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<SEC-DOCUMENT>0001021231-04-000711.txt : 20041029
<SEC-HEADER>0001021231-04-000711.hdr.sgml : 20041029
<ACCEPTANCE-DATETIME>20041029162352
ACCESSION NUMBER:		0001021231-04-000711
CONFORMED SUBMISSION TYPE:	6-K
PUBLIC DOCUMENT COUNT:		6
CONFORMED PERIOD OF REPORT:	20041029
FILED AS OF DATE:		20041029
DATE AS OF CHANGE:		20041029

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:		041106743

	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>b769527-6k.htm
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Prepared and filed by St Ives Burrups
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<p align="center"><font size="2" face="Arial, Helvetica, sans-serif"><b><font face="Arial, Helvetica, sans-serif" size="4">SECURITIES AND EXCHANGE COMMISSION</font><font face="Arial, Helvetica, sans-serif" size="3"><br>
</font>Washington, D.C. 20549 </b></font></p>
<p align="center"><b><font face="Arial, Helvetica, sans-serif" size="5">FORM 6-K </font></b></p>
<p align="center"><font size="2" face="Arial, Helvetica, sans-serif"><b>REPORT OF FOREIGN PRIVATE ISSUER<br>PURSUANT TO RULE 13a-16 or 15d-16 OF<br>THE SECURITIES EXCHANGE ACT OF 1934 </b></font></p>
<p align="center"><font size="2" face="Arial, Helvetica, sans-serif"><b>Report on Form 6-K dated October 29, 2004</b></font></p>
<p align="center"><font size="2" face="Arial, Helvetica, sans-serif"><b>(Commission File No. 1-13546)</b></font></p>
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<p align="center"><font size="2" face="Arial, Helvetica, sans-serif"><b><font face="Arial, Helvetica, sans-serif" size="5">STMicroelectronics N.V.<br>
</font></b>(Name of Registrant) </font></p>
<p align="center"><font size="2" face="Arial, Helvetica, sans-serif">39, Chemin du Champ-des-Filles<br>1228 Plan-les-Ouates, Geneva, Switzerland<br>(Address of Principal Executive Offices)</font></p>
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<div style="text-indent:3%">
  <p><font size="2" face="Arial, Helvetica, sans-serif">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>
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    <td width="48%" align="right"><font size="2" face="Arial, Helvetica, sans-serif">Form
    20-F</font> <font size="2" face="Arial, Helvetica, sans-serif"><img src="tickedbox.gif" width="12" height="12"></font></td>
    <td width="4%">&nbsp;</td>
    <td width="48%"><font size="2" face="Arial, Helvetica, sans-serif">Form 40-F <img src="emptybox.gif" width="12" height="12"></font></td>
  </tr>
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<div style="text-indent:3%">
  <p><font size="2" face="Arial, Helvetica, sans-serif">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>
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    <td width="48%" align="right"> <font size="2" face="Arial, Helvetica, sans-serif">Yes</font> <font size="2" face="Arial, Helvetica, sans-serif"><img src="emptybox.gif" width="12" height="12"></font></td>
    <td width="4%">&nbsp;</td>
    <td width="48%"><font size="2" face="Arial, Helvetica, sans-serif"> No <img src="tickedbox.gif" width="12" height="12"></font></td>
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<div style="text-indent:3%">
  <p><font size="2" face="Arial, Helvetica, sans-serif">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>
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    <td width="48%" align="right"> <font size="2" face="Arial, Helvetica, sans-serif">Yes</font> <font size="2" face="Arial, Helvetica, sans-serif"><img src="emptybox.gif" width="12" height="12"></font></td>
    <td width="4%">&nbsp;</td>
    <td width="48%"><font size="2" face="Arial, Helvetica, sans-serif"> No <img src="tickedbox.gif" width="12" height="12"></font></td>
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<div style="text-indent:3%">
  <p><font size="2" face="Arial, Helvetica, sans-serif">If &#8220;Yes&#8221; is
      marked, indicate below the file number assigned to the registrant in connection
with Rule 12g3-2(b): 82-________</font></p>
</div>
<div style="text-indent:3%">
  <p><font size="2" face="Arial, Helvetica, sans-serif">Enclosure:
  STMicroelectronics N.V.&#8217;s Third quarter of 2004:</font></p>
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<font size="2" face="Arial, Helvetica, sans-serif">&#149;</font></td>
<td>
<font size="2" face="Arial, Helvetica, sans-serif">Operating and Financial Review and Prospects;</font></td>
</tr>
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  <td>&nbsp;</td>
  <td>&nbsp;</td>
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  <td><font size="2" face="Arial, Helvetica, sans-serif">&#149;</font></td>
  <td><font size="2" face="Arial, Helvetica, sans-serif">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 nine months ended September&nbsp;25, 2004; and</font></td>
</tr>
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  <td>&nbsp;</td>
  <td>&nbsp;</td>
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  <td><font size="2" face="Arial, Helvetica, sans-serif">&#149;</font></td>
  <td><font size="2" face="Arial, Helvetica, sans-serif">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>
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<p align="center"><font size="2" face="Arial, Helvetica, sans-serif"><b>OPERATING AND FINANCIAL REVIEW AND PROSPECTS </b></font></p>
<p align="left"><font size="2" face="Arial, Helvetica, sans-serif"><b>Overview</b></font></p>
<div style="text-indent:3%"><font size="2" face="Arial, Helvetica, sans-serif"><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  nine months ended September&nbsp;25, 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;&#8212;Critical Accounting
   Policies Using Significant Estimates&#8221;, &#8220;&#8212;Business Outlook&#8221;
  and &#8220;Liquidity and Capital Resources&#8212;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

  (the &#8220;Commission&#8221; or the &#8220;SEC&#8221;) 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></div>
<p align="left"><font size="2" face="Arial, Helvetica, sans-serif"><b>Critical Accounting Policies Using Significant Estimates </b></font></p>
<div style="text-indent:3%"><font size="2" face="Arial, Helvetica, sans-serif">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></div>
<div style="text-indent:3%">
  <p><font size="2" face="Arial, Helvetica, sans-serif">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%"><font size="2" face="Arial, Helvetica, sans-serif"><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></div>
<p align="center"><font size="2" face="Arial, Helvetica, sans-serif">2</font></p>
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<div style="text-indent:3%"><font size="2" face="Arial, Helvetica, sans-serif">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></div>
<div style="text-indent:3%">
  <p><font size="2" face="Arial, Helvetica, sans-serif">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 third quarter of 2004 we recorded a provision of 1.0% of total receivables, which is equivalent to the provision recorded in 2003 and in the first half of 2004. 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%"><font size="2" face="Arial, Helvetica, sans-serif"><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 September&nbsp;25, 2004, the value of goodwill amounted to
$260 million.</font></div>
<div style="text-indent:3%">
  <p><font size="2" face="Arial, Helvetica, sans-serif"><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&#151;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%"><font size="2" face="Arial, Helvetica, sans-serif"><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 may not be in line with our estimates and may therefore require impairment of certain intangible assets. At September&nbsp;25,
  2004, the value of intangible assets subject to amortization amounted to $306
million. </font></div>
<p align="center"><font size="2" face="Arial, Helvetica, sans-serif">3</font></p>
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<div style="text-indent:3%">
  <p align="left"><font size="2" face="Arial, Helvetica, sans-serif"><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, Helvetica, sans-serif">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, Helvetica, sans-serif">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, Helvetica, sans-serif"><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 case of underutilization of our manufacturing facilities, we estimate the costs associated with the excess capacity; these costs 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, Helvetica, sans-serif">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, Helvetica, sans-serif"><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 third quarter of 2004, the amount of restructuring charges and other related closure pre-tax costs amounted to $12 million. Through the period ended September&nbsp;25, 2004, we have incurred approximately $262 million of the expected $350 million in
pre-tax charges associated with the restructuring plan that was defined on October 22, 2003, and we are expecting to incur the remaining $88 million in the next several quarters.</font></p>
</div>
<p align="center"><font size="2" face="Geneva, Arial, Helvetica, sans-serif">4</font></p>
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<div style="text-indent:3%">
<p align="left"><font size="2" face="Arial, Helvetica, sans-serif"><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, Helvetica, sans-serif">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 September&nbsp;25, 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, Helvetica, sans-serif">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, Helvetica, sans-serif"><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, Helvetica, sans-serif"><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="center"><font size="2" face="Geneva, Arial, Helvetica, sans-serif">5</font></p>
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<p align="left"><font size="2" face="Arial, Helvetica, sans-serif"><b><i>Fiscal Year </i></b></font></p>
<div style="text-indent:3%">
<p align="left"><font size="2" face="Arial, Helvetica, sans-serif">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 ended on September 25, 2004. The fourth quarter will end on December 31. </font></p>
</div>
<p align="left"><font size="2" face="Arial, Helvetica, sans-serif"><b><i>Business Overview</i></b></font></p>
<div style="text-indent:3%">
<p align="left"><font size="2" face="Arial, Helvetica, sans-serif">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, Helvetica, sans-serif">In the first nine months of 2004, the semiconductor industry benefited from favorable conditions with strong demand registered in communication, computers, and consumer applications. Based upon preliminary industry estimates, first nine months 2004 revenues increased by approximately 33% for the TAM and approximately 30% for the SAM compared to the first nine months of 2003.</font></p>
</div>
<div style="text-indent:3%">
<p align="left"><font size="2" face="Arial, Helvetica, sans-serif">After strong
    growth in the second quarter of 2004 when the TAM registered a sequential
    increase of approximately 10% over the first quarter of 2004 and approximately
    40% over the second quarter of 2003, the semiconductor industry experienced
    a progressive decline in market demand expressed by the levels of bookings
    in the third quarter of 2004. Based upon preliminary estimates of the semiconductor
    industry, third quarter 2004 semiconductor industry revenues are expected
    to increase by approximately 27% for the TAM, and by approximately 25% for
    the SAM on a year-over-year basis, which represent modest sequential increases
    of approximately 3% for the TAM and 2% for the SAM due to inventory corrections. </font></p>
</div>
<div style="text-indent:3%">
<p align="left"><font size="2" face="Arial, Helvetica, sans-serif">Our net revenues for the first nine months of 2004 also showed a marked improvement, but based on the preliminary industry estimates set forth above, our net revenue growth was below that of the TAM and the SAM.  Our net revenues for the first nine months of 2004 were $6,432 million, a 25.5% increase above the $5,124 million reported for the first nine months of 2003. Year-over-year revenue increases were achieved by all our major product groups, targeted market segments and most of our product families. However, these increases were mainly registered by our commodity products included in Memory Product Group and Discrete and Standard ICs Group .</font></p>
</div>
<div style="text-indent:3%">
<p align="left"><font size="2" face="Arial, Helvetica, sans-serif">Our third
    quarter 2004 revenues were $2,231 million, an increase of 23.7% over revenues
    of $1,803 million reported in the third quarter of 2003. On a sequential
    basis, our third quarter 2004 revenues increased by 2.7% from the $2,172
    million of the second quarter of 2004. Despite the shortened lead times and
    backlog adjustments that characterized the industry-wide decline in market
    demand expressed by the levels of bookings during the third quarter 2004,
    our third quarter 2004 revenues came in within the guidance parameters we
    provided at the time of our 2004 second quarter earnings announcement. On
    a sequential basis, revenue increases were posted by the Consumer Microcontroller
    Group as well as by the Telecommunications, Peripherals and Automotive Group,
    primarily driven by a broad range of digital consumer applications and Applications
    Specific ICs serving wireless, data storage and certain automotive/audio
  applications.</font></p>
</div>
<div style="text-indent:3%">
<p align="left"><font size="2" face="Arial, Helvetica, sans-serif">Benefiting from sequential improvement in product mix and manufacturing efficiencies, our gross margin reached 37.9% in the third quarter of 2004, improving from the 35.1% reported for last year&#8217;s third quarter and the 37.4% for the second quarter 2004. </font></p>
</div>
<div style="text-indent:3%">
<p align="left"><font size="2" face="Arial, Helvetica, sans-serif">In the third
    quarter of 2004, we kept the dollar amount of research and development spending
    at the same level as the prior quarter, and we succeeded in reducing the
    selling, general and administrative costs by 2.6% on a sequential basis,
    also taking advantage of the seasonal effects of the vacation period. In
    the aggregate, research and development expenses and selling, general and
    administrative costs accounted for 27.6% of 2004 third quarter revenues,
    a sequential reduction from 28.7% in the second quarter of 2004. This was
    accomplished while maintaining the accelerated pace of our product design
  and development activities.</font></p>
</div>
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<div style="text-indent:3%">
<p align="left"><font size="2" face="Arial, Helvetica, sans-serif">We continued to generate operating leverage in the 2004 third quarter.  All four of our major product groups produced operating profits in the period, and three out of four posted sequential increases in operating income, enabling us to significantly improve our profitability for the period and contributing to our sequential increases of 19.1% in operating income, 28.4% in net income and 25.0% in earnings per diluted share. Our operating income in the third quarter of 2004 was $213 million compared to the $179 million reported in the second quarter of 2004. In the third quarter of 2003, we incurred an operating loss of $64 million due to the effects of the 2003 restructuring plan. Our net income in the third quarter
of 2004 was $189 million compared to $148 million in the second quarter of 2004.</font></p></div>
<div style="text-indent:3%">
<p align="left"><font size="2" face="Arial, Helvetica, sans-serif">In the third quarter of 2004 we continued to invest in upgrading and expanding our manufacturing capacity in line with our capital investment plan for the full year 2004. These capital investments of third quarter 2004 were mainly made in our wafer fabrication facilities (known as &#8220;fabs&#8221;), where the factory utilization rate reached 90% of our wafer fab capacity at the end of the period. Our capital expenditures were $719 million in the third quarter of 2004 compared to $587 million in the second 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&#151;Liquidity&#8221;. </font></p></div>
<div style="text-indent:3%">
<p align="left"><font size="2" face="Arial, Helvetica, sans-serif">On July 9, 2004, we redeemed all our remaining outstanding Zero Coupon Senior Convertible Bonds due 2010 (our &#8220;2010 Bonds&#8221;) for a total cash amount paid of $131 million. On September 22, 2004, we redeemed approximately $910 million nominal value of our Liquid Yield Option Notes (LYONS) due 2009 (our &#8220;2009 Notes&#8221;) for approximately $806 million in cash. Over 99% of our outstanding 2009 Notes were surrendered by holders. On October 11, 2004, we announced that we will redeem all of our remaining 2009 Notes on November 12, 2004 at a redemption price equal to $888.96 per $1,000 principal amount. The residual value of these 2009 Notes is approximately $8 million or 0.9% of the initial total amount
issued. </font></p></div>
<div style="text-indent:3%">
<p align="left"><font size="2" face="Arial, Helvetica, sans-serif">At September 25, 2004, we had a net financial debt position of $198 million. Our total financial debt was $1,829 million, of which $1,710 million was long-term debt. The $8 million of our remaining outstanding 2009 Notes was classified as current portion of long term debt due to the announced redemption. See &#8220;Liquidity and Capital Resources&#151;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, Helvetica, sans-serif"><b><i>Other Developments in the Third Quarter of 2004</i></b></font></p>
<div style="text-indent:3%">
<p align="left"><font size="2" face="Arial, Helvetica, sans-serif">On September 27, 2004, we announced product group, front-end manufacturing and technology related research and development organizational changes that reflect our continued emphasis on developing application-specific products and platforms for an increasingly convergent marketplace. Effective January 1, 2005, we will realign our product groups in five new groups in order to increase market focus and realize the full potential of our products, technologies, and sales and marketing channels.</font></p></div>
<div style="text-indent:3%">
<p align="left"><font size="2" face="Arial, Helvetica, sans-serif">We will combine the telecommunications group of the present Telecommunications, Peripherals and Automotive groups (TPA) with the consumer group of the present Consumer and Microcontroller Groups (CMG) to create a new product sector. The new entity formed by the combination of these converging product groups will be the Telecom and Consumer Sector (TCS) and will account for over one third of our revenues.</font></p></div>
<div style="text-indent:3%">
<p align="left"><font size="2" face="Arial, Helvetica, sans-serif">All major
    complex products related to automotive applications presently in the automotive
    group of TPA and in other product groups will be consolidated in the new
    Automotive Product Group (APG).</font></p>
</div>
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<div style="text-indent:3%">
<p align="left"><font size="2" face="Arial, Helvetica, sans-serif">Peripherals products, specifically disk drive</font><font size="2" face="Arial, Helvetica, sans-serif">s and printers,
  will constitute the Computer Peripherals Group (CPG).</font></p>
</div>
<div style="text-indent:3%">
<p align="left"><font size="2" face="Arial, Helvetica, sans-serif">The Memory Product Groups (MPG) will focus on memories and smart cards.</font></p></div>
<div style="text-indent:3%">
<p align="left"><font size="2" face="Arial, Helvetica, sans-serif">The new Micro, Linear and Discrete group (MLD) will be comprised of most of the present discrete and standard circuits group&#8217;s products (DSG) plus standard microcontroller and industrial devices, and will serve a broader customer base with special emphasis on industrial applications. </font></p></div>
<div style="text-indent:3%">
<p align="left"><font size="2" face="Arial, Helvetica, sans-serif">In line with our position as a major player in the development of innovative products, manufactured in leading edge technologies, a new Front-End Technology and Manufacturing organization (FTM) will be created as of January 1, 2005 encompassing the present front end manufacturing and central research and development functions. </font></p></div>
<p align="left"><font size="2" face="Arial, Helvetica, sans-serif"><b>Business Outlook </b></font></p>
<div style="text-indent:3%">
<p align="left"><font size="2" face="Arial, Helvetica, sans-serif">Based upon
    current visibility, we expect that the fourth quarter of 2004 will be a period
    of relatively modest revenue growth for the semiconductor industry, resulting
    from lower-than-anticipated growth in market demand which has caused inventory
    build-ups in certain market segments and constrained pricing power.</font></p>
</div>
<div style="text-indent:3%">
<p align="left"><font size="2" face="Arial, Helvetica, sans-serif">Within this environment, we currently believe that our revenues for the 2004 fourth quarter will range from flat to 5% above levels reached in the third quarter of 2004, which is below our earlier expectations and historical seasonal trends. Based upon these revenue levels, the current plan for  production site loadings and an average euro to U.S. dollar exchange rate of $1.23 to &euro;1.00, we now expect our 2004 fourth quarter gross margin to be in the range of 38% to 39%. </font></p></div>
<div style="text-indent:3%">
<p align="left"><font size="2" face="Arial, Helvetica, sans-serif">To address the current situation, we have reduced our planned capital expenditures for the full year of 2004 to approximately $2 billion, or about 10% below our previous plan. Additionally, we have implemented programs that should enhance our ability to generate continued operating leverage.</font></p></div>
<div style="text-indent:3%">
<p align="left"><font size="2" face="Arial, Helvetica, sans-serif">Acknowledging
    the uncertainty of near-term market trends, we are maintaining a conservative
    approach to 2005 capital spending. We are currently budgeting approximately
    $1.5 billion of capital spending. Embedded in our plans is the flexibility
    to expand the capital program as market demand evolves. At the same time,
    we are fine tuning our product portfolio and our organizational structure
    to leverage our product leadership positions and expand the breadth of our
    applications platforms and solutions, that, together with the migration to
    finer geometries and our ongoing market initiatives, are designed to optimize
    our position in 2005. </font></p>
</div>
<div style="text-indent:3%">
<p align="left"><font size="2" face="Arial, Helvetica, sans-serif">In the third quarter of 2003, we defined a manufacturing restructuring plan that was to be substantially completed within eighteen months. Customer service requirements during the recent period of high capacity utilization in our fabs have caused the plan&#8217;s substantial completion date to be pushed back. Through September&nbsp;25, 2004, we have incurred approximately $262 million of the expected $350 million pre-tax charges associated with this restructuring plan and related manufacturing initiatives. We expect that an additional $10 million in pre-tax charges related to our 150mm fab restructuring plan will be incurred in the fourth quarter of 2004, with the remainder taken in 2005. In 2005, savings from this
restructuring initiative are expected to reach $80 million with the full projected $120 million in annualized after-tax cost savings to be realized in 2006<b>.</b></font></p></div>
<div style="text-indent:3%">
<p align="left"><font size="2" face="Arial, Helvetica, sans-serif">Our Business Outlook contains forward-looking statements that are subject to known and unknown risks and uncertainties that could cause actual results to differ materially. Currently known risks and uncertainties are described in &#8220;Cautionary Note on Forward Looking Statements&#8221; included below, and in &#8220;Item 3 &#150; Key Information &#150; Risk Factors&#8221; in our Annual Report on Form 20-F for the year ended December 31, 2003 as filed with the Commission on May 4, 2004, and as may be updated from time to time in our submissions under Form 6-K. We do not intend, and do not assume any obligation, to update any industry information or forward-looking statements to reflect subsequent events or
circumstances.</font></p></div>
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<p align="left"><font size="2" face="Arial, Helvetica, sans-serif"><b>Results of Operations </b></font></p>
<p align="left"><font size="2" face="Arial, Helvetica, sans-serif"><b><i>Segment information</i></b></font></p>

<div style="text-indent:3%"><p align="left"><font size="2" face="Arial, Helvetica, sans-serif">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, Helvetica, sans-serif">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 semi custom 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 currently 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. We announced a reorganization of our business segments to be effective as of January 1, 2005. See &#8220;Overview &#150; Other Developments in the Third Quarter of 2004&#8220; in this Form 6-K. As this new structure is not effective in fiscal
year 2004, the discussion of our results of operations is set forth according to the existing structure.</font></p></div>
<div style="text-indent:3%">
<p align="left"><font size="2" face="Arial, Helvetica, sans-serif">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, Helvetica, sans-serif">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>
<p align="center"><font size="2" face="Geneva, Arial, Helvetica, sans-serif">9</font></p>
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<table width="100%" border="0" cellpadding="0" cellspacing="0">
<tr align="center">
<td><font size="1" face="Arial, Helvetica, sans-serif">&nbsp;</font>
  </td>
<td colspan="5"><font size="1" face="Arial, Helvetica, sans-serif">&nbsp;</font><font size="1" face="Arial, Helvetica, sans-serif"><b>(unaudited)</b><br>
<b>Three
Months Ended</b></font></td>
<td><font size="1" face="Arial, Helvetica, sans-serif">&nbsp;</font></td>
<td colspan="5"><font size="1" face="Arial, Helvetica, sans-serif">&nbsp;</font><font size="1" face="Arial, Helvetica, sans-serif"><b>(unaudited)</b><br>
<b>Nine
Months Ended</b></font></td>
<td><font size="1" face="Arial, Helvetica, sans-serif">&nbsp;</font></td>
</tr>
<tr align="center">
<td><font size="1" face="Arial, Helvetica, sans-serif">&nbsp;</font></td>
<td><hr noshade size="1"></td>
<td colspan="4"><hr noshade size="1"></td>
<td><font size="1" face="Arial, Helvetica, sans-serif">&nbsp;</font></td>
<td><hr noshade size="1"></td>
<td colspan="4"><hr noshade size="1"></td>
<td><font size="1" face="Arial, Helvetica, sans-serif">&nbsp;</font></td>
</tr>
<tr align="center">
<td><font size="1" face="Arial, Helvetica, sans-serif">&nbsp;</font></td>
<td colspan="2"><font size="1" face="Arial, Helvetica, sans-serif">&nbsp;</font><font size="1" face="Arial, Helvetica, sans-serif"><b>September
  25,
        <br>
    2004</b></font></td>
<td><font size="1" face="Arial, Helvetica, sans-serif">&nbsp;</font></td>
<td colspan="2"><font size="1" face="Arial, Helvetica, sans-serif">&nbsp;</font><font size="1" face="Arial, Helvetica, sans-serif"><b>September
      27, <br>
  2003</b></font></td>
<td><font size="1" face="Arial, Helvetica, sans-serif">&nbsp;</font></td>
<td colspan="2"><font size="1" face="Arial, Helvetica, sans-serif">&nbsp;</font><font size="1" face="Arial, Helvetica, sans-serif"><b>September 25, <br>
  2004</b></font></td>
<td><font size="1" face="Arial, Helvetica, sans-serif">&nbsp;</font></td>
<td colspan="2"><font size="1" face="Arial, Helvetica, sans-serif">&nbsp;</font><font size="1" face="Arial, Helvetica, sans-serif"><b>September
      27, <br>
  2003</b></font></td>
<td><font size="1" face="Arial, Helvetica, sans-serif">&nbsp;</font></td>
</tr>
<tr align="center">
<td><font size="1" face="Arial, Helvetica, sans-serif">&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="1" face="Arial, Helvetica, sans-serif">&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="1" face="Arial, Helvetica, sans-serif">&nbsp;</font></td>
</tr>
<tr align="center">
<td><font size="1" face="Arial, Helvetica, sans-serif">&nbsp;</font></td>
<td colspan="5"><font size="1" face="Arial, Helvetica, sans-serif">&nbsp;</font><font size="1" face="Arial, Helvetica, sans-serif"><b>(in
    millions)</b></font></td>
<td><font size="1" face="Arial, Helvetica, sans-serif">&nbsp;</font></td>
<td colspan="5"><font size="1" face="Arial, Helvetica, sans-serif">&nbsp;</font><font size="1" face="Arial, Helvetica, sans-serif"><b>(in
    millions)</b></font></td>
<td><font size="1" face="Arial, Helvetica, sans-serif">&nbsp;</font></td>
</tr>
<tr>
<td align="left"><font size="2" face="Arial, Helvetica, sans-serif"><b>Net revenues by product group:</b></font></td>
<td>&nbsp;</td>
<td align="left"><font size="2" face="Arial, Helvetica, sans-serif">&nbsp;</font></td>
<td align="left">&nbsp;</td>
<td>&nbsp;</td>
<td align="left"><font size="2" face="Arial, Helvetica, sans-serif">&nbsp;</font></td>
<td align="left">&nbsp;</td>
<td>&nbsp;</td>
<td align="left"><font size="2" face="Arial, Helvetica, sans-serif">&nbsp;</font></td>
<td align="left">&nbsp;</td>
<td>&nbsp;</td>
<td align="left"><font size="2" face="Arial, Helvetica, sans-serif">&nbsp;</font></td>
<td align="left">&nbsp;</td>
</tr>
<tr bgcolor="#eeeeee">
<td align="left">  <font size="2" face="Arial, Helvetica, sans-serif"><div style="text-indent:3%">Telecommunications, Peripherals and Automotive</div></font></td>
<td width="1%"><font size="2" face="Arial, Helvetica, sans-serif">$</font></td>
<td width="10%" align="right"><font size="2" face="Arial, Helvetica, sans-serif"> 865</font></td>
<td width="2%" align="left">&nbsp;</td>
<td width="1%"><font size="2" face="Arial, Helvetica, sans-serif">$</font></td>
<td width="10%" align="right"><font size="2" face="Arial, Helvetica, sans-serif"> 797</font></td>
<td width="2%" align="left">&nbsp;</td>
<td width="1%"><font size="2" face="Arial, Helvetica, sans-serif">$</font></td>
<td width="10%" align="right"><font size="2" face="Arial, Helvetica, sans-serif"> 2,547</font></td>
<td width="2%" align="left">&nbsp;</td>
<td width="1%"><font size="2" face="Arial, Helvetica, sans-serif">$</font></td>
<td width="10%" align="right"><font size="2" face="Arial, Helvetica, sans-serif"> 2,367</font></td>
<td width="2%" align="left">&nbsp;</td>
</tr>
<tr>
<td align="left"><font size="2" face="Arial, Helvetica, sans-serif"><div style="text-indent:3%">Discrete and Standard ICs</div></font></td>
<td>&nbsp;</td>
<td align="right"><font size="2" face="Arial, Helvetica, sans-serif">422</font></td>
<td align="left">&nbsp;</td>
<td>&nbsp;</td>
<td align="right"><font size="2" face="Arial, Helvetica, sans-serif">302</font></td>
<td align="left">&nbsp;</td>
<td>&nbsp;</td>
<td align="right"><font size="2" face="Arial, Helvetica, sans-serif">1,197</font></td>
<td align="left">&nbsp;</td>
<td>&nbsp;</td>
<td align="right"><font size="2" face="Arial, Helvetica, sans-serif">874</font></td>
<td align="left">&nbsp;</td>
</tr>
<tr bgcolor="#eeeeee">
<td align="left"><font size="2" face="Arial, Helvetica, sans-serif"><div style="text-indent:3%">Memory Products</div></font></td>
<td>&nbsp;</td>
<td align="right"><font size="2" face="Arial, Helvetica, sans-serif">505</font></td>
<td align="left">&nbsp;</td>
<td>&nbsp;</td>
<td align="right"><font size="2" face="Arial, Helvetica, sans-serif">351</font></td>
<td align="left">&nbsp;</td>
<td>&nbsp;</td>
<td align="right"><font size="2" face="Arial, Helvetica, sans-serif">1,466</font></td>
<td align="left">&nbsp;</td>
<td>&nbsp;</td>
<td align="right"><font size="2" face="Arial, Helvetica, sans-serif">900</font></td>
<td align="left">&nbsp;</td>
</tr>
<tr>
<td align="left"><font size="2" face="Arial, Helvetica, sans-serif"><div style="text-indent:3%">Consumer and Microcontroller</div></font></td>
<td>&nbsp;</td>
<td align="right"><font size="2" face="Arial, Helvetica, sans-serif">423</font></td>
<td align="left">&nbsp;</td>
<td>&nbsp;</td>
<td align="right"><font size="2" face="Arial, Helvetica, sans-serif">338</font></td>
<td align="left">&nbsp;</td>
<td>&nbsp;</td>
<td align="right"><font size="2" face="Arial, Helvetica, sans-serif">1,173</font></td>
<td align="left">&nbsp;</td>
<td>&nbsp;</td>
<td align="right"><font size="2" face="Arial, Helvetica, sans-serif">933</font></td>
<td align="left">&nbsp;</td>
</tr>
<tr bgcolor="#eeeeee">
<td align="left"><font size="2" face="Arial, Helvetica, sans-serif"><div style="text-indent:3%">Others<sup>(1)</sup></div></font></td>
<td>&nbsp;</td>
<td align="right" bgcolor="#eeeeee"><font size="2" face="Arial, Helvetica, sans-serif">16</font></td>
<td align="left">&nbsp;</td>
<td>&nbsp;</td>
<td align="right"><font size="2" face="Arial, Helvetica, sans-serif">15</font></td>
<td align="left">&nbsp;</td>
<td>&nbsp;</td>
<td align="right"><font size="2" face="Arial, Helvetica, sans-serif">49</font></td>
<td align="left">&nbsp;</td>
<td>&nbsp;</td>
<td align="right"><font size="2" face="Arial, Helvetica, sans-serif">50</font></td>
<td align="left">&nbsp;</td>
</tr>
<tr>
  <td align="center"><font size="1" face="Arial, Helvetica, sans-serif">&nbsp;</font></td>
  <td><hr noshade size="1">
  </td>
  <td align="center"><hr noshade size="1">
  </td>
  <td align="center"></td>
  <td><hr noshade size="1">
  </td>
  <td align="center"><hr noshade size="1">
  </td>
  <td align="center"><font size="1" face="Arial, Helvetica, sans-serif">&nbsp;</font></td>
  <td><hr noshade size="1">
  </td>
  <td align="center"><hr noshade size="1">
  </td>
  <td align="center"></td>
  <td><hr noshade size="1">
  </td>
  <td align="center"><hr noshade size="1">
  </td>
  <td align="center"><font size="1" face="Arial, Helvetica, sans-serif">&nbsp;</font></td>
</tr>
<tr bgcolor="#eeeeee">
<td align="left"><font size="2" face="Arial, Helvetica, sans-serif"><b><div style="text-indent:6%">Total consolidated net revenues</div></b></font></td>
<td><font size="2" face="Arial, Helvetica, sans-serif"><b>$</b></font></td>
<td align="right"><font size="2" face="Arial, Helvetica, sans-serif"> <b>2,231</b></font></td>
<td align="left">&nbsp;</td>
<td><font size="2" face="Arial, Helvetica, sans-serif"><b>$</b></font></td>
<td align="right"><font size="2" face="Arial, Helvetica, sans-serif"> <b>1,803</b></font></td>
<td align="left">&nbsp;</td>
<td><font size="2" face="Arial, Helvetica, sans-serif"><b>$</b></font></td>
<td align="right"><font size="2" face="Arial, Helvetica, sans-serif"> <b>6,432</b></font></td>
<td align="left">&nbsp;</td>
<td><font size="2" face="Arial, Helvetica, sans-serif"><b>$</b></font></td>
<td align="right"><font size="2" face="Arial, Helvetica, sans-serif"> <b>5,124</b></font></td>
<td align="left">&nbsp;</td>
</tr>
<tr>
  <td align="center"><font size="1" face="Arial, Helvetica, sans-serif">&nbsp;</font></td>
  <td><hr noshade size="2">
  </td>
  <td align="center"><hr noshade size="2">
  </td>
  <td align="center"></td>
  <td><hr noshade size="2">
  </td>
  <td align="center"><hr noshade size="2">
  </td>
  <td align="center"><font size="1" face="Arial, Helvetica, sans-serif">&nbsp;</font></td>
  <td><hr noshade size="2">
  </td>
  <td align="center"><hr noshade size="2">
  </td>
  <td align="center"></td>
  <td><hr noshade size="2">
  </td>
  <td align="center"><hr noshade size="2">
  </td>
  <td align="center"><font size="1" face="Arial, Helvetica, sans-serif">&nbsp;</font></td>
</tr>
</table>
<table width="100%" border="0" cellpadding="0" cellspacing="0">
<tr>
  <td colspan="2"><hr align="left" width="150" size="1" noshade>
  </td>
  </tr>
<tr>
<td width="3%">
<font size="1" face="Arial, Helvetica, sans-serif">(1)</font></td>
<td>
<font size="1" face="Arial, Helvetica, sans-serif">
Includes revenues from sales of subsystems and other products not allocated to
product groups.
</font></td>
</tr>
</table>
<table width="100%" border="0" cellpadding="0" cellspacing="0">
<tr>
  <td align="left"><font size="2">&nbsp;</font></td>
  <td><font size="2">&nbsp;</font></td>
  <td colspan="4" align="center"><font size="2">&nbsp;</font></td>
  <td align="left"><font size="2">&nbsp;</font></td>
  <td><font size="2">&nbsp;</font></td>
  <td colspan="4" align="center"><font size="2">&nbsp;</font></td>
  <td align="left"><font size="2">&nbsp;</font></td>
</tr>
<tr align="center">
<td><font size="1" face="Arial, Helvetica, sans-serif">&nbsp;</font></td>
<td colspan="5"><font size="1">&nbsp;</font><font size="1" face="Arial, Helvetica, sans-serif"><b>(unaudited)<br>
  Three Months Ended</b></font></td>
<td><font size="1">&nbsp;</font></td>
<td colspan="5"><font size="1">&nbsp;</font><font size="1" face="Arial, Helvetica, sans-serif"><b>(unaudited)<br>
  Nine Months Ended</b></font></td>
<td><font size="1">&nbsp;</font></td>
</tr>
<tr align="center">
<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 align="center">
<td><font size="1" face="Arial, Helvetica, sans-serif">&nbsp;</font></td>
<td colspan="2"><font size="1">&nbsp;</font><font size="1" face="Arial, Helvetica, sans-serif"><b>September 25, <br>
  2004</b></font></td>
<td><font size="1">&nbsp;</font></td>
<td colspan="2"><font size="1">&nbsp;</font><font size="1" face="Arial, Helvetica, sans-serif"><b>September 27, <br>
  2003</b></font></td>
<td><font size="1">&nbsp;</font></td>
<td colspan="2"><font size="1">&nbsp;</font><font size="1" face="Arial, Helvetica, sans-serif"><b>September 25, <br>
  2004</b></font></td>
<td><font size="1">&nbsp;</font></td>
<td colspan="2"><font size="1">&nbsp;</font><font size="1" face="Arial, Helvetica, sans-serif"><b>September 27, <br>
  2003</b></font></td>
<td><font size="1">&nbsp;</font></td>
</tr>
<tr align="center">
<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 align="center">
<td><font size="1" face="Arial, Helvetica, sans-serif">&nbsp;</font></td>
<td colspan="5"><font size="1">&nbsp;</font><font size="1" face="Arial, Helvetica, sans-serif"><b>(in millions)</b></font></td>
<td><font size="1">&nbsp;</font></td>
<td colspan="5"><font size="1">&nbsp;</font><font size="1" face="Arial, Helvetica, sans-serif"><b>(in millions)</b></font></td>
<td><font size="1">&nbsp;</font></td>
</tr>
<tr>
<td align="left"><font size="2" face="Arial, Helvetica, sans-serif"><b>Operating income (loss) by product group:</b></font></td>
<td><font size="2">&nbsp;</font></td>
<td align="left"><font size="2" face="Arial, Helvetica, sans-serif">&nbsp;</font></td>
<td align="left"><font size="2">&nbsp;</font></td>
<td><font size="2">&nbsp;</font></td>
<td align="left"><font size="2" face="Arial, Helvetica, sans-serif">&nbsp;</font></td>
<td align="left"><font size="2">&nbsp;</font></td>
<td><font size="2">&nbsp;</font></td>
<td align="left"><font size="2" face="Arial, Helvetica, sans-serif">&nbsp;</font></td>
<td align="left"><font size="2">&nbsp;</font></td>
<td><font size="2">&nbsp;</font></td>
<td align="left"><font size="2" face="Arial, Helvetica, sans-serif">&nbsp;</font></td>
<td align="left"><font size="2">&nbsp;</font></td> </tr>
<tr bgcolor="#eeeeee">
<td align="left"><font size="2" face="Arial, Helvetica, sans-serif"><div style="text-indent:3%">Telecommunications, Peripherals and Automotive</div></font></td>
<td width="1%"><font size="2" face="Arial, Helvetica, sans-serif">$</font></td>
<td width="10%" align="right"><font size="2" face="Arial, Helvetica, sans-serif"> 113</font></td>
<td width="2%" align="left"><font size="2">&nbsp;</font></td>
<td width="1%"><font size="2" face="Arial, Helvetica, sans-serif">$</font></td>
<td width="10%" align="right"><font size="2" face="Arial, Helvetica, sans-serif"> 122</font></td>
<td width="2%" align="left"><font size="2">&nbsp;</font></td>
<td width="1%"><font size="2" face="Arial, Helvetica, sans-serif">$</font></td>
<td width="10%" align="right"><font size="2" face="Arial, Helvetica, sans-serif"> 336</font></td>
<td width="2%" align="left"><font size="2">&nbsp;</font></td>
<td width="1%"><font size="2" face="Arial, Helvetica, sans-serif">$</font></td>
<td width="10%" align="right"><font size="2" face="Arial, Helvetica, sans-serif"> 395</font></td>
<td width="2%" align="left"><font size="2">&nbsp;</font></td>
</tr>
<tr>
<td align="left"><font size="2" face="Arial, Helvetica, sans-serif"><div style="text-indent:3%">Discrete and Standard ICs</div></font></td>
<td><font size="2">&nbsp;</font></td>
<td align="right"><font size="2" face="Arial, Helvetica, sans-serif">109</font></td>
<td align="left"><font size="2">&nbsp;</font></td>
<td><font size="2">&nbsp;</font></td>
<td align="right"><font size="2" face="Arial, Helvetica, sans-serif">43</font></td>
<td align="left"><font size="2">&nbsp;</font></td>
<td><font size="2">&nbsp;</font></td>
<td align="right"><font size="2" face="Arial, Helvetica, sans-serif">252</font></td>
<td align="left"><font size="2">&nbsp;</font></td>
<td><font size="2">&nbsp;</font></td>
<td align="right"><font size="2" face="Arial, Helvetica, sans-serif">90</font></td>
<td align="left"><font size="2">&nbsp;</font></td>
</tr>
<tr bgcolor="#eeeeee">
<td align="left"><font size="2" face="Arial, Helvetica, sans-serif"><div style="text-indent:3%">Memory Products</div></font></td>
<td><font size="2">&nbsp;</font></td>
<td align="right"><font size="2" face="Arial, Helvetica, sans-serif">27</font></td>
<td align="left"><font size="2">&nbsp;</font></td>
<td><font size="2">&nbsp;</font></td>
<td align="right"><font size="2" face="Arial, Helvetica, sans-serif">(8</font></td>
<td align="left"><font size="2" face="Arial, Helvetica, sans-serif">)</font></td>
<td><font size="2">&nbsp;</font></td>
<td align="right"><font size="2" face="Arial, Helvetica, sans-serif">71</font></td>
<td align="left"><font size="2">&nbsp;</font></td>
<td><font size="2">&nbsp;</font></td>
<td align="right"><font size="2" face="Arial, Helvetica, sans-serif">(47</font></td>
<td align="left"><font size="2" face="Arial, Helvetica, sans-serif">)</font></td>
</tr>
<tr>
<td align="left"><font size="2" face="Arial, Helvetica, sans-serif"><div style="text-indent:3%">Consumer and Microcontroller</div></font></td>
<td><font size="2">&nbsp;</font></td>
<td align="right"><font size="2" face="Arial, Helvetica, sans-serif">46</font></td>
<td align="left"><font size="2">&nbsp;</font></td>
<td><font size="2">&nbsp;</font></td>
<td align="right"><font size="2" face="Arial, Helvetica, sans-serif">29</font></td>
<td align="left"><font size="2">&nbsp;</font></td>
<td><font size="2">&nbsp;</font></td>
<td align="right"><font size="2" face="Arial, Helvetica, sans-serif">86</font></td>
<td align="left"><font size="2">&nbsp;</font></td>
<td><font size="2">&nbsp;</font></td>
<td align="right"><font size="2" face="Arial, Helvetica, sans-serif">49</font></td>
<td align="left"><font size="2">&nbsp;</font></td>
</tr>
<tr>
  <td align="center"><font size="1" face="Arial, Helvetica, sans-serif">&nbsp;</font></td>
  <td><hr noshade size="1">
  </td>
  <td align="center"><hr noshade size="1">
  </td>
  <td align="center"></td>
  <td><hr noshade size="1">
  </td>
  <td align="center"><hr noshade size="1">
  </td>
  <td align="center"><font size="1" face="Arial, Helvetica, sans-serif">&nbsp;</font></td>
  <td><hr noshade size="1">
  </td>
  <td align="center"><hr noshade size="1">
  </td>
  <td align="center"></td>
  <td><hr noshade size="1">
  </td>
  <td align="center"><hr noshade size="1">
  </td>
  <td align="center"><font size="1" face="Arial, Helvetica, sans-serif">&nbsp;</font></td>
</tr>
<tr bgcolor="#eeeeee">
<td align="left"><font size="2" face="Arial, Helvetica, sans-serif"><div style="text-indent:3%">Total operating income of product groups</div></font></td>
<td><font size="2">&nbsp;</font></td>
<td align="right"><font size="2" face="Arial, Helvetica, sans-serif">295</font></td>
<td align="left"><font size="2">&nbsp;</font></td>
<td><font size="2">&nbsp;</font></td>
<td align="right"><font size="2" face="Arial, Helvetica, sans-serif">186</font></td>
<td align="left"><font size="2">&nbsp;</font></td>
<td><font size="2">&nbsp;</font></td>
<td align="right"><font size="2" face="Arial, Helvetica, sans-serif">745</font></td>
<td align="left"><font size="2">&nbsp;</font></td>
<td><font size="2">&nbsp;</font></td>
<td align="right"><font size="2" face="Arial, Helvetica, sans-serif">487</font></td>
<td align="left"><font size="2">&nbsp;</font></td>
</tr>
<tr>
<td align="left"><font size="2" face="Arial, Helvetica, sans-serif"><div style="text-indent:3%">Others</div></font></td>
<td><font size="2">&nbsp;</font></td>
<td align="right"><font size="2" face="Arial, Helvetica, sans-serif">(82</font></td>
<td align="left"><font size="2" face="Arial, Helvetica, sans-serif">)</font></td>
<td><font size="2">&nbsp;</font></td>
<td align="right"><font size="2" face="Arial, Helvetica, sans-serif">(250</font></td>
<td align="left"><font size="2" face="Arial, Helvetica, sans-serif">)</font></td>
<td><font size="2">&nbsp;</font></td>
<td align="right"><font size="2" face="Arial, Helvetica, sans-serif">(272</font></td>
<td align="left"><font size="2" face="Arial, Helvetica, sans-serif">)</font></td>
<td><font size="2">&nbsp;</font></td>
<td align="right"><font size="2" face="Arial, Helvetica, sans-serif">(306</font></td>
<td align="left"><font size="2" face="Arial, Helvetica, sans-serif">)</font></td>
</tr>
<tr>
  <td align="center"><font size="1" face="Arial, Helvetica, sans-serif">&nbsp;</font></td>
  <td><hr noshade size="1">
  </td>
  <td align="center"><hr noshade size="1">
  </td>
  <td align="center"></td>
  <td><hr noshade size="1">
  </td>
  <td align="center"><hr noshade size="1">
  </td>
  <td align="center"><font size="1" face="Arial, Helvetica, sans-serif">&nbsp;</font></td>
  <td><hr noshade size="1">
  </td>
  <td align="center"><hr noshade size="1">
  </td>
  <td align="center"></td>
  <td><hr noshade size="1">
  </td>
  <td align="center"><hr noshade size="1">
  </td>
  <td align="center"><font size="1" face="Arial, Helvetica, sans-serif">&nbsp;</font></td>
</tr>
<tr bgcolor="#eeeeee">
<td align="left"><font size="2" face="Arial, Helvetica, sans-serif"><b><div style="text-indent:6%">Total consolidated operating income (loss)</div></b></font></td>
<td><font size="2" face="Arial, Helvetica, sans-serif"><b>$</b></font></td>
<td align="right"><font size="2" face="Arial, Helvetica, sans-serif"> <b>213</b></font></td>
<td align="left"><font size="2">&nbsp;</font></td>
<td><font size="2" face="Arial, Helvetica, sans-serif"><b>$</b></font></td>
<td align="right"><font size="2" face="Arial, Helvetica, sans-serif"> <b>(64</b></font></td>
<td align="left"><font size="2" face="Arial, Helvetica, sans-serif"><b>)</b></font></td>
<td><font size="2" face="Arial, Helvetica, sans-serif"><b>$</b></font></td>
<td align="right"><font size="2" face="Arial, Helvetica, sans-serif"> <b>473</b></font></td>
<td align="left"><font size="2">&nbsp;</font></td>
<td><font size="2" face="Arial, Helvetica, sans-serif"><b>$</b></font></td>
<td align="right"><font size="2" face="Arial, Helvetica, sans-serif"> <b>181</b></font></td>
<td align="left"><font size="2">&nbsp;</font></td>
</tr>
<tr>
  <td><font size="1" face="Arial, Helvetica, sans-serif">&nbsp;</font></td>
  <td><hr noshade size="2">
  </td>
  <td align="center"><hr noshade size="2">
  </td>
  <td align="center"></td>
  <td><hr noshade size="2">
  </td>
  <td align="center"><hr noshade size="2">
  </td>
  <td align="center"><font size="1" face="Arial, Helvetica, sans-serif">&nbsp;</font></td>
  <td><hr noshade size="2">
  </td>
  <td align="center"><hr noshade size="2">
  </td>
  <td align="center"></td>
  <td><hr noshade size="2">
  </td>
  <td align="center"><hr noshade size="2">
  </td>
  <td align="center"><font size="1" face="Arial, Helvetica, sans-serif">&nbsp;</font></td>
</tr>
</table>
<table width="100%" border="0" cellpadding="0" cellspacing="0">
<tr>
  <td align="left"><font size="2">&nbsp;</font></td>
  <td><font size="2">&nbsp;</font></td>
  <td colspan="10" align="center"><font size="2">&nbsp;</font></td>
  <td align="left"><font size="2">&nbsp;</font></td>
</tr>
<tr align="center">
  <td><font size="1">&nbsp;</font></td>
  <td colspan="5"><font size="1">&nbsp;</font><font size="1" face="Arial, Helvetica, sans-serif">&nbsp;<b>(unaudited)<br>
Three Months Ended</b></font></td>
  <td><font size="1">&nbsp;</font></td>
  <td colspan="5"><font size="1">&nbsp;</font><font size="1" face="Arial, Helvetica, sans-serif"><b>(unaudited)<br>
Nine Months Ended</b></font></td>
  <td><font size="1">&nbsp;</font></td>
</tr>
<tr align="center">
  <td><font size="1" face="Arial, Helvetica, sans-serif">&nbsp;</font></td>
  <td><hr noshade size="1">
</td>
  <td colspan="4"><hr noshade size="1"></td>
  <td><font size="1" face="Arial, Helvetica, sans-serif">&nbsp;</font></td>
  <td><hr noshade size="1">
</td>
  <td colspan="4"><hr noshade size="1"></td>
  <td><font size="1" face="Arial, Helvetica, sans-serif">&nbsp;</font></td>
</tr>
<tr align="center">
  <td><font size="1">&nbsp;</font></td>
  <td colspan="2"><font size="1">&nbsp;</font><font size="1" face="Arial, Helvetica, sans-serif"><b>September
        25, <br>
2004</b></font></td>
  <td><font size="1">&nbsp;</font></td>
  <td colspan="2"><font size="1">&nbsp;</font><font size="1" face="Arial, Helvetica, sans-serif"><b>September
        27, <br>
2003</b></font></td>
  <td><font size="1">&nbsp;</font></td>
  <td colspan="2"><font size="1">&nbsp;</font><font size="1" face="Arial, Helvetica, sans-serif"><b>September
        25, <br>
2004</b></font></td>
  <td><font size="1">&nbsp;</font></td>
  <td colspan="2"><font size="1">&nbsp;</font><font size="1" face="Arial, Helvetica, sans-serif"><b>September
        27, <br>
2003</b></font></td>
  <td><font size="1">&nbsp;</font></td>
</tr>
<tr align="center">
  <td><font size="1" face="Arial, Helvetica, sans-serif">&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" face="Arial, Helvetica, sans-serif">&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" face="Arial, Helvetica, sans-serif">&nbsp;</font></td>
</tr>
<tr align="center">
  <td><font size="1">&nbsp;</font></td>
  <td colspan="11"><font size="1" face="Arial, Helvetica, sans-serif"><b>(as
    percentages of net revenues)</b></font></td>
  <td><font size="1">&nbsp;</font></td>
</tr>
<tr>
<td align="left"><font size="2" face="Arial, Helvetica, sans-serif"><b>Operating income (loss) by product group:</b></font></td>
<td><font size="2">&nbsp;</font></td>
<td align="left"><font size="2" face="Arial, Helvetica, sans-serif">&nbsp;</font></td>
<td align="left"><font size="2">&nbsp;</font></td>
<td><font size="2">&nbsp;</font></td>
<td align="left"><font size="2" face="Arial, Helvetica, sans-serif">&nbsp;</font></td>
<td align="left"><font size="2">&nbsp;</font></td>
<td><font size="2">&nbsp;</font></td>
<td align="left"><font size="2" face="Arial, Helvetica, sans-serif">&nbsp;</font></td>
<td align="left"><font size="2">&nbsp;</font></td>
<td><font size="2">&nbsp;</font></td>
<td align="left"><font size="2" face="Arial, Helvetica, sans-serif">&nbsp;</font></td>
<td align="left"><font size="2">&nbsp;</font></td>
</tr>
<tr bgcolor="#eeeeee">
<td align="left"><font size="2" face="Arial, Helvetica, sans-serif"><div style="text-indent:3%">Telecommunications,
      Peripherals and Automotive <sup>(1)</sup></div>
</font></td>
<td width="1%"><font size="2">&nbsp;</font></td>
<td width="10%" align="right"><font size="2" face="Arial, Helvetica, sans-serif">13.1</font></td>
<td width="2%" align="left"><font size="2" face="Arial, Helvetica, sans-serif">%</font></td>
<td width="1%"><font size="2">&nbsp;</font></td>
<td width="10%" align="right"><font size="2" face="Arial, Helvetica, sans-serif">15.3</font></td>
<td width="2%" align="left"><font size="2" face="Arial, Helvetica, sans-serif">%</font></td>
<td width="1%"><font size="2">&nbsp;</font></td>
<td width="10%" align="right"><font size="2" face="Arial, Helvetica, sans-serif">13.2</font></td>
<td width="2%" align="left"><font size="2" face="Arial, Helvetica, sans-serif">%</font></td>
<td width="1%"><font size="2">&nbsp;</font></td>
<td width="10%" align="right"><font size="2" face="Arial, Helvetica, sans-serif">16.7</font></td>
<td width="2%" align="left"><font size="2" face="Arial, Helvetica, sans-serif">%</font></td>
</tr>
<tr>
<td align="left"><font size="2" face="Arial, Helvetica, sans-serif"><div style="text-indent:3%">Discrete
      and Standard ICs <sup>(1)</sup></div>
</font></td>
<td><font size="2">&nbsp;</font></td>
<td align="right"><font size="2" face="Arial, Helvetica, sans-serif">25.8</font></td>
<td align="left"><font size="2">&nbsp;</font></td>
<td><font size="2">&nbsp;</font></td>
<td align="right"><font size="2" face="Arial, Helvetica, sans-serif">14.2</font></td>
<td align="left"><font size="2">&nbsp;</font></td>
<td><font size="2">&nbsp;</font></td>
<td align="right"><font size="2" face="Arial, Helvetica, sans-serif">21.1</font></td>
<td align="left"><font size="2">&nbsp;</font></td>
<td><font size="2">&nbsp;</font></td>
<td align="right"><font size="2" face="Arial, Helvetica, sans-serif">10.3</font></td>
<td align="left"><font size="2">&nbsp;</font></td>
</tr>
<tr bgcolor="#eeeeee">
<td align="left"><font size="2" face="Arial, Helvetica, sans-serif"><div style="text-indent:3%">Memory
      Products <sup>(1)</sup></div>
</font></td>
<td><font size="2">&nbsp;</font></td>
<td align="right"><font size="2" face="Arial, Helvetica, sans-serif">5.3</font></td>
<td align="left"><font size="2">&nbsp;</font></td>
<td><font size="2">&nbsp;</font></td>
<td align="right"><font size="2" face="Arial, Helvetica, sans-serif">(2.3</font></td>
<td align="left"><font size="2" face="Arial, Helvetica, sans-serif">)</font></td>
<td><font size="2">&nbsp;</font></td>
<td align="right"><font size="2" face="Arial, Helvetica, sans-serif">4.8</font></td>
<td align="left"><font size="2">&nbsp;</font></td>
<td><font size="2">&nbsp;</font></td>
<td align="right"><font size="2" face="Arial, Helvetica, sans-serif">(5.2</font></td>
<td align="left"><font size="2" face="Arial, Helvetica, sans-serif">)</font></td>
</tr>
<tr>
<td align="left"><font size="2" face="Arial, Helvetica, sans-serif"><div style="text-indent:3%">Consumer
      and Microcontroller <sup>(1)</sup></div>
</font></td>
<td><font size="2">&nbsp;</font></td>
<td align="right"><font size="2" face="Arial, Helvetica, sans-serif">10.9</font></td>
<td align="left"><font size="2">&nbsp;</font></td>
<td><font size="2">&nbsp;</font></td>
<td align="right"><font size="2" face="Arial, Helvetica, sans-serif">8.6</font></td>
<td align="left"><font size="2">&nbsp;</font></td>
<td><font size="2">&nbsp;</font></td>
<td align="right"><font size="2" face="Arial, Helvetica, sans-serif">7.3</font></td>
<td align="left"><font size="2">&nbsp;</font></td>
<td><font size="2">&nbsp;</font></td>
<td align="right"><font size="2" face="Arial, Helvetica, sans-serif">5.3</font></td>
<td align="left"><font size="2">&nbsp;</font></td>
</tr>
<tr bgcolor="#eeeeee">
<td align="left"><font size="2" face="Arial, Helvetica, sans-serif"><div style="text-indent:3%">Others <sup>(2)</sup></div>
</font></td>
<td><font size="2">&nbsp;</font></td>
<td align="right"><font size="2" face="Arial, Helvetica, sans-serif">(3.7</font></td>
<td align="left"><font size="2" face="Arial, Helvetica, sans-serif">)</font></td>
<td><font size="2">&nbsp;</font></td>
<td align="right"><font size="2" face="Arial, Helvetica, sans-serif">(13.9</font></td>
<td align="left"><font size="2" face="Arial, Helvetica, sans-serif">)</font></td>
<td><font size="2">&nbsp;</font></td>
<td align="right"><font size="2" face="Arial, Helvetica, sans-serif">(4.2</font></td>
<td align="left"><font size="2" face="Arial, Helvetica, sans-serif">)</font></td>
<td><font size="2">&nbsp;</font></td>
<td align="right"><font size="2" face="Arial, Helvetica, sans-serif">(6.0</font></td>
<td align="left"><font size="2" face="Arial, Helvetica, sans-serif">)</font></td>
</tr>
<tr>
  <td align="center"><font size="2" face="Arial, Helvetica, sans-serif">&nbsp;</font></td>
  <td><hr noshade size="1">
  </td>
  <td align="center"><hr noshade size="1">
  </td>
  <td align="center"><font size="2">&nbsp;</font></td>
  <td><hr noshade size="1">
  </td>
  <td align="center"><hr noshade size="1">
  </td>
  <td align="center"><font size="2" face="Arial, Helvetica, sans-serif">&nbsp;</font></td>
  <td><hr noshade size="1">
  </td>
  <td align="center"><hr noshade size="1">
  </td>
  <td align="center"><font size="2">&nbsp;</font></td>
  <td><hr noshade size="1">
  </td>
  <td align="center"><hr noshade size="1">
  </td>
  <td align="center"><font size="2" face="Arial, Helvetica, sans-serif">&nbsp;</font></td>
</tr>
<tr bgcolor="#eeeeee">
<td align="left"><div style="text-indent:6%"><font size="2" face="Arial, Helvetica, sans-serif"><b>Total consolidated operating income (loss) </b><sup>(3)</sup></font></div></td>
<td><font size="2">&nbsp;</font></td>
<td align="right"><font size="2" face="Arial, Helvetica, sans-serif"><b>9.6</b></font></td>
<td align="left"><font size="2" face="Arial, Helvetica, sans-serif"><b>%</b></font></td>
<td><font size="2">&nbsp;</font></td>
<td align="right"><font size="2" face="Arial, Helvetica, sans-serif"><b>(3.6</b></font></td>
<td align="left"><font size="2" face="Arial, Helvetica, sans-serif"><b>)%</b></font></td>
<td><font size="2">&nbsp;</font></td>
<td align="right"><font size="2" face="Arial, Helvetica, sans-serif"><b>7.4</b></font></td>
<td align="left"><font size="2" face="Arial, Helvetica, sans-serif"><b>%</b></font></td>
<td><font size="2">&nbsp;</font></td>
<td align="right"><font size="2" face="Arial, Helvetica, sans-serif"><b>3.5</b></font></td>
<td align="left"><font size="2" face="Arial, Helvetica, sans-serif"><b>%</b></font></td>
</tr>
<tr>
  <td><font size="2" face="Arial, Helvetica, sans-serif">&nbsp;</font></td>
  <td><hr noshade size="2">
  </td>
  <td align="center"><hr noshade size="2">
  </td>
  <td align="center"><font size="2">&nbsp;</font></td>
  <td><hr noshade size="2">
  </td>
  <td align="center"><hr noshade size="2">
  </td>
  <td align="center"><font size="2" face="Arial, Helvetica, sans-serif">&nbsp;</font></td>
  <td><hr noshade size="2">
  </td>
  <td align="center"><hr noshade size="2">
  </td>
  <td align="center"><font size="2">&nbsp;</font></td>
  <td><hr noshade size="2">
  </td>
  <td align="center"><hr noshade size="2">
  </td>
  <td align="center"><font size="2" face="Arial, Helvetica, sans-serif">&nbsp;</font></td>
</tr>
</table>
<table width="100%" border="0" cellpadding="0" cellspacing="0">
<tr valign="top">
  <td colspan="2"><hr align="left" width="150" size="1" noshade>
  </td>
  </tr>
<tr align="left" valign="top">
<td width="3%"><font size="1" face="Arial, Helvetica, sans-serif">(1)</font></td>
<td>
<font face="Arial, Helvetica, sans-serif" size="1">As a percentage of net revenues per product group.</font></td>
</tr>
<tr align="left" valign="top">
  <td><font face="Arial, Helvetica, sans-serif" size="1">(2)</font></td>
  <td><font face="Arial, Helvetica, sans-serif" size="1">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>
<tr align="left" valign="top">
  <td><font face="Arial, Helvetica, sans-serif" size="1">(3)</font></td>
  <td><font face="Arial, Helvetica, sans-serif" size="1">As
    a percentage of total net revenues.</font></td>
</tr>
</table>
<p align="center"><font size="2" face="Arial, Helvetica, sans-serif">10</font></p>
<hr noshade align="center" width="100%" size="2">
<div style="page-break-before:always"></div>
<page>
<a name="p11"></a>

<table width="100%" border="0" cellpadding="0" cellspacing="0">
<tr align="center">
<td><font size="1" face="Arial, Helvetica, sans-serif">&nbsp;</font></td>
<td colspan="5"><font size="1" face="Arial, Helvetica, sans-serif"><b>(unaudited)<br>
  Three Months Ended</b></font></td>
<td>&nbsp;</td>
<td colspan="5"><font size="1" face="Arial, Helvetica, sans-serif"><b> (unaudited)<br>
  Nine Months Ended</b></font></td>
<td>&nbsp;</td>
</tr>
<tr align="center">
<td></td>
<td><hr noshade size="1"></td>
<td colspan="4"><hr noshade size="1"></td>
<td></td>
<td><hr noshade size="1"></td>
<td colspan="4"><hr noshade size="1"></td>
<td></td>
</tr>
<tr align="center">
<td><font size="1" face="Arial, Helvetica, sans-serif">&nbsp;</font></td>
<td colspan="2"><font size="1" face="Arial, Helvetica, sans-serif"><b>September
      25,<br>
    2004</b></font></td>
<td>&nbsp;</td>
<td colspan="2"><font size="1" face="Arial, Helvetica, sans-serif"><b>September
      27,<br>
    2003</b></font></td>
<td>&nbsp;</td>
<td colspan="2"><font size="1" face="Arial, Helvetica, sans-serif"><b>September
      25,<br>
2004</b></font></td>
<td>&nbsp;</td>
<td colspan="2"><font size="1" face="Arial, Helvetica, sans-serif"><b>September
      27,<br>
2003</b></font></td>
<td>&nbsp;</td>
</tr>
<tr align="center">
<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>&nbsp;</td>
<td><hr noshade size="1"></td>
<td><hr noshade size="1"></td>
<td>&nbsp;</td>
<td><hr noshade size="1"></td>
<td><hr noshade size="1"></td>
<td></td>
</tr>
<tr align="center">
<td><font size="1" face="Arial, Helvetica, sans-serif">&nbsp;</font></td>
<td colspan="11"><font size="1" face="Arial, Helvetica, sans-serif"><b>(in millions)</b></font></td>
<td>&nbsp;</td>
</tr>
<tr>
<td align="left"><font size="2" face="Arial, Helvetica, sans-serif"><b>Reconciliation to consolidated operating income (loss):</b></font></td>
<td>&nbsp;</td>
<td colspan="4" align="left"><font size="2" face="Arial, Helvetica, sans-serif">&nbsp;</font></td>
<td colspan="6" align="left"><font size="2" face="Arial, Helvetica, sans-serif">&nbsp;</font></td>
<td align="left">&nbsp;</td>
</tr>
<tr bgcolor="#eeeeee">
<td align="left"><font size="2" face="Arial, Helvetica, sans-serif"><div style="text-indent:3%">Total operating income of product groups</div></font></td>
<td width="1%"><font size="2" face="Arial, Helvetica, sans-serif">$</font></td>
<td width="10%" align="right"><font size="2" face="Arial, Helvetica, sans-serif"> 295</font></td>
<td width="2%" align="left">&nbsp;</td>
<td width="1%"><font size="2" face="Arial, Helvetica, sans-serif">$</font></td>
<td width="10%" align="right"><font size="2" face="Arial, Helvetica, sans-serif"> 186</font></td>
<td width="2%" align="left">&nbsp;</td>
<td width="1%"><font size="2" face="Arial, Helvetica, sans-serif">$</font></td>
<td width="10%" align="right"><font size="2" face="Arial, Helvetica, sans-serif"> 745</font></td>
<td width="2%" align="left">&nbsp;</td>
<td width="1%"><font size="2" face="Arial, Helvetica, sans-serif">$</font></td>
<td width="10%" align="right"><font size="2" face="Arial, Helvetica, sans-serif"> 487</font></td>
<td width="2%" align="left">&nbsp;</td>
</tr>
<tr>
<td align="left">  <font size="2" face="Arial, Helvetica, sans-serif"><div style="text-indent:6%">Strategic and other research and development programs</div></font></td>
<td>&nbsp;</td>
<td align="right"><font size="2" face="Arial, Helvetica, sans-serif">(35</font></td>
<td align="left"><font size="2" face="Arial, Helvetica, sans-serif">)</font></td>
<td>&nbsp;</td>
<td align="right"><font size="2" face="Arial, Helvetica, sans-serif">(21</font></td>
<td align="left"><font size="2" face="Arial, Helvetica, sans-serif">)</font></td>
<td>&nbsp;</td>
<td align="right"><font size="2" face="Arial, Helvetica, sans-serif">(89</font></td>
<td align="left"><font size="2" face="Arial, Helvetica, sans-serif">)</font></td>
<td>&nbsp;</td>
<td align="right"><font size="2" face="Arial, Helvetica, sans-serif">(38</font></td>
<td align="left"><font size="2" face="Arial, Helvetica, sans-serif">)</font></td>
</tr>
<tr bgcolor="#eeeeee">
<td align="left"><font size="2" face="Arial, Helvetica, sans-serif"><div style="text-indent:6%">Strategic marketing programs</div></font></td>
<td>&nbsp;</td>
<td align="right"><font size="2" face="Arial, Helvetica, sans-serif">(7</font></td>
<td align="left"><font size="2" face="Arial, Helvetica, sans-serif">)</font></td>
<td>&nbsp;</td>
<td align="right"><font size="2" face="Arial, Helvetica, sans-serif">(2</font></td>
<td align="left"><font size="2" face="Arial, Helvetica, sans-serif">)</font></td>
<td>&nbsp;</td>
<td align="right"><font size="2" face="Arial, Helvetica, sans-serif">(17</font></td>
<td align="left"><font size="2" face="Arial, Helvetica, sans-serif">)</font></td>
<td>&nbsp;</td>
<td align="right"><font size="2" face="Arial, Helvetica, sans-serif">(3</font></td>
<td align="left"><font size="2" face="Arial, Helvetica, sans-serif">)</font></td>
</tr>
<tr>
<td align="left"><font size="2" face="Arial, Helvetica, sans-serif"><div style="text-indent:6%">Patent litigation</div></font></td>
<td>&nbsp;</td>
<td align="right"><font size="2" face="Arial, Helvetica, sans-serif">&#151;</font></td>
<td align="left">&nbsp;</td>
<td>&nbsp;</td>
<td align="right"><font size="2" face="Arial, Helvetica, sans-serif">&#151;</font></td>
<td align="left">&nbsp;</td>
<td>&nbsp;</td>
<td align="right"><font size="2" face="Arial, Helvetica, sans-serif">(2</font></td>
<td align="left"><font size="2" face="Arial, Helvetica, sans-serif">)</font></td>
<td>&nbsp;</td>
<td align="right"><font size="2" face="Arial, Helvetica, sans-serif">&#151;</font></td>
<td align="left"><font size="2" face="Arial, Helvetica, sans-serif">&nbsp;</font></td>
</tr>
<tr bgcolor="#eeeeee">
<td align="left"><font size="2" face="Arial, Helvetica, sans-serif"><div style="text-indent:6%">Start-up costs</div></font></td>
<td>&nbsp;</td>
<td align="right"><font size="2" face="Arial, Helvetica, sans-serif">(13</font></td>
<td align="left"><font size="2" face="Arial, Helvetica, sans-serif">)</font></td>
<td>&nbsp;</td>
<td align="right"><font size="2" face="Arial, Helvetica, sans-serif">(17</font></td>
<td align="left"><font size="2" face="Arial, Helvetica, sans-serif">)</font></td>
<td>&nbsp;</td>
<td align="right"><font size="2" face="Arial, Helvetica, sans-serif">(45</font></td>
<td align="left"><font size="2" face="Arial, Helvetica, sans-serif">)</font></td>
<td>&nbsp;</td>
<td align="right"><font size="2" face="Arial, Helvetica, sans-serif">(37</font></td>
<td align="left"><font size="2" face="Arial, Helvetica, sans-serif">)</font></td>
</tr>
<tr>
<td align="left"><font size="2" face="Arial, Helvetica, sans-serif"><div style="text-indent:6%">Impairment, restructuring charges and other related closure costs</div></font></td>
<td>&nbsp;</td>
<td align="right"><font size="2" face="Arial, Helvetica, sans-serif">(12</font></td>
<td align="left"><font size="2" face="Arial, Helvetica, sans-serif">)</font></td>
<td>&nbsp;</td>
<td align="right"><font size="2" face="Arial, Helvetica, sans-serif">(193</font></td>
<td align="left"><font size="2" face="Arial, Helvetica, sans-serif">)</font></td>
<td>&nbsp;</td>
<td align="right"><font size="2" face="Arial, Helvetica, sans-serif">(57</font></td>
<td align="left"><font size="2" face="Arial, Helvetica, sans-serif">)</font></td>
<td>&nbsp;</td>
<td align="right"><font size="2" face="Arial, Helvetica, sans-serif">(193</font></td>
<td align="left"><font size="2" face="Arial, Helvetica, sans-serif">)</font></td>
</tr>
<tr bgcolor="#eeeeee">
<td align="left"><font size="2" face="Arial, Helvetica, sans-serif"><div style="text-indent:6%">Subsystems</div></font></td>
<td>&nbsp;</td>
<td align="right"><font size="2" face="Arial, Helvetica, sans-serif">&#151;</font></td>
<td align="left">&nbsp;</td>
<td>&nbsp;</td>
<td align="right"><font size="2" face="Arial, Helvetica, sans-serif">(2</font></td>
<td align="left"><font size="2" face="Arial, Helvetica, sans-serif">)</font></td>
<td>&nbsp;</td>
<td align="right"><font size="2" face="Arial, Helvetica, sans-serif">(1</font></td>
<td align="left"><font size="2" face="Arial, Helvetica, sans-serif">)</font></td>
<td>&nbsp;</td>
<td align="right"><font size="2" face="Arial, Helvetica, sans-serif">2</font></td>
<td align="left">&nbsp;</td>
</tr>
<tr>
<td align="left"><font size="2" face="Arial, Helvetica, sans-serif"><div style="text-indent:6%">Other non-allocated provisions</div></font></td>
<td>&nbsp;</td>
<td align="right"><font size="2" face="Arial, Helvetica, sans-serif">(15</font></td>
<td align="left"><font size="2" face="Arial, Helvetica, sans-serif">)</font></td>
<td>&nbsp;</td>
<td align="right"><font size="2" face="Arial, Helvetica, sans-serif">(15</font></td>
<td align="left"><font size="2" face="Arial, Helvetica, sans-serif">)</font></td>
<td>&nbsp;</td>
<td align="right"><font size="2" face="Arial, Helvetica, sans-serif">(61</font></td>
<td align="left"><font size="2" face="Arial, Helvetica, sans-serif">)</font></td>
<td>&nbsp;</td>
<td align="right"><font size="2" face="Arial, Helvetica, sans-serif">(37</font></td>
<td align="left"><font size="2" face="Arial, Helvetica, sans-serif">)</font></td>
</tr>
<tr align="center">
  <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>&nbsp;</td>
  <td><hr noshade size="1">
  </td>
  <td><hr noshade size="1">
  </td>
  <td>&nbsp;</td>
  <td><hr noshade size="1">
  </td>
  <td><hr noshade size="1">
  </td>
  <td></td>
</tr>
<tr bgcolor="#eeeeee">
<td align="left"><font size="2" face="Arial, Helvetica, sans-serif"><div style="text-indent:3%">Others<sup> (1)</sup></div></font></td>
<td>&nbsp;</td>
<td align="right"><font size="2" face="Arial, Helvetica, sans-serif">(82</font></td>
<td align="left"><font size="2" face="Arial, Helvetica, sans-serif">)</font></td>
<td>&nbsp;</td>
<td align="right"><font size="2" face="Arial, Helvetica, sans-serif">(250</font></td>
<td align="left"><font size="2" face="Arial, Helvetica, sans-serif">)</font></td>
<td>&nbsp;</td>
<td align="right"><font size="2" face="Arial, Helvetica, sans-serif">(272</font></td>
<td align="left"><font size="2" face="Arial, Helvetica, sans-serif">)</font></td>
<td>&nbsp;</td>
<td align="right"><font size="2" face="Arial, Helvetica, sans-serif">(306</font></td>
<td align="left"><font size="2" face="Arial, Helvetica, sans-serif">)</font></td>
</tr>
<tr align="center">
  <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>&nbsp;</td>
  <td><hr noshade size="1">
  </td>
  <td><hr noshade size="1">
  </td>
  <td>&nbsp;</td>
  <td><hr noshade size="1">
  </td>
  <td><hr noshade size="1">
  </td>
  <td></td>
</tr>
<tr bgcolor="#eeeeee">
<td align="left"><font size="2" face="Arial, Helvetica, sans-serif"><div style="text-indent:3%"><b>Total consolidated operating income (loss)</b></div></font></td>
<td><font size="2" face="Arial, Helvetica, sans-serif"><b>$</b></font></td>
<td align="right"><font size="2" face="Arial, Helvetica, sans-serif"> <b>213</b></font></td>
<td align="left">&nbsp;</td>
<td><font size="2" face="Arial, Helvetica, sans-serif"><b>$</b></font></td>
<td align="right"><font size="2" face="Arial, Helvetica, sans-serif"> <b>(64</b></font></td>
<td align="left"><font size="2" face="Arial, Helvetica, sans-serif"><b>)</b></font></td>
<td><font size="2" face="Arial, Helvetica, sans-serif"><b>$</b></font></td>
<td align="right"><font size="2" face="Arial, Helvetica, sans-serif"> <b>473</b></font></td>
<td align="left">&nbsp;</td>
<td><font size="2" face="Arial, Helvetica, sans-serif"><b>$</b></font></td>
<td align="right"><font size="2" face="Arial, Helvetica, sans-serif"> <b>181</b></font></td>
<td align="left">&nbsp;</td>
</tr>
<tr>
  <td><font size="2" face="Arial, Helvetica, sans-serif">&nbsp;</font></td>
  <td><hr noshade size="2">
  </td>
  <td align="center"><hr noshade size="2">
  </td>
  <td align="center"><font size="2">&nbsp;</font></td>
  <td><hr noshade size="2">
  </td>
  <td align="center"><hr noshade size="2">
  </td>
  <td align="center"><font size="2" face="Arial, Helvetica, sans-serif">&nbsp;</font></td>
  <td><hr noshade size="2">
  </td>
  <td align="center"><hr noshade size="2">
  </td>
  <td align="center"><font size="2">&nbsp;</font></td>
  <td><hr noshade size="2">
  </td>
  <td align="center"><hr noshade size="2">
  </td>
  <td align="center"><font size="2" face="Arial, Helvetica, sans-serif">&nbsp;</font></td>
</tr>
</table>
<table width="100%" border="0" cellpadding="0" cellspacing="0">
<tr valign="top">
  <td colspan="2"><hr align="left" width="150" size="1" noshade>
  </td>
  </tr>
<tr valign="top">
<td width="3%">
<font size="1" face="Arial, Helvetica, sans-serif">(1)</font></td>
<td>
<font size="1" face="Arial, Helvetica, sans-serif">
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>
</table>
<p align="center"><font face="Arial, Helvetica, sans-serif" size="2">11</font></p>
<hr noshade align="center" width="100%" size="2">
<div style="page-break-before:always"></div>
<page>
<a name="p12"></a>

<p align="left"><font size="2" face="Arial, Helvetica, sans-serif"><b><i>Net revenues by location of order shipment and by product family</i></b></font>
<div style="text-indent:3%"><p align="left"><font size="2" face="Arial, Helvetica, sans-serif">The table below sets forth information on our net revenues by location of order shipment and by product family:</font></p></div>
<table width="100%" border="0" cellpadding="0" cellspacing="0">
<tr align="center">
<td><font size="1">&nbsp;</font></td>
<td colspan="5"><font size="1" face="Arial, Helvetica, sans-serif"><b>(unaudited)<br>
  Three Months Ended </b></font></td>
<td><font size="1">&nbsp;</font></td>
<td colspan="5"><font size="1" face="Arial, Helvetica, sans-serif"><b>(unaudited)<br>
Nine Months Ended </b></font></td>
<td><font size="1">&nbsp;</font></td>
</tr>
<tr align="center">
<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 align="center">
<td><font size="1">&nbsp;</font></td>
<td colspan="2"><font size="1" face="Arial, Helvetica, sans-serif"><b>September
      25,<br>
2004</b></font></td>
<td><font size="1">&nbsp;</font></td>
<td colspan="2"><font size="1" face="Arial, Helvetica, sans-serif"><b>September
      27,<br>
2003</b></font></td>
<td><font size="1">&nbsp;</font></td>
<td colspan="2"><font size="1" face="Arial, Helvetica, sans-serif"><b>September
      25,<br>
2004</b></font></td>
<td><font size="1">&nbsp;</font></td>
<td colspan="2"><font size="1" face="Arial, Helvetica, sans-serif"><b>September
      27,<br>
2003</b></font></td>
<td><font size="1">&nbsp;</font></td> </tr>
<tr align="center">
<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 align="center">
<td><font size="1">&nbsp;</font></td>
<td colspan="5"><font size="1" face="Arial, Helvetica, sans-serif"><b>(in millions)</b></font></td>
<td><font size="1">&nbsp;</font></td>
<td colspan="5"><font size="1" face="Arial, Helvetica, sans-serif"><b>(in millions)</b></font></td>
<td><font size="1">&nbsp;</font></td>
</tr>
<tr>
<td align="left"><font size="2" face="Arial, Helvetica, sans-serif"><b>Net Revenues by Location of Order Shipment:<sup>(1)</sup></b></font></td>
<td>&nbsp;</td>
<td align="left"><font size="2" face="Arial, Helvetica, sans-serif">&nbsp;</font></td>
<td align="left">&nbsp;</td>
<td>&nbsp;</td>
<td align="left"><font size="2" face="Arial, Helvetica, sans-serif">&nbsp;</font></td>
<td align="left">&nbsp;</td>
<td>&nbsp;</td>
<td align="left"><font size="2" face="Arial, Helvetica, sans-serif">&nbsp;</font></td>
<td align="left">&nbsp;</td>
<td>&nbsp;</td>
<td align="left"><font size="2" face="Arial, Helvetica, sans-serif">&nbsp;</font></td>
<td align="left">&nbsp;</td>
</tr>
<tr>
<td align="left" bgcolor="#eeeeee"><font size="2" face="Arial, Helvetica, sans-serif"><div style="text-indent:3%">Europe</div></font></td>
<td width="1%" bgcolor="#eeeeee"><font size="2" face="Arial, Helvetica, sans-serif">$</font></td>
<td width="10%" align="right" bgcolor="#eeeeee"><font size="2" face="Arial, Helvetica, sans-serif"> 595</font></td>
<td width="2%" align="left" bgcolor="#eeeeee">&nbsp;</td>
<td width="1%" bgcolor="#eeeeee"><font size="2" face="Arial, Helvetica, sans-serif">$</font></td>
<td width="10%" align="right" bgcolor="#eeeeee"><font size="2" face="Arial, Helvetica, sans-serif"> 495</font></td>
<td width="2%" align="left" bgcolor="#eeeeee">&nbsp;</td>
<td width="1%" bgcolor="#eeeeee"><font size="2" face="Arial, Helvetica, sans-serif">$</font></td>
<td width="10%" align="right" bgcolor="#eeeeee"><font size="2" face="Arial, Helvetica, sans-serif"> 1,737</font></td>
<td width="2%" align="left" bgcolor="#eeeeee">&nbsp;</td>
<td width="1%" bgcolor="#eeeeee"><font size="2" face="Arial, Helvetica, sans-serif">$</font></td>
<td width="10%" align="right" bgcolor="#eeeeee"><font size="2" face="Arial, Helvetica, sans-serif"> 1,456</font></td>
<td width="2%" align="left" bgcolor="#eeeeee">&nbsp;</td>
</tr>
<tr>
<td align="left"><font size="2" face="Arial, Helvetica, sans-serif"><div style="text-indent:3%">North America</div></font></td>
<td>&nbsp;</td>
<td align="right"><font size="2" face="Arial, Helvetica, sans-serif">311</font></td>
<td align="left">&nbsp;</td>
<td>&nbsp;</td>
<td align="right"><font size="2" face="Arial, Helvetica, sans-serif">234</font></td>
<td align="left">&nbsp;</td>
<td>&nbsp;</td>
<td align="right"><font size="2" face="Arial, Helvetica, sans-serif">932</font></td>
<td align="left">&nbsp;</td>
<td>&nbsp;</td>
<td align="right"><font size="2" face="Arial, Helvetica, sans-serif">695</font></td>
<td align="left">&nbsp;</td>
</tr>
<tr>
<td align="left" bgcolor="#eeeeee"><font size="2" face="Arial, Helvetica, sans-serif"><div style="text-indent:3%">Asia/Pacific</div></font></td>
<td bgcolor="#eeeeee">&nbsp;</td>
<td align="right" bgcolor="#eeeeee"><font size="2" face="Arial, Helvetica, sans-serif">939</font></td>
<td align="left" bgcolor="#eeeeee">&nbsp;</td>
<td bgcolor="#eeeeee">&nbsp;</td>
<td align="right" bgcolor="#eeeeee"><font size="2" face="Arial, Helvetica, sans-serif">820</font></td>
<td align="left" bgcolor="#eeeeee">&nbsp;</td>
<td bgcolor="#eeeeee">&nbsp;</td>
<td align="right" bgcolor="#eeeeee"><font size="2" face="Arial, Helvetica, sans-serif">2,716</font></td>
<td align="left" bgcolor="#eeeeee">&nbsp;</td>
<td bgcolor="#eeeeee">&nbsp;</td>
<td align="right" bgcolor="#eeeeee"><font size="2" face="Arial, Helvetica, sans-serif">2,252</font></td>
<td align="left" bgcolor="#eeeeee">&nbsp;</td>
</tr>
<tr>
<td align="left"><font size="2" face="Arial, Helvetica, sans-serif"><div style="text-indent:3%">Japan</div></font></td>
<td>&nbsp;</td>
<td align="right"><font size="2" face="Arial, Helvetica, sans-serif">105</font></td>
<td align="left">&nbsp;</td>
<td>&nbsp;</td>
<td align="right"><font size="2" face="Arial, Helvetica, sans-serif">85</font></td>
<td align="left">&nbsp;</td>
<td>&nbsp;</td>
<td align="right"><font size="2" face="Arial, Helvetica, sans-serif">293</font></td>
<td align="left">&nbsp;</td>
<td>&nbsp;</td>
<td align="right"><font size="2" face="Arial, Helvetica, sans-serif">243</font></td>
<td align="left">&nbsp;</td>
</tr>
<tr>
<td align="left" bgcolor="#eeeeee"><font size="2" face="Arial, Helvetica, sans-serif"><div style="text-indent:3%">Emerging Markets</div></font></td>
<td bgcolor="#eeeeee">&nbsp;</td>
<td align="right" bgcolor="#eeeeee"><font size="2" face="Arial, Helvetica, sans-serif">281</font></td>
<td align="left" bgcolor="#eeeeee">&nbsp;</td>
<td bgcolor="#eeeeee">&nbsp;</td>
<td align="right" bgcolor="#eeeeee"><font size="2" face="Arial, Helvetica, sans-serif">169</font></td>
<td align="left" bgcolor="#eeeeee">&nbsp;</td>
<td bgcolor="#eeeeee">&nbsp;</td>
<td align="right" bgcolor="#eeeeee"><font size="2" face="Arial, Helvetica, sans-serif">754</font></td>
<td align="left" bgcolor="#eeeeee">&nbsp;</td>
<td bgcolor="#eeeeee">&nbsp;</td>
<td align="right" bgcolor="#eeeeee"><font size="2" face="Arial, Helvetica, sans-serif">478</font></td>
<td align="left" bgcolor="#eeeeee">&nbsp;</td>
</tr>
<tr align="center">
  <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>&nbsp;</td>
  <td><hr noshade size="1">
  </td>
  <td><hr noshade size="1">
  </td>
  <td>&nbsp;</td>
  <td><hr noshade size="1">
  </td>
  <td><hr noshade size="1">
  </td>
  <td></td>
</tr>
<tr bgcolor="#eeeeee">
<td align="left"><font size="2" face="Arial, Helvetica, sans-serif"><b><div style="text-indent:6%">Total</div></b></font></td>
<td><font size="2" face="Arial, Helvetica, sans-serif"><b>$</b></font></td>
<td align="right"><font size="2" face="Arial, Helvetica, sans-serif"> <b>2,231</b></font></td>
<td align="left">&nbsp;</td>
<td><font size="2" face="Arial, Helvetica, sans-serif"><b>$</b></font></td>
<td align="right"><font size="2" face="Arial, Helvetica, sans-serif"> <b>1,803</b></font></td>
<td align="left">&nbsp;</td>
<td><font size="2" face="Arial, Helvetica, sans-serif"><b>$</b></font></td>
<td align="right"><font size="2" face="Arial, Helvetica, sans-serif"> <b>6,432</b></font></td>
<td align="left">&nbsp;</td>
<td><font size="2" face="Arial, Helvetica, sans-serif"><b>$</b></font></td>
<td align="right"><font size="2" face="Arial, Helvetica, sans-serif"> <b>5,124</b></font></td>
<td align="left">&nbsp;</td>
</tr>
<tr>
  <td><font size="2" face="Arial, Helvetica, sans-serif">&nbsp;</font></td>
  <td><hr noshade size="2">
  </td>
  <td align="center"><hr noshade size="2">
  </td>
  <td align="center"><font size="2">&nbsp;</font></td>
  <td><hr noshade size="2">
  </td>
  <td align="center"><hr noshade size="2">
  </td>
  <td align="center"><font size="2" face="Arial, Helvetica, sans-serif">&nbsp;</font></td>
  <td><hr noshade size="2">
  </td>
  <td align="center"><hr noshade size="2">
  </td>
  <td align="center"><font size="2">&nbsp;</font></td>
  <td><hr noshade size="2">
  </td>
  <td align="center"><hr noshade size="2">
  </td>
  <td align="center"><font size="2" face="Arial, Helvetica, sans-serif">&nbsp;</font></td>
</tr>
<tr>
<td align="left"><font size="2" face="Arial, Helvetica, sans-serif"><b>Net Revenues by Product Family:</b></font></td>
<td>&nbsp;</td>
<td align="left"><font size="2" face="Arial, Helvetica, sans-serif">&nbsp;</font></td>
<td align="left">&nbsp;</td>
<td>&nbsp;</td>
<td align="left"><font size="2" face="Arial, Helvetica, sans-serif">&nbsp;</font></td>
<td align="left">&nbsp;</td>
<td>&nbsp;</td>
<td align="left"><font size="2" face="Arial, Helvetica, sans-serif">&nbsp;</font></td>
<td align="left">&nbsp;</td>
<td>&nbsp;</td>
<td align="left"><font size="2" face="Arial, Helvetica, sans-serif">&nbsp;</font></td>
<td align="left">&nbsp;</td>
</tr>
<tr>
<td align="left" bgcolor="#eeeeee"><font size="2" face="Arial, Helvetica, sans-serif"><div style="text-indent:3%">Differentiated Products</div></font></td>
<td bgcolor="#eeeeee"><font size="2" face="Arial, Helvetica, sans-serif">$</font></td>
<td align="right" bgcolor="#eeeeee"><font size="2" face="Arial, Helvetica, sans-serif"> 1,451</font></td>
<td align="left" bgcolor="#eeeeee">&nbsp;</td>
<td bgcolor="#eeeeee"><font size="2" face="Arial, Helvetica, sans-serif">$</font></td>
<td align="right" bgcolor="#eeeeee"><font size="2" face="Arial, Helvetica, sans-serif"> 1,238</font></td>
<td align="left" bgcolor="#eeeeee">&nbsp;</td>
<td bgcolor="#eeeeee"><font size="2" face="Arial, Helvetica, sans-serif">$</font></td>
<td align="right" bgcolor="#eeeeee"><font size="2" face="Arial, Helvetica, sans-serif"> 4,222</font></td>
<td align="left" bgcolor="#eeeeee">&nbsp;</td>
<td bgcolor="#eeeeee"><font size="2" face="Arial, Helvetica, sans-serif">$</font></td>
<td align="right" bgcolor="#eeeeee"><font size="2" face="Arial, Helvetica, sans-serif"> 3,549</font></td>
<td align="left" bgcolor="#eeeeee">&nbsp;</td>
</tr>
<tr>
<td align="left"><font size="2" face="Arial, Helvetica, sans-serif"><div style="text-indent:3%">Standard &amp; Commodities</div></font></td>
<td>&nbsp;</td>
<td align="right"><font size="2" face="Arial, Helvetica, sans-serif">120</font></td>
<td align="left">&nbsp;</td>
<td>&nbsp;</td>
<td align="right"><font size="2" face="Arial, Helvetica, sans-serif">85</font></td>
<td align="left">&nbsp;</td>
<td>&nbsp;</td>
<td align="right"><font size="2" face="Arial, Helvetica, sans-serif">325</font></td>
<td align="left">&nbsp;</td>
<td>&nbsp;</td>
<td align="right"><font size="2" face="Arial, Helvetica, sans-serif">269</font></td>
<td align="left">&nbsp;</td>
</tr>
<tr>
<td align="left" bgcolor="#eeeeee"><font size="2" face="Arial, Helvetica, sans-serif"><div style="text-indent:3%">Micro &amp; Memories</div></font></td>
<td bgcolor="#eeeeee">&nbsp;</td>
<td align="right" bgcolor="#eeeeee"><font size="2" face="Arial, Helvetica, sans-serif">345</font></td>
<td align="left" bgcolor="#eeeeee">&nbsp;</td>
<td bgcolor="#eeeeee">&nbsp;</td>
<td align="right" bgcolor="#eeeeee"><font size="2" face="Arial, Helvetica, sans-serif">250</font></td>
<td align="left" bgcolor="#eeeeee">&nbsp;</td>
<td bgcolor="#eeeeee">&nbsp;</td>
<td align="right" bgcolor="#eeeeee"><font size="2" face="Arial, Helvetica, sans-serif">975</font></td>
<td align="left" bgcolor="#eeeeee">&nbsp;</td>
<td bgcolor="#eeeeee">&nbsp;</td>
<td align="right" bgcolor="#eeeeee"><font size="2" face="Arial, Helvetica, sans-serif">656</font></td>
<td align="left" bgcolor="#eeeeee">&nbsp;</td>
</tr>
<tr>
<td align="left"><font size="2" face="Arial, Helvetica, sans-serif"><div style="text-indent:3%">Discretes</div></font></td>
<td>&nbsp;</td>
<td align="right"><font size="2" face="Arial, Helvetica, sans-serif">315</font></td>
<td align="left">&nbsp;</td>
<td>&nbsp;</td>
<td align="right"><font size="2" face="Arial, Helvetica, sans-serif">230</font></td>
<td align="left">&nbsp;</td>
<td>&nbsp;</td>
<td align="right"><font size="2" face="Arial, Helvetica, sans-serif">910</font></td>
<td align="left">&nbsp;</td>
<td>&nbsp;</td>
<td align="right"><font size="2" face="Arial, Helvetica, sans-serif">650</font></td>
<td align="left">&nbsp;</td>
</tr>
<tr align="center">
  <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>&nbsp;</td>
  <td><hr noshade size="1">
  </td>
  <td><hr noshade size="1">
  </td>
  <td>&nbsp;</td>
  <td><hr noshade size="1">
  </td>
  <td><hr noshade size="1">
  </td>
  <td></td>
</tr>
<tr>
<td align="left" bgcolor="#eeeeee"><font size="2" face="Arial, Helvetica, sans-serif"><b><div style="text-indent:6%">Total</div></b></font></td>
<td bgcolor="#eeeeee"><font size="2" face="Arial, Helvetica, sans-serif"><b>$</b></font></td>
<td align="right" bgcolor="#eeeeee"><font size="2" face="Arial, Helvetica, sans-serif"> <b>2,231</b></font></td>
<td align="left" bgcolor="#eeeeee">&nbsp;</td>
<td bgcolor="#eeeeee"><font size="2" face="Arial, Helvetica, sans-serif"><b>$</b></font></td>
<td align="right" bgcolor="#eeeeee"><font size="2" face="Arial, Helvetica, sans-serif"> <b>1,803</b></font></td>
<td align="left" bgcolor="#eeeeee">&nbsp;</td>
<td bgcolor="#eeeeee"><font size="2" face="Arial, Helvetica, sans-serif"><b>$</b></font></td>
<td align="right" bgcolor="#eeeeee"><font size="2" face="Arial, Helvetica, sans-serif"> <b>6,432</b></font></td>
<td align="left" bgcolor="#eeeeee">&nbsp;</td>
<td bgcolor="#eeeeee"><font size="2" face="Arial, Helvetica, sans-serif"><b>$</b></font></td>
<td align="right" bgcolor="#eeeeee"><font size="2" face="Arial, Helvetica, sans-serif"> <b>5,124</b></font></td>
<td align="left" bgcolor="#eeeeee">&nbsp;</td>
</tr>
<tr>
  <td><font size="2" face="Arial, Helvetica, sans-serif">&nbsp;</font></td>
  <td><hr noshade size="2">
  </td>
  <td align="center"><hr noshade size="2">
  </td>
  <td align="center"><font size="2">&nbsp;</font></td>
  <td><hr noshade size="2">
  </td>
  <td align="center"><hr noshade size="2">
  </td>
  <td align="center"><font size="2" face="Arial, Helvetica, sans-serif">&nbsp;</font></td>
  <td><hr noshade size="2">
  </td>
  <td align="center"><hr noshade size="2">
  </td>
  <td align="center"><font size="2">&nbsp;</font></td>
  <td><hr noshade size="2">
  </td>
  <td align="center"><hr noshade size="2">
  </td>
  <td align="center"><font size="2" face="Arial, Helvetica, sans-serif">&nbsp;</font></td>
</tr>
</table>
<table width="100%" border="0" cellpadding="0" cellspacing="0">
<tr>
  <td colspan="2" valign="top"><hr align="left" width="150" size="1" noshade>
  </td>
  </tr>
<tr>
<td width="3%" valign="top"><font size="1" face="Arial, Helvetica, sans-serif">(1)</font></td>
<td align="left" valign="top">
<font size="1" face="Arial, Helvetica, sans-serif"> 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.
</font></td>
</tr>
</table>
<p align="center"><font size="2" face="Arial, Helvetica, sans-serif">12</font></p>
<hr noshade align="center" width="100%" size="2">
<div style="page-break-before:always"></div>
<page>
<a name="p13"></a>

<div style="text-indent:3%">
<p align="left"><font size="2" face="Arial, Helvetica, sans-serif">The table below sets forth information on our net revenues by location of order shipment and by product family in percentages of total net revenues: </font></p></div>
<table width="100%" border="0" cellpadding="0" cellspacing="0">
<tr valign="top">
<td align="left"></td>
<td align="right" valign="bottom">&nbsp;</td>
<td colspan="4" align="center" valign="bottom"><font size="2" face="Arial, Helvetica, sans-serif"><b><font face="Arial, Helvetica, sans-serif" size="1">(unaudited)<br>
</font></b></font>    <font size="1" face="Arial, Helvetica, sans-serif"><b>Three
Months Ended</b></font></td>
<td align="left">&nbsp;</td>
<td align="right">&nbsp;</td>
<td colspan="4" align="center"><font size="2" face="Arial, Helvetica, sans-serif"><b><font face="Arial, Helvetica, sans-serif" size="1">(unaudited)</font></b></font><br>
  <font size="2" face="Arial, Helvetica, sans-serif"><b><font face="Arial, Helvetica, sans-serif" size="1">Nine Months Ended</font></b></font></td>
<td align="left">&nbsp;</td>
</tr>
<tr valign="top">
<td></td>
<td align="right" valign="bottom"><hr noshade size="1"></td>
<td colspan="4"><hr noshade size="1"></td>
<td></td>
<td><hr noshade size="1"></td>
<td colspan="4"><hr noshade size="1"></td>
<td></td>
</tr>
<tr valign="top">
<td align="left"></td>
<td align="right" valign="bottom">&nbsp;</td>
<td align="center"><font size="2" face="Arial, Helvetica, sans-serif"><b><font face="Arial, Helvetica, sans-serif" size="1">September<br>
  25, 2004</font></b></font></td>
<td align="left">&nbsp;</td>
<td align="right">&nbsp;</td>
<td align="center"><font size="2" face="Arial, Helvetica, sans-serif"><b><font face="Arial, Helvetica, sans-serif" size="1">September<br>
  27, 2003</font></b></font></td>
<td align="left">&nbsp;</td>
<td align="right">&nbsp;</td>
<td align="center"><font size="2" face="Arial, Helvetica, sans-serif"><b><font face="Arial, Helvetica, sans-serif" size="1">September<br>
  25, 2004</font></b></font></td>
<td align="left">&nbsp;</td>
<td align="right">&nbsp;</td>
<td align="center"><font size="2" face="Arial, Helvetica, sans-serif"><b><font face="Arial, Helvetica, sans-serif" size="1">September<br>
  27, 2003</font></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="right">&nbsp;</td>
<td colspan="10" align="center" valign="bottom"><font size="1" face="Arial, Helvetica, sans-serif"><b>(as
    percentages of net revenues)</b></font></td>
<td align="left">&nbsp;</td>
</tr>
<tr valign="top">
<td align="left"><font size="2" face="Arial, Helvetica, sans-serif"><b>Net Revenues by Location of Order Shipment</b><sup>(1)</sup></font></td>
<td align="right">&nbsp;</td>
<td align="left"><font size="2" face="Arial, Helvetica, sans-serif">&nbsp;</font></td>
<td align="left">&nbsp;</td>
<td align="right">&nbsp;</td>
<td align="left"><font size="2" face="Arial, Helvetica, sans-serif">&nbsp;</font></td>
<td align="left">&nbsp;</td>
<td align="right">&nbsp;</td>
<td align="left"><font size="2" face="Arial, Helvetica, sans-serif">&nbsp;</font></td>
<td align="left">&nbsp;</td>
<td align="right">&nbsp;</td>
<td align="left"><font size="2" face="Arial, Helvetica, sans-serif">&nbsp;</font></td>
<td align="left">&nbsp;</td>
</tr>
<tr valign="top">
<td align="left" bgcolor="#eeeeee"><font size="2" face="Arial, Helvetica, sans-serif">
  <div style="margin-left:3%">Europe</div></font></td>
<td width="1%" align="right" bgcolor="#eeeeee">&nbsp;</td>
<td width="10%" align="right" bgcolor="#eeeeee"><font size="2" face="Arial, Helvetica, sans-serif">26.6</font></td>
<td width="2%" align="left" bgcolor="#eeeeee"><font size="2" face="Arial, Helvetica, sans-serif">%</font></td>
<td width="1%" align="right" bgcolor="#eeeeee">&nbsp;</td>
<td width="10%" align="right" bgcolor="#eeeeee"><font size="2" face="Arial, Helvetica, sans-serif">27.5</font></td>
<td width="2%" align="left" bgcolor="#eeeeee"><font size="2" face="Arial, Helvetica, sans-serif">%</font></td>
<td width="1%" align="right" bgcolor="#eeeeee">&nbsp;</td>
<td width="10%" align="right" bgcolor="#eeeeee"><font size="2" face="Arial, Helvetica, sans-serif">27.0</font></td>
<td width="2%" align="left" bgcolor="#eeeeee"><font size="2" face="Arial, Helvetica, sans-serif">%</font></td>
<td width="1%" align="right" bgcolor="#eeeeee">&nbsp;</td>
<td width="10%" align="right" bgcolor="#eeeeee"><font size="2" face="Arial, Helvetica, sans-serif">28.4</font></td>
<td width="2%" align="left" bgcolor="#eeeeee"><font size="2" face="Arial, Helvetica, sans-serif">%</font></td>
</tr>
<tr valign="top">
<td align="left"><font size="2" face="Arial, Helvetica, sans-serif"><div style="margin-left:3%">North America</div></font></td>
<td align="right">&nbsp;</td>
<td align="right"><font size="2" face="Arial, Helvetica, sans-serif">14.0</font></td>
<td align="left">&nbsp;</td>
<td align="right">&nbsp;</td>
<td align="right"><font size="2" face="Arial, Helvetica, sans-serif">13.0</font></td>
<td align="left">&nbsp;</td>
<td align="right">&nbsp;</td>
<td align="right"><font size="2" face="Arial, Helvetica, sans-serif">14.5</font></td>
<td align="left">&nbsp;</td>
<td align="right">&nbsp;</td>
<td align="right"><font size="2" face="Arial, Helvetica, sans-serif">13.6</font></td>
<td align="left">&nbsp;</td>
</tr>
<tr valign="top">
<td align="left" bgcolor="#eeeeee"><font size="2" face="Arial, Helvetica, sans-serif">
  <div style="margin-left:3%">Asia/Pacific</div></font></td>
<td align="right" bgcolor="#eeeeee">&nbsp;</td>
<td align="right" bgcolor="#eeeeee"><font size="2" face="Arial, Helvetica, sans-serif">42.1</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, Helvetica, sans-serif">45.4 </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, Helvetica, sans-serif">42.2 </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, Helvetica, sans-serif">43.9</font></td>
<td align="left" bgcolor="#eeeeee">&nbsp;</td>
</tr>
<tr valign="top">
<td align="left"><font size="2" face="Arial, Helvetica, sans-serif"><div style="margin-left:3%">Japan</div></font></td>
<td align="right">&nbsp;</td>
<td align="right"><font size="2" face="Arial, Helvetica, sans-serif">4.7</font></td>
<td align="left">&nbsp;</td>
<td align="right">&nbsp;</td>
<td align="right"><font size="2" face="Arial, Helvetica, sans-serif">4.7</font></td>
<td align="left">&nbsp;</td>
<td align="right">&nbsp;</td>
<td align="right"><font size="2" face="Arial, Helvetica, sans-serif">4.6</font></td>
<td align="left">&nbsp;</td>
<td align="right">&nbsp;</td>
<td align="right"><font size="2" face="Arial, Helvetica, sans-serif">4.8</font></td>
<td align="left">&nbsp;</td>
</tr>
<tr valign="top">
<td align="left" bgcolor="#eeeeee"><font size="2" face="Arial, Helvetica, sans-serif">
  <div style="margin-left:3%">Emerging Markets</div></font></td>
<td align="right" bgcolor="#eeeeee">&nbsp;</td>
<td align="right" bgcolor="#eeeeee"><font size="2" face="Arial, Helvetica, sans-serif">12.6</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, Helvetica, sans-serif">9.4</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, Helvetica, sans-serif">11.7</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, Helvetica, sans-serif">9.3</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"><font size="2" face="Arial, Helvetica, sans-serif"><div style="margin-left:6%">Total</div></font></td>
<td align="right">&nbsp;</td>
<td align="right"><font size="2" face="Arial, Helvetica, sans-serif"><b>100.0</b></font></td>
<td align="left"><font size="2" face="Arial, Helvetica, sans-serif"><b>%</b></font></td>
<td align="right">&nbsp;</td>
<td align="right"><font size="2" face="Arial, Helvetica, sans-serif"><b>100.0</b></font></td>
<td align="left"><font size="2" face="Arial, Helvetica, sans-serif"><b>%</b></font></td>
<td align="right">&nbsp;</td>
<td align="right"><font size="2" face="Arial, Helvetica, sans-serif"><b>100.0</b></font></td>
<td align="left"><font size="2" face="Arial, Helvetica, sans-serif"><b>%</b></font></td>
<td align="right">&nbsp;</td>
<td align="right"><font size="2" face="Arial, Helvetica, sans-serif"><b>100.0</b></font></td>
<td align="left"><font size="2" face="Arial, Helvetica, sans-serif"><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>
<tr valign="top">
<td align="left"><font size="2" face="Arial, Helvetica, sans-serif"><b>Net Revenues by Product Family:</b></font></td>
<td align="right">&nbsp;</td>
<td align="left"><font size="2" face="Arial, Helvetica, sans-serif">&nbsp;</font></td>
<td align="left">&nbsp;</td>
<td align="right">&nbsp;</td>
<td align="left"><font size="2" face="Arial, Helvetica, sans-serif">&nbsp;</font></td>
<td align="left">&nbsp;</td>
<td align="right">&nbsp;</td>
<td align="left"><font size="2" face="Arial, Helvetica, sans-serif">&nbsp;</font></td>
<td align="left">&nbsp;</td>
<td align="right">&nbsp;</td>
<td align="left"><font size="2" face="Arial, Helvetica, sans-serif">&nbsp;</font></td>
<td align="left">&nbsp;</td>
</tr>
<tr valign="top">
<td align="left" bgcolor="#eeeeee"><font size="2" face="Arial, Helvetica, sans-serif">
  <div style="margin-left:3%">Differentiated Products</div></font></td>
<td align="right" bgcolor="#eeeeee">&nbsp;</td>
<td align="right" bgcolor="#eeeeee"><font size="2" face="Arial, Helvetica, sans-serif">65.0</font></td>
<td align="left" bgcolor="#eeeeee"><font size="2" face="Arial, Helvetica, sans-serif">%</font></td>
<td align="right" bgcolor="#eeeeee">&nbsp;</td>
<td align="right" bgcolor="#eeeeee"><font size="2" face="Arial, Helvetica, sans-serif">68.6</font></td>
<td align="left" bgcolor="#eeeeee"><font size="2" face="Arial, Helvetica, sans-serif">%</font></td>
<td align="right" bgcolor="#eeeeee">&nbsp;</td>
<td align="right" bgcolor="#eeeeee"><font size="2" face="Arial, Helvetica, sans-serif">65.6</font></td>
<td align="left" bgcolor="#eeeeee"><font size="2" face="Arial, Helvetica, sans-serif">%</font></td>
<td align="right" bgcolor="#eeeeee">&nbsp;</td>
<td align="right" bgcolor="#eeeeee"><font size="2" face="Arial, Helvetica, sans-serif">69.3</font></td>
<td align="left" bgcolor="#eeeeee"><font size="2" face="Arial, Helvetica, sans-serif">%</font></td>
</tr>
<tr valign="top">
<td align="left"><font size="2" face="Arial, Helvetica, sans-serif"><div style="margin-left:3%">Standard &amp; Commodities</div></font></td>
<td align="right">&nbsp;</td>
<td align="right"><font size="2" face="Arial, Helvetica, sans-serif">5.4</font></td>
<td align="left">&nbsp;</td>
<td align="right">&nbsp;</td>
<td align="right"><font size="2" face="Arial, Helvetica, sans-serif">4.7</font></td>
<td align="left">&nbsp;</td>
<td align="right">&nbsp;</td>
<td align="right"><font size="2" face="Arial, Helvetica, sans-serif">5.1</font></td>
<td align="left">&nbsp;</td>
<td align="right">&nbsp;</td>
<td align="right"><font size="2" face="Arial, Helvetica, sans-serif">5.2</font></td>
<td align="left">&nbsp;</td>
</tr>
<tr valign="top">
<td align="left" bgcolor="#eeeeee"><font size="2" face="Arial, Helvetica, sans-serif">
  <div style="margin-left:3%">Micro &amp; Memories</div></font></td>
<td align="right" bgcolor="#eeeeee">&nbsp;</td>
<td align="right" bgcolor="#eeeeee"><font size="2" face="Arial, Helvetica, sans-serif">15.5</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, Helvetica, sans-serif">13.9</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, Helvetica, sans-serif">15.2</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, Helvetica, sans-serif">12.8</font></td>
<td align="left" bgcolor="#eeeeee">&nbsp;</td>
</tr>
<tr valign="top">
<td align="left"><font size="2" face="Arial, Helvetica, sans-serif"><div style="margin-left:3%">Discretes</div></font></td>
<td align="right">&nbsp;</td>
<td align="right"><font size="2" face="Arial, Helvetica, sans-serif">14.1</font></td>
<td align="left">&nbsp;</td>
<td align="right">&nbsp;</td>
<td align="right"><font size="2" face="Arial, Helvetica, sans-serif">12.8</font></td>
<td align="left">&nbsp;</td>
<td align="right">&nbsp;</td>
<td align="right"><font size="2" face="Arial, Helvetica, sans-serif">14.1</font></td>
<td align="left">&nbsp;</td>
<td align="right">&nbsp;</td>
<td align="right"><font size="2" face="Arial, Helvetica, sans-serif">12.7</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, Helvetica, sans-serif">
  <div style="margin-left:6%">Total</div></font></td>
<td align="right" bgcolor="#eeeeee">&nbsp;</td>
<td align="right" bgcolor="#eeeeee"><font size="2" face="Arial, Helvetica, sans-serif"><b>100.0</b></font></td>
<td align="left" bgcolor="#eeeeee"><font size="2" face="Arial, Helvetica, sans-serif"><b>%</b></font></td>
<td align="right" bgcolor="#eeeeee">&nbsp;</td>
<td align="right" bgcolor="#eeeeee"><font size="2" face="Arial, Helvetica, sans-serif"><b>100.0</b></font></td>
<td align="left" bgcolor="#eeeeee"><font size="2" face="Arial, Helvetica, sans-serif"><b>%</b></font></td>
<td align="right" bgcolor="#eeeeee">&nbsp;</td>
<td align="right" bgcolor="#eeeeee"><font size="2" face="Arial, Helvetica, sans-serif"><b>100.0</b></font></td>
<td align="left" bgcolor="#eeeeee"><font size="2" face="Arial, Helvetica, sans-serif"><b>%</b></font></td>
<td align="right" bgcolor="#eeeeee">&nbsp;</td>
<td align="right" bgcolor="#eeeeee"><font size="2" face="Arial, Helvetica, sans-serif"><b>100.0</b></font></td>
<td align="left" bgcolor="#eeeeee"><font size="2" face="Arial, Helvetica, sans-serif"><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>
<table width="100%" border="0" cellpadding="0" cellspacing="0">
<tr valign="top">
  <td colspan="2"><hr align="left" width="150" size="1">
  </td>
  </tr>
<tr valign="top">
<td width="3%"><font size="1" face="Arial, Helvetica, sans-serif"> (1)</font></td>
<td align="left">
<font size="1" face="Arial, Helvetica, sans-serif"> 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.
</font></td>
</tr>
</table>
<p align="center"><font size="2" face="Arial, Helvetica, sans-serif">13</font></p>
<hr noshade align="center" width="100%" size="2">
<div style="page-break-before:always"></div>
<page>
<a name="p14"></a>

<div style="text-indent:3%">
<p align="left"><font size="2" face="Arial, Helvetica, sans-serif">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">&nbsp;</td>
    <td align="right">&nbsp;</td>
    <td colspan="4" align="center" valign="bottom"><font size="2" face="Arial, Helvetica, sans-serif"><b><font face="Arial, Helvetica, sans-serif" size="1">(unaudited)<br>
      </font></b></font>
      <font size="1" face="Arial, Helvetica, sans-serif"><b>Three Months Ended</b></font></td>
    <td align="center" valign="bottom">&nbsp;</td>
    <td align="right">&nbsp;</td>
    <td colspan="4" align="center" valign="bottom"><font size="2" face="Arial, Helvetica, sans-serif"><b><font face="Arial, Helvetica, sans-serif" size="1">(unaudited)</font></b></font><br>
    <font size="1" face="Arial, Helvetica, sans-serif"><b>Nine Months Ended</b></font></td>
    <td align="left">&nbsp;</td>
  </tr>
  <tr valign="top">
    <td align="left">&nbsp;</td>
    <td align="right"><hr noshade size="1"></td>
    <td colspan="4" align="right"><hr noshade size="1"></td>
    <td align="left">&nbsp;</td>
    <td align="right"><hr noshade size="1"></td>
    <td colspan="4" align="right"><hr noshade size="1"></td>
    <td align="left">&nbsp;</td>
  </tr>
  <tr valign="top">
    <td align="left">&nbsp;</td>
    <td align="right">&nbsp;</td>
    <td align="center" valign="bottom"><font size="1" face="Arial, Helvetica, sans-serif"><b>September<br>
25, 2004</b></font></td>
    <td align="left">&nbsp;</td>
    <td align="right">&nbsp;</td>
    <td align="center" valign="bottom"><font size="1" face="Arial, Helvetica, sans-serif"><b>September<br>
27, 2003</b></font></td>
    <td align="left">&nbsp;</td>
    <td align="right">&nbsp;</td>
    <td align="center" valign="bottom"><font size="1" face="Arial, Helvetica, sans-serif"><b>September<br>
25, 2004</b></font></td>
    <td align="left">&nbsp;</td>
    <td align="right">&nbsp;</td>
    <td align="center" valign="bottom"><font size="1" face="Arial, Helvetica, sans-serif"><b>September<br>
27, 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">&nbsp;</td>
    <td align="right">&nbsp;</td>
    <td colspan="10" align="center" valign="bottom"><font size="1" face="Arial, Helvetica, sans-serif"><b>(as
      percentages of net revenues)</b></font></td>
    <td align="left">&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, Helvetica, sans-serif">Net
      sales</font></td>
    <td width="1%" align="right" bgcolor="#eeeeee">&nbsp;</td>
    <td width="10%" align="right" bgcolor="#eeeeee"><font size="2" face="Arial, Helvetica, sans-serif">100.0</font></td>
    <td width="2%" align="left" bgcolor="#eeeeee"><font size="2" face="Arial, Helvetica, sans-serif">%</font></td>
    <td width="1%" align="right" bgcolor="#eeeeee">&nbsp;</td>
    <td width="10%" align="right" bgcolor="#eeeeee"><font size="2" face="Arial, Helvetica, sans-serif">100.0</font></td>
    <td width="2%" align="left" bgcolor="#eeeeee"><font size="2" face="Arial, Helvetica, sans-serif">%</font></td>
    <td width="1%" align="right" bgcolor="#eeeeee">&nbsp;</td>
    <td width="10%" align="right" bgcolor="#eeeeee"><font size="2" face="Arial, Helvetica, sans-serif">100.0</font></td>
    <td width="2%" align="left" bgcolor="#eeeeee"><font size="2" face="Arial, Helvetica, sans-serif">%</font></td>
    <td width="1%" align="right" bgcolor="#eeeeee">&nbsp;</td>
    <td width="10%" align="right" bgcolor="#eeeeee"><font size="2" face="Arial, Helvetica, sans-serif">100.0</font></td>
    <td width="2%" align="left" bgcolor="#eeeeee"><font size="2" face="Arial, Helvetica, sans-serif">%</font></td>
  </tr>
  <tr valign="top">
    <td align="left"><font size="2" face="Arial, Helvetica, sans-serif">Other
      revenues</font></td>
    <td align="right">&nbsp;</td>
    <td align="right"><font size="2" face="Arial, Helvetica, sans-serif">&#151;</font></td>
    <td align="left">&nbsp;</td>
    <td align="right">&nbsp;</td>
    <td align="right"><font size="2" face="Arial, Helvetica, sans-serif">&#151;</font></td>
    <td align="left">&nbsp;</td>
    <td align="right">&nbsp;</td>
    <td align="right"><font size="2" face="Arial, Helvetica, sans-serif">&#151;</font></td>
    <td align="left">&nbsp;</td>
    <td align="right">&nbsp;</td>
    <td align="right"><font size="2" face="Arial, Helvetica, sans-serif">&#151;</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, Helvetica, sans-serif"><b>Net
      revenue</b></font></td>
    <td align="right" bgcolor="#eeeeee">&nbsp;</td>
    <td align="right" bgcolor="#eeeeee"><font size="2" face="Arial, Helvetica, sans-serif"><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, Helvetica, sans-serif"><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, Helvetica, sans-serif"><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, Helvetica, sans-serif"><b>100.0</b></font></td>
    <td align="left" bgcolor="#eeeeee">&nbsp;</td>
  </tr>
  <tr valign="top">
    <td align="left"><font size="2" face="Arial, Helvetica, sans-serif">Cost of
      sales</font></td>
    <td align="right">&nbsp;</td>
    <td align="right"><font size="2" face="Arial, Helvetica, sans-serif">(62.1</font></td>
    <td align="left"><font size="2" face="Arial, Helvetica, sans-serif">)</font></td>
    <td align="right">&nbsp;</td>
    <td align="right"><font size="2" face="Arial, Helvetica, sans-serif">(64.9</font></td>
    <td align="left"><font size="2" face="Arial, Helvetica, sans-serif">)</font></td>
    <td align="right">&nbsp;</td>
    <td align="right"><font size="2" face="Arial, Helvetica, sans-serif">(63.1</font></td>
    <td align="left"><font size="2" face="Arial, Helvetica, sans-serif">)</font></td>
    <td align="right">&nbsp;</td>
    <td align="right"><font size="2" face="Arial, Helvetica, sans-serif">(64.8</font></td>
    <td align="left"><font size="2" face="Arial, Helvetica, sans-serif">)</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" bgcolor="#eeeeee"><font size="2" face="Arial, Helvetica, sans-serif"><b>Gross
      profit</b></font></td>
    <td align="right" bgcolor="#eeeeee">&nbsp;</td>
    <td align="right" bgcolor="#eeeeee"><font size="2" face="Arial, Helvetica, sans-serif"><b>37.9</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, Helvetica, sans-serif"><b>35.1</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, Helvetica, sans-serif"><b>36.9</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, Helvetica, sans-serif"><b>35.2</b></font></td>
    <td align="left" bgcolor="#eeeeee">&nbsp;</td>
  </tr>
  <tr valign="top">
    <td align="left"><font size="2" face="Arial, Helvetica, sans-serif">Operating
      expenses:</font></td>
    <td align="right">&nbsp;</td>
    <td align="left"><font size="2" face="Arial, Helvetica, sans-serif">&nbsp;</font></td>
    <td align="left">&nbsp;</td>
    <td align="right">&nbsp;</td>
    <td align="right"><font size="2" face="Arial, Helvetica, sans-serif">&nbsp;</font></td>
    <td align="left">&nbsp;</td>
    <td align="right">&nbsp;</td>
    <td align="left"><font size="2" face="Arial, Helvetica, sans-serif">&nbsp;</font></td>
    <td align="left">&nbsp;</td>
    <td align="right">&nbsp;</td>
    <td align="left"><font size="2" face="Arial, Helvetica, sans-serif">&nbsp;</font></td>
    <td align="left">&nbsp;</td>
  </tr>
  <tr valign="top">
    <td align="left" bgcolor="#eeeeee"><font size="2" face="Arial, Helvetica, sans-serif">
      <div style="margin-left:3%">Selling, general and administrative</div>
      </font></td>
    <td align="right" bgcolor="#eeeeee">&nbsp;</td>
    <td align="right" bgcolor="#eeeeee"><font size="2" face="Arial, Helvetica, sans-serif">(10.4</font></td>
    <td align="left" bgcolor="#eeeeee"><font size="2" face="Arial, Helvetica, sans-serif">)</font></td>
    <td align="right" bgcolor="#eeeeee">&nbsp;</td>
    <td align="right" bgcolor="#eeeeee"><font size="2" face="Arial, Helvetica, sans-serif">(10.6</font></td>
    <td align="left" bgcolor="#eeeeee"><font size="2" face="Arial, Helvetica, sans-serif">)</font></td>
    <td align="right" bgcolor="#eeeeee">&nbsp;</td>
    <td align="right" bgcolor="#eeeeee"><font size="2" face="Arial, Helvetica, sans-serif">(10.9</font></td>
    <td align="left" bgcolor="#eeeeee"><font size="2" face="Arial, Helvetica, sans-serif">)</font></td>
    <td align="right" bgcolor="#eeeeee">&nbsp;</td>
    <td align="right" bgcolor="#eeeeee"><font size="2" face="Arial, Helvetica, sans-serif">(10.9</font></td>
    <td align="left" bgcolor="#eeeeee"><font size="2" face="Arial, Helvetica, sans-serif">)</font></td>
  </tr>
  <tr valign="top">
    <td align="left"><font size="2" face="Arial, Helvetica, sans-serif">
      <div style="margin-left:3%">Research and development</div>
      </font></td>
    <td align="right">&nbsp;</td>
    <td align="right"><font size="2" face="Arial, Helvetica, sans-serif">(17.2</font></td>
    <td align="left"><font size="2" face="Arial, Helvetica, sans-serif">)</font></td>
    <td align="right">&nbsp;</td>
    <td align="right"><font size="2" face="Arial, Helvetica, sans-serif">(16.8</font></td>
    <td align="left"><font size="2" face="Arial, Helvetica, sans-serif">)</font></td>
    <td align="right">&nbsp;</td>
    <td align="right"><font size="2" face="Arial, Helvetica, sans-serif">(17.6</font></td>
    <td align="left"><font size="2" face="Arial, Helvetica, sans-serif">)</font></td>
    <td align="right">&nbsp;</td>
    <td align="right"><font size="2" face="Arial, Helvetica, sans-serif">(17.2</font></td>
    <td align="left"><font size="2" face="Arial, Helvetica, sans-serif">)</font></td>
  </tr>
  <tr valign="top">
    <td align="left" bgcolor="#eeeeee"><font size="2" face="Arial, Helvetica, sans-serif">
      <div style="margin-left:3%">Other income and expenses, net</div>
      </font></td>
    <td align="right" bgcolor="#eeeeee">&nbsp;</td>
    <td align="right" bgcolor="#eeeeee"><font size="2" face="Arial, Helvetica, sans-serif">(0.1</font></td>
    <td align="left" bgcolor="#eeeeee"><font size="2" face="Arial, Helvetica, sans-serif">)</font></td>
    <td align="right" bgcolor="#eeeeee">&nbsp;</td>
    <td align="right" bgcolor="#eeeeee"><font size="2" face="Arial, Helvetica, sans-serif">(0.5</font></td>
    <td align="left" bgcolor="#eeeeee"><font size="2" face="Arial, Helvetica, sans-serif">)</font></td>
    <td align="right" bgcolor="#eeeeee">&nbsp;</td>
    <td align="right" bgcolor="#eeeeee"><font size="2" face="Arial, Helvetica, sans-serif">(0.2</font></td>
    <td align="left" bgcolor="#eeeeee"><font size="2" face="Arial, Helvetica, sans-serif">)</font></td>
    <td align="right" bgcolor="#eeeeee">&nbsp;</td>
    <td align="right" bgcolor="#eeeeee"><font size="2" face="Arial, Helvetica, sans-serif">0.2</font></td>
    <td align="left" bgcolor="#eeeeee">&nbsp;</td>
  </tr>
  <tr valign="top">
    <td align="left"><font size="2" face="Arial, Helvetica, sans-serif">
      <div style="margin-left:3%">Impairment, restructuring and other related
        closure costs</div>
      </font></td>
    <td align="right">&nbsp;</td>
    <td align="right"><font size="2" face="Arial, Helvetica, sans-serif">(0.6</font></td>
    <td align="left"><font size="2" face="Arial, Helvetica, sans-serif">)</font></td>
    <td align="right">&nbsp;</td>
    <td align="right"><font size="2" face="Arial, Helvetica, sans-serif">(10.7</font></td>
    <td align="left"><font size="2" face="Arial, Helvetica, sans-serif">)</font></td>
    <td align="right">&nbsp;</td>
    <td align="right"><font size="2" face="Arial, Helvetica, sans-serif">(0.9</font></td>
    <td align="left"><font size="2" face="Arial, Helvetica, sans-serif">)</font></td>
    <td align="right">&nbsp;</td>
    <td align="right"><font size="2" face="Arial, Helvetica, sans-serif">(3.8</font></td>
    <td align="left"><font size="2" face="Arial, Helvetica, sans-serif">)</font></td>
  </tr>
  <tr valign="top">
    <td align="left" bgcolor="#eeeeee"><font size="2" face="Arial, Helvetica, sans-serif">Total
      operating expenses</font></td>
    <td align="right" bgcolor="#eeeeee">&nbsp;</td>
    <td align="right" bgcolor="#eeeeee"><font size="2" face="Arial, Helvetica, sans-serif"><b>(28.3</b></font></td>
    <td align="left" bgcolor="#eeeeee"><font size="2" face="Arial, Helvetica, sans-serif"><b>)</b></font></td>
    <td align="right" bgcolor="#eeeeee">&nbsp;</td>
    <td align="right" bgcolor="#eeeeee"><font size="2" face="Arial, Helvetica, sans-serif"><b>(38.6</b></font></td>
    <td align="left" bgcolor="#eeeeee"><font size="2" face="Arial, Helvetica, sans-serif"><b>)</b></font></td>
    <td align="right" bgcolor="#eeeeee">&nbsp;</td>
    <td align="right" bgcolor="#eeeeee"><font size="2" face="Arial, Helvetica, sans-serif"><b>(29.6</b></font></td>
    <td align="left" bgcolor="#eeeeee"><font size="2" face="Arial, Helvetica, sans-serif"><b>)</b></font></td>
    <td align="right" bgcolor="#eeeeee">&nbsp;</td>
    <td align="right" bgcolor="#eeeeee"><font size="2" face="Arial, Helvetica, sans-serif"><b>(31.7</b></font></td>
    <td align="left" bgcolor="#eeeeee"><font size="2" face="Arial, Helvetica, sans-serif"><b>)</b></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, Helvetica, sans-serif"><b>Operating
      income (loss)</b></font></td>
    <td align="right">&nbsp;</td>
    <td align="right"><font size="2" face="Arial, Helvetica, sans-serif"><b>9.6</b></font></td>
    <td align="left">&nbsp;</td>
    <td align="right">&nbsp;</td>
    <td align="right"><font size="2" face="Arial, Helvetica, sans-serif"><b>(3.6</b></font></td>
    <td align="left"><font size="2" face="Arial, Helvetica, sans-serif"><b>)</b></font></td>
    <td align="right">&nbsp;</td>
    <td align="right"><font size="2" face="Arial, Helvetica, sans-serif"><b>7.4</b></font></td>
    <td align="left">&nbsp;</td>
    <td align="right">&nbsp;</td>
    <td align="right"><font size="2" face="Arial, Helvetica, sans-serif"><b>3.5</b></font></td>
    <td align="left">&nbsp;</td>
  </tr>
  <tr valign="top">
    <td align="left" bgcolor="#eeeeee"><font size="2" face="Arial, Helvetica, sans-serif">Interest
      expense, net</font></td>
    <td align="right" bgcolor="#eeeeee">&nbsp;</td>
    <td align="right" bgcolor="#eeeeee"><font size="2" face="Arial, Helvetica, sans-serif">&#151;</font></td>
    <td align="left" bgcolor="#eeeeee"><font size="2" face="Arial, Helvetica, sans-serif">&nbsp;</font></td>
    <td align="right" bgcolor="#eeeeee">&nbsp;</td>
    <td align="right" bgcolor="#eeeeee"><font size="2" face="Arial, Helvetica, sans-serif">(0.6</font></td>
    <td align="left" bgcolor="#eeeeee"><font size="2" face="Arial, Helvetica, sans-serif">)</font></td>
    <td align="right" bgcolor="#eeeeee">&nbsp;</td>
    <td align="right" bgcolor="#eeeeee"><font size="2" face="Arial, Helvetica, sans-serif">(0.2</font></td>
    <td align="left" bgcolor="#eeeeee"><font size="2" face="Arial, Helvetica, sans-serif">)</font></td>
    <td align="right" bgcolor="#eeeeee">&nbsp;</td>
    <td align="right" bgcolor="#eeeeee"><font size="2" face="Arial, Helvetica, sans-serif">(0.9</font></td>
    <td align="left" bgcolor="#eeeeee"><font size="2" face="Arial, Helvetica, sans-serif">)</font></td>
  </tr>
  <tr valign="top">
    <td align="left"><font size="2" face="Arial, Helvetica, sans-serif">Equity
      in loss of joint venture</font></td>
    <td align="right">&nbsp;</td>
    <td align="right"><font size="2" face="Arial, Helvetica, sans-serif">(0.1</font></td>
    <td align="left"><font size="2" face="Arial, Helvetica, sans-serif">)</font></td>
    <td align="right">&nbsp;</td>
    <td align="right"><font size="2" face="Arial, Helvetica, sans-serif">&#151;</font></td>
    <td align="left">&nbsp;</td>
    <td align="right">&nbsp;</td>
    <td align="right"><font size="2" face="Arial, Helvetica, sans-serif">&#151;</font></td>
    <td align="left">&nbsp;</td>
    <td align="right">&nbsp;</td>
    <td align="right"><font size="2" face="Arial, Helvetica, sans-serif">&#151;</font></td>
    <td align="left">&nbsp;</td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td align="left"><font size="2" face="Arial, Helvetica, sans-serif">Loss on
      extinguishment of convertible debt</font></td>
    <td align="right"><font size="2" face="Arial, Helvetica, sans-serif">&nbsp;</font></td>
    <td align="right"><font size="2" face="Arial, Helvetica, sans-serif">&#151;</font></td>
    <td align="left"><font size="2" face="Arial, Helvetica, sans-serif">&nbsp;</font></td>
    <td align="right"><font size="2" face="Arial, Helvetica, sans-serif">&nbsp;</font></td>
    <td align="right"><font size="2" face="Arial, Helvetica, sans-serif">(1.2</font></td>
    <td align="left"><font size="2" face="Arial, Helvetica, sans-serif">)</font></td>
    <td align="right"><font size="2" face="Arial, Helvetica, sans-serif">&nbsp;</font></td>
    <td align="right"><font size="2" face="Arial, Helvetica, sans-serif">(0.1</font></td>
    <td align="left"><font size="2" face="Arial, Helvetica, sans-serif">)</font></td>
    <td align="right"><font size="2" face="Arial, Helvetica, sans-serif">&nbsp;</font></td>
    <td align="right"><font size="2" face="Arial, Helvetica, sans-serif">(0.7</font></td>
    <td align="left"><font size="2" face="Arial, Helvetica, sans-serif">)</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, Helvetica, sans-serif"><b>Income
           (loss) before income taxes and minority interests</b></font></td>
    <td align="right"><font size="2" face="Arial, Helvetica, sans-serif">&nbsp;</font></td>
    <td align="right"><b><font size="2" face="Arial, Helvetica, sans-serif">9.5</font></b></td>
    <td align="left"><b><font size="2" face="Arial, Helvetica, sans-serif">&nbsp;</font></b></td>
    <td align="right"><b><font size="2" face="Arial, Helvetica, sans-serif">&nbsp;</font></b></td>
    <td align="right"><b><font size="2" face="Arial, Helvetica, sans-serif">(5.4</font></b></td>
    <td align="left"><b><font size="2" face="Arial, Helvetica, sans-serif">)</font></b></td>
    <td align="right"><b><font size="2" face="Arial, Helvetica, sans-serif">&nbsp;</font></b></td>
    <td align="right"><b><font size="2" face="Arial, Helvetica, sans-serif">7.1</font></b></td>
    <td align="left"><b><font size="2" face="Arial, Helvetica, sans-serif">&nbsp;</font></b></td>
    <td align="right"><b><font size="2" face="Arial, Helvetica, sans-serif">&nbsp;</font></b></td>
    <td align="right"><b><font size="2" face="Arial, Helvetica, sans-serif">1.9</font></b></td>
    <td align="left"><b><font size="2" face="Arial, Helvetica, sans-serif">&nbsp;</font></b></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td align="left"><font size="2" face="Arial, Helvetica, sans-serif">Income
      tax benefit (expense)</font></td>
    <td align="right"><font size="2" face="Arial, Helvetica, sans-serif">&nbsp;</font></td>
    <td align="right"><font size="2" face="Arial, Helvetica, sans-serif">(0.9</font></td>
    <td align="left"><font size="2" face="Arial, Helvetica, sans-serif">)</font></td>
    <td align="right"><font size="2" face="Arial, Helvetica, sans-serif">&nbsp;</font></td>
    <td align="right"><font size="2" face="Arial, Helvetica, sans-serif">2.7</font></td>
    <td align="left"><font size="2" face="Arial, Helvetica, sans-serif">&nbsp;</font></td>
    <td align="right"><font size="2" face="Arial, Helvetica, sans-serif">&nbsp;</font></td>
    <td align="right"><font size="2" face="Arial, Helvetica, sans-serif">(0.6</font></td>
    <td align="left"><font size="2" face="Arial, Helvetica, sans-serif">)</font></td>
    <td align="right"><font size="2" face="Arial, Helvetica, sans-serif">&nbsp;</font></td>
    <td align="right"><font size="2" face="Arial, Helvetica, sans-serif">0.3</font></td>
    <td align="left"><font size="2" face="Arial, Helvetica, sans-serif">&nbsp;</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, Helvetica, sans-serif"><b>Income
      (loss) before minority interests</b></font></td>
    <td align="right"><font size="2" face="Arial, Helvetica, sans-serif">&nbsp;</font></td>
    <td align="right"><b><font size="2" face="Arial, Helvetica, sans-serif">8.6</font></b></td>
    <td align="left"><b><font size="2" face="Arial, Helvetica, sans-serif">&nbsp;</font></b></td>
    <td align="right"><b><font size="2" face="Arial, Helvetica, sans-serif">&nbsp;</font></b></td>
    <td align="right"><b><font size="2" face="Arial, Helvetica, sans-serif">(2.7</font></b></td>
    <td align="left"><b><font size="2" face="Arial, Helvetica, sans-serif">)</font></b></td>
    <td align="right"><b><font size="2" face="Arial, Helvetica, sans-serif">&nbsp;</font></b></td>
    <td align="right"><b><font size="2" face="Arial, Helvetica, sans-serif">6.5</font></b></td>
    <td align="left"><b><font size="2" face="Arial, Helvetica, sans-serif">&nbsp;</font></b></td>
    <td align="right"><b><font size="2" face="Arial, Helvetica, sans-serif">&nbsp;</font></b></td>
    <td align="right"><b><font size="2" face="Arial, Helvetica, sans-serif">2.2</font></b></td>
    <td align="left"><b><font size="2" face="Arial, Helvetica, sans-serif">&nbsp;</font></b></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td align="left"><font size="2" face="Arial, Helvetica, sans-serif">Minority
      interests</font></td>
    <td align="right"><font size="2" face="Arial, Helvetica, sans-serif">&nbsp;</font></td>
    <td align="right"><font size="2" face="Arial, Helvetica, sans-serif">(0.1</font></td>
    <td align="left"><font size="2" face="Arial, Helvetica, sans-serif">)</font></td>
    <td align="right"><font size="2" face="Arial, Helvetica, sans-serif">&nbsp;</font></td>
    <td align="right"><font size="2" face="Arial, Helvetica, sans-serif">&#151;</font></td>
    <td align="left"><font size="2" face="Arial, Helvetica, sans-serif">&nbsp;</font></td>
    <td align="right"><font size="2" face="Arial, Helvetica, sans-serif">&nbsp;</font></td>
    <td align="right"><font size="2" face="Arial, Helvetica, sans-serif">(0.1</font></td>
    <td align="left"><font size="2" face="Arial, Helvetica, sans-serif">)</font></td>
    <td align="right"><font size="2" face="Arial, Helvetica, sans-serif">&nbsp;</font></td>
    <td align="right"><font size="2" face="Arial, Helvetica, sans-serif">(0.1</font></td>
    <td align="left"><font size="2" face="Arial, Helvetica, sans-serif">)</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 align="left">&nbsp;</td>
  </tr>
  <tr valign="top">
    <td align="left"><font size="2" face="Arial, Helvetica, sans-serif"><b>Net
      income (loss)</b></font></td>
    <td align="right"><font size="2" face="Arial, Helvetica, sans-serif">&nbsp;</font></td>
    <td align="right"><b><font size="2" face="Arial, Helvetica, sans-serif">8.5</font></b></td>
    <td align="left"><b><font size="2" face="Arial, Helvetica, sans-serif">%</font></b></td>
    <td align="right"><b><font size="2" face="Arial, Helvetica, sans-serif">&nbsp;</font></b></td>
    <td align="right"><b><font size="2" face="Arial, Helvetica, sans-serif">(2.7)</font></b></td>
    <td align="left"><b><font size="2" face="Arial, Helvetica, sans-serif">%</font></b></td>
    <td align="right"><b><font size="2" face="Arial, Helvetica, sans-serif">&nbsp;</font></b></td>
    <td align="right"><b><font size="2" face="Arial, Helvetica, sans-serif">6.4</font></b></td>
    <td align="left"><b><font size="2" face="Arial, Helvetica, sans-serif">%</font></b></td>
    <td align="right">&nbsp;</td>
    <td align="right"><b><font size="2" face="Arial, Helvetica, sans-serif">2.1</font></b></td>
    <td align="left"><b><font size="2" face="Arial, Helvetica, sans-serif">%</font></b></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 align="left">&nbsp;</td>
  </tr>
</table>
<p align="left"><font size="2" face="Arial, Helvetica, sans-serif"><b>Third Quarter of 2004 vs. Third Quarter of 2003</b></font></p>
<div style="text-indent:3%">
<p align="left"><font size="2" face="Arial, Helvetica, sans-serif">According to preliminary estimates of semiconductor industry data in the third quarter of 2004, the semiconductor industry experienced year-over-year growth of approximately 27% for the TAM and approximately 25% for the SAM; on a sequential basis, revenues increased approximately 3% for the TAM and 2% for the SAM. For the third quarter of 2004, we reported a 23.7% increase in revenues compared to the third quarter of 2003, slightly below the SAM performance, while on a sequential basis, our revenues increased 2.7%, slightly above the SAM. </font></p></div>
<div style="text-indent:3%">
<p align="left"><font size="2" face="Arial, Helvetica, sans-serif"><i>Net revenues</i>.&nbsp;&nbsp;&nbsp;&nbsp;Net sales increased by 23.7% from $1,803 million in the third quarter of 2003 to $2,231 million in the third quarter of 2004, and increased sequentially by 2.7% from $2,172 million in the second quarter of 2004. On a year-over-year basis, the increase in our net sales in the third quarter of 2004 was primarily due to higher sales volumes as our average selling prices declined by approximately 4% due to strong competitive pressure. Since the amount of other revenues was not material, net revenues increased at the same ratio as net sales, 23.7%, from $1,803 million in the third quarter of 2003 to $2,231 million in the third quarter of 2004. Net revenue increases in the Memory
Products Group and the Discrete and Standard ICs Group were significantly above the company average; the Consumer and Microcontroller Groups increased at a rate closer to the company average, while the Telecommunications, Peripherals and Automotive Groups registered a below-company average revenue increase, notably in the Telecommunications group, where revenues remained basically flat compared to the third quarter of 2003.</font></p></div>
<p align="center"><font size="2" face="Arial, Helvetica, sans-serif">14</font></p>
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<div style="text-indent:3%">
<p align="left"><font size="2" face="Arial, Helvetica, sans-serif">The Telecommunications, Peripherals and Automotive Groups&#8217; net revenues increased by 8.4% compared to the third 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, Audio and Computer Peripherals groups while our Telecommunications group revenues were nearly flat. Telecommunications revenues were impacted negatively by pricing pressure and lower volumes. The Discrete and Standard ICs Group&#8217;s net revenues increased by 39.6% 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 43.8%
as a result of a significant volume increase, particularly in Flash and other Memories. The Consumer and Microcontroller Groups&#8217; net revenues increased 25.2%, mainly due to a strong increase in volumes in digital consumer products, particularly in Imaging, Microcontroller, Displays and TV, and Set-Top Box. </font></p></div>
<div style="text-indent:3%">
<p align="left"><font size="2" face="Arial, Helvetica, sans-serif">On a sequential basis, the main revenue increase was generated by the Consumer and Microcontroller Groups which posted 9.8% growth compared to the second quarter of 2004; Telecommunications, Peripherals and Automotive Groups revenues increased sequentially by 2.6% in the third quarter of 2004 compared to the second quarter of 2004; Discrete and Standard ICs Group revenues slightly increased and Memory Products Group revenues slightly decreased.</font></p></div>
<div style="text-indent:3%">
<p align="left"><font size="2" face="Arial, Helvetica, sans-serif">In the third
    quarter of 2004, we maintained our focus on differentiated ICs, which accounted
    for the largest share, equivalent to approximately 65% of our net revenues,
    slightly above the 64% recorded in the second quarter of 2004. Differentiated
    ICs fostered close relationships with customers, resulting in early knowledge
    of their evolving requirements and opportunities to access their markets
    for other products. Analog ICs (including mixed-signal ICs), the majority
    of which are also differentiated ICs, accounted for approximately 43% of
    our net revenues in the third quarter of 2004, at the same level as the second
    quarter of 2004. 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. On a
    year-over-year basis, stronger price declines were registered in Telecommunications,
    Peripherals and Automotive Groups and Consumer Microcontroller Groups, while
    commodity products were benefiting thus far from a more favorable pricing
    environment with no material variation in prices during 2004 compared to
  the third quarter of 2003.</font></p>
</div>
<div style="text-indent:3%">
<p align="left"><font size="2" face="Arial, Helvetica, sans-serif">By location of order shipment, the revenues increases in the third quarter of 2004 compared to the third quarter of 2003 came from all regions, reflecting the relative strength 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, Helvetica, sans-serif">In the third quarter of 2004, we had several large customers, with the largest one, the Nokia group of companies, accounting for approximately 17% of our revenues, equivalent to its relative importance in the third quarter of 2003. In the second quarter of 2004, the Nokia group of companies accounted for approximately 15% of our revenues. Our top ten original equipment manufacturer customers accounted for approximately 44% of our net revenues for the third quarter of 2004 compared to approximately 46% in the same period in 2003. In the second quarter of 2004, our top ten original equipment manufacturer customers accounted for approximately 43% of our net revenues.</font></p></div>
<p align="center"><font size="2" face="Arial, Helvetica, sans-serif">15</font></p>
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<div style="text-indent:3%">
<p align="left"><font size="2" face="Arial, Helvetica, sans-serif"><i>Gross profit</i>.&nbsp;&nbsp;&nbsp;&nbsp;Our
    gross profit improved by 33.6%, from $632 million in the third quarter of
    2003 to $845 million in the third quarter of 2004. Gross margin improved
    from 35.1% in the third quarter of 2003 to 37.9% in the third quarter of
    2004. This margin improvement was mainly due to the strong increase in our
    net revenues and overall improved manufacturing performances, which was partially
    offset by the average selling price declines and the negative impact of the
    decline in value of the U.S. dollar exchange rate. The impact of changes
    in foreign exchange rates on gross profit in the third quarter of 2004 compared
    to the third 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;<i>&#8212;</i>Impact of Changes in Exchange Rates&#8221;.  </font></P>
</div>
<div style="text-indent:3%"><p align="left"><font size="2" face="Arial, Helvetica, sans-serif"><i>Selling, general and administrative expenses</i>.&nbsp;&nbsp;&nbsp;&nbsp;Selling, general and administrative expenses increased 21.5% from $191 million in the third quarter of 2003 to $233 million in the third quarter of 2004. This increase was largely due to the higher spending on marketing activities associated with new initiatives to broaden our customer base and to the decline in value of the U.S. dollar.  As a percentage of net revenues, selling, general and administrative expenses decreased slightly from 10.6% in the third quarter of 2003 to 10.4% in the third quarter of 2004.</font></P></div>
<div style="text-indent:3%"><p align="left"><font size="2" face="Arial, Helvetica, sans-serif"><i>Research and development expenses</i>.&nbsp;&nbsp;&nbsp;&nbsp;Research and development expenses increased 26.7%, from $302 million in the third quarter of 2003 to $384 million in the third quarter of 2004. This increase resulted primarily from higher spending on product design and technology for our core activities, the impact of acquisitions and from the effect of the decline in value of the U.S. dollar. We continued to invest heavily in research and development during the third quarter of 2004, having increased our research and development staff by approximately 1,500 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 16.8% in the third quarter of 2003 to 17.2% in the third quarter of 2004.</font></P></div>
<div style="text-indent:3%"><p align="left"><font size="2" face="Arial, Helvetica, sans-serif"><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, foreign currency gains and losses, the costs of certain activities relating to intellectual property and gains or losses from sales of assets. In the third quarter of 2004, the net effect of these items resulted in expense of $3 million compared to a $10 million expense in the third quarter of 2003. The main items recorded as income in the third quarter of 2004 were $9 million in income from research and development funding and $10 million of exchange gains. The main items recorded as
expense were $13 million for start-up costs, related mainly to our 150mm fab in Singapore and to our 200mm fab in Agrate (Italy), $7 million for patent claim costs and $2 million of other miscellaneous charges. </font></P></div>
<div style="text-indent:3%"><p align="left"><font size="2" face="Arial, Helvetica, sans-serif"><i>Impairment, restructuring charges and other related closure costs</i>.&nbsp;&nbsp;&nbsp;&nbsp;In the third quarter of 2004, we recorded a $12 million charge for impairment, restructuring charges and other related closure costs, of which $6 million related to our 150mm restructuring plan mainly associated with the closure of our Rennes (France) plant, $3 million related to an impairment of a financial investment in which we have a minority participation, and $2 million related to personnel reduction.  In the 2003 third quarter, we recorded a $193 million charge for impairment, restructuring charges and other related closure costs. </font></P></div>
<div style="text-indent:3%"><p align="left"><font size="2" face="Arial, Helvetica, sans-serif"><i>Operating income</i>.&nbsp;&nbsp;&nbsp;&nbsp;In the third quarter of 2004, the operating income increased to $213 million from an operating loss of $64 million in the third quarter of 2003. The operating loss of $64 million was due to the effects of the 2003 restructuring plan discussed above.  When excluding the impact of the 2003 restructuring plan, our operating income in the third quarter 2004 also improved over the third quarter of 2003 primarily due to the increased sales volume, improved manufacturing performance, and lower operating expenses as a percentage of net revenues. The impact of changes in foreign exchange rates on operating income in the third quarter of 2004 compared to the third quarter of 2003
is estimated to be negative because the decline in value of the U.S. dollar versus the euro and other currencies negatively impacted cost of sales and operating expenses, and the currency effect on these costs were higher than the favorable impact on net sales. See &#8220;<i>&#8212;</i>Impact of Changes in Exchange Rates&#8221;.</font></P>
</div>
<p align="center"><font size="2" face="Geneva, Arial, Helvetica, sans-serif">16</font></p>
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<div style="text-indent:3%"><p align="left"><font size="2" face="Arial, Helvetica, sans-serif">In the third quarter of 2004, operating income improved in all of our major product groups when compared to the third quarter of 2003, except for the Telecommunications, Peripherals and Automotive Groups. Operating income for the Discrete and Standard ICs Group&#8217;s increased to $109 million in the third quarter of 2004 from $43 million in the third quarter of 2003, equivalent to an operating margin of 25.8% in the third quarter of 2004 compared to 14.2% in the third quarter of 2003. The significant increase in Discrete and Standard ICs Group operating income was due to a strong rebound in sales, a more favorable product mix, a more stable price environment and an improvement in manufacturing performance. Memory
Products Group operating income was $27 million in the third quarter of 2004 significantly improving from an operating loss of $8 million in the third quarter of 2003. This improvement in operating income was due to a significant increase in sales, improved product mix and stable price environment. Operating income in our Consumer and Microcontroller Groups was $46 million in the third quarter 2004, increasing from $29 million in the third quarter of 2003, resulting from the increase in sales. Telecommunications, Peripherals and Automotive Groups operating income decreased from $122 million in the third quarter of 2003 to $113 million in the third quarter of 2004. This deterioration 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 research and development 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, Helvetica, sans-serif"><i>Interest expense, net</i>.&nbsp;&nbsp;&nbsp;&nbsp;Our
      interest expense, net decreased from a charge of $12 million in the third
      quarter of 2003 to a break-even result in the third quarter of 2004. This
      improvement was mainly due to the decrease in interest expense resulting
      from the repurchases of our 2010 Bonds completed in 2003 and 2004. Interest
      income on our available cash was $11 million in the third quarter of 2004
      compared to $8 million in the third quarter of 2003. Interest expense,
      which is mainly related to long-term debt, decreased to $11 million in
      the third quarter of 2004 from $20 million in the third quarter of 2003
      due to the redemption of our remaining 2010 Bonds and the redemption of
      our 2009 Notes during the third quarter of 2004. See &#8220;Overview<i>&#8212;</i>Other Developments in the Third Quarter of 2004&#8221;. </font></P>
</div>
<div style="text-indent:3%"><p align="left"><font size="2" face="Arial, Helvetica, sans-serif"><i>Equity in loss of joint venture.</i>&nbsp;&nbsp;&nbsp;&nbsp;In the third quarter of 2004, a loss of $2 million was accrued in relation to our investment in SuperH, Inc., the joint venture we formed with Renesas, Ltd. in 2001, which is currently under restructuring.</font></P></div>
<div style="text-indent:3%"><p align="left"><font size="2" face="Arial, Helvetica, sans-serif"><i>Loss on extinguishment of convertible debt.</i>&nbsp;&nbsp;&nbsp;&nbsp;In the third quarter of 2004, no loss was recorded in relation to the redemption of approximately $910 million aggregate principal amount of our 2009 Notes for a cash amount of approximately $806 million and the redemption of our remaining outstanding 2010 Bonds for a total cash amount paid of $131 million, see &#8220;Overview&#8212;Other Developments in the Third Quarter of 2004&#8221;. We did not incur any charge because the price paid corresponded to the accreted value. In the third quarter of 2003, we registered a non-operating pre-tax charge of $22 million relating to the repurchase of approximately $940 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, Helvetica, sans-serif"><i>Income tax expense.</i>&nbsp;&nbsp;&nbsp;&nbsp;In the third quarter of 2004, we registered an income tax expense of $20 million. This reduced amount is mainly due to one-time benefits of $9 million resulting from the revaluation of the deferred tax rate in a jurisdiction due to a change of law and to a research and development tax credit of $3 million for prior years. The effective tax rate was 9.5% in the third quarter of 2004, compared to 15.0% in the third quarter of 2003. Without these extraordinary benefits, the third quarter 2004 effective tax rate would have been 14.3%, including the benefit from the restructuring charges, which are incurred in jurisdictions with high tax rates. 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>
<p align="center"><font size="2" face="Geneva, Arial, Helvetica, sans-serif">17</font></p>
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<div style="text-indent:3%"><p align="left"><font size="2" face="Arial, Helvetica, sans-serif"><i>Net income.</i> For the third quarter of 2004, we had net income of $189 million, compared to net  income of $148 million for the second quarter of 2004 and net loss of $50 million for the third quarter of 2003. Net income 2003 was negatively impacted by an after tax restructuring charge of $130 million. Basic and diluted earnings per share for the third quarter of 2004 were $0.21 and $0.20, respectively, compared to basic and diluted earnings of $0.17 and $0.16, respectively, per share for the second quarter of 2004, and to a basic and diluted loss per share of $0.06 in the third quarter of 2003. </font></P></div>
<p align="left"><font size="2" face="Arial, Helvetica, sans-serif"><b>First Nine Months of 2004 vs. First Nine Months of 2003</b></font></p>
<div style="text-indent:3%"><p align="left"><font size="2" face="Arial, Helvetica, sans-serif">For the first nine months of 2004, according to preliminary estimates of the semiconductor industry data, semiconductor industry experienced revenue increases of approximately 33% for the TAM and of approximately 30% for the SAM, compared to the first nine months of 2003; our revenues for the first nine months increased approximately 25.5% compared to the first nine months of 2003, below the growth rates of the TAM and the SAM. </font></P></div>
<div style="text-indent:3%">
<p align="left"><font size="2" face="Arial, Helvetica, sans-serif"><i>Net revenues</i>.&nbsp;&nbsp;&nbsp;&nbsp;Net
      sales increased by 25.5%, from $5,122 million in the first nine months
      of 2003 to $6,429 million in the first nine months of 2004. On a year-over-year
      basis, the increase in our net sales in the first nine months of 2004 was
      primarily due to higher volumes and improved product mix, while our average
      selling prices declined by approximately 5% due to continuing pricing pressures.
      Other revenues amounted to $3 million slightly above the $2 million registered
      in the first nine months of 2003. On a year-over-year basis, net revenues
      increased by 25.5%, from $5,124 million in the first nine months of 2003
      to $6,432 million in the first nine months of 2004. The largest contributors
      to the revenue increase were Memory Product Group, Discrete and Standard
      ICs Group and Consumer Microcontroller Groups, while Telecommunications
      Peripherals Group&#8217;s revenue increase was below the company average. </font></P>
</div>
<div style="text-indent:3%"><p align="left"><font size="2" face="Arial, Helvetica, sans-serif">The Telecommunications, Peripherals and Automotive Groups&#8217; net revenues increased by 7.6% in the first nine months of 2004 compared to the first nine months of 2003, primarily as a result of an increase in volume and a more favorable product mix. The Automotive and Audio group was the major contributor to the revenue increase; Computer Peripherals revenues increased at a lower rate; and Telecommunications revenues were flat compared to 2003. Telecommunications revenues were impacted negatively by pricing pressure and lower volumes. The Discrete and Standard ICs Group&#8217;s net revenues increased by 36.9% due to higher volumes and improved product mix in almost all product families including Transistors,
Discrete and Standard Commodities. The Memory Products Group&#8217;s net revenues increased by 62.9% as a result of a strong volume increase and improved product mix, including the revenue contribution as a result of the acquisitions of Incard and Proton realized in the second quarter of 2003.  In particular, Flash memory revenues increased by approximately 75% compared to the first nine months of 2003. The Consumer and Microcontroller Groups&#8217; net revenues increased by 25.7%, mainly due to a strong increase in sales volumes in most of its business units: Set-Top Box, Imaging, Display and TV and Microcontrollers. All product groups experienced declines in selling prices. </font></P></div>
<div style="text-indent:3%"><p align="left"><font size="2" face="Arial, Helvetica, sans-serif">For the first nine months of 2004, we maintained our focus on Differentiated ICs, which accounted for approximately 66% of our net revenues, compared to approximately 69% in the first nine months of 2003. Analog ICs (including mixed-signal ICs), the majority of which are also differentiated ICs, accounted for 44% of our net revenues in the first nine months of 2004, compared to 50% in the first nine months of 2003.</font></P></div>
<div style="text-indent:3%"><p align="left"><font size="2" face="Arial, Helvetica, sans-serif">By location of order shipment, the largest revenues increase in the first nine months of 2004 compared to the first nine months of 2003 came from Emerging Markets and North America, 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, Helvetica, sans-serif">During the first nine months of 2004, we had several large customers, with the largest one, the Nokia group of companies, accounting for approximately 16% of our revenues, decreasing from approximately 18% in the first nine months of 2003. Our top ten original equipment manufacturer customers accounted for approximately 43% of our net revenues during the first nine months of 2004 compared to approximately 47% in the first nine months of 2003.</font></P></div>
<p align="center"><font size="2" face="Geneva, Arial, Helvetica, sans-serif">18</font></p>
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<div style="text-indent:3%">
<div style="text-indent:3%">
<p align="left"><font size="2" face="Arial, Helvetica, sans-serif"><i>Gross profit</i>.&nbsp;&nbsp;&nbsp;&nbsp;Our gross profit increased by 31.5% in the first nine months of 2004, from $1,806 million in the first nine months of 2003 to $2,376 million in the first nine months of 2004. Gross margin increased from 35.2% in the first nine months of 2003 to 36.9% in the first nine months of 2004. This margin increase was mainly due to higher sales volumes, improved product mix 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 nine months of 2004 compared to the first nine months 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>
<div style="text-indent:3%">
<p align="left"><font size="2" face="Arial, Helvetica, sans-serif"><i>Selling, general and administrative expenses</i>.&nbsp;&nbsp;&nbsp;&nbsp;Selling, general and administrative expenses increased 26.0% from $557 million in the first nine months of 2003 to $702 million in the first nine months of 2004. This increase was largely due to the higher spending on 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 remained flat at 10.9% of net revenues in the first nine months of 2004 compared to the first nine months of 2003. </font></p></div>
<div style="text-indent:3%">
<p align="left"><font size="2" face="Arial, Helvetica, sans-serif"><i>Research and development expenses</i>.&nbsp;&nbsp;&nbsp;&nbsp;Research and development expenses increased 27.9%, from $883 million in the first nine months of 2003 to $1,131 million in the first nine months of 2004. This increase resulted primarily from greater spending on product design and technology for our core activities, acquisitions and the impact of the decline in value of the U.S. dollar. We continued to invest heavily in research and development during the third quarter of 2004, and we increased our research and development staff by approximately 1,500 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 17.2% in the first nine months of 2003 to 17.6% in the first nine months of 2004. </font></p></div>
<div style="text-indent:3%">
<p align="left"><font size="2" face="Arial, Helvetica, sans-serif"><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, foreign currency gains and losses, the costs of certain activities relating to intellectual property and gains and losses from sales of assets. In the first nine months of 2004, the net effect of these items resulted in expense of $13 million compared to an income of $8 million in the first nine months of 2003. The main items recorded in the first nine months of 2004 as income were: </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, Helvetica, sans-serif">&#149;</font></td>
<td>
<font size="2" face="Arial, Helvetica, sans-serif">$37 million as research and development funding, </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, Helvetica, sans-serif">&#149;</font></td>
<td>
<font size="2" face="Arial, Helvetica, sans-serif">$19 million as foreign exchange
transaction gains, 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, Helvetica, sans-serif">&#149;</font></td>
<td>
<font size="2" face="Arial, Helvetica, sans-serif">$6 million of gains on sales of non-current assets. </font></td>
</tr>
</table>
<p align="left"><font size="2" face="Arial, Helvetica, sans-serif">The main items recorded as expense were: </font></p>
<table width="100%" cellspacing="0" cellpadding="0" border="0">
<tr valign="top">
<td width="3%"></td>
<td width="3%">
<font size="2" face="Arial, Helvetica, sans-serif">&#149;</font></td>
<td>
<font size="2" face="Arial, Helvetica, sans-serif">$45 million in start-up costs mainly for our 300mm fabrication facilities in Crolles (France), Catania (Italy) and for our new 150mm plant in Singapore, </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, Helvetica, sans-serif">&#149;</font></td>
<td>
<font size="2" face="Arial, Helvetica, sans-serif">$21 million as patent claim
costs, 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, Helvetica, sans-serif">&#149;</font></td>
<td>
<font size="2" face="Arial, Helvetica, sans-serif">$9 million as other non-recurring miscellaneous expenses. </font></td>
</tr>
</table>
<div style="text-indent:3%">
<p align="left"><font size="2" face="Arial, Helvetica, sans-serif"><i>Impairment, restructuring charges and other related closure costs</i>.&nbsp;&nbsp;&nbsp;&nbsp;In the first nine months of 2004, we recorded $57 million in impairment, restructuring charges and other related closure costs, while in the first nine months of 2003 we recorded an expense of $193 million, primarily reflecting costs related to our 150mm restructuring plan announced in October 2003. </font></p></div>
<p align="center"><font size="2" face="Geneva, Arial, Helvetica, sans-serif">19</font></p>
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<a name="p20"></a>

<div style="text-indent:3%">
<p align="left"><font size="2" face="Arial, Helvetica, sans-serif"><i>Operating
      income</i>.&nbsp;&nbsp;&nbsp;&nbsp;Operating
    income increased from $181 million in the first nine months of 2003 to $473
    million in the first nine months of 2004, primarily as a result of the significant
    increase in our net revenues, improved gross margin and reduced operating
    expenses, which included in the first nine months of 2003  a $193
    million charge related to impairment, restructuring charges and other related
    closure costs compared to a $57 million charge in the first nine months of
    2004. The impact of changes in foreign exchange rates on operating income
    in the first nine months of 2004 compared to the first nine months 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, Helvetica, sans-serif">In the first nine months of 2004, the operating income of our product groups, with the exception of Telecommunications, Peripherals and Automotive Groups, improved compared to the first nine months of 2003. The operating income of our Discrete and Standard ICs Group significantly increased from $90 million in the first nine months of 2003 to $252 million in the first nine months of 2004, and as a percentage of net revenues from 10.3% to 21.1%, 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 $47 million loss registered in the first nine months of 2003 to $71 million in operating income in the
first nine months of 2004, resulting from a strong increase in revenues, improved manufacturing performance and improved product mix. Our Consumer and Microcontroller Groups&#8217; operating income was $86 million in the first nine months of 2004, increasing from $49 million in the first nine months of 2003, as a result of increased sales. Our Telecommunications, Peripherals and Automotive Groups&#8217; operating income decreased from $395 million in the first nine months of 2003 to $336 million in the first nine months 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>
<div style="text-indent:3%">
<p align="left"><font size="2" face="Arial, Helvetica, sans-serif"><i>Interest expense, net</i>.&nbsp;&nbsp;&nbsp;&nbsp;Our
    interest expense, net, decreased from a charge of $45 million in the first
    nine months of 2003 to a charge of $8 million in the first nine months 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.
    Interest expense, which is mainly related to our long-term debt, decreased
    to $39 million in the first nine months of 2004 from $72 million in the first
    nine months of 2003 due to the repurchases of our 2010 Bonds completed in
    2003 and 2004. See &#8220;Overview&#8212;Other Developments in
the Third Quarter of 2004&#8221;.</font></p>
</div>
<div style="text-indent:3%">
<p align="left"><font size="2" face="Arial, Helvetica, sans-serif"><i>Equity in loss of joint venture</i>.&nbsp;&nbsp;&nbsp;&nbsp;A loss of $2 million was accrued in the first nine months of 2004 relating to our investment in SuperH, Inc., the joint venture we formed with Renesas, Ltd. in 2001 compared to a loss of $1 million incurred in the first nine months of 2003. The joint venture is currently under restructuring.</font></p></div>
<div style="text-indent:3%">
<p align="left"><font size="2" face="Arial, Helvetica, sans-serif"><i>Loss on extinguishment of convertible debt</i>.&nbsp;&nbsp;&nbsp;&nbsp;In the first nine months of 2004, we incurred a non-operating pre-tax charge of $4 million compared to $37 million in the first nine months of 2003. This charge of $4 million was incurred in the second quarter of 2004 and was related to the repurchase of approximately $307 million of the aggregate principal amount at maturity of our 2010 Bonds while the charge of $37 million recorded in the first nine months of 2003 related to the repurchase of approximately $1,583 million of the aggregate principal amount at maturity of our 2010 Bonds. The redemption on July 9, 2004 of remaining outstanding 2010 Bonds for a total cash amount paid of $131
million outstanding 2010 Bonds and the redemption of approximately $910 million outstanding 2009 Notes on September 22, 2004 did not result in any loss as the purchase price corresponded to the accreted value. </font></p></div>
<div style="text-indent:3%">
<p align="left"><font size="2" face="Arial, Helvetica, sans-serif"><i>Income tax expense</i>.&nbsp;&nbsp;&nbsp;&nbsp;Income tax expense amounted to $42 million in the first nine months of 2004, compared to an income tax benefit of $14 million in the first nine months of 2003. For the first nine months of 2004, the effective tax rate was 9.1%.The 2004 effective tax rate benefited from the reversal of some previous year accruals in one of our jurisdictions and the favorable impact of a change in the tax law, which increased deferred tax assets. 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>
<p align="center"><font size="2" face="Geneva, Arial, Helvetica, sans-serif">20</font></p>
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<a name="p21"></a>

<div style="text-indent:3%">
<p align="left"><font size="2" face="Arial, Helvetica, sans-serif"><i>Net income</i>.&nbsp;&nbsp;&nbsp;&nbsp;In the first nine months of 2004, our net income was $414 million, a 278.4% increase compared to net income of $109 million reported in the first nine months of 2003. The net income of the first nine months 2003 was significantly reduced by the after tax amount of $130 million of impairment, restructuring and other closure related costs, net of tax. Basic and diluted earnings per share for the first nine months of 2004 were $0.46 and $0.45 respectively, compared to basic and diluted earnings of $0.12 per share for the first nine months of 2003. </font></p></div>
<p align="left"><font size="2" face="Arial, Helvetica, sans-serif"><b><i>Impact of Changes in Exchange Rates</i></b></font></p>
<div style="text-indent:3%">
<p align="left"><font size="2" face="Arial, Helvetica, sans-serif">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, Helvetica, sans-serif">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>
<div style="text-indent:3%">
<p align="left"><font size="2" face="Arial, Helvetica, sans-serif">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 nine months of 2004, the U.S. dollar declined in value, particularly against the euro when
compared to the first nine months 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 nine months 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 $1.22 in the first nine months of 2004 and &euro;1.00 for $1.11 in the first nine months of 2003. The average rate of the euro to the U.S. dollar was &euro;1.00 for $1.21 in the third quarter of 2004. A continuation in the decline of the U.S. dollar compared to the other major currencies that 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, Helvetica, sans-serif">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. In order to further reduce the exposure to U.S. dollar exchange rate fluctuations, in the third quarter of 2004, we hedged certain line items on our income statement, in particular with respect to most of the research and development expenses located in the euro zone. There is no guarantee, however, 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 in the past years. 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>
<p align="center"><font size="2" face="Geneva, Arial, Helvetica, sans-serif">21</font></p>
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<a name="p22"></a>

<div style="text-indent:3%">
<p align="left"><font size="2" face="Arial, Helvetica, sans-serif">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 September 25, 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, Helvetica, sans-serif">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, Helvetica, sans-serif"><b>Liquidity and Capital Resources</b></font></p>
<div style="text-indent:3%">
<p align="left"><font size="2" face="Arial, Helvetica, sans-serif">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 reduce our short-term
    exposure to changes in exchange rates, to optimize the use of credit facilities
    and funds available, and to obtain the best possible market conditions for
    our financial and treasury operations. Our treasury controls include systematic
    reporting to senior management and are subject to internal audits. Most of
    our treasury activities are centralized, with any local treasury activities
    subject to oversight from our head treasury office. All of our cash and cash
equivalents are held in U.S. dollars and are placed with financial institutions
    rated &#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. At the end of the
    third quarter of 2004, there had been no material changes in foreign currency
    operations and hedging transactions
    exposures from those disclosed in our Annual Report on Form 20-F for the
    fiscal year ended December 31, 2003.</font></p>
</div>
<div style="text-indent:3%">
<p align="left"><font size="2" face="Arial, Helvetica, sans-serif">At September
    25, 2004, cash and cash equivalents totaled $601 million, compared to $2,998
    million at December 31, 2003, and marketable securities totaled $1,030 million
    at September 25, 2004, up from zero at December 31, 2003. On September 22,
    2004, we redeemed for cash approximately $806 million aggregate amount at
    maturity of our outstanding 2009 Notes, or approximately 99% of the total
    amount initially
    issued. At September 25, 2004, $8 million aggregate principal amount at maturity
    was
    outstanding,
    or about 0.9% of the total initial issue, which was accounted for as current
  portion of long-term debt due to the announced redemption.  </font></p>
</div>
<div style="text-indent:3%">
<p align="left"><font size="2" face="Arial, Helvetica, sans-serif">In the first
    nine months 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. We determined that this derivative element
    had no material impact on the interim financial statements at September 25,
    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 size="2" face="Geneva, Arial, Helvetica, sans-serif">22</font></p>
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<a name="p23"></a>

<p align="left"><font size="2" face="Arial, Helvetica, sans-serif"><b><i>Liquidity </i></b></font></p>
<div style="text-indent:3%">
<p align="left"><font size="2" face="Arial, Helvetica, sans-serif"><i>Net cash from operating activities</i>.&nbsp;&nbsp;&nbsp;&nbsp;The major source of cash during the first nine months of 2004 and in prior periods was cash provided by operating activities. Our net cash from operating activities totaled $1,697 million in the first nine months of 2004, compared to $1,142 million in the first nine months of 2003.</font></p></div>
<div style="text-indent:3%">
<p align="left"><font size="2" face="Arial, Helvetica, sans-serif">Net cash from net income, adjusted for non-cash items, was $1,762 million in the first nine months of 2004, an increase of approximately 15% from $1,528 million in the first nine months of 2003, mainly due to the increase in net income and in depreciation and amortization.</font></p></div>
<div style="text-indent:3%">
<p align="left"><font size="2" face="Arial, Helvetica, sans-serif">Changes in our assets and liabilities resulted in net cash used of $65 million in the first nine months of 2004, compared to net cash used of $386 million in the first nine months of 2003. In the first nine months of 2004, due to the increase in our revenues, the increase in our trade accounts receivable used net cash of $256 million, compared to net cash of $180 million in the first nine months of 2003. Our lower inventory levels used net cash of $77 million in the first nine months of 2004, significantly below the net cash of $120 million used in the first nine months of 2003. Finally, our trade payables and other assets and liabilities resulted in $268 million in available cash in the first nine months of 2004,
substantially higher than the $86 million used in the first nine months of 2003, mainly due to the increase in our trade payables. </font></p></div>
<div style="text-indent:3%">
<p align="left"><font size="2" face="Arial, Helvetica, sans-serif"><i>Net cash used in investing activities</i>.&nbsp;&nbsp;&nbsp;&nbsp;Net cash used in investing activities was $2,724 million in the first nine months of 2004, compared to $2,088 million in the first nine months 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 nine months of 2004 and $1,101 million in the first nine months of 2003. Excluding marketable securities, cash used in investing activities was $1,694 million in the first nine months of 2004, approximately 72% higher than the $987 million cash used in investing activities in the first nine months of 2003. Payment for the purchase of tangible
assets was $1,627 million for the first nine months of 2004, an increase of approximately 100% from $815 million in the first nine months of 2003. In the first nine months of 2004, cash used for investments in intangible and financial assets and payments for acquisitions was $64 million compared to $37 million in the first nine months of 2003. </font></p></div>
<div style="text-indent:3%">
<p align="left"><font size="2" face="Arial, Helvetica, sans-serif"><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%" border="0" cellpadding="0" cellspacing="0">
<tr valign="top">
  <td align="left">&nbsp;</td>
  <td align="left">&nbsp;</td>
  <td align="right">&nbsp;</td>
  <td colspan="4" align="center"><font size="1" face="Arial, Helvetica, sans-serif"><b>(unaudited)</b><br>
      <b>Nine Months Ended</b></font></td>
  <td align="left">&nbsp;</td>
</tr>
<tr valign="top">
<td align="left"><font size="1" face="Arial, Helvetica, sans-serif">&nbsp;</font></td>
<td align="left">&nbsp;</td>
<td align="right"><hr width="100%" size="1" noshade></td>
<td colspan="4" align="center"><hr width="100%" size="1" noshade>  <font size="1" face="Arial, Helvetica, sans-serif">&nbsp;</font></td>
<td align="left">&nbsp;</td>
</tr>
<tr valign="top">
<td align="left"><font size="1" face="Arial, Helvetica, sans-serif">&nbsp;</font></td>
<td align="left">&nbsp;</td>
<td align="right">&nbsp;</td>
<td align="center"><font size="1" face="Arial, Helvetica, sans-serif"><b>September 25,<br>
  2004</b></font></td>
<td align="left"><font size="1" face="Arial, Helvetica, sans-serif">&nbsp;</font></td>
<td align="right"><font size="1" face="Arial, Helvetica, sans-serif">&nbsp;</font></td>
<td align="center"><font size="1" face="Arial, Helvetica, sans-serif"><b>September 27,<br>
  2003</b></font></td>
<td align="left">&nbsp;</td>
</tr>
<tr valign="top">
  <td align="left">&nbsp;</td>
  <td align="left">&nbsp;</td>
  <td align="right"><hr width="100%" size="1" noshade></td>
  <td align="center"><hr width="100%" size="1" noshade></td>
  <td align="center">&nbsp;</td>
  <td align="center"><hr width="100%" size="1" noshade></td>
  <td align="center"><hr width="100%" size="1" noshade></td>
  <td align="left">&nbsp;</td>
</tr>
<tr valign="top">
<td align="left"><font size="1" face="Arial, Helvetica, sans-serif">&nbsp;</font></td>
<td width="2%" align="left">&nbsp;</td>
<td align="right">&nbsp;</td>
<td colspan="4" align="center"><font size="1" face="Arial, Helvetica, sans-serif"><b>(in millions)</b></font></td>
<td align="left">&nbsp;</td>
</tr>
<tr valign="top" bgcolor="#eeeeee">
<td align="left"><font size="2" face="Arial, Helvetica, sans-serif">Net cash from operating activities</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, Helvetica, sans-serif">1,697</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, Helvetica, sans-serif">1,142</font></td>
<td width="2%" align="left">&nbsp;</td>
</tr>
<tr valign="top">
<td align="left"><font size="2" face="Arial, Helvetica, sans-serif">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, Helvetica, sans-serif">(2,724</font></td>
<td align="left"><font size="2" face="Arial, Helvetica, sans-serif">)</font></td>
<td align="right">&nbsp;</td>
<td align="right"><font size="2" face="Arial, Helvetica, sans-serif">(2,088</font></td>
<td align="left"><font size="2" face="Arial, Helvetica, sans-serif">)</font></td>
</tr>
<tr valign="top" bgcolor="#eeeeee">
<td align="left"><font size="2" face="Arial, Helvetica, sans-serif">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, Helvetica, sans-serif">1,030</font></td>
<td align="left">&nbsp;</td>
<td align="right">&nbsp;</td>
<td align="right"><font size="2" face="Arial, Helvetica, sans-serif">1,101</font></td>
<td align="left">&nbsp;</td>
</tr>
<tr valign="top">
  <td align="left">&nbsp;</td>
  <td align="left">&nbsp;</td>
  <td align="right"><hr width="100%" size="1" noshade></td>
  <td align="right"><hr width="100%" size="1" noshade></td>
  <td align="left">&nbsp;</td>
  <td align="right"><hr width="100%" size="1" noshade></td>
  <td align="right"><hr width="100%" size="1" noshade></td>
  <td align="left">&nbsp;</td>
</tr>
<tr valign="top" bgcolor="#EEEEEE">
<td align="left"><font size="2" face="Arial, Helvetica, sans-serif"><b>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Net operating cash flow</b></font></td>
<td align="left">&nbsp;</td>
<td align="right"><font size="2" face="Arial, Helvetica, sans-serif"><b>$</b></font></td>
<td align="right"><font size="2" face="Arial, Helvetica, sans-serif"> <b>3</b></font></td>
<td align="left">&nbsp;</td>
<td align="right"><font size="2" face="Arial, Helvetica, sans-serif"><b>$</b></font></td>
<td align="right"><font size="2" face="Arial, Helvetica, sans-serif"> <b>155</b></font></td>
<td align="left">&nbsp;</td>
</tr>
<tr valign="top">
  <td align="left">&nbsp;</td>
  <td align="left">&nbsp;</td>
  <td align="right"><hr width="100%" size="2" noshade></td>
  <td align="right"><hr width="100%" size="2" noshade></td>
  <td align="left">&nbsp;</td>
  <td align="right"><hr width="100%" size="2" noshade></td>
  <td align="right"><hr width="100%" size="2" noshade></td>
  <td align="left">&nbsp;</td>
</tr>
</table>
<div style="text-indent:3%">
<p align="left"><font size="2" face="Arial, Helvetica, sans-serif">We generated net operating cash flow of $3 million in the first nine months of 2004, compared to net operating cash flow of $155 million in the first nine months of 2003. This deterioration resulted mainly from the increase in net cash used in investing activities. </font></p></div>
<p align="center"><font size="2" face="Geneva, Arial, Helvetica, sans-serif">23</font></p>
<hr noshade align="center" width="100%" size="2">
<div style="page-break-before:always"></div>
<page>
<a name="p24"></a>

<div style="text-indent:3%">
<p align="left"><font size="2" face="Arial, Helvetica, sans-serif"><i>Net cash
      used in financing activities</i>.&nbsp;&nbsp;&nbsp;&nbsp;Net
    cash used in financing activities was $1,368 million in the first nine months
    of 2004 compared to net cash generated from financing activities of $6 million
    in the first nine months of 2003. The significant increase of net cash used
    in financing activities in the first nine months of 2004 compared to the
    first nine months of 2003 is due to the proceeds from the issuance in 2003
      of our 2013 Bonds. During the first nine months of 2004, we used $1,263
      million in cash for
      the repayment
      of
      long-term
      debt,
    of which $375 million for the 2010 Bonds and
$806 million for the 2009 Notes.  </font></p>
</div>
<p align="left"><font size="2" face="Arial, Helvetica, sans-serif"><b><i>Capital Resources </i></b></font></p>
<div style="text-indent:3%">
<p align="left"><font size="2" face="Arial, Helvetica, sans-serif"><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 at December 31, 2003 and our Unaudited Interim Consolidated Balance Sheet at September 25, 2004, without
adjustment to the U.S. GAAP amounts presented:</font></p></div>
<table width="100%" border="0" cellpadding="0" cellspacing="0">
<tr valign="top">
  <td rowspan="6" align="left"><font size="1" face="Arial, Helvetica, sans-serif">&nbsp;</font><font size="1" face="Arial, Helvetica, sans-serif">&nbsp;</font><font size="1" face="Arial, Helvetica, sans-serif">&nbsp;</font><font size="1" face="Arial, Helvetica, sans-serif">&nbsp;</font></td>
  <td rowspan="6" align="left">&nbsp;</td>
  <td height="22" align="right">&nbsp;</td>
  <td colspan="4" align="center"><font size="1" face="Arial, Helvetica, sans-serif"><b>As
    at</b></font></td>
  <td rowspan="6" align="left">&nbsp;</td>
</tr>
<tr valign="top">
  <td align="right"><hr width="100%" size="1" noshade></td>
<td colspan="4" align="center"><hr width="100%" size="1" noshade></td>
</tr>
<tr valign="top">
  <td align="right">&nbsp;</td>
<td align="center"><font size="1" face="Arial, Helvetica, sans-serif"><b>September 25,<br>
  2004</b></font></td>
<td rowspan="3" align="left">&nbsp;</td>
<td align="right">&nbsp;</td>
<td align="center"><font size="1" face="Arial, Helvetica, sans-serif"><b>December 31, <br>
  2003</b></font></td>
</tr>
<tr valign="top">
  <td align="right"><hr width="100%" size="1" noshade></td>
  <td align="center"><hr width="100%" size="1" noshade></td>
  <td align="right"><hr width="100%" size="1" noshade></td>
  <td align="center"><hr width="100%" size="1" noshade></td>
  </tr>
<tr valign="top">
  <td rowspan="2" align="right">&nbsp;</td>
<td align="center"><font size="1" face="Arial, Helvetica, sans-serif"><b>(unaudited)</b></font></td>
<td align="right">&nbsp;</td>
<td align="center"><font size="1" face="Arial, Helvetica, sans-serif"><b>(audited)</b></font></td>
</tr>
<tr valign="top">
  <td colspan="4" align="center"><font size="1" face="Arial, Helvetica, sans-serif"><b>(in millions)</b></font></td>
</tr>
<tr valign="top">
<td align="left" bgcolor="#eeeeee"><font size="2" face="Arial, Helvetica, sans-serif">Cash and cash equivalents</font></td>
<td width="2%" align="left" bgcolor="#eeeeee">&nbsp;</td>
<td width="1%" align="right" bgcolor="#eeeeee"><font size="2" face="Arial, Helvetica, sans-serif">$</font></td>
<td width="10%" align="right" bgcolor="#eeeeee"><font size="2" face="Arial, Helvetica, sans-serif"> 601</font></td>
<td width="2%" align="left" bgcolor="#eeeeee">&nbsp;</td>
<td width="1%" align="right" bgcolor="#eeeeee"><font size="2" face="Arial, Helvetica, sans-serif">$</font></td>
<td width="10%" align="right" bgcolor="#eeeeee"><font size="2" face="Arial, Helvetica, sans-serif"> 2,998</font></td>
<td width="2%" align="left" bgcolor="#eeeeee">&nbsp;</td>
</tr>
<tr valign="top">
<td align="left"><font size="2" face="Arial, Helvetica, sans-serif">Marketable securities</font></td>
<td align="left">&nbsp;</td>
<td align="right">&nbsp;</td>
<td align="right"><font size="2" face="Arial, Helvetica, sans-serif">1,030</font></td>
<td align="left">&nbsp;</td>
<td align="right">&nbsp;</td>
<td align="right"><font size="2" face="Arial, Helvetica, sans-serif">&#8212;</font></td>
<td align="left">&nbsp;</td>
</tr>
<tr valign="top">
  <td align="left">&nbsp;</td>
  <td align="left">&nbsp;</td>
  <td align="right"><hr width="100%" size="1" noshade></td>
  <td align="right"><hr width="100%" size="1" noshade></td>
  <td align="left">&nbsp;</td>
  <td align="right"><hr width="100%" size="1" noshade></td>
  <td align="right"><hr width="100%" size="1" noshade></td>
  <td align="left">&nbsp;</td>
</tr>
<tr valign="top">
<td align="left" bgcolor="#eeeeee"><font size="2" face="Arial, Helvetica, sans-serif">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total cash position</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, Helvetica, sans-serif">1,631</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, Helvetica, sans-serif">2,998</font></td>
<td align="left" bgcolor="#eeeeee">&nbsp;</td>
</tr>
<tr valign="top">
<td align="left"><font size="2" face="Arial, Helvetica, sans-serif">Bank overdrafts</font></td>
<td align="left">&nbsp;</td>
<td align="right">&nbsp;</td>
<td align="right"><font size="2" face="Arial, Helvetica, sans-serif">(8</font></td>
<td align="left"><font size="2" face="Arial, Helvetica, sans-serif">)</font></td>
<td align="right">&nbsp;</td>
<td align="right"><font size="2" face="Arial, Helvetica, sans-serif">(45</font></td>
<td align="left"><font size="2" face="Arial, Helvetica, sans-serif">)</font></td>
</tr>
<tr valign="top">
<td align="left" bgcolor="#eeeeee"><font size="2" face="Arial, Helvetica, sans-serif">Current portion of long-term debt</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, Helvetica, sans-serif">(111</font></td>
<td align="left" bgcolor="#eeeeee"><font size="2" face="Arial, Helvetica, sans-serif">)</font></td>
<td align="right" bgcolor="#eeeeee">&nbsp;</td>
<td align="right" bgcolor="#eeeeee"><font size="2" face="Arial, Helvetica, sans-serif">(106</font></td>
<td align="left" bgcolor="#eeeeee"><font size="2" face="Arial, Helvetica, sans-serif">)</font></td>
</tr>
<tr valign="top">
<td align="left"><font size="2" face="Arial, Helvetica, sans-serif">Long-term debt</font></td>
<td align="left">&nbsp;</td>
<td align="right">&nbsp;</td>
<td align="right"><font size="2" face="Arial, Helvetica, sans-serif">(1,710</font></td>
<td align="left"><font size="2" face="Arial, Helvetica, sans-serif">)</font></td>
<td align="right">&nbsp;</td>
<td align="right"><font size="2" face="Arial, Helvetica, sans-serif">(2,944</font></td>
<td align="left"><font size="2" face="Arial, Helvetica, sans-serif">)</font></td>
</tr>
<tr valign="top">
  <td align="left">&nbsp;</td>
  <td align="left">&nbsp;</td>
  <td align="right"><hr width="100%" size="1" noshade></td>
  <td align="right"><hr width="100%" size="1" noshade></td>
  <td align="left">&nbsp;</td>
  <td align="right"><hr width="100%" size="1" noshade></td>
  <td align="right"><hr width="100%" size="1" noshade></td>
  <td align="left">&nbsp;</td>
</tr>
<tr valign="top">
<td align="left" bgcolor="#eeeeee"><font size="2" face="Arial, Helvetica, sans-serif">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total financial debt</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, Helvetica, sans-serif">(1,829</font></td>
<td align="left" bgcolor="#eeeeee"><font size="2" face="Arial, Helvetica, sans-serif">)</font></td>
<td align="right" bgcolor="#eeeeee">&nbsp;</td>
<td align="right" bgcolor="#eeeeee"><font size="2" face="Arial, Helvetica, sans-serif">(3,095</font></td>
<td align="left" bgcolor="#eeeeee"><font size="2" face="Arial, Helvetica, sans-serif">)</font></td>
</tr>
<tr valign="top">
  <td align="left">&nbsp;</td>
  <td align="left">&nbsp;</td>
  <td align="right"><hr width="100%" size="1" noshade></td>
  <td align="right"><hr width="100%" size="1" noshade></td>
  <td align="left">&nbsp;</td>
  <td align="right"><hr width="100%" size="1" noshade></td>
  <td align="right"><hr width="100%" size="1" noshade></td>
  <td align="left">&nbsp;</td>
</tr>
<tr valign="top" bgcolor="#EEEEEE">
<td align="left"><font size="2" face="Arial, Helvetica, sans-serif"><b>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Net financial cash (debt) position</b></font></td>
<td align="left">&nbsp;</td>
<td align="right"><font size="2" face="Arial, Helvetica, sans-serif"><b>$</b></font></td>
<td align="right"><font size="2" face="Arial, Helvetica, sans-serif"> <b>(198</b></font></td>
<td align="left"><font size="2" face="Arial, Helvetica, sans-serif"><b>)</b></font></td>
<td align="right"><font size="2" face="Arial, Helvetica, sans-serif"><b>$</b></font></td>
<td align="right"><font size="2" face="Arial, Helvetica, sans-serif"> <b>(97</b></font></td>
<td align="left"><font size="2" face="Arial, Helvetica, sans-serif"><b>)</b></font></td>
</tr>
<tr valign="top">
  <td align="left">&nbsp;</td>
  <td align="left">&nbsp;</td>
  <td align="right"><hr width="100%" size="2" noshade></td>
  <td align="right"><hr width="100%" size="2" noshade></td>
  <td align="left">&nbsp;</td>
  <td align="right"><hr width="100%" size="2" noshade></td>
  <td align="right"><hr width="100%" size="2" noshade></td>
  <td align="left">&nbsp;</td>
</tr>
</table>
<div style="text-indent:3%">
<p align="left"><font size="2" face="Arial, Helvetica, sans-serif">The net financial position (cash, cash equivalents and marketable securities net of total financial debt) at September 25, 2004, resulted in net financial debt position of $198 million, increasing from the net financial debt position of $97 million at December 31, 2003. This is mainly due to the payment of the $107 million of dividends.</font></p></div>
<div style="text-indent:3%">
<p align="left"><font size="2" face="Arial, Helvetica, sans-serif">At September 25, 2004, the aggregate amount of our long-term debt was approximately $1,710 million, of which $1,379 million consisted of Zero Coupon Convertible Bonds due 2013 (our &#8220;2013 Bonds&#8221;), and of which $8 million consisted of our Subordinated Convertible Liquid Yield Option<sup>&#153;</sup> Notes due 2009 (our &#8220;2009 Notes&#8221;). Additionally, the aggregate amount of our short-term credit facilities was approximately $957million, under which approximately $949 million of indebtedness was outstanding and available for use. See &#8220;Overview&#8212;Other Developments in the Third Quarter of 2004&#8221;.</font></p>
</div>
<div style="text-indent:3%">
<p align="left"><font size="2" face="Arial, Helvetica, sans-serif">As of the end of the first nine months of 2004, we had the following credit ratings on our remaining convertible debt:</font></p>  </div>
<table width="100%" border="0" cellpadding="0" cellspacing="0">
<tr valign="top">
<td align="left"></td>
<td align="left">&nbsp;</td>
<td align="right">&nbsp;</td>
<td align="center"><font size="1" face="Arial, Helvetica, sans-serif"><b>Moody&#8217;s
      Investors<br>
Service </b></font></td>
<td align="left">&nbsp;</td>
<td align="right">&nbsp;</td>
<td align="center"><font size="1" face="Arial, Helvetica, sans-serif"><b>Standard &amp; Poor&#8217;s </b></font></td>
<td align="left">&nbsp;</td>
</tr>
<tr valign="top">
  <td align="left">&nbsp;</td>
  <td align="left">&nbsp;</td>
  <td align="right"><hr width="100%" size="1" noshade></td>
  <td align="center"><hr width="100%" size="1" noshade></td>
  <td align="left">&nbsp;</td>
  <td align="right"><hr width="100%" size="1" noshade></td>
  <td align="center"><hr width="100%" size="1" noshade></td>
  <td align="left">&nbsp;</td>
</tr>
<tr valign="top">
<td align="left" bgcolor="#EEEEEE"><font size="2" face="Arial, Helvetica, sans-serif">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, Helvetica, sans-serif">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, Helvetica, sans-serif">BBB+</font></td>
<td align="left" bgcolor="#EEEEEE">&nbsp;</td>
</tr>
<tr valign="top">
<td align="left"><font size="2" face="Arial, Helvetica, sans-serif">Zero Coupon Senior Convertible bonds due 2013</font></td>
<td width="2%" align="left">&nbsp;</td>
<td width="1%" align="right">&nbsp;</td>
<td width="10%" align="center"><font size="2" face="Arial, Helvetica, sans-serif">A3</font></td>
<td width="2%" align="left">&nbsp;</td>
<td width="1%" align="right">&nbsp;</td>
<td width="10%" align="center"><font size="2" face="Arial, Helvetica, sans-serif">A-</font></td>
<td width="2%" align="left">&nbsp;</td>
</tr>
</table>
<div style="text-indent:3%">
<p align="left"><font size="2" face="Arial, Helvetica, sans-serif">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 size="2" face="Geneva, Arial, Helvetica, sans-serif">24</font></p>
<hr noshade align="center" width="100%" size="2">
<div style="page-break-before:always"></div>
<page>
<a name="p25"></a>

<p align="left"><font size="2" face="Arial, Helvetica, sans-serif"><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, Helvetica, sans-serif">Our contractual obligations, commercial commitments and contingencies as of September 25, 2004, and for each of the five years to come and thereafter, were as follows:</font></p></div>
<TABLE width="100%" border=0 cellpadding=0 cellspacing=0>
<TR>
   <TD><font size="1" face="Arial, Helvetica, sans-serif">&nbsp;</font></TD>
   <TD align="right"><font face="Arial, Helvetica, sans-serif">&nbsp;</font></TD>
   <TD colspan="22" align="center"><b><FONT size=1 face="Arial, Helvetica, sans-serif">Payments due by period</FONT></b></TD>
   <TD><font size="1" face="Arial, Helvetica, sans-serif">&nbsp;</font></TD>
</TR>
<TR>
   <TD><font size="1" face="Arial, Helvetica, sans-serif">&nbsp;</font></TD>
   <TD align="right"><font face="Arial, Helvetica, sans-serif">&nbsp;</font></TD>
   <TD colspan="22" align="center"><b><FONT size=1 face="Arial, Helvetica, sans-serif">(unaudited)</FONT></b></TD>
   <TD><font size="1" face="Arial, Helvetica, sans-serif">&nbsp;</font></TD>
</TR>
<TR>
  <TD><font face="Arial, Helvetica, sans-serif">&nbsp;</font></TD>
  <TD colspan=23 align="right"><HR noshade size=1></TD>
  <TD><font face="Arial, Helvetica, sans-serif">&nbsp;</font></TD>
</TR>
<TR>
   <TD><font size="1" face="Arial, Helvetica, sans-serif">&nbsp;</font></TD>
   <TD align="right"><font face="Arial, Helvetica, sans-serif">&nbsp;</font></TD>
   <TD align="center"><b><FONT size=1 face="Arial, Helvetica, sans-serif">Total</FONT></b></TD>
   <TD align="center"><font face="Arial, Helvetica, sans-serif">&nbsp;</font></TD>
   <TD align="center"><font face="Arial, Helvetica, sans-serif">&nbsp;</font></TD>
   <TD align="center"><b><font size=1 face="Arial, Helvetica, sans-serif">2004</font></b></TD>
   <TD align="center"><font face="Arial, Helvetica, sans-serif">&nbsp;</font></TD>
   <TD align="center"><font face="Arial, Helvetica, sans-serif">&nbsp;</font></TD>
   <TD align="center"><b><font size=1 face="Arial, Helvetica, sans-serif">2005</font></b></TD>
   <TD align="center"><font face="Arial, Helvetica, sans-serif">&nbsp;</font></TD>
   <TD align="center"><font face="Arial, Helvetica, sans-serif">&nbsp;</font></TD>
   <TD align="center"><b><font size=1 face="Arial, Helvetica, sans-serif">2006</font></b></TD>
   <TD align="center"><font face="Arial, Helvetica, sans-serif">&nbsp;</font></TD>
   <TD align="center"><font face="Arial, Helvetica, sans-serif">&nbsp;</font></TD>
   <TD align="center"><b><font size=1 face="Arial, Helvetica, sans-serif">2007</font></b></TD>
   <TD align="center"><font face="Arial, Helvetica, sans-serif">&nbsp;</font></TD>
   <TD align="center"><font face="Arial, Helvetica, sans-serif">&nbsp;</font></TD>
   <TD align="center"><b><font size=1 face="Arial, Helvetica, sans-serif">2008</font></b></TD>
   <TD align="center"><font face="Arial, Helvetica, sans-serif">&nbsp;</font></TD>
   <TD align="center"><font face="Arial, Helvetica, sans-serif">&nbsp;</font></TD>
   <TD align="center"><b><font size=1 face="Arial, Helvetica, sans-serif">2009</font></b></TD>
   <TD align="center"><font face="Arial, Helvetica, sans-serif">&nbsp;</font></TD>
   <TD align="center"><font face="Arial, Helvetica, sans-serif">&nbsp;</font></TD>
   <TD align="center"><b><font size=1 face="Arial, Helvetica, sans-serif">Thereafter</font></b></TD>
   <TD><font size="1" face="Arial, Helvetica, sans-serif">&nbsp;</font></TD>
</TR>
<TR>
   <TD><font size="1" face="Arial, Helvetica, sans-serif">&nbsp;</font></TD>
   <TD align="right"><HR noshade size=1></TD>
   <TD align="right"><HR noshade size=1></TD>
   <TD align="right"><font face="Arial, Helvetica, sans-serif">&nbsp;</font></TD>
   <TD colspan=2 align="right"><HR noshade size=1></TD>
   <TD align="right"><font face="Arial, Helvetica, sans-serif">&nbsp;</font></TD>
   <TD colspan=2 align="right"><HR noshade size=1></TD>
   <TD align="right"><font face="Arial, Helvetica, sans-serif">&nbsp;</font></TD>
   <TD colspan=2 align="right"><HR noshade size=1></TD>
   <TD align="right"><font face="Arial, Helvetica, sans-serif">&nbsp;</font></TD>
   <TD align="right"><HR noshade size=1>
   </TD>
   <TD align="right"><HR noshade size=1></TD>
   <TD align="right"><font face="Arial, Helvetica, sans-serif">&nbsp;</font></TD>
   <TD colspan=2 align="right"><HR noshade size=1></TD>
   <TD align="right"><font face="Arial, Helvetica, sans-serif">&nbsp;</font></TD>
   <TD colspan=2 align="right"><HR noshade size=1></TD>
   <TD align="right"><font face="Arial, Helvetica, sans-serif">&nbsp;</font></TD>
   <TD colspan=2 align="right"><HR noshade size=1></TD>
   <TD><font size="1" face="Arial, Helvetica, sans-serif">&nbsp;</font></TD>
</TR>
<TR>
   <TD><font size="1" face="Arial, Helvetica, sans-serif">&nbsp;</font></TD>
   <TD align="right"><font face="Arial, Helvetica, sans-serif">&nbsp;</font></TD>
   <TD colspan="22" align="center"><b><FONT size=1 face="Arial, Helvetica, sans-serif">(in millions)</FONT></b></TD>
   <TD><font size="1" face="Arial, Helvetica, sans-serif">&nbsp;</font></TD>
</TR>
<TR bgcolor="#eeeeee">
   <TD><FONT size=2 face="Arial, Helvetica, sans-serif">Capital leases (1)</FONT></TD>
   <TD width=1% align="right"><FONT size=2 face="Arial, Helvetica, sans-serif">$</FONT></TD>
   <TD width=6% align="right"><FONT size=2 face="Arial, Helvetica, sans-serif">32</FONT></TD>
   <TD width=2% align="right"><font size="2" face="Arial, Helvetica, sans-serif">&nbsp;</font></TD>
   <TD width=1% align="right"><FONT size=2 face="Arial, Helvetica, sans-serif">$</FONT></TD>
   <TD width=6% align="right"><FONT size=2 face="Arial, Helvetica, sans-serif">1</FONT></TD>
   <TD width=2% align="right"><font size="2" face="Arial, Helvetica, sans-serif">&nbsp;</font></TD>
   <TD width=1% align="right"><FONT size=2 face="Arial, Helvetica, sans-serif">$</FONT></TD>
   <TD width=6% align="right"><FONT size=2 face="Arial, Helvetica, sans-serif">5</FONT></TD>
   <TD width=2% align="right"><font size="2" face="Arial, Helvetica, sans-serif">&nbsp;</font></TD>
   <TD width=1% align="right"><FONT size=2 face="Arial, Helvetica, sans-serif">$</FONT></TD>
   <TD width=6% align="right"><FONT size=2 face="Arial, Helvetica, sans-serif">5</FONT></TD>
   <TD width=2% align="right"><font size="2" face="Arial, Helvetica, sans-serif">&nbsp;</font></TD>
   <TD width=1% align="right"><FONT size=2 face="Arial, Helvetica, sans-serif">$</FONT></TD>
   <TD width=6% align="right"><FONT size=2 face="Arial, Helvetica, sans-serif">5</FONT></TD>
   <TD width=2% align="right"><font size="2" face="Arial, Helvetica, sans-serif">&nbsp;</font></TD>
   <TD width=1% align="right"><FONT size=2 face="Arial, Helvetica, sans-serif">$</FONT></TD>
   <TD width=6% align="right"><FONT size=2 face="Arial, Helvetica, sans-serif">5</FONT></TD>
   <TD width=2% align="right"><font size="2" face="Arial, Helvetica, sans-serif">&nbsp;</font></TD>
   <TD width=1% align="right"><FONT size=2 face="Arial, Helvetica, sans-serif">$</FONT></TD>
   <TD width=6% align="right"><FONT size=2 face="Arial, Helvetica, sans-serif">5</FONT></TD>
   <TD width=2% align="right"><font size="2" face="Arial, Helvetica, sans-serif">&nbsp;</font></TD>
   <TD width=1% align="right"><FONT size=2 face="Arial, Helvetica, sans-serif">$</FONT></TD>
   <TD width=6% align="right"><FONT size=2 face="Arial, Helvetica, sans-serif">6</FONT></TD>
   <TD width=2%><font size="2" face="Arial, Helvetica, sans-serif">&nbsp;</font></TD>
</TR>
<TR>
   <TD><FONT size=2 face="Arial, Helvetica, sans-serif">Operating leases (1)</FONT></TD>
   <TD align="right">&nbsp;</TD>
   <TD align="right"><FONT size=2 face="Arial, Helvetica, sans-serif">188</FONT></TD>
   <TD align="right"><font size="2" face="Arial, Helvetica, sans-serif">&nbsp;</font></TD>
   <TD align="right"><font size="2" face="Arial, Helvetica, sans-serif">&nbsp;</font></TD>
   <TD align="right"><FONT size=2 face="Arial, Helvetica, sans-serif">9</FONT></TD>
   <TD align="right"><font size="2" face="Arial, Helvetica, sans-serif">&nbsp;</font></TD>
   <TD align="right"><font size="2" face="Arial, Helvetica, sans-serif">&nbsp;</font></TD>
   <TD align="right"><FONT size=2 face="Arial, Helvetica, sans-serif">28</FONT></TD>
   <TD align="right"><font size="2" face="Arial, Helvetica, sans-serif">&nbsp;</font></TD>
   <TD align="right"><font size="2" face="Arial, Helvetica, sans-serif">&nbsp;</font></TD>
   <TD align="right"><FONT size=2 face="Arial, Helvetica, sans-serif">23</FONT></TD>
   <TD align="right"><font size="2" face="Arial, Helvetica, sans-serif">&nbsp;</font></TD>
   <TD align="right"><font size="2" face="Arial, Helvetica, sans-serif">&nbsp;</font></TD>
   <TD align="right"><FONT size=2 face="Arial, Helvetica, sans-serif">18</FONT></TD>
   <TD align="right"><font size="2" face="Arial, Helvetica, sans-serif">&nbsp;</font></TD>
   <TD align="right"><font size="2" face="Arial, Helvetica, sans-serif">&nbsp;</font></TD>
   <TD align="right"><FONT size=2 face="Arial, Helvetica, sans-serif">16</FONT></TD>
   <TD align="right"><font size="2" face="Arial, Helvetica, sans-serif">&nbsp;</font></TD>
   <TD align="right"><font size="2" face="Arial, Helvetica, sans-serif">&nbsp;</font></TD>
   <TD align="right"><FONT size=2 face="Arial, Helvetica, sans-serif">10</FONT></TD>
   <TD align="right"><font size="2" face="Arial, Helvetica, sans-serif">&nbsp;</font></TD>
   <TD align="right"><font size="2" face="Arial, Helvetica, sans-serif">&nbsp;</font></TD>
   <TD align="right"><FONT size=2 face="Arial, Helvetica, sans-serif">84</FONT></TD>
   <TD><font size="2" face="Arial, Helvetica, sans-serif">&nbsp;</font></TD>
</TR>
<TR bgcolor="#eeeeee">
   <TD><FONT size=2 face="Arial, Helvetica, sans-serif">Purchase obligations (1)</FONT></TD>
   <TD align="right">&nbsp;</TD>
   <TD align="right"><FONT size=2 face="Arial, Helvetica, sans-serif">1,321</FONT></TD>
   <TD align="right"><font size="2" face="Arial, Helvetica, sans-serif">&nbsp;</font></TD>
   <TD align="right">&nbsp;</TD>
   <TD align="right"><font size=2 face="Arial, Helvetica, sans-serif">732</font></TD>
   <TD align="right"><font size="2" face="Arial, Helvetica, sans-serif">&nbsp;</font></TD>
   <TD align="right">&nbsp;</TD>
   <TD align="right"><font size=2 face="Arial, Helvetica, sans-serif">572</font></TD>
   <TD align="right"><font size="2" face="Arial, Helvetica, sans-serif">&nbsp;</font></TD>
   <TD align="right"><font size="2" face="Arial, Helvetica, sans-serif">&nbsp;</font></TD>
   <TD align="right"><FONT size=2 face="Arial, Helvetica, sans-serif">17</FONT></TD>
   <TD align="right"><font size="2" face="Arial, Helvetica, sans-serif">&nbsp;</font></TD>
   <TD align="right"><font size="2" face="Arial, Helvetica, sans-serif">&nbsp;</font></TD>
   <TD align="right"><FONT size=2 face="Arial, Helvetica, sans-serif">&#8212;</FONT></TD>
   <TD align="right"><font size="2" face="Arial, Helvetica, sans-serif">&nbsp;</font></TD>
   <TD align="right"><font size="2" face="Arial, Helvetica, sans-serif">&nbsp;</font></TD>
   <TD align="right"><FONT size=2 face="Arial, Helvetica, sans-serif">&#8212;</FONT></TD>
   <TD align="right"><font size="2" face="Arial, Helvetica, sans-serif">&nbsp;</font></TD>
   <TD align="right"><font size="2" face="Arial, Helvetica, sans-serif">&nbsp;</font></TD>
   <TD align="right"><FONT size=2 face="Arial, Helvetica, sans-serif">&#8212;</FONT></TD>
   <TD align="right"><font size="2" face="Arial, Helvetica, sans-serif">&nbsp;</font></TD>
   <TD align="right"><font size="2" face="Arial, Helvetica, sans-serif">&nbsp;</font></TD>
   <TD align="right"><FONT size=2 face="Arial, Helvetica, sans-serif">&#8212;</FONT></TD>
   <TD><font size="2" face="Arial, Helvetica, sans-serif">&nbsp;</font></TD>
</TR>
<TR>
   <TD><I><FONT size=2 face="Arial, Helvetica, sans-serif">Of which:</FONT></I></TD>
   <TD align="right">&nbsp;</TD>
   <TD align="right"><font size="2" face="Arial, Helvetica, sans-serif">&nbsp;</font></TD>
   <TD align="right"><font size="2" face="Arial, Helvetica, sans-serif">&nbsp;</font></TD>
   <TD align="right"><font size="2" face="Arial, Helvetica, sans-serif">&nbsp;</font></TD>
   <TD align="right"><font size="2" face="Arial, Helvetica, sans-serif">&nbsp;</font></TD>
   <TD align="right"><font size="2" face="Arial, Helvetica, sans-serif">&nbsp;</font></TD>
   <TD align="right"><font size="2" face="Arial, Helvetica, sans-serif">&nbsp;</font></TD>
   <TD align="right"><font size="2" face="Arial, Helvetica, sans-serif">&nbsp;</font></TD>
   <TD align="right"><font size="2" face="Arial, Helvetica, sans-serif">&nbsp;</font></TD>
   <TD align="right"><font size="2" face="Arial, Helvetica, sans-serif">&nbsp;</font></TD>
   <TD align="right"><font size="2" face="Arial, Helvetica, sans-serif">&nbsp;</font></TD>
   <TD align="right"><font size="2" face="Arial, Helvetica, sans-serif">&nbsp;</font></TD>
   <TD align="right"><font size="2" face="Arial, Helvetica, sans-serif">&nbsp;</font></TD>
   <TD align="right"><font size="2" face="Arial, Helvetica, sans-serif">&nbsp;</font></TD>
   <TD align="right"><font size="2" face="Arial, Helvetica, sans-serif">&nbsp;</font></TD>
   <TD align="right"><font size="2" face="Arial, Helvetica, sans-serif">&nbsp;</font></TD>
   <TD align="right"><font size="2" face="Arial, Helvetica, sans-serif">&nbsp;</font></TD>
   <TD align="right"><font size="2" face="Arial, Helvetica, sans-serif">&nbsp;</font></TD>
   <TD align="right"><font size="2" face="Arial, Helvetica, sans-serif">&nbsp;</font></TD>
   <TD align="right"><font size="2" face="Arial, Helvetica, sans-serif">&nbsp;</font></TD>
   <TD align="right"><font size="2" face="Arial, Helvetica, sans-serif">&nbsp;</font></TD>
   <TD align="right"><font size="2" face="Arial, Helvetica, sans-serif">&nbsp;</font></TD>
   <TD align="right"><font size="2" face="Arial, Helvetica, sans-serif">&nbsp;</font></TD>
   <TD><font size="2" face="Arial, Helvetica, sans-serif">&nbsp;</font></TD>
</TR>
<TR>
   <TD><font size="2" face="Arial, Helvetica, sans-serif">&nbsp;&nbsp;&nbsp;<I>Equipment purchase</I></font></TD>
   <TD align="right">&nbsp;</TD>
   <TD align="right"><I><FONT size=2 face="Arial, Helvetica, sans-serif">991</FONT></I></TD>
   <TD align="right"><font size="2" face="Arial, Helvetica, sans-serif">&nbsp;</font></TD>
   <TD align="right">&nbsp;</TD>
   <TD align="right"><font size="2" face="Arial, Helvetica, sans-serif"><i>501</i></font></TD>
   <TD align="right"><font size="2" face="Arial, Helvetica, sans-serif">&nbsp;</font></TD>
   <TD align="right">&nbsp;</TD>
   <TD align="right"><i><font size=2 face="Arial, Helvetica, sans-serif">490</font></i></TD>
   <TD align="right"><font size="2" face="Arial, Helvetica, sans-serif">&nbsp;</font></TD>
   <TD align="right"><font size="2" face="Arial, Helvetica, sans-serif">&nbsp;</font></TD>
   <TD align="right"><I><FONT size=2 face="Arial, Helvetica, sans-serif">&#8212;</FONT></I></TD>
   <TD align="right"><font size="2" face="Arial, Helvetica, sans-serif">&nbsp;</font></TD>
   <TD align="right"><font size="2" face="Arial, Helvetica, sans-serif">&nbsp;</font></TD>
   <TD align="right"><I><FONT size=2 face="Arial, Helvetica, sans-serif">&#8212;</FONT></I></TD>
   <TD align="right"><font size="2" face="Arial, Helvetica, sans-serif">&nbsp;</font></TD>
   <TD align="right"><font size="2" face="Arial, Helvetica, sans-serif">&nbsp;</font></TD>
   <TD align="right"><I><FONT size=2 face="Arial, Helvetica, sans-serif">&#8212;</FONT></I></TD>
   <TD align="right"><font size="2" face="Arial, Helvetica, sans-serif">&nbsp;</font></TD>
   <TD align="right"><font size="2" face="Arial, Helvetica, sans-serif">&nbsp;</font></TD>
   <TD align="right"><I><FONT size=2 face="Arial, Helvetica, sans-serif">&#8212;</FONT></I></TD>
   <TD align="right"><font size="2" face="Arial, Helvetica, sans-serif">&nbsp;</font></TD>
   <TD align="right"><font size="2" face="Arial, Helvetica, sans-serif">&nbsp;</font></TD>
   <TD align="right"><I><FONT size=2 face="Arial, Helvetica, sans-serif">&#8212;</FONT></I></TD>
   <TD><font size="2" face="Arial, Helvetica, sans-serif">&nbsp;</font></TD>
</TR>
<TR bgcolor="#eeeeee">
   <TD><font size="2" face="Arial, Helvetica, sans-serif">&nbsp;&nbsp;&nbsp;<I>Foundry purchase</I></font></TD>
   <TD align="right">&nbsp;</TD>
   <TD align="right"><I><FONT size=2 face="Arial, Helvetica, sans-serif">207</FONT></I></TD>
   <TD align="right"><font size="2" face="Arial, Helvetica, sans-serif">&nbsp;</font></TD>
   <TD align="right">&nbsp;</TD>
   <TD align="right"><font size="2" face="Arial, Helvetica, sans-serif"><i>207</i></font></TD>
   <TD align="right"><font size="2" face="Arial, Helvetica, sans-serif">&nbsp;</font></TD>
   <TD align="right"><font size="2" face="Arial, Helvetica, sans-serif">&nbsp;</font></TD>
   <TD align="right"><I><FONT size=2 face="Arial, Helvetica, sans-serif">&#8212;</FONT></I></TD>
   <TD align="right"><font size="2" face="Arial, Helvetica, sans-serif">&nbsp;</font></TD>
   <TD align="right"><font size="2" face="Arial, Helvetica, sans-serif">&nbsp;</font></TD>
   <TD align="right"><I><FONT size=2 face="Arial, Helvetica, sans-serif">&#8212;</FONT></I></TD>
   <TD align="right"><font size="2" face="Arial, Helvetica, sans-serif">&nbsp;</font></TD>
   <TD align="right"><font size="2" face="Arial, Helvetica, sans-serif">&nbsp;</font></TD>
   <TD align="right"><I><FONT size=2 face="Arial, Helvetica, sans-serif">&#8212;</FONT></I></TD>
   <TD align="right"><font size="2" face="Arial, Helvetica, sans-serif">&nbsp;</font></TD>
   <TD align="right"><font size="2" face="Arial, Helvetica, sans-serif">&nbsp;</font></TD>
   <TD align="right"><I><FONT size=2 face="Arial, Helvetica, sans-serif">&#8212;</FONT></I></TD>
   <TD align="right"><font size="2" face="Arial, Helvetica, sans-serif">&nbsp;</font></TD>
   <TD align="right"><font size="2" face="Arial, Helvetica, sans-serif">&nbsp;</font></TD>
   <TD align="right"><I><FONT size=2 face="Arial, Helvetica, sans-serif">&#8212;</FONT></I></TD>
   <TD align="right"><font size="2" face="Arial, Helvetica, sans-serif">&nbsp;</font></TD>
   <TD align="right"><font size="2" face="Arial, Helvetica, sans-serif">&nbsp;</font></TD>
   <TD align="right"><I><FONT size=2 face="Arial, Helvetica, sans-serif">&#8212;</FONT></I></TD>
   <TD><font size="2" face="Arial, Helvetica, sans-serif">&nbsp;</font></TD>
</TR>
<TR>
   <TD><font size="2" face="Arial, Helvetica, sans-serif">&nbsp;&nbsp;&nbsp;<I>Software, technology licenses and design</I></font></TD>
   <TD align="right">&nbsp;</TD>
   <TD align="right"><I><FONT size=2 face="Arial, Helvetica, sans-serif">123</FONT></I></TD>
   <TD align="right"><font size="2" face="Arial, Helvetica, sans-serif">&nbsp;</font></TD>
   <TD align="right">&nbsp;</TD>
   <TD align="right"><font size="2" face="Arial, Helvetica, sans-serif"><i>24</i></font></TD>
   <TD align="right"><font size="2" face="Arial, Helvetica, sans-serif">&nbsp;</font></TD>
   <TD align="right">&nbsp;</TD>
   <TD align="right"><i><font size=2 face="Arial, Helvetica, sans-serif">82</font></i></TD>
   <TD align="right"><font size="2" face="Arial, Helvetica, sans-serif">&nbsp;</font></TD>
   <TD align="right">&nbsp;</TD>
   <TD align="right"><i><font size=2 face="Arial, Helvetica, sans-serif">17</font></i></TD>
   <TD align="right"><font size="2" face="Arial, Helvetica, sans-serif">&nbsp;</font></TD>
   <TD align="right"><font size="2" face="Arial, Helvetica, sans-serif">&nbsp;</font></TD>
   <TD align="right"><I><FONT size=2 face="Arial, Helvetica, sans-serif">&#8212;</FONT></I></TD>
   <TD align="right"><font size="2" face="Arial, Helvetica, sans-serif">&nbsp;</font></TD>
   <TD align="right"><font size="2" face="Arial, Helvetica, sans-serif">&nbsp;</font></TD>
   <TD align="right"><I><FONT size=2 face="Arial, Helvetica, sans-serif">&#8212;</FONT></I></TD>
   <TD align="right"><font size="2" face="Arial, Helvetica, sans-serif">&nbsp;</font></TD>
   <TD align="right"><font size="2" face="Arial, Helvetica, sans-serif">&nbsp;</font></TD>
   <TD align="right"><I><FONT size=2 face="Arial, Helvetica, sans-serif">&#8212;</FONT></I></TD>
   <TD align="right"><font size="2" face="Arial, Helvetica, sans-serif">&nbsp;</font></TD>
   <TD align="right"><font size="2" face="Arial, Helvetica, sans-serif">&nbsp;</font></TD>
   <TD align="right"><I><FONT size=2 face="Arial, Helvetica, sans-serif">&#8212;</FONT></I></TD>
   <TD><font size="2" face="Arial, Helvetica, sans-serif">&nbsp;</font></TD>
</TR>
<TR bgcolor="#eeeeee">
   <TD><FONT size=2 face="Arial, Helvetica, sans-serif">Contingent obligations (1)</FONT></TD>
   <TD align="right">&nbsp;</TD>
   <TD align="right"><FONT size=2 face="Arial, Helvetica, sans-serif">10</FONT></TD>
   <TD align="right"><font size="2" face="Arial, Helvetica, sans-serif">&nbsp;</font></TD>
   <TD align="right"><font size="2" face="Arial, Helvetica, sans-serif">&nbsp;</font></TD>
   <TD align="right"><FONT size=2 face="Arial, Helvetica, sans-serif">&#8212;</FONT></TD>
   <TD align="right"><font size="2" face="Arial, Helvetica, sans-serif">&nbsp;</font></TD>
   <TD align="right"><font size="2" face="Arial, Helvetica, sans-serif">&nbsp;</font></TD>
   <TD align="right"><FONT size=2 face="Arial, Helvetica, sans-serif">10</FONT></TD>
   <TD align="right"><font size="2" face="Arial, Helvetica, sans-serif">&nbsp;</font></TD>
   <TD align="right"><font size="2" face="Arial, Helvetica, sans-serif">&nbsp;</font></TD>
   <TD align="right"><FONT size=2 face="Arial, Helvetica, sans-serif">&#8212;</FONT></TD>
   <TD align="right"><font size="2" face="Arial, Helvetica, sans-serif">&nbsp;</font></TD>
   <TD align="right"><font size="2" face="Arial, Helvetica, sans-serif">&nbsp;</font></TD>
   <TD align="right"><FONT size=2 face="Arial, Helvetica, sans-serif">&#8212;</FONT></TD>
   <TD align="right"><font size="2" face="Arial, Helvetica, sans-serif">&nbsp;</font></TD>
   <TD align="right"><font size="2" face="Arial, Helvetica, sans-serif">&nbsp;</font></TD>
   <TD align="right"><FONT size=2 face="Arial, Helvetica, sans-serif">&#8212;</FONT></TD>
   <TD align="right"><font size="2" face="Arial, Helvetica, sans-serif">&nbsp;</font></TD>
   <TD align="right"><font size="2" face="Arial, Helvetica, sans-serif">&nbsp;</font></TD>
   <TD align="right"><FONT size=2 face="Arial, Helvetica, sans-serif">&#8212;</FONT></TD>
   <TD align="right"><font size="2" face="Arial, Helvetica, sans-serif">&nbsp;</font></TD>
   <TD align="right"><font size="2" face="Arial, Helvetica, sans-serif">&nbsp;</font></TD>
   <TD align="right"><FONT size=2 face="Arial, Helvetica, sans-serif">&#8212;</FONT></TD>
   <TD><font size="2" face="Arial, Helvetica, sans-serif">&nbsp;</font></TD>
</TR>
<TR>
   <TD><FONT size=2 face="Arial, Helvetica, sans-serif">Other obligations (1)</FONT></TD>
   <TD align="right">&nbsp;</TD>
   <TD align="right"><FONT size=2 face="Arial, Helvetica, sans-serif">158</FONT></TD>
   <TD align="right"><font size="2" face="Arial, Helvetica, sans-serif">&nbsp;</font></TD>
   <TD align="right"><font size="2" face="Arial, Helvetica, sans-serif">&nbsp;</font></TD>
   <TD align="right"><FONT size=2 face="Arial, Helvetica, sans-serif">22</FONT></TD>
   <TD align="right"><font size="2" face="Arial, Helvetica, sans-serif">&nbsp;</font></TD>
   <TD align="right"><font size="2" face="Arial, Helvetica, sans-serif">&nbsp;</font></TD>
   <TD align="right"><FONT size=2 face="Arial, Helvetica, sans-serif">45</FONT></TD>
   <TD align="right"><font size="2" face="Arial, Helvetica, sans-serif">&nbsp;</font></TD>
   <TD align="right"><font size="2" face="Arial, Helvetica, sans-serif">&nbsp;</font></TD>
   <TD align="right"><FONT size=2 face="Arial, Helvetica, sans-serif">43</FONT></TD>
   <TD align="right"><font size="2" face="Arial, Helvetica, sans-serif">&nbsp;</font></TD>
   <TD align="right"><font size="2" face="Arial, Helvetica, sans-serif">&nbsp;</font></TD>
   <TD align="right"><FONT size=2 face="Arial, Helvetica, sans-serif">38</FONT></TD>
   <TD align="right"><font size="2" face="Arial, Helvetica, sans-serif">&nbsp;</font></TD>
   <TD align="right"><font size="2" face="Arial, Helvetica, sans-serif">&nbsp;</font></TD>
   <TD align="right"><FONT size=2 face="Arial, Helvetica, sans-serif">3</FONT></TD>
   <TD align="right"><font size="2" face="Arial, Helvetica, sans-serif">&nbsp;</font></TD>
   <TD align="right"><font size="2" face="Arial, Helvetica, sans-serif">&nbsp;</font></TD>
   <TD align="right"><FONT size=2 face="Arial, Helvetica, sans-serif">3</FONT></TD>
   <TD align="right"><font size="2" face="Arial, Helvetica, sans-serif">&nbsp;</font></TD>
   <TD align="right"><font size="2" face="Arial, Helvetica, sans-serif">&nbsp;</font></TD>
   <TD align="right"><FONT size=2 face="Arial, Helvetica, sans-serif">4</FONT></TD>
   <TD><font size="2" face="Arial, Helvetica, sans-serif">&nbsp;</font></TD>
</TR>
<TR>
  <TD>&nbsp;</TD>
  <TD align="right">&nbsp;</TD>
  <TD align="right">&nbsp;</TD>
  <TD align="right">&nbsp;</TD>
  <TD align="right">&nbsp;</TD>
  <TD align="right">&nbsp;</TD>
  <TD align="right">&nbsp;</TD>
  <TD align="right">&nbsp;</TD>
  <TD align="right">&nbsp;</TD>
  <TD align="right">&nbsp;</TD>
  <TD align="right">&nbsp;</TD>
  <TD align="right">&nbsp;</TD>
  <TD align="right">&nbsp;</TD>
  <TD align="right">&nbsp;</TD>
  <TD align="right">&nbsp;</TD>
  <TD align="right">&nbsp;</TD>
  <TD align="right">&nbsp;</TD>
  <TD align="right">&nbsp;</TD>
  <TD align="right">&nbsp;</TD>
  <TD align="right">&nbsp;</TD>
  <TD align="right">&nbsp;</TD>
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  <TD align="right">&nbsp;</TD>
  <TD align="right">&nbsp;</TD>
  <TD>&nbsp;</TD>
</TR>
<TR bgcolor="#eeeeee">
   <TD><FONT size=2 face="Arial, Helvetica, sans-serif">Long-term debt obligations (2) (3)</FONT></TD>
   <TD align="right">&nbsp;</TD>
   <TD align="right"><FONT size=2 face="Arial, Helvetica, sans-serif">1,710</FONT></TD>
   <TD align="right"><font size="2" face="Arial, Helvetica, sans-serif">&nbsp;</font></TD>
   <TD align="right"><font size="2" face="Arial, Helvetica, sans-serif">&nbsp;</font></TD>
   <TD align="right"><FONT size=2 face="Arial, Helvetica, sans-serif">&#8212;</FONT></TD>
   <TD align="right"><font size="2" face="Arial, Helvetica, sans-serif">&nbsp;</font></TD>
   <TD align="right">&nbsp;</TD>
   <TD align="right"><font size=2 face="Arial, Helvetica, sans-serif">140</font></TD>
   <TD align="right"><font size="2" face="Arial, Helvetica, sans-serif">&nbsp;</font></TD>
   <TD align="right">&nbsp;</TD>
   <TD align="right"><font size="2" face="Arial, Helvetica, sans-serif">1,493</font></TD>
   <TD align="right"><font size="2" face="Arial, Helvetica, sans-serif">&nbsp;</font></TD>
   <TD align="right"><font size="2" face="Arial, Helvetica, sans-serif">&nbsp;</font></TD>
   <TD align="right"><FONT size=2 face="Arial, Helvetica, sans-serif">23</FONT></TD>
   <TD align="right"><font size="2" face="Arial, Helvetica, sans-serif">&nbsp;</font></TD>
   <TD align="right"><font size="2" face="Arial, Helvetica, sans-serif">&nbsp;</font></TD>
   <TD align="right"><FONT size=2 face="Arial, Helvetica, sans-serif">22</FONT></TD>
   <TD align="right"><font size="2" face="Arial, Helvetica, sans-serif">&nbsp;</font></TD>
   <TD align="right"><font size="2" face="Arial, Helvetica, sans-serif">&nbsp;</font></TD>
   <TD align="right"><FONT size=2 face="Arial, Helvetica, sans-serif">16</FONT></TD>
   <TD align="right"><font size="2" face="Arial, Helvetica, sans-serif">&nbsp;</font></TD>
   <TD align="right"><font size="2" face="Arial, Helvetica, sans-serif">&nbsp;</font></TD>
   <TD align="right"><FONT size=2 face="Arial, Helvetica, sans-serif">16</FONT></TD>
   <TD><font size="2" face="Arial, Helvetica, sans-serif">&nbsp;</font></TD>
</TR>
<TR>
   <TD><FONT size=2 face="Arial, Helvetica, sans-serif">Pension obligations (2)</FONT></TD>
   <TD align="right">&nbsp;</TD>
   <TD align="right"><FONT size=2 face="Arial, Helvetica, sans-serif">259</FONT></TD>
   <TD align="right"><font size="2" face="Arial, Helvetica, sans-serif">&nbsp;</font></TD>
   <TD align="right"><font size="2" face="Arial, Helvetica, sans-serif">&nbsp;</font></TD>
   <TD align="right"><FONT size=2 face="Arial, Helvetica, sans-serif">5</FONT></TD>
   <TD align="right"><font size="2" face="Arial, Helvetica, sans-serif">&nbsp;</font></TD>
   <TD align="right"><font size="2" face="Arial, Helvetica, sans-serif">&nbsp;</font></TD>
   <TD align="right"><FONT size=2 face="Arial, Helvetica, sans-serif">14</FONT></TD>
   <TD align="right"><font size="2" face="Arial, Helvetica, sans-serif">&nbsp;</font></TD>
   <TD align="right"><font size="2" face="Arial, Helvetica, sans-serif">&nbsp;</font></TD>
   <TD align="right"><FONT size=2 face="Arial, Helvetica, sans-serif">9</FONT></TD>
   <TD align="right"><font size="2" face="Arial, Helvetica, sans-serif">&nbsp;</font></TD>
   <TD align="right"><font size="2" face="Arial, Helvetica, sans-serif">&nbsp;</font></TD>
   <TD align="right"><FONT size=2 face="Arial, Helvetica, sans-serif">9</FONT></TD>
   <TD align="right"><font size="2" face="Arial, Helvetica, sans-serif">&nbsp;</font></TD>
   <TD align="right"><font size="2" face="Arial, Helvetica, sans-serif">&nbsp;</font></TD>
   <TD align="right"><FONT size=2 face="Arial, Helvetica, sans-serif">9</FONT></TD>
   <TD align="right"><font size="2" face="Arial, Helvetica, sans-serif">&nbsp;</font></TD>
   <TD align="right"><font size="2" face="Arial, Helvetica, sans-serif">&nbsp;</font></TD>
   <TD align="right"><FONT size=2 face="Arial, Helvetica, sans-serif">10</FONT></TD>
   <TD align="right"><font size="2" face="Arial, Helvetica, sans-serif">&nbsp;</font></TD>
   <TD align="right">&nbsp;</TD>
   <TD align="right"><font size=2 face="Arial, Helvetica, sans-serif">203</font></TD>
   <TD><font size="2" face="Arial, Helvetica, sans-serif">&nbsp;</font></TD>
</TR>
<TR bgcolor="#eeeeee">
   <TD><FONT size=2 face="Arial, Helvetica, sans-serif">Other non-current liabilities (2)</FONT></TD>
   <TD align="right">&nbsp;</TD>
   <TD align="right" bgcolor="#eeeeee"><FONT size=2 face="Arial, Helvetica, sans-serif">15</FONT></TD>
   <TD align="right"><font size="2" face="Arial, Helvetica, sans-serif">&nbsp;</font></TD>
   <TD align="right"><font size="2" face="Arial, Helvetica, sans-serif">&nbsp;</font></TD>
   <TD align="right"><FONT size=2 face="Arial, Helvetica, sans-serif">2</FONT></TD>
   <TD align="right"><font size="2" face="Arial, Helvetica, sans-serif">&nbsp;</font></TD>
   <TD align="right"><font size="2" face="Arial, Helvetica, sans-serif">&nbsp;</font></TD>
   <TD align="right"><FONT size=2 face="Arial, Helvetica, sans-serif">7</FONT></TD>
   <TD align="right"><font size="2" face="Arial, Helvetica, sans-serif">&nbsp;</font></TD>
   <TD align="right"><font size="2" face="Arial, Helvetica, sans-serif">&nbsp;</font></TD>
   <TD align="right"><FONT size=2 face="Arial, Helvetica, sans-serif">2</FONT></TD>
   <TD align="right"><font size="2" face="Arial, Helvetica, sans-serif">&nbsp;</font></TD>
   <TD align="right"><font size="2" face="Arial, Helvetica, sans-serif">&nbsp;</font></TD>
   <TD align="right"><FONT size=2 face="Arial, Helvetica, sans-serif">2</FONT></TD>
   <TD align="right"><font size="2" face="Arial, Helvetica, sans-serif">&nbsp;</font></TD>
   <TD align="right"><font size="2" face="Arial, Helvetica, sans-serif">&nbsp;</font></TD>
   <TD align="right"><FONT size=2 face="Arial, Helvetica, sans-serif">2</FONT></TD>
   <TD align="right"><font size="2" face="Arial, Helvetica, sans-serif">&nbsp;</font></TD>
   <TD align="right"><font size="2" face="Arial, Helvetica, sans-serif">&nbsp;</font></TD>
   <TD align="right"><FONT size=2 face="Arial, Helvetica, sans-serif">&#8212;</FONT></TD>
   <TD align="right"><font size="2" face="Arial, Helvetica, sans-serif">&nbsp;</font></TD>
   <TD align="right"><font size="2" face="Arial, Helvetica, sans-serif">&nbsp;</font></TD>
   <TD align="right"><FONT size=2 face="Arial, Helvetica, sans-serif">&#8212;</FONT></TD>
   <TD><font size="2" face="Arial, Helvetica, sans-serif">&nbsp;</font></TD>
</TR>
<TR>
   <TD>&nbsp; </TD>
   <TD align="right"><HR noshade size=1></TD>
   <TD align="right"><HR noshade size=1></TD>
   <TD align="right"><font size="2" face="Arial, Helvetica, sans-serif">&nbsp;</font></TD>
   <TD align="right"><HR noshade size=1></TD>
   <TD align="right"><HR noshade size=1></TD>
   <TD align="right"><font size="2" face="Arial, Helvetica, sans-serif">&nbsp;</font></TD>
   <TD align="right"><HR noshade size=1></TD>
   <TD align="right"><HR noshade size=1></TD>
   <TD align="right"><font size="2" face="Arial, Helvetica, sans-serif">&nbsp;</font></TD>
   <TD align="right"><HR noshade size=1></TD>
   <TD align="right"><HR noshade size=1></TD>
   <TD align="right"><font size="2" face="Arial, Helvetica, sans-serif">&nbsp;</font></TD>
   <TD align="right"><HR noshade size=1></TD>
   <TD align="right"><HR noshade size=1></TD>
   <TD align="right"><font size="2" face="Arial, Helvetica, sans-serif">&nbsp;</font></TD>
   <TD align="right"><HR noshade size=1></TD>
   <TD align="right"><HR noshade size=1></TD>
   <TD align="right"><font size="2" face="Arial, Helvetica, sans-serif">&nbsp;</font></TD>
   <TD align="right"><HR noshade size=1></TD>
   <TD align="right"><HR noshade size=1></TD>
   <TD align="right"><font size="2" face="Arial, Helvetica, sans-serif">&nbsp;</font></TD>
   <TD align="right"><HR noshade size=1></TD>
   <TD align="right"><HR noshade size=1></TD>
   <TD><font size="2" face="Arial, Helvetica, sans-serif">&nbsp;</font></TD>
</TR>
<TR bgcolor="#eeeeee">
   <TD><FONT size=2 face="Arial, Helvetica, sans-serif">Total</FONT></TD>
   <TD align="right">&nbsp;</TD>
   <TD align="right"><FONT size=2 face="Arial, Helvetica, sans-serif">3,693</FONT></TD>
   <TD align="right"><font size="2" face="Arial, Helvetica, sans-serif">&nbsp;</font></TD>
   <TD align="right">&nbsp;</TD>
   <TD align="right"><font size=2 face="Arial, Helvetica, sans-serif">771</font></TD>
   <TD align="right"><font size="2" face="Arial, Helvetica, sans-serif">&nbsp;</font></TD>
   <TD align="right">&nbsp;</TD>
   <TD align="right"><font size=2 face="Arial, Helvetica, sans-serif">821</font></TD>
   <TD align="right"><font size="2" face="Arial, Helvetica, sans-serif">&nbsp;</font></TD>
   <TD align="right">&nbsp;</TD>
   <TD align="right"><font size=2 face="Arial, Helvetica, sans-serif">1,592</font></TD>
   <TD align="right"><font size="2" face="Arial, Helvetica, sans-serif">&nbsp;</font></TD>
   <TD align="right"><font size="2" face="Arial, Helvetica, sans-serif">&nbsp;</font></TD>
   <TD align="right"><FONT size=2 face="Arial, Helvetica, sans-serif">95</FONT></TD>
   <TD align="right"><font size="2" face="Arial, Helvetica, sans-serif">&nbsp;</font></TD>
   <TD align="right"><font size="2" face="Arial, Helvetica, sans-serif">&nbsp;</font></TD>
   <TD align="right"><FONT size=2 face="Arial, Helvetica, sans-serif">57</FONT></TD>
   <TD align="right"><font size="2" face="Arial, Helvetica, sans-serif">&nbsp;</font></TD>
   <TD align="right"><font size="2" face="Arial, Helvetica, sans-serif">&nbsp;</font></TD>
   <TD align="right"><FONT size=2 face="Arial, Helvetica, sans-serif">44</FONT></TD>
   <TD align="right"><font size="2" face="Arial, Helvetica, sans-serif">&nbsp;</font></TD>
   <TD align="right">&nbsp;</TD>
   <TD align="right"><font size=2 face="Arial, Helvetica, sans-serif">313</font></TD>
   <TD><font size="2" face="Arial, Helvetica, sans-serif">&nbsp;</font></TD>
</TR>
<TR>
   <TD>&nbsp; </TD>
   <TD align="right"><HR noshade size=2></TD>
   <TD align="right"><HR noshade size=2></TD>
   <TD align="right"><font size="2" face="Arial, Helvetica, sans-serif">&nbsp;</font></TD>
   <TD colspan=2 align="right"><HR noshade size=2></TD>
   <TD align="right"><font size="2" face="Arial, Helvetica, sans-serif">&nbsp;</font></TD>
   <TD colspan=2 align="right"><HR noshade size=2></TD>
   <TD align="right"><font size="2" face="Arial, Helvetica, sans-serif">&nbsp;</font></TD>
   <TD colspan=2 align="right"><HR noshade size=2></TD>
   <TD align="right"><font size="2" face="Arial, Helvetica, sans-serif">&nbsp;</font></TD>
   <TD align="right"><HR noshade size=2></TD>
   <TD align="right"><hr noshade size=2></TD>
   <TD align="right"><font size="2" face="Arial, Helvetica, sans-serif">&nbsp;</font></TD>
   <TD align="right"><HR noshade size=2></TD>
   <TD align="right"><HR noshade size=2></TD>
   <TD align="right"><font size="2" face="Arial, Helvetica, sans-serif">&nbsp;</font></TD>
   <TD align="right"><HR noshade size=2></TD>
   <TD align="right"><HR noshade size=2></TD>
   <TD align="right"><font size="2" face="Arial, Helvetica, sans-serif">&nbsp;</font></TD>
   <TD colspan=2 align="right"><HR noshade size=2></TD>
   <TD><font size="2" face="Arial, Helvetica, sans-serif">&nbsp;</font></TD>
</TR>
</TABLE>
<table width="100%" border="0" cellspacing="0" cellpadding="0">
  <tr>
    <td width="3%">&nbsp;</td>
    <td>&nbsp;</td>
  </tr>
  <tr>
    <td valign="top"><font face="Arial, Helvetica, sans-serif" size="1">(1)</font></td>
    <td><font face="Arial, Helvetica, sans-serif" size="1">Items not reflected
        on the Unaudited Interim Consolidated Balance Sheet at September 25,
    2004</font></td>
  </tr>
  <tr>
    <td valign="top"><font face="Arial, Helvetica, sans-serif" size="1">(2)</font></td>
    <td><font face="Arial, Helvetica, sans-serif" size="1">Items reflected on
    the Unaudited Interim Consolidated Balance Sheet at September 25, 2004.</font></td>
  </tr>
  <tr>
    <td valign="top"><font face="Arial, Helvetica, sans-serif" size="1">(3)</font></td>
    <td><font face="Arial, Helvetica, sans-serif" size="1">Refer to Note 14 to
        the Unaudited Interim Consolidated Financial Statements at September
        25, 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, Helvetica, sans-serif">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, Helvetica, sans-serif">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, Helvetica, sans-serif">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, Helvetica, sans-serif">Other obligations mainly represent payments to be made in connection with cooperation and development agreements.</font></p></div><div style="text-indent:3%">
<p align="left"><font size="2" face="Arial, Helvetica, sans-serif">Long-term
    debt obligations mainly consist of bank loans and convertible debt issued
    by us that are 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. 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 $1,379 million, $1,365 million on August
    5, 2008 or $1,352 million on August 5, 2010. </font></p>
</div>
<div style="text-indent:3%">
<p align="left"><font size="2" face="Arial, Helvetica, sans-serif">Pension
      obligations consist of our best estimates of the amounts that will be payable
      for the retirement plans based on the assumption that our employees will
      work in our company until they reach the age of retirement. The final actual
    amount to be paid and the related timings of such payments may vary significantly
    due to early retirements or terminations.</font></p>
</div>
<div style="text-indent:3%"><p align="left"><font size="2" face="Arial, Helvetica, sans-serif">Other non-current liabilities include future unused leases and miscellaneous contractual obligations. </font></p></div>

<p align="left"><font size="2" face="Arial, Helvetica, sans-serif"><b><i>Financial Outlook </i></b></font></p>
<div style="text-indent:3%"><p align="left"><font size="2" face="Arial, Helvetica, sans-serif">We currently expect that capital spending for the full year 2004 will be in the range of $2 billion, significantly above the $1.2 billion spent in 2003 but below the previously announced range for 2004 of $2.2 billion. 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. At September 25, 2004, we had $991 million in outstanding commitments for equipment purchases for the fourth quarter of 2004 and for 2005. </font></p></div>
<p align="center"><font size="2" face="Geneva, Arial, Helvetica, sans-serif">25</font></p>
<hr noshade align="center" width="100%" size="2">
<div style="page-break-before:always"></div>
<page>
<a name="p26"></a>

<div style="text-indent:3%"><p align="left"><font size="2" face="Arial, Helvetica, sans-serif">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 existing 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, Helvetica, sans-serif">We
      are currently budgeting approximately $1.5 billion of capital spending
      for 2005. We are also in discussions to create a possible joint venture
    agreement, which, if signed and implemented, will involve approximately $150
    million of additional financial investment in 2005.</font></p>
</div>
<div style="text-indent:3%"><p align="left"><font size="2" face="Arial, Helvetica, sans-serif">We redeemed all our remaining outstanding 2010 Bonds on July 9, 2004 for a total amount of cash paid of $131 million. </font></p></div>
<div style="text-indent:3%"><p align="left"><font size="2" face="Arial, Helvetica, sans-serif">On September 22, 2004, we redeemed approximately $910 million nominal value of our 2009 Notes for approximately $806 million in cash. Over 99% of our outstanding 2009 Notes were surrendered by holders. On October 11, 2004, we announced that we will redeem all of our remaining 2009 Notes on November 12, 2004 at a redemption price equal to $888.96 per $1,000 principal amount. The residual value of these 2009 Notes is approximately $8 million or 0.9% of the initial total amount issued.</font></p></div>
<div style="text-indent:3%"><p align="left"><font size="2" face="Arial, Helvetica, sans-serif">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 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, Helvetica, sans-serif"><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, Helvetica, sans-serif">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 size="2" face="Geneva, Arial, Helvetica, sans-serif">26</font></p>

<hr noshade align="center" width="100%" size="2">
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<page>
<a name="p27"></a>

<div style="text-indent:3%"><p align="left"><font size="2" face="Arial, Helvetica, sans-serif">We have identified the following VIEs under the existing contracts and disclosed the arrangements in the Unaudited Interim Consolidated Financial Statements at September 25, 2004:</font></p></div>
<table width="100%" border="0" cellpadding="0" cellspacing="0">
<tr valign="top">
<td width="3%">&#8226;</td>
<td>
<font size="2" face="Arial, Helvetica, sans-serif">a venture established with
Dai Nippon for the development and production of photo masks in which we have
a 19% stake, and an obligation to repurchase certain assets in the event of the
venture&#8217;s bankruptcy, and</font></td>
</tr>
<tr valign="top">
  <td>&nbsp;</td>
  <td>&nbsp;</td>
</tr>
</table>
<table width="100%" border="0" cellpadding="0" cellspacing="0">
<tr valign="top">
<td width="3%">&#8226;</td>
<td>
<font size="2" face="Arial, Helvetica, sans-serif">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, Helvetica, sans-serif">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, Helvetica, sans-serif">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, Helvetica, sans-serif">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, Helvetica, sans-serif">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 September 25, 2004. </font></p></div>
<p align="center"><font size="2" face="Geneva, Arial, Helvetica, sans-serif">27</font></p>

<hr noshade align="center" width="100%" size="2">
<div style="page-break-before:always"></div>
<font size="2"><page>
<a name="p28"></a>

</font>
<p align="left"><font size="2" face="Arial, Helvetica, sans-serif"><b>Backlog and Customers</b></font></p>
<div style="text-indent:3%">
<p align="left"><font size="2" face="Arial, Helvetica, sans-serif">We entered
    2004 with a backlog (including frame orders) that was approximately 30% higher
    than we had entering 2003. We had a high level of backlog (including frame
    orders) during the first half of 2004 due to favorable market conditions.
    However, at the end of the third quarter of 2004, due to order adjustments
    and rescheduling, our backlog declined by approximately 17% compared to the
    backlog
    at the
    end of the second quarter of 2004. Our new order booking rate (including
    new frame orders) was also impacted by the progressive decline in market
    demand and was significantly lower than the booking rate recorded in the
    first half of 2004. In the third quarter of 2004, we had several large customers,
    with the Nokia group of companies being the largest and accounting for approximately
    17% of our revenues. Total original equipment manufacturers (&#8220;OEMs&#8221;)
accounted for approximately 80% of our net revenues, of which the top ten OEM
customers accounted for approximately 44%. Distributors accounted for approximately
20% of our net revenues. We have no assurance that the Nokia group of companies,
or any other customer, will continue to generate revenues for us at the same
levels. If we were to lose one or more of our key customers, or if they were
to significantly reduce their bookings, or fail to meet their payment obligations,
our operating results and financial condition could be adversely affected.</font></p>
</div>
<p align="left"><font size="2" face="Arial, Helvetica, sans-serif"><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, Helvetica, sans-serif">The
    following table sets forth changes to our share capital as of September 25,
2004.</font></p></div>
<table width="100%" border="0" cellpadding="0" cellspacing="0">
<tr align="center" valign="bottom">
<td><font size="1" face="Arial, Helvetica, sans-serif"><b>Year</b></font></td>
<td rowspan="2"><font size="1">&nbsp;</font></td>
<td><font size="1" face="Arial, Helvetica, sans-serif"><b>Transaction</b></font></td>
<td rowspan="2"><font size="1">&nbsp;</font></td>
<td><font size="1" face="Arial, Helvetica, sans-serif"><b>Number<br>
  of shares</b></font></td>
<td rowspan="2"><font size="1">&nbsp;</font></td>
<td><font size="1" face="Arial, Helvetica, sans-serif"><b>Nominal<br>
  value<br>
  (euro)</b></font></td>
<td rowspan="2"><font size="1">&nbsp;</font></td>
<td><font size="1" face="Arial, Helvetica, sans-serif"><b>Cumulative<br>
  amount of<br>
  capital<br>
  (euro)</b></font></td>
<td rowspan="2"><font size="1">&nbsp;</font></td>
<td><font size="1" face="Arial, Helvetica, sans-serif"><b>Cumulative<br>
  number of shares</b></font></td>
<td rowspan="2"><font size="1">&nbsp;</font></td>
<td><font size="1" face="Arial, Helvetica, sans-serif"><b>Nominal value of increase/reduction<br>
  in capital</b></font></td>
<td rowspan="2"><font size="1">&nbsp;</font></td>
<td><font size="1" face="Arial, Helvetica, sans-serif"><b>Amount<br>
  of issue<br>
  premium<br>
  (euro)</b></font></td>
<td rowspan="2"><font size="1">&nbsp;</font></td>
<td><font size="1" face="Arial, Helvetica, sans-serif"><b>Cumulative-issue<br>
  premium<br>
  (euro)</b></font></td>
<td rowspan="2"><font size="1">&nbsp;</font></td> </tr>
<tr valign="top">
  <td align="left"><hr width="100%" size="1" noshade></td>
  <td align="right"><hr width="100%" size="1" noshade></td>
  <td align="right"><hr width="100%" size="1" noshade></td>
  <td align="right"><hr width="100%" size="1" noshade></td>
  <td align="right"><hr width="100%" size="1" noshade></td>
  <td align="right"><hr width="100%" size="1" noshade></td>
  <td align="right"><hr width="100%" size="1" noshade></td>
  <td align="right"><hr width="100%" size="1" noshade></td>
  <td align="right"><hr width="100%" size="1" noshade></td>
  </tr>
<tr valign="top">
<td align="left" bgcolor="#eeeeee"><font size="2" face="Arial, Helvetica, sans-serif">December 31, 2003</font></td>
<td width="2%" align="left" bgcolor="#eeeeee">&nbsp;</td>
<td width="12%" align="right" bgcolor="#eeeeee"><div align="left"><font size="2" face="Arial, Helvetica, sans-serif">Exercise of options </font></div></td>
<td width="2%" align="left" bgcolor="#eeeeee">&nbsp;</td>
<td width="10%" align="right" bgcolor="#eeeeee"><font size="2" face="Arial, Helvetica, sans-serif">634,261</font></td>
<td width="2%" align="left" bgcolor="#eeeeee">&nbsp;</td>
<td width="8%" align="right" bgcolor="#eeeeee"><font size="2" face="Arial, Helvetica, sans-serif">1.04</font></td>
<td width="2%" align="left" bgcolor="#eeeeee">&nbsp;</td>
<td width="10%" align="right" bgcolor="#eeeeee"><font size="2" face="Arial, Helvetica, sans-serif">938,880,523</font></td>
<td width="2%" align="left" bgcolor="#eeeeee">&nbsp;</td>
<td width="10%" align="right" bgcolor="#eeeeee"><font size="2" face="Arial, Helvetica, sans-serif">902,769,734</font></td>
<td width="2%" align="left" bgcolor="#eeeeee">&nbsp;</td>
<td width="10%" align="right" bgcolor="#eeeeee"><font size="2" face="Arial, Helvetica, sans-serif">659,631</font></td>
<td width="2%" align="left" bgcolor="#eeeeee">&nbsp;</td>
<td width="10%" align="right" bgcolor="#eeeeee"><font size="2" face="Arial, Helvetica, sans-serif">4,458,391</font></td>
<td width="2%" align="left" bgcolor="#eeeeee">&nbsp;</td>
<td width="10%" align="right" bgcolor="#eeeeee"><font size="2" face="Arial, Helvetica, sans-serif">1,693,579,662</font></td>
<td width="2%" align="left" bgcolor="#eeeeee">&nbsp;</td>
</tr>
<tr valign="top">
  <td align="left">&nbsp;</td>
  <td align="right">&nbsp;</td>
  <td align="left">&nbsp;</td>
  <td align="right">&nbsp;</td>
  <td align="right">&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="right">&nbsp;</td>
  <td align="right">&nbsp;</td>
  <td align="right">&nbsp;</td>
  <td align="right">&nbsp;</td>
  <td align="right">&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, Helvetica, sans-serif">September 25, 2004</font></td>
<td align="right" bgcolor="#eeeeee">&nbsp;</td>
<td align="left" bgcolor="#eeeeee"><font size="2" face="Arial, Helvetica, sans-serif">Exercise
    of options and conversion of bonds</font></td>
<td align="right" bgcolor="#eeeeee">&nbsp;</td>
<td align="right" bgcolor="#eeeeee"><font size="2" face="Arial, Helvetica, sans-serif">2,115,382</font></td>
<td align="right" bgcolor="#eeeeee">&nbsp;</td>
<td align="right" bgcolor="#eeeeee"><font size="2" face="Arial, Helvetica, sans-serif">1.04</font></td>
<td align="left" bgcolor="#eeeeee">&nbsp;</td>
<td align="right" bgcolor="#eeeeee"><font size="2" face="Arial, Helvetica, sans-serif">941,080,521</font></td>
<td align="right" bgcolor="#eeeeee">&nbsp;</td>
<td align="right" bgcolor="#eeeeee"><font size="2" face="Arial, Helvetica, sans-serif">904,885,116</font></td>
<td align="right" bgcolor="#eeeeee">&nbsp;</td>
<td align="right" bgcolor="#eeeeee"><font size="2" face="Arial, Helvetica, sans-serif">2,199,998</font></td>
<td align="right" bgcolor="#eeeeee">&nbsp;</td>
<td align="right" bgcolor="#eeeeee"><font size="2" face="Arial, Helvetica, sans-serif">11,302,071</font></td>
<td align="right" bgcolor="#eeeeee">&nbsp;</td>
<td align="right" bgcolor="#eeeeee"><font size="2" face="Arial, Helvetica, sans-serif">1,704,881,733</font></td>
<td align="left" bgcolor="#eeeeee">&nbsp;</td>
</tr>
</table>
<p align="center"><font face="Arial, Helvetica, sans-serif" size="2">28</font></p>
<hr noshade align="center" width="100%" size="2">
<div style="page-break-before:always"></div>
<font size="2"><page>
<a name="p29"></a>

</font>
<div style="text-indent:3%">
<p align="left"><font size="2" face="Arial, Helvetica, sans-serif">The
    following table summarizes the amount of common shares authorized to be granted,
exercised, cancelled and outstanding as of September 25, 2004. </font></p></div>
<table width="100%" border="0" cellpadding="0" cellspacing="0">
<tr align="center" valign="bottom">
<td rowspan="2"><b><font size="1">&nbsp;</font></b></td>
<td rowspan="2"><b><font size="1">&nbsp;</font></b></td>
<td><b><font size="1" face="Arial, Helvetica, sans-serif">1995 Plan </font></b></td>
<td rowspan="2"><b><font size="1">&nbsp;</font></b></td>
<td><b><font size="1" face="Arial, Helvetica, sans-serif">2001 Plan </font></b></td>
<td rowspan="2"><b><font size="1">&nbsp;</font></b></td>
<td><b><font size="1" face="Arial, Helvetica, sans-serif">Supervisory<br>
  Board Plans </font></b></td>
<td rowspan="2"><b><font size="1">&nbsp;</font></b></td>
<td><b><font size="1" face="Arial, Helvetica, sans-serif">Total </font></b></td>
<td rowspan="2"><b><font size="1">&nbsp;</font></b></td> </tr>
<tr align="center" valign="bottom">
  <td><hr width="100%" size="1" noshade></td>
  <td><hr width="100%" size="1" noshade></td>
  <td><hr width="100%" size="1" noshade></td>
  <td><hr width="100%" size="1" noshade></td>
  </tr>
<tr valign="top" bgcolor="#eeeeee">
<td align="left"><font size="2" face="Arial, Helvetica, sans-serif">Remaining amount authorized to be granted</font></td>
<td width="2%" align="left">&nbsp;</td>
<td width="10%" align="right">&#151;</td>
<td width="2%" align="left">&nbsp;</td>
<td width="10%" align="right"><font size="2" face="Arial, Helvetica, sans-serif">14,624,624</font></td>
<td width="2%" align="left">&nbsp;</td>
<td width="10%" align="right">&#151;</td>
<td width="2%" align="left">&nbsp;</td>
<td width="10%" align="right"><font size="2" face="Arial, Helvetica, sans-serif">14,624,624</font></td>
<td width="2%" align="left">&nbsp;</td>
</tr>
<tr valign="top">
<td align="left"><font size="2" face="Arial, Helvetica, sans-serif">Amount exercised</font></td>
<td align="right">&nbsp;</td>
<td align="right"><font size="2" face="Arial, Helvetica, sans-serif">9,321,204</font></td>
<td align="right">&nbsp;</td>
<td align="right"><font size="2" face="Arial, Helvetica, sans-serif">3,950</font></td>
<td align="right">&nbsp;</td>
<td align="right"><font size="2" face="Arial, Helvetica, sans-serif">286,000</font></td>
<td align="right">&nbsp;</td>
<td align="right"><font size="2" face="Arial, Helvetica, sans-serif">9,611,154</font></td>
<td align="left">&nbsp;</td>
</tr>
<tr valign="top" bgcolor="#eeeeee">
<td align="left"><font size="2" face="Arial, Helvetica, sans-serif">Amount cancelled</font></td>
<td align="right">&nbsp;</td>
<td align="right"><font size="2" face="Arial, Helvetica, sans-serif">2,169,865</font></td>
<td align="right">&nbsp;</td>
<td align="right"><font size="2" face="Arial, Helvetica, sans-serif">2,312,657</font></td>
<td align="right">&nbsp;</td>
<td align="right"><font size="2" face="Arial, Helvetica, sans-serif">159,000</font></td>
<td align="right">&nbsp;</td>
<td align="right"><font size="2" face="Arial, Helvetica, sans-serif">4,641,522</font></td>
<td align="left">&nbsp;</td>
</tr>
<tr valign="top">
<td height="19" align="left"><font size="2" face="Arial, Helvetica, sans-serif">Amount outstanding</font></td>
<td align="right">&nbsp;</td>
<td align="right"><font size="2" face="Arial, Helvetica, sans-serif">20,070,872</font></td>
<td align="right">&nbsp;</td>
<td align="right"><font size="2" face="Arial, Helvetica, sans-serif">45,375,376</font></td>
<td align="right">&nbsp;</td>
<td align="right"><font size="2" face="Arial, Helvetica, sans-serif">774,500</font></td>
<td align="right">&nbsp;</td>
<td align="right"><font size="2" face="Arial, Helvetica, sans-serif">66,220,748</font></td>
<td align="left">&nbsp;</td>
</tr>
</table>
<p align="left"><font size="2" face="Arial, Helvetica, sans-serif"><b>Quantitative and Qualitative Disclosures about Market Risk</b></font></p>
<div style="text-indent:3%">
<p align="left"><font size="2" face="Arial, Helvetica, sans-serif">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. At the end of the third quarter of 2004, there
    had 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, Helvetica, sans-serif"><b>Disclosure Controls and Procedures</b></font></p>
<div style="text-indent:3%">
<p align="left"><font size="2" face="Arial, Helvetica, sans-serif">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>
<div style="text-indent:3%">
<p align="left"><font size="2" face="Arial, Helvetica, sans-serif">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, Helvetica, sans-serif"><b>Other Procedures</b></font></p>
<div style="text-indent:3%">
<p align="left"><font size="2" face="Arial, Helvetica, sans-serif">We
    have sent this report to our Audit Committee, which had an opportunity to
    raise questions with our management and Independent Registered Public Accounting
Firm before we submitted it to the Securities and Exchange Commission.</font></p></div>
<p align="left"><font size="2" face="Arial, Helvetica, sans-serif"><b>Cautionary Note Regarding Forward-Looking Statements </b></font></p>
<div style="text-indent:3%">
<p align="left"><font size="2" face="Arial, Helvetica, sans-serif">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">
&#8226;</font></td>
<td><font size="2" face="Arial, Helvetica, sans-serif">
the actual 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 width="3%"></td>
<td width="3%"><font size="2">
&#8226;</font></td>
<td><font size="2" face="Arial, Helvetica, sans-serif">
the financial impact of any measures we may decide, if we are unable to load
our Front-End and/or Back-End fabs at
satisfactory level;</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">
&#8226;</font></td>
<td><font size="2" face="Arial, Helvetica, sans-serif">
losses or curtailments of purchases from key customers as well as inventory adjustments
from distributors;</font></td>
</tr>
</table>
<p align="center"><font size="2" face="Geneva, Arial, Helvetica, sans-serif">29</font></p>
<hr noshade align="center" width="100%" size="2">
<div style="page-break-before:always"></div>
<font size="2"><page>
<a name="p30"></a>

</font>
<table width="100%" cellspacing="0" cellpadding="0" border="0">
<tr valign="top">
<td width="3%"></td>
<td width="3%"><font size="2">
&#8226;</font></td>
<td width="94%"><font size="2" face="Arial, Helvetica, sans-serif">
further strong decline in the exchange rates between the US Dollar and the euro
compared to an average euro to US Dollar
exchange rate of $1.23 to &euro;1, and between the US 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 width="3%"></td>
<td width="3%"><font size="2">
&#8226;</font></td>
<td><font size="2" face="Arial, Helvetica, sans-serif">
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 width="3%"></td>
<td width="3%"><font size="2">
&#8226;</font></td>
<td><font size="2" face="Arial, Helvetica, sans-serif">
our ability to develop, manufacture and market innovative products in a rapidly
changing technological environment and competitive industry;</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">
&#8226;</font></td>
<td><font size="2" face="Arial, Helvetica, sans-serif">
smooth transition pursuant to recently announced and future organizational changes
in our top management;</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">
&#8226;</font></td>
<td><font size="2" face="Arial, Helvetica, sans-serif">
changes in the economic, social, or political environment as well as natural
events such as severe weather, health risks or earthquakes in the countries in
which we and our key customers operate;</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">
&#8226;</font></td>
<td><font size="2" face="Arial, Helvetica, sans-serif">
the anticipated benefits of research &amp; development alliances and cooperative
activities; 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">
&#8226;</font></td>
<td><font size="2" face="Arial, Helvetica, sans-serif">
our ability to obtain required licenses on third party intellectual property.</font></td>
</tr>
</table>
<div style="text-indent:3%">
<p align="left"><font size="2" face="Arial, Helvetica, sans-serif">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, Helvetica, sans-serif">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, Helvetica, sans-serif" size="2">30</font></p>
<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" cellpadding="0" cellspacing="0">
  <tr valign="top">
    <td colspan="3" align="center"><font size="2" face="Arial, Helvetica, sans-serif"><b>STMICROELECTRONICS
      N.V.</b></font></td>
    <td align="left">&nbsp;</td>
  </tr>
  <tr valign="top">
    <td align="center"></td>
    <td align="center">&nbsp;</td>
    <td align="center"></td>
    <td align="left">&nbsp;</td>
  </tr>
  <tr valign="top">
    <td colspan="3" align="center"><font size="2" face="Arial, Helvetica, sans-serif"><b>UNAUDITED
      INTERIM CONSOLIDATED FINANCIAL STATEMENTS</b></font></td>
    <td align="left">&nbsp;</td>
  </tr>
  <tr valign="top">
    <td align="left"></td>
    <td align="left">&nbsp;</td>
    <td align="right"><font size="2" face="Arial, Helvetica, sans-serif"><b>Pages</b></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="left">&nbsp;</td>
  </tr>
  <tr valign="top">
    <td align="left"><a href="#pf2"><font size="2" face="Arial, Helvetica, sans-serif">Consolidated
      Statements of Income for the Three Months and the Nine Months Ended September
      25, 2004 and September 27, 2003 (unaudited)</font></a></td>
    <td width="2%" align="left">&nbsp;</td>
    <td width="5%" align="right"><a href="#pf2"><font size="2" face="Arial, Helvetica, sans-serif">F-2</font></a></td>
    <td align="left">&nbsp;</td>
  </tr>
  <tr valign="top">
    <td></td>
    <td></td>
    <td>&nbsp;</td>
    <td></td>
  </tr>
  <tr valign="top">
    <td align="left"><a href="#pf4"><font size="2" face="Arial, Helvetica, sans-serif">Consolidated
      Balance Sheets as of September 25, 2004 (unaudited) and December 31, 2003
      (audited)</font></a></td>
    <td align="left">&nbsp;</td>
    <td align="right"><a href="#pf4"><font size="2" face="Arial, Helvetica, sans-serif">F-4</font></a></td>
    <td align="left">&nbsp;</td>
  </tr>
  <tr valign="top">
    <td></td>
    <td></td>
    <td>&nbsp;</td>
    <td></td>
  </tr>
  <tr valign="top">
    <td align="left"><a href="#pf5"><font size="2" face="Arial, Helvetica, sans-serif">Consolidated
      Statements of Cash Flows for the Nine Months Ended September 25, 2004 and
      September 27, 2003 (unaudited)</font></a></td>
    <td align="left">&nbsp;</td>
    <td align="right"><a href="#pf5"><font size="2" face="Arial, Helvetica, sans-serif">F-5</font></a></td>
    <td align="left">&nbsp;</td>
  </tr>
  <tr valign="top">
    <td></td>
    <td></td>
    <td>&nbsp;</td>
    <td></td>
  </tr>
  <tr valign="top">
    <td align="left"><a href="#pf6"><font size="2" face="Arial, Helvetica, sans-serif">Consolidated
      Statements of Changes in Shareholders&#8217; Equity</font></a></td>
    <td align="left">&nbsp;</td>
    <td align="right"><a href="#pf6"><font size="2" face="Arial, Helvetica, sans-serif">F-6</font></a></td>
    <td align="left">&nbsp;</td>
  </tr>
  <tr valign="top">
    <td></td>
    <td></td>
    <td>&nbsp;</td>
    <td></td>
  </tr>
  <tr valign="top">
    <td align="left"><a href="#pf7"><font size="2" face="Arial, Helvetica, sans-serif">Notes
      to Interim Consolidated Financial Statements (unaudited)</font></a></td>
    <td align="left">&nbsp;</td>
    <td align="right"><a href="#pf7"><font size="2" face="Arial, Helvetica, sans-serif">F-7</font></a></td>
    <td align="left">&nbsp;</td>
  </tr>
</table>
<p align="center"><font size="2" face="Arial, Helvetica, sans-serif">F-1</font></p>
<hr noshade align="center" width="100%" size="2">
<div style="page-break-before:always"></div>
<page><a name="pf2"></a>
<p><a href="#contents"><font size="2">Back to Contents</font></a></p>
<table width="0"><tr><td></td>
</tr>
</table>
<p><font size="2" face="Arial, Helvetica, sans-serif"><b>STMicroelectronics N.V.<br>
  CONSOLIDATED STATEMENTS OF INCOME </b></font></p>
<table width="100%" border="0" cellpadding="0" cellspacing="0">
  <tr align="center" valign="bottom">
    <td width="1" rowspan="3"><font size="1" face="Arial, Helvetica, sans-serif">&nbsp;</font><font size="1">&nbsp;</font><font size="1" face="Arial, Helvetica, sans-serif">&nbsp;</font><font size="1">&nbsp;</font><font size="1" face="Arial, Helvetica, sans-serif">&nbsp;</font><font size="1">&nbsp;</font></td>
    <td colspan="3"><font size="1" face="Arial, Helvetica, sans-serif"><b>Three
      months ended</b></font></td>
    <td width="2%" rowspan="4"><font size="1">&nbsp;</font><font size="1">&nbsp;</font><font size="1">&nbsp;</font><font size="1">&nbsp;</font><font size="1">&nbsp;</font><font size="1">&nbsp;</font><font size="1">&nbsp;</font></td>
  </tr>
  <tr align="center" valign="top">
    <td width="10%">
      <hr size="1" noshade></td>
    <td width="2%">
      <hr size="1" noshade> </td>
    <td width="10%">
      <hr size="1" noshade></td>
  </tr>
  <tr align="center" valign="top">
    <td width="10%"><font size="1" face="Arial, Helvetica, sans-serif"><b>September
      25,</b></font></td>
    <td width="2%" rowspan="2"><font size="1">&nbsp;</font><font size="1">&nbsp;</font><font size="1">&nbsp;</font><font size="1">&nbsp;</font><font size="1">&nbsp;</font></td>
    <td width="10%"><font size="1" face="Arial, Helvetica, sans-serif"><b>September
      27, </b></font></td>
  </tr>
  <tr align="center" valign="bottom">
    <td align="left"><font size="1" face="Arial, Helvetica, sans-serif"><b>In
      million of U.S. dollars except per share amounts</b></font></td>
    <td width="10%"><font size="1" face="Arial, Helvetica, sans-serif"><b>2004</b></font></td>
    <td width="10%"><font size="1" face="Arial, Helvetica, sans-serif"><b>2003</b></font></td>
  </tr>
  <tr valign="bottom">
    <td align="left"><font size="2" face="Arial, Helvetica, sans-serif">&nbsp;</font></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="bottom">
    <td align="left">&nbsp;</td>
    <td align="center" valign="top"><font size="1" face="Arial, Helvetica, sans-serif">(unaudited)</font></td>
    <td align="center" valign="top">&nbsp;</td>
    <td align="center" valign="top"><font size="1" face="Arial, Helvetica, sans-serif">(unaudited)</font></td>
    <td align="left">&nbsp;</td>
  </tr>
  <tr valign="bottom" bgcolor="#eeeeee">
    <td align="left"><font size="2" face="Arial, Helvetica, sans-serif">Net sales</font></td>
    <td align="right"><font size="2" face="Arial, Helvetica, sans-serif">2,231</font></td>
    <td align="left">&nbsp;</td>
    <td align="right"><font size="2" face="Arial, Helvetica, sans-serif">1,803</font></td>
    <td align="left">&nbsp;</td>
  </tr>
  <tr valign="bottom">
    <td align="left"><font size="2" face="Arial, Helvetica, sans-serif">Other
      revenues</font></td>
    <td align="right"><font size="2" face="Arial, Helvetica, sans-serif">&#8212;</font></td>
    <td align="left">&nbsp;</td>
    <td align="right"><font size="2" face="Arial, Helvetica, sans-serif">&#8212;</font></td>
    <td align="left">&nbsp;</td>
  </tr>
  <tr valign="bottom">
    <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="bottom" bgcolor="#eeeeee">
    <td align="left"><font size="2" face="Arial, Helvetica, sans-serif"><b>Net
      revenues </b></font></td>
    <td align="right"><font size="2" face="Arial, Helvetica, sans-serif"><b>2,231</b></font></td>
    <td align="left">&nbsp;</td>
    <td align="right"><font size="2" face="Arial, Helvetica, sans-serif"><b>1,803</b></font></td>
    <td align="left">&nbsp;</td>
  </tr>
  <tr valign="bottom">
    <td align="left"><font size="2" face="Arial, Helvetica, sans-serif">Cost of
      sales</font></td>
    <td align="right"><font size="2" face="Arial, Helvetica, sans-serif">(1,386</font></td>
    <td align="left"><font size="2" face="Arial, Helvetica, sans-serif">)</font></td>
    <td align="right"><font size="2" face="Arial, Helvetica, sans-serif">(1,171</font></td>
    <td align="left"><font size="2" face="Arial, Helvetica, sans-serif">)</font></td>
  </tr>
  <tr valign="bottom">
    <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="bottom" bgcolor="#eeeeee">
    <td align="left"><font size="2" face="Arial, Helvetica, sans-serif"><b>Gross
      profit</b></font></td>
    <td align="right"><font size="2" face="Arial, Helvetica, sans-serif"><b>845</b></font></td>
    <td align="left">&nbsp;</td>
    <td align="right"><font size="2" face="Arial, Helvetica, sans-serif"><b>632</b></font></td>
    <td align="left">&nbsp;</td>
  </tr>
  <tr valign="bottom">
    <td align="left"><font size="2" face="Arial, Helvetica, sans-serif">Selling,
      general and administrative</font></td>
    <td align="right"><font size="2" face="Arial, Helvetica, sans-serif">(233</font></td>
    <td align="left"><font size="2" face="Arial, Helvetica, sans-serif">)</font></td>
    <td align="right"><font size="2" face="Arial, Helvetica, sans-serif">(191</font></td>
    <td align="left"><font size="2" face="Arial, Helvetica, sans-serif">)</font></td>
  </tr>
  <tr valign="bottom" bgcolor="#eeeeee">
    <td align="left"><font size="2" face="Arial, Helvetica, sans-serif">Research
      and development </font></td>
    <td align="right"><font size="2" face="Arial, Helvetica, sans-serif">(384</font></td>
    <td align="left"><font size="2" face="Arial, Helvetica, sans-serif">)</font></td>
    <td align="right"><font size="2" face="Arial, Helvetica, sans-serif">(302</font></td>
    <td align="left"><font size="2" face="Arial, Helvetica, sans-serif">)</font></td>
  </tr>
  <tr valign="bottom">
    <td align="left"><font size="2" face="Arial, Helvetica, sans-serif">Other
      income and expenses, net</font></td>
    <td align="right"><font size="2" face="Arial, Helvetica, sans-serif">(3</font></td>
    <td align="left"><font size="2" face="Arial, Helvetica, sans-serif">)</font></td>
    <td align="right"><font size="2" face="Arial, Helvetica, sans-serif">(10</font></td>
    <td align="left"><font size="2" face="Arial, Helvetica, sans-serif">)</font></td>
  </tr>
  <tr valign="bottom" bgcolor="#eeeeee">
    <td align="left"><font size="2" face="Arial, Helvetica, sans-serif">Impairment,
      restructuring charges and other related closure costs</font></td>
    <td align="right"><font size="2" face="Arial, Helvetica, sans-serif">(12</font></td>
    <td align="left"><font size="2" face="Arial, Helvetica, sans-serif">)</font></td>
    <td align="right"><font size="2" face="Arial, Helvetica, sans-serif">(193</font></td>
    <td align="left"><font size="2" face="Arial, Helvetica, sans-serif">)</font></td>
  </tr>
  <tr valign="bottom">
    <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="bottom" bgcolor="#eeeeee">
    <td align="left"><font size="2" face="Arial, Helvetica, sans-serif"><b>Operating
      income (loss)</b></font></td>
    <td align="right"><font size="2" face="Arial, Helvetica, sans-serif"><b>213</b></font></td>
    <td align="left">&nbsp;</td>
    <td align="right"><font size="2" face="Arial, Helvetica, sans-serif"><b>(64</b></font></td>
    <td align="left"><font size="2" face="Arial, Helvetica, sans-serif"><b>)</b></font></td>
  </tr>
  <tr valign="bottom">
    <td align="left"><font size="2" face="Arial, Helvetica, sans-serif">Interest
      expense, net</font></td>
    <td align="right"><font size="2" face="Arial, Helvetica, sans-serif">&#8212;</font></td>
    <td align="left">&nbsp;</td>
    <td align="right"><font size="2" face="Arial, Helvetica, sans-serif">(12</font></td>
    <td align="left"><font size="2" face="Arial, Helvetica, sans-serif">)</font></td>
  </tr>
  <tr valign="bottom" bgcolor="#eeeeee">
    <td align="left"><font size="2" face="Arial, Helvetica, sans-serif">Equity
      in loss of joint venture</font></td>
    <td align="right"><font size="2" face="Arial, Helvetica, sans-serif">(2</font></td>
    <td align="left"><font size="2" face="Arial, Helvetica, sans-serif">)</font></td>
    <td align="right"><font size="2" face="Arial, Helvetica, sans-serif">&#8212;</font></td>
    <td align="left">&nbsp;</td>
  </tr>
  <tr valign="bottom">
    <td align="left"><font size="2" face="Arial, Helvetica, sans-serif">Loss on
      extinguishment of convertible debt</font></td>
    <td align="right"><font size="2" face="Arial, Helvetica, sans-serif">&#8212;</font></td>
    <td align="left">&nbsp;</td>
    <td align="right"><font size="2" face="Arial, Helvetica, sans-serif">(22</font></td>
    <td align="left"><font size="2" face="Arial, Helvetica, sans-serif">)</font></td>
  </tr>
  <tr valign="bottom">
    <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="bottom" bgcolor="#eeeeee">
    <td align="left"><font size="2" face="Arial, Helvetica, sans-serif"><b>Income
      (loss) before income taxes and minority interests</b></font></td>
    <td align="right"><font size="2" face="Arial, Helvetica, sans-serif"><b>211</b></font></td>
    <td align="left">&nbsp;</td>
    <td align="right"><font size="2" face="Arial, Helvetica, sans-serif"><b>(98</b></font></td>
    <td align="left"><font size="2" face="Arial, Helvetica, sans-serif"><b>)</b></font></td>
  </tr>
  <tr valign="bottom">
    <td align="left"><font size="2" face="Arial, Helvetica, sans-serif">Income
      tax benefit (expense)</font></td>
    <td align="right"><font size="2" face="Arial, Helvetica, sans-serif">(20</font></td>
    <td align="left"><font size="2" face="Arial, Helvetica, sans-serif">)</font></td>
    <td align="right"><font size="2" face="Arial, Helvetica, sans-serif">49</font></td>
    <td align="left">&nbsp;</td>
  </tr>
  <tr valign="bottom">
    <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="bottom" bgcolor="#eeeeee">
    <td align="left"><font size="2" face="Arial, Helvetica, sans-serif"><b>Income
      (loss) before minority interests</b></font></td>
    <td align="right"><font size="2" face="Arial, Helvetica, sans-serif"><b>191</b></font></td>
    <td align="left">&nbsp;</td>
    <td align="right"><font size="2" face="Arial, Helvetica, sans-serif"><b>(49</b></font></td>
    <td align="left"><font size="2" face="Arial, Helvetica, sans-serif"><b>)</b></font></td>
  </tr>
  <tr valign="bottom">
    <td align="left"><font size="2" face="Arial, Helvetica, sans-serif">Minority
      interests</font></td>
    <td align="right"><font size="2" face="Arial, Helvetica, sans-serif">(2</font></td>
    <td align="left"><font size="2" face="Arial, Helvetica, sans-serif">)</font></td>
    <td align="right"><font size="2" face="Arial, Helvetica, sans-serif">(1</font></td>
    <td align="left"><font size="2" face="Arial, Helvetica, sans-serif">)</font></td>
  </tr>
  <tr valign="bottom">
    <td height="22" 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="bottom" bgcolor="#eeeeee">
    <td align="left"><font size="2" face="Arial, Helvetica, sans-serif"><b>Net
      income (loss)</b></font></td>
    <td align="right"><font size="2" face="Arial, Helvetica, sans-serif"><b>189</b></font></td>
    <td align="left">&nbsp;</td>
    <td align="right"><font size="2" face="Arial, Helvetica, sans-serif"><b>(50</b></font></td>
    <td align="left"><font size="2" face="Arial, Helvetica, sans-serif"><b>)</b></font></td>
  </tr>
  <tr valign="bottom">
    <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>
  <tr valign="bottom" bgcolor="#eeeeee">
    <td align="left"><font size="2" face="Arial, Helvetica, sans-serif"><b>Earnings
      (loss) per share (Basic)</b></font></td>
    <td align="right"><font size="2" face="Arial, Helvetica, sans-serif">0.21</font></td>
    <td align="left">&nbsp;</td>
    <td align="right"><font size="2" face="Arial, Helvetica, sans-serif">(0.06</font></td>
    <td align="left"><font size="2" face="Arial, Helvetica, sans-serif">)</font></td>
  </tr>
  <tr valign="bottom">
    <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>
  <tr valign="bottom" bgcolor="#eeeeee">
    <td align="left"><font size="2" face="Arial, Helvetica, sans-serif"><b>Earnings
      (loss) per share (Diluted)</b></font></td>
    <td align="right"><font size="2" face="Arial, Helvetica, sans-serif">0.20</font></td>
    <td align="left">&nbsp;</td>
    <td align="right"><font size="2" face="Arial, Helvetica, sans-serif">(0.06</font></td>
    <td align="left"><font size="2" face="Arial, Helvetica, sans-serif">)</font></td>
  </tr>
  <tr valign="bottom">
    <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>
</table>
<p align="left"><font size="2" face="Arial, Helvetica, sans-serif">The accompanying
     notes are an integral part of these Unaudited Interim Consolidated Financial

  Statements.</font></p>
<p align="center"><font size="2" face="Arial, Helvetica, sans-serif">F-2</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><font size="2" face="Arial, Helvetica, sans-serif"><b>STMicroelectronics N.V.<br>
  CONSOLIDATED STATEMENTS OF INCOME </b></font></p>
<table width="100%" border="0" cellpadding="0" cellspacing="0">
  <tr align="center" valign="bottom">
    <td><font size="1" face="Arial, Helvetica, sans-serif">&nbsp;</font><font size="1" face="Arial, Helvetica, sans-serif">&nbsp;</font><font size="1" face="Arial, Helvetica, sans-serif">&nbsp;</font></td>
    <td colspan="3"><font size="1" face="Arial, Helvetica, sans-serif"><b>Nine
      months ended</b></font></td>
    <td rowspan="6"><font size="1">&nbsp;</font><font size="1">&nbsp;</font><font size="1">&nbsp;</font><font size="1">&nbsp;</font><font size="1">&nbsp;</font><font size="1">&nbsp;</font></td>
  </tr>
  <tr align="center" valign="bottom">
    <td>&nbsp;</td>
    <td>
      <hr size="1" noshade> </td>
    <td>
      <hr size="1" noshade></td>
    <td>
      <hr size="1" noshade> </td>
  </tr>
  <tr align="center" valign="bottom">
    <td>&nbsp;</td>
    <td><font size="1" face="Arial, Helvetica, sans-serif"><b>September 25,</b></font></td>
    <td rowspan="3"><font size="1">&nbsp;</font><font size="1">&nbsp;</font><font size="1">&nbsp;</font></td>
    <td><font size="1" face="Arial, Helvetica, sans-serif"><b>September 27, </b></font></td>
  </tr>
  <tr align="center" valign="bottom">
    <td align="left"><font size="1" face="Arial, Helvetica, sans-serif"><b>In
      million of U.S. dollars except per share amounts</b></font></td>
    <td><font size="1" face="Arial, Helvetica, sans-serif"><b>2004</b></font></td>
    <td><font size="1" face="Arial, Helvetica, sans-serif"><b>2003</b></font></td>
  </tr>
  <tr align="center" valign="bottom">
    <td><font size="1">&nbsp;</font></td>
    <td>
      <hr size="1" noshade> </td>
    <td>
      <hr size="1" noshade> </td>
  </tr>
  <tr align="center" valign="bottom">
    <td><font size="1" face="Arial, Helvetica, sans-serif">&nbsp;</font></td>
    <td><font size="1" face="Arial, Helvetica, sans-serif">(unaudited)</font></td>
    <td><font size="1">&nbsp;</font></td>
    <td><font size="1" face="Arial, Helvetica, sans-serif">(unaudited)</font></td>
  </tr>
  <tr valign="bottom">
    <td align="left" bgcolor="#eeeeee"><font size="2" face="Arial, Helvetica, sans-serif">Net
      sales</font></td>
    <td width="10%" align="right" bgcolor="#eeeeee"><font size="2" face="Arial, Helvetica, sans-serif">6,429</font></td>
    <td width="2%" align="left" bgcolor="#eeeeee">&nbsp;</td>
    <td width="10%" align="right" bgcolor="#eeeeee"><font size="2" face="Arial, Helvetica, sans-serif">5,122</font></td>
    <td width="2%" align="left" bgcolor="#eeeeee">&nbsp;</td>
  </tr>
  <tr valign="bottom">
    <td align="left"><font size="2" face="Arial, Helvetica, sans-serif">Other
      revenues</font></td>
    <td align="right"><font size="2" face="Arial, Helvetica, sans-serif">3</font></td>
    <td align="left">&nbsp;</td>
    <td align="right"><font size="2" face="Arial, Helvetica, sans-serif">2</font></td>
    <td align="left">&nbsp;</td>
  </tr>
  <tr valign="bottom">
    <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="bottom">
    <td align="left" bgcolor="#eeeeee"><font size="2" face="Arial, Helvetica, sans-serif"><b>Net
      revenues </b></font></td>
    <td align="right" bgcolor="#eeeeee"><font size="2" face="Arial, Helvetica, sans-serif"><b>6,432</b></font></td>
    <td align="left" bgcolor="#eeeeee">&nbsp;</td>
    <td align="right" bgcolor="#eeeeee"><font size="2" face="Arial, Helvetica, sans-serif"><b>5,124</b></font></td>
    <td align="left" bgcolor="#eeeeee">&nbsp;</td>
  </tr>
  <tr valign="bottom">
    <td align="left"><font size="2" face="Arial, Helvetica, sans-serif">Cost of
      sales</font></td>
    <td align="right"><font size="2" face="Arial, Helvetica, sans-serif">(4,056</font></td>
    <td align="left"><font size="2" face="Arial, Helvetica, sans-serif">)</font></td>
    <td align="right"><font size="2" face="Arial, Helvetica, sans-serif">(3,318</font></td>
    <td align="left"><font size="2" face="Arial, Helvetica, sans-serif">)</font></td>
  </tr>
  <tr valign="bottom">
    <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="bottom">
    <td align="left" bgcolor="#eeeeee"><font size="2" face="Arial, Helvetica, sans-serif"><b>Gross
      profit</b></font></td>
    <td align="right" bgcolor="#eeeeee"><font size="2" face="Arial, Helvetica, sans-serif"><b>2,376</b></font></td>
    <td align="left" bgcolor="#eeeeee">&nbsp;</td>
    <td align="right" bgcolor="#eeeeee"><font size="2" face="Arial, Helvetica, sans-serif"><b>1,806</b></font></td>
    <td align="left" bgcolor="#eeeeee">&nbsp;</td>
  </tr>
  <tr valign="bottom">
    <td align="left"><font size="2" face="Arial, Helvetica, sans-serif">Selling,
      general and administrative</font></td>
    <td align="right"><font size="2" face="Arial, Helvetica, sans-serif">(702</font></td>
    <td align="left"><font size="2" face="Arial, Helvetica, sans-serif">)</font></td>
    <td align="right"><font size="2" face="Arial, Helvetica, sans-serif">(557</font></td>
    <td align="left"><font size="2" face="Arial, Helvetica, sans-serif">)</font></td>
  </tr>
  <tr valign="bottom">
    <td align="left" bgcolor="#eeeeee"><font size="2" face="Arial, Helvetica, sans-serif">Research
      and development </font></td>
    <td align="right" bgcolor="#eeeeee"><font size="2" face="Arial, Helvetica, sans-serif">(1,131</font></td>
    <td align="left" bgcolor="#eeeeee"><font size="2" face="Arial, Helvetica, sans-serif">)</font></td>
    <td align="right" bgcolor="#eeeeee"><font size="2" face="Arial, Helvetica, sans-serif">(883</font></td>
    <td align="left" bgcolor="#eeeeee"><font size="2" face="Arial, Helvetica, sans-serif">)</font></td>
  </tr>
  <tr valign="bottom">
    <td align="left"><font size="2" face="Arial, Helvetica, sans-serif">Other
      income and expenses, net</font></td>
    <td align="right"><font size="2" face="Arial, Helvetica, sans-serif">(13</font></td>
    <td align="left"><font size="2" face="Arial, Helvetica, sans-serif">)</font></td>
    <td align="right"><font size="2" face="Arial, Helvetica, sans-serif">8</font></td>
    <td align="left">&nbsp;</td>
  </tr>
  <tr valign="bottom">
    <td align="left" bgcolor="#eeeeee"><font size="2" face="Arial, Helvetica, sans-serif">Impairment,
      restructuring charges and other related closure costs</font></td>
    <td align="right" bgcolor="#eeeeee"><font size="2" face="Arial, Helvetica, sans-serif">(57</font></td>
    <td align="left" bgcolor="#eeeeee"><font size="2" face="Arial, Helvetica, sans-serif">)</font></td>
    <td align="right" bgcolor="#eeeeee"><font size="2" face="Arial, Helvetica, sans-serif">(193</font></td>
    <td align="left" bgcolor="#eeeeee"><font size="2" face="Arial, Helvetica, sans-serif">)</font></td>
  </tr>
  <tr valign="bottom">
    <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="bottom">
    <td align="left" bgcolor="#eeeeee"><font size="2" face="Arial, Helvetica, sans-serif"><b>Operating
      income</b></font></td>
    <td align="right" bgcolor="#eeeeee"><font size="2" face="Arial, Helvetica, sans-serif"><b>473</b></font></td>
    <td align="left" bgcolor="#eeeeee">&nbsp;</td>
    <td align="right" bgcolor="#eeeeee"><font size="2" face="Arial, Helvetica, sans-serif"><b>181</b></font></td>
    <td align="left" bgcolor="#eeeeee">&nbsp;</td>
  </tr>
  <tr valign="bottom">
    <td align="left"><font size="2" face="Arial, Helvetica, sans-serif">Interest
      expense, net</font></td>
    <td align="right"><font size="2" face="Arial, Helvetica, sans-serif">(8</font></td>
    <td align="left"><font size="2" face="Arial, Helvetica, sans-serif">)</font></td>
    <td align="right"><font size="2" face="Arial, Helvetica, sans-serif">(45</font></td>
    <td align="left"><font size="2" face="Arial, Helvetica, sans-serif">)</font></td>
  </tr>
  <tr valign="bottom">
    <td align="left" bgcolor="#eeeeee"><font size="2" face="Arial, Helvetica, sans-serif">Equity
      in loss of joint venture</font></td>
    <td align="right" bgcolor="#eeeeee"><font size="2" face="Arial, Helvetica, sans-serif">(2</font></td>
    <td align="left" bgcolor="#eeeeee"><font size="2" face="Arial, Helvetica, sans-serif">)</font></td>
    <td align="right" bgcolor="#eeeeee"><font size="2" face="Arial, Helvetica, sans-serif">(1</font></td>
    <td align="left" bgcolor="#eeeeee"><font size="2" face="Arial, Helvetica, sans-serif">)</font></td>
  </tr>
  <tr valign="bottom">
    <td align="left"><font size="2" face="Arial, Helvetica, sans-serif">Loss on
      extinguishment of convertible debt</font></td>
    <td align="right"><font size="2" face="Arial, Helvetica, sans-serif">(4</font></td>
    <td align="left"><font size="2" face="Arial, Helvetica, sans-serif">)</font></td>
    <td align="right"><font size="2" face="Arial, Helvetica, sans-serif">(37</font></td>
    <td align="left"><font size="2" face="Arial, Helvetica, sans-serif">)</font></td>
  </tr>
  <tr valign="bottom">
    <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="bottom">
    <td align="left" bgcolor="#eeeeee"><font size="2" face="Arial, Helvetica, sans-serif"><b>Income
      before income taxes and minority interests</b></font></td>
    <td align="right" bgcolor="#eeeeee"><font size="2" face="Arial, Helvetica, sans-serif"><b>459</b></font></td>
    <td align="left" bgcolor="#eeeeee">&nbsp;</td>
    <td align="right" bgcolor="#eeeeee"><font size="2" face="Arial, Helvetica, sans-serif"><b>98</b></font></td>
    <td align="left" bgcolor="#eeeeee">&nbsp;</td>
  </tr>
  <tr valign="bottom">
    <td align="left"><font size="2" face="Arial, Helvetica, sans-serif">Income
      tax benefit (expense)</font></td>
    <td align="right"><font size="2" face="Arial, Helvetica, sans-serif">(42</font></td>
    <td align="left"><font size="2" face="Arial, Helvetica, sans-serif">)</font></td>
    <td align="right"><font size="2" face="Arial, Helvetica, sans-serif">14</font></td>
    <td align="left">&nbsp;</td>
  </tr>
  <tr valign="bottom">
    <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="bottom">
    <td align="left" bgcolor="#eeeeee"><font size="2" face="Arial, Helvetica, sans-serif"><b>Income
      before minority interests</b></font></td>
    <td align="right" bgcolor="#eeeeee"><font size="2" face="Arial, Helvetica, sans-serif"><b>417</b></font></td>
    <td align="left" bgcolor="#eeeeee">&nbsp;</td>
    <td align="right" bgcolor="#eeeeee"><font size="2" face="Arial, Helvetica, sans-serif"><b>112</b></font></td>
    <td align="left" bgcolor="#eeeeee">&nbsp;</td>
  </tr>
  <tr valign="bottom">
    <td align="left"><font size="2" face="Arial, Helvetica, sans-serif">Minority
      interests</font></td>
    <td align="right"><font size="2" face="Arial, Helvetica, sans-serif">(3</font></td>
    <td align="left"><font size="2" face="Arial, Helvetica, sans-serif">)</font></td>
    <td align="right"><font size="2" face="Arial, Helvetica, sans-serif">(3</font></td>
    <td align="left"><font size="2" face="Arial, Helvetica, sans-serif">)</font></td>
  </tr>
  <tr valign="bottom">
    <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="bottom">
    <td align="left" bgcolor="#eeeeee"><font size="2" face="Arial, Helvetica, sans-serif"><b>Net
      income</b></font></td>
    <td align="right" bgcolor="#eeeeee"><font size="2" face="Arial, Helvetica, sans-serif"><b>414</b></font></td>
    <td align="left" bgcolor="#eeeeee">&nbsp;</td>
    <td align="right" bgcolor="#eeeeee"><font size="2" face="Arial, Helvetica, sans-serif"><b>109</b></font></td>
    <td align="left" bgcolor="#eeeeee">&nbsp;</td>
  </tr>
  <tr valign="bottom">
    <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>
  <tr valign="bottom">
    <td align="left" bgcolor="#eeeeee"><font size="2" face="Arial, Helvetica, sans-serif"><b>Earnings
      per share (Basic)</b></font></td>
    <td align="right" bgcolor="#eeeeee"><font size="2" face="Arial, Helvetica, sans-serif">0.46</font></td>
    <td align="left" bgcolor="#eeeeee">&nbsp;</td>
    <td align="right" bgcolor="#eeeeee"><font size="2" face="Arial, Helvetica, sans-serif">0.12</font></td>
    <td align="left" bgcolor="#eeeeee">&nbsp;</td>
  </tr>
  <tr valign="bottom">
    <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>
  <tr valign="bottom">
    <td align="left" bgcolor="#eeeeee"><font size="2" face="Arial, Helvetica, sans-serif"><b>Earnings
      per share (Diluted)</b></font></td>
    <td align="right" bgcolor="#eeeeee"><font size="2" face="Arial, Helvetica, sans-serif">0.45</font></td>
    <td align="left" bgcolor="#eeeeee">&nbsp;</td>
    <td align="right" bgcolor="#eeeeee"><font size="2" face="Arial, Helvetica, sans-serif">0.12</font></td>
    <td align="left" bgcolor="#eeeeee">&nbsp;</td>
  </tr>
  <tr valign="bottom">
    <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>
</table>
<p align="left"><font size="2" face="Arial, Helvetica, sans-serif">The accompanying
     notes are an integral part of these Unaudited Interim Consolidated Financial

  Statements.</font></p>
<p align="center"><font size="2" face="Arial, Helvetica, sans-serif">F-3</font></p>
<hr noshade align="center" width="100%" size="2">
  <div style="page-break-before:always"></div>
  <page> <a name="pf4"></a>
  <p><a href="#contents"><font size="2">Back to Contents</font></a></p>
  <p><font size="2" face="Arial, Helvetica, sans-serif"><b>STMicroelectronics
        N.V.<br>
  CONSOLIDATED BALANCE SHEETS </b></font></p>
  <table width="100%" border="0" cellpadding="0" cellspacing="0">
    <tr align="center" valign="bottom">
      <td colspan="2"><font size="1">&nbsp;</font></td>
      <td><font size="1" face="Arial, Helvetica, sans-serif"><b>September 25,</b></font></td>
      <td rowspan="4"><font size="1">&nbsp;</font><font size="1">&nbsp;</font><font size="1">&nbsp;</font></td>
      <td><font size="1" face="Arial, Helvetica, sans-serif"><b>December 31, </b></font></td>
      <td rowspan="4"><font size="1">&nbsp;</font><font size="1">&nbsp;</font><font size="1">&nbsp;</font></td>
    </tr>
    <tr align="center" valign="bottom">
      <td colspan="2" align="left"><font size="1" face="Arial, Helvetica, sans-serif"><b>In
            million of U.S. dollars</b></font></td>
      <td><font size="1" face="Arial, Helvetica, sans-serif"><b>2004</b></font></td>
      <td><font size="1" face="Arial, Helvetica, sans-serif"><b>2003</b></font></td>
    </tr>
    <tr align="center" valign="bottom">
      <td colspan="2"></td>
      <td>
        <hr size="1" noshade>
      </td>
      <td>
        <hr size="1" noshade>
      </td>
    </tr>
    <tr align="center" valign="bottom">
      <td colspan="2"><font size="1">&nbsp;</font></td>
      <td><font size="1" face="Arial, Helvetica, sans-serif">(unaudited)</font></td>
      <td><font size="1" face="Arial, Helvetica, sans-serif">(audited)</font></td>
    </tr>
    <tr valign="bottom">
      <td colspan="2" align="left"><font size="2" face="Arial, Helvetica, sans-serif"><b>Assets</b></font></td>
      <td align="left"></td>
      <td align="left">&nbsp;</td>
      <td align="left"></td>
      <td align="left">&nbsp;</td>
    </tr>
    <tr valign="bottom">
      <td colspan="2" align="left"><font size="2" face="Arial, Helvetica, sans-serif"><b>Current
            assets :</b></font></td>
      <td align="left"><font size="2" face="Arial, Helvetica, sans-serif">&nbsp;</font></td>
      <td align="left">&nbsp;</td>
      <td align="left"></td>
      <td align="left">&nbsp;</td>
    </tr>
    <tr valign="bottom">
      <td colspan="2" align="left" bgcolor="#eeeeee"><font size="2" face="Arial, Helvetica, sans-serif">Cash
          and cash equivalents</font></td>
      <td width="10%" align="right" bgcolor="#eeeeee"><font size="2" face="Arial, Helvetica, sans-serif">601</font></td>
      <td width="2%" align="left" bgcolor="#eeeeee">&nbsp;</td>
      <td width="10%" align="right" bgcolor="#eeeeee"><font size="2" face="Arial, Helvetica, sans-serif">2,998</font></td>
      <td width="2%" align="left" bgcolor="#eeeeee">&nbsp;</td>
    </tr>
    <tr valign="bottom">
      <td colspan="2" align="left"><font size="2" face="Arial, Helvetica, sans-serif">Marketable
          securities</font></td>
      <td align="right"><font size="2" face="Arial, Helvetica, sans-serif">1,030</font></td>
      <td align="left">&nbsp;</td>
      <td align="right"><font size="2" face="Arial, Helvetica, sans-serif">&#8212;</font></td>
      <td align="left">&nbsp;</td>
    </tr>
    <tr valign="bottom">
      <td colspan="2" align="left" bgcolor="#eeeeee"><font size="2" face="Arial, Helvetica, sans-serif">Trade
          accounts receivable</font></td>
      <td align="right" bgcolor="#eeeeee"><font size="2" face="Arial, Helvetica, sans-serif">1,523</font></td>
      <td align="left" bgcolor="#eeeeee">&nbsp;</td>
      <td align="right" bgcolor="#eeeeee"><font size="2" face="Arial, Helvetica, sans-serif">1,272</font></td>
      <td align="left" bgcolor="#eeeeee">&nbsp;</td>
    </tr>
    <tr valign="bottom">
      <td colspan="2" align="left"><font size="2" face="Arial, Helvetica, sans-serif">Inventories</font></td>
      <td align="right"><font size="2" face="Arial, Helvetica, sans-serif">1,196</font></td>
      <td align="left">&nbsp;</td>
      <td align="right"><font size="2" face="Arial, Helvetica, sans-serif">1,129</font></td>
      <td align="left">&nbsp;</td>
    </tr>
    <tr valign="bottom">
      <td colspan="2" align="left" bgcolor="#eeeeee"><font size="2" face="Arial, Helvetica, sans-serif">Deferred
          tax assets</font></td>
      <td align="right" bgcolor="#eeeeee"><font size="2" face="Arial, Helvetica, sans-serif">141</font></td>
      <td align="left" bgcolor="#eeeeee">&nbsp;</td>
      <td align="right" bgcolor="#eeeeee"><font size="2" face="Arial, Helvetica, sans-serif">106</font></td>
      <td align="left" bgcolor="#eeeeee">&nbsp;</td>
    </tr>
    <tr valign="bottom">
      <td colspan="2" align="left"><font size="2" face="Arial, Helvetica, sans-serif">Other
          receivables and assets </font></td>
      <td align="right"><font size="2" face="Arial, Helvetica, sans-serif">616</font></td>
      <td align="left">&nbsp;</td>
      <td align="right"><font size="2" face="Arial, Helvetica, sans-serif">616</font></td>
      <td align="left">&nbsp;</td>
    </tr>
    <tr valign="bottom">
      <td colspan="2" 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="bottom">
      <td colspan="2" align="left" bgcolor="#eeeeee"><font size="2" face="Arial, Helvetica, sans-serif"><b>Total
            current assets</b></font></td>
      <td align="right" bgcolor="#eeeeee"><font size="2" face="Arial, Helvetica, sans-serif"><b>5,107</b></font></td>
      <td align="left" bgcolor="#eeeeee">&nbsp;</td>
      <td align="right" bgcolor="#eeeeee"><font size="2" face="Arial, Helvetica, sans-serif"><b>6,121</b></font></td>
      <td align="left" bgcolor="#eeeeee">&nbsp;</td>
    </tr>
    <tr valign="bottom">
      <td colspan="2" 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="bottom">
      <td colspan="2" align="left" bgcolor="#eeeeee"><font size="2" face="Arial, Helvetica, sans-serif">Goodwill</font></td>
      <td align="right" bgcolor="#eeeeee"><font size="2" face="Arial, Helvetica, sans-serif">260</font></td>
      <td align="left" bgcolor="#eeeeee">&nbsp;</td>
      <td align="right" bgcolor="#eeeeee"><font size="2" face="Arial, Helvetica, sans-serif">267</font></td>
      <td align="left" bgcolor="#eeeeee">&nbsp;</td>
    </tr>
    <tr valign="bottom">
      <td colspan="2" align="left"><font size="2" face="Arial, Helvetica, sans-serif">Other
          intangible assets, net</font></td>
      <td align="right"><font size="2" face="Arial, Helvetica, sans-serif">306</font></td>
      <td align="left">&nbsp;</td>
      <td align="right"><font size="2" face="Arial, Helvetica, sans-serif">325</font></td>
      <td align="left">&nbsp;</td>
    </tr>
    <tr valign="bottom">
      <td colspan="2" align="left" bgcolor="#eeeeee"><font size="2" face="Arial, Helvetica, sans-serif">Property,
          plant and equipment, net</font></td>
      <td align="right" bgcolor="#eeeeee"><font size="2" face="Arial, Helvetica, sans-serif">7,011</font></td>
      <td align="left" bgcolor="#eeeeee">&nbsp;</td>
      <td align="right" bgcolor="#eeeeee"><font size="2" face="Arial, Helvetica, sans-serif">6,620</font></td>
      <td align="left" bgcolor="#eeeeee">&nbsp;</td>
    </tr>
    <tr valign="bottom">
      <td colspan="2" align="left"><font size="2" face="Arial, Helvetica, sans-serif">Long-term
          deferred tax assets</font></td>
      <td align="right"><font size="2" face="Arial, Helvetica, sans-serif">59</font></td>
      <td align="left">&nbsp;</td>
      <td align="right"><font size="2" face="Arial, Helvetica, sans-serif">45</font></td>
      <td align="left">&nbsp;</td>
    </tr>
    <tr valign="bottom">
      <td colspan="2" align="left" bgcolor="#eeeeee"><font size="2" face="Arial, Helvetica, sans-serif">Investments
          and other non-current assets</font></td>
      <td align="right" bgcolor="#eeeeee"><font size="2" face="Arial, Helvetica, sans-serif">108</font></td>
      <td align="left" bgcolor="#eeeeee">&nbsp;</td>
      <td align="right" bgcolor="#eeeeee"><font size="2" face="Arial, Helvetica, sans-serif">99</font></td>
      <td align="left" bgcolor="#eeeeee">&nbsp;</td>
    </tr>
    <tr valign="bottom">
      <td colspan="2" 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="bottom">
      <td colspan="2" align="left" bgcolor="#eeeeee"></td>
      <td align="right" bgcolor="#eeeeee"><font size="2" face="Arial, Helvetica, sans-serif"><b>7,744</b></font></td>
      <td align="left" bgcolor="#eeeeee">&nbsp;</td>
      <td align="right" bgcolor="#eeeeee"><font size="2" face="Arial, Helvetica, sans-serif"><b>7,356</b></font></td>
      <td align="left" bgcolor="#eeeeee">&nbsp;</td>
    </tr>
    <tr valign="bottom">
      <td colspan="2" 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="bottom">
      <td colspan="2" align="left" bgcolor="#eeeeee"><font size="2" face="Arial, Helvetica, sans-serif"><b>Total
            assets</b></font></td>
      <td align="right" bgcolor="#eeeeee"><font size="2" face="Arial, Helvetica, sans-serif"><b>12,851</b></font></td>
      <td align="left" bgcolor="#eeeeee">&nbsp;</td>
      <td align="right" bgcolor="#eeeeee"><font size="2" face="Arial, Helvetica, sans-serif"><b>13,477</b></font></td>
      <td align="left" bgcolor="#eeeeee">&nbsp;</td>
    </tr>
    <tr valign="bottom">
      <td colspan="2" 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>
    <tr valign="bottom">
      <td colspan="2" align="left"><font size="2" face="Arial, Helvetica, sans-serif"><b>Liabilities
            and shareholders' equity</b></font></td>
      <td align="left"><font size="2" face="Arial, Helvetica, sans-serif">&nbsp;</font></td>
      <td align="left">&nbsp;</td>
      <td align="center"></td>
      <td align="left">&nbsp;</td>
    </tr>
    <tr valign="bottom">
      <td colspan="2" align="left"><font size="2" face="Arial, Helvetica, sans-serif"><b>Current
            liabilities:</b></font></td>
      <td align="left"><font size="2" face="Arial, Helvetica, sans-serif">&nbsp;</font></td>
      <td align="left">&nbsp;</td>
      <td align="left"></td>
      <td align="left">&nbsp;</td>
    </tr>
    <tr valign="bottom">
      <td colspan="2" align="left" bgcolor="#eeeeee"><font size="2" face="Arial, Helvetica, sans-serif">Bank
          overdrafts</font></td>
      <td align="right" bgcolor="#eeeeee"><font size="2" face="Arial, Helvetica, sans-serif">8</font></td>
      <td align="left" bgcolor="#eeeeee">&nbsp;</td>
      <td align="right" bgcolor="#eeeeee"><font size="2" face="Arial, Helvetica, sans-serif">45</font></td>
      <td align="left" bgcolor="#eeeeee">&nbsp;</td>
    </tr>
    <tr valign="bottom">
      <td colspan="2" align="left"><font size="2" face="Arial, Helvetica, sans-serif">Current
          portion of long-term debt</font></td>
      <td align="right"><font size="2" face="Arial, Helvetica, sans-serif">111</font></td>
      <td align="left">&nbsp;</td>
      <td align="right"><font size="2" face="Arial, Helvetica, sans-serif">106</font></td>
      <td align="left">&nbsp;</td>
    </tr>
    <tr valign="bottom">
      <td colspan="2" align="left" bgcolor="#eeeeee"><font size="2" face="Arial, Helvetica, sans-serif">Trade
          accounts payable</font></td>
      <td align="right" bgcolor="#eeeeee"><font size="2" face="Arial, Helvetica, sans-serif">1,432</font></td>
      <td align="left" bgcolor="#eeeeee">&nbsp;</td>
      <td align="right" bgcolor="#eeeeee"><font size="2" face="Arial, Helvetica, sans-serif">1,044</font></td>
      <td align="left" bgcolor="#eeeeee">&nbsp;</td>
    </tr>
    <tr valign="bottom">
      <td colspan="2" align="left"><font size="2" face="Arial, Helvetica, sans-serif">Other
          payables and accrued liabilities </font></td>
      <td align="right"><font size="2" face="Arial, Helvetica, sans-serif">701</font></td>
      <td align="left">&nbsp;</td>
      <td align="right"><font size="2" face="Arial, Helvetica, sans-serif">693</font></td>
      <td align="left">&nbsp;</td>
    </tr>
    <tr valign="bottom">
      <td colspan="2" align="left" bgcolor="#eeeeee"><font size="2" face="Arial, Helvetica, sans-serif">Deferred
          tax liabilities</font></td>
      <td align="right" bgcolor="#eeeeee"><font size="2" face="Arial, Helvetica, sans-serif">24</font></td>
      <td align="left" bgcolor="#eeeeee">&nbsp;</td>
      <td align="right" bgcolor="#eeeeee"><font size="2" face="Arial, Helvetica, sans-serif">10</font></td>
      <td align="left" bgcolor="#eeeeee">&nbsp;</td>
    </tr>
    <tr valign="bottom">
      <td colspan="2" align="left"><font size="2" face="Arial, Helvetica, sans-serif">Accrued
          income tax</font></td>
      <td align="right"><font size="2" face="Arial, Helvetica, sans-serif">187</font></td>
      <td align="left">&nbsp;</td>
      <td align="right"><font size="2" face="Arial, Helvetica, sans-serif">179</font></td>
      <td align="left">&nbsp;</td>
    </tr>
    <tr valign="bottom">
      <td colspan="2" 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="bottom">
      <td colspan="2" align="left" bgcolor="#eeeeee"><font size="2" face="Arial, Helvetica, sans-serif"><b>Total
            current liabilities</b></font></td>
      <td align="right" bgcolor="#eeeeee"><font size="2" face="Arial, Helvetica, sans-serif"><b>2,463</b></font></td>
      <td align="left" bgcolor="#eeeeee">&nbsp;</td>
      <td align="right" bgcolor="#eeeeee"><font size="2" face="Arial, Helvetica, sans-serif"><b>2,077</b></font></td>
      <td align="left" bgcolor="#eeeeee">&nbsp;</td>
    </tr>
    <tr valign="bottom">
      <td colspan="2" 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="bottom">
      <td colspan="2" align="left" bgcolor="#eeeeee"><font size="2" face="Arial, Helvetica, sans-serif">Long-term
          debt</font></td>
      <td align="right" bgcolor="#eeeeee"><font size="2" face="Arial, Helvetica, sans-serif">1,710</font></td>
      <td align="left" bgcolor="#eeeeee">&nbsp;</td>
      <td align="right" bgcolor="#eeeeee"><font size="2" face="Arial, Helvetica, sans-serif">2,944</font></td>
      <td align="left" bgcolor="#eeeeee">&nbsp;</td>
    </tr>
    <tr valign="bottom">
      <td colspan="2" align="left"><font size="2" face="Arial, Helvetica, sans-serif">Reserve
          for pension and termination indemnities</font></td>
      <td align="right"><font size="2" face="Arial, Helvetica, sans-serif">259</font></td>
      <td align="left">&nbsp;</td>
      <td align="right"><font size="2" face="Arial, Helvetica, sans-serif">236</font></td>
      <td align="left">&nbsp;</td>
    </tr>
    <tr valign="bottom">
      <td colspan="2" align="left" bgcolor="#eeeeee"><font size="2" face="Arial, Helvetica, sans-serif">Long-term
          deferred tax liabilities</font></td>
      <td align="right" bgcolor="#eeeeee"><font size="2" face="Arial, Helvetica, sans-serif">58</font></td>
      <td align="left" bgcolor="#eeeeee">&nbsp;</td>
      <td align="right" bgcolor="#eeeeee"><font size="2" face="Arial, Helvetica, sans-serif">37</font></td>
      <td align="left" bgcolor="#eeeeee">&nbsp;</td>
    </tr>
    <tr valign="bottom">
      <td colspan="2" align="left"><font size="2" face="Arial, Helvetica, sans-serif">Other
          non-current liabilities</font></td>
      <td align="right"><font size="2" face="Arial, Helvetica, sans-serif">15</font></td>
      <td align="left">&nbsp;</td>
      <td align="right"><font size="2" face="Arial, Helvetica, sans-serif">38</font></td>
      <td align="left">&nbsp;</td>
    </tr>
    <tr valign="bottom">
      <td colspan="2" 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="bottom">
      <td colspan="2" align="left" bgcolor="#eeeeee"></td>
      <td align="right" bgcolor="#eeeeee"><font size="2" face="Arial, Helvetica, sans-serif"><b>2,042</b></font></td>
      <td align="left" bgcolor="#eeeeee">&nbsp;</td>
      <td align="right" bgcolor="#eeeeee"><font size="2" face="Arial, Helvetica, sans-serif"><b>3,255</b></font></td>
      <td align="left" bgcolor="#eeeeee">&nbsp;</td>
    </tr>
    <tr valign="bottom">
      <td colspan="2" 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="bottom">
      <td colspan="2" align="left" bgcolor="#eeeeee"><font size="2" face="Arial, Helvetica, sans-serif"><b>Total
            liabilities</b></font></td>
      <td align="right" bgcolor="#eeeeee"><font size="2" face="Arial, Helvetica, sans-serif"><b>4,505</b></font></td>
      <td align="left" bgcolor="#eeeeee">&nbsp;</td>
      <td align="right" bgcolor="#eeeeee"><font size="2" face="Arial, Helvetica, sans-serif"><b>5,332</b></font></td>
      <td align="left" bgcolor="#eeeeee">&nbsp;</td>
    </tr>
    <tr valign="bottom">
      <td colspan="2" 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="bottom">
      <td colspan="2" align="left"><font size="2" face="Arial, Helvetica, sans-serif">Commitments
          and contingencies</font></td>
      <td align="left"></td>
      <td align="left">&nbsp;</td>
      <td align="left"></td>
      <td align="left">&nbsp;</td>
    </tr>
    <tr valign="bottom">
      <td colspan="2" align="left" bgcolor="#eeeeee"><font size="2" face="Arial, Helvetica, sans-serif"><b>Minority
            interests</b></font></td>
      <td align="right" bgcolor="#eeeeee"><font size="2" face="Arial, Helvetica, sans-serif">48</font></td>
      <td align="left" bgcolor="#eeeeee">&nbsp;</td>
      <td align="right" bgcolor="#eeeeee"><font size="2" face="Arial, Helvetica, sans-serif">45</font></td>
      <td align="left" bgcolor="#eeeeee">&nbsp;</td>
    </tr>
    <tr valign="bottom">
      <td colspan="2" align="left"><font size="2" face="Arial, Helvetica, sans-serif">Common
          stock</font></td>
      <td align="right"><font size="2" face="Arial, Helvetica, sans-serif">1,149</font></td>
      <td align="left">&nbsp;</td>
      <td align="right"><font size="2" face="Arial, Helvetica, sans-serif">1,146</font></td>
      <td align="left">&nbsp;</td>
    </tr>
    <tr valign="bottom">
      <td width="4%" align="left" valign="baseline"><font size="2" face="Arial, Helvetica, sans-serif">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#8226;&nbsp;&nbsp;</font></td>
      <td align="left" valign="baseline"><font size="2" face="Arial, Helvetica, sans-serif">preferred
      stock: 540,000,000 shares authorized, not issued</font></td>
      <td align="right">&nbsp;</td>
      <td align="left">&nbsp;</td>
      <td align="right">&nbsp;</td>
      <td align="left">&nbsp;</td>
    </tr>
    <tr valign="bottom">
      <td align="left" valign="baseline"><font size="2" face="Arial, Helvetica, sans-serif">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#8226;&nbsp;&nbsp;</font></td>
      <td align="left" valign="baseline"><font size="2" face="Arial, Helvetica, sans-serif">common
          stock: Euro 1.04 nominal value, 1,200,000,000 shares authorized,<br>
      904,885,116
      shares issued,<br>
      891,485,116 shares outstanding</font></td>
      <td align="right">&nbsp;</td>
      <td align="left">&nbsp;</td>
      <td align="right">&nbsp;</td>
      <td align="left">&nbsp;</td>
    </tr>
    <tr valign="bottom">
      <td colspan="2" align="left" bgcolor="#eeeeee"><font size="2" face="Arial, Helvetica, sans-serif">Capital
          surplus</font></td>
      <td align="right" bgcolor="#eeeeee"><font size="2" face="Arial, Helvetica, sans-serif">1,919</font></td>
      <td align="left" bgcolor="#eeeeee">&nbsp;</td>
      <td align="right" bgcolor="#eeeeee"><font size="2" face="Arial, Helvetica, sans-serif">1,905</font></td>
      <td align="left" bgcolor="#eeeeee">&nbsp;</td>
    </tr>
    <tr valign="bottom">
      <td colspan="2" align="left"><font size="2" face="Arial, Helvetica, sans-serif">Accumulated
          result</font></td>
      <td align="right"><font size="2" face="Arial, Helvetica, sans-serif">5,081</font></td>
      <td align="left">&nbsp;</td>
      <td align="right"><font size="2" face="Arial, Helvetica, sans-serif">4,774</font></td>
      <td align="left">&nbsp;</td>
    </tr>
    <tr valign="bottom">
      <td colspan="2" align="left" bgcolor="#eeeeee"><font size="2" face="Arial, Helvetica, sans-serif">Accumulated
          other comprehensive income</font></td>
      <td align="right" bgcolor="#eeeeee"><font size="2" face="Arial, Helvetica, sans-serif">497</font></td>
      <td align="left" bgcolor="#eeeeee">&nbsp;</td>
      <td align="right" bgcolor="#eeeeee"><font size="2" face="Arial, Helvetica, sans-serif">623</font></td>
      <td align="left" bgcolor="#eeeeee">&nbsp;</td>
    </tr>
    <tr valign="bottom">
      <td colspan="2" align="left"><font size="2" face="Arial, Helvetica, sans-serif">Treasury
          stock</font></td>
      <td align="right"><font size="2" face="Arial, Helvetica, sans-serif">(348</font></td>
      <td align="left"><font size="2" face="Arial, Helvetica, sans-serif">)</font></td>
      <td align="right"><font size="2" face="Arial, Helvetica, sans-serif">(348</font></td>
      <td align="left"><font size="2" face="Arial, Helvetica, sans-serif">)</font></td>
    </tr>
    <tr valign="bottom">
      <td colspan="2" 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="bottom">
      <td colspan="2" align="left" bgcolor="#eeeeee"><font size="2" face="Arial, Helvetica, sans-serif"><b>Shareholders'
            equity</b></font></td>
      <td align="right" bgcolor="#eeeeee"><font size="2" face="Arial, Helvetica, sans-serif"><b>8,298</b></font></td>
      <td align="left" bgcolor="#eeeeee">&nbsp;</td>
      <td align="right" bgcolor="#eeeeee"><font size="2" face="Arial, Helvetica, sans-serif"><b>8,100</b></font></td>
      <td align="left" bgcolor="#eeeeee">&nbsp;</td>
    </tr>
    <tr valign="bottom">
      <td colspan="2" 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="bottom">
      <td colspan="2" align="left" bgcolor="#eeeeee"><font size="2" face="Arial, Helvetica, sans-serif"><b>Total
            liabilities and shareholders' equity</b></font></td>
      <td align="right" bgcolor="#eeeeee"><font size="2" face="Arial, Helvetica, sans-serif"><b>12,851</b></font></td>
      <td align="left" bgcolor="#eeeeee">&nbsp;</td>
      <td align="right" bgcolor="#eeeeee"><font size="2" face="Arial, Helvetica, sans-serif"><b>13,477</b></font></td>
      <td align="left" bgcolor="#eeeeee">&nbsp;</td>
    </tr>
    <tr valign="bottom">
      <td colspan="2" 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, Helvetica, sans-serif">The accompanying
      notes are an integral part of these Unaudited Interim Consolidated Financial
      Statements.</font></p>
  <p align="center"><font size="2" face="Arial, Helvetica, sans-serif">F-4</font></p>
  <hr noshade align="center" width="100%" size="2">
<div style="page-break-before:always"></div>
<page>
<a name="pf5"></a>
<p><a href="#contents"><font size="2">Back to Contents</font></a></p>
<p><font size="2" face="Arial, Helvetica, sans-serif"><b>STMicroelectronics N.V.<br>
  CONSOLIDATED STATEMENTS OF CASH FLOWS </b></font></p>
<table width="100%" border="0" cellpadding="0" cellspacing="0">
  <tr valign="top">
    <td colspan="3" rowspan="3" align="left"><font size="2" face="Arial, Helvetica, sans-serif">&nbsp;</font><font size="2" face="Arial, Helvetica, sans-serif">&nbsp;</font><font size="2" face="Arial, Helvetica, sans-serif">&nbsp;</font><font size="1" face="Arial, Helvetica, sans-serif">&nbsp;</font><font size="1" face="Arial, Helvetica, sans-serif">&nbsp;</font><font size="1" face="Arial, Helvetica, sans-serif">&nbsp;</font></td>
    <td colspan="3" align="center" valign="bottom"><font size="1" face="Arial, Helvetica, sans-serif"><b>Nine
      Months Ended</b></font><font size="1">&nbsp;</font><font size="1" face="Arial, Helvetica, sans-serif">&nbsp;</font></td>
    <td rowspan="5" align="center" valign="bottom"><font size="1">&nbsp;</font><font size="1">&nbsp;</font><font size="1">&nbsp;</font><font size="1">&nbsp;</font><font size="1">&nbsp;</font></td>
  </tr>
  <tr valign="top">
    <td align="center" valign="bottom"> <hr size="1" noshade></td>
    <td align="center" valign="bottom"> <hr size="1" noshade></td>
    <td align="center" valign="bottom"> <hr size="1" noshade></td>
  </tr>
  <tr valign="top">
    <td align="center" valign="bottom"><font size="1" face="Arial, Helvetica, sans-serif"><b>September
      25, </b></font></td>
    <td rowspan="3" align="center" valign="bottom"><font size="1">&nbsp;</font><font size="1">&nbsp;</font><font size="1">&nbsp;</font><font size="1">&nbsp;</font></td>
    <td align="center" valign="bottom"><font size="1" face="Arial, Helvetica, sans-serif"><b>September
      27,</b></font></td>
  </tr>
  <tr valign="top">
    <td colspan="3" align="left"><font size="1" face="Arial, Helvetica, sans-serif"><b>In
      million of U.S. dollars</b></font></td>
    <td align="center" valign="bottom"><font size="1" face="Arial, Helvetica, sans-serif"><b>2004</b></font></td>
    <td align="center" valign="bottom"><font size="1" face="Arial, Helvetica, sans-serif"><b>2003</b></font></td>
  </tr>
  <tr valign="top">
    <td align="left"><font size="2" face="Arial, Helvetica, sans-serif">&nbsp;</font></td>
    <td align="center">&nbsp;</td>
    <td align="center" valign="bottom"><font size="1" face="Arial, Helvetica, sans-serif">&nbsp;</font></td>
    <td align="center" valign="bottom"> <hr size="1" noshade></td>
    <td align="center" valign="bottom"> <hr size="1" noshade></td>
  </tr>
  <tr valign="top">
    <td colspan="3" align="left">&nbsp;</td>
    <td align="center" valign="bottom"><font size="1" face="Arial, Helvetica, sans-serif">(unaudited)</font></td>
    <td align="left" valign="bottom">&nbsp;</td>
    <td align="center" valign="bottom"><font size="1" face="Arial, Helvetica, sans-serif">(unaudited)</font></td>
    <td align="left" valign="bottom">&nbsp;</td>
  </tr>
  <tr valign="top">
    <td colspan="3" align="left"><font size="2" face="Arial, Helvetica, sans-serif"><b>Cash
      flows from operating activities</b></font></td>
    <td align="center" valign="bottom"></td>
    <td align="left" valign="bottom">&nbsp;</td>
    <td align="center" valign="bottom"></td>
    <td align="left" valign="bottom">&nbsp;</td>
  </tr>
  <tr valign="top">
    <td width="3%" align="left" bgcolor="#eeeeee"><font size="2" face="Arial, Helvetica, sans-serif">&nbsp;</font></td>
    <td colspan="2" align="left" bgcolor="#eeeeee"><font size="2" face="Arial, Helvetica, sans-serif">Net
      income</font></td>
    <td width="10%" align="right" valign="bottom" bgcolor="#eeeeee"><font size="2" face="Arial, Helvetica, sans-serif">
      414 </font></td>
    <td width="2%" align="left" valign="bottom" bgcolor="#eeeeee">&nbsp;</td>
    <td width="10%" align="right" valign="bottom" bgcolor="#eeeeee"><font size="2" face="Arial, Helvetica, sans-serif">
      109 </font></td>
    <td width="2%" align="left" valign="bottom" bgcolor="#eeeeee">&nbsp;</td>
  </tr>
  <tr valign="top">
    <td align="left" bgcolor="#FFFFFF"><font size="2" face="Arial, Helvetica, sans-serif">&nbsp;</font></td>
    <td colspan="2" align="left" bgcolor="#FFFFFF"><font size="2" face="Arial, Helvetica, sans-serif">Items
      to reconcile net income and cash flows from operating activities:</font></td>
    <td align="left" valign="bottom"><font size="2" face="Arial, Helvetica, sans-serif">&nbsp;</font></td>
    <td align="left" valign="bottom">&nbsp;</td>
    <td align="left" valign="bottom"><font size="2" face="Arial, Helvetica, sans-serif">&nbsp;</font></td>
    <td align="left" valign="bottom">&nbsp;</td>
  </tr>
  <tr valign="top">
    <td align="left" bgcolor="#FFFFFF"><font size="2" face="Arial, Helvetica, sans-serif">&nbsp;</font></td>
    <td align="left" bgcolor="#FFFFFF">&nbsp;</td>
    <td align="left" valign="bottom" bgcolor="#FFFFFF"><font size="2" face="Arial, Helvetica, sans-serif">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Depreciation
      and amortization</font></td>
    <td align="right" valign="bottom"><font size="2" face="Arial, Helvetica, sans-serif">
      1,319 </font></td>
    <td align="left" valign="bottom">&nbsp;</td>
    <td align="right" valign="bottom"><font size="2" face="Arial, Helvetica, sans-serif">
      1,176 </font></td>
    <td align="left" valign="bottom">&nbsp;</td>
  </tr>
  <tr valign="top">
    <td align="left" bgcolor="#eeeeee"><font size="2" face="Arial, Helvetica, sans-serif">&nbsp;</font></td>
    <td align="left" bgcolor="#eeeeee">&nbsp;</td>
    <td align="left" valign="bottom" bgcolor="#eeeeee"><font size="2" face="Arial, Helvetica, sans-serif">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Amortization
      of discount on convertible debt</font></td>
    <td align="right" valign="bottom" bgcolor="#eeeeee"><font size="2" face="Arial, Helvetica, sans-serif">
      28 </font></td>
    <td align="left" valign="bottom" bgcolor="#eeeeee">&nbsp;</td>
    <td align="right" valign="bottom" bgcolor="#eeeeee"><font size="2" face="Arial, Helvetica, sans-serif">
      56 </font></td>
    <td align="left" valign="bottom" bgcolor="#eeeeee">&nbsp;</td>
  </tr>
  <tr valign="top">
    <td align="left"><font size="2" face="Arial, Helvetica, sans-serif">&nbsp;</font></td>
    <td align="left">&nbsp;</td>
    <td align="left" valign="bottom"><font size="2" face="Arial, Helvetica, sans-serif">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Loss
      on extinguishment of convertible debt</font></td>
    <td align="right" valign="bottom"><font size="2" face="Arial, Helvetica, sans-serif">
      4 </font></td>
    <td align="left" valign="bottom">&nbsp;</td>
    <td align="right" valign="bottom"><font size="2" face="Arial, Helvetica, sans-serif">
      37 </font></td>
    <td align="left" valign="bottom">&nbsp;</td>
  </tr>
  <tr valign="top">
    <td align="left" bgcolor="#eeeeee"><font size="2" face="Arial, Helvetica, sans-serif">&nbsp;</font></td>
    <td align="left" bgcolor="#eeeeee">&nbsp;</td>
    <td align="left" valign="bottom" bgcolor="#eeeeee"><font size="2" face="Arial, Helvetica, sans-serif">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Other
      non-cash items</font></td>
    <td align="right" valign="bottom" bgcolor="#eeeeee"><font size="2" face="Arial, Helvetica, sans-serif">
      (3</font></td>
    <td align="left" valign="bottom" bgcolor="#eeeeee"><font size="2" face="Arial, Helvetica, sans-serif">)</font></td>
    <td align="right" valign="bottom" bgcolor="#eeeeee"><font size="2" face="Arial, Helvetica, sans-serif">
      21 </font></td>
    <td align="left" valign="bottom" bgcolor="#eeeeee">&nbsp;</td>
  </tr>
  <tr valign="top">
    <td align="left"><font size="2" face="Arial, Helvetica, sans-serif">&nbsp;</font></td>
    <td align="left">&nbsp;</td>
    <td align="left" valign="bottom"><font size="2" face="Arial, Helvetica, sans-serif">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Minority
      interest in net income of subsidiaries</font></td>
    <td align="right" valign="bottom"><font size="2" face="Arial, Helvetica, sans-serif">
      3 </font></td>
    <td align="left" valign="bottom">&nbsp;</td>
    <td align="right" valign="bottom"><font size="2" face="Arial, Helvetica, sans-serif">
      3 </font></td>
    <td align="left" valign="bottom">&nbsp;</td>
  </tr>
  <tr valign="top">
    <td align="left" bgcolor="#eeeeee"><font size="2" face="Arial, Helvetica, sans-serif">&nbsp;</font></td>
    <td align="left" bgcolor="#eeeeee">&nbsp;</td>
    <td align="left" valign="bottom" bgcolor="#eeeeee"><font size="2" face="Arial, Helvetica, sans-serif">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Deferred
      income tax</font></td>
    <td align="right" valign="bottom" bgcolor="#eeeeee"><font size="2" face="Arial, Helvetica, sans-serif">
      (16</font></td>
    <td align="left" valign="bottom" bgcolor="#eeeeee"><font size="2" face="Arial, Helvetica, sans-serif">)</font></td>
    <td align="right" valign="bottom" bgcolor="#eeeeee"><font size="2" face="Arial, Helvetica, sans-serif">
      (68</font></td>
    <td align="left" valign="bottom" bgcolor="#eeeeee"><font size="2" face="Arial, Helvetica, sans-serif">)</font></td>
  </tr>
  <tr valign="top">
    <td align="left"><font size="2" face="Arial, Helvetica, sans-serif">&nbsp;</font></td>
    <td align="left">&nbsp;</td>
    <td align="left" valign="bottom"><font size="2" face="Arial, Helvetica, sans-serif">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Equity
      in loss of joint venture</font></td>
    <td align="right" valign="bottom"><font size="2" face="Arial, Helvetica, sans-serif">
      2 </font></td>
    <td align="left" valign="bottom">&nbsp;</td>
    <td align="right" valign="bottom"><font size="2" face="Arial, Helvetica, sans-serif">
      1 </font></td>
    <td align="left" valign="bottom">&nbsp;</td>
  </tr>
  <tr valign="top">
    <td align="left" bgcolor="#eeeeee"><font size="2" face="Arial, Helvetica, sans-serif">&nbsp;</font></td>
    <td align="left" bgcolor="#eeeeee">&nbsp;</td>
    <td align="left" valign="bottom" bgcolor="#eeeeee"><font size="2" face="Arial, Helvetica, sans-serif">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Impairment,
      restructuring charges and other related closure costs, net of cash payments</font></td>
    <td align="right" valign="bottom" bgcolor="#eeeeee"><font size="2" face="Arial, Helvetica, sans-serif">
      11 </font></td>
    <td align="left" valign="bottom" bgcolor="#eeeeee">&nbsp;</td>
    <td align="right" valign="bottom" bgcolor="#eeeeee"><font size="2" face="Arial, Helvetica, sans-serif">
      193 </font></td>
    <td align="left" valign="bottom" bgcolor="#eeeeee">&nbsp;</td>
  </tr>
  <tr valign="top">
    <td align="left"><font size="2" face="Arial, Helvetica, sans-serif">&nbsp;</font></td>
    <td colspan="2" align="left"><font size="2" face="Arial, Helvetica, sans-serif">Changes
      in assets and liabilities:</font></td>
    <td align="left" valign="bottom"><font size="2" face="Arial, Helvetica, sans-serif">&nbsp;</font></td>
    <td align="left" valign="bottom">&nbsp;</td>
    <td align="left" valign="bottom"><font size="2" face="Arial, Helvetica, sans-serif">&nbsp;</font></td>
    <td align="left" valign="bottom">&nbsp;</td>
  </tr>
  <tr valign="top">
    <td align="left"><font size="2" face="Arial, Helvetica, sans-serif">&nbsp;</font></td>
    <td align="left">&nbsp;</td>
    <td align="left" valign="bottom"><font size="2" face="Arial, Helvetica, sans-serif">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Trade
      receivables</font></td>
    <td align="right" valign="bottom"><font size="2" face="Arial, Helvetica, sans-serif">
      (256</font></td>
    <td align="left" valign="bottom"><font size="2" face="Arial, Helvetica, sans-serif">)</font></td>
    <td align="right" valign="bottom"><font size="2" face="Arial, Helvetica, sans-serif">
      (180</font></td>
    <td align="left" valign="bottom"><font size="2" face="Arial, Helvetica, sans-serif">)</font></td>
  </tr>
  <tr valign="top">
    <td align="left" bgcolor="#eeeeee"><font size="2" face="Arial, Helvetica, sans-serif">&nbsp;</font></td>
    <td align="left" bgcolor="#eeeeee">&nbsp;</td>
    <td align="left" valign="bottom" bgcolor="#eeeeee"><font size="2" face="Arial, Helvetica, sans-serif">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Inventories</font></td>
    <td align="right" valign="bottom" bgcolor="#eeeeee"><font size="2" face="Arial, Helvetica, sans-serif">
      (77</font></td>
    <td align="left" valign="bottom" bgcolor="#eeeeee"><font size="2" face="Arial, Helvetica, sans-serif">)</font></td>
    <td align="right" valign="bottom" bgcolor="#eeeeee"><font size="2" face="Arial, Helvetica, sans-serif">
      (120</font></td>
    <td align="left" valign="bottom" bgcolor="#eeeeee"><font size="2" face="Arial, Helvetica, sans-serif">)</font></td>
  </tr>
  <tr valign="top">
    <td align="left"><font size="2" face="Arial, Helvetica, sans-serif">&nbsp;</font></td>
    <td align="left">&nbsp;</td>
    <td align="left" valign="bottom"><font size="2" face="Arial, Helvetica, sans-serif">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Trade
      payables</font></td>
    <td align="right" valign="bottom"><font size="2" face="Arial, Helvetica, sans-serif">
      309 </font></td>
    <td align="left" valign="bottom">&nbsp;</td>
    <td align="right" valign="bottom"><font size="2" face="Arial, Helvetica, sans-serif">
      79 </font></td>
    <td align="left" valign="bottom">&nbsp;</td>
  </tr>
  <tr valign="top">
    <td align="left" bgcolor="#eeeeee"><font size="2" face="Arial, Helvetica, sans-serif">&nbsp;</font></td>
    <td align="left" bgcolor="#eeeeee">&nbsp;</td>
    <td align="left" valign="bottom" bgcolor="#eeeeee"><font size="2" face="Arial, Helvetica, sans-serif">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Other
      assets and liabilities, net</font></td>
    <td align="right" valign="bottom" bgcolor="#eeeeee"><font size="2" face="Arial, Helvetica, sans-serif">
      (41</font></td>
    <td align="left" valign="bottom" bgcolor="#eeeeee"><font size="2" face="Arial, Helvetica, sans-serif">)</font></td>
    <td align="right" valign="bottom" bgcolor="#eeeeee"><font size="2" face="Arial, Helvetica, sans-serif">
      (165</font></td>
    <td align="left" valign="bottom" bgcolor="#eeeeee"><font size="2" face="Arial, Helvetica, sans-serif">)</font></td>
  </tr>
  <tr valign="top">
    <td colspan="3" align="left">&nbsp;</td>
    <td align="right" valign="bottom"> <hr size="1" noshade></td>
    <td align="left" valign="bottom">&nbsp;</td>
    <td align="right" valign="bottom"> <hr size="1" noshade></td>
    <td align="left" valign="bottom">&nbsp;</td>
  </tr>
  <tr valign="top">
    <td colspan="3" align="left" bgcolor="#eeeeee"><font size="2" face="Arial, Helvetica, sans-serif"><b>Net
      cash from operating activities</b></font></td>
    <td align="right" valign="bottom" bgcolor="#eeeeee"><font size="2" face="Arial, Helvetica, sans-serif"><b>
      1,697 </b></font></td>
    <td align="left" valign="bottom" bgcolor="#eeeeee">&nbsp;</td>
    <td align="right" valign="bottom" bgcolor="#eeeeee"><font size="2" face="Arial, Helvetica, sans-serif"><b>
      1,142 </b></font></td>
    <td align="left" valign="bottom" bgcolor="#eeeeee">&nbsp;</td>
  </tr>
  <tr valign="top">
    <td align="left"><font size="2" face="Arial, Helvetica, sans-serif">&nbsp;</font></td>
    <td align="left">&nbsp;</td>
    <td align="left" valign="bottom"><font size="2" face="Arial, Helvetica, sans-serif">&nbsp;</font></td>
    <td align="left" valign="bottom"> <hr size="1" noshade></td>
    <td align="left" valign="bottom">&nbsp;</td>
    <td align="left" valign="bottom"> <hr size="1" noshade></td>
    <td align="left" valign="bottom">&nbsp;</td>
  </tr>
  <tr valign="top">
    <td colspan="3" align="left"><font size="2" face="Arial, Helvetica, sans-serif"><b>Cash
      flows from investing activities</b></font></td>
    <td align="left" valign="bottom"><font size="2" face="Arial, Helvetica, sans-serif">&nbsp;</font></td>
    <td align="left" valign="bottom">&nbsp;</td>
    <td align="left" valign="bottom"><font size="2" face="Arial, Helvetica, sans-serif">&nbsp;</font></td>
    <td align="left" valign="bottom">&nbsp;</td>
  </tr>
  <tr valign="top">
    <td align="left" bgcolor="#eeeeee"><font size="2" face="Arial, Helvetica, sans-serif">&nbsp;</font></td>
    <td colspan="2" align="left" bgcolor="#eeeeee"><font size="2" face="Arial, Helvetica, sans-serif">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Payment
      for purchase of tangible assets</font></td>
    <td align="right" valign="bottom" bgcolor="#eeeeee"><font size="2" face="Arial, Helvetica, sans-serif">
      (1,627</font></td>
    <td align="left" valign="bottom" bgcolor="#eeeeee"><font size="2" face="Arial, Helvetica, sans-serif">)</font></td>
    <td align="right" valign="bottom" bgcolor="#eeeeee"><font size="2" face="Arial, Helvetica, sans-serif">
      (815</font></td>
    <td align="left" valign="bottom" bgcolor="#eeeeee"><font size="2" face="Arial, Helvetica, sans-serif">)</font></td>
  </tr>
  <tr valign="top">
    <td align="left"><font size="2" face="Arial, Helvetica, sans-serif">&nbsp;</font></td>
    <td colspan="2" align="left"><font size="2" face="Arial, Helvetica, sans-serif">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Payment
      for purchase of marketable securities</font></td>
    <td align="right" valign="bottom"><font size="2" face="Arial, Helvetica, sans-serif">
      (1,030</font></td>
    <td align="left" valign="bottom"><font size="2" face="Arial, Helvetica, sans-serif">)</font></td>
    <td align="right" valign="bottom"><font size="2" face="Arial, Helvetica, sans-serif">
      (1,101</font></td>
    <td align="left" valign="bottom"><font size="2" face="Arial, Helvetica, sans-serif">)</font></td>
  </tr>
  <tr valign="top">
    <td align="left" bgcolor="#eeeeee"><font size="2" face="Arial, Helvetica, sans-serif">&nbsp;</font></td>
    <td colspan="2" align="left" bgcolor="#eeeeee"><font size="2" face="Arial, Helvetica, sans-serif">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Investment
      in intangible and financial assets</font></td>
    <td align="right" valign="bottom" bgcolor="#eeeeee"><font size="2" face="Arial, Helvetica, sans-serif">
      (64</font></td>
    <td align="left" valign="bottom" bgcolor="#eeeeee"><font size="2" face="Arial, Helvetica, sans-serif">)</font></td>
    <td align="right" valign="bottom" bgcolor="#eeeeee"><font size="2" face="Arial, Helvetica, sans-serif">
      (37</font></td>
    <td align="left" valign="bottom" bgcolor="#eeeeee"><font size="2" face="Arial, Helvetica, sans-serif">)</font></td>
  </tr>
  <tr valign="top">
    <td align="left"><font size="2" face="Arial, Helvetica, sans-serif">&nbsp;</font></td>
    <td colspan="2" align="left"><font size="2" face="Arial, Helvetica, sans-serif">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Payment
      for acquisitions, net of cash received</font></td>
    <td align="right" valign="bottom"><font size="2" face="Arial, Helvetica, sans-serif">
      (3</font></td>
    <td align="left" valign="bottom"><font size="2" face="Arial, Helvetica, sans-serif">)</font></td>
    <td align="right" valign="bottom"><font size="2" face="Arial, Helvetica, sans-serif">
      (135</font></td>
    <td align="left" valign="bottom"><font size="2" face="Arial, Helvetica, sans-serif">)</font></td>
  </tr>
  <tr valign="top">
    <td colspan="3" align="left">&nbsp;</td>
    <td align="right" valign="bottom"> <hr size="1" noshade></td>
    <td align="left" valign="bottom">&nbsp;</td>
    <td align="right" valign="bottom"> <hr size="1" noshade></td>
    <td align="left" valign="bottom">&nbsp;</td>
  </tr>
  <tr valign="top">
    <td colspan="3" align="left" bgcolor="#eeeeee"><font size="2" face="Arial, Helvetica, sans-serif"><b>Net
      cash used in investing activities</b></font></td>
    <td align="right" valign="bottom" bgcolor="#eeeeee"><font size="2" face="Arial, Helvetica, sans-serif"><b>
      (2,724</b></font></td>
    <td align="left" valign="bottom" bgcolor="#eeeeee"><font size="2" face="Arial, Helvetica, sans-serif"><b>)</b></font></td>
    <td align="right" valign="bottom" bgcolor="#eeeeee"><font size="2" face="Arial, Helvetica, sans-serif"><b>
      (2,088</b></font></td>
    <td align="left" valign="bottom" bgcolor="#eeeeee"><font size="2" face="Arial, Helvetica, sans-serif"><b>)</b></font></td>
  </tr>
  <tr valign="top">
    <td colspan="3" align="left">&nbsp;</td>
    <td align="right" valign="bottom"> <hr size="1" noshade></td>
    <td align="left" valign="bottom">&nbsp;</td>
    <td align="right" valign="bottom"> <hr size="1" noshade></td>
    <td align="left" valign="bottom">&nbsp;</td>
  </tr>
  <tr valign="top">
    <td colspan="3" align="left"><font size="2" face="Arial, Helvetica, sans-serif"><b>Cash
      flows from financing activities</b></font></td>
    <td align="left" valign="bottom"><font size="2" face="Arial, Helvetica, sans-serif">&nbsp;</font></td>
    <td align="left" valign="bottom">&nbsp;</td>
    <td align="left" valign="bottom"><font size="2" face="Arial, Helvetica, sans-serif">&nbsp;</font></td>
    <td align="left" valign="bottom">&nbsp;</td>
  </tr>
  <tr valign="top">
    <td align="left" bgcolor="#eeeeee"><font size="2" face="Arial, Helvetica, sans-serif">&nbsp;</font></td>
    <td colspan="2" align="left" bgcolor="#eeeeee"><font size="2" face="Arial, Helvetica, sans-serif">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Proceeds
      from issuance of long-term debt</font></td>
    <td align="right" valign="bottom" bgcolor="#eeeeee"><font size="2" face="Arial, Helvetica, sans-serif">
      22 </font></td>
    <td align="left" valign="bottom" bgcolor="#eeeeee">&nbsp;</td>
    <td align="right" valign="bottom" bgcolor="#eeeeee"><font size="2" face="Arial, Helvetica, sans-serif">
      1,386 </font></td>
    <td align="left" valign="bottom" bgcolor="#eeeeee">&nbsp;</td>
  </tr>
  <tr valign="top">
    <td align="left"><font size="2" face="Arial, Helvetica, sans-serif">&nbsp;</font></td>
    <td colspan="2" align="left"><font size="2" face="Arial, Helvetica, sans-serif">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Repayment
      of long-term debt</font></td>
    <td align="right" valign="bottom"><font size="2" face="Arial, Helvetica, sans-serif">
      (1,263</font></td>
    <td align="left" valign="bottom"><font size="2" face="Arial, Helvetica, sans-serif">)</font></td>
    <td align="right" valign="bottom"><font size="2" face="Arial, Helvetica, sans-serif">
      (1,311</font></td>
    <td align="left" valign="bottom"><font size="2" face="Arial, Helvetica, sans-serif">)</font></td>
  </tr>
  <tr valign="top">
    <td align="left" bgcolor="#eeeeee"><font size="2" face="Arial, Helvetica, sans-serif">&nbsp;</font></td>
    <td colspan="2" align="left" bgcolor="#eeeeee"><font size="2" face="Arial, Helvetica, sans-serif">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Decrease
      in short-term facilities</font></td>
    <td align="right" valign="bottom" bgcolor="#eeeeee"><font size="2" face="Arial, Helvetica, sans-serif">
      (37</font></td>
    <td align="left" valign="bottom" bgcolor="#eeeeee"><font size="2" face="Arial, Helvetica, sans-serif">)</font></td>
    <td align="right" valign="bottom" bgcolor="#eeeeee"><font size="2" face="Arial, Helvetica, sans-serif">
      (14</font></td>
    <td align="left" valign="bottom" bgcolor="#eeeeee"><font size="2" face="Arial, Helvetica, sans-serif">)</font></td>
  </tr>
  <tr valign="top">
    <td align="left"><font size="2" face="Arial, Helvetica, sans-serif">&nbsp;</font></td>
    <td colspan="2" align="left"><font size="2" face="Arial, Helvetica, sans-serif">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Capital
      increase</font></td>
    <td align="right" valign="bottom"><font size="2" face="Arial, Helvetica, sans-serif">
      17 </font></td>
    <td align="left" valign="bottom">&nbsp;</td>
    <td align="right" valign="bottom"><font size="2" face="Arial, Helvetica, sans-serif">
      16 </font></td>
    <td align="left" valign="bottom">&nbsp;</td>
  </tr>
  <tr valign="top">
    <td align="left" bgcolor="#eeeeee"><font size="2" face="Arial, Helvetica, sans-serif">&nbsp;</font></td>
    <td colspan="2" align="left" bgcolor="#eeeeee"><font size="2" face="Arial, Helvetica, sans-serif">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Dividends
      paid</font></td>
    <td align="right" valign="bottom" bgcolor="#eeeeee"><font size="2" face="Arial, Helvetica, sans-serif">
      (107</font></td>
    <td align="left" valign="bottom" bgcolor="#eeeeee"><font size="2" face="Arial, Helvetica, sans-serif">)</font></td>
    <td align="right" valign="bottom" bgcolor="#eeeeee"><font size="2" face="Arial, Helvetica, sans-serif">
      (71</font></td>
    <td align="left" valign="bottom" bgcolor="#eeeeee"><font size="2" face="Arial, Helvetica, sans-serif">)</font></td>
  </tr>
  <tr valign="top">
    <td colspan="3" align="left">&nbsp;</td>
    <td align="right" valign="bottom"> <hr size="1" noshade></td>
    <td align="left" valign="bottom">&nbsp;</td>
    <td align="right" valign="bottom"> <hr size="1" noshade></td>
    <td align="left" valign="bottom">&nbsp;</td>
  </tr>
  <tr valign="top">
    <td colspan="3" align="left" bgcolor="#eeeeee"><font size="2" face="Arial, Helvetica, sans-serif"><b>Net
      cash from (used in) financing activities</b></font></td>
    <td align="right" valign="bottom" bgcolor="#eeeeee"><font size="2" face="Arial, Helvetica, sans-serif"><b>
      (1,368</b></font></td>
    <td align="left" valign="bottom" bgcolor="#eeeeee"><font size="2" face="Arial, Helvetica, sans-serif"><b>)</b></font></td>
    <td align="right" valign="bottom" bgcolor="#eeeeee"><font size="2" face="Arial, Helvetica, sans-serif"><b>
      6 </b></font></td>
    <td align="left" valign="bottom" bgcolor="#eeeeee">&nbsp;</td>
  </tr>
  <tr valign="top">
    <td colspan="3" align="left">&nbsp;</td>
    <td align="right" valign="bottom"> <hr size="1" noshade></td>
    <td align="left" valign="bottom">&nbsp;</td>
    <td align="right" valign="bottom"> <hr size="1" noshade></td>
    <td align="left" valign="bottom">&nbsp;</td>
  </tr>
  <tr valign="top">
    <td align="left" bgcolor="#eeeeee"><font size="2" face="Arial, Helvetica, sans-serif">&nbsp;</font></td>
    <td colspan="2" align="left" bgcolor="#eeeeee"><font size="2" face="Arial, Helvetica, sans-serif">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Effect
      of changes in exchange rates</font></td>
    <td align="right" valign="bottom" bgcolor="#eeeeee"><font size="2" face="Arial, Helvetica, sans-serif">
      (2</font></td>
    <td align="left" valign="bottom" bgcolor="#eeeeee"><font size="2" face="Arial, Helvetica, sans-serif">)</font></td>
    <td align="right" valign="bottom" bgcolor="#eeeeee"><font size="2" face="Arial, Helvetica, sans-serif">
      6 </font></td>
    <td align="left" valign="bottom" bgcolor="#eeeeee">&nbsp;</td>
  </tr>
  <tr valign="top">
    <td colspan="3" align="left">&nbsp;</td>
    <td align="right" valign="bottom"> <hr size="1" noshade></td>
    <td align="left" valign="bottom">&nbsp;</td>
    <td align="right" valign="bottom"> <hr size="1" noshade></td>
    <td align="left" valign="bottom">&nbsp;</td>
  </tr>
  <tr valign="top">
    <td colspan="3" align="left" bgcolor="#eeeeee"><font size="2" face="Arial, Helvetica, sans-serif"><b>Net
      cash decrease</b></font></td>
    <td align="right" valign="bottom" bgcolor="#eeeeee"><font size="2" face="Arial, Helvetica, sans-serif"><b>
      (2,397</b></font></td>
    <td align="left" valign="bottom" bgcolor="#eeeeee"><font size="2" face="Arial, Helvetica, sans-serif"><b>)</b></font></td>
    <td align="right" valign="bottom" bgcolor="#eeeeee"><font size="2" face="Arial, Helvetica, sans-serif"><b>
      (934</b></font></td>
    <td align="left" valign="bottom" bgcolor="#eeeeee"><font size="2" face="Arial, Helvetica, sans-serif"><b>)</b></font></td>
  </tr>
  <tr valign="top">
    <td colspan="3" align="left">&nbsp;</td>
    <td align="right" valign="bottom"> <hr size="2" noshade></td>
    <td align="left" valign="bottom">&nbsp;</td>
    <td align="right" valign="bottom"> <hr size="2" noshade></td>
    <td align="left" valign="bottom">&nbsp;</td>
  </tr>
  <tr valign="top">
    <td colspan="3" align="left" bgcolor="#eeeeee"><font size="2" face="Arial, Helvetica, sans-serif"><b>Cash
      and cash equivalents at beginning of period</b></font></td>
    <td align="right" valign="bottom" bgcolor="#eeeeee"><font size="2" face="Arial, Helvetica, sans-serif"><b>
      2,998 </b></font></td>
    <td align="left" valign="bottom" bgcolor="#eeeeee">&nbsp;</td>
    <td align="right" valign="bottom" bgcolor="#eeeeee"><font size="2" face="Arial, Helvetica, sans-serif"><b>
      2,562 </b></font></td>
    <td align="left" valign="bottom" bgcolor="#eeeeee">&nbsp;</td>
  </tr>
  <tr valign="top">
    <td colspan="3" align="left">&nbsp;</td>
    <td align="right" valign="bottom"> <hr size="1" noshade></td>
    <td align="left" valign="bottom">&nbsp;</td>
    <td align="right" valign="bottom"> <hr size="1" noshade></td>
    <td align="left" valign="bottom">&nbsp;</td>
  </tr>
  <tr valign="top">
    <td colspan="3" align="left" bgcolor="#eeeeee"><font size="2" face="Arial, Helvetica, sans-serif"><b>Cash
      and cash equivalents at end of period</b></font></td>
    <td align="right" valign="bottom" bgcolor="#eeeeee"><font size="2" face="Arial, Helvetica, sans-serif"><b>
      601 </b></font></td>
    <td align="left" valign="bottom" bgcolor="#eeeeee">&nbsp;</td>
    <td align="right" valign="bottom" bgcolor="#eeeeee"><font size="2" face="Arial, Helvetica, sans-serif"><b>
      1,628 </b></font></td>
    <td align="left" valign="bottom" bgcolor="#eeeeee">&nbsp;</td>
  </tr>
  <tr valign="top">
    <td colspan="3" align="left">&nbsp;</td>
    <td align="right" valign="bottom"> <hr size="2" noshade></td>
    <td align="left" valign="bottom">&nbsp;</td>
    <td align="right" valign="bottom"> <hr size="2" noshade></td>
    <td align="left" valign="bottom">&nbsp;</td>
  </tr>
</table>
<p align="left"><font size="2" face="Arial, Helvetica, sans-serif">The accompanying
     notes are an integral part of these Unaudited Interim Consolidated Financial

  Statements.</font></p>
<p align="center"><font size="2" face="Arial, Helvetica, sans-serif">F-5</font></p>
<hr noshade align="center" width="100%" size="2">
<div style="page-break-before:always"></div>
<page> <a name="pf6"></a>
<p><a href="#contents"><font size="2">Back to Contents</font></a></p>
<p><font size="2" face="Arial, Helvetica, sans-serif"><b>STMicroelectronics N.V.<br>
  CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS&#8217; EQUITY </b></font></p>
<table width="100%" border="0" cellpadding="0" cellspacing="0">
  <tr align="center" valign="bottom">
    <td align="left"><font size="1" face="Arial, Helvetica, sans-serif"><b>In
          million of U.S. dollars, except per share amounts</b></font></td>
    <td width="9%" align="left">&nbsp;</td>
    <td width="2%"><font size="1">&nbsp;</font></td>
    <td width="9%"><font size="1" face="Arial, Helvetica, sans-serif">&nbsp;</font></td>
    <td width="2%"><font size="1">&nbsp;</font></td>
    <td width="9%"><font size="1" face="Arial, Helvetica, sans-serif">&nbsp;</font></td>
    <td width="2%"><font size="1">&nbsp;</font></td>
    <td width="9%"><font size="1" face="Arial, Helvetica, sans-serif">&nbsp;</font></td>
    <td width="2%"><font size="1">&nbsp;</font></td>
    <td width="9%"><font size="1" face="Arial, Helvetica, sans-serif"><b>Accumulated</b></font></td>
    <td width="2%"><font size="1">&nbsp;</font></td>
    <td width="9%"><font size="1" face="Arial, Helvetica, sans-serif">&nbsp;</font></td>
    <td width="2%"><font size="1">&nbsp;</font></td>
  </tr>
  <tr align="center" valign="bottom">
    <td><font size="1">&nbsp;</font></td>
    <td><font size="1" face="Arial, Helvetica, sans-serif">&nbsp;</font></td>
    <td><font size="1">&nbsp;</font></td>
    <td><font size="1" face="Arial, Helvetica, sans-serif">&nbsp;</font></td>
    <td><font size="1">&nbsp;</font></td>
    <td><font size="1" face="Arial, Helvetica, sans-serif">&nbsp;</font></td>
    <td><font size="1">&nbsp;</font></td>
    <td><font size="1" face="Arial, Helvetica, sans-serif">&nbsp;</font></td>
    <td><font size="1">&nbsp;</font></td>
    <td><font size="1" face="Arial, Helvetica, sans-serif"><b>Other</b></font></td>
    <td><font size="1">&nbsp;</font></td>
    <td><font size="1" face="Arial, Helvetica, sans-serif">&nbsp;</font></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" face="Arial, Helvetica, sans-serif"><b>Common</b></font></td>
    <td><font size="1">&nbsp;</font></td>
    <td><font size="1" face="Arial, Helvetica, sans-serif"><b>Capital</b></font></td>
    <td><font size="1">&nbsp;</font></td>
    <td><font size="1" face="Arial, Helvetica, sans-serif"><b>Treasury</b></font></td>
    <td><font size="1">&nbsp;</font></td>
    <td><font size="1" face="Arial, Helvetica, sans-serif"><b>Accumulated</b></font></td>
    <td><font size="1">&nbsp;</font></td>
    <td><font size="1" face="Arial, Helvetica, sans-serif"><b>Comprehensive</b></font></td>
    <td><font size="1">&nbsp;</font></td>
    <td><font size="1" face="Arial, Helvetica, sans-serif"><b>Shareholders'</b></font></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" face="Arial, Helvetica, sans-serif"><b>Stock</b></font></td>
    <td><font size="1">&nbsp;</font></td>
    <td><font size="1" face="Arial, Helvetica, sans-serif"><b>Surplus</b></font></td>
    <td><font size="1">&nbsp;</font></td>
    <td><font size="1" face="Arial, Helvetica, sans-serif"><b>Stock</b></font></td>
    <td><font size="1">&nbsp;</font></td>
    <td><font size="1" face="Arial, Helvetica, sans-serif"><b>Result</b></font></td>
    <td><font size="1">&nbsp;</font></td>
    <td><font size="1" face="Arial, Helvetica, sans-serif"><b>income (loss)</b></font></td>
    <td><font size="1">&nbsp;</font></td>
    <td><font size="1" face="Arial, Helvetica, sans-serif"><b>Equity</b></font></td>
    <td><font size="1">&nbsp;</font></td>
  </tr>
  <tr valign="bottom">
    <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="left">
      <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="bottom">
    <td align="left" bgcolor="#eeeeee"><font size="2" face="Arial, Helvetica, sans-serif"><b>Balance
          as of December 31, 2002 (audited)</b></font></td>
    <td align="right" bgcolor="#eeeeee"><b><font size="2" face="Arial, Helvetica, sans-serif">1,144</font></b></td>
    <td align="left" bgcolor="#eeeeee">&nbsp;</td>
    <td align="right" bgcolor="#eeeeee"><b><font size="2" face="Arial, Helvetica, sans-serif">1,864</font></b></td>
    <td align="left" bgcolor="#eeeeee">&nbsp;</td>
    <td align="right" bgcolor="#eeeeee"><b><font size="2" face="Arial, Helvetica, sans-serif">(348</font></b></td>
    <td align="left" bgcolor="#eeeeee"><b><font size="2" face="Arial, Helvetica, sans-serif">)</font></b></td>
    <td align="right" bgcolor="#eeeeee"><b><font size="2" face="Arial, Helvetica, sans-serif">4,592</font></b></td>
    <td align="left" bgcolor="#eeeeee">&nbsp;</td>
    <td align="right" bgcolor="#eeeeee"><b><font size="2" face="Arial, Helvetica, sans-serif">(258</font></b></td>
    <td align="left" bgcolor="#eeeeee"><b><font size="2" face="Arial, Helvetica, sans-serif">)</font></b></td>
    <td align="right" bgcolor="#eeeeee"><b><font size="2" face="Arial, Helvetica, sans-serif">6,994</font></b></td>
    <td align="left" bgcolor="#eeeeee">&nbsp;</td>
  </tr>
  <tr valign="bottom">
    <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="left">
      <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="bottom">
    <td align="left"><font size="2" face="Arial, Helvetica, sans-serif">Capital
        increase</font></td>
    <td align="right"><font size="2" face="Arial, Helvetica, sans-serif">2</font></td>
    <td align="left">&nbsp;</td>
    <td align="right"><font size="2" face="Arial, Helvetica, sans-serif">41</font></td>
    <td align="left">&nbsp;</td>
    <td align="left"><font size="2" face="Arial, Helvetica, sans-serif">&nbsp;</font></td>
    <td align="left">&nbsp;</td>
    <td align="left"><font size="2" face="Arial, Helvetica, sans-serif">&nbsp;</font></td>
    <td align="left">&nbsp;</td>
    <td align="left"><font size="2" face="Arial, Helvetica, sans-serif">&nbsp;</font></td>
    <td align="left">&nbsp;</td>
    <td align="right"><font size="2" face="Arial, Helvetica, sans-serif">43</font></td>
    <td align="left">&nbsp;</td>
  </tr>
  <tr valign="bottom">
    <td align="left"><font size="2" face="Arial, Helvetica, sans-serif">Comprehensive
        income:</font></td>
    <td align="left"><font size="2" face="Arial, Helvetica, sans-serif">&nbsp;</font></td>
    <td align="left">&nbsp;</td>
    <td align="left"><font size="2" face="Arial, Helvetica, sans-serif">&nbsp;</font></td>
    <td align="left">&nbsp;</td>
    <td align="left"><font size="2" face="Arial, Helvetica, sans-serif">&nbsp;</font></td>
    <td align="left">&nbsp;</td>
    <td align="left"><font size="2" face="Arial, Helvetica, sans-serif">&nbsp;</font></td>
    <td align="left">&nbsp;</td>
    <td align="left"><font size="2" face="Arial, Helvetica, sans-serif">&nbsp;</font></td>
    <td align="left">&nbsp;</td>
    <td align="left"><font size="2" face="Arial, Helvetica, sans-serif">&nbsp;</font></td>
    <td align="left">&nbsp;</td>
  </tr>
  <tr valign="bottom">
    <td align="left" bgcolor="#eeeeee"><font size="2" face="Arial, Helvetica, sans-serif"> &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Net
        Income</font></td>
    <td align="left" bgcolor="#eeeeee"><font size="2" face="Arial, Helvetica, sans-serif">&nbsp;</font></td>
    <td align="left" bgcolor="#eeeeee">&nbsp;</td>
    <td align="left" bgcolor="#eeeeee"><font size="2" face="Arial, Helvetica, sans-serif">&nbsp;</font></td>
    <td align="left" bgcolor="#eeeeee">&nbsp;</td>
    <td align="left" bgcolor="#eeeeee"><font size="2" face="Arial, Helvetica, sans-serif">&nbsp;</font></td>
    <td align="left" bgcolor="#eeeeee">&nbsp;</td>
    <td align="right" bgcolor="#eeeeee"><font size="2" face="Arial, Helvetica, sans-serif">253</font></td>
    <td align="left" bgcolor="#eeeeee">&nbsp;</td>
    <td align="left" bgcolor="#eeeeee"></td>
    <td align="left" bgcolor="#eeeeee">&nbsp;</td>
    <td align="right" bgcolor="#eeeeee"><font size="2" face="Arial, Helvetica, sans-serif">253</font></td>
    <td align="left" bgcolor="#eeeeee">&nbsp;</td>
  </tr>
  <tr valign="bottom">
    <td align="left"><font size="2" face="Arial, Helvetica, sans-serif">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Other
        comprehensive income, net of tax</font></td>
    <td align="left"><font size="2" face="Arial, Helvetica, sans-serif">&nbsp;</font></td>
    <td align="left">&nbsp;</td>
    <td align="left"><font size="2" face="Arial, Helvetica, sans-serif">&nbsp;</font></td>
    <td align="left">&nbsp;</td>
    <td align="left"><font size="2" face="Arial, Helvetica, sans-serif">&nbsp;</font></td>
    <td align="left">&nbsp;</td>
    <td align="left"></td>
    <td align="left">&nbsp;</td>
    <td align="right"><font size="2" face="Arial, Helvetica, sans-serif">881</font></td>
    <td align="left">&nbsp;</td>
    <td align="right"><font size="2" face="Arial, Helvetica, sans-serif">881</font></td>
    <td align="left">&nbsp;</td>
  </tr>
  <tr valign="bottom">
    <td align="left">&nbsp;</td>
    <td align="left">&nbsp;</td>
    <td align="left">&nbsp;</td>
    <td align="left">&nbsp;</td>
    <td align="left">&nbsp;</td>
    <td align="left">&nbsp;</td>
    <td align="left">&nbsp;</td>
    <td align="left">&nbsp;</td>
    <td align="left">&nbsp;</td>
    <td align="left">&nbsp;</td>
    <td align="left">&nbsp;</td>
    <td align="right">
      <hr size="1" noshade>
    </td>
    <td align="left">&nbsp;</td>
  </tr>
  <tr valign="bottom">
    <td align="left" bgcolor="#eeeeee"><font size="2" face="Arial, Helvetica, sans-serif">Comprehensive
        income</font></td>
    <td align="left" bgcolor="#eeeeee"><font size="2" face="Arial, Helvetica, sans-serif">&nbsp;</font></td>
    <td align="left" bgcolor="#eeeeee">&nbsp;</td>
    <td align="left" bgcolor="#eeeeee"><font size="2" face="Arial, Helvetica, sans-serif">&nbsp;</font></td>
    <td align="left" bgcolor="#eeeeee">&nbsp;</td>
    <td align="left" bgcolor="#eeeeee"><font size="2" face="Arial, Helvetica, sans-serif">&nbsp;</font></td>
    <td align="left" bgcolor="#eeeeee">&nbsp;</td>
    <td align="left" bgcolor="#eeeeee"><font size="2" face="Arial, Helvetica, sans-serif">&nbsp;</font></td>
    <td align="left" bgcolor="#eeeeee">&nbsp;</td>
    <td align="left" bgcolor="#eeeeee"><font size="2" face="Arial, Helvetica, sans-serif">&nbsp;</font></td>
    <td align="left" bgcolor="#eeeeee">&nbsp;</td>
    <td align="right" bgcolor="#eeeeee"><font size="2" face="Arial, Helvetica, sans-serif">1,134</font></td>
    <td align="left" bgcolor="#eeeeee">&nbsp;</td>
  </tr>
  <tr valign="bottom">
    <td align="left"><font size="2" face="Arial, Helvetica, sans-serif">Dividends,
        $0.08 per share</font></td>
    <td align="left"></td>
    <td align="left">&nbsp;</td>
    <td align="left"></td>
    <td align="left">&nbsp;</td>
    <td align="left"></td>
    <td align="left">&nbsp;</td>
    <td align="right"><font size="2" face="Arial, Helvetica, sans-serif">(71</font></td>
    <td align="left"><font size="2" face="Arial, Helvetica, sans-serif">)</font></td>
    <td align="left"></td>
    <td align="left">&nbsp;</td>
    <td align="right"><font size="2" face="Arial, Helvetica, sans-serif">(71</font></td>
    <td align="left"><font size="2" face="Arial, Helvetica, sans-serif">)</font></td>
  </tr>
  <tr valign="bottom">
    <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="left">
      <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="bottom">
    <td align="left" bgcolor="#eeeeee"><font size="2" face="Arial, Helvetica, sans-serif"><b>Balance
          as of December 31, 2003 (audited)</b></font></td>
    <td align="right" bgcolor="#eeeeee"><font size="2" face="Arial, Helvetica, sans-serif"><b>1,146</b></font></td>
    <td align="left" bgcolor="#eeeeee">&nbsp;</td>
    <td align="right" bgcolor="#eeeeee"><font size="2" face="Arial, Helvetica, sans-serif"><b>1,905</b></font></td>
    <td align="left" bgcolor="#eeeeee">&nbsp;</td>
    <td align="right" bgcolor="#eeeeee"><font size="2" face="Arial, Helvetica, sans-serif"><b>(348</b></font></td>
    <td align="left" bgcolor="#eeeeee"><font size="2" face="Arial, Helvetica, sans-serif"><b>)</b></font></td>
    <td align="right" bgcolor="#eeeeee"><font size="2" face="Arial, Helvetica, sans-serif"><b>4,774</b></font></td>
    <td align="left" bgcolor="#eeeeee">&nbsp;</td>
    <td align="right" bgcolor="#eeeeee"><font size="2" face="Arial, Helvetica, sans-serif"><b>623</b></font></td>
    <td align="left" bgcolor="#eeeeee">&nbsp;</td>
    <td align="right" bgcolor="#eeeeee"><font size="2" face="Arial, Helvetica, sans-serif"><b>8,100</b></font></td>
    <td align="left" bgcolor="#eeeeee">&nbsp;</td>
  </tr>
  <tr valign="bottom">
    <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="left">
      <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="bottom">
    <td align="left" bgcolor="#eeeeee"><font size="2" face="Arial, Helvetica, sans-serif">Capital
        increase</font></td>
    <td align="right" bgcolor="#eeeeee"><font size="2" face="Arial, Helvetica, sans-serif"><b>3</b></font></td>
    <td align="left" bgcolor="#eeeeee">&nbsp;</td>
    <td align="right" bgcolor="#eeeeee"><font size="2" face="Arial, Helvetica, sans-serif"><b>14</b></font></td>
    <td align="left" bgcolor="#eeeeee">&nbsp;</td>
    <td align="left" bgcolor="#eeeeee"><font size="2" face="Arial, Helvetica, sans-serif">&nbsp;</font></td>
    <td align="left" bgcolor="#eeeeee">&nbsp;</td>
    <td align="left" bgcolor="#eeeeee"><font size="2" face="Arial, Helvetica, sans-serif">&nbsp;</font></td>
    <td align="left" bgcolor="#eeeeee">&nbsp;</td>
    <td align="left" bgcolor="#eeeeee"><font size="2" face="Arial, Helvetica, sans-serif">&nbsp;</font></td>
    <td align="left" bgcolor="#eeeeee">&nbsp;</td>
    <td align="right" bgcolor="#eeeeee"><font size="2" face="Arial, Helvetica, sans-serif"><b>17</b></font></td>
    <td align="left" bgcolor="#eeeeee">&nbsp;</td>
  </tr>
  <tr valign="bottom">
    <td align="left"><font size="2" face="Arial, Helvetica, sans-serif">Comprehensive
        income:</font></td>
    <td align="left"><font size="2" face="Arial, Helvetica, sans-serif">&nbsp;</font></td>
    <td align="left">&nbsp;</td>
    <td align="left"><font size="2" face="Arial, Helvetica, sans-serif">&nbsp;</font></td>
    <td align="left">&nbsp;</td>
    <td align="left"><font size="2" face="Arial, Helvetica, sans-serif">&nbsp;</font></td>
    <td align="left">&nbsp;</td>
    <td align="left"><font size="2" face="Arial, Helvetica, sans-serif">&nbsp;</font></td>
    <td align="left">&nbsp;</td>
    <td align="left"><font size="2" face="Arial, Helvetica, sans-serif">&nbsp;</font></td>
    <td align="left">&nbsp;</td>
    <td align="left"><font size="2" face="Arial, Helvetica, sans-serif">&nbsp;</font></td>
    <td align="left">&nbsp;</td>
  </tr>
  <tr valign="bottom">
    <td align="left" bgcolor="#eeeeee"><font size="2" face="Arial, Helvetica, sans-serif"> &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Net
        Income</font></td>
    <td align="left" bgcolor="#eeeeee"><font size="2" face="Arial, Helvetica, sans-serif">&nbsp;</font></td>
    <td align="left" bgcolor="#eeeeee">&nbsp;</td>
    <td align="left" bgcolor="#eeeeee"><font size="2" face="Arial, Helvetica, sans-serif">&nbsp;</font></td>
    <td align="left" bgcolor="#eeeeee">&nbsp;</td>
    <td align="left" bgcolor="#eeeeee"><font size="2" face="Arial, Helvetica, sans-serif">&nbsp;</font></td>
    <td align="left" bgcolor="#eeeeee">&nbsp;</td>
    <td align="right" bgcolor="#eeeeee"><font size="2" face="Arial, Helvetica, sans-serif"><b>414</b></font></td>
    <td align="left" bgcolor="#eeeeee">&nbsp;</td>
    <td align="left" bgcolor="#eeeeee"><font size="2" face="Arial, Helvetica, sans-serif">&nbsp;</font></td>
    <td align="left" bgcolor="#eeeeee">&nbsp;</td>
    <td align="right" bgcolor="#eeeeee"><font size="2" face="Arial, Helvetica, sans-serif"><b>414</b></font></td>
    <td align="left" bgcolor="#eeeeee">&nbsp;</td>
  </tr>
  <tr valign="bottom">
    <td align="left"><font size="2" face="Arial, Helvetica, sans-serif">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Other
        comprehensive income (loss), net of tax</font></td>
    <td align="left"><font size="2" face="Arial, Helvetica, sans-serif">&nbsp;</font></td>
    <td align="left">&nbsp;</td>
    <td align="left"><font size="2" face="Arial, Helvetica, sans-serif">&nbsp;</font></td>
    <td align="left">&nbsp;</td>
    <td align="left"><font size="2" face="Arial, Helvetica, sans-serif">&nbsp;</font></td>
    <td align="left">&nbsp;</td>
    <td align="left"><font size="2" face="Arial, Helvetica, sans-serif">&nbsp;</font></td>
    <td align="left">&nbsp;</td>
    <td align="right"><font size="2" face="Arial, Helvetica, sans-serif"><b>(126</b></font></td>
    <td align="left"><font size="2" face="Arial, Helvetica, sans-serif"><b>)</b></font></td>
    <td align="right"><font size="2" face="Arial, Helvetica, sans-serif"><b>(126</b></font></td>
    <td align="left"><font size="2" face="Arial, Helvetica, sans-serif"><b>)</b></font></td>
  </tr>
  <tr valign="bottom">
    <td align="left">&nbsp;</td>
    <td align="left">&nbsp;</td>
    <td align="left">&nbsp;</td>
    <td align="left">&nbsp;</td>
    <td align="left">&nbsp;</td>
    <td align="left">&nbsp;</td>
    <td align="left">&nbsp;</td>
    <td align="left">&nbsp;</td>
    <td align="left">&nbsp;</td>
    <td align="left">&nbsp;</td>
    <td align="left">&nbsp;</td>
    <td align="right">
      <hr size="1" noshade>
    </td>
    <td align="left">&nbsp;</td>
  </tr>
  <tr valign="bottom">
    <td align="left" bgcolor="#eeeeee"><font size="2" face="Arial, Helvetica, sans-serif">Comprehensive
        income</font></td>
    <td align="left" bgcolor="#eeeeee"><font size="2" face="Arial, Helvetica, sans-serif">&nbsp;</font></td>
    <td align="left" bgcolor="#eeeeee">&nbsp;</td>
    <td align="left" bgcolor="#eeeeee"><font size="2" face="Arial, Helvetica, sans-serif">&nbsp;</font></td>
    <td align="left" bgcolor="#eeeeee">&nbsp;</td>
    <td align="left" bgcolor="#eeeeee"><font size="2" face="Arial, Helvetica, sans-serif">&nbsp;</font></td>
    <td align="left" bgcolor="#eeeeee">&nbsp;</td>
    <td align="left" bgcolor="#eeeeee"><font size="2" face="Arial, Helvetica, sans-serif">&nbsp;</font></td>
    <td align="left" bgcolor="#eeeeee">&nbsp;</td>
    <td align="left" bgcolor="#eeeeee"><font size="2" face="Arial, Helvetica, sans-serif">&nbsp;</font></td>
    <td align="left" bgcolor="#eeeeee">&nbsp;</td>
    <td align="right" bgcolor="#eeeeee"><font size="2" face="Arial, Helvetica, sans-serif"><b>288</b></font></td>
    <td align="left" bgcolor="#eeeeee">&nbsp;</td>
  </tr>
  <tr valign="bottom">
    <td align="left"><font size="2" face="Arial, Helvetica, sans-serif">Dividends,
        $0.12 per share</font></td>
    <td align="left"><font size="2" face="Arial, Helvetica, sans-serif">&nbsp;</font></td>
    <td align="left">&nbsp;</td>
    <td align="left"><font size="2" face="Arial, Helvetica, sans-serif">&nbsp;</font></td>
    <td align="left">&nbsp;</td>
    <td align="left"><font size="2" face="Arial, Helvetica, sans-serif">&nbsp;</font></td>
    <td align="left">&nbsp;</td>
    <td align="right"><font size="2" face="Arial, Helvetica, sans-serif"><b>(107</b></font></td>
    <td align="left"><font size="2" face="Arial, Helvetica, sans-serif"><b>)</b></font></td>
    <td align="left"><font size="2" face="Arial, Helvetica, sans-serif">&nbsp;</font></td>
    <td align="left">&nbsp;</td>
    <td align="right"><font size="2" face="Arial, Helvetica, sans-serif"><b>(107</b></font></td>
    <td align="left"><font size="2" face="Arial, Helvetica, sans-serif"><b>)</b></font></td>
  </tr>
  <tr valign="bottom">
    <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>
    <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="bottom">
    <td align="left" bgcolor="#eeeeee"><font size="2" face="Arial, Helvetica, sans-serif"><b>Balance
          as of September 25, 2004 (unaudited)</b></font></td>
    <td align="right" bgcolor="#eeeeee"><font size="2" face="Arial, Helvetica, sans-serif"><b>1,149</b></font></td>
    <td align="left" bgcolor="#eeeeee">&nbsp;</td>
    <td align="right" bgcolor="#eeeeee"><font size="2" face="Arial, Helvetica, sans-serif"><b>1,919</b></font></td>
    <td align="left" bgcolor="#eeeeee">&nbsp;</td>
    <td align="right" bgcolor="#eeeeee"><font size="2" face="Arial, Helvetica, sans-serif"><b>(348</b></font></td>
    <td align="left" bgcolor="#eeeeee"><font size="2" face="Arial, Helvetica, sans-serif"><b>)</b></font></td>
    <td align="right" bgcolor="#eeeeee"><font size="2" face="Arial, Helvetica, sans-serif"><b>5,081</b></font></td>
    <td align="left" bgcolor="#eeeeee">&nbsp;</td>
    <td align="right" bgcolor="#eeeeee"><font size="2" face="Arial, Helvetica, sans-serif"><b>497</b></font></td>
    <td align="left" bgcolor="#eeeeee">&nbsp;</td>
    <td align="right" bgcolor="#eeeeee"><font size="2" face="Arial, Helvetica, sans-serif"><b>8,298</b></font></td>
    <td align="left" bgcolor="#eeeeee">&nbsp;</td>
  </tr>
  <tr valign="bottom">
    <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>
    <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>
</table>
<p align="left"><font size="2" face="Arial, Helvetica, sans-serif">The accompanying
    notes are an integral part of these Unaudited Interim Consolidated Financial
    Statements.</font></p>
<p align="center"><font size="2" face="Arial, Helvetica, sans-serif">F-6</font></p>
<hr noshade align="center" width="100%" size="2">
<div style="page-break-before:always"><a name="pf7"></a></div>

<page>
<p><a href="#contents"><font size="2">Back to Contents</font></a></p>
<p align="center"><b><font face="Arial, Helvetica, sans-serif" size="4"> STMicroelectronics N.V.</font></b></p>
<p align="center"><b><font face="Arial, Helvetica, sans-serif" size="4">Notes to Interim Consolidated Financial Statements (unaudited)</font></b></p>
<table width="100%" border="0" cellpadding="0" cellspacing="0">
  <tr>
    <td width="3%"><font size="2" face="Arial, Helvetica, sans-serif"><b>1.</b></font></td>
    <td><font size="2" face="Arial, Helvetica, sans-serif"><b> Description of
      Business</b></font></td>
  </tr>
</table>

<div style="text-indent:0%">
<p align="left"><font size="2" face="Arial, Helvetica, sans-serif">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>
</div>
<div style="text-indent:0%">
<p align="left"><font size="2" face="Arial, Helvetica, sans-serif">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>
</div>
<table width="100%" border="0" cellpadding="0" cellspacing="0">
  <tr>
    <td width="3%"><font size="2" face="Arial, Helvetica, sans-serif"><b>2.</b></font></td>
    <td><font size="2" face="Arial, Helvetica, sans-serif"><b>Fiscal Year</b></font></td>
  </tr>
</table>
<div style="text-indent:0%">
<p align="left"><font size="2" face="Arial, Helvetica, sans-serif">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 on
  September 25 and its fourth quarter will end on December 31.</font></p>
</div>
<table width="100%" border="0" cellpadding="0" cellspacing="0">
  <tr>
    <td width="3%"><font size="2" face="Arial, Helvetica, sans-serif"><b>3.</b></font></td>
    <td><font size="2" face="Arial, Helvetica, sans-serif"><b>Basis of Presentation</b></font></td>
  </tr>
</table>
<div style="text-indent:0%">
<p align="left"><font size="2" face="Arial, Helvetica, sans-serif">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>
</div>
<div style="text-indent:0%">
<p align="left"><font size="2" face="Arial, Helvetica, sans-serif">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, Helvetica, sans-serif">The accompanying Unaudited Interim Consolidated Financial Statements do not include certain footnotes and financial presentation normally required on an annual basis under U.S. GAAP. 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>
</div>
<p align="center"><font face="Arial, Helvetica, sans-serif" size="2">F-7</font></p>
<hr noshade align="center" width="100%" size="2">
<div style="page-break-before:always"></div>
<page>
<a name="pf2"></a>
<p><a href="#contents"><font size="2">Back to Contents</font></a></p>
<table width="100%" border="0" cellpadding="0" cellspacing="0">
  <tr>
    <td width="3%"><font size="2" face="Arial, Helvetica, sans-serif"><b>4.</b></font></td>
    <td><font size="2" face="Arial, Helvetica, sans-serif"><b>Use of Estimates</b></font></td>
  </tr>
</table>
<div style="text-indent:0%">
<p align="left"><font size="2" face="Arial, Helvetica, sans-serif">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>
</div>
<table width="100%" border="0" cellpadding="0" cellspacing="0">
  <tr>
    <td width="3%"><font size="2" face="Arial, Helvetica, sans-serif"><b>5.</b></font></td>
    <td><font size="2" face="Arial, Helvetica, sans-serif"><b>Recent Accounting
      Pronouncements </b></font></td>
  </tr>
</table>
<div style="text-indent:0%">
<p align="left"><font size="2" face="Arial, Helvetica, sans-serif">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 46R&#8221;).
  The Company identifies VIEs as entities where the Company&#8217;s financial
  risk or reward is not consistent with the equity ownership. An entity is considered
  a VIE if any of the following factors are present: the equity investment in
  the entity is insufficient to finance the operations of that entity without
  additional subordinated financial support from other parties; the equity investors
  of the entity lack decision-making rights; an equity investor holds voting rights
  that are disproportionately low in relation to the actual economics of the investor's
  relationship with the entity and substantially all of the entity's activities
  involve or are conducted on behalf of that investor; other parties protect the
  equity investors from expected losses; or parties, other than the equity holders,
  hold the right to receive the entity's expected residual returns, or the equity
  investors' rights to expect residual returns is capped. The primary beneficiary
  of a VIE is the party that absorbs the majority of the entity&#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, Helvetica, sans-serif" size="2">F-8</font></p>
<hr noshade align="center" width="100%" size="2">
<div style="page-break-before:always"></div>
<page>
<a name="pf3"></a>
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<div style="text-indent:0%">
<p align="left"><font size="2" face="Arial, Helvetica, sans-serif">The Company has identified the following VIEs under the existing contracts and disclosed the arrangements in the Unaudited Interim Consolidated Financial Statements at September 25, 2004:</font></p>
</div>
<table width="100%" border="0" cellpadding="0" cellspacing="0">
  <tr valign="top">
    <td width="3%"> <font size="2" face="Arial, Helvetica, sans-serif">&nbsp;</font></td>
    <td width="3%"> <font size="2" face="Arial, Helvetica, sans-serif">&#149;</font></td>
    <td> <font size="2" face="Arial, Helvetica, sans-serif">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, and,</font></td>
  </tr>
  <tr valign="top">
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
  </tr>
  <tr valign="top">
    <td>&nbsp;</td>
    <td><font size="2" face="Arial, Helvetica, sans-serif">&#149;</font></td>
    <td> <font size="2" face="Arial, Helvetica, sans-serif">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>
<div style="text-indent:0%">
<p align="left"><font size="2" face="Arial, Helvetica, sans-serif">The Company
     has determined that it is not the primary beneficiary for all these VIEs
    and
  continues to account for the investments under the cost method for the venture
     with Dai Nippon, and the equity method for the UPEK, Inc. arrangement.</font></p>
</div>
<div style="text-indent:0%">
<p align="left"><font size="2" face="Arial, Helvetica, sans-serif">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>
</div>
<div style="text-indent:0%">
<p align="left"><font size="2" face="Arial, Helvetica, sans-serif">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>
</div>
<div style="text-indent:0%">
<p align="left"><font size="2" face="Arial, Helvetica, sans-serif">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 has evaluated the
  required disclosures for its foreign plans and has included the additional information
  in its Unaudited Interim Financial Statements as at September 25, 2004.</font></p>
</div>
<p align="center"><font face="Arial, Helvetica, sans-serif" size="2">F-9</font></p>
<hr noshade align="center" width="100%" size="2">
<div style="page-break-before:always"></div>
<page>
<a name="pf4"></a>
<p><a href="#contents"><font size="2">Back to Contents</font></a></p>
<table width="100%" border="0" cellspacing="0" cellpadding="0">
  <tr>
    <td width="3%"><font size="2" face="Arial, Helvetica, sans-serif"><b>6.&nbsp;</b></font></td>
    <td><p align="left"><font size="2" face="Arial, Helvetica, sans-serif"><b>Business
    combinations</b></font></p></td>
  </tr>
</table>
<p align="left"><font size="2" face="Arial, Helvetica, sans-serif">Proton World International </font></p>
<div style="text-indent:0%"><font size="2" face="Arial, Helvetica, sans-serif">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 September 25, 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></div>
<p align="left"><font size="2" face="Arial, Helvetica, sans-serif">Tioga Technologies </font></p>
<div style="text-indent:0%"><font size="2" face="Arial, Helvetica, sans-serif">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></div>
<p align="left"><font size="2" face="Arial, Helvetica, sans-serif">Incard</font></p>
<div style="text-indent:0%"><font size="2" face="Arial, Helvetica, sans-serif">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></div>
<p align="center"><font face="Arial, Helvetica, sans-serif" size="2">F-10</font></p>
<hr noshade align="center" width="100%" size="2">
<div style="page-break-before:always"></div>
<page>
<a name="pf5"></a>
<p><a href="#contents"><font size="2">Back to Contents</font></a></p>
<p align="left"><font size="2" face="Arial, Helvetica, sans-serif">Synad Technologies</font></p>
<div style="text-indent:0%"><font size="2" face="Arial, Helvetica, sans-serif">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 September 25, 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></div>
<div style="text-indent:0%">
  <p><font size="2" face="Arial, Helvetica, sans-serif">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 determined 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>
</div>
<div style="text-indent:0%">
  <p><font size="2" face="Arial, Helvetica, sans-serif">The 2003 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>
</div>
<table width="100%" border="0" cellpadding="0" cellspacing="0">
<tr>
  <td colspan="2" align="left"><font size="1">&nbsp;</font><font size="2" face="Arial, Helvetica, sans-serif">Pro forma Consolidated Statements of Income</font></td>
<td colspan="7" align="center"><b><font size="1" face="Arial, Helvetica, sans-serif">(Unaudited)</font></b></td>
<td align="left"><font size="1">&nbsp;</font></td>
</tr>
<tr>
  <td width="3%" align="left"><font size="1">&nbsp;</font></td>
  <td align="left"><font size="1">&nbsp;</font></td>
  <td colspan="3" align="center"><hr size="1" noshade></td>
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  <td colspan="3" align="center"><hr size="1" noshade></td>
  <td align="left"><hr size="1" noshade>
  </td>
</tr>
<tr>
  <td align="left"><font size="1">&nbsp;</font></td>
<td align="left"><b><font size="1" face="Arial, Helvetica, sans-serif">&nbsp;</font></b></td>
<td colspan="3" align="center"><b><font size="1" face="Arial, Helvetica, sans-serif">Three months ended</font></b></td>
<td align="left"><font size="1">&nbsp;</font></td>
<td colspan="3" align="center"><b><font size="1" face="Arial, Helvetica, sans-serif">Nine months ended</font></b></td>
<td align="left"><font size="1">&nbsp;</font></td>
</tr>
<tr>
  <td align="left"><font size="1">&nbsp;</font></td>
  <td align="left"><font size="1">&nbsp;</font></td>
  <td align="center"><hr size="1" noshade></td>
  <td align="left"><hr size="1" noshade></td>
  <td align="center"><hr size="1" noshade></td>
  <td align="left"><hr size="1" noshade></td>
  <td align="center"><hr size="1" noshade></td>
  <td align="left"><hr size="1" noshade></td>
  <td align="center"><hr size="1" noshade></td>
  <td align="left"><hr size="1" noshade></td>
</tr>
<tr>
  <td align="left"><font size="1">&nbsp;</font></td>
<td align="left"><b><font size="1" face="Arial, Helvetica, sans-serif">&nbsp;</font></b></td>
<td align="center"><b><font size="1" face="Arial, Helvetica, sans-serif">Sept. 25,  <br>
  2004 </font></b></td>
<td align="left"><font size="1">&nbsp;</font></td>
<td align="center"><b><font size="1" face="Arial, Helvetica, sans-serif">Sept. 27, <br>
  2003 </font></b></td>
<td align="left"><font size="1">&nbsp;</font></td>
<td align="center"><b><font size="1" face="Arial, Helvetica, sans-serif">Sept. 25,  <br>
  2004  </font></b></td>
<td align="left"><font size="1">&nbsp;</font></td>
<td align="center"><b><font size="1" face="Arial, Helvetica, sans-serif">Sept. 27,<br>
  2003  </font></b></td>
<td align="left"><font size="1">&nbsp;</font></td> </tr>
<tr>
  <td align="left"><hr size="1" noshade></td>
  <td align="left"><hr size="1" noshade></td>
  <td align="right"><hr size="1" noshade></td>
  <td align="left"><hr size="1" noshade></td>
  <td align="right"><hr size="1" noshade></td>
  <td align="left"><hr size="1" noshade></td>
  <td align="right"><hr size="1" noshade></td>
  <td align="left"><hr size="1" noshade></td>
  <td align="right"><hr size="1" noshade></td>
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</tr>
<tr>
  <td colspan="2" align="left" valign="top" bgcolor="#eeeeee"><font size="2" face="Arial, Helvetica, sans-serif">Net revenues</font></td>
<td width="8%" align="right" valign="top" bgcolor="#eeeeee"><font size="2" face="Arial, Helvetica, sans-serif">2,231</font></td>
<td width="2%" align="left" valign="top" bgcolor="#eeeeee">&nbsp;</td>
<td width="8%" align="right" valign="top" bgcolor="#eeeeee"><font size="2" face="Arial, Helvetica, sans-serif">1,803</font></td>
<td width="2%" align="left" valign="top" bgcolor="#eeeeee">&nbsp;</td>
<td width="8%" align="right" valign="top" bgcolor="#eeeeee"><font size="2" face="Arial, Helvetica, sans-serif">6,432</font></td>
<td width="2%" align="left" valign="top" bgcolor="#eeeeee">&nbsp;</td>
<td width="8%" align="right" valign="top" bgcolor="#eeeeee"><font size="2" face="Arial, Helvetica, sans-serif">5,162</font></td>
<td width="2%" align="left" valign="top" bgcolor="#eeeeee">&nbsp;</td>
</tr>
<tr>
  <td colspan="2" align="left" valign="top"><font size="2" face="Arial, Helvetica, sans-serif">Gross profit</font></td>
<td align="right" valign="top"><font size="2" face="Arial, Helvetica, sans-serif">845</font></td>
<td align="left" valign="top">&nbsp;</td>
<td align="right" valign="top"><font size="2" face="Arial, Helvetica, sans-serif">632</font></td>
<td align="left" valign="top">&nbsp;</td>
<td align="right" valign="top"><font size="2" face="Arial, Helvetica, sans-serif">2,376</font></td>
<td align="left" valign="top">&nbsp;</td>
<td align="right" valign="top"><font size="2" face="Arial, Helvetica, sans-serif">1,822</font></td>
<td align="left" valign="top">&nbsp;</td>
</tr>
<tr>
  <td colspan="2" align="left" valign="top" bgcolor="#eeeeee"><font size="2" face="Arial, Helvetica, sans-serif">Operating expenses</font></td>
<td align="right" valign="top" bgcolor="#eeeeee"><font size="2" face="Arial, Helvetica, sans-serif">(632</font></td>
<td align="left" valign="top" bgcolor="#eeeeee"><font size="2" face="Arial, Helvetica, sans-serif">)</font></td>
<td align="right" valign="top" bgcolor="#eeeeee"><font size="2" face="Arial, Helvetica, sans-serif">(700</font></td>
<td align="left" valign="top" bgcolor="#eeeeee"><font size="2" face="Arial, Helvetica, sans-serif">)</font></td>
<td align="right" valign="top" bgcolor="#eeeeee"><font size="2" face="Arial, Helvetica, sans-serif">(1,903</font></td>
<td align="left" valign="top" bgcolor="#eeeeee"><font size="2" face="Arial, Helvetica, sans-serif">)</font></td>
<td align="right" valign="top" bgcolor="#eeeeee"><font size="2" face="Arial, Helvetica, sans-serif">(1,646</font></td>
<td align="left" valign="top" bgcolor="#eeeeee"><font size="2" face="Arial, Helvetica, sans-serif">)</font></td>
</tr>
<tr>
  <td colspan="2" align="left" valign="top"><font size="2" face="Arial, Helvetica, sans-serif">Operating income (loss)</font></td>
<td align="right" valign="top"><font size="2" face="Arial, Helvetica, sans-serif">213</font></td>
<td align="left" valign="top">&nbsp;</td>
<td align="right" valign="top"><font size="2" face="Arial, Helvetica, sans-serif">(68</font></td>
<td align="left" valign="top"><font size="2" face="Arial, Helvetica, sans-serif">)</font></td>
<td align="right" valign="top"><font size="2" face="Arial, Helvetica, sans-serif">473</font></td>
<td align="left" valign="top">&nbsp;</td>
<td align="right" valign="top"><font size="2" face="Arial, Helvetica, sans-serif">176</font></td>
<td align="left" valign="top">&nbsp;</td>
</tr>
<tr>
  <td colspan="2" align="left" valign="top" bgcolor="#eeeeee"><font size="2" face="Arial, Helvetica, sans-serif">Net income (loss)</font></td>
<td align="right" valign="top" bgcolor="#eeeeee"><font size="2" face="Arial, Helvetica, sans-serif">189</font></td>
<td align="left" valign="top" bgcolor="#eeeeee">&nbsp;</td>
<td align="right" valign="top" bgcolor="#eeeeee"><font size="2" face="Arial, Helvetica, sans-serif">(54</font></td>
<td align="left" valign="top" bgcolor="#eeeeee"><font size="2" face="Arial, Helvetica, sans-serif">)</font></td>
<td align="right" valign="top" bgcolor="#eeeeee"><font size="2" face="Arial, Helvetica, sans-serif">414</font></td>
<td align="left" valign="top" bgcolor="#eeeeee">&nbsp;</td>
<td align="right" valign="top" bgcolor="#eeeeee"><font size="2" face="Arial, Helvetica, sans-serif">110</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"><font size="2" face="Arial, Helvetica, sans-serif">Earnings (loss) per share (basic)</font></td>
<td align="right" valign="top"><font size="2" face="Arial, Helvetica, sans-serif">0.21</font></td>
<td align="left" valign="top">&nbsp;</td>
<td align="right" valign="top"><font size="2" face="Arial, Helvetica, sans-serif">(0.06</font></td>
<td align="left" valign="top"><font size="2" face="Arial, Helvetica, sans-serif">)</font></td>
<td align="right" valign="top"><font size="2" face="Arial, Helvetica, sans-serif">0.46</font></td>
<td align="left" valign="top">&nbsp;</td>
<td align="right" valign="top"><font size="2" face="Arial, Helvetica, sans-serif">0.12</font></td>
<td align="left" valign="top">&nbsp;</td>
</tr>
<tr>
  <td align="left" valign="top" bgcolor="#eeeeee">&nbsp;</td>
<td align="left" valign="top" bgcolor="#eeeeee"><font size="2" face="Arial, Helvetica, sans-serif">Earnings (loss) per share (diluted)</font></td>
<td align="right" valign="top" bgcolor="#eeeeee"><font size="2" face="Arial, Helvetica, sans-serif">0.20</font></td>
<td align="left" valign="top" bgcolor="#eeeeee">&nbsp;</td>
<td align="right" valign="top" bgcolor="#eeeeee"><font size="2" face="Arial, Helvetica, sans-serif">(0.06</font></td>
<td align="left" valign="top" bgcolor="#eeeeee"><font size="2" face="Arial, Helvetica, sans-serif">)</font></td>
<td align="right" valign="top" bgcolor="#eeeeee"><font size="2" face="Arial, Helvetica, sans-serif">0.45</font></td>
<td align="left" valign="top" bgcolor="#eeeeee">&nbsp;</td>
<td align="right" valign="top" bgcolor="#eeeeee"><font size="2" face="Arial, Helvetica, sans-serif">0.12</font></td>
<td align="left" valign="top" bgcolor="#eeeeee">&nbsp;</td>
</tr>
<tr>
  <td align="left"><hr size="1" noshade>
  </td>
  <td align="left"><hr size="1" noshade>
  </td>
  <td align="right"><hr size="1" noshade>
  </td>
  <td align="left"><hr size="1" noshade>
  </td>
  <td align="right"><hr size="1" noshade>
  </td>
  <td align="left"><hr size="1" noshade>
  </td>
  <td align="right"><hr size="1" noshade>
  </td>
  <td align="left"><hr size="1" noshade>
  </td>
  <td align="right"><hr size="1" noshade>
  </td>
  <td align="left"><hr size="1" noshade>
  </td>
</tr>
</table>
<p align="center"><font face="Arial, Helvetica, sans-serif" size="2">F-11</font></p>
<hr noshade align="center" width="100%" size="2">
<div style="page-break-before:always"></div>
<page>
<a name="pf6"></a>
<p><a href="#contents"><font size="2">Back to Contents</font></a></p>
<table width="100%" border="0" cellpadding="0" cellspacing="0">
<tr>
  <td colspan="2" align="left"><font size="1">&nbsp;</font><font size="2" face="Arial, Helvetica, sans-serif">As reported Consolidated Statements of Income</font></td>
<td colspan="7" align="center"><b><font size="1" face="Arial, Helvetica, sans-serif">(Unaudited)</font></b></td>
<td align="left"><font size="1">&nbsp;</font></td>
</tr>
<tr>
  <td width="3%" align="left"><font size="1">&nbsp;</font></td>
  <td align="left"><font size="1">&nbsp;</font></td>
  <td colspan="3" align="center"><hr size="1" noshade></td>
  <td align="left"><hr size="1" noshade></td>
  <td colspan="3" align="center"><hr size="1" noshade></td>
  <td align="left"><hr size="1" noshade></td>
</tr>
<tr>
  <td align="left"><font size="1">&nbsp;</font></td>
<td align="left"><b><font size="1" face="Arial, Helvetica, sans-serif">&nbsp;</font></b></td>
<td colspan="3" align="center"><b><font size="1" face="Arial, Helvetica, sans-serif">Three months ended</font></b></td>
<td align="left"><font size="1">&nbsp;</font></td>
<td colspan="3" align="center"><b><font size="1" face="Arial, Helvetica, sans-serif">Nine months ended</font></b></td>
<td align="left"><font size="1">&nbsp;</font></td>
</tr>
<tr>
  <td align="left"><font size="1">&nbsp;</font></td>
  <td align="left"><font size="1">&nbsp;</font></td>
  <td align="center"><hr size="1" noshade></td>
  <td align="left"><hr size="1" noshade></td>
  <td align="center"><hr size="1" noshade></td>
  <td align="left"><hr size="1" noshade></td>
  <td align="center"><hr size="1" noshade></td>
  <td align="left"><hr size="1" noshade></td>
  <td align="center"><hr size="1" noshade></td>
  <td align="left"><hr size="1" noshade></td>
</tr>
<tr>
  <td align="left"><font size="1">&nbsp;</font></td>
<td align="left"><b><font size="1" face="Arial, Helvetica, sans-serif">&nbsp;</font></b></td>
<td align="center"><b><font size="1" face="Arial, Helvetica, sans-serif">Sept. 25,<br>
  2004 </font></b></td>
<td align="left"><font size="1">&nbsp;</font></td>
<td align="center"><b><font size="1" face="Arial, Helvetica, sans-serif">Sept. 27, <br>
  2003 </font></b></td>
<td align="left"><font size="1">&nbsp;</font></td>
<td align="center"><b><font size="1" face="Arial, Helvetica, sans-serif">Sept. 25,<br>
  2004 </font></b></td>
<td align="left"><font size="1">&nbsp;</font></td>
<td align="center"><b><font size="1" face="Arial, Helvetica, sans-serif">Sept. 27, <br>
  2003 </font></b></td>
<td align="left"><font size="1">&nbsp;</font></td> </tr>
<tr>
  <td align="left"><hr size="1" noshade></td>
  <td align="left"><hr size="1" noshade></td>
  <td align="right"><hr size="1" noshade></td>
  <td align="left"><hr size="1" noshade></td>
  <td align="right"><hr size="1" noshade></td>
  <td align="left"><hr size="1" noshade></td>
  <td align="right"><hr size="1" noshade></td>
  <td align="left"><hr size="1" noshade></td>
  <td align="right"><hr size="1" noshade></td>
  <td align="left"><hr size="1" noshade></td>
</tr>
<tr>
  <td colspan="2" align="left" valign="top" bgcolor="#eeeeee"><font size="2" face="Arial, Helvetica, sans-serif">Net revenues</font></td>
<td width="8%" align="right" valign="top" bgcolor="#eeeeee"><font size="2" face="Arial, Helvetica, sans-serif">2,231</font></td>
<td width="2%" align="left" valign="top" bgcolor="#eeeeee">&nbsp;</td>
<td width="8%" align="right" valign="top" bgcolor="#eeeeee"><font size="2" face="Arial, Helvetica, sans-serif">1,803</font></td>
<td width="2%" align="left" valign="top" bgcolor="#eeeeee">&nbsp;</td>
<td width="8%" align="right" valign="top" bgcolor="#eeeeee"><font size="2" face="Arial, Helvetica, sans-serif">6,432</font></td>
<td width="2%" align="left" valign="top" bgcolor="#eeeeee">&nbsp;</td>
<td width="8%" align="right" valign="top" bgcolor="#eeeeee"><font size="2" face="Arial, Helvetica, sans-serif">5,124</font></td>
<td width="2%" align="left" valign="top" bgcolor="#eeeeee">&nbsp;</td>
</tr>
<tr>
  <td colspan="2" align="left" valign="top"><font size="2" face="Arial, Helvetica, sans-serif">Gross profit</font></td>
<td align="right" valign="top"><font size="2" face="Arial, Helvetica, sans-serif">845</font></td>
<td align="left" valign="top">&nbsp;</td>
<td align="right" valign="top"><font size="2" face="Arial, Helvetica, sans-serif">632</font></td>
<td align="left" valign="top">&nbsp;</td>
<td align="right" valign="top"><font size="2" face="Arial, Helvetica, sans-serif">2,376</font></td>
<td align="left" valign="top">&nbsp;</td>
<td align="right" valign="top"><font size="2" face="Arial, Helvetica, sans-serif">1,806</font></td>
<td align="left" valign="top">&nbsp;</td>
</tr>
<tr>
  <td colspan="2" align="left" valign="top" bgcolor="#eeeeee"><font size="2" face="Arial, Helvetica, sans-serif">Operating expenses</font></td>
<td align="right" valign="top" bgcolor="#eeeeee"><font size="2" face="Arial, Helvetica, sans-serif">(632</font></td>
<td align="left" valign="top" bgcolor="#eeeeee"><font size="2" face="Arial, Helvetica, sans-serif">)</font></td>
<td align="right" valign="top" bgcolor="#eeeeee"><font size="2" face="Arial, Helvetica, sans-serif">(696</font></td>
<td align="left" valign="top" bgcolor="#eeeeee"><font size="2" face="Arial, Helvetica, sans-serif">)</font></td>
<td align="right" valign="top" bgcolor="#eeeeee"><font size="2" face="Arial, Helvetica, sans-serif">(1,903</font></td>
<td align="left" valign="top" bgcolor="#eeeeee"><font size="2" face="Arial, Helvetica, sans-serif">)</font></td>
<td align="right" valign="top" bgcolor="#eeeeee"><font size="2" face="Arial, Helvetica, sans-serif">(1,625</font></td>
<td align="left" valign="top" bgcolor="#eeeeee"><font size="2" face="Arial, Helvetica, sans-serif">)</font></td>
</tr>
<tr>
  <td colspan="2" align="left" valign="top"><font size="2" face="Arial, Helvetica, sans-serif">Operating income (loss)</font></td>
<td align="right" valign="top"><font size="2" face="Arial, Helvetica, sans-serif">213</font></td>
<td align="left" valign="top">&nbsp;</td>
<td align="right" valign="top"><font size="2" face="Arial, Helvetica, sans-serif">(64</font></td>
<td align="left" valign="top"><font size="2" face="Arial, Helvetica, sans-serif">)</font></td>
<td align="right" valign="top"><font size="2" face="Arial, Helvetica, sans-serif">473</font></td>
<td align="left" valign="top">&nbsp;</td>
<td align="right" valign="top"><font size="2" face="Arial, Helvetica, sans-serif">181</font></td>
<td align="left" valign="top">&nbsp;</td>
</tr>
<tr>
  <td colspan="2" align="left" valign="top" bgcolor="#eeeeee"><font size="2" face="Arial, Helvetica, sans-serif">Net income (loss)</font></td>
<td align="right" valign="top" bgcolor="#eeeeee"><font size="2" face="Arial, Helvetica, sans-serif">189</font></td>
<td align="left" valign="top" bgcolor="#eeeeee">&nbsp;</td>
<td align="right" valign="top" bgcolor="#eeeeee"><font size="2" face="Arial, Helvetica, sans-serif">(50</font></td>
<td align="left" valign="top" bgcolor="#eeeeee"><font size="2" face="Arial, Helvetica, sans-serif">)</font></td>
<td align="right" valign="top" bgcolor="#eeeeee"><font size="2" face="Arial, Helvetica, sans-serif">414</font></td>
<td align="left" valign="top" bgcolor="#eeeeee">&nbsp;</td>
<td align="right" valign="top" bgcolor="#eeeeee"><font size="2" face="Arial, Helvetica, sans-serif">109</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"><font size="2" face="Arial, Helvetica, sans-serif">Earnings (loss) per share (basic)</font></td>
<td align="right" valign="top"><font size="2" face="Arial, Helvetica, sans-serif">0.21</font></td>
<td align="left" valign="top">&nbsp;</td>
<td align="right" valign="top"><font size="2" face="Arial, Helvetica, sans-serif">(0.06</font></td>
<td align="left" valign="top"><font size="2" face="Arial, Helvetica, sans-serif">)</font></td>
<td align="right" valign="top"><font size="2" face="Arial, Helvetica, sans-serif">0.46</font></td>
<td align="left" valign="top">&nbsp;</td>
<td align="right" valign="top"><font size="2" face="Arial, Helvetica, sans-serif">0.12</font></td>
<td align="left" valign="top">&nbsp;</td>
</tr>
<tr>
  <td align="left" valign="top" bgcolor="#eeeeee">&nbsp;</td>
<td align="left" valign="top" bgcolor="#eeeeee"><font size="2" face="Arial, Helvetica, sans-serif">Earnings (loss) per share (diluted)</font></td>
<td align="right" valign="top" bgcolor="#eeeeee"><font size="2" face="Arial, Helvetica, sans-serif">0.20</font></td>
<td align="left" valign="top" bgcolor="#eeeeee">&nbsp;</td>
<td align="right" valign="top" bgcolor="#eeeeee"><font size="2" face="Arial, Helvetica, sans-serif">(0.06</font></td>
<td align="left" valign="top" bgcolor="#eeeeee"><font size="2" face="Arial, Helvetica, sans-serif">)</font></td>
<td align="right" valign="top" bgcolor="#eeeeee"><font size="2" face="Arial, Helvetica, sans-serif">0.45</font></td>
<td align="left" valign="top" bgcolor="#eeeeee">&nbsp;</td>
<td align="right" valign="top" bgcolor="#eeeeee"><font size="2" face="Arial, Helvetica, sans-serif">0.12</font></td>
<td align="left" valign="top" bgcolor="#eeeeee">&nbsp;</td>
</tr>
<tr>
  <td align="left" valign="top"><hr size="1" noshade>
  </td>
  <td align="left" valign="top"><hr size="1" noshade>
  </td>
  <td align="right" valign="top"><hr size="1" noshade>
  </td>
  <td align="left" valign="top"><hr size="1" noshade>
  </td>
  <td align="right" valign="top"><hr size="1" noshade>
  </td>
  <td align="left" valign="top"><hr size="1" noshade>
  </td>
  <td align="right" valign="top"><hr size="1" noshade>
  </td>
  <td align="left" valign="top"><hr size="1" noshade>
  </td>
  <td align="right" valign="top"><hr size="1" noshade>
  </td>
  <td align="left" valign="top"><hr size="1" noshade>
  </td>
</tr>
</table>
<table width="100%" border="0" cellspacing="0" cellpadding="0">
  <tr>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
  </tr>
  <tr>
    <td width="3%"><font size="2" face="Arial, Helvetica, sans-serif"><b>7.&nbsp;</b></font></td>
    <td><font size="2" face="Arial, Helvetica, sans-serif"><b>Other Income and
    Expenses, Net</b></font></td>
  </tr>
</table>
<div style="text-indent:0%">
  <p><font size="2" face="Arial, Helvetica, sans-serif">Other income and expenses, net consisted of the following:</font></p>
</div>
<table width="100%" border="0" cellpadding="0" cellspacing="0">
<tr>
<td align="left"><font size="1" face="Arial, Helvetica, sans-serif">&nbsp;</font></td>
<td colspan="7" align="center"><font size="1" face="Arial, Helvetica, sans-serif"><b>(Unaudited)</b></font></td>
<td align="center"><font size="1">&nbsp;</font></td>
</tr>
<tr>
  <td align="left"><font size="1">&nbsp;</font></td>
  <td colspan="3" align="center"><hr size="1" noshade></td>
  <td align="center"><hr size="1" noshade></td>
  <td colspan="3" align="center"><hr size="1" noshade></td>
  <td align="right"><hr size="1" noshade></td>
</tr>
<tr>
<td align="left"><font size="1" face="Arial, Helvetica, sans-serif">&nbsp;</font></td>
<td colspan="3" align="center"><font size="1" face="Arial, Helvetica, sans-serif"><b>Three months ended</b></font></td>
<td align="center"><font size="1">&nbsp;</font></td>
<td colspan="3" align="center"><font size="1" face="Arial, Helvetica, sans-serif"><b>Nine months
    ended</b></font></td>
<td align="right"><font size="1">&nbsp;</font></td>
</tr>
<tr>
  <td align="left"><font size="1">&nbsp;</font></td>
  <td align="center"><hr size="1" noshade></td>
  <td align="left"><hr size="1" noshade></td>
  <td align="center"><hr size="1" noshade></td>
  <td align="left"><hr size="1" noshade></td>
  <td align="center"><hr size="1" noshade></td>
  <td align="left"><hr size="1" noshade></td>
  <td align="center"><hr size="1" noshade></td>
  <td align="left"><hr size="1" noshade></td>
</tr>
<tr>
<td align="left" valign="bottom"><font size="1" face="Arial, Helvetica, sans-serif"><b>In million of U.S dollars</b> </font></td>
<td align="center"><font size="1" face="Arial, Helvetica, sans-serif"><b>September
    25, <br>
    2004</b></font></td>
<td align="left"><font size="1">&nbsp;</font></td>
<td align="center"><font size="1" face="Arial, Helvetica, sans-serif"><b>September
    27, <br>
    2003</b></font></td>
<td align="left"><font size="1">&nbsp;</font></td>
<td align="center"><font size="1" face="Arial, Helvetica, sans-serif"><b>September
    25, <br>
    2004</b></font></td>
<td align="left"><font size="1">&nbsp;</font></td>
<td align="center"><font size="1" face="Arial, Helvetica, sans-serif"><b>September
    27, <br>
    2003</b></font></td>
<td align="left"><font size="1">&nbsp;</font></td>
</tr>
<tr>
<td align="left"><hr size="1" noshade></td>
<td align="center"><hr size="1" noshade>
</td>
<td align="center"><hr size="1" noshade></td>
<td align="center"><hr size="1" noshade></td>
<td align="center"><hr size="1" noshade></td>
<td align="center"><hr size="1" noshade>
</td>
<td align="center"><hr size="1" noshade></td>
<td align="center"><hr size="1" noshade></td>
<td align="left"><hr size="1" noshade></td>
</tr>
<tr>
<td align="left" valign="top" bgcolor="#eeeeee"><font size="2" face="Arial, Helvetica, sans-serif">Research and development funding</font></td>
<td width="8%" align="right" valign="top" bgcolor="#eeeeee"><font size="2" face="Arial, Helvetica, sans-serif"><b>9</b></font></td>
<td width="2%" align="left" valign="top" bgcolor="#eeeeee">&nbsp;</td>
<td width="8%" align="right" valign="top" bgcolor="#eeeeee"><font size="2" face="Arial, Helvetica, sans-serif">16</font></td>
<td width="2%" align="left" valign="top" bgcolor="#eeeeee">&nbsp;</td>
<td width="8%" align="right" valign="top" bgcolor="#eeeeee"><font size="2" face="Arial, Helvetica, sans-serif"><b>37</b></font></td>
<td width="2%" align="left" valign="top" bgcolor="#eeeeee">&nbsp;</td>
<td width="8%" align="right" valign="top" bgcolor="#eeeeee"><font size="2" face="Arial, Helvetica, sans-serif">50</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, Helvetica, sans-serif">Start-up costs</font></td>
<td align="right" valign="top"><font size="2" face="Arial, Helvetica, sans-serif"><b>(13</b></font></td>
<td align="left" valign="top"><font size="2" face="Arial, Helvetica, sans-serif"><b>)</b></font></td>
<td align="right" valign="top"><font size="2" face="Arial, Helvetica, sans-serif">(17</font></td>
<td align="left" valign="top"><font size="2" face="Arial, Helvetica, sans-serif">)</font></td>
<td align="right" valign="top"><font size="2" face="Arial, Helvetica, sans-serif"><b>(45</b></font></td>
<td align="left" valign="top"><font size="2" face="Arial, Helvetica, sans-serif"><b>)</b></font></td>
<td align="right" valign="top"><font size="2" face="Arial, Helvetica, sans-serif">(37</font></td>
<td align="left" valign="top"><font size="2" face="Arial, Helvetica, sans-serif">)</font></td>
</tr>
<tr>
<td align="left" valign="top" bgcolor="#eeeeee"><font size="2" face="Arial, Helvetica, sans-serif">Exchange gain, net</font></td>
<td align="right" valign="top" bgcolor="#eeeeee"><font size="2" face="Arial, Helvetica, sans-serif"><b>10</b></font></td>
<td align="left" valign="top" bgcolor="#eeeeee">&nbsp;</td>
<td align="right" valign="top" bgcolor="#eeeeee"><font size="2" face="Arial, Helvetica, sans-serif">(3</font></td>
<td align="left" valign="top" bgcolor="#eeeeee"><font size="2" face="Arial, Helvetica, sans-serif">)</font></td>
<td align="right" valign="top" bgcolor="#eeeeee"><font size="2" face="Arial, Helvetica, sans-serif"><b>19</b></font></td>
<td align="left" valign="top" bgcolor="#eeeeee">&nbsp;</td>
<td align="right" valign="top" bgcolor="#eeeeee"><font size="2" face="Arial, Helvetica, sans-serif">9</font></td>
<td align="left" valign="top" bgcolor="#eeeeee">&nbsp;</td>
</tr>
<tr>
<td align="left" valign="top"><font size="2" face="Arial, Helvetica, sans-serif">Patent claim costs</font></td>
<td align="right" valign="top"><font size="2" face="Arial, Helvetica, sans-serif"><b>(7</b></font></td>
<td align="left" valign="top"><font size="2" face="Arial, Helvetica, sans-serif"><b>)</b></font></td>
<td align="right" valign="top"><font size="2" face="Arial, Helvetica, sans-serif">(4</font></td>
<td align="left" valign="top"><font size="2" face="Arial, Helvetica, sans-serif">)</font></td>
<td align="right" valign="top"><font size="2" face="Arial, Helvetica, sans-serif"><b>(21</b></font></td>
<td align="left" valign="top"><font size="2" face="Arial, Helvetica, sans-serif"><b>)</b></font></td>
<td align="right" valign="top"><font size="2" face="Arial, Helvetica, sans-serif">(9</font></td>
<td align="left" valign="top"><font size="2" face="Arial, Helvetica, sans-serif">)</font></td>
</tr>
<tr>
<td align="left" valign="top" bgcolor="#eeeeee"><font size="2" face="Arial, Helvetica, sans-serif">Gain on sale of non-current assets</font></td>
<td align="right" valign="top" bgcolor="#eeeeee"><font size="2" face="Arial, Helvetica, sans-serif"><b>&#151;</b></font></td>
<td align="left" valign="top" bgcolor="#eeeeee">&nbsp;</td>
<td align="right" valign="top" bgcolor="#eeeeee"><font size="2" face="Arial, Helvetica, sans-serif">&#151;</font></td>
<td align="left" valign="top" bgcolor="#eeeeee">&nbsp;</td>
<td align="right" valign="top" bgcolor="#eeeeee"><font size="2" face="Arial, Helvetica, sans-serif"><b>6</b></font></td>
<td align="left" valign="top" bgcolor="#eeeeee">&nbsp;</td>
<td align="right" valign="top" bgcolor="#eeeeee"><font size="2" face="Arial, Helvetica, sans-serif">&#151;</font></td>
<td align="left" valign="top" bgcolor="#eeeeee">&nbsp;</td>
</tr>
<tr>
<td align="left" valign="top"><font size="2" face="Arial, Helvetica, sans-serif">Other non-recurring, net</font></td>
<td align="right" valign="top"><font size="2" face="Arial, Helvetica, sans-serif"><b>(2</b></font></td>
<td align="left" valign="top"><font size="2" face="Arial, Helvetica, sans-serif"><b>)</b></font></td>
<td align="right" valign="top"><font size="2" face="Arial, Helvetica, sans-serif">(2</font></td>
<td align="left" valign="top"><font size="2" face="Arial, Helvetica, sans-serif">)</font></td>
<td align="right" valign="top"><font size="2" face="Arial, Helvetica, sans-serif"><b>(9</b></font></td>
<td align="left" valign="top"><font size="2" face="Arial, Helvetica, sans-serif"><b>)</b></font></td>
<td align="right" valign="top"><font size="2" face="Arial, Helvetica, sans-serif">(5</font></td>
<td align="left" valign="top"><font size="2" face="Arial, Helvetica, sans-serif">)</font></td>
</tr>
<tr>
<td align="left" valign="top"><hr size="1" noshade></td>
<td align="left" valign="top"><hr size="1" noshade></td>
<td align="left" valign="top"><hr size="1" noshade></td>
<td align="left" valign="top"><hr size="1" noshade></td>
<td align="left" valign="top"><hr size="1" noshade></td>
<td align="left" valign="top"><hr size="1" noshade></td>
<td align="left" valign="top"><hr size="1" noshade></td>
<td align="left" valign="top"><hr size="1" noshade></td>
<td align="left" valign="top"><hr size="1" noshade></td>
</tr>
<tr>
<td align="left" valign="top" bgcolor="#eeeeee"><font size="2" face="Arial, Helvetica, sans-serif"><b>Total</b></font></td>
<td align="right" valign="top" bgcolor="#eeeeee"><font size="2" face="Arial, Helvetica, sans-serif"><b>(3</b></font></td>
<td align="left" valign="top" bgcolor="#eeeeee"><font size="2" face="Arial, Helvetica, sans-serif"><b>)</b></font></td>
<td align="right" valign="top" bgcolor="#eeeeee"><font size="2" face="Arial, Helvetica, sans-serif">(10</font></td>
<td align="left" valign="top" bgcolor="#eeeeee"><font size="2" face="Arial, Helvetica, sans-serif">)</font></td>
<td align="right" valign="top" bgcolor="#eeeeee"><font size="2" face="Arial, Helvetica, sans-serif"><b>(13</b></font></td>
<td align="left" valign="top" bgcolor="#eeeeee"><font size="2" face="Arial, Helvetica, sans-serif"><b>)</b></font></td>
<td align="right" valign="top" bgcolor="#eeeeee"><font size="2" face="Arial, Helvetica, sans-serif">8</font></td>
<td align="left" valign="top" bgcolor="#eeeeee">&nbsp;</td>
</tr>
<tr>
  <td align="left" valign="top"><hr size="1" noshade></td>
  <td align="right" valign="top"><hr size="1" noshade></td>
  <td align="left" valign="top"><hr size="1" noshade></td>
  <td align="right" valign="top"><hr size="1" noshade></td>
  <td align="left" valign="top"><hr size="1" noshade></td>
  <td align="right" valign="top"><hr size="1" noshade></td>
  <td align="left" valign="top"><hr size="1" noshade></td>
  <td align="right" valign="top"><hr size="1" noshade></td>
  <td align="left" valign="top"><hr size="1" noshade></td>
</tr>
</table>
<table width="100%" border="0" cellspacing="0" cellpadding="0">
  <tr>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
  </tr>
  <tr>
    <td width="3%"><font size="2" face="Arial, Helvetica, sans-serif"><b>8.</b></font></td>
    <td><font size="2" face="Arial, Helvetica, sans-serif"><b>Impairment, Restructuring
    Charges and Other Related Closure Costs</b></font></td>
  </tr>
  <tr>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
  </tr>
</table>
<div style="text-indent:0%"><font size="2" face="Arial, Helvetica, sans-serif">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></div>
<p align="center"><font face="Arial, Helvetica, sans-serif" size="2">F-12</font></p>
<hr noshade align="center" width="100%" size="2">
<div style="page-break-before:always"></div>
<page>
<a name="pf7"></a>
<p><a href="#contents"><font size="2">Back to Contents</font></a></p>
<div style="text-indent:0%">
<p align="left"><font size="2" face="Arial, Helvetica, sans-serif">Excluding impairment charges, the provisions for restructuring charges and other related closure costs in 2004 are summarized as follows:</font></p></div>
<table width="100%" border="0" cellpadding="0" cellspacing="0">
  <tr>
    <td><b><font size="1" face="Arial, Helvetica, sans-serif">&nbsp;</font></b></td>
    <td><b><font size="1" face="Arial, Helvetica, sans-serif">&nbsp;</font></b></td>
    <td colspan="5" align="center" valign="bottom"><h2><b><font size="1" face="Arial, Helvetica, sans-serif">150mm
      fab operations
    </font></b></h2></td>
    <td align="center" valign="bottom"><b><font size="1" face="Arial, Helvetica, sans-serif">&nbsp;</font></b></td>
    <td align="center" valign="bottom"><b><font size="1" face="Arial, Helvetica, sans-serif">Back-end
    operations</font></b></td>
    <td align="center" valign="bottom"><b><font size="1" face="Arial, Helvetica, sans-serif">&nbsp;</font></b></td>
    <td align="center" valign="bottom"><b><font size="1" face="Arial, Helvetica, sans-serif">Other</font></b></td>
    <td align="center" valign="bottom"><b><font size="1" face="Arial, Helvetica, sans-serif">&nbsp;</font></b></td>
    <td align="center" valign="bottom"><b><font size="1" face="Arial, Helvetica, sans-serif">Total restructuring
        &amp; other related closure costs</font></b></td>
    <td><b><font size="1" face="Arial, Helvetica, sans-serif">&nbsp;</font></b></td>
  </tr>
  <tr>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td><hr size="1" noshade></td>
    <td><hr size="1" noshade></td>
    <td><hr size="1" noshade></td>
    <td><hr size="1" noshade></td>
    <td><hr size="1" noshade></td>
    <td>&nbsp;</td>
    <td><hr size="1" noshade></td>
    <td>&nbsp;</td>
    <td><hr size="1" noshade></td>
    <td>&nbsp;</td>
    <td><hr size="1" noshade></td>
    <td><b><font size="1" face="Arial, Helvetica, sans-serif">&nbsp;</font></b></td>
  </tr>
  <tr>
    <td><b><font size="1" face="Arial, Helvetica, sans-serif">&nbsp;</font></b></td>
    <td><b><font size="1" face="Arial, Helvetica, sans-serif">&nbsp;</font></b></td>
    <td align="center" valign="bottom"><b><font size="1" face="Arial, Helvetica, sans-serif">Restructuring</font></b></td>
    <td align="center" valign="bottom"><b><font size="1" face="Arial, Helvetica, sans-serif">&nbsp;</font></b></td>
    <td align="center" valign="bottom"><b><font size="1" face="Arial, Helvetica, sans-serif">Other related closure
    costs</font></b></td>
    <td align="center" valign="bottom"><b><font size="1" face="Arial, Helvetica, sans-serif">&nbsp;</font></b></td>
    <td align="center" valign="bottom"><b><font size="1" face="Arial, Helvetica, sans-serif">Total </font></b></td>
    <td><b><font size="1" face="Arial, Helvetica, sans-serif">&nbsp;</font></b></td>
    <td><b><font size="1" face="Arial, Helvetica, sans-serif">&nbsp;</font></b></td>
    <td><b><font size="1" face="Arial, Helvetica, sans-serif">&nbsp;</font></b></td>
    <td><b><font size="1" face="Arial, Helvetica, sans-serif">&nbsp;</font></b></td>
    <td><b><font size="1" face="Arial, Helvetica, sans-serif">&nbsp;</font></b></td>
    <td><b><font size="1" face="Arial, Helvetica, sans-serif">&nbsp;</font></b></td>
    <td><b><font size="1" face="Arial, Helvetica, sans-serif">&nbsp;</font></b></td>
  </tr>
  <tr>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td><hr size="1" noshade></td>
    <td>&nbsp;</td>
    <td><hr size="1" noshade></td>
    <td>&nbsp;</td>
    <td><hr size="1" noshade></td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td><b><font size="1" face="Arial, Helvetica, sans-serif">&nbsp;</font></b></td>
  </tr>
  <tr bgcolor="#eeeeee">
    <td><b><font size="2" face="Arial, Helvetica, sans-serif">Provision as at December
    31, 2003</font></b></td>
    <td width="2%"><font size="2" face="Arial, Helvetica, sans-serif">&nbsp;</font></td>
    <td width="8%" align="right"><b><font size="2" face="Arial, Helvetica, sans-serif">32</font></b></td>
    <td width="2%"><b><font size="2" face="Arial, Helvetica, sans-serif">&nbsp;</font></b></td>
    <td width="8%" align="right"><b><font size="2" face="Arial, Helvetica, sans-serif">1</font></b></td>
    <td width="2%"><b><font size="2" face="Arial, Helvetica, sans-serif">&nbsp;</font></b></td>
    <td width="8%" align="right"><b><font size="2" face="Arial, Helvetica, sans-serif">33</font></b></td>
    <td width="2%">&nbsp;</td>
    <td width="8%" align="right"><b><font size="2" face="Arial, Helvetica, sans-serif">&#8212;</font></b></td>
    <td width="2%"><b><font size="2" face="Arial, Helvetica, sans-serif">&nbsp;</font></b></td>
    <td width="8%" align="right"><b><font size="2" face="Arial, Helvetica, sans-serif">3</font></b></td>
    <td width="2%"><b><font size="2" face="Arial, Helvetica, sans-serif">&nbsp;</font></b></td>
    <td width="11%" align="right"><b><font size="2" face="Arial, Helvetica, sans-serif">36</font></b></td>
    <td width="2%"><font size="2" face="Arial, Helvetica, sans-serif">&nbsp;</font></td>
  </tr>
  <tr>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td align="right"><hr size="1" noshade></td>
    <td>&nbsp;</td>
    <td align="right"><hr size="1" noshade></td>
    <td>&nbsp;</td>
    <td align="right"><hr size="1" noshade></td>
    <td>&nbsp;</td>
    <td align="right"><hr size="1" noshade></td>
    <td>&nbsp;</td>
    <td align="right"><hr size="1" noshade></td>
    <td>&nbsp;</td>
    <td align="right"><hr size="1" noshade></td>
    <td>&nbsp;</td>
  </tr>
  <tr bgcolor="#eeeeee">
    <td><font size="2" face="Arial, Helvetica, sans-serif">Charges incurred in
        Q1 2004</font></td>
    <td>&nbsp;</td>
    <td align="right"><font size="2" face="Arial, Helvetica, sans-serif">25</font></td>
    <td><b><font size="2" face="Arial, Helvetica, sans-serif">&nbsp;</font></b></td>
    <td align="right"><font size="2" face="Arial, Helvetica, sans-serif">6</font></td>
    <td><font size="2" face="Arial, Helvetica, sans-serif">&nbsp;</font></td>
    <td align="right"><font size="2" face="Arial, Helvetica, sans-serif">31</font></td>
    <td><b><font size="2" face="Arial, Helvetica, sans-serif">&nbsp;</font></b></td>
    <td align="right"><font size="2" face="Arial, Helvetica, sans-serif">1</font></td>
    <td><font size="2" face="Arial, Helvetica, sans-serif">&nbsp;</font></td>
    <td align="right"><font size="2" face="Arial, Helvetica, sans-serif">1</font></td>
    <td><font size="2" face="Arial, Helvetica, sans-serif">&nbsp;</font></td>
    <td align="right"><font size="2" face="Arial, Helvetica, sans-serif">33</font></td>
    <td><font size="2" face="Arial, Helvetica, sans-serif">&nbsp;</font></td>
  </tr>
  <tr>
    <td><font size="2" face="Arial, Helvetica, sans-serif">Amounts paid</font></td>
    <td><font size="2" face="Arial, Helvetica, sans-serif">&nbsp;</font></td>
    <td align="right"><font size="2" face="Arial, Helvetica, sans-serif">(1</font></td>
    <td><font size="2" face="Arial, Helvetica, sans-serif">)</font></td>
    <td align="right"><font size="2" face="Arial, Helvetica, sans-serif">(7</font></td>
    <td><font size="2" face="Arial, Helvetica, sans-serif">)</font></td>
    <td align="right"><font size="2" face="Arial, Helvetica, sans-serif">(8</font></td>
    <td><font size="2" face="Arial, Helvetica, sans-serif">)</font></td>
    <td align="right"><font size="2" face="Arial, Helvetica, sans-serif">(1</font></td>
    <td><font size="2" face="Arial, Helvetica, sans-serif">)</font></td>
    <td align="right"><font size="2" face="Arial, Helvetica, sans-serif">(1</font></td>
    <td><font size="2" face="Arial, Helvetica, sans-serif">)</font></td>
    <td align="right"><font size="2" face="Arial, Helvetica, sans-serif">(10</font></td>
    <td><font size="2" face="Arial, Helvetica, sans-serif">)</font></td>
  </tr>
  <tr>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td align="right"><hr size="1" noshade></td>
    <td>&nbsp;</td>
    <td align="right"><hr size="1" noshade></td>
    <td>&nbsp;</td>
    <td align="right"><hr size="1" noshade></td>
    <td>&nbsp;</td>
    <td align="right"><hr size="1" noshade></td>
    <td>&nbsp;</td>
    <td align="right"><hr size="1" noshade></td>
    <td>&nbsp;</td>
    <td align="right"><hr size="1" noshade></td>
    <td><font size="2" face="Arial, Helvetica, sans-serif">&nbsp;</font></td>
  </tr>
  <tr bgcolor="#eeeeee">
    <td><b><font size="2" face="Arial, Helvetica, sans-serif">Provision as at March
    27, 2004</font></b></td>
    <td><font size="2" face="Arial, Helvetica, sans-serif">&nbsp;</font></td>
    <td align="right"><b><font size="2" face="Arial, Helvetica, sans-serif">56</font></b></td>
    <td><b><font size="2" face="Arial, Helvetica, sans-serif">&nbsp;</font></b></td>
    <td align="right"><b><font size="2" face="Arial, Helvetica, sans-serif">0</font></b></td>
    <td><b><font size="2" face="Arial, Helvetica, sans-serif">&nbsp;</font></b></td>
    <td align="right"><b><font size="2" face="Arial, Helvetica, sans-serif">56</font></b></td>
    <td><b><font size="2" face="Arial, Helvetica, sans-serif">&nbsp;</font></b></td>
    <td align="right"><b><font size="2" face="Arial, Helvetica, sans-serif">0</font></b></td>
    <td><b><font size="2" face="Arial, Helvetica, sans-serif">&nbsp;</font></b></td>
    <td align="right"><b><font size="2" face="Arial, Helvetica, sans-serif">3</font></b></td>
    <td><b><font size="2" face="Arial, Helvetica, sans-serif">&nbsp;</font></b></td>
    <td align="right"><b><font size="2" face="Arial, Helvetica, sans-serif">59</font></b></td>
    <td><b><font size="2" face="Arial, Helvetica, sans-serif">&nbsp;</font></b></td>
  </tr>
  <tr>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td align="right"><hr size="1" noshade>      <font size="2" face="Arial, Helvetica, sans-serif">&nbsp;</font></td>
    <td>&nbsp;</td>
    <td align="right"><hr size="1" noshade>      <font size="2" face="Arial, Helvetica, sans-serif">&nbsp;</font></td>
    <td>&nbsp;</td>
    <td align="right"><hr size="1" noshade>      <font size="2" face="Arial, Helvetica, sans-serif">&nbsp;</font></td>
    <td>&nbsp;</td>
    <td align="right"><hr size="1" noshade>      <font size="2" face="Arial, Helvetica, sans-serif">&nbsp;</font></td>
    <td>&nbsp;</td>
    <td align="right"><hr size="1" noshade>      <font size="2" face="Arial, Helvetica, sans-serif">&nbsp;</font></td>
    <td>&nbsp;</td>
    <td align="right"><hr size="1" noshade>      <font size="2" face="Arial, Helvetica, sans-serif">&nbsp;</font></td>
    <td><font size="2" face="Arial, Helvetica, sans-serif">&nbsp;</font></td>
  </tr>
  <tr bgcolor="#eeeeee">
    <td><font size="2" face="Arial, Helvetica, sans-serif">Charges incurred in
        Q2 2004</font></td>
    <td><font size="2" face="Arial, Helvetica, sans-serif">&nbsp;</font></td>
    <td align="right"><font size="2" face="Arial, Helvetica, sans-serif">0</font></td>
    <td><font size="2" face="Arial, Helvetica, sans-serif">&nbsp;</font></td>
    <td align="right"><font size="2" face="Arial, Helvetica, sans-serif">9</font></td>
    <td><font size="2" face="Arial, Helvetica, sans-serif">&nbsp;</font></td>
    <td align="right"><font size="2" face="Arial, Helvetica, sans-serif">9</font></td>
    <td><font size="2" face="Arial, Helvetica, sans-serif">&nbsp;</font></td>
    <td align="right"><font size="2" face="Arial, Helvetica, sans-serif">1</font></td>
    <td><font size="2" face="Arial, Helvetica, sans-serif">&nbsp;</font></td>
    <td align="right"><font size="2" face="Arial, Helvetica, sans-serif">1</font></td>
    <td><font size="2" face="Arial, Helvetica, sans-serif">&nbsp;</font></td>
    <td align="right"><font size="2" face="Arial, Helvetica, sans-serif">11</font></td>
    <td><b><font size="2" face="Arial, Helvetica, sans-serif">&nbsp;</font></b></td>
  </tr>
  <tr>
    <td><font size="2" face="Arial, Helvetica, sans-serif">Amounts paid</font></td>
    <td><font size="2" face="Arial, Helvetica, sans-serif">&nbsp;</font></td>
    <td align="right"><font size="2" face="Arial, Helvetica, sans-serif">(5</font></td>
    <td><font size="2" face="Arial, Helvetica, sans-serif">)</font></td>
    <td align="right"><font size="2" face="Arial, Helvetica, sans-serif">(8</font></td>
    <td><font size="2" face="Arial, Helvetica, sans-serif">)</font></td>
    <td align="right"><font size="2" face="Arial, Helvetica, sans-serif">(13</font></td>
    <td><font size="2" face="Arial, Helvetica, sans-serif">)</font></td>
    <td align="right"><font size="2" face="Arial, Helvetica, sans-serif">(1</font></td>
    <td><font size="2" face="Arial, Helvetica, sans-serif">)</font></td>
    <td align="right"><font size="2" face="Arial, Helvetica, sans-serif">(1</font></td>
    <td><font size="2" face="Arial, Helvetica, sans-serif">)</font></td>
    <td align="right"><font size="2" face="Arial, Helvetica, sans-serif">(15</font></td>
    <td><font size="2" face="Arial, Helvetica, sans-serif">)</font></td>
  </tr>
  <tr>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td align="right"><hr size="1" noshade>      <font size="2" face="Arial, Helvetica, sans-serif">&nbsp;</font></td>
    <td>&nbsp;</td>
    <td align="right"><hr size="1" noshade>      <font size="2" face="Arial, Helvetica, sans-serif">&nbsp;</font></td>
    <td>&nbsp;</td>
    <td align="right"><hr size="1" noshade>      <font size="2" face="Arial, Helvetica, sans-serif">&nbsp;</font></td>
    <td>&nbsp;</td>
    <td align="right"><hr size="1" noshade>      <font size="2" face="Arial, Helvetica, sans-serif">&nbsp;</font></td>
    <td>&nbsp;</td>
    <td align="right"><hr size="1" noshade>      <font size="2" face="Arial, Helvetica, sans-serif">&nbsp;</font></td>
    <td>&nbsp;</td>
    <td align="right"><hr size="1" noshade>      <font size="2" face="Arial, Helvetica, sans-serif">&nbsp;</font></td>
    <td>&nbsp;</td>
  </tr>
  <tr bgcolor="#eeeeee">
    <td><b><font size="2" face="Arial, Helvetica, sans-serif">Provision as at June
        26, 2004</font></b></td>
    <td><font size="2" face="Arial, Helvetica, sans-serif">&nbsp;</font></td>
    <td align="right"><b><font size="2" face="Arial, Helvetica, sans-serif">51</font></b></td>
    <td><b><font size="2" face="Arial, Helvetica, sans-serif">&nbsp;</font></b></td>
    <td align="right"><b><font size="2" face="Arial, Helvetica, sans-serif">1</font></b></td>
    <td><b><font size="2" face="Arial, Helvetica, sans-serif">&nbsp;</font></b></td>
    <td align="right"><b><font size="2" face="Arial, Helvetica, sans-serif">52</font></b></td>
    <td><b><font size="2" face="Arial, Helvetica, sans-serif">&nbsp;</font></b></td>
    <td align="right"><b><font size="2" face="Arial, Helvetica, sans-serif">0</font></b></td>
    <td><b><font size="2" face="Arial, Helvetica, sans-serif">&nbsp;</font></b></td>
    <td align="right"><b><font size="2" face="Arial, Helvetica, sans-serif">3</font></b></td>
    <td><b><font size="2" face="Arial, Helvetica, sans-serif">&nbsp;</font></b></td>
    <td align="right"><b><font size="2" face="Arial, Helvetica, sans-serif">55</font></b></td>
    <td><b><font size="2" face="Arial, Helvetica, sans-serif">&nbsp;</font></b></td>
  </tr>
  <tr>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td align="right"><hr size="1" noshade>      <font size="2" face="Arial, Helvetica, sans-serif">&nbsp;</font></td>
    <td>&nbsp;</td>
    <td align="right"><hr size="1" noshade>      <font size="2" face="Arial, Helvetica, sans-serif">&nbsp;</font></td>
    <td>&nbsp;</td>
    <td align="right"><hr size="1" noshade>      <font size="2" face="Arial, Helvetica, sans-serif">&nbsp;</font></td>
    <td>&nbsp;</td>
    <td align="right"><hr size="1" noshade>      <font size="2" face="Arial, Helvetica, sans-serif">&nbsp;</font></td>
    <td>&nbsp;</td>
    <td align="right"><hr size="1" noshade>      <font size="2" face="Arial, Helvetica, sans-serif">&nbsp;</font></td>
    <td>&nbsp;</td>
    <td align="right"><hr size="1" noshade>      <font size="2" face="Arial, Helvetica, sans-serif">&nbsp;</font></td>
    <td><font size="2" face="Arial, Helvetica, sans-serif">&nbsp;</font></td>
  </tr>
  <tr bgcolor="#eeeeee">
    <td><font size="2" face="Arial, Helvetica, sans-serif">Charges incurred in
        Q3 2004</font></td>
    <td><font size="2" face="Arial, Helvetica, sans-serif">&nbsp;</font></td>
    <td align="right"><font size="2" face="Arial, Helvetica, sans-serif">1</font></td>
    <td><font size="2" face="Arial, Helvetica, sans-serif">&nbsp;</font></td>
    <td align="right"><font size="2" face="Arial, Helvetica, sans-serif">8</font></td>
    <td><font size="2" face="Arial, Helvetica, sans-serif">&nbsp;</font></td>
    <td align="right"><font size="2" face="Arial, Helvetica, sans-serif">9</font></td>
    <td><font size="2" face="Arial, Helvetica, sans-serif">&nbsp;</font></td>
    <td align="right"><font size="2" face="Arial, Helvetica, sans-serif">1</font></td>
    <td><font size="2" face="Arial, Helvetica, sans-serif">&nbsp;</font></td>
    <td align="right"><font size="2" face="Arial, Helvetica, sans-serif">&#8212;</font></td>
    <td><font size="2" face="Arial, Helvetica, sans-serif">&nbsp;</font></td>
    <td align="right"><font size="2" face="Arial, Helvetica, sans-serif">10</font></td>
    <td><font size="2" face="Arial, Helvetica, sans-serif">&nbsp;</font></td>
  </tr>
  <tr>
    <td><font size="2" face="Arial, Helvetica, sans-serif">Amounts paid</font></td>
    <td><font size="2" face="Arial, Helvetica, sans-serif">&nbsp;</font></td>
    <td align="right"><font size="2" face="Arial, Helvetica, sans-serif">(9</font></td>
    <td><font size="2" face="Arial, Helvetica, sans-serif">)</font></td>
    <td align="right"><font size="2" face="Arial, Helvetica, sans-serif">(9</font></td>
    <td><font size="2" face="Arial, Helvetica, sans-serif">)</font></td>
    <td align="right"><font size="2" face="Arial, Helvetica, sans-serif">(18</font></td>
    <td><font size="2" face="Arial, Helvetica, sans-serif">)</font></td>
    <td align="right"><font size="2" face="Arial, Helvetica, sans-serif">(1</font></td>
    <td><font size="2" face="Arial, Helvetica, sans-serif">)</font></td>
    <td align="right"><font size="2" face="Arial, Helvetica, sans-serif">(2</font></td>
    <td><font size="2" face="Arial, Helvetica, sans-serif">)</font></td>
    <td align="right"><font size="2" face="Arial, Helvetica, sans-serif">(21</font></td>
    <td><font size="2" face="Arial, Helvetica, sans-serif">)</font></td>
  </tr>
  <tr>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td align="right"><hr size="1" noshade>      <font size="2" face="Arial, Helvetica, sans-serif">&nbsp;</font></td>
    <td>&nbsp;</td>
    <td align="right"><hr size="1" noshade>      <font size="2" face="Arial, Helvetica, sans-serif">&nbsp;</font></td>
    <td>&nbsp;</td>
    <td align="right"><hr size="1" noshade>      <font size="2" face="Arial, Helvetica, sans-serif">&nbsp;</font></td>
    <td>&nbsp;</td>
    <td align="right"><hr size="1" noshade>      <font size="2" face="Arial, Helvetica, sans-serif">&nbsp;</font></td>
    <td>&nbsp;</td>
    <td align="right"><hr size="1" noshade>      <font size="2" face="Arial, Helvetica, sans-serif">&nbsp;</font></td>
    <td>&nbsp;</td>
    <td align="right"><hr size="1" noshade>      <font size="2" face="Arial, Helvetica, sans-serif">&nbsp;</font></td>
    <td><font size="2" face="Arial, Helvetica, sans-serif">&nbsp;</font></td>
  </tr>
  <tr bgcolor="#eeeeee">
    <td><b><font size="2" face="Arial, Helvetica, sans-serif">Provision as at September
        25, 2004</font></b></td>
    <td><font size="2" face="Arial, Helvetica, sans-serif">&nbsp;</font></td>
    <td align="right"><b><font size="2" face="Arial, Helvetica, sans-serif">43</font></b></td>
    <td><b><font size="2" face="Arial, Helvetica, sans-serif">&nbsp;</font></b></td>
    <td align="right"><b><font size="2" face="Arial, Helvetica, sans-serif">0</font></b></td>
    <td><b><font size="2" face="Arial, Helvetica, sans-serif">&nbsp;</font></b></td>
    <td align="right"><b><font size="2" face="Arial, Helvetica, sans-serif">43</font></b></td>
    <td><b><font size="2" face="Arial, Helvetica, sans-serif">&nbsp;</font></b></td>
    <td align="right"><b><font size="2" face="Arial, Helvetica, sans-serif">0</font></b></td>
    <td><b><font size="2" face="Arial, Helvetica, sans-serif">&nbsp;</font></b></td>
    <td align="right"><b><font size="2" face="Arial, Helvetica, sans-serif">1</font></b></td>
    <td><b><font size="2" face="Arial, Helvetica, sans-serif">&nbsp;</font></b></td>
    <td align="right"><b><font size="2" face="Arial, Helvetica, sans-serif">44</font></b></td>
    <td><b><font size="2" face="Arial, Helvetica, sans-serif">&nbsp;</font></b></td>
  </tr>
  <tr>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td align="right"><hr size="1" noshade>      <font size="2" face="Arial, Helvetica, sans-serif">&nbsp;</font></td>
    <td>&nbsp;</td>
    <td align="right"><hr size="1" noshade>      <font size="2" face="Arial, Helvetica, sans-serif">&nbsp;</font></td>
    <td>&nbsp;</td>
    <td align="right"><hr size="1" noshade>      <font size="2" face="Arial, Helvetica, sans-serif">&nbsp;</font></td>
    <td>&nbsp;</td>
    <td align="right"><hr size="1" noshade>      <font size="2" face="Arial, Helvetica, sans-serif">&nbsp;</font></td>
    <td>&nbsp;</td>
    <td align="right"><hr size="1" noshade>      <font size="2" face="Arial, Helvetica, sans-serif">&nbsp;</font></td>
    <td>&nbsp;</td>
    <td align="right"><hr size="1" noshade>      <font size="2" face="Arial, Helvetica, sans-serif">&nbsp;</font></td>
    <td><font size="2" face="Arial, Helvetica, sans-serif">&nbsp;</font></td>
  </tr>
</table>
<p align="left"><font size="2" face="Arial, Helvetica, sans-serif">150mm fab operations</font></p>
<div style="text-indent:0%"><p align="left"><font size="2" face="Arial, Helvetica, sans-serif">The 150mm restructuring plan focuses on cost reduction by migrating a large part of European and U.S. 150mm production to Singapore and by upgrading production to a finer geometry 200mm wafer 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></div>
<div style="text-indent:0%"><p align="left"><font size="2" face="Arial, Helvetica, sans-serif">During the first nine months of 2004, the Company recorded total restructuring charges of $49 million for its 150mm fab operations, of which $31 million in the first quarter, $9 million in the second quarter and $9 million in the third quarter. Total 2004 restructuring charges primarily related to $26 million in estimated one-time involuntary termination benefits and $23 million of other charges associated with the closure and transfers of production. Total 2004 restructuring charges were related to the discontinuation of the production of Rennes, for an amount of $42 million and to the production transfer from Carrollton (USA) for $3 million, from Rousset (France) for $3 million and from Agrate (Italy) for $1 million. </font></p></div>
<p align="center"><font size="2" face="Arial, Helvetica, sans-serif">F-13</font></p>
<hr noshade align="center" width="100%" size="2">
<div style="page-break-before:always"></div>
<page>
<a name="pf8"></a>
<p><a href="#contents"><font size="2">Back to Contents</font></a></p>
<div style="text-indent:0%"><p align="left"><font size="2" face="Arial, Helvetica, sans-serif">In the third quarter of 2004, restructuring charges were $9 million of which $6 million related to the discontinuation of production in Rennes (France), $1 million of decontamination costs in Carrollton (USA), $1 million mainly related to transfer costs in Rousset (France) and $1 million of other related closure costs in Agrate (Italy).</font></p></div>
<p align="left"><font size="2" face="Arial, Helvetica, sans-serif">Back-end operations</font></p>
<div style="text-indent:0%"><p align="left"><font size="2" face="Arial, Helvetica, sans-serif">During the first nine months of 2004, transfer costs amounting to $3 million were paid for back-end sites in Morocco, of which $1 million was incurred in the third quarter of 2004. No other major restructuring charges or other related closures costs were incurred in the third quarter of 2004 relating to back-end operations.  </font></p></div>
<p align="left"><font size="2" face="Arial, Helvetica, sans-serif">Other restructuring charges</font></p>
<div style="text-indent:0%"><p align="left"><font size="2" face="Arial, Helvetica, sans-serif">During the first nine months of 2004, amounts totaling $2 million were incurred by the Company for a voluntary termination benefit program. </font></p></div>
<p align="left"><font size="2" face="Arial, Helvetica, sans-serif">Impairment charges</font></p>
<div style="text-indent:0%"><p align="left"><font size="2" face="Arial, Helvetica, sans-serif">During the first nine months of 2004, impairment charges amounted to $4 million. </font></p></div>
<div style="text-indent:0%"><p align="left"><font size="2" face="Arial, Helvetica, sans-serif">In the third quarter of 2004, the Company recorded an impairment charge of $3 million related to some of its financial investments.     </font></p></div>
<div style="text-indent:0%"><p align="left"><font size="2" face="Arial, Helvetica, sans-serif">In 2004, total cash outlays for the restructuring plan amounted to $46 million, of which $21 million paid in the third quarter.</font></p></div>
<div style="text-indent:0%"><p align="left"><font size="2" face="Arial, Helvetica, sans-serif">The total plan of 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 $262 million has been incurred as of September 25, 2004 ($205 million in 2003, $33 million in the first quarter of 2004, $12 million in the second quarter of 2004 and $12 million in the third 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 final agreed termination benefits and the
costs associated with the transfer of equipment, products and processes.</font></p></div>
<p align="center"><font size="2" face="Arial, Helvetica, sans-serif">F-14</font></p>
<hr noshade align="center" width="100%" size="2">
<div style="page-break-before:always"></div>
<page>
<a name="pf9"></a>
<p><a href="#contents"><font size="2">Back to Contents</font></a></p>
<table width="100%" border="0" cellspacing="0" cellpadding="0">
  <tr>
    <td width="3%"><font size="2" face="Arial, Helvetica, sans-serif"><b>9. </b></font></td>
    <td><font size="2" face="Arial, Helvetica, sans-serif"><b>Interest expense,
    net</b></font></td>
  </tr>
</table>

<div style="text-indent:0%"><p align="left"><font size="2" face="Arial, Helvetica, sans-serif">Interest expense, net consisted of the following:</font></p></div>
<table width="100%" border="0" cellpadding="0" cellspacing="0">
<tr valign="top">
  <td rowspan="5" align="left"><font size="1">&nbsp;</font><font size="1" face="Arial, Helvetica, sans-serif">&nbsp;</font><font size="1">&nbsp;</font><font size="1" face="Arial, Helvetica, sans-serif">&nbsp;</font><font size="1">&nbsp;</font><font size="1" face="Arial, Helvetica, sans-serif">&nbsp;</font></td>
<td colspan="7" align="center"><b><font size="1" face="Arial, Helvetica, sans-serif">(Unaudited)</font></b></td>
<td rowspan="5" align="left"><b><font size="1">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</font></b></td>
</tr>
<tr valign="top">
  <td colspan="3" align="center"><hr size="1" noshade></td>
  <td align="left"><hr size="1" noshade></td>
  <td colspan="3" align="center"><hr size="1" noshade></td>
  </tr>
<tr valign="top">
<td colspan="3" align="center"><b><font size="1" face="Arial, Helvetica, sans-serif">Three months ended</font></b></td>
<td align="left"><b><font size="1">&nbsp;</font></b></td>
<td colspan="3" align="center"><b><font size="1" face="Arial, Helvetica, sans-serif">Nine months ended</font></b></td>
</tr>
<tr valign="top">
  <td align="center"><hr size="1" noshade></td>
  <td align="left"><hr size="1" noshade></td>
  <td align="center"><hr size="1" noshade></td>
  <td align="left"><hr size="1" noshade></td>
  <td align="center"><hr size="1" noshade></td>
  <td align="left"><hr size="1" noshade></td>
  <td align="center"><hr size="1" noshade></td>
  </tr>
<tr valign="top">
<td align="center"><b><font size="1" face="Arial, Helvetica, sans-serif">September 25,</font></b></td>
<td rowspan="2" align="center"><b><font size="1">&nbsp;&nbsp;</font></b></td>
<td align="center"><b><font size="1" face="Arial, Helvetica, sans-serif">September 27,</font></b></td>
<td rowspan="2" align="center"><b><font size="1">&nbsp;&nbsp;</font></b></td>
<td align="center"><b><font size="1" face="Arial, Helvetica, sans-serif">September 25,</font></b></td>
<td rowspan="2" align="center"><b><font size="1">&nbsp;&nbsp;</font></b></td>
<td align="center"><b><font size="1" face="Arial, Helvetica, sans-serif">September 27,</font></b></td>
</tr>
<tr valign="top">
<td align="left"><font size="1" face="Arial, Helvetica, sans-serif"><b>In million of U.S dollars          </b></font></td>
<td align="center"><b><font size="1" face="Arial, Helvetica, sans-serif">2004</font></b></td>
<td align="center"><b><font size="1" face="Arial, Helvetica, sans-serif">2003</font></b></td>
<td align="center"><b><font size="1" face="Arial, Helvetica, sans-serif">2004</font></b></td>
<td align="center"><b><font size="1" face="Arial, Helvetica, sans-serif">2003</font></b></td>
<td align="left"><b><font size="1">&nbsp;</font></b></td>
</tr>
<tr valign="top">
<td align="left"><hr size="1" noshade></td>
<td align="left">
  <hr size="1" noshade></td>
<td align="left"><hr size="1" noshade></td>
<td align="left"><hr size="1" noshade></td>
<td align="left"><hr size="1" noshade></td>
<td align="left"><hr size="1" noshade></td>
<td align="left"><hr size="1" noshade></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, Helvetica, sans-serif">Income</font></td>
<td width="10%" align="right" bgcolor="#eeeeee"><font size="2" face="Arial, Helvetica, sans-serif"><b>11</b></font></td>
<td width="2%" align="left" bgcolor="#eeeeee">&nbsp;</td>
<td width="10%" align="right" bgcolor="#eeeeee"><font size="2" face="Arial, Helvetica, sans-serif">8</font></td>
<td width="2%" align="left" bgcolor="#eeeeee">&nbsp;</td>
<td width="10%" align="right" bgcolor="#eeeeee"><font size="2" face="Arial, Helvetica, sans-serif"><b>31</b></font></td>
<td width="2%" align="left" bgcolor="#eeeeee">&nbsp;</td>
<td width="10%" align="right" bgcolor="#eeeeee"><font size="2" face="Arial, Helvetica, sans-serif">27</font></td>
<td width="2%" align="left" bgcolor="#eeeeee">&nbsp;</td>
</tr>
<tr valign="top">
<td align="left"><font size="2" face="Arial, Helvetica, sans-serif">Expense</font></td>
<td align="right"><font size="2" face="Arial, Helvetica, sans-serif"><b>(11</b></font></td>
<td align="left"><font size="2" face="Arial, Helvetica, sans-serif"><b>)</b></font></td>
<td align="right"><font size="2" face="Arial, Helvetica, sans-serif">(20</font></td>
<td align="left"><font size="2" face="Arial, Helvetica, sans-serif">)</font></td>
<td align="right"><font size="2" face="Arial, Helvetica, sans-serif"><b>(39</b></font></td>
<td align="left"><font size="2" face="Arial, Helvetica, sans-serif"><b>)</b></font></td>
<td align="right"><font size="2" face="Arial, Helvetica, sans-serif">(72</font></td>
<td align="left"><font size="2" face="Arial, Helvetica, sans-serif">)</font></td>
</tr>
<tr valign="top">
<td align="left"><hr size="1" noshade></td>
<td align="left"><hr size="1" noshade></td>
<td align="left"><hr size="1" noshade></td>
<td align="left"><hr size="1" noshade></td>
<td align="left"><hr size="1" noshade></td>
<td align="left"><hr size="1" noshade></td>
<td align="left"><hr size="1" noshade></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, Helvetica, sans-serif"><b>Total</b></font></td>
<td align="right" bgcolor="#eeeeee"><font size="2" face="Arial, Helvetica, sans-serif"><b>&#151;</b></font></td>
<td align="left" bgcolor="#eeeeee">&nbsp;</td>
<td align="right" bgcolor="#eeeeee"><font size="2" face="Arial, Helvetica, sans-serif">(12</font></td>
<td align="left" bgcolor="#eeeeee"><font size="2" face="Arial, Helvetica, sans-serif">)</font></td>
<td align="right" bgcolor="#eeeeee"><font size="2" face="Arial, Helvetica, sans-serif"><b>(8</b></font></td>
<td align="left" bgcolor="#eeeeee"><font size="2" face="Arial, Helvetica, sans-serif"><b>)</b></font></td>
<td align="right" bgcolor="#eeeeee"><font size="2" face="Arial, Helvetica, sans-serif">(45</font></td>
<td align="left" bgcolor="#eeeeee"><font size="2" face="Arial, Helvetica, sans-serif">)</font></td>
</tr>
<tr valign="top">
  <td align="left"><hr size="1" noshade></td>
  <td align="right"><hr size="1" noshade></td>
  <td align="left"><hr size="1" noshade></td>
  <td align="right"><hr size="1" noshade></td>
  <td align="left"><hr size="1" noshade></td>
  <td align="right"><hr size="1" noshade></td>
  <td align="left"><hr size="1" noshade></td>
  <td align="right"><hr size="1" noshade></td>
  <td align="left">&nbsp;</td>
</tr>
</table>
<div style="text-indent:0%"><p align="left"><font size="2" face="Arial, Helvetica, sans-serif">Interest expense also included charges related to the amortization of issuance costs incurred by the Company for the outstanding convertible bonds.</font></p></div>
<table width="100%" border="0" cellspacing="0" cellpadding="0">
  <tr>
    <td width="3%"><font size="2" face="Arial, Helvetica, sans-serif"><b>10. </b></font></td>
    <td><p align="left"><font size="2" face="Arial, Helvetica, sans-serif"><b>Loss
    on extinguishment of convertible debt </b></font></p></td>
  </tr>
</table>
<div style="text-indent:0%"><p align="left"><font size="2" face="Arial, Helvetica, sans-serif">During the first nine months of 2004, the Company completed the repurchase of its 3.75% Zero Coupon Senior Convertible Bonds due 2010. </font></p></div>
<div style="text-indent:0%"><p align="left"><font size="2" face="Arial, Helvetica, sans-serif">In May 2004, the Company repurchased on the market approximately $307 million aggregate principal amount at maturity of its outstanding 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. 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></div>
<div style="text-indent:0%"><p align="left"><font size="2" face="Arial, Helvetica, sans-serif">In July 2004, the Company redeemed all the remaining $131 million of outstanding Bonds due 2010. For this purchase, the Company did not incur any charge since the price paid corresponded to the accreted value. </font></p></div>
<div style="text-indent:0%"><p align="left"><font size="2" face="Arial, Helvetica, sans-serif">In the third quarter of 2003, the Company repurchased on the market an additional $940 million aggregate principal amount at maturity of its Bonds due 2010. The cash amount paid was approximately $737 million. The repurchased 2010 Bonds represented an equivalent of 8,762,748 shares. The Company registered in the third quarter of 2003 a non-operating pre-tax charge of $22 million, of which $18 million related to the price paid in excess of the repurchased convertible bonds accreted value and $4 million related to the write-off of bond issuance costs.</font></p></div>
<div style="text-indent:0%"><p align="left"><font size="2" face="Arial, Helvetica, sans-serif">During the first nine months of 2003, the Company repurchased on the market approximately $1,583 million aggregate principal amount at maturity of its 3.75% Zero Coupon Senior Convertible Bonds due 2010. The total cash amount paid was approximately $1,233 million. The repurchased convertible bonds were equivalent to 14,753,364 shares. The Company recorded in the first nine months of 2003 a non-operating pre-tax charge of $37 million, of which $29 million related to the price paid in excess of the repurchased convertible bonds accreted value and $8 million related to the write-off of the related bond issuance costs. </font></p></div>
<p align="center"><font face="Arial, Helvetica, sans-serif" size="2">F-15</font></p>
<hr noshade align="center" width="100%" size="2">
<div style="page-break-before:always"></div>
<page>
<a name="F10?"></a>
<p><a href="#contents"><font size="2">Back to Contents</font></a></p>
<table width="100%" border="0" cellpadding="0" cellspacing="0">
  <tr>
    <td width="3%"><font size="2" face="Arial, Helvetica, sans-serif"><b>11.</b></font></td>
    <td><font size="2" face="Arial, Helvetica, sans-serif"><b>Marketable
Securities</b></font></td>
  </tr>
</table>
<div style="text-indent:0%"><p align="left"><font size="2" face="Arial, Helvetica, sans-serif">Marketable securities totaled $1,030 million as at September 25, 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 September 25, 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></div>
<table width="100%" border="0" cellpadding="0" cellspacing="0">
  <tr>
    <td width="3%"><font size="2" face="Arial, Helvetica, sans-serif"><b>12.</b></font></td>
    <td><font size="2" face="Arial, Helvetica, sans-serif"><b>Inventories</b></font></td>
  </tr>
</table>
<div style="text-indent:0%"><p align="left"><font size="2" face="Arial, Helvetica, sans-serif">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></div>
<div style="text-indent:0%"><p align="left"><font size="2" face="Arial, Helvetica, sans-serif">Provisions for obsolescence are estimated for uncommitted inventories based on the previous quarter sales, orders backlog and production plans. </font></p></div>
<div style="text-indent:0%"><p align="left"><font size="2" face="Arial, Helvetica, sans-serif">Inventories, net of reserve consisted of the following:</font></p></div>
<table width="100%" border="0" cellpadding="0" cellspacing="0">
<tr valign="top">
  <td align="left">&nbsp;</td>
  <td align="center"><hr noshade size="1"></td>
  <td align="left"><hr noshade size="1"></td>
  <td align="center"><hr noshade size="1"></td>
  <td align="left">&nbsp;</td>
</tr>
<tr valign="top">
<td align="left"><b><font size="1" face="Arial, Helvetica, sans-serif">&nbsp;</font></b></td>
<td align="center"><b><font size="1" face="Arial, Helvetica, sans-serif">(Unaudited)</font></b></td>
<td align="left">&nbsp;</td>
<td align="center"><b><font size="1" face="Arial, Helvetica, sans-serif">(Audited)</font></b></td>
<td align="left">&nbsp;</td>
</tr>
<tr valign="top">
  <td align="left">&nbsp;</td>
  <td align="center"><hr noshade size="1"></td>
  <td align="left"><hr noshade size="1"></td>
  <td align="center"><hr noshade size="1"></td>
  <td align="left">&nbsp;</td>
</tr>
<tr valign="top">
<td align="left" valign="bottom"><font size="1" face="Arial, Helvetica, sans-serif"><b>In million of U.S. dollars</b></font></td>
<td align="center"><b><font size="1" face="Arial, Helvetica, sans-serif">As at  <br>
  September 25, 2004</font></b></td>
<td align="left"><b><font size="1">&nbsp;</font></b></td>
<td align="center"><b><font size="1" face="Arial, Helvetica, sans-serif">As at <br>
  December 31, 2003</font></b></td>
<td align="left"><b><font size="1">&nbsp;</font></b></td> </tr>
<tr valign="top">
<td align="left"><hr noshade size="1"></td>
<td align="left"><hr noshade size="1"></td>
<td align="left"><hr noshade size="1"></td>
<td align="left"><hr noshade size="1"></td>
<td align="left">&nbsp;</td>
</tr>
<tr valign="top" bgcolor="#eeeeee">
<td align="left"><font size="2" face="Arial, Helvetica, sans-serif">Raw materials</font></td>
<td width="8%" align="right"><font size="2" face="Arial, Helvetica, sans-serif"><b>63</b></font></td>
<td width="2%" align="left">&nbsp;</td>
<td width="8%" align="right"><font size="2" face="Arial, Helvetica, sans-serif">50</font></td>
<td width="2%" align="left">&nbsp;</td>
</tr>
<tr valign="top">
<td align="left"><font size="2" face="Arial, Helvetica, sans-serif">Work-in-process</font></td>
<td align="right"><font size="2" face="Arial, Helvetica, sans-serif"><b>837</b></font></td>
<td align="left">&nbsp;</td>
<td align="right"><font size="2" face="Arial, Helvetica, sans-serif">768</font></td>
<td align="left">&nbsp;</td>
</tr>
<tr valign="top" bgcolor="#eeeeee">
<td align="left"><font size="2" face="Arial, Helvetica, sans-serif">Finished
    products</font></td>
<td align="right"><font size="2" face="Arial, Helvetica, sans-serif"><b>296</b></font></td>
<td align="left">&nbsp;</td>
<td align="right"><font size="2" face="Arial, Helvetica, sans-serif">311</font></td>
<td align="left">&nbsp;</td>
</tr>
<tr valign="top">
  <td align="left"><hr noshade size="1"></td>
  <td align="right"><hr noshade size="1"></td>
  <td align="left"><hr noshade size="1"></td>
  <td align="right"><hr noshade size="1"></td>
  <td align="left">&nbsp;</td>
</tr>
<tr valign="top" bgcolor="#eeeeee">
<td align="left"><font size="2" face="Arial, Helvetica, sans-serif"><b>Total</b></font></td>
<td align="right"><font size="2" face="Arial, Helvetica, sans-serif"><b>1,196</b></font></td>
<td align="left">&nbsp;</td>
<td align="right"><font size="2" face="Arial, Helvetica, sans-serif">1,129</font></td>
<td align="left">&nbsp;</td>
</tr>
<tr valign="top">
  <td align="left"><hr noshade size="1"></td>
  <td align="right"><hr noshade size="1"></td>
  <td align="left"><hr noshade size="1"></td>
  <td align="right"><hr noshade size="1"></td>
  <td align="left">&nbsp;</td>
</tr>
</table>
<p align="center"><font size="2" face="Arial, Helvetica, sans-serif">F-16</font></p>
<hr noshade align="center" width="100%" size="2">
<div style="page-break-before:always"></div>
<page>
<a name="pF11"></a>
<p><a href="#contents"><font size="2">Back to Contents</font></a></p>

<table width="100%" border="0" cellpadding="0" cellspacing="0">
  <tr>
    <td width="3%"><font size="2" face="Arial, Helvetica, sans-serif"><b>13.</b></font></td>
    <td><font size="2" face="Arial, Helvetica, sans-serif"><b>Investments and
    other non-current assets</b></font></td>
  </tr>
</table>
<div style="text-indent:0%"><p align="left"><font size="2" face="Arial, Helvetica, sans-serif"> Investments and other non-current assets consisted of the following:</font></p></div>
<table width="100%" border="0" cellpadding="0" cellspacing="0">
  <tr valign="top">
    <td align="left">&nbsp;</td>
    <td align="center"><hr noshade size="1">
    </td>
    <td align="left"><hr noshade size="1">
    </td>
    <td align="center"><hr noshade size="1">
    </td>
    <td align="left">&nbsp;</td>
  </tr>
  <tr valign="top">
    <td align="left"><font size="1" face="Arial, Helvetica, sans-serif">&nbsp;</font></td>
    <td align="center"><b><font size="1" face="Arial, Helvetica, sans-serif">(Unaudited)</font></b></td>
    <td align="left">&nbsp;</td>
    <td align="center"><b><font size="1" face="Arial, Helvetica, sans-serif">(Audited)</font></b></td>
    <td align="left">&nbsp;</td>
  </tr>
  <tr valign="top">
    <td align="left">&nbsp;</td>
    <td align="center"><hr noshade size="1">
    </td>
    <td align="left"><hr noshade size="1">
    </td>
    <td align="center"><hr noshade size="1">
    </td>
    <td align="left">&nbsp;</td>
  </tr>
  <tr valign="top">
    <td align="left" valign="bottom"><font size="1" face="Arial, Helvetica, sans-serif"><b>In
        million of U.S. dollars</b></font></td>
    <td align="center"><b><font size="1" face="Arial, Helvetica, sans-serif">As
          at <br>
    September 25, 2004</font></b></td>
    <td align="left"><b><font size="1">&nbsp;</font></b></td>
    <td align="center"><b><font size="1" face="Arial, Helvetica, sans-serif">As
        at <br>
    December 31, 2003</font></b></td>
    <td align="left"><b><font size="1">&nbsp;</font></b></td>
  </tr>
  <tr valign="top">
    <td align="left"><hr noshade size="1">
    </td>
    <td align="left"><hr noshade size="1">
    </td>
    <td align="left"><hr noshade size="1">
    </td>
    <td align="left"><hr noshade size="1">
    </td>
    <td align="left">&nbsp;</td>
  </tr>
<tr valign="top" bgcolor="#eeeeee">
<td align="left"><font size="2" face="Arial, Helvetica, sans-serif">Investments</font></td>
<td width="8%" align="right"><font size="2" face="Arial, Helvetica, sans-serif"><b>40</b></font></td>
<td width="2%" align="left">&nbsp;</td>
<td width="8%" align="right"><font size="2" face="Arial, Helvetica, sans-serif">38</font></td>
<td width="2%" align="left">&nbsp;</td>
</tr>
<tr valign="top">
<td align="left"><font size="2" face="Arial, Helvetica, sans-serif">Long-term deposits </font></td>
<td align="right"><font size="2" face="Arial, Helvetica, sans-serif"><b>59</b></font></td>
<td align="left">&nbsp;</td>
<td align="right"><font size="2" face="Arial, Helvetica, sans-serif">44</font></td>
<td align="left">&nbsp;</td>
</tr>
<tr valign="top" bgcolor="#eeeeee">
<td align="left"><font size="2" face="Arial, Helvetica, sans-serif">Debt issuance costs, net</font></td>
<td align="right"><font size="2" face="Arial, Helvetica, sans-serif"><b>  9</b></font></td>
<td align="left">&nbsp;</td>
<td align="right"><font size="2" face="Arial, Helvetica, sans-serif">17</font></td>
<td align="left">&nbsp;</td>
</tr>
<tr valign="top">
  <td align="left"><hr noshade size="1"></td>
  <td align="right"><hr noshade size="1"></td>
  <td align="left"><hr noshade size="1"></td>
  <td align="right"><hr noshade size="1"></td>
  <td align="left">&nbsp;</td>
</tr>
<tr valign="top" bgcolor="#eeeeee">
<td align="left"><font size="2" face="Arial, Helvetica, sans-serif"><b>Total</b></font></td>
<td align="right"><font size="2" face="Arial, Helvetica, sans-serif"><b>108</b></font></td>
<td align="left">&nbsp;</td>
<td align="right"><font size="2" face="Arial, Helvetica, sans-serif">99</font></td>
<td align="left">&nbsp;</td>
</tr>
<tr valign="top">
  <td align="left"><hr noshade size="1"></td>
  <td align="right"><hr noshade size="1"></td>
  <td align="left"><hr noshade size="1"></td>
  <td align="right"><hr noshade size="1"></td>
  <td align="left">&nbsp;</td>
</tr>
</table>
<p align="left"><font size="2" face="Arial, Helvetica, sans-serif">SuperH, Inc.</font></p>
<div style="text-indent:0%">
<p align="left"><font size="2" face="Arial, Helvetica, sans-serif">In 2001, the
    Company and Renesas Technology Corp. (previously known as Hitachi, Ltd.)
    formed a joint venture to develop and license RISC microprocessors, where
    the Company continues to hold a 44% interest. The Company is accounting for
    its share in the SuperH, Inc. joint venture under the equity method based
    on the actual results of the joint venture. At September 25, 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>
</div>
<div style="text-indent:0%"><p align="left"><font size="2" face="Arial, Helvetica, sans-serif">In the third quarter of 2004, the shareholders agreed to restructure their presence in SuperH business by transferring the intellectual properties to both shareholders and continuing the further developments by each company&#8217;s resources, after a transitional period. Based upon current estimate of forecasted cash requirements of the joint venture, the Company is required to make a funding of $2 million, which was accrued for at September 25, 2004.</font></p></div>
<p align="left"><font size="2" face="Arial, Helvetica, sans-serif">UPEK, Inc.</font></p>
<div style="text-indent:0%">
<p align="left"><font size="2" face="Arial, Helvetica, sans-serif">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>
</div>
<div style="text-indent:0%"><p align="left"><font size="2" face="Arial, Helvetica, sans-serif">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></div>
<p align="center"><font size="2" face="Arial, Helvetica, sans-serif">F-17</font></p>
<hr noshade align="center" width="100%" size="2">
<div style="page-break-before:always"></div>
<page>
<a name="pF12"></a>
<p><a href="#contents"><font size="2">Back to Contents</font></a></p>

<table width="100%" border="0" cellpadding="0" cellspacing="0">
  <tr>
    <td width="3%"><font size="2" face="Arial, Helvetica, sans-serif"><b>14.</b></font></td>
    <td><font size="2" face="Arial, Helvetica, sans-serif"><b>Long-term
Debt </b></font></td>
  </tr>
</table>
<p align="left"><font size="2" face="Arial, Helvetica, sans-serif">Long-term debt consisted of the following:</font></p>
<div style="text-indent:0%"></div>
<table width="100%" border="0" cellpadding="0" cellspacing="0">
  <tr valign="top">
    <td align="left">&nbsp;</td>
    <td align="center"><hr noshade size="1">
    </td>
    <td align="left"><hr noshade size="1">
    </td>
    <td align="center"><hr noshade size="1">
    </td>
    <td align="left">&nbsp;</td>
  </tr>
  <tr valign="top">
    <td align="left"><font size="1" face="Arial, Helvetica, sans-serif">&nbsp;</font></td>
    <td align="center"><b><font size="1" face="Arial, Helvetica, sans-serif">(Unaudited)</font></b></td>
    <td align="left">&nbsp;</td>
    <td align="center"><b><font size="1" face="Arial, Helvetica, sans-serif">(Audited)</font></b></td>
    <td align="left">&nbsp;</td>
  </tr>
  <tr valign="top">
    <td align="left">&nbsp;</td>
    <td align="center"><hr noshade size="1">
    </td>
    <td align="left"><hr noshade size="1">
    </td>
    <td align="center"><hr noshade size="1">
    </td>
    <td align="left">&nbsp;</td>
  </tr>
  <tr valign="top">
    <td align="left" valign="bottom"><font size="1" face="Arial, Helvetica, sans-serif"><b>In
        million of U.S. dollars</b></font></td>
    <td align="center"><b><font size="1" face="Arial, Helvetica, sans-serif">As
          at <br>
    September 25, 2004</font></b></td>
    <td align="left"><b><font size="1">&nbsp;</font></b></td>
    <td align="center"><b><font size="1" face="Arial, Helvetica, sans-serif">As
        at <br>
    December 31, 2003</font></b></td>
    <td align="left"><b><font size="1">&nbsp;</font></b></td>
  </tr>
  <tr valign="top">
    <td align="left"><hr noshade size="1">
    </td>
    <td align="left"><hr noshade size="1">
    </td>
    <td align="left"><hr noshade size="1">
    </td>
    <td align="left"><hr noshade size="1">
    </td>
    <td align="left">&nbsp;</td>
  </tr>
<tr valign="top">
<td align="left"><font size="2" face="Arial, Helvetica, sans-serif">STMicroelectronics SA (France)</font></td>
<td align="left"><font size="2" face="Arial, Helvetica, sans-serif">&nbsp;</font></td>
<td align="right">&nbsp;</td>
<td align="left"><font size="2" face="Arial, Helvetica, sans-serif">&nbsp;</font></td>
<td align="left">&nbsp;</td>
</tr>
<tr valign="top">
<td align="left"></td>
<td align="left"><font size="2" face="Arial, Helvetica, sans-serif">&nbsp;</font></td>
<td align="right">&nbsp;</td>
<td align="left"><font size="2" face="Arial, Helvetica, sans-serif">&nbsp;</font></td>
<td align="left">&nbsp;</td>
</tr>
<tr valign="top">
<td align="left" bgcolor="#eeeeee"><font size="2" face="Arial, Helvetica, sans-serif">2.43% (weighted average) bank loans due 2006</font></td>
<td width="8%" align="right" bgcolor="#eeeeee"><font size="2" face="Arial, Helvetica, sans-serif">101</font></td>
<td width="2%" align="right" bgcolor="#eeeeee">&nbsp;</td>
<td width="8%" align="right" bgcolor="#eeeeee"><font size="2" face="Arial, Helvetica, sans-serif">146</font></td>
<td width="2%" align="left" bgcolor="#eeeeee">&nbsp;</td>
</tr>
<tr valign="top">
<td align="left"><font size="2" face="Arial, Helvetica, sans-serif">0.00% (weighted average) other bank loans</font></td>
<td align="right"><font size="2" face="Arial, Helvetica, sans-serif">   1</font></td>
<td align="right">&nbsp;</td>
<td align="right"><font size="2" face="Arial, Helvetica, sans-serif">1</font></td>
<td align="left">&nbsp;</td>
</tr>
<tr valign="top">
<td align="left" bgcolor="#eeeeee"><font size="2" face="Arial, Helvetica, sans-serif">4.79% (weighted average) capital leases </font></td>
<td align="right" bgcolor="#eeeeee"><font size="2" face="Arial, Helvetica, sans-serif">32</font></td>
<td align="right" bgcolor="#eeeeee">&nbsp;</td>
<td align="right" bgcolor="#eeeeee"><font size="2" face="Arial, Helvetica, sans-serif">37</font></td>
<td align="left" bgcolor="#eeeeee">&nbsp;</td>
</tr>
<tr valign="top">
<td align="left"></td>
<td align="left"><font size="2" face="Arial, Helvetica, sans-serif">&nbsp;</font></td>
<td align="right">&nbsp;</td>
<td align="left"><font size="2" face="Arial, Helvetica, sans-serif">&nbsp;</font></td>
<td align="left">&nbsp;</td>
</tr>
<tr valign="top">
<td align="left"><font size="2" face="Arial, Helvetica, sans-serif">STMicroelectronics S.r.l. (Italy)</font></td>
<td align="left"><font size="2" face="Arial, Helvetica, sans-serif">&nbsp;</font></td>
<td align="right">&nbsp;</td>
<td align="left"><font size="2" face="Arial, Helvetica, sans-serif">&nbsp;</font></td>
<td align="left">&nbsp;</td>
</tr>
<tr valign="top">
<td align="left"></td>
<td align="left"><font size="2" face="Arial, Helvetica, sans-serif">&nbsp;</font></td>
<td align="right">&nbsp;</td>
<td align="left"><font size="2" face="Arial, Helvetica, sans-serif">&nbsp;</font></td>
<td align="left">&nbsp;</td>
</tr>
<tr valign="top">
<td align="left" bgcolor="#eeeeee"><font size="2" face="Arial, Helvetica, sans-serif">7.35% bank loan due 2005 </font></td>
<td align="right" bgcolor="#eeeeee"><font size="2" face="Arial, Helvetica, sans-serif">1</font></td>
<td align="right" bgcolor="#eeeeee">&nbsp;</td>
<td align="right" bgcolor="#eeeeee"><font size="2" face="Arial, Helvetica, sans-serif">2</font></td>
<td align="left" bgcolor="#eeeeee">&nbsp;</td>
</tr>
<tr valign="top">
<td align="left"><font size="2" face="Arial, Helvetica, sans-serif">5.35% bank loan due 2006</font></td>
<td align="right"><font size="2" face="Arial, Helvetica, sans-serif">14</font></td>
<td align="right">&nbsp;</td>
<td align="right"><font size="2" face="Arial, Helvetica, sans-serif">18</font></td>
<td align="left">&nbsp;</td>
</tr>
<tr valign="top">
<td align="left" bgcolor="#eeeeee"><font size="2" face="Arial, Helvetica, sans-serif">1.06% (weighted average) bank loans due 2009</font></td>
<td align="right" bgcolor="#eeeeee"><font size="2" face="Arial, Helvetica, sans-serif">68</font></td>
<td align="right" bgcolor="#eeeeee">&nbsp;</td>
<td align="right" bgcolor="#eeeeee"><font size="2" face="Arial, Helvetica, sans-serif">72</font></td>
<td align="left" bgcolor="#eeeeee">&nbsp;</td>
</tr>
<tr valign="top">
<td align="left"><font size="2" face="Arial, Helvetica, sans-serif">3.43% (weighted average) other bank loans</font></td>
<td align="right"><font size="2" face="Arial, Helvetica, sans-serif">14</font></td>
<td align="right">&nbsp;</td>
<td align="right"><font size="2" face="Arial, Helvetica, sans-serif">14</font></td>
<td align="left">&nbsp;</td>
</tr>
<tr valign="top">
<td align="left"></td>
<td align="left"><font size="2" face="Arial, Helvetica, sans-serif">&nbsp;</font></td>
<td align="right">&nbsp;</td>
<td align="left"><font size="2" face="Arial, Helvetica, sans-serif">&nbsp;</font></td>
<td align="left">&nbsp;</td>
</tr>
<tr valign="top">
<td align="left"><font size="2" face="Arial, Helvetica, sans-serif">STMicroelectronics N.V. (The Netherlands)</font></td>
<td align="left"><font size="2" face="Arial, Helvetica, sans-serif">&nbsp;</font></td>
<td align="right">&nbsp;</td>
<td align="left"><font size="2" face="Arial, Helvetica, sans-serif">&nbsp;</font></td>
<td align="left">&nbsp;</td>
</tr>
<tr valign="top">
<td align="left"></td>
<td align="left"><font size="2" face="Arial, Helvetica, sans-serif">&nbsp;</font></td>
<td align="right">&nbsp;</td>
<td align="left"><font size="2" face="Arial, Helvetica, sans-serif">&nbsp;</font></td>
<td align="left">&nbsp;</td>
</tr>
<tr valign="top">
<td align="left" bgcolor="#eeeeee"><font size="2" face="Arial, Helvetica, sans-serif"> 2.44% Liquid Yield Option Notes (LYONs) due 2009</font></td>
<td align="right" bgcolor="#eeeeee"><font size="2" face="Arial, Helvetica, sans-serif">8</font></td>
<td align="right" bgcolor="#eeeeee">&nbsp;</td>
<td align="right" bgcolor="#eeeeee"><font size="2" face="Arial, Helvetica, sans-serif">799</font></td>
<td align="left" bgcolor="#eeeeee">&nbsp;</td>
</tr>
<tr valign="top">
<td align="left"><font size="2" face="Arial, Helvetica, sans-serif"> 3.75% Convertible bonds due 2010</font></td>
<td align="right"><font size="2" face="Arial, Helvetica, sans-serif">&#151;</font></td>
<td align="right">&nbsp;</td>
<td align="right"><font size="2" face="Arial, Helvetica, sans-serif">366</font></td>
<td align="left">&nbsp;</td>
</tr>
<tr valign="top">
<td align="left" bgcolor="#eeeeee"><font size="2" face="Arial, Helvetica, sans-serif">-0.50% Convertible bonds due 2013</font></td>
<td align="right" bgcolor="#eeeeee"><font size="2" face="Arial, Helvetica, sans-serif">1,379</font></td>
<td align="right" bgcolor="#eeeeee">&nbsp;</td>
<td align="right" bgcolor="#eeeeee"><font size="2" face="Arial, Helvetica, sans-serif">1,379</font></td>
<td align="left" bgcolor="#eeeeee">&nbsp;</td>
</tr>
<tr valign="top">
<td align="left"></td>
<td align="left"><font size="2" face="Arial, Helvetica, sans-serif">&nbsp;</font></td>
<td align="right">&nbsp;</td>
<td align="left"><font size="2" face="Arial, Helvetica, sans-serif">&nbsp;</font></td>
<td align="left">&nbsp;</td>
</tr>
<tr valign="top">
<td align="left"><font size="2" face="Arial, Helvetica, sans-serif">STMicroelectronics PTE (Singapore)</font></td>
<td align="left"><font size="2" face="Arial, Helvetica, sans-serif">&nbsp;</font></td>
<td align="right">&nbsp;</td>
<td align="left"><font size="2" face="Arial, Helvetica, sans-serif">&nbsp;</font></td>
<td align="left">&nbsp;</td>
</tr>
<tr valign="top">
<td align="left"></td>
<td align="left"><font size="2" face="Arial, Helvetica, sans-serif">&nbsp;</font></td>
<td align="right">&nbsp;</td>
<td align="left"><font size="2" face="Arial, Helvetica, sans-serif">&nbsp;</font></td>
<td align="left">&nbsp;</td>
</tr>
<tr valign="top">
<td align="left" bgcolor="#eeeeee"><font size="2" face="Arial, Helvetica, sans-serif">2.52% (weighted average) bank loans due 2007</font></td>
<td align="right" bgcolor="#eeeeee"><font size="2" face="Arial, Helvetica, sans-serif">148</font></td>
<td align="right" bgcolor="#eeeeee">&nbsp;</td>
<td align="right" bgcolor="#eeeeee"><font size="2" face="Arial, Helvetica, sans-serif">147</font></td>
<td align="left" bgcolor="#eeeeee">&nbsp;</td>
</tr>
<tr valign="top">
<td align="left"><font size="2" face="Arial, Helvetica, sans-serif">3.50% (weighted average) other bank loans</font></td>
<td align="right"><font size="2" face="Arial, Helvetica, sans-serif">&#151;</font></td>
<td align="right">&nbsp;</td>
<td align="right"><font size="2" face="Arial, Helvetica, sans-serif">1</font></td>
<td align="left">&nbsp;</td>
</tr>
<tr valign="top">
<td align="left"></td>
<td align="left"><font size="2" face="Arial, Helvetica, sans-serif">&nbsp;</font></td>
<td align="right">&nbsp;</td>
<td align="left"><font size="2" face="Arial, Helvetica, sans-serif">&nbsp;</font></td>
<td align="left">&nbsp;</td>
</tr>
<tr valign="top">
<td align="left"><font size="2" face="Arial, Helvetica, sans-serif">STMicroelectronics (others)</font></td>
<td align="left"><font size="2" face="Arial, Helvetica, sans-serif">&nbsp;</font></td>
<td align="right">&nbsp;</td>
<td align="left"><font size="2" face="Arial, Helvetica, sans-serif">&nbsp;</font></td>
<td align="left">&nbsp;</td>
</tr>
<tr valign="top">
<td align="left" bgcolor="#eeeeee"><font size="2" face="Arial, Helvetica, sans-serif">3.38% (weighted average) other bank loans</font></td>
<td align="right" bgcolor="#eeeeee"><font size="2" face="Arial, Helvetica, sans-serif">55</font></td>
<td align="right" bgcolor="#eeeeee">&nbsp;</td>
<td align="right" bgcolor="#eeeeee"><font size="2" face="Arial, Helvetica, sans-serif">68</font></td>
<td align="left" bgcolor="#eeeeee">&nbsp;</td>
</tr>
<tr valign="top">
<td align="left"><hr noshade size="1"></td>
<td align="left"><hr noshade size="1"></td>
<td align="right"><hr noshade size="1"></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, Helvetica, sans-serif"><b>Total  long-term debt</b></font></td>
<td align="right" bgcolor="#eeeeee"><font size="2" face="Arial, Helvetica, sans-serif"><b>1,821</b></font></td>
<td align="right" bgcolor="#eeeeee">&nbsp;</td>
<td align="right" bgcolor="#eeeeee"><font size="2" face="Arial, Helvetica, sans-serif">3,050</font></td>
<td align="left" bgcolor="#eeeeee">&nbsp;</td>
</tr>
<tr valign="top">
<td align="left"><font size="2" face="Arial, Helvetica, sans-serif">Less current portion</font></td>
<td align="right"><font size="2" face="Arial, Helvetica, sans-serif">   111</font></td>
<td align="right">&nbsp;</td>
<td align="right"><font size="2" face="Arial, Helvetica, sans-serif">106</font></td>
<td align="left">&nbsp;</td>
</tr>
<tr valign="top">
<td align="left"><hr noshade size="1"></td>
<td align="left"><hr noshade size="1"></td>
<td align="right"><hr noshade size="1"></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, Helvetica, sans-serif"><b>Total long-term debt, less current portion</b></font></td>
<td align="right" bgcolor="#eeeeee"><font size="2" face="Arial, Helvetica, sans-serif"><b>1,710</b></font></td>
<td align="right" bgcolor="#eeeeee">&nbsp;</td>
<td align="right" bgcolor="#eeeeee"><font size="2" face="Arial, Helvetica, sans-serif">2,944</font></td>
<td align="left" bgcolor="#eeeeee">&nbsp;</td>
</tr>
<tr valign="top">
  <td align="left"><hr noshade size="1"></td>
  <td align="right"><hr noshade size="1"></td>
  <td align="right"><hr noshade size="1"></td>
  <td align="right"><hr noshade size="1"></td>
  <td align="left">&nbsp;</td>
</tr>
</table>
<div style="text-indent:0%">
<p align="left"><font size="2" face="Arial, Helvetica, sans-serif">The Company
    redeemed all of its outstanding Zero Coupon Senior Convertible Bonds due
    2010 on July 9, 2004 for a total cash amount of $131 million. </font></p>
</div>
<div style="text-indent:0%"><p align="left"><font size="2" face="Arial, Helvetica, sans-serif">On September 22, 2004, according to the one-time optional redemption right of holders, the Company redeemed approximately $910 million nominal value of its outstanding Liquid Yield Option<sup>TM</sup> Notes due 2009 (the &#8220;2009 Notes&#8221;), or 99% of the total issuance, for approximately $806 million in cash. The Company intends to redeem the remaining outstanding 2009 Notes amounting to $8 million for cash at their accreted value in the last quarter of 2004. This amount was classified as &#8220;current portion of long-term debt&#8221; at September 25, 2004. Additionally, the Company may be required to purchase, at the option of the holder, any outstanding 2013 bond for cash on August 5, 2006.</font></p></div>
<p align="center"><font face="Arial, Helvetica, sans-serif" size="2">F-18</font></p>
<hr noshade align="center" width="100%" size="2">
<div style="page-break-before:always"></div>
<page>
<a name="pf13"></a>
<p><a href="#contents"><font size="2">Back to Contents</font></a></p>
<table width="100%" border="0" cellspacing="0" cellpadding="0">
  <tr>
    <td width="3%"><font size="2" face="Arial, Helvetica, sans-serif"><b>15.</b></font></td>
    <td><font size="2" face="Arial, Helvetica, sans-serif"><b>Computation of Earnings
      per Share</b></font></td>
  </tr>
</table>
<div style="text-indent:0%">
<p align="left"><font size="2" face="Arial, Helvetica, sans-serif">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>
</div>
<div style="text-indent:0%">
<p align="left"><font size="2" face="Arial, Helvetica, sans-serif">(In millions of U.S. dollars, except per share amounts): </font></p></DIV>
<table width="100%" border="0" cellpadding="0" cellspacing="0">
  <tr>
    <td align="left" valign="top"><font size="1" face="Arial, Helvetica, sans-serif">&nbsp;</font></td>
    <td colspan="7" align="center" valign="top"><b><font size="1" face="Arial, Helvetica, sans-serif">(Unaudited)</font></b></td>
    <td align="left" valign="top">&nbsp;</td>
  </tr>
  <tr>
    <td align="left" valign="top">&nbsp;</td>
    <td colspan="7" align="center" valign="top"><hr noshade size="1"></td>
    <td align="left" valign="top">&nbsp;</td>
  </tr>
  <tr>
    <td align="left" valign="top"><font size="1" face="Arial, Helvetica, sans-serif">&nbsp;</font></td>
    <td colspan="3" align="center" valign="top"><b><font size="1" face="Arial, Helvetica, sans-serif">Three
      Months Ended</font></b></td>
    <td align="left" valign="top">&nbsp;</td>
    <td colspan="3" align="center" valign="top"><b><font size="1" face="Arial, Helvetica, sans-serif">Nine
      Months Ended</font></b></td>
    <td align="left" valign="top">&nbsp;</td>
  </tr>
  <tr>
    <td align="left" valign="top">&nbsp;</td>
    <td colspan="3" align="center" valign="bottom"><hr noshade size="1"></td>
    <td align="center" valign="bottom">&nbsp;</td>
    <td colspan="3" align="center" valign="bottom"><hr noshade size="1"></td>
    <td align="left" valign="top">&nbsp;</td>
  </tr>
  <tr>
    <td align="left" valign="top"><font size="1" face="Arial, Helvetica, sans-serif">&nbsp;</font></td>
    <td align="center" valign="bottom"><b><font size="1" face="Arial, Helvetica, sans-serif">
      September 25,</font><br>
      <font size="1" face="Arial, Helvetica, sans-serif">
      2004 </font></b></td>
    <td align="center" valign="bottom">&nbsp;</td>
    <td align="center" valign="bottom"><b><font size="1" face="Arial, Helvetica, sans-serif">September
      27,</font><br>
      <font size="1" face="Arial, Helvetica, sans-serif">2003</font></b></td>
    <td align="center" valign="bottom">&nbsp;</td>
    <td align="center" valign="bottom"><b><font size="1" face="Arial, Helvetica, sans-serif">September
      25, 2004</font></b></td>
    <td align="center" valign="bottom">&nbsp;</td>
    <td align="center" valign="bottom"><b><font size="1" face="Arial, Helvetica, sans-serif">September
      27,</font><br>
      <font size="1" face="Arial, Helvetica, sans-serif">2003</font></b></td>
    <td align="left" valign="top">&nbsp;</td>
  </tr>
  <tr>
    <td align="left" valign="top">
    <hr noshade size="1"></td>
    <td align="left" valign="top"><hr noshade size="1"></td>
    <td align="left" valign="top"><hr noshade size="1"></td>
    <td align="left" valign="top"><hr noshade size="1"></td>
    <td align="left" valign="top"><hr noshade size="1"></td>
    <td align="left" valign="top"><hr noshade size="1"></td>
    <td align="left" valign="top"><hr noshade size="1"></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, Helvetica, sans-serif"><b>Basic
      EPS:</b></font></td>
    <td align="left" valign="top"><font size="2" face="Arial, Helvetica, sans-serif">&nbsp;</font></td>
    <td align="left" valign="top">&nbsp;</td>
    <td align="left" valign="top"><font size="2" face="Arial, Helvetica, sans-serif">&nbsp;</font></td>
    <td align="left" valign="top">&nbsp;</td>
    <td align="left" valign="top"><font size="2" face="Arial, Helvetica, sans-serif">&nbsp;</font></td>
    <td align="left" valign="top">&nbsp;</td>
    <td align="left" valign="top"><font size="2" face="Arial, Helvetica, sans-serif">&nbsp;</font></td>
    <td align="left" valign="top">&nbsp;</td>
  </tr>
  <tr>
    <td align="left" valign="top">&nbsp;</td>
    <td align="right" valign="top">&nbsp;</td>
    <td align="left" valign="top">&nbsp;</td>
    <td align="right" valign="top">&nbsp;</td>
    <td align="left" valign="top">&nbsp;</td>
    <td align="right" valign="top">&nbsp;</td>
    <td align="left" valign="top">&nbsp;</td>
    <td align="right" valign="top">&nbsp;</td>
    <td align="left" valign="top">&nbsp;</td>
  </tr>
  <tr>
    <td align="left" valign="top" bgcolor="#eeeeee"><font size="2" face="Arial, Helvetica, sans-serif">Net
      income&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</font></td>
    <td width="8%" align="right" valign="top" bgcolor="#eeeeee"><font size="2" face="Arial, Helvetica, sans-serif">
      <b>189</b></font></td>
    <td width="2%" align="left" valign="top" bgcolor="#eeeeee">&nbsp;</td>
    <td width="8%" align="right" valign="top" bgcolor="#eeeeee"><font size="2" face="Arial, Helvetica, sans-serif">
      (50</font></td>
    <td width="2%" align="left" valign="top" bgcolor="#eeeeee"><font size="2" face="Arial, Helvetica, sans-serif">)</font></td>
    <td width="8%" align="right" valign="top" bgcolor="#eeeeee"><font size="2" face="Arial, Helvetica, sans-serif"><b>
      414</b></font></td>
    <td width="2%" align="left" valign="top" bgcolor="#eeeeee">&nbsp;</td>
    <td width="8%" align="right" valign="top" bgcolor="#eeeeee"><font size="2" face="Arial, Helvetica, sans-serif">109</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, Helvetica, sans-serif">Weighted
      average shares outstanding </font></td>
    <td align="right" valign="top"><font size="2" face="Arial, Helvetica, sans-serif"><b>891,446,812</b></font></td>
    <td align="left" valign="top">&nbsp;</td>
    <td align="right" valign="top"><font size="2" face="Arial, Helvetica, sans-serif">888,346,944</font></td>
    <td align="left" valign="top">&nbsp;</td>
    <td align="right" valign="top"><font size="2" face="Arial, Helvetica, sans-serif"><b>891,015,308</b></font></td>
    <td align="left" valign="top">&nbsp;</td>
    <td align="right" valign="top"><font size="2" face="Arial, Helvetica, sans-serif">887,876,818</font></td>
    <td align="left" valign="top">&nbsp;</td>
  </tr>
  <tr>
    <td align="left" valign="top" bgcolor="#eeeeee"><font size="2" face="Arial, Helvetica, sans-serif"><b>EPS
      (basic)</b></font></td>
    <td align="right" valign="top" bgcolor="#eeeeee"><font size="2" face="Arial, Helvetica, sans-serif">
      <b>0.21</b></font></td>
    <td align="left" valign="top" bgcolor="#eeeeee">&nbsp;</td>
    <td align="right" valign="top" bgcolor="#eeeeee"><font size="2" face="Arial, Helvetica, sans-serif">(0.06</font></td>
    <td align="left" valign="top" bgcolor="#eeeeee"><font size="2" face="Arial, Helvetica, sans-serif">)</font></td>
    <td align="right" valign="top" bgcolor="#eeeeee"><font size="2" face="Arial, Helvetica, sans-serif"><b>0.46</b></font></td>
    <td align="left" valign="top" bgcolor="#eeeeee">&nbsp;</td>
    <td align="right" valign="top" bgcolor="#eeeeee"><font size="2" face="Arial, Helvetica, sans-serif">0.12</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"><hr noshade size="1">
    </td>
    <td align="left" valign="top">&nbsp;    </td>
    <td align="left" valign="top"><hr noshade size="1">
    </td>
    <td align="left" valign="top">&nbsp;    </td>
    <td align="left" valign="top"><hr noshade size="1">
    </td>
    <td align="left" 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, Helvetica, sans-serif">Diluted
      EPS:</font></td>
    <td align="left" valign="top"><font size="2" face="Arial, Helvetica, sans-serif">&nbsp;</font></td>
    <td align="left" valign="top">&nbsp;</td>
    <td align="left" valign="top"><font size="2" face="Arial, Helvetica, sans-serif">&nbsp;</font></td>
    <td align="left" valign="top">&nbsp;</td>
    <td align="left" valign="top"><font size="2" face="Arial, Helvetica, sans-serif">&nbsp;</font></td>
    <td align="left" valign="top">&nbsp;</td>
    <td align="left" valign="top"><font size="2" face="Arial, Helvetica, sans-serif">&nbsp;</font></td>
    <td align="left" valign="top">&nbsp;</td>
  </tr>
  <tr>
    <td align="left" valign="top" bgcolor="#eeeeee"><font size="2" face="Arial, Helvetica, sans-serif">Net
      income</font></td>
    <td align="right" valign="top" bgcolor="#eeeeee"><font size="2" face="Arial, Helvetica, sans-serif">
      <b>189</b></font></td>
    <td align="left" valign="top" bgcolor="#eeeeee">&nbsp;</td>
    <td align="right" valign="top" bgcolor="#eeeeee"><font size="2" face="Arial, Helvetica, sans-serif">(50</font></td>
    <td align="left" valign="top" bgcolor="#eeeeee"><font size="2" face="Arial, Helvetica, sans-serif">)</font></td>
    <td align="right" valign="top" bgcolor="#eeeeee"><font size="2" face="Arial, Helvetica, sans-serif"><b>414</b></font></td>
    <td align="left" valign="top" bgcolor="#eeeeee">&nbsp;</td>
    <td align="right" valign="top" bgcolor="#eeeeee"><font size="2" face="Arial, Helvetica, sans-serif">109</font></td>
    <td align="left" valign="top" bgcolor="#eeeeee">&nbsp;</td>
  </tr>
  <tr>
    <td align="left" valign="top"><font size="2" face="Arial, Helvetica, sans-serif">Interest
      expense on convertible debt, net of tax </font></td>
    <td align="right" valign="top"><font size="2" face="Arial, Helvetica, sans-serif"> <b>1
      </b></font></td>
    <td align="left" valign="top">&nbsp;</td>
    <td align="right" valign="top"><font size="2" face="Arial, Helvetica, sans-serif">&#151;</font></td>
    <td align="left" valign="top">&nbsp;</td>
    <td align="right" valign="top"><font size="2" face="Arial, Helvetica, sans-serif"><b> 3</b></font></td>
    <td align="left" valign="top">&nbsp;</td>
    <td align="right" valign="top"><font size="2" face="Arial, Helvetica, sans-serif">&#151;</font></td>
    <td align="left" valign="top">&nbsp;</td>
  </tr>
  <tr>
    <td align="left" valign="top" bgcolor="#eeeeee"><font size="2" face="Arial, Helvetica, sans-serif">Net
      income, adjusted </font></td>
    <td align="right" valign="top" bgcolor="#eeeeee"><font size="2" face="Arial, Helvetica, sans-serif">
      <b> 190 </b></font></td>
    <td align="left" valign="top" bgcolor="#eeeeee">&nbsp;</td>
    <td align="right" valign="top" bgcolor="#eeeeee"><font size="2" face="Arial, Helvetica, sans-serif">(50</font></td>
    <td align="left" valign="top" bgcolor="#eeeeee"><font size="2" face="Arial, Helvetica, sans-serif">)</font></td>
    <td align="right" valign="top" bgcolor="#eeeeee"><font size="2" face="Arial, Helvetica, sans-serif"><b>417</b></font></td>
    <td align="left" valign="top" bgcolor="#eeeeee">&nbsp;</td>
    <td align="right" valign="top" bgcolor="#eeeeee"><font size="2" face="Arial, Helvetica, sans-serif">109</font></td>
    <td align="left" valign="top" bgcolor="#eeeeee">&nbsp;</td>
  </tr>
  <tr>
    <td align="left" valign="top"><font size="2" face="Arial, Helvetica, sans-serif">&nbsp;</font></td>
    <td align="left" valign="top"><font size="2" face="Arial, Helvetica, sans-serif">&nbsp;</font></td>
    <td align="left" valign="top">&nbsp;</td>
    <td align="left" valign="top"><font size="2" face="Arial, Helvetica, sans-serif">&nbsp;</font></td>
    <td align="left" valign="top">&nbsp;</td>
    <td align="left" valign="top"><font size="2" face="Arial, Helvetica, sans-serif">&nbsp;</font></td>
    <td align="left" valign="top">&nbsp;</td>
    <td align="left" valign="top"><font size="2" face="Arial, Helvetica, sans-serif">&nbsp;</font></td>
    <td align="left" valign="top">&nbsp;</td>
  </tr>
  <tr>
    <td align="left" valign="top" bgcolor="#eeeeee"><font size="2" face="Arial, Helvetica, sans-serif">Weighted
      average shares outstanding </font></td>
    <td align="right" valign="top" bgcolor="#eeeeee"><font size="2" face="Arial, Helvetica, sans-serif"><b>891,446,812</b></font></td>
    <td align="left" valign="top" bgcolor="#eeeeee">&nbsp;</td>
    <td align="right" valign="top" bgcolor="#eeeeee"><font size="2" face="Arial, Helvetica, sans-serif">888,346,944</font></td>
    <td align="left" valign="top" bgcolor="#eeeeee">&nbsp;</td>
    <td align="right" valign="top" bgcolor="#eeeeee"><font size="2" face="Arial, Helvetica, sans-serif"><b>891,015,308</b></font></td>
    <td align="left" valign="top" bgcolor="#eeeeee">&nbsp;</td>
    <td align="right" valign="top" bgcolor="#eeeeee"><font size="2" face="Arial, Helvetica, sans-serif">887,876,818</font></td>
    <td align="left" valign="top" bgcolor="#eeeeee">&nbsp;</td>
  </tr>
  <tr>
    <td align="left" valign="top"><font size="2" face="Arial, Helvetica, sans-serif">Dilutive
      effect of stock options </font></td>
    <td align="right" valign="top"><font size="2" face="Arial, Helvetica, sans-serif"> <b>1,604,142</b></font></td>
    <td align="left" valign="top">&nbsp;</td>
    <td align="right" valign="top"><font size="2" face="Arial, Helvetica, sans-serif">&#151;</font></td>
    <td align="left" valign="top">&nbsp;</td>
    <td align="right" valign="top"><font size="2" face="Arial, Helvetica, sans-serif"><b>3,971,242</b></font></td>
    <td align="left" valign="top">&nbsp;</td>
    <td align="right" valign="top"><font size="2" face="Arial, Helvetica, sans-serif">5,121,821</font></td>
    <td align="left" valign="top">&nbsp;</td>
  </tr>
  <tr>
    <td align="left" valign="top" bgcolor="#eeeeee"><font size="2" face="Arial, Helvetica, sans-serif">Dilutive
      effect of convertible debt </font></td>
    <td align="right" valign="top" bgcolor="#eeeeee"><font size="2" face="Arial, Helvetica, sans-serif">
      <b>41,880,160</b></font></td>
    <td align="left" valign="top" bgcolor="#eeeeee">&nbsp;</td>
    <td align="right" valign="top" bgcolor="#eeeeee"><font size="2" face="Arial, Helvetica, sans-serif">&#151;</font></td>
    <td align="left" valign="top" bgcolor="#eeeeee">&nbsp;</td>
    <td align="right" valign="top" bgcolor="#eeeeee"><font size="2" face="Arial, Helvetica, sans-serif"><b>41,880,160</b></font></td>
    <td align="left" valign="top" bgcolor="#eeeeee">&nbsp;</td>
    <td align="right" valign="top" bgcolor="#eeeeee"><font size="2" face="Arial, Helvetica, sans-serif">41,880,160</font></td>
    <td align="left" valign="top" bgcolor="#eeeeee">&nbsp;</td>
  </tr>
  <tr>
    <td align="left" valign="top"><font size="2" face="Arial, Helvetica, sans-serif">Number
      of shares used in calculating EPS </font></td>
    <td align="right" valign="top"><font size="2" face="Arial, Helvetica, sans-serif"><b>934,931,114</b></font></td>
    <td align="left" valign="top">&nbsp;</td>
    <td align="right" valign="top"><font size="2" face="Arial, Helvetica, sans-serif">888,346,944</font></td>
    <td align="left" valign="top">&nbsp;</td>
    <td align="right" valign="top"><font size="2" face="Arial, Helvetica, sans-serif"><b>936,866,710</b></font></td>
    <td align="left" valign="top">&nbsp;</td>
    <td align="right" valign="top"><font size="2" face="Arial, Helvetica, sans-serif">934,878,799</font></td>
    <td align="left" valign="top">&nbsp;</td>
  </tr>
  <tr>
    <td align="left" valign="top">
      <hr noshade size="1">
    </td>
    <td align="left" valign="top"><hr noshade size="1">
    </td>
    <td align="left" valign="top"><hr noshade size="1">
    </td>
    <td align="left" valign="top"><hr noshade size="1">
    </td>
    <td align="left" valign="top"><hr noshade size="1">
    </td>
    <td align="left" valign="top"><hr noshade size="1">
    </td>
    <td align="left" valign="top"><hr noshade size="1">
    </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, Helvetica, sans-serif"><b>EPS
      (diluted) </b></font></td>
    <td align="right" valign="top" bgcolor="#eeeeee"><font size="2" face="Arial, Helvetica, sans-serif">
      <b>0.20</b></font></td>
    <td align="left" valign="top" bgcolor="#eeeeee">&nbsp;</td>
    <td align="right" valign="top" bgcolor="#eeeeee"><font size="2" face="Arial, Helvetica, sans-serif">(0.06</font></td>
    <td align="left" valign="top" bgcolor="#eeeeee"><font size="2" face="Arial, Helvetica, sans-serif">)</font></td>
    <td align="right" valign="top" bgcolor="#eeeeee"><font size="2" face="Arial, Helvetica, sans-serif"><b>0.45</b></font></td>
    <td align="left" valign="top" bgcolor="#eeeeee">&nbsp;</td>
    <td align="right" valign="top" bgcolor="#eeeeee"><font size="2" face="Arial, Helvetica, sans-serif">0.12</font></td>
    <td align="left" valign="top" bgcolor="#eeeeee">&nbsp;</td>
  </tr>
  <tr>
    <td align="left" valign="top">
      <hr noshade size="1">
    </td>
    <td align="left" valign="top"><hr noshade size="1">
    </td>
    <td align="left" valign="top"><hr noshade size="1">
    </td>
    <td align="left" valign="top"><hr noshade size="1">
    </td>
    <td align="left" valign="top"><hr noshade size="1">
    </td>
    <td align="left" valign="top"><hr noshade size="1">
    </td>
    <td align="left" valign="top"><hr noshade size="1">
    </td>
    <td align="left" valign="top"><hr noshade size="1">
    </td>
    <td align="left" valign="top">&nbsp;</td>
  </tr>
</table>
<div style="text-indent:0%">
<p align="left"><font size="2" face="Arial, Helvetica, sans-serif">As of September 25, 2004, common shares issued were 904,885,116 shares of which 13,400,000 shares were owned by the Company as treasury stock.</font></p></div>
<div style="text-indent:0%">
<p align="left"><font size="2" face="Arial, Helvetica, sans-serif">As of September 25, 2004, there were outstanding stock options exercisable into the equivalent of 66,220,748 common shares and the equivalent of 42,095,001 common shares for convertible debt.</font></p>
</div>
<p align="center"><font face="Arial, Helvetica, sans-serif" size="2">F-19</font></p>
<hr noshade align="center" width="100%" size="2">
<div style="page-break-before:always"></div>
<page>
<a name="pf14"></a>
<p><a href="#contents"><font size="2">Back to Contents</font></a></p>
<table width="100%" border="0" cellspacing="0" cellpadding="0">
  <tr>
    <td width="3%"><font size="2" face="Arial, Helvetica, sans-serif"><b>16.</b></font></td>
    <td><font size="2" face="Arial, Helvetica, sans-serif"><b>Retirement plans</b></font></td>
  </tr>
</table>
<div style="text-indent:0%">
<p align="left"><font size="2" face="Arial, Helvetica, sans-serif">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></div>
<div style="text-indent:0%">
<p align="left"><font size="2" face="Arial, Helvetica, sans-serif">The components of the net periodic benefit cost include the following:</font></p></div>
<table width="100%" border="0" cellpadding="0" cellspacing="0">
  <tr valign="top">
    <td align="left"><font size="1" face="Arial, Helvetica, sans-serif">&nbsp;</font></td>
    <td colspan="7" align="center"><b><font size="1" face="Arial, Helvetica, sans-serif">(Unaudited)</font></b></td>
    <td align="left"><b><font size="1">&nbsp;</font></b></td>
  </tr>
  <tr valign="top">
    <td align="left">&nbsp;</td>
    <td colspan="7" align="center"><hr noshade size="1"></td>
    <td align="left">&nbsp;</td>
  </tr>
  <tr valign="top">
    <td align="left"><font size="1" face="Arial, Helvetica, sans-serif">&nbsp;</font></td>
    <td colspan="3" align="center"><b><font size="1" face="Arial, Helvetica, sans-serif">Three
      Months ended</font></b></td>
    <td align="left"><b><font size="1">&nbsp;</font></b></td>
    <td colspan="3" align="center"><b><font size="1" face="Arial, Helvetica, sans-serif">Nine
      Months ended</font></b></td>
    <td align="left"><b><font size="1">&nbsp;</font></b></td>
  </tr>
  <tr valign="top">
    <td align="left">&nbsp;</td>
    <td colspan="3" align="center"><hr noshade size="1"></td>
    <td align="center">&nbsp;</td>
    <td colspan="3" align="center"><hr noshade size="1"></td>
    <td align="left">&nbsp;</td>
  </tr>
  <tr valign="top">
    <td align="left"><font size="1" face="Arial, Helvetica, sans-serif"><b>In millions
      of U.S dollars</b></font></td>
    <td align="center"><b><font size="1" face="Arial, Helvetica, sans-serif">Sept.
      25, 2004</font></b></td>
    <td align="center"><b><font size="1">&nbsp;</font></b></td>
    <td align="center"><b><font size="1" face="Arial, Helvetica, sans-serif">Sept.
      27, 2003</font></b></td>
    <td align="center"><b><font size="1">&nbsp;</font></b></td>
    <td align="center"><b><font size="1" face="Arial, Helvetica, sans-serif">Sept.
      25, 2004</font></b></td>
    <td align="center"><b><font size="1">&nbsp;</font></b></td>
    <td align="center"><b><font size="1" face="Arial, Helvetica, sans-serif">Sept.
      27, 2003</font></b></td>
    <td align="left"><b><font size="1">&nbsp;</font></b></td>
  </tr>
  <tr>
    <td align="left" valign="top">
      <hr noshade size="1">
    </td>
    <td align="left" valign="top"><hr noshade size="1">
    </td>
    <td align="left" valign="top"><hr noshade size="1">
    </td>
    <td align="left" valign="top"><hr noshade size="1">
    </td>
    <td align="left" valign="top"><hr noshade size="1">
    </td>
    <td align="left" valign="top"><hr noshade size="1">
    </td>
    <td align="left" valign="top"><hr noshade size="1">
    </td>
    <td align="left" valign="top"><hr noshade size="1">
    </td>
    <td align="left" valign="top">&nbsp;</td>
  </tr>
  <tr valign="top">
    <td align="left" bgcolor="#eeeeee"><font size="2" face="Arial, Helvetica, sans-serif">Service
      cost</font></td>
    <td width="8%" align="right" bgcolor="#eeeeee"><font size="2" face="Arial, Helvetica, sans-serif"><b>3</b></font></td>
    <td width="2%" align="left" bgcolor="#eeeeee">&nbsp;</td>
    <td width="8%" align="right" bgcolor="#eeeeee"><font size="2" face="Arial, Helvetica, sans-serif">3</font></td>
    <td width="2%" align="left" bgcolor="#eeeeee">&nbsp;</td>
    <td width="8%" align="right" bgcolor="#eeeeee"><font size="2" face="Arial, Helvetica, sans-serif"><b>10</b></font></td>
    <td width="2%" align="left" bgcolor="#eeeeee">&nbsp;</td>
    <td width="8%" align="right" bgcolor="#eeeeee"><font size="2" face="Arial, Helvetica, sans-serif">8</font></td>
    <td width="2%" align="left" bgcolor="#eeeeee">&nbsp;</td>
  </tr>
  <tr valign="top">
    <td align="left"><font size="2" face="Arial, Helvetica, sans-serif">Interest
      cost </font></td>
    <td align="right"><font size="2" face="Arial, Helvetica, sans-serif"><b>3</b></font></td>
    <td align="left">&nbsp;</td>
    <td align="right"><font size="2" face="Arial, Helvetica, sans-serif">2</font></td>
    <td align="left">&nbsp;</td>
    <td align="right"><font size="2" face="Arial, Helvetica, sans-serif"><b>9</b></font></td>
    <td align="left">&nbsp;</td>
    <td align="right"><font size="2" face="Arial, Helvetica, sans-serif">7</font></td>
    <td align="left">&nbsp;</td>
  </tr>
  <tr valign="top">
    <td align="left" bgcolor="#eeeeee"><font size="2" face="Arial, Helvetica, sans-serif">Expected
      return on plan assets </font></td>
    <td align="right" bgcolor="#eeeeee"><font size="2" face="Arial, Helvetica, sans-serif"><b>(3</b></font></td>
    <td align="left" bgcolor="#eeeeee"><b><font size="2" face="Arial, Helvetica, sans-serif">)</font></b></td>
    <td align="right" bgcolor="#eeeeee"><font size="2" face="Arial, Helvetica, sans-serif">(2</font></td>
    <td align="left" bgcolor="#eeeeee"><font size="2" face="Arial, Helvetica, sans-serif">)</font></td>
    <td align="right" bgcolor="#eeeeee"><font size="2" face="Arial, Helvetica, sans-serif"><b>(7</b></font></td>
    <td align="left" bgcolor="#eeeeee"><b><font size="2" face="Arial, Helvetica, sans-serif">)</font></b></td>
    <td align="right" bgcolor="#eeeeee"><font size="2" face="Arial, Helvetica, sans-serif">(5</font></td>
    <td align="left" bgcolor="#eeeeee"><font size="2" face="Arial, Helvetica, sans-serif">)</font></td>
  </tr>
  <tr valign="top">
    <td align="left"><font size="2" face="Arial, Helvetica, sans-serif">Amortization
      of net (gain) and loss </font></td>
    <td align="right"><font size="2" face="Arial, Helvetica, sans-serif"><b>1</b></font></td>
    <td align="left">&nbsp;</td>
    <td align="right"><font size="2" face="Arial, Helvetica, sans-serif">1</font></td>
    <td align="left">&nbsp;</td>
    <td align="right"><font size="2" face="Arial, Helvetica, sans-serif"><b>3</b></font></td>
    <td align="left">&nbsp;</td>
    <td align="right"><font size="2" face="Arial, Helvetica, sans-serif">2</font></td>
    <td align="left">&nbsp;</td>
  </tr>
  <tr valign="top">
    <td align="left" bgcolor="#eeeeee"><font size="2" face="Arial, Helvetica, sans-serif">Amortization
      of prior service cost</font></td>
    <td align="right" bgcolor="#eeeeee"><font size="2" face="Arial, Helvetica, sans-serif"><b>2</b></font></td>
    <td align="left" bgcolor="#eeeeee">&nbsp;</td>
    <td align="right" bgcolor="#eeeeee"><font size="2" face="Arial, Helvetica, sans-serif">&#151;</font></td>
    <td align="left" bgcolor="#eeeeee">&nbsp;</td>
    <td align="right" bgcolor="#eeeeee"><font size="2" face="Arial, Helvetica, sans-serif"><b>2</b></font></td>
    <td align="left" bgcolor="#eeeeee">&nbsp;</td>
    <td align="right" bgcolor="#eeeeee"><font size="2" face="Arial, Helvetica, sans-serif">&#151;</font></td>
    <td align="left" bgcolor="#eeeeee">&nbsp;</td>
  </tr>
  <tr>
    <td align="left" valign="top">
      <hr noshade size="1">
    </td>
    <td align="left" valign="top"><hr noshade size="1">
    </td>
    <td align="left" valign="top"><hr noshade size="1">
    </td>
    <td align="left" valign="top"><hr noshade size="1">
    </td>
    <td align="left" valign="top"><hr noshade size="1">
    </td>
    <td align="left" valign="top"><hr noshade size="1">
    </td>
    <td align="left" valign="top"><hr noshade size="1">
    </td>
    <td align="left" valign="top"><hr noshade size="1">
    </td>
    <td align="left" valign="top">&nbsp;</td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td align="left"><font size="2" face="Arial, Helvetica, sans-serif">Net periodic
      benefit cost </font></td>
    <td align="right"><font size="2" face="Arial, Helvetica, sans-serif"><b>6</b></font></td>
    <td align="left">&nbsp;</td>
    <td align="right"><font size="2" face="Arial, Helvetica, sans-serif">4</font></td>
    <td align="left">&nbsp;</td>
    <td align="right"><font size="2" face="Arial, Helvetica, sans-serif"><b>17</b></font></td>
    <td align="left">&nbsp;</td>
    <td align="right"><font size="2" face="Arial, Helvetica, sans-serif">12</font></td>
    <td align="left">&nbsp;</td>
  </tr>
  <tr valign="top">
    <td align="left">
      <hr noshade size="1">
    </td>
    <td align="left"><hr noshade size="1">
    </td>
    <td align="left"><hr noshade size="1">
    </td>
    <td align="left"><hr noshade size="1">
    </td>
    <td align="left"><hr noshade size="1">
    </td>
    <td align="left"><hr noshade size="1">
    </td>
    <td align="left"><hr noshade size="1">
    </td>
    <td align="left"><hr noshade size="1">
    </td>
    <td align="left"><font size="1">&nbsp;</font></td>
  </tr>
</table>
<div style="text-indent:0%">
<p align="left"><font size="2" face="Arial, Helvetica, sans-serif">Employer contributions expected to be paid in 2004 are consistent with the amounts disclosed in the consolidated financial statements for the year ended December 31, 2003. </font></p></div>
<table width="100%" border="0" cellspacing="0" cellpadding="0">
  <tr>
    <td width="3%"><font size="2" face="Arial, Helvetica, sans-serif"><b>17. </b></font></td>
    <td><font size="2" face="Arial, Helvetica, sans-serif"><b>Fair value of stock-based
      compensation </b></font></td>
  </tr>
</table>
<div style="text-indent:0%">
<p align="left"><font size="2" face="Arial, Helvetica, sans-serif">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></div>
<div style="text-indent:0%">
<p align="left"><font size="2" face="Arial, Helvetica, sans-serif">The fair value of the Company's stock-based awards to employees was estimated using a Black-Scholes option-pricing model.</font></p></div>
<p align="center"><font face="Arial, Helvetica, sans-serif" size="2">F-20</font></p>
<hr noshade align="center" width="100%" size="2">
<div style="page-break-before:always"></div>
<page>
<a name="pf15"></a>
<p><a href="#contents"><font size="2">Back to Contents</font></a></p>
<div style="text-indent:0%">
<p align="left"><font size="2" face="Arial, Helvetica, sans-serif">The fair value was estimated using the following weighted-average assumptions:</font></p></div>
<table width="100%" cellspacing="0" cellpadding="0" border="0">
  <tr valign="top">
    <td align="left">&nbsp;</td>
    <td align="left"><hr noshade size="1">
    </td>
    <td align="left"><hr noshade size="1">
    </td>
    <td align="left"><hr noshade size="1">
    </td>
    <td align="left"><hr noshade size="1">
    </td>
    <td align="left"><hr noshade size="1">
    </td>
    <td align="left"><hr noshade size="1">
    </td>
    <td align="left"><hr noshade size="1">
    </td>
    <td align="left">&nbsp;</td>
  </tr>
  <tr valign="top">
    <td align="left"><font size="1" face="Arial, Helvetica, sans-serif">&nbsp;</font></td>
    <td align="center"><b><font size="1" face="Arial, Helvetica, sans-serif">Three
      months</font><br>
      <font size="1" face="Arial, Helvetica, sans-serif">ended
      September 25, 2004</font></b></td>
    <td align="left">&nbsp;</td>
    <td align="center"><b><font size="1" face="Arial, Helvetica, sans-serif">Three
      months</font><br>
      <font size="1" face="Arial, Helvetica, sans-serif">ended
      September 27, 2003</font></b></td>
    <td align="left">&nbsp;</td>
    <td align="center"><b><font size="1" face="Arial, Helvetica, sans-serif">Nine
      months</font><br>
      <font size="1" face="Arial, Helvetica, sans-serif">ended
      September 25, 2004</font></b></td>
    <td align="left">&nbsp;</td>
    <td align="center"><b><font size="1" face="Arial, Helvetica, sans-serif">Nine
      months</font><br>
      <font size="1" face="Arial, Helvetica, sans-serif">ended
      September 27, 2003</font></b></td>
    <td align="left">&nbsp;</td>
  </tr>
  <tr>
    <td align="left" valign="top">
      <hr noshade size="1">
    </td>
    <td align="left" valign="top"><hr noshade size="1">
    </td>
    <td align="left" valign="top"><hr noshade size="1">
    </td>
    <td align="left" valign="top"><hr noshade size="1">
    </td>
    <td align="left" valign="top"><hr noshade size="1">
    </td>
    <td align="left" valign="top"><hr noshade size="1">
    </td>
    <td align="left" valign="top"><hr noshade size="1">
    </td>
    <td align="left" valign="top"><hr noshade size="1">
    </td>
    <td align="left" valign="top">&nbsp;</td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td align="left"><font size="2" face="Arial, Helvetica, sans-serif">Expected
      life (years)</font></td>
    <td width="10%" align="right"><font size="2" face="Arial, Helvetica, sans-serif"><b>6</b></font></td>
    <td width="2%" align="left">&nbsp;</td>
    <td width="10%" align="right"><font size="2" face="Arial, Helvetica, sans-serif">&#151;</font></td>
    <td width="2%" align="left">&nbsp;</td>
    <td width="10%" align="right"><font size="2" face="Arial, Helvetica, sans-serif"><b>6</b></font></td>
    <td width="2%" align="left">&nbsp;</td>
    <td width="10%" align="right"><font size="2" face="Arial, Helvetica, sans-serif">5</font></td>
    <td width="2%" align="left">&nbsp;</td>
  </tr>
  <tr valign="top">
    <td align="left"><font size="2" face="Arial, Helvetica, sans-serif">Volatility</font></td>
    <td align="right"><font size="2" face="Arial, Helvetica, sans-serif"><b> 56.1</b></font></td>
    <td align="left"><font size="2" face="Arial, Helvetica, sans-serif"><b>%</b></font></td>
    <td align="right"><font size="2" face="Arial, Helvetica, sans-serif">&#151;</font></td>
    <td align="left">&nbsp;</td>
    <td align="right"><font size="2" face="Arial, Helvetica, sans-serif"><b> 56.4</b></font></td>
    <td align="left"><font size="2" face="Arial, Helvetica, sans-serif"><b>%</b></font></td>
    <td align="right"><font size="2" face="Arial, Helvetica, sans-serif"> 60</font></td>
    <td align="left"><font size="2" face="Arial, Helvetica, sans-serif">%</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td align="left"><font size="2" face="Arial, Helvetica, sans-serif">Risk-free
      interest rate</font></td>
    <td align="right"><font size="2" face="Arial, Helvetica, sans-serif"><b> 3.32</b></font></td>
    <td align="left"><font size="2" face="Arial, Helvetica, sans-serif"><b>%</b></font></td>
    <td align="right"><font size="2" face="Arial, Helvetica, sans-serif">&#151;</font></td>
    <td align="left">&nbsp;</td>
    <td align="right"><font size="2" face="Arial, Helvetica, sans-serif"><b>3.57</b></font></td>
    <td align="left"><font size="2" face="Arial, Helvetica, sans-serif"><b>%</b></font></td>
    <td align="right"><font size="2" face="Arial, Helvetica, sans-serif">2.71</font></td>
    <td align="left"><font size="2" face="Arial, Helvetica, sans-serif">%</font></td>
  </tr>
  <tr valign="top">
    <td align="left"><font size="2" face="Arial, Helvetica, sans-serif">Dividend
      yield</font></td>
    <td align="right"><font size="2" face="Arial, Helvetica, sans-serif"><b>0.6</b></font></td>
    <td align="left"><font size="2" face="Arial, Helvetica, sans-serif"><b>%</b></font></td>
    <td align="right"><font size="2" face="Arial, Helvetica, sans-serif">&#151;</font></td>
    <td align="left">&nbsp;</td>
    <td align="right"><font size="2" face="Arial, Helvetica, sans-serif"><b>0.5</b></font></td>
    <td align="left"><font size="2" face="Arial, Helvetica, sans-serif"><b>%</b></font></td>
    <td align="right"><font size="2" face="Arial, Helvetica, sans-serif"> 0.4</font></td>
    <td align="left"><font size="2" face="Arial, Helvetica, sans-serif">%</font></td>
  </tr>
  <tr>
    <td align="left" valign="top">
      <hr noshade size="1">
    </td>
    <td align="left" valign="top"><hr noshade size="1">
    </td>
    <td align="left" valign="top"><hr noshade size="1">
    </td>
    <td align="left" valign="top"><hr noshade size="1">
    </td>
    <td align="left" valign="top"><hr noshade size="1">
    </td>
    <td align="left" valign="top"><hr noshade size="1">
    </td>
    <td align="left" valign="top"><hr noshade size="1">
    </td>
    <td align="left" valign="top"><hr noshade size="1">
    </td>
    <td align="left" valign="top">&nbsp;</td>
  </tr>
</table>
<div style="text-indent:0%">
<p align="left"><font size="2" face="Arial, Helvetica, sans-serif">The weighted average fair value of options granted during the third quarter of 2004 was $9.07. No option was granted in the third quarter of 2003. </font></p></div>
<div style="text-indent:0%">
<p align="left"><font size="2" face="Arial, Helvetica, sans-serif">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></div>
<table width="100%" border="0" cellpadding="0" cellspacing="0">
  <tr valign="top">
    <td align="left"><font size="1" face="Arial, Helvetica, sans-serif">&nbsp;</font></td>
    <td colspan="7" align="center"><b><font size="1" face="Arial, Helvetica, sans-serif">(Unaudited)</font></b></td>
    <td align="left">&nbsp;</td>
  </tr>
  <tr valign="top">
    <td align="left">&nbsp;</td>
    <td colspan="7" align="center"><hr noshade size="1"></td>
    <td align="left">&nbsp;</td>
  </tr>
  <tr valign="top">
    <td align="left"><font size="1" face="Arial, Helvetica, sans-serif">&nbsp;</font></td>
    <td align="center"><b><font size="1" face="Arial, Helvetica, sans-serif">Three
      months ended </font><br>
      <font size="1" face="Arial, Helvetica, sans-serif">Sept.
      25, 2004</font></b></td>
    <td align="left">&nbsp;</td>
    <td align="center"><b><font size="1" face="Arial, Helvetica, sans-serif">Three
      months ended </font><br>
      <font size="1" face="Arial, Helvetica, sans-serif">Sept.
      27, 2003</font></b></td>
    <td align="left">&nbsp;</td>
    <td align="center"><b><font size="1" face="Arial, Helvetica, sans-serif">Nine
      months ended </font><br>
      <font size="1" face="Arial, Helvetica, sans-serif">Sept.
      25, 2004</font></b></td>
    <td align="left">&nbsp;</td>
    <td align="center"><b><font size="1" face="Arial, Helvetica, sans-serif">Nine
      months ended </font><br>
      <font size="1" face="Arial, Helvetica, sans-serif">Sept.
      27, 2003</font></b></td>
    <td align="left">&nbsp;</td>
  </tr>
  <tr>
    <td align="left" valign="top">
      <hr noshade size="1">
    </td>
    <td align="left" valign="top"><hr noshade size="1">
    </td>
    <td align="left" valign="top"><hr noshade size="1">
    </td>
    <td align="left" valign="top"><hr noshade size="1">
    </td>
    <td align="left" valign="top"><hr noshade size="1">
    </td>
    <td align="left" valign="top"><hr noshade size="1">
    </td>
    <td align="left" valign="top"><hr noshade size="1">
    </td>
    <td align="left" valign="top"><hr noshade size="1">
    </td>
    <td align="left" valign="top">&nbsp;</td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td align="left"><font size="2" face="Arial, Helvetica, sans-serif">Net income
      , as reported</font></td>
    <td width="10%" align="right"><font size="2" face="Arial, Helvetica, sans-serif"><b>189</b></font></td>
    <td width="2%" align="left">&nbsp;</td>
    <td width="10%" align="right"><font size="2" face="Arial, Helvetica, sans-serif">(50</font></td>
    <td width="2%" align="left"><font size="2" face="Arial, Helvetica, sans-serif">)</font></td>
    <td width="10%" align="right"><font size="2" face="Arial, Helvetica, sans-serif"><b>414</b></font></td>
    <td width="2%" align="left">&nbsp;</td>
    <td width="10%" align="right"><font size="2" face="Arial, Helvetica, sans-serif">109</font></td>
    <td width="2%" align="left">&nbsp;</td>
  </tr>
  <tr valign="top">
    <td align="left"><font size="2" face="Arial, Helvetica, sans-serif">Deduct:
      </font><br> </td>
    <td align="right"><font size="2" face="Arial, Helvetica, sans-serif"><b>(40</b></font></td>
    <td align="left"><font size="2" face="Arial, Helvetica, sans-serif"><b>)</b></font></td>
    <td align="right"><font size="2" face="Arial, Helvetica, sans-serif">(52</font></td>
    <td align="left"><font size="2" face="Arial, Helvetica, sans-serif">)</font></td>
    <td align="right"><font size="2" face="Arial, Helvetica, sans-serif"><b> (127</b></font></td>
    <td align="left"><font size="2" face="Arial, Helvetica, sans-serif"><b>)</b></font></td>
    <td align="right"><font size="2" face="Arial, Helvetica, sans-serif">(152</font></td>
    <td align="left"><font size="2" face="Arial, Helvetica, sans-serif">)</font></td>
  </tr>
  <tr valign="top">
    <td align="left"><font size="2" face="Arial, Helvetica, sans-serif">Total
      stock-based employee compensation expense</font><br> <font size="2" face="Arial, Helvetica, sans-serif">determined
      under FAS 123, net of related tax effects</font></td>
    <td align="left">&nbsp;</td>
    <td align="left">&nbsp;</td>
    <td align="left">&nbsp;</td>
    <td align="left">&nbsp;</td>
    <td align="left">&nbsp;</td>
    <td align="left">&nbsp;</td>
    <td align="left">&nbsp;</td>
    <td align="left">&nbsp;</td>
  </tr>
  <tr valign="top">
    <td align="left"><font size="2" face="Arial, Helvetica, sans-serif">&nbsp;</font></td>
    <td align="left"><font size="2" face="Arial, Helvetica, sans-serif">&nbsp;</font></td>
    <td align="left">&nbsp;</td>
    <td align="left"><font size="2" face="Arial, Helvetica, sans-serif">&nbsp;</font></td>
    <td align="left">&nbsp;</td>
    <td align="left"><font size="2" face="Arial, Helvetica, sans-serif">&nbsp;</font></td>
    <td align="left">&nbsp;</td>
    <td align="left"><font size="2" face="Arial, Helvetica, sans-serif">&nbsp;</font></td>
    <td align="left">&nbsp;</td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td align="left"><font size="2" face="Arial, Helvetica, sans-serif">Net income,
        pro forma</font></td>
    <td align="right"><font size="2" face="Arial, Helvetica, sans-serif"><b>149</b></font></td>
    <td align="left">&nbsp;</td>
    <td align="right"><font size="2" face="Arial, Helvetica, sans-serif">(102</font></td>
    <td align="left"><font size="2" face="Arial, Helvetica, sans-serif">)</font></td>
    <td align="right"><font size="2" face="Arial, Helvetica, sans-serif"><b>287</b></font></td>
    <td align="left">&nbsp;</td>
    <td align="right"><font size="2" face="Arial, Helvetica, sans-serif">(43</font></td>
    <td align="left"><font size="2" face="Arial, Helvetica, sans-serif">)</font></td>
  </tr>
  <tr valign="top">
    <td></td>
    <td valign="top"><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"><font size="2" face="Arial, Helvetica, sans-serif">Earnings
      per share:</font></td>
    <td align="left"><font size="2" face="Arial, Helvetica, sans-serif">&nbsp;</font></td>
    <td align="left">&nbsp;</td>
    <td align="left"><font size="2" face="Arial, Helvetica, sans-serif">&nbsp;</font></td>
    <td align="left">&nbsp;</td>
    <td align="left"><font size="2" face="Arial, Helvetica, sans-serif">&nbsp;</font></td>
    <td align="left">&nbsp;</td>
    <td align="left"><font size="2" face="Arial, Helvetica, sans-serif">&nbsp;</font></td>
    <td align="left">&nbsp;</td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td align="left"><font size="2" face="Arial, Helvetica, sans-serif">&nbsp;&nbsp;&nbsp;Basic,
      as reported</font></td>
    <td align="right"><font size="2" face="Arial, Helvetica, sans-serif"><b>0.21</b></font></td>
    <td align="left">&nbsp;</td>
    <td align="right"><font size="2" face="Arial, Helvetica, sans-serif">(0.06</font></td>
    <td align="left"><font size="2" face="Arial, Helvetica, sans-serif">)</font></td>
    <td align="right"><font size="2" face="Arial, Helvetica, sans-serif"><b>0.46</b></font></td>
    <td align="left">&nbsp;</td>
    <td align="right"><font size="2" face="Arial, Helvetica, sans-serif">0.12</font></td>
    <td align="left">&nbsp;</td>
  </tr>
  <tr valign="top">
    <td align="left"><font size="2" face="Arial, Helvetica, sans-serif">&nbsp;&nbsp;&nbsp;Basic,
      pro forma</font></td>
    <td align="right"><font size="2" face="Arial, Helvetica, sans-serif"><b>0.17</b></font></td>
    <td align="left">&nbsp;</td>
    <td align="right"><font size="2" face="Arial, Helvetica, sans-serif">(0.11</font></td>
    <td align="left"><font size="2" face="Arial, Helvetica, sans-serif">)</font></td>
    <td align="right"><font size="2" face="Arial, Helvetica, sans-serif"><b>0.32</b></font></td>
    <td align="left">&nbsp;</td>
    <td align="right"><font size="2" face="Arial, Helvetica, sans-serif">(0.05</font></td>
    <td align="left"><font size="2" face="Arial, Helvetica, sans-serif">)</font></td>
  </tr>
  <tr valign="top">
    <td align="left"><font size="2" face="Arial, Helvetica, sans-serif">&nbsp;</font></td>
    <td align="left"><font size="2" face="Arial, Helvetica, sans-serif">&nbsp;</font></td>
    <td align="left">&nbsp;</td>
    <td align="left"><font size="2" face="Arial, Helvetica, sans-serif">&nbsp;</font></td>
    <td align="left">&nbsp;</td>
    <td align="left"><font size="2" face="Arial, Helvetica, sans-serif">&nbsp;</font></td>
    <td align="left">&nbsp;</td>
    <td align="left"><font size="2" face="Arial, Helvetica, sans-serif">&nbsp;</font></td>
    <td align="left">&nbsp;</td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td align="left"><font size="2" face="Arial, Helvetica, sans-serif">&nbsp;&nbsp;&nbsp;Diluted,
      as reported</font></td>
    <td align="right"><font size="2" face="Arial, Helvetica, sans-serif"><b>0.20</b></font></td>
    <td align="left">&nbsp;</td>
    <td align="right"><font size="2" face="Arial, Helvetica, sans-serif">(0.06</font></td>
    <td align="left"><font size="2" face="Arial, Helvetica, sans-serif">)</font></td>
    <td align="right"><font size="2" face="Arial, Helvetica, sans-serif"><b>0.45</b></font></td>
    <td align="left">&nbsp;</td>
    <td align="right"><font size="2" face="Arial, Helvetica, sans-serif">0.12</font></td>
    <td align="left">&nbsp;</td>
  </tr>
  <tr valign="top">
    <td align="left"><font size="2" face="Arial, Helvetica, sans-serif">&nbsp;&nbsp;&nbsp;Diluted,
      pro forma</font></td>
    <td align="right"><font size="2" face="Arial, Helvetica, sans-serif"><b>0.16</b></font></td>
    <td align="left">&nbsp;</td>
    <td align="right"><font size="2" face="Arial, Helvetica, sans-serif">(0.11</font></td>
    <td align="left"><font size="2" face="Arial, Helvetica, sans-serif">)</font></td>
    <td align="right"><font size="2" face="Arial, Helvetica, sans-serif"><b>0.31</b></font></td>
    <td align="left">&nbsp;</td>
    <td align="right"><font size="2" face="Arial, Helvetica, sans-serif">(0.05</font></td>
    <td align="left"><font size="2" face="Arial, Helvetica, sans-serif">)</font></td>
  </tr>
  <tr valign="top">
    <td align="left">
      <hr noshade size="1">
    </td>
    <td align="left"><hr noshade size="1">
    </td>
    <td align="left"><hr noshade size="1">
    </td>
    <td align="left"><hr noshade size="1">
    </td>
    <td align="left"><hr noshade size="1">
    </td>
    <td align="left"><hr noshade size="1">
    </td>
    <td align="left"><hr noshade size="1">
    </td>
    <td align="left"><hr noshade size="1">
    </td>
    <td align="left">&nbsp;</td>
  </tr>
</table>
<table width="100%" border="0" cellspacing="0" cellpadding="0">
  <tr>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
  </tr>
  <tr>
    <td width="3%"><font size="2" face="Arial, Helvetica, sans-serif"><b>18.</b></font></td>
    <td><font size="2" face="Arial, Helvetica, sans-serif"><b>Dividends </b></font></td>
  </tr>
</table>

<div style="text-indent:0%">
<p align="left"><font size="2" face="Arial, Helvetica, sans-serif">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>
</div>
<div style="text-indent:0%">
<p align="left"><font size="2" face="Arial, Helvetica, sans-serif">At 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></div>
<p align="center"><font face="Arial, Helvetica, sans-serif" size="2">F-21</font></p>
<hr noshade align="center" width="100%" size="2">
<div style="page-break-before:always"></div>
<page>
<a name="pF16"></a>
<p><a href="#contents"><font size="2">Back to Contents</font></a></p>
<table width="100%" border="0" cellspacing="0" cellpadding="0">
  <tr>
    <td width="3%"><font size="2" face="Arial, Helvetica, sans-serif"><b>19.</b></font></td>
    <td><font size="2" face="Arial, Helvetica, sans-serif"><b>Contingencies</b></font></td>
  </tr>
</table>
<div style="text-indent:0%">
<p align="left"><font size="2" face="Arial, Helvetica, sans-serif">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 material negative effect on the Company&#8217;s
    results of operations or its financial position for the period in which they
occur.</font></p>
</div>
<table width="100%" border="0" cellspacing="0" cellpadding="0">
  <tr>
    <td width="3%"><font size="2" face="Arial, Helvetica, sans-serif"><b>20.</b></font></td>
    <td><font size="2" face="Arial, Helvetica, sans-serif"><b>Claims and Legal
    proceedings</b></font></td>
  </tr>
</table>

<div style="text-indent:0%">
<p align="left"><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&#8212;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&#8217;s results of operations and ability to compete.</font></p>
</div>
<div style="text-indent:0%">
<p align="left"><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. 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. In the event of litigation which is adversely determined with respect to
the Company&#8217;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, a material adverse effect could impact the operations or financial condition at the time it were to materialize.</font></p></div>
<div style="text-indent:0%">
<p align="left"><font size="2" face="Arial, Helvetica, sans-serif">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></div>
<p align="center"><font face="Arial, Helvetica, sans-serif" size="2">F-22</font></p>
<hr noshade align="center" width="100%" size="2">
<div style="page-break-before:always"></div>
<page> <a name="p31"></a>
<p align="center"><font size="2" face="Arial, Helvetica, sans-serif"><b>SIGNATURES </b></font></p>
<div style="text-indent:3%">
  <p align="left"><font size="2" face="Arial, Helvetica, sans-serif">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%" border="0" cellspacing="0" cellpadding="0">
  <tr>
    <td><font size="2" face="Arial, Helvetica, sans-serif">Date: October 29,
        2004</font></td>
    <td width="5%"><font size="2" face="sans-serif">By:</font></td>
    <td width="40%"><font size="2" face="sans-serif">/s/ PASQUALE PISTORIO</font></td>
  </tr>
  <tr>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td><hr align="left" width="200" size="1" noshade>
    </td>
  </tr>
  <tr>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
  </tr>
  <tr>
    <td>&nbsp;</td>
    <td><font size="2" face="Arial, Helvetica, sans-serif">Name: </font></td>
    <td><font size="2" face="Arial, Helvetica, sans-serif">Pasquale Pistorio</font></td>
  </tr>
  <tr>
    <td>&nbsp;</td>
    <td><font size="2" face="Arial, Helvetica, sans-serif">Title:</font></td>
    <td><font size="2" face="Arial, Helvetica, sans-serif">President and Chief
        Executive Officer</font></td>
  </tr>
  <tr>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
  </tr>
</table>
<p align="left"><font size="2" face="Arial, Helvetica, sans-serif">Enclosure:
    STMicroelectronics N.V.&#8217;s Third quarter of 2004:</font></p>
<table width="100%" border="0" cellspacing="0" cellpadding="0">
  <tr>
    <td width="4%" valign="top">&#8226;</td>
    <td width="1%">&nbsp;</td>
    <td><font size="2" face="Arial, Helvetica, sans-serif">Operating and Financial
        Review and Prospects;</font></td>
  </tr>
  <tr>
    <td valign="top">&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
  </tr>
  <tr>
    <td valign="top">&#8226;</td>
    <td>&nbsp;</td>
    <td><font size="2" face="Arial, Helvetica, sans-serif">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 nine months ended September&nbsp;25, 2004;
        and</font></td>
  </tr>
  <tr>
    <td valign="top">&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
  </tr>
  <tr>
    <td valign="top">&#8226;</td>
    <td>&nbsp;</td>
    <td><font size="2" face="Arial, Helvetica, sans-serif">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="0"><tr><td></td>
</tr>
</table>
<hr noshade align="center" width="100%" size="2">
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<DOCUMENT>
<TYPE>EX-12
<SEQUENCE>4
<FILENAME>b769527ex12-1.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>VOLUNTARY CERTIFICATION OF PASQUALE
      PISTORIO, PRESIDENT AND<br>
  CHIEF EXECUTIVE OFFICER OF STMICROELECTRONICS N.V., PURSUANT TO<br>
  SECTION 302
  OF THE SARBANES-OXLEY ACT OF 2002 </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: October 29, 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>5
<FILENAME>b769527ex12-2.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 OF CARLO
      FERRO, CORPORATE VICE<br>
      PRESIDENT AND CHIEF FINANCIAL OFFICER OF STMICROELECTRONICS N.V.,<br>
      PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
</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: October 29, 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>6
<FILENAME>b769527ex13-1.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 September 25, 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: October 29, 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: October 29, 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-----
