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<SEC-DOCUMENT>0001021231-05-000358.txt : 20050504
<SEC-HEADER>0001021231-05-000358.hdr.sgml : 20050504
<ACCEPTANCE-DATETIME>20050504170802
ACCESSION NUMBER:		0001021231-05-000358
CONFORMED SUBMISSION TYPE:	6-K
PUBLIC DOCUMENT COUNT:		7
CONFORMED PERIOD OF REPORT:	20050504
FILED AS OF DATE:		20050504
DATE AS OF CHANGE:		20050504

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:		05800070

	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>b792748-6k.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="3">SECURITIES AND EXCHANGE COMMISSION</font><br>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 May 4, 2005</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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<p align="left"><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&nbsp;20-F or Form 40-F:</font></p>
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    <td width="45%" align="right"><font size="2" face="Arial, Helvetica, sans-serif">Form 20-F</font></td>
    <td width="10%" align="left">&nbsp;&nbsp;&nbsp;&nbsp;<img src="tickedbox.gif"></td>
    <td align="left"><font size="2" face="Arial, Helvetica, sans-serif">Form 40-F</font>&nbsp;&nbsp;&nbsp;&nbsp;<img src="emptybox.gif"></td>
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    <td align="left">&nbsp;</td>
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<p align="left"><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="10%" align="left">&nbsp;&nbsp;&nbsp;&nbsp;<img src="emptybox.gif"></td>
    <td align="left"><font size="2" face="Arial, Helvetica, sans-serif">No</font>&nbsp;&nbsp;&nbsp;&nbsp;<img src="tickedbox.gif"></td>
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<p align="left"><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>
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    <td width="45%" align="right"><font size="2" face="Arial, Helvetica, sans-serif">Yes</font></td>
    <td width="10%" align="left">&nbsp;&nbsp;&nbsp;&nbsp;<img src="emptybox.gif"></td>
    <td align="left"><font size="2" face="Arial, Helvetica, sans-serif">No</font>&nbsp;&nbsp;&nbsp;&nbsp;<img src="tickedbox.gif"></td>
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<p align="left"><font size="2" face="Arial, Helvetica, sans-serif">If &#147;Yes&#148; is marked, indicate below the file number assigned to the registrant in connection with Rule 12g3-2(b): 82- __________</font></p>
<p align="left"><font size="2" face="Arial, Helvetica, sans-serif">&nbsp;Enclosure: STMicroelectronics N.V.&#146;s First Quarter 2005:</font></p>
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<font size="2" face="Arial, Helvetica, sans-serif">Operating and Financial Review and Prospects;</font></td>
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  <td>&nbsp;</td>
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<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&#146; Equity and related Notes for the three months ended April 2, 2005; and</font></td>
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<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><a href="#contents"><font size="2">Back to Contents</font></a></p>
<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>
<p align="left"><font size="2" face="Arial, Helvetica, sans-serif">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<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&#146; Equity for the three months ended April 2, 2005 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 &#147;&#151;Critical Accounting Policies Using Significant Estimates&#148;, &#147;&#151;Business Outlook&#148; and &#147;Liquidity and
Capital Resources&#151;Financial Outlook&#148;. 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 &#147;Cautionary Note Regarding Forward-Looking Statements&#148; and &#147;Item 3. Key Information&#151;Risk Factors&#148; included in our annual report on Form 20-F for the year ended December&nbsp;31, 2004 as filed with the U.S. Securities and Exchange Commission (the &#147;Commission&#148; or the &#147;SEC&#148;) on March&nbsp;23,&nbsp;2005 (the &#147;Form 20-F&#148;), as they may be updated in our SEC submissions from
time to time. We assume no obligation to update the forward-looking statements or such risk factors.</i></font></p>
<p align="left"><font size="2" face="Arial, Helvetica, sans-serif"><b><i>Critical Accounting Policies Using Significant Estimates</i></b></font></p>
<p align="left"><font size="2" face="Arial, Helvetica, sans-serif">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The preparation of our Consolidated Financial Statements in accordance with accounting principles generally accepted in the United States of America (&#147;U.S. GAAP&#148;), requires us to make estimates and assumptions that have a significant impact on the results we report in our consolidated financial statements, which we discuss under the section &#147;Results of Operations&#148;. Some of our accounting policies require us to make difficult and subjective judgments that can 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; reserves for price protection to certain distributor customers; allowances for doubtful accounts; inventory reserves and normal manufacturing capacity thresholds to determine costs to be capitalized in inventory; accruals for warranty costs; 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 non-recurring special charges; assumptions used in calculating pension obligations and pro forma share-based compensation; assessment of hedge effectiveness of derivative instruments; deferred income tax assets, including required valuation allowances and liabilities; as well as
provisions for specifically identified income tax exposures. We base our estimates and assumptions on historical experience and on various other factors such as market trends and business plans that we believe to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities. While we regularly evaluate our estimates and assumptions, our actual results may differ materially and adversely from our estimates. To the extent there are material differences between the actual results and these estimates, our future results of operations could be significantly affected.</font></p>
<p align="left"><font size="2" face="Arial, Helvetica, sans-serif">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;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>
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<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 all of the following conditions have been met: (a) persuasive evidence of an arrangement exists; (b) delivery has occurred; (c) the selling price is fixed or determinable; and (d) collectibility is reasonably assured. This 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.  </font></td>
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<td align="left"><font size="2" face="Arial, Helvetica, sans-serif">Consistent with standard business practice in the semiconductor industry, price protection is granted to distribution customers on their existing inventory of our products to compensate them for declines in market prices. The ultimate decision to authorize a distributor refund remains fully within our control. We accrue a provision for price protection based on a rolling historical price trend computed on a monthly basis as a percentage of gross distributor sales. This historical price trend represents differences in recent months between the invoiced price and the final price to the distributor, adjusted if required, to accommodate a significant move in the current market price. The short outstanding inventory time period, visibility into the
standard inventory product pricing (as opposed to certain customized products) and long distributor pricing history have enabled us to reliably estimate price protection provisions at period-end. We record the accrued amounts as a deduction of revenue at the time of the sale. If market conditions differ from our assumptions, this could have an impact on future periods; in particular, if market conditions were to deteriorate, net revenues could be reduced due to higher product returns and price reductions at the time these adjustments occur.</font></td>
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<p>&nbsp;</p>
<p align="center"><font size="2" face="Arial, Helvetica, sans-serif">2</font></p>
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<td align="left"><font size="2" face="Arial, Helvetica, sans-serif">Our customers occasionally return our products for technical reasons. Our standard terms and conditions of sale provide that if we determine that products are non-conforming, we will repair or replace the non-conforming products, or issue a credit or rebate of the purchase price. Quality returns are not related to any technological obsolescence issues and are identified shortly after sale in customer quality control testing. Quality returns are always associated with end-user customers, not with distribution channels. We provide for such returns when they are considered as probable and can be reasonably estimated. We record the accrued amounts as a reduction of revenue.</font></td>
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<td align="left"><font size="2" face="Arial, Helvetica, sans-serif">We do not have insurance against product claims and we record a provision for warranty costs as a charge against cost of sales based on historical trends of warranty costs incurred as a percentage of sales which we have determined to be a reasonable estimate of the probable losses to be incurred for warranty claims in a period. Any potential warranty claims are subject to our determination that we are at fault and liable for damages, and such claims usually must be submitted within a short period following the date of sale. This warranty is given in lieu of all other warranties, conditions or terms expressed or implied by statute or common law. We limit our liability to the price allocable to the products which gives rise to the
claims.</font></td>
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<td align="left"><font size="2" face="Arial, Helvetica, sans-serif">We maintain an allowance for doubtful accounts for potential estimated losses resulting from our customers&#146; inability to make required payments. We base our estimates on historical collection trends. We recorded a provision of 1.0% of total receivables in the first quarter of 2005. In addition, we are required to evaluate our customers&#146; credit ratings from time to time and take an additional provision for any specific account that we estimate as doubtful. Although we have determined that our most significant customers are creditworthy, if the financial condition of our customers were to deteriorate, resulting in an impairment of their ability to make payments, additional allowances could be required. </font></td>
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<font size="2" face="Arial, Helvetica, sans-serif"><b>Goodwill</b> <b>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 not amortized but are instead 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 April
2, 2005, the value of goodwill amounted to $228 million.</font></td>
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<font size="2" face="Arial, Helvetica, sans-serif"><b>Impairment</b> <b>of goodwill</b>.
Goodwill acquired in business combinations is not amortized and is instead 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 one
level below the three semiconductor product groups described in the &#147;<i>Business
Overview</i>&#148; included in this Form 6-K. This impairment test determines
whether 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, including its allocated goodwill. If lower, the implied fair value of the
reporting unit goodwill is then compared to the carrying value of the goodwill
and an impairment charge is recognized for any excess. In determining the fair
value of a reporting unit, we usually estimate the expected discounted future
cash flows associated with the reporting unit. Significant management judgments
and estimates are used in forecasting the future discounted cash flows including:
the applicable industry&#146;s sales volume forecast and selling price evolution,
the reporting unit&#146;s market penetration, the market acceptance of certain
new technologies and relevant costs structure. Our evaluations are based on financial
plans updated with the latest available projections of the semiconductor market
evolution, our sales expectations and our costs evaluation and are consistent
with the plans and estimates that we use to manage our business. It is possible,
however, that the plans and estimates used may be incorrect, and future adverse
changes in market conditions or operating results of acquired businesses not
in line with our estimates may require impairment of certain goodwill. For example,
in the first quarter of 2005, following the decision taken in January 2005 to
discontinue the Customer Premises Equipment (CPE) product lines, we recorded
an impairment charge of $39 million on goodwill.</font></td>
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<p>&nbsp;</p>
<p align="center"><font size="2" face="Arial, Helvetica, sans-serif">3</font></p>
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<font size="2" face="Arial, Helvetica, sans-serif"><b>Intangible</b> <b>assets
subject to amortization</b>. Intangible assets subject to amortization include
the cost of technologies and licenses purchased from third parties, internally
developed software which is capitalized and purchased software. Intangible assets
subject to amortization are reflected net of any impairment losses. 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 determining
recoverability, we initially assess whether the carrying value exceeds the undiscounted
cash flows associated with the intangible assets. If exceeded, we then evaluate
whether an
impairment charge is required by determining if the asset&#146;s carrying value
also exceeds its fair value. An impairment loss is recognized for the excess
of the carrying amount over the fair value. We normally estimate the fair value
based on the projected discounted future cash flows associated with the intangible
assets. 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&#146;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. For example in the first quarter of 2005, we recorded an impairment
of $24&nbsp;million of intangible assets mainly related to the decision taken
in January 2005 to discontinue the Customer Premises Equipment (&#147;CPE&#148;)
product lines. At April 2, 2005, the value of intangible assets subject to amortization
amounted to $250 million.</font></td>
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<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 may become significantly underutilized or obsolete as a result of rapid changes in demand and ongoing technological evolution. We estimate the useful life of our manufacturing equipment, which is the largest component of our long-lived assets, to be six years. This estimate is based on our experience with using equipment over time. Depreciation expense is a major element of our manufacturing cost structure. We begin to depreciate new equipment when it is put into use.</font></td>
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  <td width="3%">&nbsp;</td>
<td width="3%"><font size="2" face="Arial, Helvetica, sans-serif">&nbsp;</font></td>
<td align="left"><font size="2" face="Arial, Helvetica, sans-serif">We evaluate each period whether there is reason to suspect that tangible assets or groups of assets might not be recoverable. Several impairment indicators exist for making this assessment, such as: significant changes in the technological, market, economic or legal environment in which we operate or in the market to which the asset is dedicated; available evidence of obsolescence of the asset; strategic management decisions impacting production or indication that its economic performance is, or will be, worse than expected. In determining the recoverability of assets to be held and used, we initially assess whether the carrying value exceeds the undiscounted cash flows associated with the tangible assets or group of assets. If exceeded, we then
evaluate whether an impairment charge is required by determining if the asset&#146;s carrying value also exceeds its fair value. We normally estimate this fair value based on independent market appraisals or the sum of discounted future cash flows, using market assumptions such as the utilization of our fabrication facilities and the ability to upgrade such facilities, change in the selling price and the adoption of new technologies. We also evaluate the continued validity of an asset&#146;s useful life when impairment indicators are identified. Assets classified as held for disposal are reflected at the lower of their carrying amount or fair value less selling costs and are not depreciated during the selling period. Selling costs include incremental direct costs to transact the sale
that we would not have incurred except for the decision to sell.</font></td>
</tr>
</table>
<p>&nbsp;</p>
<p align="center"><font size="2" face="Arial, Helvetica, sans-serif">4</font></p>
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<tr valign="top">
  <td>&nbsp;</td>
  <td>&nbsp;</td>
  <td align="left">&nbsp;</td>
</tr>
<tr valign="top">
  <td width="3%">&nbsp;</td>
<td width="3%"><font size="2" face="Arial, Helvetica, sans-serif">&nbsp;</font></td>
<td align="left"><font size="2" face="Arial, Helvetica, sans-serif">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 which 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. Since a significant portion of our tangible assets are carried by our European affiliates and their cost of operations are mainly denominated in euros, while revenues primarily are denominated in U.S. dollars, the exchange rate dynamic may trigger impairment charges.</font></td>
</tr>
<tr valign="top">
  <td>&nbsp;</td>
  <td>&nbsp;</td>
  <td align="left">&nbsp;</td>
</tr>
</table>
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<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"><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; the cost is therefore dependent on our manufacturing performance. In the case of underutilization of our manufacturing facilities, we estimate the costs associated with the excess capacity; these costs are not included in the valuation of inventories but charged directly to cost of sales.</font></td>
</tr>
</table>
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<tr valign="top">
  <td></td>
  <td>&nbsp;</td>
  <td align="left">&nbsp;</td>
</tr>
<tr valign="top">
<td width="3%"></td>
<td width="3%"><font size="2" face="Arial, Helvetica, sans-serif">&nbsp;</font></td>
<td align="left"><font size="2" face="Arial, Helvetica, sans-serif">The valuation of inventory requires us to estimate obsolete or excess inventory as well as inventory that is not of saleable quality. Provisions for obsolescence are estimated for excess uncommitted inventories based on the previous quarter sales, order backlog 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 provisions, which would have a negative impact on our gross margin.</font></td>
</tr>
</table>
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<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"><b>Restructuring charges.</b> We have undertaken, and we may continue to undertake, significant restructuring initiatives, which have required us, or may require us in the future, 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 non&nbsp;voluntary termination benefit arrangements such as severance and outplacement 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 operate 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 of amounts previously recorded. The potential impact of these charges could be material and have a material adverse effect on our results of operations or financial condition. In the first quarter of 2005, the amount of restructuring charges and other related closure costs amounted to $15 million before taxes, out of which $7 million related to our formerly announced October 2003 plan and $8 million related to our new 2005 restructuring initiatives.
</font></td>
</tr>
<tr>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
</tr>
</table>
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<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"><b>Income</b> <b>taxes</b>. We are required to make estimates and judgments in determining income tax expense for financial statement purposes. These estimates and judgments also occur in the calculation of certain tax assets and liabilities and provisions.</font></td>
</tr>
</table>
<p>&nbsp;</p>
<p align="center"><font size="2" face="Arial, Helvetica, sans-serif">5</font></p>
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<a name="p6"></a>
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<tr valign="top">
  <td></td>
  <td>&nbsp;</td>
  <td align="left">&nbsp;</td>
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<td width="3%"></td>
<td width="3%"><font size="2" face="Arial, Helvetica, sans-serif">&nbsp;</font></td>
<td 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 April 2, 2005, we believed that all of the deferred tax assets, net of valuation allowances, as recorded on our balance sheet, would ultimately be recovered. However, should there be a change in our ability to recover our deferred tax assets or in our estimates of the valuation allowance, 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></td>
</tr>
</table>
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<tr valign="top">
  <td></td>
  <td>&nbsp;</td>
  <td align="left">&nbsp;</td>
</tr>
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<td width="3%"></td>
<td width="3%"><font size="2" face="Arial, Helvetica, sans-serif">&nbsp;</font></td>
<td 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 that probable additional
    taxes will be due. We reverse the liability and recognize a tax benefit during
    the period if we ultimately determine that the liability is no longer necessary.
    For example, during the first quarter of 2005, we reversed some provisions
    for approximately $20 million pursuant to an agreement concluded with U.S.
    tax authorities. 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 what we expect the ultimate assessment to be. </font></td>
</tr>
</table>
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<tr valign="top">
  <td>&nbsp;</td>
  <td>&nbsp;</td>
  <td align="left">&nbsp;</td>
</tr>
<tr valign="top">
  <td width="3%">&nbsp;</td>
<td width="3%"><font size="2" face="Arial, Helvetica, sans-serif">&nbsp;</font></td>
<td align="left"><p><font size="2" face="sans-serif"><b>Patent and other intellectual
        property litigation or claims</b>. As is the case with many companies
        in the semiconductor industry, we have from time to time received, and
        may in the future receive, communications alleging possible infringement
        of patents and other intellectual property rights of others. Furthermore,
        we may become involved in costly litigation brought against us regarding
        patents, mask works, copyrights, trademarks or trade secrets. In the
        event that the outcome of any litigation would be unfavorable to us,
        we 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 our results
        of operations and ability to compete. We constantly monitor, with the
        support of our outside attorneys when deemed necessary or advisable,
        the chances of any 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. See &#8220;Item
        3. Key Information</font><font size="2" face="Arial, Helvetica, sans-serif">&#151;</font><font size="2" face="sans-serif">Risk
        Factors</font><font size="2" face="Arial, Helvetica, sans-serif">&#151;</font><font size="2" face="sans-serif">We
        depend on patents to protect our rights to our technology&quot; included in our Form 20-F, as may
        be updated from time to time in our public filings.</font></p>
  <p align="left"><font size="2" face="sans-serif">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In
      December 2004, we settled certain litigations relating to claims of infringements
      of patents and similar intellectual property rights of others. Payments,
      which had already been largely accrued for were made in the first quarter
      of 2005, pursuant to said settlement agreements. </font></p>
  <p align="left"><font size="2" face="sans-serif">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;ST
      is currently a party to legal proceedings with SanDisk Corporation (&#8220;SanDisk&#8221;). </font></p>
  <p align="left"><font size="2" face="sans-serif">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;On
      October 15, 2004, SanDisk filed a complaint against us in the United States
      International Trade Commission (the &#8220;ITC&#8221;) with respect to
      certain NAND memory products, alleging patent infringement and seeking
      an order excluding our products from importation into the United States.
      On November 15, 2004, the ITC instituted an investigation against us in
      response to the complaint.</font></p>
  <p align="left"><font size="2" face="sans-serif">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;On
      October 15, 2004, SanDisk also filed a complaint for patent infringement,
      and declaratory judgment of non-infringement and patent invalidity, against
      us in the United States District Court for the Northern District of California.
      The complaint alleges that our products infringe a SanDisk U.S. patent
      and seeks a declaratory judgment that SanDisk does not infringe several
      of our U.S. patents. By order dated January 4, 2005, the court stayed SanDisk&#8217;s
      patent infringement claim pending an outcome in the ITC action discussed
      above. On January 20, 2005, the court issued an order granting our motion
      to dismiss the declaratory judgment causes of action. SanDisk has appealed
      the order to the United States Court of Appeals for the Federal Circuit. </font></p>
  <p align="left"><font size="2" face="sans-serif">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;On
      February 4, 2005, we filed two complaints for patent infringement against
      SanDisk in the United States District Court for the Eastern District of
      Texas. The complaints allege that SanDisk products infringe seven of our
      U.S. patents. On March 28, 2005, SanDisk filed motions to dismiss, transfer,
      or sever and stay the cases. On April 22, 2005, SanDisk filed a counterclaim
      against us alleging that our products practice two SanDisk patents. On
      April 25 and 27, 2005, the court issued orders denying the motions to dismiss,
      transfer, or sever and stay the cases. </font></p>
  <p align="left"><font size="2" face="sans-serif">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;On
      March 28, 2005, SanDisk filed a complaint for declaratory judgment of non-infringement
      and patent invalidity against us in the United States District Court for
      the Northern District of California. The complaint seeks a declaratory
      judgment that SanDisk does not infringe several of our U.S. patents. On
      April 11, 2005, SanDisk voluntarily dismissed the case. </font></p>
  <p align="left"><font size="2" face="sans-serif">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Based
      on our current assessment, made with support of our outside attorneys,
      we do not believe that the SanDisk litigation will result in a probable
      loss, or will have a material adverse effect on our financial position,
      cash flow, or results of operations. However, if we are unsuccessful in
      resolving these proceedings, or if the outcome of any other litigation
      or claim would be unfavorable to us, we may incur money damages, or an
    injunction or exclusion order.</font></p>  </td>
</tr>
</table>
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<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"><b>Other</b> <b>claims</b>. We are subject to the possibility of loss contingencies arising in the ordinary course of business. These include, but are not limited to: warranty costs on our products not covered by insurance, breach of contract claims, tax claims and provisions for specifically identified income tax exposures as well as claims for environmental damages. In 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></td>
</tr>
</table>
<p align="left"><font size="2" face="Arial, Helvetica, sans-serif"><b><i>Fiscal Year </i></b></font></p>
<p align="left"><font size="2" face="Arial, Helvetica, sans-serif">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our fiscal year starts at January 1, the first quarter of 2005 lasted until Saturday, April 2, 2005.  The second quarter of 2005 will end on July 2, 2005, and the third quarter of 2005 will end on October 1, 2005.  The fourth quarter of 2005 will end on December&nbsp;31, 2005. </font></p>
<p align="left"><font size="2" face="Arial, Helvetica, sans-serif"><b><i>Business Overview</i></b></font></p>
<p align="left"><font size="2" face="Arial, Helvetica, sans-serif">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The total available market is defined as the &#147;TAM&#148;, while the serviceable available market, the &#147;SAM&#148;, is defined as the market for products produced by us (which consists of the TAM and excludes PC motherboard major devices such as microprocessors (&#147;MPU&#148;), dynamic random access memories (&#147;DRAMs&#148;), and optoelectronics devices).</font></p>

<p>&nbsp;</p>
<p align="center"><font size="2" face="Arial, Helvetica, sans-serif">6</font></p>
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<p align="left"><font size="2" face="Arial, Helvetica, sans-serif">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Effective January 1, 2005, we realigned our product groups to increase market focus and realize the full potential of our products, technologies, sales and marketing channels. Beginning with this first quarter of 2005, we now report our sales and operating income in three segments:</font></p>
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<td>
<font size="2" face="Arial, Helvetica, sans-serif">the new Application Specific Products Groups (&#147;ASG&#148;) segment, comprised of three product groups &#150; our new Home, Personal and Communication Sector (&#147;HPC&#148;), our new Computer Peripherals Group (&#147;CPG&#148;) and our new Automotive Product Group (&#147;APG&#148;). Our new HPC Sector is comprised of the telecommunications and the audio divisions from the former TPA combined with the consumer group from the former CMG Group. Our new CPG Group covers computer peripherals products, specifically disk drives and printers, and our new APG Group now comprises all of our major complex products related to automotive applications formerly within the automotive group of TPA and in other product groups (notably from the former DSG and the
Microcontroller Group);</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">the Memory Products Group (&#147;MPG&#148;) segment, comprised of our memories and Smart card businesses; and</font></td>
</tr>
</table>
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<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">the new Micro, Linear and Discrete Group (&#147;MLD&#148;) segment, comprised of most of the former DSG plus standard microcontroller and industrial devices (including the programmable systems memories (&#147;PSM&#148;) division from the former MPG).</font></td>
</tr>
</table>
<p align="left"><font size="2" face="Arial, Helvetica, sans-serif">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Based
    upon preliminary industry estimates, in the first quarter of 2005, semiconductor
    industry revenue increased year-over-year by approximately 13% for the TAM
    and by approximately 11% for the SAM. On a sequential basis, in the
    first quarter of 2005, the TAM registered a slight increase of 0.4% and the
    SAM registered an increase of approximately 2%. </font></p>
<p align="left"><font size="2" face="Arial, Helvetica, sans-serif">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;On a year-over-year basis, our net revenues have improved 2.6% from $2,029 million in the first quarter of 2004 to $2,083 million in the first quarter of 2005, however declining 10.5% on a sequential basis from $2,328 million in the fourth quarter of 2004. Based on preliminary industry estimates, our revenue performances were below the level registered by the TAM and the SAM. Our first quarter 2005 results were within the guidance released to the market announcing a sequential decrease between 4% and 12% in comparison to the fourth quarter of 2004. On a sequential basis, our net revenues were negatively impacted by unfavorable seasonal dynamics resulting in lower sales volumes and continuing pricing pressures across
many of our product families. The year-over-year increase of our net revenues was mainly driven by higher sales volume which was significantly offset by an average price decline of about 5%.</font></p>
<p align="left"><font size="2" face="Arial, Helvetica, sans-serif">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our gross margin for the first quarter of 2005 was 32.9%, decreasing both in comparison to 35.4% gross margin in the first quarter of 2004 and 36.6% in the fourth quarter of 2004. The lower gross margin was mainly generated by the selling price decline, lower utilization rates of certain of our wafer fabs and the weaker U.S. dollar exchange rate against the other major international currencies.</font></p>
<p align="left"><font size="2" face="Arial, Helvetica, sans-serif">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our selling, general and administrative expenses and research and development expenses were impacted in the first quarter of 2005 by one-time compensation and related charges of about $20 million related to the retirement of our former CEO and of a limited number of senior executive officers granted by our Supervisory Board. Excluding these one-time compensation charges, the aggregate amount of these expenses was basically flat in dollar value compared to the fourth quarter of 2004; but increased by about 9% compared to the first quarter of 2004 mainly due to higher investment in research and development and the impact of the weakening U.S. dollar exchange rate. Furthermore, our Supervisory Board granted an
additional special contribution to a non profitable charitable institution amounting to $4 million, which is included as charge in &#147;Other Income and Expenses, net&#148;. </font></p>
<p align="left"><font size="2" face="Arial, Helvetica, sans-serif">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Additionally, in the first quarter of 2005, we registered a benefit in income taxes of $20 million due to the reverse of certain tax provisions accrued in previous periods.</font></p>
<p>&nbsp;</p>
<p align="center"><font size="2" face="Arial, Helvetica, sans-serif">7</font></p>
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<p align="left"><font size="2" face="Arial, Helvetica, sans-serif">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our
    first quarter 2005 earnings were also penalized by impairment, restructuring
    charges and other related closure costs for a total amount of $78 million
    mainly relating to the announcement to eliminate low-volume, non strategic
    product families such as the scaling back of Access programs focused on Customer
    Premises Equipment (&#147;CPE&#148;) and to the previously announced 150mm
    restructuring plan. </font></p>
<p align="left"><font size="2" face="Arial, Helvetica, sans-serif">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In summary, our profitability during the first quarter 2005 was negatively impacted by the following factors:</font></p>
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<td width="3%">
<font size="2" face="Arial, Helvetica, sans-serif">&#149;</font></td>
<td>
<font size="2" face="Arial, Helvetica, sans-serif">the lower volume of sales compared to the fourth quarter of 2004,</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">the lower gross margin compared both to the fourth quarter 2004 and the first quarter of 2004, which reflected increased price pressure, lower utilization rates and the weaker US dollar,</font></td>
</tr>
</table>
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<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">the one-time compensation and related charges and the one-time special contribution to a non profit charitable institution, and</font></td>
</tr>
</table>
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<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">the impairment, restructuring charges and other closure costs.</font></td>
</tr>
</table>
<p align="left"><font size="2" face="Arial, Helvetica, sans-serif">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;However, our profitability was improved by the tax provision reversal of $20 million. </font></p>
<p align="left"><font size="2" face="Arial, Helvetica, sans-serif">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;This
    resulted in an operating loss in the first quarter of 2005 of $68 million,
    compared to the operating income of $210 million in the fourth quarter 2004
    and the operating income of $80 million in the first quarter of 2004.</font></p>
<p align="left"><font size="2" face="Arial, Helvetica, sans-serif">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In
    the first quarter of 2005, our capital expenditures were $564 million compared
    to $423 million in the fourth quarter 2004 and $321 million in the first
    quarter of 2004, due to the payment of capital expenditures purchased during
    the last period of 2004. See &#147;Liquidity and Capital Resources&#151;Liquidity&#148;.
    At April 2, 2005, our net financial position resulted in a net debt position
    of $210 million compared to a net debt position of $8 million at December
    31, 2004. Our total financial debt was $1,897 million, of which $1,702 million
    was long-term debt. At April 2, 2005, our cash and marketable securities
    amounted to $1,687 million. See &#147;Liquidity and Capital Resources&#151;Capital
Resources&#148; in this Form 6-K for a definition and reconciliation of net financial
position, which is a non-GAAP financial measure.</font></p>
<p align="left"><font size="2" face="Arial, Helvetica, sans-serif">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We are focusing on improving the competitiveness of our Company. In addition to previously announced initiatives, we are undertaking several new actions designed to streamline our cost structure and strengthen our product portfolio, the two positive drivers of our gross margin.  We expect the actions completed to date to progressively provide results which will ultimately yield approximately $100 million per quarter in manufacturing costs and expense savings in the fourth quarter of 2005 compared to the same period of 2004. We are migrating a portion of memory wafer output to Asia. This coupled with repatriation of wafer supply and assembly services will improve both our fab loading and our manufacturing cost
structure. Our procurement cost reduction campaign underway since January has resulted in substantial savings thus far, and this effort continues.  Moreover, we continue our expense reduction initiatives, including the consolidation of certain general and administrative functions as well as the closure of several non-manufacturing sites.</font></p>
<p align="left"><font size="2" face="Arial, Helvetica, sans-serif">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;From a product perspective, our objective is to accelerate innovation in order to increase our product leadership and importantly to strengthen our gross margin over the medium term. Our progress thus far is encouraging as we have a number of new products entering key markets, including: digital consumer System-on-Chip (&#147;SoC&#148;) in 90 nanometer technology, a first in our industry; system-in-package solutions for both Radio Frequency (&#147;RF&#148;) and energy management in cellular phones, and new SoC solutions in data storage. We also have begun Application-Specific Integrated Circuits (&#147;ASIC&#148;) designs in 65 nanometer platforms for wireless terminal and infrastructure products with several
key customers.</font></p>
<p align="left"><font size="2" face="Arial, Helvetica, sans-serif">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;With our significant research and development resources and deep talent pool, we believe that our product objectives can be accomplished through better focus and by selectively reallocating research and development resources to higher priority product categories. Therefore, in order to accelerate our research and development programs, we are redeploying approximately 1,000 engineers, representing 10% of our research and development workforce from non-core programs, including Field Programmable Gate Array (&#147;FPGA&#148;) and third-party design services, and from CPE modem and Global System for Mobile (&#147;GSM&#148;) chipset activities.</font></p>

<p>&nbsp;</p>
<p align="center"><font size="2" face="Arial, Helvetica, sans-serif">8</font></p>
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<page>
<a name="p9"></a>

<p align="left"><font size="2" face="Arial, Helvetica, sans-serif">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;These
    are forward-looking statements that are subject to known and unknown risks
    and uncertainties that could cause actual results to differ materially; in
    particular, refer to those known risks and uncertainties described in<i> &#147;Cautionary
    Note on Forward-Looking Statements&#148; </i>herein and<i> &#147;Item 3. Key Information&#151;Risk
    Factors&#148; </i>in our Form 20-F as may be updated from time to time in
    our SEC filings.</font></p>
<p align="left"><font size="2" face="Arial, Helvetica, sans-serif"><b><i>Business Outlook </i></b></font></p>
<p align="left"><font size="2" face="Arial, Helvetica, sans-serif">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We
    are beginning to see signs of improvement in certain segments of the marketplace:
    the first indications of increased order flow from the distribution market,
    as well as a pattern of strengthening in wireless. However, we still see
    strong price pressure in several markets, notably memory. With the present
    order visibility, we expect sales to grow sequentially in the range of -1%
    to 7%. For the 2005 second quarter the gross margin is expected to be about
    33.5%, plus or minus one percentage point, reflecting both price pressure
    and progressive cost reduction. This guidance is based on a currency exchange
rate of $1.30 to &euro;1.00.</font></p>
<p align="left"><font size="2" face="Arial, Helvetica, sans-serif">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;For the full year 2005, we are confirming that the level of our capital investment will be $1.5 billion.</font></p>
<p align="left"><font size="2" face="Arial, Helvetica, sans-serif">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;These are forward-looking statements that are subject to known and unknown risks and uncertainties that could cause actual results to differ materially; in particular, refer to those known risks and uncertainties described in <i>&#147;Cautionary Note on Forward-Looking Statements&#148;</i> herein and &#147;<i>Item 3. Key Information&#151;Risk Factors</i>&#148; in our Form 20-F as may be updated from time to time in our SEC filings<b>.</b></font></p>
<p align="left"><font size="2" face="Arial, Helvetica, sans-serif"><b><i>Other Developments in the First Quarter of 2005 </i></b></font></p>
<p align="left"><font size="2" face="Arial, Helvetica, sans-serif">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In
    January 2005, we decided to reduce our Access technology products for CPE
    modem products. This decision was intended to eliminate certain low-volume,
    non strategic product families whose return in the current environment did
    not meet internal targets. This decision resulted in a total impairment charge
    of approximately $63 million in the first quarter of 2005 out of which
    $61 million related to impairment of intangible assets and goodwill related
    to the CPE product lines.  </font></p>
<p align="left"><font size="2" face="Arial, Helvetica, sans-serif">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;On
    February 28, 2005, we signed an advanced pricing agreement for the period
    2001 through 2007 with the United States Internal Revenue Service resulting
    in a net one-time tax benefit of approximately $20 million in the
    first quarter of 2005.  </font></p>
<p align="left"><font size="2" face="Arial, Helvetica, sans-serif">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;At our annual general meeting of shareholders held on March 18, 2005, our shareholders approved the distribution of a cash dividend of $0.12 per common share in respect to the 2004 financial year, equivalent to the prior year&#146;s cash dividend payment, for a total of approximately $107 million to be paid in the latter half of May 2005. In addition, the shareholders approved the appointment of our Supervisory Board and Managing Board members, amendments to our articles of association and to our 2001 Employee Stock Option Plan, as well as a new 2005 Supervisory Board member and professional stock-based compensation plan, among other resolutions. Our Supervisory Board is composed of Messrs. G&eacute;rald Arbola,
Matteo del Fante, Tom de Waard, Didier Lombard, Bruno Steve and Antonino Turicchi, who were each appointed for a three-year term, as well as Messrs. Doug Dunn, Francis Gavois and Robert White, who were each appointed for a one-year term.</font></p>
<p>&nbsp;</p>
<p align="center"><font size="2" face="Arial, Helvetica, sans-serif">9</font></p>
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<page>
<a name="p10"></a>


<p align="left"><font size="2" face="Arial, Helvetica, sans-serif">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;After
    our annual general meeting of shareholders, the Supervisory Board met and
    appointed Mr. G&eacute;rald Arbola as Chairman of the Supervisory Board and
    Mr. Bruno Steve as Vice Chairman, each for a three-year term. In addition,
    the Supervisory Board appointed Mr. G&eacute;rald Arbola as Chairman of the
    Strategic Committee, Mr. Bruno Steve as Vice Chairman, and Messrs. Turicchi,
    Lombard and White as members.</font></p>
<p align="left"><font size="2" face="Arial, Helvetica, sans-serif">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In the first quarter of 2005, we recorded in our income statement a total charge of $24 million before tax ($20 million after tax) for the compensation packages and special bonuses granted to our former CEO and to a limited number of senior executives. This charge included:</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">a one-time compensation package and bonus to our former CEO amounting to $7 million, including $1 million for social charges as granted by our Supervisory Board;</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">a special contribution to a non profit charitable institution amounting to $4 million as granted by our Supervisory Board;</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">an additional pension plan
of $8 million, of which $3 million was allocated to grant an annuity of $200
thousand to our former CEO as granted by our Supervisory Board; 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">special compensation packages for two of our former senior executives for a total amount of $5&nbsp;million including social charges.</font></td>
</tr>
</table>
<p align="left"><font size="2" face="Arial, Helvetica, sans-serif">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;On November 16, 2004, we signed a joint-venture agreement with Hynix Semiconductor Inc. to build a front-end memory-manufacturing facility in Wuxi City, Jiangsu Province, China. The conditions for the creation of the new company were met on April 28, 2005; we expect to make capital investments totaling $125 million in 2005 and $125 million in 2006. In addition, we have undertaken to extend $250 million in long-term financing to the new joint venture guaranteed by subordinated collateral on the joint-venture assets. </font></p>
<p align="left"><font size="2" face="Arial, Helvetica, sans-serif"><b><i>Results of Operations</i></b></font></p>
<p align="left"><font size="2" face="Arial, Helvetica, sans-serif"><b><i>Segment Information </i></b></font></p>
<p align="left"><font size="2" face="Arial, Helvetica, sans-serif">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We operate in two business areas: Semiconductors and Subsystems.</font></p>
<p align="left"><font size="2" face="Arial, Helvetica, sans-serif">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In the Semiconductors business area, we design, develop, manufacture and market a broad range of products, including discrete, memories and standard commodity components, application-specific integrated circuits (&#147;ASICs&#148;), full custom devices and semicustom devices and application-specific standard products (&#147;ASSPs&#148;) for analog, digital, and mixed-signal applications. In addition, we further participate in the manufacturing value chain of Smart card products through our Incard division, which includes the production and sale of both silicon chips and Smart cards. Our principal investment and resource allocation decisions in the Semiconductor business area are for expenditures on research and
development and capital investments in front-end and back-end manufacturing facilities. </font></p>
<p align="left"><font size="2" face="Arial, Helvetica, sans-serif">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In the Semiconductors segment, effective January 1, 2005, we realigned our product groups to increase market focus and realize the full potential of our products, technologies, and sales and marketing channels. Beginning with this first quarter of 2005, we now report our sales and operating income in three segments:</font></p>
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<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">the new Application Specific Products Groups (&#147;ASG&#148;) segment, comprised of three product groups &#150; our new Home, Personal and Communication Sector (&#147;HPC&#148;), our new Computer Peripherals Group (&#147;CPG&#148;) and our new Automotive Product Group (&#147;APG&#148;). Our new HPC Sector is comprised of the telecommunications and the audio divisions from the former TPA combined with the consumer group from the former CMG Group. Our new CPG Group covers computer peripherals products, specifically disk drives and printers, and our new APG Group now comprises all of our major complex products related to automotive applications formerly within the automotive group of TPA and in other product groups (notably from the former DSG and the
Microcontroller Group);</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">the Memory Products Group (&#147;MPG&#148;) segment, comprised of our memories and Smart card businesses; 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">the new Micro, Linear and Discrete Group (&#147;MLD&#148;) segment, comprised of most of the former DSG plus standard microcontroller and industrial devices (including the programmable systems memories (&#147;PSM&#148;) division from the former MPG).</font></td>
</tr>
</table>
<p>&nbsp;</p>
<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>

<p align="left"><font size="2" face="Arial, Helvetica, sans-serif">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We have restated our results in prior periods for illustrative comparisons of our performance by product group and by period. The segment information of 2004 has been restated using the same principles as the ones used for the current year. Furthermore, the preparation of segment information in accordance with the new organization of the groups, due to the significant changes in the segment structure, requires management to make significant estimates, assumptions and judgments in determining the operating income of the new groups for the prior year, which can affect the reported amounts for 2004. </font></p>
<p align="left"><font size="2" face="Arial, Helvetica, sans-serif">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;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> (FAS 131).</font></p>
<p align="left"><font size="2" face="Arial, Helvetica, sans-serif">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The following tables present our consolidated net revenues and consolidated operating income by semiconductor product segment. For the computation of the Groups&#146; 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 certain corporate level operating expenses and certain other miscellaneous charges. Starting in the first quarter 2005, we allocated the starting up costs to expand our marketing and design presence in new developing areas to each Group, and we restated prior year results accordingly.</font></p>
<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 align="left">&nbsp;</td>
<td align="left">&nbsp;</td>
<td align="center"><font size="1" face="Arial, Helvetica, sans-serif">&nbsp;</font></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="1" face="Arial, Helvetica, sans-serif">&nbsp;</font></td>
<td align="left">&nbsp;</td>
<td colspan="5" align="center" valign="bottom"><font size="1" face="Arial, Helvetica, sans-serif"><b>(unaudited)<br>
Three
      Months Ended</b></font></td>
<td align="left">&nbsp;</td>
</tr>
<tr valign="top">
  <td align="left">&nbsp;</td>
  <td align="left">&nbsp;</td>
  <td colspan="5" align="center"><hr noshade size="1"></td>
  <td align="left">&nbsp;</td>
</tr>
<tr valign="bottom">
<td align="left"><font size="1" face="Arial, Helvetica, sans-serif">&nbsp;</font></td>
<td align="left">&nbsp;</td>
<td colspan="2" align="center"><font size="1" face="Arial, Helvetica, sans-serif"><b>April
    2, 2005</b></font></td>
<td align="center">&nbsp;</td>
<td colspan="2" align="center"><font size="1" face="Arial, Helvetica, sans-serif"><b>March
    27, 2004</b></font></td>
<td align="left">&nbsp;</td>
</tr>
<tr valign="bottom">
  <td align="left">&nbsp;</td>
  <td align="left">&nbsp;</td>
  <td colspan="2" align="center"><hr noshade size="1"></td>
  <td align="center">&nbsp;</td>
  <td colspan="2" 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="left">&nbsp;</td>
<td colspan="5" align="center"><font size="1" face="Arial, Helvetica, sans-serif"><b>(in
      millions)</b></font></td>
<td align="left">&nbsp;</td>
</tr>
<tr valign="bottom" bgcolor="#FFFFFF">
<td align="left"><font size="2" face="Arial, Helvetica, sans-serif"><b>Net revenues by product groups:</b></font></td>
<td align="left"><font size="2">&nbsp;</font></td>
<td align="right"><font size="2">&nbsp;</font></td>
<td align="left"><font size="2" face="Arial, Helvetica, sans-serif">&nbsp;</font></td>
<td align="left"><font size="2">&nbsp;</font></td>
<td align="right"><font size="2">&nbsp;</font></td>
<td align="left"><font size="2" face="Arial, Helvetica, sans-serif">&nbsp;</font></td>
<td align="left"><font size="2">&nbsp;</font></td> </tr>
<tr valign="bottom" bgcolor="#eeeeee">
<td align="left"><font size="2" face="Arial, Helvetica, sans-serif">Application Specific Products </font></td>
<td width="2%" align="left"><font size="2">&nbsp;</font></td>
<td width="2%" align="right"><font size="2" face="Arial, Helvetica, sans-serif"><b>$</b></font></td>
<td width="8%" align="right"><font size="2" face="Arial, Helvetica, sans-serif"><b>1,188</b></font></td>
<td width="2%" align="left"><font size="2">&nbsp;</font></td>
<td width="2%" align="right"><font size="2" face="Arial, Helvetica, sans-serif">$</font></td>
<td width="8%" align="right"><font size="2" face="Arial, Helvetica, sans-serif"><b>1,161</b></font></td>
<td width="2%" align="left"><font size="2">&nbsp;</font></td>
</tr>
<tr valign="bottom" bgcolor="#FFFFFF">
<td align="left"><font size="2" face="Arial, Helvetica, sans-serif">Micro, Linear and Discrete</font></td>
<td align="left"><font size="2">&nbsp;</font></td>
<td align="right"><font size="2">&nbsp;</font></td>
<td align="right"><font size="2" face="Arial, Helvetica, sans-serif"><b>457</b></font></td>
<td align="left"><font size="2">&nbsp;</font></td>
<td align="right"><font size="2">&nbsp;</font></td>
<td align="right"><font size="2" face="Arial, Helvetica, sans-serif"><b>420</b></font></td>
<td align="left"><font size="2">&nbsp;</font></td>
</tr>
<tr valign="bottom" bgcolor="#eeeeee">
<td align="left"><font size="2" face="Arial, Helvetica, sans-serif">Memory Products</font></td>
<td align="left"><font size="2">&nbsp;</font></td>
<td align="right"><font size="2">&nbsp;</font></td>
<td align="right"><font size="2" face="Arial, Helvetica, sans-serif"><b>421</b></font></td>
<td align="left"><font size="2">&nbsp;</font></td>
<td align="right"><font size="2">&nbsp;</font></td>
<td align="right"><font size="2" face="Arial, Helvetica, sans-serif"><b>431</b></font></td>
<td align="left"><font size="2">&nbsp;</font></td>
</tr>
<tr valign="bottom" bgcolor="#FFFFFF">
<td align="left"><font size="2" face="Arial, Helvetica, sans-serif">Others<sup>(1)</sup></font></td>
<td align="left"><font size="2">&nbsp;</font></td>
<td align="right"><font size="2">&nbsp;</font></td>
<td align="right"><font size="2" face="Arial, Helvetica, sans-serif"><b>17</b></font></td>
<td align="left"><font size="2">&nbsp;</font></td>
<td align="right"><font size="2">&nbsp;</font></td>
<td align="right"><font size="2" face="Arial, Helvetica, sans-serif"><b>17</b></font></td>
<td align="left"><font size="2">&nbsp;</font></td>
</tr>
<tr valign="bottom" bgcolor="#eeeeee">
<td align="left"><font size="2" face="Arial, Helvetica, sans-serif"><b>Total consolidated net revenues</b></font></td>
<td align="left"><font size="2">&nbsp;</font></td>
<td align="right"><font size="2" face="Arial, Helvetica, sans-serif"><b>$</b></font></td>
<td align="right"><font size="2" face="Arial, Helvetica, sans-serif"><b>2,083</b></font></td>
<td align="left"><font size="2">&nbsp;</font></td>
<td align="right"><font size="2" face="Arial, Helvetica, sans-serif"><b>$</b></font></td>
<td align="right"><font size="2" face="Arial, Helvetica, sans-serif"><b>2,029</b></font></td>
<td align="left"><font size="2">&nbsp;</font></td>
</tr>
</table>
<table width="100%" border="0" cellpadding="0" cellspacing="0">
<tr valign="top">
  <td colspan="2"><hr align="left" width="100" size="1" noshade></td>
</tr>
<tr 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">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 valign="top">
  <td align="left">&nbsp;</td>
  <td align="left">&nbsp;</td>
  <td align="center">&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="1" face="Arial, Helvetica, sans-serif">&nbsp;</font></td>
<td align="left">&nbsp;</td>
<td align="center"><font size="1" face="Arial, Helvetica, sans-serif">&nbsp;</font></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="1" face="Arial, Helvetica, sans-serif">&nbsp;</font></td>
<td colspan="5" align="center"><font size="1" face="Arial, Helvetica, sans-serif"><b>(unaudited)<br>
Three
    Months Ended</b></font></td>
<td align="left">&nbsp;</td>
</tr>
<tr valign="top">
  <td align="left">&nbsp;</td>
  <td colspan="5" 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="2" align="center"><font size="1" face="Arial, Helvetica, sans-serif"><b>April
      2, 2005</b></font></td>
<td align="left">&nbsp;</td>
<td colspan="2" align="center"><font size="1" face="Arial, Helvetica, sans-serif"><b>March
    27, 2004</b></font></td>
<td align="left">&nbsp;</td>
</tr>
<tr valign="top">
  <td align="left">&nbsp;</td>
  <td colspan="2" align="center"><hr noshade size="1"></td>
  <td align="left">&nbsp;</td>
  <td colspan="2" 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 colspan="5" 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="#FFFFFF">
<td align="left"><font size="2" face="Arial, Helvetica, sans-serif"><b>Operating income (loss) by product groups:</b></font></td>
<td align="right"><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 align="right"><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 valign="top" bgcolor="#eeeeee">
<td align="left"><font size="2" face="Arial, Helvetica, sans-serif">Application Specific Products</font></td>
<td width="2%" align="right"><font size="2" face="Arial, Helvetica, sans-serif"><b>$</b></font></td>
<td width="8%" align="right"><font size="2" face="Arial, Helvetica, sans-serif">65</font></td>
<td width="2%" align="left"><font size="2">&nbsp;</font></td>
<td width="2%" align="right"><font size="2" face="Arial, Helvetica, sans-serif">$</font></td>
<td width="8%" align="right"><font size="2" face="Arial, Helvetica, sans-serif">118</font></td>
<td width="2%" align="left"><font size="2">&nbsp;</font></td>
</tr>
<tr valign="top" bgcolor="#FFFFFF">
<td align="left"><font size="2" face="Arial, Helvetica, sans-serif">Micro, Linear and Discrete</font></td>
<td align="right"><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 align="right"><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>
</tr>
<tr valign="top" bgcolor="#eeeeee">
<td align="left"><font size="2" face="Arial, Helvetica, sans-serif">Memory Products</font></td>
<td align="right"><font size="2">&nbsp;</font></td>
<td align="right"><font size="2" face="Arial, Helvetica, sans-serif">(62</font></td>
<td align="left"><font size="2" face="Arial, Helvetica, sans-serif">)</font></td>
<td align="right"><font size="2">&nbsp;</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="top">
  <td align="left"><font size="2">&nbsp;</font></td>
  <td colspan="2" align="center"><hr noshade size="1"></td>
  <td align="left"><font size="2">&nbsp;</font></td>
  <td colspan="2" align="left"><hr noshade size="1"></td>
  <td align="left"><font size="2">&nbsp;</font></td>
</tr>
<tr valign="top" bgcolor="#FFFFFF">
<td align="left"><font size="2" face="Arial, Helvetica, sans-serif">Total operating income of product groups</font></td>
<td align="right"><font size="2">&nbsp;</font></td>
<td align="right"><font size="2" face="Arial, Helvetica, sans-serif">74</font></td>
<td align="left"><font size="2">&nbsp;</font></td>
<td align="right"><font size="2">&nbsp;</font></td>
<td align="right"><font size="2" face="Arial, Helvetica, sans-serif">186</font></td>
<td align="left"><font size="2">&nbsp;</font></td>
</tr>
<tr valign="top" bgcolor="#eeeeee">
<td align="left"><font size="2" face="Arial, Helvetica, sans-serif">Others<sup>(1)</sup></font></td>
<td align="right"><font size="2">&nbsp;</font></td>
<td align="right"><font size="2" face="Arial, Helvetica, sans-serif">(142</font></td>
<td align="left"><font size="2" face="Arial, Helvetica, sans-serif">)</font></td>
<td align="right"><font size="2">&nbsp;</font></td>
<td align="right"><font size="2" face="Arial, Helvetica, sans-serif">(106</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">&nbsp;</font></td>
  <td colspan="2" align="center"><hr noshade size="1"></td>
  <td align="left"><font size="2">&nbsp;</font></td>
  <td colspan="2" align="left"><hr noshade size="1"></td>
  <td align="left"><font size="2">&nbsp;</font></td>
</tr>
<tr valign="top" bgcolor="#FFFFFF">
<td align="left"><font size="2" face="Arial, Helvetica, sans-serif"><b>Total consolidated operating income (loss)</b></font></td>
<td align="right"><font size="2" face="Arial, Helvetica, sans-serif"><b>$</b></font></td>
<td align="right"><font size="2" face="Arial, Helvetica, sans-serif"><b>(68</b></font></td>
<td align="left"><font size="2" face="Arial, Helvetica, sans-serif"><b>)</b></font></td>
<td align="right"><font size="2" face="Arial, Helvetica, sans-serif"><b>$</b></font></td>
<td align="right"><font size="2" face="Arial, Helvetica, sans-serif"><b>80</b></font></td>
<td align="left"><font size="2">&nbsp;</font></td>
</tr>
</table>
<table width="100%" border="0" cellpadding="0" cellspacing="0">
<tr valign="top">
  <td colspan="2"><hr align="left" width="100" size="1" noshade></td>
</tr>
</table>
<table width="100%" cellspacing="0" cellpadding="0" border="0">
<tr valign="top">
<td width="3%"><font size="1" face="Arial, Helvetica, sans-serif">(1)</font></td>
<td><font face="Arial, Helvetica, sans-serif" size="1">Operating income (loss)
    of &#147;Others&#148; includes items such as impairment, restructuring charges
    and other related closure costs, start-up costs, and other unallocated expenses
    such as: strategic or special research and development programs, certain
    corporate level operating expenses, certain patent claims and litigations,
    and other costs that are not allocated to the product groups, as well as
    operating earnings or losses of the Subsystems and Other Products Group.
    Certain costs, mainly R&amp;D, formerly in the &#147;Others&#148; category
    have been allocated to the groups, thus the comparable amounts reported in
    this category in prior period reports may not be the same, while prior periods
    are accordingly reclassified in the above table.</font></td>
</tr>
<tr valign="top">
  <td>&nbsp;</td>
  <td>&nbsp;</td>
</tr>
</table>
<p>&nbsp;</p>
<p align="center"><font size="2" face="Arial, Helvetica, sans-serif">11</font></p>
<hr noshade align="center" width="100%" size="2">
<div style="page-break-before:always"></div>
<page>
<a name="p12"></a>
<table width="100%" border="0" align="center" cellpadding="0" cellspacing="0">
  <tr valign="top">
    <td align="left">&nbsp;</td>
    <td align="left">&nbsp;</td>
    <td colspan="5" align="center">&nbsp;</td>
    <td align="left">&nbsp;</td>
  </tr>
</table>
<table width="100%" border="0" cellpadding="0" cellspacing="0">
<tr valign="top">
  <td align="left">&nbsp;</td>
  <td colspan="5" align="center"><font size="1" face="Arial, Helvetica, sans-serif"><b>(unaudited)<br>
Three Months Ended</b></font></td>
  <td align="left">&nbsp;</td>
</tr>
<tr valign="top">
  <td align="left">&nbsp;</td>
  <td colspan="5" 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="2" align="center"><font size="1" face="Arial, Helvetica, sans-serif"><b>April
      2, 2005</b></font></td>
<td align="left">&nbsp;</td>
<td colspan="2" align="center"><font size="1" face="Arial, Helvetica, sans-serif"><b>March
    27, 2004</b></font></td>
<td align="left">&nbsp;</td>
</tr>
<tr valign="top">
  <td align="left">&nbsp;</td>
  <td colspan="2" align="center"><hr noshade size="1"></td>
  <td align="left">&nbsp;</td>
  <td colspan="2" align="right"><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="5" align="center"><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="bottom" bgcolor="#FFFFFF">
<td align="left"><font size="2" face="Arial, Helvetica, sans-serif"><b>Operating income (loss) by product groups:</b></font></td>
<td width="2%" align="right"><font size="2">&nbsp;</font></td>
<td width="8%" align="left"><font size="2" face="Arial, Helvetica, sans-serif">&nbsp;</font></td>
<td width="2%" align="left"><font size="2">&nbsp;</font></td>
<td width="2%" align="right"><font size="2">&nbsp;</font></td>
<td width="8%" align="left"><font size="2" face="Arial, Helvetica, sans-serif">&nbsp;</font></td>
<td width="2%" align="left"><font size="2">&nbsp;</font></td> </tr>
<tr valign="bottom" bgcolor="#eeeeee">
<td align="left"><font size="2" face="Arial, Helvetica, sans-serif">Application Specific Products<sup>(1)</sup></font></td>
<td align="right"><font size="2">&nbsp;</font></td>
<td align="right"><font size="2" face="Arial, Helvetica, sans-serif">5.5</font></td>
<td align="left"><font size="2" face="Arial, Helvetica, sans-serif">%</font></td>
<td align="right"><font size="2">&nbsp;</font></td>
<td align="right"><font size="2" face="Arial, Helvetica, sans-serif">10.2</font></td>
<td align="left"><font size="2" face="Arial, Helvetica, sans-serif">%</font></td>
</tr>
<tr valign="bottom" bgcolor="#FFFFFF">
<td align="left"><font size="2" face="Arial, Helvetica, sans-serif">Micro, Linear and Discrete <sup>(1)</sup></font></td>
<td align="right"><font size="2">&nbsp;</font></td>
<td align="right"><font size="2" face="Arial, Helvetica, sans-serif">15.5</font></td>
<td align="left"><font size="2">&nbsp;</font></td>
<td align="right"><font size="2">&nbsp;</font></td>
<td align="right"><font size="2" face="Arial, Helvetica, sans-serif">16.9</font></td>
<td align="left"><font size="2">&nbsp;</font></td>
</tr>
<tr valign="bottom" bgcolor="#eeeeee">
<td align="left"><font size="2" face="Arial, Helvetica, sans-serif">Memory Products <sup>(1)</sup></font></td>
<td align="right"><font size="2">&nbsp;</font></td>
<td align="right"><font size="2" face="Arial, Helvetica, sans-serif">(14.7</font></td>
<td align="left"><font size="2" face="Arial, Helvetica, sans-serif">)</font></td>
<td align="right"><font size="2">&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="bottom" bgcolor="#FFFFFF">
<td align="left"><font size="2" face="Arial, Helvetica, sans-serif">Others<sup>(2)</sup></font></td>
<td align="right"><font size="2">&nbsp;</font></td>
<td align="right"><font size="2" face="Arial, Helvetica, sans-serif">(6.8</font></td>
<td align="left"><font size="2" face="Arial, Helvetica, sans-serif">)</font></td>
<td align="right"><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 valign="bottom" bgcolor="#eeeeee">
<td align="left"><font size="2" face="Arial, Helvetica, sans-serif"><b>Total consolidated operating income (loss) </b><sup>(3)</sup></font></td>
<td align="right"><font size="2">&nbsp;</font></td>
<td align="right"><font size="2" face="Arial, Helvetica, sans-serif"><b>(3.2</b></font></td>
<td align="left"><font size="2" face="Arial, Helvetica, sans-serif"><b>)%</b></font></td>
<td align="right"><font size="2">&nbsp;</font></td>
<td align="right"><font size="2" face="Arial, Helvetica, sans-serif"><b>4.0</b></font></td>
<td align="left"><font size="2" face="Arial, Helvetica, sans-serif"><b>%</b></font></td>
</tr>
</table>
<table width="100%" cellspacing="0" cellpadding="0" border="0">
<tr valign="top">
  <td>&nbsp;</td>
  <td>&nbsp;</td>
</tr>
<tr valign="top">
  <td colspan="2"><hr align="left" width="100" size="1" noshade></td>
</tr>
</table>
<table width="100%" border="0" cellpadding="0" cellspacing="0">
<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 width="3%">
<font size="1" face="Arial, Helvetica, sans-serif">(2)</font></td>
<td><font face="Arial, Helvetica, sans-serif" size="1">As a percentage of total net revenues. Includes operating income (loss) from sales of subsystems and other income (costs) not allocated to product groups.</font>
</td>
</tr>
<tr align="left" valign="top">
<td width="3%">
<font size="1" face="Arial, Helvetica, sans-serif">(3)</font></td>
<td><font face="Arial, Helvetica, sans-serif" size="1">As a percentage of total net revenues.</font>
</td>
</tr>
<tr valign="top">
  <td>&nbsp;</td>
  <td valign="top">&nbsp;</td>
</tr>
</table>
<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 align="left">&nbsp;</td>
<td align="left">&nbsp;</td>
<td align="center"><font size="1" face="Arial, Helvetica, sans-serif">&nbsp;</font></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="1" face="Arial, Helvetica, sans-serif">&nbsp;</font></td>
<td align="left">&nbsp;</td>
<td colspan="5" align="center"><font size="1" face="Arial, Helvetica, sans-serif"><b>(unaudited)<br>
Three
      Months Ended</b></font></td>
<td align="left">&nbsp;</td>
</tr>
<tr valign="top">
  <td align="left">&nbsp;</td>
  <td align="left">&nbsp;</td>
  <td colspan="5" 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="left">&nbsp;</td>
<td colspan="2" align="center"><font size="1" face="Arial, Helvetica, sans-serif"><b>April
    2, 2005</b></font></td>
<td align="left">&nbsp;</td>
<td colspan="2" align="center"><font size="1" face="Arial, Helvetica, sans-serif"><b>March
    27, 2004</b></font></td>
<td align="left">&nbsp;</td>
</tr>
<tr valign="top">
  <td align="left">&nbsp;</td>
  <td align="left">&nbsp;</td>
  <td colspan="2" align="center"><hr noshade size="1"></td>
  <td align="left">&nbsp;</td>
  <td colspan="2" 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="left">&nbsp;</td>
<td colspan="5" align="center"><font size="1" face="Arial, Helvetica, sans-serif"><b>(in
      millions)</b></font></td>
<td align="left">&nbsp;</td>
</tr>
<tr valign="bottom" bgcolor="#FFFFFF">
<td align="left"><font size="2" face="Arial, Helvetica, sans-serif"><b>Reconciliation to consolidated operating income (loss):</b></font></td>
<td align="left"><font size="2">&nbsp;</font></td>
<td align="right"><font size="2">&nbsp;</font></td>
<td align="left"><font size="2" face="Arial, Helvetica, sans-serif">&nbsp;</font></td>
<td align="left"><font size="2">&nbsp;</font></td>
<td align="right"><font size="2">&nbsp;</font></td>
<td align="left"><font size="2" face="Arial, Helvetica, sans-serif">&nbsp;</font></td>
<td align="left"><font size="2">&nbsp;</font></td> </tr>
<tr valign="bottom" bgcolor="#eeeeee">
<td align="left"><font size="2" face="Arial, Helvetica, sans-serif">Total operating income (loss) of product groups</font></td>
<td width="2%" align="left"><font size="2">&nbsp;</font></td>
<td width="2%" align="right"><font size="2" face="Arial, Helvetica, sans-serif"><b>$</b></font></td>
<td width="8%" align="right"><font size="2" face="Arial, Helvetica, sans-serif">74</font></td>
<td width="2%" align="left"><font size="2">&nbsp;</font></td>
<td width="2%" align="right"><font size="2" face="Arial, Helvetica, sans-serif">$</font></td>
<td width="8%" align="right"><font size="2" face="Arial, Helvetica, sans-serif">186</font></td>
<td width="2%" align="left"><font size="2">&nbsp;</font></td>
</tr>
<tr valign="bottom" bgcolor="#FFFFFF">
<td align="left"><font size="2" face="Arial, Helvetica, sans-serif">Strategic and other research and development programs</font></td>
<td align="left"><font size="2">&nbsp;</font></td>
<td align="right"><font size="2">&nbsp;</font></td>
<td align="right"><font size="2" face="Arial, Helvetica, sans-serif">(17</font></td>
<td align="left"><font size="2" face="Arial, Helvetica, sans-serif">)</font></td>
<td align="right"><font size="2">&nbsp;</font></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>
</tr>
<tr valign="bottom" bgcolor="#eeeeee">
<td align="left"><font size="2" face="Arial, Helvetica, sans-serif">Start-up costs</font></td>
<td align="left"><font size="2">&nbsp;</font></td>
<td align="right"><font size="2">&nbsp;</font></td>
<td align="right"><font size="2" face="Arial, Helvetica, sans-serif">(22</font></td>
<td align="left"><font size="2" face="Arial, Helvetica, sans-serif">)</font></td>
<td align="right"><font size="2">&nbsp;</font></td>
<td align="right"><font size="2" face="Arial, Helvetica, sans-serif">(23</font></td>
<td align="left"><font size="2" face="Arial, Helvetica, sans-serif">)</font></td>
</tr>
<tr valign="bottom" bgcolor="#FFFFFF">
<td align="left"><font size="2" face="Arial, Helvetica, sans-serif">Impairment, restructuring charges and other related closure costs</font></td>
<td align="left"><font size="2">&nbsp;</font></td>
<td align="right"><font size="2">&nbsp;</font></td>
<td align="right"><font size="2" face="Arial, Helvetica, sans-serif">(78</font></td>
<td align="left"><font size="2" face="Arial, Helvetica, sans-serif">)</font></td>
<td align="right"><font size="2">&nbsp;</font></td>
<td align="right"><font size="2" face="Arial, Helvetica, sans-serif">(33</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">One-time compensation and special contributions<sup>(1)</sup></font></td>
<td align="left"><font size="2">&nbsp;</font></td>
<td align="right"><font size="2">&nbsp;</font></td>
<td align="right"><font size="2" face="Arial, Helvetica, sans-serif">(22</font></td>
<td align="left"><font size="2" face="Arial, Helvetica, sans-serif">)</font></td>
<td align="right"><font size="2">&nbsp;</font></td>
<td align="right"><font size="2" face="Arial, Helvetica, sans-serif">&#151;</font></td>
<td align="left"><font size="2">&nbsp;</font></td>
</tr>
<tr valign="bottom" bgcolor="#FFFFFF">
<td align="left"><font size="2" face="Arial, Helvetica, sans-serif">Other non-allocated provisions</font></td>
<td align="left"><font size="2">&nbsp;</font></td>
<td align="right"><font size="2">&nbsp;</font></td>
<td align="right"><font size="2" face="Arial, 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">&nbsp;</font></td>
<td align="right"><font size="2" face="Arial, Helvetica, sans-serif">(29</font></td>
<td align="left"><font size="2" face="Arial, Helvetica, sans-serif">)</font></td>
</tr>
<tr valign="bottom" bgcolor="#FFFFFF">
  <td colspan="7" align="left"><hr noshade size="1"></td>
  </tr>
<tr valign="bottom" bgcolor="#eeeeee">
<td align="left"><font size="2" face="Arial, Helvetica, sans-serif">Others<sup>(2)</sup></font></td>
<td align="left"><font size="2">&nbsp;</font></td>
<td align="right"><font size="2">&nbsp;</font></td>
<td align="right"><font size="2" face="Arial, Helvetica, sans-serif">(142</font></td>
<td align="left"><font size="2" face="Arial, Helvetica, sans-serif">)</font></td>
<td align="right"><font size="2">&nbsp;</font></td>
<td align="right"><font size="2" face="Arial, Helvetica, sans-serif">(106</font></td>
<td align="left"><font size="2" face="Arial, Helvetica, sans-serif">)</font></td>
</tr>
<tr valign="bottom" bgcolor="#FFFFFF">
  <td colspan="7" align="left"><hr noshade size="1"></td>
  </tr>
<tr valign="bottom" bgcolor="#FFFFFF">
<td align="left"><font size="2" face="Arial, Helvetica, sans-serif"><b>Total consolidated operating income (loss)</b></font></td>
<td align="left"><font size="2">&nbsp;</font></td>
<td align="right"><font size="2" face="Arial, Helvetica, sans-serif"><b>$</b></font></td>
<td align="right"><font size="2" face="Arial, Helvetica, sans-serif"><b>(68</b></font></td>
<td align="left"><font size="2" face="Arial, Helvetica, sans-serif"><b>)</b></font></td>
<td align="right"><font size="2" face="Arial, Helvetica, sans-serif"><b>$</b></font></td>
<td align="right"><font size="2" face="Arial, Helvetica, sans-serif"><b>80</b></font></td>
<td align="left"><font size="2">&nbsp;</font></td>
</tr>
</table>
<table width="100%" border="0" cellpadding="0" cellspacing="0">
<tr valign="top">
  <td>&nbsp;</td>
  <td>&nbsp;</td>
</tr>
<tr valign="top">
  <td colspan="2"><hr align="left" width="100" size="1" noshade></td>
</tr>
</table>
<table width="100%" border="0" cellpadding="0" cellspacing="0">
<tr align="left" valign="baseline">
<td width="3%"><font size="1" face="Arial, Helvetica, sans-serif">(1)</font></td>
<td><font face="Arial, Helvetica, sans-serif" size="1">The total charge for one-time compensation and special contributions was $24 million, of which $22 million not allocated to product groups and $2 million allocated to product groups.</font>
</td>
</tr>
<tr align="left" valign="baseline">
<td width="3%"><font size="1" face="Arial, Helvetica, sans-serif">(2)</font></td>
<td><font face="Arial, Helvetica, sans-serif" size="1">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="left"><font size="2" face="Arial, Helvetica, sans-serif"><b><i>Net revenues by location of order shipment </i></b></font></p>
<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:</font></p>
<table width="100%" cellspacing="0" cellpadding="0" align="center" border="0">
<tr valign="top">
<td align="left"><font size="1" face="Arial, Helvetica, sans-serif">&nbsp;</font></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"><font size="1" face="Arial, Helvetica, sans-serif">&nbsp;</font></td>
<td align="left">&nbsp;</td>
<td colspan="5" align="center"><font size="1" face="Arial, Helvetica, sans-serif"><b>(unaudited)<br>
  Three Months Ended</b></font></td>
<td align="left">&nbsp;</td>
</tr>
<tr valign="top">
  <td align="left">&nbsp;</td>
  <td align="left">&nbsp;</td>
  <td colspan="5" 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="left">&nbsp;</td>
<td colspan="2" align="center"><font size="1" face="Arial, Helvetica, sans-serif"><b>April
      2, 2005</b></font></td>
<td align="left">&nbsp;</td>
<td colspan="2" align="center"><font size="1" face="Arial, Helvetica, sans-serif"><b>March
    27, 2004</b></font></td>
<td align="left">&nbsp;</td>
</tr>
<tr valign="top">
  <td align="left">&nbsp;</td>
  <td align="left">&nbsp;</td>
  <td colspan="2" align="center"><hr noshade size="1"></td>
  <td align="left">&nbsp;</td>
  <td colspan="2" 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="left">&nbsp;</td>
<td colspan="5" align="center"><font size="1" face="Arial, Helvetica, sans-serif"><b>(in
      millions)</b></font></td>
<td align="left">&nbsp;</td>
</tr>
<tr valign="bottom" bgcolor="#FFFFFF">
<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 width="2%" align="left"><font size="2">&nbsp;</font></td>
<td width="2%" align="right"><font size="2">&nbsp;</font></td>
<td width="8%" align="left"><font size="2" face="Arial, Helvetica, sans-serif">&nbsp;</font></td>
<td width="2%" align="left"><font size="2">&nbsp;</font></td>
<td width="2%" align="right"><font size="2">&nbsp;</font></td>
<td width="8%" align="left"><font size="2" face="Arial, Helvetica, sans-serif">&nbsp;</font></td>
<td width="2%" align="left"><font size="2">&nbsp;</font></td> </tr>
<tr valign="bottom" bgcolor="#eeeeee">
<td align="left"><font size="2" face="Arial, Helvetica, sans-serif">Europe <b><sup>(2)</sup></b></font></td>
<td align="left"><font size="2">&nbsp;</font></td>
<td align="right"><font size="2" face="Arial, Helvetica, sans-serif"><b>$</b></font></td>
<td align="right"><font size="2" face="Arial, Helvetica, sans-serif">679</font></td>
<td align="left"><font size="2">&nbsp;</font></td>
<td align="right"><font size="2" face="Arial, Helvetica, sans-serif">$</font></td>
<td align="right"><font size="2" face="Arial, Helvetica, sans-serif">649</font></td>
<td align="left"><font size="2">&nbsp;</font></td>
</tr>
<tr valign="bottom" bgcolor="#FFFFFF">
<td align="left"><font size="2" face="Arial, Helvetica, sans-serif">North America</font></td>
<td align="left"><font size="2">&nbsp;</font></td>
<td align="right"><font size="2">&nbsp;</font></td>
<td align="right"><font size="2" face="Arial, Helvetica, sans-serif">284</font></td>
<td align="left"><font size="2">&nbsp;</font></td>
<td align="right"><font size="2">&nbsp;</font></td>
<td align="right"><font size="2" face="Arial, Helvetica, sans-serif">302</font></td>
<td align="left"><font size="2">&nbsp;</font></td>
</tr>
<tr valign="bottom" bgcolor="#eeeeee">
<td align="left"><font size="2" face="Arial, Helvetica, sans-serif">Asia/Pacific</font></td>
<td align="left"><font size="2">&nbsp;</font></td>
<td align="right"><font size="2">&nbsp;</font></td>
<td align="right"><font size="2" face="Arial, Helvetica, sans-serif">906</font></td>
<td align="left"><font size="2">&nbsp;</font></td>
<td align="right"><font size="2">&nbsp;</font></td>
<td align="right"><font size="2" face="Arial, Helvetica, sans-serif">854</font></td>
<td align="left"><font size="2">&nbsp;</font></td>
</tr>
<tr valign="bottom" bgcolor="#FFFFFF">
<td align="left"><font size="2" face="Arial, Helvetica, sans-serif">Japan</font></td>
<td align="left"><font size="2">&nbsp;</font></td>
<td align="right"><font size="2">&nbsp;</font></td>
<td align="right"><font size="2" face="Arial, Helvetica, sans-serif">74</font></td>
<td align="left"><font size="2">&nbsp;</font></td>
<td align="right"><font size="2">&nbsp;</font></td>
<td align="right"><font size="2" face="Arial, Helvetica, sans-serif">87</font></td>
<td align="left"><font size="2">&nbsp;</font></td>
</tr>
<tr valign="bottom" bgcolor="#eeeeee">
<td align="left"><font size="2" face="Arial, Helvetica, sans-serif">Emerging Markets <b><sup>(2)</sup></b></font></td>
<td align="left"><font size="2">&nbsp;</font></td>
<td align="right"><font size="2">&nbsp;</font></td>
<td align="right"><font size="2" face="Arial, Helvetica, sans-serif">140</font></td>
<td align="left"><font size="2">&nbsp;</font></td>
<td align="right"><font size="2">&nbsp;</font></td>
<td align="right"><font size="2" face="Arial, Helvetica, sans-serif">137</font></td>
<td align="left"><font size="2">&nbsp;</font></td>
</tr>
<tr valign="bottom" bgcolor="#FFFFFF">
<td align="left"><font size="2" face="Arial, Helvetica, sans-serif"><b>Total</b></font></td>
<td align="left"><font size="2">&nbsp;</font></td>
<td align="right"><font size="2" face="Arial, Helvetica, sans-serif"><b>$</b></font></td>
<td align="right"><font size="2" face="Arial, Helvetica, sans-serif"><b>2,083</b></font></td>
<td align="left"><font size="2">&nbsp;</font></td>
<td align="right"><font size="2" face="Arial, Helvetica, sans-serif"><b>$</b></font></td>
<td align="right"><font size="2" face="Arial, Helvetica, sans-serif"><b>2,029</b></font></td>
<td align="left"><font size="2">&nbsp;</font></td>
</tr>
</table>
<table width="100%" cellspacing="0" cellpadding="0" border="0">
<tr valign="top">
  <td>&nbsp;</td>
  <td>&nbsp;</td>
</tr>
<tr valign="top">
  <td colspan="2"><hr align="left" width="100" size="1" noshade></td>
</tr>
</table>
<table width="100%" border="0" align="center" cellpadding="0" cellspacing="0">
<tr align="left" valign="baseline">
<td width="3%">
<font size="1" face="Arial, Helvetica, sans-serif">(1)</font></td>
<td><font face="Arial, Helvetica, sans-serif" size="1">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>
<tr align="left" valign="baseline">
<td width="3%">
<font size="1" face="Arial, Helvetica, sans-serif">(2) </font></td>
<td>
<font face="Arial, Helvetica, sans-serif" size="1">Since January 1, 2005, the
region &#147;Europe&#148; includes the former East European countries that joined
the European Union in 2004. These countries were part of the Emerging Markets
perimeter in the previous periods. Net revenues for Europe and Emerging Markets
for prior periods were restated according to the new perimeter. </font></td>
</tr>
</table>
<p>&nbsp;</p>
<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>
<p align="left"><font size="2" face="Arial, Helvetica, sans-serif">The table below shows our net revenues by location of order shipment and market segment application in percentages of net revenues:</font></p>
<table width="100%" border="0" align="center" cellpadding="0" cellspacing="0">
<tr valign="top">
<td align="left"><font size="1" face="Arial, Helvetica, sans-serif">&nbsp;</font></td>
<td align="right">&nbsp;</td>
<td colspan="5" align="center"><font size="1" face="Arial, Helvetica, sans-serif"><b>(unaudited)<br>
  Three Months Ended</b></font></td>
<td align="left">&nbsp;</td>
</tr>
<tr valign="top">
  <td align="left">&nbsp;</td>
  <td align="right">&nbsp;</td>
  <td colspan="5" 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="left">&nbsp;</td>
<td colspan="2" align="center"><font size="1" face="Arial, Helvetica, sans-serif"><b>April
    2, 2005</b></font></td>
<td align="left">&nbsp;</td>
<td colspan="2" align="center"><font size="1" face="Arial, Helvetica, sans-serif"><b>March
    27, 2004</b></font></td>
<td align="left">&nbsp;</td>
</tr>
<tr valign="top">
  <td align="left">&nbsp;</td>
  <td align="left">&nbsp;</td>
  <td colspan="2" align="center"><hr noshade size="1"></td>
  <td align="left">&nbsp;</td>
  <td colspan="2" 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="left">&nbsp;</td>
<td colspan="5" align="center"><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="bottom" bgcolor="#FFFFFF">
<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 align="left"><font size="2">&nbsp;</font></td>
<td align="right"><font size="2">&nbsp;</font></td>
<td align="left"><font size="2" face="Arial, Helvetica, sans-serif">&nbsp;</font></td>
<td align="left"><font size="2">&nbsp;</font></td>
<td align="right"><font size="2">&nbsp;</font></td>
<td align="left"><font size="2" face="Arial, Helvetica, sans-serif">&nbsp;</font></td>
<td align="left"><font size="2">&nbsp;</font></td> </tr>
<tr valign="bottom" bgcolor="#eeeeee">
<td align="left"><font size="2" face="Arial, Helvetica, sans-serif">Europe <b><sup>(2)</sup></b></font></td>
<td align="left"><font size="2">&nbsp;</font></td>
<td width="2%" align="right"><font size="2">&nbsp;</font></td>
<td width="9%" align="right"><font size="2" face="Arial, Helvetica, sans-serif">32.6</font></td>
<td width="2%" align="left"><font size="2" face="Arial, Helvetica, sans-serif">%</font></td>
<td width="2%" align="right"><font size="2">&nbsp;</font></td>
<td width="9%" align="right"><font size="2" face="Arial, Helvetica, sans-serif">32.0</font></td>
<td width="2%" align="left"><font size="2" face="Arial, Helvetica, sans-serif">%</font></td>
</tr>
<tr valign="bottom" bgcolor="#FFFFFF">
<td align="left"><font size="2" face="Arial, Helvetica, sans-serif">North America</font></td>
<td align="left"><font size="2">&nbsp;</font></td>
<td align="right"><font size="2">&nbsp;</font></td>
<td align="right"><font size="2" face="Arial, Helvetica, sans-serif">13.6</font></td>
<td align="left"><font size="2">&nbsp;</font></td>
<td align="right"><font size="2">&nbsp;</font></td>
<td align="right"><font size="2" face="Arial, Helvetica, sans-serif">14.9</font></td>
<td align="left"><font size="2">&nbsp;</font></td>
</tr>
<tr valign="bottom" bgcolor="#eeeeee">
<td align="left"><font size="2" face="Arial, Helvetica, sans-serif">Asia/Pacific</font></td>
<td align="left"><font size="2">&nbsp;</font></td>
<td align="right"><font size="2">&nbsp;</font></td>
<td align="right"><font size="2" face="Arial, Helvetica, sans-serif">43.5</font></td>
<td align="left"><font size="2">&nbsp;</font></td>
<td align="right"><font size="2">&nbsp;</font></td>
<td align="right"><font size="2" face="Arial, Helvetica, sans-serif">42.1</font></td>
<td align="left"><font size="2">&nbsp;</font></td>
</tr>
<tr valign="bottom" bgcolor="#FFFFFF">
<td align="left"><font size="2" face="Arial, Helvetica, sans-serif">Japan</font></td>
<td align="left"><font size="2">&nbsp;</font></td>
<td align="right"><font size="2">&nbsp;</font></td>
<td align="right"><font size="2" face="Arial, Helvetica, sans-serif">3.6</font></td>
<td align="left"><font size="2">&nbsp;</font></td>
<td align="right"><font size="2">&nbsp;</font></td>
<td align="right"><font size="2" face="Arial, Helvetica, sans-serif">4.3</font></td>
<td align="left"><font size="2">&nbsp;</font></td>
</tr>
<tr valign="bottom" bgcolor="#eeeeee">
<td align="left"><font size="2" face="Arial, Helvetica, sans-serif">Emerging Markets <b><sup>(2)</sup></b></font></td>
<td align="left"><font size="2">&nbsp;</font></td>
<td align="right"><font size="2">&nbsp;</font></td>
<td align="right"><font size="2" face="Arial, Helvetica, sans-serif">6.7</font></td>
<td align="left"><font size="2">&nbsp;</font></td>
<td align="right"><font size="2">&nbsp;</font></td>
<td align="right"><font size="2" face="Arial, Helvetica, sans-serif">6.7</font></td>
<td align="left"><font size="2">&nbsp;</font></td>
</tr>
<tr valign="bottom" bgcolor="#FFFFFF">
<td align="left"><font size="2" face="Arial, Helvetica, sans-serif"><b>Total</b></font></td>
<td align="left"><font size="2">&nbsp;</font></td>
<td align="right"><font size="2">&nbsp;</font></td>
<td align="right"><font size="2" face="Arial, 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"><font size="2">&nbsp;</font></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="bottom" bgcolor="#FFFFFF">
<td align="left"><font size="2" face="Arial, Helvetica, sans-serif"><b>Net Revenues by Market Segment Application:</b></font></td>
<td align="left"><font size="2">&nbsp;</font></td>
<td align="right"><font size="2">&nbsp;</font></td>
<td align="left"><font size="2" face="Arial, Helvetica, sans-serif">&nbsp;</font></td>
<td align="left"><font size="2">&nbsp;</font></td>
<td align="right"><font size="2">&nbsp;</font></td>
<td align="left"><font size="2" face="Arial, Helvetica, sans-serif">&nbsp;</font></td>
<td align="left"><font size="2">&nbsp;</font></td>
</tr>
<tr valign="bottom" bgcolor="#eeeeee">
<td align="left"><font size="2" face="Arial, Helvetica, sans-serif">Automotive</font></td>
<td align="left"><font size="2">&nbsp;</font></td>
<td align="right"><font size="2">&nbsp;</font></td>
<td align="right"><font size="2" face="Arial, Helvetica, sans-serif">16</font></td>
<td align="left"><font size="2" face="Arial, Helvetica, sans-serif">%</font></td>
<td align="right"><font size="2">&nbsp;</font></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>
</tr>
<tr valign="bottom" bgcolor="#FFFFFF">
<td align="left"><font size="2" face="Arial, Helvetica, sans-serif">Consumer</font></td>
<td align="left"><font size="2">&nbsp;</font></td>
<td align="right"><font size="2">&nbsp;</font></td>
<td align="right"><font size="2" face="Arial, Helvetica, sans-serif">19</font></td>
<td align="left"><font size="2">&nbsp;</font></td>
<td align="right"><font size="2">&nbsp;</font></td>
<td align="right"><font size="2" face="Arial, Helvetica, sans-serif">20</font></td>
<td align="left"><font size="2">&nbsp;</font></td>
</tr>
<tr valign="bottom" bgcolor="#eeeeee">
<td align="left"><font size="2" face="Arial, Helvetica, sans-serif">Computer</font></td>
<td align="left"><font size="2">&nbsp;</font></td>
<td align="right"><font size="2">&nbsp;</font></td>
<td align="right"><font size="2" face="Arial, Helvetica, sans-serif">18</font></td>
<td align="left"><font size="2">&nbsp;</font></td>
<td align="right"><font size="2">&nbsp;</font></td>
<td align="right"><font size="2" face="Arial, Helvetica, sans-serif">17</font></td>
<td align="left"><font size="2">&nbsp;</font></td>
</tr>
<tr valign="bottom" bgcolor="#FFFFFF">
<td align="left"><font size="2" face="Arial, Helvetica, sans-serif">Telecom</font></td>
<td align="left"><font size="2">&nbsp;</font></td>
<td align="right"><font size="2">&nbsp;</font></td>
<td align="right"><font size="2" face="Arial, Helvetica, sans-serif">32</font></td>
<td align="left"><font size="2">&nbsp;</font></td>
<td align="right"><font size="2">&nbsp;</font></td>
<td align="right"><font size="2" face="Arial, Helvetica, sans-serif">32</font></td>
<td align="left"><font size="2">&nbsp;</font></td>
</tr>
<tr valign="bottom" bgcolor="#eeeeee">
<td align="left"><font size="2" face="Arial, Helvetica, sans-serif">Industrial and Other</font></td>
<td align="left"><font size="2">&nbsp;</font></td>
<td align="right"><font size="2">&nbsp;</font></td>
<td align="right"><font size="2" face="Arial, Helvetica, sans-serif">15</font></td>
<td align="left"><font size="2">&nbsp;</font></td>
<td align="right"><font size="2">&nbsp;</font></td>
<td align="right"><font size="2" face="Arial, Helvetica, sans-serif">16</font></td>
<td align="left"><font size="2">&nbsp;</font></td>
</tr>
<tr valign="bottom" bgcolor="#FFFFFF">
<td align="left"><font size="2" face="Arial, Helvetica, sans-serif"><b>Total</b></font></td>
<td align="left"><font size="2">&nbsp;</font></td>
<td align="right"><font size="2">&nbsp;</font></td>
<td align="right"><font size="2" face="Arial, 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"><font size="2">&nbsp;</font></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>
</table>
<table width="100%" cellspacing="0" cellpadding="0" border="0">
<tr valign="top">
  <td>&nbsp;</td>
  <td>&nbsp;</td>
</tr>
<tr valign="top">
  <td colspan="2"><hr align="left" width="100" size="1" noshade></td>
</tr>
</table>
<table width="100%" border="0" align="center" cellpadding="0" cellspacing="0">
<tr valign="baseline">
<td width="3%">
<font size="1" face="Arial, Helvetica, sans-serif">(1)</font></td>
<td><font face="Arial, Helvetica, sans-serif" size="1">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>
<tr valign="baseline">
<td width="3%">
<font size="1" face="Arial, Helvetica, sans-serif">(2)</font></td>
<td>
<font face="Arial, Helvetica, sans-serif" size="1">Since January 1, 2005, the region &#147;Europe&#148; includes the former East European countries that joined the European Union in 2004. These countries were part of the Emerging Markets perimeter in the previous periods. Net revenues for Europe and Emerging Markets for prior periods were restated according to the new perimeter.</font></td>
</tr>
<tr valign="top">
  <td>&nbsp;</td>
  <td valign="top">&nbsp;</td>
</tr>
</table>
<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>
<table width="100%" border="0" align="center" cellpadding="0" cellspacing="0">
<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 colspan="4" align="center"><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 colspan="5" align="center" valign="bottom"><font size="1" face="Arial, Helvetica, sans-serif"><b>(unaudited)<br>
Three Months Ended</b></font></td>
<td align="left">&nbsp;</td>
</tr>
<tr valign="top">
  <td align="left">&nbsp;</td>
  <td align="left">&nbsp;</td>
  <td colspan="5" 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="left">&nbsp;</td>
<td colspan="2" align="center" valign="bottom"><font size="1" face="Arial, Helvetica, sans-serif"><b>April 2, 2005</b></font></td>
<td align="left" valign="bottom">&nbsp;</td>
<td colspan="2" align="center" valign="bottom"><font size="1" face="Arial, Helvetica, sans-serif"><b>March 27, 2004</b></font></td>
<td align="left">&nbsp;</td>
</tr>
<tr valign="top">
  <td align="left">&nbsp;</td>
  <td align="left">&nbsp;</td>
  <td colspan="2" align="center" valign="bottom"><hr noshade size="1"></td>
  <td align="left" valign="bottom">&nbsp;</td>
  <td colspan="2" align="center" valign="bottom"><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="left">&nbsp;</td>
<td colspan="5" align="center" valign="bottom"><font size="1" face="Arial, Helvetica, sans-serif"><b>(as a percentage of net revenues)</b></font></td>
<td align="left">&nbsp;</td>
</tr>
<tr valign="top" bgcolor="#FFFFFF">
  <td align="left">&nbsp;</td>
  <td align="left">&nbsp;</td>
  <td align="right">&nbsp;</td>
  <td align="right">&nbsp;</td>
  <td align="left">&nbsp;</td>
  <td align="right">&nbsp;</td>
  <td align="right">&nbsp;</td>
  <td align="left">&nbsp;</td>
</tr>
<tr valign="bottom" bgcolor="#eeeeee">
<td align="left"><font size="2" face="Arial, Helvetica, sans-serif">Net sales</font></td>
<td width="2%" align="left"><font size="2">&nbsp;</font></td>
<td width="2%" align="right"><font size="2">&nbsp;</font></td>
<td width="8%" align="right"><font size="2" face="Arial, Helvetica, sans-serif">99.9</font></td>
<td width="2%" align="left"><font size="2" face="Arial, Helvetica, sans-serif">%</font></td>
<td width="2%" align="right"><font size="2">&nbsp;</font></td>
<td width="8%" align="right"><font size="2" face="Arial, Helvetica, sans-serif">100.0</font></td>
<td width="2%" align="left"><font size="2" face="Arial, Helvetica, sans-serif">%</font></td>
</tr>
<tr valign="bottom" bgcolor="#FFFFFF">
<td align="left"><font size="2" face="Arial, Helvetica, sans-serif">Other revenues</font></td>
<td align="left"><font size="2">&nbsp;</font></td>
<td align="right"><font size="2">&nbsp;</font></td>
<td align="right"><font size="2" face="Arial, Helvetica, sans-serif">0.1</font></td>
<td align="left"><font size="2">&nbsp;</font></td>
<td align="right"><font size="2">&nbsp;</font></td>
<td align="right"><font size="2" face="Arial, Helvetica, sans-serif">&#151;</font></td>
<td align="left"><font size="2">&nbsp;</font></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="left"><font size="2">&nbsp;</font></td>
<td align="right"><font size="2">&nbsp;</font></td>
<td align="right"><font size="2" face="Arial, Helvetica, sans-serif"><b>100.0</b></font></td>
<td align="left"><font size="2">&nbsp;</font></td>
<td align="right"><font size="2">&nbsp;</font></td>
<td align="right"><font size="2" face="Arial, Helvetica, sans-serif"><b>100.0</b></font></td>
<td align="left"><font size="2">&nbsp;</font></td>
</tr>
<tr valign="bottom" bgcolor="#FFFFFF">
<td align="left"><font size="2" face="Arial, Helvetica, sans-serif">Cost of sales</font></td>
<td align="left"><font size="2">&nbsp;</font></td>
<td align="right"><font size="2">&nbsp;</font></td>
<td align="right"><font size="2" face="Arial, Helvetica, sans-serif">(67.1</font></td>
<td align="left"><font size="2" face="Arial, Helvetica, sans-serif">)</font></td>
<td align="right"><font size="2">&nbsp;</font></td>
<td align="right"><font size="2" face="Arial, Helvetica, sans-serif">(64.6</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"><b>Gross profit</b></font></td>
<td align="left"><font size="2">&nbsp;</font></td>
<td align="right"><font size="2">&nbsp;</font></td>
<td align="right"><font size="2" face="Arial, Helvetica, sans-serif"><b>32.9</b></font></td>
<td align="left"><font size="2">&nbsp;</font></td>
<td align="right"><font size="2">&nbsp;</font></td>
<td align="right"><font size="2" face="Arial, Helvetica, sans-serif"><b>35.4</b></font></td>
<td align="left"><font size="2">&nbsp;</font></td>
</tr>
<tr valign="bottom" bgcolor="#FFFFFF">
<td align="left"><font size="2" face="Arial, Helvetica, sans-serif">Selling, general and administrative</font></td>
<td align="left"><font size="2">&nbsp;</font></td>
<td align="right"><font size="2">&nbsp;</font></td>
<td align="right"><font size="2" face="Arial, Helvetica, sans-serif">(12.7</font></td>
<td align="left"><font size="2" face="Arial, Helvetica, sans-serif">)</font></td>
<td align="right"><font size="2">&nbsp;</font></td>
<td align="right"><font size="2" face="Arial, Helvetica, sans-serif">(11.3</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="left"><font size="2">&nbsp;</font></td>
<td align="right"><font size="2">&nbsp;</font></td>
<td align="right"><font size="2" face="Arial, Helvetica, sans-serif">(19.4</font></td>
<td align="left"><font size="2" face="Arial, Helvetica, sans-serif">)</font></td>
<td align="right"><font size="2">&nbsp;</font></td>
<td align="right"><font size="2" face="Arial, Helvetica, sans-serif">(17.9</font></td>
<td align="left"><font size="2" face="Arial, Helvetica, sans-serif">)</font></td>
</tr>
<tr valign="bottom" bgcolor="#FFFFFF">
<td align="left"><font size="2" face="Arial, Helvetica, sans-serif">Other income and expenses, net</font></td>
<td align="left"><font size="2">&nbsp;</font></td>
<td align="right"><font size="2">&nbsp;</font></td>
<td align="right"><font size="2" face="Arial, Helvetica, sans-serif">(0.3</font></td>
<td align="left"><font size="2" face="Arial, Helvetica, sans-serif">)</font></td>
<td align="right"><font size="2">&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>
</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="left"><font size="2">&nbsp;</font></td>
<td align="right"><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 align="right"><font size="2">&nbsp;</font></td>
<td align="right"><font size="2" face="Arial, Helvetica, sans-serif">(1.6</font></td>
<td align="left"><font size="2" face="Arial, Helvetica, sans-serif">)</font></td>
</tr>
<tr valign="bottom" bgcolor="#FFFFFF">
<td align="left"><font size="2" face="Arial, Helvetica, sans-serif"><b>Operating income (loss)</b></font></td>
<td align="left"><font size="2">&nbsp;</font></td>
<td align="right"><font size="2">&nbsp;</font></td>
<td align="right"><font size="2" face="Arial, Helvetica, sans-serif"><b>(3.2</b></font></td>
<td align="left"><font size="2" face="Arial, Helvetica, sans-serif"><b>)</b></font></td>
<td align="right"><font size="2">&nbsp;</font></td>
<td align="right"><font size="2" face="Arial, Helvetica, sans-serif"><b>4.0</b></font></td>
<td align="left"><font size="2">&nbsp;</font></td>
</tr>
<tr valign="bottom" bgcolor="#eeeeee">
<td align="left"><font size="2" face="Arial, Helvetica, sans-serif">Interest income (expense), net</font></td>
<td align="left"><font size="2">&nbsp;</font></td>
<td align="right"><font size="2">&nbsp;</font></td>
<td align="right"><font size="2" face="Arial, Helvetica, sans-serif">0.3</font></td>
<td align="left"><font size="2">&nbsp;</font></td>
<td align="right"><font size="2">&nbsp;</font></td>
<td align="right"><font size="2" face="Arial, Helvetica, sans-serif">(0.2</font></td>
<td align="left"><font size="2" face="Arial, Helvetica, sans-serif">)</font></td>
</tr>
<tr valign="bottom" bgcolor="#FFFFFF">
<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="left"><font size="2">&nbsp;</font></td>
<td align="right"><font size="2">&nbsp;</font></td>
<td align="right"><font size="2" face="Arial, Helvetica, sans-serif">(2.9</font></td>
<td align="left"><font size="2" face="Arial, Helvetica, sans-serif">)</font></td>
<td align="right"><font size="2">&nbsp;</font></td>
<td align="right"><font size="2" face="Arial, Helvetica, sans-serif">3.8</font></td>
<td align="left"><font size="2">&nbsp;</font></td>
</tr>
<tr valign="bottom" bgcolor="#eeeeee">
<td align="left"><font size="2" face="Arial, Helvetica, sans-serif">Income tax benefit (expense)</font></td>
<td align="left"><font size="2">&nbsp;</font></td>
<td align="right"><font size="2">&nbsp;</font></td>
<td align="right"><font size="2" face="Arial, Helvetica, sans-serif">1.5</font></td>
<td align="left"><font size="2">&nbsp;</font></td>
<td align="right"><font size="2">&nbsp;</font></td>
<td align="right"><font size="2" face="Arial, Helvetica, sans-serif">&#151;</font></td>
<td align="left"><font size="2">&nbsp;</font></td>
</tr>
<tr valign="bottom" bgcolor="#FFFFFF">
<td align="left"><font size="2" face="Arial, Helvetica, sans-serif"><b>Income (loss) before minority interests</b></font></td>
<td align="left"><font size="2">&nbsp;</font></td>
<td align="right"><font size="2">&nbsp;</font></td>
<td align="right"><font size="2" face="Arial, Helvetica, sans-serif">(1.4</font></td>
<td align="left"><font size="2" face="Arial, Helvetica, sans-serif">)</font></td>
<td align="right"><font size="2">&nbsp;</font></td>
<td align="right"><font size="2" face="Arial, Helvetica, sans-serif">3.8</font></td>
<td align="left"><font size="2">&nbsp;</font></td>
</tr>
<tr valign="bottom" bgcolor="#eeeeee">
<td align="left"><font size="2" face="Arial, Helvetica, sans-serif">Minority interests</font></td>
<td align="left"><font size="2">&nbsp;</font></td>
<td align="right"><font size="2">&nbsp;</font></td>
<td align="right"><font size="2" face="Arial, 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">&nbsp;</font></td>
<td align="right"><font size="2" face="Arial, Helvetica, sans-serif">&#151;</font></td>
<td align="left"><font size="2">&nbsp;</font></td>
</tr>
<tr valign="bottom" bgcolor="#FFFFFF">
<td align="left"><font size="2" face="Arial, Helvetica, sans-serif"><b>Net income (loss)</b></font></td>
<td align="left"><font size="2">&nbsp;</font></td>
<td align="right"><font size="2">&nbsp;</font></td>
<td align="right"><font size="2" face="Arial, Helvetica, sans-serif"><b>(1.5</b></font></td>
<td align="left"><font size="2" face="Arial, Helvetica, sans-serif"><b>%)</b></font></td>
<td align="right"><font size="2">&nbsp;</font></td>
<td align="right"><font size="2" face="Arial, Helvetica, sans-serif"><b>3.8</b></font></td>
<td align="left"><font size="2" face="Arial, Helvetica, sans-serif"><b>%</b></font></td>
</tr>
</table>
<p>&nbsp;</p>
<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>
<p><a href="#contents"><font size="2">Back to Contents</font></a></p>
<p align="left"><font size="2" face="Arial, Helvetica, sans-serif"><b>First Quarter of 2005 vs. First Quarter of 2004 </b></font></p>
<p align="left"><font size="2" face="Arial, Helvetica, sans-serif">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Based
    upon preliminary industry estimates, in the first quarter of 2005, semiconductor
    industry revenue increased year-over-year by approximately 13% for the TAM
    and by approximately 11% for the SAM. On a sequential basis compared
    to the fourth quarter of 2004, revenues in the first quarter of 2005 increased
    approximately 0.4% for the TAM and 2% for the SAM.</font></p>
<p align="left"><font size="2" face="Arial, Helvetica, sans-serif">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<i>Net Revenues</i></font></p>
<table width="100%" border="0" align="center" cellpadding="0" cellspacing="0">
<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 colspan="7" align="center" valign="bottom"><font size="1" face="Arial, Helvetica, sans-serif"><b>Quarter ended</b></font></td>
<td align="left" valign="bottom">&nbsp;</td>
<td align="right" valign="bottom">&nbsp;</td>
<td colspan="4" align="center" valign="bottom"><font size="1" face="Arial, Helvetica, sans-serif"><b>% Variation</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 colspan="7" align="center" valign="bottom"><hr noshade size="1"></td>
  <td align="left" valign="bottom">&nbsp;</td>
  <td align="right" valign="bottom">&nbsp;</td>
  <td colspan="4" align="center" valign="bottom"><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="left">&nbsp;</td>
<td align="right">&nbsp;</td>
<td align="center" valign="bottom"><font size="1" face="Arial, Helvetica, sans-serif"><b>April 2, 2005</b></font></td>
<td align="left" valign="bottom">&nbsp;</td>
<td align="right" valign="bottom">&nbsp;</td>
<td align="center" valign="bottom"><font size="1" face="Arial, Helvetica, sans-serif"><b>Dec 31, 2004</b></font></td>
<td align="left" valign="bottom">&nbsp;</td>
<td align="right" valign="bottom">&nbsp;</td>
<td align="center" valign="bottom"><font size="1" face="Arial, Helvetica, sans-serif"><b>March 27, 2004</b></font></td>
<td align="left" valign="bottom">&nbsp;</td>
<td align="right" valign="bottom">&nbsp;</td>
<td align="center" valign="bottom"><font size="1" face="Arial, Helvetica, sans-serif"><b>Sequential</b></font></td>
<td align="left" valign="bottom">&nbsp;</td>
<td align="right" valign="bottom">&nbsp;</td>
<td align="center" valign="bottom"><font size="1" face="Arial, Helvetica, sans-serif"><b>Year-over-year</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="center" valign="bottom"><hr noshade size="1"></td>
  <td align="left" valign="bottom">&nbsp;</td>
  <td align="right" valign="bottom">&nbsp;</td>
  <td align="center" valign="bottom"><hr noshade size="1"></td>
  <td align="left" valign="bottom">&nbsp;</td>
  <td align="right" valign="bottom">&nbsp;</td>
  <td align="center" valign="bottom"><hr noshade size="1"></td>
  <td align="left" valign="bottom">&nbsp;</td>
  <td align="right" valign="bottom">&nbsp;</td>
  <td align="center" valign="bottom"><hr noshade size="1"></td>
  <td align="left" valign="bottom">&nbsp;</td>
  <td align="right" valign="bottom">&nbsp;</td>
  <td align="center" valign="bottom"><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="left">&nbsp;</td>
<td align="right">&nbsp;</td>
<td colspan="7" align="center" valign="bottom"><font size="1" face="Arial, Helvetica, sans-serif"><b>(in millions)</b></font></td>
<td align="left" valign="bottom">&nbsp;</td>
<td align="right" valign="bottom">&nbsp;</td>
<td align="left" valign="bottom"><font size="1" face="Arial, Helvetica, sans-serif">&nbsp;</font></td>
<td align="left" valign="bottom">&nbsp;</td>
<td align="right" valign="bottom">&nbsp;</td>
<td align="left" valign="bottom"><font size="1" face="Arial, Helvetica, sans-serif">&nbsp;</font></td>
<td align="left">&nbsp;</td>
</tr>
<tr valign="top">
  <td align="left">&nbsp;</td>
  <td align="left">&nbsp;</td>
  <td align="right">&nbsp;</td>
  <td colspan="7" align="center"><hr noshade size="1"></td>
  <td align="left">&nbsp;</td>
  <td align="right">&nbsp;</td>
  <td colspan="4" align="left"><hr noshade size="1"></td>
  <td align="left">&nbsp;</td>
</tr>
<tr valign="bottom" bgcolor="#FFFFFF">
  <td align="left"><font size="2">&nbsp;</font></td>
  <td align="left"><font size="2">&nbsp;</font></td>
  <td align="right"><font size="2">&nbsp;</font></td>
  <td align="right"><font size="2">&nbsp;</font></td>
  <td align="left"><font size="2">&nbsp;</font></td>
  <td align="right"><font size="2">&nbsp;</font></td>
  <td align="right"><font size="2">&nbsp;</font></td>
  <td align="left"><font size="2">&nbsp;</font></td>
  <td align="right"><font size="2">&nbsp;</font></td>
  <td align="right"><font size="2">&nbsp;</font></td>
  <td align="left"><font size="2">&nbsp;</font></td>
  <td align="right"><font size="2">&nbsp;</font></td>
  <td align="right"><font size="2">&nbsp;</font></td>
  <td align="left"><font size="2">&nbsp;</font></td>
  <td align="right"><font size="2">&nbsp;</font></td>
  <td align="right"><font size="2">&nbsp;</font></td>
  <td align="left"><font size="2">&nbsp;</font></td>
</tr>
<tr valign="bottom" bgcolor="#eeeeee">
<td align="left"><font size="2" face="Arial, Helvetica, sans-serif">Net sales</font></td>
<td width="2%" align="left"><font size="2">&nbsp;</font></td>
<td width="2%" align="right"><font size="2" face="Arial, Helvetica, sans-serif">$</font></td>
<td width="8%" align="right"><font size="2" face="Arial, Helvetica, sans-serif"> 2,081</font></td>
<td width="2%" align="left"><font size="2">&nbsp;</font></td>
<td width="2%" align="right"><font size="2" face="Arial, Helvetica, sans-serif">$</font></td>
<td width="8%" align="right"><font size="2" face="Arial, Helvetica, sans-serif"> 2,326</font></td>
<td width="2%" align="left"><font size="2">&nbsp;</font></td>
<td width="2%" align="right"><font size="2" face="Arial, Helvetica, sans-serif">$</font></td>
<td width="8%" align="right"><font size="2" face="Arial, Helvetica, sans-serif"> 2,028</font></td>
<td width="2%" align="left"><font size="2">&nbsp;</font></td>
<td width="2%" align="right"><font size="2">&nbsp;</font></td>
<td width="8%" align="right"><font size="2" face="Arial, Helvetica, sans-serif">(10.6</font></td>
<td width="2%" align="left"><font size="2" face="Arial, Helvetica, sans-serif">%)</font></td>
<td width="2%" align="right"><font size="2">&nbsp;</font></td>
<td width="8%" align="right"><font size="2" face="Arial, Helvetica, sans-serif">2.6</font></td>
<td width="2%" align="left"><font size="2" face="Arial, Helvetica, sans-serif">%</font></td>
</tr>
<tr valign="bottom" bgcolor="#FFFFFF">
<td align="left"><font size="2" face="Arial, Helvetica, sans-serif">Other revenues</font></td>
<td align="left"><font size="2">&nbsp;</font></td>
<td align="right"><font size="2">&nbsp;</font></td>
<td align="right"><font size="2" face="Arial, Helvetica, sans-serif">2</font></td>
<td align="left"><font size="2">&nbsp;</font></td>
<td align="right"><font size="2">&nbsp;</font></td>
<td align="right"><font size="2" face="Arial, Helvetica, sans-serif">2</font></td>
<td align="left"><font size="2">&nbsp;</font></td>
<td align="right"><font size="2">&nbsp;</font></td>
<td align="right"><font size="2" face="Arial, Helvetica, sans-serif">1</font></td>
<td align="left"><font size="2">&nbsp;</font></td>
<td align="right"><font size="2">&nbsp;</font></td>
<td align="right"><font size="2" face="Arial, Helvetica, sans-serif">26.7</font></td>
<td align="left"><font size="2" face="Arial, Helvetica, sans-serif">%</font></td>
<td align="right"><font size="2">&nbsp;</font></td>
<td align="right"><font size="2" face="Arial, Helvetica, sans-serif">137.5</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">Net revenues</font></td>
<td align="left"><font size="2">&nbsp;</font></td>
<td align="right"><font size="2" face="Arial, Helvetica, sans-serif">$</font></td>
<td align="right"><font size="2" face="Arial, Helvetica, sans-serif"> 2,083</font></td>
<td align="left"><font size="2">&nbsp;</font></td>
<td align="right"><font size="2" face="Arial, Helvetica, sans-serif">$</font></td>
<td align="right"><font size="2" face="Arial, Helvetica, sans-serif"> 2,328</font></td>
<td align="left"><font size="2">&nbsp;</font></td>
<td align="right"><font size="2" face="Arial, Helvetica, sans-serif">$</font></td>
<td align="right"><font size="2" face="Arial, Helvetica, sans-serif"> 2,029</font></td>
<td align="left"><font size="2">&nbsp;</font></td>
<td align="right"><font size="2">&nbsp;</font></td>
<td align="right"><font size="2" face="Arial, Helvetica, sans-serif">(10.5</font></td>
<td align="left"><font size="2" face="Arial, Helvetica, sans-serif">%)</font></td>
<td align="right"><font size="2">&nbsp;</font></td>
<td align="right"><font size="2" face="Arial, Helvetica, sans-serif">2.6</font></td>
<td align="left"><font size="2" face="Arial, Helvetica, sans-serif">%</font></td>
</tr>
</table>
<p align="left"><font size="2" face="Arial, Helvetica, sans-serif">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;On a year-over-year basis, our first quarter 2005 revenues increased 2.6% compared to the first quarter of 2004. This was mainly due to the higher sales volume that more than compensated the negative impact of the decline in selling prices. Major increases in net revenues were registered in MLD and ASG while MPG net revenues were decreasing.  On a sequential basis, our first quarter of 2005 recorded a 10.5% decrease resulting from a significant drop in volume, a further decline in selling prices and a less favorable product mix. During the first quarter of 2005, due to ongoing price pressure in the semiconductor market, our net revenues were negatively impacted and our average selling prices decreased by
approximately 3% sequentially and by approximately 5% compared to the first quarter of 2004.</font></p>
<p align="left"><font size="2" face="Arial, Helvetica, sans-serif">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;With respect to our product segments, in the first quarter of 2005, net revenues for ASG increased 2.3% over the first quarter of 2004 due to higher sales volume mainly in Automotive, Data storage, Imaging and Cellular phones, and a more favorable product mix mainly in Automotive, and Imaging products for cellular phones. The volume increase and a more favorable product mix were partially offset by a decline in average selling prices. First quarter 2005 net revenues for MLD increased 8.9% compared to the first quarter of 2004 mainly due to the volume increase mainly registered in Microcontrollers, Power Mos and discrete products and more favorable product mix. MPG net revenues in the first quarter of 2005 decreased
by 2.4% in comparison to the first quarter of 2004, which is the result of a strong decline in selling prices, which was partially offset by the sales volume increase.</font></p>
<p align="left"><font size="2" face="Arial, Helvetica, sans-serif">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In the first quarter 2005, net revenues for ASG decreased 10.6% sequentially, mainly due to lower sales volume and average selling price decline in most of the product groups, while data storage net revenues increased by approximately 12%. Net revenues for MLD decreased 7.6% sequentially, mainly due to lower sales volume in most of the product groups. MPG net revenues decreased 13.3% in the first quarter of 2005 compared to the fourth quarter of 2004 mainly due to lower sales volume and the decline in selling prices.</font></p>
<p align="left"><font size="2" face="Arial, Helvetica, sans-serif">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;During the first quarter of 2005, net revenues by segment market application were mainly increasing compared to the first quarter of 2004, in Automotive by approximately 13%, Computer by 5% and Telecom by 2%, while Consumer and Industrial and Other decreased by 3% and 1% respectively. </font></p>
<p align="left"><font size="2" face="Arial, Helvetica, sans-serif">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;By location of order shipment, major increases in net revenues in the first quarter of 2005 versus the first quarter of 2004 were registered in the Asia Pacific, Europe and Emerging Markets regions, which revenues increased by approximately 6%, 5% and 2%, respectively, while North America and Japan revenues were decreasing by 6% and 15%, respectively.  </font></p>
<p align="left"><font size="2" face="Arial, Helvetica, sans-serif">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In the first quarter of 2005, we had several large customers, with the largest one, the Nokia group of companies, accounting for approximately 20% of our net revenues, basically equivalent to the 21% it accounted for during the fourth quarter of 2004, and higher than the 15% it accounted for during the first quarter of 2004.  Our top ten original equipment manufacturer customers accounted for approximately 48% of our net revenues in the first quarter of 2005 compared to approximately 48% of our net revenues in the fourth quarter of 2004 and approximately 43% of our net revenues in the first quarter of 2004.</font></p>
<p>&nbsp;</p>
<p align="center"><font size="2" face="Arial, Helvetica, sans-serif">14</font></p>
<hr noshade align="center" width="100%" size="2">
<div style="page-break-before:always"></div>
<page>
<a name="p15"></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">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<i>Gross profit</i></font></p>
<table width="100%" border="0" align="center" cellpadding="0" cellspacing="0">
<tr valign="bottom">
<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 colspan="7" align="center"><font size="1" face="Arial, Helvetica, sans-serif"><b>Quarter ended</b></font></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>% Variation</b></font></td>
<td align="left">&nbsp;</td>
</tr>
<tr valign="bottom">
  <td align="left">&nbsp;</td>
  <td align="left">&nbsp;</td>
  <td align="right">&nbsp;</td>
  <td colspan="7" align="center"><hr noshade size="1"></td>
  <td align="left">&nbsp;</td>
  <td align="right">&nbsp;</td>
  <td colspan="4" align="center"><hr noshade size="1"></td>
  <td align="left">&nbsp;</td>
</tr>
<tr valign="bottom">
<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>April 2, 2005</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>Dec 31, 2004</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>March 27, 2004</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>Sequential</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>Year-over-year</b></font></td>
<td align="left">&nbsp;</td>
</tr>
<tr valign="bottom">
  <td align="left">&nbsp;</td>
  <td align="left">&nbsp;</td>
  <td align="right">&nbsp;</td>
  <td align="center"><hr noshade size="1"></td>
  <td align="left">&nbsp;</td>
  <td align="right">&nbsp;</td>
  <td align="center"><hr noshade size="1"></td>
  <td align="left">&nbsp;</td>
  <td align="right">&nbsp;</td>
  <td align="center"><hr noshade size="1"></td>
  <td align="left">&nbsp;</td>
  <td align="right">&nbsp;</td>
  <td align="center"><hr noshade size="1"></td>
  <td align="left">&nbsp;</td>
  <td align="right">&nbsp;</td>
  <td align="center"><hr noshade size="1"></td>
  <td align="left">&nbsp;</td>
</tr>
<tr valign="bottom">
<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 colspan="7" align="center" valign="bottom"><font size="1" face="Arial, Helvetica, sans-serif"><b>(in millions)</b></font></td>
<td align="left">&nbsp;</td>
<td align="right">&nbsp;</td>
<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="left"><font size="1" face="Arial, Helvetica, sans-serif">&nbsp;</font></td>
<td align="left">&nbsp;</td>
</tr>
<tr valign="bottom">
  <td align="left">&nbsp;</td>
  <td align="left">&nbsp;</td>
  <td align="right">&nbsp;</td>
  <td align="left">&nbsp;</td>
  <td align="left">&nbsp;</td>
  <td align="right">&nbsp;</td>
  <td align="center">&nbsp;</td>
  <td align="left">&nbsp;</td>
  <td align="right">&nbsp;</td>
  <td align="left">&nbsp;</td>
  <td align="left">&nbsp;</td>
  <td align="right">&nbsp;</td>
  <td align="left">&nbsp;</td>
  <td align="left">&nbsp;</td>
  <td align="right">&nbsp;</td>
  <td align="left">&nbsp;</td>
  <td align="left">&nbsp;</td>
</tr>
<tr valign="bottom" bgcolor="#eeeeee">
<td align="left"><font size="2" face="Arial, Helvetica, sans-serif">Cost of sales</font></td>
<td width="2%" align="left"><font size="2">&nbsp;</font></td>
<td width="2%" align="right"><font size="2" face="Arial, Helvetica, sans-serif">$</font></td>
<td width="8%" align="right"><font size="2" face="Arial, Helvetica, sans-serif">(1,398</font></td>
<td width="2%" align="left"><font size="2" face="Arial, Helvetica, sans-serif">)</font></td>
<td width="2%" align="right"><font size="2" face="Arial, Helvetica, sans-serif">$</font></td>
<td width="8%" align="right"><font size="2" face="Arial, Helvetica, sans-serif"> (1,476</font></td>
<td width="2%" align="left"><font size="2" face="Arial, Helvetica, sans-serif">)</font></td>
<td width="2%" align="right"><font size="2" face="Arial, Helvetica, sans-serif">$</font></td>
<td width="8%" align="right"><font size="2" face="Arial, Helvetica, sans-serif"> (1,311</font></td>
<td width="2%" align="left"><font size="2" face="Arial, Helvetica, sans-serif">)</font></td>
<td width="2%" align="right"><font size="2">&nbsp;</font></td>
<td width="8%" align="right"><font size="2" face="Arial, Helvetica, sans-serif">(5.3</font></td>
<td width="2%" align="left"><font size="2" face="Arial, Helvetica, sans-serif">%)</font></td>
<td width="2%" align="right"><font size="2">&nbsp;</font></td>
<td width="8%" align="right"><font size="2" face="Arial, Helvetica, sans-serif">(6.6</font></td>
<td width="2%" align="left"><font size="2" face="Arial, Helvetica, sans-serif">%)</font></td>
</tr>
<tr valign="bottom" bgcolor="#FFFFFF">
<td align="left"><font size="2" face="Arial, Helvetica, sans-serif">Gross profit</font></td>
<td align="left"><font size="2">&nbsp;</font></td>
<td align="right"><font size="2" face="Arial, Helvetica, sans-serif">$</font></td>
<td align="right"><font size="2" face="Arial, Helvetica, sans-serif">685</font></td>
<td align="left"><font size="2">&nbsp;</font></td>
<td align="right"><font size="2" face="Arial, Helvetica, sans-serif">$</font></td>
<td align="right"><font size="2" face="Arial, Helvetica, sans-serif"> 852</font></td>
<td align="left"><font size="2">&nbsp;</font></td>
<td align="right"><font size="2" face="Arial, Helvetica, sans-serif">$</font></td>
<td align="right"><font size="2" face="Arial, Helvetica, sans-serif"> 718</font></td>
<td align="left"><font size="2">&nbsp;</font></td>
<td align="right"><font size="2">&nbsp;</font></td>
<td align="right"><font size="2" face="Arial, Helvetica, sans-serif">(19.7</font></td>
<td align="left"><font size="2" face="Arial, Helvetica, sans-serif">%)</font></td>
<td align="right"><font size="2">&nbsp;</font></td>
<td align="right"><font size="2" face="Arial, Helvetica, sans-serif">(4.7</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">Gross margin (as a percentage of net revenues)</font></td>
<td align="left"><font size="2">&nbsp;</font></td>
<td align="right"><font size="2">&nbsp;</font></td>
<td align="right"><font size="2" face="Arial, Helvetica, sans-serif">32.9</font></td>
<td align="left"><font size="2" face="Arial, Helvetica, sans-serif">%</font></td>
<td align="right"><font size="2">&nbsp;</font></td>
<td align="right"><font size="2" face="Arial, Helvetica, sans-serif">36.6</font></td>
<td align="left"><font size="2" face="Arial, Helvetica, sans-serif">%</font></td>
<td align="right"><font size="2">&nbsp;</font></td>
<td align="right"><font size="2" face="Arial, Helvetica, sans-serif">35.4</font></td>
<td align="left"><font size="2" face="Arial, Helvetica, sans-serif">%</font></td>
<td align="right"><font size="2">&nbsp;</font></td>
<td align="right"><font size="2" face="Arial, Helvetica, sans-serif">&#151;</font></td>
<td align="left"><font size="2">&nbsp;</font></td>
<td align="right"><font size="2">&nbsp;</font></td>
<td align="right"><font size="2" face="Arial, Helvetica, sans-serif">&#151;</font></td>
<td align="left"><font size="2">&nbsp;</font></td>
</tr>
</table>
<p align="left"><font size="2" face="Arial, Helvetica, sans-serif">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Gross
    margin in the first quarter of 2005 decreased to 32.9% compared to 36.6%
    in the fourth quarter of 2004 and 35.4% in the first quarter of 2004. The
    first quarter of 2005 gross margin was negatively impacted in comparison
    with the first quarter of 2004 by the continuing pricing pressure and the
    negative impact of the U.S. dollar weakening, which exceeded the benefits
    of improved manufacturing efficiencies and higher sales volume. On a sequential
    basis, our gross margin deteriorated due to the decline in selling
    prices, and lower volume and related reduced capacity utilization in some
    fabs. In addition, the further weakening of the U.S. dollar compared to the
    other major currencies negatively impacted our gross margin in the first
    quarter by approximately 100 basis points compared to the fourth quarter
    of 2004. </font></p>
<p align="left"><font size="2" face="Arial, Helvetica, sans-serif">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<i>Selling, general and administrative expenses</i></font></p>
<table width="100%" border="0" align="center" cellpadding="0" cellspacing="0">
<tr valign="bottom">
<td align="left"><font size="1" face="Arial, Helvetica, sans-serif">&nbsp;</font></td>
<td align="left">&nbsp;</td>
<td colspan="8" align="center"><font size="1" face="Arial, Helvetica, sans-serif"><b>Quarter ended</b></font></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>% Variation</b></font></td>
<td align="left">&nbsp;</td>
</tr>
<tr valign="bottom">
  <td align="left">&nbsp;</td>
  <td align="left">&nbsp;</td>
  <td colspan="8" align="center"><hr noshade size="1"></td>
  <td align="left">&nbsp;</td>
  <td align="right">&nbsp;</td>
  <td colspan="4" align="center"><hr noshade size="1"></td>
  <td align="left">&nbsp;</td>
</tr>
<tr valign="bottom">
<td align="left"><font size="1" face="Arial, Helvetica, sans-serif">&nbsp;</font></td>
<td align="left">&nbsp;</td>
<td colspan="2" align="center"><font size="1" face="Arial, Helvetica, sans-serif"><b>April 2, 2005</b></font></td>
<td align="left">&nbsp;</td>
<td colspan="2" align="center"><font size="1" face="Arial, Helvetica, sans-serif"><b>Dec 31, 2004</b></font></td>
<td align="left">&nbsp;</td>
<td colspan="2" align="center"><font size="1" face="Arial, Helvetica, sans-serif"><b>March 27, 2004</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>Sequential</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>Year-over-year</b></font></td>
<td align="left">&nbsp;</td>
</tr>
<tr valign="bottom">
  <td align="left">&nbsp;</td>
  <td align="left">&nbsp;</td>
  <td colspan="2" align="center"><hr noshade size="1"></td>
  <td align="left">&nbsp;</td>
  <td colspan="2" align="center"><hr noshade size="1"></td>
  <td align="left">&nbsp;</td>
  <td colspan="2" align="center"><hr noshade size="1"></td>
  <td align="left">&nbsp;</td>
  <td align="right">&nbsp;</td>
  <td align="center"><hr noshade size="1"></td>
  <td align="left">&nbsp;</td>
  <td align="right">&nbsp;</td>
  <td align="center"><hr noshade size="1"></td>
  <td align="left">&nbsp;</td>
</tr>
<tr valign="bottom">
<td align="left"><font size="1" face="Arial, Helvetica, sans-serif">&nbsp;</font></td>
<td align="left">&nbsp;</td>
<td colspan="8" align="center"><font size="1" face="Arial, Helvetica, sans-serif"><b>(in millions)</b></font></td>
<td align="left">&nbsp;</td>
<td align="right">&nbsp;</td>
<td colspan="4" align="left"><font size="1" face="Arial, Helvetica, sans-serif">&nbsp;</font></td>
<td align="left">&nbsp;</td>
</tr>
<tr valign="bottom">
  <td align="left">&nbsp;</td>
  <td align="left">&nbsp;</td>
  <td colspan="8" align="center"><hr noshade size="1"></td>
  <td align="left">&nbsp;</td>
  <td align="right">&nbsp;</td>
  <td colspan="4" align="left"><hr noshade size="1"></td>
  <td align="left">&nbsp;</td>
</tr>
<tr valign="bottom" bgcolor="#eeeeee">
<td align="left"><font size="2" face="Arial, Helvetica, sans-serif">Selling, general and administrative expenses</font></td>
<td width="2%" align="left"><font size="2">&nbsp;</font></td>
<td width="2%" align="right"><font size="2" face="Arial, Helvetica, sans-serif">$</font></td>
<td width="8%" align="right"><font size="2" face="Arial, Helvetica, sans-serif"> (<b>265</b></font></td>
<td width="2%" align="left"><font size="2" face="Arial, Helvetica, sans-serif"><b>)</b></font></td>
<td width="2%" align="right"><font size="2" face="Arial, Helvetica, sans-serif">$</font></td>
<td width="8%" align="right"><font size="2" face="Arial, Helvetica, sans-serif"> (245</font></td>
<td width="2%" align="left"><font size="2" face="Arial, Helvetica, sans-serif">)</font></td>
<td width="2%" align="right"><font size="2" face="Arial, Helvetica, sans-serif">$</font></td>
<td width="8%" align="right"><font size="2" face="Arial, Helvetica, sans-serif"> (230</font></td>
<td width="2%" align="left"><font size="2" face="Arial, Helvetica, sans-serif">)</font></td>
<td width="2%" align="right"><font size="2">&nbsp;</font></td>
<td width="8%" align="right"><font size="2" face="Arial, Helvetica, sans-serif">(8.0</font></td>
<td width="2%" align="left"><font size="2" face="Arial, Helvetica, sans-serif">%)</font></td>
<td width="2%" align="right"><font size="2">&nbsp;</font></td>
<td width="8%" align="right"><font size="2" face="Arial, Helvetica, sans-serif">(14.9</font></td>
<td width="2%" align="left"><font size="2" face="Arial, Helvetica, sans-serif">%)</font></td>
</tr>
<tr valign="bottom" bgcolor="#FFFFFF">
<td align="left"><font size="2" face="Arial, Helvetica, sans-serif">As a percentage of net revenues</font></td>
<td align="left"><font size="2">&nbsp;</font></td>
<td align="right"><font size="2">&nbsp;</font></td>
<td align="right"><font size="2" face="Arial, Helvetica, sans-serif"><b>(12.7</b></font></td>
<td align="left"><font size="2" face="Arial, Helvetica, sans-serif"><b>%)</b></font></td>
<td align="right"><font size="2">&nbsp;</font></td>
<td align="right"><font size="2" face="Arial, Helvetica, sans-serif">(10.5</font></td>
<td align="left"><font size="2" face="Arial, Helvetica, sans-serif">%)</font></td>
<td align="right"><font size="2">&nbsp;</font></td>
<td align="right"><font size="2" face="Arial, Helvetica, sans-serif">(11.3</font></td>
<td align="left"><font size="2" face="Arial, Helvetica, sans-serif">%)</font></td>
<td align="right"><font size="2">&nbsp;</font></td>
<td align="right"><font size="2" face="Arial, Helvetica, sans-serif">&#151;</font></td>
<td align="left"><font size="2">&nbsp;</font></td>
<td align="right"><font size="2">&nbsp;</font></td>
<td align="right"><font size="2" face="Arial, Helvetica, sans-serif">&#151;</font></td>
<td align="left"><font size="2">&nbsp;</font></td>
</tr>
<tr valign="bottom">
<td align="left"><font size="2" face="Arial, Helvetica, sans-serif">&nbsp;</font></td>
<td align="left"><font size="2">&nbsp;</font></td>
<td align="right"><font size="2">&nbsp;</font></td>
<td align="left"><font size="2" face="Arial, Helvetica, sans-serif">&nbsp;</font></td>
<td align="left"><font size="2">&nbsp;</font></td>
<td align="right"><font size="2">&nbsp;</font></td>
<td align="left"><font size="2" face="Arial, Helvetica, sans-serif">&nbsp;</font></td>
<td align="left"><font size="2">&nbsp;</font></td>
<td align="right"><font size="2">&nbsp;</font></td>
<td align="left"><font size="2" face="Arial, Helvetica, sans-serif">&nbsp;</font></td>
<td align="left"><font size="2">&nbsp;</font></td>
<td align="right"><font size="2">&nbsp;</font></td>
<td align="left"><font size="2" face="Arial, Helvetica, sans-serif">&nbsp;</font></td>
<td align="left"><font size="2">&nbsp;</font></td>
<td align="right"><font size="2">&nbsp;</font></td>
<td align="left"><font size="2" face="Arial, Helvetica, sans-serif">&nbsp;</font></td>
<td align="left"><font size="2">&nbsp;</font></td>
</tr>
</table>
<p align="left"><font size="2" face="Arial, Helvetica, sans-serif">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our selling, general and administrative expenses increased 14.9% in the first quarter of 2005 compared to the first quarter of 2004. This increase was mainly associated with the provision amounting to $15 million in one-time compensation charges to be paid to the former CEO and three other senior executives as decided by our Supervisory Board, higher spending in marketing activities associated with our program to broaden our customer base and the negative impact of the U.S. dollar decline. On a sequential basis, we registered an increase of 8.0% mainly due to the one-time compensation charges of $15 million as well as the negative impact of the U.S. dollar decline. Excluding this specific item, selling, general and
administrative expenses would have amounted to $250 million, corresponding to a 2% increase compared to the fourth quarter of 2004.  </font></p>
<p align="left"><font size="2" face="Arial, Helvetica, sans-serif">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<i>Research and development expenses</i></font></p>
<table width="100%" border="0" align="center" cellpadding="0" cellspacing="0">
<tr valign="bottom">
<td align="left"><font size="1" face="Arial, Helvetica, sans-serif">&nbsp;</font></td>
<td align="left">&nbsp;</td>
<td colspan="8" align="center"><font size="1" face="Arial, Helvetica, sans-serif"><b>Quarter ended</b></font></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>% Variation</b></font></td>
<td align="left">&nbsp;</td>
</tr>
<tr valign="bottom">
  <td align="left">&nbsp;</td>
  <td align="left">&nbsp;</td>
  <td colspan="8" align="center"><hr noshade size="1"></td>
  <td align="left">&nbsp;</td>
  <td align="right">&nbsp;</td>
  <td colspan="4" align="center"><hr noshade size="1"></td>
  <td align="left">&nbsp;</td>
</tr>
<tr valign="bottom">
<td align="left"><font size="1" face="Arial, Helvetica, sans-serif">&nbsp;</font></td>
<td align="left">&nbsp;</td>
<td colspan="2" align="center"><font size="1" face="Arial, Helvetica, sans-serif"><b>April 2, 2005</b></font></td>
<td align="left">&nbsp;</td>
<td colspan="2" align="center"><font size="1" face="Arial, Helvetica, sans-serif"><b>Dec 31, 2004</b></font></td>
<td align="left">&nbsp;</td>
<td colspan="2" align="center"><font size="1" face="Arial, Helvetica, sans-serif"><b>March 27, 2004</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>Sequential</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>Year-over-year</b></font></td>
<td align="left">&nbsp;</td>
</tr>
<tr valign="bottom">
  <td align="left">&nbsp;</td>
  <td align="left">&nbsp;</td>
  <td colspan="2" align="center"><hr noshade size="1"></td>
  <td align="left">&nbsp;</td>
  <td colspan="2" align="center"><hr noshade size="1"></td>
  <td align="left">&nbsp;</td>
  <td colspan="2" align="center"><hr noshade size="1"></td>
  <td align="left">&nbsp;</td>
  <td align="right">&nbsp;</td>
  <td align="center"><hr noshade size="1"></td>
  <td align="left">&nbsp;</td>
  <td align="right">&nbsp;</td>
  <td align="center"><hr noshade size="1"></td>
  <td align="left">&nbsp;</td>
</tr>
<tr valign="bottom">
<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 colspan="7" align="center"><font size="1" face="Arial, Helvetica, sans-serif"><b>(in millions)</b></font></td>
<td align="left">&nbsp;</td>
<td align="right">&nbsp;</td>
<td colspan="4" align="left"><font size="1" face="Arial, Helvetica, sans-serif">&nbsp;</font></td>
<td align="left">&nbsp;</td>
</tr>
<tr valign="bottom">
  <td align="left">&nbsp;</td>
  <td align="left">&nbsp;</td>
  <td colspan="8" align="center"><hr noshade size="1"></td>
  <td align="left">&nbsp;</td>
  <td align="right">&nbsp;</td>
  <td colspan="4" align="left"><hr noshade size="1"></td>
  <td align="left">&nbsp;</td>
</tr>
<tr valign="bottom" bgcolor="#eeeeee">
<td align="left"><font size="2" face="Arial, Helvetica, sans-serif">Research and development expenses</font></td>
<td width="2%" align="left"><font size="2">&nbsp;</font></td>
<td width="2%" align="right"><font size="2" face="Arial, Helvetica, sans-serif">$</font></td>
<td width="8%" align="right"><font size="2" face="Arial, Helvetica, sans-serif"> <b>(404</b></font></td>
<td width="2%" align="left"><font size="2" face="Arial, Helvetica, sans-serif"><b>)</b></font></td>
<td width="2%" align="right"><font size="2" face="Arial, Helvetica, sans-serif">$</font></td>
<td width="8%" align="right"><font size="2" face="Arial, Helvetica, sans-serif"> (402</font></td>
<td width="2%" align="left"><font size="2" face="Arial, Helvetica, sans-serif">)</font></td>
<td width="2%" align="right"><font size="2" face="Arial, Helvetica, sans-serif">$</font></td>
<td width="8%" align="right"><font size="2" face="Arial, Helvetica, sans-serif"> (363</font></td>
<td width="2%" align="left"><font size="2" face="Arial, Helvetica, sans-serif">)</font></td>
<td width="2%" align="right"><font size="2">&nbsp;</font></td>
<td width="8%" align="right"><font size="2" face="Arial, Helvetica, sans-serif">(0.4</font></td>
<td width="2%" align="left"><font size="2" face="Arial, Helvetica, sans-serif">%)</font></td>
<td width="2%" align="right"><font size="2">&nbsp;</font></td>
<td width="8%" align="right"><font size="2" face="Arial, Helvetica, sans-serif">(11.3</font></td>
<td colspan="2" align="left"><font size="2" face="Arial, Helvetica, sans-serif">%)</font></td>
</tr>
<tr valign="bottom" bgcolor="#FFFFFF">
<td align="left"><font size="2" face="Arial, Helvetica, sans-serif">As a percentage of net revenues</font></td>
<td align="left"><font size="2">&nbsp;</font></td>
<td align="right"><font size="2">&nbsp;</font></td>
<td align="right"><font size="2" face="Arial, Helvetica, sans-serif"><b>(19.4</b></font></td>
<td align="left"><font size="2" face="Arial, Helvetica, sans-serif"><b>%)</b></font></td>
<td align="right"><font size="2">&nbsp;</font></td>
<td align="right"><font size="2" face="Arial, Helvetica, sans-serif">(17.3</font></td>
<td align="left"><font size="2" face="Arial, Helvetica, sans-serif">%)</font></td>
<td align="right"><font size="2">&nbsp;</font></td>
<td align="right"><font size="2" face="Arial, Helvetica, sans-serif">(17.9</font></td>
<td align="left"><font size="2" face="Arial, Helvetica, sans-serif">%)</font></td>
<td align="right"><font size="2">&nbsp;</font></td>
<td align="right"><font size="2" face="Arial, Helvetica, sans-serif">&#151;</font></td>
<td align="left"><font size="2">&nbsp;</font></td>
<td align="right"><font size="2">&nbsp;</font></td>
<td align="right"><font size="2" face="Arial, Helvetica, sans-serif">&#151;</font></td>
<td align="left"><font size="2">&nbsp;</font></td>
</tr>
<tr valign="bottom">
<td align="left"><font size="2" face="Arial, Helvetica, sans-serif">&nbsp;</font></td>
<td align="left"><font size="2">&nbsp;</font></td>
<td align="right"><font size="2">&nbsp;</font></td>
<td align="left"><font size="2" face="Arial, Helvetica, sans-serif">&nbsp;</font></td>
<td align="left"><font size="2">&nbsp;</font></td>
<td align="right"><font size="2">&nbsp;</font></td>
<td align="left"><font size="2" face="Arial, Helvetica, sans-serif">&nbsp;</font></td>
<td align="left"><font size="2">&nbsp;</font></td>
<td align="right"><font size="2">&nbsp;</font></td>
<td align="left"><font size="2" face="Arial, Helvetica, sans-serif">&nbsp;</font></td>
<td align="left"><font size="2">&nbsp;</font></td>
<td align="right"><font size="2">&nbsp;</font></td>
<td align="left"><font size="2" face="Arial, Helvetica, sans-serif">&nbsp;</font></td>
<td align="left"><font size="2">&nbsp;</font></td>
<td align="right"><font size="2">&nbsp;</font></td>
<td align="left"><font size="2" face="Arial, Helvetica, sans-serif">&nbsp;</font></td>
<td align="left"><font size="2">&nbsp;</font></td>
</tr>
</table>
<p align="left"><font size="2" face="Arial, Helvetica, sans-serif">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In the first quarter of 2005, research and development expenses increased 11.3% compared to the first quarter of 2004, due to higher levels of investment in research and development activities and due to the impact of the U.S. dollar decline. In addition, in the first quarter of 2005, research and development expenses included a $5 million one-time termination charge to be paid to two former executives. On a sequential basis, our research and development expenses remained basically flat. </font></p>
<p align="left"><font size="2" face="Arial, Helvetica, sans-serif">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;On
    a year-over-year basis, as a percentage of net revenues, research and development
    expenses grew at a higher rate than our net revenues, increasing from 17.9%
    in the first quarter of 2004 up to 19.4% in the first quarter of 2005. Research
    and development expenses represented 17.3% as a percentage of our fourth
    quarter of 2004 sales. </font></p>
<p>&nbsp;</p>
<p align="center"><font size="2" face="Arial, Helvetica, sans-serif">15</font></p>
<hr noshade align="center" width="100%" size="2">
<div style="page-break-before:always"></div>
<page>
<a name="p16"></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">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<i>Other income and expenses, net</i></font></p>
<table width="100%" border="0" align="center" cellpadding="0" cellspacing="0">
<tr valign="bottom">
<td align="left"><font size="1" face="Arial, Helvetica, sans-serif">&nbsp;</font></td>
<td align="left">&nbsp;</td>
<td colspan="8" align="center"><font size="1" face="Arial, Helvetica, sans-serif"><b>Quarter ended</b></font></td>
<td align="left">&nbsp;</td>
</tr>
<tr valign="bottom">
  <td align="left">&nbsp;</td>
  <td align="left">&nbsp;</td>
  <td colspan="8" align="center"><hr noshade size="1"></td>
  <td align="left">&nbsp;</td>
</tr>
<tr valign="bottom">
<td align="left"><font size="1" face="Arial, Helvetica, sans-serif">&nbsp;</font></td>
<td align="left">&nbsp;</td>
<td colspan="2" align="center"><font size="1" face="Arial, Helvetica, sans-serif"><b>April 2, 2005</b></font></td>
<td align="left">&nbsp;</td>
<td colspan="2" align="center"><font size="1" face="Arial, Helvetica, sans-serif"><b>Dec 31, 2004</b></font></td>
<td align="left">&nbsp;</td>
<td colspan="2" align="center"><font size="1" face="Arial, Helvetica, sans-serif"><b>March 27, 2004</b></font></td>
<td align="left">&nbsp;</td>
</tr>
<tr valign="bottom">
  <td align="left">&nbsp;</td>
  <td align="left">&nbsp;</td>
  <td colspan="2" align="center"><hr noshade size="1"></td>
  <td align="left">&nbsp;</td>
  <td colspan="2" align="center"><hr noshade size="1"></td>
  <td align="left">&nbsp;</td>
  <td colspan="2" align="center"><hr noshade size="1"></td>
  <td align="left">&nbsp;</td>
</tr>
<tr valign="bottom">
<td align="left"><font size="1" face="Arial, Helvetica, sans-serif">&nbsp;</font></td>
<td align="left">&nbsp;</td>
<td colspan="8" align="center"><font size="1" face="Arial, Helvetica, sans-serif"><b>(in millions)</b></font></td>
<td align="left">&nbsp;</td>
</tr>
<tr valign="bottom">
  <td align="left">&nbsp;</td>
  <td align="left">&nbsp;</td>
  <td colspan="8" align="center"><hr noshade size="1"></td>
  <td align="left">&nbsp;</td>
</tr>
<tr valign="bottom" bgcolor="#eeeeee">
<td align="left"><font size="2" face="Arial, Helvetica, sans-serif">Research and development funding</font></td>
<td width="2%" align="left"><font size="2">&nbsp;</font></td>
<td width="2%" align="right"><font size="2" face="Arial, Helvetica, sans-serif">$</font></td>
<td width="8%" align="right"><font size="2" face="Arial, Helvetica, sans-serif">14</font></td>
<td width="2%" align="left"><font size="2">&nbsp;</font></td>
<td width="2%" align="right"><font size="2" face="Arial, Helvetica, sans-serif">$</font></td>
<td width="8%" align="right"><font size="2" face="Arial, Helvetica, sans-serif"> 47</font></td>
<td width="2%" align="left"><font size="2">&nbsp;</font></td>
<td width="2%" align="right"><font size="2" face="Arial, Helvetica, sans-serif">$</font></td>
<td width="8%" align="right"><font size="2" face="Arial, Helvetica, sans-serif"> 16</font></td>
<td width="2%" align="left"><font size="2">&nbsp;</font></td>
</tr>
<tr valign="bottom" bgcolor="#FFFFFF">
<td align="left"><font size="2" face="Arial, Helvetica, sans-serif">Start-up costs</font></td>
<td align="left"><font size="2">&nbsp;</font></td>
<td align="right"><font size="2">&nbsp;</font></td>
<td align="right"><font size="2" face="Arial, Helvetica, sans-serif">(22</font></td>
<td align="left"><font size="2" face="Arial, Helvetica, sans-serif">)</font></td>
<td align="right"><font size="2">&nbsp;</font></td>
<td align="right"><font size="2" face="Arial, Helvetica, sans-serif">(18</font></td>
<td align="left"><font size="2" face="Arial, Helvetica, sans-serif">)</font></td>
<td align="right"><font size="2">&nbsp;</font></td>
<td align="right"><font size="2" face="Arial, Helvetica, sans-serif">(23</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">Exchange gain (loss) net</font></td>
<td align="left"><font size="2">&nbsp;</font></td>
<td align="right"><font size="2">&nbsp;</font></td>
<td align="right"><font size="2" face="Arial, Helvetica, sans-serif">14</font></td>
<td align="left"><font size="2">&nbsp;</font></td>
<td align="right"><font size="2">&nbsp;</font></td>
<td align="right"><font size="2" face="Arial, Helvetica, sans-serif">14</font></td>
<td align="left"><font size="2">&nbsp;</font></td>
<td align="right"><font size="2">&nbsp;</font></td>
<td align="right"><font size="2" face="Arial, Helvetica, sans-serif">1</font></td>
<td align="left"><font size="2">&nbsp;</font></td>
</tr>
<tr valign="bottom" bgcolor="#FFFFFF">
<td align="left"><font size="2" face="Arial, Helvetica, sans-serif">Patent claim costs</font></td>
<td align="left"><font size="2">&nbsp;</font></td>
<td align="right"><font size="2">&nbsp;</font></td>
<td align="right"><font size="2" face="Arial, Helvetica, sans-serif">(5</font></td>
<td align="left"><font size="2" face="Arial, Helvetica, sans-serif">)</font></td>
<td align="right"><font size="2">&nbsp;</font></td>
<td align="right"><font size="2" face="Arial, Helvetica, sans-serif">(16</font></td>
<td align="left"><font size="2" face="Arial, Helvetica, sans-serif">)</font></td>
<td align="right"><font size="2">&nbsp;</font></td>
<td align="right"><font size="2" face="Arial, Helvetica, sans-serif">(6</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">Gain on sale of non-current assets</font></td>
<td align="left"><font size="2">&nbsp;</font></td>
<td align="right"><font size="2">&nbsp;</font></td>
<td align="right"><font size="2" face="Arial, Helvetica, sans-serif">&#151;</font></td>
<td align="left"><font size="2">&nbsp;</font></td>
<td align="right"><font size="2">&nbsp;</font></td>
<td align="right"><font size="2" face="Arial, Helvetica, sans-serif">&#151;</font></td>
<td align="left"><font size="2">&nbsp;</font></td>
<td align="right"><font size="2">&nbsp;</font></td>
<td align="right"><font size="2" face="Arial, Helvetica, sans-serif">4</font></td>
<td align="left"><font size="2">&nbsp;</font></td>
</tr>
<tr valign="bottom" bgcolor="#FFFFFF">
<td align="left"><font size="2" face="Arial, Helvetica, sans-serif">Other, net</font></td>
<td align="left"><font size="2">&nbsp;</font></td>
<td align="right"><font size="2">&nbsp;</font></td>
<td align="right"><font size="2" face="Arial, Helvetica, sans-serif">(7</font></td>
<td align="left"><font size="2" face="Arial, Helvetica, sans-serif">)</font></td>
<td align="right"><font size="2">&nbsp;</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">&nbsp;</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>
</tr>
<tr valign="bottom" bgcolor="#eeeeee">
<td align="left"><font size="2" face="Arial, Helvetica, sans-serif"><b>Other income and expenses, net</b></font></td>
<td align="left"><font size="2">&nbsp;</font></td>
<td align="right"><font size="2" face="Arial, Helvetica, sans-serif">$</font></td>
<td align="right"><font size="2" face="Arial, Helvetica, sans-serif"><b>(6</b></font></td>
<td align="left"><font size="2" face="Arial, Helvetica, sans-serif"><b>)</b></font></td>
<td align="right"><font size="2" face="Arial, Helvetica, sans-serif">$</font></td>
<td align="right"><font size="2" face="Arial, Helvetica, sans-serif"><b>23</b></font></td>
<td align="left"><font size="2">&nbsp;</font></td>
<td align="right"><font size="2" face="Arial, Helvetica, sans-serif">$</font></td>
<td align="right"><font size="2" face="Arial, Helvetica, sans-serif"><b>(12</b></font></td>
<td align="left"><font size="2" face="Arial, Helvetica, sans-serif"><b>)</b></font></td>
</tr>
<tr valign="bottom" bgcolor="#FFFFFF">
<td align="left"><font size="2" face="Arial, Helvetica, sans-serif">As a percentage of net revenues</font></td>
<td align="left"><font size="2">&nbsp;</font></td>
<td align="right"><font size="2">&nbsp;</font></td>
<td align="right"><font size="2" face="Arial, Helvetica, sans-serif">(0.3</font></td>
<td align="left"><font size="2" face="Arial, Helvetica, sans-serif">%)</font></td>
<td align="right"><font size="2">&nbsp;</font></td>
<td align="right"><font size="2" face="Arial, Helvetica, sans-serif">1.0</font></td>
<td align="left"><font size="2" face="Arial, Helvetica, sans-serif">%</font></td>
<td align="right"><font size="2">&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>
</tr>
</table>
<p align="left"><font size="2" face="Arial, Helvetica, sans-serif">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;Other income and expenses, net&#148; resulted in an expense of $6 million in the first quarter of 2005, compared to expense of $12 million in the first quarter of 2004. On a year-over-year basis, the most important variation was the result of an exchange gain of $14 million related to realized and unrealized exchange gains and losses related to transactions denominated in foreign currencies, not designated as cash flow hedge. Startup costs in the first quarter of 2005 were related to our 150-mm fab expansion in Singapore and the conversion to 200-mm fab in Agrate (Italy). Patent claim costs included costs associated with several ongoing litigations and claims. Patent claim costs are categorized either as
patent litigation costs or pre-litigation costs, amounting to $3 million and $2 million, respectively. The $7 million of miscellaneous charges of the first quarter of 2005 included $4 million one-time contribution to a non profitable charitable institution as decided by our Supervisory Board. In the fourth quarter of 2004, &#147;Other income and expenses, net&#148; resulted in an income of $23 million due to the higher level of research and development funding. </font></p>
<p align="left"><font size="2" face="Arial, Helvetica, sans-serif">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<i>Impairment, restructuring charges and other related closure costs</i></font></p>
<table width="100%" border="0" align="center" cellpadding="0" cellspacing="0">
<tr valign="bottom">
<td align="left"><font size="1" face="Arial, Helvetica, sans-serif">&nbsp;</font></td>
<td align="left">&nbsp;</td>
<td colspan="8" align="center"><font size="1" face="Arial, Helvetica, sans-serif"><b>Quarter ended</b></font></td>
<td align="right">&nbsp;</td>
</tr>
<tr valign="bottom">
  <td align="left">&nbsp;</td>
  <td align="left">&nbsp;</td>
  <td colspan="8" align="center"><hr noshade size="1"></td>
  <td align="right">&nbsp;</td>
</tr>
<tr valign="bottom">
<td height="20" align="left"><font size="1" face="Arial, Helvetica, sans-serif">&nbsp;</font></td>
<td align="left">&nbsp;</td>
<td colspan="2" align="center"><font size="1" face="Arial, Helvetica, sans-serif"><b>April 2, 2005</b></font></td>
<td align="left">&nbsp;</td>
<td colspan="2" align="center"><font size="1" face="Arial, Helvetica, sans-serif"><b>Dec 31, 2004</b></font></td>
<td align="left">&nbsp;</td>
<td colspan="2" align="center"><font size="1" face="Arial, Helvetica, sans-serif"><b>March 27, 2004</b></font></td>
<td align="left">&nbsp;</td>
</tr>
<tr valign="bottom">
  <td align="left">&nbsp;</td>
  <td align="left">&nbsp;</td>
  <td colspan="2" align="center"><hr noshade size="1"></td>
  <td align="left">&nbsp;</td>
  <td colspan="2" align="center"><hr noshade size="1"></td>
  <td align="left">&nbsp;</td>
  <td colspan="2" align="center"><hr noshade size="1"></td>
  <td align="left">&nbsp;</td>
</tr>
<tr valign="bottom">
<td align="left"><font size="1" face="Arial, Helvetica, sans-serif">&nbsp;</font></td>
<td align="left">&nbsp;</td>
<td colspan="8" align="center"><font size="1" face="Arial, Helvetica, sans-serif"><b>(in millions)</b></font></td>
<td align="left">&nbsp;</td>
</tr>
<tr valign="bottom">
  <td align="left">&nbsp;</td>
  <td align="left">&nbsp;</td>
  <td colspan="8" align="center"><hr noshade size="1"></td>
  <td align="left">&nbsp;</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 width="2%" align="left"><font size="2">&nbsp;</font></td>
<td width="2%" align="right"><font size="2" face="Arial, Helvetica, sans-serif">$</font></td>
<td width="8%" align="right"><font size="2" face="Arial, Helvetica, sans-serif"> (78</font></td>
<td width="2%" align="left"><font size="2" face="Arial, Helvetica, sans-serif">)</font></td>
<td width="2%" align="right"><font size="2" face="Arial, Helvetica, sans-serif">$</font></td>
<td width="8%" align="right"><font size="2" face="Arial, Helvetica, sans-serif"> (18</font></td>
<td width="2%" align="left"><font size="2" face="Arial, Helvetica, sans-serif">)</font></td>
<td width="2%" align="right"><font size="2" face="Arial, Helvetica, sans-serif">$</font></td>
<td width="8%" align="right"><font size="2" face="Arial, Helvetica, sans-serif"> (33</font></td>
<td width="2%" align="left"><font size="2" face="Arial, Helvetica, sans-serif">)</font></td>
</tr>
<tr valign="bottom" bgcolor="#FFFFFF">
<td align="left"><font size="2" face="Arial, Helvetica, sans-serif">As a percentage of net revenues</font></td>
<td align="left"><font size="2">&nbsp;</font></td>
<td align="right"><font size="2">&nbsp;</font></td>
<td align="right"><font size="2" face="Arial, Helvetica, sans-serif">(3.7</font></td>
<td align="left"><font size="2" face="Arial, Helvetica, sans-serif">%)</font></td>
<td align="right"><font size="2">&nbsp;</font></td>
<td align="right"><font size="2" face="Arial, Helvetica, sans-serif">(0.8</font></td>
<td align="left"><font size="2" face="Arial, Helvetica, sans-serif">%)</font></td>
<td align="right"><font size="2">&nbsp;</font></td>
<td align="right"><font size="2" face="Arial, Helvetica, sans-serif">(1.6</font></td>
<td align="left"><font size="2" face="Arial, Helvetica, sans-serif">%)</font></td>
</tr>
</table>
<p align="left"><font size="2" face="Arial, Helvetica, sans-serif">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In the first quarter of 2005, we recorded impairment, restructuring charges and other related closure costs of $78 million. This expense was mainly composed of:</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">the reduction of Access technology products for Customer Premises Equipment (CPE), as announced in January 2005, that generated an impairment charge of $61 million on goodwill and other intangible assets as well as $5 million charge for workforce termination benefits pursuant to the exit plan committed in one of our European subsidiaries;</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">the closure of certain sites in Germany and in the USA, which resulted in a restructuring expense and other related closure costs of approximately $3 million corresponding to unused lease and employee termination 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">the continuation of our restructuring plan, mainly related to 150-mm fabs, announced in October 2003 that generated restructuring charges of approximately $7 million. Through the period ended April 2, 2005, we have incurred $288 million in connection with our restructuring plan announced in October 2003 of the total expected approximate $350 million in pre-tax charges. We expect to incur the balance in the coming quarters.</font></td>
</tr>
</table>
<p align="left"><font size="2" face="Arial, Helvetica, sans-serif">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;See Note 7 to our Unaudited Interim Consolidated Financial Statements.</font></p>
<p>&nbsp;</p>
<p align="center"><font size="2" face="Arial, Helvetica, sans-serif">16</font></p>
<hr noshade align="center" width="100%" size="2">
<div style="page-break-before:always"></div>
<page>
<a name="p17"></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">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<i>Operating income (loss)</i></font></p>
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<td align="left"><font size="1" face="Arial, Helvetica, sans-serif">&nbsp;</font></td>
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<td colspan="8" align="center"><font size="1" face="Arial, Helvetica, sans-serif"><b>Quarter ended</b></font></td>
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<td align="left"><font size="1" face="Arial, Helvetica, sans-serif">&nbsp;</font></td>
<td align="left">&nbsp;</td>
<td colspan="2" align="center"><font size="1" face="Arial, Helvetica, sans-serif"><b>April 2, 2005</b></font></td>
<td align="left">&nbsp;</td>
<td colspan="2" align="center"><font size="1" face="Arial, Helvetica, sans-serif"><b>Dec 31, 2004</b></font></td>
<td align="left">&nbsp;</td>
<td colspan="2" align="center"><font size="1" face="Arial, Helvetica, sans-serif"><b>March 27, 2004</b></font></td>
<td align="left">&nbsp;</td>
</tr>
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  <td align="left">&nbsp;</td>
  <td align="left">&nbsp;</td>
  <td colspan="2" align="center"><hr noshade size="1"></td>
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  <td colspan="2" align="center"><hr noshade size="1"></td>
  <td align="left">&nbsp;</td>
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<td align="left"><font size="1" face="Arial, Helvetica, sans-serif">&nbsp;</font></td>
<td align="left">&nbsp;</td>
<td colspan="8" align="center"><font size="1" face="Arial, Helvetica, sans-serif"><b>(in millions)</b></font></td>
<td align="left">&nbsp;</td>
</tr>
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  <td align="left">&nbsp;</td>
  <td align="left">&nbsp;</td>
  <td colspan="8" align="center"><hr noshade size="1"></td>
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<tr valign="bottom" bgcolor="#eeeeee">
<td align="left"><font size="2" face="Arial, Helvetica, sans-serif">Operating income (loss)</font></td>
<td width="2%" align="left"><font size="2">&nbsp;</font></td>
<td width="2%" align="right"><font size="2" face="Arial, Helvetica, sans-serif">$</font></td>
<td width="8%" align="right"><font size="2" face="Arial, Helvetica, sans-serif"> (68</font></td>
<td width="2%" align="left"><font size="2" face="Arial, Helvetica, sans-serif">)</font></td>
<td width="2%" align="right"><font size="2" face="Arial, Helvetica, sans-serif">$</font></td>
<td width="8%" align="right"><font size="2" face="Arial, Helvetica, sans-serif"> 210</font></td>
<td width="2%" align="left"><font size="2">&nbsp;</font></td>
<td width="2%" align="right"><font size="2" face="Arial, Helvetica, sans-serif">$</font></td>
<td width="8%" align="right"><font size="2" face="Arial, Helvetica, sans-serif"> 80</font></td>
<td width="2%" align="left"><font size="2">&nbsp;</font></td>
</tr>
<tr valign="bottom" bgcolor="#FFFFFF">
<td align="left"><font size="2" face="Arial, Helvetica, sans-serif">As a percentage of net revenues</font></td>
<td align="left"><font size="2">&nbsp;</font></td>
<td align="right"><font size="2">&nbsp;</font></td>
<td align="right"><font size="2" face="Arial, Helvetica, sans-serif">(3.2</font></td>
<td align="left"><font size="2" face="Arial, Helvetica, sans-serif">%)</font></td>
<td align="right"><font size="2">&nbsp;</font></td>
<td align="right"><font size="2" face="Arial, Helvetica, sans-serif">9.0</font></td>
<td align="left"><font size="2" face="Arial, Helvetica, sans-serif">%</font></td>
<td align="right"><font size="2">&nbsp;</font></td>
<td align="right"><font size="2" face="Arial, Helvetica, sans-serif">4.0</font></td>
<td align="left"><font size="2" face="Arial, Helvetica, sans-serif">%</font></td>
</tr>
</table>
<p align="left"><font size="2" face="Arial, Helvetica, sans-serif">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our operating result translated from an operating income of $80 million in the first quarter of 2004 to an operating loss of $68 million in the first quarter of 2005, due to several factors that negatively impacted our profitability although our net revenues have increased. These factors mainly included:</font></p>
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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">seasonal volume decline
      in revenues;</font></td>
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<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">the negative impact of the ongoing pricing pressure on our net revenues;</font></td>
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<table width="100%" cellspacing="0" cellpadding="0" border="0">
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  <td></td>
  <td>&nbsp;</td>
  <td>&nbsp;</td>
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<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">the negative impact of the U.S. dollar decline; 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">the increase in our total operating expenses from $638 million in the first quarter of 2004 to $753 million in the first quarter of 2005 in relation to the impairment of CPE and one-time compensation and related charges. </font></td>
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<p align="left"><font size="2" face="Arial, Helvetica, sans-serif">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;These negative factors were partially compensated by improved efficiencies in our manufacturing activities and higher volume of sales. </font></p>
<p align="left"><font size="2" face="Arial, Helvetica, sans-serif">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In the first quarter of 2005, MLD registered an operating income of $71 million, equivalent to the first quarter of 2004, as improved sales volume offset the negative impacts of ongoing pricing pressure and increased operating expenses. ASG operating income decreased to $65 million, significantly decreasing compared to $118 million in the first quarter of 2004 due to pricing pressure and increased operating expenses. In the first quarter of 2005, MPG registered an operating loss of $62&nbsp;million, compared to an operating loss of $3 million in the first quarter of 2004, due to the negative price impact and lower sales. All the groups were negatively impacted by the decline in the value of the U.S. dollar.
</font></p>
<p align="left"><font size="2" face="Arial, Helvetica, sans-serif">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<i>Interest income (expense), net</i></font></p>
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<td align="left"><font size="1" face="Arial, Helvetica, sans-serif">&nbsp;</font></td>
<td align="left">&nbsp;</td>
<td colspan="8" align="center"><font size="1" face="Arial, Helvetica, sans-serif"><b>Quarter ended</b></font></td>
<td align="left">&nbsp;</td>
</tr>
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  <td align="left">&nbsp;</td>
  <td align="left">&nbsp;</td>
  <td colspan="8" align="center"><hr noshade size="1"></td>
  <td align="right">&nbsp;</td>
</tr>
<tr valign="bottom">
<td align="left"><font size="1" face="Arial, Helvetica, sans-serif">&nbsp;</font></td>
<td align="left">&nbsp;</td>
<td colspan="2" align="center"><font size="1" face="Arial, Helvetica, sans-serif"><b>April 2, 2005</b></font></td>
<td align="left">&nbsp;</td>
<td colspan="2" align="center"><font size="1" face="Arial, Helvetica, sans-serif"><b>Dec 31, 2004</b></font></td>
<td align="left">&nbsp;</td>
<td colspan="2" align="center"><font size="1" face="Arial, Helvetica, sans-serif"><b>March 27, 2004</b></font></td>
<td align="left">&nbsp;</td>
</tr>
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  <td align="left">&nbsp;</td>
  <td align="left">&nbsp;</td>
  <td colspan="2" align="center"><hr noshade size="1"></td>
  <td align="left">&nbsp;</td>
  <td colspan="2" align="center"><hr noshade size="1"></td>
  <td align="left">&nbsp;</td>
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<td align="left"><font size="1" face="Arial, Helvetica, sans-serif">&nbsp;</font></td>
<td align="left">&nbsp;</td>
<td colspan="8" align="center"><font size="1" face="Arial, Helvetica, sans-serif"><b>(in millions)</b></font></td>
<td align="left">&nbsp;</td>
</tr>
<tr valign="bottom">
  <td align="left">&nbsp;</td>
  <td align="left">&nbsp;</td>
  <td colspan="8" align="center"><hr noshade size="1"></td>
  <td align="left">&nbsp;</td>
</tr>
<tr valign="bottom" bgcolor="#eeeeee">
<td align="left"><font size="2" face="Arial, Helvetica, sans-serif">Interest income (expense), net</font></td>
<td width="2%" align="left"><font size="2">&nbsp;</font></td>
<td width="2%" align="right"><font size="2" face="Arial, Helvetica, sans-serif">$</font></td>
<td width="8%" align="right"><font size="2" face="Arial, Helvetica, sans-serif"> 7</font></td>
<td width="2%" align="left"><font size="2">&nbsp;</font></td>
<td width="2%" align="right"><font size="2" face="Arial, Helvetica, sans-serif">$</font></td>
<td width="8%" align="right"><font size="2" face="Arial, Helvetica, sans-serif"> 5</font></td>
<td width="2%" align="left"><font size="2">&nbsp;</font></td>
<td width="2%" align="right"><font size="2" face="Arial, Helvetica, sans-serif">$</font></td>
<td width="8%" align="right"><font size="2" face="Arial, Helvetica, sans-serif"> (4</font></td>
<td width="2%" align="left"><font size="2" face="Arial, Helvetica, sans-serif">)</font></td>
</tr>
</table>
<p align="left"><font size="2" face="Arial, Helvetica, sans-serif">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The interest income, net, of $7 million of the first quarter of 2005 is in line with the interest income, net, of $5 million recorded in the fourth quarter of 2004 and represents an improvement compared to the first quarter 2004, reflecting the decrease in interest expense due to our repurchases of our 2010 Bonds and our early redemption of the 2009 LYONs. </font></p>
<p align="left"><font size="2" face="Arial, Helvetica, sans-serif">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<i>Income tax benefit (expense)</i></font></p>
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<td align="left"><font size="1" face="Arial, Helvetica, sans-serif">&nbsp;</font></td>
<td align="left">&nbsp;</td>
<td colspan="8" align="center"><font size="1" face="Arial, Helvetica, sans-serif"><b>Quarter ended</b></font></td>
<td align="left">&nbsp;</td>
</tr>
<tr valign="bottom">
  <td align="left">&nbsp;</td>
  <td align="left">&nbsp;</td>
  <td colspan="8" align="center"><hr noshade size="1"></td>
  <td align="right">&nbsp;</td>
</tr>
<tr valign="bottom">
<td align="left"><font size="1" face="Arial, Helvetica, sans-serif">&nbsp;</font></td>
<td align="left">&nbsp;</td>
<td colspan="2" align="center"><font size="1" face="Arial, Helvetica, sans-serif"><b>April 2, 2005</b></font></td>
<td align="left">&nbsp;</td>
<td colspan="2" align="center"><font size="1" face="Arial, Helvetica, sans-serif"><b>Dec 31, 2004</b></font></td>
<td align="left">&nbsp;</td>
<td colspan="2" align="center"><font size="1" face="Arial, Helvetica, sans-serif"><b>March 27, 2004</b></font></td>
<td align="left">&nbsp;</td>
</tr>
<tr valign="bottom">
  <td align="left">&nbsp;</td>
  <td align="left">&nbsp;</td>
  <td colspan="2" align="center"><hr noshade size="1"></td>
  <td align="left">&nbsp;</td>
  <td colspan="2" align="center"><hr noshade size="1"></td>
  <td align="left">&nbsp;</td>
  <td colspan="2" align="center"><hr noshade size="1"></td>
  <td align="left">&nbsp;</td>
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<tr valign="bottom">
<td align="left"><font size="1" face="Arial, Helvetica, sans-serif">&nbsp;</font></td>
<td align="left">&nbsp;</td>
<td colspan="8" align="center"><font size="1" face="Arial, Helvetica, sans-serif"><b>(in millions)</b></font></td>
<td align="left">&nbsp;</td>
</tr>
<tr valign="bottom">
  <td align="left">&nbsp;</td>
  <td align="left">&nbsp;</td>
  <td colspan="8" align="center"><hr noshade size="1"></td>
  <td align="left">&nbsp;</td>
</tr>
<tr valign="bottom" bgcolor="#eeeeee">
<td align="left"><font size="2" face="Arial, Helvetica, sans-serif">Income tax benefit (expense)</font></td>
<td width="2%" align="left"><font size="2">&nbsp;</font></td>
<td width="2%" align="right"><font size="2" face="Arial, Helvetica, sans-serif">$</font></td>
<td width="8%" align="right"><font size="2" face="Arial, Helvetica, sans-serif"> 31</font></td>
<td width="2%" align="left"><font size="2">&nbsp;</font></td>
<td width="2%" align="right"><font size="2" face="Arial, Helvetica, sans-serif">$</font></td>
<td width="8%" align="right"><font size="2" face="Arial, Helvetica, sans-serif"> (26</font></td>
<td width="2%" align="left"><font size="2" face="Arial, Helvetica, sans-serif">)</font></td>
<td width="2%" align="right"><font size="2" face="Arial, Helvetica, sans-serif">$</font></td>
<td width="8%" align="right"><font size="2" face="Arial, Helvetica, sans-serif"> 1</font></td>
<td width="2%" align="left"><font size="2">&nbsp;</font></td>
</tr>
</table>
<p align="left"><font size="2" face="Arial, Helvetica, sans-serif">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;During the first quarter of 2005, we incurred an income tax benefit of $31 million, which included a $20 million reversal of certain tax provisions following the conclusion of an advanced pricing agreement for the period 2001 through 2007 with the United States Internal Revenue Service. Excluding these amounts, our effective tax rate would have been 16.4%, which is equivalent to the estimate of the 2005 tax charges in each of our jurisdictions. The effective tax rate for the first quarter of 2005 was computed on the basis of actual tax charges in each jurisdiction. 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 be different in future quarters and may increase in the coming years. </font></p>
<p>&nbsp;</p>
<p align="center"><font size="2" face="Arial, Helvetica, sans-serif">17</font></p>
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<page>
<a name="p18"></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">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<i>Net income (loss)</i></font></p>
<table width="100%" cellspacing="0" cellpadding="0" align="center" border="0">
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<td align="left"><font size="1" face="Arial, Helvetica, sans-serif">&nbsp;</font></td>
<td align="left">&nbsp;</td>
<td colspan="8" align="center"><font size="1" face="Arial, Helvetica, sans-serif"><b>Quarter ended</b></font></td>
<td align="left">&nbsp;</td>
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  <td align="left">&nbsp;</td>
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  <td colspan="8" align="center"><hr noshade size="1"></td>
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<td align="left"><font size="1" face="Arial, Helvetica, sans-serif">&nbsp;</font></td>
<td align="left">&nbsp;</td>
<td colspan="2" align="center"><font size="1" face="Arial, Helvetica, sans-serif"><b>April 2, 2005</b></font></td>
<td align="left">&nbsp;</td>
<td colspan="2" align="center"><font size="1" face="Arial, Helvetica, sans-serif"><b>Dec 31, 2004</b></font></td>
<td align="left">&nbsp;</td>
<td colspan="2" align="center"><font size="1" face="Arial, Helvetica, sans-serif"><b>March 27, 2004</b></font></td>
<td align="left">&nbsp;</td>
</tr>
<tr valign="bottom">
  <td align="left">&nbsp;</td>
  <td align="left">&nbsp;</td>
  <td colspan="2" align="center"><hr noshade size="1"></td>
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<td align="left"><font size="1" face="Arial, Helvetica, sans-serif">&nbsp;</font></td>
<td align="left">&nbsp;</td>
<td colspan="8" align="center"><font size="1" face="Arial, Helvetica, sans-serif"><b>(in millions)</b></font></td>
<td align="left">&nbsp;</td>
</tr>
<tr valign="bottom">
  <td align="left">&nbsp;</td>
  <td align="left">&nbsp;</td>
  <td colspan="8" align="center"><hr noshade size="1"></td>
  <td align="left">&nbsp;</td>
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<tr valign="bottom" bgcolor="#eeeeee">
<td align="left"><font size="2" face="Arial, Helvetica, sans-serif">Net income (loss)</font></td>
<td width="2%" align="left"><font size="2">&nbsp;</font></td>
<td width="2%" align="right"><font size="2" face="Arial, Helvetica, sans-serif">$</font></td>
<td width="8%" align="right"><font size="2" face="Arial, Helvetica, sans-serif"> (31</font></td>
<td width="2%" align="left"><font size="2" face="Arial, Helvetica, sans-serif">)</font></td>
<td width="2%" align="right"><font size="2" face="Arial, Helvetica, sans-serif">$</font></td>
<td width="8%" align="right"><font size="2" face="Arial, Helvetica, sans-serif"> 187</font></td>
<td width="2%" align="left"><font size="2">&nbsp;</font></td>
<td width="2%" align="right"><font size="2" face="Arial, Helvetica, sans-serif">$</font></td>
<td width="8%" align="right"><font size="2" face="Arial, Helvetica, sans-serif"> 77</font></td>
<td width="2%" align="left"><font size="2">&nbsp;</font></td>
</tr>
<tr valign="bottom" bgcolor="#FFFFFF">
<td align="left"><font size="2" face="Arial, Helvetica, sans-serif">As a percentage of net revenues</font></td>
<td align="left"><font size="2">&nbsp;</font></td>
<td align="right"><font size="2">&nbsp;</font></td>
<td align="right"><font size="2" face="Arial, Helvetica, sans-serif">(1.5</font></td>
<td align="left"><font size="2" face="Arial, Helvetica, sans-serif">%<b>)</b></font></td>
<td align="right"><font size="2">&nbsp;</font></td>
<td align="right"><font size="2" face="Arial, Helvetica, sans-serif">8.0</font></td>
<td align="left"><font size="2" face="Arial, Helvetica, sans-serif">%</font></td>
<td align="right"><font size="2">&nbsp;</font></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>
</table>
<p align="left"><font size="2" face="Arial, Helvetica, sans-serif">For the first quarter of 2005, we reported a net loss of $31 million, compared to net income of $77 million in the first quarter of 2004 and net income of $187 million in the fourth quarter of 2004. Basic and diluted earnings per share for the first quarter of 2005 were $0.03 loss, deteriorating from basic and diluted earnings of $0.09 and $0.08 per share, respectively, for the first quarter of 2004 and compared to basic and diluted earnings per share of $0.21 and $0.20, respectively, for the fourth quarter of 2004. The first quarter of 2005 earnings per share included net cost equivalent to $0.07 per diluted share associated with the impairment and one-time compensation charges, and with the tax benefit generated by our reverse of certain income
tax provisions.</font></p>
<p align="left"><font size="2" face="Arial, Helvetica, sans-serif"><b>Related-Party Transactions</b></font></p>
<p align="left"><font size="2" face="Arial, Helvetica, sans-serif">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;On February 27, 2005, the board of directors of France Telecom appointed Didier Lombard, member of our Supervisory Board, as its Chairman and CEO. France Telecom and its subsidiaries are our suppliers and we will disclose the relevant transactions in our annual report.</font></p>
<p align="left"><font size="2" face="sans-serif">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;At
    a meeting on April&nbsp;26,&nbsp;2005,
    the Managing Board informed the Supervisory Board about the renewal of a
    contract for the provision of various telecom-related services with EQUANT,
    a subsidiary of France Telecom. The Supervisory Board noted the Management
    Board&#8217;s assessment of the positive commercial benefits of such contract.
    Additionally, the Supervisory Board noted that the contract was concluded
    at normal and competitive conditions and was based on a long-standing proven
    business relationship between EQUANT and us, which was established before
    EQUANT became a controlled
subsidiary of France Telecom.</font></p>
<p align="left"><font size="2" face="Arial, Helvetica, sans-serif"><b>Impact of Changes in Exchange Rates</b></font></p>
<p align="left"><font size="2" face="Arial, Helvetica, sans-serif">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our results of operations and financial condition can be significantly affected by material changes in exchange rates between the U.S. dollar and other currencies where we maintain our operations, particularly the euro, the Japanese yen and other Asian currencies.</font></p>
<p align="left"><font size="2" face="Arial, Helvetica, sans-serif">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;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 in the short term our level of revenues when reported in U.S. dollars.</font></p>
<p align="left"><font size="2" face="Arial, Helvetica, sans-serif">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;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 quarter of 2005, the average rate of U.S. dollar during the period declined in value,
particularly against the euro, causing us to report higher expenses and negatively impacting both our gross margin and operating income. Our Consolidated Statement of Income for the first quarter of 2005 includes income and expense items translated at the average exchange rate for the period. The average rate of the euro to the U.S. dollar was &euro;1.00 for $1.31 in the first quarter of 2005, and it was &euro;1.00 for $1.27 in the fourth quarter of 2004 and &euro;1.00 for $1.26 in the first quarter of 2004. The further weakening of the U.S. dollar compared to the other major currencies negatively impacted our gross margin in the first quarter of 2005 by approximately 100 basis points compared to the fourth quarter of 2004.  A continuation in the decline of the U.S. dollar compared to the
other major currencies, which affect our operations, would negatively impact our expenses, margins and profitability. </font></p>
<p>&nbsp;</p>
<p align="center"><font size="2" face="Arial, Helvetica, sans-serif">18</font></p>
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<p align="left"><font size="2" face="Arial, Helvetica, sans-serif">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;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, we have hedged certain line items on our income statement,
    in particular with respect to a portion of cost of goods sold, most of the
    research and development expenses and certain selling and general and administrative
    expenses, located in the euro zone. As of April 2, 2005 these hedging contracts
    represent a deferred loss of $32 million after tax, registered in other comprehensive
    income in shareholders&#146; equity, compared to deferred profit of $59 million
    after tax as at December 31, 2004. However, there is no guarantee that we
    will be capable of reaching a complete balance, and, consequently, our result
    of operations could be impacted by significant fluctuations in exchange rates.
    In addition, in order to avoid potential exchange rate risks on our commercial
    transactions, from time to time, we may purchase or sell forward foreign
    currency exchange contracts and currency options to cover foreign currency
    exposure in payables or receivables at our affiliates. Our management strategies
    to reduce exchange rate risks have served to mitigate, but not eliminate,
    the positive or negative impact of exchange rate fluctuations. No assurance
    may be given that our hedging activities will sufficiently protect us against
    declines in the value of the dollar, and if the value of the dollar increases,
    we will record losses in connection with the loss in value of the remaining
    forward hedging contracts at the time.</font></p>
<p align="left"><font size="2" face="Arial, Helvetica, sans-serif">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;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 since a large part of our assets and liabilities are accounted for in euro as their functional currency. Adjustments resulting from the translation are recorded directly in shareholders&#146; equity, and are shown as &#147;accumulated other comprehensive income (loss)&#148; in the consolidated statements of changes in shareholders&#146; equity. At April 2, 2005, our outstanding
indebtedness was denominated principally in U.S. dollars and, to a limited extent, in euros and in Singapore dollars. </font></p>
<p align="left"><font size="2" face="Arial, Helvetica, sans-serif">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;For a more detailed discussion, see &#147;Item 3. Key Information&#150;Risk Factors&#150;Our financial results can be adversely affected by fluctuations in exchange rates, principally in the value of the U.S. dollar&#148; as set forth in our Form 20-F.</font></p>
<p align="left"><font size="2" face="Arial, Helvetica, sans-serif"><b>Liquidity and Capital Resources</b></font></p>
<p align="left"><font size="2" face="Arial, Helvetica, sans-serif">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;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. Most treasury activities are centralized, with any local treasury activities subject to oversight from our head treasury office. The majority of our cash and cash equivalents are held in U.S. dollars and are placed with financial institutions rated &#147;A&#148; or higher. Marginal amounts are held in other currencies. See &#147;Item 11. Quantitative and Qualitative Disclosures about Market Risk&#148; in our Form 20-F. At April 2, 2005, there had been no material changes in foreign currency
operations and hedging transactions exposures from those disclosed in our Form 20-F.</font></p>
<p align="left"><font size="2" face="Arial, Helvetica, sans-serif">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;At April 2, 2005, cash and cash equivalents totaled $1,162 million, compared to $1,950 million at December 31, 2004. Our available cash decreased in the first quarter of 2005 due to the $525 investment in marketable securities and the negative net operating cash flow of the period. In the first quarter of 2005, we invested $525 million 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 instruments (&#147;reference debt&#148;) that have been issued by different financial institutions with a minimum rating of &#147;A-&#148; and include a derivative instrument related to the underlying
credit default swap of the credit-linked deposit. We determined that this derivative element had no material impact on our interim Consolidated Financial Statements as of April 2, 2005. 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 by December 31, 2005, unless suspended by credit default of the reference debt. Additionally, the carrying value of the instruments depends on the non-default of the reference debt. The principal will be repaid at final maturity unless a default occurs, in which case repayment of principal would be reduced based on the decline in value of the defaulted debt.
</font></p>
<p>&nbsp;</p>
<p align="center"><font size="2" face="Arial, Helvetica, sans-serif">19</font></p>
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<p align="left"><font size="2" face="Arial, Helvetica, sans-serif"><b><i>Liquidity</i></b></font></p>
<p align="left"><font size="2" face="Arial, Helvetica, sans-serif">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We maintain a significant cash position and a low debt to equity ratio which provide us with adequate financial flexibility. As in the past, our cash management policy is to finance our investment needs mainly with net cash generated from operating activities. Net cash from operating activities was $359 million in the first quarter of 2005, while net cash used in investing activities was $1,100 million, of which $525 million related to investments in short-term marketable securities.</font></p>
<p align="left"><font size="2" face="Arial, Helvetica, sans-serif">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<i>Net cash from operating activities</i>.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
    major source of cash during the first quarter of 2005 and in prior periods
    was cash provided by operating activities. Our net cash from operating activities
    totaled $359 million in the first quarter of 2005, decreasing from $552 million
    in the first quarter of 2004, due to the lower profitability level and the
negative changes in assets and liabilities. </font></p>
<p align="left"><font size="2" face="Arial, Helvetica, sans-serif">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Changes in our operating assets and liabilities resulted in net cash used of $157 million in the first quarter of 2005, compared to net cash generated of $26 million in the first quarter of 2004. In the first quarter of 2005, the increase in our trade accounts receivable used net cash of $24 million, while it used $125 million of net cash in the first quarter of 2004. Inventory used net cash for $65 million in the first quarter of 2005, while in the first quarter of 2004 inventory generated net cash of $44 million. Finally, our trade payables used net cash of $57 million in the first quarter of 2005, while they generated net cash of $169 million in the first quarter of 2004. </font></p>
<p align="left"><font size="2" face="Arial, Helvetica, sans-serif">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<i>Net cash used in investing activities</i>.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Net cash used in investing activities was $1,100 million in the first quarter of 2005, compared to $1,367 million in the first quarter of 2004. Payments for purchases of tangible assets were the main utilization of cash amounting to $564 million for the first quarter of 2005, a significant increase over the $321 million in the first quarter of 2004. Purchases of marketable securities in the first quarter of 2005 amounted to $525 million compared to $1,030 in the first quarter of 2004.</font></p>
<p align="left"><font size="2" face="Arial, Helvetica, sans-serif">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<i>Net operating cash flow</i>.&nbsp;&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>
<table width="100%" border="0" align="center" cellpadding="0" cellspacing="0">
<tr valign="bottom">
<td align="left"><font size="1" face="Arial, Helvetica, sans-serif">&nbsp;</font></td>
<td align="left">&nbsp;</td>
<td colspan="5" align="center"><font size="1" face="Arial, Helvetica, sans-serif"><b>Three Months Ended</b></font></td>
<td align="left">&nbsp;</td>
</tr>
<tr valign="bottom">
  <td align="left">&nbsp;</td>
  <td align="left">&nbsp;</td>
  <td colspan="5" align="center"><hr noshade size="1"></td>
  <td align="left">&nbsp;</td>
</tr>
<tr valign="bottom">
  <td align="left">&nbsp;</td>
  <td align="left">&nbsp;</td>
  <td colspan="2" align="center"><font size="1" face="Arial, Helvetica, sans-serif"><b>April
    2, 2005</b></font></td>
  <td align="left">&nbsp;</td>
  <td colspan="2" align="center"><font size="1" face="Arial, Helvetica, sans-serif"><b>March
    27, 2004</b></font></td>
  <td align="left">&nbsp;</td>
</tr>
<tr valign="bottom">
  <td align="left">&nbsp;</td>
  <td align="left">&nbsp;</td>
  <td colspan="2" align="center"><hr noshade size="1"></td>
  <td align="left">&nbsp;</td>
  <td colspan="2" align="center"><hr noshade size="1"></td>
  <td align="left">&nbsp;</td>
</tr>
<tr valign="bottom">
<td align="left"><font size="1" face="Arial, Helvetica, sans-serif">&nbsp;</font></td>
<td align="left">&nbsp;</td>
<td colspan="5" align="center"><font size="1" face="Arial, Helvetica, sans-serif"><b>(in millions)</b></font></td>
<td align="left">&nbsp;</td>
</tr>
<tr valign="bottom">
  <td align="left">&nbsp;</td>
  <td align="left">&nbsp;</td>
  <td colspan="5" align="center"><hr noshade size="1">
  </td>
  <td align="left">&nbsp;</td>
</tr>
<tr valign="bottom">
  <td align="left">&nbsp;</td>
  <td align="left">&nbsp;</td>
  <td colspan="5" align="center">&nbsp;</td>
  <td align="left">&nbsp;</td>
</tr>
<tr valign="bottom" 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"><font size="2">&nbsp;</font></td>
<td width="2%" align="right"><font size="2" face="Arial, Helvetica, sans-serif">$</font></td>
<td width="8%" align="right"><font size="2" face="Arial, Helvetica, sans-serif"> 359</font></td>
<td width="2%" align="left"><font size="2">&nbsp;</font></td>
<td width="2%" align="right"><font size="2" face="Arial, Helvetica, sans-serif">$</font></td>
<td width="8%" align="right"><font size="2" face="Arial, Helvetica, sans-serif"> 552</font></td>
<td width="2%" align="left"><font size="2">&nbsp;</font></td>
</tr>
<tr valign="bottom" bgcolor="#FFFFFF">
<td align="left"><font size="2" face="Arial, Helvetica, sans-serif">Net cash used in investing activities</font></td>
<td align="left"><font size="2">&nbsp;</font></td>
<td align="right"><font size="2">&nbsp;</font></td>
<td align="right"><font size="2" face="Arial, Helvetica, sans-serif">(1,100</font></td>
<td align="left"><font size="2" face="Arial, Helvetica, sans-serif">)</font></td>
<td align="right"><font size="2">&nbsp;</font></td>
<td align="right"><font size="2" face="Arial, Helvetica, sans-serif">(1,367</font></td>
<td align="left"><font size="2" face="Arial, Helvetica, sans-serif">)</font></td>
</tr>
<tr valign="bottom" bgcolor="#eeeeee">
<td align="left"><font size="2" face="Arial, Helvetica, sans-serif">Payment for
    purchase of marketable securities</font></td>
<td align="left"><font size="2">&nbsp;</font></td>
<td align="right"><font size="2">&nbsp;</font></td>
<td align="right"><font size="2" face="Arial, Helvetica, sans-serif">525</font></td>
<td align="left"><font size="2">&nbsp;</font></td>
<td align="right"><font size="2">&nbsp;</font></td>
<td align="right"><font size="2" face="Arial, Helvetica, sans-serif">1,030</font></td>
<td align="left"><font size="2">&nbsp;</font></td>
</tr>
<tr valign="bottom" bgcolor="#FFFFFF">
<td align="left"><font size="2" face="Arial, Helvetica, sans-serif">Net operating cash flow</font></td>
<td align="left"><font size="2">&nbsp;</font></td>
<td align="right"><font size="2" face="Arial, Helvetica, sans-serif"><b>$</b></font></td>
<td align="right"><font size="2" face="Arial, Helvetica, sans-serif"> <b>(216</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>215</b></font></td>
<td align="left"><font size="2">&nbsp;</font></td>
</tr>
</table>
<p>&nbsp;</p>
<p align="center"><font size="2" face="Arial, Helvetica, sans-serif">20</font></p>
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<page>
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<p align="left"><font size="2" face="Arial, Helvetica, sans-serif">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We generated negative net operating cash flow of $216 million in the first quarter of 2005, compared to positive net operating cash flow of $215 million in the first quarter of 2004. This resulted mainly from the payment of purchases of tangible assets related to the capital investments undertaken in the fourth quarter of 2004 and to the decrease of profitability to a net loss of $31&nbsp;million. </font></p>
<p align="left"><font size="2" face="Arial, Helvetica, sans-serif">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<i>Net cash used in financing activities</i>.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Net cash used in financing activities was $38 million in the first quarter of 2005 compared to $77 million used in the first quarter of 2004. The major item of cash used in financing activities in the first quarter of 2005 was the repayment of long-term debt for $20 million. </font></p>
<p align="left"><font size="2" face="Arial, Helvetica, sans-serif"><b><i>Capital Resources</i></b></font></p>
<p align="left"><font size="2" face="Arial, Helvetica, sans-serif">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<i>Net financial position</i></font></p>
<p align="left"><font size="2" face="Arial, Helvetica, sans-serif">&nbsp;&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). Net financial position is not a U.S. GAAP measure. We believe our net financial position provides useful information for investors because it gives evidence of our global position either in terms of net indebtedness or net cash by measuring our capital resources based on cash, cash equivalents and marketable securities and the total level of our financial indebtedness. The net financial position is determined as follows from our Unaudited Interim Consolidated Balance Sheet as at
April 2, 2005:</font></p>
<table width="100%" border="0" align="center" cellpadding="0" cellspacing="0">
<tr valign="bottom">
<td align="left"><font size="1" face="Arial, Helvetica, sans-serif">&nbsp;</font></td>
<td align="left">&nbsp;</td>
<td colspan="5" align="center"><font size="1" face="Arial, Helvetica, sans-serif"><b>As at</b></font></td>
<td align="left">&nbsp;</td>
</tr>
<tr valign="bottom">
  <td align="left">&nbsp;</td>
  <td align="left">&nbsp;</td>
  <td colspan="5" align="center"><hr noshade size="1"></td>
  <td align="left">&nbsp;</td>
</tr>
<tr valign="bottom">
<td align="left"><font size="1" face="Arial, Helvetica, sans-serif">&nbsp;</font></td>
<td align="left">&nbsp;</td>
<td colspan="2" align="center"><font size="1" face="Arial, Helvetica, sans-serif"><b>April 2, 2005</b></font></td>
<td align="left">&nbsp;</td>
<td colspan="2" align="center"><font size="1" face="Arial, Helvetica, sans-serif"><b>March 27, 2004</b></font></td>
<td align="left">&nbsp;</td>
</tr>
<tr valign="bottom">
  <td align="left">&nbsp;</td>
  <td align="left">&nbsp;</td>
  <td colspan="2" align="center"><hr noshade size="1"></td>
  <td align="left">&nbsp;</td>
  <td colspan="2" align="center"><hr noshade size="1"></td>
  <td align="left">&nbsp;</td>
</tr>
<tr valign="bottom">
<td align="left"><font size="1" face="Arial, Helvetica, sans-serif">&nbsp;</font></td>
<td align="left">&nbsp;</td>
<td colspan="5" align="center"><font size="1" face="Arial, Helvetica, sans-serif"><b>(in millions)</b></font></td>
<td align="left">&nbsp;</td>
</tr>
<tr valign="bottom">
  <td align="left">&nbsp;</td>
  <td align="left">&nbsp;</td>
  <td colspan="5" align="center"><hr noshade size="1"></td>
  <td align="left">&nbsp;</td>
</tr>
<tr valign="bottom" bgcolor="#eeeeee">
<td align="left"><font size="2" face="Arial, Helvetica, sans-serif">Cash and cash equivalents</font></td>
<td width="2%" align="left"><font size="2">&nbsp;</font></td>
<td width="2%" align="right"><font size="2" face="Arial, Helvetica, sans-serif">$</font></td>
<td width="8%" align="right"><font size="2" face="Arial, Helvetica, sans-serif"> 1,162</font></td>
<td width="2%" align="left"><font size="2">&nbsp;</font></td>
<td width="2%" align="right"><font size="2" face="Arial, Helvetica, sans-serif">$</font></td>
<td width="8%" align="right"><font size="2" face="Arial, Helvetica, sans-serif"> 2,103</font></td>
<td width="2%" align="left"><font size="2">&nbsp;</font></td>
</tr>
<tr valign="bottom" bgcolor="#FFFFFF">
<td align="left"><font size="2" face="Arial, Helvetica, sans-serif">Marketable securities</font></td>
<td align="left"><font size="2">&nbsp;</font></td>
<td align="right"><font size="2">&nbsp;</font></td>
<td align="right"><font size="2" face="Arial, Helvetica, sans-serif">525</font></td>
<td align="left"><font size="2">&nbsp;</font></td>
<td align="right"><font size="2">&nbsp;</font></td>
<td align="right"><font size="2" face="Arial, Helvetica, sans-serif">1,030</font></td>
<td align="left"><font size="2">&nbsp;</font></td>
</tr>
<tr valign="bottom">
  <td align="left">&nbsp;</td>
  <td align="left">&nbsp;</td>
  <td colspan="5" align="center"><hr noshade size="1"></td>
  <td align="left">&nbsp;</td>
</tr>
<tr valign="bottom" bgcolor="#eeeeee">
<td align="left"><font size="2" face="Arial, Helvetica, sans-serif"><b>Total cash position</b></font></td>
<td align="left"><font size="2">&nbsp;</font></td>
<td align="right"><font size="2">&nbsp;</font></td>
<td align="right"><font size="2" face="Arial, Helvetica, sans-serif"><b>1,687</b></font></td>
<td align="left"><font size="2">&nbsp;</font></td>
<td align="right"><font size="2">&nbsp;</font></td>
<td align="right"><font size="2" face="Arial, Helvetica, sans-serif"><b>3,133</b></font></td>
<td align="left"><font size="2">&nbsp;</font></td>
</tr>
<tr valign="bottom" bgcolor="#FFFFFF">
<td align="left"><font size="2" face="Arial, Helvetica, sans-serif">Bank overdrafts</font></td>
<td align="left"><font size="2">&nbsp;</font></td>
<td align="right"><font size="2">&nbsp;</font></td>
<td align="right"><font size="2" face="Arial, Helvetica, sans-serif">(37</font></td>
<td align="left"><font size="2" face="Arial, Helvetica, sans-serif">)</font></td>
<td align="right"><font size="2">&nbsp;</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>
</tr>
<tr valign="bottom" bgcolor="#eeeeee">
<td align="left"><font size="2" face="Arial, Helvetica, sans-serif">Current portion of long-term debt</font></td>
<td align="left"><font size="2">&nbsp;</font></td>
<td align="right"><font size="2">&nbsp;</font></td>
<td align="right"><font size="2" face="Arial, Helvetica, sans-serif">(158</font></td>
<td align="left"><font size="2" face="Arial, Helvetica, sans-serif">)</font></td>
<td align="right"><font size="2">&nbsp;</font></td>
<td align="right"><font size="2" face="Arial, Helvetica, sans-serif">(443</font></td>
<td align="left"><font size="2" face="Arial, Helvetica, sans-serif">)</font></td>
</tr>
<tr valign="bottom" bgcolor="#FFFFFF">
<td align="left"><font size="2" face="Arial, Helvetica, sans-serif">Long-term debt</font></td>
<td align="left"><font size="2">&nbsp;</font></td>
<td align="right"><font size="2">&nbsp;</font></td>
<td align="right"><font size="2" face="Arial, Helvetica, sans-serif">(1,702</font></td>
<td align="left"><font size="2" face="Arial, Helvetica, sans-serif">)</font></td>
<td align="right"><font size="2">&nbsp;</font></td>
<td align="right"><font size="2" face="Arial, Helvetica, sans-serif">(2,555</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="left">&nbsp;</td>
  <td colspan="5" align="center"><hr noshade size="1"></td>
  <td align="left">&nbsp;</td>
</tr>
<tr valign="bottom" bgcolor="#eeeeee">
<td align="left"><font size="2" face="Arial, Helvetica, sans-serif"><b>Total financial debt</b></font></td>
<td align="left"><font size="2">&nbsp;</font></td>
<td align="right"><font size="2">&nbsp;</font></td>
<td align="right"><font size="2" face="Arial, Helvetica, sans-serif"><b>(1,897</b></font></td>
<td align="left"><font size="2" face="Arial, Helvetica, sans-serif"><b>)</b></font></td>
<td align="right"><font size="2">&nbsp;</font></td>
<td align="right"><font size="2" face="Arial, Helvetica, sans-serif"><b>(3,002</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 colspan="5" align="center"><hr noshade size="1"></td>
  <td align="left">&nbsp;</td>
</tr>
<tr valign="bottom" bgcolor="#FFFFFF">
<td align="left"><font size="2" face="Arial, Helvetica, sans-serif"><b>Net financial position</b></font></td>
<td align="left"><font size="2">&nbsp;</font></td>
<td align="right"><font size="2" face="Arial, Helvetica, sans-serif">$</font></td>
<td align="right"><font size="2" face="Arial, Helvetica, sans-serif"> <b>(210</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>131</b></font></td>
<td align="left"><font size="2">&nbsp;</font></td>
</tr>
<tr valign="bottom">
  <td align="left">&nbsp;</td>
  <td align="left">&nbsp;</td>
  <td colspan="5" align="center"><hr noshade size="1"></td>
  <td align="left">&nbsp;</td>
</tr>
</table>
<p align="left"><font size="2" face="Arial, Helvetica, sans-serif">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The net financial position (cash, cash equivalents and marketable securities net of total financial debt) as of April 2, 2005 was a net debt in the amount of $210 million, representing deterioration from the net cash position of $131 million as of March 27, 2004. </font></p>
<p align="left"><font size="2" face="Arial, Helvetica, sans-serif">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;At April 2, 2005, the aggregate amount of our long-term debt was $1,702 million, including $1,379 million of our negative yield zero coupon senior convertible bonds due 2013 (&#147;2013 Bonds&#148;). Additionally, the aggregate amount of our available short-term credit facilities was approximately $1,891 million, under which $37 million was used at April 2, 2005. Our long-term financing instruments contain standard covenants, but do not impose minimum financial ratios or similar obligations on us.</font></p>
<p align="left"><font size="2" face="Arial, Helvetica, sans-serif">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;As of April 2, 2005, we have the following credit ratings on our 2013 Bonds:</font></p>
<table width="100%" cellspacing="0" cellpadding="0" align="center" border="0">
<tr valign="bottom">
<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>Moody&#146;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&#146;s</b></font></td>
<td align="left">&nbsp;</td>
</tr>
<tr valign="bottom">
  <td align="left">&nbsp;</td>
  <td align="left">&nbsp;</td>
  <td align="right">&nbsp;</td>
  <td align="center"><hr noshade size="1"></td>
  <td align="left">&nbsp;</td>
  <td align="right">&nbsp;</td>
  <td align="center"><hr noshade size="1"></td>
  <td align="left">&nbsp;</td>
</tr>
<tr valign="bottom" bgcolor="#eeeeee">
<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"><font size="2">&nbsp;</font></td>
<td width="2%" align="right"><font size="2">&nbsp;</font></td>
<td width="10%" align="center"><font size="2" face="Arial, Helvetica, sans-serif">A3</font></td>
<td width="2%" align="center"><font size="2">&nbsp;</font></td>
<td width="2%" align="center"><font size="2">&nbsp;</font></td>
<td width="10%" align="center"><font size="2" face="Arial, Helvetica, sans-serif">A&#150;</font></td>
<td width="2%" align="left"><font size="2">&nbsp;</font></td>
</tr>
</table>
<p align="left"><font size="2" face="Arial, Helvetica, sans-serif">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In the event of a downgrade of these ratings, we believe we would continue to have access to sufficient capital resources. </font></p>
<p>&nbsp;</p>
<p align="center"><font size="2" face="Arial, Helvetica, sans-serif">21</font></p>
<hr noshade align="center" width="100%" size="2">
<div style="page-break-before:always"></div>
<page>
<a name="p22"></a>
<p align="left"><font size="2" face="Arial, Helvetica, sans-serif"><b><i>Contractual Obligations, Commitments and Contingencies</i></b></font></p>
<p align="left"><font size="2" face="Arial, Helvetica, sans-serif">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our
    contractual obligations, commercial commitments and contingencies as of April
    2, 2005, and for each of the five years to come and thereafter, were as follows:</font></p>
<table width="100%" border="0" align="center" cellpadding="0" cellspacing="0">
<tr valign="bottom">
<td align="left"><font size="1" face="Arial, Helvetica, sans-serif">&nbsp;</font></td>
<td align="left">&nbsp;</td>
<td colspan="23" align="center"><font size="1" face="Arial, Helvetica, sans-serif"><b>Payments due by period<br>
(unaudited)</b></font></td>
<td align="left">&nbsp;</td>
</tr>
<tr valign="bottom">
  <td align="left">&nbsp;</td>
  <td align="left">&nbsp;</td>
  <td colspan="23" align="center"><hr noshade size="1"></td>
  <td align="left">&nbsp;</td>
</tr>
<tr align="center" valign="bottom">
<td><font size="1" face="Arial, Helvetica, sans-serif">&nbsp;</font></td>
<td>&nbsp;</td>
<td colspan="2"><font size="1" face="Arial, Helvetica, sans-serif"><b>Total</b></font></td>
<td>&nbsp;</td>
<td colspan="2"><font size="1" face="Arial, Helvetica, sans-serif"><b>2005</b></font></td>
<td>&nbsp;</td>
<td colspan="2"><font size="1" face="Arial, Helvetica, sans-serif"><b>2006</b></font></td>
<td>&nbsp;</td>
<td colspan="2"><font size="1" face="Arial, Helvetica, sans-serif"><b>2007</b></font></td>
<td>&nbsp;</td>
<td colspan="2"><font size="1" face="Arial, Helvetica, sans-serif"><b>2008</b></font></td>
<td>&nbsp;</td>
<td colspan="2"><font size="1" face="Arial, Helvetica, sans-serif"><b>2009</b></font></td>
<td>&nbsp;</td>
<td colspan="2"><font size="1" face="Arial, Helvetica, sans-serif"><b>2010</b></font></td>
<td>&nbsp;</td>
<td colspan="2"><font size="1" face="Arial, Helvetica, sans-serif"><b>Thereafter</b></font></td>
<td>&nbsp;</td>
</tr>
<tr align="center" valign="bottom">
  <td>&nbsp;</td>
  <td>&nbsp;</td>
  <td colspan="2"><hr noshade size="1"></td>
  <td>&nbsp;</td>
  <td colspan="2"><hr noshade size="1"></td>
  <td>&nbsp;</td>
  <td colspan="2"><hr noshade size="1"></td>
  <td>&nbsp;</td>
  <td colspan="2"><hr noshade size="1"></td>
  <td>&nbsp;</td>
  <td colspan="2"><hr noshade size="1"></td>
  <td>&nbsp;</td>
  <td colspan="2"><hr noshade size="1"></td>
  <td>&nbsp;</td>
  <td colspan="2"><hr noshade size="1"></td>
  <td>&nbsp;</td>
  <td colspan="2"><hr noshade size="1"></td>
  <td>&nbsp;</td>
</tr>
<tr valign="bottom" bgcolor="#eeeeee">
<td align="left"><font size="2" face="Arial, Helvetica, sans-serif">Capital leases<sup>(2)</sup></font></td>
<td width="1%" align="left">&nbsp;</td>
<td width="2%" 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"> 33</font></td>
<td width="1%" align="left">&nbsp;</td>
<td width="2%" align="right"><font size="2" face="Arial, Helvetica, sans-serif">$</font></td>
<td width="6%" align="right"><font size="2" face="Arial, Helvetica, sans-serif"> 4</font></td>
<td width="1%" align="left">&nbsp;</td>
<td width="2%" align="right"><font size="2" face="Arial, Helvetica, sans-serif">$</font></td>
<td width="6%" align="right"><font size="2" face="Arial, Helvetica, sans-serif"> 6</font></td>
<td width="1%" align="left">&nbsp;</td>
<td width="2%" align="right"><font size="2" face="Arial, Helvetica, sans-serif">$</font></td>
<td width="6%" align="right"><font size="2" face="Arial, Helvetica, sans-serif"> 6</font></td>
<td width="1%" align="left">&nbsp;</td>
<td width="2%" align="right"><font size="2" face="Arial, Helvetica, sans-serif">$</font></td>
<td width="6%" align="right"><font size="2" face="Arial, Helvetica, sans-serif"> 6</font></td>
<td width="1%" align="left">&nbsp;</td>
<td width="2%" align="right"><font size="2" face="Arial, Helvetica, sans-serif">$</font></td>
<td width="6%" align="right"><font size="2" face="Arial, Helvetica, sans-serif"> 5</font></td>
<td width="1%" align="left">&nbsp;</td>
<td width="2%" align="right"><font size="2" face="Arial, Helvetica, sans-serif">$</font></td>
<td width="6%" align="right"><font size="2" face="Arial, Helvetica, sans-serif"> 5</font></td>
<td width="1%" align="left">&nbsp;</td>
<td width="2%" 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="1%" align="left">&nbsp;</td>
</tr>
<tr valign="bottom" bgcolor="#FFFFFF">
<td align="left"><font size="2" face="Arial, Helvetica, sans-serif">Operating leases<sup>(1)</sup></font></td>
<td align="left">&nbsp;</td>
<td align="right">&nbsp;</td>
<td align="right"><font size="2" face="Arial, Helvetica, sans-serif">281</font></td>
<td align="left">&nbsp;</td>
<td align="right">&nbsp;</td>
<td align="right"><font size="2" face="Arial, Helvetica, sans-serif">39</font></td>
<td align="left">&nbsp;</td>
<td align="right">&nbsp;</td>
<td align="right"><font size="2" face="Arial, Helvetica, sans-serif">38</font></td>
<td align="left">&nbsp;</td>
<td align="right">&nbsp;</td>
<td align="right"><font size="2" face="Arial, Helvetica, sans-serif">31</font></td>
<td align="left">&nbsp;</td>
<td align="right">&nbsp;</td>
<td align="right"><font size="2" face="Arial, Helvetica, sans-serif">27</font></td>
<td align="left">&nbsp;</td>
<td align="right">&nbsp;</td>
<td align="right"><font size="2" face="Arial, Helvetica, sans-serif">23</font></td>
<td align="left">&nbsp;</td>
<td align="right">&nbsp;</td>
<td align="right"><font size="2" face="Arial, Helvetica, sans-serif">19</font></td>
<td align="left">&nbsp;</td>
<td align="right">&nbsp;</td>
<td align="right"><font size="2" face="Arial, Helvetica, sans-serif">104</font></td>
<td align="left">&nbsp;</td>
</tr>
<tr valign="bottom" bgcolor="#eeeeee">
<td align="left"><font size="2" face="Arial, Helvetica, sans-serif">Purchase obligations<sup>(1)</sup></font></td>
<td align="left">&nbsp;</td>
<td align="right">&nbsp;</td>
<td align="right"><font size="2" face="Arial, Helvetica, sans-serif">967</font></td>
<td align="left">&nbsp;</td>
<td align="right">&nbsp;</td>
<td align="right"><font size="2" face="Arial, Helvetica, sans-serif">922</font></td>
<td align="left">&nbsp;</td>
<td align="right">&nbsp;</td>
<td align="right"><font size="2" face="Arial, Helvetica, sans-serif">42</font></td>
<td align="left">&nbsp;</td>
<td align="right">&nbsp;</td>
<td align="right"><font size="2" face="Arial, Helvetica, sans-serif">3</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>
<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="bottom" bgcolor="#FFFFFF">
<td align="left"><font size="2" face="Arial, Helvetica, sans-serif">of which<i>:</i></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>
<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>
<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="bottom" bgcolor="#FFFFFF">
<td align="left"><div style="margin-left:6%; text-indent:-3%"><font size="2" face="Arial, Helvetica, sans-serif"><i>Equipment purchase</i></font></div></td>
<td align="left">&nbsp;</td>
<td align="right">&nbsp;</td>
<td align="right"><font size="2" face="Arial, Helvetica, sans-serif"><i>675</i></font></td>
<td align="left">&nbsp;</td>
<td align="right">&nbsp;</td>
<td align="right"><font size="2" face="Arial, Helvetica, sans-serif"><i>668</i></font></td>
<td align="left">&nbsp;</td>
<td align="right">&nbsp;</td>
<td align="right"><font size="2" face="Arial, Helvetica, sans-serif"><i>7</i></font></td>
<td align="left">&nbsp;</td>
<td align="right">&nbsp;</td>
<td align="right"><font size="2" face="Arial, Helvetica, sans-serif"><i>&#151;</i></font></td>
<td align="left">&nbsp;</td>
<td align="right">&nbsp;</td>
<td align="right"><font size="2" face="Arial, Helvetica, sans-serif"><i>&#151;</i></font></td>
<td align="left">&nbsp;</td>
<td align="right">&nbsp;</td>
<td align="right"><font size="2" face="Arial, Helvetica, sans-serif"><i>&#151;</i></font></td>
<td align="left">&nbsp;</td>
<td align="right">&nbsp;</td>
<td align="right"><font size="2" face="Arial, Helvetica, sans-serif"><i>&#151;</i></font></td>
<td align="left">&nbsp;</td>
<td align="right">&nbsp;</td>
<td align="right"><font size="2" face="Arial, Helvetica, sans-serif"><i>&#151;</i></font></td>
<td align="left">&nbsp;</td>
</tr>
<tr valign="bottom" bgcolor="#eeeeee">
<td align="left"><div style="margin-left:6%; text-indent:-3%"><font size="2" face="Arial, Helvetica, sans-serif"><i>Foundry purchase</i></font></div></td>
<td align="left">&nbsp;</td>
<td align="right">&nbsp;</td>
<td align="right"><font size="2" face="Arial, Helvetica, sans-serif"><i>179</i></font></td>
<td align="left">&nbsp;</td>
<td align="right">&nbsp;</td>
<td align="right"><font size="2" face="Arial, Helvetica, sans-serif"><i>179</i></font></td>
<td align="left">&nbsp;</td>
<td align="right">&nbsp;</td>
<td align="right"><font size="2" face="Arial, Helvetica, sans-serif"><i>&#151;</i></font></td>
<td align="left">&nbsp;</td>
<td align="right">&nbsp;</td>
<td align="right"><font size="2" face="Arial, Helvetica, sans-serif"><i>&#151;</i></font></td>
<td align="left">&nbsp;</td>
<td align="right">&nbsp;</td>
<td align="right"><font size="2" face="Arial, Helvetica, sans-serif"><i>&#151;</i></font></td>
<td align="left">&nbsp;</td>
<td align="right">&nbsp;</td>
<td align="right"><font size="2" face="Arial, Helvetica, sans-serif"><i>&#151;</i></font></td>
<td align="left">&nbsp;</td>
<td align="right">&nbsp;</td>
<td align="right"><font size="2" face="Arial, Helvetica, sans-serif"><i>&#151;</i></font></td>
<td align="left">&nbsp;</td>
<td align="right">&nbsp;</td>
<td align="right"><font size="2" face="Arial, Helvetica, sans-serif"><i>&#151;</i></font></td>
<td align="left">&nbsp;</td>
</tr>
<tr valign="bottom" bgcolor="#FFFFFF">
<td align="left"><div style="margin-left:6%; text-indent:-3%"><font size="2" face="Arial, Helvetica, sans-serif"><i>Software, technology licenses and design</i></font></div></td>
<td align="left">&nbsp;</td>
<td align="right">&nbsp;</td>
<td align="right"><font size="2" face="Arial, Helvetica, sans-serif"><i>113</i></font></td>
<td align="left">&nbsp;</td>
<td align="right">&nbsp;</td>
<td align="right"><font size="2" face="Arial, Helvetica, sans-serif"><i>75</i></font></td>
<td align="left">&nbsp;</td>
<td align="right">&nbsp;</td>
<td align="right"><font size="2" face="Arial, Helvetica, sans-serif"><i>35</i></font></td>
<td align="left">&nbsp;</td>
<td align="right">&nbsp;</td>
<td align="right"><font size="2" face="Arial, Helvetica, sans-serif"><i>3</i></font></td>
<td align="left">&nbsp;</td>
<td align="right">&nbsp;</td>
<td align="right"><font size="2" face="Arial, Helvetica, sans-serif"><i>&#151;</i></font></td>
<td align="left">&nbsp;</td>
<td align="right">&nbsp;</td>
<td align="right"><font size="2" face="Arial, Helvetica, sans-serif"><i>&#151;</i></font></td>
<td align="left">&nbsp;</td>
<td align="right">&nbsp;</td>
<td align="right"><font size="2" face="Arial, Helvetica, sans-serif"><i>&#151;</i></font></td>
<td align="left">&nbsp;</td>
<td align="right">&nbsp;</td>
<td align="right"><font size="2" face="Arial, Helvetica, sans-serif"><i>&#151;</i></font></td>
<td align="left">&nbsp;</td>
</tr>
<tr valign="bottom" bgcolor="#eeeeee">
<td align="left"><font size="2" face="Arial, Helvetica, sans-serif">Joint Venture Agreement with Hynix Semiconductor Inc.<sup>(1)(4)</sup></font></td>
<td align="left">&nbsp;</td>
<td align="right">&nbsp;</td>
<td align="right"><font size="2" face="Arial, Helvetica, sans-serif">250</font></td>
<td align="left">&nbsp;</td>
<td align="right">&nbsp;</td>
<td align="right"><font size="2" face="Arial, Helvetica, sans-serif">125</font></td>
<td align="left">&nbsp;</td>
<td align="right">&nbsp;</td>
<td align="right"><font size="2" face="Arial, Helvetica, sans-serif">125</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>
<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="bottom" bgcolor="#FFFFFF">
<td align="left"><font size="2" face="Arial, Helvetica, sans-serif">Other Obligations<sup>(1)</sup></font></td>
<td align="left">&nbsp;</td>
<td align="right">&nbsp;</td>
<td align="right"><font size="2" face="Arial, Helvetica, sans-serif">172</font></td>
<td align="left">&nbsp;</td>
<td align="right">&nbsp;</td>
<td align="right"><font size="2" face="Arial, Helvetica, sans-serif">62</font></td>
<td align="left">&nbsp;</td>
<td align="right">&nbsp;</td>
<td align="right"><font size="2" face="Arial, Helvetica, sans-serif">56</font></td>
<td align="left">&nbsp;</td>
<td align="right">&nbsp;</td>
<td align="right"><font size="2" face="Arial, Helvetica, sans-serif">45</font></td>
<td align="left">&nbsp;</td>
<td align="right">&nbsp;</td>
<td align="right"><font size="2" face="Arial, Helvetica, sans-serif">3</font></td>
<td align="left">&nbsp;</td>
<td align="right">&nbsp;</td>
<td align="right"><font size="2" face="Arial, Helvetica, sans-serif">2</font></td>
<td align="left">&nbsp;</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>
<td align="right">&nbsp;</td>
<td align="right"><font size="2" face="Arial, Helvetica, sans-serif">3</font></td>
<td align="left">&nbsp;</td>
</tr>
<tr valign="bottom" bgcolor="#eeeeee">
<td align="left"><font size="2" face="Arial, Helvetica, sans-serif">Long-term debt obligations<sup>(2)(3)</sup></font></td>
<td align="left">&nbsp;</td>
<td align="right">&nbsp;</td>
<td align="right"><font size="2" face="Arial, Helvetica, sans-serif">1,702</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">122</font></td>
<td align="left">&nbsp;</td>
<td align="right">&nbsp;</td>
<td align="right"><font size="2" face="Arial, Helvetica, sans-serif">85</font></td>
<td align="left">&nbsp;</td>
<td align="right">&nbsp;</td>
<td align="right"><font size="2" face="Arial, Helvetica, sans-serif">27</font></td>
<td align="left">&nbsp;</td>
<td align="right">&nbsp;</td>
<td align="right"><font size="2" face="Arial, Helvetica, sans-serif">27</font></td>
<td align="left">&nbsp;</td>
<td align="right">&nbsp;</td>
<td align="right"><font size="2" face="Arial, Helvetica, sans-serif">25</font></td>
<td align="left">&nbsp;</td>
<td align="right">&nbsp;</td>
<td align="right"><font size="2" face="Arial, Helvetica, sans-serif">1,416</font></td>
<td align="left">&nbsp;</td>
</tr>
<tr valign="bottom" bgcolor="#FFFFFF">
<td align="left"><font size="2" face="Arial, Helvetica, sans-serif">Pension obligations<sup>(2)</sup></font></td>
<td align="left">&nbsp;</td>
<td align="right">&nbsp;</td>
<td align="right"><font size="2" face="Arial, Helvetica, sans-serif">265</font></td>
<td align="left">&nbsp;</td>
<td align="right">&nbsp;</td>
<td align="right"><font size="2" face="Arial, Helvetica, sans-serif">33</font></td>
<td align="left">&nbsp;</td>
<td align="right">&nbsp;</td>
<td align="right"><font size="2" face="Arial, Helvetica, sans-serif">21</font></td>
<td align="left">&nbsp;</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>
<td align="right">&nbsp;</td>
<td align="right"><font size="2" face="Arial, Helvetica, sans-serif">20</font></td>
<td align="left">&nbsp;</td>
<td align="right">&nbsp;</td>
<td align="right"><font size="2" face="Arial, Helvetica, sans-serif">21</font></td>
<td align="left">&nbsp;</td>
<td align="right">&nbsp;</td>
<td align="right"><font size="2" face="Arial, Helvetica, sans-serif">17</font></td>
<td align="left">&nbsp;</td>
<td align="right">&nbsp;</td>
<td align="right"><font size="2" face="Arial, Helvetica, sans-serif">135</font></td>
<td align="left">&nbsp;</td>
</tr>
<tr valign="bottom" bgcolor="#eeeeee">
<td align="left"><font size="2" face="Arial, Helvetica, sans-serif">Other non-current liabilities<sup>(2)</sup></font></td>
<td align="left">&nbsp;</td>
<td align="right">&nbsp;</td>
<td align="right"><font size="2" face="Arial, Helvetica, sans-serif">22</font></td>
<td align="left">&nbsp;</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>
<td align="right">&nbsp;</td>
<td align="right"><font size="2" face="Arial, Helvetica, sans-serif">7</font></td>
<td align="left">&nbsp;</td>
<td align="right">&nbsp;</td>
<td align="right"><font size="2" face="Arial, Helvetica, sans-serif">3</font></td>
<td align="left">&nbsp;</td>
<td align="right">&nbsp;</td>
<td align="right"><font size="2" face="Arial, Helvetica, sans-serif">3</font></td>
<td align="left">&nbsp;</td>
<td align="right">&nbsp;</td>
<td align="right"><font size="2" face="Arial, Helvetica, sans-serif">3</font></td>
<td align="left">&nbsp;</td>
<td align="right">&nbsp;</td>
<td align="right"><font size="2" face="Arial, Helvetica, sans-serif">3</font></td>
<td align="left">&nbsp;</td>
<td align="right">&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" bgcolor="#FFFFFF">
<td align="left"><font size="2" face="Arial, Helvetica, sans-serif"><b>Total</b></font></td>
<td align="left">&nbsp;</td>
<td align="right"><font size="2" face="Arial, Helvetica, sans-serif">$</font></td>
<td align="right"><font size="2" face="Arial, Helvetica, sans-serif"> <b>3,692</b></font></td>
<td align="left">&nbsp;</td>
<td align="right"><font size="2" face="Arial, Helvetica, sans-serif"><b>$</b></font></td>
<td align="right"><font size="2" face="Arial, Helvetica, sans-serif"> <b>1,186</b></font></td>
<td align="left">&nbsp;</td>
<td align="right"><font size="2" face="Arial, Helvetica, sans-serif"><b>$</b></font></td>
<td align="right"><font size="2" face="Arial, Helvetica, sans-serif"> <b>417</b></font></td>
<td align="left">&nbsp;</td>
<td align="right"><font size="2" face="Arial, Helvetica, sans-serif"><b>$</b></font></td>
<td align="right"><font size="2" face="Arial, Helvetica, sans-serif"> <b>191</b></font></td>
<td align="left">&nbsp;</td>
<td align="right"><font size="2" face="Arial, Helvetica, sans-serif"><b>$</b></font></td>
<td align="right"><font size="2" face="Arial, Helvetica, sans-serif"> <b>86</b></font></td>
<td align="left">&nbsp;</td>
<td align="right"><font size="2" face="Arial, Helvetica, sans-serif"><b>$</b></font></td>
<td align="right"><font size="2" face="Arial, Helvetica, sans-serif"> <b>81</b></font></td>
<td align="left">&nbsp;</td>
<td align="right"><font size="2" face="Arial, Helvetica, sans-serif"><b>$</b></font></td>
<td align="right"><font size="2" face="Arial, Helvetica, sans-serif"> <b>70</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>1,661</b></font></td>
<td align="left">&nbsp;</td>
</tr>
</table>
<table width="100%" cellspacing="0" cellpadding="0" border="0">
<tr valign="top">
  <td>&nbsp;</td>
  <td>&nbsp;</td>
</tr>
<tr valign="top">
  <td colspan="2"><hr align="left" width="100" size="1" noshade></td>
</tr>
<tr valign="baseline">
  <td><font face="Arial, Helvetica, sans-serif" size="1">(1)</font></td>
  <td align="left"><font face="Arial, Helvetica, sans-serif" size="1">Items not reflected on the Unaudited Interim Consolidated Balance Sheet at April 2, 2005.</font></td>
</tr>
<tr valign="baseline">
  <td><font face="Arial, Helvetica, sans-serif" size="1">(2)</font></td>
  <td align="left"><font face="Arial, Helvetica, sans-serif" size="1">Items reflected on the Unaudited Interim Consolidated Balance Sheet at April 2, 2005.</font></td>
</tr>
<tr valign="baseline">
<td width="3%"><font face="Arial, Helvetica, sans-serif" size="1">(3)</font></td>
<td align="left"><font face="Arial, Helvetica, sans-serif" size="1">See Note 12 to the Unaudited Interim Consolidated Financial Statements at April 2, 2005 for additional information related to long-term debt and redeemable convertible securities, in particular, in respect to the noteholders&#146; option to put our convertible bonds for earlier redemption in August 2006.</font></td>
</tr>
<tr valign="baseline">
  <td><font face="Arial, Helvetica, sans-serif" size="1">(4)</font></td>
  <td align="left"> <font size="1" face="Arial, Helvetica, sans-serif"> These
      amounts correspond to our capital commitments to the joint venture, but
    not the additional $250 million in loans that we have committed to provide.</font></td>
</tr>
</table>
<p align="left"><font size="2" face="Arial, Helvetica, sans-serif">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Operating leases are mainly related to building leases. The amount disclosed is composed of minimum payments for future leases from 2005 to 2010 and thereafter. We lease land, buildings, plants and equipment under operating leases that expire at various dates under non-cancelable lease agreements.</font></p>
<p align="left"><font size="2" face="Arial, Helvetica, sans-serif">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Purchase obligations are primarily comprised of purchase commitments for equipment, for outsourced foundry wafers and for software licenses.</font></p>
<p align="left"><font size="2" face="Arial, Helvetica, sans-serif">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We signed a joint-venture agreement with Hynix Semiconductor Inc. on November 16, 2004 to build a front-end memory-manufacturing facility in Wuxi City, Jiangsu Province, China. As the business license for the joint venture was obtained in April 2005, we expect to fulfill our financial obligations later in 2005. In addition, we are committed to grant long-term financing for $250 million to the new joint venture guaranteed by subordinated collateral on the joint venture&#146;s assets. </font></p>
<p align="left"><font size="2" face="Arial, Helvetica, sans-serif">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Long-term debt obligations mainly consist of bank loans and convertible debt issued by us that is totally or partially redeemable for cash at the option of the holder. They include maximum future amounts that may be redeemable for cash at the option of the holder, at fixed prices. At the holder&#146;s option, any outstanding 2013 Bond may be redeemed for cash on August 5, 2006, 2008 or 2010 for a total aggregate amount payable by us of $1,379 million on August 5, 2006, $1,365 million on August&nbsp;5, 2008 or $1,352 million on August 5, 2010. The conversion ratio is $985.09 per $1,000 principal amount of 2013 Bonds at August 5, 2006, $975.28 at August 5, 2008 and $965.56 at August 5, 2010, subject to adjustments in
certain circumstances.</font></p>
<p align="left"><font size="2" face="Arial, Helvetica, sans-serif">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Pension obligations consist of our best estimates of the amounts that will be payable by us for the retirement plans based on the assumption that our employees will work for us until they reach the age of retirement. The final actual amount to be paid and related timings of such payments may vary significantly due to early retirements or terminations. This amount does not include the additional pension plan of $8 million granted by our Supervisory Board to the CEO and to a limited number of senior executives, which was recorded as current liabilities, as we are willing to transfer this obligation to an insurance company.</font></p>
<p>&nbsp;</p>
<p align="center"><font size="2" face="Arial, Helvetica, sans-serif">22</font></p>
<hr noshade align="center" width="100%" size="2">
<div style="page-break-before:always"></div>
<page>
<a name="p23"></a>
<p align="left"><font size="2" face="Arial, Helvetica, sans-serif">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Other non-current liabilities include future unused leases and miscellaneous contractual obligations.</font></p>
<p align="left"><font size="2" face="Arial, Helvetica, sans-serif">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Other obligations primarily relate to contractual firm commitments with respect to cooperation agreements.</font></p>
<p align="left"><font size="2" face="Arial, Helvetica, sans-serif">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Other than those described above, there are no material off-balance sheet obligations, contractual obligations or other commitments. </font></p>
<p align="left"><font size="2" face="Arial, Helvetica, sans-serif"><b><i>Financial Outlook </i></b></font></p>
<p align="left"><font size="2" face="Arial, Helvetica, sans-serif">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We currently expect that capital spending for 2005 will be approximately $1.5 billion, significantly below the $2.05 billion spent in 2004. 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 April 2, 2005, we had a total of $675 million in outstanding commitments for equipment purchases for 2005 and 2006.</font></p>
<p align="left"><font size="2" face="Arial, Helvetica, sans-serif">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The most significant of our 2005 capital expenditure projects are expected to be (i) the capacity expansion of our 200-mm and 150-mm front-end facilities in Singapore; (ii) the completion of building and facilities for our 300-mm front-end plant in Catania (Italy); (iii) the conversion to 200-mm of our front-end facility in Agrate, Italy; (iv) the expansion of our 200-mm front-end facility in Phoenix, Arizona; (v) the expansion of the 300-mm front-end joint project with Philips Semiconductors International B.V. and Freescale Semiconductor, Inc. in Crolles (France); and (vi) the capacity expansion of our back-end plants in Muar (Malaysia), Toa Payoh (Singapore) and Malta. 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>
<p align="left"><font size="2" face="Arial, Helvetica, sans-serif">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The holders of our 2013 Bonds may require us to redeem them on August 5, 2006 at a price of $985.09 per one thousand dollar face value. The conversion ratio is $985.09 per $1,000 principal amount of 2013 Bonds at August 5, 2006, $975.28 at August 5, 2008 and $965.56 at August 5, 2010, subject to adjustments in certain circumstances. The total redeemable amount will be equivalent to $1,379 million on August 5, 2006. 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 2005.</font></p>
<p>&nbsp;</p>
<p align="center"><font size="2" face="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>

<p align="left"><font size="2" face="Arial, Helvetica, sans-serif"><b>Impact of Recently Issued U.S. Accounting Standards </b></font></p>
<p align="left"><font size="2" face="Arial, Helvetica, sans-serif">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In November 2004, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 151, <i>Inventory Costs, an amendment of ARB No. 43, Chapter 4</i> (&#147;FAS 151&#148;). The Standard requires abnormal amounts of idle capacity and spoilage costs to be excluded from the cost of inventory and expensed when incurred. The provisions of FAS 151 are applicable prospectively to inventory costs incurred during fiscal years beginning after June 15, 2005. As costs associated with underutilization of manufacturing facilities have historically been charged directly to cost of sales, we believe that FAS 151 will have no material effect on our financial position or results of
operations.</font></p>
<p align="left"><font size="2" face="Arial, Helvetica, sans-serif">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In December 2004, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 153, <i>Exchanges of Nonmonetary Assets, an amendment of APB Opinion No. 29</i> (&#147;FAS 153&#148;). This Statement amends Opinion 29 to eliminate the exception to the basis measurement principle (fair value) for nonmonetary exchanges of similar productive assets and replaces it with a general exception for exchanges of transactions that do not have commercial substance, that is, transactions that are not expected to result in significant changes in the cash flows of the reporting entity. The Statement is effective prospectively for nonmonetary asset exchanges occurring in fiscal periods beginning
after June 15, 2005, with early application permitted. We have not had any nonmonetary exchanges of assets since FAS 153 was published and believe that FAS 153 will have no material effect on our financial position or results of operations.</font></p>
<p align="left"><font size="2" face="Arial, Helvetica, sans-serif">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In
    December 2004, the Financial Accounting Standards Board issued Statement
    of Financial Accounting Standards No. 123 (revised 2004), <i>Share-Based
    Payment</i> (&#147;FAS 123R&#148;). This Statement revises FASB Statement
    No.&nbsp;123, <i>Accounting for Stock-Based Compensation</i> and supersedes
    APB Opinion No. 25, <i>Accounting for Stock Issued to Employees</i>, and
    its related implementation guidance. FAS 123R requires a public entity to
    measure the cost of share-based service awards based on the grant-date fair
    value of the award. That cost will be recognized over the period during which
    an employee is required to provide service in exchange for the award or the
    requisite service period, usually the vesting period. The grant-date fair
    value of employee share options and similar instruments will be estimated
    using option-pricing models adjusted for the unique characteristics of those
    instruments. FAS 123R also requires more extensive disclosures than the previous
    standards relating to the nature of share-based payment transactions, compensation
    cost and cash flow effects. On April 14, 2005, the U.S. Securities and Exchange
    Commission
    amended the effective date of FAS 123R;  the Statement now applies
    to all awards granted and to all unvested awards modified, repurchased, or
    cancelled during the first annual reporting
    period beginning after June 15, 2005. FAS 123R provides a choice
    of transition methods including the modified prospective application method,
    which
allows discretionary restatement of interim periods during the calendar year
    of adoption, or the modified retrospective application method, which allows
    the restatement of the prior years presented. Each method requires the cumulative
    effect of initially applying FAS 123R to be recognized in the period of adoption.
    We will adopt FAS 123R in the first quarter of 2006 using the modified prospective
    application method. As a significant number of option grants are above current
    market prices, we believe that our existing equity-based compensation strategy
    is minimally effective in motivating and retaining key employees. Therefore,
    we are currently reviewing our share-based remunerations programs. In conjunction
    with this review, we intend to  accelerate the vesting period of  outstanding
    stock options, following authorization from our
shareholders at our annual general meeting held on March&nbsp;18, 2005. In addition,
we are evaluating to base our share-based remuneration programs on nonvested
shares. We
will
disclose
the
cumulative
impact
on
our
consolidated
accumulated
result
from
adopting
FAS 123R when such review is finalized. The impact on our financial position
and results of operations are illustrated in the information presented in note
15 to our Unaudited Interim Consolidated Financial Statements&#150;&#147;Fair
value of stock-based compensation&#148;. </font></p>
<p align="left"><font size="2" face="Arial, Helvetica, sans-serif"><b>Backlog and Customers </b></font></p>
<p align="left"><font size="2" face="Arial, Helvetica, sans-serif">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We began the second quarter of 2005 with a backlog 11% higher than we had entering the second quarter of 2004. In the first quarter of 2005, we had several large customers, with the Nokia Group of companies being the largest and accounting for approximately 20% of our revenues. Total original equipment manufacturers (&#147;OEMs&#148;) accounted for approximately 82% of our net revenues, of which the top ten OEM customers accounted for approximately 48%. Distributors accounted for approximately 18% of our net revenues. We have no assurance that the Nokia Group of companies, or any other large 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>
<p>&nbsp;</p>
<p align="center"><font size="2" face="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>Changes to Our Share Capital, Stock Option Grants and Other Matters</b></font></p>
<p align="left"><font size="2" face="Arial, Helvetica, sans-serif">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The following table sets forth changes to our share capital as of April 2, 2005: </font></p>
<table width="100%" cellspacing="0" cellpadding="0" align="center" border="0">
<tr valign="bottom" bgcolor="#FFFFFF">
<td align="left"><font size="1" face="Arial, Helvetica, sans-serif"><b>Year</b></font></td>
<td width="2%" align="left">&nbsp;</td>
<td width="1%" align="right">&nbsp;</td>
<td width="9%" align="center"><font size="1" face="Arial, Helvetica, sans-serif"><b>Transaction</b></font></td>
<td width="2%" align="left">&nbsp;</td>
<td width="1%" align="right">&nbsp;</td>
<td width="7%" align="center"><font size="1" face="Arial, Helvetica, sans-serif"><b>Number
    of shares</b></font></td>
<td width="2%" align="left">&nbsp;</td>
<td width="1%" align="right">&nbsp;</td>
<td width="6%" align="center"><font size="1" face="Arial, Helvetica, sans-serif"><b>Nominal
    value (euro)</b></font></td>
<td width="2%" align="left">&nbsp;</td>
<td width="1%" align="right">&nbsp;</td>
<td width="9%" align="center"><font size="1" face="Arial, Helvetica, sans-serif"><b>Cumulative
    amount of capital (euro)</b></font></td>
<td width="2%" align="left">&nbsp;</td>
<td width="1%" align="right">&nbsp;</td>
<td width="9%" align="center"><font size="1" face="Arial, Helvetica, sans-serif"><b>Cumulative
    number of shares</b></font></td>
<td width="2%" align="left">&nbsp;</td>
<td width="1%" align="right">&nbsp;</td>
<td width="7%" align="center"><font size="1" face="Arial, Helvetica, sans-serif"><b>Nominal
    value of increase/ reduction in capital</b></font></td>
<td width="2%" align="left">&nbsp;</td>
<td width="1%" align="right">&nbsp;</td>
<td width="7%" align="center"><font size="1" face="Arial, Helvetica, sans-serif"><b>Amount
    of issue premium (euro)</b></font></td>
<td width="2%" align="left">&nbsp;</td>
<td width="1%" align="right">&nbsp;</td>
<td width="10%" align="center"><font size="1" face="Arial, Helvetica, sans-serif"><b>Cumulative&#150;issue
    premium (euro)</b></font></td>
<td width="2%" align="left">&nbsp;</td>
</tr>
<tr valign="bottom" bgcolor="#FFFFFF">
  <td align="left"><hr noshade size="1"></td>
  <td align="left">&nbsp;</td>
  <td align="right">&nbsp;</td>
  <td align="center"><hr noshade size="1"></td>
  <td align="left">&nbsp;</td>
  <td align="right">&nbsp;</td>
  <td align="center"><hr noshade size="1"></td>
  <td align="left">&nbsp;</td>
  <td align="right">&nbsp;</td>
  <td align="center"><hr noshade size="1"></td>
  <td align="left">&nbsp;</td>
  <td align="right">&nbsp;</td>
  <td align="center"><hr noshade size="1"></td>
  <td align="left">&nbsp;</td>
  <td align="right">&nbsp;</td>
  <td align="center"><hr noshade size="1"></td>
  <td align="left">&nbsp;</td>
  <td align="right">&nbsp;</td>
  <td align="center"><hr noshade size="1"></td>
  <td align="left">&nbsp;</td>
  <td align="right">&nbsp;</td>
  <td align="center"><hr noshade size="1"></td>
  <td align="left">&nbsp;</td>
  <td align="right">&nbsp;</td>
  <td align="center"><hr noshade size="1"></td>
  <td align="left">&nbsp;</td>
</tr>
<tr valign="top" bgcolor="#FFFFFF">
<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 colspan="22" align="center"><font size="1" face="Arial, Helvetica, sans-serif">(in
    millions)</font></td>
<td align="left">&nbsp;</td>
</tr>
<tr valign="top" bgcolor="#eeeeee">
<td align="left"><font size="1" face="Arial, Helvetica, sans-serif">December
    31, 2005</font></td>
<td align="left">&nbsp;</td>
<td align="right">&nbsp;</td>
<td align="left"><font size="1" face="Arial, Helvetica, sans-serif">LYONs conversion </font></td>
<td align="left">&nbsp;</td>
<td align="right">&nbsp;</td>
<td align="right" valign="bottom"><font size="1" face="Arial, Helvetica, sans-serif">1,761</font></td>
<td align="left" valign="bottom">&nbsp;</td>
<td align="right" valign="bottom">&nbsp;</td>
<td align="right" valign="bottom"><font size="1" face="Arial, Helvetica, sans-serif">1.04</font></td>
<td align="left" valign="bottom">&nbsp;</td>
<td align="right" valign="bottom">&nbsp;</td>
<td align="right" valign="bottom"><font size="1" face="Arial, Helvetica, sans-serif">941,521,357</font></td>
<td align="left" valign="bottom">&nbsp;</td>
<td align="right" valign="bottom">&nbsp;</td>
<td align="right" valign="bottom"><font size="1" face="Arial, Helvetica, sans-serif">905,308,997</font></td>
<td align="left" valign="bottom">&nbsp;</td>
<td align="right" valign="bottom">&nbsp;</td>
<td align="right" valign="bottom"><font size="1" face="Arial, Helvetica, sans-serif">1,831</font></td>
<td align="left" valign="bottom">&nbsp;</td>
<td align="right" valign="bottom">&nbsp;</td>
<td align="right" valign="bottom"><font size="1" face="Arial, Helvetica, sans-serif">46,225</font></td>
<td align="left" valign="bottom">&nbsp;</td>
<td align="right" valign="bottom">&nbsp;</td>
<td align="right" valign="bottom"><font size="1" face="Arial, Helvetica, sans-serif">1,708,949,494</font></td>
<td align="left" valign="bottom">&nbsp;</td>
</tr>
<tr valign="top" bgcolor="#FFFFFF">
<td align="left"><font size="1" face="Arial, Helvetica, sans-serif">April 2,
    2005</font></td>
<td align="left">&nbsp;</td>
<td align="right">&nbsp;</td>
<td align="left"><font size="1" face="Arial, Helvetica, sans-serif">Exercise
    of options</font></td>
<td align="left">&nbsp;</td>
<td align="right">&nbsp;</td>
<td align="right" valign="bottom"><font size="1" face="Arial, Helvetica, sans-serif">63,270</font></td>
<td align="left" valign="bottom">&nbsp;</td>
<td align="right" valign="bottom">&nbsp;</td>
<td align="right" valign="bottom"><font size="1" face="Arial, Helvetica, sans-serif">1.04</font></td>
<td align="left" valign="bottom">&nbsp;</td>
<td align="right" valign="bottom">&nbsp;</td>
<td align="right" valign="bottom"><font size="1" face="Arial, Helvetica, sans-serif">941,587,158</font></td>
<td align="left" valign="bottom">&nbsp;</td>
<td align="right" valign="bottom">&nbsp;</td>
<td align="right" valign="bottom"><font size="1" face="Arial, Helvetica, sans-serif">905,372,267</font></td>
<td align="left" valign="bottom">&nbsp;</td>
<td align="right" valign="bottom">&nbsp;</td>
<td align="right" valign="bottom"><font size="1" face="Arial, Helvetica, sans-serif">65,801</font></td>
<td align="left" valign="bottom">&nbsp;</td>
<td align="right" valign="bottom">&nbsp;</td>
<td align="right" valign="bottom"><font size="1" face="Arial, Helvetica, sans-serif">571,525</font></td>
<td align="left" valign="bottom">&nbsp;</td>
<td align="right" valign="bottom">&nbsp;</td>
<td align="right" valign="bottom"><font size="1" face="Arial, Helvetica, sans-serif">1,709,521,019</font></td>
<td align="left" valign="bottom">&nbsp;</td>
</tr>
<tr valign="top" bgcolor="#eeeeee">
<td align="left"><font size="1" face="Arial, Helvetica, sans-serif">April 2,
    2005</font></td>
<td align="left">&nbsp;</td>
<td align="right">&nbsp;</td>
<td align="left"><font size="1" face="Arial, Helvetica, sans-serif">Conversion
    of bonds</font></td>
<td align="left">&nbsp;</td>
<td align="right">&nbsp;</td>
<td align="right" valign="bottom"><font size="1" face="Arial, Helvetica, sans-serif">59</font></td>
<td align="left" valign="bottom">&nbsp;</td>
<td align="right" valign="bottom">&nbsp;</td>
<td align="right" valign="bottom"><font size="1" face="Arial, Helvetica, sans-serif">1.04</font></td>
<td align="left" valign="bottom">&nbsp;</td>
<td align="right" valign="bottom">&nbsp;</td>
<td align="right" valign="bottom"><font size="1" face="Arial, Helvetica, sans-serif">941,587,219</font></td>
<td align="left" valign="bottom">&nbsp;</td>
<td align="right" valign="bottom">&nbsp;</td>
<td align="right" valign="bottom"><font size="1" face="Arial, Helvetica, sans-serif">905,372,326</font></td>
<td align="left" valign="bottom">&nbsp;</td>
<td align="right" valign="bottom">&nbsp;</td>
<td align="right" valign="bottom"><font size="1" face="Arial, Helvetica, sans-serif">61</font></td>
<td align="left" valign="bottom">&nbsp;</td>
<td align="right" valign="bottom">&nbsp;</td>
<td align="right" valign="bottom"><font size="1" face="Arial, Helvetica, sans-serif">1,448</font></td>
<td align="left" valign="bottom">&nbsp;</td>
<td align="right" valign="bottom">&nbsp;</td>
<td align="right" valign="bottom"><font size="1" face="Arial, Helvetica, sans-serif">1,709,522,467</font></td>
<td align="left" valign="bottom">&nbsp;</td>
</tr>
</table>
<p align="left"><font size="2" face="Arial, Helvetica, sans-serif">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The following table summarizes the amount of stock options authorized to be granted exercised, cancelled and outstanding as of April 2, 2005: </font></p>
<table width="100%" cellspacing="0" cellpadding="0" align="center" border="0">
<tr valign="top">
<td align="left"><font size="1" face="Arial, Helvetica, sans-serif">&nbsp;</font></td>
<td align="right">&nbsp;</td>
<td colspan="4" align="center"><font size="1" face="Arial, Helvetica, sans-serif"><b>Employees</b></font></td>
<td align="center">&nbsp;</td>
<td align="center">&nbsp;</td>
<td colspan="7" align="center"><font size="1" face="Arial, Helvetica, sans-serif"><b>Supervisory Board</b></font></td>
<td align="center">&nbsp;</td>
<td align="center">&nbsp;</td>
<td align="center"><font size="1" face="Arial, Helvetica, sans-serif">&nbsp;</font></td>
<td align="center">&nbsp;</td>
</tr>
<tr valign="top">
  <td align="left">&nbsp;</td>
  <td align="right">&nbsp;</td>
  <td colspan="4" align="center"><hr noshade size="1"></td>
  <td align="center">&nbsp;</td>
  <td align="center">&nbsp;</td>
  <td colspan="7" align="center"><hr noshade size="1"></td>
  <td align="center">&nbsp;</td>
  <td align="center">&nbsp;</td>
  <td align="center">&nbsp;</td>
  <td align="center">&nbsp;</td>
</tr>
<tr valign="top">
<td align="left"><font size="1" face="Arial, Helvetica, sans-serif">&nbsp;</font></td>
<td align="right">&nbsp;</td>
<td align="center"><font size="1" face="Arial, Helvetica, sans-serif"><b>1995 Plan</b></font></td>
<td align="center">&nbsp;</td>
<td align="center">&nbsp;</td>
<td align="center"><font size="1" face="Arial, Helvetica, sans-serif"><b>2001 Plan</b></font></td>
<td align="center">&nbsp;</td>
<td align="center">&nbsp;</td>
<td align="center"><font size="1" face="Arial, Helvetica, sans-serif"><b>1996</b></font></td>
<td align="center">&nbsp;</td>
<td align="center">&nbsp;</td>
<td align="center"><font size="1" face="Arial, Helvetica, sans-serif"><b>1999</b></font></td>
<td align="center">&nbsp;</td>
<td align="center">&nbsp;</td>
<td align="center"><font size="1" face="Arial, Helvetica, sans-serif"><b>2002</b></font></td>
<td align="center">&nbsp;</td>
<td align="center">&nbsp;</td>
<td align="center"><font size="1" face="Arial, Helvetica, sans-serif"><b>Total</b></font></td>
<td align="center">&nbsp;</td>
</tr>
<tr valign="top">
  <td align="left">&nbsp;</td>
  <td align="right">&nbsp;</td>
  <td align="center"><hr noshade size="1"></td>
  <td align="left">&nbsp;</td>
  <td align="right">&nbsp;</td>
  <td align="center"><hr noshade size="1"></td>
  <td align="left">&nbsp;</td>
  <td align="right">&nbsp;</td>
  <td align="right"><hr noshade size="1"></td>
  <td align="left">&nbsp;</td>
  <td align="right">&nbsp;</td>
  <td align="right"><hr noshade size="1"></td>
  <td align="left">&nbsp;</td>
  <td align="right">&nbsp;</td>
  <td align="right"><hr noshade size="1"></td>
  <td align="left">&nbsp;</td>
  <td align="right">&nbsp;</td>
  <td align="center"><hr noshade size="1"></td>
  <td align="left">&nbsp;</td>
</tr>
<tr valign="bottom" bgcolor="#eeeeee">
<td align="left"><font size="2" face="Arial, Helvetica, sans-serif">Remaining amount authorized to be granted</font></td>
<td width="1%" align="right">&nbsp;</td>
<td width="10%" align="right"><font size="2" face="Arial, Helvetica, sans-serif">0</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">15,216,052</font></td>
<td width="2%" align="left">&nbsp;</td>
<td width="1%" align="right">&nbsp;</td>
<td width="8%" align="right"><font size="2" face="Arial, Helvetica, sans-serif">0</font></td>
<td width="2%" align="left">&nbsp;</td>
<td width="1%" align="right">&nbsp;</td>
<td width="7%" align="right"><font size="2" face="Arial, Helvetica, sans-serif">0</font></td>
<td width="2%" align="left">&nbsp;</td>
<td width="1%" align="right">&nbsp;</td>
<td width="8%" align="right"><font size="2" face="Arial, Helvetica, sans-serif">0</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">15,216,052</font></td>
<td width="2%" align="left">&nbsp;</td> </tr>
<tr valign="bottom" bgcolor="#FFFFFF">
<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">9,788,894</font></td>
<td align="left">&nbsp;</td>
<td align="right">&nbsp;</td>
<td align="right"><font size="2" face="Arial, Helvetica, sans-serif">9,650</font></td>
<td align="left">&nbsp;</td>
<td align="right">&nbsp;</td>
<td align="right"><font size="2" face="Arial, Helvetica, sans-serif">280,000</font></td>
<td align="left">&nbsp;</td>
<td align="right">&nbsp;</td>
<td align="right"><font size="2" face="Arial, Helvetica, sans-serif">18,000</font></td>
<td align="left">&nbsp;</td>
<td align="right">&nbsp;</td>
<td align="right"><font size="2" face="Arial, Helvetica, sans-serif">0</font></td>
<td align="left">&nbsp;</td>
<td align="right">&nbsp;</td>
<td align="right"><font size="2" face="Arial, Helvetica, sans-serif">10,096,544</font></td>
<td align="left">&nbsp;</td>
</tr>
<tr valign="bottom" 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">2,353,770</font></td>
<td align="left">&nbsp;</td>
<td align="right">&nbsp;</td>
<td align="right"><font size="2" face="Arial, Helvetica, sans-serif">2,940,585</font></td>
<td align="left">&nbsp;</td>
<td align="right">&nbsp;</td>
<td align="right"><font size="2" face="Arial, Helvetica, sans-serif">72,000</font></td>
<td align="left">&nbsp;</td>
<td align="right">&nbsp;</td>
<td align="right"><font size="2" face="Arial, Helvetica, sans-serif">63,000</font></td>
<td align="left">&nbsp;</td>
<td align="right">&nbsp;</td>
<td align="right"><font size="2" face="Arial, Helvetica, sans-serif">24,000</font></td>
<td align="left">&nbsp;</td>
<td align="right">&nbsp;</td>
<td align="right"><font size="2" face="Arial, Helvetica, sans-serif">5,453,355</font></td>
<td align="left">&nbsp;</td>
</tr>
<tr valign="bottom" bgcolor="#FFFFFF">
<td 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">19,419,277</font></td>
<td align="left">&nbsp;</td>
<td align="right">&nbsp;</td>
<td align="right"><font size="2" face="Arial, Helvetica, sans-serif">44,783,948</font></td>
<td align="left">&nbsp;</td>
<td align="right">&nbsp;</td>
<td align="right"><font size="2" face="Arial, Helvetica, sans-serif">48,500</font></td>
<td align="left">&nbsp;</td>
<td align="right">&nbsp;</td>
<td align="right"><font size="2" face="Arial, Helvetica, sans-serif">342,000</font></td>
<td align="left">&nbsp;</td>
<td align="right">&nbsp;</td>
<td align="right"><font size="2" face="Arial, Helvetica, sans-serif">372,000</font></td>
<td align="left">&nbsp;</td>
<td align="right">&nbsp;</td>
<td align="right"><font size="2" face="Arial, Helvetica, sans-serif">64,965,725</font></td>
<td align="left">&nbsp;</td>
</tr>
</table>
<p align="left"><font size="2" face="Arial, Helvetica, sans-serif">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
    Supervisory Board granted 29,200 options at an exercise price of $16.73 on
    January 31, 2005 and 13,000 options at an exercise price of $17.31 on March
17, 2005.</font></p>
<p align="left"><font size="2" face="Arial, Helvetica, sans-serif">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;During
    our Annual General Meeting of Shareholders held on March 18, 2005, the amendment
    of our existing 2001 Employee Stock Option Plan proposed by our Supervisory
    Board was approved. Our Supervisory Board decided to authorize to accelerate
    vesting of outstanding stock options in connection with the overall change
    of our
    stock-based compensation policy. In addition to that, nonvested stock awards
    will be introduced with our next 2005 allocation. The maximum number of nonvested
    shares will be four million shares and will fall within the outstanding amount
    of options to be granted under our existing 2001 Stock Option Plan.</font></p>
<p align="left"><font size="2" face="Arial, Helvetica, sans-serif"><b>Disclosure Controls and Procedures</b></font></p>
<p align="left"><font size="2" face="Arial, Helvetica, sans-serif">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our chief executive officer and chief financial officer, after evaluating the effectiveness of our disclosure controls and procedures (as defined in Exchange Act Rule 13a-14(c)) as of the end of the period covered by this report, have concluded that, as of such date, our disclosure controls and procedures were effective to ensure that material information relating to our company was made known to them by others within our company, particularly during the period when this Form 6-K was being prepared.</font></p>
<p align="left"><font size="2" face="Arial, Helvetica, sans-serif">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;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 in addition to those taken from time to time.</font></p>
<p>&nbsp;</p>
<p align="center"><font size="2" face="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>
<p align="left"><font size="2" face="Arial, Helvetica, sans-serif"><b>Other Reviews</b></font></p>
<p align="left"><font size="2" face="Arial, Helvetica, sans-serif">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We have sent this report to our Audit Committee, which had an opportunity to raise questions with our management and independent auditors before we submitted it to the Securities and Exchange Commission.</font></p>
<p align="left"><font size="2" face="Arial, Helvetica, sans-serif"><b>Cautionary Note Regarding Forward-Looking Statements</b></font></p>
<p align="left"><font size="2" face="Arial, Helvetica, sans-serif">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Some of the statements contained in &#147;Overview&#150;Business Outlook&#148; and in &#147;Liquidity and Capital Resources&#150;Financial Outlook&#148; 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&#146;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>
<table width="100%" cellspacing="0" cellpadding="0" border="0">
<tr valign="top">
<td width="3%"><font size="2" face="Arial, Helvetica, sans-serif">&#149;</font></td>
<td align="left">
<font size="2" face="Arial, Helvetica, sans-serif"> future developments of the world semiconductor market, in particular the future 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>&nbsp;</td>
  <td align="left">&nbsp;</td>
</tr>
<tr valign="top">
<td width="3%"><font size="2" face="Arial, Helvetica, sans-serif">&#149;</font></td>
<td align="left">
<font size="2" face="Arial, Helvetica, sans-serif"> pricing pressures, losses or curtailments of purchases from key customers as well as inventory adjustments from distributors;</font></td>
</tr>
</table>
<table width="100%" cellspacing="0" cellpadding="0" border="0">
<tr valign="top">
  <td>&nbsp;</td>
  <td align="left">&nbsp;</td>
</tr>
<tr valign="top">
<td width="3%"><font size="2" face="Arial, Helvetica, sans-serif">&#149;</font></td>
<td align="left">
<font size="2" face="Arial, Helvetica, sans-serif"> changes in the exchange rates between the US Dollar and the Euro, compared to the current exchange rate of $1.30=1 Euro, 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>&nbsp;</td>
  <td align="left">&nbsp;</td>
</tr>
<tr valign="top">
<td width="3%"><font size="2" face="Arial, Helvetica, sans-serif">&#149;</font></td>
<td align="left">
<font size="2" face="Arial, Helvetica, sans-serif"> our ability to develop new products in time to meet market demand for volume supplies;</font></td>
</tr>
</table>
<table width="100%" cellspacing="0" cellpadding="0" border="0">
<tr valign="top">
  <td>&nbsp;</td>
  <td align="left">&nbsp;</td>
</tr>
<tr valign="top">
<td width="3%"><font size="2" face="Arial, Helvetica, sans-serif">&#149;</font></td>
<td align="left">
<font size="2" face="Arial, Helvetica, sans-serif"> our ability to complete, successfully and in a timely manner, our various announced  initiatives to improve the efficiency of our research and development programs, our manufacturing and the reduction of our procurement costs;</font></td>
</tr>
</table>
<table width="100%" cellspacing="0" cellpadding="0" border="0">
<tr valign="top">
  <td>&nbsp;</td>
  <td align="left">&nbsp;</td>
</tr>
<tr valign="top">
<td width="3%"><font size="2" face="Arial, Helvetica, sans-serif">&#149;</font></td>
<td align="left">
<font size="2" face="Arial, Helvetica, sans-serif"> the anticipated benefits of research &amp; development alliances and cooperative activities;</font></td>
</tr>
</table>
<table width="100%" cellspacing="0" cellpadding="0" border="0">
<tr valign="top">
  <td>&nbsp;</td>
  <td align="left">&nbsp;</td>
</tr>
<tr valign="top">
<td width="3%"><font size="2" face="Arial, Helvetica, sans-serif">&#149;</font></td>
<td align="left">
<font size="2" face="Arial, Helvetica, sans-serif"> the ramp- up of volume production in new manufacturing technologies at our fabs;</font></td>
</tr>
</table>
<table width="100%" cellspacing="0" cellpadding="0" border="0">
<tr valign="top">
  <td>&nbsp;</td>
  <td align="left">&nbsp;</td>
</tr>
<tr valign="top">
<td width="3%"><font size="2" face="Arial, Helvetica, sans-serif">&#149;</font></td>
<td align="left">
<font size="2" face="Arial, Helvetica, sans-serif"> the ability of our suppliers to meet our demands for products and to offer competitive pricing;</font></td>
</tr>
</table>
<table width="100%" cellspacing="0" cellpadding="0" border="0">
<tr valign="top">
  <td>&nbsp;</td>
  <td align="left">&nbsp;</td>
</tr>
<tr valign="top">
<td width="3%"><font size="2" face="Arial, Helvetica, sans-serif">&#149;</font></td>
<td align="left">
<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>&nbsp;</td>
  <td align="left">&nbsp;</td>
</tr>
<tr valign="top">
<td width="3%"><font size="2" face="Arial, Helvetica, sans-serif">&#149;</font></td>
<td align="left">
<font size="2" face="Arial, Helvetica, sans-serif"> our ability to obtain required licenses on third party intellectual property; and </font></td>
</tr>
</table>
<table width="100%" cellspacing="0" cellpadding="0" border="0">
<tr valign="top">
  <td>&nbsp;</td>
  <td align="left">&nbsp;</td>
</tr>
<tr valign="top">
<td width="3%"><font size="2" face="Arial, Helvetica, sans-serif">&#149;</font></td>
<td align="left">
<font size="2" face="Arial, Helvetica, sans-serif"> make consistent changes in our taxation rate, tax provisions and deferred taxes.</font></td>
</tr>
</table>
<p align="left"><font size="2" face="Arial, Helvetica, sans-serif">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Such forward-looking statements are subject to various risks and uncertainties, which may cause actual results and performance of our business to differ materially and adversely from the forward-looking statements. Certain such forward-looking statements can be identified by the use of forward-looking terminology such as &#147;believe&#148;, &#147;may&#148;, &#147;will&#148;, &#147;should&#148;, &#147;would be&#148; or &#147;anticipates&#148; 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 &#147;Item 3. Key
Information&#150;Risk Factors&#148; in our Form 20-F. 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>
<p align="left"><font size="2" face="Arial, Helvetica, sans-serif">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Unfavorable changes in the above or other factors listed under &#147;Risk Factors&#148; from time to time in our Securities and Exchange Commission (&#147;SEC&#148;) filings, could have a material adverse effect on our business and/or financial condition.</font></p>
<p>&nbsp;</p>
<p align="center"><font size="2" face="Arial, Helvetica, sans-serif">26</font></p>
<hr noshade align="center" width="100%" size="2">
<div style="page-break-before:always"><font size="2" face="Arial, Helvetica, sans-serif"><b><a name="contents"></a></b></font></div>
<page>
<p><a href="#contents"><font size="2">Back to Contents</font></a></p>
<table width="100%" cellspacing="0" cellpadding="0" border="0">
<tr valign="top">
<td colspan="3" align="center"><font size="2" face="Arial, Helvetica, sans-serif"><b>STMICROELECTRONICS N.V.</b></font></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>
</tr>
<tr valign="top">
  <td colspan="3" align="center">&nbsp;</td>
</tr>
<tr valign="top">
  <td colspan="3" align="center">&nbsp;</td>
</tr>
<tr valign="top">
  <td colspan="3" align="center">&nbsp;</td>
</tr>
</table>
<table width="100%" border="0" cellpadding="0" cellspacing="0">
<tr valign="top">
<td align="left"></td>
<td colspan="2" align="center"><font size="1" face="Arial, Helvetica, sans-serif"><b>Pages</b></font></td>
</tr>
<tr valign="top">
  <td align="left"></td>
  <td colspan="2" align="center"><hr noshade size="1"></td>
</tr>
<tr valign="top">
<td align="left"><a href="#pf1"><font size="2" face="Arial, Helvetica, sans-serif">Consolidated Statements of Income for the Three Months Ended April 2, 2005 and March 27, 2004 (unaudited)</font></a></td>
<td width="2%" align="left">&nbsp;</td>
<td width="8%" align="center"><a href="#pf1"><font size="2" face="Arial, Helvetica, sans-serif">F-1</font></a></td>
</tr>
<tr valign="top">
<td align="left"><a href="#pf2"><font size="2" face="Arial, Helvetica, sans-serif">Consolidated Balance Sheets as of April 2, 2005 (unaudited) and December 31, 2004 (audited)</font></a></td>
<td align="left">&nbsp;</td>
<td align="center"><a href="#pf2"><font size="2" face="Arial, Helvetica, sans-serif">F-2</font></a></td>
</tr>
<tr valign="top">
  <td align="left"><a href="#pf3"><font size="2" face="Arial, Helvetica, sans-serif">Consolidated
        Statements of Cash Flows for the Three Months Ended April 2, 2005 and
    March 27, 2004 (unaudited)</font></a></td>
  <td align="left">&nbsp;</td>
  <td align="center"><a href="#pf3"><font size="2" face="Arial, Helvetica, sans-serif">F-3</font></a></td>
</tr>
<tr valign="top">
<td align="left"><a href="#pf4"><font size="2" face="Arial, Helvetica, sans-serif">Consolidated
    Statements of Changes in Shareholders&#146; Equity</font></a></td>
<td align="left">&nbsp;</td>
<td align="center"><a href="#pf4"><font size="2" face="Arial, Helvetica, sans-serif">F-4</font></a></td>
</tr>
<tr valign="top">
<td align="left"><a href="#pf5"><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="center"><a href="#pf5"><font size="2" face="Arial, Helvetica, sans-serif">F-5</font></a></td>
</tr>
<tr valign="top">
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td> </tr>
</table>
<p align="center"><font face="Arial, Helvetica, sans-serif" size="2">27</font></p>
<hr noshade align="center" width="100%" size="2">
<div style="page-break-before:always"></div>
<page>
<p><a name="pf1"></a>
</p>
<p><a href="#contents"><font size="2">Back to Contents</font></a></p>
<table width="100%" cellspacing="0" cellpadding="0" border="0">
<tr valign="top">
<td align="left"><font size="2" face="Arial, Helvetica, sans-serif"><b>STMicroelectronics N.V.</b></font></td>
</tr>
<tr valign="top">
<td align="left"><font color="0098D7" size="2" face="Arial, Helvetica, sans-serif"><b>CONSOLIDATED
    STATEMENTS OF INCOME</b></font></td>
</tr>
</table>
<font face="Arial, Helvetica, sans-serif"><br>
<br>
</font>
<table width="100%" cellspacing="0" cellpadding="0" align="center" border="0">
  <tr valign="top" bgcolor="#FFFFFF">
    <td align="left">&nbsp;</td>
    <td align="left">&nbsp;</td>
    <td colspan="4" align="right"><div align="center"><font size="1" face="Arial, Helvetica, sans-serif"><b>Three
            months ended<br>
    (unaudited)</b></font></div></td>
    <td align="left">&nbsp;</td>
  </tr>
  <tr valign="top" bgcolor="#FFFFFF">
    <td align="left">&nbsp;</td>
    <td align="left">&nbsp;</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="right"><hr size="1" noshade></td>
    <td align="left">&nbsp;</td>
  </tr>
  <tr valign="top" bgcolor="#FFFFFF">
    <td align="left">&nbsp;</td>
    <td align="left">&nbsp;</td>
    <td align="right"><div align="center"><font size="1" face="Arial, Helvetica, sans-serif"><b>April
    2,</b></font></div></td>
    <td align="left">&nbsp;</td>
    <td align="right">&nbsp;</td>
    <td align="right"><div align="center"><font size="1" face="Arial, Helvetica, sans-serif"><b>March
    27, </b></font></div></td>
    <td align="left">&nbsp;</td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td align="left"><font size="2" face="Arial, Helvetica, sans-serif"><b>In
    millions of U.S. dollars except per share amounts</b></font></td>
    <td align="left">&nbsp;</td>
    <td align="right"><div align="center"><font size="1" face="Arial, Helvetica, sans-serif"><b>2005</b></font></div></td>
    <td align="left">&nbsp;</td>
    <td align="right">&nbsp;</td>
    <td align="right"><div align="center"><font size="1" face="Arial, Helvetica, sans-serif"><b>2004</b></font></div></td>
    <td align="left">&nbsp;</td>
  </tr>
  <tr valign="top" bgcolor="#FFFFFF">
    <td align="left">&nbsp;</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="right"><hr size="1" noshade></td>
    <td align="left">&nbsp;</td>
  </tr>
  <tr valign="top" bgcolor="#FFFFFF">
    <td align="left">&nbsp;</td>
    <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="left">&nbsp;</td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
<td align="left" bgcolor="#eeeeee"><font size="2" face="Arial, Helvetica, sans-serif">Net sales</font></td>
<td align="left" width="2%">&nbsp;</td>
<td width="10%" align="right"><font size="2" face="Arial, Helvetica, sans-serif">2,081 </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">2,028 </font></td>
<td width="2%" align="left">&nbsp;</td> </tr>
<tr valign="top" bgcolor="#FFFFFF">
<td align="left"><font size="2" face="Arial, Helvetica, sans-serif">Other revenues</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">&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" bgcolor="#FFFFFF">
  <td align="left">&nbsp;</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="right"><hr size="1" noshade></td>
  <td align="left">&nbsp;</td>
</tr>
<tr valign="top" bgcolor="#eeeeee">
<td align="left"><font size="2" face="Arial, Helvetica, sans-serif"><b>Net revenues </b></font></td>
<td align="left">&nbsp;</td>
<td align="right"><font size="2" face="Arial, Helvetica, sans-serif"><b>2,083 </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>2,029 </b></font></td>
<td align="left">&nbsp;</td>
</tr>
<tr valign="top" bgcolor="#FFFFFF">
<td align="left"><font size="2" face="Arial, Helvetica, sans-serif">Cost of sales</font></td>
<td align="left">&nbsp;</td>
<td align="right"><font size="2" face="Arial, Helvetica, sans-serif">(1,398</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">(1,311</font></td>
<td align="left"><font size="2" face="Arial, Helvetica, sans-serif">)</font></td>
</tr>
<tr valign="top" bgcolor="#FFFFFF">
  <td align="left">&nbsp;</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="right"><hr size="1" noshade></td>
  <td align="left">&nbsp;</td>
</tr>
<tr valign="top" bgcolor="#eeeeee">
<td align="left"><font size="2" face="Arial, Helvetica, sans-serif"><b>Gross profit</b></font></td>
<td align="left">&nbsp;</td>
<td align="right"><font size="2" face="Arial, Helvetica, sans-serif"><b>685 </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>718 </b></font></td>
<td align="left">&nbsp;</td>
</tr>
<tr valign="top" bgcolor="#FFFFFF">
<td align="left"><font size="2" face="Arial, Helvetica, sans-serif">Selling, general and administrative</font></td>
<td align="left">&nbsp;</td>
<td align="right"><font size="2" face="Arial, Helvetica, sans-serif">(265</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">(230</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">Research and development </font></td>
<td align="left">&nbsp;</td>
<td align="right"><font size="2" face="Arial, Helvetica, sans-serif">(404</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">(363</font></td>
<td align="left"><font size="2" face="Arial, Helvetica, sans-serif">)</font></td>
</tr>
<tr valign="top" bgcolor="#FFFFFF">
<td align="left"><font size="2" face="Arial, Helvetica, sans-serif">Other income and expenses, net</font></td>
<td align="left">&nbsp;</td>
<td align="right"><font size="2" face="Arial, Helvetica, sans-serif">(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">(12</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">Impairment, restructuring charges and other related closure costs</font></td>
<td align="left">&nbsp;</td>
<td align="right"><font size="2" face="Arial, Helvetica, sans-serif">(78</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">(33</font></td>
<td align="left"><font size="2" face="Arial, Helvetica, sans-serif">)</font></td>
</tr>
<tr valign="top" bgcolor="#FFFFFF">
  <td align="left">&nbsp;</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="right"><hr size="1" noshade></td>
  <td align="left">&nbsp;</td>
</tr>
<tr valign="top" bgcolor="#FFFFFF">
<td align="left"><font size="2" face="Arial, Helvetica, sans-serif"><b>Operating income (loss)</b></font></td>
<td align="left">&nbsp;</td>
<td align="right"><font size="2" face="Arial, Helvetica, sans-serif"><b>(68</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>80</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">Interest income (expense), net</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>
<td align="right">&nbsp;</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>
</tr>
<tr valign="top" bgcolor="#FFFFFF">
  <td align="left">&nbsp;</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="right"><hr size="1" noshade></td>
  <td align="left">&nbsp;</td>
</tr>
<tr valign="top" bgcolor="#FFFFFF">
<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="left">&nbsp;</td>
<td align="right"><font size="2" face="Arial, Helvetica, sans-serif"><b>(61</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>76</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">Income tax benefit</font></td>
<td align="left">&nbsp;</td>
<td align="right"><font size="2" face="Arial, Helvetica, sans-serif">31</font></td>
<td align="left">&nbsp;</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" bgcolor="#FFFFFF">
  <td align="left">&nbsp;</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="right"><hr size="1" noshade></td>
  <td align="left">&nbsp;</td>
</tr>
<tr valign="top" bgcolor="#FFFFFF">
<td align="left"><font size="2" face="Arial, Helvetica, sans-serif"><b>Income (loss) before minority interests</b></font></td>
<td align="left">&nbsp;</td>
<td align="right"><font size="2" face="Arial, Helvetica, sans-serif"><b>(30</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>77</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">Minority interests</font></td>
<td align="left">&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 align="right">&nbsp;</td>
<td align="right"><font size="2" face="Arial, Helvetica, sans-serif">0</font></td>
<td align="left">&nbsp;</td>
</tr>
<tr valign="top" bgcolor="#FFFFFF">
  <td align="left">&nbsp;</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="right"><hr size="1" noshade></td>
  <td align="left">&nbsp;</td>
</tr>
<tr valign="top" bgcolor="#FFFFFF">
<td align="left"><font size="2" face="Arial, Helvetica, sans-serif"><b>Net income (loss)</b></font></td>
<td align="left">&nbsp;</td>
<td align="right"><font size="2" face="Arial, Helvetica, sans-serif"><b>(31</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>77</b></font></td>
<td align="left">&nbsp;</td>
</tr>
<tr valign="top">
  <td align="left">&nbsp;</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"><hr size="1" noshade></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">&nbsp;</td>
<td align="left"></td>
<td align="left">&nbsp;</td>
<td align="right">&nbsp;</td>
<td align="left"></td>
<td align="left">&nbsp;</td>
</tr>
<tr valign="top" bgcolor="#eeeeee">
<td align="left"><font size="2" face="Arial, Helvetica, sans-serif"><b>Earnings (loss) per share (Basic)</b></font></td>
<td align="left">&nbsp;</td>
<td align="right"><font size="2" face="Arial, Helvetica, sans-serif">(0.03</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">0.09 </font></td>
<td align="left">&nbsp;</td>
</tr>
<tr valign="top" bgcolor="#FFFFFF">
  <td align="left">&nbsp;</td>
  <td align="left">&nbsp;</td>
  <td align="right"><hr size="2" noshade></td>
  <td align="left">&nbsp;</td>
  <td align="right"><hr size="2" noshade></td>
  <td align="right"><hr size="2" noshade></td>
  <td align="left">&nbsp;</td>
</tr>
<tr valign="top" bgcolor="#FFFFFF">
<td align="left"><font size="2" face="Arial, Helvetica, sans-serif"><b>Earnings (loss) per share (Diluted)</b></font></td>
<td align="left">&nbsp;</td>
<td align="right"><font size="2" face="Arial, Helvetica, sans-serif">(0.03</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">0.08 </font></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">&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"><hr size="1" noshade></td>
<td align="left">&nbsp;</td>
</tr>
</table>
<p align="center"><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="right"><img src="st-logo.jpg" width="100%"></p>
<p align="center"><font face="Arial, Helvetica, sans-serif" size="2">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>
<br>
<br>
<table width="100%" cellspacing="0" cellpadding="0" border="0">
<tr valign="top">
<td align="left"><font size="2" face="Arial, Helvetica, sans-serif"><b>STMicroelectronics N.V.</b></font></td>
</tr>
<tr valign="top">
<td align="left"><font color="0098D7" size="2" face="Arial, Helvetica, sans-serif"><b>CONSOLIDATED BALANCE SHEETS</b></font></td>
</tr>
</table>
<font face="Arial, Helvetica, sans-serif"><br>
<br>
</font>
<table width="100%" cellspacing="0" cellpadding="0" align="center" border="0">
  <tr valign="top" bgcolor="#FFFFFF">
    <td align="left"></td>
    <td width="2%" align="left">&nbsp;</td>
    <td width="10%" align="center">&nbsp;</td>
    <td width="2%" align="center">&nbsp;</td>
    <td width="2%" align="center">&nbsp;</td>
    <td width="10%" align="center">&nbsp;</td>
    <td align="center">&nbsp;</td>
    <td align="center">&nbsp;</td>
    <td align="center">&nbsp;</td>
    <td width="2%" align="left">&nbsp;</td>
  </tr>
  <tr valign="top">
    <td align="left"></td>
    <td align="left">&nbsp;</td>
    <td align="left"></td>
    <td align="left">&nbsp;</td>
    <td align="right">&nbsp;</td>
    <td align="left"></td>
    <td align="left">&nbsp;</td>
  </tr>
  <tr valign="top">
    <td align="left"></td>
    <td align="left">&nbsp;</td>
    <td align="left">&nbsp;</td>
    <td align="left">&nbsp;</td>
    <td align="right">&nbsp;</td>
    <td align="left">&nbsp;</td>
    <td align="left">&nbsp;</td>
  </tr>
  <tr valign="top">
    <td align="left"></td>
    <td align="left">&nbsp;</td>
    <td colspan="4" align="left"><div align="center"><font size="1" face="Arial, Helvetica, sans-serif"><b>As
            at </b></font></div>
    </td>
    <td width="2%"align="left">&nbsp;</td>
  </tr>
  <tr valign="top">
    <td align="left"></td>
    <td align="left">&nbsp;</td>
    <td colspan="4" align="left"><hr size="1" noshade></td>
    <td align="left">&nbsp;</td>
  </tr>
  <tr valign="top" bgcolor="#FFFFFF">
    <td align="left"></td>
    <td align="left">&nbsp;</td>
    <td align="center"><div align="center"><font size="1" face="Arial, Helvetica, sans-serif"><b>April
            2,</b></font></div>
    </td>
    <td align="left">&nbsp;</td>
    <td align="right">&nbsp;</td>
    <td align="center"><div align="center"><font size="1" face="Arial, Helvetica, sans-serif"><b>December
            31, </b></font></div>
    </td>
    <td align="left">&nbsp;</td>
  </tr>
  <tr valign="top">
    <td align="left"><font size="2" face="Arial, Helvetica, sans-serif"><b>In
          millions of U.S. dollars</b></font></td>
    <td align="left">&nbsp;</td>
    <td align="right"><div align="center"><font size="1" face="Arial, Helvetica, sans-serif"><b>2005</b></font></div>
    </td>
    <td align="left">&nbsp;</td>
    <td align="right">&nbsp;</td>
    <td align="right"><div align="center"><font size="1" face="Arial, Helvetica, sans-serif"><b>2004</b></font></div>
    </td>
    <td align="left">&nbsp;</td>
  </tr>
  <tr valign="top" bgcolor="#FFFFFF">
    <td align="left"></td>
    <td align="left">&nbsp;</td>
    <td align="center"><hr size="1" noshade></td>
    <td align="left">&nbsp;</td>
    <td align="right"><hr size="1" noshade></td>
    <td align="center"><hr size="1" noshade></td>
    <td align="left">&nbsp;</td>
  </tr>
  <tr valign="top" bgcolor="#FFFFFF">
    <td align="left"></td>
    <td align="left">&nbsp;</td>
    <td align="center"><font size="1" face="Arial, Helvetica, sans-serif">(unaudited)</font></td>
    <td align="left">&nbsp;</td>
    <td align="right">&nbsp;</td>
    <td align="center"><font size="1" face="Arial, Helvetica, sans-serif">(audited)</font></td>
    <td align="left">&nbsp;</td>
  </tr>
  <tr valign="top" bgcolor="#FFFFFF">
    <td align="left"><font size="2" face="Arial, Helvetica, sans-serif"><b>Assets</b></font></td>
    <td align="left">&nbsp;</td>
    <td align="left"></td>
    <td align="left">&nbsp;</td>
    <td align="right">&nbsp;</td>
    <td align="left"></td>
    <td align="left">&nbsp;</td>
  </tr>
  <tr valign="top" bgcolor="#FFFFFF">
    <td align="left"><font size="2" face="Arial, Helvetica, sans-serif"><b>Current
          assets :</b></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">&nbsp;</td>
    <td align="left"></td>
    <td align="left">&nbsp;</td>
  </tr>
  <tr valign="top" bgcolor="#FFFFFF">
    <td align="left"><font size="2" face="Arial, Helvetica, sans-serif">Cash
        and cash equivalents</font></td>
    <td align="left">&nbsp;</td>
    <td align="right"><font size="2" face="Arial, Helvetica, sans-serif">1,162 </font></td>
    <td align="left">&nbsp;</td>
    <td align="right">&nbsp;</td>
    <td align="right"><font size="2" face="Arial, Helvetica, sans-serif">1,950 </font></td>
    <td align="left">&nbsp;</td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td align="left"><font size="2" face="Arial, Helvetica, sans-serif">Marketable
        securities</font></td>
    <td align="left">&nbsp;</td>
    <td align="right"><font size="2" face="Arial, Helvetica, sans-serif">525 </font></td>
    <td align="left">&nbsp;</td>
    <td align="right">&nbsp;</td>
    <td align="right"><font size="2" face="Arial, Helvetica, sans-serif">0 </font></td>
    <td align="left">&nbsp;</td>
  </tr>
  <tr valign="top" bgcolor="#FFFFFF">
    <td align="left"><font size="2" face="Arial, Helvetica, sans-serif">Trade
        accounts receivable, net</font></td>
    <td align="left">&nbsp;</td>
    <td align="right"><font size="2" face="Arial, Helvetica, sans-serif">1,414 </font></td>
    <td align="left">&nbsp;</td>
    <td align="right">&nbsp;</td>
    <td align="right"><font size="2" face="Arial, Helvetica, sans-serif">1,408 </font></td>
    <td align="left">&nbsp;</td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td align="left"><font size="2" face="Arial, Helvetica, sans-serif">Inventories,
        net</font></td>
    <td align="left">&nbsp;</td>
    <td align="right"><font size="2" face="Arial, Helvetica, sans-serif">1,369 </font></td>
    <td align="left">&nbsp;</td>
    <td align="right">&nbsp;</td>
    <td align="right"><font size="2" face="Arial, Helvetica, sans-serif">1,344 </font></td>
    <td align="left">&nbsp;</td>
  </tr>
  <tr valign="top" bgcolor="#FFFFFF">
    <td align="left"><font size="2" face="Arial, Helvetica, sans-serif">Deferred
        tax assets</font></td>
    <td align="left">&nbsp;</td>
    <td align="right"><font size="2" face="Arial, Helvetica, sans-serif">141 </font></td>
    <td align="left">&nbsp;</td>
    <td align="right">&nbsp;</td>
    <td align="right"><font size="2" face="Arial, Helvetica, sans-serif">140 </font></td>
    <td align="left">&nbsp;</td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td align="left"><font size="2" face="Arial, Helvetica, sans-serif">Other
        receivables and assets </font></td>
    <td align="left">&nbsp;</td>
    <td align="right"><font size="2" face="Arial, Helvetica, sans-serif">740 </font></td>
    <td align="left">&nbsp;</td>
    <td align="right">&nbsp;</td>
    <td align="right"><font size="2" face="Arial, Helvetica, sans-serif">785 </font></td>
    <td align="left">&nbsp;</td>
  </tr>
  <tr valign="top" bgcolor="#FFFFFF">
    <td align="left">&nbsp;</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="right"><hr size="1" noshade></td>
    <td align="left">&nbsp;</td>
  </tr>
  <tr valign="top" bgcolor="#FFFFFF">
    <td align="left"><font size="2" face="Arial, Helvetica, sans-serif"><b>Total
          current assets</b></font></td>
    <td align="left">&nbsp;</td>
    <td align="right"><font size="2" face="Arial, Helvetica, sans-serif"><b>5,351 </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>5,627 </b></font></td>
    <td align="left">&nbsp;</td>
  </tr>
  <tr valign="top" bgcolor="#FFFFFF">
    <td align="left">&nbsp;</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="right"><hr size="1" noshade></td>
    <td align="left">&nbsp;</td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td align="left"><font size="2" face="Arial, Helvetica, sans-serif">Goodwill</font></td>
    <td align="left">&nbsp;</td>
    <td align="right"><font size="2" face="Arial, Helvetica, sans-serif">228 </font></td>
    <td align="left">&nbsp;</td>
    <td align="right">&nbsp;</td>
    <td align="right"><font size="2" face="Arial, Helvetica, sans-serif">264 </font></td>
    <td align="left">&nbsp;</td>
  </tr>
  <tr valign="top" bgcolor="#FFFFFF">
    <td align="left"><font size="2" face="Arial, Helvetica, sans-serif">Other
        intangible assets, net</font></td>
    <td align="left">&nbsp;</td>
    <td align="right"><font size="2" face="Arial, Helvetica, sans-serif">250 </font></td>
    <td align="left">&nbsp;</td>
    <td align="right">&nbsp;</td>
    <td align="right"><font size="2" face="Arial, Helvetica, sans-serif">291 </font></td>
    <td align="left">&nbsp;</td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td align="left"><font size="2" face="Arial, Helvetica, sans-serif">Property,
        plant and equipment, net</font></td>
    <td align="left">&nbsp;</td>
    <td align="right"><font size="2" face="Arial, Helvetica, sans-serif">7,039 </font></td>
    <td align="left">&nbsp;</td>
    <td align="right">&nbsp;</td>
    <td align="right"><font size="2" face="Arial, Helvetica, sans-serif">7,442 </font></td>
    <td align="left">&nbsp;</td>
  </tr>
  <tr valign="top" bgcolor="#FFFFFF">
    <td align="left"><font size="2" face="Arial, Helvetica, sans-serif">Long-term
        deferred tax assets</font></td>
    <td align="left">&nbsp;</td>
    <td align="right"><font size="2" face="Arial, Helvetica, sans-serif">59 </font></td>
    <td align="left">&nbsp;</td>
    <td align="right">&nbsp;</td>
    <td align="right"><font size="2" face="Arial, Helvetica, sans-serif">59 </font></td>
    <td align="left">&nbsp;</td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td align="left"><font size="2" face="Arial, Helvetica, sans-serif">Investments
        and other non-current assets</font></td>
    <td align="left">&nbsp;</td>
    <td align="right"><font size="2" face="Arial, Helvetica, sans-serif">119 </font></td>
    <td align="left">&nbsp;</td>
    <td align="right">&nbsp;</td>
    <td align="right"><font size="2" face="Arial, Helvetica, sans-serif">117 </font></td>
    <td align="left">&nbsp;</td>
  </tr>
  <tr valign="top" bgcolor="#FFFFFF">
    <td align="left"></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="right"><hr size="1" noshade></td>
    <td align="left">&nbsp;</td>
  </tr>
  <tr valign="top" bgcolor="#FFFFFF">
    <td align="left"></td>
    <td align="left">&nbsp;</td>
    <td align="right"><font size="2" face="Arial, Helvetica, sans-serif"><b>7,695 </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>8,173 </b></font></td>
    <td align="left">&nbsp;</td>
  </tr>
  <tr valign="top" bgcolor="#FFFFFF">
    <td align="left"></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="right"><hr size="1" noshade></td>
    <td align="left">&nbsp;</td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td align="left"><font size="2" face="Arial, Helvetica, sans-serif"><b>Total
          assets</b></font></td>
    <td align="left">&nbsp;</td>
    <td align="right"><font size="2" face="Arial, Helvetica, sans-serif"><b>13,046 </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>13,800 </b></font></td>
    <td align="left">&nbsp;</td>
  </tr>
  <tr valign="top">
    <td align="left"></td>
    <td align="left">&nbsp;</td>
    <td align="left"><hr size="2" noshade></td>
    <td align="left">&nbsp;</td>
    <td align="right"><hr size="2" noshade></td>
    <td align="left"><hr size="2" noshade></td>
    <td align="left">&nbsp;</td>
  </tr>
  <tr valign="top">
    <td align="left"></td>
    <td align="left">&nbsp;</td>
    <td align="left"></td>
    <td align="left">&nbsp;</td>
    <td align="right">&nbsp;</td>
    <td align="left"></td>
    <td align="left">&nbsp;</td>
  </tr>
  <tr valign="top" bgcolor="#FFFFFF">
    <td align="left"><font size="2" face="Arial, Helvetica, sans-serif"><b>Liabilities
          and shareholders' equity</b></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">&nbsp;</td>
    <td align="center"></td>
    <td align="left">&nbsp;</td>
  </tr>
  <tr valign="top" bgcolor="#FFFFFF">
    <td align="left"><font size="2" face="Arial, Helvetica, sans-serif"><b>Current
          liabilities:</b></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">&nbsp;</td>
    <td align="left"></td>
    <td align="left">&nbsp;</td>
  </tr>
  <tr valign="top" bgcolor="#FFFFFF">
    <td align="left"><font size="2" face="Arial, Helvetica, sans-serif">Bank
        overdrafts</font></td>
    <td align="left">&nbsp;</td>
    <td align="right"><font size="2" face="Arial, Helvetica, sans-serif">37 </font></td>
    <td align="left">&nbsp;</td>
    <td align="right">&nbsp;</td>
    <td align="right"><font size="2" face="Arial, Helvetica, sans-serif">58 </font></td>
    <td align="left">&nbsp;</td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td align="left"><font size="2" face="Arial, Helvetica, sans-serif">Current
        portion of long-term debt</font></td>
    <td align="left">&nbsp;</td>
    <td align="right"><font size="2" face="Arial, Helvetica, sans-serif">158 </font></td>
    <td align="left">&nbsp;</td>
    <td align="right">&nbsp;</td>
    <td align="right"><font size="2" face="Arial, Helvetica, sans-serif">133 </font></td>
    <td align="left">&nbsp;</td>
  </tr>
  <tr valign="top" bgcolor="#FFFFFF">
    <td align="left"><font size="2" face="Arial, Helvetica, sans-serif">Trade
        accounts payable</font></td>
    <td align="left">&nbsp;</td>
    <td align="right"><font size="2" face="Arial, Helvetica, sans-serif">1,027 </font></td>
    <td align="left">&nbsp;</td>
    <td align="right">&nbsp;</td>
    <td align="right"><font size="2" face="Arial, Helvetica, sans-serif">1,352 </font></td>
    <td align="left">&nbsp;</td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td align="left"><font size="2" face="Arial, Helvetica, sans-serif">Other
        payables and accrued liabilities </font></td>
    <td align="left">&nbsp;</td>
    <td align="right"><font size="2" face="Arial, Helvetica, sans-serif">852 </font></td>
    <td align="left">&nbsp;</td>
    <td align="right">&nbsp;</td>
    <td align="right"><font size="2" face="Arial, Helvetica, sans-serif">776 </font></td>
    <td align="left">&nbsp;</td>
  </tr>
  <tr valign="top" bgcolor="#FFFFFF">
    <td align="left"><font size="2" face="Arial, Helvetica, sans-serif">Deferred
        tax liabilities</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>
    <td align="right">&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" bgcolor="#eeeeee">
    <td align="left"><font size="2" face="Arial, Helvetica, sans-serif">Accrued
        income tax</font></td>
    <td align="left">&nbsp;</td>
    <td align="right"><font size="2" face="Arial, Helvetica, sans-serif">157 </font></td>
    <td align="left">&nbsp;</td>
    <td align="right">&nbsp;</td>
    <td align="right"><font size="2" face="Arial, Helvetica, sans-serif">176 </font></td>
    <td align="left">&nbsp;</td>
  </tr>
  <tr valign="top" bgcolor="#FFFFFF">
    <td align="left">&nbsp;</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="right"><hr size="1" noshade></td>
    <td align="left">&nbsp;</td>
  </tr>
  <tr valign="top" bgcolor="#FFFFFF">
    <td align="left"><font size="2" face="Arial, Helvetica, sans-serif"><b>Total
          current liabilities</b></font></td>
    <td align="left">&nbsp;</td>
    <td align="right"><font size="2" face="Arial, Helvetica, sans-serif"><b>2,238 </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>2,512 </b></font></td>
    <td align="left">&nbsp;</td>
  </tr>
  <tr valign="top">
    <td align="left"></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"><hr size="1" noshade></td>
    <td align="left">&nbsp;</td>
  </tr>
  <tr valign="top">
    <td align="left"></td>
    <td align="left">&nbsp;</td>
    <td align="left"></td>
    <td align="left">&nbsp;</td>
    <td align="right">&nbsp;</td>
    <td align="left"></td>
    <td align="left">&nbsp;</td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td align="left"><font size="2" face="Arial, Helvetica, sans-serif">Long-term
        debt</font></td>
    <td align="left">&nbsp;</td>
    <td align="right"><font size="2" face="Arial, Helvetica, sans-serif">1,702 </font></td>
    <td align="left">&nbsp;</td>
    <td align="right">&nbsp;</td>
    <td align="right"><font size="2" face="Arial, Helvetica, sans-serif">1,767 </font></td>
    <td align="left">&nbsp;</td>
  </tr>
  <tr valign="top" bgcolor="#FFFFFF">
    <td align="left"><font size="2" face="Arial, Helvetica, sans-serif">Reserve
        for pension and termination indemnities</font></td>
    <td align="left">&nbsp;</td>
    <td align="right"><font size="2" face="Arial, Helvetica, sans-serif">265 </font></td>
    <td align="left">&nbsp;</td>
    <td align="right">&nbsp;</td>
    <td align="right"><font size="2" face="Arial, Helvetica, sans-serif">285 </font></td>
    <td align="left">&nbsp;</td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td align="left"><font size="2" face="Arial, Helvetica, sans-serif">Long-term
        deferred tax liabilities</font></td>
    <td align="left">&nbsp;</td>
    <td align="right"><font size="2" face="Arial, Helvetica, sans-serif">50 </font></td>
    <td align="left">&nbsp;</td>
    <td align="right">&nbsp;</td>
    <td align="right"><font size="2" face="Arial, Helvetica, sans-serif">63 </font></td>
    <td align="left">&nbsp;</td>
  </tr>
  <tr valign="top" bgcolor="#FFFFFF">
    <td align="left"><font size="2" face="Arial, Helvetica, sans-serif">Other
        non-current liabilities</font></td>
    <td align="left">&nbsp;</td>
    <td align="right"><font size="2" face="Arial, Helvetica, sans-serif">22 </font></td>
    <td align="left">&nbsp;</td>
    <td align="right">&nbsp;</td>
    <td align="right"><font size="2" face="Arial, Helvetica, sans-serif">15 </font></td>
    <td align="left">&nbsp;</td>
  </tr>
  <tr valign="top" bgcolor="#FFFFFF">
    <td align="left">&nbsp;</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="right"><hr size="1" noshade></td>
    <td align="left">&nbsp;</td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td align="left"></td>
    <td align="left">&nbsp;</td>
    <td align="right"><font size="2" face="Arial, Helvetica, sans-serif"><b>2,039 </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>2,130 </b></font></td>
    <td align="left">&nbsp;</td>
  </tr>
  <tr valign="top" bgcolor="#FFFFFF">
    <td align="left">&nbsp;</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="right"><hr size="1" noshade></td>
    <td align="left">&nbsp;</td>
  </tr>
  <tr valign="top" bgcolor="#FFFFFF">
    <td align="left"><font size="2" face="Arial, Helvetica, sans-serif"><b>Total
          liabilities</b></font></td>
    <td align="left">&nbsp;</td>
    <td align="right"><font size="2" face="Arial, Helvetica, sans-serif"><b>4,277 </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>4,642 </b></font></td>
    <td align="left">&nbsp;</td>
  </tr>
  <tr valign="top" bgcolor="#FFFFFF">
    <td align="left">&nbsp;</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"><hr size="1" noshade></td>
    <td align="left">&nbsp;</td>
  </tr>
  <tr valign="top" bgcolor="#FFFFFF">
    <td align="left">&nbsp;</td>
    <td align="left">&nbsp;</td>
    <td align="left"></td>
    <td align="left">&nbsp;</td>
    <td align="right">&nbsp;</td>
    <td align="left"></td>
    <td align="left">&nbsp;</td>
  </tr>
  <tr valign="top" bgcolor="#FFFFFF">
    <td align="left"><font size="2" face="Arial, Helvetica, sans-serif">Commitment
        and contingencies</font></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"><hr 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>Minority
          interests</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">&nbsp;</td>
    <td align="right">&nbsp;</td>
    <td align="right"><font size="2" face="Arial, Helvetica, sans-serif"><b>48 </b></font></td>
    <td align="left">&nbsp;</td>
  </tr>
  <tr valign="top">
    <td align="left"></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"><hr size="1" noshade></td>
    <td align="left">&nbsp;</td>
  </tr>
  <tr valign="top">
    <td align="left"></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">&nbsp;</td>
    <td align="left"></td>
    <td align="left">&nbsp;</td>
  </tr>
  <tr valign="top" bgcolor="#FFFFFF">
    <td align="left"><font size="2" face="Arial, Helvetica, sans-serif">Common
        stock (preferred stock: 540,000,000 shares authorized, not issued; common
        stock: Euro 1.04 nominal value, 1,200,000,000 shares authorized, 905,372,326
        shares issued, 891,972,326 shares outstanding)</font></td>
    <td align="left">&nbsp;</td>
    <td align="right"><font size="2" face="Arial, Helvetica, sans-serif">1,150 </font></td>
    <td align="left">&nbsp;</td>
    <td align="right">&nbsp;</td>
    <td align="right"><font size="2" face="Arial, Helvetica, sans-serif">1,150 </font></td>
    <td align="left">&nbsp;</td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td align="left"><font size="2" face="Arial, Helvetica, sans-serif">Capital
        surplus</font></td>
    <td align="left">&nbsp;</td>
    <td align="right"><font size="2" face="Arial, Helvetica, sans-serif">1,925 </font></td>
    <td align="left">&nbsp;</td>
    <td align="right">&nbsp;</td>
    <td align="right"><font size="2" face="Arial, Helvetica, sans-serif">1,924 </font></td>
    <td align="left">&nbsp;</td>
  </tr>
  <tr valign="top" bgcolor="#FFFFFF">
    <td align="left"><font size="2" face="Arial, Helvetica, sans-serif">Accumulated
        result</font></td>
    <td align="left">&nbsp;</td>
    <td align="right"><font size="2" face="Arial, Helvetica, sans-serif">5,237 </font></td>
    <td align="left">&nbsp;</td>
    <td align="right">&nbsp;</td>
    <td align="right"><font size="2" face="Arial, Helvetica, sans-serif">5,268 </font></td>
    <td align="left">&nbsp;</td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td align="left"><font size="2" face="Arial, Helvetica, sans-serif">Accumulated
        other comprehensive income</font></td>
    <td align="left">&nbsp;</td>
    <td align="right"><font size="2" face="Arial, Helvetica, sans-serif">756</font></td>
    <td align="left">&nbsp;</td>
    <td align="right">&nbsp;</td>
    <td align="right"><font size="2" face="Arial, Helvetica, sans-serif">1,116</font></td>
    <td align="left">&nbsp;</td>
  </tr>
  <tr valign="top" bgcolor="#FFFFFF">
    <td align="left"><font size="2" face="Arial, Helvetica, sans-serif">Treasury
        stock</font></td>
    <td align="left">&nbsp;</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">&nbsp;</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="top" bgcolor="#FFFFFF">
    <td align="left">&nbsp;</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="right"><hr size="1" noshade></td>
    <td align="left">&nbsp;</td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td align="left"><font size="2" face="Arial, Helvetica, sans-serif"><b>Shareholders'
          equity</b></font></td>
    <td align="left">&nbsp;</td>
    <td align="right"><font size="2" face="Arial, Helvetica, sans-serif"><b>8,720 </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>9,110 </b></font></td>
    <td align="left">&nbsp;</td>
  </tr>
  <tr valign="top">
    <td align="left"></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"><hr size="1" noshade></td>
    <td align="left">&nbsp;</td>
  </tr>
  <tr valign="top">
    <td align="left"></td>
    <td align="left">&nbsp;</td>
    <td align="left"></td>
    <td align="left">&nbsp;</td>
    <td align="right">&nbsp;</td>
    <td align="left"></td>
    <td align="left">&nbsp;</td>
  </tr>
  <tr valign="top" bgcolor="#FFFFFF">
    <td align="left"><font size="2" face="Arial, Helvetica, sans-serif"><b>Total
          liabilities and shareholders' equity</b></font></td>
    <td align="left">&nbsp;</td>
    <td align="right"><font size="2" face="Arial, Helvetica, sans-serif"><b>13,046 </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>13,800 </b></font></td>
    <td align="left">&nbsp;</td>
  </tr>
  <tr valign="top">
    <td align="left"></td>
    <td align="left">&nbsp;</td>
    <td align="left"><hr size="2" noshade></td>
    <td align="left">&nbsp;</td>
    <td align="right"><hr size="2" noshade></td>
    <td align="left"><hr size="2" noshade></td>
    <td align="left">&nbsp;</td>
  </tr>
  <tr valign="top" bgcolor="#FFFFFF">
    <td align="left">&nbsp;</td>
    <td align="left">&nbsp;</td>
    <td colspan="4" align="left"><font size="2" face="Arial, Helvetica, sans-serif">&nbsp;</font></td>
    <td align="left">&nbsp;</td>
  </tr>
</table>
<p align="center"><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="right"><img src="st-logo.jpg" width="100%"></p>
<p align="center"><font face="Arial, Helvetica, sans-serif" size="2">F-2</font></p>
<hr noshade align="center" width="100%" size="2">
<div style="page-break-before:always"></div>
<page>
<a name="pf3"></a>
<p><a href="#contents"><font size="2">Back to Contents</font></a></p>
<br>
<br>
<table width="100%" cellspacing="0" cellpadding="0" border="0">
  <tr valign="top">
    <td align="left" width="80%"><font size="2" face="Arial, Helvetica, sans-serif"><b>STMicroelectronics
          N.V.</b></font></td>
    <td align="left"><font size="2" face="Arial, Helvetica, sans-serif">&nbsp;</font></td>
  </tr>
  <tr valign="top">
    <td colspan="2" align="left"><font color="0098D7" size="2" face="Arial, Helvetica, sans-serif"><b>CONSOLIDATED
          STATEMENTS OF CASH FLOWS</b></font></td>
  </tr>
</table>
<font face="Arial, Helvetica, sans-serif"><br>
<br>
</font>
<table width="100%" cellspacing="0" cellpadding="0" align="center" border="0">
  <tr valign="top">
    <td align="left" bgcolor="#FFFFFF">&nbsp;</td>
    <td align="left" bgcolor="#FFFFFF">&nbsp;</td>
    <td align="left" bgcolor="#FFFFFF">&nbsp;</td>
    <td align="right" bgcolor="#FFFFFF">&nbsp;</td>
    <td colspan="4" align="center" bgcolor="#FFFFFF"><font size="1" face="Arial, Helvetica, sans-serif"><b> Three
          Months Ended <br>
      (unaudited) </b></font></td>
    <td align="left" bgcolor="#FFFFFF">&nbsp;</td>
  </tr>
  <tr valign="top">
    <td align="left" bgcolor="#FFFFFF">&nbsp;</td>
    <td align="left" bgcolor="#FFFFFF">&nbsp;</td>
    <td align="left" bgcolor="#FFFFFF">&nbsp;</td>
    <td align="right" bgcolor="#FFFFFF">&nbsp;</td>
    <td align="center" bgcolor="#FFFFFF"></td>
    <td align="left" bgcolor="#FFFFFF">&nbsp;</td>
    <td align="right" bgcolor="#FFFFFF">&nbsp;</td>
    <td align="center" bgcolor="#FFFFFF"></td>
    <td align="left" bgcolor="#FFFFFF">&nbsp;</td>
  </tr>
  <tr valign="top">
    <td align="left" bgcolor="#FFFFFF">&nbsp;</td>
    <td align="left" bgcolor="#FFFFFF">&nbsp;</td>
    <td align="left" bgcolor="#FFFFFF">&nbsp;</td>
    <td align="right" bgcolor="#FFFFFF">&nbsp;</td>
    <td align="center" bgcolor="#FFFFFF"><font size="1" face="Arial, Helvetica, sans-serif"><b>April
          2,</b></font></td>
    <td align="left" bgcolor="#FFFFFF"><font size="1">&nbsp;</font></td>
    <td align="right" bgcolor="#FFFFFF"><font size="1">&nbsp;</font></td>
    <td align="center" bgcolor="#FFFFFF"><font size="1" face="Arial, Helvetica, sans-serif"><b>March
          27, </b></font></td>
    <td align="left" bgcolor="#FFFFFF"><font size="1">&nbsp;</font></td>
  </tr>
  <tr valign="top">
    <td colspan="3" align="left"><font size="2" face="Arial, Helvetica, sans-serif"><b>In
          millions of U.S. dollars</b></font></td>
    <td align="right">&nbsp;</td>
    <td align="center"><font size="1" face="Arial, Helvetica, sans-serif"><b>2005 </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>2004 </b></font></td>
    <td align="left">&nbsp;</td>
  </tr>
  <tr valign="top">
    <td align="left" bgcolor="#FFFFFF">&nbsp;</td>
    <td align="left" bgcolor="#FFFFFF">&nbsp;</td>
    <td align="left" bgcolor="#FFFFFF">&nbsp;</td>
    <td align="right" bgcolor="#FFFFFF">&nbsp;</td>
    <td align="center" bgcolor="#FFFFFF"><hr size="1">
    </td>
    <td align="left" bgcolor="#FFFFFF">&nbsp;</td>
    <td align="right" bgcolor="#FFFFFF">&nbsp;</td>
    <td align="center" bgcolor="#FFFFFF"><hr size="1">
    </td>
    <td align="left" bgcolor="#FFFFFF">&nbsp;</td>
  </tr>
  <tr valign="top">
    <td colspan="3" align="left" bgcolor="#FFFFFF"><font size="2" face="Arial, Helvetica, sans-serif"><b>Cash
          flows from operating activities:</b></font></td>
    <td align="right" bgcolor="#FFFFFF">&nbsp;</td>
    <td align="center" bgcolor="#FFFFFF"></td>
    <td align="left" bgcolor="#FFFFFF">&nbsp;</td>
    <td align="right" bgcolor="#FFFFFF">&nbsp;</td>
    <td align="center" bgcolor="#FFFFFF"></td>
    <td align="left" bgcolor="#FFFFFF">&nbsp;</td>
  </tr>
  <tr valign="top">
    <td align="left" bgcolor="#eeeeee">&nbsp;</td>
    <td colspan="2" align="left" bgcolor="#eeeeee"><font size="2" face="Arial, Helvetica, sans-serif">Net
        income (loss)</font></td>
    <td align="right" bgcolor="#eeeeee">&nbsp;</td>
    <td align="right" bgcolor="#eeeeee"><font size="2" face="Arial, Helvetica, sans-serif"> (31</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"> 77 </font></td>
    <td align="left" bgcolor="#eeeeee">&nbsp;</td>
  </tr>
  <tr valign="top">
    <td align="left" bgcolor="#FFFFFF">&nbsp;</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="right" bgcolor="#FFFFFF">&nbsp;</td>
    <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="right" bgcolor="#FFFFFF">&nbsp;</td>
    <td align="left" bgcolor="#FFFFFF"><font size="2" face="Arial, Helvetica, sans-serif">&nbsp;</font></td>
    <td align="left" bgcolor="#FFFFFF">&nbsp;</td>
  </tr>
  <tr valign="top">
    <td width="2%" align="right" bgcolor="#FFFFFF">&nbsp;</td>
    <td width="2%" align="right" bgcolor="#FFFFFF">&nbsp;</td>
    <td align="left" bgcolor="#FFFFFF"><font size="2" face="Arial, Helvetica, sans-serif">Depreciation
          and amortization</font></td>
    <td width="2%" align="right" bgcolor="#FFFFFF">&nbsp;</td>
    <td width="10%" align="right" bgcolor="#FFFFFF"><font size="2" face="Arial, Helvetica, sans-serif">506 </font></td>
    <td width="2%" align="left" bgcolor="#FFFFFF">&nbsp;</td>
    <td width="2%" align="right" bgcolor="#FFFFFF">&nbsp;</td>
    <td width="10%" align="right" bgcolor="#FFFFFF"><font size="2" face="Arial, Helvetica, sans-serif">421 </font></td>
    <td width="2%" align="left" bgcolor="#FFFFFF">&nbsp;</td>
  </tr>
  <tr valign="top">
    <td align="right" bgcolor="#eeeeee">&nbsp;</td>
    <td align="right" bgcolor="#eeeeee">&nbsp;</td>
    <td align="left" bgcolor="#eeeeee"><font size="2" face="Arial, Helvetica, sans-serif">Amortization
          of discount on convertible debt</font></td>
    <td align="right" bgcolor="#eeeeee">&nbsp;</td>
    <td align="right" bgcolor="#eeeeee"><font size="2" face="Arial, Helvetica, sans-serif"> 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"> 11 </font></td>
    <td align="left" bgcolor="#eeeeee">&nbsp;</td>
  </tr>
  <tr valign="top">
    <td align="right" bgcolor="#FFFFFF">&nbsp;</td>
    <td align="right" bgcolor="#FFFFFF">&nbsp;</td>
    <td align="left" bgcolor="#FFFFFF"><font size="2" face="Arial, Helvetica, sans-serif">Other
          non-cash items</font></td>
    <td align="right" bgcolor="#FFFFFF">&nbsp;</td>
    <td align="right" bgcolor="#FFFFFF"><font size="2" face="Arial, Helvetica, sans-serif"> 2 </font></td>
    <td align="left" bgcolor="#FFFFFF">&nbsp;</td>
    <td align="right" bgcolor="#FFFFFF">&nbsp;</td>
    <td align="right" bgcolor="#FFFFFF"><font size="2" face="Arial, Helvetica, sans-serif"> (3</font></td>
    <td align="left" bgcolor="#FFFFFF"><font size="2" face="Arial, Helvetica, sans-serif">)</font></td>
  </tr>
  <tr valign="top">
    <td align="right" bgcolor="#eeeeee">&nbsp;</td>
    <td align="right" bgcolor="#eeeeee">&nbsp;</td>
    <td align="left" bgcolor="#eeeeee"><font size="2" face="Arial, Helvetica, sans-serif">Minority
          interest in net income of subsidiaries</font></td>
    <td align="right" bgcolor="#eeeeee">&nbsp;</td>
    <td align="right" bgcolor="#eeeeee"><font size="2" face="Arial, Helvetica, sans-serif"> 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">&#151;</font></td>
    <td align="left" bgcolor="#eeeeee">&nbsp;</td>
  </tr>
  <tr valign="top">
    <td align="right" bgcolor="#FFFFFF">&nbsp;</td>
    <td align="right" bgcolor="#FFFFFF">&nbsp;</td>
    <td align="left" bgcolor="#FFFFFF"><font size="2" face="Arial, Helvetica, sans-serif">Deferred
          income tax</font></td>
    <td align="right" bgcolor="#FFFFFF">&nbsp;</td>
    <td align="right" bgcolor="#FFFFFF"><font size="2" face="Arial, Helvetica, sans-serif"> (23</font></td>
    <td align="left" bgcolor="#FFFFFF"><font size="2" face="Arial, Helvetica, sans-serif">)</font></td>
    <td align="right" bgcolor="#FFFFFF">&nbsp;</td>
    <td align="right" bgcolor="#FFFFFF"><font size="2" face="Arial, Helvetica, sans-serif"> (3</font></td>
    <td align="left" bgcolor="#FFFFFF"><font size="2" face="Arial, Helvetica, sans-serif">)</font></td>
  </tr>
  <tr valign="top">
    <td align="right" bgcolor="#eeeeee">&nbsp;</td>
    <td align="right" bgcolor="#eeeeee">&nbsp;</td>
    <td align="left" bgcolor="#eeeeee"><font size="2" face="Arial, Helvetica, sans-serif">Impairment,
          restructuring charges and other related closure costs, net of cash
          payments</font></td>
    <td align="right" bgcolor="#eeeeee">&nbsp;</td>
    <td align="right" bgcolor="#eeeeee"><font size="2" face="Arial, Helvetica, sans-serif"> 60 </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"> 23 </font></td>
    <td align="left" bgcolor="#eeeeee">&nbsp;</td>
  </tr>
  <tr valign="top">
    <td align="left" bgcolor="#FFFFFF">&nbsp;</td>
    <td colspan="2" align="left" bgcolor="#FFFFFF"><font size="2" face="Arial, Helvetica, sans-serif">Changes
        in assets and liabilities:</font></td>
    <td align="right" bgcolor="#FFFFFF">&nbsp;</td>
    <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="right" bgcolor="#FFFFFF">&nbsp;</td>
    <td align="left" bgcolor="#FFFFFF"><font size="2" face="Arial, Helvetica, sans-serif">&nbsp;</font></td>
    <td align="left" bgcolor="#FFFFFF">&nbsp;</td>
  </tr>
  <tr valign="top">
    <td align="right" bgcolor="#FFFFFF">&nbsp;</td>
    <td align="right" bgcolor="#FFFFFF">&nbsp;</td>
    <td align="left" bgcolor="#FFFFFF"><font size="2" face="Arial, Helvetica, sans-serif">Trade
          receivables, net</font></td>
    <td align="right" bgcolor="#FFFFFF">&nbsp;</td>
    <td align="right" bgcolor="#FFFFFF"><font size="2" face="Arial, Helvetica, sans-serif"> (24</font></td>
    <td align="left" bgcolor="#FFFFFF"><font size="2" face="Arial, Helvetica, sans-serif">)</font></td>
    <td align="right" bgcolor="#FFFFFF">&nbsp;</td>
    <td align="right" bgcolor="#FFFFFF"><font size="2" face="Arial, Helvetica, sans-serif"> (125</font></td>
    <td align="left" bgcolor="#FFFFFF"><font size="2" face="Arial, Helvetica, sans-serif">)</font></td>
  </tr>
  <tr valign="top">
    <td align="right" bgcolor="#eeeeee">&nbsp;</td>
    <td align="right" bgcolor="#eeeeee">&nbsp;</td>
    <td align="left" bgcolor="#eeeeee"><font size="2" face="Arial, Helvetica, sans-serif">Inventories,
          net</font></td>
    <td align="right" bgcolor="#eeeeee">&nbsp;</td>
    <td align="right" bgcolor="#eeeeee"><font size="2" face="Arial, Helvetica, sans-serif"> (65</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"> 44 </font></td>
    <td align="left" bgcolor="#eeeeee">&nbsp;</td>
  </tr>
  <tr valign="top">
    <td align="right" bgcolor="#FFFFFF">&nbsp;</td>
    <td align="right" bgcolor="#FFFFFF">&nbsp;</td>
    <td align="left" bgcolor="#FFFFFF"><font size="2" face="Arial, Helvetica, sans-serif">Trade
          payables</font></td>
    <td align="right" bgcolor="#FFFFFF">&nbsp;</td>
    <td align="right" bgcolor="#FFFFFF"><font size="2" face="Arial, Helvetica, sans-serif"> (57</font></td>
    <td align="left" bgcolor="#FFFFFF"><font size="2" face="Arial, Helvetica, sans-serif">)</font></td>
    <td align="right" bgcolor="#FFFFFF">&nbsp;</td>
    <td align="right" bgcolor="#FFFFFF"><font size="2" face="Arial, Helvetica, sans-serif"> 169 </font></td>
    <td align="left" bgcolor="#FFFFFF">&nbsp;</td>
  </tr>
  <tr valign="top">
    <td align="right" bgcolor="#eeeeee">&nbsp;</td>
    <td align="right" bgcolor="#eeeeee">&nbsp;</td>
    <td align="left" bgcolor="#eeeeee"><font size="2" face="Arial, Helvetica, sans-serif">Other
          assets and liabilities, net</font></td>
    <td align="right" bgcolor="#eeeeee">&nbsp;</td>
    <td align="right" bgcolor="#eeeeee"><font size="2" face="Arial, Helvetica, sans-serif"> (11</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"> (62</font></td>
    <td align="left" bgcolor="#eeeeee"><font size="2" face="Arial, Helvetica, sans-serif">)</font></td>
  </tr>
  <tr valign="top">
    <td colspan="3" align="left" bgcolor="#FFFFFF">&nbsp;</td>
    <td align="right" bgcolor="#FFFFFF">&nbsp;</td>
    <td align="right" bgcolor="#FFFFFF"><hr size="1">
    </td>
    <td align="left" bgcolor="#FFFFFF">&nbsp;</td>
    <td align="right" bgcolor="#FFFFFF"><hr size="1">
    </td>
    <td align="right" bgcolor="#FFFFFF"><hr size="1">
    </td>
    <td align="left" bgcolor="#FFFFFF">&nbsp;</td>
  </tr>
  <tr valign="top">
    <td colspan="3" align="left" bgcolor="#FFFFFF"><font size="2" face="Arial, Helvetica, sans-serif"><b>Net
          cash from operating activities</b></font></td>
    <td align="right" bgcolor="#FFFFFF">&nbsp;</td>
    <td align="right" bgcolor="#FFFFFF"><font size="2" face="Arial, Helvetica, sans-serif"><b> 359 </b></font></td>
    <td align="left" bgcolor="#FFFFFF">&nbsp;</td>
    <td align="right" bgcolor="#FFFFFF">&nbsp;</td>
    <td align="right" bgcolor="#FFFFFF"><font size="2" face="Arial, Helvetica, sans-serif"><b> 552 </b></font></td>
    <td align="left" bgcolor="#FFFFFF">&nbsp;</td>
  </tr>
  <tr valign="top">
    <td align="right">&nbsp;</td>
    <td align="right">&nbsp;</td>
    <td align="left">&nbsp;</td>
    <td align="right">&nbsp;</td>
    <td align="left"><hr size="1">
    </td>
    <td align="left">&nbsp;</td>
    <td align="right"><hr size="1">
    </td>
    <td align="left"><hr size="1">
    </td>
    <td align="left">&nbsp;</td>
  </tr>
  <tr valign="top">
    <td align="right">&nbsp;</td>
    <td align="right">&nbsp;</td>
    <td align="left"><font size="2" face="Arial, Helvetica, sans-serif">&nbsp;</font></td>
    <td align="right">&nbsp;</td>
    <td align="left"></td>
    <td align="left">&nbsp;</td>
    <td align="right">&nbsp;</td>
    <td align="left"></td>
    <td align="left">&nbsp;</td>
  </tr>
  <tr valign="top">
    <td colspan="3" align="left" bgcolor="#FFFFFF"><font size="2" face="Arial, Helvetica, sans-serif"><b>Cash
          flows from investing activities:</b></font></td>
    <td align="right" bgcolor="#FFFFFF">&nbsp;</td>
    <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="right" bgcolor="#FFFFFF">&nbsp;</td>
    <td align="left" bgcolor="#FFFFFF"><font size="2" face="Arial, Helvetica, sans-serif">&nbsp;</font></td>
    <td align="left" bgcolor="#FFFFFF">&nbsp;</td>
  </tr>
  <tr valign="top">
    <td align="left" bgcolor="#eeeeee">&nbsp;</td>
    <td align="left" bgcolor="#eeeeee">&nbsp;</td>
    <td align="left" bgcolor="#eeeeee"><font size="2" face="Arial, Helvetica, sans-serif">Payment
        for purchases of tangible assets</font></td>
    <td align="right" bgcolor="#eeeeee">&nbsp;</td>
    <td align="right" bgcolor="#eeeeee"><font size="2" face="Arial, Helvetica, sans-serif"> (564</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"> (321</font></td>
    <td align="left" bgcolor="#eeeeee"><font size="2" face="Arial, Helvetica, sans-serif">)</font></td>
  </tr>
  <tr valign="top">
    <td align="left" bgcolor="#FFFFFF">&nbsp;</td>
    <td align="left" bgcolor="#FFFFFF">&nbsp;</td>
    <td align="left" bgcolor="#FFFFFF"><font size="2" face="Arial, Helvetica, sans-serif">Payment
        for purchases of marketable securities</font></td>
    <td align="right" bgcolor="#FFFFFF">&nbsp;</td>
    <td align="right" bgcolor="#FFFFFF"><font size="2" face="Arial, Helvetica, sans-serif"> (525</font></td>
    <td align="left" bgcolor="#FFFFFF"><font size="2" face="Arial, Helvetica, sans-serif">)</font></td>
    <td align="right" bgcolor="#FFFFFF">&nbsp;</td>
    <td align="right" bgcolor="#FFFFFF"><font size="2" face="Arial, Helvetica, sans-serif"> (1,030</font></td>
    <td align="left" bgcolor="#FFFFFF"><font size="2" face="Arial, Helvetica, sans-serif">)</font></td>
  </tr>
  <tr valign="top">
    <td align="left" bgcolor="#eeeeee">&nbsp;</td>
    <td align="left" bgcolor="#eeeeee">&nbsp;</td>
    <td align="left" bgcolor="#eeeeee"><font size="2" face="Arial, Helvetica, sans-serif">Investment
        in intangible and financial assets</font></td>
    <td align="right" bgcolor="#eeeeee">&nbsp;</td>
    <td align="right" bgcolor="#eeeeee"><font size="2" face="Arial, Helvetica, sans-serif"> (11</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"> (13</font></td>
    <td align="left" bgcolor="#eeeeee"><font size="2" face="Arial, Helvetica, sans-serif">)</font></td>
  </tr>
  <tr valign="top">
    <td align="left" bgcolor="#FFFFFF">&nbsp;</td>
    <td align="left" bgcolor="#FFFFFF">&nbsp;</td>
    <td align="left" bgcolor="#FFFFFF"><font size="2" face="Arial, Helvetica, sans-serif">Payment
        for acquisitions, net of cash received</font></td>
    <td align="right" bgcolor="#FFFFFF">&nbsp;</td>
    <td align="right" bgcolor="#FFFFFF"><font size="2" face="Arial, Helvetica, sans-serif">&#151;</font></td>
    <td align="left" bgcolor="#FFFFFF">&nbsp;</td>
    <td align="right" bgcolor="#FFFFFF">&nbsp;</td>
    <td align="right" bgcolor="#FFFFFF"><font size="2" face="Arial, Helvetica, sans-serif"> (3</font></td>
    <td align="left" bgcolor="#FFFFFF"><font size="2" face="Arial, Helvetica, sans-serif">)</font></td>
  </tr>
  <tr valign="top">
    <td align="left" bgcolor="#FFFFFF">&nbsp;</td>
    <td align="left" bgcolor="#FFFFFF">&nbsp;</td>
    <td align="left" bgcolor="#FFFFFF">&nbsp;</td>
    <td align="right" bgcolor="#FFFFFF">&nbsp;</td>
    <td align="right" bgcolor="#FFFFFF"><hr size="1">
    </td>
    <td align="left" bgcolor="#FFFFFF">&nbsp;</td>
    <td align="right" bgcolor="#FFFFFF"><hr size="1">
    </td>
    <td align="right" bgcolor="#FFFFFF"><hr size="1">
    </td>
    <td align="left" bgcolor="#FFFFFF">&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" bgcolor="#eeeeee">&nbsp;</td>
    <td align="right" bgcolor="#eeeeee"><font size="2" face="Arial, Helvetica, sans-serif"><b> (1,100</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> (1,367</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 align="right">&nbsp;</td>
    <td align="right">&nbsp;</td>
    <td align="left"><font size="2" face="Arial, Helvetica, sans-serif">&nbsp;</font></td>
    <td align="right">&nbsp;</td>
    <td align="left"><hr size="1">
    </td>
    <td align="left">&nbsp;</td>
    <td align="right"><hr size="1">
    </td>
    <td align="left"><hr size="1">
    </td>
    <td align="left">&nbsp;</td>
  </tr>
  <tr valign="top">
    <td colspan="3" align="left" bgcolor="#FFFFFF">&nbsp;</td>
    <td align="right" bgcolor="#FFFFFF">&nbsp;</td>
    <td align="left" bgcolor="#FFFFFF">&nbsp;</td>
    <td align="left" bgcolor="#FFFFFF">&nbsp;</td>
    <td align="right" bgcolor="#FFFFFF">&nbsp;</td>
    <td align="left" bgcolor="#FFFFFF">&nbsp;</td>
    <td align="left" bgcolor="#FFFFFF">&nbsp;</td>
  </tr>
  <tr valign="top">
    <td colspan="3" align="left" bgcolor="#FFFFFF"><font size="2" face="Arial, Helvetica, sans-serif"><b>Cash
          flows from financing activities:</b></font></td>
    <td align="right" bgcolor="#FFFFFF">&nbsp;</td>
    <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="right" bgcolor="#FFFFFF">&nbsp;</td>
    <td align="left" bgcolor="#FFFFFF"><font size="2" face="Arial, Helvetica, sans-serif">&nbsp;</font></td>
    <td align="left" bgcolor="#FFFFFF">&nbsp;</td>
  </tr>
  <tr valign="top">
    <td align="left" bgcolor="#FFFFFF">&nbsp;</td>
    <td align="left" bgcolor="#FFFFFF">&nbsp;</td>
    <td align="left" bgcolor="#FFFFFF"><font size="2" face="Arial, Helvetica, sans-serif">Repayment
        of long-term debt</font></td>
    <td align="right" bgcolor="#FFFFFF">&nbsp;</td>
    <td align="right" bgcolor="#FFFFFF"><font size="2" face="Arial, Helvetica, sans-serif"> (20</font></td>
    <td align="left" bgcolor="#FFFFFF"><font size="2" face="Arial, Helvetica, sans-serif">)</font></td>
    <td align="right" bgcolor="#FFFFFF">&nbsp;</td>
    <td align="right" bgcolor="#FFFFFF"><font size="2" face="Arial, Helvetica, sans-serif"> (50</font></td>
    <td align="left" bgcolor="#FFFFFF"><font size="2" face="Arial, Helvetica, sans-serif">)</font></td>
  </tr>
  <tr valign="top">
    <td align="left" bgcolor="#eeeeee">&nbsp;</td>
    <td align="left" bgcolor="#eeeeee">&nbsp;</td>
    <td align="left" bgcolor="#eeeeee"><font size="2" face="Arial, Helvetica, sans-serif">Decrease
        in short-term facilities</font></td>
    <td align="right" bgcolor="#eeeeee">&nbsp;</td>
    <td align="right" bgcolor="#eeeeee"><font size="2" face="Arial, Helvetica, sans-serif"> (19</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"> (41</font></td>
    <td align="left" bgcolor="#eeeeee"><font size="2" face="Arial, Helvetica, sans-serif">)</font></td>
  </tr>
  <tr valign="top">
    <td align="left" bgcolor="#FFFFFF">&nbsp;</td>
    <td align="left" bgcolor="#FFFFFF">&nbsp;</td>
    <td align="left" bgcolor="#FFFFFF"><font size="2" face="Arial, Helvetica, sans-serif">Capital
        increase</font></td>
    <td align="right" bgcolor="#FFFFFF">&nbsp;</td>
    <td align="right" bgcolor="#FFFFFF"><font size="2" face="Arial, Helvetica, sans-serif"> 1 </font></td>
    <td align="left" bgcolor="#FFFFFF">&nbsp;</td>
    <td align="right" bgcolor="#FFFFFF">&nbsp;</td>
    <td align="right" bgcolor="#FFFFFF"><font size="2" face="Arial, Helvetica, sans-serif"> 14 </font></td>
    <td align="left" bgcolor="#FFFFFF">&nbsp;</td>
  </tr>
  <tr valign="top">
    <td align="left" bgcolor="#FFFFFF">&nbsp;</td>
    <td align="left" bgcolor="#FFFFFF">&nbsp;</td>
    <td align="left" bgcolor="#FFFFFF">&nbsp;</td>
    <td align="right" bgcolor="#FFFFFF">&nbsp;</td>
    <td align="right" bgcolor="#FFFFFF"><hr size="1">
    </td>
    <td align="left" bgcolor="#FFFFFF">&nbsp;</td>
    <td align="right" bgcolor="#FFFFFF"><hr size="1">
    </td>
    <td align="right" bgcolor="#FFFFFF"><hr size="1">
    </td>
    <td align="left" bgcolor="#FFFFFF">&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 financing activities</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</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> (77</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 align="left" bgcolor="#FFFFFF">&nbsp;</td>
    <td align="left" bgcolor="#FFFFFF">&nbsp;</td>
    <td align="left" bgcolor="#FFFFFF">&nbsp;</td>
    <td align="right" bgcolor="#FFFFFF">&nbsp;</td>
    <td align="right" bgcolor="#FFFFFF"><hr size="1">
    </td>
    <td align="left" bgcolor="#FFFFFF">&nbsp;</td>
    <td align="right" bgcolor="#FFFFFF"><hr size="1">
    </td>
    <td align="right" bgcolor="#FFFFFF"><hr size="1">
    </td>
    <td align="left" bgcolor="#FFFFFF">&nbsp;</td>
  </tr>
  <tr valign="top">
    <td align="left" bgcolor="#FFFFFF">&nbsp;</td>
    <td align="left" bgcolor="#FFFFFF">&nbsp;</td>
    <td align="left" bgcolor="#FFFFFF"><font size="2" face="Arial, Helvetica, sans-serif">Effect
        of changes in exchange rates</font></td>
    <td align="right" bgcolor="#FFFFFF">&nbsp;</td>
    <td align="right" bgcolor="#FFFFFF"><font size="2" face="Arial, Helvetica, sans-serif"> (9</font></td>
    <td align="left" bgcolor="#FFFFFF"><font size="2" face="Arial, Helvetica, sans-serif">)</font></td>
    <td align="right" bgcolor="#FFFFFF">&nbsp;</td>
    <td align="right" bgcolor="#FFFFFF"><font size="2" face="Arial, Helvetica, sans-serif"> (3</font></td>
    <td align="left" bgcolor="#FFFFFF"><font size="2" face="Arial, Helvetica, sans-serif">)</font></td>
  </tr>
  <tr valign="top">
    <td align="left" bgcolor="#FFFFFF">&nbsp;</td>
    <td align="left" bgcolor="#FFFFFF">&nbsp;</td>
    <td align="left" bgcolor="#FFFFFF">&nbsp;</td>
    <td align="right" bgcolor="#FFFFFF">&nbsp;</td>
    <td align="right" bgcolor="#FFFFFF"><hr size="1">
    </td>
    <td align="left" bgcolor="#FFFFFF">&nbsp;</td>
    <td align="right" bgcolor="#FFFFFF"><hr size="1">
    </td>
    <td align="right" bgcolor="#FFFFFF"><hr size="1">
    </td>
    <td align="left" bgcolor="#FFFFFF">&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" bgcolor="#eeeeee">&nbsp;</td>
    <td align="right" bgcolor="#eeeeee"><font size="2" face="Arial, Helvetica, sans-serif"><b> (788</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> (895</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 colspan="3" align="left" bgcolor="#FFFFFF">&nbsp;</td>
    <td align="right" bgcolor="#FFFFFF">&nbsp;</td>
    <td align="right" bgcolor="#FFFFFF"><hr size="2" noshade>
    </td>
    <td align="left" bgcolor="#FFFFFF">&nbsp;</td>
    <td align="right" bgcolor="#FFFFFF"><hr size="2" noshade>
    </td>
    <td align="right" bgcolor="#FFFFFF"><hr size="2" noshade>
    </td>
    <td align="left" bgcolor="#FFFFFF">&nbsp;</td>
  </tr>
  <tr valign="top">
    <td colspan="3" align="left" bgcolor="#FFFFFF"><font size="2" face="Arial, Helvetica, sans-serif"><b>Cash
          and cash equivalents at beginning of the period</b></font></td>
    <td align="right" bgcolor="#FFFFFF">&nbsp;</td>
    <td align="right" bgcolor="#FFFFFF"><font size="2" face="Arial, Helvetica, sans-serif"><b> 1,950 </b></font></td>
    <td align="left" bgcolor="#FFFFFF">&nbsp;</td>
    <td align="right" bgcolor="#FFFFFF">&nbsp;</td>
    <td align="right" bgcolor="#FFFFFF"><font size="2" face="Arial, Helvetica, sans-serif"><b> 2,998 </b></font></td>
    <td align="left" bgcolor="#FFFFFF">&nbsp;</td>
  </tr>
  <tr valign="top">
    <td colspan="3" align="left" bgcolor="#FFFFFF">&nbsp;</td>
    <td align="right" bgcolor="#FFFFFF">&nbsp;</td>
    <td align="right" bgcolor="#FFFFFF"><hr size="1">
    </td>
    <td align="left" bgcolor="#FFFFFF">&nbsp;</td>
    <td align="right" bgcolor="#FFFFFF"><hr size="1">
    </td>
    <td align="right" bgcolor="#FFFFFF"><hr size="1">
    </td>
    <td align="left" bgcolor="#FFFFFF">&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 the period</b></font></td>
    <td align="right" bgcolor="#eeeeee">&nbsp;</td>
    <td align="right" bgcolor="#eeeeee"><font size="2" face="Arial, Helvetica, sans-serif"><b> 1,162 </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> 2,103 </b></font></td>
    <td align="left" bgcolor="#eeeeee">&nbsp;</td>
  </tr>
  <tr valign="top">
    <td colspan="3" align="left">&nbsp;</td>
    <td align="right">&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="right"><hr size="2" noshade>
    </td>
    <td align="left">&nbsp;</td>
  </tr>
</table>
<p align="center"><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="right"><img src="st-logo.jpg" width="100%"></p>
<p align="center"><font face="Arial, Helvetica, sans-serif" size="2">F-3</font></p>
<hr noshade align="center" width="100%" size="2">
<div style="page-break-before:always"></div>
<page>
<a name="pf4"></a>
<p><a href="#contents"><font size="2">Back to Contents</font></a></p>
<br>
<br>
<table width="100%" cellspacing="0" cellpadding="0" border="0">
  <tr valign="top">
    <td align="left" width="42%"><font size="2" face="Arial, Helvetica, sans-serif"><b>STMicroelectronics
          N.V.</b></font></td>
    <td align="left" width="15%"></td>
    <td align="left" width="15%"></td>
    <td align="left" width="15%"></td>
    <td align="left"></td>
  </tr>
  <tr valign="top">
    <td colspan="5" align="left"><font color="0098D7" size="2" face="Arial, Helvetica, sans-serif"><b>CONSOLIDATED
          STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY</b></font></td>
  </tr>
</table>
<font face="Arial, Helvetica, sans-serif"><br>
<br>
</font>
<table width="100%" cellspacing="0" cellpadding="0" align="center" border="0">
  <tr valign="bottom" bgcolor="#FFFFFF">
    <td colspan="3" align="left"><font size="2" face="Arial, Helvetica, sans-serif"><b>In
          millions of U.S. dollars, except per share amounts</b></font><font size="1">&nbsp;</font></td>
    <td align="left"><font size="1">&nbsp;</font></td>
    <td align="left"><font size="1" face="Arial, Helvetica, sans-serif">&nbsp;</font></td>
    <td align="left"><font size="1">&nbsp;</font></td>
    <td align="left"><font size="1" face="Arial, Helvetica, sans-serif">&nbsp;</font></td>
    <td align="left"><font size="1">&nbsp;</font></td>
    <td align="right"><font size="1">&nbsp;</font></td>
    <td align="left"><font size="1" face="Arial, Helvetica, sans-serif">&nbsp;</font></td>
    <td align="left"><font size="1">&nbsp;</font></td>
    <td align="right"><font size="1">&nbsp;</font></td>
    <td align="center"><font size="1" face="Arial, Helvetica, sans-serif"><b>Accumulated</b></font></td>
    <td align="left"><font size="1">&nbsp;</font></td>
    <td align="right"><font size="1">&nbsp;</font></td>
    <td align="left"><font size="1" face="Arial, Helvetica, sans-serif">&nbsp;</font></td>
    <td align="left"><font size="1">&nbsp;</font></td>
  </tr>
  <tr valign="bottom" bgcolor="#FFFFFF">
    <td align="left"></td>
    <td width="2%" align="left">&nbsp;</td>
    <td width="8%" align="left"><font size="1" face="Arial, Helvetica, sans-serif">&nbsp;</font></td>
    <td width="2%" align="left"><font size="1">&nbsp;</font></td>
    <td width="8%" align="left"><font size="1" face="Arial, Helvetica, sans-serif">&nbsp;</font></td>
    <td width="2%" align="left"><font size="1">&nbsp;</font></td>
    <td width="8%" align="left"><font size="1" face="Arial, Helvetica, sans-serif">&nbsp;</font></td>
    <td width="2%" align="left"><font size="1">&nbsp;</font></td>
    <td width="2%" align="right"><font size="1">&nbsp;</font></td>
    <td width="8%" align="left"><font size="1" face="Arial, Helvetica, sans-serif">&nbsp;</font></td>
    <td width="2%" align="left"><font size="1">&nbsp;</font></td>
    <td width="2%" align="right"><font size="1">&nbsp;</font></td>
    <td width="8%" align="center"><font size="1" face="Arial, Helvetica, sans-serif"><b>Other</b></font></td>
    <td width="2%" align="left"><font size="1">&nbsp;</font></td>
    <td width="2%" align="right"><font size="1">&nbsp;</font></td>
    <td width="8%" align="left"><font size="1" face="Arial, Helvetica, sans-serif">&nbsp;</font></td>
    <td width="2%" align="left"><font size="1">&nbsp;</font></td>
  </tr>
  <tr valign="bottom" bgcolor="#FFFFFF">
    <td align="left"></td>
    <td align="left">&nbsp;</td>
    <td align="center"><font size="1" face="Arial, Helvetica, sans-serif"><b>Common</b></font></td>
    <td align="left"><font size="1">&nbsp;</font></td>
    <td align="center"><font size="1" face="Arial, Helvetica, sans-serif"><b>Capital</b></font></td>
    <td align="left"><font size="1">&nbsp;</font></td>
    <td align="center"><font size="1" face="Arial, Helvetica, sans-serif"><b>Treasury</b></font></td>
    <td align="left"><font size="1">&nbsp;</font></td>
    <td align="right"><font size="1">&nbsp;</font></td>
    <td align="center"><font size="1" face="Arial, Helvetica, sans-serif"><b>Accumulated</b></font></td>
    <td align="left"><font size="1">&nbsp;</font></td>
    <td align="right"><font size="1">&nbsp;</font></td>
    <td align="center"><font size="1" face="Arial, Helvetica, sans-serif"><b>Comprehensive</b></font></td>
    <td align="left"><font size="1">&nbsp;</font></td>
    <td align="right"><font size="1">&nbsp;</font></td>
    <td align="center"><font size="1" face="Arial, Helvetica, sans-serif"><b>Shareholders'</b></font></td>
    <td align="left"><font size="1">&nbsp;</font></td>
  </tr>
  <tr valign="bottom" bgcolor="#FFFFFF">
    <td align="left"></td>
    <td align="left">&nbsp;</td>
    <td align="center"><font size="1" face="Arial, Helvetica, sans-serif"><b>Stock</b></font></td>
    <td align="left"><font size="1">&nbsp;</font></td>
    <td align="center"><font size="1" face="Arial, Helvetica, sans-serif"><b>Surplus</b></font></td>
    <td align="left"><font size="1">&nbsp;</font></td>
    <td align="center"><font size="1" face="Arial, Helvetica, sans-serif"><b>Stock</b></font></td>
    <td align="left"><font size="1">&nbsp;</font></td>
    <td align="right"><font size="1">&nbsp;</font></td>
    <td align="center"><font size="1" face="Arial, Helvetica, sans-serif"><b>Result</b></font></td>
    <td align="left"><font size="1">&nbsp;</font></td>
    <td align="right"><font size="1">&nbsp;</font></td>
    <td align="center"><font size="1" face="Arial, Helvetica, sans-serif"><b>income
          (loss)</b></font></td>
    <td align="left"><font size="1">&nbsp;</font></td>
    <td align="right"><font size="1">&nbsp;</font></td>
    <td align="center"><font size="1" face="Arial, Helvetica, sans-serif"><b>Equity</b></font></td>
    <td align="left"><font size="1">&nbsp;</font></td>
  </tr>
  <tr valign="bottom" bgcolor="#FFFFFF">
    <td align="left"></td>
    <td align="left">&nbsp;</td>
    <td align="center"><hr size="1" noshade>
    </td>
    <td align="left">&nbsp;</td>
    <td align="center"><hr size="1" noshade>
    </td>
    <td align="left">&nbsp;</td>
    <td align="center"><hr size="1" noshade>
    </td>
    <td align="left">&nbsp;</td>
    <td align="right">&nbsp;</td>
    <td align="center"><hr size="1" noshade>
    </td>
    <td align="left">&nbsp;</td>
    <td align="right">&nbsp;</td>
    <td align="center"><hr size="1" noshade>
    </td>
    <td align="left">&nbsp;</td>
    <td align="right">&nbsp;</td>
    <td align="center"><hr size="1" noshade>
    </td>
    <td align="left">&nbsp;</td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td align="left"><font size="2" face="Arial, Helvetica, sans-serif"><b>Balance
          as of December 31, 2003 (audited)</b></font></td>
    <td align="left">&nbsp;</td>
    <td align="right"><font size="2" face="Arial, Helvetica, sans-serif"><b>1,146</b></font></td>
    <td align="left">&nbsp;</td>
    <td align="right"><font size="2" face="Arial, Helvetica, sans-serif"><b>1,905</b></font></td>
    <td align="left">&nbsp;</td>
    <td align="right"><font size="2" face="Arial, Helvetica, sans-serif"><b>(348</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>4,774</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>623</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>8,100</b></font></td>
    <td align="left">&nbsp;</td>
  </tr>
  <tr valign="top" bgcolor="#FFFFFF">
    <td align="left"><font size="2" face="Arial, Helvetica, sans-serif">Capital
        increase</font></td>
    <td align="left">&nbsp;</td>
    <td align="right"><font size="2" face="Arial, Helvetica, sans-serif"><b>4</b></font></td>
    <td align="left">&nbsp;</td>
    <td align="right"><font size="2" face="Arial, Helvetica, sans-serif"><b>19</b></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">&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="right"><font size="2" face="Arial, Helvetica, sans-serif"><b>23</b></font></td>
    <td align="left">&nbsp;</td>
  </tr>
  <tr valign="top" bgcolor="#FFFFFF">
    <td align="left"><font size="2" face="Arial, Helvetica, sans-serif">Comprehensive
        income:</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">&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" bgcolor="#eeeeee">
    <td align="left"><font size="2" face="Arial, Helvetica, sans-serif"> Net
        Income</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">&nbsp;</td>
    <td align="right"><font size="2" face="Arial, Helvetica, sans-serif"><b>601</b></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="right"><font size="2" face="Arial, Helvetica, sans-serif"><b>601</b></font></td>
    <td align="left">&nbsp;</td>
  </tr>
  <tr valign="top" bgcolor="#FFFFFF">
    <td align="left"><font size="2" face="Arial, Helvetica, sans-serif"> Other
        comprehensive income, net of tax</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">&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"><b>493</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>493</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">Comprehensive
        income</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">&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="right"><font size="2" face="Arial, Helvetica, sans-serif"><b>1,094</b></font></td>
    <td align="left">&nbsp;</td>
  </tr>
  <tr valign="top" bgcolor="#FFFFFF">
    <td align="left"><font size="2" face="Arial, Helvetica, sans-serif">Dividends,
        $0.12 per share</font></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="left"></td>
    <td align="left">&nbsp;</td>
    <td align="right">&nbsp;</td>
    <td align="right"><font size="2" face="Arial, Helvetica, sans-serif">(107</font></td>
    <td align="left"><font size="2" face="Arial, Helvetica, sans-serif">)</font></td>
    <td align="right">&nbsp;</td>
    <td align="left"></td>
    <td align="left">&nbsp;</td>
    <td align="right">&nbsp;</td>
    <td align="right"><font size="2" face="Arial, Helvetica, sans-serif">(107</font></td>
    <td align="left"><font size="2" face="Arial, Helvetica, sans-serif">)</font></td>
  </tr>
  <tr valign="top" bgcolor="#FFFFFF">
    <td align="left">&nbsp;</td>
    <td align="left">&nbsp;</td>
    <td align="left"><hr size="1" noshade>
    </td>
    <td align="left">&nbsp;</td>
    <td align="left"><hr size="1" noshade>
    </td>
    <td align="left">&nbsp;</td>
    <td align="left"><hr size="1" noshade>
    </td>
    <td align="left">&nbsp;</td>
    <td align="right">&nbsp;</td>
    <td align="right"><hr size="1" noshade>
    </td>
    <td align="left">&nbsp;</td>
    <td align="right">&nbsp;</td>
    <td align="left"><hr size="1" noshade>
    </td>
    <td align="left">&nbsp;</td>
    <td align="right">&nbsp;</td>
    <td align="right"><hr size="1" noshade>
    </td>
    <td align="left">&nbsp;</td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td align="left"><font size="2" face="Arial, Helvetica, sans-serif"><b>Balance
          as of December 31, 2004 (audited)</b></font></td>
    <td align="left">&nbsp;</td>
    <td align="right"><font size="2" face="Arial, Helvetica, sans-serif"><b>1,150</b></font></td>
    <td align="left">&nbsp;</td>
    <td align="right"><font size="2" face="Arial, Helvetica, sans-serif"><b>1,924</b></font></td>
    <td align="left">&nbsp;</td>
    <td align="right"><font size="2" face="Arial, Helvetica, sans-serif"><b>(348</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>5,268</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>1,116</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>9,110</b></font></td>
    <td align="left">&nbsp;</td>
  </tr>
  <tr valign="top" bgcolor="#FFFFFF">
    <td align="left">&nbsp;</td>
    <td align="left">&nbsp;</td>
    <td align="left"><hr size="2" noshade>
    </td>
    <td align="left">&nbsp;</td>
    <td align="right"><hr size="2" noshade>
    </td>
    <td align="left">&nbsp;</td>
    <td align="left"><hr size="2" noshade>
    </td>
    <td align="left">&nbsp;</td>
    <td align="right">&nbsp;</td>
    <td align="left"><hr size="2" noshade>
    </td>
    <td align="left">&nbsp;</td>
    <td align="right">&nbsp;</td>
    <td align="left"><hr size="2" noshade>
    </td>
    <td align="left">&nbsp;</td>
    <td align="right">&nbsp;</td>
    <td align="right"><hr size="2" noshade>
    </td>
    <td align="left">&nbsp;</td>
  </tr>
  <tr valign="top" bgcolor="#FFFFFF">
    <td align="left"><font size="2" face="Arial, Helvetica, sans-serif">Capital
        increase</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>1</b></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">&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="right"><font size="2" face="Arial, Helvetica, sans-serif"><b>1</b></font></td>
    <td align="left">&nbsp;</td>
  </tr>
  <tr valign="top" bgcolor="#FFFFFF">
    <td align="left"><font size="2" face="Arial, Helvetica, sans-serif">Comprehensive
        income (loss):</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">&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" bgcolor="#eeeeee">
    <td align="left"><font size="2" face="Arial, Helvetica, sans-serif"> Net
        loss</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">&nbsp;</td>
    <td align="right"><font size="2" face="Arial, Helvetica, sans-serif"><b>(31</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="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"><b>(31</b></font></td>
    <td align="left"><font size="2" face="Arial, Helvetica, sans-serif"><b>)</b></font></td>
  </tr>
  <tr valign="top" bgcolor="#FFFFFF">
    <td align="left"><font size="2" face="Arial, Helvetica, sans-serif"> Other
        comprehensive loss, net of tax</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">&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"><b>(360</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>(360</b></font></td>
    <td align="left"><font size="2" face="Arial, Helvetica, sans-serif"><b>)</b></font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td align="left"><font size="2" face="Arial, Helvetica, sans-serif">Comprehensive
        income (loss)</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">&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="right"><font size="2" face="Arial, Helvetica, sans-serif"><b>(391</b></font></td>
    <td align="left"><font size="2" face="Arial, Helvetica, sans-serif"><b>)</b></font></td>
  </tr>
  <tr valign="top" bgcolor="#FFFFFF">
    <td align="left"><font size="2" face="Arial, Helvetica, sans-serif"><b>Balance
          as of April 2, 2005 (unaudited)</b></font></td>
    <td align="left">&nbsp;</td>
    <td align="right"><font size="2" face="Arial, Helvetica, sans-serif"><b>1,150</b></font></td>
    <td align="left">&nbsp;</td>
    <td align="right"><font size="2" face="Arial, Helvetica, sans-serif"><b>1,925</b></font></td>
    <td align="left">&nbsp;</td>
    <td align="right"><font size="2" face="Arial, Helvetica, sans-serif"><b>(348</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>5,237</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>756</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>8,720</b></font></td>
    <td align="left">&nbsp;</td>
  </tr>
  <tr valign="top">
    <td align="left"></td>
    <td align="left">&nbsp;</td>
    <td align="left"><hr size="2" noshade>
    </td>
    <td align="left">&nbsp;</td>
    <td align="left"><hr size="2" noshade>
    </td>
    <td align="left">&nbsp;</td>
    <td align="left"><hr size="2" noshade>
    </td>
    <td align="left">&nbsp;</td>
    <td align="right">&nbsp;</td>
    <td align="left"><hr size="2" noshade>
    </td>
    <td align="left">&nbsp;</td>
    <td align="right">&nbsp;</td>
    <td align="left"><hr size="2" noshade>
    </td>
    <td align="left">&nbsp;</td>
    <td align="right">&nbsp;</td>
    <td align="left"><hr size="2" noshade>
    </td>
    <td align="left">&nbsp;</td>
  </tr>
  <tr valign="top">
    <td align="left"></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">&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>
</table>
<p align="center"><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 face="Arial, Helvetica, sans-serif"><img src="st-logo.jpg" width="100%"></font></p>
<p align="center"><font face="Arial, Helvetica, sans-serif" size="2">F-4</font></p>
<hr noshade align="center" width="100%" size="2">
<div style="page-break-before:always"></div>
<page>
<a name="pf5"></a>
<p><a href="#contents"><font size="2">Back to Contents</font></a></p>
<p align="center"><b><font size="2">STMicroelectronics N.V.</font></b></p>
<p align="center"><b><font size="2">Notes to Interim Consolidated Financial Statements (unaudited)</font></b></p>
<p align="left"><font size="2" face="Arial, Helvetica, sans-serif"><b>1. The Company</b></font></p>
<p align="left"><font size="2" face="Arial, Helvetica, sans-serif">STMicroelectronics
    N.V. (the &#147;Company&#148;) is registered in The Netherlands with its statutory
    domicile in Amsterdam. The Company was formed in 1987 with the original name
    of SGS-THOMSON Microelectronics by the combination of the semiconductor business
    of SGS Microelettronica (then owned by Societ&agrave; Finanziaria
    Telefonica (S.T.E.T.), an Italian corporation) and the non-military business
    of Thomson Semiconducteurs (then owned by Thomson-CSF, a French corporation)
    whereby each company contributed their respective semiconductor businesses
in exchange for a 50% interest in the Company. </font></p>
<p align="left"><font size="2" face="Arial, Helvetica, sans-serif">The Company
    is a global independent semiconductor company that designs, develops, manufactures
    and markets a broad range of semiconductor integrated circuits (&#147;ICs&#148;)
    and discrete devices. The Company offers a diversified product portfolio
    and develops products for a wide range of market applications, including
    automotive products, computer peripherals, telecommunications systems, consumer
    products, industrial automation and control systems. Within its diversified
    portfolio, the Company has focused on developing products that leverage its
    technological strengths in creating customized, system-level solutions with
high-growth digital and mixed-signal content. </font></p>
<p align="left"><font size="2" face="Arial, Helvetica, sans-serif"><b>2. Fiscal year</b></font></p>
<p align="left"><font size="2" face="Arial, Helvetica, sans-serif">The Company&#146;s fiscal year ends on December 31. Interim periods are established for accounting purposes on a thirteen-week basis. In 2005, the Company&#146;s
    first quarter ended on April 2, its second quarter will end on July 2, its
third quarter on October 1 and its fourth quarter will end on December 31. </font></p>
<p align="left"><font size="2" face="Arial, Helvetica, sans-serif"><b>3. Basis of Presentation</b></font></p>
<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 (&#147;U.S. GAAP&#148;), consistent in all material
    respects with those applied for the year ended December 31, 2004. 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 periods presented. The results of operations for the interim
    period are not necessarily indicative of the results to be expected for the
entire year. </font></p>
<p align="left"><font size="2" face="Arial, 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&#146;s
    Annual Report on Form 20-F for the year ended December 31, 2004.</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="f6"></a>
<p><font size="2" face="Arial, Helvetica, sans-serif"><a href="#contents">Back
      to Contents</a></font></p>
<p align="left"><font size="2" face="Arial, Helvetica, sans-serif"><b>4. Use of Estimates</b></font></p>
<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 and normal manufacturing capacity thresholds
    to determine costs capitalized in inventory, accruals for warranty costs,
    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 non-recurring special charges, assumptions used
    in calculating pension obligations and pro forma share-based compensation,
    assessment of hedge effectiveness of derivative instruments, deferred income
    tax assets including required valuation allowances and liabilities as well
    as provisions for specifically identified income tax exposures. The Company
    bases the estimates and assumptions on historical experience and on various
    other factors such as market trends and business plans that it believes to
    be reasonable under the circumstances, the results of which form the basis
    for making judgments about the carrying values of assets and liabilities.
    The actual results experienced by the Company could differ materially and
    adversely from
management&#146;s estimates. To the extent there are material differences between
the estimates and the actual results, future results of operations could be significantly
affected.</font></p>
<p align="left"><font size="2" face="Arial, Helvetica, sans-serif"><b>5. Recent Accounting Pronouncements</b></font></p>
<p align="left"><font size="2" face="Arial, Helvetica, sans-serif">In November 2004, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 151, <i>Inventory Costs, an amendment of ARB No. 43, Chapter 4</i> (&#147;FAS&nbsp;151&#148;).
    The Standard requires abnormal amounts of idle capacity and spoilage costs
    to be excluded from the cost of inventory and expensed when incurred. The
    provisions of FAS 151 are applicable prospectively to inventory costs incurred
    during fiscal years beginning after June 15, 2005. As costs associated with
    underutilization of manufacturing facilities have historically been charged
    directly to cost of sales, the Company believes that FAS 151 will have no
material effect on its financial position or results of operations.</font></p>
<p align="left"><font size="2" face="Arial, Helvetica, sans-serif">In December
    2004, the Financial Accounting Standards Board issued Statement of Financial
    Accounting Standards No. 153, <i>Exchanges of Nonmonetary Assets, an amendment
    of APB Opinion No. 29 </i>(&#147;FAS 153&#148;).
    This Statement amends Opinion 29 to eliminate the exception to the basis
    measurement principle (fair value) for nonmonetary exchanges of similar productive
    assets and replaces it with a general exception for exchanges of transactions
    that do not have commercial substance, that is, transactions that are not
    expected to result in significant changes in the cash flows of the reporting
    entity.
    The Statement is effective prospectively for nonmonetary asset exchanges
    occurring in fiscal periods beginning after June 15, 2005, with early application
    permitted. The Company has not had any nonmonetary exchanges of assets since
    FAS 153 was published and believes that FAS 153 will have no material effect
on its financial position or results of operations. </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"></div>
<page> <a name="f6"></a>
<p><font size="2" face="Arial, Helvetica, sans-serif"><a href="#contents">Back
      to Contents</a></font></p>
<p align="left">&nbsp;</p>
<p align="left"><font size="2" face="Arial, Helvetica, sans-serif">In December
    2004, the Financial Accounting Standards Board issued Statement of Financial
    Accounting Standards No. 123 (revised 2004), <i>Share-Based Payment</i> (&#147;FAS
    123R&#148;).
    This Statement revises FASB Statement No. 123, <i>Accounting for Stock-Based
    Compensation</i> and supersedes APB Opinion No. 25, <i>Accounting for Stock
    Issued to Employees</i>,
    and its related implementation guidance. FAS 123R requires a public entity
    to measure the cost of share-based service awards based on the grant-date
    fair value of the award. That cost will be recognized over the period during
    which an employee is required to provide service in exchange for the award
    or the requisite service period, usually the vesting period. The grant-date
    fair value of employee share options and similar instruments will be estimated
    using option-pricing models adjusted for the unique characteristics of those
    instruments. FAS 123R also requires more extensive disclosures than the previous
    standards relating to the nature of share-based payment transactions, compensation
    cost and cash flow effects. On April 14, 2005, the U.S. Securities and Exchange
    Commission amended the effective date of FAS 123R; the Statement now applies
    to all awards granted and to all unvested awards modified, repurchased, or
    cancelled during the first annual reporting period beginning after June 15,
    2005. FAS 123R provides a choice of transition methods including the modified
    prospective application method, which allows discretionary restatement of
    interim periods during the calendar
year of adoption, or the modified retrospective application method, which allows
    the restatement of the prior years presented. Each method requires the cumulative
    effect of initially applying FAS 123R to be recognized in the period of adoption.
    The Company will adopt FAS 123R in the first quarter of 2006 using the modified
    prospective application method. As a significant number of option grants
    are above current market prices, the Company believes their existing
    equity-based compensation strategy is minimally effective in motivating and
    retaining
    key employees. Therefore, the Company is currently reviewing its share-based
    remunerations programs. In conjunction with this review, the Company intends
    to accelerate the vesting period of outstanding stock options, following
    authorization from
the Company&#146;s shareholders at the annual general meeting held on March 18,
2005. In addition, the Company is evaluating to base its share-based remuneration
programs on nonvested shares. The Company will disclose the cumulative impact
on its consolidated accumulated result from adopting FAS 123R when such review
is
finalized. The impact on the Company&#146;s financial position and results of
operations are further illustrated in the information presented in note 15 &#150; Fair
value of stock-based compensation.</font></p>
<p align="center"><font size="2" face="Arial, Helvetica, sans-serif">F-7</font></p>
<hr noshade align="center" width="100%" size="2">
<div style="page-break-before:always"></div>
<page> <a name="f7"></a>
<p><font size="2" face="Arial, Helvetica, sans-serif"><a href="#contents">Back
      to Contents</a></font></p>
<p align="left">&nbsp;</p>
<p align="left"><font size="2" face="Arial, Helvetica, sans-serif"><b>6. Other Income and Expenses, Net</b></font></p>
<p align="left"><font size="2" face="Arial, Helvetica, sans-serif">Other income and expenses, net consisted of the following:</font></p>
<table width="80%" cellspacing="0" cellpadding="0" align="center" border="0">
<tr valign="bottom">
<td align="left"><font size="1" face="Arial, Helvetica, sans-serif">&nbsp;</font></td>
<td align="left">&nbsp;</td>
<td colspan="4" align="center"><font size="1" face="Arial, Helvetica, sans-serif"><b>(unaudited)</b></font></td>
<td align="left">&nbsp;</td>
</tr>
<tr valign="bottom">
<td align="left"><font size="1" face="Arial, Helvetica, sans-serif">&nbsp;</font></td>
<td align="left">&nbsp;</td>
<td colspan="4" align="center"><font size="1" face="Arial, Helvetica, sans-serif"><b>Three months ended</b></font></td>
<td align="left">&nbsp;</td>
</tr>
<tr valign="bottom">
<td align="left">&nbsp;</td>
<td align="left">&nbsp;</td>
<td align="center"><font size="1" face="Arial, Helvetica, sans-serif"><b>April 2,</b></font></td>
<td align="center">&nbsp;</td>
<td align="center">&nbsp;</td>
<td align="center"><font size="1" face="Arial, Helvetica, sans-serif"><b>March 27,</b></font></td>
<td align="left">&nbsp;</td>
</tr>
<tr valign="bottom">
  <td align="left">&nbsp;</td>
  <td align="left">&nbsp;</td>
  <td align="center"><font size="1" face="Arial, Helvetica, sans-serif"><b>2005</b></font></td>
  <td align="center">&nbsp;</td>
  <td align="center">&nbsp;</td>
  <td align="center"><font size="1" face="Arial, Helvetica, sans-serif"><b>2004</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 size="1" noshade></td>
  <td align="left">&nbsp;</td>
  <td align="right">&nbsp;</td>
  <td align="right"><hr size="1" noshade></td>
  <td align="left">&nbsp;</td>
</tr>
<tr valign="top">
<td align="left"><font size="1" face="Arial, Helvetica, sans-serif"><b>&nbsp;In
    millions of U.S dollars</b> </font></td>
<td align="left">&nbsp;</td>
<td align="right"><font size="1" face="Arial, Helvetica, sans-serif">&nbsp;</font></td>
<td align="left">&nbsp;</td>
<td align="right">&nbsp;</td>
<td align="right"><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="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">&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">Research and development funding</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">14</font></td>
<td width="2%" align="left" bgcolor="#eeeeee">&nbsp;</td>
<td width="2%" align="right" bgcolor="#eeeeee">&nbsp;</td>
<td width="10%" align="right" bgcolor="#eeeeee"><font size="2" face="Arial, Helvetica, sans-serif">16</font></td>
<td width="2%" align="left" bgcolor="#eeeeee">&nbsp;</td> </tr>
<tr valign="top">
<td align="left" bgcolor="#FFFFFF"><font size="2" face="Arial, Helvetica, sans-serif">Start-up costs</font></td>
<td align="left" bgcolor="#FFFFFF">&nbsp;</td>
<td align="right" bgcolor="#FFFFFF"><font size="2" face="Arial, Helvetica, sans-serif">(22</font></td>
<td align="left" bgcolor="#FFFFFF"><font size="2" face="Arial, Helvetica, sans-serif">)</font></td>
<td align="right" bgcolor="#FFFFFF">&nbsp;</td>
<td align="right" bgcolor="#FFFFFF"><font size="2" face="Arial, Helvetica, sans-serif">(23</font></td>
<td align="left" bgcolor="#FFFFFF"><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">Exchange gain, net</font></td>
<td align="left" bgcolor="#eeeeee">&nbsp;</td>
<td align="right" bgcolor="#eeeeee"><font size="2" face="Arial, Helvetica, sans-serif">14</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</font></td>
<td align="left" bgcolor="#eeeeee">&nbsp;</td>
</tr>
<tr valign="top">
<td align="left" bgcolor="#FFFFFF"><font size="2" face="Arial, Helvetica, sans-serif">Patent claim costs</font></td>
<td align="left" bgcolor="#FFFFFF">&nbsp;</td>
<td align="right" bgcolor="#FFFFFF"><font size="2" face="Arial, Helvetica, sans-serif">(5</font></td>
<td align="left" bgcolor="#FFFFFF"><font size="2" face="Arial, Helvetica, sans-serif">)</font></td>
<td align="right" bgcolor="#FFFFFF">&nbsp;</td>
<td align="right" bgcolor="#FFFFFF"><font size="2" face="Arial, Helvetica, sans-serif">(6</font></td>
<td align="left" bgcolor="#FFFFFF"><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">Gain on sale of non-current assets</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">&nbsp;</td>
<td align="right" bgcolor="#eeeeee"><font size="2" face="Arial, Helvetica, sans-serif">4</font></td>
<td align="left" bgcolor="#eeeeee">&nbsp;</td>
</tr>
<tr valign="top">
<td align="left" bgcolor="#FFFFFF"><font size="2" face="Arial, Helvetica, sans-serif">Other, net</font></td>
<td align="left" bgcolor="#FFFFFF">&nbsp;</td>
<td align="right" bgcolor="#FFFFFF"><font size="2" face="Arial, Helvetica, sans-serif">(7</font></td>
<td align="left" bgcolor="#FFFFFF"><font size="2" face="Arial, Helvetica, sans-serif">)</font></td>
<td align="right" bgcolor="#FFFFFF">&nbsp;</td>
<td align="right" bgcolor="#FFFFFF"><font size="2" face="Arial, Helvetica, sans-serif">(4</font></td>
<td align="left" bgcolor="#FFFFFF"><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"><hr size="1" noshade></td>
<td align="left">&nbsp;</td>
<td align="right">&nbsp;</td>
<td align="left"><hr size="1" noshade></td>
<td align="left">&nbsp;</td>
</tr>
<tr valign="top">
<td align="left" bgcolor="#eeeeee"><font size="2" face="Arial, Helvetica, sans-serif"><b>Total</b></font></td>
<td align="left" bgcolor="#eeeeee">&nbsp;</td>
<td align="right" bgcolor="#eeeeee"><font size="2" face="Arial, Helvetica, sans-serif">(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">(12</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 size="2" noshade></td>
  <td align="left">&nbsp;</td>
  <td align="right">&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">Start-up
    costs represent costs incurred in the start-up and testing of the Company's
    new manufacturing facilities, before reaching the earlier of a minimum level
    of production or 6-months after the fabrication line&#146;s quality qualification.
    For the first quarter of 2005, start-up costs mainly related to the 200mm
    fab in Agrate (Italy) and the 150mm fab in Ang Mo Kio (Singapore). For the
    same period of 2004, start-up costs mainly related to the 300mm pilot line
    in Crolles (France), the launch of the 150mm fab in Ang Mo Kio (Singapore),
    the upgrading of the 200mm fab in Agrate (Italy) and the build-up of the
    300mm fab in
Catania (Italy). </font></p>
<p align="left"><font size="2" face="Arial, Helvetica, sans-serif">Fundings
    received by the Company are mainly from governmental agencies and income
    is recorded as recognized when all contractually required conditions are
    fulfilled. The Company&#146;s primary sources for government funding are French, Italian and other European Union (&#147;EU&#148;)
    governmental entities. Such funding is generally provided to encourage research
    and development activities, industrialization and the economic development
    of underdeveloped regions. Certain specific contracts contain obligations
    to maintain a minimum level of employment and investment during a certain
    amount of time. There could be penalties if these objectives are not fulfilled.
    Other contracts contain penalties for late deliveries or for breach of contract,
which may result in repayment obligations.</font></p>
<p align="center"><font size="2" face="Arial, Helvetica, sans-serif">F-8</font></p>
<hr noshade align="center" width="100%" size="2">
<div style="page-break-before:always"></div>
<a name="f8"></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">Patent claim costs correspond to patent litigation costs, which include legal and attorney fees and payment of claims, and patent pre-litigation costs, which are composed of consultancy fees and legal fees. Patent litigation costs are costs incurred in respect of pending litigation. Patent pre-litigation costs are costs incurred to prepare for licensing discussions with third parties with a view to concluding an agreement. Litigation may occur if such discussions are unsuccessful. In the first quarter of 2005, patent litigation costs and patent pre-litigation costs amounted to $3 million and $2 million respectively. In the first quarter of 2004, patent litigation costs amounted to $5 million and patent pre-litigation costs amounted to $1 million.
</font></p>
<p align="left"><font size="2" face="Arial, Helvetica, sans-serif">Exchange gain, net includes the realized and unrealized exchange gains and losses related to transactions denominated in foreign currencies. It includes all transactions to cover exchange risk not designated as cash flow hedge.  </font></p>
<p align="left"><font size="2" face="Arial, Helvetica, sans-serif"><b>7. Impairment, Restructuring Charges and Other Related Closure Costs</b></font></p>
<p align="left"><font size="2" face="Arial, Helvetica, sans-serif">During the third quarter of 2003, the Company commenced a plan to restructure its 150mm fab operations and part of its back-end operations in order to improve cost competitiveness. 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), which was completed during 2004, 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. Impairment, restructuring charges and other related closure costs incurred in the first quarter of 2005 and the same period of 2004 are summarized as follows:</font></p>
<table width="100%" cellspacing="0" cellpadding="0" align="center" border="0">
<tr valign="bottom" bgcolor="#FFFFFF">
  <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="center"><hr size="1" noshade></td>
  <td align="left"><hr size="1" noshade></td>
  <td align="right"><hr size="1" noshade></td>
  <td align="center"><hr size="1" noshade></td>
  <td align="left"><hr size="1" noshade></td>
  <td align="right"><hr size="1" noshade></td>
  <td align="center"><hr size="1" noshade></td>
  <td align="left"><hr size="1" noshade></td>
  <td align="right"><hr size="1" noshade></td>
  <td align="center"><hr size="1" noshade></td>
  <td align="left"><hr size="1" noshade></td>
</tr>
<tr valign="bottom" bgcolor="#FFFFFF">
<td align="left"><font size="2" face="Arial, Helvetica, sans-serif">Three months ended </font><font face="Arial, Helvetica, sans-serif"><br>
    <font size="2">April 2, 2005</font></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">Impairment</font></td>
<td width="2%" align="left">&nbsp;</td>
<td width="1%" align="right">&nbsp;</td>
<td width="12%" align="center"><font size="2" face="Arial, Helvetica, sans-serif">Restructuring charges</font></td>
<td width="2%" align="left">&nbsp;</td>
<td width="1%" align="right">&nbsp;</td>
<td width="12%" align="center"><font size="2" face="Arial, Helvetica, sans-serif">Other related closure costs</font></td>
<td width="2%" align="left">&nbsp;</td>
<td width="1%" align="right">&nbsp;</td>
<td width="20%" align="center"><font size="2" face="Arial, Helvetica, sans-serif">Total  impairment, restructuring charges and other related closure costs</font></td>
<td width="2%" align="left">&nbsp;</td> </tr>
<tr valign="top">
  <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="left"><hr size="1" noshade></td>
  <td align="right"><hr size="1" noshade></td>
  <td align="left"><hr size="1" noshade></td>
  <td align="left"><hr size="1" noshade></td>
  <td align="right"><hr size="1" noshade></td>
  <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="left"><hr size="1" noshade></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="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" bgcolor="#eeeeee">
<td align="left"><font size="2" face="Arial, Helvetica, sans-serif">150mm fab operations</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">(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">(4</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">(6</font></td>
<td align="left"><font size="2" face="Arial, Helvetica, sans-serif">)</font></td>
</tr>
<tr valign="top" bgcolor="#FFFFFF">
<td align="left"><font size="2" face="Arial, Helvetica, sans-serif">Back-end operations</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>
<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">Intangible assets and investments</font></td>
<td align="left">&nbsp;</td>
<td align="right">&nbsp;</td>
<td align="right"><font size="2" face="Arial, Helvetica, sans-serif">(63</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">(63</font></td>
<td align="left"><font size="2" face="Arial, Helvetica, sans-serif">)</font></td>
</tr>
<tr valign="top" bgcolor="#FFFFFF">
<td align="left"><font size="2" face="Arial, Helvetica, sans-serif">Other</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">(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">(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">(9</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">&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>
<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" bgcolor="#eeeeee">
<td align="left"><font size="2" face="Arial, Helvetica, sans-serif">Total</font></td>
<td align="left">&nbsp;</td>
<td align="right">&nbsp;</td>
<td align="right"><font size="2" face="Arial, Helvetica, sans-serif">(63</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</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">(5</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">(78</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="right"><hr size="1" noshade></td>
  <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="left"><hr size="1" noshade></td>
  <td align="right"><hr size="1" noshade></td>
  <td align="left"><hr size="1" noshade></td>
  <td align="left"><hr size="1" noshade></td>
  <td align="right"><hr size="1" noshade></td>
  <td align="left"><hr size="1" noshade></td>
  <td align="left"><hr size="1" noshade></td>
</tr>
<tr valign="top">
<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>
<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>
</table>
<p align="center"><font size="2" face="Arial, Helvetica, sans-serif">F-9</font></p>
<hr noshade align="center" width="100%" size="2">
<div style="page-break-before:always"></div>
<page> <a name="f9"></a>
<p><font size="2" face="Arial, Helvetica, sans-serif"><a href="#contents">Back
      to Contents</a></font></p>
<table width="100%" cellspacing="0" cellpadding="0" align="center" border="0">
  <tr valign="bottom" bgcolor="#FFFFFF">
    <td align="left"><hr size="1" noshade>
    </td>
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    </td>
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    </td>
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    </td>
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    </td>
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    </td>
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  <tr valign="bottom" bgcolor="#FFFFFF">
    <td align="left"><font size="2" face="Arial, Helvetica, sans-serif">Three
        months ended </font><font face="Arial, Helvetica, sans-serif"><br>
          <font size="2">March 27, 2004</font></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">Impairment</font></td>
    <td width="2%" align="left">&nbsp;</td>
    <td width="1%" align="right">&nbsp;</td>
    <td width="12%" align="center"><font size="2" face="Arial, Helvetica, sans-serif">Restructuring
        charges</font></td>
    <td width="2%" align="left">&nbsp;</td>
    <td width="1%" align="right">&nbsp;</td>
    <td width="12%" align="center"><font size="2" face="Arial, Helvetica, sans-serif">Other
        related closure costs</font></td>
    <td width="2%" align="left">&nbsp;</td>
    <td width="1%" align="right">&nbsp;</td>
    <td width="20%" align="center"><font size="2" face="Arial, Helvetica, sans-serif">Total
        impairment, restructuring charges and other related closure costs</font></td>
    <td width="2%" align="left">&nbsp;</td>
  </tr>
  <tr valign="bottom" bgcolor="#FFFFFF">
    <td align="left"><hr size="1" noshade>
    </td>
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    </td>
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    </td>
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    </td>
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    </td>
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    </td>
    <td align="center"><hr size="1" noshade>
    </td>
    <td align="left"><hr size="1" noshade>
    </td>
    <td align="right"><hr size="1" noshade>
    </td>
    <td align="center"><hr size="1" noshade>
    </td>
    <td align="left"><hr size="1" noshade>
    </td>
    <td align="right"><hr size="1" noshade>
    </td>
    <td align="center"><hr size="1" noshade>
    </td>
    <td align="left"><hr size="1" noshade>
    </td>
  </tr>
  <tr valign="top" bgcolor="#FFFFFF">
    <td align="left">&nbsp;</td>
    <td align="left">&nbsp;</td>
    <td align="right">&nbsp;</td>
    <td align="right">&nbsp;</td>
    <td align="left">&nbsp;</td>
    <td align="right">&nbsp;</td>
    <td align="right">&nbsp;</td>
    <td align="left">&nbsp;</td>
    <td align="right">&nbsp;</td>
    <td align="right">&nbsp;</td>
    <td align="left">&nbsp;</td>
    <td align="right">&nbsp;</td>
    <td align="right">&nbsp;</td>
    <td align="left">&nbsp;</td>
  </tr>
  <tr valign="top" bgcolor="#FFFFFF">
    <td align="left"><font size="2" face="Arial, Helvetica, sans-serif">150mm
        fab operations</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">(25</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">(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">(31</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">Back-end
        operations</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">(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">(1</font></td>
    <td align="left"><font size="2" face="Arial, Helvetica, sans-serif">)</font></td>
  </tr>
  <tr valign="top" bgcolor="#FFFFFF">
    <td align="left"><font size="2" face="Arial, Helvetica, sans-serif">Intangible
        assets and investments</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>
    <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">Other</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">(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">(1</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">&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>
    <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" bgcolor="#FFFFFF">
    <td align="left"><font size="2" face="Arial, Helvetica, sans-serif">Total</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">(26</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">(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">(33</font></td>
    <td align="left"><font size="2" face="Arial, Helvetica, sans-serif">)</font></td>
  </tr>
  <tr valign="bottom" bgcolor="#FFFFFF">
    <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="center"><hr size="1" noshade>
    </td>
    <td align="left"><hr size="1" noshade>
    </td>
    <td align="right"><hr size="1" noshade>
    </td>
    <td align="center"><hr size="1" noshade>
    </td>
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    </td>
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    </td>
    <td align="center"><hr size="1" noshade>
    </td>
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    </td>
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    </td>
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    </td>
  </tr>
</table>
<p align="left"><font size="2" face="Arial, Helvetica, sans-serif">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Impairment
charges</font></p>
<p align="left"><font size="2" face="Arial, Helvetica, sans-serif">In January
    2005, the Company decided to reduce its Access technology products for Customer
    Premises Equipment (&#147;CPE&#148;) modem products. This decision was
    intended to eliminate certain low volume, non-strategic product families
    whose returns in the current environment did not meet internal targets. The
    Company reports CPE business as part of the Access reporting unit. Following
    the decision to discontinue a portion of this reporting unit, the Company,
    in compliance with FAS 142 <i>Goodwill and Other Intangible Assets</i>, reassessed
    the allocation of goodwill to businesses composing the Access reporting unit
    according to the
    relative
    fair
    values as determined based on market comparables of
    these businesses in the total reporting unit.
    The reassessment gave an allocation of $39 million of goodwill allocated
    to the CPE business unit in addition to  $22 million of intangible assets
    without alternative use following the discontinuation of CPE product lines,
    which
    resulted in
a total impairment charge of $61 million in the first quarter of 2005.</font></p>
<p align="left"><font size="2" face="Arial, Helvetica, sans-serif">Moreover, impairment charges of $2 million for technologies and other intangible assets were incurred pursuant to the decision of the Company to close a research and development design center in Karlsruhe (Germany) and the discontinuation of a development project in Singapore. </font></p>
<p align="left"><font size="2" face="Arial, Helvetica, sans-serif">No impairment charge was recorded during the same period of 2004. </font></p>
<p align="left"><font size="2" face="Arial, Helvetica, sans-serif">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Restructuring
charges and other related closure costs</font></p>
<p align="left"><font size="2" face="Arial, Helvetica, sans-serif">Provisions for restructuring charges and other related closure costs as at April 2, 2005 are summarized as follows:</font></p>
<p align="center"><font size="2" face="Arial, Helvetica, sans-serif">F-10</font></p>
<hr noshade align="center" width="100%" size="2">
<div style="page-break-before:always"></div>
<page> <a name="f10"></a>
<p><font size="2" face="Arial, Helvetica, sans-serif"><a href="#contents">Back
      to Contents</a></font></p>
<table width="100%" align="center" border=0 cellspacing=0 cellpadding=0>
  <tr>
    <td colspan="12" align="center"><hr noshade size=1></td>
  </tr>
  <tr>
    <td align="center"><font size="1">&nbsp;</font></td>
    <td width="10%" align="center"><font size="1">&nbsp;<b><font size=1 face="Arial, Helvetica, sans-serif">150mm
    fab operations</font></b></font></td>
    <td width="2%" align="center"><font size="1">&nbsp;</font></td>
    <td width="10%" align="center"><font size="1">&nbsp;</font></td>
    <td width="2%" align="center"><font size="1">&nbsp;</font></td>
    <td width="6%" align="center"><font size="1">&nbsp;</font></td>
    <td width="2%" align="center"><font size="1">&nbsp;</font></td>
    <td width="10%" align="center"><b><font size=1 face="Arial, Helvetica, sans-serif">Back-end<br>
    operations</font></b></td>
    <td width="6%" align="center"><font size="1"><b><font size=1 face="Arial, Helvetica, sans-serif">Other</font></b>&nbsp;</font></td>
    <td width="2%" align="center"><font size="1">&nbsp;</font></td>
    <td width="10%" align="center"><b><font size=1 face="Arial, Helvetica, sans-serif">Total<br>
      restructuring &amp;<br>
    other related<br>
    closure costs    </font></b></td>
    <td width="2%" align="center"><font size="1">&nbsp;</font></td>
  </tr>
  <tr>
    <td><hr noshade size=1>
    </td>
    <td><hr noshade size=1>
    </td>
    <td>
    <hr noshade size=1></td>
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    </td>
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    <td><hr noshade size=1>
    </td>
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    </td>
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    </td>
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    </td>
    <td><hr noshade size=1></td>
  </tr>
  <tr>
    <td><div align="center"><font size="1">&nbsp;</font></div></td>
    <td><div align="center"><font size="1">&nbsp;</font><font size=1 face="Arial, Helvetica, sans-serif">Restructuring</font></div></td>
    <td><div align="center"><font size="1">&nbsp;</font></div></td>
    <td><div align="center"><font size=1 face="Arial, Helvetica, sans-serif">Other related<br>
    closure costs    </font></div></td>
    <td><div align="center"><font size="1">&nbsp;</font></div></td>
    <td><div align="center"><font size="1">&nbsp;</font><font size=1 face="Arial, Helvetica, sans-serif">Total</font></div></td>
    <td><div align="center"><font size="1">&nbsp;</font></div></td>
    <td><div align="center"><font size="1">&nbsp;</font></div></td>
    <td><div align="center"><font size="1">&nbsp;</font></div></td>
    <td><div align="center"><font size="1">&nbsp;</font></div></td>
    <td><div align="center"><font size="1">&nbsp;</font></div></td>
    <td><div align="center"><font size="1">&nbsp;</font></div></td>
  </tr>
  <tr>
    <td><hr noshade size=1>
    </td>
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    </td>
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      <hr noshade size=1>
    </td>
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    </td>
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    </td>
    <td><hr noshade size=1>
    </td>
    <td><hr noshade size=1>
    </td>
    <td><hr noshade size=1>
    </td>
    <td><hr noshade size=1>
    </td>
    <td><hr noshade size=1>
    </td>
    <td><hr noshade size=1>
    </td>
    <td><hr noshade size=1></td>
  </tr>
  <tr>
    <td bgcolor="#eeeeee"><font size="1"><b><font size="2" face="Arial, Helvetica, sans-serif">Provision
    as at December 31, 2004</font> </b></font></td>
    <td align="right" bgcolor="#eeeeee"><b><font size=2 face="Arial, Helvetica, sans-serif">36</font></b></td>
    <td align="right" bgcolor="#eeeeee"><font size="2">&nbsp;</font></td>
    <td align="right" bgcolor="#eeeeee"><b><font size=2 face="Arial, Helvetica, sans-serif">1</font></b></td>
    <td align="right" bgcolor="#eeeeee"><font size="2">&nbsp;</font></td>
    <td align="right" bgcolor="#eeeeee"><b><font size=2 face="Arial, Helvetica, sans-serif">37</font></b></td>
    <td align="right" bgcolor="#eeeeee"><font size="2">&nbsp;</font></td>
    <td align="right" bgcolor="#eeeeee"><font size="2">&#150;</font></td>
    <td align="right" bgcolor="#eeeeee"><b><font size=2 face="Arial, Helvetica, sans-serif">3</font></b></td>
    <td align="right" bgcolor="#eeeeee"><font size="2">&nbsp;</font></td>
    <td align="right" bgcolor="#eeeeee"><b><font size=2 face="Arial, Helvetica, sans-serif">40</font></b></td>
    <td align="right" bgcolor="#eeeeee"><font size="2">&nbsp;</font></td>
  </tr>
  <tr>
    <td colspan="12">
    <hr noshade size=2>
    </td>
  </tr>
  <tr>
    <td><font size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</font></td>
    <td><font size="2">&nbsp;</font></td>
    <td><font size="2">&nbsp;</font></td>
    <td><font size="2">&nbsp;</font></td>
    <td><font size="2">&nbsp;</font></td>
    <td><font size="2">&nbsp;</font></td>
    <td><font size="2">&nbsp;</font></td>
    <td><font size="2">&nbsp;</font></td>
    <td><font size="2">&nbsp;</font></td>
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    <td><font size="2">&nbsp;</font></td>
    <td><font size="2">&nbsp;</font></td>
  </tr>
  <tr>
    <td><div style="margin-left:18%"><font size="2" face="Arial, Helvetica, sans-serif">Charges
          incurred in 2005</font></div></td>
    <td align="right"><font size=2 face="Arial, Helvetica, sans-serif">2</font></td>
    <td><font size="2">&nbsp;</font></td>
    <td align="right"><font size=2 face="Arial, Helvetica, sans-serif">4</font></td>
    <td><font size="2">&nbsp;</font></td>
    <td align="right"><font size=2 face="Arial, Helvetica, sans-serif">6</font></td>
    <td><font size="2">&nbsp;</font></td>
    <td align="center">&#150;</td>
    <td align="right"><font size=2 face="Arial, Helvetica, sans-serif">9</font></td>
    <td><font size="2">&nbsp;</font></td>
    <td align="right"><font size=2 face="Arial, Helvetica, sans-serif">15</font></td>
    <td><font size="2">&nbsp;</font></td>
  </tr>
  <tr>
    <td><div align="center"><font size="2">&nbsp;</font></div></td>
    <td><font size="2">&nbsp;</font></td>
    <td><font size="2">&nbsp;</font></td>
    <td><font size="2">&nbsp;</font></td>
    <td><font size="2">&nbsp;</font></td>
    <td><font size="2">&nbsp;</font></td>
    <td><font size="2">&nbsp;</font></td>
    <td><font size="2">&nbsp;</font></td>
    <td><font size="2">&nbsp;</font></td>
    <td><font size="2">&nbsp;</font></td>
    <td><font size="2">&nbsp;</font></td>
    <td><font size="2">&nbsp;</font></td>
  </tr>
  <tr>
    <td bgcolor="#eeeeee"><div style="margin-left:18%"><font size="2" face="Arial, Helvetica, sans-serif">Amounts
          paid</font></div></td>
    <td align="right" bgcolor="#eeeeee"><font size=2 face="Arial, Helvetica, sans-serif">(10</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">(5</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">(15</font></td>
    <td bgcolor="#eeeeee"><font size=2 face="Arial, Helvetica, sans-serif">)</font></td>
    <td align="center" bgcolor="#eeeeee">&#150;</td>
    <td align="right" bgcolor="#eeeeee"><font size=2 face="Arial, Helvetica, sans-serif">(3</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">(18</font></td>
    <td bgcolor="#eeeeee"><font size=2 face="Arial, Helvetica, sans-serif">)</font></td>
  </tr>
  <tr>
    <td><div align="center"><font size="2">&nbsp;</font></div></td>
    <td><font size="2">&nbsp;</font></td>
    <td><font size="2">&nbsp;</font></td>
    <td><font size="2">&nbsp;</font></td>
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    <td><font size="2">&nbsp;</font></td>
    <td><font size="2">&nbsp;</font></td>
    <td><font size="2">&nbsp;</font></td>
  </tr>
  <tr>
    <td><div style="margin-left:18%"><font size="2" face="Arial, Helvetica, sans-serif">Currency
          translation effect</font></div></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">&#150;</td>
    <td><font size="2">&nbsp;</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="center">&#150;</td>
    <td align="right">&#150;</td>
    <td><font size="2">&nbsp;</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>
  </tr>
  <tr>
    <td><hr align="center" size=1 noshade>
    </td>
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    </td>
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    </td>
    <td><hr noshade size=1>
    </td>
    <td><hr noshade size=1>
    </td>
    <td><hr noshade size=1>
    </td>
    <td><hr noshade size=1>
    </td>
    <td><hr noshade size=1>
    </td>
    <td><hr noshade size=1>
    </td>
    <td><hr noshade size=1>
    </td>
    <td><hr noshade size=1>
    </td>
  </tr>
  <tr>
    <td><div align="center"><font size="2">&nbsp;</font></div></td>
    <td><font size="2">&nbsp;</font></td>
    <td><font size="2">&nbsp;</font></td>
    <td><font size="2">&nbsp;</font></td>
    <td><font size="2">&nbsp;</font></td>
    <td><font size="2">&nbsp;</font></td>
    <td><font size="2">&nbsp;</font></td>
    <td><font size="2">&nbsp;</font></td>
    <td><font size="2">&nbsp;</font></td>
    <td><font size="2">&nbsp;</font></td>
    <td><font size="2">&nbsp;</font></td>
    <td><font size="2">&nbsp;</font></td>
  </tr>
  <tr>
    <td bgcolor="#eeeeee"><div style="margin-left:18%"><b><font size=2 face="Arial, Helvetica, sans-serif">Provision as at April 2, 2005</font></b></div></td>
    <td align="right" bgcolor="#eeeeee"><b><font size=2 face="Arial, Helvetica, sans-serif">26</font></b></td>
    <td bgcolor="#eeeeee"><font size="2">&nbsp;</font></td>
    <td align="right" bgcolor="#eeeeee"><b><font size=2 face="Arial, Helvetica, sans-serif">0</font></b></td>
    <td bgcolor="#eeeeee"><font size="2">&nbsp;</font></td>
    <td align="right" bgcolor="#eeeeee"><b><font size=2 face="Arial, Helvetica, sans-serif">26</font></b></td>
    <td bgcolor="#eeeeee"><font size="2">&nbsp;</font></td>
    <td align="center" bgcolor="#eeeeee">&#150;</td>
    <td align="right" bgcolor="#eeeeee"><b><font size=2 face="Arial, Helvetica, sans-serif">9</font></b></td>
    <td bgcolor="#eeeeee"><font size="2">&nbsp;</font></td>
    <td align="right" bgcolor="#eeeeee"><b><font size=2 face="Arial, Helvetica, sans-serif">35</font></b></td>
    <td bgcolor="#eeeeee"><font size="2">&nbsp;</font></td>
  </tr>
  <tr>
    <td><hr noshade size=1>
    </td>
    <td><hr noshade size=1>
    </td>
    <td>
      <hr noshade size=1>
    </td>
    <td><hr noshade size=1>
    </td>
    <td><hr noshade size=1>
    </td>
    <td><hr noshade size=1>
    </td>
    <td><hr noshade size=1>
    </td>
    <td><hr noshade size=1>
    </td>
    <td><hr noshade size=1>
    </td>
    <td><hr noshade size=1>
    </td>
    <td><hr noshade size=1>
    </td>
    <td><hr noshade size=1>
    </td>
  </tr>
</table>
<p align="left"><font size="2" face="Arial, Helvetica, sans-serif">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;150mm
fab operations:</font></p>
<p align="left"><font size="2" face="Arial, Helvetica, sans-serif">Restructuring charges incurred in the first quarter of 2005 primarily related to $2 million in termination benefits for the sites of Agrate (Italy) and Rousset (France) and $4 million of other charges associated with the closure and transfers of production for the site in Rennes (France) for $3 million and Carrollton (USA) for $1 million.  </font></p>
<p align="left"><font size="2" face="Arial, Helvetica, sans-serif">During the first quarter of 2004, the Company recorded restructuring charges of $31 million for its 150mm fab operations, relating mainly to the discontinuation of Rennes, for which the exit plan was communicated to employees in March 2004. At communication date, the Company recorded $25 million corresponding to involuntary termination benefits and certain period charges related to the transfer of employees to other sites of the Company during the first quarter of 2004. In addition, the Company registered $6 million of other related closure costs, mainly related to the closure of Rennes and other similar costs in the United States and Europe.   </font></p>
<p align="left"><font size="2" face="Arial, Helvetica, sans-serif">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Back-end
operations:</font></p>
<p align="left"><font size="2" face="Arial, Helvetica, sans-serif">During the first quarter of 2005, minor charges for transfer costs and involuntary termination payments were incurred in back-end sites in Singapore and Morocco. During the same period of 2004, transfer costs amounting to $1 million were registered in Morocco.</font></p>
<p align="left"><font size="2" face="Arial, Helvetica, sans-serif">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Other:</font></p>
<p align="left"><font size="2" face="Arial, Helvetica, sans-serif">Pursuant
    to the decision of reducing its Access technology products for Customer Premises
    Equipment (&#147;CPE&#148;) modem products, the Company committed to an
    exit plan in Zaventem (Belgium) and accrued for $5 million of obligatory
workforce termination benefits in the first quarter of 2005.</font></p>
<p align="left"><font size="2" face="Arial, Helvetica, sans-serif">Moreover,
    in order to optimize its research and development sites, the Company decided
    to cease its activities in two locations, Karlsruhe (Germany) and Malvern
    (USA). The Company incurred in the first quarter of 2005 $3 million restructuring
    charges corresponding to unused lease and employee involuntary termination
     costs relating to the closure of these two sites.</font></p>
<p align="center"><font size="2" face="Arial, Helvetica, sans-serif">F-11</font></p>
<hr noshade align="center" width="100%" size="2">
<div style="page-break-before:always"></div>
<page> <a name="f11"></a>
<p><font size="2" face="Arial, Helvetica, sans-serif"><a href="#contents">Back
      to Contents</a></font></p>
<p align="left">&nbsp;</p>
<p align="left"><font size="2" face="Arial, Helvetica, sans-serif">In the first quarter of 2005 and 2004, charges totaling $1 million were paid by the Company for voluntary termination benefits in France. </font></p>
<p align="left"><font size="2" face="Arial, Helvetica, sans-serif">In the first quarter of 2005, total cash outlays amounted to $18 million. </font></p>
<p align="left"><font size="2" face="Arial, Helvetica, sans-serif">Of the total
    plan of impairment and restructuring costs for the front-end and back-end
    reorganization, $288 million has been incurred as of April 2, 2005 ($7 million
    in 2005, $76 million in 2004 and $205 million in 2003), out of the total
    expected approximate $350 million pre-tax charges. The restructuring plan
    and related
    manufacturing initiatives are expected to be largely completed by mid-2006.
    In addition to this plan, the reorganization and restructuring actions taken
    in the first quarter of 2005 generated impairment and restructuring charges
    that amounted to $71 million. The total actual costs that the Company will
    incur may differ from these estimates based on the timing required to complete
    the restructuring plan, the number of people involved, the final agreed termination
    benefits and the costs associated with the transfer of equipment, products
    and processes.</font></p>
<p align="left"><font size="2" face="Arial, Helvetica, sans-serif"><b>8. Interest income (expense), net</b></font></p>
<p align="left"><font size="2" face="Arial, Helvetica, sans-serif">Interest income (expense), net consisted of the following:</font></p>
<table width="100%" cellspacing="0" cellpadding="0" align="center" border="0">
<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 colspan="4" align="center"><div align="center"><font size="1" face="Arial, Helvetica, sans-serif"><b>(unaudited)</b></font></div></td>
<td align="left">&nbsp;</td>
</tr>
<tr valign="top">
  <td align="left">&nbsp;</td>
  <td align="left">&nbsp;</td>
  <td align="right">&nbsp;</td>
  <td colspan="4" align="center"><hr 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="left">&nbsp;</td>
<td align="right">&nbsp;</td>
<td colspan="4" align="center"><div align="center"><font size="1" face="Arial, Helvetica, sans-serif">Three months ended</font></div></td>
<td align="left">&nbsp;</td>
</tr>
<tr valign="top">
  <td align="left">&nbsp;</td>
  <td align="left">&nbsp;</td>
  <td align="right">&nbsp;</td>
  <td colspan="4" align="center"><hr 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="left">&nbsp;</td>
<td align="right">&nbsp;</td>
<td align="center"><div align="center"><font size="1" face="Arial, Helvetica, sans-serif"><b>April 2,</b></font></div></td>
<td align="left">&nbsp;</td>
<td align="right">&nbsp;</td>
<td align="center"><div align="center"><font size="1" face="Arial, Helvetica, sans-serif">March 27,</font></div></td>
<td align="left">&nbsp;</td>
</tr>
<tr valign="top" bgcolor="#eeeeee">
<td align="left"><font size="2" face="Arial, Helvetica, sans-serif">In millions
    of U.S dollars          </font></td>
<td align="left" width="2%">&nbsp;</td>
<td width="1%" align="right">&nbsp;</td>
<td width="10%" align="right"><div align="center"><font size="1" face="Arial, Helvetica, sans-serif"><b>2005</b></font></div></td>
<td width="2%" align="left">&nbsp;</td>
<td width="1%" align="right">&nbsp;</td>
<td width="10%" align="right"><div align="center"><font size="1" face="Arial, Helvetica, sans-serif">2004</font></div></td>
<td width="2%" align="left">&nbsp;</td>
</tr>
<tr valign="top">
  <td align="left">&nbsp;</td>
  <td align="left">&nbsp;</td>
  <td align="right">&nbsp;</td>
  <td align="left"><hr noshade size=1></td>
  <td align="left">&nbsp;</td>
  <td align="right">&nbsp;</td>
  <td align="left"><hr noshade size=1></td>
  <td align="left">&nbsp;</td>
</tr>
<tr valign="top">
<td align="left"><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" bgcolor="#FFFFFF">
<td align="left"><font size="2" face="Arial, Helvetica, sans-serif">Income</font></td>
<td align="left">&nbsp;</td>
<td align="right">&nbsp;</td>
<td align="right"><font size="2" face="Arial, Helvetica, sans-serif"><b>12</b></font></td>
<td align="left">&nbsp;</td>
<td align="right">&nbsp;</td>
<td align="right"><font size="2" face="Arial, Helvetica, sans-serif">11</font></td>
<td align="left">&nbsp;</td>
</tr>
<tr valign="top" bgcolor="#eeeeee">
<td align="left"><font size="2" face="Arial, Helvetica, sans-serif">Expense</font></td>
<td align="left">&nbsp;</td>
<td align="right">&nbsp;</td>
<td align="right"><font size="2" face="Arial, Helvetica, sans-serif"><b>(5</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">(15</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">&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" bgcolor="#FFFFFF">
  <td align="left">&nbsp;</td>
  <td align="left">&nbsp;</td>
  <td align="right">&nbsp;</td>
  <td align="right"><hr noshade size=1></td>
  <td align="left">&nbsp;</td>
  <td align="right">&nbsp;</td>
  <td align="right"><hr noshade size=1></td>
  <td align="left">&nbsp;</td>
</tr>
<tr valign="top" bgcolor="#FFFFFF">
<td align="left"><font size="2" face="Arial, Helvetica, sans-serif"><b>Total</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>7</b></font></td>
<td align="left">&nbsp;</td>
<td align="right">&nbsp;</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>
</tr>
<tr valign="top" bgcolor="#FFFFFF">
  <td align="left">&nbsp;</td>
  <td align="left">&nbsp;</td>
  <td align="right">&nbsp;</td>
  <td align="right"><hr noshade size=1></td>
  <td align="left">&nbsp;</td>
  <td align="right">&nbsp;</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">Interest expense also included charges related to the amortization of issuance costs incurred by the Company for the outstanding convertible bonds.</font></p>
<p align="left"><font size="2" face="Arial, Helvetica, sans-serif"><b>9. Marketable securities </b></font></p>
<p align="left"><font size="2" face="Arial, Helvetica, sans-serif">In the first
    quarter of 2005, the Company invested $525 million of existing cash in credit-linked
    deposits issued by several primary banks in order to maximize the return
    on available cash. These credit-linked deposits are reinvested by the banks
    in underlying debt instruments (&#147;reference debt&#148;) that have been issued by different banks with a minimum rating of &#147;A-&#148; 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 consolidated
    financial statements as of April 2, 2005. 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 2005
    year-end, unless suspended by credit default of the reference debt. Additionally,
    the carrying value of the instruments depends on the non-default of the reference
    debt. The principal will be repaid at final maturity unless a default occurs,
    in which case repayment of principal would be reduced based on the decline
in value of the defaulted debt.</font></p>
<p align="center"><font size="2" face="Arial, Helvetica, sans-serif">F-12</font></p>
<hr noshade align="center" width="100%" size="2">
<div style="page-break-before:always"></div>
<page> <a name="f12"></a>
<p><font size="2" face="Arial, Helvetica, sans-serif"><a href="#contents">Back
      to Contents</a></font></p>
<p align="left">&nbsp;</p>
<p align="left"><font size="2" face="Arial, Helvetica, sans-serif"><b>10. Inventories, net</b></font></p>
<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>
<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>
<p align="left"><font size="2" face="Arial, Helvetica, sans-serif">Inventories, net of reserve consisted of the following:</font></p>
<table width="100%" cellspacing="0" cellpadding="0" align="center" border="0">
<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>(Unaudited)</b></font></td>
<td align="left"><font size="1">&nbsp;</font></td>
<td align="center"><font size="1" face="Arial, Helvetica, sans-serif">(Audited)</font></td>
<td align="left"><font size="1">&nbsp;</font></td>
</tr>
<tr valign="top" bgcolor="#FFFFFF">
  <td align="left">&nbsp;</td>
  <td align="left">&nbsp;</td>
  <td align="right">&nbsp;</td>
  <td align="center"><hr noshade size=1></td>
  <td align="left">&nbsp;</td>
  <td align="center"><hr noshade size=1></td>
  <td align="left">&nbsp;</td>
</tr>
<tr valign="top" bgcolor="#FFFFFF">
<td align="left"><font size="2" face="Arial, Helvetica, sans-serif">In millions
    of U.S. dollars</font></td>
<td align="left" width="2%">&nbsp;</td>
<td width="1%" align="right">&nbsp;</td>
<td width="14%" align="center"><font size="1" face="Arial, Helvetica, sans-serif"><b>As at  April 2, 2005</b></font></td>
<td width="2%" align="left"><font size="1">&nbsp;</font></td>
<td width="14%" align="center"><font size="1" face="Arial, Helvetica, sans-serif">As at December 31, 2004</font></td>
<td width="2%" align="left"><font size="1">&nbsp;</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="right">&nbsp;</td>
<td align="left">
  <hr noshade size=1></td>
<td align="left">&nbsp;</td>
<td align="left">
  <hr noshade size=1></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>
  <td align="left">&nbsp;</td>
  <td align="left">&nbsp;</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 align="left">&nbsp;</td>
<td align="right">&nbsp;</td>
<td align="right"><font size="2" face="Arial, Helvetica, sans-serif"><b>70</b></font></td>
<td align="left">&nbsp;</td>
<td align="right"><font size="2" face="Arial, Helvetica, sans-serif">70</font></td>
<td align="left">&nbsp;</td>
</tr>
<tr valign="top" bgcolor="#FFFFFF">
<td align="left"><font size="2" face="Arial, Helvetica, sans-serif">Work-in-process         </font></td>
<td align="left">&nbsp;</td>
<td align="right">&nbsp;</td>
<td align="right"><font size="2" face="Arial, Helvetica, sans-serif"><b>896</b></font></td>
<td align="left">&nbsp;</td>
<td align="right"><font size="2" face="Arial, Helvetica, sans-serif">874</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="left">&nbsp;</td>
<td align="right">&nbsp;</td>
<td align="right"><font size="2" face="Arial, Helvetica, sans-serif"><b>403</b></font></td>
<td align="left">&nbsp;</td>
<td align="right"><font size="2" face="Arial, Helvetica, sans-serif">400</font></td>
<td align="left">&nbsp;</td>
</tr>
<tr valign="top" bgcolor="#FFFFFF">
  <td align="left">&nbsp;</td>
  <td align="left">&nbsp;</td>
  <td align="right">&nbsp;</td>
  <td align="right"><hr noshade size=1></td>
  <td align="left">&nbsp;</td>
  <td align="right"><hr noshade size=1></td>
  <td align="left">&nbsp;</td>
</tr>
<tr valign="top" bgcolor="#FFFFFF">
<td align="left"><div style="margin-left: 6%; text-indent: -3%"><font size="2" face="Arial, Helvetica, sans-serif"><b>Total</b></font></div></td>
<td align="left">&nbsp;</td>
<td align="right">&nbsp;</td>
<td align="right"><font size="2" face="Arial, Helvetica, sans-serif"><b>1,369</b></font></td>
<td align="left">&nbsp;</td>
<td align="right"><font size="2" face="Arial, Helvetica, sans-serif">1,344</font></td>
<td align="left">&nbsp;</td>
</tr>
<tr valign="top" bgcolor="#FFFFFF">
  <td align="left">&nbsp;</td>
  <td align="left">&nbsp;</td>
  <td align="right">&nbsp;</td>
  <td align="right"><hr noshade size=1></td>
  <td align="left">&nbsp;</td>
  <td align="right"><hr noshade size=1></td>
  <td align="left">&nbsp;</td>
</tr>
</table>
<p align="left"><font size="2" face="Arial, Helvetica, sans-serif"><b>11. Investments and other non-current assets</b></font></p>
<p align="left"><font size="2" face="Arial, Helvetica, sans-serif"> Investments and other non-current assets consisted of the following:</font></p>
<table width="100%" cellspacing="0" cellpadding="0" align="center" border="0">
<tr valign="top">
<td align="left"><font size="1" face="Arial, Helvetica, sans-serif">&nbsp;</font></td>
<td align="left"><font size="1">&nbsp;</font></td>
<td align="right"><font size="1">&nbsp;</font></td>
<td align="center"><font size="1" face="Arial, Helvetica, sans-serif"><b>(Unaudited)</b></font></td>
<td align="left"><font size="1">&nbsp;</font></td>
<td align="center"><font size="1" face="Arial, Helvetica, sans-serif">(Audited)</font></td>
<td align="left">&nbsp;</td>
</tr>
<tr valign="top">
  <td align="left" bgcolor="#FFFFFF">&nbsp;</td>
  <td align="left" bgcolor="#FFFFFF">&nbsp;</td>
  <td align="right" bgcolor="#FFFFFF">&nbsp;</td>
  <td align="center" bgcolor="#FFFFFF"><hr noshade size=1></td>
  <td align="left" bgcolor="#FFFFFF">&nbsp;</td>
  <td align="center" bgcolor="#FFFFFF"><hr noshade size=1></td>
  <td align="left" bgcolor="#FFFFFF">&nbsp;</td>
</tr>
<tr valign="top">
<td align="left" bgcolor="#FFFFFF"><font size="2" face="Arial, Helvetica, sans-serif">In
    millions of U.S. dollars</font></td>
<td width="2%" align="left" bgcolor="#FFFFFF"><font size="1">&nbsp;</font></td>
<td width="1%" align="right" bgcolor="#FFFFFF"><font size="1">&nbsp;</font></td>
<td width="14%" align="center" bgcolor="#FFFFFF"><font size="1" face="Arial, Helvetica, sans-serif"><b>As at  April 2, 2005</b></font></td>
<td width="2%" align="left" bgcolor="#FFFFFF"><font size="1">&nbsp;</font></td>
<td width="14%" align="center" bgcolor="#FFFFFF"><font size="1" face="Arial, Helvetica, sans-serif">As at December 31, 2004</font></td>
<td width="2%" align="left" bgcolor="#FFFFFF">&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="right">&nbsp;</td>
<td align="left"><hr noshade size=1></td>
<td align="left">&nbsp;</td>
<td align="left"><hr noshade size=1></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>
  <td align="left">&nbsp;</td>
  <td align="left">&nbsp;</td>
  <td align="left">&nbsp;</td>
</tr>
<tr valign="top">
<td align="left" bgcolor="#eeeeee"><font size="2" face="Arial, Helvetica, sans-serif">Equity-method investments</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>6</b></font></td>
<td align="left" bgcolor="#eeeeee">&nbsp;</td>
<td align="right" bgcolor="#eeeeee"><font size="2" face="Arial, Helvetica, sans-serif">6</font></td>
<td align="left" bgcolor="#eeeeee">&nbsp;</td>
</tr>
<tr valign="top">
<td align="left" bgcolor="#FFFFFF"><font size="2" face="Arial, Helvetica, sans-serif">Cost Investments</font></td>
<td align="left" bgcolor="#FFFFFF">&nbsp;</td>
<td align="right" bgcolor="#FFFFFF">&nbsp;</td>
<td align="right" bgcolor="#FFFFFF"><font size="2" face="Arial, Helvetica, sans-serif"><b>35</b></font></td>
<td align="left" bgcolor="#FFFFFF">&nbsp;</td>
<td align="right" bgcolor="#FFFFFF"><font size="2" face="Arial, Helvetica, sans-serif">34</font></td>
<td align="left" bgcolor="#FFFFFF">&nbsp;</td>
</tr>
<tr valign="top">
<td align="left" bgcolor="#eeeeee"><font size="2" face="Arial, Helvetica, sans-serif">Deposits and long-term receivables related to funding </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>72</b></font></td>
<td align="left" bgcolor="#eeeeee">&nbsp;</td>
<td align="right" bgcolor="#eeeeee"><font size="2" face="Arial, Helvetica, sans-serif">69</font></td>
<td align="left" bgcolor="#eeeeee">&nbsp;</td>
</tr>
<tr valign="top">
<td align="left" bgcolor="#FFFFFF"><font size="2" face="Arial, Helvetica, sans-serif">Debt issuance costs, net</font></td>
<td align="left" bgcolor="#FFFFFF">&nbsp;</td>
<td align="right" bgcolor="#FFFFFF">&nbsp;</td>
<td align="right" bgcolor="#FFFFFF"><font size="2" face="Arial, Helvetica, sans-serif"><b>6</b></font></td>
<td align="left" bgcolor="#FFFFFF">&nbsp;</td>
<td align="right" bgcolor="#FFFFFF"><font size="2" face="Arial, Helvetica, sans-serif">8</font></td>
<td align="left" bgcolor="#FFFFFF">&nbsp;</td>
</tr>
<tr valign="top">
  <td align="left" bgcolor="#FFFFFF">&nbsp;</td>
  <td align="left" bgcolor="#FFFFFF">&nbsp;</td>
  <td align="right" bgcolor="#FFFFFF">&nbsp;</td>
  <td align="right" bgcolor="#FFFFFF"><hr noshade size=1></td>
  <td align="left" bgcolor="#FFFFFF">&nbsp;</td>
  <td align="right" bgcolor="#FFFFFF"><hr noshade size=1></td>
  <td align="left" bgcolor="#FFFFFF">&nbsp;</td>
</tr>
<tr valign="top">
<td align="left" bgcolor="#eeeeee"><div style="margin-left: 6%; text-indent: -3%"><font size="2" face="Arial, Helvetica, sans-serif"><b>Total</b></font></div>  <font size="2" face="Arial, Helvetica, sans-serif">&nbsp;</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>119</b></font></td>
<td align="left" bgcolor="#eeeeee">&nbsp;</td>
<td align="right" bgcolor="#eeeeee"><font size="2" face="Arial, Helvetica, sans-serif">117</font></td>
<td align="left" bgcolor="#eeeeee">&nbsp;</td>
</tr>
<tr valign="top">
  <td align="left">&nbsp;</td>
  <td align="left">&nbsp;</td>
  <td align="right">&nbsp;</td>
  <td align="right"><hr noshade size=1></td>
  <td align="left">&nbsp;</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"><i>SuperH Joint Venture</i></font></p>
<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. The joint
    venture, SuperH Inc., was initially capitalized with the Company&#146;s contribution of $15 million of cash plus internally developed technologies with an agreed intrinsic value of $14 million for a 44% interest. Renesas Technology Corp. contributed $37 million of cash for a 56% interest. The Company accounts for its share in the SuperH, Inc. joint venture under the equity method based on the actual results of the joint venture. During 2002 and 2003, the Company made additional capital contributions on which accumulated losses have exceeded the Company&#146;s
    total investment, which
is shown at a zero carrying value at April 2, 2005.</font></p>
<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="f13"></a>
<p><font size="2" face="Arial, Helvetica, sans-serif"><a href="#contents">Back
      to Contents</a></font></p>
<p align="left">&nbsp;</p>
<p align="left"><font size="2" face="Arial, Helvetica, sans-serif">In 2004, the shareholders agreed to restructure the joint venture by transferring the intellectual properties to each shareholder and continuing any further development individually. In March 2005, the Board of Directors decided to close the joint venture. The Company estimates that no future losses will result from this liquidation in excess of the existing provisions.</font></p>
<p align="left"><font size="2" face="Arial, Helvetica, sans-serif"><i>UPEK Inc.</i></font></p>
<p align="left"><font size="2" face="Arial, Helvetica, sans-serif">In the first
    quarter of 2004, the Company and Sofinnova Capital IV FCPR formed a new company,
    UPEK Inc., as a venture capitalist-funded spin-off of the Company&#146;s TouchChip business. UPEK, Inc. was initially capitalized with the Company&#146;s transfer of the business, personnel and technology assets related to the fingerprint biometrics business, formerly known as the TouchChip Business Unit, for a 48% interest. Sofinnova Capital IV FCPR contributed $11 million of cash for a 52% interest. The shareholder agreement requires Sofinnova Capital IV FCPR to additionally contribute $9 million within approximately 12 months from the first quarter of 2004. During the first quarter of 2005, such contribution was made by Sofinnova Capital IV FCPR,
reducing the Company&#146;s ownership to 33%. </font></p>
<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.  </font></p>
<p align="left"><font size="2" face="Arial, Helvetica, sans-serif"><i>DNP Photomask Europe S.p.A.</i></font></p>
<p align="left"><font size="2" face="Arial, Helvetica, sans-serif">The Company
    entered into a joint venture agreement in 2002 with Dai Nippon Printing Co,
    Ltd for the development and production of photomask in which the Company
    holds a 19% interest. The joint venture, DNP Photomask Europe S.p.A, was
    initially capitalized with the Company&#146;s contribution of &euro;2 million
    of cash. Dai Nippon Printing Co, Ltd contributed &euro;8 million of cash
    for an 81% interest. In the event of the liquidation of the joint venture,
    the Company is required to repurchase the land at cost, and the facility
    at 10% of its net book value, if no suitable buyer is identified. No provision
    for this obligation has been registered so far. At April 2, 2005, the Company&#146;s
    total contribution to the joint venture is $10 million. The Company continues
    to maintain its 19% ownership of the joint venture, and accounts for this
investment under the cost method.</font></p>
<p align="left"><font size="2" face="Arial, Helvetica, sans-serif">The Company has identified the joint venture relationship as a Variable Interest Entity (VIE), but has determined that it is not the primary beneficiary of the VIE.  The Company estimates that no future loss exposure will result from the joint venture.</font></p>
<p align="center"><font face="Arial, Helvetica, sans-serif" size="2">F-14</font></p>
<hr noshade align="center" width="100%" size="2">
<div style="page-break-before:always"></div>
<page>
<a name="f14"></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"><b>12. Long-term Debt </b></font></p>
<p align="left"><font size="2" face="Arial, Helvetica, sans-serif">Long-term debt consisted of the following:</font></p>
<table width="100%" cellspacing="0" cellpadding="0" align="center" border="0">
<tr valign="top">
<td align="left"><font size="1" face="Arial, Helvetica, sans-serif">&nbsp;</font></td>
<td align="left"><font size="1">&nbsp;</font></td>
<td align="right"><font size="1">&nbsp;</font></td>
<td align="center"><font size="1" face="Arial, Helvetica, sans-serif"><b>            (Unaudited)</b></font></td>
<td align="left"><font size="1">&nbsp;</font></td>
<td align="right"><font size="1">&nbsp;</font></td>
<td align="center"><font size="1" face="Arial, Helvetica, sans-serif">(Audited)</font></td>
<td align="left"><font size="1">&nbsp;</font></td>
</tr>
<tr valign="top" bgcolor="#FFFFFF">
  <td align="left">&nbsp;</td>
  <td align="left">&nbsp;</td>
  <td align="right">&nbsp;</td>
  <td align="center"><hr noshade size=1></td>
  <td align="left">&nbsp;</td>
  <td align="right">&nbsp;</td>
  <td align="center"><hr noshade size=1></td>
  <td align="left">&nbsp;</td>
</tr>
<tr valign="top" bgcolor="#FFFFFF">
<td align="left"><font size="2" face="Arial, Helvetica, sans-serif">In millions
    of U.S dollars          </font></td>
<td align="left" width="2%"><font size="1">&nbsp;</font></td>
<td width="1%" align="right"><font size="1">&nbsp;</font></td>
<td width="12%" align="center"><font size="1" face="Arial, Helvetica, sans-serif"><b>As at  April 2, 2005</b></font></td>
<td width="2%" align="left"><font size="1">&nbsp;</font></td>
<td width="1%" align="right"><font size="1">&nbsp;</font></td>
<td width="14%" align="center"><font size="1" face="Arial, Helvetica, sans-serif">As at December 31, 2004</font></td>
<td width="2%" align="left"><font size="1">&nbsp;</font></td> </tr>
<tr valign="top">
<td align="left"></td>
<td align="left"><font size="1">&nbsp;</font></td>
<td align="right"><font size="1">&nbsp;</font></td>
<td align="left">
  <hr noshade size=1></td>
<td align="left"><font size="1">&nbsp;</font></td>
<td align="right"><font size="1">&nbsp;</font></td>
<td align="left"><hr noshade size=1></td>
<td align="left"><font size="1">&nbsp;</font></td>
</tr>
<tr valign="top" bgcolor="#FFFFFF">
<td align="left"><font size="2" face="Arial, Helvetica, sans-serif"><b>Bank loans:</b></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"></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" bgcolor="#eeeeee">
<td align="left"><font size="2" face="Arial, Helvetica, sans-serif">2.52% (weighted average) due 2007, fixed interest rate</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">153</font></td>
<td align="left">&nbsp;</td>
</tr>
<tr valign="top" bgcolor="#FFFFFF">
<td align="left"><font size="2" face="Arial, Helvetica, sans-serif">2.46% (weighted average) due 2006, floating interest rate at Libor + 0.30</font></td>
<td align="left">&nbsp;</td>
<td align="right">&nbsp;</td>
<td align="right"><font size="2" face="Arial, Helvetica, sans-serif">81</font></td>
<td align="left">&nbsp;</td>
<td align="right">&nbsp;</td>
<td align="right"><font size="2" face="Arial, Helvetica, sans-serif">105</font></td>
<td align="left">&nbsp;</td>
</tr>
<tr valign="top" bgcolor="#eeeeee">
<td align="left"><font size="2" face="Arial, Helvetica, sans-serif">3.80% (weighted average) due 2007, floating interest rate</font></td>
<td align="left">&nbsp;</td>
<td align="right">&nbsp;</td>
<td align="right"><font size="2" face="Arial, Helvetica, sans-serif">42</font></td>
<td align="left">&nbsp;</td>
<td align="right">&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">
<td align="left"></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" bgcolor="#FFFFFF">
<td align="left"><font size="2" face="Arial, Helvetica, sans-serif"><b>Funding program loans:</b></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"></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" bgcolor="#FFFFFF">
<td align="left"><font size="2" face="Arial, Helvetica, sans-serif">1.09% (weighted average), due 2009, fixed interest rate</font></td>
<td align="left">&nbsp;</td>
<td align="right">&nbsp;</td>
<td align="right"><font size="2" face="Arial, Helvetica, sans-serif">97</font></td>
<td align="left">&nbsp;</td>
<td align="right">&nbsp;</td>
<td align="right"><font size="2" face="Arial, Helvetica, sans-serif">102</font></td>
<td align="left">&nbsp;</td>
</tr>
<tr valign="top" bgcolor="#eeeeee">
<td align="left"><font size="2" face="Arial, Helvetica, sans-serif">0.83%  (weighted average), due 2017, fixed interest rate</font></td>
<td align="left">&nbsp;</td>
<td align="right">&nbsp;</td>
<td align="right"><font size="2" face="Arial, Helvetica, sans-serif">52</font></td>
<td align="left">&nbsp;</td>
<td align="right">&nbsp;</td>
<td align="right"><font size="2" face="Arial, Helvetica, sans-serif">55</font></td>
<td align="left">&nbsp;</td>
</tr>
<tr valign="top" bgcolor="#FFFFFF">
<td align="left"><font size="2" face="Arial, Helvetica, sans-serif">3.43% (weighted average), due 2012, fixed interest rate</font></td>
<td align="left">&nbsp;</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>
<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" bgcolor="#eeeeee">
<td align="left"><font size="2" face="Arial, Helvetica, sans-serif">5.35% (weighted average), due 2006, fixed interest rate</font></td>
<td align="left">&nbsp;</td>
<td align="right">&nbsp;</td>
<td align="right"><font size="2" face="Arial, Helvetica, sans-serif">12</font></td>
<td align="left">&nbsp;</td>
<td align="right">&nbsp;</td>
<td align="right"><font size="2" face="Arial, Helvetica, sans-serif">13</font></td>
<td align="left">&nbsp;</td>
</tr>
<tr valign="top">
<td align="left"></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" bgcolor="#FFFFFF">
<td align="left"><font size="2" face="Arial, Helvetica, sans-serif"><b>Capital leases:</b></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"></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" bgcolor="#FFFFFF">
<td align="left"><font size="2" face="Arial, Helvetica, sans-serif">4.79% due 2011, fixed interest rate</font></td>
<td align="left">&nbsp;</td>
<td align="right">&nbsp;</td>
<td align="right"><font size="2" face="Arial, Helvetica, sans-serif">32</font></td>
<td align="left">&nbsp;</td>
<td align="right">&nbsp;</td>
<td align="right"><font size="2" face="Arial, Helvetica, sans-serif">35</font></td>
<td align="left">&nbsp;</td>
</tr>
<tr valign="top">
<td align="left"></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" bgcolor="#FFFFFF">
<td align="left"><font size="2" face="Arial, Helvetica, sans-serif"><b>Convertible debt:</b></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"></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" bgcolor="#eeeeee">
<td align="left"><font size="2" face="Arial, Helvetica, sans-serif">-0.50% convertible bonds due 2013</font></td>
<td align="left">&nbsp;</td>
<td align="right">&nbsp;</td>
<td align="right"><font size="2" face="Arial, Helvetica, sans-serif">1,379</font></td>
<td align="left">&nbsp;</td>
<td align="right">&nbsp;</td>
<td align="right"><font size="2" face="Arial, Helvetica, sans-serif">1,379</font></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">&nbsp;</td>
<td align="right">&nbsp;</td>
<td align="left">
  <hr noshade size=1></td>
<td align="left">&nbsp;</td>
<td align="right">&nbsp;</td>
<td align="left">
  <hr noshade size=1></td>
<td align="left">&nbsp;</td>
</tr>
<tr valign="top">
<td align="left"><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" bgcolor="#FFFFFF">
<td align="left"><font size="2" face="Arial, Helvetica, sans-serif"><b>Total  long-term debt</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>1,860</b></font></td>
<td align="left">&nbsp;</td>
<td align="right">&nbsp;</td>
<td align="right"><font size="2" face="Arial, Helvetica, sans-serif">1,900</font></td>
<td align="left">&nbsp;</td>
</tr>
<tr valign="top" bgcolor="#eeeeee">
<td align="left"><font size="2" face="Arial, Helvetica, sans-serif">Less current portion</font></td>
<td align="left">&nbsp;</td>
<td align="right">&nbsp;</td>
<td align="right"><font size="2" face="Arial, Helvetica, sans-serif">  158</font></td>
<td align="left">&nbsp;</td>
<td align="right">&nbsp;</td>
<td align="right"><font size="2" face="Arial, Helvetica, sans-serif">133</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"><hr noshade size=1></td>
  <td align="left">&nbsp;</td>
  <td align="right">&nbsp;</td>
  <td align="left"><hr noshade size=1></td>
  <td align="left">&nbsp;</td>
</tr>
<tr valign="top">
<td align="left"><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" bgcolor="#FFFFFF">
<td align="left"><font size="2" face="Arial, Helvetica, sans-serif"><b>Total long-term debt, less current portion</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>1,702</b></font></td>
<td align="left">&nbsp;</td>
<td align="right">&nbsp;</td>
<td align="right"><font size="2" face="Arial, Helvetica, sans-serif">1,767</font></td>
<td align="left">&nbsp;</td>
</tr>
<tr valign="top" bgcolor="#FFFFFF">
  <td align="left">&nbsp;</td>
  <td align="left">&nbsp;</td>
  <td align="right">&nbsp;</td>
  <td align="right"><hr noshade size=1></td>
  <td align="left">&nbsp;</td>
  <td align="right">&nbsp;</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"><b>13. Earnings
      (Loss) per Share </b></font></p>
<p align="left"><font size="2" face="Arial, Helvetica, sans-serif">Basic net
    earnings (loss) per share  is computed based on net income
    (loss) 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 earnings (loss) per share is computed
    using the weighted-average number of common shares and dilutive potential
    common
    shares
    outstanding during the period, such as stock issuable pursuant to the exercise
of stock options outstanding and the conversion of convertible debt. </font></p>
<p align="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="f15"></a>
<p><font size="2" face="Arial, Helvetica, sans-serif"><a href="#contents">Back
      to Contents</a></font></p>
<p align="left">&nbsp;</p>
<p align="left"><font size="2" face="Arial, Helvetica, sans-serif">(In millions of U.S. dollars, except per share amounts): </font></p>
<table width="100%" cellspacing="0" cellpadding="0" align="center" border="0">
<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 colspan="4" align="center"><font size="1" face="Arial, Helvetica, sans-serif">(unaudited)</font></td>
<td align="center">&nbsp;</td>
<td align="center" bgcolor="#FFFFFF">&nbsp;</td>
<td align="left" bgcolor="#FFFFFF">&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 colspan="4" align="center"><font size="1" face="Arial, Helvetica, sans-serif">Three Months Ended</font></td>
<td align="center">&nbsp;</td>
<td align="center" bgcolor="#FFFFFF">&nbsp;</td>
<td align="left" bgcolor="#FFFFFF">&nbsp;</td>
</tr>
<tr valign="top">
  <td align="left">&nbsp;</td>
  <td align="left">&nbsp;</td>
  <td align="right">&nbsp;</td>
  <td colspan="4" align="center"><hr noshade size="1"></td>
  <td align="center">&nbsp;</td>
  <td align="center" bgcolor="#FFFFFF">&nbsp;</td>
  <td align="left" bgcolor="#FFFFFF">&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>April 2,</b></font><font face="Arial, Helvetica, sans-serif"><br>
    <font size="1"><b>2005</b></font></font></td>
<td align="left">&nbsp;</td>
<td align="right">&nbsp;</td>
<td align="center"><font size="1" face="Arial, Helvetica, sans-serif">March 27,</font><font face="Arial, Helvetica, sans-serif"><br>
    <font size="1">2004</font></font></td>
<td align="center">&nbsp;</td>
<td align="center" bgcolor="#FFFFFF">&nbsp;</td>
<td align="left" bgcolor="#FFFFFF">&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="left">
  <hr noshade size="1"></td>
<td align="left">&nbsp;</td>
<td align="right">&nbsp;</td>
<td align="left"><hr noshade size="1"></td>
<td align="left">&nbsp;</td>
<td align="left" bgcolor="#FFFFFF">&nbsp;</td>
<td align="left" bgcolor="#FFFFFF">&nbsp;</td>
</tr>
<tr valign="top">
<td align="left" bgcolor="#FFFFFF"><font size="2" face="Arial, Helvetica, sans-serif"><b>Basic
      Earnings (Loss) per Share:</b></font></td>
<td width="2%" align="left" bgcolor="#FFFFFF">&nbsp;</td>
<td width="1%" align="right" bgcolor="#FFFFFF">&nbsp;</td>
<td width="10%" align="left" bgcolor="#FFFFFF"><font size="2" face="Arial, Helvetica, sans-serif">&nbsp;</font></td>
<td width="2%" align="left" bgcolor="#FFFFFF">&nbsp;</td>
<td width="1%" align="right" bgcolor="#FFFFFF">&nbsp;</td>
<td width="10%" align="left" bgcolor="#FFFFFF"><font size="2" face="Arial, Helvetica, sans-serif">&nbsp;</font></td>
<td width="2%" align="left" bgcolor="#FFFFFF">&nbsp;</td>
<td width="10%" align="left" bgcolor="#FFFFFF">&nbsp;</td>
<td width="10%" align="left" bgcolor="#FFFFFF">&nbsp;</td> </tr>
<tr valign="top">
<td align="left" bgcolor="#eeeeee"><font size="2" face="Arial, Helvetica, sans-serif">Net income
    (loss)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</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">(31</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">77</font></td>
<td align="right" bgcolor="#eeeeee">&nbsp;</td>
<td align="right" bgcolor="#FFFFFF">&nbsp;</td>
<td align="left" bgcolor="#FFFFFF">&nbsp;</td>
</tr>
<tr valign="top">
<td align="left" bgcolor="#FFFFFF"><font size="2" face="Arial, Helvetica, sans-serif">Weighted average shares outstanding </font></td>
<td align="left" bgcolor="#FFFFFF">&nbsp;</td>
<td align="right" bgcolor="#FFFFFF">&nbsp;</td>
<td align="right" bgcolor="#FFFFFF"><font size="2" face="Arial, Helvetica, sans-serif">891,928,298</font></td>
<td align="left" bgcolor="#FFFFFF">&nbsp;</td>
<td align="right" bgcolor="#FFFFFF">&nbsp;</td>
<td align="right" bgcolor="#FFFFFF"><font size="2" face="Arial, Helvetica, sans-serif">890,211,387</font></td>
<td align="right" bgcolor="#FFFFFF">&nbsp;</td>
<td align="right" bgcolor="#FFFFFF">&nbsp;</td>
<td align="left" bgcolor="#FFFFFF">&nbsp;</td>
</tr>
<tr valign="top">
<td align="left" bgcolor="#eeeeee"><font size="2" face="Arial, Helvetica, sans-serif"><b>Earnings
    (Loss) per Share (basic)</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">(0.03</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">0.09</font></td>
<td align="right" bgcolor="#eeeeee">&nbsp;</td>
<td align="right" bgcolor="#FFFFFF">&nbsp;</td>
<td align="left" bgcolor="#FFFFFF">&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="left">
  <hr noshade size="1"></td>
<td align="left">&nbsp;</td>
<td align="right">&nbsp;</td>
<td align="left"><hr noshade size="1"></td>
<td align="left">&nbsp;</td>
<td align="left" bgcolor="#FFFFFF">&nbsp;</td>
<td align="left" bgcolor="#FFFFFF">&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="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="left" bgcolor="#FFFFFF">&nbsp;</td>
<td align="left" bgcolor="#FFFFFF">&nbsp;</td>
</tr>
<tr valign="top">
<td align="left" bgcolor="#FFFFFF"><font size="2" face="Arial, Helvetica, sans-serif">Diluted
    Earnings (Loss) per Share:</font></td>
<td align="left" bgcolor="#FFFFFF">&nbsp;</td>
<td align="right" bgcolor="#FFFFFF">&nbsp;</td>
<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="right" bgcolor="#FFFFFF">&nbsp;</td>
<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" bgcolor="#FFFFFF">&nbsp;</td>
<td align="left" bgcolor="#FFFFFF">&nbsp;</td>
</tr>
<tr valign="top">
<td align="left" bgcolor="#FFFFFF"><font size="2" face="Arial, Helvetica, sans-serif">Net income (loss)</font></td>
<td align="left" bgcolor="#FFFFFF">&nbsp;</td>
<td align="right" bgcolor="#FFFFFF">&nbsp;</td>
<td align="right" bgcolor="#FFFFFF"><font size="2" face="Arial, Helvetica, sans-serif">(31</font></td>
<td align="left" bgcolor="#FFFFFF"><font size="2" face="Arial, Helvetica, sans-serif">)</font></td>
<td align="right" bgcolor="#FFFFFF">&nbsp;</td>
<td align="right" bgcolor="#FFFFFF"><font size="2" face="Arial, Helvetica, sans-serif">77</font></td>
<td align="right" bgcolor="#FFFFFF">&nbsp;</td>
<td align="right" bgcolor="#FFFFFF">&nbsp;</td>
<td align="left" bgcolor="#FFFFFF">&nbsp;</td>
</tr>
<tr valign="top">
<td align="left" bgcolor="#eeeeee"><font size="2" face="Arial, Helvetica, sans-serif">Interest
    expense on convertible debt, net of tax  </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">&#151;</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</font></td>
<td align="right" bgcolor="#eeeeee">&nbsp;</td>
<td align="right" bgcolor="#FFFFFF">&nbsp;</td>
<td align="left" bgcolor="#FFFFFF">&nbsp;</td>
</tr>
<tr valign="top">
<td align="left" bgcolor="#FFFFFF"><font size="2" face="Arial, Helvetica, sans-serif">Net income (loss), adjusted</font></td>
<td align="left" bgcolor="#FFFFFF">&nbsp;</td>
<td align="right" bgcolor="#FFFFFF">&nbsp;</td>
<td align="right" bgcolor="#FFFFFF"><font size="2" face="Arial, Helvetica, sans-serif">(31</font></td>
<td align="left" bgcolor="#FFFFFF"><font size="2" face="Arial, Helvetica, sans-serif">)</font></td>
<td align="right" bgcolor="#FFFFFF">&nbsp;</td>
<td align="right" bgcolor="#FFFFFF"><font size="2" face="Arial, Helvetica, sans-serif">78</font></td>
<td align="right" bgcolor="#FFFFFF">&nbsp;</td>
<td align="right" bgcolor="#FFFFFF">&nbsp;</td>
<td align="left" bgcolor="#FFFFFF">&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="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="left" bgcolor="#FFFFFF">&nbsp;</td>
<td align="left" bgcolor="#FFFFFF">&nbsp;</td>
</tr>
<tr valign="top">
<td align="left" bgcolor="#eeeeee"><font size="2" face="Arial, Helvetica, sans-serif">Weighted average shares outstanding </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">891,928,298</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">890,211,387</font></td>
<td align="right" bgcolor="#eeeeee">&nbsp;</td>
<td align="right" bgcolor="#FFFFFF">&nbsp;</td>
<td align="left" bgcolor="#FFFFFF">&nbsp;</td>
</tr>
<tr valign="top">
<td align="left" bgcolor="#FFFFFF"><font size="2" face="Arial, Helvetica, sans-serif">Dilutive effect of stock options </font></td>
<td align="left" bgcolor="#FFFFFF">&nbsp;</td>
<td align="right" bgcolor="#FFFFFF">&nbsp;</td>
<td align="right" bgcolor="#FFFFFF"><font size="2" face="Arial, Helvetica, sans-serif">&#151;</font></td>
<td align="left" bgcolor="#FFFFFF">&nbsp;</td>
<td align="right" bgcolor="#FFFFFF">&nbsp;</td>
<td align="right" bgcolor="#FFFFFF"><font size="2" face="Arial, Helvetica, sans-serif">6,563,534</font></td>
<td align="right" bgcolor="#FFFFFF">&nbsp;</td>
<td align="right" bgcolor="#FFFFFF">&nbsp;</td>
<td align="left" bgcolor="#FFFFFF">&nbsp;</td>
</tr>
<tr valign="top">
<td align="left" bgcolor="#eeeeee"><font size="2" face="Arial, Helvetica, sans-serif">Dilutive effect of convertible 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">&#151;</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">41,880,160</font></td>
<td align="right" bgcolor="#eeeeee">&nbsp;</td>
<td align="right" bgcolor="#FFFFFF">&nbsp;</td>
<td align="left" bgcolor="#FFFFFF">&nbsp;</td>
</tr>
<tr valign="top">
<td align="left" bgcolor="#FFFFFF"><font size="2" face="Arial, Helvetica, sans-serif">Number
    of shares used in calculating Earnings (Loss) per Share</font></td>
<td align="left" bgcolor="#FFFFFF">&nbsp;</td>
<td align="right" bgcolor="#FFFFFF">&nbsp;</td>
<td align="right" bgcolor="#FFFFFF"><font size="2" face="Arial, Helvetica, sans-serif">891,928,298</font></td>
<td align="left" bgcolor="#FFFFFF">&nbsp;</td>
<td align="right" bgcolor="#FFFFFF">&nbsp;</td>
<td align="right" bgcolor="#FFFFFF"><font size="2" face="Arial, Helvetica, sans-serif">938,655,081</font></td>
<td align="right" bgcolor="#FFFFFF">&nbsp;</td>
<td align="right" bgcolor="#FFFFFF">&nbsp;</td>
<td align="left" bgcolor="#FFFFFF">&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="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="left" bgcolor="#FFFFFF">&nbsp;</td>
<td align="left" bgcolor="#FFFFFF">&nbsp;</td>
</tr>
<tr valign="top">
  <td align="left">&nbsp;</td>
  <td align="left">&nbsp;</td>
  <td align="right">&nbsp;</td>
  <td align="left"><hr noshade size="1"></td>
  <td align="left">&nbsp;</td>
  <td align="right">&nbsp;</td>
  <td align="left"><hr noshade size="1"></td>
  <td align="left">&nbsp;</td>
  <td align="left" bgcolor="#FFFFFF">&nbsp;</td>
  <td align="left" bgcolor="#FFFFFF">&nbsp;</td>
</tr>
<tr valign="top">
<td height="22" align="left" bgcolor="#eeeeee"><font size="2" face="Arial, Helvetica, sans-serif"><b>Earnings
    (Loss) per Share (diluted)  </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">(0.03</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">0.08</font></td>

<td align="right" bgcolor="#eeeeee">&nbsp;</td>
<td align="right" bgcolor="#FFFFFF">&nbsp;</td>
<td align="left" bgcolor="#FFFFFF">&nbsp;</td>
</tr>
<tr valign="top">
  <td align="left">&nbsp;</td>
  <td align="left">&nbsp;</td>
  <td align="right">&nbsp;</td>
  <td align="right"><hr noshade size="1"></td>
  <td align="left">&nbsp;</td>
  <td align="right">&nbsp;</td>
  <td align="right"><hr noshade size="1"></td>
  <td align="right">&nbsp;</td>
  <td align="right" bgcolor="#FFFFFF">&nbsp;</td>
  <td align="left" bgcolor="#FFFFFF">&nbsp;</td>
</tr>
</table>
<p align="left"><font size="2" face="Arial, Helvetica, sans-serif">As of April 2, 2005, common shares issued were 905,372,326 shares of which 13,400,000 shares were owned by the Company as treasury stock.</font></p>
<p align="left"><font size="2" face="Arial, Helvetica, sans-serif">As of April
    2, 2005, there were outstanding stock options exercisable into the equivalent
    of 64,965,725 common shares and convertible debt exercisable into the equivalent
of 41,880,114 common shares.</font></p>
<p align="left"><font size="2" face="Arial, Helvetica, sans-serif"><b>14. Retirement plans</b></font></p>
<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>
<p align="center"><font face="Arial, Helvetica, sans-serif" size="2">F-16</font></p>
<hr noshade align="center" width="100%" size="2">
<div style="page-break-before:always"></div>
<page> <a name="f16"></a>
<p><font size="2" face="Arial, Helvetica, sans-serif"><a href="#contents">Back
      to Contents</a></font></p>
<p align="left">&nbsp;</p>
<p align="left"><font size="2" face="Arial, Helvetica, sans-serif">The components of the net periodic benefit cost include the following: </font></p>
<table width="100%" cellspacing="0" cellpadding="0" align="center" border="0">
<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 colspan="4" align="center"><font size="1" face="Arial, Helvetica, sans-serif">(unaudited)</font></td>
<td align="center">&nbsp;</td>
<td align="center" bgcolor="#FFFFFF">&nbsp;</td>
<td align="left" bgcolor="#FFFFFF">&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 colspan="4" align="center"><font size="1" face="Arial, Helvetica, sans-serif">Three Months Ended</font></td>
<td align="center">&nbsp;</td>
<td align="center" bgcolor="#FFFFFF">&nbsp;</td>
<td align="left" bgcolor="#FFFFFF">&nbsp;</td>
</tr>
<tr valign="top">
  <td align="left">&nbsp;</td>
  <td align="left">&nbsp;</td>
  <td align="right">&nbsp;</td>
  <td colspan="4" align="center"><hr noshade size="1"></td>
  <td align="center">&nbsp;</td>
  <td align="center" bgcolor="#FFFFFF">&nbsp;</td>
  <td align="left" bgcolor="#FFFFFF">&nbsp;</td>
</tr>
<tr valign="top">
<td align="left"><font size="2" face="Arial, Helvetica, sans-serif">In millions of US dollars</font></td>
<td align="left">&nbsp;</td>
<td align="right">&nbsp;</td>
<td align="center"><font size="1" face="Arial, Helvetica, sans-serif"><b>April
    2,&nbsp;2005</b></font></td>
<td align="left">&nbsp;</td>
<td align="right">&nbsp;</td>
<td align="center"><font size="1" face="Arial, Helvetica, sans-serif">March
    27,&nbsp;2004</font></td>
<td align="center">&nbsp;</td>
<td align="center" bgcolor="#FFFFFF">&nbsp;</td>
<td align="left" bgcolor="#FFFFFF">&nbsp;</td>
</tr>
<tr valign="top">
  <td align="left">&nbsp;</td>
  <td align="left">&nbsp;</td>
  <td align="right">&nbsp;</td>
  <td align="left"><hr noshade size="1"></td>
  <td align="left">&nbsp;</td>
  <td align="right">&nbsp;</td>
  <td align="left"><hr noshade size="1"></td>
  <td align="left">&nbsp;</td>
  <td align="left" bgcolor="#FFFFFF">&nbsp;</td>
  <td align="left" bgcolor="#FFFFFF">&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="left"><font size="1" face="Arial, Helvetica, sans-serif">&nbsp;</font></td>
<td align="left">&nbsp;</td>
<td align="right">&nbsp;</td>
<td align="left"><font size="1" face="Arial, Helvetica, sans-serif">&nbsp;</font></td>
<td align="left">&nbsp;</td>
<td align="left" bgcolor="#FFFFFF">&nbsp;</td>
<td align="left" bgcolor="#FFFFFF">&nbsp;</td>
</tr>
<tr valign="top" bgcolor="#eeeeee">
<td align="left"><font size="2" face="Arial, Helvetica, sans-serif">Service
    cost&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</font></td>
<td align="left" width="2%">&nbsp;</td>
<td width="1%" align="right">&nbsp;</td>
<td width="10%" align="right"><font size="2" face="Arial, Helvetica, sans-serif"><b>1</b></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">4</font></td>
<td width="2%" align="right">&nbsp;</td>
<td width="10%" align="right" bgcolor="#FFFFFF">&nbsp;</td>
<td width="10%" align="left" bgcolor="#FFFFFF">&nbsp;</td> </tr>
<tr valign="top" bgcolor="#FFFFFF">
<td align="left"><font size="2" face="Arial, Helvetica, sans-serif">Interest cost</font></td>
<td align="left">&nbsp;</td>
<td align="right">&nbsp;</td>
<td align="right"><font size="2" face="Arial, Helvetica, sans-serif"><b>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">3</font></td>
<td align="right">&nbsp;</td>
<td align="right" bgcolor="#FFFFFF">&nbsp;</td>
<td align="left" bgcolor="#FFFFFF">&nbsp;</td>
</tr>
<tr valign="top" bgcolor="#eeeeee">
<td align="left"><font size="2" face="Arial, Helvetica, sans-serif">Expected return on plan assets</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</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" bgcolor="#eeeeee"><font size="2" face="Arial, Helvetica, sans-serif">(2</font></td>
<td align="right"><div align="left"><font size="2" face="Arial, Helvetica, sans-serif">)</font></div></td>
<td align="right" bgcolor="#FFFFFF">&nbsp;</td>
<td align="left" bgcolor="#FFFFFF">&nbsp;</td>
</tr>
<tr valign="top" bgcolor="#FFFFFF">
<td align="left"><font size="2" face="Arial, Helvetica, sans-serif">Amortization of net (gain) and loss</font></td>
<td align="left">&nbsp;</td>
<td align="right">&nbsp;</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">&nbsp;</td>
<td align="right"><font size="2" face="Arial, Helvetica, sans-serif">1</font></td>
<td align="right">&nbsp;</td>
<td align="right" bgcolor="#FFFFFF">&nbsp;</td>
<td align="left" bgcolor="#FFFFFF">&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="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="left" bgcolor="#FFFFFF">&nbsp;</td>
<td align="left" bgcolor="#FFFFFF">&nbsp;</td>
</tr>
<tr valign="top" bgcolor="#FFFFFF">
  <td align="left">&nbsp;</td>
  <td align="left">&nbsp;</td>
  <td align="right">&nbsp;</td>
  <td align="right"><hr noshade size="1"></td>
  <td align="left">&nbsp;</td>
  <td align="right">&nbsp;</td>
  <td align="right"><hr noshade size="1"></td>
  <td align="right">&nbsp;</td>
  <td align="right" bgcolor="#FFFFFF">&nbsp;</td>
  <td align="left" bgcolor="#FFFFFF">&nbsp;</td>
</tr>
<tr valign="top" bgcolor="#FFFFFF">
<td align="left" bgcolor="#eeeeee"><font size="2" face="Arial, Helvetica, sans-serif"><b>Net periodic benefit cost </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>3</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">6</font></td>
<td align="right" bgcolor="#eeeeee">&nbsp;</td>
<td align="right" bgcolor="#FFFFFF">&nbsp;</td>
<td align="left" bgcolor="#FFFFFF">&nbsp;</td>
</tr>
<tr valign="top" bgcolor="#FFFFFF">
  <td align="left">&nbsp;</td>
  <td align="left">&nbsp;</td>
  <td align="right">&nbsp;</td>
  <td align="right"><hr noshade size="1"></td>
  <td align="left">&nbsp;</td>
  <td align="right">&nbsp;</td>
  <td align="right"><hr noshade size="1"></td>
  <td align="right">&nbsp;</td>
  <td align="right" bgcolor="#FFFFFF">&nbsp;</td>
  <td align="left" bgcolor="#FFFFFF">&nbsp;</td>
</tr>
</table>
<p align="left"><font size="2" face="Arial, Helvetica, sans-serif">Employer contributions expected to be paid in 2005 are consistent with the amounts disclosed in the consolidated financial statements for the year ended December 31, 2004.</font></p>
<p align="left"><font size="2" face="Arial, Helvetica, sans-serif"><b>15. Fair value of stock-based compensation </b></font></p>
<p align="left"><font size="2" face="Arial, Helvetica, sans-serif">At April 2,
    2005, the Company has five stock-based employee and Supervisory Board compensation
    plans as well as an employee share purchase plan which are described in detail
    in Note 17 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 under those plans were granted
    at 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  is required by Statement of Financial Accounting Standards
    Board No. 123 <i>Accounting for Stock-Based Compensation</i> (FAS 123) as
    if the Company had accounted for its stock-based awards to employees under
    the fair value method prescribed by FAS 123, which results in a charge for
    total stock-based employee expense, net of related tax effects. </font></p>
<p align="left"><font size="2" face="Arial, Helvetica, sans-serif">The fair value of the Company's stock-based awards to employees was estimated using a Black-Scholes option-pricing model. Forfeitures of options are reflected in the pro forma charge as they occur. For those stock option plans with graded vesting periods, the Company has determined the historical exercise activity for such plans actually reflects that employees exercise the option after the close of the graded vesting period. Therefore, the Company recognizes the estimated pro forma charge for plans with graded vesting periods on a straight-line basis.</font></p>
<p align="left"><font size="2" face="Arial, Helvetica, sans-serif">The fair value was estimated using the following weighted-average assumptions:</font></p>
<table width="100%" cellspacing="0" cellpadding="0" align="center" border="0">
<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>Three months</b></font><font face="Arial, Helvetica, sans-serif"><br>
    <font size="1"><b>ended April 2, 2005</b></font></font></td>
<td align="left">&nbsp;</td>
<td align="right">&nbsp;</td>
<td align="center"><font size="1" face="Arial, Helvetica, sans-serif">Three months</font><font face="Arial, Helvetica, sans-serif"><br>
    <font size="1">ended March 27, 2004</font></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"><hr noshade size="1"></td>
  <td align="left">&nbsp;</td>
  <td align="right">&nbsp;</td>
  <td align="left"><hr noshade size="1"></td>
  <td align="left">&nbsp;</td>
</tr>
<tr valign="top">
<td align="left"><font size="1" face="Arial, Helvetica, sans-serif">&nbsp;</font></td>
<td align="left">&nbsp;</td>
<td align="right">&nbsp;</td>
<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="left"><font size="1" 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">Expected life (years)</font></td>
<td align="left" width="2%">&nbsp;</td>
<td width="1%" align="right">&nbsp;</td>
<td width="12%" align="right"><font size="2" face="Arial, Helvetica, sans-serif"><b>6</b></font></td>
<td width="2%" align="left">&nbsp;</td>
<td width="1%" align="right">&nbsp;</td>
<td width="12%" align="right"><font size="2" face="Arial, Helvetica, sans-serif">6</font></td>
<td width="2%" align="left">&nbsp;</td> </tr>
<tr valign="top" bgcolor="#FFFFFF">
<td align="left"><font size="2" face="Arial, Helvetica, sans-serif">Volatility</font></td>
<td align="left">&nbsp;</td>
<td align="right">&nbsp;</td>
<td align="right"><font size="2" face="Arial, Helvetica, sans-serif"><b>52.9</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">57.5</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="left">&nbsp;</td>
<td align="right">&nbsp;</td>
<td align="right"><font size="2" face="Arial, Helvetica, sans-serif"><b>3.84</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">3.4</font></td>
<td align="left"><font size="2" face="Arial, Helvetica, sans-serif">%</font></td>
</tr>
<tr valign="top" bgcolor="#FFFFFF">
<td align="left"><font size="2" face="Arial, Helvetica, sans-serif">Dividend yield</font></td>
<td align="left">&nbsp;</td>
<td align="right">&nbsp;</td>
<td align="right"><font size="2" face="Arial, Helvetica, sans-serif"><b>0.69</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">0.45</font></td>
<td align="left"><font size="2" face="Arial, Helvetica, sans-serif">%</font></td>
</tr>
<tr valign="top" bgcolor="#FFFFFF">
  <td align="left">&nbsp;</td>
  <td align="left">&nbsp;</td>
  <td align="right">&nbsp;</td>
  <td align="right"><hr noshade size="1"></td>
  <td align="left">&nbsp;</td>
  <td align="right">&nbsp;</td>
  <td align="right"><hr noshade size="1"></td>
  <td align="left">&nbsp;</td>
</tr>
</table>
<p align="center"><font face="Arial, Helvetica, sans-serif" size="2">F-17</font></p>
<hr noshade align="center" width="100%" size="2">
<div style="page-break-before:always"></div>
<page> <a name="f17"></a>
<p><font size="2" face="Arial, Helvetica, sans-serif"><a href="#contents">Back
      to Contents</a></font></p>
<p align="left"><font size="2" face="Arial, Helvetica, sans-serif">The weighted
    average fair value of options granted in the first quarter of 2005 and the
    same period of 2004 was $8.60 and $14.72, respectively. </font></p>
<p align="left"><font size="2" face="Arial, Helvetica, sans-serif">The following table illustrates the effect on net income (loss) and earnings (loss) per share if the Company had applied the fair value recognition provisions of FAS 123 to employee stock-based compensation, which consists of applying the amortization of the fair-value of stock-based compensation over the vesting period.</font></p>
<table width="100%" cellspacing="0" cellpadding="0" align="center" border="0">
<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 colspan="4" align="center"><font size="1" face="Arial, Helvetica, sans-serif">(unaudited)</font></td>
<td align="center">&nbsp;</td>
<td align="center" bgcolor="#FFFFFF">&nbsp;</td>
<td align="left" bgcolor="#FFFFFF">&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>Three
      months ended </b></font><font face="Arial, Helvetica, sans-serif"><br>
    <font size="1"><b>April 2, 2005</b></font></font></td>
<td align="left">&nbsp;</td>
<td align="right">&nbsp;</td>
<td align="center"><font size="1" face="Arial, Helvetica, sans-serif">Three months ended </font><font face="Arial, Helvetica, sans-serif"><br>
    <font size="1">March 27, 2004</font></font></td>
<td align="center">&nbsp;</td>
<td align="center" bgcolor="#FFFFFF">&nbsp;</td>
<td align="left" bgcolor="#FFFFFF">&nbsp;</td>
</tr>
<tr valign="top">
  <td align="left">&nbsp;</td>
  <td align="left">&nbsp;</td>
  <td align="right">&nbsp;</td>
  <td align="left"><hr noshade size="1"></td>
  <td align="left">&nbsp;</td>
  <td align="right">&nbsp;</td>
  <td align="left"><hr noshade size="1"></td>
  <td align="left">&nbsp;</td>
  <td align="left" bgcolor="#FFFFFF">&nbsp;</td>
  <td align="left" bgcolor="#FFFFFF">&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="left"><font size="1" face="Arial, Helvetica, sans-serif">&nbsp;</font></td>
<td align="left">&nbsp;</td>
<td align="right">&nbsp;</td>
<td align="left"><font size="1" face="Arial, Helvetica, sans-serif">&nbsp;</font></td>
<td align="left">&nbsp;</td>
<td align="left" bgcolor="#FFFFFF">&nbsp;</td>
<td align="left" bgcolor="#FFFFFF">&nbsp;</td>
</tr>
<tr valign="top" bgcolor="#eeeeee">
<td align="left"><font size="2" face="Arial, Helvetica, sans-serif">Net income
    (loss), as reported</font></td>
<td align="left" width="2%">&nbsp;</td>
<td width="1%" align="right">&nbsp;</td>
<td width="10%" align="right"><font size="2" face="Arial, Helvetica, sans-serif"><b>(31</b></font></td>
<td width="2%" align="left"><font size="2" face="Arial, Helvetica, sans-serif"><b>)</b></font></td>
<td width="1%" align="right">&nbsp;</td>
<td width="10%" align="right"><font size="2" face="Arial, Helvetica, sans-serif">77</font></td>
<td width="2%" align="right">&nbsp;</td>
<td width="10%" align="right" bgcolor="#FFFFFF">&nbsp;</td>
<td width="10%" align="left" bgcolor="#FFFFFF">&nbsp;</td> </tr>
<tr valign="top" bgcolor="#FFFFFF">
<td align="left"><font size="2" face="Arial, Helvetica, sans-serif">Deduct: </font><font face="Arial, Helvetica, sans-serif"><br>
    <font size="2">Total stock-based employee compensation expense</font><br>
    <font size="2">determined under FAS 123, net of related tax effects</font></font></td>
<td align="left">&nbsp;</td>
<td align="right">&nbsp;</td>
<td align="right"><font size="2" face="Arial, Helvetica, sans-serif"><b>(36</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">(41</font></td>
<td align="right"><div align="left"><font size="2" face="Arial, Helvetica, sans-serif">)</font></div></td>
<td align="right" bgcolor="#FFFFFF">&nbsp;</td>
<td align="left" bgcolor="#FFFFFF">&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="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="left" bgcolor="#FFFFFF">&nbsp;</td>
<td align="left" bgcolor="#FFFFFF">&nbsp;</td>
</tr>
<tr valign="top" bgcolor="#eeeeee">
<td align="left"><font size="2" face="Arial, Helvetica, sans-serif">Net income
    (loss), pro forma</font></td>
<td align="left">&nbsp;</td>
<td align="right">&nbsp;</td>
<td align="right"><font size="2" face="Arial, Helvetica, sans-serif"><b>(67</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">36</font></td>
<td align="right">&nbsp;</td>
<td align="right" bgcolor="#FFFFFF">&nbsp;</td>
<td align="left" bgcolor="#FFFFFF">&nbsp;</td>
</tr>
<tr valign="top">
<td></td>
<td></td>
<td><hr noshade size="1"></td>
<td><hr noshade size="1"></td>
<td></td>
<td><hr noshade size="1"></td>
<td><hr noshade size="1"></td>
<td>&nbsp;</td>
<td bgcolor="#FFFFFF">&nbsp;</td>
<td bgcolor="#FFFFFF"></td>
</tr>
<tr valign="top" bgcolor="#FFFFFF">
<td align="left"><font size="2" face="Arial, Helvetica, sans-serif">Earnings
    (loss) per share:</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="left" bgcolor="#FFFFFF">&nbsp;</td>
<td align="left" bgcolor="#FFFFFF">&nbsp;</td>
</tr>
<tr valign="top" bgcolor="#FFFFFF">
<td align="left"><div style="margin-left: 6%; text-indent: -3%"><font size="2" face="Arial, Helvetica, sans-serif"> Basic,
    as reported</font></div></td>
<td align="left">&nbsp;</td>
<td align="right">&nbsp;</td>
<td align="right"><font size="2" face="Arial, Helvetica, sans-serif"><b>(0.03</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">0.09</font></td>
<td align="right">&nbsp;</td>
<td align="right" bgcolor="#FFFFFF">&nbsp;</td>
<td align="left" bgcolor="#FFFFFF">&nbsp;</td>
</tr>
<tr valign="top" bgcolor="#eeeeee">
<td align="left"><div style="margin-left: 6%; text-indent: -3%"><font size="2" face="Arial, Helvetica, sans-serif"> Basic,
    pro forma</font></div></td>
<td align="left">&nbsp;</td>
<td align="right">&nbsp;</td>
<td align="right"><font size="2" face="Arial, Helvetica, sans-serif"><b>(0.07</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">0.04</font></td>
<td align="right">&nbsp;</td>
<td align="right" bgcolor="#FFFFFF">&nbsp;</td>
<td align="left" bgcolor="#FFFFFF">&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="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="left" bgcolor="#FFFFFF">&nbsp;</td>
<td align="left" bgcolor="#FFFFFF">&nbsp;</td>
</tr>
<tr valign="top" bgcolor="#FFFFFF">
<td align="left"><div style="margin-left: 6%; text-indent: -3%"><font size="2" face="Arial, Helvetica, sans-serif"> Diluted,
    as reported</font></div></td>
<td align="left">&nbsp;</td>
<td align="right">&nbsp;</td>
<td align="right"><font size="2" face="Arial, Helvetica, sans-serif"><b>(0.03</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">0.08</font></td>
<td align="right">&nbsp;</td>
<td align="right" bgcolor="#FFFFFF">&nbsp;</td>
<td align="left" bgcolor="#FFFFFF">&nbsp;</td>
</tr>
<tr valign="top" bgcolor="#eeeeee">
<td align="left"><div style="margin-left: 6%; text-indent: -3%"><font size="2" face="Arial, Helvetica, sans-serif"> Diluted,
    pro forma</font></div></td>
<td align="left">&nbsp;</td>
<td align="right">&nbsp;</td>
<td align="right"><font size="2" face="Arial, Helvetica, sans-serif"><b>(0.07</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">0.04</font></td>
<td align="right">&nbsp;</td>
<td align="right" bgcolor="#FFFFFF">&nbsp;</td>
<td align="left" bgcolor="#FFFFFF">&nbsp;</td>
</tr>
<tr valign="top" bgcolor="#FFFFFF">
  <td align="left">&nbsp;</td>
  <td align="left">&nbsp;</td>
  <td align="right">&nbsp;</td>
  <td align="right"><hr noshade size="1"></td>
  <td align="left">&nbsp;</td>
  <td align="right">&nbsp;</td>
  <td align="right"><hr noshade size="1"></td>
  <td align="right">&nbsp;</td>
  <td align="right" bgcolor="#FFFFFF">&nbsp;</td>
  <td align="left" bgcolor="#FFFFFF">&nbsp;</td>
</tr>
</table>
<p align="left"><font size="2" face="Arial, Helvetica, sans-serif">In connection
    with an overall change of the Company&#146;s stock-based compensation policy,
    the Company intends to accelerate the vesting period of the outstanding unvested
stock options.</font></p>
<p align="left"><font size="2" face="Arial, Helvetica, sans-serif"><b>16. Dividends   </b></font></p>
<p align="left"><font size="2" face="Arial, Helvetica, sans-serif">At the Annual General Meeting of Shareholders on March 18, 2005, shareholders approved the distribution of $0.12 per share in cash dividends. The dividend amount of approximately $107 million will be paid in the second quarter of 2005. </font></p>
<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>
<p align="left"><font size="2" face="Arial, Helvetica, sans-serif"><b>17. Treasury Stock</b></font></p>
<p align="left"><font size="2" face="Arial, Helvetica, sans-serif">In 2002,
    the Company  repurchased 13,400,000 own shares, for a total amount of
    $348 million, which were reflected at cost as a reduction of the shareholders&#146; equity.
    The repurchased shares have been designated to be used for the Company&#146;s
employee stock option plan.</font></p>
<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="f18"></a>
<p><font size="2" face="Arial, Helvetica, sans-serif"><a href="#contents">Back
      to Contents</a></font></p>
<p align="left">&nbsp;</p>
<p align="left"><font size="2" face="Arial, Helvetica, sans-serif">As of April 2, 2005, none of the common shares repurchased had been transferred to employees under the employee stock option plan.</font></p>
<p align="left"><font size="2" face="Arial, Helvetica, sans-serif"><b>18. Contingencies</b></font></p>
<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, claims for unauthorized use of third party intellectual property,
    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 reevaluates claims to determine
    whether provisions need to be readjusted based on the most current information
    available to the Company. Adverse 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&#146;s results of operations,
cash flows or its financial position for the period in which they occur.</font></p>
<p align="left"><font size="2" face="Arial, Helvetica, sans-serif"><b>19. Claims and Legal proceedings</b></font></p>
<p align="left"><font size="2" face="Arial, Helvetica, sans-serif">The Company
    has received and may in the future receive communications alleging possible
    infringements, in particular in the case of patents and similar intellectual
    property rights of others. Furthermore, the Company may become involved in
    costly litigation brought against the Company regarding patents, mask works,
    copyrights, trademarks or trade secrets. In the event that the outcome
    of any litigation would be unfavorable to the Company, the Company may be
    required to license the underlying intellectual property right at economically
    unfavorable terms and conditions, and possibly pay damages for prior use
    and/or face an injunction, all of which individually or in the aggregate
    could have a material adverse effect on the Company&#146;s results of
operations, cash flows or financial position and ability to compete.</font></p>
<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 claims from customers
    or other parties 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&#146;s
interests, or in the event the Company needs to change its evaluation of a potential
    third-party claim, based on new evidence or communications, a material adverse
    effect could impact its operations or financial condition at the time it
were to materialize.</font></p>
<p align="left"><font size="2" face="Arial, Helvetica, sans-serif">During 2004, the Company has settled certain disputes with respect to claims and litigation relating to possible infringements of patents and similar intellectual property rights of others.  An accrual of $10 million had been established at December 31, 2003 for such claims, which was paid in the first quarter of 2005 in accordance with the final settlements. No additional accrual has been recorded in 2005 since no other risks were estimated to result in a probable loss.</font></p>
<p align="left"><font size="2" face="Arial, Helvetica, sans-serif">The Company
    is currently a party to legal proceedings with SanDisk Corporation (&#8220;SanDisk&#8221;).
    Based on management's current assumptions made with support of the company's
    outside attorneys, the Company does not believe that the
    SanDisk litigation will result in a probable loss.</font></p>
<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="psig"></a>
<p><a href="#contents"><font size="2">Back to Contents</font></a></p>
<p align="center"><font size="2" face="Arial, Helvetica, sans-serif"><b>SIGNATURES</b></font></p>
<p align="left"><font size="2" face="Arial, Helvetica, sans-serif">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Pursuant to the requirements of the Securities Exchange Act of 1934, STMicroelectronics N.V. has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.</font></p>
<table width="100%" cellspacing="0" cellpadding="0" border="0">
<tr valign="top">
<td align="left" width="6%"></td>
<td align="left" width="52%"></td>
<td align="left" width="12%"></td>
<td align="left"><font size="2" face="Arial, Helvetica, sans-serif"><b>STMicroelectronics N.V.</b></font></td>
</tr>
<tr valign="top">
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td> </tr>
<tr valign="top">
<td align="left"><font size="2" face="Arial, Helvetica, sans-serif">Date:</font></td>
<td align="left"><font size="2" face="Arial, Helvetica, sans-serif">May 4, 2005</font></td>
<td align="left"><font size="2" face="Arial, Helvetica, sans-serif">By:</font></td>
<td align="left"><font size="2" face="sans-serif">/s/</font><font size="2"> <font face="Arial, Helvetica, sans-serif">Carlo
    Bozotti</font></font></td>
</tr>
<tr valign="top">
<td></td>
<td></td>
<td></td>
<td><hr noshade size="1"></td>
</tr>
<tr valign="top">
<td align="left"></td>
<td align="left"></td>
<td align="left"><font size="2" face="Arial, Helvetica, sans-serif">Name:</font></td>
<td align="left"><font size="2" face="Arial, Helvetica, sans-serif"><b>Carlo Bozotti</b></font></td>
</tr>
<tr valign="top">
<td align="left"></td>
<td align="left"></td>
<td align="left"><font size="2" face="Arial, Helvetica, sans-serif">Title:</font></td>
<td align="left"><font size="2" face="Arial, Helvetica, sans-serif"><b>President and Chief Executive Officer and Sole Member of our Managing Board</b></font></td>
</tr>
</table>
<p align="left"><font size="2" face="Arial, Helvetica, sans-serif">&nbsp;Enclosure: STMicroelectronics N.V.&#146;s First Quarter 2005: </font></p>
<table width="100%" cellspacing="0" cellpadding="0" border="0">
<tr valign="top">
<td align="left" width="4%"><font size="2" face="Arial, Helvetica, sans-serif">&nbsp;</font></td>
<td align="left" width="2%"><font size="2" face="Arial, Helvetica, sans-serif">&#149;</font></td>
<td align="left"><font size="2" face="Arial, Helvetica, sans-serif">Operating and Financial Review and Prospects;</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">&#149;</font></td>
<td align="left"><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&#146; Equity and related
    Notes for the three months ended April 2, 2005; and </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">&#149;</font></td>
<td align="left"><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>
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<head><title>
Prepared and filed by St Ives Burrups
</title>
</head>
<body bgcolor="#FFFFFF">

<a name="pex12"></a>
<p><a href="#contents"><font size="2">Back to Contents</font></a></p>
<p align="right"><font size="2" face="Arial, Helvetica, sans-serif"><b>Exhibit 12.1</b></font></p>
<p align="center"><font size="2" face="Arial, Helvetica, sans-serif"><b>VOLUNTARY CERTIFICATION</b></font></p>
<p align="left"><font size="2" face="Arial, Helvetica, sans-serif">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;I, Carlo Bozotti, certify that: </font></p>
<table width="100%" cellspacing="0" cellpadding="0" border="0">
<tr valign="top">
<td>
<font size="2" face="Arial, Helvetica, sans-serif">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;I have reviewed this report on Form 6-K of STMicroelectronics N.V.;</font></td>
</tr>
</table>
<table width="100%" cellspacing="0" cellpadding="0" border="0">
<tr valign="top">
  <td>&nbsp;</td>
</tr>
<tr valign="top">
<td>
<font size="2" face="Arial, Helvetica, sans-serif">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;</font></td>
</tr>
</table>
<table width="100%" cellspacing="0" cellpadding="0" border="0">
<tr valign="top">
  <td>&nbsp;</td>
</tr>
<tr valign="top">
<td>
<font size="2" face="Arial, Helvetica, sans-serif">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;3.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Based on my knowledge, the Unaudited Interim Consolidated Statements of Income, Balance Sheets, Statements of Cash Flow and Statements of
Changes in Shareholders&#146; 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></td>
</tr>
</table>
<table width="100%" cellspacing="0" cellpadding="0" border="0">
<tr valign="top">
  <td>&nbsp;</td>
</tr>
<tr valign="top">
<td>
<font size="2" face="Arial, Helvetica, sans-serif">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;4.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The company&#146;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></td>
</tr>
</table>
<table width="100%" cellspacing="0" cellpadding="0" border="0">
<tr valign="top">
  <td>&nbsp;</td>
  <td>&nbsp;</td>
  <td>&nbsp;</td>
  <td>&nbsp;</td>
</tr>
<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">&nbsp;</font></td>
<td width="3%">
<font size="2" face="Arial, Helvetica, sans-serif">a)</font></td>
<td>
<font size="2" face="Arial, Helvetica, sans-serif">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></td>
</tr>
</table>
<table width="100%" cellspacing="0" cellpadding="0" border="0">
<tr valign="top">
  <td>&nbsp;</td>
  <td>&nbsp;</td>
  <td>&nbsp;</td>
  <td>&nbsp;</td>
</tr>
<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">&nbsp;</font></td>
<td width="3%">
<font size="2" face="Arial, Helvetica, sans-serif">b)</font></td>
<td>
<font size="2" face="Arial, Helvetica, sans-serif">Evaluated the effectiveness of the company&#146;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></td>
</tr>
</table>
<table width="100%" cellspacing="0" cellpadding="0" border="0">
<tr valign="top">
  <td>&nbsp;</td>
  <td>&nbsp;</td>
  <td>&nbsp;</td>
  <td>&nbsp;</td>
</tr>
<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">&nbsp;</font></td>
<td width="3%">
<font size="2" face="Arial, Helvetica, sans-serif">c)</font></td>
<td>
<font size="2" face="Arial, Helvetica, sans-serif">Disclosed in this report any change in the company&#146;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&#146;s internal control over financial reporting; and</font></td>
</tr>
</table>
<table width="100%" cellspacing="0" cellpadding="0" border="0">
<tr valign="top">
  <td>&nbsp;</td>
</tr>
<tr valign="top">
<td>
<font size="2" face="Arial, Helvetica, sans-serif">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;5.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The company&#146;s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the company&#146;s auditors and the audit committee of the company&#146;s board of directors (or persons performing the equivalent functions):</font></td>
</tr>
</table>
<table width="100%" cellspacing="0" cellpadding="0" border="0">
<tr valign="top">
  <td>&nbsp;</td>
  <td>&nbsp;</td>
  <td>&nbsp;</td>
  <td>&nbsp;</td>
</tr>
<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">&nbsp;</font></td>
<td width="3%">
<font size="2" face="Arial, Helvetica, sans-serif">a)</font></td>
<td>
<font size="2" face="Arial, Helvetica, sans-serif">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&#146;s ability to record, process, summarize and report financial information; and</font></td>
</tr>
</table>
<table width="100%" cellspacing="0" cellpadding="0" border="0">
<tr valign="top">
  <td>&nbsp;</td>
  <td>&nbsp;</td>
  <td>&nbsp;</td>
  <td>&nbsp;</td>
</tr>
<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">&nbsp;</font></td>
<td width="3%">
<font size="2" face="Arial, Helvetica, sans-serif">b)</font></td>
<td>
<font size="2" face="Arial, Helvetica, sans-serif">Any fraud, whether or not material, that involves management or other employees who have a significant role in the company&#146;s internal control over financial reporting.</font></td>
</tr>
</table>
<table width="100%" cellspacing="0" cellpadding="0" border="0">
<tr valign="top">
<td width="59%">&nbsp;</td>
<td width="7%">&nbsp;</td>
<td>&nbsp;</td> </tr>
<tr valign="top">
<td align="left"><font size="2" face="Arial, Helvetica, sans-serif">Date:&nbsp;May
    4, 2005</font></td>
<td align="left"><font size="2" face="Arial, Helvetica, sans-serif">By:&nbsp;</font></td>
<td align="left"><font size="2" face="Arial, Helvetica, sans-serif">/s/</font> <font size="2" face="Arial, Helvetica, sans-serif">Carlo
    Bozotti</font></td>
</tr>
<tr valign="top">
<td></td>
<td></td>
<td><hr noshade size="1"></td>
</tr>
<tr valign="top">
<td align="left"></td>
<td align="left"><font size="2" face="Arial, Helvetica, sans-serif">Name:</font></td>
<td align="left"><font size="2" face="Arial, Helvetica, sans-serif"><b>Carlo Bozotti</b></font></td>
</tr>
<tr valign="top">
<td align="left"></td>
<td align="left"><font size="2" face="Arial, Helvetica, sans-serif">Title:</font></td>
<td align="left"><font size="2" face="Arial, Helvetica, sans-serif"><b>President and Chief Executive Officer and Sole Member of our Managing Board</b></font></td>
</tr>
</table>
<p align="center">&nbsp;</p>
<hr noshade align="center" width="100%" size="2">
</body>
</html>
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-12
<SEQUENCE>6
<FILENAME>b792748ex12-2.htm
<TEXT>
<html>
<head><title>
Prepared and filed by St Ives Burrups
</title>
</head>
<body bgcolor="#FFFFFF">

<a name="p1"></a>
<p><a href="#contents"><font size="2">Back to Contents</font></a></p>
<p align="right"><font size="2" face="Arial, Helvetica, sans-serif"><b>Exhibit 12.2</b></font></p>
<p align="center"><font size="2" face="Arial, Helvetica, sans-serif"><b>VOLUNTARY CERTIFICATION</b></font></p>
<p align="left"><font size="2" face="Arial, Helvetica, sans-serif">I, Carlo Ferro, certify that: </font></p>
<table width="100%" cellspacing="0" cellpadding="0" border="0">
<tr valign="top">
<td>
<font size="2" face="Arial, Helvetica, sans-serif">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;I have reviewed this report on Form 6-K of STMicroelectronics N.V.;</font></td>
</tr>
</table>
<table width="100%" cellspacing="0" cellpadding="0" border="0">
<tr valign="top">
  <td>&nbsp;</td>
</tr>
<tr valign="top">
<td>
<font size="2" face="Arial, Helvetica, sans-serif">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;</font></td>
</tr>
</table>
<table width="100%" cellspacing="0" cellpadding="0" border="0">
<tr valign="top">
  <td>&nbsp;</td>
</tr>
<tr valign="top">
<td>
<font size="2" face="Arial, Helvetica, sans-serif">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;3.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Based on my knowledge, the Unaudited Interim Consolidated Statements of Income, Balance Sheets, Statements of Cash Flow and Statements of
Changes in Shareholders&#146; 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></td>
</tr>
</table>
<table width="100%" cellspacing="0" cellpadding="0" border="0">
<tr valign="top">
  <td>&nbsp;</td>
</tr>
<tr valign="top">
<td>
<font size="2" face="Arial, Helvetica, sans-serif">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;4.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The company&#146;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></td>
</tr>
</table>
<table width="100%" cellspacing="0" cellpadding="0" border="0">
<tr valign="top">
  <td>&nbsp;</td>
  <td>&nbsp;</td>
  <td>&nbsp;</td>
  <td>&nbsp;</td>
</tr>
<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">&nbsp;</font></td>
<td width="3%">
<font size="2" face="Arial, Helvetica, sans-serif">a)</font></td>
<td>
<font size="2" face="Arial, Helvetica, sans-serif">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></td>
</tr>
</table>
<table width="100%" cellspacing="0" cellpadding="0" border="0">
<tr valign="top">
  <td>&nbsp;</td>
  <td>&nbsp;</td>
  <td>&nbsp;</td>
  <td>&nbsp;</td>
</tr>
<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">&nbsp;</font></td>
<td width="3%">
<font size="2" face="Arial, Helvetica, sans-serif">b)</font></td>
<td>
<font size="2" face="Arial, Helvetica, sans-serif">Evaluated the effectiveness of the company&#146;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></td>
</tr>
</table>
<table width="100%" cellspacing="0" cellpadding="0" border="0">
<tr valign="top">
  <td>&nbsp;</td>
  <td>&nbsp;</td>
  <td>&nbsp;</td>
  <td>&nbsp;</td>
</tr>
<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">&nbsp;</font></td>
<td width="3%">
<font size="2" face="Arial, Helvetica, sans-serif">c)</font></td>
<td>
<font size="2" face="Arial, Helvetica, sans-serif">Disclosed in this report any change in the company&#146;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&#146;s internal control over financial reporting; and</font></td>
</tr>
</table>
<table width="100%" cellspacing="0" cellpadding="0" border="0">
<tr valign="top">
  <td>&nbsp;</td>
</tr>
<tr valign="top">
<td>
<font size="2" face="Arial, Helvetica, sans-serif">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;5.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The company&#146;s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the company&#146;s auditors and the audit committee of the company&#146;s board of directors (or persons performing the equivalent functions):</font></td>
</tr>
</table>
<table width="100%" cellspacing="0" cellpadding="0" border="0">
<tr valign="top">
  <td>&nbsp;</td>
  <td>&nbsp;</td>
  <td>&nbsp;</td>
  <td>&nbsp;</td>
</tr>
<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">&nbsp;</font></td>
<td width="3%">
<font size="2" face="Arial, Helvetica, sans-serif">a)</font></td>
<td>
<font size="2" face="Arial, Helvetica, sans-serif">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&#146;s ability to record, process, summarize and report financial information; and</font></td>
</tr>
</table>
<table width="100%" cellspacing="0" cellpadding="0" border="0">
<tr valign="top">
  <td>&nbsp;</td>
  <td>&nbsp;</td>
  <td>&nbsp;</td>
  <td>&nbsp;</td>
</tr>
<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">&nbsp;</font></td>
<td width="3%">
<font size="2" face="Arial, Helvetica, sans-serif">b)</font></td>
<td>
<font size="2" face="Arial, Helvetica, sans-serif">Any fraud, whether or not material, that involves management or other employees who have a significant role in the company&#146;s internal control over financial reporting.</font></td>
</tr>
</table>
<table width="100%" cellspacing="0" cellpadding="0" border="0">
<tr valign="top">
<td width="59%">&nbsp;</td>
<td width="7%">&nbsp;</td>
<td>&nbsp;</td> </tr>
<tr valign="top">
<td align="left"><font size="2" face="Arial, Helvetica, sans-serif">Date:&nbsp;&nbsp;May
    4, 2005</font></td>
<td align="left"><font size="2" face="Arial, Helvetica, sans-serif">By:</font></td>
<td align="left"><font size="2" face="Arial, Helvetica, sans-serif">/s/ Carlo
    Ferro</font></td>
</tr>
<tr valign="top">
<td></td>
<td></td>
<td><hr noshade size="1"></td>
</tr>
<tr valign="top">
<td align="left"></td>
<td align="left"><font size="2" face="Arial, Helvetica, sans-serif">Name:</font></td>
<td align="left"><font size="2" face="Arial, Helvetica, sans-serif"><b>Carlo Ferro </b></font></td>
</tr>
<tr valign="top">
<td align="left"></td>
<td align="left"><font size="2" face="Arial, Helvetica, sans-serif">Title:</font></td>
<td align="left"><font size="2" face="Arial, Helvetica, sans-serif"><b>Executive Vice President and Chief Financial Officer</b></font></td>
</tr>
</table>
<p align="center">&nbsp;</p>
<hr noshade align="center" width="100%" size="2">
</body>
</html>
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-13
<SEQUENCE>7
<FILENAME>b792748ex13-1.htm
<TEXT>
<html>
<head><title>
Prepared and filed by St Ives Burrups
</title>
</head>
<body bgcolor="#FFFFFF">

<a name="p1"></a>
<p><a href="#contents"><font size="2">Back to Contents</font></a></p>
<p align="right"><font size="2" face="Arial, Helvetica, sans-serif"><b>Exhibit 13.1</b></font></p>
<table width="100%" cellspacing="0" cellpadding="0" border="0">
<tr valign="top">
  <td align="center" width="9%">&nbsp;</td>
<td align="center"><font size="2" face="Arial, Helvetica, sans-serif">VOLUNTARY
    CERTIFICATION OF CARLO BOZOTTI, PRESIDENT AND CHIEF EXECUTIVE OFFICER AND
    SOLE MEMBER OF THE MANAGING BOARD OF STMICROELECTRONICS N.V. AND CARLO FERRO,
    EXECUTIVE VICE PRESIDENT AND CHIEF FINANCIAL OFFICER OF STMICROELECTRONICS
    N.V., PURSUANT TO SECTION 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO<br>
    SECTION
    906 OF THE SARBANES-OXLEY ACT OF 2002</font></td>
  <td align="center" width="9%">&nbsp;</td>
</tr>
</table>
<p align="left"><font size="2" face="Arial, Helvetica, sans-serif">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In connection with the Report on Form 6-K of
STMicroelectronics N.V. (the &#147;Company&#148;) for the period ending April 2, 2005, as submitted to the Securities and Exchange Commission on the date hereof
(the &#147;Report&#148;), the undersigned hereby certify that to the best of our knowledge: </font></p>
<table width="100%" cellspacing="0" cellpadding="0" border="0">
<tr valign="top">
<td>
<font size="2" face="Arial, Helvetica, sans-serif">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Report fully complies with the requirements of Section 13(a) of the Securities Exchange Act of 1934; and</font></td>
</tr>
</table>
<table width="100%" cellspacing="0" cellpadding="0" border="0">
<tr valign="top">
  <td>&nbsp;</td>
</tr>
<tr valign="top">
<td>
<font size="2" face="Arial, Helvetica, sans-serif">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.</font></td>
</tr>
</table>
<table width="100%" cellspacing="0" cellpadding="0" border="0">
<tr valign="top">
  <td align="left">&nbsp;</td>
  <td align="left">&nbsp;</td>
  <td align="left">&nbsp;</td>
</tr>
<tr valign="top">
<td align="left" width="58%"><font size="2" face="Arial, Helvetica, sans-serif">Date:
    May 4, 2005 </font></td>
<td align="left" width="8%"><font size="2" face="Arial, Helvetica, sans-serif">By:</font></td>
<td align="left"><font size="2" face="Arial, Helvetica, sans-serif">/s/ Carlo
    Bozotti</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, Helvetica, sans-serif">&nbsp;</font></td>
<td align="left"><font size="2" face="Arial, Helvetica, sans-serif">Name:&nbsp;&nbsp;</font></td>
<td align="left"><font size="2" face="Arial, Helvetica, sans-serif"><b>Carlo Bozotti</b></font></td>
</tr>
<tr valign="top">
<td align="left"></td>
<td align="left"><font size="2" face="Arial, Helvetica, sans-serif">Title:&nbsp;&nbsp;</font></td>
<td align="left"><font size="2" face="Arial, Helvetica, sans-serif"><b>President and Chief Executive Officer and Sole Member of our Managing Board </b></font></td>
</tr>
<tr valign="top">
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td> </tr>
<tr valign="top">
<td align="left"><font size="2" face="Arial, Helvetica, sans-serif">Date: May
    4, 2005 </font></td>
<td align="left"><font size="2" face="Arial, Helvetica, sans-serif">By:</font></td>
<td align="left"><font size="2" face="Arial, Helvetica, sans-serif">/s/ Carlo
    Ferro</font></td>
</tr>
<tr valign="top">
<td></td>
<td></td>
<td><hr noshade size="1"></td>
</tr>
<tr valign="top">
<td align="left"></td>
<td align="left"><font size="2" face="Arial, Helvetica, sans-serif">Name:&nbsp;&nbsp;</font></td>
<td align="left"><font size="2" face="Arial, Helvetica, sans-serif"><b>Carlo Ferro</b></font></td>
</tr>
<tr valign="top">
<td align="left"></td>
<td align="left"><font size="2" face="Arial, Helvetica, sans-serif">Title:&nbsp;&nbsp;</font></td>
<td align="left"><font size="2" face="Arial, Helvetica, sans-serif"><b>Executive&nbsp;Vice&nbsp;President&nbsp;and<br>Chief Financial Officer</b></font></td>
</tr>
</table>
<p align="center">&nbsp;</p>
<hr noshade align="center" width="100%" size="2">
</body>
</html>
</TEXT>
</DOCUMENT>
</SEC-DOCUMENT>
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