></font></td>
    <td align="left"><font size="1">&nbsp;</font></td>
    <td align="right"><font size="1">&nbsp;</font></td>
    <td align="center"><font size="1" face="Arial"><b>June 28, 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><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>
    <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 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>
    <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 product group:</b></font></td>
<td width="2%" align="left">&nbsp;</td>
<td width="1%" align="right">&nbsp;</td>
<td width="7%" 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="7%" 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="7%" 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="7%" 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">$</font></td>
<td align="right"><font size="2" face="Arial">        842</font></td>
<td align="left">&nbsp;</td>
<td align="right"><font size="2" face="Arial">$</font></td>
<td align="right"><font size="2" face="Arial"> 784</font></td>
<td align="left">&nbsp;</td>
<td align="right"><font size="2" face="Arial">$</font></td>
<td align="right"><font size="2" face="Arial">      1,682</font></td>
<td align="left">&nbsp;</td>
<td align="right"><font size="2" face="Arial">$</font></td>
<td align="right"><font size="2" face="Arial"> 1,570</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">         419</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;299</font></td>
<td align="left">&nbsp;</td>
<td align="right">&nbsp;</td>
<td align="right"><font size="2" face="Arial">775</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;572</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">         509</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;287</font></td>
<td align="left">&nbsp;</td>
<td align="right">&nbsp;</td>
<td align="right"><font size="2" face="Arial">961</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;549</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">         386</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;313</font></td>
<td align="left">&nbsp;</td>
<td align="right">&nbsp;</td>
<td align="right"><font size="2" face="Arial">750</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;595</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">           16</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;19</font></td>
<td align="left">&nbsp;</td>
<td align="right">&nbsp;</td>
<td align="right"><font size="2" face="Arial">            33</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;35</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>
<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>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total consolidated net revenues</b></font></td>
<td align="left">&nbsp;</td>
<td align="right"><font size="2" face="Arial"><b>$</b></font></td>
<td align="right"><font size="2" face="Arial"> <b>    2,172</b></font></td>
<td align="left">&nbsp;</td>
<td align="right"><font size="2" face="Arial"><b>$</b></font></td>
<td align="right"><font size="2" face="Arial"> <b>1,702</b></font></td>
<td align="left">&nbsp;</td>
<td align="right"><font size="2" face="Arial"><b> $</b></font></td>
<td align="right"><font size="2" face="Arial"> <b>     4,201</b></font></td>
<td align="left">&nbsp;</td>
<td align="right"><font size="2" face="Arial"><b>$</b></font></td>
<td align="right"><font size="2" face="Arial"> <b>3,321</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>
<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>
<tr valign="top">
  <td><hr align="left" width="100" size="1" noshade></td>
  <td></td>
  <td>&nbsp;</td>
  <td>&nbsp;</td>
  <td></td>
  <td>&nbsp;</td>
  <td>&nbsp;</td>
  <td></td>
  <td>&nbsp;</td>
  <td>&nbsp;</td>
  <td></td>
  <td>&nbsp;</td>
  <td>&nbsp;</td>
  <td></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"> Includes revenues from sales of subsystems and other
products not allocated to product groups.
</font></td>
</tr>
</table>
<p align="center"><font face="Arial" size="2">8</font></p>
<hr noshade align="center" width="100%" size="2">
<div style="page-break-before:always"></div>
<page>


<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>
    <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>
    <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>
    <td align="right"><font size="1">&nbsp;</font></td>
    <td colspan="4" align="center"><font size="1" face="Arial"><b>Six 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>
    <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 align="center"><font size="1" face="Arial"><b>June 26, 2004</b></font></td>
    <td align="left"><font size="1">&nbsp;</font></td>
    <td align="right"><font size="1">&nbsp;</font></td>
    <td align="center"><font size="1" face="Arial"><b>June 28, 2003</b></font></td>
    <td align="left"><font size="1">&nbsp;</font></td>
    <td align="right"><font size="1">&nbsp;</font></td>
    <td align="center"><font size="1" face="Arial"><b>June 26, 2004</b></font></td>
    <td align="left"><font size="1">&nbsp;</font></td>
    <td align="right"><font size="1">&nbsp;</font></td>
    <td align="center"><font size="1" face="Arial"><b>June 28, 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><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>
    <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 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>
    <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="7%" 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="7%" 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="7%" 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="7%" align="left"><font size="2" face="Arial">&nbsp;</font></td>
<td width="2%" align="left">&nbsp;</td> </tr>
<tr valign="top">
<td align="left" bgcolor="#eeeeee"><font size="2" face="Arial">&nbsp;&nbsp;&nbsp;Telecommunications, Peripherals and Automotive</font></td>
<td align="left" bgcolor="#eeeeee">&nbsp;</td>
<td align="right" bgcolor="#eeeeee"><font size="2" face="Arial">$</font></td>
<td align="right" bgcolor="#eeeeee"><font size="2" face="Arial">        109</font></td>
<td align="left" bgcolor="#eeeeee">&nbsp;</td>
<td align="right" bgcolor="#eeeeee"><font size="2" face="Arial">$</font></td>
<td align="right" bgcolor="#eeeeee"><font size="2" face="Arial"> 134</font></td>
<td align="left" bgcolor="#eeeeee">&nbsp;</td>
<td align="right" bgcolor="#eeeeee"><font size="2" face="Arial">$</font></td>
<td align="right" bgcolor="#eeeeee"><font size="2" face="Arial">        223</font></td>
<td align="left" bgcolor="#eeeeee">&nbsp;</td>
<td align="right" bgcolor="#eeeeee"><font size="2" face="Arial">$</font></td>
<td align="right" bgcolor="#eeeeee"><font size="2" face="Arial"> 273</font></td>
<td align="left" bgcolor="#eeeeee">&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">           92</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;24</font></td>
<td align="left">&nbsp;</td>
<td align="right">&nbsp;</td>
<td align="right"><font size="2" face="Arial">143</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;47</font></td>
<td align="left">&nbsp;</td>
</tr>
<tr valign="top">
<td align="left" bgcolor="#eeeeee"><font size="2" face="Arial">&nbsp;&nbsp;&nbsp;Memory Products</font></td>
<td align="left" bgcolor="#eeeeee">&nbsp;</td>
<td align="right" bgcolor="#eeeeee">&nbsp;</td>
<td align="right" bgcolor="#eeeeee"><font size="2" face="Arial">           39</font></td>
<td align="left" bgcolor="#eeeeee">&nbsp;</td>
<td align="right" bgcolor="#eeeeee">&nbsp;</td>
<td align="right" bgcolor="#eeeeee"><font size="2" face="Arial">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(13</font></td>
<td align="left" bgcolor="#eeeeee"><font size="2" face="Arial">)</font></td>
<td align="right" bgcolor="#eeeeee">&nbsp;</td>
<td align="right" bgcolor="#eeeeee"><font size="2" face="Arial">44</font></td>
<td align="left" bgcolor="#eeeeee">&nbsp;</td>
<td align="right" bgcolor="#eeeeee">&nbsp;</td>
<td align="right" bgcolor="#eeeeee"><font size="2" face="Arial">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(39</font></td>
<td align="left" bgcolor="#eeeeee"><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 align="right"><font size="2" face="Arial">           22</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;8</font></td>
<td align="left">&nbsp;</td>
<td align="right">&nbsp;</td>
<td align="right"><font size="2" face="Arial">40</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;20</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>
  <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">
<td align="left" bgcolor="#eeeeee"><font size="2" face="Arial">&nbsp;&nbsp;&nbsp;Total operating income of product groups</font></td>
<td align="left" bgcolor="#eeeeee">&nbsp;</td>
<td align="right" bgcolor="#eeeeee">&nbsp;</td>
<td align="right" bgcolor="#eeeeee"><font size="2" face="Arial">         262</font></td>
<td align="left" bgcolor="#eeeeee">&nbsp;</td>
<td align="right" bgcolor="#eeeeee">&nbsp;</td>
<td align="right" bgcolor="#eeeeee"><font size="2" face="Arial">           153</font></td>
<td align="left" bgcolor="#eeeeee">&nbsp;</td>
<td align="right" bgcolor="#eeeeee">&nbsp;</td>
<td align="right" bgcolor="#eeeeee"><font size="2" face="Arial">         450</font></td>
<td align="left" bgcolor="#eeeeee">&nbsp;</td>
<td align="right" bgcolor="#eeeeee">&nbsp;</td>
<td align="right" bgcolor="#eeeeee"><font size="2" face="Arial">          301</font></td>
<td align="left" bgcolor="#eeeeee">&nbsp;</td>
</tr>
<tr valign="top">
<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 align="right"><font size="2" face="Arial">          (83</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;&nbsp;&nbsp;&nbsp;&nbsp;(32</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">        (191</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">(56</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><hr noshade size="1"></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>
<td><hr noshade size="1"></td>
<td><hr noshade size="1"></td>
<td></td>
</tr>
<tr valign="top">
<td align="left" bgcolor="#eeeeee"><font size="2" face="Arial"><b>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total consolidated operating income</b></font></td>
<td align="left" bgcolor="#eeeeee">&nbsp;</td>
<td align="right" bgcolor="#eeeeee"><font size="2" face="Arial"><b>$</b></font></td>
<td align="right" bgcolor="#eeeeee"><font size="2" face="Arial"> <b>       179</b></font></td>
<td align="left" bgcolor="#eeeeee">&nbsp;</td>
<td align="right" bgcolor="#eeeeee"><font size="2" face="Arial"><b>$</b></font></td>
<td align="right" bgcolor="#eeeeee"><font size="2" face="Arial"> <b>    121</b></font></td>
<td align="left" bgcolor="#eeeeee">&nbsp;</td>
<td align="right" bgcolor="#eeeeee"><font size="2" face="Arial"><b>$</b></font></td>
<td align="right" bgcolor="#eeeeee"><font size="2" face="Arial"> <b>       259</b></font></td>
<td align="left" bgcolor="#eeeeee">&nbsp;</td>
<td align="right" bgcolor="#eeeeee"><font size="2" face="Arial"><b>$</b></font></td>
<td align="right" bgcolor="#eeeeee"><font size="2" face="Arial"> <b>245</b></font></td>
<td align="left" bgcolor="#eeeeee">&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>
<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>
<br><br>
<table width="100%" cellspacing="0" cellpadding="0" border="0">
<tr valign="top">
  <td colspan="4" align="left"><font size="1">&nbsp;</font></td>
  <td colspan="3" align="center" valign="bottom"><font size="1" face="Arial"><b>(unaudited)</b></font></td>
  <td align="left" valign="bottom"><font size="1">&nbsp;</font></td>
  <td colspan="3" align="center" valign="bottom"><font size="1" face="Arial"><b>(unaudited)</b></font></td>
  <td align="left" valign="bottom"><font size="1">&nbsp;</font></td>
</tr>
<tr valign="top">
  <td colspan="4" align="left"><font size="1">&nbsp;</font></td>
  <td colspan="3" align="center" valign="bottom"><hr noshade size="1"></td>
  <td align="left" valign="bottom"><font size="1">&nbsp;</font></td>
  <td colspan="3" align="center" valign="bottom"><hr noshade size="1"></td>
  <td align="left" valign="bottom"><font size="1">&nbsp;</font></td>
</tr>
<tr valign="top">
  <td colspan="4" align="left"><font size="1">&nbsp;</font></td>
  <td colspan="3" align="center" valign="bottom"><font size="1" face="Arial"><b>Three Months Ended</b></font></td>
  <td align="left" valign="bottom"><font size="1">&nbsp;</font></td>
  <td colspan="3" align="center" valign="bottom"><font size="1" face="Arial"><b>Six Months Ended</b></font></td>
  <td align="left" valign="bottom"><font size="1">&nbsp;</font></td>
</tr>
<tr valign="top">
  <td colspan="4" align="left"><font size="1">&nbsp;</font></td>
  <td colspan="3" align="center" valign="bottom"><hr noshade size="1"></td>
  <td align="left" valign="bottom"><font size="1">&nbsp;</font></td>
  <td colspan="3" align="center" valign="bottom"><hr noshade size="1"></td>
  <td align="left" valign="bottom"><font size="1">&nbsp;</font></td>
</tr>
<tr valign="top">
<td colspan="4" align="left"><font size="1" face="Arial">&nbsp;</font></td>
<td align="center" valign="bottom"><font size="1" face="Arial"><b>June 26, 2004</b></font></td>
<td align="left" valign="bottom"><font size="1">&nbsp;</font></td>
<td align="center" valign="bottom"><font size="1" face="Arial"><b>June 28, 2003</b></font></td>
<td align="left" valign="bottom"><font size="1">&nbsp;</font></td>
<td align="center" valign="bottom"><font size="1" face="Arial"><b>June 26, 2004</b></font></td>
<td align="left" valign="bottom"><font size="1">&nbsp;</font></td>
<td align="center" valign="bottom"><font size="1" face="Arial"><b>June 28, 2003</b></font></td>
<td align="left" valign="bottom"><font size="1">&nbsp;</font></td>
</tr>
<tr valign="top">
<td colspan="4"><font size="1">&nbsp;</font></td>
<td valign="bottom"><hr noshade size="1"></td>
<td valign="bottom"><font size="1">&nbsp;</font></td>
<td valign="bottom"><hr noshade size="1"></td>
<td valign="bottom"><font size="1">&nbsp;</font></td>
<td valign="bottom"><hr noshade size="1"></td>
<td valign="bottom"><font size="1">&nbsp;</font></td>
<td valign="bottom"><hr noshade size="1"></td>
<td valign="bottom"><font size="1">&nbsp;</font></td>
</tr>
<tr valign="top">
<td colspan="4" align="left"><font size="1" face="Arial">&nbsp;</font></td>
<td colspan="7" align="center"><font size="1" face="Arial"><b>(as percentage of net revenues)</b></font></td>
<td align="left"><font size="1">&nbsp;</font></td>
</tr>
<tr valign="top">
<td colspan="4" align="left"><font size="2" face="Arial"><b>Operating income (loss) by product group:</b></font></td>
<td align="left"><font size="2" face="Arial">&nbsp;</font></td>
<td align="left">&nbsp;</td>
<td align="left"><font size="2" face="Arial">&nbsp;</font></td>
<td align="left">&nbsp;</td>
<td align="left"><font size="2" face="Arial">&nbsp;</font></td>
<td align="left">&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 colspan="4" align="left"><font size="2" face="Arial">&nbsp;&nbsp;&nbsp;Telecommunications, Peripherals and Automotive <sup>(1)</sup></font></td>
<td width="7%" align="right"><font size="2" face="Arial">12.9</font></td>
<td width="3%" align="left"><font size="2" face="Arial">%</font></td>
<td width="7%" align="right"><font size="2" face="Arial">17.1</font></td>
<td width="3%" align="left"><font size="2" face="Arial">%</font></td>
<td width="7%" align="right"><font size="2" face="Arial">13.3</font></td>
<td width="3%" align="left"><font size="2" face="Arial">%</font></td>
<td width="7%" align="right"><font size="2" face="Arial">17.4</font></td>
<td width="2%" align="left"><font size="2" face="Arial">%</font></td>
</tr>
<tr valign="top">
<td colspan="4" align="left"><font size="2" face="Arial">&nbsp;&nbsp;&nbsp;Discrete and Standard ICs <sup>(1)</sup></font></td>
<td align="right"><font size="2" face="Arial">22.0</font></td>
<td align="left">&nbsp;</td>
<td align="right"><font size="2" face="Arial">8.0</font></td>
<td align="left">&nbsp;</td>
<td align="right"><font size="2" face="Arial">18.5</font></td>
<td align="left">&nbsp;</td>
<td align="right"><font size="2" face="Arial">8.2</font></td>
<td align="left">&nbsp;</td>
</tr>
<tr valign="top" bgcolor="#eeeeee">
<td colspan="4" align="left"><font size="2" face="Arial">&nbsp;&nbsp;&nbsp;Memory Products <sup>(1)</sup></font></td>
<td align="right"><font size="2" face="Arial">7.7</font></td>
<td align="left">&nbsp;</td>
<td align="right"><font size="2" face="Arial">(4.5</font></td>
<td align="left"><font size="2" face="Arial">)</font></td>
<td align="right"><font size="2" face="Arial">4.6</font></td>
<td align="left">&nbsp;</td>
<td align="right"><font size="2" face="Arial">(7.1</font></td>
<td align="left"><font size="2" face="Arial">)</font></td>
</tr>
<tr valign="top">
<td colspan="4" align="left"><font size="2" face="Arial">&nbsp;&nbsp;&nbsp;Consumer and Microcontroller <sup>(1)</sup></font></td>
<td align="right"><font size="2" face="Arial">5.7</font></td>
<td align="left">&nbsp;</td>
<td align="right"><font size="2" face="Arial">2.6</font></td>
<td align="left">&nbsp;</td>
<td align="right"><font size="2" face="Arial">5.3</font></td>
<td align="left">&nbsp;</td>
<td align="right"><font size="2" face="Arial">3.4</font></td>
<td align="left">&nbsp;</td>
</tr>
<tr valign="top" bgcolor="#eeeeee">
<td colspan="4" align="left"><font size="2" face="Arial">&nbsp;&nbsp;&nbsp;Others <sup>(2)</sup></font></td>
<td align="right"><font size="2" face="Arial">(3.8</font></td>
<td align="left"><font size="2" face="Arial">)</font></td>
<td align="right"><font size="2" face="Arial">(1.1</font></td>
<td align="left"><font size="2" face="Arial">)</font></td>
<td align="right"><font size="2" face="Arial">(4.5</font></td>
<td align="left"><font size="2" face="Arial">)</font></td>
<td align="right"><font size="2" face="Arial">(1.7</font></td>
<td align="left"><font size="2" face="Arial">)</font></td>
</tr>
<tr valign="top">
  <td colspan="4" align="left">&nbsp;</td>
  <td align="right"><hr noshade size="1"></td>
  <td align="left">&nbsp;</td>
  <td align="right"><hr noshade size="1"></td>
  <td align="left">&nbsp;</td>
  <td align="right"><hr noshade size="1"></td>
  <td align="left">&nbsp;</td>
  <td align="right"><hr noshade size="1"></td>
  <td align="left">&nbsp;</td>
</tr>
<tr valign="top">
<td colspan="4" align="left"><font size="2" face="Arial"><b>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total consolidated operating income </b><sup>(3)</sup></font></td>
<td align="right"><font size="2" face="Arial"><b>8.2</b></font></td>
<td align="left"><font size="2" face="Arial"><b>%</b></font></td>
<td align="right"><font size="2" face="Arial"><b>7.1</b></font></td>
<td align="left"><font size="2" face="Arial"><b>%</b></font></td>
<td align="right"><font size="2" face="Arial"><b>6.2</b></font></td>
<td align="left"><font size="2" face="Arial"><b>%</b></font></td>
<td align="right"><font size="2" face="Arial"><b>7.4</b></font></td>
<td align="left"><font size="2" face="Arial"><b>%</b></font></td>
</tr>
<tr valign="top">
  <td colspan="4" align="left">&nbsp;</td>
  <td align="right"><hr noshade size="2"></td>
  <td align="left">&nbsp;</td>
  <td align="right"><hr noshade size="2"></td>
  <td align="left">&nbsp;</td>
  <td align="right"><hr noshade size="2"></td>
  <td align="left">&nbsp;</td>
  <td align="right"><hr noshade size="2"></td>
  <td align="left">&nbsp;</td>
</tr>
<tr valign="top">
  <td colspan="4" align="left"><hr align="left" width="100" size="1" noshade></td>
  <td align="right">&nbsp;</td>
  <td align="left">&nbsp;</td>
  <td align="right">&nbsp;</td>
  <td align="left">&nbsp;</td>
  <td align="right">&nbsp;</td>
  <td align="left">&nbsp;</td>
  <td align="right">&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="1" face="Arial">
(1)
</font></td>
<td align="left">
<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="top">
<td width="3%"><font size="1" face="Arial">
(2)
</font></td>
<td align="left">
<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="top">
<td width="3%"><font size="1" face="Arial">
(3)
</font></td>
<td align="left">
<font size="1" face="Arial"> As a percentage of total net revenues.
</font></td>
</tr>
</table>
<p align="center"><font face="Arial" size="2">9</font></p>
<hr noshade align="center" width="100%" size="2">
<div style="page-break-before:always"></div>
<page>


<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">&nbsp;</td>
<td align="right">&nbsp;</td>
<td colspan="4" align="center"><div align="center"><font size="1" face="Arial"><b>(unaudited)</b></font></div></td>
<td align="left">&nbsp;</td>
<td align="right">&nbsp;</td>
<td colspan="4" align="center"><div align="center"><font size="1" face="Arial"><b>(unaudited)</b></font></div></td>
<td align="left">&nbsp;</td>
</tr>
<tr valign="top">
<td></td>
<td></td>
<td><hr noshade size="1"></td>
<td colspan="4"><hr align="center" size="1" noshade></td>
<td>&nbsp;</td>
<td><hr align="center" size="1" noshade></td>
<td colspan="4"><hr align="center" size="1" noshade></td>
<td></td>
</tr>
<tr valign="top">
<td align="left"><font size="1" face="Arial">&nbsp;</font></td>
<td align="left">&nbsp;</td>
<td align="right">&nbsp;</td>
<td colspan="4" align="center"><div align="center"><font size="1" face="Arial"><b>Three
        Months Ended</b></font></div></td>
<td align="left">&nbsp;</td>
<td align="right">&nbsp;</td>
<td colspan="4" align="center"><div align="center"><font size="1" face="Arial"><b>Six
        Months Ended</b></font></div></td>
<td align="left">&nbsp;</td>
</tr>
<tr valign="top">
<td></td>
<td></td>
<td><hr noshade size="1"></td>
<td colspan="4"><hr align="center" size="1" noshade></td>
<td>&nbsp;</td>
<td><hr align="center" size="1" noshade></td>
<td colspan="4"><hr align="center" size="1" noshade></td>
<td></td>
</tr>
<tr valign="top">
<td align="left"><font size="1" face="Arial">&nbsp;</font></td>
<td align="left">&nbsp;</td>
<td align="right">&nbsp;</td>
<td align="right"><div align="center"><font size="1" face="Arial"><b>June 26,
        2004</b></font></div></td>
<td align="left">&nbsp;</td>
<td align="right">&nbsp;</td>
<td align="right"><div align="center"><font size="1" face="Arial"><b>June 28,
        2003</b></font></div></td>
<td align="left">&nbsp;</td>
<td align="right">&nbsp;</td>
<td align="right"><div align="center"><font size="1" face="Arial"><b>June 26,
        2004</b></font></div></td>
<td align="left">&nbsp;</td>
<td align="right">&nbsp;</td>
<td align="right"><div align="center"><font size="1" face="Arial"><b>June 28,
        2003</b></font></div></td>
<td align="left">&nbsp;</td>
</tr>
<tr valign="top">
<td></td>
<td></td>
<td><hr noshade size="1"></td>
<td><hr align="center" size="1" noshade></td>
<td>&nbsp;</td>
<td><hr align="center" size="1" noshade></td>
<td><hr align="center" size="1" noshade></td>
<td>&nbsp;</td>
<td><hr align="center" size="1" noshade></td>
<td><hr align="center" size="1" noshade></td>
<td>&nbsp;</td>
<td><hr align="center" size="1" noshade></td>
<td><hr align="center" size="1" noshade></td>
<td></td>
</tr>
<tr valign="top">
<td align="left"><font size="1" face="Arial">&nbsp;</font></td>
<td align="left">&nbsp;</td>
<td align="right">&nbsp;</td>
<td colspan="4" align="center"><div align="center"><font size="1" face="Arial"><b>(in
        millions)</b></font></div></td>
<td align="left">&nbsp;</td>
<td align="right">&nbsp;</td>
<td colspan="4" align="center"><div align="center"><font size="1" face="Arial"><b>(in
        millions)</b></font></div></td>
<td align="left">&nbsp;</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="7%" 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="7%" 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="7%" 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="7%" align="left"><font size="2" face="Arial">&nbsp;</font></td>
<td width="2%" align="left">&nbsp;</td> </tr>
<tr valign="top">
<td align="left" bgcolor="#eeeeee"><font size="2" face="Arial">&nbsp;&nbsp;&nbsp;Total operating income of product groups</font></td>
<td align="left" bgcolor="#eeeeee">&nbsp;</td>
<td align="right" bgcolor="#eeeeee"><font size="2" face="Arial">$</font></td>
<td align="right" bgcolor="#eeeeee"><font size="2" face="Arial"> 262</font></td>
<td align="left" bgcolor="#eeeeee">&nbsp;</td>
<td align="right" bgcolor="#eeeeee"><font size="2" face="Arial">$</font></td>
<td align="right" bgcolor="#eeeeee"><font size="2" face="Arial"> 153</font></td>
<td align="left" bgcolor="#eeeeee">&nbsp;</td>
<td align="right" bgcolor="#eeeeee"><font size="2" face="Arial">$</font></td>
<td align="right" bgcolor="#eeeeee"><font size="2" face="Arial"> 450</font></td>
<td align="left" bgcolor="#eeeeee">&nbsp;</td>
<td align="right" bgcolor="#eeeeee"><font size="2" face="Arial">$</font></td>
<td align="right" bgcolor="#eeeeee"><font size="2" face="Arial"> 301</font></td>
<td align="left" bgcolor="#eeeeee">&nbsp;</td>
</tr>
<tr valign="top">
<td align="left"><font size="2" face="Arial">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Strategic and other research and development programs</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;(25</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;&nbsp;&nbsp;&nbsp;&nbsp;(10</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;&nbsp;&nbsp;&nbsp;&nbsp;(54</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;&nbsp;&nbsp;&nbsp;&nbsp;(17</font></td>
<td align="left"><font size="2" face="Arial">)</font></td>
</tr>
<tr valign="top">
<td align="left" bgcolor="#eeeeee"><font size="2" face="Arial">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Strategic marketing programs</font></td>
<td align="left" bgcolor="#eeeeee">&nbsp;</td>
<td align="right" bgcolor="#eeeeee">&nbsp;</td>
<td align="right" bgcolor="#eeeeee"><font size="2" face="Arial">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(7</font></td>
<td align="left" bgcolor="#eeeeee"><font size="2" face="Arial">)</font></td>
<td align="right" bgcolor="#eeeeee">&nbsp;</td>
<td align="right" bgcolor="#eeeeee"><font size="2" face="Arial">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(1</font></td>
<td align="left" bgcolor="#eeeeee"><font size="2" face="Arial">)</font></td>
<td align="right" bgcolor="#eeeeee">&nbsp;</td>
<td align="right" bgcolor="#eeeeee"><font size="2" face="Arial">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(10</font></td>
<td align="left" bgcolor="#eeeeee"><font size="2" face="Arial">)</font></td>
<td align="right" bgcolor="#eeeeee">&nbsp;</td>
<td align="right" bgcolor="#eeeeee"><font size="2" face="Arial">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(1</font></td>
<td align="left" bgcolor="#eeeeee"><font size="2" face="Arial">)</font></td>
</tr>
<tr valign="top">
<td align="left"><font size="2" face="Arial">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Patent litigations</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;(2</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;&nbsp;&nbsp;&nbsp;&nbsp;0</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;(2</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;&nbsp;&nbsp;&nbsp;&nbsp;0</font></td>
<td align="left">&nbsp;</td>
</tr>
<tr valign="top">
<td align="left" bgcolor="#eeeeee"><font size="2" face="Arial">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Start-up costs</font></td>
<td align="left" bgcolor="#eeeeee">&nbsp;</td>
<td align="right" bgcolor="#eeeeee">&nbsp;</td>
<td align="right" bgcolor="#eeeeee"><font size="2" face="Arial">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(9</font></td>
<td align="left" bgcolor="#eeeeee"><font size="2" face="Arial">)</font></td>
<td align="right" bgcolor="#eeeeee">&nbsp;</td>
<td align="right" bgcolor="#eeeeee"><font size="2" face="Arial">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(12</font></td>
<td align="left" bgcolor="#eeeeee"><font size="2" face="Arial">)</font></td>
<td align="right" bgcolor="#eeeeee">&nbsp;</td>
<td align="right" bgcolor="#eeeeee"><font size="2" face="Arial">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(32</font></td>
<td align="left" bgcolor="#eeeeee"><font size="2" face="Arial">)</font></td>
<td align="right" bgcolor="#eeeeee">&nbsp;</td>
<td align="right" bgcolor="#eeeeee"><font size="2" face="Arial">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(19</font></td>
<td align="left" bgcolor="#eeeeee"><font size="2" face="Arial">)</font></td>
</tr>
<tr valign="top">
<td align="left"><font size="2" face="Arial">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Impairment,
    restructuring charges and other related closure costs</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;(12</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;&nbsp;&nbsp;&nbsp;&nbsp;&#151;</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;(45</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;&nbsp;&nbsp;&nbsp;&nbsp;&#151;</font></td>
<td align="left">&nbsp;</td>
</tr>
<tr valign="top">
<td align="left" bgcolor="#eeeeee"><font size="2" face="Arial">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Subsystems</font></td>
<td align="left" bgcolor="#eeeeee">&nbsp;</td>
<td align="right" bgcolor="#eeeeee">&nbsp;</td>
<td align="right" bgcolor="#eeeeee"><font size="2" face="Arial">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(1</font></td>
<td align="left" bgcolor="#eeeeee"><font size="2" face="Arial">)</font></td>
<td align="right" bgcolor="#eeeeee">&nbsp;</td>
<td align="right" bgcolor="#eeeeee"><font size="2" face="Arial">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2</font></td>
<td align="left" bgcolor="#eeeeee">&nbsp;</td>
<td align="right" bgcolor="#eeeeee">&nbsp;</td>
<td align="right" bgcolor="#eeeeee"><font size="2" face="Arial">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(1</font></td>
<td align="left" bgcolor="#eeeeee"><font size="2" face="Arial">)</font></td>
<td align="right" bgcolor="#eeeeee">&nbsp;</td>
<td align="right" bgcolor="#eeeeee"><font size="2" face="Arial">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;4</font></td>
<td align="left" bgcolor="#eeeeee">&nbsp;</td>
</tr>
<tr valign="top">
<td align="left"><font size="2" face="Arial">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Other non-allocated provisions</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;(27</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;&nbsp;&nbsp;&nbsp;&nbsp;(11</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;&nbsp;&nbsp;&nbsp;&nbsp;(47</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;&nbsp;&nbsp;&nbsp;&nbsp;(23</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><hr noshade size="1">
  </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>
  <td><hr noshade size="1">
  </td>
  <td><hr noshade size="1">
  </td>
  <td></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 align="right"><font size="2" face="Arial">(83</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">(32</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">(191</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">(56</font></td>
<td align="left"><font size="2" face="Arial">)</font></td>
</tr>
<tr valign="top">
<td align="left" bgcolor="#eeeeee"><font size="2" face="Arial"><b>&nbsp;&nbsp;&nbsp;Total consolidated operating income</b></font></td>
<td align="left" bgcolor="#eeeeee">&nbsp;</td>
<td align="right" bgcolor="#eeeeee"><b><font size="2" face="Arial">$</font></b></td>
<td align="right" bgcolor="#eeeeee"><b><font size="2" face="Arial">        179 </font></b></td>
<td align="left" bgcolor="#eeeeee">&nbsp;</td>
<td align="right" bgcolor="#eeeeee"><font size="2" face="Arial"><b>$</b></font></td>
<td align="right" bgcolor="#eeeeee"><font size="2" face="Arial"> <b>       121 </b></font></td>
<td align="left" bgcolor="#eeeeee">&nbsp;</td>
<td align="right" bgcolor="#eeeeee"><b><font size="2" face="Arial">$</font></b></td>
<td align="right" bgcolor="#eeeeee"><b><font size="2" face="Arial">        259 </font></b></td>
<td align="left" bgcolor="#eeeeee">&nbsp;</td>
<td align="right" bgcolor="#eeeeee"><font size="2" face="Arial"><b>$</b></font></td>
<td align="right" bgcolor="#eeeeee"><font size="2" face="Arial"> <b>       245 </b></font></td>
<td align="left" bgcolor="#eeeeee">&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>
<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>
<tr valign="top">
  <td><hr align="left" width="100" size="1" noshade></td>
  <td></td>
  <td>&nbsp;</td>
  <td>&nbsp;</td>
  <td></td>
  <td>&nbsp;</td>
  <td>&nbsp;</td>
  <td></td>
  <td>&nbsp;</td>
  <td>&nbsp;</td>
  <td></td>
  <td>&nbsp;</td>
  <td>&nbsp;</td>
  <td></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"> Includes unallocated expenses such as: strategic
and 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.</font></td>
</tr>
<tr valign="top">
  <td>&nbsp;</td>
  <td align="left">&nbsp;</td>
</tr>
</table>
<p align="left"><font size="2" face="Arial"><b><i>Net revenues by location of order shipment, by customers&#8217; 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&#8217; 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"></td>
<td align="left">&nbsp;</td>
<td align="right">&nbsp;</td>
<td colspan="4" align="center"><div align="center"><b><font size="1" face="Arial">(unaudited)</font></b></div></td>
<td align="left">&nbsp;</td>
<td align="right">&nbsp;</td>
<td colspan="4" align="center"><div align="center"><b><font size="1" face="Arial">(unaudited)</font></b></div></td>
<td align="left">&nbsp;</td>
</tr>
<tr valign="top">
<td></td>
<td></td>
<td><hr noshade size="1"></td>
<td colspan="4"><hr align="center" size="1" noshade></td>
<td>&nbsp;</td>
<td><hr align="center" size="1" noshade></td>
<td colspan="4"><hr align="center" size="1" noshade></td>
<td></td>
</tr>
<tr valign="top">
<td align="left"></td>
<td align="left">&nbsp;</td>
<td align="right">&nbsp;</td>
<td colspan="4" align="center"><div align="center"><b><font size="1" face="Arial">Three Months Ended</font></b></div></td>
<td align="left">&nbsp;</td>
<td align="right">&nbsp;</td>
<td colspan="4" align="center"><div align="center"><b><font size="1" face="Arial">Six Months Ended</font></b></div></td>
<td align="left">&nbsp;</td>
</tr>
<tr valign="top">
<td></td>
<td></td>
<td><hr noshade size="1"></td>
<td colspan="4"><hr align="center" size="1" noshade></td>
<td>&nbsp;</td>
<td><hr align="center" size="1" noshade></td>
<td colspan="4"><hr align="center" size="1" noshade></td>
<td></td>
</tr>
<tr valign="top">
<td align="left"></td>
<td align="left" width="2%">&nbsp;</td>
<td width="1%" align="right">&nbsp;</td>
<td width="7%" align="center"><div align="center"><b><font size="1" face="Arial">June 26, 2004</font></b></div></td>
<td width="2%" align="left">&nbsp;</td>
<td width="1%" align="right">&nbsp;</td>
<td width="7%" align="center"><div align="center"><b><font size="1" face="Arial">June 28, 2003</font></b></div></td>
<td width="2%" align="left">&nbsp;</td>
<td width="1%" align="right">&nbsp;</td>
<td width="7%" align="center"><div align="center"><b><font size="1" face="Arial">June 26, 2004</font></b></div></td>
<td width="2%" align="left">&nbsp;</td>
<td width="1%" align="right">&nbsp;</td>
<td width="7%" align="center"><div align="center"><b><font size="1" face="Arial">June 28, 2003</font></b></div></td>
<td width="2%" align="left">&nbsp;</td> </tr>
<tr valign="top">
<td></td>
<td></td>
<td><hr noshade size="1"></td>
<td><hr align="center" size="1" noshade></td>
<td>&nbsp;</td>
<td><hr align="center" size="1" noshade></td>
<td><hr align="center" size="1" noshade></td>
<td>&nbsp;</td>
<td><hr align="center" size="1" noshade></td>
<td><hr align="center" size="1" noshade></td>
<td>&nbsp;</td>
<td><hr align="center" size="1" noshade></td>
<td><hr align="center" size="1" noshade></td>
<td></td>
</tr>
<tr valign="top">
<td align="left"></td>
<td align="left">&nbsp;</td>
<td align="right">&nbsp;</td>
<td colspan="4" align="center"><div align="center"><b><font size="1" face="Arial">(in
        millions)</font></b></div></td>
<td align="left">&nbsp;</td>
<td align="right">&nbsp;</td>
<td colspan="4" align="center"><div align="center"><b><font size="1" face="Arial">(in
        millions)</font></b></div></td>
<td align="left">&nbsp;</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 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="#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">$</font></td>
<td align="right"><font size="2" face="Arial"> 587</font></td>
<td align="left"><font size="2">&nbsp;</font></td>
<td align="right"><font size="2" face="Arial">$</font></td>
<td align="right"><font size="2" face="Arial"> 490</font></td>
<td align="left">&nbsp;</td>
<td align="right"><font size="2" face="Arial">$</font></td>
<td align="right"><font size="2" face="Arial"> 1,142</font></td>
<td align="left"><font size="2">&nbsp;</font></td>
<td align="right"><font size="2" face="Arial">$</font></td>
<td align="right"><font size="2" face="Arial"> 961</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"><font size="2">&nbsp;</font></td>
<td align="right"><font size="2" face="Arial">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;318</font></td>
<td align="left"><font size="2">&nbsp;</font></td>
<td align="right">&nbsp;</td>
<td align="right"><font size="2" face="Arial">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;232</font></td>
<td align="left">&nbsp;</td>
<td align="right"><font size="2">&nbsp;</font></td>
<td align="right"><font size="2" face="Arial">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;620</font></td>
<td align="left"><font size="2">&nbsp;</font></td>
<td align="right">&nbsp;</td>
<td align="right"><font size="2" face="Arial">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;460</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"><font size="2">&nbsp;</font></td>
<td align="right"><font size="2" face="Arial">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;923</font></td>
<td align="left"><font size="2">&nbsp;</font></td>
<td align="right">&nbsp;</td>
<td align="right"><font size="2" face="Arial">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;730</font></td>
<td align="left">&nbsp;</td>
<td align="right"><font size="2">&nbsp;</font></td>
<td align="right"><font size="2" face="Arial">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1,777</font></td>
<td align="left"><font size="2">&nbsp;</font></td>
<td align="right">&nbsp;</td>
<td align="right"><font size="2" face="Arial">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1,432</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"><font size="2">&nbsp;</font></td>
<td align="right"><font size="2" face="Arial">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;101</font></td>
<td align="left"><font size="2">&nbsp;</font></td>
<td align="right">&nbsp;</td>
<td align="right"><font size="2" face="Arial">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;86</font></td>
<td align="left">&nbsp;</td>
<td align="right"><font size="2">&nbsp;</font></td>
<td align="right"><font size="2" face="Arial">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;188</font></td>
<td align="left"><font size="2">&nbsp;</font></td>
<td align="right">&nbsp;</td>
<td align="right"><font size="2" face="Arial">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;158</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"><font size="2">&nbsp;</font></td>
<td align="right"><font size="2" face="Arial">243</font></td>
<td align="left"><font size="2">&nbsp;</font></td>
<td align="right">&nbsp;</td>
<td align="right"><font size="2" face="Arial">164</font></td>
<td align="left">&nbsp;</td>
<td align="right"><font size="2">&nbsp;</font></td>
<td align="right"><font size="2" face="Arial">474</font></td>
<td align="left"><font size="2">&nbsp;</font></td>
<td align="right">&nbsp;</td>
<td align="right"><font size="2" face="Arial">310</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><font size="2">&nbsp;</font></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><font size="2">&nbsp;</font></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">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total</font></td>
<td align="left">&nbsp;</td>
<td align="right"><b><font size="2" face="Arial">$</font></b></td>
<td align="right"><b><font size="2" face="Arial"> 2,172</font></b></td>
<td align="left"><font size="2">&nbsp;</font></td>
<td align="right"><font size="2" face="Arial"><b>$</b></font></td>
<td align="right"><font size="2" face="Arial"> <b>1,702</b></font></td>
<td align="left">&nbsp;</td>
<td align="right"><b><font size="2" face="Arial">$</font></b></td>
<td align="right"><b><font size="2" face="Arial"> 4,201</font></b></td>
<td align="left"><font size="2">&nbsp;</font></td>
<td align="right"><font size="2" face="Arial"><b>$</b></font></td>
<td align="right"><font size="2" face="Arial"> <b>3,321</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>
<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>
<tr valign="top">
<td align="left"><font size="2" face="Arial"><b>Net Revenues by Customers&#8217; Region of Origin:<sup>(1)</sup></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>
<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;Europe</font></td>
<td align="left">&nbsp;</td>
<td align="right"><font size="2" face="Arial">$</font></td>
<td align="right"><font size="2" face="Arial"> 998</font></td>
<td align="left">&nbsp;</td>
<td align="right"><font size="2" face="Arial">$</font></td>
<td align="right"><font size="2" face="Arial"> 783</font></td>
<td align="left">&nbsp;</td>
<td align="right"><font size="2" face="Arial">$</font></td>
<td align="right"><font size="2" face="Arial"> 1,923</font></td>
<td align="left">&nbsp;</td>
<td align="right"><font size="2" face="Arial">$</font></td>
<td align="right"><font size="2" face="Arial"> 1,503</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 align="right"><font size="2" face="Arial">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;567</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;484</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;1,160</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;977</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 align="right"><font size="2" face="Arial">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;395</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;254</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;714</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;501</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 align="right"><font size="2" face="Arial">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;134</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;126</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;255</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;235</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 align="right"><font size="2" face="Arial">78</font></td>
<td align="left">&nbsp;</td>
<td align="right">&nbsp;</td>
<td align="right"><font size="2" face="Arial">55</font></td>
<td align="left">&nbsp;</td>
<td align="right">&nbsp;</td>
<td align="right"><font size="2" face="Arial">149</font></td>
<td align="left">&nbsp;</td>
<td align="right">&nbsp;</td>
<td align="right"><font size="2" face="Arial">105</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>
<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">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<b>&nbsp;</b>Total</font></td>
<td align="left">&nbsp;</td>
<td align="right"><b><font size="2" face="Arial">$</font></b></td>
<td align="right"><b><font size="2" face="Arial"> 2,172</font></b></td>
<td align="left">&nbsp;</td>
<td align="right"><font size="2" face="Arial"><b>$</b></font></td>
<td align="right"><font size="2" face="Arial"> <b>1,702</b></font></td>
<td align="left">&nbsp;</td>
<td align="right"><b><font size="2" face="Arial">$</font></b></td>
<td align="right"><b><font size="2" face="Arial"> 4,201</font></b></td>
<td align="left">&nbsp;</td>
<td align="right"><font size="2" face="Arial"><b>$</b></font></td>
<td align="right"><font size="2" face="Arial"> <b>3,321</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>
<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>
<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 align="left"><b><font size="2" face="Arial">&nbsp;</font></b></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"><b><font size="2" face="Arial">&nbsp;</font></b></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;Differentiated Products</font></td>
<td align="left">&nbsp;</td>
<td align="right"><font size="2" face="Arial">$</font></td>
<td align="right"><font size="2" face="Arial"> 1,400</font></td>
<td align="left">&nbsp;</td>
<td align="right"><font size="2" face="Arial">$</font></td>
<td align="right"><font size="2" face="Arial"> 1,179</font></td>
<td align="left">&nbsp;</td>
<td align="right"><font size="2" face="Arial">$</font></td>
<td align="right"> <font size="2" face="Arial">2,771</font></td>
<td align="left">&nbsp;</td>
<td align="right"><font size="2" face="Arial">$</font></td>
<td align="right"><font size="2" face="Arial"> 2,311</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 align="right"><font size="2" face="Arial">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;108</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;96</font></td>
<td align="left">&nbsp;</td>
<td align="right">&nbsp;</td>
<td align="right"><font size="2" face="Arial">&nbsp;<b>&nbsp;&nbsp;&nbsp;&nbsp;</b>205</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;184</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 align="right"><font size="2" face="Arial">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;341</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;206</font></td>
<td align="left">&nbsp;</td>
<td align="right">&nbsp;</td>
<td align="right"><b><font size="2" face="Arial">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</font></b><font size="2" face="Arial">630</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;406</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 align="right"><font size="2" face="Arial">323</font></td>
<td align="left">&nbsp;</td>
<td align="right">&nbsp;</td>
<td align="right"><font size="2" face="Arial">221</font></td>
<td align="left">&nbsp;</td>
<td align="right">&nbsp;</td>
<td align="right"><font size="2" face="Arial">595</font></td>
<td align="left">&nbsp;</td>
<td align="right">&nbsp;</td>
<td align="right"><font size="2" face="Arial">420</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>
<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">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total</font></td>
<td align="left">&nbsp;</td>
<td align="right"><b><font size="2" face="Arial">$</font></b></td>
<td align="right"><b><font size="2" face="Arial"> 2,172</font></b></td>
<td align="left">&nbsp;</td>
<td align="right"><font size="2" face="Arial"><b>$</b></font></td>
<td align="right"><font size="2" face="Arial"> <b>1,702</b></font></td>
<td align="left">&nbsp;</td>
<td align="right"><b><font size="2" face="Arial">$</font></b></td>
<td align="right"><b><font size="2" face="Arial"> 4,201</font></b></td>
<td align="left">&nbsp;</td>
<td align="right"><font size="2" face="Arial"><b>$</b></font></td>
<td align="right"><font size="2" face="Arial"> <b>3,321</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>
<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>
<tr valign="top">
  <td><hr align="left" width="100" size="1" noshade></td>
  <td></td>
  <td>&nbsp;</td>
  <td>&nbsp;</td>
  <td></td>
  <td>&nbsp;</td>
  <td>&nbsp;</td>
  <td></td>
  <td>&nbsp;</td>
  <td>&nbsp;</td>
  <td></td>
  <td>&nbsp;</td>
  <td>&nbsp;</td>
  <td></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"> 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. Net revenues by customers&#8217; region of origin depend on the location
of the customer&#8217;s headquarters. For example, 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">10</font></p>
<hr noshade align="center" width="100%" size="2">
<div style="page-break-before:always"></div>
<page>


<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&#8217; region of origin and by product family in percentages of total net revenues:</font></p></div>
<table width="100%" cellspacing="0" cellpadding="0" border="0">
<tr valign="top">
<td align="left"></td>
<td align="left">&nbsp;</td>
<td align="right">&nbsp;</td>
<td colspan="4" align="center"><div align="center"><b><font size="1" face="Arial">(unaudited)</font></b></div></td>
<td align="left">&nbsp;</td>
<td align="right">&nbsp;</td>
<td colspan="4" align="center"><div align="center"><b><font size="1" face="Arial">(unaudited)</font></b></div></td>
<td align="left">&nbsp;</td>
</tr>
<tr valign="top">
<td></td>
<td></td>
<td><hr noshade size="1"></td>
<td colspan="4"><hr align="center" size="1" noshade></td>
<td>&nbsp;</td>
<td><hr align="center" size="1" noshade></td>
<td colspan="4"><hr align="center" size="1" noshade></td>
<td></td>
</tr>
<tr valign="top">
<td align="left"></td>
<td align="left">&nbsp;</td>
<td align="right">&nbsp;</td>
<td colspan="4" align="center"><div align="center"><b><font size="1" face="Arial">Three Months Ended</font></b></div></td>
<td align="left">&nbsp;</td>
<td align="right">&nbsp;</td>
<td colspan="4" align="center"><div align="center"><b><font size="1" face="Arial">Six Months Ended</font></b></div></td>
<td align="left">&nbsp;</td>
</tr>
<tr valign="top">
<td></td>
<td></td>
<td><hr noshade size="1"></td>
<td colspan="4"><hr align="center" size="1" noshade></td>
<td>&nbsp;</td>
<td><hr align="center" size="1" noshade></td>
<td colspan="4"><hr align="center" size="1" noshade></td>
<td></td>
</tr>
<tr valign="top">
<td align="left"></td>
<td align="left" width="2%">&nbsp;</td>
<td width="1%" align="right">&nbsp;</td>
<td width="7%" align="center"><div align="center"><b><font size="1" face="Arial">June 26, 2004</font></b></div></td>
<td width="2%" align="left">&nbsp;</td>
<td width="1%" align="right">&nbsp;</td>
<td width="7%" align="center"><div align="center"><b><font size="1" face="Arial">June 28, 2003</font></b></div></td>
<td width="2%" align="left">&nbsp;</td>
<td width="1%" align="right">&nbsp;</td>
<td width="7%" align="center"><div align="center"><b><font size="1" face="Arial">June 26, 2004</font></b></div></td>
<td width="2%" align="left">&nbsp;</td>
<td width="1%" align="right">&nbsp;</td>
<td width="7%" align="center"><div align="center"><b><font size="1" face="Arial">June 28, 2003</font></b></div></td>
<td width="2%" align="left">&nbsp;</td> </tr>
<tr valign="top">
<td></td>
<td></td>
<td><hr noshade size="1"></td>
<td><hr align="center" size="1" noshade></td>
<td>&nbsp;</td>
<td><hr align="center" size="1" noshade></td>
<td><hr align="center" size="1" noshade></td>
<td>&nbsp;</td>
<td><hr align="center" size="1" noshade></td>
<td><hr align="center" size="1" noshade></td>
<td>&nbsp;</td>
<td><hr align="center" size="1" noshade></td>
<td><hr align="center" size="1" noshade></td>
<td></td>
</tr>
<tr valign="top">
<td align="left"></td>
<td align="left">&nbsp;</td>
<td align="right">&nbsp;</td>
<td colspan="4" align="center"><div align="center"><b><font size="1" face="Arial">(as
        percentages of net revenues)</font></b></div></td>
<td align="left">&nbsp;</td>
<td align="right">&nbsp;</td>
<td colspan="4" align="center"><div align="center"><b><font size="1" face="Arial">(as
        percentages of net revenues)</font></b></div></td>
<td align="left">&nbsp;</td>
</tr>
<tr valign="top">
<td align="left"><font size="2" face="Arial"><b>Net Revenues by Location of Order Shipment</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>
<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;Europe</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;27.0</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;&nbsp;&nbsp;&nbsp;&nbsp;28.8</font></td>
<td align="left"><font size="2" face="Arial">%</font></td>
<td align="right">&nbsp;</td>
<td align="right"><b><font size="2" face="Arial">&nbsp;</font></b><font size="2" face="Arial">&nbsp;&nbsp;&nbsp;&nbsp;27.2</font></td>
<td align="left"><b><font size="2" face="Arial">%</font></b></td>
<td align="right">&nbsp;</td>
<td align="right"><font size="2" face="Arial">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;28.9</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;North America</font></td>
<td align="left">&nbsp;</td>
<td align="right">&nbsp;</td>
<td align="right"><b><font size="2" face="Arial">&nbsp;&nbsp;&nbsp;</font></b><font size="2" face="Arial">&nbsp;&nbsp;14.6</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;13.7</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;14.7</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;13.9</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 align="right"><font size="2" face="Arial">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;42.5</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;42.9</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;42.3</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;43.1</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 align="right"><font size="2" face="Arial">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;4.7</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;5.0</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;4.5</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;4.8</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 align="right"><font size="2" face="Arial">11.2</font></td>
<td align="left">&nbsp;</td>
<td align="right">&nbsp;</td>
<td align="right"><font size="2" face="Arial">9.6</font></td>
<td align="left">&nbsp;</td>
<td align="right">&nbsp;</td>
<td align="right"><font size="2" face="Arial">11.3</font></td>
<td align="left">&nbsp;</td>
<td align="right">&nbsp;</td>
<td align="right"><font size="2" face="Arial">9.3</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>
<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">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total</font></td>
<td align="left">&nbsp;</td>
<td align="right">&nbsp;</td>
<td align="right"><b><font size="2" face="Arial">100.0</font></b></td>
<td align="left"><b><font size="2" face="Arial">%</font></b></td>
<td align="right">&nbsp;</td>
<td align="right"><font size="2" face="Arial"><b>100.0</b></font></td>
<td align="left"><font size="2" face="Arial"><b>%</b></font></td>
<td align="right">&nbsp;</td>
<td align="right"><b><font size="2" face="Arial">100.0</font></b></td>
<td align="left"><b><font size="2" face="Arial">%</font></b></td>
<td align="right">&nbsp;</td>
<td align="right"><font size="2" face="Arial"><b>100.0</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><hr noshade size="2"></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>
<td><hr noshade size="2"></td>
<td><hr noshade size="2"></td>
<td></td>
</tr>
<tr valign="top">
<td align="left"><font size="2" face="Arial"><b>Net Revenues by Customers&#8217; Region of Origin:<sup>(1)</sup></b></font></td>
<td align="left">&nbsp;</td>
<td align="right">&nbsp;</td>
<td align="left"><b><font size="2" face="Arial">&nbsp;</font></b></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"><b><font size="2" face="Arial">&nbsp;</font></b></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;Europe</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;45.9</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;46.1</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;45.8</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;45.3</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 align="right"><font size="2" face="Arial">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;26.1</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;28.4</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;27.6</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;29.4</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 align="right"><font size="2" face="Arial">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;18.2</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;14.9</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;17.0</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;15.1</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 align="right"><font size="2" face="Arial">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;6.2</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;7.4</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;6.1</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;7.1</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 align="right"><font size="2" face="Arial">3.6</font></td>
<td align="left">&nbsp;</td>
<td align="right">&nbsp;</td>
<td align="right"><font size="2" face="Arial">3.2</font></td>
<td align="left">&nbsp;</td>
<td align="right">&nbsp;</td>
<td align="right"><font size="2" face="Arial">3.5</font></td>
<td align="left">&nbsp;</td>
<td align="right">&nbsp;</td>
<td align="right"><font size="2" face="Arial">3.1</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>
<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">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total</font></td>
<td align="left">&nbsp;</td>
<td align="right">&nbsp;</td>
<td align="right"><b><font size="2" face="Arial">100.0</font></b></td>
<td align="left"><b><font size="2" face="Arial">%</font></b></td>
<td align="right">&nbsp;</td>
<td align="right"><font size="2" face="Arial"><b>100.0</b></font></td>
<td align="left"><font size="2" face="Arial"><b>%</b></font></td>
<td align="right">&nbsp;</td>
<td align="right"><b><font size="2" face="Arial">100.0</font></b></td>
<td align="left"><b><font size="2" face="Arial">%</font></b></td>
<td align="right">&nbsp;</td>
<td align="right"><font size="2" face="Arial"><b>100.0</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><hr noshade size="2"></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>
<td><hr noshade size="2"></td>
<td><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 align="left"><b><font size="2" face="Arial">&nbsp;</font></b></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"><b><font size="2" face="Arial">&nbsp;</font></b></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;Differentiated Products</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;64.4</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;69.3</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;65.9</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;69.6</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 align="right"><font size="2" face="Arial">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;5.0</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;5.6</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;4.9</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;5.5</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 align="right"><font size="2" face="Arial">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;15.7</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;12.1</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;15.0</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;12.2</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 align="right"><font size="2" face="Arial">14.9</font></td>
<td align="left">&nbsp;</td>
<td align="right">&nbsp;</td>
<td align="right"><font size="2" face="Arial">13.0</font></td>
<td align="left">&nbsp;</td>
<td align="right">&nbsp;</td>
<td align="right"><font size="2" face="Arial">14.2</font></td>
<td align="left">&nbsp;</td>
<td align="right">&nbsp;</td>
<td align="right"><font size="2" face="Arial">12.7</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>
<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">&nbsp;&nbsp;<b>&nbsp;&nbsp;&nbsp;&nbsp;</b>Total</font></td>
<td align="left">&nbsp;</td>
<td align="right">&nbsp;</td>
<td align="right"><b><font size="2" face="Arial">100.0</font></b></td>
<td align="left"><b><font size="2" face="Arial">%</font></b></td>
<td align="right">&nbsp;</td>
<td align="right"><font size="2" face="Arial"><b>100.0</b></font></td>
<td align="left"><font size="2" face="Arial"><b>%</b></font></td>
<td align="right">&nbsp;</td>
<td align="right"><b><font size="2" face="Arial">100.0</font></b></td>
<td align="left"><b><font size="2" face="Arial">%</font></b></td>
<td align="right">&nbsp;</td>
<td align="right"><font size="2" face="Arial"><b>100.0</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><hr noshade size="2"></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>
<td><hr noshade size="2"></td>
<td><hr noshade size="2"></td>
<td></td>
</tr>
</table>
<div style="text-indent:3%"><p 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></p>
</div>
<table width="100%" border="0" cellpadding="0" cellspacing="0">
<tr valign="top">
<td align="left"><font size="1" face="Arial">&nbsp;</font></td>
<td align="right">&nbsp;</td>
<td colspan="4" align="center"><font size="1" face="Arial"><b>(unaudited)</b></font></td>
<td align="left">&nbsp;</td>
<td align="right">&nbsp;</td>
<td colspan="4" align="center"><font size="1" face="Arial"><b>(unaudited)</b></font></td>
<td align="left">&nbsp;</td>
</tr>
<tr valign="top">
<td></td>
<td><hr noshade size="1"></td>
<td><hr noshade size="1"></td>
<td><hr noshade size="1"></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><hr noshade size="1"></td>
<td><hr noshade size="1"></td>
<td><hr noshade size="1"></td>
<td></td>
</tr>
<tr valign="top">
<td align="left"><font size="1" face="Arial">&nbsp;</font></td>
<td align="right">&nbsp;</td>
<td colspan="4" align="center"><font size="1" face="Arial"><b>Three Months Ended</b></font></td>
<td align="left">&nbsp;</td>
<td align="right">&nbsp;</td>
<td colspan="4" align="center"><font size="1" face="Arial"><b>Six Months Ended</b></font></td>
<td align="left">&nbsp;</td>
</tr>
<tr valign="top">
<td></td>
<td><hr noshade size="1"></td>
<td><hr noshade size="1"></td>
<td><hr noshade size="1"></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><hr noshade size="1"></td>
<td><hr noshade size="1"></td>
<td><hr noshade size="1"></td>
<td></td>
</tr>
<tr valign="top">
<td align="left"><font size="1" face="Arial">&nbsp;</font></td>
<td align="right">&nbsp;</td>
<td align="center"><font size="1" face="Arial"><b>June 26, 2004</b></font></td>
<td align="left">&nbsp;</td>
<td align="right">&nbsp;</td>
<td align="center"><font size="1" face="Arial"><b>June 28, 2003</b></font></td>
<td align="left">&nbsp;</td>
<td align="right">&nbsp;</td>
<td align="center"><font size="1" face="Arial"><b>June 26, 2004</b></font></td>
<td align="left">&nbsp;</td>
<td align="right">&nbsp;</td>
<td align="center"><font size="1" face="Arial"><b>June 28, 2003</b></font></td>
<td align="left">&nbsp;</td>
</tr>
<tr valign="top">
<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>
<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">
<td align="left"></td>
<td align="left"></td>
<td colspan="4" align="left"><div align="center"><font size="1" face="Arial"><b>(as
        percentages of net revenues)</b></font></div></td>
<td align="center">&nbsp;</td>
<td align="center">&nbsp;</td>
<td colspan="4" align="center"><div align="center"><font size="1" face="Arial"><b>(as
        percentages of net revenues)</b></font></div></td>
<td align="left">&nbsp;</td>
</tr>
<tr valign="top">
<td align="left" bgcolor="#eeeeee"><font size="2" face="Arial">Net sales</font></td>
<td width="1%" align="right" bgcolor="#eeeeee">&nbsp;</td>
<td width="7%" align="right" bgcolor="#eeeeee"><font size="2" face="Arial">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;100.0</font></td>
<td width="2%" align="left" bgcolor="#eeeeee"><font size="2" face="Arial">%</font></td>
<td width="1%" align="right" bgcolor="#eeeeee">&nbsp;</td>
<td width="7%" align="right" bgcolor="#eeeeee"><font size="2" face="Arial">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;100.0</font></td>
<td width="2%" align="left" bgcolor="#eeeeee"><font size="2" face="Arial">%</font></td>
<td width="1%" align="right" bgcolor="#eeeeee">&nbsp;</td>
<td width="7%" align="right" bgcolor="#eeeeee"><font size="2" face="Arial">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;100.0</font></td>
<td width="2%" align="left" bgcolor="#eeeeee"><font size="2" face="Arial">%</font></td>
<td width="1%" align="right" bgcolor="#eeeeee">&nbsp;</td>
<td width="7%" align="right" bgcolor="#eeeeee"><font size="2" face="Arial">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;99.9</font></td>
<td width="2%" align="left" bgcolor="#eeeeee"><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="right">&nbsp;</td>
<td align="right"><font size="2" face="Arial">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;0.0</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;0.0</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;0.0</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;0.1</font></td>
<td align="left">&nbsp;</td>
</tr>
<tr valign="top">
  <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>
  <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">
<td align="left" bgcolor="#eeeeee"><font size="2" face="Arial"><b>Net revenue</b></font></td>
<td align="right" bgcolor="#eeeeee">&nbsp;</td>
<td align="right" bgcolor="#eeeeee"><font size="2" face="Arial"><b>100.0</b></font></td>
<td align="left" bgcolor="#eeeeee">&nbsp;</td>
<td align="right" bgcolor="#eeeeee">&nbsp;</td>
<td align="right" bgcolor="#eeeeee"><font size="2" face="Arial"><b>100.0</b></font></td>
<td align="left" bgcolor="#eeeeee">&nbsp;</td>
<td align="right" bgcolor="#eeeeee">&nbsp;</td>
<td align="right" bgcolor="#eeeeee"><font size="2" face="Arial"><b>100.0</b></font></td>
<td align="left" bgcolor="#eeeeee">&nbsp;</td>
<td align="right" bgcolor="#eeeeee">&nbsp;</td>
<td align="right" bgcolor="#eeeeee"><font size="2" face="Arial"><b>100.0</b></font></td>
<td align="left" bgcolor="#eeeeee">&nbsp;</td>
</tr>
<tr valign="top">
  <td align="left">&nbsp;</td>
  <td align="right">&nbsp;</td>
  <td align="right">&nbsp;</td>
  <td align="left">&nbsp;</td>
  <td align="right">&nbsp;</td>
  <td align="right">&nbsp;</td>
  <td align="left">&nbsp;</td>
  <td align="right">&nbsp;</td>
  <td align="right">&nbsp;</td>
  <td align="left">&nbsp;</td>
  <td align="right">&nbsp;</td>
  <td align="right">&nbsp;</td>
  <td align="left">&nbsp;</td>
</tr>
<tr valign="top">
<td align="left" bgcolor="#eeeeee"><font size="2" face="Arial">Cost of sales</font></td>
<td align="right" bgcolor="#eeeeee">&nbsp;</td>
<td align="right" bgcolor="#eeeeee"><font size="2" face="Arial">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(62.6</font></td>
<td align="left" bgcolor="#eeeeee"><font size="2" face="Arial">)</font></td>
<td align="right" bgcolor="#eeeeee">&nbsp;</td>
<td align="right" bgcolor="#eeeeee"><font size="2" face="Arial">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(64.3</font></td>
<td align="left" bgcolor="#eeeeee"><font size="2" face="Arial">)</font></td>
<td align="right" bgcolor="#eeeeee">&nbsp;</td>
<td align="right" bgcolor="#eeeeee"><font size="2" face="Arial">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(63.6</font></td>
<td align="left" bgcolor="#eeeeee"><font size="2" face="Arial">)</font></td>
<td align="right" bgcolor="#eeeeee">&nbsp;</td>
<td align="right" bgcolor="#eeeeee"><font size="2" face="Arial">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(64.7</font></td>
<td align="left" bgcolor="#eeeeee"><font size="2" face="Arial">)</font></td>
</tr>
<tr valign="top">
  <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>
  <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">
<td align="left"><font size="2" face="Arial"><b>Gross profit</b></font></td>
<td align="right">&nbsp;</td>
<td align="right"><font size="2" face="Arial"><b>37.4</b></font></td>
<td align="left">&nbsp;</td>
<td align="right">&nbsp;</td>
<td align="right"><font size="2" face="Arial"><b>35.7</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;<b>36.4</b></font></td>
<td align="left">&nbsp;</td>
<td align="right">&nbsp;</td>
<td align="right"><font size="2" face="Arial"><b>35.3</b></font></td>
<td align="left">&nbsp;</td>
</tr>
<tr valign="top">
<td></td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td></td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td></td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td></td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td></td>
</tr>
<tr valign="top">
<td align="left"><font size="2" face="Arial">Operating expenses:</font></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" bgcolor="#eeeeee"><font size="2" face="Arial">&nbsp;&nbsp;&nbsp;Selling, general and administrative</font></td>
<td align="right" bgcolor="#eeeeee">&nbsp;</td>
<td align="right" bgcolor="#eeeeee"><font size="2" face="Arial">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(11.0</font></td>
<td align="left" bgcolor="#eeeeee"><font size="2" face="Arial">)</font></td>
<td align="right" bgcolor="#eeeeee">&nbsp;</td>
<td align="right" bgcolor="#eeeeee"><font size="2" face="Arial">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(11.2</font></td>
<td align="left" bgcolor="#eeeeee"><font size="2" face="Arial">)</font></td>
<td align="right" bgcolor="#eeeeee">&nbsp;</td>
<td align="right" bgcolor="#eeeeee"><font size="2" face="Arial">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(11.2</font></td>
<td align="left" bgcolor="#eeeeee"><font size="2" face="Arial">)</font></td>
<td align="right" bgcolor="#eeeeee">&nbsp;</td>
<td align="right" bgcolor="#eeeeee"><font size="2" face="Arial">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(11.0</font></td>
<td align="left" bgcolor="#eeeeee"><font size="2" face="Arial">)</font></td>
</tr>
<tr valign="top">
<td align="left"><font size="2" face="Arial">&nbsp;&nbsp;&nbsp;Research and development</font></td>
<td align="right">&nbsp;</td>
<td align="right"><font size="2" face="Arial">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(17.7</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;&nbsp;&nbsp;&nbsp;&nbsp;(17.5</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;&nbsp;&nbsp;&nbsp;&nbsp;(17.8</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;&nbsp;&nbsp;&nbsp;&nbsp;(17.4</font></td>
<td align="left"><font size="2" face="Arial">)</font></td>
</tr>
<tr valign="top">
<td align="left" bgcolor="#eeeeee"><font size="2" face="Arial">&nbsp;&nbsp;&nbsp;Other income and expenses, net</font></td>
<td align="right" bgcolor="#eeeeee">&nbsp;</td>
<td align="right" bgcolor="#eeeeee"><font size="2" face="Arial">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;0.2</font></td>
<td align="left" bgcolor="#eeeeee">&nbsp;</td>
<td align="right" bgcolor="#eeeeee">&nbsp;</td>
<td align="right" bgcolor="#eeeeee"><font size="2" face="Arial">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;0.1</font></td>
<td align="left" bgcolor="#eeeeee">&nbsp;</td>
<td align="right" bgcolor="#eeeeee">&nbsp;</td>
<td align="right" bgcolor="#eeeeee"><font size="2" face="Arial">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(0.1</font></td>
<td align="left" bgcolor="#eeeeee"><font size="2" face="Arial">)</font></td>
<td align="right" bgcolor="#eeeeee">&nbsp;</td>
<td align="right" bgcolor="#eeeeee"><font size="2" face="Arial">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;0.5</font></td>
<td align="left" bgcolor="#eeeeee">&nbsp;</td>
</tr>
<tr valign="top">
<td align="left"><font size="2" face="Arial">&nbsp;&nbsp;&nbsp;Impairment, restructuring and other related closure costs</font></td>
<td align="right">&nbsp;</td>
<td align="right"><font size="2" face="Arial">(0.6</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">0.0</font></td>
<td align="left">&nbsp;</td>
<td align="right">&nbsp;</td>
<td align="right"><font size="2" face="Arial">(1.1</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">0.0</font></td>
<td align="left">&nbsp;</td>
</tr>
<tr valign="top">
<td align="left" bgcolor="#eeeeee"><font size="2" face="Arial">Total operating expenses</font></td>
<td align="right" bgcolor="#eeeeee">&nbsp;</td>
<td align="right" bgcolor="#eeeeee"><font size="2" face="Arial">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(29.1</font></td>
<td align="left" bgcolor="#eeeeee"><font size="2" face="Arial">)</font></td>
<td align="right" bgcolor="#eeeeee">&nbsp;</td>
<td align="right" bgcolor="#eeeeee"><font size="2" face="Arial">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(28.6</font></td>
<td align="left" bgcolor="#eeeeee"><font size="2" face="Arial">)</font></td>
<td align="right" bgcolor="#eeeeee">&nbsp;</td>
<td align="right" bgcolor="#eeeeee"><font size="2" face="Arial">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(30.2</font></td>
<td align="left" bgcolor="#eeeeee"><font size="2" face="Arial">)</font></td>
<td align="right" bgcolor="#eeeeee">&nbsp;</td>
<td align="right" bgcolor="#eeeeee"><font size="2" face="Arial">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(27.9</font></td>
<td align="left" bgcolor="#eeeeee"><font size="2" face="Arial">)</font></td>
</tr>
<tr valign="top">
  <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>
  <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">
<td align="left"><font size="2" face="Arial"><b>Operating income</b></font></td>
<td align="right">&nbsp;</td>
<td align="right"><font size="2" face="Arial">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<b>8.3</b></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;7.1</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;<b>6.2</b></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;7.4</b></font></td>
<td align="left">&nbsp;</td>
</tr>
<tr valign="top">
<td align="left" bgcolor="#eeeeee"><font size="2" face="Arial">Interest expense, net</font></td>
<td align="right" bgcolor="#eeeeee">&nbsp;</td>
<td align="right" bgcolor="#eeeeee"><font size="2" face="Arial">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(0.2</font></td>
<td align="left" bgcolor="#eeeeee"><font size="2" face="Arial">)</font></td>
<td align="right" bgcolor="#eeeeee">&nbsp;</td>
<td align="right" bgcolor="#eeeeee"><font size="2" face="Arial">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(0.9</font></td>
<td align="left" bgcolor="#eeeeee"><font size="2" face="Arial">)</font></td>
<td align="right" bgcolor="#eeeeee">&nbsp;</td>
<td align="right" bgcolor="#eeeeee"><font size="2" face="Arial">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(0.2</font></td>
<td align="left" bgcolor="#eeeeee"><font size="2" face="Arial">)</font></td>
<td align="right" bgcolor="#eeeeee">&nbsp;</td>
<td align="right" bgcolor="#eeeeee"><font size="2" face="Arial">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(1.0</font></td>
<td align="left" bgcolor="#eeeeee"><font size="2" face="Arial">)</font></td>
</tr>
<tr valign="top">
<td align="left"><font size="2" face="Arial">Equity in loss of joint venture</font></td>
<td align="right">&nbsp;</td>
<td align="right"><font size="2" face="Arial">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(0.0</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;&nbsp;&nbsp;&nbsp;&nbsp;(0.1</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;&nbsp;&nbsp;&nbsp;&nbsp;(0.0</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;&nbsp;&nbsp;&nbsp;&nbsp;0.0</font></td>
<td align="left">&nbsp;</td>
</tr>
<tr valign="top">
<td align="left" bgcolor="#eeeeee"><font size="2" face="Arial">Loss on extinguishment of convertible debt</font></td>
<td align="right" bgcolor="#eeeeee">&nbsp;</td>
<td align="right" bgcolor="#eeeeee"><font size="2" face="Arial">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(0.2</font></td>
<td align="left" bgcolor="#eeeeee"><font size="2" face="Arial">)</font></td>
<td align="right" bgcolor="#eeeeee">&nbsp;</td>
<td align="right" bgcolor="#eeeeee"><font size="2" face="Arial">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(0.4</font></td>
<td align="left" bgcolor="#eeeeee"><font size="2" face="Arial">)</font></td>
<td align="right" bgcolor="#eeeeee">&nbsp;</td>
<td align="right" bgcolor="#eeeeee"><font size="2" face="Arial">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(0.1</font></td>
<td align="left" bgcolor="#eeeeee"><font size="2" face="Arial">)</font></td>
<td align="right" bgcolor="#eeeeee">&nbsp;</td>
<td align="right" bgcolor="#eeeeee"><font size="2" face="Arial">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(0.5</font></td>
<td align="left" bgcolor="#eeeeee"><font size="2" face="Arial">)</font></td>
</tr>
<tr valign="top">
  <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>
  <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">
<td align="left"><font size="2" face="Arial"><b>Income before income taxes and minority interests</b></font></td>
<td align="right">&nbsp;</td>
<td align="right"><font size="2" face="Arial">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<b>7.9</b></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;5.7</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;<b>5.9</b></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;5.9</b></font></td>
<td align="left">&nbsp;</td>
</tr>
<tr valign="top">
<td align="left" bgcolor="#eeeeee"><font size="2" face="Arial">Income tax expense</font></td>
<td align="right" bgcolor="#eeeeee">&nbsp;</td>
<td align="right" bgcolor="#eeeeee"><font size="2" face="Arial">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(1.1</font></td>
<td align="left" bgcolor="#eeeeee"><font size="2" face="Arial">)</font></td>
<td align="right" bgcolor="#eeeeee">&nbsp;</td>
<td align="right" bgcolor="#eeeeee"><font size="2" face="Arial">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(1.0</font></td>
<td align="left" bgcolor="#eeeeee"><font size="2" face="Arial">)</font></td>
<td align="right" bgcolor="#eeeeee">&nbsp;</td>
<td align="right" bgcolor="#eeeeee"><font size="2" face="Arial">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(0.5</font></td>
<td align="left" bgcolor="#eeeeee"><font size="2" face="Arial">)</font></td>
<td align="right" bgcolor="#eeeeee">&nbsp;</td>
<td align="right" bgcolor="#eeeeee"><font size="2" face="Arial">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(1.1</font></td>
<td align="left" bgcolor="#eeeeee"><font size="2" face="Arial">)</font></td>
</tr>
<tr valign="top">
  <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>
  <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">
<td align="left"><font size="2" face="Arial"><b>Income before minority interests</b></font></td>
<td align="right">&nbsp;</td>
<td align="right"><font size="2" face="Arial">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<b>6.8</b></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;4.7</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;<b>5.4</b></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;4.8</b></font></td>
<td align="left">&nbsp;</td>
</tr>
<tr valign="top">
<td align="left" bgcolor="#eeeeee"><font size="2" face="Arial">Minority interests</font></td>
<td align="right" bgcolor="#eeeeee">&nbsp;</td>
<td align="right" bgcolor="#eeeeee"><font size="2" face="Arial">0.0</font></td>
<td align="left" bgcolor="#eeeeee">&nbsp;</td>
<td align="right" bgcolor="#eeeeee">&nbsp;</td>
<td align="right" bgcolor="#eeeeee"><font size="2" face="Arial">0.0</font></td>
<td align="left" bgcolor="#eeeeee">&nbsp;</td>
<td align="right" bgcolor="#eeeeee">&nbsp;</td>
<td align="right" bgcolor="#eeeeee"><font size="2" face="Arial">(0.1</font></td>
<td align="left" bgcolor="#eeeeee"><font size="2" face="Arial">)</font></td>
<td align="right" bgcolor="#eeeeee">&nbsp;</td>
<td align="right" bgcolor="#eeeeee"><font size="2" face="Arial">0.0</font></td>
<td align="left" bgcolor="#eeeeee">&nbsp;</td>
</tr>
<tr valign="top">
<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>
<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">
<td align="left" bgcolor="#eeeeee"><font size="2" face="Arial"><b>Net income</b></font></td>
<td align="right" bgcolor="#eeeeee">&nbsp;</td>
<td align="right" bgcolor="#eeeeee"><font size="2" face="Arial"><b>6.8</b></font></td>
<td align="left" bgcolor="#eeeeee"><font size="2" face="Arial"><b>%</b></font></td>
<td align="right" bgcolor="#eeeeee">&nbsp;</td>
<td align="right" bgcolor="#eeeeee"><font size="2" face="Arial"><b>4.7</b></font></td>
<td align="left" bgcolor="#eeeeee"><font size="2" face="Arial"><b>%</b></font></td>
<td align="right" bgcolor="#eeeeee">&nbsp;</td>
<td align="right" bgcolor="#eeeeee"><font size="2" face="Arial"><b>5.3</b></font></td>
<td align="left" bgcolor="#eeeeee"><font size="2" face="Arial"><b>%</b></font></td>
<td align="right" bgcolor="#eeeeee">&nbsp;</td>
<td align="right" bgcolor="#eeeeee"><font size="2" face="Arial"><b>4.8</b></font></td>
<td align="left" bgcolor="#eeeeee"><font size="2" face="Arial"><b>%</b></font></td>
</tr>
<tr valign="top">
<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>
<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>
<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>


<p align="left"><font size="2" face="Arial"><b>Second Quarter 2004 vs. Second Quarter 2003</b></font></p>
<div style="text-indent:3%">
<p align="left"><font size="2" face="Arial">In the second quarter of 2004, our
    net revenues increased  27.6% from the second quarter of 2003, and
    7.0%  compared to the first quarter of 2004.</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
      sales increased by 27.5% from $1,702 million in the second quarter of 2003
      to $2,171 million in the second quarter of 2004, and increased sequentially
      by 7.0% from $2,029 million in the first quarter of 2004. On a year-over-year
      basis, the increase in our net sales in the second quarter of 2004 was
      primarily due to higher sales volumes and a more favorable product mix
    while our average selling prices declined by approximately 6% due to the
    continuing
      pricing pressure. Other revenues amounted to $1 million in the second
    quarter of 2004. Net revenues increased 27.6%, from $1,702 million
      in the second quarter of 2003 to $2,172 million in the second quarter of
      2004. The increases in Memory Products Group and Discrete and Standard
      ICs Group were significantly above the Company's average; the Consumer
    and Microcontroller Groups increased at a rate close to the Company's average,
    while the Telecommunications, Peripherals and Automotive Groups registered
    a more moderate increase.</font></p>
</div>
<div style="text-indent:3%">
<p align="left"><font size="2" face="Arial">The Telecommunications, Peripherals
    and Automotive Groups&#8217; net revenues increased by
    7.4% compared to the second quarter of 2003, primarily as a result of an
    increase in volume and of a more favorable product mix, offset by continuing
    price pressures. Revenues increased mainly in the Automotive and Audio groups
    while sales in Computer Peripherals and Telecommunications groups increased
    slightly. The Discrete and Standard ICs Group&#8217;s net revenues increased
    by 39.8% as a result of higher volumes in all major product families and
    an improved product mix. The Memory Products Group&#8217;s net revenues increased
    by 77.7% as a result of a significant volume increase and a more favorable
    product mix, particularly
in Flash and Smart card. Second quarter 2004 Smart card revenues also benefited
    from the acquisitions of Incard and Proton, which contributed $30 million
    in
    sales.
    The Consumer
    and Microcontroller
    Groups&#8217; net revenues increased 23.3%, mainly due to a strong increase
    in sales volumes in digital consumer products, particularly in our Set-Top
    Box and Imaging Divisions, the latter led by demand for cameras used in cellular
    phones. All product groups experienced declines in selling prices, both in
    standard products
    and differentiated
    products.
</font></p>
</div>
<div style="text-indent:3%">
<p align="left"><font size="2" face="Arial">On a
      sequential basis, Discrete and Standard ICs Group and Memory Products Group
    posted revenue increases of 17.5% and 12.8%, respectively, while Consumer
    and Microcontroller Groups revenues increased by 5.7%, and Telecommunications,
    Peripherals and Automotive Groups revenues were basically flat compared to
    the first quarter of 2004. </font></p>
</div>
<div style="text-indent:3%">
<p align="left"><font size="2" face="Arial">In
      the second quarter of 2004, we maintained our focus on differentiated ICs,
      which accounted for the largest share, equivalent to approximately 64%
      of our net revenues, decreasing however from the share of approximately
      69% recorded in the second quarter of 2003. This decrease in share is mainly
      due to the relatively lower contributions of Telecommunications, Peripherals
    and Automotive Groups and Consumer and Microcontroller Groups. Differentiated
    ICs
          foster close relationships with customers,
          resulting
          in early knowledge
      of their evolving requirements and opportunities to access their markets
      for other products. Our Memories and Micro products and our Discrete products
      increased significantly as a percentage of net revenues in the second quarter
      of
      2004  compared to the second quarter of 2003, reflecting the strong
      increase in revenues of the Memory Products Group, in particular Flash
      memory, and of Discrete and Standard ICs Group. Memories and Micro products
          represented   15.7% of net revenues in the second quarter of 2004 compared
          to 12.1% one
          year ago,
          and
          Discrete
      products reached 14.9% of our net revenues compared to 13.0% last year
          second quarter. Analog ICs (including mixed-signal ICs), the majority
          of which are also differentiated
      ICs, accounted for approximately 42.6% of our net revenues in the second
      quarter of 2004, compared to 50.1% of net revenues in the second quarter
      of 2003. Historically, these families of products, particularly 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; we registered important price declines in these product
      families during the latest quarters.
</font></p>
</div>
<div style="text-indent:3%">
<p align="left"><font size="2" face="Arial">In the
      second quarter of 2004, the largest share of our revenues continued to
      come from customers whose region of origin is Europe. The largest
     revenue increases, however, were from customers in Asia/Pacific
      and Emerging Markets, reflecting a strong increase in market demand in
    these regions. </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>


<div style="text-indent:3%">
<p align="left"><font size="2" face="Arial">By location
      of order shipment, the largest revenues increases in the second quarter
      of 2004 compared to the second quarter of 2003 came from Emerging Markets,
      America and Asia/Pacific, attributable to the higher rates of growth
    of local economies and the delocalization of production activities to new
    developing
    countries.</font></p>
</div>
<div style="text-indent:3%">
<p align="left"><font size="2" face="Arial">In the
      second quarter of 2004, we had several large customers, with the largest
      one, the Nokia group of companies, accounting for approximately 15% of
      our revenues, down from approximately 18% in the second quarter of 2003.
    Our top ten original equipment manufacturer
      customers accounted for approximately 43% of our net revenues for the second
      quarter 2004 compared to approximately 47% in the same period in 2003.</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 improved by 33.8%, from $607 million in the second quarter
      of 2003 to $812 million in the second quarter of 2004. As a percentage
      of net revenues, gross profit improved from 35.7% in the second quarter
      of 2003 to 37.4% in the second quarter of 2004. This margin improvement
      was mainly due to the strong increase in our net revenue volumes and overall
      improved manufacturing performances, partially offset by the average selling
      price declines and the negative impact of the weakening U.S. dollar exchange
      rate. The impact of changes in foreign exchange rates on gross profit in
      the second quarter of 2004 compared to the second quarter of 2003 was estimated
      to be negative since the negative currency impact on cost of sales generated
      by the weaker U.S. dollar versus the euro and other currencies was greater
      than the favorable impact on net revenues. See &#8220;&#150;Impact of Changes in Exchange Rates&#8221;.</font></p>
</div>
<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 25.1% from $191 million in
      the second quarter of 2003 to $239 million in the second quarter of 2004.
      This increase was largely due to the enhanced spending in marketing activities
      associated with new initiatives to broaden our customer base and
      to the depreciation of the U.S. dollar. As a percentage of net revenues,
      selling, general and administrative expenses decreased slightly from 11.2%
      in the second quarter of 2003 to 11.0% in the second 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 28.9%, from $298 million in the second
      quarter of 2003 to $384 million in the second quarter of 2004. This increase
      resulted primarily from increased spending in product design and technology
      for our core activities, the impact of acquisitions and from the effect
    of the U.S. dollar depreciation. We continued to invest heavily in research
    and
    development
      during the second quarter of 2004, and we have increased our research
    and development staff by approximately 1,400 people during the last twelve
    months.
    We continued
      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 or process-transfer costs, which
      are accounted for as cost of sales. As a percentage of net revenues, research
      and development expenses increased slightly from 17.5% in the second quarter
      of 2003 to 17.7% in the second 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, 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 and the costs
    of certain activities relating to intellectual property and gains or losses
    from sales of assets. In the second quarter of 2004, the net effect of these
    items resulted in income of $2 million compared to $3 million in the second
    quarter of 2003. The main items recorded in the second quarter of 2004 were
    $13 million in income from research and development funding and $8 million
    of exchange gains, offset by expenses of $9 million for start-up costs, related
    mainly to our 150mm fab in Singapore, to our 200mm fab in Agrate (Italy)
    and to our 300mm fab in Catania (Italy) and $8 million for patent claim 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 second quarter of 2004, we recorded a $12 million charge for impairment,
      restructuring charges and other related closure costs, of which $9 million
      related to our 150mm restructuring plan mainly associated with the closure
      of our Rennes (France) plant, $2 million to back-end restructuring, and
      $1 million related to personnel reduction.</font></p>
</div>
<div style="text-indent:3%">
<p align="left"><font size="2" face="Arial"><i>Operating income</i>.&nbsp;&nbsp;&nbsp;&nbsp;Operating
    income increased from $121 million in the second quarter of 2003 to $179
    million in the second quarter of 2004. This increase in operating income
    was primarily due to the increased volume of sales and improved manufacturing
    performance, which more than offset a slight increase in total operating
    expenses as a percentage of net revenues while total operating expenses slightly
    increased as a percentage of net revenues. The impact
    of changes
    in
    foreign exchange
    rates
    on
    operating
    income in the second quarter of 2004 compared to the second quarter of 2003
    was estimated to be unfavorable because the depreciation of the U.S. dollar
    versus the euro and other currencies negatively impacted cost of sales and
    operating expenses, and the currency impacts on these costs were higher than
    the
favorable impact on net sales. See &#8220;&#8212;Impact of Changes in Exchange
Rates&#8221;.</font></p>
</div>
<p align="center"><font face="Arial" size="2">13</font></p>
<hr noshade align="center" width="100%" size="2">
<div style="page-break-before:always"></div>
<page>


<div style="text-indent:3%">
<p align="left"><font size="2" face="Arial">Compared to the second quarter 2003,
    the operating income of our product groups improved for all the groups except
    for the Telecommunications, Peripherals and Automotive Groups in the second quarter 2004. Operating
    income for the Discrete and Standard ICs Group increased to $92 million in
    the second quarter of 2004 from $24 million in the second quarter of 2003,
    equivalent to an operating margin of 22.0% in the second quarter 2004
    compared to 8.0% in the prior year. This significant increase in Discrete
    and Standard
    ICs
    Group operating income was due to a strong rebound in sales and
    more favorable product mix as well as to an improvement in manufacturing
    performance. Memory Products Group operating income was $39 million in the
    second quarter
    of
    2004 significantly improving from an operating loss of $13 million in the
    second quarter of 2003. This improvement in operating income was due to a
    significant increase in sales and  improved product mix. The operating income
    of our Consumer and Microcontroller Groups was $22 million
    in the second
    quarter 2004, increasing from $8 million in the second quarter 2003, resulting
    from the increase in sales. Telecommunications, Peripherals and Automotive
    Groups
    operating income decreased from $134 million in the second quarter
    2003 to $109 million in the second quarter 2004. The deterioration of the
    operating result in Telecommunications, Peripherals and Automotive Groups
    was mainly due to the decline in selling prices caused by competitive market
    conditions and to the
higher level of operating expenses related to higher R&amp;D expenditures, as
well as to the impact of the decline in the value of the U.S. dollar. </font></p>
</div>
<div style="text-indent:3%">
<p align="left"><font size="2" face="Arial"><i>Interest expense, net</i>.&nbsp;&nbsp;&nbsp;&nbsp;Our
      interest expense, net, decreased from a charge of $16 million in the second
      quarter of 2003 to a charge of $3 million in the second quarter of 2004.
      This improvement was mainly due to the decrease in interest expense resulting
      from the repurchases completed in 2003 and 2004 of our 2010 Bonds. Our
      interest income on our available cash was $10 million in the second quarter
      of 2004 compared to $9 million in the second quarter of 2003. Interest
      expense, which is mainly related to long-term debt consisting mainly of
    outstanding convertible bonds issued at fixed rates, decreased to $13 million
    in the
    second quarter
      of 2004 from $25 million in the second quarter of 2003 due to the repurchase
      of our 2010 Bonds during the second quarter 2004. We redeemed all remaining
      outstanding 2010 Bonds on July&nbsp;9, 2004. See &#8220;Overview&#8212;Other
Developments&#8221;.</font></p>
</div>
<div style="text-indent:3%"><p align="left"><font size="2" face="Arial"><i>Equity in loss of joint venture.</i>&nbsp;&nbsp;&nbsp;&nbsp;No loss was registered in the second quarter of 2004, while we incurred a net loss of $1 million in the second quarter of 2003 on our investment in SuperH, Inc., the joint venture we formed with Hitachi, Ltd. in 2001.</font></p></div>
<div style="text-indent:3%">
<p align="left"><font size="2" face="Arial"><i>Loss on extinguishment of convertible
      debt.</i>&nbsp;&nbsp;&nbsp;&nbsp;During
      the second quarter of 2004, we registered a non-operating pre-tax charge
      of $4 million related to the repurchase of approximately $307 million aggregate
      principal
      amount at maturity of our 2010 Bonds, see &#8220;Overview&#8212;Other
      Developments&#8221;. As of June 26, 2004, we had repurchased 92.28% of
      the total amount of 2010 Bonds originally issued. This $4 million charge
      included the $3 million price paid in excess of the bonds&#8217; accreted
      value and the $1 million write-off of the related capitalized offering
      expenses. In the second quarter of 2003, we registered a non-operating
      pre-tax charge of $6 million related to the repurchase of approximately
      $214 million
      of the aggregate principal amount at maturity of our 2010 Bonds. </font></p>
</div>
<div style="text-indent:3%"><p align="left"><font size="2" face="Arial"><i>Income tax expense.</i>&nbsp;&nbsp;&nbsp;&nbsp;Income tax expense was $18 million in the second quarter of 2003 and $23 million in the second quarter of 2004. The increase in income tax expense was due to the increase in income before income tax and minority interests in the second quarter of 2004. The effective tax rate was 13.4% in the second quarter of 2004, compared to 18.0% in the second 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, 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>    For the second quarter of 2004, we had net income of $148 million, compared to net income of $80 million for the second quarter of 2003 and $77 million for the first quarter of 2004. Basic and diluted earnings per share for the second quarter of 2004 were $0.17 and $0.16, respectively, compared to basic and diluted earnings of $0.09 per share for the second quarter of 2003 and basic and diluted earnings of $0.09 and $0.08, respectively, per share for the first quarter of 2004.</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>


<p align="left"><font size="2" face="Arial"><b>First Half of 2004 vs. First Half of 2003</b></font></p>
<div style="text-indent:3%">
<p align="left"><font size="2" face="Arial">During the first half of 2004, according
    to preliminary estimates of industry data, the semiconductor industry experienced
    an increase in revenues of approximately 35% for the TAM and of approximately
    32% for the SAM, compared to the first half of 2003. During the first half
    of
    2004,
    our
    net revenues registered a 26.5% increase compared to the first half 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
      sales increased by 26.5%, from $3,319 million in the first half of 2003
      to $4,199 million in the first half of 2004. On a year-over-year basis,
      the increase in our net sales in the first half of 2004 was primarily due
      to our sales volumes, while our average selling prices declined by approximately
      6% due to continuing pricing pressures. Other revenues amounting to $2
      million remained constant at the same level as last year. On a year-over-year
      basis, net revenues increased by 26.5%, from $3,321 million in the first
      half of 2003 to $4,201 million in the first half of 2004. The greatest
      contributors to the revenues increase were Memories and Discrete Products,
    while Differentiated and Standard Products were below our Company-wide average.
    In terms of
      market segments, the greatest year-over-year improvements in revenues came
    from Consumer, Industrial, Automotive and Telecommunications while Computer
    registered
    a
    solid increase.
</font></p>
</div>
<div style="text-indent:3%">
<p align="left"><font size="2" face="Arial">The Telecommunications, Peripherals
    and Automotive Groups&#8217; net
      revenues increased by 7.2% in the first half of 2004 compared to the first
      half of 2003, primarily as a result of an increase in volume and a more
      favorable product mix. Automotive and Audio group was the major contributor,
    while Telecommunications group was marginally up. The Discrete
    and Standard
    ICs Group&#8217;s
      net revenues increased by 35.5% due to higher volumes and improved
      product mix in all product families including Transistors, Discrete and
      Standard Commodities. The Memory Products Group&#8217;s net revenues increased
      by 75.1% as a result of a strong volume increase and  improved
      product mix registered in all major product families; in particular, Flash
      memory revenues
      increased by approximately 84% compared to the first half of 2003. In the
      first half of 2004, Memory Products Group also benefited from a contribution
      of $56 million of revenues as a result of the acquisitions of Incard and
      Proton.
      The Consumer
      and
      Microcontroller Groups&#8217; net revenues increased 26.0%, mainly due
      to a strong increase in sales volumes in most of its business units: Set-Top
      Box, Imaging, Display and TV and Microcontrollers, while the DVD business
      unit registered a decrease in sales. All product groups experienced declines
      in selling prices.</font></p>
</div>
<div style="text-indent:3%">
<p align="left"><font size="2" face="Arial">During
      the first half of 2004, we maintained our focus on differentiated ICs,
      which accounted for approximately 66% of our net revenues, compared to
      approximately 70% in the first half of 2003. The decrease in share is mainly
      due to the lower revenue increase performances of the Telecommunications,
    Peripherals and Automotive and Consumer and Microcontroller Groups. Our Memories
    and Micro products and our Discrete products increased their share of our
    net revenues
    significantly
    in the first
    half
    of 2004 when
      compared to the first half of 2003, reflecting the strong increase in revenues
      of the Memory Products Group, in particular Flash memory, and of the Discrete
    and Standard ICs Group.
      Memories and Micro products share accounted for 15.0% of net revenues in
    the first half of 2004 compared to 12.2% one year ago, and Discrete products
    reached
      14.2% of net revenues compared to 12.7% in the previous year. Analog ICs
    (including mixed-signal ICs), the majority of which are also differentiated
    ICs, accounted
      for 43.8% of our net revenues in the first half of 2004, compared to 51.3%
      in the first half of 2003.</font></p>
</div>
<div style="text-indent:3%">
<p align="left"><font size="2" face="Arial">In the
      first half of 2004, the largest share of our revenues continued to come
      from customers whose region of origin is Europe. In terms of revenues
      increase, however, the largest contributors were customers in Asia/Pacific
    and Emerging Markets, reflecting a strong increase in market demand in these
    regions. </font></p>
</div>
<div style="text-indent:3%">
<p align="left"><font size="2" face="Arial">By location
      of order shipment, the largest revenues increases in the first half of 2004
    compared to the first half of 2003 came from Emerging Markets, America
    and Asia/Pacific,
      reflecting the higher growth rates of local economies and the
    delocalization of production activities to new developing countries.</font></p>
</div>
<div style="text-indent:3%"><p align="left"><font size="2" face="Arial">During
      the first half of 2004, we had several large customers, with the largest
      one, the Nokia group of companies, accounting for approximately 15% of
      our revenues, decreasing from approximately 18% in the first half of 2003.
      Our top ten original equipment manufacturer customers accounted for approximately
      43% of our net revenues during the first half of 2004 compared to approximately
      47% in the first half of 2003.</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>


<div style="text-indent:3%">
<p align="left"><font size="2" face="Arial"><i>Gross profit</i>.&nbsp;&nbsp;&nbsp;&nbsp;Our
    gross profit increased by 30.4% in the first half of 2004, from $1,174 million
    in the first half of 2003 to $1,530 million in the first half of 2004. As
    a percentage of net revenues, gross margin increased from 35.3% in the first
    half of 2003 to 36.4% in the first half of 2004. This margin increase was
    mainly due to higher sales volumes and  improved manufacturing performance
    that more than compensated for the decline in average selling prices and
    the negative impact of the decline in the value of the U.S. dollar.
    The impact of changes in foreign exchange rates on gross profit in the first
    half of
    2004
    compared
    to the first half of 2003 was estimated to be negative, since the negative
    currency impact on cost of sales generated by the weaker U.S. dollar versus
    the euro and other currencies was greater than the favorable impact on net
    revenues. See &#8220;&#8212;Impact of Changes in Exchange Rates&#8221;.
</font></p>
</div>
<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 28.4% from $366 million in
      the first half of 2003 to $469 million in the first half of 2004. This
      increase was largely due to the enhanced spending in marketing activities
      associated with new initiatives to expand our customer base and to the
      decline in the value of the U.S. dollar. As a percentage of net revenues,
      selling, general and
      administrative
      expenses
      increased
      slightly from 11.0% in the first half of 2003 to 11.2% in the first half
      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 28.6%, from $581 million in the first
    half of 2003 to $747 million in the first half of 2004. This increase resulted
    primarily from greater spending on product design and technology for our
    core activities, as a result of acquisitions and from the impact of the decline
    in value of the U.S. dollar. We continued to invest heavily
    in research and development
    during the second quarter of 2004, and we increased our research and development
    staff by approximately 1,400 people during the last twelve months. We continued
    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 or process-transfer costs, which are
    accounted for as cost of sales. As a percentage of net revenues, research
    and development expenses increased from 17.4% in the first half of 2003 to
    17.8% in the first half 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, 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 and the costs
    of certain activities relating to intellectual property and gains and losses
    from sales of assets. In the first half of 2004, the net effect of these
    items resulted in expense of $10 million compared to an income of $18 million
    in the first half of 2003. The main items recorded in the first half of 2004
    were $28 million in income from research and development funding, $9 million
    of foreign exchange transaction gains and $6 million of gains on sales of
    non-current assets; offset by expenses of $32 million for start-up costs
    mainly for our 300mm fabrication facilities in Crolles (France) and Catania
    (Italy) as well as for our new 150mm plant in Singapore, $14 million for
    patent claim
    costs
    and $7 million for other non-recurring miscellaneous expenses.
</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 half of 2004, we recorded $45 million in impairment, restructuring
      charges and other related closure costs, while in the
      first
      half
      of 2003
      we did
      not record any expense. The main items included in this year&#8217;s costs
      relate to our 150mm  restructuring plan announced in October 2003.
</font></p>
</div>
<div style="text-indent:3%">
<p align="left"><font size="2" face="Arial"><i>Operating income</i>.&nbsp;&nbsp;&nbsp;&nbsp;Operating
      income increased from $245 million in the first half of 2003 to $259 million
      in the first half of 2004, primarily as a result of the significant increase
      in our net revenues and our improved gross margin. First half  2004 operating
    income included a charge of $45 million related to impairment, restructuring
    charges and other
      related closure costs. The impact of changes in foreign exchange rates
      on operating income in the first half of 2004 compared to the first half
      of 2003 was estimated to be negative because the decline in the value of
    the U.S. dollar versus the euro and other currencies negatively impacted
    cost
      of sales and operating expenses, and the currency impact on these costs
      was higher than
the favorable impact on net sales. See &#8220;&#8212;Impact of Changes in Exchange
Rates&#8221;.
</font></p>
</div>
<div style="text-indent:3%">
<p align="left"><font size="2" face="Arial">In the first half of 2004, the operating
    income of our product groups, with the exception of Telecommmunications,
    Peripherals and Automotive Groups, improved compared to the first half of
    2003. Operating income in our Discrete and
    Standard
    ICs
    Group
    significantly
    increased
    from $47 million in the first half of 2003 to $143 million in the
    first half of 2004, and as a percentage of sales from 8.2% to 18.5%, mainly
    due to the higher level of revenues and improvement in manufacturing performance.
    Our Memory Product Group&#8217;s operating results also improved significantly
    from a $39 million loss registered in the first half of 2003 to $44 million
    in operating income in the first half of 2004, resulting from a strong increase
    in revenues, improved manufacturing performance and an improved product
    mix.
    Our Consumer
    and Microcontroller Groups&#8217; operating income was $40 million in the
    first half of 2004, increasing from $20 million in the first half of 2003,
    as a result of increased sales. Our Telecommunications, Peripherals and Automotive
    Groups&#8217; operating income decreased from $273 million in the first half
    of 2003 to $223 million in the first half of 2004. This decline was mainly
    due to lower selling prices and a higher level of operating expenses caused
    by increased
    spending in research and development,
    as well as by the negative impact of the decline in the value of the U.S.
    dollar.</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>
<div style="text-indent:3%">
  <p align="left"><font size="2" face="Arial"><i>Interest expense, net</i>.&nbsp;&nbsp;&nbsp;&nbsp;Our
      interest expense, net, decreased from a charge of $33 million in the first
      half of 2003 to a charge of $7 million in the first half of 2004. This
      improvement was mainly due to the decrease in interest expense, resulting
      from the repurchases done in 2003 and 2004 of our 2010 Bonds. Interest
      expense, which is mainly related to our long-term debt, consisting primarily
      of outstanding convertible bonds issued at fixed rates, decreased to $28
      million in the first half of 2004 from $52 million in the first half
      of 2003 due to the repurchases of our 2010 Bonds done in 2003 and
      2004. We redeemed all remaining outstanding 2010 Bonds on July&nbsp;9,
      2004. See &#8220;Overview&#8212;Other Developments&#8221;.</font></p>
</div>
<div style="text-indent:3%">
  <p align="left"><font size="2" face="Arial"><i>Equity in loss of joint venture</i>.&nbsp;&nbsp;&nbsp;&nbsp;No
      loss was registered in the first half of 2004 while we incurred, in the
      first half of 2003, a net loss of $1 million on our investment in SuperH,
      Inc., the joint venture we formed with Hitachi, Ltd. in 2001.</font></p>
</div>
<div style="text-indent:3%">
  <p align="left"><font size="2" face="Arial"><i>Loss on extinguishment of convertible
        debt</i>.&nbsp;&nbsp;&nbsp;&nbsp;In the first half of 2004, we registered
        a non-operating pre-tax charge of $4 million related to the repurchase
        of approximately $307 million of the aggregate principal amount at maturity
        of our 2010 Bonds. This charge included the $3 million price paid in
        excess of the bonds&#8217; accreted value and the $1 million write-off
        of the related capitalized offering expenses. In the first half of
        2003, we registered a non-operating pre-tax charge of $15 million related
        to the repurchase of approximately $643 million of the aggregate principal
        amount at maturity of our 2010 Bonds. </font></p>
</div>
<div style="text-indent:3%">
  <p align="left"><font size="2" face="Arial"><i>Income tax expense</i>.&nbsp;&nbsp;&nbsp;&nbsp;Income
      tax expense amounted to $22 million in the first half of 2004, compared
      to $35 million in the first half of 2003. In the first half of 2004, we
      registered a tax benefit of $13 million as a result of a reversal of the
      previous year's accruals in one of our jurisdictions. The effective tax
      rate was 8.8% in the first half of 2004, compared to 18.0% in the first
      half of 2003. Excluding the benefit of the reversal, the effective tax
      rate would have been 13.9%. 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, 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;In
      the first half of 2004, our net income was $225 million, a 41.7% increase
      compared to net income of $159 million reported in the first half of 2003.
      Basic and diluted earnings per share for the first half of 2004 were $0.25
      and $0.24, respectively, compared to basic and diluted earnings of $0.18
      per share for the first half 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, 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">As a market rule, the reference
      currency for the semiconductor industry is the U.S. dollar, and product
      prices are mainly denominated in U.S. dollars. However, 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 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">17</font></p>
<hr noshade align="center" width="100%" size="2">
<div style="page-break-before:always"></div>
<page>
<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 currency 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
      the first half of 2004, the U.S. dollar has declined in value, particularly
      against the euro when compared to the first half of 2003, causing us to
      report higher cost of sales and operating expenses thus negatively impacting
      both our gross margin and our operating income. Our Unaudited Interim Statement
      of Income for the first half of 2004 includes income and expense items
      translated at the average rate for the period. The average rate of the
      euro to the U.S. dollar was respectively &euro;1.00 for $1.10 in the first
      half of 2003 and &euro;1.00 for $1.23 in the first half of 2004. The average
      rate of the euro to the U.S. dollar was &euro;1.00 for $1.20 in the second
      quarter of 2004. 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, purchases and services
      from our suppliers 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 at any time capable of reaching a
      complete balance, and, consequently, our results 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 risks 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. </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&#8217; equity,
      and are shown as &#8220;accumulated other comprehensive income (loss)&#8221; in
      the consolidated statements of changes in shareholders&#8217; equity. At
      June 26, 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 &#8220;Item 3. Key Information&#8212;Risk Factors&#8212;Our financial results
      can be adversely affected by fluctuations in exchange rates, principally
      in
      the
      value of
      the U.S.
      dollar&#8221; as set forth in our Form 20-F.</font></p>
</div>
<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 of receivables and payables accounts 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 &#8220;A-&#8221; or higher. Marginal
      amounts are held in other currencies. Foreign currency operations and hedging
      transactions are performed only to cover commercial positions. See &#8220;Item 11. Quantitative
      and Qualitative Disclosures about Market Risk&#8221; in our Form 20-F.</font></p>
</div>
<div style="text-indent:3%">
  <p align="left"><font size="2" face="Arial">At June 26, 2004, cash and cash
      equivalents totaled $1,656 million, compared to $2,998 million at December
      31, 2003, and marketable securities totaled $1,030 million at June 26,
      2004, compared to $0 million at December 31, 2003. In the first half of
      2004, we invested $1,030 million of existing cash in credit-linked deposits
      or similar instruments issued by several primary banks to maximize the
      return on available cash. These credit-linked instruments have returns
      that depend on credit events of certain underlying debt instruments (&#8220;reference
      debt&#8221;) that have been issued by different banks with a minimum rating
      of &#8220;BBB+&#8221;  and include a derivative instrument related to the
      underlying credit default swap of the credit-linked deposits. The Company
      has determined that this derivative element has no material impact on the
      interim financial statements as of June 26, 2004. 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 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, in which case repayment of principal would be reduced based
      on the decline in value of the defaulted debt.</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>
<div style="text-indent:3%">
  <p align="left"><font size="2" face="Arial"><b><i>Liquidity </i></b></font></p>
</div>
<div style="text-indent:3%">
  <p align="left"><font size="2" face="Arial"><i>Net cash from operating activities</i>.&nbsp;&nbsp;&nbsp;&nbsp;The
      major source of cash during the first half of 2004 and in prior periods
      was cash provided by operating activities. Our net cash from operating
      activities totaled $1,061 million in the first half of 2004, compared to
      $776 million in the first half of 2003.</font></p>
</div>
<div style="text-indent:3%">
  <p align="left"><font size="2" face="Arial">Net cash from net income, adjusted
      for non-cash items, was $1,117 million in the first half of 2004, an increase
      of approximately 15% from $972 million in the first half of 2003, mainly
      due to the increase in net income, in depreciation and amortization, and
      in impairment, restructuring charges and other related closure costs net
      of cash payments in the first half of 2004.</font></p>
</div>
<div style="text-indent:3%">
  <p align="left"><font size="2" face="Arial">Changes in our assets and liabilities
      resulted in net cash used of $56 million in the first half of 2004, compared
      to net cash used of $196 million in the first half of 2003. In the first
      half of 2004, due to the increase in our revenues, the increase in our
      trade accounts receivable used net cash of $201 million, while it used
      net cash of $78 million in the first half of 2003. Our lower levels of
      inventory generated net cash of $12 million in the first half of 2004,
      while in the first half of 2003 inventory used net cash of $115 million.
      Finally, our trade payables and other assets and liabilities generated
      $133 million in cash in the first half of 2004, compared to $3 million
      used in the first half of 2003, mainly due to the increase of our trade
      payables. </font></p>
</div>
<div style="text-indent:3%">
  <p align="left"><font size="2" face="Arial"><i>Net cash used in investing activities</i>.&nbsp;&nbsp;&nbsp;&nbsp;Net
      cash used in investing activities was $1,972 million in the first half
      of 2004, compared to $1,822 million in the first half 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 half of 2004 and $1,100 million in the first half of 2003. Excluding
      marketable securities, cash used in investing activities was $942 million
      in the first half of 2004, approximately 30% higher than the $722 million
      cash used in investing activities in the first half of 2003. Payment for
      the purchase of tangible assets was $908 million for the first half of
      2004, an increase from $554 million in the first half of 2003. In the first
      half of 2004, cash used for investments in intangible and financial assets
      and payments for acquisitions was $34 million compared to $168 million
      in the first half of 2003, of which $139 million was spent for the acquisitions
      of Proton, Incard and Tioga.</font></p>
</div>
<div style="text-indent:3%">
  <p align="left"><font size="2" face="Arial"><i>Net operating cash flow</i>.&nbsp;&nbsp;&nbsp;&nbsp;We
      define net operating cash flow as net cash from operating activities minus
      net cash used in investing activities excluding payment for purchases 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 Flow. </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><font size="1"><b><br>
            <font face="Arial">Six Months Ended</font></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 align="center"><font size="1" face="Arial"><b>June 26, 2004</b></font></td>
    <td align="left"><font size="1">&nbsp;</font></td>
    <td align="right"><font size="1">&nbsp;</font></td>
    <td align="center"><font size="1" face="Arial"><b>June 28, 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><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 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 align="left" width="2%">&nbsp;</td>
    <td width="1%" align="right">&nbsp;</td>
    <td width="7%" align="right"><font size="2" face="Arial">1,061</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">776</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 align="right"><font size="2" face="Arial">(1,972</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">(1,822</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 marketable
        securities</font></td>
    <td align="left">&nbsp;</td>
    <td align="right">&nbsp;</td>
    <td align="right"><font size="2" face="Arial">1,030</font></td>
    <td align="left">&nbsp;</td>
    <td align="right">&nbsp;</td>
    <td align="right"><font size="2" face="Arial">1,100</font></td>
    <td align="left">&nbsp;</td>
  </tr>
  <tr valign="top">
    <td align="left"><font size="2" face="Arial"><b>&nbsp;&nbsp;&nbsp;Net operating
          cash flow</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>119</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>54</b></font></td>
    <td align="left">&nbsp;</td>
  </tr>
</table>
<div style="text-indent:3%">
  <p align="left"><font size="2" face="Arial">We generated a net operating cash
      flow of $119 million in the first half of 2004, compared to a net operating
      cash flow of $54 million in the first half of 2003. This improvement resulted
      mainly from the increase in net cash from operating activities. </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>
<div style="text-indent:3%">
  <p align="left"><font size="2" face="Arial"><i>Net cash used in financing activities</i>.&nbsp;&nbsp;&nbsp;&nbsp;Net
      cash used in financing activities was $428 million in the first half of
      2004 and $632 million in the first half of 2003. During the first half
      of 2004, the cash used for the repayment of long-term debt was $300 million.
      In the second quarter of 2004, we repurchased approximately $307 million
      aggregate principal amount at maturity of our 2010 Bonds for a total
      cash amount of approximately $244 million. These Bonds have been cancelled
      and were equivalent to 2,859,851 shares. We redeemed the remaining amount
      of outstanding 2010 Bonds on July&nbsp;9, 2004. See &#8220;Overview&#8212;Other
      Developments&#8221;. The dividend amount of $107 million was paid in the
      second quarter 2004.</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>.&nbsp;&nbsp;&nbsp;&nbsp;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. The net financial position is determined
      as follows from our Audited Consolidated Balance Sheet as at December 31,
      2003 and our Unaudited Interim Consolidated Balance Sheet as at June 26,
      2004, without adjustment to the U.S. GAAP amounts presented:</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>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 align="center"><font size="1" face="Arial"><b>June 26, 2004</b></font></td>
    <td align="left"><font size="1">&nbsp;</font></td>
    <td align="right"><font size="1">&nbsp;</font></td>
    <td align="center"><font size="1" face="Arial"><b>Dec. 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><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 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 align="center"><font size="1" face="Arial"><b>(unaudited)</b></font></td>
    <td align="left"><font size="1">&nbsp;</font></td>
    <td align="right"><font size="1">&nbsp;</font></td>
    <td align="center"><font size="1" face="Arial"><b>(audited)</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" bgcolor="#eeeeee"><font size="2" face="Arial">Cash and cash
        equivalents</font></td>
    <td align="left" width="2%">&nbsp;</td>
    <td width="1%" align="right"><font size="2" face="Arial">$</font></td>
    <td width="7%" align="right"><font size="2" face="Arial"> 1,656</font></td>
    <td width="2%" align="left">&nbsp;</td>
    <td width="1%" align="right"><font size="2" face="Arial">$</font></td>
    <td width="7%" 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 align="right"><font size="2" face="Arial">1,030</font></td>
    <td align="left">&nbsp;</td>
    <td align="right">&nbsp;</td>
    <td align="right"><font size="2" face="Arial">0</font></td>
    <td align="left">&nbsp;</td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td align="left"><font size="2" face="Arial">&nbsp;&nbsp;&nbsp;Total cash
        position</font></td>
    <td align="left">&nbsp;</td>
    <td align="right">&nbsp;</td>
    <td align="right"><font size="2" face="Arial">2,686</font></td>
    <td align="left">&nbsp;</td>
    <td align="right">&nbsp;</td>
    <td align="right"><font size="2" face="Arial">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 align="right"><font size="2" face="Arial"> (8</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">(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 align="right"><font size="2" face="Arial">(1,012</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">(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 align="right"><font size="2" face="Arial">(1,741</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">(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">&nbsp;&nbsp;&nbsp;Total financial
        debt</font></td>
    <td align="left">&nbsp;</td>
    <td align="right">&nbsp;</td>
    <td align="right"><font size="2" face="Arial">(2,761</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">(3,095</font></td>
    <td align="left"><font size="2" face="Arial">)</font></td>
  </tr>
  <tr valign="top">
    <td align="left"><font size="2" face="Arial"><b>&nbsp;&nbsp;&nbsp;Net financial
          debt position</b></font></td>
    <td align="left">&nbsp;</td>
    <td align="right"><font size="2" face="Arial"><b> $</b></font></td>
    <td align="right"><font size="2" face="Arial"> <b>(75</b></font></td>
    <td align="left"><font size="2" face="Arial"><b>)</b></font></td>
    <td align="right"><font size="2" face="Arial"><b>$</b></font></td>
    <td 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>
</table>
<div style="text-indent:3%">
  <p align="left"><font size="2" face="Arial">The net financial position (cash,
      cash equivalents and marketable securities net of total financial debt)
      as of June 26, 2004, resulted in net financial debt of $75 million, basically
      equivalent to the net financial debt position of $97 million as of December
      31, 2003. This is mainly due to the payment of the $107 million dividend
      and to the favorable cash flow in the first half of 2004. </font></p>
</div>
<div style="text-indent:3%">
  <p align="left"><font size="2" face="Arial">At June 26, 2004, the aggregate
      amount of our long-term debt was approximately $1,741 million, of which
      $1,379 million consisted of Zero Coupon Convertible Bonds due 2013 (our &#8220;2013
      Bonds&#8221;). The current portion of the long-term debt of $1,012 million
      includes $809 million of our Subordinated Convertible Liquid Yield Option<sup>&#153;</sup> Notes
      due 2009 (our &#8220;2009 Bonds&#8221;) and $131 million of our 2010 Bonds.
      On July&nbsp;9, 2004, we redeemed all remaining outstanding 2010 Bonds.
      Additionally, the aggregate amount of our short-term credit facilities
      was approximately $900 million, under which approximately $892 million of
      indebtedness was outstanding. See &#8220;Overview&#8212;Other Developments&#8221;.</font></p>
</div>
<div style="text-indent:3%">
  <p align="left"><font size="2" face="Arial">As of the end of the first half
      of 2004, we had the following credit ratings on our remaining convertible
      debt:</font></p>
</div>
<table width="100%" cellspacing="0" cellpadding="0" border="0">
  <tr valign="bottom">
    <td align="left"><font size="1">&nbsp;</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="14%" align="center"><font size="1" face="Arial"><b>Moody&#8217;s
          Investors 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="14%" align="center"><font size="1" face="Arial"><b>Standard &amp; Poor&#8217;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><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 valign="top">
    <td align="left" bgcolor="#eeeeee"><font size="2" face="Arial">LYONs due
        2009</font></td>
    <td align="left" bgcolor="#eeeeee">&nbsp;</td>
    <td align="right" bgcolor="#eeeeee">&nbsp;</td>
    <td align="center" bgcolor="#eeeeee"><font size="2" face="Arial">Baa1</font></td>
    <td align="left" bgcolor="#eeeeee">&nbsp;</td>
    <td align="right" bgcolor="#eeeeee">&nbsp;</td>
    <td align="center" bgcolor="#eeeeee"><font size="2" face="Arial">BBB+</font></td>
    <td align="left" bgcolor="#eeeeee">&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 align="center"><font size="2" face="Arial">A3</font></td>
    <td align="left">&nbsp;</td>
    <td align="right">&nbsp;</td>
    <td align="center"><font size="2" face="Arial">A-</font></td>
    <td align="left">&nbsp;</td>
  </tr>
  <tr valign="top">
    <td align="left" bgcolor="#eeeeee"><font size="2" face="Arial">Zero Coupon
        Senior Convertible bonds due 2013</font></td>
    <td align="left" bgcolor="#eeeeee">&nbsp;</td>
    <td align="right" bgcolor="#eeeeee">&nbsp;</td>
    <td align="center" bgcolor="#eeeeee"><font size="2" face="Arial">A3</font></td>
    <td align="left" bgcolor="#eeeeee">&nbsp;</td>
    <td align="right" bgcolor="#eeeeee">&nbsp;</td>
    <td align="center" bgcolor="#eeeeee"><font size="2" face="Arial">A-</font></td>
    <td align="left" bgcolor="#eeeeee">&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>
<p align="left"><font size="2" face="Arial"><b><i>Contractual obligations, commercial
        commitments and contingencies </i></b> </font></p>
<div style="text-indent:3%">
  <p align="left"><font size="2" face="Arial">Our contractual obligations, commercial
      commitments and contingencies as of June 26, 2004, and for each of the
      five years to come and thereafter, 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="right"><font size="1">&nbsp;</font></td>
    <td colspan="22" align="center"><font size="1" face="Arial"><b>Payment due
          by period</b></font></td>
    <td align="left"><font size="1">&nbsp;</font></td>
  </tr>
  <tr valign="top">
    <td><font size="1">&nbsp;</font></td>
    <td><hr noshade size="1">
    </td>
    <td colspan="22"><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="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>
    <td align="right"><font size="1">&nbsp;</font></td>
    <td align="right"><font size="1" face="Arial"><b>2004</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>2005</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>2006</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>2007</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>2008</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>2009</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>Thereafter</b></font></td>
    <td align="left"><font size="1">&nbsp;</font></td>
  </tr>
  <tr valign="top">
    <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>
    <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>
    <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>
    <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 valign="top">
    <td align="left"><font size="1" face="Arial">&nbsp;</font></td>
    <td align="right">&nbsp;</td>
    <td colspan="22" align="center"><font size="1" face="Arial"><b>(in millions)</b></font></td>
    <td align="left">&nbsp;</td>
  </tr>
  <tr valign="top">
    <td align="left" bgcolor="#eeeeee"><font size="2" face="Arial">Capital leases</font></td>
    <td width="1%" align="right" bgcolor="#eeeeee"><font size="2" face="Arial">$</font></td>
    <td width="6%" align="right" bgcolor="#eeeeee"><font size="2" face="Arial"> 33</font></td>
    <td width="2%" align="left" bgcolor="#eeeeee"><font size="2">&nbsp;</font></td>
    <td width="1%" align="right" bgcolor="#eeeeee"><font size="2" face="Arial">$</font></td>
    <td width="6%" align="right" bgcolor="#eeeeee"><font size="2" face="Arial"> 2</font></td>
    <td width="2%" align="left" bgcolor="#eeeeee"><font size="2">&nbsp;</font></td>
    <td width="1%" align="right" bgcolor="#eeeeee"><font size="2" face="Arial">$</font></td>
    <td width="6%" align="right" bgcolor="#eeeeee"><font size="2" face="Arial"> 5</font></td>
    <td width="2%" align="left" bgcolor="#eeeeee"><font size="2">&nbsp;</font></td>
    <td width="1%" align="right" bgcolor="#eeeeee"><font size="2" face="Arial">$</font></td>
    <td width="6%" align="right" bgcolor="#eeeeee"><font size="2" face="Arial"> 5</font></td>
    <td width="2%" align="left" bgcolor="#eeeeee"><font size="2">&nbsp;</font></td>
    <td width="1%" align="right" bgcolor="#eeeeee"><font size="2" face="Arial">$</font></td>
    <td width="6%" align="right" bgcolor="#eeeeee"><font size="2" face="Arial"> 5</font></td>
    <td width="2%" align="left" bgcolor="#eeeeee"><font size="2">&nbsp;</font></td>
    <td width="1%" align="right" bgcolor="#eeeeee"><font size="2" face="Arial">$</font></td>
    <td width="6%" align="right" bgcolor="#eeeeee"><font size="2" face="Arial"> 5</font></td>
    <td width="2%" align="left" bgcolor="#eeeeee"><font size="2">&nbsp;</font></td>
    <td width="1%" align="right" bgcolor="#eeeeee"><font size="2" face="Arial">$</font></td>
    <td width="6%" align="right" bgcolor="#eeeeee"><font size="2" face="Arial"> 5</font></td>
    <td width="2%" align="left" bgcolor="#eeeeee"><font size="2">&nbsp;</font></td>
    <td width="1%" align="right" bgcolor="#eeeeee"><font size="2" face="Arial">$</font></td>
    <td width="6%" align="right" bgcolor="#eeeeee"><font size="2" face="Arial"> 6</font></td>
    <td width="2%" align="left" bgcolor="#eeeeee"><font size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top">
    <td align="left"><font size="2" face="Arial">Operating leases</font></td>
    <td align="right"><font size="2">&nbsp;</font></td>
    <td align="right"><font size="2" face="Arial">177</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">17</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">26</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">22</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">17</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">15</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">7</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">73</font></td>
    <td align="left"><font size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top">
    <td align="left" bgcolor="#eeeeee"><font size="2" face="Arial">Purchase obligations</font></td>
    <td align="right" bgcolor="#eeeeee"><font size="2">&nbsp;</font></td>
    <td align="right" bgcolor="#eeeeee"><font size="2" face="Arial">1,698</font></td>
    <td align="left" bgcolor="#eeeeee"><font size="2">&nbsp;</font></td>
    <td align="right" bgcolor="#eeeeee"><font size="2">&nbsp;</font></td>
    <td align="right" bgcolor="#eeeeee"><font size="2" face="Arial">1,424</font></td>
    <td align="left" bgcolor="#eeeeee"><font size="2">&nbsp;</font></td>
    <td align="right" bgcolor="#eeeeee"><font size="2">&nbsp;</font></td>
    <td align="right" bgcolor="#eeeeee"><font size="2" face="Arial">257</font></td>
    <td align="left" bgcolor="#eeeeee"><font size="2">&nbsp;</font></td>
    <td align="right" bgcolor="#eeeeee"><font size="2">&nbsp;</font></td>
    <td align="right" bgcolor="#eeeeee"><font size="2" face="Arial">17</font></td>
    <td align="left" bgcolor="#eeeeee"><font size="2">&nbsp;</font></td>
    <td align="right" bgcolor="#eeeeee"><font size="2">&nbsp;</font></td>
    <td align="right" bgcolor="#eeeeee"><font size="2" face="Arial">&#151;</font></td>
    <td align="left" bgcolor="#eeeeee"><font size="2">&nbsp;</font></td>
    <td align="right" bgcolor="#eeeeee"><font size="2">&nbsp;</font></td>
    <td align="right" bgcolor="#eeeeee"><font size="2" face="Arial">&#151;</font></td>
    <td align="left" bgcolor="#eeeeee"><font size="2">&nbsp;</font></td>
    <td align="right" bgcolor="#eeeeee"><font size="2">&nbsp;</font></td>
    <td align="right" bgcolor="#eeeeee"><font size="2" face="Arial">&#151;</font></td>
    <td align="left" bgcolor="#eeeeee"><font size="2">&nbsp;</font></td>
    <td align="right" bgcolor="#eeeeee"><font size="2">&nbsp;</font></td>
    <td align="right" bgcolor="#eeeeee"><font size="2" face="Arial">&#151;</font></td>
    <td align="left" bgcolor="#eeeeee"><font size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top">
    <td align="left"><font size="2" face="Arial">&nbsp;&nbsp;&nbsp;of which:</font></td>
    <td align="right"><font size="2">&nbsp;</font></td>
    <td align="left"><font size="2" face="Arial">&nbsp;</font></td>
    <td align="left"><font size="2">&nbsp;</font></td>
    <td align="right"><font size="2">&nbsp;</font></td>
    <td align="left"><font size="2" face="Arial">&nbsp;</font></td>
    <td align="left"><font size="2">&nbsp;</font></td>
    <td align="right"><font size="2">&nbsp;</font></td>
    <td align="left"><font size="2" face="Arial">&nbsp;</font></td>
    <td align="left"><font size="2">&nbsp;</font></td>
    <td align="right"><font size="2">&nbsp;</font></td>
    <td align="left"><font size="2" face="Arial">&nbsp;</font></td>
    <td align="left"><font size="2">&nbsp;</font></td>
    <td align="right"><font size="2">&nbsp;</font></td>
    <td align="left"><font size="2" face="Arial">&nbsp;</font></td>
    <td align="left"><font size="2">&nbsp;</font></td>
    <td align="right"><font size="2">&nbsp;</font></td>
    <td align="left"><font size="2" face="Arial">&nbsp;</font></td>
    <td align="left"><font size="2">&nbsp;</font></td>
    <td align="right"><font size="2">&nbsp;</font></td>
    <td align="left"><font size="2" face="Arial">&nbsp;</font></td>
    <td align="left"><font size="2">&nbsp;</font></td>
    <td align="right"><font size="2">&nbsp;</font></td>
    <td align="left"><font size="2" face="Arial">&nbsp;</font></td>
    <td align="left"><font size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top">
    <td align="left" bgcolor="#eeeeee"><font size="2" face="Arial"><i>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Equipment
          purchase&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</i></font></td>
    <td align="right" bgcolor="#eeeeee"><font size="2">&nbsp;</font></td>
    <td align="right" bgcolor="#eeeeee"><font size="2" face="Arial"><i>1,281</i></font></td>
    <td align="left" bgcolor="#eeeeee"><font size="2">&nbsp;</font></td>
    <td align="right" bgcolor="#eeeeee"><font size="2">&nbsp;</font></td>
    <td align="right" bgcolor="#eeeeee"><font size="2" face="Arial"><i>1,102</i></font></td>
    <td align="left" bgcolor="#eeeeee"><font size="2">&nbsp;</font></td>
    <td align="right" bgcolor="#eeeeee"><font size="2">&nbsp;</font></td>
    <td align="right" bgcolor="#eeeeee"><font size="2" face="Arial"><i>179</i></font></td>
    <td align="left" bgcolor="#eeeeee"><font size="2">&nbsp;</font></td>
    <td align="right" bgcolor="#eeeeee"><font size="2">&nbsp;</font></td>
    <td align="right" bgcolor="#eeeeee"><font size="2" face="Arial">&#151;</font></td>
    <td align="left" bgcolor="#eeeeee"><font size="2">&nbsp;</font></td>
    <td align="right" bgcolor="#eeeeee"><font size="2">&nbsp;</font></td>
    <td align="right" bgcolor="#eeeeee"><font size="2" face="Arial">&#151;</font></td>
    <td align="left" bgcolor="#eeeeee"><font size="2">&nbsp;</font></td>
    <td align="right" bgcolor="#eeeeee"><font size="2">&nbsp;</font></td>
    <td align="right" bgcolor="#eeeeee"><font size="2" face="Arial">&#151;</font></td>
    <td align="left" bgcolor="#eeeeee"><font size="2">&nbsp;</font></td>
    <td align="right" bgcolor="#eeeeee"><font size="2">&nbsp;</font></td>
    <td align="right" bgcolor="#eeeeee"><font size="2" face="Arial">&#151;</font></td>
    <td align="left" bgcolor="#eeeeee"><font size="2">&nbsp;</font></td>
    <td align="right" bgcolor="#eeeeee"><font size="2">&nbsp;</font></td>
    <td align="right" bgcolor="#eeeeee"><font size="2" face="Arial">&#151;</font></td>
    <td align="left" bgcolor="#eeeeee"><font size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top">
    <td align="left"><font size="2" face="Arial"><i>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Foundry
          purchase&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</i></font></td>
    <td align="right"><font size="2">&nbsp;</font></td>
    <td align="right"><font size="2" face="Arial"><i>274</i></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"><i>274</i></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">&#151;</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">&#151;</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">&#151;</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">&#151;</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">&#151;</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">&#151;</font></td>
    <td align="left"><font size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top">
    <td align="left" bgcolor="#eeeeee"><font size="2" face="Arial"><i>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Software,
          technology licenses and design&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</i></font></td>
    <td align="right" bgcolor="#eeeeee"><font size="2">&nbsp;</font></td>
    <td align="right" bgcolor="#eeeeee"><font size="2" face="Arial"><i>143</i></font></td>
    <td align="left" bgcolor="#eeeeee"><font size="2">&nbsp;</font></td>
    <td align="right" bgcolor="#eeeeee"><font size="2">&nbsp;</font></td>
    <td align="right" bgcolor="#eeeeee"><font size="2" face="Arial"><i>48</i></font></td>
    <td align="left" bgcolor="#eeeeee"><font size="2">&nbsp;</font></td>
    <td align="right" bgcolor="#eeeeee"><font size="2">&nbsp;</font></td>
    <td align="right" bgcolor="#eeeeee"><font size="2" face="Arial"><i>78</i></font></td>
    <td align="left" bgcolor="#eeeeee"><font size="2">&nbsp;</font></td>
    <td align="right" bgcolor="#eeeeee"><font size="2">&nbsp;</font></td>
    <td align="right" bgcolor="#eeeeee"><font size="2" face="Arial"><i>17</i></font></td>
    <td align="left" bgcolor="#eeeeee"><font size="2">&nbsp;</font></td>
    <td align="right" bgcolor="#eeeeee"><font size="2">&nbsp;</font></td>
    <td align="right" bgcolor="#eeeeee"><font size="2" face="Arial">&#151;</font></td>
    <td align="left" bgcolor="#eeeeee"><font size="2">&nbsp;</font></td>
    <td align="right" bgcolor="#eeeeee"><font size="2">&nbsp;</font></td>
    <td align="right" bgcolor="#eeeeee"><font size="2" face="Arial">&#151;</font></td>
    <td align="left" bgcolor="#eeeeee"><font size="2">&nbsp;</font></td>
    <td align="right" bgcolor="#eeeeee"><font size="2">&nbsp;</font></td>
    <td align="right" bgcolor="#eeeeee"><font size="2" face="Arial">&#151;</font></td>
    <td align="left" bgcolor="#eeeeee"><font size="2">&nbsp;</font></td>
    <td align="right" bgcolor="#eeeeee"><font size="2">&nbsp;</font></td>
    <td align="right" bgcolor="#eeeeee"><font size="2" face="Arial">&#151;</font></td>
    <td align="left" bgcolor="#eeeeee"><font size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top">
    <td align="left"><font size="2" face="Arial">Long-term debt obligations <sup>(1)</sup></font></td>
    <td align="right"><font size="2">&nbsp;</font></td>
    <td align="right"><font size="2" face="Arial">2,256</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">944</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">&#151;</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">1,312</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">&#151;</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">&#151;</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">&#151;</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">&#151;</font></td>
    <td align="left"><font size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top">
    <td align="left" bgcolor="#eeeeee"><font size="2" face="Arial">Contingent
        obligations</font></td>
    <td align="right" bgcolor="#eeeeee"><font size="2">&nbsp;</font></td>
    <td align="right" bgcolor="#eeeeee"><font size="2" face="Arial">13</font></td>
    <td align="left" bgcolor="#eeeeee"><font size="2">&nbsp;</font></td>
    <td align="right" bgcolor="#eeeeee"><font size="2">&nbsp;</font></td>
    <td align="right" bgcolor="#eeeeee"><font size="2" face="Arial">13</font></td>
    <td align="left" bgcolor="#eeeeee"><font size="2">&nbsp;</font></td>
    <td align="right" bgcolor="#eeeeee"><font size="2">&nbsp;</font></td>
    <td align="right" bgcolor="#eeeeee"><font size="2" face="Arial">&#151;</font></td>
    <td align="left" bgcolor="#eeeeee"><font size="2">&nbsp;</font></td>
    <td align="right" bgcolor="#eeeeee"><font size="2">&nbsp;</font></td>
    <td align="right" bgcolor="#eeeeee"><font size="2" face="Arial">&#151;</font></td>
    <td align="left" bgcolor="#eeeeee"><font size="2">&nbsp;</font></td>
    <td align="right" bgcolor="#eeeeee"><font size="2">&nbsp;</font></td>
    <td align="right" bgcolor="#eeeeee"><font size="2" face="Arial">&#151;</font></td>
    <td align="left" bgcolor="#eeeeee"><font size="2">&nbsp;</font></td>
    <td align="right" bgcolor="#eeeeee"><font size="2">&nbsp;</font></td>
    <td align="right" bgcolor="#eeeeee"><font size="2" face="Arial">&#151;</font></td>
    <td align="left" bgcolor="#eeeeee"><font size="2">&nbsp;</font></td>
    <td align="right" bgcolor="#eeeeee"><font size="2">&nbsp;</font></td>
    <td align="right" bgcolor="#eeeeee"><font size="2" face="Arial">&#151;</font></td>
    <td align="left" bgcolor="#eeeeee"><font size="2">&nbsp;</font></td>
    <td align="right" bgcolor="#eeeeee"><font size="2">&nbsp;</font></td>
    <td align="right" bgcolor="#eeeeee"><font size="2" face="Arial">&#151;</font></td>
    <td align="left" bgcolor="#eeeeee"><font size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top">
    <td align="left"><font size="2" face="Arial">Restructuring non-current liabilities</font></td>
    <td align="right"><font size="2">&nbsp;</font></td>
    <td align="right"><font size="2" face="Arial">3</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">&#151;</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</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">&#151;</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">&#151;</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">&#151;</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">&#151;</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">&#151;</font></td>
    <td align="left"><font size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top">
    <td align="left" bgcolor="#eeeeee"><font size="2" face="Arial">Other obligations</font></td>
    <td align="right" bgcolor="#eeeeee"><font size="2">&nbsp;</font></td>
    <td align="right" bgcolor="#eeeeee"><font size="2" face="Arial">72</font></td>
    <td align="left" bgcolor="#eeeeee"><font size="2">&nbsp;</font></td>
    <td align="right" bgcolor="#eeeeee"><font size="2">&nbsp;</font></td>
    <td align="right" bgcolor="#eeeeee"><font size="2" face="Arial">22</font></td>
    <td align="left" bgcolor="#eeeeee"><font size="2">&nbsp;</font></td>
    <td align="right" bgcolor="#eeeeee"><font size="2">&nbsp;</font></td>
    <td align="right" bgcolor="#eeeeee"><font size="2" face="Arial">18</font></td>
    <td align="left" bgcolor="#eeeeee"><font size="2">&nbsp;</font></td>
    <td align="right" bgcolor="#eeeeee"><font size="2">&nbsp;</font></td>
    <td align="right" bgcolor="#eeeeee"><font size="2" face="Arial">14</font></td>
    <td align="left" bgcolor="#eeeeee"><font size="2">&nbsp;</font></td>
    <td align="right" bgcolor="#eeeeee"><font size="2">&nbsp;</font></td>
    <td align="right" bgcolor="#eeeeee"><font size="2" face="Arial">8</font></td>
    <td align="left" bgcolor="#eeeeee"><font size="2">&nbsp;</font></td>
    <td align="right" bgcolor="#eeeeee"><font size="2">&nbsp;</font></td>
    <td align="right" bgcolor="#eeeeee"><font size="2" face="Arial">3</font></td>
    <td align="left" bgcolor="#eeeeee"><font size="2">&nbsp;</font></td>
    <td align="right" bgcolor="#eeeeee"><font size="2">&nbsp;</font></td>
    <td align="right" bgcolor="#eeeeee"><font size="2" face="Arial">3</font></td>
    <td align="left" bgcolor="#eeeeee"><font size="2">&nbsp;</font></td>
    <td align="right" bgcolor="#eeeeee"><font size="2">&nbsp;</font></td>
    <td align="right" bgcolor="#eeeeee"><font size="2" face="Arial">4</font></td>
    <td align="left" bgcolor="#eeeeee"><font size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top">
    <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>
    <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>
    <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>
    <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 valign="top">
    <td align="left"><font size="2" face="Arial"><b>Total</b></font></td>
    <td align="right"><font size="2">&nbsp;</font></td>
    <td align="right"><font size="2" face="Arial"><b>4,252</b></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"><b>2,422</b></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"><b>309</b></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"><b>1,370</b></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"><b>30</b></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"><b>23</b></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"><b>15</b></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"><b>83</b></font></td>
    <td align="left"><font size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top">
    <td><font size="1">&nbsp;</font></td>
    <td><hr noshade size="2">
    </td>
    <td><hr noshade size="2">
    </td>
    <td><font size="2">&nbsp;</font></td>
    <td><hr noshade size="2">
    </td>
    <td><hr noshade size="2">
    </td>
    <td><font size="2">&nbsp;</font></td>
    <td><hr noshade size="2">
    </td>
    <td><hr noshade size="2">
    </td>
    <td><font size="2">&nbsp;</font></td>
    <td><hr noshade size="2">
    </td>
    <td><hr noshade size="2">
    </td>
    <td><font size="2">&nbsp;</font></td>
    <td><hr noshade size="2">
    </td>
    <td><hr noshade size="2">
    </td>
    <td><font size="1">&nbsp;</font></td>
    <td><hr noshade size="2">
    </td>
    <td><hr noshade size="2">
    </td>
    <td><font size="2">&nbsp;</font></td>
    <td><hr noshade size="2">
    </td>
    <td><hr noshade size="2">
    </td>
    <td><font size="2">&nbsp;</font></td>
    <td><hr noshade size="2">
    </td>
    <td><hr noshade size="2">
    </td>
    <td><font size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top">
    <td><hr align="left" width="100" size="1" noshade>
    </td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <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%" 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"> Refer to Note 17 to the Unaudited
        Interim Consolidated Financial Statements as of June 26, 2004 for additional
        information related to long-term debt and redeemable convertible securities. </font></td>
  </tr>
</table>
<div style="text-indent:3%">
  <p align="left"><font size="2" face="Arial">Operating leases are mainly related
      to building leases. The amount disclosed is composed of minimum payments
      for future leases from 2004 to 2009 and thereafter.</font></p>
</div>
<div style="text-indent:3%">
  <p align="left"><font size="2" face="Arial">Purchase obligations are primarily
      comprised of purchase commitments for equipment, for outsourced foundry
      wafers and for software licenses. </font></p>
</div>
<div style="text-indent:3%">
  <p align="left"><font size="2" face="Arial">Long-term debt obligations consist
      of convertible debt issued by us that is totally or partially redeemable
      for cash at the option of the holder. They include maximum future amounts
      that may be redeemable for cash at the option of the holder, at fixed prices
      as stated in the offering memoranda, and purchases announced by us.
      Pursuant to the terms of the 2009 Bonds, we agreed to purchase, at the
      option of the holder, any outstanding 2009 Bonds on September 22, 2004
      payable in cash or shares at our option for a total cash amount estimated
      at $813 million; of this amount, $809 million was recorded as &#8220;current
      portion of long-term debt&#8221; in the Unaudited Interim Consolidated
      Balance Sheet as of June 26, 2004. As far as the 2010 Bonds are concerned,
      we announced in June 2004 that we would redeem all of our outstanding 2010
      Bonds on July 9, 2004 for a total amount of $131 million recorded as &#8220;current
      portion of long-term debt&#8221; in the Unaudited Interim Consolidated
      Balance Sheet as of June 26, 2004. This amount was redeemed on
      July 9, 2004. See &#8220;Overview&#8212;Other Developments&#8221;. At the
      holder&#8217;s
      option, any outstanding 2013 Bonds may be redeemed for cash on August 5,
      2006 for a total maximum amount of $1,312 million, $1,299 million on August
      5, 2008 or $1,286 million on August 5, 2010. </font></p>
</div>
<div style="text-indent:3%">
  <p align="left"><font size="2" face="Arial">Contingent obligations relate to
      patent claims for which the risk is estimated as possible. </font></p>
</div>
<div style="text-indent:3%">
  <p align="left"><font size="2" face="Arial">Restructuring non-current liabilities
      consist primarily of estimated future unused leases in the United States.
      These amounts are included in the Unaudited Interim Consolidated Balance
      Sheet as of June 26, 2004.</font></p>
</div>
<div style="text-indent:3%">
  <p align="left"><font size="2" face="Arial">Other obligations mainly represent
      payments to be made in connection with cooperation and development agreements.</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">We currently expect that capital
      spending for the full year 2004 will be in the range of $2.2 billion, significantly
      above the $1.2 billion spent in 2003, although we have the flexibility
      to modulate our investments up or down in response to changes in market
      conditions, and we are ready to accelerate or slow down investments in
      leading-edge technologies if market trends require. As of June 26, 2004,
      we had $1,281
      million in outstanding commitments for purchases of equipment. </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>


<div style="text-indent:3%">
<p align="left"><font size="2" face="Arial">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 facilitization 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
    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>
<div style="text-indent:3%">
<p align="left"><font size="2" face="Arial">On May
      28, 2004, we announced that, from May 21, 2004 through May 27, 2004, we
      repurchased an additional nominal amount of $121 million of our outstanding
      2010 Bonds, in addition to the nominal amount of $186 million repurchased
      on May 19, 2004, for a total nominal aggregate amount repurchased of $307
      million and for a total aggregate amount paid of approximately $244 million.
      We redeemed all of our remaining outstanding 2010 Bonds on July 9, 2004
      for a total cash amount of $131 million. See &#8220;Overview&#8212;Other
      Developments&#8221;.  </font></p>
</div>
<div style="text-indent:3%">
<p align="left"><font size="2" face="Arial">In addition,
      pursuant to the terms of the 2009 Bonds, we have agreed to purchase, at
      the option of the holder, any outstanding 2009 Bonds payable in cash or
    shares at our option on September 22, 2004. At June 26, 2004, $809 million
    was outstanding under
      our 2009 Bonds and $1,379 million under our 2013 Bonds. </font></p>
</div>
<div style="text-indent:3%"><p align="left"><font size="2" face="Arial">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, &#8220;FIN 46&#8221;). 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&#8217;s relationship
    with the entity and substantially all of the entity&#8217;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&#8217;s expected residual returns, or
    the equity investors&#8217; rights to expect residual returns is capped.
    The primary beneficiary of a VIE is the party that absorbs the majority of
    the entity&#8217;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>


<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 June 26, 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 venture established with Dai Nippon for the development
and production of photomasks in which we have a 19% stake, and an obligation
to
repurchase certain assets in the event of the venture&#8217;s bankruptcy,</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.,
in which 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> (&#8220;FAS 150&#8221;). FAS 150 specifies that &#8220;freestanding&#8221; 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> (&#8220;EITF 00-21&#8221;), 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&#8217; 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> (&#8220;FAS 132 revised&#8221;). This Statement revises employers&#8217; 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&#8217; Accounting for Pensions, </i>No. 88, <i>Employers&#8217; Accounting for Settlements and Curtailments of Defined Benefit Pension Plans and for
Termination Benefits, </i>and No. 106, <i>Employers&#8217; 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. 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 June 26, 2004. </font></p></div>
<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 registered a steady 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)
      that was approximately 30% higher than we had entering 2003. Backlog for
    the second half 2004 is about 28% higher than backlog for the second half
    of
    2003.
      Our new order booking rate (including new frame orders) continued to be
      strong in the second quarter of 2004. During the second quarter of 2004,
      we had several large customers, with the Nokia group of companies being
      the largest and accounting for approximately 15% of our revenues. Total
      original equipment manufacturers 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="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>


<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 June 26, 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="2%" align="left">&nbsp;</td>
<td width="25%" align="center"><h6><font size="1" face="Arial"><b>Transaction</b></font></h6></td>
<td width="2%" align="left">&nbsp;</td>
<td width="5%" align="center"><font size="1" face="Arial"><b>Number<br>
of shares</b></font></td>
<td width="2%" align="left">&nbsp;</td>
<td width="3%" align="center"><font size="1" face="Arial"><b>Nominal<br>
value<br>
(euro)</b></font></td>
<td width="2%" align="left">&nbsp;</td>
<td width="6%" align="center"><font size="1" face="Arial"><b>Cumulative<br>
Amount of<br>
capital<br>
(euro)</b></font></td>
<td width="2%" align="left">&nbsp;</td>
<td width="8%" align="center"><font size="2" face="Arial"><b><font face="Arial" size="1">Cumulative<br>number of </font></b><font face="Arial" size="1"><b>shares</b></font></font></td>
<td width="2%" align="left">&nbsp;</td>
<td width="8%" align="center"><font size="2" face="Arial"><b><font face="Arial" size="1">Nominal</font></b><font face="Arial" size="1"> <b>value of</b> <b>increase/</b> <b><br>
  reduction<br>
  in capital</b></font></font></td>
<td width="2%" align="left">&nbsp;</td>
<td width="5%" align="center"><font size="1" face="Arial"><b>Amount<br>
of issue<br>
premium<br>
(euro)</b></font></td>
<td width="2%" align="left">&nbsp;</td>
<td width="8%" align="center"><font size="1" face="Arial"><b>Cumulative- issue<br>
premium<br>
(euro)</b></font></td>
<td width="2%" align="left">&nbsp;</td>
</tr>
<tr valign="top">
<td><hr noshade size="1"></td>
<td></td>
<td><hr noshade size="1"></td>
<td></td>
<td><hr noshade size="1"></td>
<td></td>
<td><hr noshade size="1"></td>
<td></td>
<td><hr noshade size="1"></td>
<td></td>
<td><hr noshade size="1"></td>
<td></td>
<td><hr noshade size="1"></td>
<td></td>
<td><hr noshade size="1"></td>
<td></td>
<td><hr noshade size="1"></td>
<td></td>
</tr>
<tr valign="top" bgcolor="#eeeeee">
<td align="left"><font size="2" face="Arial">December 31, 2003</font></td>
<td align="left"><font size="2">&nbsp;</font></td>
<td align="left"><font size="2" face="Arial">Exercise of options </font></td>
<td align="left"><font size="2">&nbsp;</font></td>
<td align="right"><font size="2" face="Arial">634,261</font></td>
<td align="left"><font size="2">&nbsp;</font></td>
<td align="right"><font size="2" face="Arial">1.04</font></td>
<td align="left"><font size="2">&nbsp;</font></td>
<td align="right"><font size="2" face="Arial">938,880,523</font></td>
<td align="left"><font size="2">&nbsp;</font></td>
<td align="right"><font size="2" face="Arial">902,769,734</font></td>
<td align="left"><font size="2">&nbsp;</font></td>
<td align="right"><font size="2" face="Arial">659,631</font></td>
<td align="left"><font size="2">&nbsp;</font></td>
<td align="right"><font size="2" face="Arial">4,458,391</font></td>
<td align="left"><font size="2">&nbsp;</font></td>
<td align="right"><font size="2" face="Arial">1,693,579,662</font></td>
<td align="left"><font size="2">&nbsp;</font></td>
</tr>
<tr valign="bottom">
<td align="left"><font size="2" face="Arial">June 26, 2004</font></td>
<td align="left"><font size="2">&nbsp;</font></td>
<td align="left"><font size="2" face="Arial">Exercise of options and employee stock purchases</font></td>
<td align="left"><font size="2">&nbsp;</font></td>
<td align="right"><font size="2" face="Arial">2,049,291</font></td>
<td align="left"><font size="2">&nbsp;</font></td>
<td align="right"><font size="2" face="Arial">1.04</font></td>
<td align="left"><font size="2">&nbsp;</font></td>
<td align="right"><font size="2" face="Arial">941,011,786</font></td>
<td align="left"><font size="2">&nbsp;</font></td>
<td align="right"><font size="2" face="Arial">904,819,025</font></td>
<td align="left"><font size="2">&nbsp;</font></td>
<td align="right"><font size="2" face="Arial">2,131,263</font></td>
<td align="left"><font size="2">&nbsp;</font></td>
<td align="right"><font size="2" face="Arial">10,689,523</font></td>
<td align="left"><font size="2">&nbsp;</font></td>
<td align="right"><font size="2" face="Arial">1,704,269,185</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">The following table summarizes the amount of common shares authorized to be granted, exercised, cancelled and outstanding as of June 26, 2004. </font></p></div>
<table width="100%" cellspacing="0" cellpadding="0" border="0">
<tr valign="bottom">
<td align="left"></td>
<td width="2%" align="left">&nbsp;</td>
<td width="9%" align="center"><font size="2" face="Arial"><b><font face="Arial" size="1">1995</font></b><b><font face="Arial" size="1"> Plan</font></b></font></td>
<td width="2%" align="left">&nbsp;</td>
<td width="9%" align="center"><font size="2" face="Arial"><b><font face="Arial" size="1">2001</font></b><b><font face="Arial" size="1"> Plan</font></b></font></td>
<td width="2%" align="left">&nbsp;</td>
<td width="9%" align="center"><font size="1" face="Arial"><b>Supervisory<br>
Board Plans</b></font></td>
<td width="2%" align="left">&nbsp;</td>
<td width="9%" align="center"><font size="1" face="Arial"><b>Total</b></font></td>
<td width="2%" align="left">&nbsp;</td>
</tr>
<tr valign="top">
<td></td>
<td></td>
<td><hr noshade size="1"></td>
<td></td>
<td><hr noshade size="1"></td>
<td></td>
<td><hr noshade size="1"></td>
<td></td>
<td><hr noshade size="1"></td>
<td></td>
</tr>
<tr valign="top">
<td align="left" bgcolor="#eeeeee"><font size="2" face="Arial">Remaining amount authorized to be granted</font></td>
<td align="left" bgcolor="#eeeeee">&nbsp;</td>
<td align="right" bgcolor="#eeeeee"><font size="2" face="Arial">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;0</font></td>
<td width="1%" align="left" bgcolor="#eeeeee">&nbsp;</td>
<td align="right" bgcolor="#eeeeee"><font size="2" face="Arial">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;14,294,101</font></td>
<td width="1%" align="left" bgcolor="#eeeeee">&nbsp;</td>
<td align="right" bgcolor="#eeeeee"><font size="2" face="Arial">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;0</font></td>
<td width="1%" align="left" bgcolor="#eeeeee">&nbsp;</td>
<td align="right" bgcolor="#eeeeee"><font size="2" face="Arial">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;14,294,101</font></td>
<td width="1%" align="left" bgcolor="#eeeeee">&nbsp;</td>
</tr>
<tr valign="top">
<td align="left"><font size="2" face="Arial">Amount exercised</font></td>
<td align="left">&nbsp;</td>
<td align="right"><font size="2" face="Arial">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;9,271,214</font></td>
<td align="left">&nbsp;</td>
<td align="right"><font size="2" face="Arial">&nbsp;&nbsp;&nbsp;&nbsp;3,950</font></td>
<td align="left">&nbsp;</td>
<td align="right"><font size="2" face="Arial">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;271,000</font></td>
<td align="left">&nbsp;</td>
<td align="right"><font size="2" face="Arial">&nbsp;&nbsp;&nbsp;&nbsp;9,546,164</font></td>
<td align="left">&nbsp;</td>
</tr>
<tr valign="top">
<td align="left" bgcolor="#eeeeee"><font size="2" face="Arial">Amount cancelled</font></td>
<td align="left" bgcolor="#eeeeee">&nbsp;</td>
<td align="right" bgcolor="#eeeeee"><font size="2" face="Arial">&nbsp;&nbsp;&nbsp;&nbsp;2,123,005</font></td>
<td align="left" bgcolor="#eeeeee">&nbsp;</td>
<td align="right" bgcolor="#eeeeee"><font size="2" face="Arial">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1,806,744</font></td>
<td align="left" bgcolor="#eeeeee">&nbsp;</td>
<td align="right" bgcolor="#eeeeee"><font size="2" face="Arial">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;159,000</font></td>
<td align="left" bgcolor="#eeeeee">&nbsp;</td>
<td align="right" bgcolor="#eeeeee"><font size="2" face="Arial">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;4,088,749</font></td>
<td align="left" bgcolor="#eeeeee">&nbsp;</td>
</tr>
<tr valign="top">
<td align="left"><font size="2" face="Arial">Amount outstanding</font></td>
<td align="left">&nbsp;</td>
<td align="right"><font size="2" face="Arial">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;20,167,722</font></td>
<td align="left">&nbsp;</td>
<td align="right"><font size="2" face="Arial">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;45,705,899</font></td>
<td align="left">&nbsp;</td>
<td align="right"><font size="2" face="Arial">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;789,500</font></td>
<td align="left">&nbsp;</td>
<td align="right"><font size="2" face="Arial">&nbsp;&nbsp;&nbsp;&nbsp;66,663,121</font></td>
<td align="left">&nbsp;</td>
</tr>
</table>
<div style="text-indent:3%"><p align="left"><font size="2" face="Arial">On April 23, 2004, the Supervisory Board granted 12,235,490 options under the 2001 plan at a $22.71 exercise price. </font></p></div>
<p align="left"><font size="2" face="Arial"><b>Quantitative and Qualitative Disclosures about Market Risk</b></font></p>
<div style="text-indent:3%">
<p align="left"><font size="2" face="Arial">We have exposure to changes in financial
    market conditions in the normal course of business due to our operations
    in different foreign currencies and our ongoing investing and financing activities.
    There have been no material changes in market risk exposures from those disclosed
    in our Annual Report on Form 20-F for the fiscal year ended December 31,
    2003. See &#8220;Item
      11. Quantitative and Qualitative Disclosures About Market Risk&#8221; in
      our Form 20-F for additional details.</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>
</div>
<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>


<div style="text-indent:3%"><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 Procedures</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 &#8220;Overview&#8212;Business Outlook&#8221; and
      in the &#8220;Liquidity and Capital Resources&#8212;Financial Outlook&#8221;,
      and elsewhere in this Form 6-K, 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&#8217;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%"></td>
<td width="3%">
<font size="2" face="Arial">&#149;</font></td>
<td>
<font size="2" face="Arial">the demand for semiconductor products in the key application markets and from key customers served by our products;</font></td>
</tr>
</table>
<table width="100%" cellspacing="0" cellpadding="0" border="0">
<tr valign="top">
  <td></td>
  <td>&nbsp;</td>
  <td>&nbsp;</td>
</tr>
<tr valign="top">
<td width="3%"></td>
<td width="3%">
<font size="2" face="Arial">&#149;</font></td>
<td>
<font size="2" face="Arial">further strong decline in the exchange rates between the U.S. dollar and the euro compared to an average euro to U.S. dollar exchange rate of $1.23 to &euro;1.00, and between the U.S. dollar and the currencies of the other major countries in which we have our operating infrastructure;</font></td>
</tr>
</table>
<table width="100%" cellspacing="0" cellpadding="0" border="0">
<tr valign="top">
  <td></td>
  <td>&nbsp;</td>
  <td>&nbsp;</td>
</tr>
<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 ramp up of volume production in new manufacturing technologies at our leading-edge fabs and at our outside suppliers in time to meet the demand of our customers;</font></td>
</tr>
</table>
<table width="100%" cellspacing="0" cellpadding="0" border="0">
<tr valign="top">
  <td></td>
  <td>&nbsp;</td>
  <td>&nbsp;</td>
</tr>
<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 future development of the world semiconductor market, and the trends in prices for our products;</font></td>
</tr>
</table>
<table width="100%" cellspacing="0" cellpadding="0" border="0">
<tr valign="top">
  <td></td>
  <td>&nbsp;</td>
  <td>&nbsp;</td>
</tr>
<tr valign="top">
<td width="3%"></td>
<td width="3%">
<font size="2" face="Arial">&#149;</font></td>
<td>
<font size="2" face="Arial">changes in the economic, social or political environment in the countries in which we and our key customers operate; and</font></td>
</tr>
</table>
<table width="100%" cellspacing="0" cellpadding="0" border="0">
<tr valign="top">
  <td></td>
  <td>&nbsp;</td>
  <td>&nbsp;</td>
</tr>
<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 anticipated benefits of research and development
alliances and cooperative activities.</font></td>
</tr>
</table>
<div style="text-indent:3%">
<p align="left"><font size="2" face="Arial">Certain such forward-looking statements
    can be identified by the use of forward-looking terminology such as &#8220;believes&#8221;, &#8220;expects&#8221;, &#8220;may&#8221;, &#8220;are
    expected to&#8221;, &#8220;will&#8221;, &#8220;will continue&#8221;, &#8220;should&#8221;, &#8220;would
    be&#8221;, &#8220;seeks&#8221; or &#8220;anticipates&#8221; 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 &#8220;Item 3. Key Information&#8212;Risk
    Factors&#8221; 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 Form 6-K  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 Form 6-K to reflect subsequent events or circumstances.</font></p>
</div>
<div style="text-indent:3%"><p align="left"><font size="2" face="Arial">Unfavorable changes in the above or other factors listed under &#8220;Risk Factors&#8221; from time to time in our SEC filings, including in our Form 20-F, could have a material adverse effect on our business or financial condition.</font></p></div>
<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>



<p align="center"><font size="2" face="Arial"><b>SIGNATURES </b></font></p>
<div style="text-indent:3%"><p align="left"><font size="2" face="Arial">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></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 colspan="2" align="left"><font size="1" face="Arial">&nbsp;</font></td> </tr>
<tr valign="top">
<td align="left" width="61%"><font size="2" face="Arial">Date: July 30,
    2004</font></td>
<td align="left" width="6%"><font size="2" face="Arial">By:</font></td>
<td align="left"><font size="2" face="Arial"><u>/s/ P<font face="Arial" size="1">ASQUALE</font> P<font face="Arial" size="1">ISTORIO</font></u></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>
</tr>
<tr valign="top">
<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">Title: </font></td>
<td align="left"><font size="2" face="Arial">President and Chief Executive Officer</font></td>
</tr>
</table>
<p align="center">&nbsp;</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 and the Six Months Ended June 26, 2004
          and June 28, 2003 (unaudited)</font></a></td>
    <td width="2%">&nbsp;</td>
    <td width="8%" align="right"><a href="#pf2"><font face="Arial" size="2">F-2</font></a></td>
  </tr>
  <tr>
    <td><a href="#pf4"><font face="Arial" size="2">Consolidated Balance Sheets
          as of June 26, 2004 (unaudited) and December 31, 2003 (audited)</font></a>c</td>
    <td>&nbsp;</td>
    <td align="right"><a href="#pf4"><font face="Arial" size="2">F-4</font></a></td>
  </tr>
  <tr>
    <td><a href="#pf6"><font face="Arial" size="2">Consolidated Statements of
          Cash Flows for the Six Months Ended June 26, 2004 and June 28, 2003
          (unaudited)</font></a></td>
    <td>&nbsp;</td>
    <td align="right"><a href="#pf6"><font face="Arial" size="2">F-5</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>&nbsp;</td>
    <td align="right"><a href="#pf5"><font face="Arial" size="2">F-6</font></a></td>
  </tr>
  <tr>
    <td><a href="#pf7"><font face="Arial" size="2">Notes to Interim Consolidated Financial Statements
        (unaudited)</font></a></td>
    <td>&nbsp;</td>
    <td align="right"><a href="#pf7"><font face="Arial" size="2">F-7</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">
<font size="2"><a name="pf2"></a>
<div style="page-break-before:always"></div>
<page>
<p><a href="#contents">Back to Contents</a></p>
</font>
<p align="center"><font size="2" face="Arial"><b>STMicroelectronics N.V.</b>
</font></p>
<p align="center"><font size="2" face="Arial">
  <b>CONSOLIDATED STATEMENTS OF INCOME</b>
</font></p>
<table width="100%" border=0 align="center" cellpadding=0 cellspacing=0>
  <tr>
    <td><font size="1">&nbsp;</font></td>
    <td align="center" colspan=3><font size="1" face="Arial"><b>Three months
          ended</b></font></td>
    <td align="center"><font size="1">&nbsp;</font></td>
  </tr>
  <tr>
    <td><font size="1">&nbsp;</font></td>
    <td align="center"><b><font size=1 face="Arial">(unaudited)</font></b></td>
    <td><font size="1">&nbsp;</font></td>
    <td align="center"><b><font size=1 face="Arial">(unaudited)</font></b></td>
    <td><font size="1">&nbsp;</font></td>
  </tr>
  <tr>
    <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>
    <td><font size="1">&nbsp;</font></td>
    <td align="center"><font size="1" face="Arial"><b>June 26,</b></font></td>
    <td><font size="1">&nbsp;</font></td>
    <td align="center"><font size="1" face="Arial"><b>June 28,</b></font></td>
    <td><font size="1">&nbsp;</font></td>
  </tr>
  <tr>
    <td><font size="1" face="Arial"><b>In million of U.S. dollars except per
          share amounts</b></font></td>
    <td align="center"><font size="1" face="Arial"><b>2004</b></font></td>
    <td><font size="1">&nbsp;</font></td>
    <td align="center"><font size="1" face="Arial"><b>2003</b></font></td>
    <td><font size="1">&nbsp;</font></td>
  </tr>
  <tr>
    <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 bgcolor="#eeeeee">
   <td><font size=2 face="Arial">Net sales</font></td>
   <td width="10%" align="right" bgcolor="#eeeeee"><font size=2 face="Arial">2,171</font></td>
   <td width="2%" bgcolor="#eeeeee">&nbsp;</td>
   <td width="10%" align="right" bgcolor="#eeeeee"><font size=2 face="Arial">1,702</font></td>
   <td width="2%" bgcolor="#eeeeee">&nbsp;</td>
</tr>
<tr>
   <td><font size=2 face="Arial">Other revenues</font></td>
   <td align="right"><font size=2 face="Arial">1</font></td>
   <td>&nbsp;</td>
   <td align="right"><font size=2 face="Arial">0</font></td>
   <td>&nbsp;</td>
</tr>
<tr>
   <td>&nbsp;</td>
   <td><hr noshade size=1></td>
   <td>&nbsp;</td>
   <td><hr noshade size=1></td>
   <td>&nbsp;</td>
</tr>
<tr bgcolor="#eeeeee">
   <td><font size="2" face="Arial"><b>Net revenues</b></font></td>
   <td align="right"><font size="2" face="Arial"><b>2,172</b></font></td>
   <td>&nbsp;</td>
   <td align="right"><font size="2" face="Arial"><b>1,702</b></font></td>
   <td>&nbsp;</td>
</tr>
<tr>
   <td><font size=2 face="Arial">Cost of sales</font></td>
   <td align="right"><font size=2 face="Arial">(1,360</font></td>
   <td><font size=2 face="Arial">)</font></td>
   <td align="right"><font size=2 face="Arial">(1,095</font></td>
   <td><font size=2 face="Arial">)</font></td>
</tr>
<tr>
   <td>&nbsp;</td>
   <td><hr noshade size=1></td>
   <td>&nbsp;</td>
   <td><hr noshade size=1></td>
   <td>&nbsp;</td>
</tr>
<tr bgcolor="#eeeeee">
   <td><font size="2" face="Arial"><b>Gross profit</b></font></td>
   <td align="right"><font size="2" face="Arial"><b>812</b></font></td>
   <td>&nbsp;</td>
   <td align="right"><font size="2" face="Arial"><b>607</b></font></td>
   <td>&nbsp;</td>
</tr>
<tr>
   <td><font size=2 face="Arial">Selling, general and administrative</font></td>
   <td align="right"><font size=2 face="Arial">(239</font></td>
   <td><font size=2 face="Arial">)</font></td>
   <td align="right"><font size=2 face="Arial">(191</font></td>
   <td><font size=2 face="Arial">)</font></td>
</tr>
<tr bgcolor="#eeeeee">
   <td><font size=2 face="Arial">Research and development</font></td>
   <td align="right"><font size=2 face="Arial">(384</font></td>
   <td><font size=2 face="Arial">)</font></td>
   <td align="right"><font size=2 face="Arial">(298</font></td>
   <td><font size=2 face="Arial">)</font></td>
</tr>
<tr>
   <td><font size=2 face="Arial">Other income and expenses, net</font></td>
   <td align="right"><font size=2 face="Arial">2</font></td>
   <td>&nbsp;</td>
   <td align="right"><font size=2 face="Arial">3</font></td>
   <td>&nbsp;</td>
</tr>
<tr bgcolor="#eeeeee">
   <td><font size=2 face="Arial">Impairment, restructuring charges and other related closure costs</font></td>
   <td align="right"><font size=2 face="Arial">(12</font></td>
   <td><font size=2 face="Arial">)</font></td>
   <td align="right"><font size=2 face="Arial">0</font></td>
   <td>&nbsp;</td>
</tr>
<tr>
   <td>&nbsp;</td>
   <td><hr noshade size=1></td>
   <td>&nbsp;</td>
   <td><hr noshade size=1></td>
   <td>&nbsp;</td>
</tr>
<tr bgcolor="#eeeeee">
   <td><font size="2" face="Arial"><b>Operating income</b></font></td>
   <td align="right"><font size="2" face="Arial"><b>179</b></font></td>
   <td>&nbsp;</td>
   <td align="right"><font size="2" face="Arial"><b>121</b></font></td>
   <td>&nbsp;</td>
</tr>
<tr>
   <td><font size=2 face="Arial">Interest expense, net</font></td>
   <td align="right"><font size=2 face="Arial">(3</font></td>
   <td><font size=2 face="Arial">)</font></td>
   <td align="right"><font size=2 face="Arial">(16</font></td>
   <td><font size=2 face="Arial">)</font></td>
</tr>
<tr bgcolor="#eeeeee">
   <td><font size=2 face="Arial">Equity in loss of joint venture</font></td>
   <td align="right"><font size=2 face="Arial">0</font></td>
   <td>&nbsp;</td>
   <td align="right"><font size=2 face="Arial">(1</font></td>
   <td><font size=2 face="Arial">)</font></td>
</tr>
<tr>
   <td><font size=2 face="Arial">Loss on extinguishment of convertible debt</font></td>
   <td align="right"><font size=2 face="Arial">(4</font></td>
   <td><font size=2 face="Arial">)</font></td>
   <td align="right"><font size=2 face="Arial">(6</font></td>
   <td><font size=2 face="Arial">)</font></td>
</tr>
<tr>
   <td>&nbsp;</td>
   <td><hr noshade size=1></td>
   <td>&nbsp;</td>
   <td><hr noshade size=1></td>
   <td>&nbsp;</td>
</tr>
<tr bgcolor="#eeeeee">
   <td><font size="2" face="Arial"><b>Income before income taxes and minority
    interests</b></font></td>
   <td align="right"><font size="2" face="Arial"><b>172</b></font></td>
   <td>&nbsp;</td>
   <td align="right"><font size="2" face="Arial"><b>98</b></font></td>
   <td>&nbsp;</td>
</tr>
<tr>
   <td><font size=2 face="Arial">Income tax expense</font></td>
   <td align="right"><font size=2 face="Arial">(23</font></td>
   <td><font size=2 face="Arial">)</font></td>
   <td align="right"><font size=2 face="Arial">(18</font></td>
   <td><font size=2 face="Arial">)</font></td>
</tr>
<tr>
   <td>&nbsp;</td>
   <td><hr noshade size=1></td>
   <td>&nbsp;</td>
   <td><hr noshade size=1></td>
   <td>&nbsp;</td>
</tr>
<tr bgcolor="#eeeeee">
   <td><font size="2" face="Arial"><b>Income before minority interests</b></font></td>
   <td align="right"><font size="2" face="Arial"><b>149</b></font></td>
   <td>&nbsp;</td>
   <td align="right"><font size="2" face="Arial"><b>80</b></font></td>
   <td>&nbsp;</td>
</tr>
<tr>
   <td><font size=2 face="Arial">Minority interests</font></td>
   <td align="right"><font size=2 face="Arial">(1</font></td>
   <td><font size=2 face="Arial">)</font></td>
   <td align="right"><font size=2 face="Arial">0</font></td>
   <td>&nbsp;</td>
</tr>
<tr>
   <td>&nbsp;</td>
   <td><hr noshade size=1></td>
   <td>&nbsp;</td>
   <td><hr noshade size=1></td>
   <td>&nbsp;</td>
</tr>
<tr bgcolor="#eeeeee">
   <td><font size="2" face="Arial"><b>Net income</b></font></td>
   <td align="right"><font size="2" face="Arial"><b>148</b></font></td>
   <td>&nbsp;</td>
   <td align="right"><font size="2" face="Arial"><b>80</b></font></td>
   <td>&nbsp;</td>
</tr>
<tr>
   <td>&nbsp;</td>
   <td><hr noshade size=2></td>
   <td>&nbsp;</td>
   <td><hr noshade size=2></td>
   <td>&nbsp;</td>
</tr>
<tr>
   <td>&nbsp;</td>
   <td>&nbsp;</td>
   <td>&nbsp;</td>
   <td>&nbsp;</td>
   <td>&nbsp;</td>
</tr>
<tr bgcolor="#eeeeee">
   <td><font size="2" face="Arial"><b>Earnings per share (Basic)</b></font></td>
   <td align="right"><font size=2 face="Arial">0.17</font></td>
   <td>&nbsp;</td>
   <td align="right"><font size=2 face="Arial">0.09</font></td>
   <td>&nbsp;</td>
</tr>
<tr>
   <td>&nbsp;</td>
   <td><hr noshade size=1></td>
   <td>&nbsp;</td>
   <td><hr noshade size=1></td>
   <td>&nbsp;</td>
</tr>
<tr bgcolor="#eeeeee">
   <td><font size="2" face="Arial"><b>Earnings per share (Diluted)</b></font></td>
   <td align="right"><font size=2 face="Arial">0.16</font></td>
   <td>&nbsp;</td>
   <td align="right"><font size=2 face="Arial">0.09</font></td>
   <td>&nbsp;</td>
</tr>
<tr>
   <td>&nbsp;</td>
   <td><hr noshade size=1></td>
   <td>&nbsp;</td>
   <td><hr noshade size=1></td>
   <td>&nbsp;</td>
</tr>
</table>
<p align="center"><font size="2" face="Arial">
The accompanying notes are an integral part of these Unaudited Interim Consolidated
Financial Statements
</font></p>
<p align="right"><font size="2">
<img src="b759550-2x1x1.jpg" border=0>
</font></p>

<p align="center"><font face="Arial" size="2">F-2</font></p>
<hr noshade align="center" width="100%" size="2">
<font size="2"><a name="pf3"></a>
<div style="page-break-before:always"></div>
<page>
<p><a href="#contents">Back to Contents</a></p>
</font>
<p>
<p align="center"><font size="2" face="Arial"><b>STMicroelectronics N.V.</b>
</font></p>
<p align="center"><font size="2" face="Arial">
  <b>CONSOLIDATED STATEMENTS OF INCOME</b>
</font></p>
<table width="100%" border=0 align="center" cellpadding=0 cellspacing=0>
  <tr>
    <td><font size="1">&nbsp;</font></td>
    <td align="center" colspan=3><font size="1" face="Arial"><b>Six months ended</b></font></td>
    <td align="center"><font size="1">&nbsp;</font></td>
  </tr>
  <tr>
    <td><font size="1">&nbsp;</font></td>
    <td align="center"><b><font size=1 face="Arial">(unaudited)</font></b></td>
    <td><font size="1">&nbsp;</font></td>
    <td align="center"><b><font size=1 face="Arial">(unaudited)</font></b></td>
    <td><font size="1">&nbsp;</font></td>
  </tr>
  <tr>
    <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>
    <td><font size="1">&nbsp;</font></td>
    <td align="center"><font size="1" face="Arial"><b>June 26,</b></font></td>
    <td><font size="1">&nbsp;</font></td>
    <td align="center"><font size="1" face="Arial"><b>June 28,</b></font></td>
    <td><font size="1">&nbsp;</font></td>
  </tr>
  <tr>
    <td><font size="1" face="Arial"><b>In million of U.S. dollars except per
          share amounts</b></font></td>
    <td align="center"><font size="1" face="Arial"><b>2004</b></font></td>
    <td><font size="1">&nbsp;</font></td>
    <td align="center"><font size="1" face="Arial"><b>2003</b></font></td>
    <td><font size="1">&nbsp;</font></td>
  </tr>
  <tr>
    <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 bgcolor="#eeeeee">
   <td><font size=2 face="Arial">Net sales</font></td>
   <td width="10%" align="right"><font size=2 face="Arial">4,199</font></td>
   <td width="2%">&nbsp;</td>
   <td width="10%" align="right"><font size=2 face="Arial">3,319</font></td>
   <td width="2%">&nbsp;</td>
</tr>
<tr>
   <td><font size=2 face="Arial">Other revenues</font></td>
   <td align="right"><font size=2 face="Arial">2</font></td>
   <td>&nbsp;</td>
   <td align="right"><font size=2 face="Arial">2</font></td>
   <td>&nbsp;</td>
</tr>
<tr>
   <td>&nbsp;</td>
   <td><hr noshade size=1></td>
   <td>&nbsp;</td>
   <td><hr noshade size=1></td>
   <td>&nbsp;</td>
</tr>
<tr bgcolor="#eeeeee">
   <td><font size="2" face="Arial"><b>Net revenues</b></font></td>
   <td align="right"><font size="2" face="Arial"><b>4,201</b></font></td>
   <td>&nbsp;</td>
   <td align="right"><font size="2" face="Arial"><b>3,321</b></font></td>
   <td>&nbsp;</td>
</tr>
<tr>
   <td><font size=2 face="Arial">Cost of sales</font></td>
   <td align="right"><font size=2 face="Arial">(2,671</font></td>
   <td><font size=2 face="Arial">)</font></td>
   <td align="right"><font size=2 face="Arial">(2,147</font></td>
   <td><font size=2 face="Arial">)</font></td>
</tr>
<tr>
   <td>&nbsp;</td>
   <td><hr noshade size=1></td>
   <td>&nbsp;</td>
   <td><hr noshade size=1></td>
   <td>&nbsp;</td>
</tr>
<tr bgcolor="#eeeeee">
   <td><font size="2" face="Arial"><b>Gross profit</b></font></td>
   <td align="right"><font size="2" face="Arial"><b>1,530</b></font></td>
   <td>&nbsp;</td>
   <td align="right"><font size="2" face="Arial"><b>1,174</b></font></td>
   <td>&nbsp;</td>
</tr>
<tr>
   <td><font size=2 face="Arial">Selling, general and administrative</font></td>
   <td align="right"><font size=2 face="Arial">(469</font></td>
   <td><font size=2 face="Arial">)</font></td>
   <td align="right"><font size=2 face="Arial">(366</font></td>
   <td><font size=2 face="Arial">)</font></td>
</tr>
<tr bgcolor="#eeeeee">
   <td><font size=2 face="Arial">Research and development</font></td>
   <td align="right"><font size=2 face="Arial">(747</font></td>
   <td><font size=2 face="Arial">)</font></td>
   <td align="right"><font size=2 face="Arial">(581</font></td>
   <td><font size=2 face="Arial">)</font></td>
</tr>
<tr>
   <td><font size=2 face="Arial">Other income and expenses, net</font></td>
   <td align="right"><font size=2 face="Arial">(10</font></td>
   <td><font size=2 face="Arial">)</font></td>
   <td align="right"><font size=2 face="Arial">18</font></td>
   <td>&nbsp;</td>
</tr>
<tr bgcolor="#eeeeee">
   <td><font size=2 face="Arial">Impairment, restructuring charges and other related closure costs</font></td>
   <td align="right"><font size=2 face="Arial">(45</font></td>
   <td><font size=2 face="Arial">)</font></td>
   <td align="right"><font size=2 face="Arial">0</font></td>
   <td>&nbsp;</td>
</tr>
<tr>
   <td>&nbsp;</td>
   <td><hr noshade size=1></td>
   <td>&nbsp;</td>
   <td><hr noshade size=1></td>
   <td>&nbsp;</td>
</tr>
<tr bgcolor="#eeeeee">
   <td><font size="2" face="Arial"><b>Operating income</b></font></td>
   <td align="right"><font size="2" face="Arial"><b>259</b></font></td>
   <td>&nbsp;</td>
   <td align="right"><font size="2" face="Arial"><b>245</b></font></td>
   <td>&nbsp;</td>
</tr>
<tr>
   <td><font size=2 face="Arial">Interest expense, net</font></td>
   <td align="right"><font size=2 face="Arial">(7</font></td>
   <td><font size=2 face="Arial">)</font></td>
   <td align="right"><font size=2 face="Arial">(33</font></td>
   <td><font size=2 face="Arial">)</font></td>
</tr>
<tr bgcolor="#eeeeee">
   <td><font size=2 face="Arial">Equity in loss of joint venture</font></td>
   <td align="right"><font size=2 face="Arial">0</font></td>
   <td>&nbsp;</td>
   <td align="right"><font size=2 face="Arial">(1</font></td>
   <td><font size=2 face="Arial">)</font></td>
</tr>
<tr>
   <td><font size=2 face="Arial">Loss on extinguishment of convertible debt</font></td>
   <td align="right"><font size=2 face="Arial">(4</font></td>
   <td><font size=2 face="Arial">)</font></td>
   <td align="right"><font size=2 face="Arial">(15</font></td>
   <td><font size=2 face="Arial">)</font></td>
</tr>
<tr>
   <td>&nbsp;</td>
   <td><hr noshade size=1></td>
   <td>&nbsp;</td>
   <td><hr noshade size=1></td>
   <td>&nbsp;</td>
</tr>
<tr bgcolor="#eeeeee">
   <td><font size="2" face="Arial"><b>Income before income taxes and minority
    interests</b></font></td>
   <td align="right"><font size="2" face="Arial"><b>248</b></font></td>
   <td>&nbsp;</td>
   <td align="right"><font size="2" face="Arial"><b>196</b></font></td>
   <td>&nbsp;</td>
</tr>
<tr>
   <td><font size=2 face="Arial">Income tax expense</font></td>
   <td align="right"><font size=2 face="Arial">(22</font></td>
   <td><font size=2 face="Arial">)</font></td>
   <td align="right"><font size=2 face="Arial">(35</font></td>
   <td><font size=2 face="Arial">)</font></td>
</tr>
<tr>
   <td>&nbsp;</td>
   <td><hr noshade size=1></td>
   <td>&nbsp;</td>
   <td><hr noshade size=1></td>
   <td>&nbsp;</td>
</tr>
<tr bgcolor="#eeeeee">
   <td><font size="2" face="Arial"><b>Income before minority interests</b></font></td>
   <td align="right"><font size="2" face="Arial"><b>226</b></font></td>
   <td>&nbsp;</td>
   <td align="right"><font size="2" face="Arial"><b>161</b></font></td>
   <td>&nbsp;</td>
</tr>
<tr>
   <td><font size=2 face="Arial">Minority interests</font></td>
   <td align="right"><font size=2 face="Arial">(1</font></td>
   <td><font size=2 face="Arial">)</font></td>
   <td align="right"><font size=2 face="Arial">(2</font></td>
   <td><font size=2 face="Arial">)</font></td>
</tr>
<tr>
   <td>&nbsp;</td>
   <td><hr noshade size=1></td>
   <td>&nbsp;</td>
   <td><hr noshade size=1></td>
   <td>&nbsp;</td>
</tr>
<tr bgcolor="#eeeeee">
   <td><font size="2" face="Arial"><b>Net income</b></font></td>
   <td align="right"><font size="2" face="Arial"><b>225</b></font></td>
   <td>&nbsp;</td>
   <td align="right"><font size="2" face="Arial"><b>159</b></font></td>
   <td>&nbsp;</td>
</tr>
<tr>
   <td>&nbsp;</td>
   <td><hr noshade size=2></td>
   <td>&nbsp;</td>
   <td><hr noshade size=2></td>
   <td>&nbsp;</td>
</tr>
<tr>
   <td>&nbsp;</td>
   <td>&nbsp;</td>
   <td>&nbsp;</td>
   <td>&nbsp;</td>
   <td>&nbsp;</td>
</tr>
<tr bgcolor="#eeeeee">
   <td><font size="2" face="Arial"><b>Earnings per share (Basic)</b></font></td>
   <td align="right"><font size=2 face="Arial">0.25</font></td>
   <td>&nbsp;</td>
   <td align="right"><font size=2 face="Arial">0.18</font></td>
   <td>&nbsp;</td>
</tr>
<tr>
   <td>&nbsp;</td>
   <td><hr noshade size=1></td>
   <td>&nbsp;</td>
   <td><hr noshade size=1></td>
   <td>&nbsp;</td>
</tr>
<tr bgcolor="#eeeeee">
   <td><font size="2" face="Arial"><b>Earnings per share (Diluted)</b></font></td>
   <td align="right"><font size=2 face="Arial">0.24</font></td>
   <td>&nbsp;</td>
   <td align="right"><font size=2 face="Arial">0.18</font></td>
   <td>&nbsp;</td>
</tr>
<tr>
   <td>&nbsp;</td>
   <td><hr noshade size=1></td>
   <td>&nbsp;</td>
   <td><hr noshade size=1></td>
   <td>&nbsp;</td>
</tr>
</table>
<p align="center"><font size="2" face="Arial">
The accompanying notes are an integral part of these Unaudited Interim Consolidated
Financial Statements
</font></p>
<p align="right"><font size="2"><img src="b759550-2x1x1.jpg" border=0></font></p>
<p align="center"><font face="Arial" size="2">F-3</font></p>
<hr noshade align="center" width="100%" size="2">
<font size="2"><a name="pf4"></a>
<div style="page-break-before:always"></div>
<page>
<p><a href="#contents">Back to Contents</a></p>
</font>
<p>
<p align="center"><font size="2" face="Arial"><b>STMicroelectronics N.V.</b>
</font></p>
<p align="center"><font size="2" face="Arial">
  <b>CONSOLIDATED BALANCE SHEETS</b>
</font></p>
<table width="100%" border=0 align="center" cellpadding=0 cellspacing=0>
<tr>
   <td><font size="1">&nbsp;</font></td>
   <td colspan="3" align="center"><font size="1" face="Arial"><b>As at</b></font></td>
   <td><font size="1">&nbsp;</font></td>
</tr>
<tr>
  <td><font size="1">&nbsp;</font></td>
  <td><hr noshade size=1>
  </td>
  <td><hr noshade size=1></td>
  <td><hr noshade size=1>
  </td>
  <td><font size="1">&nbsp;</font></td>
</tr>
<tr>
   <td><font size="1">&nbsp;</font></td>
   <td align="center"><font size="1" face="Arial"><b>June 26,</b></font></td>
   <td><font size="1">&nbsp;</font></td>
   <td align="center"><font size="1" face="Arial"><b>December 31,</b></font></td>
   <td><font size="1">&nbsp;</font></td>
</tr>
<tr>
   <td><font size="1" face="Arial"><b>In million of U.S. dollars</b></font></td>
   <td align="center"><font size="1" face="Arial"><b>2004</b></font></td>
   <td><font size="1">&nbsp;</font></td>
   <td align="center"><font size="1" face="Arial"><b>2003</b></font></td>
   <td><font size="1">&nbsp;</font></td>
</tr>
<tr>
   <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>
   <td><font size="1">&nbsp;</font></td>
   <td align="center"><b><font size=1 face="Arial">(unaudited)</font></b></td>
   <td><font size="1">&nbsp;</font></td>
   <td align="center"><b><font size=1 face="Arial">(audited)</font></b></td>
   <td><font size="1">&nbsp;</font></td>
</tr>
<tr>
   <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>
   <td><font size="2" face="Arial"><b>Assets</b></font></td>
   <td>&nbsp;</td>
   <td>&nbsp;</td>
   <td>&nbsp;</td>
   <td>&nbsp;</td>
</tr>
<tr>
   <td><font size="2" face="Arial"><b>Current assets :</b></font></td>
   <td>&nbsp;</td>
   <td>&nbsp;</td>
   <td>&nbsp;</td>
   <td>&nbsp;</td>
</tr>
<tr>
   <td bgcolor="#eeeeee"><font size=2 face="Arial">&nbsp;&nbsp;&nbsp;Cash and cash equivalents</font></td>
   <td width="10%" align="right" bgcolor="#eeeeee"><font size=2 face="Arial">1,656</font></td>
   <td width="2%" bgcolor="#eeeeee">&nbsp;</td>
   <td width="10%" align="right" bgcolor="#eeeeee"><font size=2 face="Arial">2,998</font></td>
   <td width="2%" bgcolor="#eeeeee">&nbsp;</td>
</tr>
<tr>
   <td><font size=2 face="Arial">&nbsp;&nbsp;&nbsp;Marketable securities</font></td>
   <td align="right"><font size=2 face="Arial">1,030</font></td>
   <td>&nbsp;</td>
   <td align="right"><font size=2 face="Arial">0</font></td>
   <td>&nbsp;</td>
</tr>
<tr>
   <td bgcolor="#eeeeee"><font size=2 face="Arial">&nbsp;&nbsp;&nbsp;Trade accounts receivable</font></td>
   <td align="right" bgcolor="#eeeeee"><font size=2 face="Arial">1,464</font></td>
   <td bgcolor="#eeeeee">&nbsp;</td>
   <td align="right" bgcolor="#eeeeee"><font size=2 face="Arial">1,272</font></td>
   <td bgcolor="#eeeeee">&nbsp;</td>
</tr>
<tr>
   <td><font size=2 face="Arial">&nbsp;&nbsp;&nbsp;Inventories</font></td>
   <td align="right"><font size=2 face="Arial">1,097</font></td>
   <td>&nbsp;</td>
   <td align="right"><font size=2 face="Arial">1,129</font></td>
   <td>&nbsp;</td>
</tr>
<tr>
   <td bgcolor="#eeeeee"><font size=2 face="Arial">&nbsp;&nbsp;&nbsp;Deferred tax assets</font></td>
   <td align="right" bgcolor="#eeeeee"><font size=2 face="Arial">130</font></td>
   <td bgcolor="#eeeeee">&nbsp;</td>
   <td align="right" bgcolor="#eeeeee"><font size=2 face="Arial">106</font></td>
   <td bgcolor="#eeeeee">&nbsp;</td>
</tr>
<tr>
   <td><font size=2 face="Arial">&nbsp;&nbsp;&nbsp;Other receivables and assets</font></td>
   <td align="right"><font size=2 face="Arial">629</font></td>
   <td>&nbsp;</td>
   <td align="right"><font size=2 face="Arial">616</font></td>
   <td>&nbsp;</td>
</tr>
<tr>
   <td>&nbsp;</td>
   <td><hr noshade size=1></td>
   <td>&nbsp;</td>
   <td><hr noshade size=1></td>
   <td>&nbsp;</td>
</tr>
<tr>
   <td bgcolor="#eeeeee"><font size="2" face="Arial"><b>Total current assets</b></font></td>
   <td align="right" bgcolor="#eeeeee"><font size="2" face="Arial"><b>6,006</b></font></td>
   <td bgcolor="#eeeeee">&nbsp;</td>
   <td align="right" bgcolor="#eeeeee"><font size="2" face="Arial"><b>6,121</b></font></td>
   <td bgcolor="#eeeeee">&nbsp;</td>
</tr>
<tr>
   <td>&nbsp;</td>
   <td><hr noshade size=1></td>
   <td>&nbsp;</td>
   <td><hr noshade size=1></td>
   <td>&nbsp;</td>
</tr>
<tr>
   <td bgcolor="#eeeeee"><font size=2 face="Arial">Goodwill</font></td>
   <td align="right" bgcolor="#eeeeee"><font size=2 face="Arial">259</font></td>
   <td bgcolor="#eeeeee">&nbsp;</td>
   <td align="right" bgcolor="#eeeeee"><font size=2 face="Arial">267</font></td>
   <td bgcolor="#eeeeee">&nbsp;</td>
</tr>
<tr>
   <td><font size=2 face="Arial">Other intangible assets, net</font></td>
   <td align="right"><font size=2 face="Arial">302</font></td>
   <td>&nbsp;</td>
   <td align="right"><font size=2 face="Arial">325</font></td>
   <td>&nbsp;</td>
</tr>
<tr>
   <td bgcolor="#eeeeee"><font size=2 face="Arial">Property, plant and equipment, net</font></td>
   <td align="right" bgcolor="#eeeeee"><font size=2 face="Arial">6,791</font></td>
   <td bgcolor="#eeeeee">&nbsp;</td>
   <td align="right" bgcolor="#eeeeee"><font size=2 face="Arial">6,620</font></td>
   <td bgcolor="#eeeeee">&nbsp;</td>
</tr>
<tr>
   <td><font size=2 face="Arial">Long-term deferred tax assets</font></td>
   <td align="right"><font size=2 face="Arial">43</font></td>
   <td>&nbsp;</td>
   <td align="right"><font size=2 face="Arial">45</font></td>
   <td>&nbsp;</td>
</tr>
<tr>
   <td bgcolor="#eeeeee"><font size=2 face="Arial">Investments and other non-current assets</font></td>
   <td align="right" bgcolor="#eeeeee"><font size=2 face="Arial">108</font></td>
   <td bgcolor="#eeeeee">&nbsp;</td>
   <td align="right" bgcolor="#eeeeee"><font size=2 face="Arial">99</font></td>
   <td bgcolor="#eeeeee">&nbsp;</td>
</tr>
<tr>
   <td>&nbsp;</td>
   <td><hr noshade size=1></td>
   <td>&nbsp;</td>
   <td><hr noshade size=1></td>
   <td>&nbsp;</td>
</tr>
<tr>
   <td bgcolor="#eeeeee">&nbsp;</td>
   <td align="right" bgcolor="#eeeeee"><font size="2" face="Arial"><b>7,503</b></font></td>
   <td bgcolor="#eeeeee">&nbsp;</td>
   <td align="right" bgcolor="#eeeeee"><font size="2" face="Arial"><b>7,356</b></font></td>
   <td bgcolor="#eeeeee">&nbsp;</td>
</tr>
<tr>
   <td>&nbsp;</td>
   <td><hr noshade size=1></td>
   <td>&nbsp;</td>
   <td><hr noshade size=1></td>
   <td>&nbsp;</td>
</tr>
<tr>
   <td bgcolor="#eeeeee"><font size="2" face="Arial"><b>Total assets</b></font></td>
   <td align="right" bgcolor="#eeeeee"><font size="2" face="Arial"><b>13,509</b></font></td>
   <td bgcolor="#eeeeee">&nbsp;</td>
   <td align="right" bgcolor="#eeeeee"><font size="2" face="Arial"><b>13,477</b></font></td>
   <td bgcolor="#eeeeee">&nbsp;</td>
</tr>
<tr>
   <td>&nbsp;</td>
   <td><hr noshade size=1></td>
   <td>&nbsp;</td>
   <td><hr noshade size=1></td>
   <td>&nbsp;</td>
</tr>
<tr>
   <td><font size="2" face="Arial"><b>Liabilities and shareholders' equity</b></font></td>
   <td>&nbsp;</td>
   <td>&nbsp;</td>
   <td>&nbsp;</td>
   <td>&nbsp;</td>
</tr>
<tr>
   <td><font size="2" face="Arial"><b>Current liabilities:</b></font></td>
   <td>&nbsp;</td>
   <td>&nbsp;</td>
   <td>&nbsp;</td>
   <td>&nbsp;</td>
</tr>
<tr>
   <td bgcolor="#eeeeee"><font size=2 face="Arial">&nbsp;&nbsp;&nbsp;Bank overdrafts</font></td>
   <td align="right" bgcolor="#eeeeee"><font size=2 face="Arial">8</font></td>
   <td bgcolor="#eeeeee">&nbsp;</td>
   <td align="right" bgcolor="#eeeeee"><font size=2 face="Arial">45</font></td>
   <td bgcolor="#eeeeee">&nbsp;</td>
</tr>
<tr>
   <td><font size=2 face="Arial">&nbsp;&nbsp;&nbsp;Current portion of long-term debt</font></td>
   <td align="right"><font size=2 face="Arial">1,012</font></td>
   <td>&nbsp;</td>
   <td align="right"><font size=2 face="Arial">106</font></td>
   <td>&nbsp;</td>
</tr>
<tr>
   <td bgcolor="#eeeeee"><font size=2 face="Arial">&nbsp;&nbsp;&nbsp;Trade accounts payable</font></td>
   <td align="right" bgcolor="#eeeeee"><font size=2 face="Arial">1,490</font></td>
   <td bgcolor="#eeeeee">&nbsp;</td>
   <td align="right" bgcolor="#eeeeee"><font size=2 face="Arial">1,044</font></td>
   <td bgcolor="#eeeeee">&nbsp;</td>
</tr>
<tr>
   <td><font size=2 face="Arial">&nbsp;&nbsp;&nbsp;Other payables and accrued liabilities</font></td>
   <td align="right"><font size=2 face="Arial">669</font></td>
   <td>&nbsp;</td>
   <td align="right"><font size=2 face="Arial">693</font></td>
   <td>&nbsp;</td>
</tr>
<tr>
   <td bgcolor="#eeeeee"><font size=2 face="Arial">&nbsp;&nbsp;&nbsp;Deferred tax liabilities</font></td>
   <td align="right" bgcolor="#eeeeee"><font size=2 face="Arial">16</font></td>
   <td bgcolor="#eeeeee">&nbsp;</td>
   <td align="right" bgcolor="#eeeeee"><font size=2 face="Arial">10</font></td>
   <td bgcolor="#eeeeee">&nbsp;</td>
</tr>
<tr>
   <td><font size=2 face="Arial">&nbsp;&nbsp;&nbsp;Accrued income tax</font></td>
   <td align="right"><font size=2 face="Arial">176</font></td>
   <td>&nbsp;</td>
   <td align="right"><font size=2 face="Arial">179</font></td>
   <td>&nbsp;</td>
</tr>
<tr>
   <td>&nbsp;</td>
   <td><hr noshade size=1></td>
   <td>&nbsp;</td>
   <td><hr noshade size=1></td>
   <td>&nbsp;</td>
</tr>
<tr>
   <td bgcolor="#eeeeee"><font size="2" face="Arial"><b>Total current liabilities</b></font></td>
   <td align="right" bgcolor="#eeeeee"><font size="2" face="Arial"><b>3,371</b></font></td>
   <td bgcolor="#eeeeee">&nbsp;</td>
   <td align="right" bgcolor="#eeeeee"><font size="2" face="Arial"><b>2,077</b></font></td>
   <td bgcolor="#eeeeee">&nbsp;</td>
</tr>
<tr>
   <td>&nbsp;</td>
   <td><hr noshade size=1></td>
   <td>&nbsp;</td>
   <td><hr noshade size=1></td>
   <td>&nbsp;</td>
</tr>
<tr>
   <td>&nbsp;</td>
   <td>&nbsp;</td>
   <td>&nbsp;</td>
   <td>&nbsp;</td>
   <td>&nbsp;</td>
</tr>
<tr>
   <td bgcolor="#eeeeee"><font size=2 face="Arial">Long-term debt</font></td>
   <td align="right" bgcolor="#eeeeee"><font size=2 face="Arial">1,741</font></td>
   <td bgcolor="#eeeeee">&nbsp;</td>
   <td align="right" bgcolor="#eeeeee"><font size=2 face="Arial">2,944</font></td>
   <td bgcolor="#eeeeee">&nbsp;</td>
</tr>
<tr>
   <td><font size=2 face="Arial">Reserve for pension and termination indemnities</font></td>
   <td align="right"><font size=2 face="Arial">245</font></td>
   <td>&nbsp;</td>
   <td align="right"><font size=2 face="Arial">236</font></td>
   <td>&nbsp;</td>
</tr>
<tr>
   <td bgcolor="#eeeeee"><font size=2 face="Arial">Long-term deferred tax liabilities</font></td>
   <td align="right" bgcolor="#eeeeee"><font size=2 face="Arial">49</font></td>
   <td bgcolor="#eeeeee">&nbsp;</td>
   <td align="right" bgcolor="#eeeeee"><font size=2 face="Arial">37</font></td>
   <td bgcolor="#eeeeee">&nbsp;</td>
</tr>
<tr>
   <td><font size=2 face="Arial">Other non-current liabilities</font></td>
   <td align="right"><font size=2 face="Arial">19</font></td>
   <td>&nbsp;</td>
   <td align="right"><font size=2 face="Arial">38</font></td>
   <td>&nbsp;</td>
</tr>
<tr>
   <td>&nbsp;</td>
   <td><hr noshade size=1></td>
   <td>&nbsp;</td>
   <td><hr noshade size=1></td>
   <td>&nbsp;</td>
</tr>
<tr>
   <td bgcolor="#eeeeee">&nbsp;</td>
   <td align="right" bgcolor="#eeeeee"><font size="2" face="Arial"><b>2,054</b></font></td>
   <td bgcolor="#eeeeee">&nbsp;</td>
   <td align="right" bgcolor="#eeeeee"><font size="2" face="Arial"><b>3,255</b></font></td>
   <td bgcolor="#eeeeee">&nbsp;</td>
</tr>
<tr>
   <td>&nbsp;</td>
   <td><hr noshade size=1></td>
   <td>&nbsp;</td>
   <td><hr noshade size=1></td>
   <td>&nbsp;</td>
</tr>
<tr>
   <td bgcolor="#eeeeee"><font size="2" face="Arial"><b>Total liabilities</b></font></td>
   <td align="right" bgcolor="#eeeeee"><font size="2" face="Arial"><b>5,425</b></font></td>
   <td bgcolor="#eeeeee">&nbsp;</td>
   <td align="right" bgcolor="#eeeeee"><font size="2" face="Arial"><b>5,332</b></font></td>
   <td bgcolor="#eeeeee">&nbsp;</td>
</tr>
<tr>
   <td>&nbsp;</td>
   <td><hr noshade size=1></td>
   <td>&nbsp;</td>
   <td><hr noshade size=1></td>
   <td>&nbsp;</td>
</tr>
<tr>
   <td><font size=2 face="Arial">Commitment and contingencies</font></td>
   <td>&nbsp;</td>
   <td>&nbsp;</td>
   <td>&nbsp;</td>
   <td>&nbsp;</td>
</tr>
<tr>
   <td bgcolor="#eeeeee"><font size="2" face="Arial"><b>Minority interests</b></font></td>
   <td align="right" bgcolor="#eeeeee"><font size=2 face="Arial">47</font></td>
   <td bgcolor="#eeeeee">&nbsp;</td>
   <td align="right" bgcolor="#eeeeee"><font size=2 face="Arial">45</font></td>
   <td bgcolor="#eeeeee">&nbsp;</td>
</tr>
<tr>
   <td>&nbsp;</td>
   <td>&nbsp;</td>
   <td>&nbsp;</td>
   <td>&nbsp;</td>
   <td>&nbsp;</td>
</tr>
<tr>
   <td valign="bottom"><font size=2 face="Arial">Common stock<br>
     </font></td>
   <td align="right" valign="bottom">&nbsp;</td>
   <td>&nbsp;</td>
   <td align="right" valign="bottom">&nbsp;</td>
   <td>&nbsp;</td>
</tr>
<tr>
  <td><font size=2 face="Arial">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#149;&nbsp;&nbsp;(preferred stock:540,000,000 shares authorized,
      not issued; <br>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#149;&nbsp;&nbsp;common stock:Euro 1.04 nominal value, 1,200,000,000 shares authorized, <br>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<font color="#FFFFFF">&#149;</font>&nbsp;&nbsp;904,819,025
shares issued, 891,419,025 shares outstanding)</font></td>
  <td align="right" valign="top"><font size=2 face="Arial">1,149</font></td>
  <td>&nbsp;</td>
  <td align="right" valign="top"><font size=2 face="Arial">1,146</font></td>
  <td>&nbsp;</td>
</tr>
<tr>
   <td bgcolor="#eeeeee"><font size=2 face="Arial">Capital surplus</font></td>
   <td align="right" bgcolor="#eeeeee"><font size=2 face="Arial">1,918</font></td>
   <td bgcolor="#eeeeee">&nbsp;</td>
   <td align="right" bgcolor="#eeeeee"><font size=2 face="Arial">1,905</font></td>
   <td bgcolor="#eeeeee">&nbsp;</td>
</tr>
<tr>
   <td><font size=2 face="Arial">Accumulated result</font></td>
   <td align="right"><font size=2 face="Arial">4,892</font></td>
   <td>&nbsp;</td>
   <td align="right"><font size=2 face="Arial">4,774</font></td>
   <td>&nbsp;</td>
</tr>
<tr>
   <td bgcolor="#eeeeee"><font size=2 face="Arial">Accumulated other comprehensive (loss) income</font></td>
   <td align="right" bgcolor="#eeeeee"><font size=2 face="Arial">426</font></td>
   <td bgcolor="#eeeeee">&nbsp;</td>
   <td align="right" bgcolor="#eeeeee"><font size=2 face="Arial">623</font></td>
   <td bgcolor="#eeeeee">&nbsp;</td>
</tr>
<tr>
   <td><font size=2 face="Arial">Treasury stock</font></td>
   <td align="right"><font size=2 face="Arial">&#150;348</font></td>
   <td>&nbsp;</td>
   <td align="right"><font size=2 face="Arial">&#150;348</font></td>
   <td>&nbsp;</td>
</tr>
<tr>
   <td>&nbsp;</td>
   <td><hr noshade size=1></td>
   <td>&nbsp;</td>
   <td><hr noshade size=1></td>
   <td>&nbsp;</td>
</tr>
<tr>
   <td bgcolor="#eeeeee"><font size="2" face="Arial"><b>Shareholders' equity</b></font></td>
   <td align="right" bgcolor="#eeeeee"><font size="2" face="Arial"><b>8,037</b></font></td>
   <td bgcolor="#eeeeee">&nbsp;</td>
   <td align="right" bgcolor="#eeeeee"><font size="2" face="Arial"><b>8,100</b></font></td>
   <td bgcolor="#eeeeee">&nbsp;</td>
</tr>
<tr>
   <td>&nbsp;</td>
   <td><hr noshade size=1></td>
   <td>&nbsp;</td>
   <td><hr noshade size=1></td>
   <td>&nbsp;</td>
</tr>
<tr>
   <td>&nbsp;</td>
   <td>&nbsp;</td>
   <td>&nbsp;</td>
   <td>&nbsp;</td>
   <td>&nbsp;</td>
</tr>
<tr>
   <td bgcolor="#eeeeee"><font size="2" face="Arial"><b>Total liabilities and
    shareholders' equity</b></font></td>
   <td align="right" bgcolor="#eeeeee"><font size="2" face="Arial"><b>13,509</b></font></td>
   <td bgcolor="#eeeeee">&nbsp;</td>
   <td align="right" bgcolor="#eeeeee"><font size="2" face="Arial"><b>13,477</b></font></td>
   <td bgcolor="#eeeeee">&nbsp;</td>
</tr>
<tr>
  <td>&nbsp;</td>
  <td><hr noshade size=2>
  </td>
  <td>&nbsp;</td>
  <td><hr noshade size=2>
  </td>
  <td>&nbsp;</td>
</tr>
</table>
<p align="center"><font size="2" face="Arial">
The accompanying notes are an integral part of these Unaudited Interim Consolidated
Financial Statements
</font></p>
<p align="right"><font size="2"><img src="b759550-2x1x1.jpg" border=0></font></p>

<p align="center"><font face="Arial" size="2">F-4</font></p>
<hr noshade align="center" width="100%" size="2">
<font size="2"><a name="pf6"></a> </font>
<div style="page-break-before:always"></div>
<page>
<p><font size="2"><a href="#contents">Back to Contents</a></font></p>
<p align="center"><font size="2" face="Arial"> <b>STMicroelectroni</b></font><font size="2" face="Arial"><b>cs
      N.V.</b> </font></p>
<p align="center"><font size="2" face="Arial"> <b>CONSOLIDATED STAT</b></font><font size="2" face="Arial"><b>EMENTS
      OF CASH FLOWS</b> </font></p>
<table width="100%" border=0 align="center" cellpadding=0 cellspacing=0>
  <tr>
    <td><font size="1">&nbsp;</font></td>
    <td align="center" colspan=3><font size="1" face="Arial"><b>Six Months Ended</b></font></td>
    <td align="center"><font size="1">&nbsp;</font></td>
  </tr>
  <tr>
    <td><font size="1">&nbsp;</font></td>
    <td colspan=3><hr noshade size=1>
    </td>
    <td><font size="1">&nbsp;</font></td>
  </tr>
  <tr>
    <td><font size="1">&nbsp;</font></td>
    <td align="center"><font size="1" face="Arial"><b>(unaudited)</b></font></td>
    <td align="center"><font size="1">&nbsp;</font></td>
    <td align="center"><font size="1" face="Arial"><b>(unaudited)</b></font></td>
    <td align="center"><font size="1">&nbsp;</font></td>
  </tr>
  <tr>
    <td><font size="1">&nbsp;</font></td>
    <td align="center"><font size="1" face="Arial"><b>June 26,</b></font></td>
    <td align="center"><font size="1">&nbsp;</font></td>
    <td align="center"><font size="1" face="Arial"><b>June 28,</b></font></td>
    <td align="center"><font size="1">&nbsp;</font></td>
  </tr>
  <tr>
    <td><font size="1" face="Arial"><b>In million of U.S. dollars</b></font></td>
    <td align="center"><font size="1" face="Arial"><b>2004</b></font></td>
    <td align="center"><font size="1">&nbsp;</font></td>
    <td align="center"><font size="1" face="Arial"><b>2003</b></font></td>
    <td align="center"><font size="1">&nbsp;</font></td>
  </tr>
  <tr>
    <td>&nbsp;</td>
    <td align="center">&nbsp;</td>
    <td align="center">&nbsp;</td>
    <td align="center">&nbsp;</td>
    <td align="center">&nbsp;</td>
  </tr>
  <tr>
    <td><font size="2" face="Arial"><b>Cash flows from operating activities:</b></font></td>
    <td align="center">&nbsp;</td>
    <td align="center">&nbsp;</td>
    <td align="center">&nbsp;</td>
    <td align="center">&nbsp;</td>
  </tr>
  <tr bgcolor="#eeeeee">
    <td><font size="2">&nbsp;&nbsp;&nbsp;<font face="Arial">Net income</font></font></td>
    <td width="10%" align="right"><font size="2" face="Arial">225</font></td>
    <td width="2%">&nbsp;</td>
    <td width="10%" align="right"><font size="2" face="Arial">159</font></td>
    <td width="2%">&nbsp;</td>
  </tr>
  <tr>
    <td><font size="2">&nbsp;&nbsp;&nbsp;<font face="Arial">Items to reconcile
          net income and cash flows from operating activities:</font></font></td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
  </tr>
  <tr>
    <td><font size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<font face="Arial">Depreciation
            and amortization</font></font></td>
    <td align="right"><font size="2" face="Arial">858</font></td>
    <td>&nbsp;</td>
    <td align="right"><font size="2" face="Arial">771</font></td>
    <td>&nbsp;</td>
  </tr>
  <tr bgcolor="#eeeeee">
    <td><font size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<font face="Arial">Amortization
            of discount on convertible debt</font></font></td>
    <td align="right"><font size="2" face="Arial">21</font></td>
    <td>&nbsp;</td>
    <td align="right"><font size="2" face="Arial">40</font></td>
    <td>&nbsp;</td>
  </tr>
  <tr>
    <td><font size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<font face="Arial">Loss
            on extinguishment of convertible debt</font></font></td>
    <td align="right"><font size="2" face="Arial">4</font></td>
    <td>&nbsp;</td>
    <td align="right"><font size="2" face="Arial">15</font></td>
    <td>&nbsp;</td>
  </tr>
  <tr bgcolor="#eeeeee">
    <td><font size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<font face="Arial">Other
            non-cash items</font></font></td>
    <td align="right"><font size="2" face="Arial">(5</font></td>
    <td><font size="2" face="Arial">)</font></td>
    <td align="right"><font size="2" face="Arial">(2</font></td>
    <td><font size="2" face="Arial">)</font></td>
  </tr>
  <tr>
    <td><font size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<font face="Arial">Minority
            interest in net income of subsidiaries</font></font></td>
    <td align="right"><font size="2" face="Arial">1</font></td>
    <td>&nbsp;</td>
    <td align="right"><font size="2" face="Arial">2</font></td>
    <td>&nbsp;</td>
  </tr>
  <tr bgcolor="#eeeeee">
    <td><font size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<font face="Arial">Deferred
            income tax</font></font></td>
    <td align="right"><font size="2" face="Arial">(7</font></td>
    <td><font size="2" face="Arial">)</font></td>
    <td align="right"><font size="2" face="Arial">(14</font></td>
    <td><font size="2" face="Arial">)</font></td>
  </tr>
  <tr>
    <td><font size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<font face="Arial">Equity
            in loss of joint venture</font></font></td>
    <td align="right"><font size="2">&#8212;</font></td>
    <td>&nbsp;</td>
    <td align="right"><font size="2" face="Arial">1</font></td>
    <td>&nbsp;</td>
  </tr>
  <tr bgcolor="#eeeeee">
    <td><font size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<font face="Arial">Impairment,
            restructuring charges and other related closure costs, net of cash
            payments</font></font></td>
    <td align="right"><font size="2" face="Arial">20</font></td>
    <td>&nbsp;</td>
    <td align="right"><font size="2">&#8212;</font></td>
    <td>&nbsp;</td>
  </tr>
  <tr>
    <td><font size="2">&nbsp;&nbsp;&nbsp;<font face="Arial">Changes in assets
          and liabilities:</font></font></td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
  </tr>
  <tr>
    <td><font size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<font face="Arial">Trade
            receivables</font></font></td>
    <td align="right"><font size="2" face="Arial">(201</font></td>
    <td><font size="2" face="Arial">)</font></td>
    <td align="right"><font size="2" face="Arial">(78</font></td>
    <td><font size="2" face="Arial">)</font></td>
  </tr>
  <tr bgcolor="#eeeeee">
    <td><font size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<font face="Arial">Inventories</font></font></td>
    <td align="right"><font size="2" face="Arial">12</font></td>
    <td>&nbsp;</td>
    <td align="right"><font size="2" face="Arial">(115</font></td>
    <td><font size="2" face="Arial">)</font></td>
  </tr>
  <tr>
    <td><font size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<font face="Arial">Trade
            payables</font></font></td>
    <td align="right"><font size="2" face="Arial">235</font></td>
    <td>&nbsp;</td>
    <td align="right"><font size="2" face="Arial">84</font></td>
    <td>&nbsp;</td>
  </tr>
  <tr bgcolor="#eeeeee">
    <td><font size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<font face="Arial">Other
            assets and liabilities, net</font></font></td>
    <td align="right"><font size="2" face="Arial">(102</font></td>
    <td><font size="2" face="Arial">)</font></td>
    <td align="right"><font size="2" face="Arial">(87</font></td>
    <td><font size="2" face="Arial">)</font></td>
  </tr>
  <tr>
    <td>&nbsp;</td>
    <td><hr noshade size=1>
    </td>
    <td>&nbsp;</td>
    <td><hr noshade size=1>
    </td>
    <td>&nbsp;</td>
  </tr>
  <tr bgcolor="#eeeeee">
    <td><font size="2" face="Arial"><b>Net cash from operating activities</b></font></td>
    <td align="right"><font size="2" face="Arial"><b>1,061</b></font></td>
    <td>&nbsp;</td>
    <td align="right"><font size="2" face="Arial"><b>776</b></font></td>
    <td>&nbsp;</td>
  </tr>
  <tr>
    <td>&nbsp;</td>
    <td><hr noshade size=1>
    </td>
    <td>&nbsp;</td>
    <td><hr noshade size=1>
    </td>
    <td>&nbsp;</td>
  </tr>
  <tr>
    <td><font size="2" face="Arial"><b>Cash flows from investing activities:</b></font></td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
  </tr>
  <tr bgcolor="#eeeeee">
    <td><font size="2">&nbsp;&nbsp;&nbsp;<font face="Arial">Payment for purchase
          of tangible assets</font></font></td>
    <td align="right"><font size="2" face="Arial">(908</font></td>
    <td><font size="2" face="Arial">)</font></td>
    <td align="right"><font size="2" face="Arial">(554</font></td>
    <td><font size="2" face="Arial">)</font></td>
  </tr>
  <tr>
    <td><font size="2">&nbsp;&nbsp;&nbsp;<font face="Arial">Payment for purchase
          of marketable securities</font></font></td>
    <td align="right"><font size="2" face="Arial">(1,030</font></td>
    <td><font size="2" face="Arial">)</font></td>
    <td align="right"><font size="2" face="Arial">(1,100</font></td>
    <td><font size="2" face="Arial">)</font></td>
  </tr>
  <tr bgcolor="#eeeeee">
    <td><font size="2">&nbsp;&nbsp;&nbsp;<font face="Arial">Investment in intangible
          and financial assets</font></font></td>
    <td align="right"><font size="2" face="Arial">(31</font></td>
    <td><font size="2" face="Arial">)</font></td>
    <td align="right"><font size="2" face="Arial">(29</font></td>
    <td><font size="2" face="Arial">)</font></td>
  </tr>
  <tr>
    <td><font size="2">&nbsp;&nbsp;&nbsp;<font face="Arial">Payment for acquisitions,
          net of cash received</font></font></td>
    <td align="right"><font size="2" face="Arial">(3</font></td>
    <td><font size="2" face="Arial">)</font></td>
    <td align="right"><font size="2" face="Arial">(139</font></td>
    <td><font size="2" face="Arial">)</font></td>
  </tr>
  <tr>
    <td>&nbsp;</td>
    <td><hr noshade size=1>
    </td>
    <td>&nbsp;</td>
    <td><hr noshade size=1>
    </td>
    <td>&nbsp;</td>
  </tr>
  <tr bgcolor="#eeeeee">
    <td><font size="2" face="Arial"><b>Net cash used in investing activities</b></font></td>
    <td align="right"><font size="2" face="Arial"><b>(1,972</b></font></td>
    <td><font size="2" face="Arial"><b>)</b></font></td>
    <td align="right"><font size="2" face="Arial"><b>(1,822</b></font></td>
    <td><font size="2" face="Arial"><b>)</b></font></td>
  </tr>
  <tr>
    <td>&nbsp;</td>
    <td><hr noshade size=1>
    </td>
    <td>&nbsp;</td>
    <td><hr noshade size=1>
    </td>
    <td>&nbsp;</td>
  </tr>
  <tr>
    <td><font size="2" face="Arial"><b>Cash flows from financing activities:</b></font></td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
  </tr>
  <tr bgcolor="#eeeeee">
    <td><font size="2">&nbsp;&nbsp;&nbsp;<font face="Arial">Repayment of long-term
          debt</font></font></td>
    <td align="right"><font size="2" face="Arial">(300</font></td>
    <td><font size="2" face="Arial">)</font></td>
    <td align="right"><font size="2" face="Arial">(550</font></td>
    <td><font size="2" face="Arial">)</font></td>
  </tr>
  <tr>
    <td><font size="2">&nbsp;&nbsp;&nbsp;<font face="Arial">Decrease in short-term
          facilities</font></font></td>
    <td align="right"><font size="2" face="Arial">(37</font></td>
    <td><font size="2" face="Arial">)</font></td>
    <td align="right"><font size="2" face="Arial">(14</font></td>
    <td><font size="2" face="Arial">)</font></td>
  </tr>
  <tr bgcolor="#eeeeee">
    <td><font size="2">&nbsp;&nbsp;&nbsp;<font face="Arial">Capital increase</font></font></td>
    <td align="right"><font size="2" face="Arial">16</font></td>
    <td>&nbsp;</td>
    <td align="right"><font size="2" face="Arial">3</font></td>
    <td>&nbsp;</td>
  </tr>
  <tr>
    <td><font size="2">&nbsp;&nbsp;&nbsp;<font face="Arial">Dividends paid</font></font></td>
    <td align="right"><font size="2" face="Arial">(107</font></td>
    <td><font size="2" face="Arial">)</font></td>
    <td align="right"><font size="2" face="Arial">(71</font></td>
    <td><font size="2" face="Arial">)</font></td>
  </tr>
  <tr>
    <td>&nbsp;</td>
    <td><hr noshade size=1>
    </td>
    <td>&nbsp;</td>
    <td><hr noshade size=1>
    </td>
    <td>&nbsp;</td>
  </tr>
  <tr bgcolor="#eeeeee">
    <td><font size="2" face="Arial"><b>Net cash used in financing activities</b></font></td>
    <td align="right"><font size="2" face="Arial"><b>(428</b></font></td>
    <td><font size="2" face="Arial"><b>)</b></font></td>
    <td align="right"><font size="2" face="Arial"><b>(632</b></font></td>
    <td><font size="2" face="Arial"><b>)</b></font></td>
  </tr>
  <tr>
    <td>&nbsp;</td>
    <td><hr noshade size=1>
    </td>
    <td>&nbsp;</td>
    <td><hr noshade size=1>
    </td>
    <td>&nbsp;</td>
  </tr>
  <tr bgcolor="#eeeeee">
    <td><font size="2">&nbsp;&nbsp;&nbsp;<font face="Arial">Effect of changes
          in exchange rates</font></font></td>
    <td align="right"><font size="2" face="Arial">(3</font></td>
    <td><font size="2" face="Arial">)</font></td>
    <td align="right"><font size="2" face="Arial">3</font></td>
    <td>&nbsp;</td>
  </tr>
  <tr>
    <td>&nbsp;</td>
    <td><hr noshade size=1>
    </td>
    <td>&nbsp;</td>
    <td><hr noshade size=1>
    </td>
    <td>&nbsp;</td>
  </tr>
  <tr bgcolor="#eeeeee">
    <td><font size="2" face="Arial"><b>Net cash decrease</b></font></td>
    <td align="right"><font size="2" face="Arial"><b>(1,342</b></font></td>
    <td><font size="2" face="Arial"><b>)</b></font></td>
    <td align="right"><font size="2" face="Arial"><b>(1,675</b></font></td>
    <td><font size="2" face="Arial"><b>)</b></font></td>
  </tr>
  <tr>
    <td>&nbsp;</td>
    <td align="right"><hr noshade size=2>
    </td>
    <td>&nbsp;</td>
    <td align="right"><hr noshade size=2>
    </td>
    <td>&nbsp;</td>
  </tr>
  <tr bgcolor="#eeeeee">
    <td><font size="2" face="Arial">Cash and cash equivalents at beginning
          of period</font></td>
    <td align="right"><font size="2" face="Arial"><b>2,998</b></font></td>
    <td>&nbsp;</td>
    <td align="right"><font size="2" face="Arial"><b>2,562</b></font></td>
    <td>&nbsp;</td>
  </tr>
  <tr>
    <td>&nbsp;</td>
    <td><hr noshade size=1>
    </td>
    <td>&nbsp;</td>
    <td><hr noshade size=1>
    </td>
    <td>&nbsp;</td>
  </tr>
  <tr bgcolor="#eeeeee">
    <td><font size="2" face="Arial">Cash and cash equivalents at end of period</font></td>
    <td align="right"><font size="2" face="Arial"><b>1,656</b></font></td>
    <td>&nbsp;</td>
    <td align="right"><font size="2" face="Arial"><b>887</b></font></td>
    <td>&nbsp;</td>
  </tr>
  <tr>
    <td>&nbsp;</td>
    <td align="right"><hr noshade size=2>
    </td>
    <td>&nbsp;</td>
    <td align="right"><hr noshade size=2>
    </td>
    <td>&nbsp;</td>
  </tr>
</table>
<p align="center"><font size="2" face="Arial"> The accompanying notes are an
    integral part of these Unaudited Interim Consolidated Financial Statements </font></p>
<p align="right"><font size="2"><img src="b759550-2x1x1.jpg" border=0></font></p>
<p align="center"><font face="Arial" size="2">F-5</font></p>
<hr noshade align="center" width="100%" size="2">
<div style="page-break-before:always"></div>
<font size="2"><a name="pf5"></a>
<div style="page-break-before:always"></div>
<page>
<p><a href="#contents">Back to Contents</a></p>
<p align="center">
  <b><font face="Arial">CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY</font></b>
</p>
</font>
<table width="100%" border=0 align="center" cellpadding=0 cellspacing=0>
  <tr>
    <td colspan=2><font size="1" face="Arial"><b>In million of U.S. dollars,
          except per share amounts</b></font></td>
    <td><font size="1">&nbsp;</font></td>
    <td align="center"><font size="1">&nbsp;</font></td>
    <td align="center"><font size="1">&nbsp;</font></td>
    <td align="center"><font size="1">&nbsp;</font></td>
    <td align="center"><font size="1">&nbsp;</font></td>
    <td align="center"><font size="1">&nbsp;</font></td>
    <td align="center"><font size="1">&nbsp;</font></td>
    <td align="center"><font size="1" face="Arial"><b>Accumulated</b></font></td>
    <td align="center"><font size="1">&nbsp;</font></td>
    <td align="center"><font size="1">&nbsp;</font></td>
    <td align="center"><font size="1">&nbsp;</font></td>
  </tr>
  <tr>
    <td><font size="1">&nbsp;</font></td>
    <td><font size="1">&nbsp;</font></td>
    <td><font size="1">&nbsp;</font></td>
    <td><font size="1">&nbsp;</font></td>
    <td><font size="1">&nbsp;</font></td>
    <td><font size="1">&nbsp;</font></td>
    <td><font size="1">&nbsp;</font></td>
    <td><font size="1">&nbsp;</font></td>
    <td><font size="1">&nbsp;</font></td>
    <td align="center"><font size="1" face="Arial"><b>Other</b></font></td>
    <td><font size="1">&nbsp;</font></td>
    <td><font size="1">&nbsp;</font></td>
    <td><font size="1">&nbsp;</font></td>
  </tr>
  <tr>
    <td><font size="1">&nbsp;</font></td>
    <td align="center"><font size="1" face="Arial"><b>Common</b></font></td>
    <td><font size="1">&nbsp;</font></td>
    <td align="center"><font size="1" face="Arial"><b>Capital</b></font></td>
    <td align="center"><font size="1">&nbsp;</font></td>
    <td align="center"><font size="1" face="Arial"><b>Treasury</b></font></td>
    <td><font size="1">&nbsp;</font></td>
    <td align="center"><font size="1" face="Arial"><b>Accumulated</b></font></td>
    <td><font size="1">&nbsp;</font></td>
    <td align="center"><font size="1" face="Arial"><b>Comprehensive</b></font></td>
    <td><font size="1">&nbsp;</font></td>
    <td align="center"><font size="1" face="Arial"><b>Shareholders'</b></font></td>
    <td><font size="1">&nbsp;</font></td>
  </tr>
  <tr>
    <td><font size="1">&nbsp;</font></td>
    <td align="center"><font size="1" face="Arial"><b>Stock</b></font></td>
    <td><font size="1">&nbsp;</font></td>
    <td align="center"><font size="1" face="Arial"><b>Surplus</b></font></td>
    <td align="center"><font size="1">&nbsp;</font></td>
    <td align="center"><font size="1" face="Arial"><b>Stock</b></font></td>
    <td><font size="1">&nbsp;</font></td>
    <td align="center"><font size="1" face="Arial"><b>Result</b></font></td>
    <td><font size="1">&nbsp;</font></td>
    <td align="center"><font size="1" face="Arial"><b>income (loss)</b></font></td>
    <td><font size="1">&nbsp;</font></td>
    <td align="center"><font size="1" face="Arial"><b>Equity</b></font></td>
    <td><font size="1">&nbsp;</font></td>
  </tr>
  <tr>
    <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>
   <td>&nbsp;</td>
   <td>&nbsp;</td>
   <td>&nbsp;</td>
   <td>&nbsp;</td>
   <td>&nbsp;</td>
   <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>
<tr bgcolor="#eeeeee">
   <td><font size="2" face="Arial"><b>Balance as of December 31, 2002 (audited)</b></font></td>
   <td width="9%" align="right"><font size=2 face="Arial">1,144</font></td>
   <td width="2%">&nbsp;</td>
   <td width="9%" align="right"><font size=2 face="Arial">1,864</font></td>
   <td width="2%" align="right">&nbsp;</td>
   <td width="9%" align="right"><font size=2 face="Arial">(348</font></td>
   <td width="2%"><font size=2 face="Arial">)</font></td>
   <td width="9%" align="right"><font size=2 face="Arial">4,592</font></td>
   <td width="2%">&nbsp;</td>
   <td width="9%" align="right"><font size=2 face="Arial">(258</font></td>
   <td width="2%"><font size=2 face="Arial">)</font></td>
   <td width="9%" align="right"><font size=2 face="Arial">6,994</font></td>
   <td width="2%">&nbsp;</td>
</tr>
<tr>
  <td><font size="1">&nbsp;</font></td>
  <td><hr noshade size=2>
  </td>
  <td><font size="1">&nbsp;</font></td>
  <td><hr noshade size=2>
  </td>
  <td>&nbsp;</td>
  <td><hr noshade size=2>
  </td>
  <td><font size="1">&nbsp;</font></td>
  <td><hr noshade size=2>
  </td>
  <td><font size="1">&nbsp;</font></td>
  <td><hr noshade size=2>
  </td>
  <td><font size="1">&nbsp;</font></td>
  <td><hr noshade size=2>
  </td>
  <td><font size="1">&nbsp;</font></td>
</tr>
<tr bgcolor="#eeeeee">
   <td><font size=2 face="Arial">Capital increase</font></td>
   <td align="right"><font size=2 face="Arial">2</font></td>
   <td>&nbsp;</td>
   <td align="right"><font size=2 face="Arial">41</font></td>
   <td>&nbsp;</td>
   <td>&nbsp;</td>
   <td>&nbsp;</td>
   <td>&nbsp;</td>
   <td>&nbsp;</td>
   <td>&nbsp;</td>
   <td>&nbsp;</td>
   <td align="right"><font size=2 face="Arial">43</font></td>
   <td>&nbsp;</td>
</tr>
<tr>
   <td><font size=2 face="Arial">Comprehensive income:</font></td>
   <td>&nbsp;</td>
   <td>&nbsp;</td>
   <td>&nbsp;</td>
   <td>&nbsp;</td>
   <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>
<tr>
   <td><font size="2">&nbsp;&nbsp;&nbsp;<font face="Arial">Net Income</font></font></td>
   <td>&nbsp;</td>
   <td>&nbsp;</td>
   <td>&nbsp;</td>
   <td>&nbsp;</td>
   <td>&nbsp;</td>
   <td>&nbsp;</td>
   <td align="right"><font size=2 face="Arial">253</font></td>
   <td>&nbsp;</td>
   <td>&nbsp;</td>
   <td>&nbsp;</td>
   <td align="right"><font size=2 face="Arial">253</font></td>
   <td>&nbsp;</td>
</tr>
<tr bgcolor="#eeeeee">
   <td><font size="2">&nbsp;&nbsp;&nbsp;<font face="Arial">Other comprehensive income, net of tax</font></font></td>
   <td>&nbsp;</td>
   <td>&nbsp;</td>
   <td>&nbsp;</td>
   <td>&nbsp;</td>
   <td>&nbsp;</td>
   <td>&nbsp;</td>
   <td>&nbsp;</td>
   <td>&nbsp;</td>
   <td align="right"><font size=2 face="Arial">881</font></td>
   <td>&nbsp;</td>
   <td align="right"><font size=2 face="Arial">881</font></td>
   <td>&nbsp;</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>
   <td>&nbsp;</td>
   <td>&nbsp;</td>
   <td>&nbsp;</td>
   <td><hr noshade size=1></td>
   <td>&nbsp;</td>
</tr>
<tr bgcolor="#eeeeee">
   <td><font size=2 face="Arial">Comprehensive income</font></td>
   <td>&nbsp;</td>
   <td>&nbsp;</td>
   <td>&nbsp;</td>
   <td>&nbsp;</td>
   <td>&nbsp;</td>
   <td>&nbsp;</td>
   <td>&nbsp;</td>
   <td>&nbsp;</td>
   <td>&nbsp;</td>
   <td>&nbsp;</td>
   <td align="right"><font size=2 face="Arial">1,134</font></td>
   <td>&nbsp;</td>
</tr>
<tr>
   <td><font size=2 face="Arial">Dividends, $0.08 per share</font></td>
   <td>&nbsp;</td>
   <td>&nbsp;</td>
   <td>&nbsp;</td>
   <td>&nbsp;</td>
   <td>&nbsp;</td>
   <td>&nbsp;</td>
   <td align="right"><font size=2 face="Arial">(71</font></td>
   <td><font size=2 face="Arial">)</font></td>
   <td>&nbsp;</td>
   <td>&nbsp;</td>
   <td align="right"><font size=2 face="Arial">(71</font></td>
   <td><font size=2 face="Arial">)</font></td>
</tr>
<tr>
  <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>&nbsp;</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 bgcolor="#eeeeee">
   <td><font size="2" face="Arial"><b>Balance as of December 31, 2003 (audited)</b></font></td>
   <td align="right"><font size="2" face="Arial"><b>1,146</b></font></td>
   <td>&nbsp;</td>
   <td align="right"><font size="2" face="Arial"><b>1,905</b></font></td>
   <td align="right">&nbsp;</td>
   <td align="right"><font size="2" face="Arial"><b>(348</b></font></td>
   <td><font size="2" face="Arial"><b>)</b></font></td>
   <td align="right"><font size="2" face="Arial"><b>4,774</b></font></td>
   <td>&nbsp;</td>
   <td align="right"><font size="2" face="Arial"><b>623</b></font></td>
   <td>&nbsp;</td>
   <td align="right"><font size="2" face="Arial"><b>8,100</b></font></td>
   <td>&nbsp;</td>
</tr>
<tr>
   <td>&nbsp;</td>
   <td><hr noshade size=2></td>
   <td>&nbsp;</td>
   <td><hr noshade size=2></td>
   <td>&nbsp;</td>
   <td><hr noshade size=2></td>
   <td>&nbsp;</td>
   <td><hr noshade size=2></td>
   <td>&nbsp;</td>
   <td><hr noshade size=2></td>
   <td>&nbsp;</td>
   <td><hr noshade size=2></td>
   <td>&nbsp;</td>
</tr>
<tr bgcolor="#eeeeee">
   <td><font size=2 face="Arial">Capital increase</font></td>
   <td align="right"><font size="2" face="Arial"><b>3</b></font></td>
   <td>&nbsp;</td>
   <td align="right"><font size="2" face="Arial"><b>13</b></font></td>
   <td>&nbsp;</td>
   <td>&nbsp;</td>
   <td>&nbsp;</td>
   <td>&nbsp;</td>
   <td>&nbsp;</td>
   <td>&nbsp;</td>
   <td>&nbsp;</td>
   <td align="right"><font size="2" face="Arial"><b>16</b></font></td>
   <td>&nbsp;</td>
</tr>
<tr>
   <td><font size=2 face="Arial">Comprehensive income:</font></td>
   <td>&nbsp;</td>
   <td>&nbsp;</td>
   <td>&nbsp;</td>
   <td>&nbsp;</td>
   <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>
<tr>
   <td><font size="2">&nbsp;&nbsp;&nbsp;<font face="Arial">Net Income</font></font></td>
   <td>&nbsp;</td>
   <td>&nbsp;</td>
   <td>&nbsp;</td>
   <td>&nbsp;</td>
   <td>&nbsp;</td>
   <td>&nbsp;</td>
   <td align="right"><font size="2" face="Arial"><b>225</b></font></td>
   <td>&nbsp;</td>
   <td>&nbsp;</td>
   <td>&nbsp;</td>
   <td align="right"><font size="2" face="Arial"><b>225</b></font></td>
   <td>&nbsp;</td>
</tr>
<tr bgcolor="#eeeeee">
   <td><font size="2">&nbsp;&nbsp;&nbsp;<font face="Arial">Other comprehensive income (loss), net of tax</font></font></td>
   <td>&nbsp;</td>
   <td>&nbsp;</td>
   <td>&nbsp;</td>
   <td>&nbsp;</td>
   <td>&nbsp;</td>
   <td>&nbsp;</td>
   <td>&nbsp;</td>
   <td>&nbsp;</td>
   <td align="right"><font size="2" face="Arial"><b>(197</b></font></td>
   <td><font size="2" face="Arial"><b>)</b></font></td>
   <td align="right"><font size="2" face="Arial"><b>(197</b></font></td>
   <td><font size="2" face="Arial"><b>)</b></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>
   <td>&nbsp;</td>
   <td>&nbsp;</td>
   <td>&nbsp;</td>
   <td><hr noshade size=1></td>
   <td>&nbsp;</td>
</tr>
<tr bgcolor="#eeeeee">
   <td><font size=2 face="Arial">Comprehensive income (loss)</font></td>
   <td>&nbsp;</td>
   <td>&nbsp;</td>
   <td>&nbsp;</td>
   <td>&nbsp;</td>
   <td>&nbsp;</td>
   <td>&nbsp;</td>
   <td>&nbsp;</td>
   <td>&nbsp;</td>
   <td>&nbsp;</td>
   <td>&nbsp;</td>
   <td align="right"><font size="2" face="Arial"><b>28</b></font></td>
   <td>&nbsp;</td>
</tr>
<tr>
   <td><font size=2 face="Arial">Dividends, $0.12 per share</font></td>
   <td>&nbsp;</td>
   <td>&nbsp;</td>
   <td>&nbsp;</td>
   <td>&nbsp;</td>
   <td>&nbsp;</td>
   <td>&nbsp;</td>
   <td align="right"><font size="2" face="Arial"><b>(107</b></font></td>
   <td><font size="2" face="Arial"><b>)</b></font></td>
   <td>&nbsp;</td>
   <td>&nbsp;</td>
   <td align="right"><font size="2" face="Arial"><b>(107</b></font></td>
   <td><font size="2" face="Arial"><b>)</b></font></td>
</tr>
<tr bgcolor="#eeeeee">
   <td><font size="2" face="Arial"><b>Balance as of June 26, 2004 (unaudited)</b></font></td>
   <td align="right"><font size="2" face="Arial"><b>1,149</b></font></td>
   <td>&nbsp;</td>
   <td align="right"><font size="2" face="Arial"><b>1,918</b></font></td>
   <td align="right">&nbsp;</td>
   <td align="right"><font size="2" face="Arial"><b>(348</b></font></td>
   <td><font size="2" face="Arial"><b>)</b></font></td>
   <td align="right"><font size="2" face="Arial"><b>4,892</b></font></td>
   <td>&nbsp;</td>
   <td align="right"><font size="2" face="Arial"><b>426</b></font></td>
   <td>&nbsp;</td>
   <td align="right"><font size="2" face="Arial"><b>8,037</b></font></td>
   <td>&nbsp;</td>
</tr>
<tr>
  <td>&nbsp;</td>
  <td align="right"><hr noshade size=2></td>
  <td>&nbsp;</td>
  <td align="right"><hr noshade size=2></td>
  <td align="right">&nbsp;</td>
  <td align="right"><hr noshade size=2></td>
  <td>&nbsp;</td>
  <td align="right"><hr noshade size=2></td>
  <td>&nbsp;</td>
  <td align="right"><hr noshade size=2></td>
  <td>&nbsp;</td>
  <td align="right"><hr noshade size=2></td>
  <td>&nbsp;</td>
</tr>
</table>
<p align="center"><font size="2" face="Arial">
The accompanying notes are an integral part of these Unaudited Interim Consolidated
Financial Statements
</font></p>
<p align="right"><font size="2"><img src="b759550-2x1x1.jpg" border=0></font></p>

<p align="center"><font face="Arial" size="2">F-6</font></p>
<hr noshade align="center" width="100%" size="2">
<page> <a name="pf7"></a>
<p><a href="#contents"><font size="2">Back to Contents</font></a></p>
<p align="center"><b><font face="Arial" size="2"> STMicroelectronics N.V.</font></b></p>
<p align="center"><font size="2" face="Arial"><b>Notes to Interim Consolidated
Financial Statements (unaudited)</b></font></p>
<p align="left"><font size="2" face="Arial"><b>1. Description of Business</b></font></p>
<p align="left"><font size="2" face="Arial">STMicroelectronics N.V. (the &quot;Company&quot;) 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 size="2" face="Arial">The Company is a global independent semiconductor company that designs, develops, manufactures and markets a broad range of semiconductor integrated circuits (&quot;ICs&quot;) 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 size="2" face="Arial">The Company&#8217;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 (&quot;CMOS&quot;), 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 &quot;system-on-a-chip&quot; 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>
<p align="left"><font size="2" face="Arial"><b>2. Fiscal Year</b></font></p>
<p align="left"><font size="2" face="Arial">The Company&#8217;s fiscal year ends
    on December 31. Interim periods are established for accounting purposes on
    a thirteen-week basis. In 2004, the Company&#8217;s
    first quarter ended on March 27, its second quarter ended on June 26, its
    third
quarter will end on September 25 and its fourth quarter on December 31.</font></p>
<p align="center"><font face="Arial" size="2">F-7</font></p>
<hr noshade align="center" width="100%" size="2">
<div style="page-break-before:always"></div>
<page>
<a name="p?"></a>
<p><a href="#contents"><font size="2">Back to Contents</font></a></p>
<p align="left"><font size="2" face="Arial"><b>3. Basis of Presentation</b></font></p>
<p align="left"><font size="2" face="Arial">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 (&#8220;U.S. GAAP&#8221;), 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 size="2" face="Arial">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 size="2" face="Arial">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&#8217;s Annual Report on Form  20-F for the year ended December 31, 2003.</font></p>
<p align="left"><font size="2" face="Arial"><b>4. Use of Estimates</b></font></p>
<p align="left"><font size="2" face="Arial">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&#8217;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>
<p align="left"><font size="2" face="Arial"><b>5. Recent Accounting Pronouncements</b></font></p>
<p align="left"><font size="2" face="Arial">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 &#8220;FIN 46&#8221;). The Company identifies VIEs as entities where the Company&#8217;s financial risk or reward is not consistent with the equity ownership. </font></p>
<p align="center"><font face="Arial" size="2">F-8</font></p>
<hr noshade align="center" width="100%" size="2">
<div style="page-break-before:always"></div>
<page>
<a name="p?"></a>
<p><a href="#contents"><font size="2">Back to Contents</font></a></p>
<p align="left"><font size="2" face="Arial">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&#8217;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 size="2" face="Arial">The Company has identified the following VIEs under the existing contracts and disclosed the arrangements in the Unaudited Interim Consolidated Financial Statements at June 26, 2004:</font></p>
<table width="100%" cellspacing="0" cellpadding="0" border="0">
<tr valign="top">
<td width="3%"></td>
<td width="3%"></td>
<td width="3%">
<font size="2" face="Arial">&nbsp;</font></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 photomasks in which the Company has a 19% stake and an obligation to repurchase certain assets in the event of the venture&#8217;s bankruptcy, </font></td>
</tr>
</table>
<table width="100%" cellspacing="0" cellpadding="0" border="0">
<tr valign="top">
<td width="3%"></td>
<td width="3%"></td>
<td width="3%">
<font size="2" face="Arial">&nbsp;</font></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 the Company owns 44% and has 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%"></td>
<td width="3%">
<font size="2" face="Arial">&nbsp;</font></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 the Company&#8217;s TouchChip business, in which the Company has a 48% stake.</font></td>
</tr>
</table>
<p align="left"><font size="2" face="Arial">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 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> (&#8220;FAS
    150&#8221;). FAS 150 specifies that &#8220;freestanding&#8221; 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 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>(EITF 00-21), 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&#8217;s financial position or results of operations. </font></p>
<p align="center"><font face="Arial" size="2">F-9</font></p>
<hr noshade align="center" width="100%" size="2">
<div style="page-break-before:always"></div>
<page>
<a name="p?"></a>
<p><a href="#contents"><font size="2">Back to Contents</font></a></p>
<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&#8217; 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>(FAS 132 revised). This
    Statement revises employers&#8217; 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&#8217; Accounting
    for Pensions</i>, No. 88, <i>Employers&#8217; Accounting for Settlements
    and Curtailments of Defined Benefit Pension Plans and for Termination Benefits</i>,
    and No. 106,
<i>Employers&#8217; 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
Interim
Financial Statements as at June 26, 2004. </font></p>
<p align="left"><font size="2" face="Arial"><b>6. Business combinations</b></font></p>
<p align="left"><font size="2" face="Arial">Proton World International </font></p>
<p align="left"><font size="2" face="Arial">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. The   obligation
    to pay such amount is not considered beyond a reasonable doubt and therefore
    no provision has been recorded as of June 26, 2004. The acquisition was conducted
    to significantly extend the Company'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' relationships,
    $1 million for trademarks and $33 million in goodwill. The core technologies
    have an estimated useful life of seven years, the customers' relationship
    of four years and the trademarks of one year. </font></p>
<p align="left"><font size="2" face="Arial">Tioga Technologies </font></p>
<p align="left"><font size="2" face="Arial">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-10</font></p>
<hr noshade align="center" width="100%" size="2">
<div style="page-break-before:always"></div>
<page>
<a name="p?"></a>
<p><a href="#contents"><font size="2">Back to Contents</font></a></p>
<p align="left"><font size="2" face="Arial">Incard</font></p>
<p align="left"><font size="2" face="Arial">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'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, and that could represent additional contingent payments. If these contingent payments will materialize, the purchase consideration will be changed accordingly. 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' relationships, $3 million for trademarks and $30 million in goodwill.  The core technologies have an estimated useful life of seven years, the customers' relationships of four years and the trademarks of three years. </font></p>
<p align="left"><font size="2" face="Arial">Synad Technologies</font></p>
<p align="left"><font size="2" face="Arial">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&#8217;s broadband access portfolio and add wireless
    networking capabilities to its wide range of highly integrated cost-effective
    application platforms. Purchase price allocation, further adjusted in
    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 June 26, 2004. The
    Company also recorded in the fourth quarter of 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 size="2" face="Arial">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="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="p?"></a>
<p><a href="#contents"><font size="2">Back to Contents</font></a></p>
<p align="left"><font size="2" face="Arial">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>
<table width="100%" cellspacing="0" cellpadding="0" border="0">
  <tr>
    <td align="left" valign="top"><font size="2" face="Arial">Pro forma Statements of Income</font></td>
    <td align="left" valign="top"><font size="1">&nbsp;</font></td>
    <td align="right" valign="top"><font size="1">&nbsp;</font></td>
    <td colspan="4" align="center"><b><font size="1" face="Arial">(unaudited)</font></b></td>
    <td align="left"><b><font size="1">&nbsp;</font></b></td>
    <td align="right"><b><font size="1">&nbsp;</font></b></td>
    <td colspan="4" align="center"><b><font size="1" face="Arial">(unaudited)</font></b></td>
    <td align="left" valign="top"><font size="1">&nbsp;</font></td>
  </tr>
  <tr>
    <td align="left" valign="top"><font size="1" face="Arial">&nbsp;</font></td>
    <td align="left" valign="top"><font size="1">&nbsp;</font></td>
    <td align="right" valign="top"><font size="1">&nbsp;</font></td>
    <td colspan="4" align="center" valign="top"><b><font size="1" face="Arial">Three
          months ended</font></b></td>
    <td align="left" valign="top"><b><font size="1">&nbsp;</font></b></td>
    <td align="right" valign="top"><b><font size="1">&nbsp;</font></b></td>
    <td colspan="4" align="center" valign="top"><b><font size="1" face="Arial">Six
          months ended</font></b></td>
    <td align="left" valign="top"><font size="1">&nbsp;</font></td>
  </tr>
  <tr>
    <td align="left" valign="top"><font size="1">&nbsp;</font></td>
    <td align="left" valign="top"><font size="1">&nbsp;</font></td>
    <td align="right" valign="top"><font size="1">&nbsp;</font></td>
    <td colspan="4" align="center" valign="top"><hr size="1" noshade>
    </td>
    <td align="left" valign="top"><font size="1">&nbsp;</font></td>
    <td align="right" valign="top"><font size="1">&nbsp;</font></td>
    <td colspan="4" align="center" valign="top"><hr size="1" noshade>
    </td>
    <td align="left" valign="top"><font size="1">&nbsp;</font></td>
  </tr>
  <tr>
    <td align="left" valign="top"><font size="1" face="Arial">&nbsp;</font></td>
    <td align="left" valign="top"><font size="1">&nbsp;</font></td>
    <td align="right" valign="top"><font size="1">&nbsp;</font></td>
    <td align="center" valign="top"><b><font size="1" face="Arial">June 26, 2004 </font></b></td>
    <td align="left" valign="top"><b><font size="1">&nbsp;</font></b></td>
    <td align="right" valign="top"><b><font size="1">&nbsp;</font></b></td>
    <td align="center" valign="top"><b><font size="1" face="Arial">June 28, 2003 </font></b></td>
    <td align="left" valign="top"><b><font size="1">&nbsp;</font></b></td>
    <td align="right" valign="top"><b><font size="1">&nbsp;</font></b></td>
    <td align="center" valign="top"><b><font size="1" face="Arial">June 26, 2004 </font></b></td>
    <td align="left" valign="top"><b><font size="1">&nbsp;</font></b></td>
    <td align="right" valign="top"><b><font size="1">&nbsp;</font></b></td>
    <td align="center" valign="top"><b><font size="1" face="Arial">June 28, 2003 </font></b></td>
    <td align="left" valign="top"><font size="1">&nbsp;</font></td>
  </tr>
  <tr>
    <td align="left" valign="top"><font size="1">&nbsp;</font></td>
    <td align="left" valign="top"><font size="1">&nbsp;</font></td>
    <td align="right" valign="top"><font size="1">&nbsp;</font></td>
    <td align="right" valign="top"><hr size="1" noshade>
    </td>
    <td align="left" valign="top"><font size="1">&nbsp;</font></td>
    <td align="right" valign="top"><font size="1">&nbsp;</font></td>
    <td align="right" valign="top"><hr size="1" noshade>
    </td>
    <td align="left" valign="top"><font size="1">&nbsp;</font></td>
    <td align="right" valign="top"><font size="1">&nbsp;</font></td>
    <td align="right" valign="top"><hr size="1" noshade>
    </td>
    <td align="left" valign="top"><font size="1">&nbsp;</font></td>
    <td align="right" valign="top"><font size="1">&nbsp;</font></td>
    <td align="right" valign="top"><hr size="1" noshade>
    </td>
    <td align="left" valign="top"><font size="1">&nbsp;</font></td>
  </tr>
  <tr>
<td align="left" valign="top" bgcolor="#eeeeee"><font size="2" face="Arial">Net revenues</font></td>
<td width="2%" align="left" valign="top" bgcolor="#eeeeee">&nbsp;</td>
<td width="1%" align="right" valign="top" bgcolor="#eeeeee">&nbsp;</td>
<td width="8%" align="right" valign="top" bgcolor="#eeeeee"><font size="2" face="Arial">2,172</font></td>
<td width="2%" align="left" valign="top" bgcolor="#eeeeee">&nbsp;</td>
<td width="1%" align="right" valign="top" bgcolor="#eeeeee">&nbsp;</td>
<td width="8%" align="right" valign="top" bgcolor="#eeeeee"><font size="2" face="Arial">1,714</font></td>
<td width="2%" align="left" valign="top" bgcolor="#eeeeee">&nbsp;</td>
<td width="1%" align="right" valign="top" bgcolor="#eeeeee">&nbsp;</td>
<td width="8%" align="right" valign="top" bgcolor="#eeeeee"><font size="2" face="Arial">4,201</font></td>
<td width="2%" align="left" valign="top" bgcolor="#eeeeee">&nbsp;</td>
<td width="1%" align="right" valign="top" bgcolor="#eeeeee">&nbsp;</td>
<td width="8%" align="right" valign="top" bgcolor="#eeeeee"><font size="2" face="Arial">3,358</font></td>
<td width="2%" align="left" valign="top" bgcolor="#eeeeee">&nbsp;</td>
</tr>
<tr>
<td align="left" valign="top"><font size="2" face="Arial">Gross profit</font></td>
<td align="left" valign="top">&nbsp;</td>
<td align="right" valign="top">&nbsp;</td>
<td align="right" valign="top"><font size="2" face="Arial">812</font></td>
<td align="left" valign="top">&nbsp;</td>
<td align="right" valign="top">&nbsp;</td>
<td align="right" valign="top"><font size="2" face="Arial">610</font></td>
<td align="left" valign="top">&nbsp;</td>
<td align="right" valign="top">&nbsp;</td>
<td align="right" valign="top"><font size="2" face="Arial">1,530</font></td>
<td align="left" valign="top">&nbsp;</td>
<td align="right" valign="top">&nbsp;</td>
<td align="right" valign="top"><font size="2" face="Arial">1,189</font></td>
<td align="left" valign="top">&nbsp;</td>
</tr>
<tr>
<td align="left" valign="top" bgcolor="#eeeeee"><font size="2" face="Arial">Operating expenses</font></td>
<td align="left" valign="top" bgcolor="#eeeeee">&nbsp;</td>
<td align="right" valign="top" bgcolor="#eeeeee">&nbsp;</td>
<td align="right" valign="top" bgcolor="#eeeeee"><font size="2" face="Arial">(633</font></td>
<td align="left" valign="top" bgcolor="#eeeeee"><font size="2" face="Arial">)</font></td>
<td align="right" valign="top" bgcolor="#eeeeee">&nbsp;</td>
<td align="right" valign="top" bgcolor="#eeeeee"><font size="2" face="Arial">(493</font></td>
<td align="left" valign="top" bgcolor="#eeeeee"><font size="2" face="Arial">)</font></td>
<td align="right" valign="top" bgcolor="#eeeeee">&nbsp;</td>
<td align="right" valign="top" bgcolor="#eeeeee"><font size="2" face="Arial">(1,271</font></td>
<td align="left" valign="top" bgcolor="#eeeeee"><font size="2" face="Arial">)</font></td>
<td align="right" valign="top" bgcolor="#eeeeee">&nbsp;</td>
<td align="right" valign="top" bgcolor="#eeeeee"><font size="2" face="Arial">(945</font></td>
<td align="left" valign="top" bgcolor="#eeeeee"><font size="2" face="Arial">)</font></td>
</tr>
<tr>
<td align="left" valign="top"><font size="2" face="Arial">Operating income </font></td>
<td align="left" valign="top">&nbsp;</td>
<td align="right" valign="top">&nbsp;</td>
<td align="right" valign="top"><font size="2" face="Arial">179</font></td>
<td align="left" valign="top">&nbsp;</td>
<td align="right" valign="top">&nbsp;</td>
<td align="right" valign="top"><font size="2" face="Arial">117</font></td>
<td align="left" valign="top">&nbsp;</td>
<td align="right" valign="top">&nbsp;</td>
<td align="right" valign="top"><font size="2" face="Arial">259</font></td>
<td align="left" valign="top">&nbsp;</td>
<td align="right" valign="top">&nbsp;</td>
<td align="right" valign="top"><font size="2" face="Arial">244</font></td>
<td align="left" valign="top">&nbsp;</td>
</tr>
<tr>
<td align="left" valign="top" bgcolor="#eeeeee"><font size="2" face="Arial">Net income</font></td>
<td align="left" valign="top" bgcolor="#eeeeee">&nbsp;</td>
<td align="right" valign="top" bgcolor="#eeeeee">&nbsp;</td>
<td align="right" valign="top" bgcolor="#eeeeee"><font size="2" face="Arial">148</font></td>
<td align="left" valign="top" bgcolor="#eeeeee">&nbsp;</td>
<td align="right" valign="top" bgcolor="#eeeeee">&nbsp;</td>
<td align="right" valign="top" bgcolor="#eeeeee"><font size="2" face="Arial">78</font></td>
<td align="left" valign="top" bgcolor="#eeeeee">&nbsp;</td>
<td align="right" valign="top" bgcolor="#eeeeee">&nbsp;</td>
<td align="right" valign="top" bgcolor="#eeeeee"><font size="2" face="Arial">225</font></td>
<td align="left" valign="top" bgcolor="#eeeeee">&nbsp;</td>
<td align="right" valign="top" bgcolor="#eeeeee">&nbsp;</td>
<td align="right" valign="top" bgcolor="#eeeeee"><font size="2" face="Arial">164</font></td>
<td align="left" valign="top" bgcolor="#eeeeee">&nbsp;</td>
</tr>
<tr>
<td align="left" valign="top"><font size="2" face="Arial">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Earnings per share (basic)</font></td>
<td align="left" valign="top">&nbsp;</td>
<td align="right" valign="top">&nbsp;</td>
<td align="right" valign="top"><font size="2" face="Arial">0.17</font></td>
<td align="left" valign="top">&nbsp;</td>
<td align="right" valign="top">&nbsp;</td>
<td align="right" valign="top"><font size="2" face="Arial">0.09</font></td>
<td align="left" valign="top">&nbsp;</td>
<td align="right" valign="top">&nbsp;</td>
<td align="right" valign="top"><font size="2" face="Arial">0.25</font></td>
<td align="left" valign="top">&nbsp;</td>
<td align="right" valign="top">&nbsp;</td>
<td align="right" valign="top"><font size="2" face="Arial">0.18</font></td>
<td align="left" valign="top">&nbsp;</td>
</tr>
<tr>
<td align="left" valign="top" bgcolor="#eeeeee"><font size="2" face="Arial">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Earnings per share (diluted)</font></td>
<td align="left" valign="top" bgcolor="#eeeeee">&nbsp;</td>
<td align="right" valign="top" bgcolor="#eeeeee">&nbsp;</td>
<td align="right" valign="top" bgcolor="#eeeeee"><font size="2" face="Arial">0.16</font></td>
<td align="left" valign="top" bgcolor="#eeeeee">&nbsp;</td>
<td align="right" valign="top" bgcolor="#eeeeee">&nbsp;</td>
<td align="right" valign="top" bgcolor="#eeeeee"><font size="2" face="Arial">0.09</font></td>
<td align="left" valign="top" bgcolor="#eeeeee">&nbsp;</td>
<td align="right" valign="top" bgcolor="#eeeeee">&nbsp;</td>
<td align="right" valign="top" bgcolor="#eeeeee"><font size="2" face="Arial">0.24</font></td>
<td align="left" valign="top" bgcolor="#eeeeee">&nbsp;</td>
<td align="right" valign="top" bgcolor="#eeeeee">&nbsp;</td>
<td align="right" valign="top" bgcolor="#eeeeee"><font size="2" face="Arial">0.18</font></td>
<td align="left" valign="top" bgcolor="#eeeeee">&nbsp;</td>
</tr>
</table>
<br><br>
<table width="100%" cellspacing="0" cellpadding="0" border="0">
  <tr>
    <td align="left"><font size="2" face="Arial">As reported Statements of Income</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"><b><font size="1" face="Arial">(unaudited)</font></b></td>
    <td align="left"><b><font size="1">&nbsp;</font></b></td>
    <td align="right"><b><font size="1">&nbsp;</font></b></td>
    <td colspan="4" align="center"><b><font size="1" face="Arial">(unaudited)</font></b></td>
    <td align="left"><font size="1">&nbsp;</font></td>
  </tr>
  <tr>
    <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"><b><font size="1" face="Arial">Three months ended</font></b></td>
    <td align="left"><b><font size="1">&nbsp;</font></b></td>
    <td align="right"><b><font size="1">&nbsp;</font></b></td>
    <td colspan="4" align="center"><b><font size="1" face="Arial">Six months ended</font></b></td>
    <td align="left"><font size="1">&nbsp;</font></td>
  </tr>
  <tr>
    <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">&nbsp;</td>
    <td align="right">&nbsp;</td>
    <td colspan="4" align="center"><hr size="1" noshade></td>
    <td align="left">&nbsp;</td>
  </tr>
  <tr>
    <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="center"><b><font size="1" face="Arial">June 26, 2004 </font></b></td>
    <td align="left"><b><font size="1">&nbsp;</font></b></td>
    <td align="right"><b><font size="1">&nbsp;</font></b></td>
    <td align="center"><b><font size="1" face="Arial">June 28, 2003 </font></b></td>
    <td align="left"><b><font size="1">&nbsp;</font></b></td>
    <td align="right"><b><font size="1">&nbsp;</font></b></td>
    <td align="center"><b><font size="1" face="Arial">June 26, 2004 </font></b></td>
    <td align="left"><b><font size="1">&nbsp;</font></b></td>
    <td align="right"><b><font size="1">&nbsp;</font></b></td>
    <td align="center"><b><font size="1" face="Arial">June 28, 2003 </font></b></td>
    <td align="left"><font size="1">&nbsp;</font></td>
  </tr>
  <tr>
    <td align="left" valign="top">&nbsp;</td>
    <td align="left" valign="top">&nbsp;</td>
    <td align="right" valign="top">&nbsp;</td>
    <td align="right" valign="top"><hr size="1" noshade></td>
    <td align="left" valign="top">&nbsp;</td>
    <td align="right" valign="top">&nbsp;</td>
    <td align="right" valign="top"><hr size="1" noshade></td>
    <td align="left" valign="top">&nbsp;</td>
    <td align="right" valign="top">&nbsp;</td>
    <td align="right" valign="top"><hr size="1" noshade></td>
    <td align="left" valign="top">&nbsp;</td>
    <td align="right" valign="top">&nbsp;</td>
    <td align="right" valign="top"><hr size="1" noshade></td>
    <td align="left" valign="top">&nbsp;</td>
  </tr>
  <tr>
<td align="left" valign="top" bgcolor="#eeeeee"><font size="2" face="Arial">Net revenues</font></td>
<td width="2%" align="left" valign="top" bgcolor="#eeeeee">&nbsp;</td>
<td width="1%" align="right" valign="top" bgcolor="#eeeeee">&nbsp;</td>
<td width="8%" align="right" valign="top" bgcolor="#eeeeee"><font size="2" face="Arial">2,172</font></td>
<td width="2%" align="left" valign="top" bgcolor="#eeeeee">&nbsp;</td>
<td width="1%" align="right" valign="top" bgcolor="#eeeeee">&nbsp;</td>
<td width="8%" align="right" valign="top" bgcolor="#eeeeee"><font size="2" face="Arial">1,702</font></td>
<td width="2%" align="left" valign="top" bgcolor="#eeeeee">&nbsp;</td>
<td width="1%" align="right" valign="top" bgcolor="#eeeeee">&nbsp;</td>
<td width="8%" align="right" valign="top" bgcolor="#eeeeee"><font size="2" face="Arial">4,201</font></td>
<td width="2%" align="left" valign="top" bgcolor="#eeeeee">&nbsp;</td>
<td width="1%" align="right" valign="top" bgcolor="#eeeeee">&nbsp;</td>
<td width="8%" align="right" valign="top" bgcolor="#eeeeee"><font size="2" face="Arial">3,321</font></td>
<td width="2%" align="left" valign="top" bgcolor="#eeeeee">&nbsp;</td>
</tr>
<tr>
<td align="left" valign="top"><font size="2" face="Arial">Gross profit</font></td>
<td align="left" valign="top">&nbsp;</td>
<td align="right" valign="top">&nbsp;</td>
<td align="right" valign="top"><font size="2" face="Arial">812</font></td>
<td align="left" valign="top">&nbsp;</td>
<td align="right" valign="top">&nbsp;</td>
<td align="right" valign="top"><font size="2" face="Arial">607</font></td>
<td align="left" valign="top">&nbsp;</td>
<td align="right" valign="top">&nbsp;</td>
<td align="right" valign="top"><font size="2" face="Arial">1,530</font></td>
<td align="left" valign="top">&nbsp;</td>
<td align="right" valign="top">&nbsp;</td>
<td align="right" valign="top"><font size="2" face="Arial">1,174</font></td>
<td align="left" valign="top">&nbsp;</td>
</tr>
<tr>
<td align="left" valign="top" bgcolor="#eeeeee"><font size="2" face="Arial">Operating expenses</font></td>
<td align="left" valign="top" bgcolor="#eeeeee">&nbsp;</td>
<td align="right" valign="top" bgcolor="#eeeeee">&nbsp;</td>
<td align="right" valign="top" bgcolor="#eeeeee"><font size="2" face="Arial">(633</font></td>
<td align="left" valign="top" bgcolor="#eeeeee"><font size="2" face="Arial">)</font></td>
<td align="right" valign="top" bgcolor="#eeeeee">&nbsp;</td>
<td align="right" valign="top" bgcolor="#eeeeee"><font size="2" face="Arial">(486</font></td>
<td align="left" valign="top" bgcolor="#eeeeee"><font size="2" face="Arial">)</font></td>
<td align="right" valign="top" bgcolor="#eeeeee">&nbsp;</td>
<td align="right" valign="top" bgcolor="#eeeeee"><font size="2" face="Arial">(1,271</font></td>
<td align="left" valign="top" bgcolor="#eeeeee"><font size="2" face="Arial">)</font></td>
<td align="right" valign="top" bgcolor="#eeeeee">&nbsp;</td>
<td align="right" valign="top" bgcolor="#eeeeee"><font size="2" face="Arial">(929</font></td>
<td align="left" valign="top" bgcolor="#eeeeee"><font size="2" face="Arial">)</font></td>
</tr>
<tr>
<td align="left" valign="top"><font size="2" face="Arial">Operating income </font></td>
<td align="left" valign="top">&nbsp;</td>
<td align="right" valign="top">&nbsp;</td>
<td align="right" valign="top"><font size="2" face="Arial">179</font></td>
<td align="left" valign="top">&nbsp;</td>
<td align="right" valign="top">&nbsp;</td>
<td align="right" valign="top"><font size="2" face="Arial">121</font></td>
<td align="left" valign="top">&nbsp;</td>
<td align="right" valign="top">&nbsp;</td>
<td align="right" valign="top"><font size="2" face="Arial">259</font></td>
<td align="left" valign="top">&nbsp;</td>
<td align="right" valign="top">&nbsp;</td>
<td align="right" valign="top"><font size="2" face="Arial">245</font></td>
<td align="left" valign="top">&nbsp;</td>
</tr>
<tr>
<td align="left" valign="top" bgcolor="#eeeeee"><font size="2" face="Arial">Net income</font></td>
<td align="left" valign="top" bgcolor="#eeeeee">&nbsp;</td>
<td align="right" valign="top" bgcolor="#eeeeee">&nbsp;</td>
<td align="right" valign="top" bgcolor="#eeeeee"><font size="2" face="Arial">148</font></td>
<td align="left" valign="top" bgcolor="#eeeeee">&nbsp;</td>
<td align="right" valign="top" bgcolor="#eeeeee">&nbsp;</td>
<td align="right" valign="top" bgcolor="#eeeeee"><font size="2" face="Arial">80</font></td>
<td align="left" valign="top" bgcolor="#eeeeee">&nbsp;</td>
<td align="right" valign="top" bgcolor="#eeeeee">&nbsp;</td>
<td align="right" valign="top" bgcolor="#eeeeee"><font size="2" face="Arial">225</font></td>
<td align="left" valign="top" bgcolor="#eeeeee">&nbsp;</td>
<td align="right" valign="top" bgcolor="#eeeeee">&nbsp;</td>
<td align="right" valign="top" bgcolor="#eeeeee"><font size="2" face="Arial">159</font></td>
<td align="left" valign="top" bgcolor="#eeeeee">&nbsp;</td>
</tr>
<tr>
<td align="left" valign="top"><font size="2" face="Arial">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Earnings per share (basic)</font></td>
<td align="left" valign="top">&nbsp;</td>
<td align="right" valign="top">&nbsp;</td>
<td align="right" valign="top"><font size="2" face="Arial">0.17</font></td>
<td align="left" valign="top">&nbsp;</td>
<td align="right" valign="top">&nbsp;</td>
<td align="right" valign="top"><font size="2" face="Arial">0.09</font></td>
<td align="left" valign="top">&nbsp;</td>
<td align="right" valign="top">&nbsp;</td>
<td align="right" valign="top"><font size="2" face="Arial">0.25</font></td>
<td align="left" valign="top">&nbsp;</td>
<td align="right" valign="top">&nbsp;</td>
<td align="right" valign="top"><font size="2" face="Arial">0.18</font></td>
<td align="left" valign="top">&nbsp;</td>
</tr>
<tr>
<td align="left" valign="top" bgcolor="#eeeeee"><font size="2" face="Arial">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Earnings per share (diluted)</font></td>
<td align="left" valign="top" bgcolor="#eeeeee">&nbsp;</td>
<td align="right" valign="top" bgcolor="#eeeeee">&nbsp;</td>
<td align="right" valign="top" bgcolor="#eeeeee"><font size="2" face="Arial">0.16</font></td>
<td align="left" valign="top" bgcolor="#eeeeee">&nbsp;</td>
<td align="right" valign="top" bgcolor="#eeeeee">&nbsp;</td>
<td align="right" valign="top" bgcolor="#eeeeee"><font size="2" face="Arial">0.09</font></td>
<td align="left" valign="top" bgcolor="#eeeeee">&nbsp;</td>
<td align="right" valign="top" bgcolor="#eeeeee">&nbsp;</td>
<td align="right" valign="top" bgcolor="#eeeeee"><font size="2" face="Arial">0.24</font></td>
<td align="left" valign="top" bgcolor="#eeeeee">&nbsp;</td>
<td align="right" valign="top" bgcolor="#eeeeee">&nbsp;</td>
<td align="right" valign="top" bgcolor="#eeeeee"><font size="2" face="Arial">0.18</font></td>
<td align="left" valign="top" bgcolor="#eeeeee">&nbsp;</td>
</tr>
</table>
<p align="left"><font size="2" face="Arial"><b>7. Other Income and Expenses, Net</b></font></p>
<p align="left"><font size="2" face="Arial">Other income and expenses, net consisted
    of the following:</font></p>
<table width="100%" border="0" cellpadding="0" cellspacing="0">
<tr>
  <td align="left" valign="top"><b><font size="1" face="Arial">In
    millions of U.S dollars</font></b></td>
  <td align="right" valign="top"><font size="1">&nbsp;</font></td>
  <td colspan="10" align="center"><b><font size="1" face="Arial">(Unaudited)</font></b></td>
  <td align="left" valign="top"><font size="1">&nbsp;</font></td>
</tr>
<tr>
  <td align="left" valign="top"><font size="1">&nbsp;</font></td>
  <td align="right" valign="top"><font size="1">&nbsp;</font></td>
  <td colspan="10" align="center"><hr size="1" noshade></td>
  <td align="left" valign="top"><font size="1">&nbsp;</font></td>
</tr>
<tr>
  <td align="left" valign="top"><font size="1">&nbsp;</font></td>
  <td align="right" valign="top"><font size="1">&nbsp;</font></td>
  <td colspan="4" align="center"><b><font size="1" face="Arial">Three months ended</font></b></td>
  <td align="right"><font size="1">&nbsp;</font></td>
  <td align="right"><font size="1">&nbsp;</font></td>
  <td colspan="4" align="center"><b><font size="1" face="Arial">Six months ended</font></b></td>
  <td align="left" valign="top"><font size="1">&nbsp;</font></td>
</tr>
<tr>
  <td align="left" valign="top"><font size="1">&nbsp;</font></td>
  <td align="right" valign="top"><font size="1">&nbsp;</font></td>
  <td colspan="4" align="right"><hr size="1" noshade></td>
  <td align="right"><font size="1">&nbsp;</font></td>
  <td align="right"><font size="1">&nbsp;</font></td>
  <td colspan="4" align="right"><hr size="1" noshade></td>
  <td align="left" valign="top"><font size="1">&nbsp;</font></td>
</tr>
<tr>
<td align="center" valign="top">&nbsp;</td>
<td align="right" valign="top"><font size="1">&nbsp;</font></td>
<td align="right"><b><font size="1" face="Arial">June 26,</font></b></td>
<td align="right"><font size="1">&nbsp;</font></td>
<td align="right"><font size="1">&nbsp;</font></td>
<td align="right"><b><font size="1" face="Arial">June 28,</font></b></td>
<td align="right"><font size="1">&nbsp;</font></td>
<td align="right"><font size="1">&nbsp;</font></td>
<td align="right"><b><font size="1" face="Arial">June 26,</font></b></td>
<td align="right">&nbsp;</td>
<td align="right"><font size="1">&nbsp;</font></td>
<td align="right"><b><font size="1" face="Arial">June 28,</font></b></td>
<td align="left" valign="top"><font size="1">&nbsp;</font></td>
</tr>
<tr>
<td align="left" valign="top"><font size="1" face="Arial">&nbsp;</font></td>
<td align="right" valign="top"><font size="1">&nbsp;</font></td>
<td align="right" valign="top"><b><font size="1" face="Arial">2004</font></b></td>
<td align="left" valign="top"><font size="1">&nbsp;</font></td>
<td align="right" valign="top"><font size="1">&nbsp;</font></td>
<td align="right" valign="top"><b><font size="1" face="Arial">2003</font></b></td>
<td align="left" valign="top"><font size="1">&nbsp;</font></td>
<td align="right" valign="top"><font size="1">&nbsp;</font></td>
<td align="right" valign="top"><b><font size="1" face="Arial">2004</font></b></td>
<td align="left" valign="top"><font size="1">&nbsp;</font></td>
<td align="right" valign="top"><font size="1">&nbsp;</font></td>
<td align="right" valign="top"><b><font size="1" face="Arial">2003</font></b></td>
<td align="left" valign="top"><font size="1">&nbsp;</font></td>
</tr>
<tr>
<td align="left" valign="top"><font size="1" face="Arial">&nbsp;</font></td>
<td align="right" valign="top"><font size="1">&nbsp;</font></td>
<td align="left" valign="top"><hr size="1" noshade></td>
<td align="left" valign="top"><font size="1">&nbsp;</font></td>
<td align="right" valign="top"><font size="1">&nbsp;</font></td>
<td align="left" valign="top"><hr size="1" noshade></td>
<td align="left" valign="top"><font size="1">&nbsp;</font></td>
<td align="right" valign="top"><font size="1">&nbsp;</font></td>
<td align="left" valign="top"><hr size="1" noshade></td>
<td align="left" valign="top"><font size="1">&nbsp;</font></td>
<td align="right" valign="top"><font size="1">&nbsp;</font></td>
<td align="left" valign="top"><hr size="1" noshade></td>
<td align="left" valign="top"><font size="1">&nbsp;</font></td>
</tr>
<tr>
<td align="left" valign="top" bgcolor="#eeeeee"><font size="2" face="Arial">Research and development funding</font></td>
<td align="right" valign="top" bgcolor="#eeeeee">&nbsp;</td>
<td width="8%" align="right" valign="top" bgcolor="#eeeeee"><font size="2" face="Arial">13</font></td>
<td width="1%" align="left" valign="top" bgcolor="#eeeeee">&nbsp;</td>
<td width="1%" align="right" valign="top" bgcolor="#eeeeee">&nbsp;</td>
<td width="8%" align="right" valign="top" bgcolor="#eeeeee"><font size="2" face="Arial">15</font></td>
<td width="1%" align="left" valign="top" bgcolor="#eeeeee">&nbsp;</td>
<td width="1%" align="right" valign="top" bgcolor="#eeeeee">&nbsp;</td>
<td width="8%" align="right" valign="top" bgcolor="#eeeeee"><font size="2" face="Arial">28</font></td>
<td width="1%" align="left" valign="top" bgcolor="#eeeeee">&nbsp;</td>
<td width="1%" align="right" valign="top" bgcolor="#eeeeee">&nbsp;</td>
<td width="8%" align="right" valign="top" bgcolor="#eeeeee"><font size="2" face="Arial">34</font></td>
<td width="2%" align="left" valign="top" bgcolor="#eeeeee">&nbsp;</td>
</tr>
<tr>
<td align="left" valign="top"><font size="2" face="Arial">Start-up costs</font></td>
<td align="right" valign="top">&nbsp;</td>
<td align="right" valign="top"><font size="2" face="Arial">(9</font></td>
<td align="left" valign="top"><font size="2" face="Arial">)</font></td>
<td align="right" valign="top">&nbsp;</td>
<td align="right" valign="top"><font size="2" face="Arial">(12</font></td>
<td align="left" valign="top"><font size="2" face="Arial">)</font></td>
<td align="right" valign="top">&nbsp;</td>
<td align="right" valign="top"><font size="2" face="Arial">(32</font></td>
<td align="left" valign="top"><font size="2" face="Arial">)</font></td>
<td align="right" valign="top">&nbsp;</td>
<td align="right" valign="top"><font size="2" face="Arial">(20</font></td>
<td align="left" valign="top"><font size="2" face="Arial">)</font></td>
</tr>
<tr>
<td align="left" valign="top" bgcolor="#eeeeee"><font size="2" face="Arial">Exchange gain, net</font></td>
<td align="right" valign="top" bgcolor="#eeeeee">&nbsp;</td>
<td align="right" valign="top" bgcolor="#eeeeee"><font size="2" face="Arial">8</font></td>
<td align="left" valign="top" bgcolor="#eeeeee">&nbsp;</td>
<td align="right" valign="top" bgcolor="#eeeeee">&nbsp;</td>
<td align="right" valign="top" bgcolor="#eeeeee"><font size="2" face="Arial">5</font></td>
<td align="left" valign="top" bgcolor="#eeeeee">&nbsp;</td>
<td align="right" valign="top" bgcolor="#eeeeee">&nbsp;</td>
<td align="right" valign="top" bgcolor="#eeeeee"><font size="2" face="Arial">9</font></td>
<td align="left" valign="top" bgcolor="#eeeeee">&nbsp;</td>
<td align="right" valign="top" bgcolor="#eeeeee">&nbsp;</td>
<td align="right" valign="top" bgcolor="#eeeeee"><font size="2" face="Arial">12</font></td>
<td align="left" valign="top" bgcolor="#eeeeee">&nbsp;</td>
</tr>
<tr>
<td align="left" valign="top"><font size="2" face="Arial">Patent claim costs</font></td>
<td align="right" valign="top">&nbsp;</td>
<td align="right" valign="top"><font size="2" face="Arial">(8</font></td>
<td align="left" valign="top"><font size="2" face="Arial">)</font></td>
<td align="right" valign="top">&nbsp;</td>
<td align="right" valign="top"><font size="2" face="Arial">(3</font></td>
<td align="left" valign="top"><font size="2" face="Arial">)</font></td>
<td align="right" valign="top">&nbsp;</td>
<td align="right" valign="top"><font size="2" face="Arial">(14</font></td>
<td align="left" valign="top"><font size="2" face="Arial">)</font></td>
<td align="right" valign="top">&nbsp;</td>
<td align="right" valign="top"><font size="2" face="Arial">(5</font></td>
<td align="left" valign="top"><font size="2" face="Arial">)</font></td>
</tr>
<tr>
<td align="left" valign="top" bgcolor="#eeeeee"><font size="2" face="Arial">Gain on sale of non-current assets</font></td>
<td align="right" valign="top" bgcolor="#eeeeee">&nbsp;</td>
<td align="right" valign="top" bgcolor="#eeeeee"><font size="2" face="Arial">1</font></td>
<td align="left" valign="top" bgcolor="#eeeeee">&nbsp;</td>
<td align="right" valign="top" bgcolor="#eeeeee">&nbsp;</td>
<td align="right" valign="top" bgcolor="#eeeeee"><font size="2" face="Arial">&#151;</font></td>
<td align="left" valign="top" bgcolor="#eeeeee">&nbsp;</td>
<td align="right" valign="top" bgcolor="#eeeeee">&nbsp;</td>
<td align="right" valign="top" bgcolor="#eeeeee"><font size="2" face="Arial">6</font></td>
<td align="left" valign="top" bgcolor="#eeeeee">&nbsp;</td>
<td align="right" valign="top" bgcolor="#eeeeee">&nbsp;</td>
<td align="right" valign="top" bgcolor="#eeeeee"><font size="2" face="Arial">&#151;</font></td>
<td align="left" valign="top" bgcolor="#eeeeee">&nbsp;</td>
</tr>
<tr>
<td align="left" valign="top"><font size="2" face="Arial">Other non-recurring, net</font></td>
<td align="right" valign="top">&nbsp;</td>
<td align="right" valign="top"><font size="2" face="Arial">(3</font></td>
<td align="left" valign="top"><font size="2" face="Arial">)</font></td>
<td align="right" valign="top">&nbsp;</td>
<td align="right" valign="top"><font size="2" face="Arial">(2</font></td>
<td align="left" valign="top"><font size="2" face="Arial">)</font></td>
<td align="right" valign="top">&nbsp;</td>
<td align="right" valign="top"><font size="2" face="Arial">(7</font></td>
<td align="left" valign="top"><font size="2" face="Arial">)</font></td>
<td align="right" valign="top">&nbsp;</td>
<td align="right" valign="top"><font size="2" face="Arial">(3</font></td>
<td align="left" valign="top"><font size="2" face="Arial">)</font></td>
</tr>
<tr>
<td align="left" valign="top"><font size="2" face="Arial">&nbsp;</font></td>
<td align="right" valign="top">&nbsp;</td>
<td align="left" valign="top"><font size="2" face="Arial">&nbsp;</font></td>
<td align="left" valign="top">&nbsp;</td>
<td align="right" valign="top">&nbsp;</td>
<td align="left" valign="top"><font size="2" face="Arial">&nbsp;</font></td>
<td align="left" valign="top">&nbsp;</td>
<td align="right" valign="top">&nbsp;</td>
<td align="left" valign="top"><font size="2" face="Arial">&nbsp;</font></td>
<td align="left" valign="top">&nbsp;</td>
<td align="right" valign="top">&nbsp;</td>
<td align="left" valign="top"><font size="2" face="Arial">&nbsp;</font></td>
<td align="left" valign="top">&nbsp;</td>
</tr>
<tr>
<td align="left" valign="top" bgcolor="#eeeeee"><font size="2" face="Arial">Total</font></td>
<td align="right" valign="top" bgcolor="#eeeeee">&nbsp;</td>
<td align="right" valign="top" bgcolor="#eeeeee"><font size="2" face="Arial">2</font></td>
<td align="left" valign="top" bgcolor="#eeeeee">&nbsp;</td>
<td align="right" valign="top" bgcolor="#eeeeee">&nbsp;</td>
<td align="right" valign="top" bgcolor="#eeeeee"><font size="2" face="Arial">3</font></td>
<td align="left" valign="top" bgcolor="#eeeeee">&nbsp;</td>
<td align="right" valign="top" bgcolor="#eeeeee">&nbsp;</td>
<td align="right" valign="top" bgcolor="#eeeeee"><font size="2" face="Arial">(10</font></td>
<td align="left" valign="top" bgcolor="#eeeeee"><font size="2" face="Arial">)</font></td>
<td align="right" valign="top" bgcolor="#eeeeee">&nbsp;</td>
<td align="right" valign="top" bgcolor="#eeeeee"><font size="2" face="Arial">18</font></td>
<td align="left" valign="top" bgcolor="#eeeeee">&nbsp;</td>
</tr>
</table>
<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>
<a name="p?"></a>
<p><a href="#contents"><font size="2">Back to Contents</font></a></p>
<p align="left"><font size="2" face="Arial"><b>8. Impairment, Restructuring Charges and Other Related Closure Costs</b></font></p>
<p align="left"><font size="2" face="Arial">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>
<p align="left"><font size="2" face="Arial">150mm fab operations</font></p>
<p align="left"><font size="2" face="Arial">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 finer geometry 200mm wafer
    fabs. 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 downsizing 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 size="2" face="Arial">During the first half of 2004, the
    Company recorded restructuring charges of $40 million for its 150mm fab operations,
    of which $31 million was incurred in the first quarter and $9 million in
    the second quarter. These charges primarily related to $25 million in estimated
    one-time involuntary termination benefits associated with the plan communicated
    to the employees in March 2004 and $15 million of other charges associated
    with the closure and transfers of productions. These charges were related
    to the discontinuation of the production of Rennes, for an amount of $36
    million
    and to the production
    transfer from
    Carrollton
    (USA) for $2 million, from Rousset (France) for $1 million and from Agrate
    (Italy) for $1 million.</font></p>
<p align="left"><font size="2" face="Arial">Back-end operations</font></p>
<p align="left"><font size="2" face="Arial">During the first half of 2004, transfer
    costs amounting to $2 million were paid for back-end sites in Morocco, of
    which $1 million was incurred in the second quarter of 2004. No other major
    restructuring charges
    or other related closure costs were incurred in the second quarter of 2004
relating to back-end operations.  </font></p>
<p align="left"><font size="2" face="Arial">Other restructuring charges</font></p>
<p align="left"><font size="2" face="Arial">During the first half of 2004, amounts totaling $2 million were paid by the Company, of which $1 million was paid in the second quarter of 2004 for a voluntary termination benefit program. In addition, the Company recorded an impairment charge of $1 million mainly related to its financial investment in the joint venture SuperH, Inc. </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="p?"></a>
<p><a href="#contents"><font size="2">Back to Contents</font></a></p>
<p align="left"><font size="2" face="Arial">Impairment, restructuring charges and other related closure costs incurred in 2004 are summarized as follows:</font></p>
<table width="100%" border="0" cellpadding="0" cellspacing="0">
<tr valign="bottom">
<td align="left"><b><font size="1" face="Arial">&nbsp;</font></b></td>
<td align="right">&nbsp;</td>
<td align="center"><b><font size="1" face="Arial">Provision as at December 31, 2003</font></b></td>
<td align="left">&nbsp;</td>
<td align="center"><b><font size="1" face="Arial">Charges 2004 </font></b></td>
<td align="left">&nbsp;</td>
<td align="center"><b><font size="1" face="Arial">Amounts paid</font></b></td>
<td align="left">&nbsp;</td>
<td align="center"><b><font size="1" face="Arial">Provision as at </font><br>
    <font size="1" face="Arial">June 26, 2004</font></b></td>
<td align="left">&nbsp;</td>
</tr>
<tr valign="top">
<td align="left"><font size="1" face="Arial">&nbsp;</font></td>
<td align="right">&nbsp;</td>
<td align="left"><hr size="1" noshade></td>
<td align="left">&nbsp;</td>
<td align="left"><hr size="1" noshade></td>
<td align="left">&nbsp;</td>
<td align="left"><hr size="1" noshade></td>
<td align="left">&nbsp;</td>
<td align="left"><hr size="1" noshade></td>
<td align="left">&nbsp;</td>
</tr>
<tr valign="top">
<td align="left"><font size="2" face="Arial"><b>150mm fab operations</b></font></td>
<td align="right">&nbsp;</td>
<td align="left"><font size="2" face="Arial">&nbsp;</font></td>
<td align="left">&nbsp;</td>
<td align="left"><font size="2" face="Arial">&nbsp;</font></td>
<td align="left">&nbsp;</td>
<td align="left"><font size="2" face="Arial">&nbsp;</font></td>
<td align="left">&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" bgcolor="#eeeeee"><font size="2" face="Arial">&nbsp;&nbsp;&nbsp;Restructuring</font></td>
<td width="2%" align="right" bgcolor="#eeeeee">&nbsp;</td>
<td width="8%" align="right" bgcolor="#eeeeee"><font size="2" face="Arial">32</font></td>
<td width="2%" align="left" bgcolor="#eeeeee">&nbsp;</td>
<td width="8%" align="right" bgcolor="#eeeeee"><font size="2" face="Arial">25</font></td>
<td width="2%" align="left" bgcolor="#eeeeee">&nbsp;</td>
<td width="8%" align="right" bgcolor="#eeeeee"><font size="2" face="Arial">(6</font></td>
<td width="2%" align="left" bgcolor="#eeeeee"><font size="2" face="Arial">)</font></td>
<td width="8%" align="right" bgcolor="#eeeeee"><font size="2" face="Arial">51</font></td>
<td width="2%" align="left" bgcolor="#eeeeee">&nbsp;</td>
</tr>
<tr valign="top">
<td align="left"><font size="2" face="Arial">&nbsp;&nbsp;&nbsp;Other related closure costs</font></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"><font size="2" face="Arial">15</font></td>
<td align="left">&nbsp;</td>
<td align="right"><font size="2" face="Arial">(15</font></td>
<td align="left"><font size="2" face="Arial">)</font></td>
<td align="right"><font size="2" face="Arial">1</font></td>
<td align="left">&nbsp;</td>
</tr>
<tr valign="top">
<td align="left"><font size="2" face="Arial">&nbsp;</font></td>
<td align="right">&nbsp;</td>
<td align="left"><hr size="1" noshade></td>
<td align="left">&nbsp;</td>
<td align="left"><hr size="1" noshade></td>
<td align="left">&nbsp;</td>
<td align="left"><hr size="1" noshade></td>
<td align="left">&nbsp;</td>
<td align="left"><hr size="1" noshade></td>
<td align="left">&nbsp;</td>
</tr>
<tr valign="top">
<td align="left" bgcolor="#eeeeee"><font size="2" face="Arial">Total 150mm fab operations</font></td>
<td align="right" bgcolor="#eeeeee">&nbsp;</td>
<td align="right" bgcolor="#eeeeee"><font size="2" face="Arial">33</font></td>
<td align="left" bgcolor="#eeeeee">&nbsp;</td>
<td align="right" bgcolor="#eeeeee"><font size="2" face="Arial">40</font></td>
<td align="left" bgcolor="#eeeeee">&nbsp;</td>
<td align="right" bgcolor="#eeeeee"><font size="2" face="Arial">(21</font></td>
<td align="left" bgcolor="#eeeeee"><font size="2" face="Arial">)</font></td>
<td align="right" bgcolor="#eeeeee"><font size="2" face="Arial">52</font></td>
<td align="left" bgcolor="#eeeeee">&nbsp;</td>
</tr>
<tr valign="top">
<td align="left"><font size="2" face="Arial">&nbsp;</font></td>
<td align="right">&nbsp;</td>
<td align="left"><hr size="1" noshade></td>
<td align="left">&nbsp;</td>
<td align="left"><hr size="1" noshade></td>
<td align="left">&nbsp;</td>
<td align="left"><hr size="1" noshade></td>
<td align="left">&nbsp;</td>
<td align="left"><hr size="1" noshade></td>
<td align="left">&nbsp;</td>
</tr>
<tr valign="top">
<td align="left"><font size="2" face="Arial"><b>Back-end operations</b></font></td>
<td align="right">&nbsp;</td>
<td align="left"><font size="2" face="Arial">&nbsp;</font></td>
<td align="left">&nbsp;</td>
<td align="left"><font size="2" face="Arial">&nbsp;</font></td>
<td align="left">&nbsp;</td>
<td align="left"><font size="2" face="Arial">&nbsp;</font></td>
<td align="left">&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;Other related closure costs</font></td>
<td align="right">&nbsp;</td>
<td align="right"><font size="2" face="Arial">&#151;</font></td>
<td align="left">&nbsp;</td>
<td align="right"><font size="2" face="Arial">2</font></td>
<td align="left">&nbsp;</td>
<td align="right"><font size="2" face="Arial">(2</font></td>
<td align="left"><font size="2" face="Arial">)</font></td>
<td align="right"><font size="2" face="Arial">&#151;</font></td>
<td align="left">&nbsp;</td>
</tr>
<tr valign="top">
<td align="left"><font size="2" face="Arial">&nbsp;</font></td>
<td align="right">&nbsp;</td>
<td align="left"><hr size="1" noshade></td>
<td align="left">&nbsp;</td>
<td align="left"><hr size="1" noshade></td>
<td align="left">&nbsp;</td>
<td align="left"><hr size="1" noshade></td>
<td align="left">&nbsp;</td>
<td align="left"><hr size="1" noshade></td>
<td align="left">&nbsp;</td>
</tr>
<tr valign="top">
<td align="left" bgcolor="#eeeeee"><font size="2" face="Arial">Total Back-end operations</font></td>
<td align="right" bgcolor="#eeeeee">&nbsp;</td>
<td align="right" bgcolor="#eeeeee"><font size="2" face="Arial">&#151;</font></td>
<td align="left" bgcolor="#eeeeee">&nbsp;</td>
<td align="right" bgcolor="#eeeeee"><font size="2" face="Arial">2</font></td>
<td align="left" bgcolor="#eeeeee">&nbsp;</td>
<td align="right" bgcolor="#eeeeee"><font size="2" face="Arial">(2</font></td>
<td align="left" bgcolor="#eeeeee"><font size="2" face="Arial">)</font></td>
<td align="right" bgcolor="#eeeeee"><font size="2" face="Arial">&#151;</font></td>
<td align="left" bgcolor="#eeeeee">&nbsp;</td>
</tr>
<tr valign="top">
  <td align="left">&nbsp;</td>
  <td align="right">&nbsp;</td>
  <td align="left"><hr size="1" noshade></td>
  <td align="left">&nbsp;</td>
  <td align="left"><hr size="1" noshade></td>
  <td align="left">&nbsp;</td>
  <td align="left"><hr size="1" noshade></td>
  <td align="left">&nbsp;</td>
  <td align="left"><hr size="1" noshade></td>
  <td align="left">&nbsp;</td>
</tr>
<tr valign="top">
<td align="left"><font size="2" face="Arial"><b>Other</b></font></td>
<td align="right">&nbsp;</td>
<td align="left"><font size="2" face="Arial">&nbsp;</font></td>
<td align="left">&nbsp;</td>
<td align="left"><font size="2" face="Arial">&nbsp;</font></td>
<td align="left">&nbsp;</td>
<td align="left"><font size="2" face="Arial">&nbsp;</font></td>
<td align="left">&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;Restructuring</font></td>
<td align="right">&nbsp;</td>
<td align="right"><font size="2" face="Arial">3</font></td>
<td align="left">&nbsp;</td>
<td align="right"><font size="2" face="Arial">2</font></td>
<td align="left">&nbsp;</td>
<td align="right"><font size="2" face="Arial">(2</font></td>
<td align="left"><font size="2" face="Arial">)</font></td>
<td align="right"><font size="2" face="Arial">3</font></td>
<td align="left">&nbsp;</td>
</tr>
<tr valign="top">
<td align="left"><font size="2" face="Arial">&nbsp;</font></td>
<td align="right">&nbsp;</td>
<td align="left"><hr size="1" noshade></td>
<td align="left">&nbsp;</td>
<td align="left"><hr size="1" noshade></td>
<td align="left">&nbsp;</td>
<td align="left"><hr size="1" noshade></td>
<td align="left">&nbsp;</td>
<td align="left"><hr size="1" noshade></td>
<td align="left">&nbsp;</td>
</tr>
<tr valign="top">
<td align="left" bgcolor="#eeeeee"><font size="2" face="Arial">Total Other</font></td>
<td align="right" bgcolor="#eeeeee">&nbsp;</td>
<td align="right" bgcolor="#eeeeee"><font size="2" face="Arial">3</font></td>
<td align="left" bgcolor="#eeeeee">&nbsp;</td>
<td align="right" bgcolor="#eeeeee"><font size="2" face="Arial">2</font></td>
<td align="left" bgcolor="#eeeeee">&nbsp;</td>
<td align="right" bgcolor="#eeeeee"><font size="2" face="Arial">(2</font></td>
<td align="left" bgcolor="#eeeeee"><font size="2" face="Arial">)</font></td>
<td align="right" bgcolor="#eeeeee"><font size="2" face="Arial">3</font></td>
<td align="left" bgcolor="#eeeeee">&nbsp;</td>
</tr>
<tr valign="top">
  <td align="left">&nbsp;</td>
  <td align="right">&nbsp;</td>
  <td align="right"><hr size="1" noshade></td>
  <td align="left">&nbsp;</td>
  <td align="right"><hr size="1" noshade></td>
  <td align="left">&nbsp;</td>
  <td align="right"><hr size="1" noshade></td>
  <td align="left">&nbsp;</td>
  <td align="right"><hr 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 restructuring and other related closure costs</b></font></td>
<td align="right">&nbsp;</td>
<td align="right"><font size="2" face="Arial"><b>36</b></font></td>
<td align="left">&nbsp;</td>
<td align="right"><font size="2" face="Arial"><b>44</b></font></td>
<td align="left">&nbsp;</td>
<td align="right"><font size="2" face="Arial"><b>(25</b></font></td>
<td align="left"><font size="2" face="Arial"><b>)</b></font></td>
<td align="right"><font size="2" face="Arial"><b>55</b></font></td>
<td align="left">&nbsp;</td>
</tr>
<tr valign="top">
<td align="left"><font size="2" face="Arial">&nbsp;</font></td>
<td align="right">&nbsp;</td>
<td align="left"><hr size="2" noshade></td>
<td align="left">&nbsp;</td>
<td align="left"><hr size="2" noshade></td>
<td align="left">&nbsp;</td>
<td align="left"><hr size="2" noshade></td>
<td align="left">&nbsp;</td>
<td align="left"><hr size="2" noshade></td>
<td align="left">&nbsp;</td>
</tr>
</table>
<br><br>
<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="p?"></a>
<p><a href="#contents"><font size="2">Back to Contents</font></a></p>
<p align="left"><font size="2" face="Arial">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;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 $250 million has been incurred to date, $205 million in 2003, $33 million in the first quarter of 2004 and $12 million the second 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 size="2" face="Arial">In 2004, total cash outlays for the restructuring plan amounted to $25 million, of which $15 million paid in the second quarter.</font></p>
<p align="left"><font size="2" face="Arial"><b>9. Interest expense, net</b></font></p>
<p align="left"><font size="2" face="Arial">Interest expense, net consisted of
    the following:</font></p>
<table width="100%" cellspacing="0" cellpadding="0" border="0">
  <tr align="center" valign="bottom">
    <td align="left"><b><font size="1" face="Arial">In millions of U.S dollars </font></b></td>
    <td><font size="1">&nbsp;</font></td>
    <td colspan="7"><b><font size="1" face="Arial">(Unaudited)</font></b></td>
    <td><font size="1">&nbsp;</font></td>
  </tr>
  <tr align="center" valign="bottom">
    <td><font size="1">&nbsp;</font></td>
    <td><font size="1">&nbsp;</font></td>
    <td colspan="3"><hr size="1" noshade>
    </td>
    <td><hr size="1" noshade>
    </td>
    <td colspan="3"><hr size="1" noshade>
    </td>
    <td><font size="1">&nbsp;</font></td>
  </tr>
  <tr align="center" valign="bottom">
    <td><b><font size="1" face="Arial">&nbsp;</font></b></td>
    <td><font size="1">&nbsp;</font></td>
    <td colspan="3"><b><font size="1" face="Arial">Three months ended</font></b></td>
    <td><font size="1">&nbsp;</font></td>
    <td colspan="3"><b><font size="1" face="Arial">Six months ended</font></b></td>
    <td><font size="1">&nbsp;</font></td>
  </tr>
  <tr align="center" valign="bottom">
    <td><font size="1">&nbsp;</font></td>
    <td><font size="1">&nbsp;</font></td>
    <td><hr size="1" noshade>
    </td>
    <td><hr size="1" noshade>
    </td>
    <td><hr size="1" noshade>
    </td>
    <td><font size="1">&nbsp;</font></td>
    <td><hr size="1" noshade>
    </td>
    <td><hr size="1" noshade>
    </td>
    <td><hr size="1" noshade>
    </td>
    <td><font size="1">&nbsp;</font></td>
  </tr>
  <tr align="center" valign="bottom">
    <td><b><font size="1" face="Arial">&nbsp;</font></b></td>
    <td><font size="1">&nbsp;</font></td>
    <td><b><font size="1" face="Arial">June 26,</font></b></td>
    <td><font size="1">&nbsp;</font></td>
    <td><b><font size="1" face="Arial">June 28,</font></b></td>
    <td><font size="1">&nbsp;</font></td>
    <td><b><font size="1" face="Arial">June 26,</font></b></td>
    <td><font size="1">&nbsp;</font></td>
    <td><b><font size="1" face="Arial">June 28,</font></b></td>
    <td><font size="1">&nbsp;</font></td>
  </tr>
  <tr align="center" valign="bottom">
    <td><b><font size="1" face="Arial">&nbsp;</font></b></td>
    <td><font size="1">&nbsp;</font></td>
    <td><b><font size="1" face="Arial">2004</font></b></td>
    <td><font size="1">&nbsp;</font></td>
    <td><b><font size="1" face="Arial">2003</font></b></td>
    <td><font size="1">&nbsp;</font></td>
    <td><b><font size="1" face="Arial">2004</font></b></td>
    <td><font size="1">&nbsp;</font></td>
    <td><b><font size="1" face="Arial">2003</font></b></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="left"><hr size="1" noshade>
    </td>
    <td align="left"><font size="1">&nbsp;</font></td>
    <td align="left"><hr size="1" noshade>
    </td>
    <td align="left"><font size="1">&nbsp;</font></td>
    <td align="left"><hr size="1" noshade>
    </td>
    <td align="left"><font size="1">&nbsp;</font></td>
    <td align="left"><hr size="1" noshade>
    </td>
    <td align="left"><font size="1">&nbsp;</font></td>
  </tr>
<tr valign="top">
<td align="left" bgcolor="#eeeeee"><font size="2" face="Arial">Income</font></td>
<td width="2%" align="left" bgcolor="#eeeeee">&nbsp;</td>
<td width="8%" align="right" bgcolor="#eeeeee"><font size="2" face="Arial">10</font></td>
<td width="2%" align="left" bgcolor="#eeeeee">&nbsp;</td>
<td width="8%" align="right" bgcolor="#eeeeee"><font size="2" face="Arial">9</font></td>
<td width="2%" align="left" bgcolor="#eeeeee">&nbsp;</td>
<td width="8%" align="right" bgcolor="#eeeeee"><font size="2" face="Arial">21</font></td>
<td width="2%" align="left" bgcolor="#eeeeee">&nbsp;</td>
<td width="8%" align="right" bgcolor="#eeeeee"><font size="2" face="Arial">19</font></td>
<td width="2%" align="left" bgcolor="#eeeeee">&nbsp;</td>
</tr>
<tr valign="top">
<td align="left"><font size="2" face="Arial">Expense</font></td>
<td align="left">&nbsp;</td>
<td align="right"><font size="2" face="Arial">(13</font></td>
<td align="left"><font size="2" face="Arial">)</font></td>
<td align="right"><font size="2" face="Arial">(25</font></td>
<td align="left"><font size="2" face="Arial">)</font></td>
<td align="right"><font size="2" face="Arial">(28</font></td>
<td align="left"><font size="2" face="Arial">)</font></td>
<td align="right"><font size="2" face="Arial">(52</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;</font></td>
<td align="left">&nbsp;</td>
<td align="left"><hr size="1" noshade></td>
<td align="left">&nbsp;</td>
<td align="left"><hr size="1" noshade></td>
<td align="left">&nbsp;</td>
<td align="left"><hr size="1" noshade></td>
<td align="left">&nbsp;</td>
<td align="left"><hr size="1" noshade></td>
<td align="left">&nbsp;</td>
</tr>
<tr valign="top">
<td align="left" bgcolor="#eeeeee"><font size="2" face="Arial">Total</font></td>
<td align="left" bgcolor="#eeeeee">&nbsp;</td>
<td align="right" bgcolor="#eeeeee"><font size="2" face="Arial">(3</font></td>
<td align="left" bgcolor="#eeeeee"><font size="2" face="Arial">)</font></td>
<td align="right" bgcolor="#eeeeee"><font size="2" face="Arial">(16</font></td>
<td align="left" bgcolor="#eeeeee"><font size="2" face="Arial">)</font></td>
<td align="right" bgcolor="#eeeeee"><font size="2" face="Arial">(7</font></td>
<td align="left" bgcolor="#eeeeee"><font size="2" face="Arial">)</font></td>
<td align="right" bgcolor="#eeeeee"><font size="2" face="Arial">(33</font></td>
<td align="left" bgcolor="#eeeeee"><font size="2" face="Arial">)</font></td>
</tr>
<tr valign="top">
  <td align="left">&nbsp;</td>
  <td align="left">&nbsp;</td>
  <td align="right"><hr size="2" noshade></td>
  <td align="left">&nbsp;</td>
  <td align="right"><hr size="2" noshade></td>
  <td align="left">&nbsp;</td>
  <td align="right"><hr size="2" noshade></td>
  <td align="left">&nbsp;</td>
  <td align="right"><hr size="2" noshade></td>
  <td align="left">&nbsp;</td>
</tr>
</table>
<p align="left"><font size="2" face="Arial">Interest expense also included charges
    related to the amortization of issuance costs incurred by the Company for
    the outstanding convertible bonds.</font></p>
<p align="left"><font size="2" face="Arial"><b>10. Loss on extinguishment of convertible debt </b></font></p>
<p align="left"><font size="2" face="Arial">In the second quarter of 2004, the Company repurchased on the market approximately $307 million aggregate principal amount at maturity of its 3.75% Zero Coupon Senior Convertible Bonds due 2010. The total cash amount paid was approximately $244 million. The repurchased convertible bonds were equivalent to 2,859,851 shares and have been cancelled.</font></p>
<p align="left"><font size="2" face="Arial">In relation to this repurchase, the
    Company recorded in the second quarter of 2004 a non-operating pre-tax charge
    of $4 million, of which $3 million related to the price paid in excess of
    the repurchased convertible bonds accreted value and $1 million related to
the write-off of the related bond issuance costs. </font></p>
<p align="left"><font size="2" face="Arial">On July 9, 2004, the Company redeemed
the remaining $131 million in outstanding Bonds due 2010.</font></p>
<p align="left"><font size="2" face="Arial">During the first six months of 2003,
    the Company repurchased on the market approximately
    $643
    million
    aggregate
    principal
    amount at maturity of its 3.75% Zero Coupon Senior Convertible Bonds due
    2010. The total cash amount paid was approximately $495 million. The repurchased
    convertible bonds were equivalent to 5,990,616 shares and have been
    cancelled.</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="p?"></a>
<p><a href="#contents"><font size="2">Back to Contents</font></a></p>
<p align="left"><font size="2" face="Arial">In relation to this repurchase, the
    Company registered in the second quarter of 2003 a non-operating pre-tax
    charge of $15 million, of which $11 million related to the price paid in
    excess of
    the repurchased convertible bonds accreted value and $4 million related
    to the write-off of the related bond issuance costs. </font></p>
<p align="left"><font size="2" face="Arial"><b>11. Cash Equivalents</b></font></p>
<p align="left"><font size="2" face="Arial">All highly liquid investments purchased with an original maturity of ninety days or less are considered to be cash equivalents.</font></p>
<p align="left"><font size="2" face="Arial"><b>12. Marketable Securities</b></font></p>
<p align="left"><font size="2" face="Arial">Marketable securities totaled $1,030
    million as at June 26, 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 (&#8220;reference
    debt&#8221;) that have been issued by different banks with a minimum rating
    of &#8220;BBB+&#8221; and include a derivative instrument related to the
    underlying credit default swap of the credit-linked deposits. The Company
    has determined that this derivative element does not have a material impact
    on the interim financial statements as of June 26, 2004. 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, in which case repayment of principal
    would be
reduced based on the decline in value of the defaulted debt.</font></p>
<p align="left"><font size="2" face="Arial"><b>13. Inventories</b></font></p>
<p align="left"><font size="2" face="Arial">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 size="2" face="Arial">Provisions for obsolescence are estimated
    for uncommitted inventories based on the previous quarter sales, orders backlog
and production plans. </font></p>
<p align="left"><font size="2" face="Arial">Inventories, net of reserve consisted
    of the following:</font></p>
<table width="100%" cellspacing="0" cellpadding="0" border="0">
<tr valign="top">
<td align="left"><div align="left"><b><font size="1" face="Arial">In millions of U.S. dollars</font></b></div></td>
<td align="left" width="2%">&nbsp;</td>
<td width="1%" align="right">&nbsp;</td>
<td width="8%" align="center"><div align="center"><b><font size="1" face="Arial">As at <br>
  June 26,<br>
  2004</font></b></div></td>
<td width="2%" align="left">&nbsp;</td>
<td width="1%" align="right">&nbsp;</td>
<td width="8%" align="center"><div align="center"><b><font size="1" face="Arial">As at <br>
  December 31,<br>
2003</font></b></div></td>
<td width="2%" align="left">&nbsp;</td>
</tr>
<tr valign="top">
  <td align="left">&nbsp;</td>
  <td align="left">&nbsp;</td>
  <td align="right">&nbsp;</td>
  <td align="center"><hr size="1" noshade></td>
  <td align="left">&nbsp;</td>
  <td align="right">&nbsp;</td>
  <td align="center"><hr size="1" noshade></td>
  <td align="left">&nbsp;</td>
</tr>
<tr valign="top">
<td align="left"><font size="2" face="Arial">&nbsp;</font></td>
<td align="left">&nbsp;</td>
<td align="right">&nbsp;</td>
<td align="center"><div align="center"><b><font size="1" face="Arial">            (unaudited)</font></b></div></td>
<td align="left">&nbsp;</td>
<td align="right">&nbsp;</td>
<td align="center"><div align="center"><b><font size="1" face="Arial">            (audited)</font></b></div></td>
<td align="left">&nbsp;</td>
</tr>
<tr valign="top">
<td align="left" bgcolor="#eeeeee"><font size="2" face="Arial">Raw materials</font></td>
<td align="left" bgcolor="#eeeeee">&nbsp;</td>
<td align="right" bgcolor="#eeeeee">&nbsp;</td>
<td align="right" bgcolor="#eeeeee"><font size="2" face="Arial">56</font></td>
<td align="left" bgcolor="#eeeeee">&nbsp;</td>
<td align="right" bgcolor="#eeeeee">&nbsp;</td>
<td align="right" bgcolor="#eeeeee"><font size="2" face="Arial">50</font></td>
<td align="left" bgcolor="#eeeeee">&nbsp;</td>
</tr>
<tr valign="top">
<td align="left"><font size="2" face="Arial">Work-in-process.         </font></td>
<td align="left">&nbsp;</td>
<td align="right">&nbsp;</td>
<td align="right"><font size="2" face="Arial">753</font></td>
<td align="left">&nbsp;</td>
<td align="right">&nbsp;</td>
<td align="right"><font size="2" face="Arial">768</font></td>
<td align="left">&nbsp;</td>
</tr>
<tr valign="top">
<td align="left" bgcolor="#eeeeee"><font size="2" face="Arial">Finished products.</font></td>
<td align="left" bgcolor="#eeeeee">&nbsp;</td>
<td align="right" bgcolor="#eeeeee">&nbsp;</td>
<td align="right" bgcolor="#eeeeee"><font size="2" face="Arial">288</font></td>
<td align="left" bgcolor="#eeeeee">&nbsp;</td>
<td align="right" bgcolor="#eeeeee">&nbsp;</td>
<td align="right" bgcolor="#eeeeee"><font size="2" face="Arial">311</font></td>
<td align="left" bgcolor="#eeeeee">&nbsp;</td>
</tr>
<tr valign="top">
  <td align="left">&nbsp;</td>
  <td align="left">&nbsp;</td>
  <td align="right">&nbsp;</td>
  <td align="right"><hr size="1" noshade></td>
  <td align="left">&nbsp;</td>
  <td align="right">&nbsp;</td>
  <td align="right"><hr size="1" noshade></td>
  <td align="left">&nbsp;</td>
</tr>
<tr valign="top">
<td align="left" bgcolor="#eeeeee"><font size="2" face="Arial"><b>Total</b></font></td>
<td align="left" bgcolor="#eeeeee">&nbsp;</td>
<td align="right" bgcolor="#eeeeee">&nbsp;</td>
<td align="right" bgcolor="#eeeeee"><font size="2" face="Arial">1,097</font></td>
<td align="left" bgcolor="#eeeeee">&nbsp;</td>
<td align="right" bgcolor="#eeeeee">&nbsp;</td>
<td align="right" bgcolor="#eeeeee"><font size="2" face="Arial">1,129</font></td>
<td align="left" bgcolor="#eeeeee">&nbsp;</td>
</tr>
<tr valign="top">
  <td align="left">&nbsp;</td>
  <td align="left">&nbsp;</td>
  <td align="right">&nbsp;</td>
  <td align="right"><hr size="1" noshade></td>
  <td align="left">&nbsp;</td>
  <td align="right">&nbsp;</td>
  <td align="right"><hr size="1" noshade></td>
  <td align="left">&nbsp;</td>
</tr>
</table>
<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="p?"></a>
<p><a href="#contents"><font size="2">Back to Contents</font></a></p>
<p align="left"><font size="2" face="Arial"><b>14. Warranty costs</b></font></p>
<p align="left"><font size="2" face="Arial">The Company&#8217;s products typically
    carry a warranty in case of issue for a certain amount of time. The Company
    provides a reserve for estimated product warranty cost based on the Company&#8217;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.
    Total provision amounted to $2 million as at June 26, 2004.</font></p>
<p align="left"><font size="2" face="Arial"><b>15. Goodwill and Other Intangible Assets</b></font></p>
<p align="left"><font size="2" face="Arial">    Goodwill and other intangible
    assets consisted of the following:</font></p>
<table width="100%" cellspacing="0" cellpadding="0" border="0">
<tr valign="top">
<td align="left"><div align="left"><font size="1" face="Arial"><b>In millions
        of U.S. dollars</b></font></div></td>
<td align="left" width="2%">&nbsp;</td>
<td width="1%" align="right">&nbsp;</td>
<td width="8%" align="center"><div align="center"><font size="1" face="Arial"><b>As
        at<br>
June 26,<br>
2004</b></font></div></td>
<td width="2%" align="left">&nbsp;</td>
<td width="1%" align="right">&nbsp;</td>
<td width="8%" align="center"><div align="center"><font size="1" face="Arial"><b>As
        at <br>
December 31,<br>
2003</b></font></div></td>
<td width="2%" align="left">&nbsp;</td>
</tr>
<tr valign="top">
  <td align="left">&nbsp;</td>
  <td align="left">&nbsp;</td>
  <td align="right">&nbsp;</td>
  <td align="center"><hr size="1" noshade></td>
  <td align="left">&nbsp;</td>
  <td align="right">&nbsp;</td>
  <td align="center"><hr size="1" noshade></td>
  <td align="left">&nbsp;</td>
</tr>
<tr valign="top">
<td align="left"><div align="center"><font size="1" face="Arial"><b>&nbsp;</b></font></div></td>
<td align="left">&nbsp;</td>
<td align="right">&nbsp;</td>
<td align="center"><div align="center"><font size="1" face="Arial"><b> (unaudited)</b></font></div></td>
<td align="left">&nbsp;</td>
<td align="right">&nbsp;</td>
<td align="center"><div align="center"><font size="1" face="Arial"><b> (audited)</b></font></div></td>
<td align="left">&nbsp;</td>
</tr>
<tr valign="top">
<td align="left" bgcolor="#eeeeee"><font size="2" face="Arial">Goodwill</font></td>
<td align="left" bgcolor="#eeeeee">&nbsp;</td>
<td align="right" bgcolor="#eeeeee">&nbsp;</td>
<td align="right" bgcolor="#eeeeee"><font size="2" face="Arial">259</font></td>
<td align="left" bgcolor="#eeeeee">&nbsp;</td>
<td align="right" bgcolor="#eeeeee">&nbsp;</td>
<td align="right" bgcolor="#eeeeee"><font size="2" face="Arial">267</font></td>
<td align="left" bgcolor="#eeeeee">&nbsp;</td>
</tr>
<tr valign="top">
<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" bgcolor="#eeeeee"><font size="2" face="Arial">Other intangible assets.</font></td>
<td align="left" bgcolor="#eeeeee">&nbsp;</td>
<td align="right" bgcolor="#eeeeee">&nbsp;</td>
<td align="right" bgcolor="#eeeeee"><font size="2" face="Arial">302</font></td>
<td align="left" bgcolor="#eeeeee">&nbsp;</td>
<td align="right" bgcolor="#eeeeee">&nbsp;</td>
<td align="right" bgcolor="#eeeeee"><font size="2" face="Arial">325</font></td>
<td align="left" bgcolor="#eeeeee">&nbsp;</td>
</tr>
<tr valign="top">
  <td align="left">&nbsp;</td>
  <td align="left">&nbsp;</td>
  <td align="right">&nbsp;</td>
  <td align="right"><hr size="1" noshade></td>
  <td align="left">&nbsp;</td>
  <td align="right">&nbsp;</td>
  <td align="right"><hr 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">&nbsp;</td>
<td align="right"><font size="2" face="Arial">561</font></td>
<td align="left">&nbsp;</td>
<td align="right">&nbsp;</td>
<td align="right"><font size="2" face="Arial">592</font></td>
<td align="left">&nbsp;</td>
</tr>
<tr valign="top">
  <td align="left">&nbsp;</td>
  <td align="left">&nbsp;</td>
  <td align="right">&nbsp;</td>
  <td align="right"><hr size="1" noshade></td>
  <td align="left">&nbsp;</td>
  <td align="right">&nbsp;</td>
  <td align="right"><hr size="1" noshade></td>
  <td align="left">&nbsp;</td>
</tr>
</table>
<p align="left"><font size="2" face="Arial">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>
<p align="left"><font size="2" face="Arial"><b>16. Investments and other non-current assets</b></font></p>
<p align="left"><font size="2" face="Arial"> Investments and other non-current
    assets consisted of the following:</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">&nbsp;</td>
<td align="right">&nbsp;</td>
<td width="8%" align="center"><font size="1" face="Arial"><b>June 26,<br>
  2004</b></font></td>
<td align="left">&nbsp;</td>
<td align="right">&nbsp;</td>
<td width="8%" align="center"><font size="1" face="Arial"><b>December 31, <br>
  2003</b></font></td>
<td align="left">&nbsp;</td>
</tr>
<tr valign="top">
<td height="21" align="left"><font size="1" face="Arial">&nbsp;</font></td>
<td align="left">&nbsp;</td>
<td align="right">&nbsp;</td>
<td align="right"><hr size="1" noshade><font size="1" face="Arial">&nbsp;</font></td>
<td align="left">&nbsp;</td>
<td align="right">&nbsp;</td>
<td align="right"><hr size="1" noshade> <font size="1" face="Arial">&nbsp;</font></td>
<td align="left">&nbsp;</td>
</tr>
<tr valign="top">
<td align="left"><font size="1" face="Arial">&nbsp;</font></td>
<td align="left">&nbsp;</td>
<td align="right">&nbsp;</td>
<td align="center"><b><font size="1" face="Arial">(unaudited)</font></b></td>
<td align="left">&nbsp;</td>
<td align="right">&nbsp;</td>
<td align="center"><b><font size="1" face="Arial">(audited)</font></b></td>
<td align="left">&nbsp;</td>
</tr>
<tr valign="top">
<td align="left" bgcolor="#eeeeee"><font size="2" face="Arial">Investments</font></td>
<td width="2%" align="left" bgcolor="#eeeeee">&nbsp;</td>
<td width="1%" align="right" bgcolor="#eeeeee">&nbsp;</td>
<td width="7%" align="right" bgcolor="#eeeeee"><font size="2" face="Arial"><b>43</b></font></td>
<td width="2%" align="left" bgcolor="#eeeeee">&nbsp;</td>
<td width="1%" align="right" bgcolor="#eeeeee">&nbsp;</td>
<td width="7%" align="right" bgcolor="#eeeeee"><font size="2" face="Arial">38</font></td>
<td width="2%" align="left" bgcolor="#eeeeee">&nbsp;</td> </tr>
<tr valign="top">
<td align="left"><font size="2" face="Arial">Long-term deposits </font></td>
<td align="left">&nbsp;</td>
<td align="right">&nbsp;</td>
<td align="right"><font size="2" face="Arial"><b>54</b></font></td>
<td align="left">&nbsp;</td>
<td align="right">&nbsp;</td>
<td align="right"><font size="2" face="Arial">44</font></td>
<td align="left">&nbsp;</td>
</tr>
<tr valign="top">
<td align="left" bgcolor="#eeeeee"><font size="2" face="Arial">Debt issuance costs, net</font></td>
<td align="left" bgcolor="#eeeeee">&nbsp;</td>
<td align="right" bgcolor="#eeeeee">&nbsp;</td>
<td align="right" bgcolor="#eeeeee"><font size="2" face="Arial"><b>11</b></font></td>
<td align="left" bgcolor="#eeeeee">&nbsp;</td>
<td align="right" bgcolor="#eeeeee">&nbsp;</td>
<td align="right" bgcolor="#eeeeee"><font size="2" face="Arial">17</font></td>
<td align="left" bgcolor="#eeeeee">&nbsp;</td>
</tr>
<tr valign="top">
<td align="left"><font size="2" face="Arial">&nbsp;</font></td>
<td align="left">&nbsp;</td>
<td align="right">&nbsp;</td>
<td align="left">
  <hr size="1" noshade></td>
<td align="left">&nbsp;</td>
<td align="right">&nbsp;</td>
<td align="left">
  <hr size="1" noshade></td>
<td align="left">&nbsp;</td>
</tr>
<tr valign="top">
<td align="left" bgcolor="#eeeeee"><font size="2" face="Arial"><b>Total</b></font></td>
<td align="left" bgcolor="#eeeeee">&nbsp;</td>
<td align="right" bgcolor="#eeeeee">&nbsp;</td>
<td align="right" bgcolor="#eeeeee"><font size="2" face="Arial"><b>108</b></font></td>
<td align="left" bgcolor="#eeeeee">&nbsp;</td>
<td align="right" bgcolor="#eeeeee">&nbsp;</td>
<td align="right" bgcolor="#eeeeee"><font size="2" face="Arial">99</font></td>
<td align="left" bgcolor="#eeeeee">&nbsp;</td>
</tr>
<tr valign="top">
  <td align="left">&nbsp;</td>
  <td align="left">&nbsp;</td>
  <td align="right">&nbsp;</td>
  <td align="right"><hr size="1" noshade></td>
  <td align="left">&nbsp;</td>
  <td align="right">&nbsp;</td>
  <td align="right"><hr size="1" noshade></td>
  <td align="left">&nbsp;</td>
</tr>
</table>
<p align="left"><font size="2" face="Arial">DNP Photomask Europe S.p.A</font></p>
<p align="left"><font size="2" face="Arial">The Company entered into a joint
    venture agreement in 2002 with Dai Nippon Printing Co, Ltd for the development
    and production of photomasks in which the Company holds a 19% interest. The
    joint venture, DNP Photomask Europe S.p.A, was initially capitalized with
    the Company&#8217;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 June 26, 2004, the Company&#8217;s
    total contribution to the joint venture was $10 million. The Company continues
    to maintain its 19% ownership of the
joint venture.</font></p>
<p align="center"><font face="Arial" size="2">F-17</font></p>
<hr noshade align="center" width="100%" size="2">
<div style="page-break-before:always"></div>
<page>
<a name="p?"></a>
<p><a href="#contents"><font size="2">Back to Contents</font></a></p>
<p align="left"><font size="2" face="Arial">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>
<p align="left"><font size="2" face="Arial">SuperH, Inc.</font></p>
<p align="left"><font size="2" face="Arial">In 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&#8217;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 size="2" face="Arial">As a result of deteriorating market
    conditions and the inability of SuperH, Inc. to meet its projected business
    plan objectives, the Company wrote off the $4 million
    remaining book value of its investment in SuperH, Inc. at December 31, 2002
    and provisioned an additional $3 million for a capital contribution that
    the Company was committed
    to and did make in 2003. </font></p>
<p align="left"><font size="2" face="Arial">During the third quarter of 2003,
    the shareholders&#8217; agreement was amended to require the Company to additionally
    contribute up to $3 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 the final $1 million installment
    was paid in the first half of 2004. The revised Shareholder
    agreement also
    stipulated
    to review any additional cash requirements in the second half of 2004, which
    has resulted in the Company being required to make a further
    capital investment of up to $1 million. The Company was required to do part
    of this
    additional
    contribution for less than
$1 million in the second quarter of 2004. </font></p>
<p align="left"><font size="2" face="Arial">As of June 26, 2004, the Company continues to maintain its 44% ownership of the joint venture. The Company is accounting for its share in SuperH, Inc. joint venture under the equity method based on the actual results of the joint venture. At June 26, 2004, the accumulated losses of the joint venture exceeded the Company&#8217;s total investment, and the investment was shown at a zero carrying value.  </font></p>
<p align="left"><font size="2" face="Arial">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&#8217; agreement
    and ongoing discussions with its partners, the Company estimates that future
    loss exposure from the joint venture in
    addition to the provisions recorded is considered possible for an amount
    of $3 million.</font></p>
<p align="left"><font size="2" face="Arial">UPEK, Inc.</font></p>
<p align="left"><font size="2" face="Arial">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&#8217;s TouchChip business. UPEK,
    Inc. was initially capitalized with the Company&#8217;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 from the first quarter of 2004, which will reduce the Company&#8217;s
ownership
to
33%.</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="p?"></a>
<p><a href="#contents"><font size="2">Back to Contents</font></a></p>
<p align="left"><font size="2" face="Arial">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>
<p align="left"><font size="2" face="Arial"><b>17. Long-term Debt </b></font></p>
<p align="left"><font size="2" face="Arial">Long-term debt consisted of the
    following:</font></p>
<table width="100%" border="0" cellpadding="0" cellspacing="0">
  <tr>
    <td align="left"><b><font size="1" face="Arial">In millions of U.S dollars </font></b></td>
    <td align="left"><b><font size="1">&nbsp;</font></b></td>
    <td align="right"><b><font size="1">&nbsp;</font></b></td>
    <td align="center"><b><font size="1" face="Arial">As at June 26, 2004</font></b></td>
    <td align="left"><b><font size="1">&nbsp;</font></b></td>
    <td align="right"><b><font size="1">&nbsp;</font></b></td>
    <td align="center"><b><font size="1" face="Arial">As at December 31, 2003</font></b></td>
    <td align="left"><b><font size="1">&nbsp;</font></b></td>
  </tr>
  <tr>
    <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 align="right"><b><font size="1">&nbsp;</font></b></td>
    <td align="center"><b><font size="1" face="Arial"> (unaudited)</font></b></td>
    <td align="left"><b><font size="1">&nbsp;</font></b></td>
    <td align="right"><b><font size="1">&nbsp;</font></b></td>
    <td align="center"><b><font size="1" face="Arial"> (audited)</font></b></td>
    <td align="left"><b><font size="1">&nbsp;</font></b></td>
  </tr>
<tr>
<td align="left" valign="top"></td>
<td align="left" valign="top">&nbsp;</td>
<td align="right" valign="top">&nbsp;</td>
<td align="left" valign="top"><hr noshade size="1"></td>
<td align="left" valign="top">&nbsp;</td>
<td align="right" valign="top">&nbsp;</td>
<td align="left" valign="top"><hr noshade size="1"></td>
<td align="left" valign="top">&nbsp;</td>
</tr>
<tr>
<td align="left" valign="top"><font size="2" face="Arial">STMicroelectronics SA (France)</font></td>
<td width="2%" align="left" valign="top">&nbsp;</td>
<td width="1%" align="right" valign="top">&nbsp;</td>
<td width="10%" align="left" valign="top"><font size="2" face="Arial">&nbsp;</font></td>
<td width="2%" align="left" valign="top">&nbsp;</td>
<td width="1%" align="right" valign="top">&nbsp;</td>
<td width="10%" align="left" valign="top"><font size="2" face="Arial">&nbsp;</font></td>
<td width="2%" align="left" valign="top">&nbsp;</td>
</tr>
<tr>
<td align="left" valign="top"></td>
<td align="left" valign="top">&nbsp;</td>
<td align="right" valign="top">&nbsp;</td>
<td align="left" valign="top"><font size="2" face="Arial">&nbsp;</font></td>
<td align="left" valign="top">&nbsp;</td>
<td align="right" valign="top">&nbsp;</td>
<td align="left" valign="top"><font size="2" face="Arial">&nbsp;</font></td>
<td align="left" valign="top">&nbsp;</td>
</tr>
<tr>
<td align="left" valign="top" bgcolor="#eeeeee"><font size="2" face="Arial">2.40% (weighted average) bank loans due 2006</font></td>
<td align="left" valign="top" bgcolor="#eeeeee">&nbsp;</td>
<td align="right" valign="top" bgcolor="#eeeeee">&nbsp;</td>
<td align="right" valign="top" bgcolor="#eeeeee"><font size="2" face="Arial">117</font></td>
<td align="left" valign="top" bgcolor="#eeeeee">&nbsp;</td>
<td align="right" valign="top" bgcolor="#eeeeee">&nbsp;</td>
<td align="right" valign="top" bgcolor="#eeeeee"><font size="2" face="Arial">146</font></td>
<td align="left" valign="top" bgcolor="#eeeeee">&nbsp;</td>
</tr>
<tr>
<td align="left" valign="top"><font size="2" face="Arial">0.00% (weighted average) other bank loans</font></td>
<td align="left" valign="top">&nbsp;</td>
<td align="right" valign="top">&nbsp;</td>
<td align="right" valign="top"><font size="2" face="Arial">   1</font></td>
<td align="left" valign="top">&nbsp;</td>
<td align="right" valign="top">&nbsp;</td>
<td align="right" valign="top"><font size="2" face="Arial">1</font></td>
<td align="left" valign="top">&nbsp;</td>
</tr>
<tr>
<td align="left" valign="top" bgcolor="#eeeeee"><font size="2" face="Arial">4.79% (weighted average) capital leases </font></td>
<td align="left" valign="top" bgcolor="#eeeeee">&nbsp;</td>
<td align="right" valign="top" bgcolor="#eeeeee">&nbsp;</td>
<td align="right" valign="top" bgcolor="#eeeeee"><font size="2" face="Arial">33</font></td>
<td align="left" valign="top" bgcolor="#eeeeee">&nbsp;</td>
<td align="right" valign="top" bgcolor="#eeeeee">&nbsp;</td>
<td align="right" valign="top" bgcolor="#eeeeee"><font size="2" face="Arial">37</font></td>
<td align="left" valign="top" bgcolor="#eeeeee">&nbsp;</td>
</tr>
<tr>
<td align="left" valign="top"></td>
<td align="left" valign="top">&nbsp;</td>
<td align="right" valign="top">&nbsp;</td>
<td align="left" valign="top"><font size="2" face="Arial">&nbsp;</font></td>
<td align="left" valign="top">&nbsp;</td>
<td align="right" valign="top">&nbsp;</td>
<td align="left" valign="top"><font size="2" face="Arial">&nbsp;</font></td>
<td align="left" valign="top">&nbsp;</td>
</tr>
<tr>
<td align="left" valign="top"><font size="2" face="Arial">STMicroelectronics S.r.l. (Italy)</font></td>
<td align="left" valign="top">&nbsp;</td>
<td align="right" valign="top">&nbsp;</td>
<td align="left" valign="top"><font size="2" face="Arial">&nbsp;</font></td>
<td align="left" valign="top">&nbsp;</td>
<td align="right" valign="top">&nbsp;</td>
<td align="left" valign="top"><font size="2" face="Arial">&nbsp;</font></td>
<td align="left" valign="top">&nbsp;</td>
</tr>
<tr>
<td align="left" valign="top"></td>
<td align="left" valign="top">&nbsp;</td>
<td align="right" valign="top">&nbsp;</td>
<td align="left" valign="top"><font size="2" face="Arial">&nbsp;</font></td>
<td align="left" valign="top">&nbsp;</td>
<td align="right" valign="top">&nbsp;</td>
<td align="left" valign="top"><font size="2" face="Arial">&nbsp;</font></td>
<td align="left" valign="top">&nbsp;</td>
</tr>
<tr>
<td align="left" valign="top" bgcolor="#eeeeee"><font size="2" face="Arial">7.35% bank loan due 2005 </font></td>
<td align="left" valign="top" bgcolor="#eeeeee">&nbsp;</td>
<td align="right" valign="top" bgcolor="#eeeeee">&nbsp;</td>
<td align="right" valign="top" bgcolor="#eeeeee"><font size="2" face="Arial">2</font></td>
<td align="left" valign="top" bgcolor="#eeeeee">&nbsp;</td>
<td align="right" valign="top" bgcolor="#eeeeee">&nbsp;</td>
<td align="right" valign="top" bgcolor="#eeeeee"><font size="2" face="Arial">2</font></td>
<td align="left" valign="top" bgcolor="#eeeeee">&nbsp;</td>
</tr>
<tr>
<td align="left" valign="top"><font size="2" face="Arial">5.35% bank loan due 2006</font></td>
<td align="left" valign="top">&nbsp;</td>
<td align="right" valign="top">&nbsp;</td>
<td align="right" valign="top"><font size="2" face="Arial">18</font></td>
<td align="left" valign="top">&nbsp;</td>
<td align="right" valign="top">&nbsp;</td>
<td align="right" valign="top"><font size="2" face="Arial">18</font></td>
<td align="left" valign="top">&nbsp;</td>
</tr>
<tr>
<td align="left" valign="top" bgcolor="#eeeeee"><font size="2" face="Arial">1.07% (weighted average) bank loans due 2009</font></td>
<td align="left" valign="top" bgcolor="#eeeeee">&nbsp;</td>
<td align="right" valign="top" bgcolor="#eeeeee">&nbsp;</td>
<td align="right" valign="top" bgcolor="#eeeeee"><font size="2" face="Arial">69</font></td>
<td align="left" valign="top" bgcolor="#eeeeee">&nbsp;</td>
<td align="right" valign="top" bgcolor="#eeeeee">&nbsp;</td>
<td align="right" valign="top" bgcolor="#eeeeee"><font size="2" face="Arial">72</font></td>
<td align="left" valign="top" bgcolor="#eeeeee">&nbsp;</td>
</tr>
<tr>
<td align="left" valign="top"><font size="2" face="Arial">3.43% (weighted average) other bank loans</font></td>
<td align="left" valign="top">&nbsp;</td>
<td align="right" valign="top">&nbsp;</td>
<td align="right" valign="top"><font size="2" face="Arial">13</font></td>
<td align="left" valign="top">&nbsp;</td>
<td align="right" valign="top">&nbsp;</td>
<td align="right" valign="top"><font size="2" face="Arial">14</font></td>
<td align="left" valign="top">&nbsp;</td>
</tr>
<tr>
<td align="left" valign="top"></td>
<td align="left" valign="top">&nbsp;</td>
<td align="right" valign="top">&nbsp;</td>
<td align="left" valign="top"><font size="2" face="Arial">&nbsp;</font></td>
<td align="left" valign="top">&nbsp;</td>
<td align="right" valign="top">&nbsp;</td>
<td align="left" valign="top"><font size="2" face="Arial">&nbsp;</font></td>
<td align="left" valign="top">&nbsp;</td>
</tr>
<tr>
<td align="left" valign="top"><font size="2" face="Arial">STMicroelectronics N.V. (The Netherlands)</font></td>
<td align="left" valign="top">&nbsp;</td>
<td align="right" valign="top">&nbsp;</td>
<td align="left" valign="top"><font size="2" face="Arial">&nbsp;</font></td>
<td align="left" valign="top">&nbsp;</td>
<td align="right" valign="top">&nbsp;</td>
<td align="left" valign="top"><font size="2" face="Arial">&nbsp;</font></td>
<td align="left" valign="top">&nbsp;</td>
</tr>
<tr>
<td align="left" valign="top"></td>
<td align="left" valign="top">&nbsp;</td>
<td align="right" valign="top">&nbsp;</td>
<td align="left" valign="top"><font size="2" face="Arial">&nbsp;</font></td>
<td align="left" valign="top">&nbsp;</td>
<td align="right" valign="top">&nbsp;</td>
<td align="left" valign="top"><font size="2" face="Arial">&nbsp;</font></td>
<td align="left" valign="top">&nbsp;</td>
</tr>
<tr>
<td align="left" valign="top" bgcolor="#eeeeee"><font size="2" face="Arial"> 2.44% Liquid Yield Option Notes (LYONs) due 2009</font></td>
<td align="left" valign="top" bgcolor="#eeeeee">&nbsp;</td>
<td align="right" valign="top" bgcolor="#eeeeee">&nbsp;</td>
<td align="right" valign="top" bgcolor="#eeeeee"><font size="2" face="Arial">809</font></td>
<td align="left" valign="top" bgcolor="#eeeeee">&nbsp;</td>
<td align="right" valign="top" bgcolor="#eeeeee">&nbsp;</td>
<td align="right" valign="top" bgcolor="#eeeeee"><font size="2" face="Arial">799</font></td>
<td align="left" valign="top" bgcolor="#eeeeee">&nbsp;</td>
</tr>
<tr>
<td align="left" valign="top"><font size="2" face="Arial"> 3.75% Convertible bonds due 2010</font></td>
<td align="left" valign="top">&nbsp;</td>
<td align="right" valign="top">&nbsp;</td>
<td align="right" valign="top"><font size="2" face="Arial">131</font></td>
<td align="left" valign="top">&nbsp;</td>
<td align="right" valign="top">&nbsp;</td>
<td align="right" valign="top"><font size="2" face="Arial">366</font></td>
<td align="left" valign="top">&nbsp;</td>
</tr>
<tr>
<td align="left" valign="top" bgcolor="#eeeeee"><font size="2" face="Arial">-0.50% Convertible bonds due 2013</font></td>
<td align="left" valign="top" bgcolor="#eeeeee">&nbsp;</td>
<td align="right" valign="top" bgcolor="#eeeeee">&nbsp;</td>
<td align="right" valign="top" bgcolor="#eeeeee"><font size="2" face="Arial">1,379</font></td>
<td align="left" valign="top" bgcolor="#eeeeee">&nbsp;</td>
<td align="right" valign="top" bgcolor="#eeeeee">&nbsp;</td>
<td align="right" valign="top" bgcolor="#eeeeee"><font size="2" face="Arial">1,379</font></td>
<td align="left" valign="top" bgcolor="#eeeeee">&nbsp;</td>
</tr>
<tr>
<td align="left" valign="top"></td>
<td align="left" valign="top">&nbsp;</td>
<td align="right" valign="top">&nbsp;</td>
<td align="left" valign="top"><font size="2" face="Arial">&nbsp;</font></td>
<td align="left" valign="top">&nbsp;</td>
<td align="right" valign="top">&nbsp;</td>
<td align="left" valign="top"><font size="2" face="Arial">&nbsp;</font></td>
<td align="left" valign="top">&nbsp;</td>
</tr>
<tr>
<td align="left" valign="top"><font size="2" face="Arial">STMicroelectronics PTE (Singapore)</font></td>
<td align="left" valign="top">&nbsp;</td>
<td align="right" valign="top">&nbsp;</td>
<td align="left" valign="top"><font size="2" face="Arial">&nbsp;</font></td>
<td align="left" valign="top">&nbsp;</td>
<td align="right" valign="top">&nbsp;</td>
<td align="left" valign="top"><font size="2" face="Arial">&nbsp;</font></td>
<td align="left" valign="top">&nbsp;</td>
</tr>
<tr>
<td align="left" valign="top"></td>
<td align="left" valign="top">&nbsp;</td>
<td align="right" valign="top">&nbsp;</td>
<td align="left" valign="top"><font size="2" face="Arial">&nbsp;</font></td>
<td align="left" valign="top">&nbsp;</td>
<td align="right" valign="top">&nbsp;</td>
<td align="left" valign="top"><font size="2" face="Arial">&nbsp;</font></td>
<td align="left" valign="top">&nbsp;</td>
</tr>
<tr>
<td align="left" valign="top" bgcolor="#eeeeee"><font size="2" face="Arial">2.52% (weighted average) bank loans due 2007</font></td>
<td align="left" valign="top" bgcolor="#eeeeee">&nbsp;</td>
<td align="right" valign="top" bgcolor="#eeeeee">&nbsp;</td>
<td align="right" valign="top" bgcolor="#eeeeee"><font size="2" face="Arial">146</font></td>
<td align="left" valign="top" bgcolor="#eeeeee">&nbsp;</td>
<td align="right" valign="top" bgcolor="#eeeeee">&nbsp;</td>
<td align="right" valign="top" bgcolor="#eeeeee"><font size="2" face="Arial">147</font></td>
<td align="left" valign="top" bgcolor="#eeeeee">&nbsp;</td>
</tr>
<tr>
<td align="left" valign="top"><font size="2" face="Arial">3.50% (weighted average) other bank loans</font></td>
<td align="left" valign="top">&nbsp;</td>
<td align="right" valign="top">&nbsp;</td>
<td align="right" valign="top"><font size="2" face="Arial">&#151;</font></td>
<td align="left" valign="top">&nbsp;</td>
<td align="right" valign="top">&nbsp;</td>
<td align="right" valign="top"><font size="2" face="Arial">1</font></td>
<td align="left" valign="top">&nbsp;</td>
</tr>
<tr>
<td align="left" valign="top"></td>
<td align="left" valign="top">&nbsp;</td>
<td align="right" valign="top">&nbsp;</td>
<td align="left" valign="top"><font size="2" face="Arial">&nbsp;</font></td>
<td align="left" valign="top">&nbsp;</td>
<td align="right" valign="top">&nbsp;</td>
<td align="left" valign="top"><font size="2" face="Arial">&nbsp;</font></td>
<td align="left" valign="top">&nbsp;</td>
</tr>
<tr>
<td align="left" valign="top"><font size="2" face="Arial">STMicroelectronics (others)</font></td>
<td align="left" valign="top">&nbsp;</td>
<td align="right" valign="top">&nbsp;</td>
<td align="left" valign="top"><font size="2" face="Arial">&nbsp;</font></td>
<td align="left" valign="top">&nbsp;</td>
<td align="right" valign="top">&nbsp;</td>
<td align="left" valign="top"><font size="2" face="Arial">&nbsp;</font></td>
<td align="left" valign="top">&nbsp;</td>
</tr>
<tr>
<td align="left" valign="top" bgcolor="#eeeeee"><font size="2" face="Arial">4.05% (weighted average) other bank loans</font></td>
<td align="left" valign="top" bgcolor="#eeeeee">&nbsp;</td>
<td align="right" valign="top" bgcolor="#eeeeee">&nbsp;</td>
<td align="right" valign="top" bgcolor="#eeeeee"><font size="2" face="Arial">35</font></td>
<td align="left" valign="top" bgcolor="#eeeeee">&nbsp;</td>
<td align="right" valign="top" bgcolor="#eeeeee">&nbsp;</td>
<td align="right" valign="top" bgcolor="#eeeeee"><font size="2" face="Arial">68</font></td>
<td align="left" valign="top" bgcolor="#eeeeee">&nbsp;</td>
</tr>
<tr>
<td align="left" valign="top"><font size="2" face="Arial">&nbsp;</font></td>
<td align="left" valign="top">&nbsp;</td>
<td align="right" valign="top">&nbsp;</td>
<td align="left" valign="top"><hr noshade size="1"></td>
<td align="left" valign="top">&nbsp;</td>
<td align="right" valign="top">&nbsp;</td>
<td align="left" valign="top"><hr noshade size="1"></td>
<td align="left" valign="top">&nbsp;</td>
</tr>
<tr>
<td align="left" valign="top" bgcolor="#eeeeee"><font size="2" face="Arial">Total  long-term debt</font></td>
<td align="left" valign="top" bgcolor="#eeeeee">&nbsp;</td>
<td align="right" valign="top" bgcolor="#eeeeee">&nbsp;</td>
<td align="right" valign="top" bgcolor="#eeeeee"><font size="2" face="Arial">2,753</font></td>
<td align="left" valign="top" bgcolor="#eeeeee">&nbsp;</td>
<td align="right" valign="top" bgcolor="#eeeeee">&nbsp;</td>
<td align="right" valign="top" bgcolor="#eeeeee"><font size="2" face="Arial">3,050</font></td>
<td align="left" valign="top" bgcolor="#eeeeee">&nbsp;</td>
</tr>
<tr>
<td align="left" valign="top"><font size="2" face="Arial">Less current portion</font></td>
<td align="left" valign="top">&nbsp;</td>
<td align="right" valign="top">&nbsp;</td>
<td align="right" valign="top"><font size="2" face="Arial">1,012</font></td>
<td align="left" valign="top">&nbsp;</td>
<td align="right" valign="top">&nbsp;</td>
<td align="right" valign="top"><font size="2" face="Arial">106</font></td>
<td align="left" valign="top">&nbsp;</td>
</tr>
<tr>
<td align="left" valign="top"><font size="2" face="Arial">&nbsp;</font></td>
<td align="left" valign="top">&nbsp;</td>
<td align="right" valign="top">&nbsp;</td>
<td align="left" valign="top"><hr noshade size="1"></td>
<td align="left" valign="top">&nbsp;</td>
<td align="right" valign="top">&nbsp;</td>
<td align="left" valign="top"><hr noshade size="1"></td>
<td align="left" valign="top">&nbsp;</td>
</tr>
<tr>
<td align="left" valign="top" bgcolor="#eeeeee"><font size="2" face="Arial">Total long-term debt, less current portion</font></td>
<td align="left" valign="top" bgcolor="#eeeeee">&nbsp;</td>
<td align="right" valign="top" bgcolor="#eeeeee">&nbsp;</td>
<td align="right" valign="top" bgcolor="#eeeeee"><font size="2" face="Arial">1,741</font></td>
<td align="left" valign="top" bgcolor="#eeeeee">&nbsp;</td>
<td align="right" valign="top" bgcolor="#eeeeee">&nbsp;</td>
<td align="right" valign="top" bgcolor="#eeeeee"><font size="2" face="Arial">2,944</font></td>
<td align="left" valign="top" bgcolor="#eeeeee">&nbsp;</td>
</tr>
<tr>
  <td align="left" valign="top">&nbsp;</td>
  <td align="left" valign="top">&nbsp;</td>
  <td align="right" valign="top">&nbsp;</td>
  <td align="right" valign="top"><hr noshade size="2"></td>
  <td align="left" valign="top">&nbsp;</td>
  <td align="right" valign="top">&nbsp;</td>
  <td align="right" valign="top"><hr noshade size="2"></table><td align="left" valign="top">&nbsp;</td>


<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="p?"></a>
<p><a href="#contents"><font size="2">Back to Contents</font></a></p>
<p align="left"><font size="2" face="Arial">Pursuant to the terms of the 2009
    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&#8217;s option. As a result of this cash option,
    the outstanding amount of 2009 Bonds totaling $809 million was classified
    as &#8220;current portion of long-term debt&#8221; at June 26, 2004. Additionally,
    the Company may be required to purchase at the option of the holder any outstanding
    2013 Bonds for cash on August 5, 2006. As far as 2010 convertible Bonds are
    concerned, the Company announced in June
    2004 that it would redeem all its outstanding Zero Coupon Senior Convertible
    Bonds due 2010 in July 2004. On July 9, 2004, the Company redeemed the
    remaining $131 million in outstanding 2010 Bonds.</font></p>
<p align="left"><font size="2" face="Arial"><b>18. Computation of Earnings Per Share </b></font></p>
<p align="left"><font size="2" face="Arial">Basic net earnings per share (&#8220;EPS&#8221;)
    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"><font size="2" face="Arial">(In millions of U.S. dollars, except per share amounts): </font></p>
<table width="100%" border="0" cellpadding="0" cellspacing="0">
  <tr>
    <td align="center"><b><font size="1" face="Arial">&nbsp;</font></b></td>
    <td align="center"><font size="1">&nbsp;</font></td>
    <td align="center"><font size="1">&nbsp;</font></td>
    <td colspan="4" align="center"><b><font size="1" face="Arial">Three Months
          Ended</font></b></td>
    <td align="center"><font size="1">&nbsp;</font></td>
    <td align="center"><font size="1">&nbsp;</font></td>
    <td colspan="4" align="center"><b><font size="1" face="Arial">Six Months
          Ended</font></b></td>
    <td align="left" valign="top"><font size="1">&nbsp;</font></td>
  </tr>
  <tr>
    <td align="center"><font size="1">&nbsp;</font></td>
    <td align="center"><font size="1">&nbsp;</font></td>
    <td align="center"><font size="1">&nbsp;</font></td>
    <td colspan="4" align="center"><hr noshade size="1">
    </td>
    <td align="center"><font size="1">&nbsp;</font></td>
    <td align="center"><font size="1">&nbsp;</font></td>
    <td colspan="4" align="center"><hr noshade size="1">
    </td>
    <td align="left" valign="top"><font size="1">&nbsp;</font></td>
  </tr>
  <tr>
    <td align="center"><font size="1">&nbsp;</font></td>
    <td align="center"><font size="1">&nbsp;</font></td>
    <td align="center"><font size="1">&nbsp;</font></td>
    <td align="center"><b><font size="1" face="Arial">June 26, 2004</font></b></td>
    <td align="center"><font size="1">&nbsp;</font></td>
    <td align="center"><font size="1">&nbsp;</font></td>
    <td align="center"><b><font size="1" face="Arial">June 28, 2003</font></b></td>
    <td align="center"><font size="1">&nbsp;</font></td>
    <td align="center"><font size="1">&nbsp;</font></td>
    <td align="center"><b><font size="1" face="Arial">June 26, 2004</font></b></td>
    <td align="center"><font size="1">&nbsp;</font></td>
    <td align="center"><font size="1">&nbsp;</font></td>
    <td align="center"><b><font size="1" face="Arial">June 26, 2003</font></b></td>
    <td align="left" valign="top"><font size="1">&nbsp;</font></td>
  </tr>
  <tr>
    <td align="center"><font size="1">&nbsp;</font></td>
    <td align="center"><font size="1">&nbsp;</font></td>
    <td align="center"><font size="1">&nbsp;</font></td>
    <td align="center"><hr noshade size="1">
    </td>
    <td align="center"><font size="1">&nbsp;</font></td>
    <td align="center"><font size="1">&nbsp;</font></td>
    <td align="center"><hr noshade size="1">
    </td>
    <td align="center"><font size="1">&nbsp;</font></td>
    <td align="center"><font size="1">&nbsp;</font></td>
    <td align="center"><hr noshade size="1">
    </td>
    <td align="center"><font size="1">&nbsp;</font></td>
    <td align="center"><font size="1">&nbsp;</font></td>
    <td align="center"><hr noshade size="1">
    </td>
    <td align="left" valign="top"><font size="1">&nbsp;</font></td>
  </tr>
  <tr>
    <td align="center"><b><font size="1" face="Arial">&nbsp;</font></b></td>
    <td align="center"><font size="1">&nbsp;</font></td>
    <td align="center"><font size="1">&nbsp;</font></td>
    <td align="center"><b><font size="1" face="Arial"> (unaudited) </font></b></td>
    <td align="center"><font size="1">&nbsp;</font></td>
    <td align="center"><font size="1">&nbsp;</font></td>
    <td align="center"><b><font size="1" face="Arial">(unaudited)</font></b></td>
    <td align="center"><font size="1">&nbsp;</font></td>
    <td align="center"><font size="1">&nbsp;</font></td>
    <td align="center"><b><font size="1" face="Arial"> (unaudited) </font></b></td>
    <td align="center"><font size="1">&nbsp;</font></td>
    <td align="center"><font size="1">&nbsp;</font></td>
    <td align="center"><b><font size="1">&nbsp;<font face="Arial">(unaudited)</font></font></b></td>
    <td align="left" valign="top"><font size="1">&nbsp;</font></td>
  </tr>
<tr>
  <td width="54%" align="left" valign="top"><font size="2" face="Arial"><b>Basic EPS:</b></font></td>
  <td align="left" valign="top"><font size="1">&nbsp;</font></td>
  <td align="right" valign="top"><font size="1">&nbsp;</font></td>
  <td align="left" valign="top">&nbsp;</td>
  <td align="left" valign="top"><font size="1">&nbsp;</font></td>
  <td align="left" valign="top"><font size="1">&nbsp;</font></td>
  <td align="left" valign="top">&nbsp;  </td>
  <td align="left" valign="top"><font size="1">&nbsp;</font></td>
  <td align="right" valign="top"><font size="1">&nbsp;</font></td>
  <td align="left" valign="top">      <font size="1" face="Arial"> &nbsp;</font></td>
  <td align="left" valign="top"><font size="1">&nbsp;</font></td>
  <td align="left" valign="top"><font size="1">&nbsp;</font></td>
  <td align="left" valign="top">&nbsp;</td>
  <td align="left" valign="top"><font size="1">&nbsp;</font></td>
</tr>
<tr>
<td align="left" valign="top" bgcolor="#eeeeee"><font size="2" face="Arial">Net income&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</font></td>
<td width="2%" align="left" valign="top" bgcolor="#eeeeee">&nbsp;</td>
<td width="1%" align="right" valign="top" bgcolor="#eeeeee">&nbsp;</td>
<td width="8%" align="right" valign="top" bgcolor="#eeeeee"><font size="2" face="Arial">                  148                        </font></td>
<td width="2%" align="right" valign="top" bgcolor="#eeeeee">&nbsp;</td>
<td width="1%" align="right" valign="top" bgcolor="#eeeeee">&nbsp;</td>
<td width="8%" align="right" valign="top" bgcolor="#eeeeee"><font size="2" face="Arial">80</font></td>
<td width="2%" align="left" valign="top" bgcolor="#eeeeee">&nbsp;</td>
<td width="1%" align="right" valign="top" bgcolor="#eeeeee">&nbsp;</td>
<td width="8%" align="right" valign="top" bgcolor="#eeeeee"><font size="2" face="Arial">                   225                        </font></td>
<td width="2%" align="right" valign="top" bgcolor="#eeeeee">&nbsp;</td>
<td width="1%" align="right" valign="top" bgcolor="#eeeeee">&nbsp;</td>
<td width="8%" align="right" valign="top" bgcolor="#eeeeee"><font size="2" face="Arial">159</font></td>
<td width="2%" align="left" valign="top" bgcolor="#eeeeee">&nbsp;</td>
</tr>
<tr>
<td align="left" valign="top"><font size="2" face="Arial">Weighted average shares outstanding </font></td>
<td align="left" valign="top">&nbsp;</td>
<td align="right" valign="top">&nbsp;</td>
<td align="right" valign="top"><font size="2" face="Arial">  891,369,659        </font></td>
<td align="right" valign="top">&nbsp;</td>
<td align="right" valign="top">&nbsp;</td>
<td align="right" valign="top"><font size="2" face="Arial">887,699,431</font></td>
<td align="left" valign="top">&nbsp;</td>
<td align="right" valign="top">&nbsp;</td>
<td align="right" valign="top"><font size="2" face="Arial">   890,797,105          </font></td>
<td align="right" valign="top">&nbsp;</td>
<td align="right" valign="top">&nbsp;</td>
<td align="right" valign="top"><font size="2" face="Arial">887,629,106</font></td>
<td align="left" valign="top">&nbsp;</td>
</tr>
<tr>
<td align="left" valign="top" bgcolor="#eeeeee"><font size="2" face="Arial"><b>EPS (basic)</b></font></td>
<td align="left" valign="top" bgcolor="#eeeeee">&nbsp;</td>
<td align="right" valign="top" bgcolor="#eeeeee">&nbsp;</td>
<td align="right" valign="top" bgcolor="#eeeeee"><font size="2" face="Arial">               0.17                   </font></td>
<td align="right" valign="top" bgcolor="#eeeeee">&nbsp;</td>
<td align="right" valign="top" bgcolor="#eeeeee">&nbsp;</td>
<td align="right" valign="top" bgcolor="#eeeeee"><font size="2" face="Arial">0.09</font></td>
<td align="left" valign="top" bgcolor="#eeeeee">&nbsp;</td>
<td align="right" valign="top" bgcolor="#eeeeee">&nbsp;</td>
<td align="right" valign="top" bgcolor="#eeeeee"><font size="2" face="Arial">               0.25                       </font></td>
<td align="right" valign="top" bgcolor="#eeeeee">&nbsp;</td>
<td align="right" valign="top" bgcolor="#eeeeee">&nbsp;</td>
<td align="right" valign="top" bgcolor="#eeeeee"><font size="2" face="Arial">0.18</font></td>
<td align="left" valign="top" bgcolor="#eeeeee">&nbsp;</td>
</tr>
<tr>
<td align="left" valign="top"><font size="2" face="Arial">Diluted EPS:</font></td>
<td align="left" valign="top">&nbsp;</td>
<td align="right" valign="top">&nbsp;</td>
<td colspan="4" align="left" valign="top"><font size="2" face="Arial">&nbsp;</font></td>
<td align="left" valign="top">&nbsp;</td>
<td align="right" valign="top">&nbsp;</td>
<td colspan="4" align="left" valign="top"><font size="2" face="Arial">&nbsp;</font></td>
<td align="left" valign="top">&nbsp;</td>
</tr>
<tr>
<td align="left" valign="top" bgcolor="#eeeeee"><font size="2" face="Arial">Net income</font></td>
<td align="left" valign="top" bgcolor="#eeeeee">&nbsp;</td>
<td align="right" valign="top" bgcolor="#eeeeee">&nbsp;</td>
<td align="right" valign="top" bgcolor="#eeeeee"><font size="2" face="Arial">                  148                        </font></td>
<td align="right" valign="top" bgcolor="#eeeeee">&nbsp;</td>
<td align="right" valign="top" bgcolor="#eeeeee">&nbsp;</td>
<td align="right" valign="top" bgcolor="#eeeeee"><font size="2" face="Arial">80 </font></td>
<td align="left" valign="top" bgcolor="#eeeeee">&nbsp;</td>
<td align="right" valign="top" bgcolor="#eeeeee">&nbsp;</td>
<td align="right" valign="top" bgcolor="#eeeeee"><font size="2" face="Arial">                  225                           </font></td>
<td align="right" valign="top" bgcolor="#eeeeee">&nbsp;</td>
<td align="right" valign="top" bgcolor="#eeeeee">&nbsp;</td>
<td align="right" valign="top" bgcolor="#eeeeee"><font size="2" face="Arial">159</font></td>
<td align="left" valign="top" bgcolor="#eeeeee">&nbsp;</td>
</tr>
<tr>
<td align="left" valign="top"><font size="2" face="Arial">Interest expense on
    convertible debt, net of tax  </font></td>
<td align="left" valign="top">&nbsp;</td>
<td align="right" valign="top">&nbsp;</td>
<td align="right" valign="top"><font size="2" face="Arial">                    1</font></td>
<td align="right" valign="top">&nbsp;</td>
<td align="right" valign="top">&nbsp;</td>
<td align="right" valign="top"><font size="2" face="Arial"> &#8212;</font></td>
<td align="left" valign="top">&nbsp;</td>
<td align="right" valign="top">&nbsp;</td>
<td align="right" valign="top"><font size="2" face="Arial">                   2</font></td>
<td align="right" valign="top">&nbsp;</td>
<td align="right" valign="top">&nbsp;</td>
<td align="right" valign="top"><font size="2" face="Arial"> &#8212;</font></td>
<td align="left" valign="top">&nbsp;</td>
</tr>
<tr>
<td align="left" valign="top" bgcolor="#eeeeee"><font size="2" face="Arial">Net income, adjusted </font></td>
<td align="left" valign="top" bgcolor="#eeeeee">&nbsp;</td>
<td align="right" valign="top" bgcolor="#eeeeee">&nbsp;</td>
<td align="right" valign="top" bgcolor="#eeeeee"><font size="2" face="Arial">                  149                       </font></td>
<td align="right" valign="top" bgcolor="#eeeeee">&nbsp;</td>
<td align="right" valign="top" bgcolor="#eeeeee">&nbsp;</td>
<td align="right" valign="top" bgcolor="#eeeeee"><font size="2" face="Arial">80</font></td>
<td align="left" valign="top" bgcolor="#eeeeee">&nbsp;</td>
<td align="right" valign="top" bgcolor="#eeeeee">&nbsp;</td>
<td align="right" valign="top" bgcolor="#eeeeee"><font size="2" face="Arial">                  227                         </font></td>
<td align="right" valign="top" bgcolor="#eeeeee">&nbsp;</td>
<td align="right" valign="top" bgcolor="#eeeeee">&nbsp;</td>
<td align="right" valign="top" bgcolor="#eeeeee"><font size="2" face="Arial">159 </font></td>
<td align="left" valign="top" bgcolor="#eeeeee">&nbsp;</td>
</tr>
<tr>
<td align="left" valign="top"><font size="2" face="Arial">Weighted average shares outstanding </font></td>
<td align="left" valign="top">&nbsp;</td>
<td align="right" valign="top">&nbsp;</td>
<td align="right" valign="top"><font size="2" face="Arial">  891,369,659       </font></td>
<td align="right" valign="top">&nbsp;</td>
<td align="right" valign="top">&nbsp;</td>
<td align="right" valign="top"><font size="2" face="Arial">887,699,431</font></td>
<td align="left" valign="top">&nbsp;</td>
<td align="right" valign="top">&nbsp;</td>
<td align="right" valign="top"><font size="2" face="Arial">  890,797,105           </font></td>
<td align="right" valign="top">&nbsp;</td>
<td align="right" valign="top">&nbsp;</td>
<td align="right" valign="top"><font size="2" face="Arial">887,629,106</font></td>
<td align="left" valign="top">&nbsp;</td>
</tr>
<tr>
<td align="left" valign="top" bgcolor="#eeeeee"><font size="2" face="Arial">Dilutive effect of stock options </font></td>
<td align="left" valign="top" bgcolor="#eeeeee">&nbsp;</td>
<td align="right" valign="top" bgcolor="#eeeeee">&nbsp;</td>
<td align="right" valign="top" bgcolor="#eeeeee"><font size="2" face="Arial">      3,746,052          </font></td>
<td align="right" valign="top" bgcolor="#eeeeee">&nbsp;</td>
<td align="right" valign="top" bgcolor="#eeeeee">&nbsp;</td>
<td align="right" valign="top" bgcolor="#eeeeee"><font size="2" face="Arial">4,931,336</font></td>
<td align="left" valign="top" bgcolor="#eeeeee">&nbsp;</td>
<td align="right" valign="top" bgcolor="#eeeeee">&nbsp;</td>
<td align="right" valign="top" bgcolor="#eeeeee"><font size="2" face="Arial">      5,154,793              </font></td>
<td align="right" valign="top" bgcolor="#eeeeee">&nbsp;</td>
<td align="right" valign="top" bgcolor="#eeeeee">&nbsp;</td>
<td align="right" valign="top" bgcolor="#eeeeee"><font size="2" face="Arial">4,221,239</font></td>
<td align="left" valign="top" bgcolor="#eeeeee">&nbsp;</td>
</tr>
<tr>
<td align="left" valign="top"><font size="2" face="Arial">Dilutive effect of convertible debt </font></td>
<td align="left" valign="top">&nbsp;</td>
<td align="right" valign="top">&nbsp;</td>
<td align="right" valign="top"><font size="2" face="Arial">    41,880,160</font></td>
<td align="right" valign="top">&nbsp;</td>
<td align="right" valign="top">&nbsp;</td>
<td align="right" valign="top"><font size="2" face="Arial">&#8212;</font></td>
<td align="left" valign="top">&nbsp;</td>
<td align="right" valign="top">&nbsp;</td>
<td align="right" valign="top"><font size="2" face="Arial">    41,880,160</font></td>
<td align="right" valign="top">&nbsp;</td>
<td align="right" valign="top">&nbsp;</td>
<td align="right" valign="top"><font size="2" face="Arial"> &#8212;</font></td>
<td align="left" valign="top">&nbsp;</td>
</tr>
<tr>
<td align="left" valign="top" bgcolor="#eeeeee"><font size="2" face="Arial">Number of shares used in calculating EPS </font></td>
<td align="left" valign="top" bgcolor="#eeeeee">&nbsp;</td>
<td align="right" valign="top" bgcolor="#eeeeee">&nbsp;</td>
<td align="right" valign="top" bgcolor="#eeeeee"><font size="2" face="Arial">  936,995,871      </font></td>
<td align="right" valign="top" bgcolor="#eeeeee">&nbsp;</td>
<td align="right" valign="top" bgcolor="#eeeeee">&nbsp;</td>
<td align="right" valign="top" bgcolor="#eeeeee"><font size="2" face="Arial">892,630,767</font></td>
<td align="left" valign="top" bgcolor="#eeeeee">&nbsp;</td>
<td align="right" valign="top" bgcolor="#eeeeee">&nbsp;</td>
<td align="right" valign="top" bgcolor="#eeeeee"><font size="2" face="Arial"> 937,832,058          </font></td>
<td align="right" valign="top" bgcolor="#eeeeee">&nbsp;</td>
<td align="right" valign="top" bgcolor="#eeeeee">&nbsp;</td>
<td align="right" valign="top" bgcolor="#eeeeee"><font size="2" face="Arial">891,850,345</font></td>
<td align="left" valign="top" bgcolor="#eeeeee">&nbsp;</td>
</tr>
<tr>
<td align="left" valign="top"><font size="2" face="Arial"><b>EPS (diluted)  </b></font></td>
<td align="left" valign="top">&nbsp;</td>
<td align="right" valign="top">&nbsp;</td>
<td align="right" valign="top"><font size="2" face="Arial">               0.16</font></td>
<td align="right" valign="top">&nbsp;</td>
<td align="right" valign="top">&nbsp;</td>
<td align="right" valign="top"><font size="2" face="Arial"> 0.09</font></td>
<td align="left" valign="top">&nbsp;</td>
<td align="right" valign="top">&nbsp;</td>
<td align="right" valign="top"><font size="2" face="Arial">               0.24                      </font></td>
<td align="right" valign="top">&nbsp;</td>
<td align="right" valign="top">&nbsp;</td>
<td align="right" valign="top"><font size="2" face="Arial">0.18</font></td>
<td align="left" valign="top">&nbsp;</td>
</tr>
</table>
<p align="left"><font size="2" face="Arial">As of June 26, 2004, common shares
    issued were 904,819,025 shares, of which 13,400,000 shares were owned by the
    Company as treasury stock.</font></p>
<p align="left"><font size="2" face="Arial">As of June 26, 2004, there were outstanding stock options exercisable into the equivalent of 66,663,121 common shares and the equivalent of 67,558,209 common shares for convertible debt.</font></p>
<p align="center"><font face="Arial" size="2">F-20</font></p>
<hr noshade align="center" width="100%" size="2">
<div style="page-break-before:always"></div>
<page>
<a name="p?"></a>
<p><a href="#contents"><font size="2">Back to Contents</font></a></p>
<p align="left"><font size="2" face="Arial"><b>19. Retirement plans</b></font></p>
<p align="left"><font size="2" face="Arial">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="left"><font size="2" face="Arial">The components of the net periodic
    benefit cost included the following:</font></p>
<table width="100%" cellspacing="0" cellpadding="0" border="0">
  <tr valign="top">
    <td align="left"><b><font size="1">&nbsp;</font></b></td>
    <td align="left"><b><font size="1">&nbsp;</font></b></td>
    <td align="right"><b><font size="1">&nbsp;</font></b></td>
    <td colspan="4" align="center"><b><font size="1" face="Arial">Three Months ended</font></b></td>
    <td align="left"><b><font size="1">&nbsp;</font></b></td>
    <td align="right"><b><font size="1">&nbsp;</font></b></td>
    <td colspan="4" align="center"><b><font size="1" face="Arial">Six Months ended</font></b></td>
    <td align="left"><b><font size="1">&nbsp;</font></b></td>
  </tr>
  <tr valign="top">
    <td align="left"><b><font size="1">&nbsp;</font></b></td>
    <td align="left"><b><font size="1">&nbsp;</font></b></td>
    <td align="right"><b><font size="1">&nbsp;</font></b></td>
    <td colspan="4" align="center"><hr noshade size="1">
    </td>
    <td align="left"><b><font size="1">&nbsp;</font></b></td>
    <td align="right"><b><font size="1">&nbsp;</font></b></td>
    <td colspan="4" align="center"><hr noshade size="1">
    </td>
    <td align="left"><b><font size="1">&nbsp;</font></b></td>
  </tr>
  <tr valign="top">
    <td align="left"><b><font size="1">&nbsp;</font></b></td>
    <td align="left"><b><font size="1">&nbsp;</font></b></td>
    <td align="right"><b><font size="1">&nbsp;</font></b></td>
    <td align="center"><b><font size="1" face="Arial">June 26, 2004</font></b></td>
    <td align="left"><b><font size="1">&nbsp;</font></b></td>
    <td align="right"><b><font size="1">&nbsp;</font></b></td>
    <td align="center"><b><font size="1" face="Arial">June 28, 2003</font></b></td>
    <td align="left"><b><font size="1">&nbsp;</font></b></td>
    <td align="right"><b><font size="1">&nbsp;</font></b></td>
    <td align="center"><b><font size="1" face="Arial">June 26, 2004</font></b></td>
    <td align="left"><b><font size="1">&nbsp;</font></b></td>
    <td align="right"><b><font size="1">&nbsp;</font></b></td>
    <td align="center"><b><font size="1" face="Arial">June 28, 2003</font></b></td>
    <td align="left"><b><font size="1">&nbsp;</font></b></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 align="right"><hr noshade size="1">
    </td>
    <td align="left"><font size="1">&nbsp;</font></td>
    <td align="right"><font size="1">&nbsp;</font></td>
    <td align="right"><hr noshade size="1">
    </td>
    <td align="left"><font size="1">&nbsp;</font></td>
    <td align="right"><font size="1">&nbsp;</font></td>
    <td align="right"><hr noshade size="1">
    </td>
    <td align="left"><font size="1">&nbsp;</font></td>
    <td align="right"><font size="1">&nbsp;</font></td>
    <td align="right"><hr noshade size="1">
    </td>
    <td align="left"><font size="1">&nbsp;</font></td>
  </tr>
<tr valign="baseline">
<td align="left" bgcolor="#eeeeee"><font size="2" face="Arial">Service cost</font></td>
<td width="2%" align="left" bgcolor="#eeeeee">&nbsp;</td>
<td width="1%" align="right" bgcolor="#eeeeee">&nbsp;</td>
<td width="8%" align="right" bgcolor="#eeeeee"><font size="2" face="Arial">3</font></td>
<td width="2%" align="left" bgcolor="#eeeeee">&nbsp;</td>
<td width="1%" align="right" bgcolor="#eeeeee">&nbsp;</td>
<td width="8%" align="right" bgcolor="#eeeeee"><font size="2" face="Arial">2</font></td>
<td width="2%" align="left" bgcolor="#eeeeee">&nbsp;</td>
<td width="1%" align="right" bgcolor="#eeeeee">&nbsp;</td>
<td width="8%" align="right" bgcolor="#eeeeee"><font size="2" face="Arial">7</font></td>
<td width="2%" align="left" bgcolor="#eeeeee">&nbsp;</td>
<td width="1%" align="right" bgcolor="#eeeeee">&nbsp;</td>
<td width="8%" align="right" bgcolor="#eeeeee"><font size="2" face="Arial">5</font></td>
<td width="2%" align="left" bgcolor="#eeeeee">&nbsp;</td>
</tr>
<tr valign="baseline">
<td align="left"><font size="2" face="Arial">Interest cost </font></td>
<td align="left">&nbsp;</td>
<td align="right">&nbsp;</td>
<td align="right"><font size="2" face="Arial">3</font></td>
<td align="left">&nbsp;</td>
<td align="right">&nbsp;</td>
<td align="right"><font size="2" face="Arial">3</font></td>
<td align="left">&nbsp;</td>
<td align="right">&nbsp;</td>
<td align="right"><font size="2" face="Arial">6</font></td>
<td align="left">&nbsp;</td>
<td align="right">&nbsp;</td>
<td align="right"><font size="2" face="Arial">5</font></td>
<td align="left">&nbsp;</td>
</tr>
<tr valign="baseline">
<td align="left" bgcolor="#eeeeee"><font size="2" face="Arial">Expected return on plan assets </font></td>
<td align="left" bgcolor="#eeeeee">&nbsp;</td>
<td align="right" bgcolor="#eeeeee">&nbsp;</td>
<td align="right" bgcolor="#eeeeee"><font size="2" face="Arial">(2</font></td>
<td align="left" bgcolor="#eeeeee">)</td>
<td align="right" bgcolor="#eeeeee">&nbsp;</td>
<td align="right" bgcolor="#eeeeee"><font size="2" face="Arial">(1</font></td>
<td align="left" bgcolor="#eeeeee">)</td>
<td align="right" bgcolor="#eeeeee">&nbsp;</td>
<td align="right" bgcolor="#eeeeee"><font size="2" face="Arial">(4</font></td>
<td align="left" bgcolor="#eeeeee">)</td>
<td align="right" bgcolor="#eeeeee">&nbsp;</td>
<td align="right" bgcolor="#eeeeee"><font size="2" face="Arial">(3</font></td>
<td align="left" bgcolor="#eeeeee">)</td>
</tr>
<tr valign="baseline">
<td align="left"><font size="2" face="Arial">Amortization of net (gain) loss   </font></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="right"><font size="2" face="Arial">0</font></td>
<td align="left">&nbsp;</td>
<td align="right">&nbsp;</td>
<td align="right"><font size="2" face="Arial">2</font></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>
</tr>
<tr valign="top">
  <td align="left"><font size="2" face="Arial">&nbsp;</font></td>
  <td align="left">&nbsp;</td>
  <td align="right">&nbsp;</td>
  <td align="left"><hr noshade size="1">
  </td>
  <td align="left">&nbsp;</td>
  <td align="right">&nbsp;</td>
  <td align="left"><hr noshade size="1">
  </td>
  <td align="left">&nbsp;</td>
  <td align="right">&nbsp;</td>
  <td align="left"><hr noshade size="1">
  </td>
  <td align="left">&nbsp;</td>
  <td align="right">&nbsp;</td>
  <td align="left"><hr noshade size="1">
  </td>
  <td align="left">&nbsp;</td>
</tr>
<tr valign="top">
<td align="left" bgcolor="#eeeeee"><font size="2" face="Arial">Net periodic benefit cost </font></td>
<td align="left" bgcolor="#eeeeee">&nbsp;</td>
<td align="right" bgcolor="#eeeeee">&nbsp;</td>
<td align="right" bgcolor="#eeeeee"><font size="2" face="Arial">5</font></td>
<td align="left" bgcolor="#eeeeee">&nbsp;</td>
<td align="right" bgcolor="#eeeeee">&nbsp;</td>
<td align="right" bgcolor="#eeeeee"><font size="2" face="Arial">4</font></td>
<td align="left" bgcolor="#eeeeee">&nbsp;</td>
<td align="right" bgcolor="#eeeeee">&nbsp;</td>
<td align="right" bgcolor="#eeeeee"><font size="2" face="Arial">11</font></td>
<td align="left" bgcolor="#eeeeee">&nbsp;</td>
<td align="right" bgcolor="#eeeeee">&nbsp;</td>
<td align="right" bgcolor="#eeeeee"><font size="2" face="Arial">8</font></td>
<td align="left" bgcolor="#eeeeee">&nbsp;</td>
</tr>
<tr valign="top">
  <td align="left">&nbsp;</td>
  <td align="left">&nbsp;</td>
  <td align="right">&nbsp;</td>
  <td align="right"><hr noshade size="2"></td>
  <td align="left">&nbsp;</td>
  <td align="right">&nbsp;</td>
  <td align="right"><hr noshade size="2"></td>
  <td align="left">&nbsp;</td>
  <td align="right">&nbsp;</td>
  <td align="right"><hr noshade size="2"></td>
  <td align="left">&nbsp;</td>
  <td align="right">&nbsp;</td>
  <td align="right"><hr noshade size="2"></td>
  <td align="left">&nbsp;</td>
</tr>
<tr valign="top">
  <td align="left">&nbsp;</td>
  <td align="left">&nbsp;</td>
  <td align="right">&nbsp;</td>
  <td align="right">&nbsp;</td>
  <td align="left">&nbsp;</td>
  <td align="right">&nbsp;</td>
  <td align="right">&nbsp;</td>
  <td align="left">&nbsp;</td>
  <td align="right">&nbsp;</td>
  <td align="right">&nbsp;</td>
  <td align="left">&nbsp;</td>
  <td align="right">&nbsp;</td>
  <td align="right">&nbsp;</td>
  <td align="left">&nbsp;</td>
</tr>
</table>
<td align="left">&nbsp;</td>
<td align="left"><font size="2" face="Arial">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></td>


<p align="left"><font size="2" face="Arial"><b>20. Fair value of stock-based compensation </b></font></p>
<p align="left"><font size="2" face="Arial">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 Statement of Financial Accounting Standards Board No. 123 <i>Accounting for Stock-Based Compensation</i> (FAS 123) as if the Company had accounted for its stock-based awards to employees under the fair value method prescribed by FAS 123, which results in a charge for total stock-based employee expense, net of related tax effects. </font></p>
<p align="left"><font size="2" face="Arial">The fair value of the Company's stock-based awards to employees was estimated using a Black-Scholes option-pricing model.</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="p?"></a>
<p><a href="#contents"><font size="2">Back to Contents</font></a></p>
<p align="left"><font size="2" face="Arial">The fair value was estimated using the following weighted-average assumptions:</font></p>
<table width="100%" cellspacing="0" cellpadding="0" border="0">
<tr valign="top">
<td align="left"><div align="center"><font size="1" face="Arial"><b>&nbsp;</b></font></div></td>
<td align="left">&nbsp;</td>
<td align="right">&nbsp;</td>
<td align="center"><div align="center"><font size="1"><b><font face="Arial">Three months</font><br>
    <font face="Arial">ended June 26, 2004</font></b></font></div></td>
<td align="left">&nbsp;</td>
<td align="right">&nbsp;</td>
<td align="center"><div align="center"><font size="1"><b><font face="Arial">Three months</font><br>
    <font face="Arial">ended June 28, 2003</font></b></font></div></td>
<td align="left">&nbsp;</td>
<td align="right">&nbsp;</td>
<td align="center"><div align="center"><font size="1"><b><font face="Arial">Six months</font><br>
    <font face="Arial">ended June 26, 2004</font></b></font></div></td>
<td align="left">&nbsp;</td>
<td align="right">&nbsp;</td>
<td align="center"><div align="center"><font size="1"><b><font face="Arial">Six months</font><br>
    <font face="Arial">ended June 28, 2003</font></b></font></div></td>
<td align="left">&nbsp;</td>
</tr>
<tr valign="top">
<td align="left"><font size="1" face="Arial">&nbsp;</font></td>
<td align="left">&nbsp;</td>
<td align="right">&nbsp;</td>
<td align="left">
  <hr size="1" noshade></td>
<td align="left">&nbsp;</td>
<td align="right">&nbsp;</td>
<td align="left"><hr size="1" noshade></td>
<td align="left">&nbsp;</td>
<td align="right">&nbsp;</td>
<td align="left"><hr size="1" noshade></td>
<td align="left">&nbsp;</td>
<td align="right">&nbsp;</td>
<td align="left"><hr size="1" noshade></td>
<td align="left">&nbsp;</td>
</tr>
<tr valign="top">
<td align="left"><font size="2" face="Arial">Expected life (years)</font></td>
<td align="left" width="2%">&nbsp;</td>
<td width="1%" align="right">&nbsp;</td>
<td width="10%" align="right"><font size="2" face="Arial">6</font></td>
<td width="2%" align="left">&nbsp;</td>
<td width="1%" align="right">&nbsp;</td>
<td width="10%" align="right"><font size="2" face="Arial">5</font></td>
<td width="2%" align="left">&nbsp;</td>
<td width="1%" align="right">&nbsp;</td>
<td width="10%" align="right"><font size="2" face="Arial">6</font></td>
<td width="2%" align="left">&nbsp;</td>
<td width="1%" align="right">&nbsp;</td>
<td width="10%" align="right"><font size="2" face="Arial">5</font></td>
<td width="2%" align="left">&nbsp;</td> </tr>
<tr valign="top" bgcolor="#eeeeee">
<td align="left"><font size="2" face="Arial">Volatility</font></td>
<td align="left">&nbsp;</td>
<td align="right">&nbsp;</td>
<td align="right"><font size="2" face="Arial">                     55.7</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">                60</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">                     55.7</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">                60</font></td>
<td align="left"><font size="2" face="Arial">%</font></td>
</tr>
<tr valign="top">
<td align="left"><font size="2" face="Arial">Risk-free interest rate</font></td>
<td align="left">&nbsp;</td>
<td align="right">&nbsp;</td>
<td align="right"><font size="2" face="Arial">3.57</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">2.25</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">3.57</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">2.71</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">Dividend yield</font></td>
<td align="left">&nbsp;</td>
<td align="right">&nbsp;</td>
<td align="right"><font size="2" face="Arial">0.5</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">                0.4</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">0.5</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">                0.4</font></td>
<td align="left"><font size="2" face="Arial">%</font></td>
</tr>
</table>
<p align="left"><font size="2" face="Arial">The weighted average fair value of options granted during the second quarter of 2004 and the same period of 2003 was $12.17 and $11.64 respectively. </font></p>
<p align="left"><font size="2" face="Arial">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%" cellspacing="0" cellpadding="0" border="0">
<tr valign="top">
<td align="left"><font size="1" face="Arial">&nbsp;</font></td>
<td align="left">&nbsp;</td>
<td align="right">&nbsp;</td>
<td colspan="4" align="center"><font size="1" face="Arial">(unaudited)</font></td>
<td align="left">&nbsp;</td>
<td align="right">&nbsp;</td>
<td colspan="10" align="center"><font size="1" face="Arial">(unaudited)</font><font size="1" face="Arial">&nbsp;</font></td>
<td align="left">&nbsp;</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">&nbsp;</td>
  <td align="right">&nbsp;</td>
  <td colspan="10" align="center"><hr 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">&nbsp;</td>
<td align="right">&nbsp;</td>
<td width="10%" align="center"><font size="1" face="Arial">Three months ended </font><br><font size="1" face="Arial">June 26, 2004</font></td>
<td align="left">&nbsp;</td>
<td align="right">&nbsp;</td>
<td width="10%" align="center"><font size="1" face="Arial">Three months ended </font><br><font size="1" face="Arial">June 28, 2003</font></td>
<td align="left">&nbsp;</td>
<td align="right">&nbsp;</td>
<td width="10%" align="center"><font size="1" face="Arial">Six months ended </font><br><font size="1" face="Arial">June 26, 2004</font></td>
<td align="left">&nbsp;</td>
<td align="right">&nbsp;</td>
<td colspan="7" align="center"><font size="1" face="Arial">Six months ended </font><br><font size="1" face="Arial">June 28, 2003</font></td>
<td align="left">&nbsp;</td>
</tr>
<tr valign="top">
<td align="left"><font size="1" face="Arial">&nbsp;</font></td>
<td align="left">&nbsp;</td>
<td align="right">&nbsp;</td>
<td align="left">
  <hr size="1" noshade></td>
<td align="left">&nbsp;</td>
<td align="right">&nbsp;</td>
<td align="left"><hr size="1" noshade></td>
<td align="left">&nbsp;</td>
<td align="right">&nbsp;</td>
<td align="left"><hr size="1" noshade></td>
<td align="left">&nbsp;</td>
<td align="right">&nbsp;</td>
<td colspan="7" align="left"><hr size="1" noshade></td>
<td align="left">&nbsp;</td>
</tr>
<tr valign="top" bgcolor="#eeeeee">
<td align="left"><font size="2" face="Arial">Net income, as reported</font></td>
<td width="2%" align="left">&nbsp;</td>
<td width="1%" align="right">&nbsp;</td>
<td width="10%" align="right"><font size="2" face="Arial">148</font></td>
<td width="2%" align="left">&nbsp;</td>
<td width="1%" align="right">&nbsp;</td>
<td width="10%" align="right"><font size="2" face="Arial">80</font></td>
<td width="2%" align="left">&nbsp;</td>
<td width="1%" align="right">&nbsp;</td>
<td width="10%" align="right"><font size="2" face="Arial">225</font></td>
<td width="2%" align="left">&nbsp;</td>
<td width="1%" align="right">&nbsp;</td>
<td colspan="7" align="right"><font size="2" face="Arial">159</font></td>
<td width="2%" align="left">&nbsp;</td>
</tr>
<tr valign="top">
<td align="left"><font size="2" face="Arial">Deduct: </font><br><font size="2" face="Arial">Total stock-based employee compensation expense</font><br><font size="2" face="Arial">determined under FAS 123, net of related tax effects</font></td>
<td align="left">&nbsp;</td>
<td align="right">&nbsp;</td>
<td align="right"><font size="2" face="Arial">(46</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">(56</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">(87</font></td>
<td align="left"><font size="2" face="Arial">)</font></td>
<td align="right">&nbsp;</td>
<td colspan="7" align="right"><font size="2" face="Arial">(101</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;</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 colspan="7" 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">Net income , pro forma</font></td>
<td align="left">&nbsp;</td>
<td align="right">&nbsp;</td>
<td align="right"><font size="2" face="Arial">102</font></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">138</font></td>
<td align="left">&nbsp;</td>
<td align="right">&nbsp;</td>
<td colspan="7" align="right"><font size="2" face="Arial">58</font></td>
<td align="left">&nbsp;</td>
</tr>
<tr valign="top">
<td align="left"><font size="2" face="Arial">Earnings per share:</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 colspan="7" 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;Basic, as reported</font></td>
<td align="left">&nbsp;</td>
<td align="right">&nbsp;</td>
<td align="right"><font size="2" face="Arial">0.17</font></td>
<td align="left">&nbsp;</td>
<td align="right">&nbsp;</td>
<td align="right"><font size="2" face="Arial">0.09</font></td>
<td align="left">&nbsp;</td>
<td align="right">&nbsp;</td>
<td align="right"><font size="2" face="Arial">0.25</font></td>
<td align="left">&nbsp;</td>
<td align="right">&nbsp;</td>
<td colspan="7" align="right"><font size="2" face="Arial">0.18</font></td>
<td align="left">&nbsp;</td>
</tr>
<tr valign="top">
<td align="left"><font size="2" face="Arial">    &nbsp;&nbsp;&nbsp;Basic, pro forma</font></td>
<td align="left">&nbsp;</td>
<td align="right">&nbsp;</td>
<td align="right"><font size="2" face="Arial">0.11</font></td>
<td align="left">&nbsp;</td>
<td align="right">&nbsp;</td>
<td align="right"><font size="2" face="Arial">0.03</font></td>
<td align="left">&nbsp;</td>
<td align="right">&nbsp;</td>
<td align="right"><font size="2" face="Arial">0.15</font></td>
<td align="left">&nbsp;</td>
<td align="right">&nbsp;</td>
<td colspan="7" align="right"><font size="2" face="Arial">0.07</font></td>
<td align="left">&nbsp;</td>
</tr>
<tr valign="top">
<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 colspan="7" 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;Diluted, as reported</font></td>
<td align="left">&nbsp;</td>
<td align="right">&nbsp;</td>
<td align="right"><font size="2" face="Arial">0.16</font></td>
<td align="left">&nbsp;</td>
<td align="right">&nbsp;</td>
<td align="right"><font size="2" face="Arial">0.09</font></td>
<td align="left">&nbsp;</td>
<td align="right">&nbsp;</td>
<td align="right"><font size="2" face="Arial">0.24</font></td>
<td align="left">&nbsp;</td>
<td align="right">&nbsp;</td>
<td colspan="7" align="right"><font size="2" face="Arial">0.18</font></td>
<td align="left">&nbsp;</td>
</tr>
<tr valign="top">
<td align="left"><font size="2" face="Arial">    &nbsp;&nbsp;&nbsp;Diluted, pro forma</font></td>
<td align="left">&nbsp;</td>
<td align="right">&nbsp;</td>
<td align="right"><font size="2" face="Arial">0.11</font></td>
<td align="left">&nbsp;</td>
<td align="right">&nbsp;</td>
<td align="right"><font size="2" face="Arial">0.03</font></td>
<td align="left">&nbsp;</td>
<td align="right">&nbsp;</td>
<td align="right"><font size="2" face="Arial">0.15</font></td>
<td align="left">&nbsp;</td>
<td align="right">&nbsp;</td>
<td colspan="7" align="right"><font size="2" face="Arial">0.07</font></td>
<td align="left">&nbsp;</td>
</tr>
</table>
<p align="left"><font size="2" face="Arial"><b> 21. Treasury Stock</b></font></p>
<p align="left"><font size="2" face="Arial">In 2002, the Company repurchased
    13,400,000 of its own shares, for a total amount of $348 million, which were
    reflected
at cost as a reduction of the shareholders&#8217; equity.</font></p>
<p align="left"><font size="2" face="Arial">As of June 26, 2004, none of the common shares repurchased had been transferred to employees under the employee stock option plan.</font></p>
<p align="left"><font size="2" face="Arial">During 2003 and during the first half of 2004, the Company did not repurchase any of its common shares.</font></p>
<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="p?"></a>
<p><a href="#contents"><font size="2">Back to Contents</font></a></p>
<p align="left"><font size="2" face="Arial"><b>   22. Dividends   </b></font></p>
<p align="left"><font size="2" face="Arial">At the Annual General Meeting of
    Shareholders on April 23, 2004, shareholders approved the distribution of
    $0.12 per share in cash dividends.
    The dividend amount of $107 million was paid in the second quarter of 2004. </font></p>
<p align="left"><font size="2" face="Arial">The Annual General Meeting of
    Shareholders
    on March 12, 2003, shareholders approved the distribution of $0.08 per share
    in cash dividends. The dividend amount of $71 million was paid in the second
    quarter
of 2003. </font></p>
<p align="left"><font size="2" face="Arial"><b>23. Contingencies</b></font></p>
<p align="left"><font size="2" face="Arial">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 the products of the Company 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 provisions need to be readjusted based
    on the most 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 result in adverse determinations with respect to the
    interests of the Company could have a materially negative effect
    on the Company's results of operations
or its financial position for the period in which they occur.</font></p>
<p align="left">&nbsp;</p>
<p align="left">&nbsp;</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>
<a name="p?"></a>
<p><a href="#contents"><font size="2">Back to Contents</font></a></p>
<p align="left">&nbsp;</p>
<p align="left"><font size="2" face="Arial"><b>24. Claims and Legal proceedings</b></font></p>
<p><font size="2" face="Arial, Helvetica, sans-serif">The Company has from time
    to time received and may in future receive communications alleging possible
    infringements, in particular in case of patents and similar intellectual
    property rights of others. Furthermore, the Company may become involved in
    costly litigation brought against the Company regarding patents, mask works,
    copy rights, trade marks or trade secrets. For a description of material
    intellectual property claims and litigation see &#8220;Item 8 &#8211; Legal
    Proceedings&#8221;, included in our annual report on Form 20-F for the year
    ended December 31, 2003. In the event that the outcome of any litigation
    would be unfavorable to the Company, the Company may be required to take
    a license to the underlying intellectual property right upon economically
    unfavorable terms and conditions, and possibly pay damages for prior use
    and/or face an injunction, all of which singly or in the aggregate could
    have a material adverse effect on the Company's results of operations and
    ability to compete.</font></p>
<p><font size="2" face="Arial, Helvetica, sans-serif">The Company is involved
    in various lawsuits, claims, investigations and proceedings 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. 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'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><font size="2" face="Arial">The Company records a provision for claims and
    legal proceedings when it is probable that a liability has been incurred
    and when the amount of the loss can be reasonably estimated. The Company
    regularly evaluates claims and legal proceedings together with their related
    probable losses to determine whether they need to be adjusted based on the
    current information available to the Company. Legal costs associated with
    claims are expensed as incurred.</font></p>
<font size="2" face="Arial">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,
and an accrual of $2 million in the second quarter 2004, which represents its
best estimate of probable losses based on the information currently available
to the Company. </font>
<p align="left">&nbsp;</p>
<p align="center"><font face="Arial" size="2">F-24</font></p>
<hr noshade align="center" width="100%" size="2">
</body>
</html>

</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>GRAPHIC
<SEQUENCE>2
<FILENAME>b759550-2x1x1.jpg
<DESCRIPTION>GRAPHIC
<TEXT>
begin 644 b759550-2x1x1.jpg
M_]C_X``02D9)1@`!`0```0`!``#_VP!#``$!`0$!`0$!`0$!`0$!`0$!`0$!
M`0$!`0$!`0$!`0$!`0$!`0$!`0$!`0$!`0$!`0$!`0$!`0$!`0$!`0$!`0'_
MVP!#`0$!`0$!`0$!`0$!`0$!`0$!`0$!`0$!`0$!`0$!`0$!`0$!`0$!`0$!
M`0$!`0$!`0$!`0$!`0$!`0$!`0$!`0'_P``1"``]`%D#`2(``A$!`Q$!_\0`
M'P```04!`0$!`0$```````````$"`P0%!@<("0H+_\0`M1```@$#`P($`P4%
M!`0```%]`0(#``01!1(A,4$&$U%A!R)Q%#*!D:$((T*QP152T?`D,V)R@@D*
M%A<8&1HE)B<H*2HT-38W.#DZ0T1%1D=(24I35%565UA96F-D969G:&EJ<W1U
M=G=X>7J#A(6&AXB)BI*3E)66EYB9FJ*CI*6FIZBIJK*SM+6VM[BYNL+#Q,7&
MQ\C)RM+3U-76U]C9VN'BX^3EYN?HZ>KQ\O/T]?;W^/GZ_\0`'P$``P$!`0$!
M`0$!`0````````$"`P0%!@<("0H+_\0`M1$``@$"!`0#!`<%!`0``0)W``$"
M`Q$$!2$Q!A)!40=A<1,B,H$(%$*1H;'!"2,S4O`58G+1"A8D-.$E\1<8&1HF
M)R@I*C4V-S@Y.D-$149'2$E*4U155E=865IC9&5F9VAI:G-T=79W>'EZ@H.$
MA8:'B(F*DI.4E9:7F)F:HJ.DI::GJ*FJLK.TM;:WN+FZPL/$Q<;'R,G*TM/4
MU=;7V-G:XN/DY>;GZ.GJ\O/T]?;W^/GZ_]H`#`,!``(1`Q$`/P#^_BBBCIUH
M`\B^,_QV^%7[/?@Z?X@?&#QAIW@OPA!J%AI)U*[AU+4;R[U341,UMIVD:#H=
MAJFOZ[?^3#+?SV>C:;?7%IHUGJ^NWD=OHVB:K?6OR'_P]H_X)^_]%]/_`(:O
MXU?_`#N:_(?_`(+2_'F\^+7QS\"_LH^"M$\7ZA<?#B^L-2U33-.O+G4+3Q]X
M]^).@^%+WP9)H/@O2+2_;7+CPMHM\NG:%K-P[ZQ)KOBSQ%H6DZ39VZF_\0^"
M_"S_`((T_MC?%#PE9^+;^#X=_".6_6UF@\-?%+Q!KUEXHGL;[3-/U6VU*?1?
M"7AGQ@?#X<ZA+8W&B>(Y-"\2Z;>V%S:ZGX?L#%&TW];<(^"'AG1X#R#BOQ4X
MOS3A7'\1TY8[+\%ALWR/"0J977E?+:U/#8G*<UQF(GB<,EC*E2E-0H4L10HU
MZ-&M"K?_`#_\1/I-^-M;Q4XJX%\"O#W(^.<IX0K0RC-<PQ?#W$V85J>?86,E
MG-&MC,%Q#DF!PE'!8U5LIITJM#GK8G`5Z]&OB*&*PS7[Y?\`#VC_`()^_P#1
M?3_X:OXU?_.YH_X>T?\`!/W_`*+Z?_#5_&K_`.=S7XJ?\.)?VNO^BE_LY_\`
MA2?$W_YU-'_#B7]KK_HI?[.?_A2?$W_YU->C_P`0Q^BU_P!'7S__`,/&2_\`
MT'GA?\1Q^G3_`-&%X4Z?\TWQ-Y?]7`\U][^7[5_\/:/^"?O_`$7T_P#AJ_C5
M_P#.YH_X>T?\$_?^B^G_`,-7\:O_`)W-?BI_PXE_:Z_Z*7^SG_X4GQ-_^=31
M_P`.)?VNO^BE_LY_^%)\3?\`YU-'_$,?HM?]'7S_`/\`#QDO_P!!X?\`$<?I
MT_\`1A>%.G_--\3>7_5P/-?>_E^U?_#VC_@G[_T7T_\`AJ_C5_\`.YH_X>T?
M\$_?^B^G_P`-7\:O_G<U^*G_``XE_:Z_Z*7^SG_X4GQ-_P#G4TH_X(3_`+72
MD,/B3^SF^",I_P`)+\2EWKGYUW/\)G`W+D9`1QG]W+!)MFC/^(8_1:_Z.OG_
M`/X>,E7XOA!+[]!KQP^G2VO^-#<*=-?]6^)^MM?^3@>:^]_+^B+X%?ME_LZ_
MM+ZIKVD_!#QOJ?CFX\,:=;ZGKUS%\//B;H6D:7!=7:6=G;7>N^)_!NBZ)%JN
MHRN[Z1HG]H'6=9M[+5KK2["[M=$UB>Q^H,CU'YBOST_X)P?L8:O^QG\&/$7A
M7QS?^"/$/Q)\;^-;[Q-XHU[P=IMP;.'1[73K#1?#/A./Q'JVFZ3KWB/2=(CM
M-6\06?\`:6EZ5;Z7JOC'Q#:6.G$/<ZKJWZ"?9+3_`)]K?_OS'_\`$U_,O&V#
MX4R[BC-L!P9CLPS+AW!UXX?`9EF%;#XC$8[V=*DL374\/@<MI.@\5[>.'<,-
M:I1C3J*I.,U(_N#PQS#CG-^!\@S3Q*R_*\EXQS#"2Q>;Y1DV$Q.'P662K8BO
M+"X/V6,S;-<0L32P/U5XMSQT[8J5:G[*A[/D=BO"_P!I?XI#X*?`CXK_`!4A
MO?#UGJ_@7P!XM\1^&5\57$-OH>H^+K#1+P^#]#NS+J.D271\1>*I-%\/P:98
MZG9:GJUQJD6FZ7/'J%U;2)[DYPCG)&%8Y4;F&`>0N&R?0;6R>,'I7\V__!=;
M]H#5&U3X7_LP0:!8C2HK+2/CQJ?B66XG;5CJ4[_$/P'X?\/6D$-S#'ID%E;6
M^MZAJMZYO[C57U?1X8(],M-)U2+Q#[/A/P95X\X\R'A^/*L+/$_7<SG-4YQC
MEF`MB,8O95:U!5G6A%8=4X3E-.LING*$9(^8\?/$JCX4>%7%?%SC.>/HX)Y;
MDE.#JP<\\S52PF6RE6I4:RHPPU6<L;.57V5.I'"O#QKTJM:G)>B?\$<_`>K_
M`!G\4?'K]MWXSWUA\1OB?K?C:T\&>&?%VMM)=>*_"^M0>'6O/'LUG8_V=9^'
MM!M=2\*^*_`/A'PXF@R?:-"\,^'-0\(Z59^'O#E_<V.N?H-^U;_P46^`O[&W
MB_PYX%^(^C_$?Q%XH\2>'?\`A)HM+^'_`(?T.\32/#RW]SI6F7VJ77BKQ5X2
MTYEUC4;'7+;3XM$NM7EA&B78U6/35;33?_EC_P`$/OVDO"_AQ_'7[,GBK6]$
MTK5?&/C"+QM\);&/2/$DVJ>+=:?PM>KX_LKW5H8Y?#6E6VA:!\/_``OJ.B6N
MI2Z9>7EQK&JPV\VJ71\I?T(_X*"?\$YO#O[99T3QOX>\4Q^"/C!X0T*YT+3M
M6U.VO]8\+^,-!C_M76=#\&^((X;R&X\-11^)+^>:S\4^'K75[K2+3Q!KSWWA
M;Q.[Z%%I?['XA9?PU3^D!F.`\45F65\&?5,)A\F_LVC6PN!PN34,HHX?)*>!
MIT,//V63T,33Q%&M')Z#I4LTCBH5(0=/'*/\Y^%6;\:S^B7D^<^!4\IX@\1%
MCLQQO$:S>KAL;FF.X@K9_7QW%$LTJ8S$4*>(XBQ.7XC!XG!RSW%8?$U\DJ9=
M4ISJ1Q&6*7C_`/P_5_9,_P"B;?M&?^$M\+?_`)\-'_#]7]DS_HFW[1G_`(2W
MPM_^?#7\NOQ'^&WC;X2^-O$OP\^(7AO5?"GB_P`):E)I>O:+JZV[3V-R%CEC
MD6\LC)I>H:=>13VT^D:SI=Q=:-K-G>:?=Z1?W]KJ%E/<\/V)[#&<#/4A1P.>
MI'TZG@$U_1F'^B]X/8JA1Q.&HYOB<-B*5.O0Q&'X@G6H5Z-6$:E*M1K4Z<J=
M6E5IR4Z=2$I0G"<91;BTW_'&+^G'](W`8O$X#&XGAW"8W!XBMA,5A,5PC##8
MG#XG#5'1Q&'Q&'K5H5J%>C5A.G6HU80JTJBE"<8RBTOZY?"'_!:?]G#Q[XL\
M,>"?"7PB_:/U?Q)XQ\1:)X3\/6/_``CWPCL([[Q!XAU&WTG2;!K_`%/XSV6G
M6PN;^]LH6N[F[BL[9;@S74\$4,S)^MFOZ[H_A?1-6\1^(=5TO0M`T'3-0UK6
M]:UK4+;2M(TC2-*LI]0U+5-3U*\>.TL=/L+.VFNKZ\NI8K>TM(IKF>18HF-?
MS`?\$/?V?K;Q=\5_'/[1&O6-Z]C\)M-@\*>`99+#58M,N/&WCS3-<L/$>J6>
MLIJ-EI=UJ'A3P0;C2]7\,W&EZ^)+7XE>'=::32[NVTPW/Z+_`/!8K]I;4_@Q
M^SC9_#GPIJ]A8^*OCYJ&M>!=4M;G2+O5[S_A5\.A3Q_$:YTVZ=ET/3Y]0&M>
M&/##SZE*FMKHWB?5-1\*6:ZO8+KOAS^6_$'PRX6EXMY)X6^'N%QE*NY87#YW
MC<;CJ^,<<5BZ,<RQ/LU[*JHX?*,EBL97K4J,VZU3%4:M.^$CS_W5X2>-?'=/
MZ/O$?CIXOXK`5\+&&,Q7#V7Y5EN$RU2P&`Q7]B82552Q,)2QF?<1U)8'#T,1
M6I1=*E@:V%E)9ARPY<?\%UOV326_XMM^T65#L$=?"WPPV2(#@.A?XO1L1G*M
M\N%=74,VW)]Z_9H_X*E_`O\`:M^*^C?"#X8?#OX[1Z_J>F:]K%_K&O>$?"47
MAGPMI6@:<UY<:EXJU#0_'NO7FCZ?=7S6'ARRO)-->*;Q+K>A:4QC.I1SI_&4
MZO*\C*?.*K$S%1APIC55W1XW@1%?(W9DC'EJ(W2(QQ)_5I_P1&^!K>`?V?\`
MQ+\:KW4&N]1_:"UM;K3K*.YEGMM+\%?#76O%OAC1(Y;>?3K4Z=J]YXGOO&]W
M<I8ZCJVBWV@2>%9],32Y(+^VD_5?&3P6\)_#C@+,^(,+@<WJ9O5J8?*\DI5<
M[Q*H2S/'J;C4J1>%J\T<#A*6+S+V%1TUBG@UA93I*LZE/\(^CA])3Q[\9O%7
M*.$\?F7#M/A_#T,3GW$M;!\-X>->GD>6JE&I1H.>)IU8_P!HYCB,ORE8M>_@
MEF'UQX>K*BJ#_:ZBBBOX9/\`4,YKQGXN\/\`P_\`!_BOQYXLU#^R?"O@GPUK
MOB[Q-JGV2]O_`.S?#_AO2[K6=9U#[#IMO=ZC>?8].LKFX^R6%K<WMQY?DVMO
M-.\<;?P,?'KXK:G\<OC+\3?B_JT=W;W'Q%\:Z_XKM=.O-;N?$K:'HVHWK#P_
MX9M]>G$4>HV/A30H-.\+V#V5I8Z?'9:/;II]E::?]DM8?[,/V]/@C^T!^T+\
M"-0^$_P"\>Z!X`U7Q9K]K8^.;[Q+K&JZ/INN?#.31M>37?"C7VA>%O$^LPIK
MVKR:#;:K;6<-K%JWAPZSHNH7C:9?7.GW/X*G_@A1^V`26/Q%_9K)/4GQ9\42
M3]3_`,*ER>I_.O[)^C)GOAUP1E^>Y_Q/Q9E.6Y]G%6EEV&P6(K8E5L)E.$:K
M3<Z<,.J2EC\7.-27[S$I4L#A7#V$YUX3_P`XOIM\+>,'B?FO"W"?!/`?$.<<
M+</X>OG&-S'!X?#/"X_/\P:PU&%.I/%JI.&59?2JTX7H8=^VS'%J<:\%AJM/
M\8D?:T6P!75PV\X;$F3LE7[K+)$"&B99`4D42`@U_5+_`,$YO^"HVC?&2QTG
MX,_M&>)=/T3XT3:Q#I?A+QGJOV?2],^,%[K^J^);R#2(K'P]X3T/P5X(U?0-
M,3PUX3T73+[5T'C34K_2H-&%QXCNEL+G\]_^'$_[8'_11?V:_P#PK/BC_P#.
MEJ6+_@A?^V!;SPSM\0/V<9UCDW.L/C+XH13,FQAMC9_A0B*?-\F7S0\<T9@5
M8Y`CRI)^R>)7$?@'XH9&\HSKCC)*.+PKJU\FSC#SG]?RK%RC'F=&=6A&%7!X
MM0C1S#+ZTUA\92C2G&6'QN%P&-PO\Z>"?!WTKO`WB>6?\.^&'$^+RW'0IX?B
M/AK%0HK+.(<#153V5.O"&)E+#YE@G5J5LFS6@HXG`8F56C4>)RG'9KEN8?LM
M_P`%#/V$O"?[77PQU#7]*T<:?\>O`?A[5)_AQK^EOI-O=>(VM+>]U>P^%OB6
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MXG'\18_#9>V\<^%L)7J1SS-,*ZZ_LS"81U,2H4*$Y_T&_L;?`#4_V:?V9_A?
M\%=<UZP\0:]X3TO69M=U;2;.XM-*DUGQ/XJU_P`8ZG9Z;%>2-=3V&E77B.XT
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M^)FL[K4YET^2/0O#NF69UCQ?XBCM-2OM/AU:3P]X5LM7UO\`LN"YCN[R73[6
MPM3)>ZA96T_]\>B:#I7AS2])T+0;"RT;0M!TNPT71M$TJT@T_2=*TK2[9++3
M].TW3[9([6QL;*TBAMK6UMHHXX(((880D2%&_GW_`."(_P"S-H5KX4\7?M3>
M+/#?VWQ9=^(KOP/\);C6?#FI1RZ!H6F:4I\6>,_"6I3WK:?JD7C&_P!3N_`<
M^M:=HO\`:'AY?!OBSP]9:[/:^*/%>CP?OAX7^(7@3QM<:Q:>#?&7ACQ7<^'K
MM;#7X/#FN:;K4NAW[J72QUA-.N;DZ9>NJ2[+2]\BX<V]TJQEK2Y$7Y/]*;CR
M/$O&]'AG`U7++.#*6(P=9JFH*OGV.E3JYK4C+GYZM+"T:6!RZ/M:5-PQ>$S"
M='VM"O"O5_?/H*^%DN"_"^MQEFF&C2SSQ#Q&&S&C><Y5*'#.7QKT\CI5(R@H
M4J^+KXK,\SG[&I453!8S+*6(Y,1A94Z?84445_,!_<`4444`%%%%`'Y,_M_W
M7[?_`,3M-\<_`O\`9P^`"0^`=:6#P_K'Q=?XI_!6X_X6/X!\5?#^^T[QSX+'
MP[\>#3M8\(Q-JGB22PE\20:L=9=O"D5SI`MK356D'J7_``3C_8UTW]CWX-K%
MJZ:I+\8OBC9>'?$?QAGU&_M;FUT?5+&ROIM(\"Z1%HUU?>'AI_@3^VM8TZ?6
M+.ZNI_$^K7>L:U%J=QH,OAK1]$_1/`ZX&2<DXZD<`_4#BC:O/RCDY/`Y.W;D
M^^WY<]=O'3BOO\3XAYG4X*AP'@,KR3(\DJ8C"8S-JN4T<PAF7$>+P<*?L:^?
M8S&YECOK4(8BG]>IX3#TL)@</BW&6&PU&E1H4J7Y-@O"')J/B77\5<USWB3B
M;B6G@L;EN04,_KY14R;A#+\=5KRK8;AC+LKR?*U@ZDL+7EEM7,<;5S#-<3E_
M-3QF.Q%:OBZ^(_GH_P""I?[+O[<G[6?QQT"/X:?!=]:^#GPNT"'3_!6K'XA_
M"/3FU_7_`!+!I.M>-?$D=AK_`(E\,^)=)V7]AH'A>WT?7X-5M;>;P5+XCTH6
MI\33PP?FSH__``2,_;TU#5M*T_5/@W9>&-.OM4TVTO?$>K_%#X42Z5H-I-?V
MZW6LZG!H/CG5M<N-/TNW\V^O8-&TS4-6DMH)1IEC>7WV>UF_L]``````'``&
M`!Z`#I00&&&`(]"`1^1K]+X7^DQQOPAPYE?"^29%P9ALNRC!QPF&JRR_.98R
M<[RJ5L=7G'/X8>ICL5BJE;&8F:P\*$\35FXX>%)JBOQ;C?Z%7AGXA<:9UQWQ
M/Q7XDXO.L]S)9CBZ=/..&Z6!IPI1HT<)EF%IRX2JXFEEN`P6'P^6X*G/%5L1
M3P5"C"IB:U:,JT_'?@7\)-+^"_P9^&WPDTR;3;JU\">#-`\,7NJZ5H5IH-IX
MFU33M-ABUOQ2^C1W6J16=_XIUIM1\0ZN9;W4;JYU34KVXN=0O9I6NY?*/@#^
MRKHOP+\??$;XBV'B6\U#6/BSJOBGQ)XJT;2-'C\(^#I/%WC?QYXD^(GBKQ(?
M#.FW]_97&HSW^L6NEZ9JNN7&L>+;:V@U8:IXOU^/6K>ST7ZZI``H`4``#```
M``]`!T%?S[C,7B,?B\5CL95=;%XW$5\7BJTE%2JXC$U95JU1J$803G4G*34(
MQBKVC&,4DOZURS+L'E&6Y?E.78>GA,ORO!83+L!A:7,J6&P6"H4\-A</24Y3
8FJ="A2ITJ:G.<E"*YIR=Y-:***YSM/_9
`
end

</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>GRAPHIC
<SEQUENCE>3
<FILENAME>emptybox.gif
<DESCRIPTION>GRAPHIC
<TEXT>
begin 644 emptybox.gif
M1TE&.#EA#``,`/?^``````$!`0("`@,#`P0$!`4%!08&!@<'!P@("`D)"0H*
M"@L+"PP,#`T-#0X.#@\/#Q`0$!$1$1(2$A,3$Q04%!45%186%A<7%Q@8&!D9
M&1H:&AL;&QP<'!T='1X>'A\?'R`@("$A(2(B(B,C(R0D)"4E)28F)B<G)R@H
M*"DI*2HJ*BLK*RPL+"TM+2XN+B\O+S`P,#$Q,3(R,C,S,S0T-#4U-38V-C<W
M-S@X.#DY.3HZ.CL[.SP\/#T]/3X^/C\_/T!`0$%!04)"0D-#0T1$1$5%149&
M1D='1TA(2$E)24I*2DM+2TQ,3$U-34Y.3D]/3U!04%%145)24E-34U145%55
M55965E=75UA86%E965I:6EM;6UQ<7%U=75Y>7E]?7V!@8&%A86)B8F-C8V1D
M9&5E969F9F=G9VAH:&EI:6IJ:FMK:VQL;&UM;6YN;F]O;W!P<'%Q<7)R<G-S
M<W1T='5U=79V=G=W=WAX>'EY>7IZ>GM[>WQ\?'U]?7Y^?G]_?X"`@(&!@8*"
M@H.#@X2$A(6%A8:&AH>'AXB(B(F)B8J*BHN+BXR,C(V-C8Z.CH^/CY"0D)&1
MD9*2DI.3DY24E)65E9:6EI>7EYB8F)F9F9J:FIN;FYR<G)V=G9Z>GI^?GZ"@
MH*&AH:*BHJ.CHZ2DI*6EI::FIJ>GIZBHJ*FIJ:JJJJNKJZRLK*VMK:ZNKJ^O
MK["PL+&QL;*RLK.SL[2TM+6UM;:VMK>WM[BXN+FYN;JZNKN[N[R\O+V]O;Z^
MOK^_O\#`P,'!P<+"PL/#P\3$Q,7%Q<;&QL?'Q\C(R,G)R<K*RLO+R\S,S,W-
MS<[.SL_/S]#0T-'1T=+2TM/3T]34U-75U=;6UM?7U]C8V-G9V=K:VMO;V]S<
MW-W=W=[>WM_?W^#@X.'AX>+BXN/CX^3DY.7EY>;FYN?GY^CHZ.GIZ>KJZNOK
MZ^SL[.WM[>[N[N_O[_#P\/'Q\?+R\O/S\_3T]/7U]?;V]O?W]_CX^/GY^?KZ
M^OO[^_S\_/W]_?[^_O___R'Y!`$``/X`+``````,``P`!P@Z`/\)'$APX)L?
M"!,J_/<#F;B'$!\:8"BNX,`#%"T*Q/BCHD:.'BV"U/AOY,>,)SN2Y&C@@,N7
&+@$$!``[
`
end

</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>GRAPHIC
<SEQUENCE>4
<FILENAME>tickedbox.gif
<DESCRIPTION>GRAPHIC
<TEXT>
begin 644 tickedbox.gif
M1TE&.#EA#``,`/?^``````$!`0("`@,#`P0$!`4%!08&!@<'!P@("`D)"0H*
M"@L+"PP,#`T-#0X.#@\/#Q`0$!$1$1(2$A,3$Q04%!45%186%A<7%Q@8&!D9
M&1H:&AL;&QP<'!T='1X>'A\?'R`@("$A(2(B(B,C(R0D)"4E)28F)B<G)R@H
M*"DI*2HJ*BLK*RPL+"TM+2XN+B\O+S`P,#$Q,3(R,C,S,S0T-#4U-38V-C<W
M-S@X.#DY.3HZ.CL[.SP\/#T]/3X^/C\_/T!`0$%!04)"0D-#0T1$1$5%149&
M1D='1TA(2$E)24I*2DM+2TQ,3$U-34Y.3D]/3U!04%%145)24E-34U145%55
M55965E=75UA86%E965I:6EM;6UQ<7%U=75Y>7E]?7V!@8&%A86)B8F-C8V1D
M9&5E969F9F=G9VAH:&EI:6IJ:FMK:VQL;&UM;6YN;F]O;W!P<'%Q<7)R<G-S
M<W1T='5U=79V=G=W=WAX>'EY>7IZ>GM[>WQ\?'U]?7Y^?G]_?X"`@(&!@8*"
M@H.#@X2$A(6%A8:&AH>'AXB(B(F)B8J*BHN+BXR,C(V-C8Z.CH^/CY"0D)&1
MD9*2DI.3DY24E)65E9:6EI>7EYB8F)F9F9J:FIN;FYR<G)V=G9Z>GI^?GZ"@
MH*&AH:*BHJ.CHZ2DI*6EI::FIJ>GIZBHJ*FIJ:JJJJNKJZRLK*VMK:ZNKJ^O
MK["PL+&QL;*RLK.SL[2TM+6UM;:VMK>WM[BXN+FYN;JZNKN[N[R\O+V]O;Z^
MOK^_O\#`P,'!P<+"PL/#P\3$Q,7%Q<;&QL?'Q\C(R,G)R<K*RLO+R\S,S,W-
MS<[.SL_/S]#0T-'1T=+2TM/3T]34U-75U=;6UM?7U]C8V-G9V=K:VMO;V]S<
MW-W=W=[>WM_?W^#@X.'AX>+BXN/CX^3DY.7EY>;FYN?GY^CHZ.GIZ>KJZNOK
MZ^SL[.WM[>[N[N_O[_#P\/'Q\?+R\O/S\_3T]/7U]?;V]O?W]_CX^/GY^?KZ
M^OO[^_S\_/W]_?[^_O___R'Y!`$``/X`+``````,``P`!PA>`/]%8T:PH,%_
M&0`H7,@0(3UF_R)&C*8N`T)P"O1(1"4@F$6+UB@0^H=*P2V$*/]94\!$P$F4
J%B/^`1!%XL>('#-EC'BSY,F0(S]&<REQY:B;RR1&M`8S@].G3P4$!``[
`
end

</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-12
<SEQUENCE>5
<FILENAME>b759550ex12-1.htm
<TEXT>
<html>
<head><title>
Prepared and filed by St Ives Burrups
</title>
</head>
<body bgcolor="#FFFFFF">
<div style="text-indent:3%"><p align="right"><font size="2" face="Arial"><b>Exhibit 12.1</b></font></p></div>
<hr noshade align="center" width="100%" size="2">
<div style="page-break-before:always"></div>
<page>


<p align="center"><font size="2" face="Arial"><b>STMICROELECTRONICS N.V. </b></font></p>
<p align="center"><font size="2" face="Arial"><b>VOLUNTARY CERTIFICATION</b></font></p>
<div style="text-indent:3%"><p align="left"><font size="2" face="Arial">I, Pasquale Pistorio, certify that:</font></p></div>
<div style="text-indent:3%"><p align="left"><font size="2" face="Arial">1.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; I have reviewed this report on Form 6-K of STMicroelectronics N.V.;</font></p></div>
<div style="text-indent:3%"><p align="left"><font size="2" face="Arial">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></div>
<div style="text-indent:3%"><p align="left"><font size="2" face="Arial">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></div>
<div style="text-indent:3%"><p align="left"><font size="2" face="Arial">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></div>
<div style="text-indent:3%"><p align="left"><font size="2" face="Arial">a)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 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></p></div>
<div style="text-indent:3%"><p align="left"><font size="2" face="Arial">b)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 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></p></div>
<div style="text-indent:3%"><p align="left"><font size="2" face="Arial">c)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 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></p></div>
<div style="text-indent:3%"><p align="left"><font size="2" face="Arial">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></div>
<div style="text-indent:3%"><p align="left"><font size="2" face="Arial">a)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 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></p></div>
<div style="text-indent:3%"><p align="left"><font size="2" face="Arial">b)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 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></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 colspan="2" align="left"><font size="1" face="Arial">&nbsp;</font></td> </tr>
<tr valign="top"> <td align="left"><font size="1" face="Arial">&nbsp;</font></td>
<td colspan="2" align="left"><font size="1" face="Arial">&nbsp;</font></td> </tr>
<tr valign="top">
<td align="left" width="51%"><font size="2" face="Arial">Date: July 30, 2004</font></td>
<td align="left" width="3%"><font size="2" face="Arial">By:</font></td>
<td align="left"><font size="2" face="Arial">/s/ P<font face="Arial" size="1">ASQUALE</font> P<font face="Arial" size="1">ISTORIO</font></font></td>
</tr>
<tr valign="top">
<td></td>
<td></td>
<td><hr noshade size="1"></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: Pasquale Pistorio</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="Arial">&nbsp;</font></td>
<td align="left"><font size="2" face="Arial">&nbsp;</font></td>
<td align="left"><font size="2" face="Arial">Title: President and Chief Executive Officer</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>6
<FILENAME>b759550ex12-2.htm
<TEXT>
<html>
<head><title>
Prepared and filed by St Ives Burrups
</title>
</head>
<body bgcolor="#FFFFFF"> <p align="center">&nbsp;</p>
<div style="text-indent:3%"><p align="right"><font size="2" face="Arial"><b>Exhibit 12.2</b></font></p></div>
<hr noshade align="center" width="100%" size="2">
<div style="page-break-before:always"></div>
<page>

<p align="center"><font size="2" face="Arial"><b>VOLUNTARY CERTIFICATION</b></font></p>
<div style="text-indent:3%"><p align="left"><font size="2" face="Arial">I, Carlo Ferro, certify that: </font></p></div>
<div style="text-indent:3%"><p align="left"><font size="2" face="Arial">1.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; I have reviewed this report on Form 6-K of STMicroelectronics N.V.;</font></p></div>
<div style="text-indent:3%"><p align="left"><font size="2" face="Arial">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></div>
<div style="text-indent:3%"><p align="left"><font size="2" face="Arial">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></div>
<div style="text-indent:3%"><p align="left"><font size="2" face="Arial">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></div>
<div style="text-indent:3%"><p align="left"><font size="2" face="Arial">a)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 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></p></div>
<div style="text-indent:3%"><p align="left"><font size="2" face="Arial">b)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 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></p></div>
<div style="text-indent:3%"><p align="left"><font size="2" face="Arial">c)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 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></p></div>
<div style="text-indent:3%"><p align="left"><font size="2" face="Arial">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></div>
<div style="text-indent:3%"><p align="left"><font size="2" face="Arial">a)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 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></p></div>
<div style="text-indent:3%"><p align="left"><font size="2" face="Arial">b)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 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></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 colspan="2" align="left"><font size="1" face="Arial">&nbsp;</font></td> </tr>
<tr valign="top"> <td align="left"><font size="1" face="Arial">&nbsp;</font></td>
<td colspan="2" align="left"><font size="1" face="Arial">&nbsp;</font></td> </tr>
<tr valign="top">
<td align="left" width="51%"><font size="2" face="Arial">Date: July 30, 2004</font></td>
<td align="left" width="3%"><font size="2" face="Arial">By:</font></td>
<td align="left"><font size="2" face="Arial">/s/ C<font size="1">ARLO</font> F<font size="1">ERRO</font></font></td>
</tr>
<tr valign="top">
<td></td>
<td></td>
<td><hr noshade size="1"></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: Carlo Ferro </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="Arial">&nbsp;</font></td>
<td align="left"><font size="2" face="Arial">&nbsp;</font></td>
<td align="left"><font size="2" face="Arial">Title: Corporate Vice President and Chief Financial Officer</font></td>
</tr>
</table>
<p align="center">&nbsp;</p>
<hr noshade align="center" width="100%" size="2">
</body>
</html>

</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-13
<SEQUENCE>7
<FILENAME>b759550ex13-1.htm
<TEXT>
<html>
<head><title>
Prepared and filed by St Ives Burrups
</title>
</head>
<div style="text-indent:3%"><p align="right"><font size="2" face="Arial"><b>Exhibit 13.1</b></font></p></div>
<hr noshade align="center" width="100%" size="2">
<div style="page-break-before:always"></div>
<page>

<div style="text-indent:3%">
<p align="left"><font size="2" face="Arial">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>
</div>
<div style="text-indent:3%"><p align="left"><font size="2" face="Arial">In connection with the Report on Form 6-K of STMicroelectronics N.V. (the &#8220;Company&#8221;) for the period ending June 26, 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></div>
<div style="text-indent:3%"><p align="left"><font size="2" face="Arial">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></div>
<div style="text-indent:3%"><p align="left"><font size="2" face="Arial">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></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 colspan="2" align="left"><font size="1" face="Arial">&nbsp;</font></td> </tr>
<tr valign="top"> <td align="left"><font size="1" face="Arial">&nbsp;</font></td>
<td colspan="2" align="left"><font size="1" face="Arial">&nbsp;</font></td> </tr>
<tr valign="top">
<td align="left" width="51%"><font size="2" face="Arial">Date: July 30, 2004</font></td>
<td align="left" width="3%"><font size="2" face="Arial">By:</font></td>
<td align="left"><font size="2" face="Arial">/s/ P<font face="Arial" size="1">ASQUALE</font> P<font face="Arial" size="1">ISTORIO</font></font></td>
</tr>
<tr valign="top">
<td></td>
<td></td>
<td><hr noshade size="1"></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: Pasquale Pistorio</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="Arial">&nbsp;</font></td>
<td align="left"><font size="2" face="Arial">&nbsp;</font></td>
<td align="left"><font size="2" face="Arial">Title: President and Chief Executive Officer</font></td>
</tr>
<tr valign="top">
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td> </tr>
<tr valign="top">
<td>&nbsp;</td>
<td>&nbsp;</td> </tr>
<tr valign="top">
<td>&nbsp;</td>
<td>&nbsp;</td> </tr>
<tr valign="top">
<td align="left"><font size="2" face="Arial">Date: July 30, 2004</font></td>
<td align="left"><font size="2" face="Arial">By:</font></td>
<td align="left"><font size="2" face="Arial">/s/ C<font size="1">ARLO</font> F<font size="1">ERRO</font></font></td>
</tr>
<tr valign="top">
<td></td>
<td></td>
<td><hr noshade size="1"></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: Carlo Ferro </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="Arial">&nbsp;</font></td>
<td align="left"><font size="2" face="Arial">&nbsp;</font></td>
<td align="left"><font size="2" face="Arial">Title: Corporate Vice President and Chief Financial Officer</font></td>
</tr>
</table>
<p align="center">&nbsp;</p>
<hr noshade align="center" width="100%" size="2">
</body>
</html>

</TEXT>
</DOCUMENT>
</SEC-DOCUMENT>
-----END PRIVACY-ENHANCED MESSAGE-----
