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<SEC-DOCUMENT>0001308179-05-000106.txt : 20051109
<SEC-HEADER>0001308179-05-000106.hdr.sgml : 20051109
<ACCEPTANCE-DATETIME>20051109164101
ACCESSION NUMBER:		0001308179-05-000106
CONFORMED SUBMISSION TYPE:	6-K
PUBLIC DOCUMENT COUNT:		6
CONFORMED PERIOD OF REPORT:	20051109
FILED AS OF DATE:		20051109
DATE AS OF CHANGE:		20051109

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:		051190552

	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>texte.htm
<DESCRIPTION>STMICROELECTRONICS FORM 6-K
<TEXT>
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<TITLE>STMICROELECTRONICS Form 6-K</TITLE>
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<P style="margin-top:0pt; margin-bottom:10pt; font-family:Times New Roman" align=center><B>SECURITIES AND EXCHANGE COMMISSION<BR>
Washington, D. C. 20549</B></P>
<P style="margin-top:0pt; margin-bottom:14pt; line-height:16pt; font-family:Times New Roman; font-size:14pt" align=center><B>FORM 6-K</B></P>
<P style="margin:0pt; font-family:Times New Roman" align=center><B>REPORT OF FOREIGN PRIVATE ISSUER</B></P>
<P style="margin:0pt; font-family:Times New Roman" align=center><B>PURSUANT TO RULE 13a-16 or 15d-16 OF</B></P>
<P style="margin:0pt; font-family:Times New Roman" align=center><B>THE SECURITIES EXCHANGE ACT OF 1934</B></P>
<P style="margin:0pt; font-family:Times New Roman" align=center><B><BR></B></P>
<P style="margin:0pt; font-family:Times New Roman" align=center><B>Report on Form 6-K dated November 9, 2005</B></P>
<P style="margin:0pt; font-family:Times New Roman" align=center><B>------------------------------------</B></P>
<P style="margin-top:0pt; margin-bottom:14pt; line-height:16pt; font-family:Times New Roman; font-size:14pt" align=center><B>STMicroelectronics N.V.</B></P>
<P style="margin-top:0pt; margin-bottom:10pt; font-family:Times New Roman" align=center>(Name of Registrant)</P>
<P style="margin:0pt; font-family:Times New Roman" align=center>39, Chemin du Champ-des-Filles</P>
<P style="margin:0pt; font-family:Times New Roman" align=center>1228 Plan-les-Ouates, Geneva, Switzerland</P>
<P style="margin:0pt; font-family:Times New Roman" align=center><BR></P>
<P style="margin:0pt; font-family:Times New Roman" align=center>(Address of Principal Executive Offices)</P>
<P style="margin-top:0pt; margin-bottom:1????y???0pt; font-family:Times New Roman" align=center><B>------------------------------------</B></P>
<P style="margin-top:0pt; margin-bottom:10pt; font-family:Times New Roman" align=justify>Indicate by check mark whether the registrant files or will file annual reports under cover of Form 20-F or Form 40-F:</P>
<P style="margin-top:0pt; margin-bottom:10pt; font-family:Times New Roman" align=center>Form
 20-F <img src="check.gif" width="14" height="14" align="absmiddle">&nbsp;Form
 40-F <img src="uncheck.gif" width="14" height="14" align="absmiddle"></P>
<P style="margin-top:0pt; margin-bottom:10pt; font-family:Times New Roman" align=justify>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):</P>
<P style="margin-top:0pt; margin-bottom:10pt; font-family:Times New Roman" align=center>Yes
 <img src="uncheck.gif" width="14" height="14" align="absmiddle">&nbsp;No <img src="check.gif" width="14" height="14" align="absmiddle"></P>
<P style="margin-top:0pt; margin-bottom:10pt; font-family:Times New Roman" align=justify>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:</P>
<P style="margin-top:0pt; margin-bottom:10pt; font-family:Times New Roman" align=center>Yes
 <img src="uncheck.gif" width="14" height="14" align="absmiddle">&nbsp;No <img src="check.gif" width="14" height="14" align="absmiddle"></P>
<P style="margin-top:0pt; margin-bottom:10pt; font-family:Times New Roman" align=justify>If &#147;Yes&#148; is marked, indicate below the file number assigned to the registrant in connection with Rule 12g3-2(b): 82- __________</P>
<P style="margin-top:10pt; margin-bottom:10pt; font-family:Times New Roman" align=justify>Enclosure: STMicroelectronics N.V.&#146;s Third Quarter 2005:</P>
<P style="margin-top:0pt; margin-bottom:-10pt; padding-left:36pt; text-indent:-36pt; line-height:10pt; font-family:Times New Roman; font-size:8pt">&#9679;</P>
<P style="margin-top:0pt; margin-bottom:10pt; padding-left:36pt; font-family:Times New Roman; font-size:10pt">Operating and Financial Review and Prospects;</P>
<P style="margin-top:0pt; margin-bottom:-10pt; padding-left:36pt; text-indent:-36pt; line-height:10pt; font-family:Times New Roman; font-size:8pt">&#9679;</P>
<P align="left" style="margin-top:0pt; margin-bottom:10pt; padding-left:36pt; font-family:Times New Roman; font-size:10pt">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 and nine months ended October 1, 2005; and</P>
<P style="margin-top:0pt; margin-bottom:-10pt; padding-left:36pt; text-indent:-36pt; line-height:10pt; font-family:Times New Roman; font-size:8pt">&#9679;</P>
<P align="left" style="margin-top:0pt; margin-bottom:20pt; padding-left:36pt; font-family:Times New Roman; font-size:10pt">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.</P>
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</TABLE>
<P style="margin-top:0pt; margin-bottom:10pt; font-family:Times New Roman" align=justify><BR></P><HR style="padding-top:7.2pt; padding-bottom:7.2pt" noshade size=1.333>
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<P align="center" style="margin:0pt; font-family:Times New Roman"><BR>
 <BR>
</P>
<P style="margin:0pt; font-family:Times New Roman"><BR></P>
<P style="margin-top:0pt; margin-bottom:10pt; font-family:Times New Roman" align=center><B>OPERATING AND FINANCIAL REVIEW AND PROSPECTS</B></P>
<P style="margin-top:0pt; margin-bottom:10pt; font-family:Times New Roman"><B>Overview</B></P>
<P style="margin-top:0pt; margin-bottom:10pt; font-family:Times New Roman" align=justify>The following discussion should be read in conjunction with our Unaudited Interim Consolidated Statements of Income, Balance Sheets, Statements of Cash Flows and Statements of Changes in Shareholders&#146; Equity for the three months and nine months ended October 1, 2005 and Notes thereto included elsewhere in this Form 6-K and in our annual report on Form 20-F for the year ended December 31, 2004 as filed with the U.S. Securities and Exchange Commission (the &#147;Commission&#148; or the &#147;SEC&#148;) on March 23, 2005 (the &#147;Form 20-F&#148;).&nbsp;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;&#150;Critical Accounting Policies Using Significant Estimates&#148;, &#147;&#150;Business Outl
ook&#148; and &#147;Liquidity and Capital Resources&#150;Financial Outlook&#148;.&nbsp;Our actual results may differ significantly from those projected in the forward-looking statements.&nbsp;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.&nbsp;Key Information&#150;Risk Factors&#148; included in our Form 20-F as they may be updated in our SEC submissions from time to time.&nbsp;We assume no obligation to update the forward-looking statements or such risk factors. </P>
<P style="margin-top:0pt; margin-bottom:10pt; font-family:Times New Roman"><B>Critical Accounting Policies Using Significant Estimates</B></P>
<P style="margin-top:0pt; margin-bottom:10pt; font-family:Times New Roman" align=justify>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;.&nbsp;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.&nbsp;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.&nbsp;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.&nbsp;While we regularly
 evaluate our estimates and assumptions, our actual results may differ materially
 and adversely from our estimates.&nbsp;To the extent there are material differences
 between the actual results and these estimates, our future results of operations
 could be significantly affected. </P>
<P style="margin-top:0pt; margin-bottom:10pt; font-family:Times New Roman" align=justify>We believe the following critical accounting policies require us to make significant judgments and estimates in the preparation of our consolidated financial statements:</P>
<P style="margin-top:0pt; margin-bottom:10pt; font-family:Times New Roman" align=justify><B>Revenue
 recognition</B>.&nbsp;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. </P>
<P style="margin-top:0pt; margin-bottom:10pt; font-family:Times New Roman" align=justify>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.&nbsp;The ultimate decision
 to authorize a distributor refund remains fully within our control.&nbsp;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.&nbsp;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.&nbsp;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.&nbsp;We record the accrued amounts as a deduction of revenue at
 the time of the sale.&nbsp;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. </P>
<P style="margin-top:0pt; margin-bottom:10pt; font-family:Times New Roman" align=justify><BR>
<BR></P>
<P style="margin:0pt; font-family:Times New Roman" align=center>1</P>
<P style="margin:0pt; font-family:Times New Roman"><BR></P>
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<P style="margin:0pt; font-family:Times New Roman"><BR></P>
<P style="margin-top:0pt; margin-bottom:10pt; font-family:Times New Roman" align=justify>&nbsp;</P>
<P style="margin-top:0pt; margin-bottom:10pt; font-family:Times New Roman" align=justify>Our customers occasionally return our products for technical reasons.&nbsp;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.&nbsp;Quality returns are not related to any technological obsolescence issues and are identified shortly after sale in customer quality control testing.&nbsp;Quality returns are always associated with end-user customers, not with distribution channels.&nbsp;We provide for such returns when they are considered as probable and can be reasonably estimated.&nbsp;We record the accrued amounts as a reduction of revenue. </P>
<P style="margin-top:0pt; margin-bottom:10pt; font-family:Times New Roman" align=justify>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.&nbsp;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.&nbsp;This warranty is given in lieu of all other warranties, conditions or terms expressed or implied by statute or common law.&nbsp;Generally, we limit our liability to the price allocated to the products which gives rise to the claims. </P>
<P style="margin-top:0pt; margin-bottom:10pt; font-family:Times New Roman" align=justify>We maintain an allowance for doubtful accounts for potential estimated losses resulting from our customers&#146; inability to make required payments.&nbsp;We base our estimates on historical collection trends.&nbsp;Furthermore, 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.&nbsp;In the first nine months of 2005, we recorded specific provisions of $6 million related to bankrupt customers, in addition to our standard provision of 1% of total receivables based on the estimated historical collection trends.&nbsp;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. </P>
<P style="margin-top:0pt; margin-bottom:10pt; font-family:Times New Roman" align=justify><B>Goodwill and purchased intangible assets</B>.&nbsp;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.&nbsp;Goodwill and intangible assets deemed to have indefinite lives are not amortized but are instead subject to annual impairment tests.&nbsp;The amounts and useful lives assigned to other intangible assets impact future amortization.&nbsp;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.&nbsp;As of October 1, 2005, the value of goodwill amounted to $223 million. </P>
<P style="margin-top:0pt; margin-bottom:10pt; font-family:Times New Roman" align=justify><B>Impairment of goodwill</B>.&nbsp;Goodwill acquired in business combinations is not amortized and is instead subject to an impairment test performed on an annual basis, or more frequently if indicators of impairment exist, in order to assess the recoverability of its carrying value.&nbsp;Goodwill subject to potential impairment is tested at a level of reporting referred to as a reporting unit.&nbsp;We define our reporting units one level below the three semiconductor product groups under the caption &#147;<I>Business Overview</I>&#148; below.&nbsp;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.&nbsp;If lower, the implied fair value of the reporting unit goodwill is then compared to the carrying value of the goodwill, and an impai
rment charge is recognized for any excess.&nbsp;In determining the fair value of a reporting unit, we usually estimate the expected discounted future cash flows associated with the reporting unit.&nbsp;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 cost structure.&nbsp;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.&nbsp;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.&nbsp;For the first nine months as of October 1, 2005, we had an impairment of goodwill of $39 million, which we recorded in the first quarter of 2005. </P>
<P style="margin-top:0pt; margin-bottom:10pt; font-family:Times New Roman" align=justify>&nbsp;</P>
<P style="margin-top:0pt; margin-bottom:10pt; font-family:Times New Roman" align=justify><BR>
<BR></P>
<P style="margin:0pt; font-family:Times New Roman" align=center>2</P>
<P style="margin:0pt; font-family:Times New Roman"><BR></P>
<HR style="padding-top:7.2pt; padding-bottom:7.2pt" noshade size=1.333>
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<P style="margin:0pt; font-family:Times New Roman"><BR></P>
<P style="margin-top:0pt; margin-bottom:10pt; font-family:Times New Roman" align=justify><b>Intangible
 assets subject to amortization</b>.&nbsp;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.&nbsp;Intangible
 assets subject to amortization are reflected net of any impairment losses.&nbsp;These
 are amortized over a period ranging from three to seven years.&nbsp;The carrying
 value of intangible assets subject to amortization is evaluated whenever changes
 in circumstances indicate that the carrying amount may not be recoverable.&nbsp;In
 determining recoverability, we initially assess whether the carrying value exceeds
 the undiscounted cash flows associated with the intangible assets.&nbsp;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.&nbsp;An impairment
 loss is recognized for the excess of the carrying amount over the fair value.&nbsp;We normally estimate the fair value based on the projected discounted
 future cash flows associated with the intangible assets.&nbsp;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.&nbsp;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.&nbsp;It is possible, however, that such plans
 and estimates 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.&nbsp;For
 the first nine months as of October 1, 2005, we have registered an impairment
 charge of $25 million, out of which $1 million with respect to the third quarter
 of 2005.&nbsp;As of October 1, 2005, the value of intangible assets subject
 to amortization amounted to $227 million. </P>
<P style="margin-top:0pt; margin-bottom:10pt; font-family:Times New Roman" align=justify><B>Property, plant and equipment</B>.&nbsp;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.&nbsp;We estimate the useful life of our manufacturing equipment, which is the largest component of our long-lived assets, to be six years.&nbsp;This estimate is based on our experience with using equipment over time.&nbsp;Depreciation expense is a major element of our manufacturing cost structure.&nbsp;We begin to depreciate new equipment when it is put into use. </P>
<P style="margin-top:0pt; margin-bottom:10pt; font-family:Times New Roman" align=justify>We evaluate each period whether there is reason to suspect that tangible assets or groups of assets might not be recoverable.&nbsp;Factors we consider important which could trigger an impairment review include: significant negative industry trends, significant underutilization of the assets or available evidence of obsolescence of an asset and strategic management decisions impacting production or an indication that its economic performance is, or will be, worse than expected.&nbsp;Since a significant portion of our tangible assets is 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 dynamics may also trigger impairment charges.&nbsp;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 ta
ngible assets or group of assets.&nbsp;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.&nbsp;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.&nbsp;We also evaluate the continued validity of an asset&#146;s useful life when impairment indicators are identified.&nbsp;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.&nbsp;Selling costs include incremental direct costs to transact the sale that we would not have incurred except for the decision to sell. </P>
<P style="margin-top:0pt; margin-bottom:10pt; font-family:Times New Roman" align=justify>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.&nbsp;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.&nbsp;</P>
<P style="margin-top:0pt; margin-bottom:10pt; font-family:Times New Roman" align=justify><B>Inventory</B>.&nbsp;Inventory is stated at the lower of cost or net realizable value.&nbsp;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.&nbsp;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. </P>
<P style="margin-top:0pt; margin-bottom:10pt; font-family:Times New Roman" align=justify><BR>
<BR></P>
<P style="margin:0pt; font-family:Times New Roman" align=center>3</P>
<P style="margin:0pt; font-family:Times New Roman"><BR></P>
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<P style="margin:0pt; font-family:Times New Roman"><BR></P>
<P style="margin-top:0pt; margin-bottom:10pt; font-family:Times New Roman" align=justify>The valuation of inventory requires us to estimate obsolete or excess inventory as well as inventory that is not of saleable quality.&nbsp;Provisions for obsolescence are estimated for excess uncommitted inventories based on the previous quarter sales, order backlog and production plans.&nbsp;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. </P>
<P style="margin-top:0pt; margin-bottom:10pt; font-family:Times New Roman" align=justify><B>Restructuring charges</B>.&nbsp;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 our exiting activities or to dispose of our activities.&nbsp;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.&nbsp;We record estimated charges for non-voluntary termination benefit arrangements such as severance and outplacement costs meeting the criteria for a liability as described above.&nbsp;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.&nbsp;As we operate in a highly cyclical industry, we continue to evaluate business conditions.&nbsp;If bro
ader 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.&nbsp;The potential impact of these charges could be material and have a material adverse effect on our results of operations or financial condition.&nbsp;In the third quarter of 2005 and in the first nine months of 2005, the amount of restructuring charges and other related closure costs amounted to $11 million and $49 million before taxes, respectively. </P>
<P style="margin-top:0pt; margin-bottom:10pt; font-family:Times New Roman" align=justify><B>Income taxes</B>.&nbsp;We are required to make estimates and judgments in determining income tax expense for financial statement purposes.&nbsp;These estimates and judgments also occur in the calculation of certain tax assets and liabilities and provisions. </P>
<P style="margin-top:0pt; margin-bottom:10pt; font-family:Times New Roman" align=justify>We are required to assess the likelihood of recovery of our deferred tax assets.&nbsp;If recovery is not likely, we are required to record a valuation allowance against the deferred tax assets that we estimate will not ultimately be recoverable, which would increase our provision for income taxes.&nbsp;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. </P>
<P style="margin-top:0pt; margin-bottom:10pt; font-family:Times New Roman" align=justify>In addition, the calculation of our tax liabilities involves dealing with uncertainties in the application of complex tax regulations.&nbsp;We recognize liabilities for anticipated tax audit issues based on our estimate that probable additional taxes will be due.&nbsp;We reverse the liability and recognize a tax benefit during the period if we ultimately determine that the liability is no longer necessary.&nbsp;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. </P>
<P style="margin-top:0pt; margin-bottom:10pt; font-family:Times New Roman" align=justify><B>Patent and other intellectual property litigation or claims</B>.&nbsp;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.&nbsp;Furthermore, we may become involved in costly litigation brought against us regarding patents, mask works, copyrights, trademarks or trade secrets.&nbsp;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 under economically unfavorable terms and conditions, 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.&nbsp;We constantly monitor, with the support of our outsid
e attorneys when deemed necessary or advisable, the chances of any such intellectual property claims being successfully asserted.&nbsp;We record a provision when we estimate that the claim could successfully be asserted in a court of law, when the resulting loss is considered probable and in the absence of a valid offset or counterclaim.&nbsp;See &#147;Item 3.&nbsp;Key Information&#150;Risk Factors&#150;We depend on patents to protect our rights to our technology&#148; included in our Form 20-F, as may be updated from time to time in our public filings. </P>
<P style="margin-top:0pt; margin-bottom:10pt; font-family:Times New Roman" align=justify>We
 are currently a party to legal proceedings with SanDisk Corporation (&#147;SanDisk&#148;);
 see &#147;<I>Other Developments</I>&#148; below.&nbsp;Based on our current
 assessment, made with support of our outside attorneys, we do not believe that
 the SanDisk litigation will have a material adverse effect on our financial
 position, cash flow, or results of operations. In the third quarter of 2005,
 there was no impact on our financial statements relating to the ScanDisk litigation.
 However, if we are unsuccessful in resolving these proceedings, or if the outcome
 of any other litigation or claim were to be unfavorable to us, we may incur
 monetary damages, or an injunction or exclusion order.&nbsp;</P>
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<P style="margin-top:0pt; margin-bottom:10pt; font-family:Times New Roman" align=justify>&nbsp;</P>
<P style="margin-top:0pt; margin-bottom:10pt; font-family:Times New Roman" align=justify><B>Other claims</B>.&nbsp;We are subject to the possibility of loss contingencies arising in the ordinary course of business.&nbsp;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.&nbsp;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.&nbsp;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.&nbsp;We regularly re-evaluate any losses and claims and determine whether they need to be readjusted based on the current information available to us.&nbsp;In the event of litigation that is adversely determ
ined 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. </P>
<P style="margin-top:0pt; margin-bottom:10pt; font-family:Times New Roman" align=justify><B><I>Fiscal Year</I></B></P>
<P style="margin-top:0pt; margin-bottom:10pt; font-family:Times New Roman" align=justify>Our fiscal year starts on January 1, and the first quarter of 2005 ended on April 2, 2005.&nbsp;The second quarter of 2005 ended on July 2, 2005, and the third quarter of 2005 ended on October 1, 2005.&nbsp;The fourth quarter of 2005 will end on December 31, 2005. </P>
<P style="margin-top:0pt; margin-bottom:10pt; font-family:Times New Roman" align=justify><B><I>Business Overview</I></B></P>
<P style="margin-top:0pt; margin-bottom:10pt; font-family:Times New Roman" align=justify>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). </P>
<P style="margin-top:0pt; margin-bottom:10pt; font-family:Times New Roman" align=justify>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.&nbsp;Beginning with the first quarter of 2005, we now report our sales and operating income in three segments:</P>
<P style="margin-top:0pt; margin-bottom:-12pt; padding-left:36pt; text-indent:-36pt; font-family:Symbol" align=justify>&#183;</P>
<P style="margin-top:0pt; margin-bottom:10pt; padding-left:36pt; font-family:Symbol" align=justify><FONT FACE="Times New Roman">the Application Specific Product Groups (&#147;ASG&#148;) segment, comprised of three product groups &#150; our Home, Personal and Communication Sector (&#147;HPC&#148;), our Computer Peripherals Group (&#147;CPG&#148;) and our Automotive Product Group (&#147;APG&#148;).&nbsp;Our new HPC Sector is comprised of the telecommunications, audio and digital consumer groups.&nbsp;Our CPG Group covers computer peripherals products, specifically disk drives and printers, and our APG Group now comprises all of our major complex products related to automotive applications;</FONT></P>
<P style="margin-top:0pt; margin-bottom:-12pt; padding-left:36pt; text-indent:-36pt; font-family:Symbol" align=justify>&#183;</P>
<P style="margin-top:0pt; margin-bottom:10pt; padding-left:36pt; font-family:Symbol" align=justify><FONT FACE="Times New Roman">the Memory Product Group (&#147;MPG&#148;) segment, comprised of our memories and Smart card businesses; and</FONT></P>
<P style="margin-top:0pt; margin-bottom:-12pt; padding-left:36pt; text-indent:-36pt; font-family:Symbol" align=justify>&#183;</P>
<P style="margin-top:0pt; margin-bottom:10pt; padding-left:36pt; font-family:Symbol" align=justify><FONT FACE="Times New Roman">the Micro, Linear and Discrete Group (&#147;MLD&#148;) segment, comprised of discrete and standard products plus standard microcontroller and industrial devices (including the programmable systems memories (&#147;PSM&#148;) division). </FONT></P>
<P style="margin-top:0pt; margin-bottom:10pt; font-family:Times New Roman" align=justify>Based upon most recently published estimates, in the first nine months and in the third quarter of 2005, semiconductor industry revenues increased by approximately 6% for the TAM and approximately 5% for the SAM compared to the first nine months of 2004 and the third quarter of 2004.&nbsp;On a sequential basis, the third quarter of 2005 registered an increase of approximately 9% for both the TAM and the SAM.</P>
<P style="margin-top:0pt; margin-bottom:10pt; font-family:Times New Roman" align=justify>Our first nine months of 2005 revenues were characterized by a significant sales volume increase and more favorable product mix, which did not translate into an equivalent revenue performance due to the persisting negative impact of pricing pressure.&nbsp;As a result, our revenues increased by approximately 1% to $6,493 million in the first nine months of 2005 compared to $6,432 million in the first nine months of 2004.&nbsp;Our year-over-year sales growth was driven primarily by Computer, Automotive and Telecom, while Consumer and Industrial and Other both declined.&nbsp;Our sales trend, however, was below the TAM and SAM growth rate of 6% and 5% respectively, in the first nine months of 2005. </P>
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<P style="margin:0pt; font-family:Times New Roman" align=center>5</P>
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<P style="margin-top:0pt; margin-bottom:10pt; font-family:Times New Roman" align=justify>On
 a year-over-year basis, our third quarter 2005 net revenues slightly increased
 by approximately 1% to $2,247 million compared to $2,231 million in the third
 quarter 2004. Several applications experienced year-over-year sales growth,
 of which Telecom and Computer Peripherals registered strong double-digit sales
 growth. These year-over-year increases were largely offset by sales declines
 in Consumer applications and the distribution market.&nbsp;Our revenue increased
 in the third quarter of 2005, but remained below the TAM and the SAM, which
 registered increases of approximately 6% and 5%, respectively. </P>
<P style="margin-top:0pt; margin-bottom:10pt; font-family:Times New Roman" align=justify>On
 a sequential basis, in the third quarter of 2005, we achieved a 3.9% increase
 in net revenues mainly generated by sales volume, which more than offset the
 persisting decline in average selling prices.&nbsp;Wireless and Computer Peripherals
 applications were the primary drivers of this improvement, while Consumer applications
 slightly improved. We expanded sales in several key markets, notably wireless
 with new design wins across all targeted market segments.&nbsp;Additionally,
 our effort to expand our key customer base is gaining momentum.&nbsp;Our net
 revenues performance was firmly within the previously provided guidance, which
 indicated a sequential variation between 0% and plus 6% compared to sales in
 the second quarter of 2005.&nbsp;Nevertheless, our sales trend in the third
 quarter of 2005 was below the TAM and SAM, as both registered an increase of
 approximately 9%. </P>
<P style="margin-top:0pt; margin-bottom:10pt; font-family:Times New Roman" align=justify>In the first nine months of 2005, our effective exchange rate was &#8364;1 for $1.30, which reflects current exchange rate levels and the impact of certain hedging contracts, compared to a 2004 exchange rate of &#8364;1 for $1.23.&nbsp;For a more detailed discussion of our hedging arrangements and the impact of fluctuations in exchange rates see &#147;<I>Impact of Changes in Exchange Rates</I>&#148; below. </P>
<P style="margin-top:0pt; margin-bottom:10pt; font-family:Times New Roman" align=justify>Due
 primarily to the negative impact of the declining sales prices and our effective
 U.S. dollar exchange rate, our gross margin dropped to 33.3% in the first nine
 months of 2005 from 36.9% in the comparable period of 2004.&nbsp;This negative
 impact was partially balanced by manufacturing and product mix improvements
 as well as increased sales volume. A similar trend occurred in the year-over-year
 basis as our gross margin in the third quarter of 2005 dropped to 34.1% compared
 to 37.9% in the third quarter of 2004. </P>
<P style="margin-top:0pt; margin-bottom:10pt; font-family:Times New Roman" align=justify>On a sequential basis, our gross margin increased from 33.0% in the second quarter of 2005 to 34.1% in the third quarter of 2005.&nbsp;This was the result of increased sales volume, improved product mix and manufacturing efficiencies that were partially offset by the negative pricing pressure.&nbsp;Our third quarter result was within the guidance that indicated a gross margin of approximately 34% plus or minus 1 percentage point. </P>
<P style="margin-top:0pt; margin-bottom:10pt; font-family:Times New Roman" align=justify>Our total impairment, restructuring charges and other closure costs were significantly higher in the first nine months of 2005 compared to the first nine months of 2004.&nbsp;This increase relates to our 2005 restructuring and reorganization plans.&nbsp;Our manufacturing cost reduction initiatives are moving forward steadily and contributed to the improved results in the quarter.&nbsp;These will become significant drivers of margin improvement after the next nine months as we complete these programs and realize the associated benefits. </P>
<P style="margin-top:0pt; margin-bottom:10pt; font-family:Times New Roman" align=justify>Our
 operating expenses including selling, general and administrative expenses and
 research and development were also higher in the first nine months of 2005 compared
 to the first nine months of 2004 due to the significant resources invested in
 research and development and to the negative impact of our effective U.S. dollar
 exchange rate and to one-time compensation charges. </P>
<P style="margin-top:0pt; margin-bottom:10pt; font-family:Times New Roman" align=justify>The combined impact of these and other factors resulted in operating income of $47 million in the first nine months of 2005, compared to operating income of $473 million in the first nine months of 2004.&nbsp;In the third quarter of 2005, we registered operating income of $102 million compared to $213 million in the third quarter of 2004 and $12 million in the second quarter of 2005. </P>
<P style="margin-top:0pt; margin-bottom:10pt; font-family:Times New Roman" align=justify>In the first nine months of 2005, we realized interest income compared to an expense in the prior year.&nbsp;This was a combined result of rising interest rates on our available cash, and the repurchase in 2004 of our 2010 convertible notes thereby reducing our interest expense.&nbsp;</P>
<P style="margin-top:0pt; margin-bottom:10pt; font-family:Times New Roman" align=justify>In
 the first nine months of 2005, our income taxes resulted in a net benefit of
 $17 million, compared to a $42 million charge in the first nine months of 2004.
</P>
<P style="margin-top:0pt; margin-bottom:10pt; font-family:Times New Roman" align=justify>In summary, our financial results for the first nine months of 2005, compared to the first nine months of 2004, were negatively impacted by the following factors:</P>
<P style="margin-top:0pt; margin-bottom:-12pt; padding-left:36pt; text-indent:-36pt; font-family:Symbol" align=justify>&#183;</P>
<P style="margin-top:0pt; margin-bottom:10pt; padding-left:36pt; font-family:Symbol" align=justify><FONT FACE="Times New Roman">negative pricing trends due to a persisting overcapacity in the industry, which translated into our average selling prices declining as a pure pricing effect by approximately 7%;</FONT></P>
<P style="margin-top:0pt; margin-bottom:10pt; padding-left:36pt; text-indent:-36pt; font-family:Times New Roman" align=justify><BR>
<BR></P>
<P style="margin:0pt; font-family:Times New Roman" align=center>6</P>
<P style="margin:0pt; font-family:Times New Roman"><BR></P>
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<P style="margin:0pt; font-family:Times New Roman"><BR></P>
<P style="margin-top:0pt; margin-bottom:-12pt; padding-left:36pt; text-indent:-36pt; font-family:Symbol" align=justify>&#183;</P>
<P style="margin-top:0pt; margin-bottom:10pt; padding-left:36pt; font-family:Symbol" align=justify><FONT FACE="Times New Roman">the impact of our effective U.S. dollar exchange rate against the euro and other currencies, which translated into an increase in our cost of sales and in our operating expenses significantly higher than the favorable impact on our revenues;</FONT></P>
<P style="margin-top:0pt; margin-bottom:-12pt; padding-left:36pt; text-indent:-36pt; font-family:Symbol" align=justify>&#183;</P>
<P style="margin-top:0pt; margin-bottom:10pt; padding-left:36pt; font-family:Symbol" align=justify><FONT FACE="Times New Roman">higher impairment, restructuring charges and other related closure costs of $113 million in the first nine months of 2005 compared to $57 million in the first nine months of 2004 due to the restructuring and reorganization activities announced in 2005; and</FONT></P>
<P style="margin-top:0pt; margin-bottom:-12pt; padding-left:36pt; text-indent:-36pt; font-family:Symbol" align=justify>&#183;</P>
<P style="margin-top:0pt; margin-bottom:10pt; padding-left:36pt; font-family:Symbol" align=justify><FONT FACE="Times New Roman">the one-time compensation packages and special bonuses to our former CEO and to a limited number of retired senior executives and related charges for a total amount of $24 million recorded in the first quarter of 2005. </FONT></P>
<P style="margin-top:0pt; margin-bottom:10pt; font-family:Times New Roman" align=justify>Our financial results for the first nine months of 2005 were favorably impacted compared to the first nine months of 2004 by the following factors:</P>
<P style="margin-top:0pt; margin-bottom:-12pt; padding-left:36pt; text-indent:-36pt; font-family:Symbol" align=justify>&#183;</P>
<P style="margin-top:0pt; margin-bottom:10pt; padding-left:36pt; font-family:Symbol" align=justify><FONT FACE="Times New Roman">higher sales volume and favorable product mix in our revenues;</FONT></P>
<P style="margin-top:0pt; margin-bottom:-12pt; padding-left:36pt; text-indent:-36pt; font-family:Symbol" align=justify>&#183;</P>
<P style="margin-top:0pt; margin-bottom:10pt; padding-left:36pt; font-family:Symbol" align=justify><FONT FACE="Times New Roman">continuous improvements of our manufacturing performance;</FONT></P>
<P style="margin-top:0pt; margin-bottom:-12pt; padding-left:36pt; text-indent:-36pt; font-family:Symbol" align=justify>&#183;</P>
<P style="margin-top:0pt; margin-bottom:10pt; padding-left:36pt; font-family:Symbol" align=justify><FONT FACE="Times New Roman">net interest income; and</FONT></P>
<P style="margin-top:0pt; margin-bottom:-12pt; padding-left:36pt; text-indent:-36pt; font-family:Symbol" align=justify>&#183;</P>
<P style="margin-top:0pt; margin-bottom:10pt; padding-left:36pt; font-family:Symbol" align=justify><FONT FACE="Times New Roman">net income tax benefit. </FONT></P>
<P style="margin-top:0pt; margin-bottom:10pt; font-family:Times New Roman" align=justify>Our third quarter financial performance was in line with our outlook and showed sequential improvements in revenue, gross margin and earnings per share as well as a significant increase in net operating cash flow.&nbsp;The third quarter was also a period of steady progress across our key objectives:</P>
<P style="margin-top:0pt; margin-bottom:-12pt; padding-left:36pt; text-indent:-36pt; font-family:Symbol" align=justify>&#183;</P>
<P style="margin-top:0pt; margin-bottom:10pt; padding-left:36pt; font-family:Symbol" align=justify><FONT FACE="Times New Roman">We had a good level of sequential sales increase in several key markets, led by wireless.&nbsp;The effort to expand our key customer base also continued to gain momentum.&nbsp;In addition, reflecting the importance of the China market and our leading presence there, we created the &#145;Greater China&#146; region, a new regional organization focused exclusively on this key market. </FONT></P>
<P style="margin-top:0pt; margin-bottom:-12pt; padding-left:36pt; text-indent:-36pt; font-family:Symbol" align=justify>&#183;</P>
<P style="margin-top:0pt; margin-bottom:10pt; padding-left:36pt; font-family:Symbol" align=justify><FONT FACE="Times New Roman">On the product front, we continued to gain traction in the acceptance of our new products.&nbsp;From wireless connectivity application-specific standard product solutions to a new wave of high definition digital consumer offerings, we are compiling important design wins, which will help drive sales and margin improvements in 2006 and beyond. </FONT></P>
<P style="margin-top:0pt; margin-bottom:-12pt; padding-left:36pt; text-indent:-36pt; font-family:Symbol" align=justify>&#183;</P>
<P style="margin-top:0pt; margin-bottom:10pt; padding-left:36pt; font-family:Symbol" align=justify><FONT FACE="Times New Roman">Finally, our manufacturing cost reduction initiatives are moving forward steadily and contributed to the improved results in the quarter. </FONT></P>
<P style="margin-top:0pt; margin-bottom:10pt; font-family:Times New Roman" align=justify>In summary, we are in line with our initiatives to improve overall corporate performance.&nbsp;Our efforts are starting to become visible with improvements of our key metrics to date. </P>
<P style="margin-top:0pt; margin-bottom:10pt; font-family:Times New Roman" align=justify>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 &#147;Cautionary Note on Forward-Looking Statements&#148; herein and &#147;Item 3.&nbsp;<I>Key Information&#150;Risk Factors</I>&#148; in our Form 20-F as may be updated from time to time in our SEC filings. </P>
<P style="margin-top:0pt; margin-bottom:10pt; font-family:Times New Roman" align=justify><B><I>Business Outlook</I></B></P>
<P style="margin-top:0pt; margin-bottom:10pt; font-family:Times New Roman" align=justify>We believe that moderate industry growth will continue into the final quarter of 2005 and into 2006.&nbsp;Within these dynamics, we expect to continue to make solid progress in improving our performance thanks to our ongoing marketing, research and development and cost actions. </P>
<P style="margin-top:0pt; margin-bottom:10pt; font-family:Times New Roman" align=justify>Accordingly, we expect that our revenues will increase sequentially in the fourth quarter in the range between 3% and 9%.&nbsp;Our gross margin for the fourth quarter is expected to be about 36% plus or minus 1 percentage point. </P>
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<P style="margin:0pt; font-family:Times New Roman" align=center>7</P>
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<P style="margin:0pt; font-family:Times New Roman"><BR></P>
<P style="margin-top:0pt; margin-bottom:10pt; font-family:Times New Roman" align=justify>This guidance is based on an effective currency exchange rate for the Company of approximately $1.22 = &#8364;1, which reflects current exchange rate levels combined with the impact of existing hedging contracts. </P>
<P style="margin-top:0pt; margin-bottom:10pt; font-family:Times New Roman" align=justify>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 &#147;Cautionary Note on Forward-Looking Statements&#148; herein and &#147;Item 3.&nbsp;Key Information&#150;Risk Factors&#148; in our Form 20-F, as may be updated from time to time in our SEC filings. </P>
<P style="margin-top:0pt; margin-bottom:10pt; font-family:Times New Roman" align=justify><B><I>Other Developments</I></B></P>
<P style="margin-top:0pt; margin-bottom:10pt; font-family:Times New Roman" align=justify>In January 2005, we decided to reduce our Access technology products for CPE modem products.&nbsp;This decision was intended to eliminate certain low-volume, non-strategic product families whose return in the current environment did not meet internal targets.&nbsp;This decision resulted in a total impairment charge of approximately $64 million in the first nine months of 2005, out of which $61 million related to impairment of intangible assets and goodwill related to the CPE product lines. </P>
<P style="margin-top:0pt; margin-bottom:10pt; font-family:Times New Roman" align=justify>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 $10 million in the first nine months of 2005.&nbsp;In the second quarter of 2005, we benefited from a tax credit of $18 million in relation to the application of the ETI (Extraterritorial Income Exclusion) rules in the United States after notification in writing by the local authorities. </P>
<P style="margin-top:0pt; margin-bottom:10pt; font-family:Times New Roman" align=justify>At our annual general meeting of shareholders held on March 18, 2005 (the &#147;2005 AGM&#148;), 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 that was paid in the second quarter of 2005.&nbsp;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 a professional stock-based compensation plan, among other resolutions.&nbsp;Our Supervisory Board is composed of Messrs. G&#233;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 Gavoi
s and Robert White, who were each appointed for a one-year term.&nbsp;Our Managing Board is composed of Mr. Carlo Bozotti, our President and Chief Executive Officer. </P>
<P style="margin-top:0pt; margin-bottom:10pt; font-family:Times New Roman" align=justify>After
  our annual general meeting of shareholders, the Supervisory Board 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 Presidents and members to the Strategic Committee, the Audit
  Committee and the Compensation Committee. Mr. G&eacute;rald Arbola was appointed
  President of the Strategic Committee, and Messrs. Bruno Steve, Antonino Turicchi,
  Didier Lombard and Robert White were appointed as members. Mr. Tom de Waard
  was appointed President of the Audit Committee, Messrs. Robert White and Doug
  Dunn were appointed members and Messrs. Matteo del Fante and Francis Gavois
  were appointed as observers. Mr. G&eacute;rald Arbola was appointed President
  of the Compensation Committee, and Messrs. Bruno Steve, Antonino Turicchi, Didier
  Lombard and Tom de Waard were appointed as members. <br>
</P>
<P style="margin-top:0pt; margin-bottom:10pt; font-family:Times New Roman" align=justify>On
 October 25, 2005, the Supervisory Board appointed Mr. Tom de Waard as President
 of the Nominating and Corporate Governance Committee and Messrs. G&eacute;rald
 Arbola, Bruno Steve, Antonino Turicchi and Didier Lombard were appointed as
 members.</P>
<P style="margin-top:0pt; margin-bottom:10pt; font-family:Times New Roman" align=justify>
 In line with our 2005 AGM shareholders&#146; resolutions, we are transitioning
 our stock-based compensation plans from stock-option grants to non-vested stock
 awards. Pursuant to the shareholders&#146; resolutions adopted by the 2005 AGM,
 our Supervisory Board, upon the proposal of the Managing Board and recommendation
 of the Compensation Committee, took the following actions:</P>
<P style="margin-top:0pt; margin-bottom:-12pt; padding-left:36pt; text-indent:-36pt; font-family:Symbol" align=justify>&#183;</P>
<P style="margin-top:0pt; margin-bottom:10pt; padding-left:36pt; font-family:Symbol" align=justify><FONT FACE="Times New Roman">approved the terms and conditions of the 2005 Supervisory Board Stock-Based Compensation Plan for members and professionals;</FONT></P>
<P style="margin-top:0pt; margin-bottom:-12pt; padding-left:36pt; text-indent:-36pt; font-family:Symbol" align=justify>&#183;</P>
<P style="margin-top:0pt; margin-bottom:10pt; padding-left:36pt; font-family:Symbol" align=justify><FONT FACE="Times New Roman">amended our 2001 Employee Stock Option Plan with the aim of enhancing our ability to retain key employees and motivate them to shareholder value creation;</FONT></P>
<P style="margin-top:0pt; margin-bottom:-12pt; padding-left:36pt; text-indent:-36pt; font-family:Symbol" align=justify>&#183;</P>
<P style="margin-top:0pt; margin-bottom:10pt; padding-left:36pt; font-family:Symbol" align=justify><FONT FACE="Times New Roman">approved the vesting conditions, linked to our future performance and their continued service with us, to apply to non-vested stock awards granted to employees in 2005, the maximum number of which will be four million, within the remaining number of shares authorized for issuance pursuant to the original plan; and</FONT></P>
<P style="margin-top:0pt; margin-bottom:-12pt; padding-left:36pt; text-indent:-36pt; font-family:Symbol" align=justify>&#183;</P>
<P style="margin-top:0pt; margin-bottom:10pt; padding-left:36pt; font-family:Symbol" align=justify><FONT FACE="Times New Roman">accelerated the vesting of all of our outstanding stock options in July 2005 aimed at facilitating the transition to new stock compensation policy with no charge to our interim consolidated statements of income. </FONT></P>
<P style="margin-top:0pt; margin-bottom:10pt; padding-left:36pt; text-indent:-36pt; font-family:Times New Roman" align=justify><BR>
<BR></P>
<P style="margin:0pt; font-family:Times New Roman" align=center>8</P>
<P style="margin:0pt; font-family:Times New Roman"><BR></P>
<HR style="padding-top:7.2pt; padding-bottom:7.2pt" noshade size=1.333>
<P style="page-break-before:always; margin:0pt; font-family:Times New Roman" align=right><BR></P>
<P style="margin:0pt; font-family:Times New Roman"><BR></P>
<P style="margin-top:0pt; margin-bottom:10pt; font-family:Times New Roman" align=justify>We
 intend to use 4.1 million of our shares held by us in treasury (out of the 13.4
 million currently available) to cover the four million non-vested stock award
 grants pursuant to the 2001 Employee Stock Option Plan as well as the granting
 of up to 100,000 non-vested shares to the sole member of our Managing Board
 that was also approved by shareholders at the 2005 AGM.&nbsp;Following this
 decision, the new plan will generate an additional charge in the income statements
 of the fourth quarter of 2005 and of the first quarter of 2006.&nbsp;This charge
 will correspond to the compensation expense to be recognized for the non-vested
 stock awards from the grant date over the vesting period and will take into
 consideration the probability of the performance achievement.</P>
<P style="margin-top:0pt; margin-bottom:10pt; font-family:Times New Roman" align=justify>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 retired senior executives. </P>
<P style="margin-top:0pt; margin-bottom:10pt; font-family:Times New Roman" align=justify>On
  May 16, 2005, we announced a restructuring plan that cumulated with other already
  announced initiatives will address approximately 3,000 people of our workforce
  outside Asia by mid-2006. From these new measures estimated to cost between
  $100 to $130 million, we anticipate additional savings of $90 million per year,
  at completion of the plan. On June 8, 2005, we specified our restructuring efforts
  by announcing the following: our workforce gross reduction in Europe will represent
  2,300 jobs of the 3,000 already announced, we will pursue the upgrading of 150-mm
  production fabs to 200-mm, we will optimize on a global scale our Electrical
  Wafer Sorting (EWS) activities, harmonize and rationalize our support functions
  and disengage from certain activities. </P>
<P style="margin-top:0pt; margin-bottom:10pt; font-family:Times New Roman" align=justify>Pursuant
 to the joint venture agreement that we signed in 2004 with Hynix Semiconductor
 Inc., to build a front-end memory-manufacturing facility in Wuxi City, Jiangsu
 Province, China, we made during the first nine months of 2005 capital contributions
 to the joint venture totaling $25 million, of which $17 million were paid in
 the third quarter. Under the agreement, Hynix Semiconductor Inc., will contribute
 $500 million for a 67% equity interest and we will contribute $250 million for
 a 33% equity interest. In addition, we have committed to grant $250 million
 in long-term financing for the new joint venture guaranteed by a subordinated
 collateral on the joint venture&#8217;s assets. </P>
<P style="margin-top:0pt; margin-bottom:10pt; font-family:Times New Roman" align=justify>
 On June 30, 2005, we sold our interest in Upek Inc., (a spin-off of our former
 TouchChip business) for $13 million and recorded in the second quarter of 2005
 a gain amounting to $6 million. Additionally, on June 30, 2005, we were granted
 warrants for 2 million shares of Upek Inc., at an exercise price of $0.01 per
 share. The warrants are not limited in time but can only be exercised subject
 to certain conditions, such as a change of control or an initial public offering
 of Upek Inc., with a valuation of the entire company at or over $39 million.
</P>
<P style="margin-top:0pt; margin-bottom:10pt; font-family:Times New Roman" align=justify>On
 August 6, 2005, the &euro;442 million aggregate principal amount of 6&frac34;%
 mandatory exchangeable notes, initially issued by France Telecom in 2002 and
 exchangeable into our common shares, reached maturity. We were informed that
 the exchange ratio was 1.25 of our common shares per each &euro;20.92 principal
 amount of notes, which resulted in the disposal by France Telecom of approximately
 26.4 million of our currently existing common shares, representing the totality
 of the shares held indirectly by France Telecom in our company. <br>
</P>
<P style="margin-top:0pt; margin-bottom:10pt; font-family:Times New Roman" align=justify>On September 6, 2005, we announced the appointment of two new Corporate Vice Presidents: Mr. Reza Kazerounian was promoted to the position of Corporate Vice President for the North America region and Mr. Marco Cassis was appointed to the position of Corporate Vice President of STMicroelectronics Japan.&nbsp;</P>
<P style="margin-top:0pt; margin-bottom:10pt; font-family:Times New Roman" align=justify>On
 October 17, 2005, we announced the creation of our new 'Greater China' region
 to focus exclusively on our operations in China, Hong Kong and Taiwan and appointed
 Mr. Robert Krysiak as Corporate Vice President and General Manager of Greater
 China. </P>
<P style="margin-top:0pt; margin-bottom:10pt; font-family:Times New Roman" align=justify>On
  October 25, 2005, upon recommendation of its Compensation Committee, our Supervisory
  Board approved the conditions for the Executive-Vice Presidents and Corporate
  Vice-Presidents to become eligible for the Company&#8217;s Executive Pension
  Plan Scheme, as follows: eight years of seniority as Executive Vice-President
  or Corporate Vice-President and a maximum pension after 13 years of service
  in these positions. Under these conditions, an accrual of up to approximately
  $2 to $4 million will be recorded in the fourth quarter of 2005.</P>
<P style="margin-top:0pt; margin-bottom:10pt; font-family:Times New Roman" align=justify><I>Legal Proceedings </I></P>
<P style="margin-top:0pt; margin-bottom:10pt; font-family:Times New Roman" align=justify>We are currently a party to legal proceedings with SanDisk. </P>
<P style="margin-top:0pt; margin-bottom:10pt; font-family:Times New Roman" align=justify>On
  October 15, 2004, SanDisk filed a complaint against us with the United States
  International Trade Commission (the &#147;ITC&#148;) with respect to certain
  NAND memory products, alleging patent infringement and seeking an order excluding
  our NAND products from importation into the United States.&nbsp;On November
  15, 2004, the ITC instituted an investigation against us in response to the
  complaint.&nbsp;On October 19, 2005, Administrative Law Judge Paul J.&nbsp;Luckern,
  in his Initial Determination, ruled that our NAND products do not infringe the
  asserted SanDisk patent, and that there was no violation of Section 337 of the
  U.S. Tariff Act of 1930. No impact to our financial statements resulted from
  this recent decision. </P>
<P style="margin-top:0pt; margin-bottom:10pt; font-family:Times New Roman" align=justify><BR>
<BR></P>
<P style="margin:0pt; font-family:Times New Roman" align=center>9</P>
<P style="margin:0pt; font-family:Times New Roman"><BR></P>
<HR style="padding-top:7.2pt; padding-bottom:7.2pt" noshade size=1.333>
<P style="page-break-before:always; margin:0pt; font-family:Times New Roman" align=right><BR></P>
<P style="margin:0pt; font-family:Times New Roman"><BR></P>
<P style="margin-top:0pt; margin-bottom:10pt; font-family:Times New Roman" align=justify>On
 October 15, 2004, SanDisk also filed a complaint for patent infringement, and
 declaratory judgment of non-infringement and patent invalidity against us with
 the United States District Court for the Northern District of California.&nbsp;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.&nbsp;By order dated January 4, 2005, the court stayed SanDisk&#146;s patent
 infringement claim pending a final determination in the ITC action discussed
 above.&nbsp;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. </P>
<P style="margin-top:0pt; margin-bottom:10pt; font-family:Times New Roman" align=justify>On
 February 4, 2005, we filed two complaints for patent infringement against SanDisk
 with the United States District Court for the Eastern District of Texas.&nbsp;The
 complaints allege that SanDisk products infringe seven of our U.S. patents.&nbsp;On April 22, 2005, SanDisk filed a counterclaim against us alleging that
 our products infringed two SanDisk patents.&nbsp;We anticipate that the first
 trial will be held during the first quarter of 2006 and that the second trial
 will be held during the third quarter of 2006.&nbsp;</P>
<P style="margin-top:0pt; margin-bottom:10pt; font-family:Times New Roman" align=justify>On March 28, 2005, SanDisk filed a complaint for declaratory judgment of non-infringement and patent invalidity against us with the United States District Court for the Northern District of California.&nbsp;The complaint seeks a declaratory judgment that SanDisk does not infringe several of our U.S. patents.&nbsp;On April 11, 2005, SanDisk voluntarily dismissed the case. </P>
<P style="margin-top:0pt; margin-bottom:10pt; font-family:Times New Roman" align=justify>On
 October 14, 2005, we filed a complaint against SanDisk and its current CEO Dr.
 Eli Harari before the Superior Court of California, County of Alameda.&nbsp;The
 complaint seeks, among other relief, assignment of certain SanDisk patents that
 resulted from inventive activity on the part of Dr. Harari that took place while
 he was an employee, officer and/or director of Waferscale Integration, Inc.&nbsp;We are the successor to Waferscale Integration, Inc. by merger. </P>
<P style="margin-top:0pt; margin-bottom:10pt; font-family:Times New Roman"><B>Results of Operations</B></P>
<P style="margin-top:0pt; margin-bottom:10pt; font-family:Times New Roman" align=justify><B><I>Segment Information</I></B></P>
<P style="margin-top:0pt; margin-bottom:10pt; font-family:Times New Roman" align=justify>We operate in two business areas: Semiconductors and Subsystems. </P>
<P style="margin-top:0pt; margin-bottom:10pt; font-family:Times New Roman" align=justify>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 semi-custom devices and application-specific standard products (&#147;ASSPs&#148;) for analog, digital, and mixed-signal applications.&nbsp;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.&nbsp;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. </P>
<P style="margin-top:0pt; margin-bottom:10pt; font-family:Times New Roman" align=justify>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.&nbsp;Beginning with the first quarter of 2005, we now report our sales and operating income in three segments:</P>
<P style="margin-top:0pt; margin-bottom:-12pt; padding-left:36pt; text-indent:-36pt; font-family:Symbol" align=justify>&#183;</P>
<P style="margin-top:0pt; margin-bottom:10pt; padding-left:36pt; font-family:Symbol" align=justify><FONT FACE="Times New Roman">Application Specific Product Groups (&#147;ASG&#148;) segment, comprised of three product groups &#150; Home, Personal and Communication Sector (&#147;HPC&#148;), Computer Peripherals Group (&#147;CPG&#148;) and new Automotive Product Group (&#147;APG&#148;);</FONT></P>
<P style="margin-top:0pt; margin-bottom:-12pt; padding-left:36pt; text-indent:-36pt; font-family:Symbol" align=justify>&#183;</P>
<P style="margin-top:0pt; margin-bottom:10pt; padding-left:36pt; font-family:Symbol" align=justify><FONT FACE="Times New Roman">Memory Products Group (&#147;MPG&#148;) segment; and</FONT></P>
<P style="margin-top:0pt; margin-bottom:-12pt; padding-left:36pt; text-indent:-36pt; font-family:Symbol" align=justify>&#183;</P>
<P style="margin-top:0pt; margin-bottom:10pt; padding-left:36pt; font-family:Symbol" align=justify><FONT FACE="Times New Roman">Micro, Linear and Discrete Group (&#147;MLD&#148;) segment. </FONT></P>
<P style="margin-top:0pt; margin-bottom:10pt; font-family:Times New Roman" align=justify>We have restated our results in prior periods for illustrative comparisons of our performance by product group and by period.&nbsp;The segment information of 2004 has been restated using the same principles as the ones used for the current year.&nbsp;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. </P>
<P style="margin-top:0pt; margin-bottom:10pt; font-family:Times New Roman" align=justify><BR>
<BR></P>
<P style="margin:0pt; font-family:Times New Roman" align=center>10</P>
<P style="margin:0pt; font-family:Times New Roman"><BR></P>
<HR style="padding-top:7.2pt; padding-bottom:7.2pt" noshade size=1.333>
<P style="page-break-before:always; margin:0pt; font-family:Times New Roman" align=right><BR></P>
<P style="margin:0pt; font-family:Times New Roman"><BR></P>
<P style="margin-top:0pt; margin-bottom:10pt; font-family:Times New Roman" align=justify>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.&nbsp;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, Disclosures about Segments of an Enterprise and Related Information (FAS 131). </P>
<P style="margin-top:0pt; margin-bottom:10pt; font-family:Times New Roman" align=justify>The following tables present our consolidated net revenues and consolidated operating income by semiconductor product segment.&nbsp;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.&nbsp;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.&nbsp;Starting in the first quarter of 2005, we allocated the start-u
p costs to expand our marketing and design presence in new developing areas to each Group, and we restated prior year results accordingly. </P>
<TABLE style="font-size:10pt" cellspacing=0 align=center><TR><TD valign=top width=240>&nbsp;</TD><TD valign=top width=192 colspan=2><P style="margin:0pt; padding-bottom:3pt; line-height:11pt; font-family:Times New Roman; font-size:9pt; border-bottom:0.5pt solid #000000" align=center><B><BR>
Three Months Ended</B></P>
</TD><TD valign=top width=192 colspan=2><P style="margin:0pt; padding-bottom:3pt; line-height:11pt; font-family:Times New Roman; font-size:9pt; border-bottom:0.5pt solid #000000" align=center><B><BR>
Nine Months Ended</B></P>
</TD></TR>
<TR><TD valign=top width=240>&nbsp;</TD><TD valign=bottom width=96><P style="border-bottom:0.5pt solid #000000; margin:0pt; padding-bottom:3pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=center><B>October 1,<BR>2005</B></P>
</TD><TD valign=bottom width=96><P style="margin:0pt; padding-bottom:3pt; line-height:11pt; font-family:Times New Roman; font-size:9pt; border-bottom:0.5pt solid #000000" align=center><B>September 25,<BR>
2004</B></P>
</TD><TD valign=bottom width=96><P style="border-bottom:0.5pt solid #000000; margin:0pt; padding-bottom:3pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=center><B>October 1,<BR>2005</B></P>
</TD><TD valign=bottom width=96><P style="margin:0pt; padding-bottom:3pt; line-height:11pt; font-family:Times New Roman; font-size:9pt; border-bottom:0.5pt solid #000000" align=center><B>September 25,<BR>
2004</B></P>
</TD></TR>
<TR><TD valign=top width=240>&nbsp;</TD><TD valign=top width=384 colspan=4><P style="margin:0pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=center><B>(unaudited, in $ millions)</B></P>
</TD></TR>
<TR><TD valign=top width=240><P style="margin:0pt; line-height:11pt; font-family:Times New Roman; font-size:9pt"><B>Net revenues by product groups:</B></P>
</TD><TD valign=top width=96>&nbsp;</TD><TD valign=top width=96>&nbsp;</TD><TD valign=top width=96>&nbsp;</TD><TD valign=top width=96>&nbsp;</TD></TR>
<TR><TD style="background-color:#DFDFDF" valign=top width=240><P style="margin:0pt; line-height:11pt; font-family:Times New Roman; font-size:9pt">Application Specific Product Groups</P>
</TD><TD style="background-color:#DFDFDF" valign=top width=96><P style="margin:0pt; padding-right:12.95pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=right>1,263</P>
</TD><TD style="background-color:#DFDFDF" valign=top width=96><P style="margin:0pt; padding-right:12.95pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=right>1,231</P>
</TD><TD style="background-color:#DFDFDF" valign=top width=96><P style="margin:0pt; padding-right:12.95pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=right>3,686</P>
</TD><TD style="background-color:#DFDFDF" valign=top width=96><P style="margin:0pt; padding-right:12.95pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=right>3,572</P>
</TD></TR>
<TR><TD valign=top width=240><P style="margin:0pt; line-height:11pt; font-family:Times New Roman; font-size:9pt">Micro, Linear and Discrete Group</P>
</TD><TD valign=top width=96><P style="margin:0pt; padding-right:12.95pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=right>472</P>
</TD><TD valign=top width=96><P style="margin:0pt; padding-right:12.95pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=right>501</P>
</TD><TD valign=top width=96><P style="margin:0pt; padding-right:12.95pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=right>1,388</P>
</TD><TD valign=top width=96><P style="margin:0pt; padding-right:12.95pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=right>1,408</P>
</TD></TR>
<TR><TD style="background-color:#DFDFDF" valign=top width=240><P style="margin:0pt; line-height:11pt; font-family:Times New Roman; font-size:9pt">Memory Product Groups</P>
</TD><TD style="background-color:#DFDFDF" valign=top width=96><P style="margin:0pt; padding-right:12.95pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=right>501</P>
</TD><TD style="background-color:#DFDFDF" valign=top width=96><P style="margin:0pt; padding-right:12.95pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=right>482</P>
</TD><TD style="background-color:#DFDFDF" valign=top width=96><P style="margin:0pt; padding-right:12.95pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=right>1,375</P>
</TD><TD style="background-color:#DFDFDF" valign=top width=96><P style="margin:0pt; padding-right:12.95pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=right>1,401</P>
</TD></TR>
<TR><TD valign=top width=240><P style="margin:0pt; line-height:11pt; font-family:Times New Roman; font-size:9pt">Others<SUP>(1)</SUP></P>
</TD><TD valign=top width=96><P style="margin:0pt; padding-left:14.4pt; padding-right:12.95pt; padding-bottom:3pt; line-height:11pt; font-family:Times New Roman; font-size:9pt; border-bottom:0.5pt solid #000000" align=right>11</P>
</TD><TD valign=top width=96><P style="margin:0pt; padding-left:14.4pt; padding-right:12.95pt; padding-bottom:3pt; line-height:11pt; font-family:Times New Roman; font-size:9pt; border-bottom:0.5pt solid #000000" align=right>17</P>
</TD><TD valign=top width=96><P style="margin:0pt; padding-left:14.4pt; padding-right:12.95pt; padding-bottom:3pt; line-height:11pt; font-family:Times New Roman; font-size:9pt; border-bottom:0.5pt solid #000000" align=right>44</P>
</TD><TD valign=top width=96><P style="margin:0pt; padding-left:14.4pt; padding-right:12.95pt; padding-bottom:3pt; line-height:11pt; font-family:Times New Roman; font-size:9pt; border-bottom:0.5pt solid #000000" align=right>51</P>
</TD></TR>
<TR><TD style="background-color:#DFDFDF" width=240>&nbsp;</TD><TD style="background-color:#DFDFDF" width=96>&nbsp;</TD><TD style="background-color:#DFDFDF" width=96>&nbsp;</TD><TD style="background-color:#DFDFDF" width=96>&nbsp;</TD><TD style="background-color:#DFDFDF" width=96>&nbsp;</TD></TR>
<TR><TD valign=top width=240><P style="margin:0pt; line-height:11pt; font-family:Times New Roman; font-size:9pt"><B>Total consolidated net revenues</B></P>
</TD><TD valign=top width=96><P style="margin:0pt; padding-right:12.95pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=right><B>2,247</B></P>
</TD><TD valign=top width=96><P style="margin:0pt; padding-right:12.95pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=right><B>2,231</B></P>
</TD><TD valign=top width=96><P style="margin:0pt; padding-right:12.95pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=right><B>6,493</B></P>
</TD><TD valign=top width=96><P style="margin:0pt; padding-right:12.95pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=right><B>6,432</B></P>
</TD></TR>
</TABLE>
<U><P style="margin:0pt; text-indent:108pt; font-family:Times New Roman" align=justify><BR></P></U>
<P style="margin-top:0pt; margin-bottom:-11pt; padding-left:18pt; text-indent:-18pt; line-height:11pt; font-family:Times New Roman; font-size:9pt">(1)</P>
<P style="margin-top:0pt; margin-bottom:7.5pt; padding-left:18pt; line-height:11pt; font-family:Times New Roman; font-size:9pt">Includes revenues from sales of subsystems and other products not allocated to product groups. </P>
<P style="margin:0pt; font-family:Times New Roman"><BR></P>
<TABLE style="font-size:10pt" cellspacing=0 align=center><TR><TD width=240>&nbsp;</TD><TD width=192 colspan=2><P style="margin:0pt; padding-bottom:3pt; line-height:11pt; font-family:Times New Roman; font-size:9pt; border-bottom:0.5pt solid #000000" align=center><B><BR>
Three Months Ended</B></P>
</TD><TD width=192 colspan=2><P style="margin:0pt; padding-bottom:3pt; line-height:11pt; font-family:Times New Roman; font-size:9pt; border-bottom:0.5pt solid #000000" align=center><B><BR>
Nine Months Ended</B></P>
</TD></TR>
<TR><TD width=240>&nbsp;</TD><TD valign=bottom width=96><P style="border-bottom:0.5pt solid #000000; margin:0pt; padding-bottom:3pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=center><B>October 1,<br>2005</B></P>
</TD><TD valign=bottom width=96><P style="margin:0pt; padding-bottom:3pt; line-height:11pt; font-family:Times New Roman; font-size:9pt; border-bottom:0.5pt solid #000000" align=center><B>September 25,<BR>
2004</B></P>
</TD><TD valign=bottom width=96><P style="border-bottom:0.5pt solid #000000; margin:0pt; padding-bottom:3pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=center><B>October 1,<br>2005</B></P>
</TD><TD valign=bottom width=96><P style="margin:0pt; padding-bottom:3pt; line-height:11pt; font-family:Times New Roman; font-size:9pt; border-bottom:0.5pt solid #000000" align=center><B>September 25,<BR>
2004</B></P>
</TD></TR>
<TR><TD width=240>&nbsp;</TD><TD width=384 colspan=4><P style="margin:0pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=center><B>(unaudited, in $ millions)</B></P>
</TD></TR>
<TR><TD width=240><P style="margin:0pt; line-height:11pt; font-family:Times New Roman; font-size:9pt"><B>Operating income (loss) by product groups:</B></P>
</TD><TD width=96>&nbsp;</TD><TD width=96>&nbsp;</TD><TD width=96>&nbsp;</TD><TD width=96>&nbsp;</TD></TR>
<TR><TD style="background-color:#DFDFDF" width=240><P style="margin:0pt; line-height:11pt; font-family:Times New Roman; font-size:9pt">Application Specific Product Groups</P>
</TD><TD style="background-color:#DFDFDF" width=96><P style="margin:0pt; padding-right:15.5pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=right>81</P>
</TD><TD style="background-color:#DFDFDF" width=96><P style="margin:0pt; padding-right:15.5pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=right>137</P>
</TD><TD style="background-color:#DFDFDF" width=96><P style="margin:0pt; padding-right:15.5pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=right>218</P>
</TD><TD style="background-color:#DFDFDF" width=96><P style="margin:0pt; padding-right:15.5pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=right>373</P>
</TD></TR>
<TR><TD width=240><P style="margin:0pt; line-height:11pt; font-family:Times New Roman; font-size:9pt">Micro, Linear and Discrete Group</P>
</TD><TD width=96><P style="margin:0pt; padding-right:15.5pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=right>68</P>
</TD><TD width=96><P style="margin:0pt; padding-right:15.5pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=right>134</P>
</TD><TD width=96><P style="margin:0pt; padding-right:15.5pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=right>204</P>
</TD><TD width=96><P style="margin:0pt; padding-right:15.5pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=right>314</P>
</TD></TR>
<TR><TD style="background-color:#DFDFDF" width=240><P style="margin:0pt; line-height:11pt; font-family:Times New Roman; font-size:9pt">Memory Product Groups</P>
</TD><TD style="background-color:#DFDFDF" width=96><P style="margin:0pt; padding-left:14.4pt; padding-right:15.5pt; padding-bottom:3pt; line-height:11pt; font-family:Times New Roman; font-size:9pt; border-bottom:0.5pt solid #000000" align=right>(17)</P>
</TD><TD style="background-color:#DFDFDF" width=96><P style="margin:0pt; padding-left:14.4pt; padding-right:15.5pt; padding-bottom:3pt; line-height:11pt; font-family:Times New Roman; font-size:9pt; border-bottom:0.5pt solid #000000" align=right>14</P>
</TD><TD style="background-color:#DFDFDF" width=96><P style="margin:0pt; padding-left:14.4pt; padding-right:15.5pt; padding-bottom:3pt; line-height:11pt; font-family:Times New Roman; font-size:9pt; border-bottom:0.5pt solid #000000" align=right>(145)</P>
</TD><TD style="background-color:#DFDFDF" width=96><P style="margin:0pt; padding-left:14.4pt; padding-right:15.5pt; padding-bottom:3pt; line-height:11pt; font-family:Times New Roman; font-size:9pt; border-bottom:0.5pt solid #000000" align=right>40</P>
</TD></TR>
<TR><TD width=240>&nbsp;</TD><TD width=96>&nbsp;</TD><TD width=96>&nbsp;</TD><TD width=96>&nbsp;</TD><TD width=96>&nbsp;</TD></TR>
<TR><TD style="background-color:#DFDFDF" width=240><P style="margin:0pt; line-height:11pt; font-family:Times New Roman; font-size:9pt">Total operating income of product groups</P>
</TD><TD style="background-color:#DFDFDF" width=96><P style="margin:0pt; padding-right:15.5pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=right>132</P>
</TD><TD style="background-color:#DFDFDF" width=96><P style="margin:0pt; padding-right:15.5pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=right>285</P>
</TD><TD style="background-color:#DFDFDF" width=96><P style="margin:0pt; padding-right:15.5pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=right>277</P>
</TD><TD style="background-color:#DFDFDF" width=96><P style="margin:0pt; padding-right:15.5pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=right>727</P>
</TD></TR>
<TR><TD width=240><P style="margin:0pt; line-height:11pt; font-family:Times New Roman; font-size:9pt">Others<SUP>(1)</SUP></P>
</TD><TD width=96><P style="margin:0pt; padding-left:14.4pt; padding-right:15.5pt; padding-bottom:3pt; line-height:11pt; font-family:Times New Roman; font-size:9pt; border-bottom:0.5pt solid #000000" align=right>(30)</P>
</TD><TD width=96><P style="margin:0pt; padding-left:14.4pt; padding-right:15.5pt; padding-bottom:3pt; line-height:11pt; font-family:Times New Roman; font-size:9pt; border-bottom:0.5pt solid #000000" align=right>(72)</P>
</TD><TD width=96><P style="margin:0pt; padding-left:14.4pt; padding-right:15.5pt; padding-bottom:3pt; line-height:11pt; font-family:Times New Roman; font-size:9pt; border-bottom:0.5pt solid #000000" align=right>(230)</P>
</TD><TD width=96><P style="margin:0pt; padding-left:14.4pt; padding-right:15.5pt; padding-bottom:3pt; line-height:11pt; font-family:Times New Roman; font-size:9pt; border-bottom:0.5pt solid #000000" align=right>(254)</P>
</TD></TR>
<TR><TD style="background-color:#DFDFDF" width=240>&nbsp;</TD><TD style="background-color:#DFDFDF" width=96>&nbsp;</TD><TD style="background-color:#DFDFDF" width=96>&nbsp;</TD><TD style="background-color:#DFDFDF" width=96>&nbsp;</TD><TD style="background-color:#DFDFDF" width=96>&nbsp;</TD></TR>
<TR><TD width=240><P style="margin:0pt; line-height:11pt; font-family:Times New Roman; font-size:9pt"><B>Total consolidated operating income</B></P>
</TD><TD width=96><P style="margin:0pt; padding-right:15.5pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=right><B>102</B></P>
</TD><TD width=96><P style="margin:0pt; padding-right:15.5pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=right><B>213</B></P>
</TD><TD width=96><P style="margin:0pt; padding-right:15.5pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=right><B>47</B></P>
</TD><TD width=96><P style="margin:0pt; padding-right:15.5pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=right><B>473</B></P>
</TD></TR>
</TABLE>
<U><P style="margin:0pt; text-indent:108pt; font-family:Times New Roman" align=justify><BR></P></U>
<P style="margin-top:0pt; margin-bottom:-11pt; padding-left:18pt; text-indent:-18pt; line-height:11pt; font-family:Times New Roman; font-size:9pt">(1)</P>
<P style="margin-top:0pt; margin-bottom:7.5pt; padding-left:18pt; line-height:11pt; font-family:Times New Roman; font-size:9pt">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.&nbsp;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 reclassified accordingly in the above table. </P>
<P style="margin:0pt; font-family:Times New Roman"><BR></P>
<P style="margin:0pt; font-family:Times New Roman"><BR>
<BR></P>
<P style="margin:0pt; font-family:Times New Roman" align=center>11</P>
<P style="margin:0pt; font-family:Times New Roman"><BR></P>
<HR style="padding-top:7.2pt; padding-bottom:7.2pt" noshade size=1.333>
<P style="page-break-before:always; margin:0pt; font-family:Times New Roman" align=right><BR></P>
<P style="margin:0pt; font-family:Times New Roman"><BR></P>
<P style="margin:0pt; font-family:Times New Roman; font-size:9pt"><BR>
<BR>
<BR></P>
<TABLE style="font-size:10pt" cellspacing=0 align=center><TR><TD valign=top width=240>&nbsp;</TD><TD valign=top width=192 colspan=2><P style="margin:0pt; padding-bottom:3pt; line-height:11pt; font-family:Times New Roman; font-size:9pt; border-bottom:0.5pt solid #000000" align=center><B><BR>
Three Months Ended</B></P>
</TD><TD valign=top width=192 colspan=2><P style="margin:0pt; padding-bottom:3pt; line-height:11pt; font-family:Times New Roman; font-size:9pt; border-bottom:0.5pt solid #000000" align=center><B><BR>
Nine Months Ended</B></P>
</TD></TR>
<TR><TD valign=top width=240>&nbsp;</TD><TD valign=bottom width=96><P style="border-bottom:0.5pt solid #000000; margin:0pt; padding-bottom:3pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=center><B>October 1,<br>2005</B></P>
</TD><TD valign=bottom width=96><P style="margin:0pt; padding-bottom:3pt; line-height:11pt; font-family:Times New Roman; font-size:9pt; border-bottom:0.5pt solid #000000" align=center><B>September 25,<BR>
2004</B></P>
</TD><TD valign=bottom width=96><P style="border-bottom:0.5pt solid #000000; margin:0pt; padding-bottom:3pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=center><B>October 1,<br>2005</B></P>
</TD><TD valign=bottom width=96><P style="margin:0pt; padding-bottom:3pt; line-height:11pt; font-family:Times New Roman; font-size:9pt; border-bottom:0.5pt solid #000000" align=center><B>September 25,<BR>
2004</B></P>
</TD></TR>
<TR><TD valign=top width=240>&nbsp;</TD><TD valign=top width=384 colspan=4><P style="margin:0pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=center><B>(unaudited)</B></P>
<P style="margin:0pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=center><B>(as a percentage of net revenues)</B></P>
</TD></TR>
<TR><TD valign=top width=240><P style="margin:0pt; line-height:11pt; font-family:Times New Roman; font-size:9pt"><B>Operating income (loss) by product groups:</B></P>
</TD><TD valign=top width=96>&nbsp;</TD><TD valign=top width=96>&nbsp;</TD><TD valign=top width=96>&nbsp;</TD><TD valign=top width=96>&nbsp;</TD></TR>
<TR><TD style="background-color:#DFDFDF" valign=top width=240><P style="margin:0pt; line-height:11pt; font-family:Times New Roman; font-size:9pt">Application Specific Product Groups<SUP>(1)</SUP></P>
</TD><TD style="background-color:#DFDFDF" valign=top width=96><P style="margin:0pt; padding-right:15.5pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=right>6.4%</P>
</TD><TD style="background-color:#DFDFDF" valign=top width=96><P style="margin:0pt; padding-right:15.5pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=right>11.1%</P>
</TD><TD style="background-color:#DFDFDF" valign=top width=96><P style="margin:0pt; padding-right:15.5pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=right>5.9%</P>
</TD><TD style="background-color:#DFDFDF" valign=top width=96><P style="margin:0pt; padding-right:15.5pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=right>10.4%</P>
</TD></TR>
<TR><TD valign=top width=240><P style="margin:0pt; line-height:11pt; font-family:Times New Roman; font-size:9pt">Micro, Linear and Discrete Group<SUP>(1)</SUP></P>
</TD><TD valign=top width=96><P style="margin:0pt; padding-right:15.5pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=right>14.4</P>
</TD><TD valign=top width=96><P style="margin:0pt; padding-right:15.5pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=right>26.7</P>
</TD><TD valign=top width=96><P style="margin:0pt; padding-right:15.5pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=right>14.7</P>
</TD><TD valign=top width=96><P style="margin:0pt; padding-right:15.5pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=right>22.3</P>
</TD></TR>
<TR><TD style="background-color:#DFDFDF" valign=top width=240><P style="margin:0pt; line-height:11pt; font-family:Times New Roman; font-size:9pt">Memory Product Groups<SUP>(1)</SUP></P>
</TD><TD style="background-color:#DFDFDF" valign=top width=96><P style="margin:0pt; padding-right:15.5pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=right>(3.4)</P>
</TD><TD style="background-color:#DFDFDF" valign=top width=96><P style="margin:0pt; padding-right:15.5pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=right>2.9</P>
</TD><TD style="background-color:#DFDFDF" valign=top width=96><P style="margin:0pt; padding-right:15.5pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=right>(10.5)</P>
</TD><TD style="background-color:#DFDFDF" valign=top width=96><P style="margin:0pt; padding-right:15.5pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=right>2.9</P>
</TD></TR>
<TR><TD valign=top width=240><P style="margin:0pt; line-height:11pt; font-family:Times New Roman; font-size:9pt">Others<SUP>(2)</SUP></P>
</TD><TD valign=top width=96><P style="margin:0pt; padding-right:15.5pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=right>(1.3)</P>
</TD><TD valign=top width=96><P style="margin:0pt; padding-right:15.5pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=right>(3.2)</P>
</TD><TD valign=top width=96><P style="margin:0pt; padding-right:15.5pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=right>(3.5)</P>
</TD><TD valign=top width=96><P style="margin:0pt; padding-right:15.5pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=right>(3.9)</P>
</TD></TR>
<TR><TD style="background-color:#DFDFDF" valign=top width=240>&nbsp;</TD><TD style="background-color:#DFDFDF" valign=top width=96>&nbsp;</TD><TD style="background-color:#DFDFDF" valign=top width=96>&nbsp;</TD><TD style="background-color:#DFDFDF" valign=top width=96>&nbsp;</TD><TD style="background-color:#DFDFDF" valign=top width=96>&nbsp;</TD></TR>
<TR><TD valign=top width=240><P style="margin:0pt; line-height:11pt; font-family:Times New Roman; font-size:9pt"><B>Total consolidated operating income</B><SUP>(3)</SUP></P>
</TD><TD valign=top width=96><P style="margin:0pt; padding-right:15.5pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=right><B>4.5%</B></P>
</TD><TD valign=top width=96><P style="margin:0pt; padding-right:15.5pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=right><B>9.6%</B></P>
</TD><TD valign=top width=96><P style="margin:0pt; padding-right:15.5pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=right><B>0.7%</B></P>
</TD><TD valign=top width=96><P style="margin:0pt; padding-right:15.5pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=right><B>7.4%</B></P>
</TD></TR>
</TABLE>
<U><P style="margin:0pt; text-indent:108pt; font-family:Times New Roman" align=justify><BR></P></U>
<P style="margin-top:0pt; margin-bottom:-11pt; padding-left:36pt; text-indent:-18pt; line-height:11pt; font-family:Times New Roman; font-size:9pt">(1)</P>
<P style="margin:0pt; padding-left:36pt; line-height:11pt; font-family:Times New Roman; font-size:9pt">As a percentage of net revenues per product group. </P>
<P style="margin-top:0pt; margin-bottom:-11pt; padding-left:36pt; text-indent:-18pt; line-height:11pt; font-family:Times New Roman; font-size:9pt">(2)</P>
<P style="margin:0pt; padding-left:36pt; line-height:11pt; font-family:Times New Roman; font-size:9pt">As
 a percentage of total net revenues. 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.&nbsp;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 reclassified accordingly in the
 above table. </P>
<P style="margin-top:0pt; margin-bottom:-11pt; padding-left:36pt; text-indent:-18pt; line-height:11pt; font-family:Times New Roman; font-size:9pt">(3)</P>
<P style="margin:0pt; padding-left:36pt; line-height:11pt; font-family:Times New Roman; font-size:9pt">As a percentage of total net revenues. </P>
<P style="margin:0pt; padding-left:18pt; text-indent:-18pt; line-height:11pt; font-family:Times New Roman; font-size:9pt">&nbsp;</P>
<TABLE style="font-size:10pt" cellspacing=0 align=center><TR><TD valign=top width=240>&nbsp;</TD><TD valign=top width=192 colspan=2><P style="margin:0pt; padding-bottom:3pt; line-height:11pt; font-family:Times New Roman; font-size:9pt; border-bottom:0.5pt solid #000000" align=center><B><BR>
Three Months Ended</B></P>
</TD><TD valign=top width=192 colspan=2><P style="margin:0pt; padding-bottom:3pt; line-height:11pt; font-family:Times New Roman; font-size:9pt; border-bottom:0.5pt solid #000000" align=center><B><BR>
Nine Months Ended</B></P>
</TD></TR>
<TR><TD valign=top width=240>&nbsp;</TD><TD valign=bottom width=96><P style="border-bottom:0.5pt solid #000000; margin:0pt; padding-bottom:3pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=center><B>October 1,<br>2005</B></P>
</TD><TD valign=bottom width=96><P style="margin:0pt; padding-bottom:3pt; line-height:11pt; font-family:Times New Roman; font-size:9pt; border-bottom:0.5pt solid #000000" align=center><B>September 25, 2004</B></P>
</TD><TD valign=bottom width=96><P style="border-bottom:0.5pt solid #000000; margin:0pt; padding-bottom:3pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=center><B>October 1,<br>2005</B></P>
</TD><TD valign=bottom width=96><P style="margin:0pt; padding-bottom:3pt; line-height:11pt; font-family:Times New Roman; font-size:9pt; border-bottom:0.5pt solid #000000" align=center><B>September 25, 2004</B></P>
</TD></TR>
<TR><TD valign=top width=240>&nbsp;</TD><TD valign=top width=384 colspan=4><P style="margin:0pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=center><B>(unaudited, in $ millions)</B></P>
</TD></TR>
<TR><TD valign=top width=240><P style="margin-top:0pt; margin-bottom:1.5pt; line-height:11pt; font-family:Times New Roman; font-size:9pt"><B>Reconciliation to consolidated operating income:</B></P>
</TD><TD valign=top width=96>&nbsp;</TD><TD valign=top width=96>&nbsp;</TD><TD valign=top width=96>&nbsp;</TD><TD valign=top width=96>&nbsp;</TD></TR>
<TR><TD style="background-color:#DFDFDF" valign=top width=240><P style="margin-top:0pt; margin-bottom:1.5pt; line-height:11pt; font-family:Times New Roman; font-size:9pt">Total operating income of product groups</P>
</TD><TD style="background-color:#DFDFDF" valign=top width=96><P style="margin-top:0pt; margin-bottom:1.5pt; padding-right:15.5pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=right>132</P>
</TD><TD style="background-color:#DFDFDF" valign=top width=96><P style="margin-top:0pt; margin-bottom:1.5pt; padding-right:15.5pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=right>285</P>
</TD><TD style="background-color:#DFDFDF" valign=top width=96><P style="margin-top:0pt; margin-bottom:1.5pt; padding-right:15.5pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=right>277</P>
</TD><TD style="background-color:#DFDFDF" valign=top width=96><P style="margin-top:0pt; margin-bottom:1.5pt; padding-right:15.5pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=right>727</P>
</TD></TR>
<TR><TD valign=top width=240><P style="margin-top:0pt; margin-bottom:1.5pt; padding-left:17.4pt; line-height:11pt; font-family:Times New Roman; font-size:9pt">Strategic and other research and development programs</P>
</TD><TD valign=top width=96><P style="margin-top:0pt; margin-bottom:1.5pt; padding-right:15.5pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=right>(10)</P>
</TD><TD valign=top width=96><P style="margin-top:0pt; margin-bottom:1.5pt; padding-right:15.5pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=right>(35)</P>
</TD><TD valign=top width=96><P style="margin-top:0pt; margin-bottom:1.5pt; padding-right:15.5pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=right>(38)</P>
</TD><TD valign=top width=96><P style="margin-top:0pt; margin-bottom:1.5pt; padding-right:15.5pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=right>(89)</P>
</TD></TR>
<TR><TD style="background-color:#DFDFDF" valign=top width=240><P style="margin-top:0pt; margin-bottom:1.5pt; padding-left:17.4pt; line-height:11pt; font-family:Times New Roman; font-size:9pt">Start-up costs</P>
</TD><TD style="background-color:#DFDFDF" valign=top width=96><P style="margin-top:0pt; margin-bottom:1.5pt; padding-right:15.5pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=right>(12)</P>
</TD><TD style="background-color:#DFDFDF" valign=top width=96><P style="margin-top:0pt; margin-bottom:1.5pt; padding-right:15.5pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=right>(13)</P>
</TD><TD style="background-color:#DFDFDF" valign=top width=96><P style="margin-top:0pt; margin-bottom:1.5pt; padding-right:15.5pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=right>(46)</P>
</TD><TD style="background-color:#DFDFDF" valign=top width=96><P style="margin-top:0pt; margin-bottom:1.5pt; padding-right:15.5pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=right>(45)</P>
</TD></TR>
<TR><TD valign=top width=240><P style="margin-top:0pt; margin-bottom:1.5pt; padding-left:17.4pt; line-height:11pt; font-family:Times New Roman; font-size:9pt">Impairment, restructuring charges and other related closure costs</P>
</TD><TD valign=top width=96><P style="margin-top:0pt; margin-bottom:1.5pt; padding-right:15.5pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=right>(13)</P>
</TD><TD valign=top width=96><P style="margin-top:0pt; margin-bottom:1.5pt; padding-right:15.5pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=right>(12)</P>
</TD><TD valign=top width=96><P style="margin-top:0pt; margin-bottom:1.5pt; padding-right:15.5pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=right>(113)</P>
</TD><TD valign=top width=96><P style="margin-top:0pt; margin-bottom:1.5pt; padding-right:15.5pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=right>(57)</P>
</TD></TR>
<TR><TD style="background-color:#DFDFDF" valign=top width=240><P style="margin-top:0pt; margin-bottom:1.5pt; padding-left:17.4pt; line-height:11pt; font-family:Times New Roman; font-size:9pt">One-time compensation and special contributions<SUP>(1)</SUP></P>
</TD><TD style="background-color:#DFDFDF" valign=top width=96><P style="margin-top:0pt; margin-bottom:1.5pt; padding-right:15.5pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=right>-</P>
</TD><TD style="background-color:#DFDFDF" valign=top width=96><P style="margin-top:0pt; margin-bottom:1.5pt; padding-right:15.5pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=right>-</P>
</TD><TD style="background-color:#DFDFDF" valign=top width=96><P style="margin-top:0pt; margin-bottom:1.5pt; padding-right:15.5pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=right>(22)</P>
</TD><TD style="background-color:#DFDFDF" valign=top width=96><P style="margin-top:0pt; margin-bottom:1.5pt; padding-right:15.5pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=right>-</P>
</TD></TR>
<TR><TD valign=top width=240><P style="margin-top:0pt; margin-bottom:1.5pt; padding-left:17.4pt; line-height:11pt; font-family:Times New Roman; font-size:9pt">Loss on foreign exchange</P>
</TD><TD valign=top width=96><P style="margin-top:0pt; margin-bottom:1.5pt; padding-right:15.5pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=right>-</P>
</TD><TD valign=top width=96><P style="margin-top:0pt; margin-bottom:1.5pt; padding-right:15.5pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=right>(2)</P>
</TD><TD valign=top width=96><P style="margin-top:0pt; margin-bottom:1.5pt; padding-right:15.5pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=right>(9)</P>
</TD><TD valign=top width=96><P style="margin-top:0pt; margin-bottom:1.5pt; padding-right:15.5pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=right>(6)</P>
</TD></TR>
<TR><TD style="background-color:#DFDFDF" valign=top width=240><P style="margin-top:0pt; margin-bottom:1.5pt; padding-left:17.4pt; line-height:11pt; font-family:Times New Roman; font-size:9pt">Other non-allocated provisions<SUP>(2)</SUP></P>
</TD><TD style="background-color:#DFDFDF" valign=top width=96><P style="margin-top:0pt; margin-bottom:1.5pt; padding-right:15.5pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=right>5</P>
</TD><TD style="background-color:#DFDFDF" valign=top width=96><P style="margin-top:0pt; margin-bottom:1.5pt; padding-right:15.5pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=right>(10)</P>
</TD><TD style="background-color:#DFDFDF" valign=top width=96><P style="margin-top:0pt; margin-bottom:1.5pt; padding-right:15.5pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=right>(2)</P>
</TD><TD style="background-color:#DFDFDF" valign=top width=96><P style="margin-top:0pt; margin-bottom:1.5pt; padding-right:15.5pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=right>(57)</P>
</TD></TR>
<TR><TD valign=top width=240><P style="margin:0pt; line-height:11pt; font-family:Times New Roman; font-size:9pt">Others<SUP>(3)</SUP></P>
</TD><TD valign=top width=96><P style="margin:0pt; padding-right:15.5pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=right>(30)</P>
</TD><TD valign=top width=96><P style="margin:0pt; padding-right:15.5pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=right>(72)</P>
</TD><TD valign=top width=96><P style="margin:0pt; padding-right:15.5pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=right>(230)</P>
</TD><TD valign=top width=96><P style="margin:0pt; padding-right:15.5pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=right>(254)</P>
</TD></TR>
<TR><TD style="background-color:#DFDFDF" valign=top width=240>&nbsp;</TD><TD style="background-color:#DFDFDF" valign=top width=96>&nbsp;</TD><TD style="background-color:#DFDFDF" valign=top width=96>&nbsp;</TD><TD style="background-color:#DFDFDF" valign=top width=96>&nbsp;</TD><TD style="background-color:#DFDFDF" valign=top width=96>&nbsp;</TD></TR>
<TR><TD valign=top width=240><P style="margin:0pt; line-height:11pt; font-family:Times New Roman; font-size:9pt"><B>Total consolidated operating income </B></P>
</TD><TD width=96><P style="margin:0pt; padding-right:15.5pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=right><B>102</B></P>
</TD><TD width=96><P style="margin:0pt; padding-right:15.5pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=right><B>213</B></P>
</TD><TD width=96><P style="margin:0pt; padding-right:15.5pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=right><B>47</B></P>
</TD><TD width=96><P style="margin:0pt; padding-right:15.5pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=right><B>473</B></P>
</TD></TR>
</TABLE>
<U><P style="margin:0pt; text-indent:108pt; font-family:Times New Roman" align=justify><BR></P></U>
<P style="margin-top:0pt; margin-bottom:-11pt; padding-left:18pt; text-indent:-18pt; line-height:11pt; font-family:Times New Roman; font-size:9pt">(1)</P>
<P style="margin:0pt; padding-left:18pt; line-height:11pt; font-family:Times New Roman; font-size:9pt">The total charge for one-time compensation and special contributions was $24 million, of which $2 million was allocated to product groups.&nbsp;The remaining $22 million was not allocated to product groups. </P>
<P style="margin-top:0pt; margin-bottom:-11pt; padding-left:18pt; text-indent:-18pt; line-height:11pt; font-family:Times New Roman; font-size:9pt">(2)</P>
<P style="margin-top:0pt; margin-bottom:7pt; padding-left:18pt; line-height:11pt; font-family:Times New Roman; font-size:9pt">Includes
  unallocated income and expenses such as certain corporate level operating expenses
  and other costs that are not allocated to the product groups.</P>

<P style="margin-top:0pt; margin-bottom:-11pt; padding-left:18pt; text-indent:-18pt; line-height:11pt; font-family:Times New Roman; font-size:9pt">(3)</P>
<P style="margin-top:0pt; margin-bottom:7pt; padding-left:18pt; line-height:11pt; font-family:Times New Roman; font-size:9pt">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 reclassified accordingly in the above table.</P>
<P style="margin-top:0pt; margin-bottom:13.5pt; padding-left:18pt; line-height:11pt; font-family:Times New Roman; font-size:9pt">&nbsp;</P>
<P style="margin:0pt; font-family:Times New Roman" align=justify><BR>
<BR></P>
<P style="margin:0pt; font-family:Times New Roman" align=center>12</P>
<P style="margin:0pt; font-family:Times New Roman"><BR></P>
<HR style="padding-top:7.2pt; padding-bottom:7.2pt" noshade size=1.333>
<P style="page-break-before:always; margin:0pt; font-family:Times New Roman" align=right><BR></P>
<P style="margin:0pt; font-family:Times New Roman"><BR>
</P>
<p style="margin-top:0pt; margin-bottom:10pt; font-family:Times New Roman"><b>Net
  revenues by location of order shipment and by market segment application</b></p>
<p style="margin:0pt; font-family:Times New Roman" align=justify>The tables below
  set forth information on our net revenues by location of order shipment and
  as a percentage of net revenues:</p>
<P style="margin:0pt; font-family:Times New Roman; font-size:9pt" align=justify><BR>
<BR>
<BR></P>
<TABLE style="font-size:10pt" cellspacing=0 align=center><TR><TD width=240>&nbsp;</TD><TD width=192 colspan=2><P style="margin:0pt; padding-bottom:3pt; line-height:11pt; font-family:Times New Roman; font-size:9pt; border-bottom:0.5pt solid #000000" align=center><B><BR>
Three Months Ended</B></P>
</TD><TD width=192 colspan=2><P style="margin:0pt; padding-bottom:3pt; line-height:11pt; font-family:Times New Roman; font-size:9pt; border-bottom:0.5pt solid #000000" align=center><B><BR>
Nine Months Ended</B></P>
</TD></TR>
<TR><TD width=240>&nbsp;</TD><TD valign=bottom width=96><P style="border-bottom:0.5pt solid #000000; margin:0pt; padding-bottom:3pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=center><B>October 1,<br>2005</B></P>
</TD><TD valign=bottom width=96><P style="margin:0pt; padding-bottom:3pt; line-height:11pt; font-family:Times New Roman; font-size:9pt; border-bottom:0.5pt solid #000000" align=center><B>September 25, 2004</B></P>
</TD><TD valign=bottom width=96><P style="border-bottom:0.5pt solid #000000; margin:0pt; padding-bottom:3pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=center><B>October 1,<br>2005</B></P>
</TD><TD valign=bottom width=96><P style="margin:0pt; padding-bottom:3pt; line-height:11pt; font-family:Times New Roman; font-size:9pt; border-bottom:0.5pt solid #000000" align=center><B>September 25, 2004</B></P>
</TD></TR>
<TR><TD width=240>&nbsp;</TD><TD width=384 colspan=4><P style="margin:0pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=center><B>(unaudited, in $ millions)</B></P>
</TD></TR>
<TR><TD width=240><P style="margin-top:0pt; margin-bottom:1.5pt; line-height:11pt; font-family:Times New Roman; font-size:9pt"><B>Net
 Revenues by Location <br>
 of Order Shipment<SUP>(1)</SUP></B></P>
</TD><TD width=96>&nbsp;</TD><TD width=96>&nbsp;</TD><TD width=96>&nbsp;</TD><TD width=96>&nbsp;</TD></TR>
<TR><TD style="background-color:#DFDFDF" width=240><P style="margin-top:0pt; margin-bottom:1.5pt; line-height:11pt; font-family:Times New Roman; font-size:9pt">Europe<SUP> (2)</SUP></P>
</TD><TD style="background-color:#DFDFDF" width=96><P style="margin-top:0pt; margin-bottom:1.5pt; padding-right:16.2pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=right>680</P>
</TD><TD style="background-color:#DFDFDF" width=96><P style="margin-top:0pt; margin-bottom:1.5pt; padding-left:1.4pt; padding-right:16.2pt; text-indent:-1.4pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=right>711</P>
</TD><TD style="background-color:#DFDFDF" width=96><P style="margin-top:0pt; margin-bottom:1.5pt; padding-right:16.2pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=right>2,060</P>
</TD><TD style="background-color:#DFDFDF" width=96><P style="margin-top:0pt; margin-bottom:1.5pt; padding-left:1.4pt; padding-right:16.2pt; text-indent:-1.4pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=right>2,036</P>
</TD></TR>
<TR><TD width=240><P style="margin-top:0pt; margin-bottom:1.5pt; line-height:11pt; font-family:Times New Roman; font-size:9pt">North America</P>
</TD><TD width=96><P style="margin-top:0pt; margin-bottom:1.5pt; padding-right:16.2pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=right>269</P>
</TD><TD width=96><P style="margin-top:0pt; margin-bottom:1.5pt; padding-left:1.4pt; padding-right:16.2pt; text-indent:-1.4pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=right>311</P>
</TD><TD width=96><P style="margin-top:0pt; margin-bottom:1.5pt; padding-right:16.2pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=right>856</P>
</TD><TD width=96><P style="margin-top:0pt; margin-bottom:1.5pt; padding-left:1.4pt; padding-right:16.2pt; text-indent:-1.4pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=right>932</P>
</TD></TR>
<TR><TD style="background-color:#DFDFDF" width=240><P style="margin-top:0pt; margin-bottom:1.5pt; line-height:11pt; font-family:Times New Roman; font-size:9pt">Asia/Pacific</P>
</TD><TD style="background-color:#DFDFDF" width=96><P style="margin-top:0pt; margin-bottom:1.5pt; padding-right:16.2pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=right>1,071</P>
</TD><TD style="background-color:#DFDFDF" width=96><P style="margin-top:0pt; margin-bottom:1.5pt; padding-left:1.4pt; padding-right:16.2pt; text-indent:-1.4pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=right>939</P>
</TD><TD style="background-color:#DFDFDF" width=96><P style="margin-top:0pt; margin-bottom:1.5pt; padding-right:16.2pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=right>2,920</P>
</TD><TD style="background-color:#DFDFDF" width=96><P style="margin-top:0pt; margin-bottom:1.5pt; padding-left:1.4pt; padding-right:16.2pt; text-indent:-1.4pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=right>2,716</P>
</TD></TR>
<TR><TD width=240><P style="margin-top:0pt; margin-bottom:1.5pt; line-height:11pt; font-family:Times New Roman; font-size:9pt">Japan</P>
</TD><TD width=96><P style="margin-top:0pt; margin-bottom:1.5pt; padding-right:16.2pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=right>79</P>
</TD><TD width=96><P style="margin-top:0pt; margin-bottom:1.5pt; padding-left:1.4pt; padding-right:16.2pt; text-indent:-1.4pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=right>105</P>
</TD><TD width=96><P style="margin-top:0pt; margin-bottom:1.5pt; padding-right:16.2pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=right>226</P>
</TD><TD width=96><P style="margin-top:0pt; margin-bottom:1.5pt; padding-left:1.4pt; padding-right:16.2pt; text-indent:-1.4pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=right>293</P>
</TD></TR>
<TR><TD style="background-color:#DFDFDF" width=240><P style="margin-top:0pt; margin-bottom:1.5pt; line-height:11pt; font-family:Times New Roman; font-size:9pt">Emerging Markets<SUP> (2)</SUP></P>
</TD><TD style="background-color:#DFDFDF" width=96><P style="margin-top:0pt; margin-bottom:1.5pt; padding-right:16.2pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=right>148</P>
</TD><TD style="background-color:#DFDFDF" width=96><P style="margin-top:0pt; margin-bottom:1.5pt; padding-left:1.4pt; padding-right:16.2pt; text-indent:-1.4pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=right>165</P>
</TD><TD style="background-color:#DFDFDF" width=96><P style="margin-top:0pt; margin-bottom:1.5pt; padding-right:16.2pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=right>431</P>
</TD><TD style="background-color:#DFDFDF" width=96><P style="margin-top:0pt; margin-bottom:1.5pt; padding-left:1.4pt; padding-right:16.2pt; text-indent:-1.4pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=right>455</P>
</TD></TR>
<TR><TD width=240><P style="margin-top:0pt; margin-bottom:1.5pt; line-height:11pt; font-family:Times New Roman; font-size:9pt"><B>Total</B></P>
</TD><TD width=96><P style="margin-top:0pt; margin-bottom:1.5pt; padding-right:16.2pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=right><B>2,247</B></P>
</TD><TD width=96><P style="margin-top:0pt; margin-bottom:1.5pt; padding-left:1.4pt; padding-right:16.2pt; text-indent:-1.4pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=right><B>2,231</B></P>
</TD><TD width=96><P style="margin-top:0pt; margin-bottom:1.5pt; padding-right:16.2pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=right><B>6,493</B></P>
</TD><TD width=96><P style="margin-top:0pt; margin-bottom:1.5pt; padding-left:1.4pt; padding-right:16.2pt; text-indent:-1.4pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=right><B>6,432</B></P>
</TD></TR>
<TR><TD style="background-color:#DFDFDF" width=624 colspan=5><P style="margin:0pt; padding-left:171.35pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=center><B>(unaudited)</B></P>
<P style="margin:0pt; padding-left:171.35pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=center><B>(as a percentage of net revenues)</B></P>
</TD></TR>
<TR><TD width=240><P style="margin-top:0pt; margin-bottom:1.5pt; line-height:11pt; font-family:Times New Roman; font-size:9pt"><B>Net
 Revenues by Location<br>
 of Order Shipment<SUP>(1)</SUP></B></P>
</TD><TD width=96>&nbsp;</TD><TD width=96>&nbsp;</TD><TD width=96>&nbsp;</TD><TD width=96>&nbsp;</TD></TR>
<TR><TD style="background-color:#DFDFDF" width=240><P style="margin-top:0pt; margin-bottom:1.5pt; line-height:11pt; font-family:Times New Roman; font-size:9pt">Europe<SUP> (2)</SUP></P>
</TD><TD style="background-color:#DFDFDF" width=96><P style="margin-top:0pt; margin-bottom:1.5pt; padding-left:3.6pt; padding-right:16.2pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=right>30.2%</P>
</TD><TD style="background-color:#DFDFDF" width=96><P style="margin-top:0pt; margin-bottom:1.5pt; padding-left:1.4pt; padding-right:16.2pt; text-indent:-1.4pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=right>31.8%</P>
</TD><TD style="background-color:#DFDFDF" width=96><P style="margin-top:0pt; margin-bottom:1.5pt; padding-right:16.2pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=right>31.7%</P>
</TD><TD style="background-color:#DFDFDF" width=96><P style="margin-top:0pt; margin-bottom:1.5pt; padding-right:16.2pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=right>31.6%</P>
</TD></TR>
<TR><TD width=240><P style="margin-top:0pt; margin-bottom:1.5pt; line-height:11pt; font-family:Times New Roman; font-size:9pt">North America</P>
</TD><TD width=96><P style="margin-top:0pt; margin-bottom:1.5pt; padding-right:16.2pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=right>12.0</P>
</TD><TD width=96><P style="margin-top:0pt; margin-bottom:1.5pt; padding-left:1.4pt; padding-right:16.2pt; text-indent:-1.4pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=right>14.0</P>
</TD><TD width=96><P style="margin-top:0pt; margin-bottom:1.5pt; padding-right:16.2pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=right>13.2</P>
</TD><TD width=96><P style="margin-top:0pt; margin-bottom:1.5pt; padding-right:16.2pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=right>14.5</P>
</TD></TR>
<TR><TD style="background-color:#DFDFDF" width=240><P style="margin-top:0pt; margin-bottom:1.5pt; line-height:11pt; font-family:Times New Roman; font-size:9pt">Asia/Pacific</P>
</TD><TD style="background-color:#DFDFDF" width=96><P style="margin-top:0pt; margin-bottom:1.5pt; padding-right:16.2pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=right>47.7</P>
</TD><TD style="background-color:#DFDFDF" width=96><P style="margin-top:0pt; margin-bottom:1.5pt; padding-left:1.4pt; padding-right:16.2pt; text-indent:-1.4pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=right>42.1</P>
</TD><TD style="background-color:#DFDFDF" width=96><P style="margin-top:0pt; margin-bottom:1.5pt; padding-right:16.2pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=right>45.0</P>
</TD><TD style="background-color:#DFDFDF" width=96><P style="margin-top:0pt; margin-bottom:1.5pt; padding-right:16.2pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=right>42.2</P>
</TD></TR>
<TR><TD width=240><P style="margin-top:0pt; margin-bottom:1.5pt; line-height:11pt; font-family:Times New Roman; font-size:9pt">Japan</P>
</TD><TD width=96><P style="margin-top:0pt; margin-bottom:1.5pt; padding-right:16.2pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=right>3.5</P>
</TD><TD width=96><P style="margin-top:0pt; margin-bottom:1.5pt; padding-left:1.4pt; padding-right:16.2pt; text-indent:-1.4pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=right>4.7</P>
</TD><TD width=96><P style="margin-top:0pt; margin-bottom:1.5pt; padding-right:16.2pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=right>3.5</P>
</TD><TD width=96><P style="margin-top:0pt; margin-bottom:1.5pt; padding-right:16.2pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=right>4.6</P>
</TD></TR>
<TR><TD style="background-color:#DFDFDF" width=240><P style="margin-top:0pt; margin-bottom:1.5pt; line-height:11pt; font-family:Times New Roman; font-size:9pt">Emerging Markets <SUP>(2)</SUP></P>
</TD><TD style="background-color:#DFDFDF" width=96><P style="margin-top:0pt; margin-bottom:1.5pt; padding-right:16.2pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=right>6.6</P>
</TD><TD style="background-color:#DFDFDF" width=96><P style="margin-top:0pt; margin-bottom:1.5pt; padding-left:1.4pt; padding-right:16.2pt; text-indent:-1.4pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=right>7.4</P>
</TD><TD style="background-color:#DFDFDF" width=96><P style="margin-top:0pt; margin-bottom:1.5pt; padding-right:16.2pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=right>6.6</P>
</TD><TD style="background-color:#DFDFDF" width=96><P style="margin-top:0pt; margin-bottom:1.5pt; padding-right:16.2pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=right>7.1</P>
</TD></TR>
<TR><TD width=240>&nbsp;</TD><TD width=96>&nbsp;</TD><TD width=96>&nbsp;</TD><TD width=96>&nbsp;</TD><TD width=96>&nbsp;</TD></TR>
<TR><TD style="background-color:#DFDFDF" width=240><P style="margin:0pt; line-height:11pt; font-family:Times New Roman; font-size:9pt"><B>Total</B></P>
</TD><TD style="background-color:#DFDFDF" width=96><P style="margin:0pt; padding-right:16.2pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=right><B>100%</B></P>
</TD><TD style="background-color:#DFDFDF" width=96><P style="margin:0pt; padding-left:1.4pt; padding-right:16.2pt; text-indent:-1.4pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=right><B>100%</B></P>
</TD><TD style="background-color:#DFDFDF" width=96><P style="margin:0pt; padding-right:16.2pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=right><B>100%</B></P>
</TD><TD style="background-color:#DFDFDF" width=96><P style="margin:0pt; padding-right:16.2pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=right><B>100%</B></P>
</TD></TR>
</TABLE>
<U><P style="margin:0pt; text-indent:108pt; font-family:Times New Roman" align=justify><BR></P></U>
<P style="margin-top:0pt; margin-bottom:-11pt; padding-left:18pt; text-indent:-18pt; line-height:11pt; font-family:Times New Roman; font-size:9pt">(1)</P>
<P style="margin:0pt; padding-left:18pt; line-height:11pt; font-family:Times New Roman; font-size:9pt">Net
 revenues by location of order shipment are classified by location of customer
 invoiced.&nbsp;For example, products ordered by U.S.-based companies to be
 invoiced to Asia/Pacific affiliates are classified as Asia/Pacific revenues.
</P>
<P style="margin-top:0pt; margin-bottom:-11pt; padding-left:18pt; text-indent:-18pt; line-height:11pt; font-family:Times New Roman; font-size:9pt">(2)</P>
<P style="margin-top:0pt; margin-bottom:7.5pt; padding-left:18pt; line-height:11pt; font-family:Times New Roman; font-size:9pt">Since January 1, 2005, the region &#147;Europe&#148; includes the former East European countries that joined the European Union in 2004.&nbsp;These countries were part of the Emerging Markets perimeter in the previous periods.&nbsp;Net revenues for Europe and Emerging Markets for prior periods were restated according to the new perimeter. </P>
<P style="margin-top:0pt; margin-bottom:10pt; font-family:Times New Roman" align=justify>The table below estimates, within a variance of 5%-to-10% in absolute dollar amounts, the relative weighting of each of our target market segments in percentages of net revenues:</P>
<TABLE style="font-size:10pt" cellspacing=0 align=center><TR><TD valign=top width=240>&nbsp;</TD><TD valign=top width=192 colspan=2><P style="margin:0pt; padding-bottom:3pt; line-height:11pt; font-family:Times New Roman; font-size:9pt; border-bottom:0.5pt solid #000000" align=center><B>Three Months Ended</B></P>
</TD><TD valign=top width=192 colspan=2><P style="margin:0pt; padding-bottom:3pt; line-height:11pt; font-family:Times New Roman; font-size:9pt; border-bottom:0.5pt solid #000000" align=center><B>Nine Months Ended</B></P>
</TD></TR>
<TR><TD valign=top width=240>&nbsp;</TD><TD valign=bottom width=96><P style="border-bottom:0.5pt solid #000000; margin:0pt; padding-bottom:3pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=center><B>October 1,<br>2005</B></P>
</TD><TD valign=bottom width=96><P style="margin:0pt; padding-bottom:3pt; line-height:11pt; font-family:Times New Roman; font-size:9pt; border-bottom:0.5pt solid #000000" align=center><B>September 25, 2004</B></P>
</TD><TD valign=bottom width=96><P style="border-bottom:0.5pt solid #000000; margin:0pt; padding-bottom:3pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=center><B>October 1,<br>2005</B></P>
</TD><TD valign=bottom width=96><P style="border-bottom:0.5pt solid #000000; margin:0pt; padding-bottom:3pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=center><B>September 25,<br>2004</B></P>
</TD></TR>
<TR><TD valign=top width=624 colspan=5><P style="margin:0pt; padding-left:180pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=center><B>(unaudited)</B></P>
<P style="margin:0pt; padding-left:180pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=center><B>(as a percentage of net revenues)</B></P>
</TD></TR>
<TR><TD valign=top width=240><P style="margin-top:0pt; margin-bottom:1.5pt; line-height:11pt; font-family:Times New Roman; font-size:9pt"><B>Net Revenues by Market Segment Application:</B></P>
</TD><TD valign=top width=96>&nbsp;</TD><TD valign=top width=96>&nbsp;</TD><TD valign=top width=96>&nbsp;</TD><TD valign=top width=96>&nbsp;</TD></TR>
<TR><TD style="background-color:#DFDFDF" valign=top width=240><P style="margin-top:0pt; margin-bottom:1.5pt; line-height:11pt; font-family:Times New Roman; font-size:9pt">Automotive</P>
</TD><TD style="background-color:#DFDFDF" valign=top width=96><P style="margin-top:0pt; margin-bottom:1.5pt; padding-right:16.2pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=right>15%</P>
</TD><TD style="background-color:#DFDFDF" valign=top width=96><P style="margin-top:0pt; margin-bottom:1.5pt; padding-right:16.2pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=right>15%</P>
</TD><TD style="background-color:#DFDFDF" valign=top width=96><P style="margin-top:0pt; margin-bottom:1.5pt; padding-right:16.2pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=right>16%</P>
</TD><TD style="background-color:#DFDFDF" valign=top width=96><P style="margin-top:0pt; margin-bottom:1.5pt; padding-right:16.2pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=right>15%</P>
</TD></TR>
<TR><TD valign=top width=240><P style="margin-top:0pt; margin-bottom:1.5pt; line-height:11pt; font-family:Times New Roman; font-size:9pt">Consumer</P>
</TD><TD valign=top width=96><P style="margin-top:0pt; margin-bottom:1.5pt; padding-right:16.2pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=right>17</P>
</TD><TD valign=top width=96><P style="margin-top:0pt; margin-bottom:1.5pt; padding-right:16.2pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=right>23</P>
</TD><TD valign=top width=96><P style="margin-top:0pt; margin-bottom:1.5pt; padding-right:16.2pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=right>18</P>
</TD><TD valign=top width=96><P style="margin-top:0pt; margin-bottom:1.5pt; padding-right:16.2pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=right>21</P>
</TD></TR>
<TR><TD style="background-color:#DFDFDF" valign=top width=240><P style="margin-top:0pt; margin-bottom:1.5pt; line-height:11pt; font-family:Times New Roman; font-size:9pt">Computer</P>
</TD><TD style="background-color:#DFDFDF" valign=top width=96><P style="margin-top:0pt; margin-bottom:1.5pt; padding-right:16.2pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=right>18</P>
</TD><TD style="background-color:#DFDFDF" valign=top width=96><P style="margin-top:0pt; margin-bottom:1.5pt; padding-right:16.2pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=right>15</P>
</TD><TD style="background-color:#DFDFDF" valign=top width=96><P style="margin-top:0pt; margin-bottom:1.5pt; padding-right:16.2pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=right>17</P>
</TD><TD style="background-color:#DFDFDF" valign=top width=96><P style="margin-top:0pt; margin-bottom:1.5pt; padding-right:16.2pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=right>16</P>
</TD></TR>
<TR><TD valign=top width=240><P style="margin-top:0pt; margin-bottom:1.5pt; line-height:11pt; font-family:Times New Roman; font-size:9pt">Telecom</P>
</TD><TD valign=top width=96><P style="margin-top:0pt; margin-bottom:1.5pt; padding-right:16.2pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=right>36</P>
</TD><TD valign=top width=96><P style="margin-top:0pt; margin-bottom:1.5pt; padding-right:16.2pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=right>31</P>
</TD><TD valign=top width=96><P style="margin-top:0pt; margin-bottom:1.5pt; padding-right:16.2pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=right>34</P>
</TD><TD valign=top width=96><P style="margin-top:0pt; margin-bottom:1.5pt; padding-right:16.2pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=right>32</P>
</TD></TR>
<TR><TD style="background-color:#DFDFDF" valign=top width=240><P style="margin-top:0pt; margin-bottom:1.5pt; line-height:11pt; font-family:Times New Roman; font-size:9pt">Industrial and Other</P>
</TD><TD style="background-color:#DFDFDF" valign=top width=96><P style="margin-top:0pt; margin-bottom:1.5pt; padding-right:16.2pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=right>14</P>
</TD><TD style="background-color:#DFDFDF" valign=top width=96><P style="margin-top:0pt; margin-bottom:1.5pt; padding-right:16.2pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=right>16</P>
</TD><TD style="background-color:#DFDFDF" valign=top width=96><P style="margin-top:0pt; margin-bottom:1.5pt; padding-right:16.2pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=right>15</P>
</TD><TD style="background-color:#DFDFDF" valign=top width=96><P style="margin-top:0pt; margin-bottom:1.5pt; padding-right:16.2pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=right>16</P>
</TD></TR>
<TR><TD valign=top width=240>&nbsp;</TD><TD valign=top width=96>&nbsp;</TD><TD valign=top width=96>&nbsp;</TD><TD valign=top width=96>&nbsp;</TD><TD valign=top width=96>&nbsp;</TD></TR>
<TR><TD style="background-color:#DFDFDF" valign=top width=240><P style="margin:0pt; line-height:11pt; font-family:Times New Roman; font-size:9pt"><B>Total</B></P>
</TD><TD style="background-color:#DFDFDF" valign=top width=96><P style="margin:0pt; padding-right:16.2pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=right><B>100%</B></P>
</TD><TD style="background-color:#DFDFDF" valign=top width=96><P style="margin:0pt; padding-right:16.2pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=right><B>100%</B></P>
</TD><TD style="background-color:#DFDFDF" valign=top width=96><P style="margin:0pt; padding-right:16.2pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=right><B>100%</B></P>
</TD><TD style="background-color:#DFDFDF" valign=top width=96><P style="margin:0pt; padding-right:16.2pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=right><B>100%</B></P>
</TD></TR>
</TABLE>
<P style="margin-top:10pt; margin-bottom:10pt; font-family:Times New Roman" align=justify><BR>
<BR></P>
<P style="margin:0pt; font-family:Times New Roman" align=center>13</P>
<P style="margin:0pt; font-family:Times New Roman"><BR></P>
<HR style="padding-top:7.2pt; padding-bottom:7.2pt" noshade size=1.333>
<P style="page-break-before:always; margin:0pt; font-family:Times New Roman" align=right><BR></P>
<P style="margin:0pt; font-family:Times New Roman; margin-bottom: 9pt;">&nbsp;</P>
<p style="margin-top:10pt; margin-bottom:9pt; font-family:Times New Roman" align=justify>The
  following table sets forth certain financial data from our consolidated statements
  of income, expressed in each case as a percentage of net revenues:</p>
<p style="margin-top:10pt; margin-bottom:9pt; font-family:Times New Roman" align=justify>&nbsp;</p>
<TABLE style="font-size:10pt" cellspacing=0 align=center><TR><TD valign=top width=223.6>&nbsp;</TD><TD valign=top width=198.667 colspan=2><P style="margin:0pt; padding-bottom:3pt; line-height:11pt; font-family:Times New Roman; font-size:9pt; border-bottom:0.5pt solid #000000" align=center><B><BR>
Three Months Ended</B></P>
</TD><TD valign=top width=201.733 colspan=2><P style="margin:0pt; padding-bottom:3pt; line-height:11pt; font-family:Times New Roman; font-size:9pt; border-bottom:0.5pt solid #000000" align=center><B><BR>
Nine&nbsp;Months Ended</B></P>
</TD></TR>
<TR><TD valign=top width=223.6>&nbsp;</TD><TD valign=bottom width=94.667><P style="margin:0pt; padding-bottom:3pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=center><B>October 1,</B></P>
<P style="margin:0pt; padding-bottom:3pt; line-height:11pt; font-family:Times New Roman; font-size:9pt; border-bottom:0.5pt solid #000000" align=center><B>2005</B></P>
</TD><TD valign=bottom width=104><P style="margin:0pt; padding-bottom:3pt; line-height:11pt; font-family:Times New Roman; font-size:9pt;" align=center><B>September 25,</B></P>
<P style="margin:0pt; padding-bottom:3pt; line-height:11pt; font-family:Times New Roman; font-size:9pt; border-bottom:0.5pt solid #000000" align=center><B>2004</B></P>
</TD><TD valign=bottom width=100.867><P style="margin:0pt; padding-bottom:3pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=center><B>October 1,</B></P>
<P style="margin:0pt; padding-bottom:3pt; line-height:11pt; font-family:Times New Roman; font-size:9pt; border-bottom:0.5pt solid #000000" align=center><B>2005</B></P>
</TD><TD valign=bottom width=100.867><P style="margin:0pt; padding-bottom:3pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=center><B>September 25,</B></P>
<P style="margin:0pt; padding-bottom:3pt; line-height:11pt; font-family:Times New Roman; font-size:9pt; border-bottom:0.5pt solid #000000" align=center><B>2004</B></P>
</TD></TR>
<TR><TD valign=top width=223.6>&nbsp;</TD><TD valign=top width=400.4 colspan=4><P style="margin:0pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=center><B>(unaudited)</B></P>
<P style="margin:0pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=center><B>(as a percentage of net revenues)</B></P>
</TD></TR>
<TR><TD valign=top width=223.6>&nbsp;</TD><TD valign=top width=94.667>&nbsp;</TD><TD valign=top width=104>&nbsp;</TD><TD valign=top width=100.867>&nbsp;</TD><TD valign=top width=100.867>&nbsp;</TD></TR>
<TR><TD style="background-color:#DFDFDF" valign=top width=223.6><P style="margin-top:0pt; margin-bottom:1.5pt; line-height:11pt; font-family:Times New Roman; font-size:9pt">Net sales</P>
</TD><TD style="background-color:#DFDFDF" valign=top width=94.667><P style="margin-top:0pt; margin-bottom:1.5pt; padding-right:16.2pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=right>100.0%</P>
</TD><TD style="background-color:#DFDFDF" valign=top width=104><P style="margin-top:0pt; margin-bottom:1.5pt; padding-right:16.2pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=right>&nbsp;100.0%</P>
</TD><TD style="background-color:#DFDFDF" valign=top width=100.867><P style="margin-top:0pt; margin-bottom:1.5pt; padding-right:16.2pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=right>&nbsp;99.9%</P>
</TD><TD style="background-color:#DFDFDF" valign=top width=100.867><P style="margin-top:0pt; margin-bottom:1.5pt; padding-right:16.2pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=right>&nbsp;100.0%</P>
</TD></TR>
<TR><TD valign=top width=223.6><P style="margin-top:0pt; margin-bottom:1.5pt; line-height:11pt; font-family:Times New Roman; font-size:9pt">Other revenues</P>
</TD><TD valign=top width=94.667><P style="margin-top:0pt; margin-bottom:1.5pt; padding-right:16.2pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=right>&nbsp;&#151;</P>
</TD><TD valign=top width=104><P style="margin-top:0pt; margin-bottom:1.5pt; padding-right:16.2pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=right>&nbsp;&#151;</P>
</TD><TD valign=top width=100.867><P style="margin-top:0pt; margin-bottom:1.5pt; padding-right:16.2pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=right>&nbsp;0.1</P>
</TD><TD valign=top width=100.867><P style="margin-top:0pt; margin-bottom:1.5pt; padding-right:16.2pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=right>&nbsp;&#151;</P>
</TD></TR>
<TR><TD style="background-color:#DFDFDF" valign=top width=223.6>&nbsp;</TD><TD style="background-color:#DFDFDF" valign=top width=94.667>&nbsp;</TD><TD style="background-color:#DFDFDF" valign=top width=104><P style="margin:0pt; padding-right:16.2pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=right><B>&nbsp;</B></P>
</TD><TD style="background-color:#DFDFDF" valign=top width=100.867><P style="margin:0pt; padding-right:16.2pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=right><B>&nbsp;</B></P>
</TD><TD style="background-color:#DFDFDF" valign=top width=100.867><P style="margin:0pt; padding-right:16.2pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=right><B>&nbsp;</B></P>
</TD></TR>
<TR><TD valign=top width=223.6><P style="margin-top:0pt; margin-bottom:1.5pt; line-height:11pt; font-family:Times New Roman; font-size:9pt"><B>Net revenues</B></P>
</TD><TD valign=top width=94.667><P style="margin:0pt; padding-right:16.2pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=right><B>100.0</B></P>
</TD><TD valign=top width=104><P style="margin:0pt; padding-right:16.2pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=right>&nbsp;<B>100.0</B></P>
</TD><TD valign=top width=100.867><P style="margin:0pt; padding-right:16.2pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=right>&nbsp;<B>100.0</B></P>
</TD><TD valign=top width=100.867><P style="margin:0pt; padding-right:16.2pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=right>&nbsp;<B>100.0</B></P>
</TD></TR>
<TR><TD style="background-color:#DFDFDF" valign=top width=223.6><P style="margin:0pt; line-height:11pt; font-family:Times New Roman; font-size:9pt">Cost of sales</P>
</TD><TD style="background-color:#DFDFDF" valign=top width=94.667><P style="margin:0pt; padding-right:16.2pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=right>(65.9)</P>
</TD><TD style="background-color:#DFDFDF" valign=top width=104><P style="margin:0pt; padding-right:16.2pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=right>&nbsp;(62.1)</P>
</TD><TD style="background-color:#DFDFDF" valign=top width=100.867><P style="margin:0pt; padding-right:16.2pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=right>&nbsp;(66.7)</P>
</TD><TD style="background-color:#DFDFDF" valign=top width=100.867><P style="margin:0pt; padding-right:16.2pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=right>&nbsp;(63.1)</P>
</TD></TR>
<TR><TD valign=top width=223.6>&nbsp;</TD><TD valign=top width=94.667>&nbsp;</TD><TD valign=top width=104><P style="margin:0pt; padding-right:16.2pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=right><B>&nbsp;</B></P>
</TD><TD valign=top width=100.867><P style="margin:0pt; padding-right:16.2pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=right><B>&nbsp;</B></P>
</TD><TD valign=top width=100.867><P style="margin:0pt; padding-right:16.2pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=right><B>&nbsp;</B></P>
</TD></TR>
<TR><TD style="background-color:#DFDFDF" valign=top width=223.6><P style="margin-top:0pt; margin-bottom:1.5pt; line-height:11pt; font-family:Times New Roman; font-size:9pt"><B>Gross profit</B></P>
</TD><TD style="background-color:#DFDFDF" valign=top width=94.667><P style="margin-top:0pt; margin-bottom:1.5pt; padding-right:16.2pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=right><B>34.1</B></P>
</TD><TD style="background-color:#DFDFDF" valign=top width=104><P style="margin-top:0pt; margin-bottom:1.5pt; padding-right:16.2pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=right>&nbsp;<B>37.9</B></P>
</TD><TD style="background-color:#DFDFDF" valign=top width=100.867><P style="margin-top:0pt; margin-bottom:1.5pt; padding-right:16.2pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=right>&nbsp;<B>33.3</B></P>
</TD><TD style="background-color:#DFDFDF" valign=top width=100.867><P style="margin-top:0pt; margin-bottom:1.5pt; padding-right:16.2pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=right>&nbsp;<B>36.9</B></P>
</TD></TR>
<TR><TD valign=top width=223.6><P style="margin-top:0pt; margin-bottom:1.5pt; line-height:11pt; font-family:Times New Roman; font-size:9pt">Selling, general and administrative</P>
</TD><TD valign=top width=94.667><P style="margin-top:0pt; margin-bottom:1.5pt; padding-right:16.2pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=right>(11.0)</P>
</TD><TD valign=top width=104><P style="margin-top:0pt; margin-bottom:1.5pt; padding-right:16.2pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=right>&nbsp;(10.4)</P>
</TD><TD valign=top width=100.867><P style="margin-top:0pt; margin-bottom:1.5pt; padding-right:16.2pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=right>&nbsp;(11.8)</P>
</TD><TD valign=top width=100.867><P style="margin-top:0pt; margin-bottom:1.5pt; padding-right:16.2pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=right>&nbsp;(10.9)</P>
</TD></TR>
<TR><TD style="background-color:#DFDFDF" valign=top width=223.6><P style="margin-top:0pt; margin-bottom:1.5pt; line-height:11pt; font-family:Times New Roman; font-size:9pt">Research and development</P>
</TD><TD style="background-color:#DFDFDF" valign=top width=94.667><P style="margin-top:0pt; margin-bottom:1.5pt; padding-right:16.2pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=right>(17.9)</P>
</TD><TD style="background-color:#DFDFDF" valign=top width=104><P style="margin-top:0pt; margin-bottom:1.5pt; padding-right:16.2pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=right>&nbsp;(17.2)</P>
</TD><TD style="background-color:#DFDFDF" valign=top width=100.867><P style="margin-top:0pt; margin-bottom:1.5pt; padding-right:16.2pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=right>&nbsp;(18.9)</P>
</TD><TD style="background-color:#DFDFDF" valign=top width=100.867><P style="margin-top:0pt; margin-bottom:1.5pt; padding-right:16.2pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=right>&nbsp;(17.6)</P>
</TD></TR>
<TR><TD valign=top width=223.6><P style="margin-top:0pt; margin-bottom:1.5pt; line-height:11pt; font-family:Times New Roman; font-size:9pt">Other income and expenses, net</P>
</TD><TD valign=top width=94.667><P style="margin-top:0pt; margin-bottom:1.5pt; padding-right:16.2pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=right>(0.1)</P>
</TD><TD valign=top width=104><P style="margin-top:0pt; margin-bottom:1.5pt; padding-right:16.2pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=right>&nbsp;(0.1)</P>
</TD><TD valign=top width=100.867><P style="margin-top:0pt; margin-bottom:1.5pt; padding-right:16.2pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=right>&nbsp;(0.2)</P>
</TD><TD valign=top width=100.867><P style="margin-top:0pt; margin-bottom:1.5pt; padding-right:16.2pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=right>&nbsp;(0.2)</P>
</TD></TR>
<TR><TD style="background-color:#DFDFDF" valign=top width=223.6><P style="margin-top:0pt; margin-bottom:1.5pt; line-height:11pt; font-family:Times New Roman; font-size:9pt">Impairment, restructuring charges and other related closure costs</P>
</TD><TD style="background-color:#DFDFDF" valign=top width=94.667><P style="margin-top:0pt; margin-bottom:1.5pt; padding-right:16.2pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=right>(0.5)</P>
</TD><TD style="background-color:#DFDFDF" valign=top width=104><P style="margin-top:0pt; margin-bottom:1.5pt; padding-right:16.2pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=right>&nbsp;(0.6)</P>
</TD><TD style="background-color:#DFDFDF" valign=top width=100.867><P style="margin-top:0pt; margin-bottom:1.5pt; padding-right:16.2pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=right>&nbsp;(1.7)</P>
</TD><TD style="background-color:#DFDFDF" valign=top width=100.867><P style="margin-top:0pt; margin-bottom:1.5pt; padding-right:16.2pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=right>&nbsp;(0.9)</P>
</TD></TR>
<TR><TD valign=top width=223.6><P style="margin:0pt; line-height:11pt; font-family:Times New Roman; font-size:9pt">Total operating expenses</P>
</TD><TD valign=top width=94.667><P style="margin:0pt; padding-right:16.2pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=right>(29.5)</P>
</TD><TD valign=top width=104><P style="margin:0pt; padding-right:16.2pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=right>&nbsp;(28.3)</P>
</TD><TD valign=top width=100.867><P style="margin:0pt; padding-right:16.2pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=right>&nbsp;(32.6)</P>
</TD><TD valign=top width=100.867><P style="margin:0pt; padding-right:16.2pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=right>&nbsp;(29.6)</P>
</TD></TR>
<TR><TD style="background-color:#DFDFDF" valign=top width=223.6>&nbsp;</TD><TD style="background-color:#DFDFDF" valign=top width=94.667>&nbsp;</TD><TD style="background-color:#DFDFDF" valign=top width=104><P style="margin:0pt; padding-right:16.2pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=right><B>&nbsp;</B></P>
</TD><TD style="background-color:#DFDFDF" valign=top width=100.867><P style="margin:0pt; padding-right:16.2pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=right><B>&nbsp;</B></P>
</TD><TD style="background-color:#DFDFDF" valign=top width=100.867><P style="margin:0pt; padding-right:16.2pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=right><B>&nbsp;</B></P>
</TD></TR>
<TR><TD valign=top width=223.6><P style="margin-top:0pt; margin-bottom:1.5pt; line-height:11pt; font-family:Times New Roman; font-size:9pt"><B>Operating income</B></P>
</TD><TD valign=top width=94.667><P style="margin-top:0pt; margin-bottom:1.5pt; padding-right:16.2pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=right><B>4.5</B></P>
</TD><TD valign=top width=104><P style="margin-top:0pt; margin-bottom:1.5pt; padding-right:16.2pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=right>&nbsp;<B>9.6</B></P>
</TD><TD valign=top width=100.867><P style="margin-top:0pt; margin-bottom:1.5pt; padding-right:16.2pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=right>&nbsp;<B>0.7</B></P>
</TD><TD valign=top width=100.867><P style="margin-top:0pt; margin-bottom:1.5pt; padding-right:16.2pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=right>&nbsp;<B>7.4</B></P>
</TD></TR>
<TR><TD style="background-color:#DFDFDF" valign=top width=223.6><P style="margin-top:0pt; margin-bottom:1.5pt; line-height:11pt; font-family:Times New Roman; font-size:9pt">Interest income (expense), net</P>
</TD><TD style="background-color:#DFDFDF" valign=top width=94.667><P style="margin-top:0pt; margin-bottom:1.5pt; padding-right:16.2pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=right>0.4</P>
</TD><TD style="background-color:#DFDFDF" valign=top width=104><P style="margin-top:0pt; margin-bottom:1.5pt; padding-right:16.2pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=right>&nbsp;&#151;</P>
</TD><TD style="background-color:#DFDFDF" valign=top width=100.867><P style="margin-top:0pt; margin-bottom:1.5pt; padding-right:16.2pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=right>&nbsp;0.4</P>
</TD><TD style="background-color:#DFDFDF" valign=top width=100.867><P style="margin-top:0pt; margin-bottom:1.5pt; padding-right:16.2pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=right>&nbsp;(0.2)</P>
</TD></TR>
<TR><TD valign=top width=223.6><P style="margin-top:0pt; margin-bottom:1.5pt; line-height:11pt; font-family:Times New Roman; font-size:9pt">Loss on equity investment</P>
</TD><TD valign=top width=94.667><P style="margin-top:0pt; margin-bottom:1.5pt; padding-right:16.2pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=right>(0.1)</P>
</TD><TD valign=top width=104><P style="margin-top:0pt; margin-bottom:1.5pt; padding-right:16.2pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=right>&nbsp;(0.1)</P>
</TD><TD valign=top width=100.867><P style="margin-top:0pt; margin-bottom:1.5pt; padding-right:16.2pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=right>&nbsp;&#151;</P>
</TD><TD valign=top width=100.867><P style="margin-top:0pt; margin-bottom:1.5pt; padding-right:16.2pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=right>&nbsp;&#151;</P>
</TD></TR>
<TR><TD style="background-color:#DFDFDF" valign=top width=223.6><P style="margin:0pt; line-height:11pt; font-family:Times New Roman; font-size:9pt">Loss on extinguishment of convertible debt</P>
</TD><A NAME="OLE_LINK1"></A><TD style="background-color:#DFDFDF" valign=top width=94.667><P style="margin:0pt; padding-right:16.2pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=right>&nbsp;&#151;</P>
</TD><TD style="background-color:#DFDFDF" valign=top width=104><P style="margin:0pt; padding-right:16.2pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=right>&nbsp;&#151;</P>
</TD><TD style="background-color:#DFDFDF" valign=top width=100.867><P style="margin:0pt; padding-right:16.2pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=right>&nbsp;&#151;</P>
</TD><TD style="background-color:#DFDFDF" valign=top width=100.867><P style="margin:0pt; padding-right:16.2pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=right>&nbsp;(0.1)</P>
</TD></TR>
<TR><TD valign=top width=223.6>&nbsp;</TD><TD valign=top width=94.667>&nbsp;</TD><TD valign=top width=104><P style="margin:0pt; padding-right:16.2pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=right><B>&nbsp;</B></P>
</TD><TD valign=top width=100.867><P style="margin:0pt; padding-right:16.2pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=right><B>&nbsp;</B></P>
</TD><TD valign=top width=100.867><P style="margin:0pt; padding-right:16.2pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=right><B>&nbsp;</B></P>
</TD></TR>
<TR><TD style="background-color:#DFDFDF" valign=top width=223.6><P style="margin-top:0pt; margin-bottom:1.5pt; line-height:11pt; font-family:Times New Roman; font-size:9pt"><B>Income before income taxes and minority interests</B></P>
</TD><TD style="background-color:#DFDFDF" valign=top width=94.667><P style="margin-top:0pt; margin-bottom:1.5pt; padding-right:16.2pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=right><B>4.8</B></P>
</TD><TD style="background-color:#DFDFDF" valign=top width=104><P style="margin-top:0pt; margin-bottom:1.5pt; padding-right:16.2pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=right>&nbsp;<B>9.5</B></P>
</TD><TD style="background-color:#DFDFDF" valign=top width=100.867><P style="margin-top:0pt; margin-bottom:1.5pt; padding-right:16.2pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=right>&nbsp;<B>1.0</B></P>
</TD><TD style="background-color:#DFDFDF" valign=top width=100.867><P style="margin-top:0pt; margin-bottom:1.5pt; padding-right:16.2pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=right>&nbsp;<B>7.1</B></P>
</TD></TR>
<TR><TD valign=top width=223.6><P style="margin:0pt; line-height:11pt; font-family:Times New Roman; font-size:9pt">Income tax benefit (expense)</P>
</TD><TD valign=top width=94.667><P style="margin:0pt; padding-right:16.2pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=right>(0.8)</P>
</TD><TD valign=top width=104><P style="margin:0pt; padding-right:16.2pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=right>&nbsp;(0.9)</P>
</TD><TD valign=top width=100.867><P style="margin:0pt; padding-right:16.2pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=right>&nbsp;0.3</P>
</TD><TD valign=top width=100.867><P style="margin:0pt; padding-right:16.2pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=right>&nbsp;(0.6)</P>
</TD></TR>
<TR><TD style="background-color:#DFDFDF" valign=top width=223.6>&nbsp;</TD><TD style="background-color:#DFDFDF" valign=top width=94.667>&nbsp;</TD><TD style="background-color:#DFDFDF" valign=top width=104><P style="margin:0pt; padding-right:16.2pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=right><B>&nbsp;</B></P>
</TD><TD style="background-color:#DFDFDF" valign=top width=100.867><P style="margin:0pt; padding-right:16.2pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=right><B>&nbsp;</B></P>
</TD><TD style="background-color:#DFDFDF" valign=top width=100.867><P style="margin:0pt; padding-right:16.2pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=right><B>&nbsp;</B></P>
</TD></TR>
<TR><TD valign=top width=223.6><P style="margin-top:0pt; margin-bottom:1.5pt; line-height:11pt; font-family:Times New Roman; font-size:9pt"><B>Income before minority interests</B></P>
</TD><TD valign=top width=94.667><P style="margin-top:0pt; margin-bottom:1.5pt; padding-right:16.2pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=right><B>4.0</B></P>
</TD><TD valign=top width=104><P style="margin-top:0pt; margin-bottom:1.5pt; padding-right:16.2pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=right>&nbsp;<B>8.6</B></P>
</TD><TD valign=top width=100.867><P style="margin-top:0pt; margin-bottom:1.5pt; padding-right:16.2pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=right>&nbsp;<B>1.3</B></P>
</TD><TD valign=top width=100.867><P style="margin-top:0pt; margin-bottom:1.5pt; padding-right:16.2pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=right>&nbsp;<B>6.5</B></P>
</TD></TR>
<TR><TD style="background-color:#DFDFDF" valign=top width=223.6><P style="margin:0pt; line-height:11pt; font-family:Times New Roman; font-size:9pt">Minority interests</P>
</TD><TD style="background-color:#DFDFDF" valign=top width=94.667><P style="margin:0pt; padding-right:16.2pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=right>&nbsp;&#151;</P>
</TD><TD style="background-color:#DFDFDF" valign=top width=104><P style="margin:0pt; padding-right:16.2pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=right>&nbsp;(0.1)</P>
</TD><TD style="background-color:#DFDFDF" valign=top width=100.867><P style="margin:0pt; padding-right:16.2pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=right>&nbsp;&#151;</P>
</TD><TD style="background-color:#DFDFDF" valign=top width=100.867><P style="margin:0pt; padding-right:16.2pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=right>&nbsp;(0.1)</P>
</TD></TR>
<TR><TD valign=top width=223.6>&nbsp;</TD><TD valign=top width=94.667>&nbsp;</TD><TD valign=top width=104><P style="margin:0pt; padding-right:16.2pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=right><B>&nbsp;</B></P>
</TD><TD valign=top width=100.867><P style="margin:0pt; padding-right:16.2pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=right><B>&nbsp;</B></P>
</TD><TD valign=top width=100.867><P style="margin:0pt; padding-right:16.2pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=right><B>&nbsp;</B></P>
</TD></TR>
<TR><TD style="background-color:#DFDFDF" valign=top width=223.6><P style="margin:0pt; line-height:11pt; font-family:Times New Roman; font-size:9pt"><B>Net income</B></P>
</TD><TD style="background-color:#DFDFDF" valign=top width=94.667><P style="margin:0pt; padding-right:16.2pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=right><B>3.9%</B></P>
</TD><TD style="background-color:#DFDFDF" valign=top width=104><P style="margin:0pt; padding-right:16.2pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=right>&nbsp;<B>8.5%</B></P>
</TD><TD style="background-color:#DFDFDF" valign=top width=100.867><P style="margin:0pt; padding-right:16.2pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=right>&nbsp;<B>1.3%</B></P>
</TD><TD style="background-color:#DFDFDF" valign=top width=100.867><P style="margin:0pt; padding-right:16.2pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=right>&nbsp;<B>6.4%</B></P>
</TD></TR>
</TABLE>
<P style="margin-top:20pt; margin-bottom:10pt; font-family:Times New Roman"><B>Third Quarter of 2005 vs. Third Quarter of 2004 and Second Quarter of 2005</B></P>
<P style="margin-top:0pt; margin-bottom:10pt; font-family:Times New Roman" align=justify>Based upon most recently published estimates, in the third quarter of 2005, semiconductor industry revenues increased year-over-year by approximately 6% for the TAM and 5% for the SAM.&nbsp;On a sequential basis, revenues in the third quarter of 2005 increased by approximately 9% for both the TAM and the SAM. </P>
<P style="margin-top:0pt; margin-bottom:10pt; font-family:Times New Roman" align=justify><I>Net Revenues</I></P>
<TABLE style="font-size:10pt" cellspacing=0 align=center><TR><TD valign=top width=102.867>&nbsp;</TD><TD valign=top width=325.8 colspan=3><P style="margin:0pt; padding-bottom:3pt; line-height:11pt; font-family:Times New Roman; font-size:9pt; border-bottom:0.5pt solid #000000" align=center><B>Quarter Ended</B></P>
</TD><TD valign=top width=195.333 colspan=2><P style="margin:0pt; padding-bottom:3pt; line-height:11pt; font-family:Times New Roman; font-size:9pt; border-bottom:0.5pt solid #000000" align=center><B>% Variation</B></P>
</TD></TR>
<TR><TD valign=top width=102.867>&nbsp;</TD><TD valign=top width=102.933><P style="margin:0pt; padding-bottom:3pt; line-height:11pt; font-family:Times New Roman; font-size:9pt; border-bottom:0.5pt solid #000000" align=center><B>October 1, 2005</B></P>
</TD><TD valign=top width=102.933><P style="margin:0pt; padding-bottom:3pt; line-height:11pt; font-family:Times New Roman; font-size:9pt; border-bottom:0.5pt solid #000000" align=center><B>July 2, 2005</B></P>
</TD><TD valign=top width=119.933><P style="margin:0pt; padding-bottom:3pt; line-height:11pt; font-family:Times New Roman; font-size:9pt; border-bottom:0.5pt solid #000000" align=center><B>September 25, 2004</B></P>
</TD><TD valign=top width=92.4><P style="margin:0pt; padding-bottom:3pt; line-height:11pt; font-family:Times New Roman; font-size:9pt; border-bottom:0.5pt solid #000000" align=center><B>Sequential</B></P>
</TD><TD valign=top width=102.933><P style="margin:0pt; padding-bottom:3pt; line-height:11pt; font-family:Times New Roman; font-size:9pt; border-bottom:0.5pt solid #000000" align=center><B>Year-over-year</B></P>
</TD></TR>
<TR><TD valign=top width=102.867>&nbsp;</TD><TD valign=top width=521.133 colspan=5><P style="margin:0pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=center><B>(unaudited, in $ millions)</B></P>
</TD></TR>
<TR><TD style="background-color:#DFDFDF" valign=top width=102.867><P style="margin:0pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=justify>Net sales</P>
</TD><TD style="background-color:#DFDFDF" valign=top width=102.933><P style="margin:0pt; padding-right:17.6pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=right>2,246</P>
</TD><TD style="background-color:#DFDFDF" valign=top width=102.933><P style="margin:0pt; padding-right:17.6pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=right>2,161</P>
</TD><TD style="background-color:#DFDFDF" valign=top width=119.933><P style="margin:0pt; padding-right:17.6pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=right>2,231</P>
</TD><TD style="background-color:#DFDFDF" valign=top width=92.4><P style="margin:0pt; padding-right:17.6pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=right>3.9%</P>
</TD><TD style="background-color:#DFDFDF" valign=top width=102.933><P style="margin:0pt; padding-right:17.6pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=right>0.7%</P>
</TD></TR>
<TR><TD valign=top width=102.867><P style="margin:0pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=justify>Other revenues</P>
</TD><TD valign=top width=102.933><P style="margin:0pt; padding-right:17.6pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=right>1</P>
</TD><TD valign=top width=102.933><P style="margin:0pt; padding-right:17.6pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=right>1</P>
</TD><TD valign=top width=119.933><P style="margin:0pt; padding-right:17.6pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=right>&#151;</P>
</TD><TD valign=top width=92.4><P style="margin:0pt; padding-right:17.6pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=right>&#151;</P>
</TD><TD valign=top width=102.933><P style="margin:0pt; padding-right:17.6pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=right>&#151;</P>
</TD></TR>
<TR><TD style="background-color:#DFDFDF" valign=top width=102.867><P style="margin:0pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=justify>Net revenues</P>
</TD><TD style="background-color:#DFDFDF" valign=top width=102.933><P style="margin:0pt; padding-right:17.6pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=right>2,247</P>
</TD><TD style="background-color:#DFDFDF" valign=top width=102.933><P style="margin:0pt; padding-right:17.6pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=right>2,162</P>
</TD><TD style="background-color:#DFDFDF" valign=top width=119.933><P style="margin:0pt; padding-right:17.6pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=right>2,231</P>
</TD><TD style="background-color:#DFDFDF" valign=top width=92.4><P style="margin:0pt; padding-right:17.6pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=right>3.9%</P>
</TD><TD style="background-color:#DFDFDF" valign=top width=102.933><P style="margin:0pt; padding-right:17.6pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=right>0.7%</P>
</TD></TR>
</TABLE>
<P style="margin-top:10pt; margin-bottom:10pt; font-family:Times New Roman" align=justify><I>Year-over-year comparison</I></P>
<P style="margin-top:0pt; margin-bottom:10pt; font-family:Times New Roman" align=justify>Our third quarter 2005 net revenues slightly increased compared to the third quarter of 2004.&nbsp;Our higher sales volume and improved product mix were largely offset by the negative impact of the decline in our average selling prices.&nbsp;Due to ongoing pricing pressure in the semiconductor market, our average selling prices decreased by approximately 8% during the third quarter of 2005 compared to the third quarter of 2004. </P>
<P style="margin:0pt; font-family:Times New Roman" align=center>14</P>
<P style="margin:0pt; font-family:Times New Roman"><BR></P>
<HR style="padding-top:7.2pt; padding-bottom:7.2pt" noshade size=1.333>
<P style="page-break-before:always; margin:0pt; font-family:Times New Roman" align=right><BR></P>
<P style="margin:0pt; font-family:Times New Roman"><BR></P>
<P style="margin-top:0pt; margin-bottom:10pt; font-family:Times New Roman" align=justify>With
 respect to our product segments, ASG and MPG net revenues increased while MLD
 net revenues registered a decrease.&nbsp;ASG net revenues increased 2.5% due
 to a more favorable product mix, which was partially offset by the price decline;
 main revenue increases were registered in Imaging, Data Storage, Cellular communication
 and Automotive.&nbsp;MPG net revenues increased 3.8% as a result of a significant
 increase in sales volume that more than compensated for the average selling
 price decline; this net revenue increase is mainly due to Flash products revenues
 that increased by approximately 15%, particularly in NAND products, while Other
 Memories and Smart Cards registered a decrease in their net revenues of approximately
 17% and 11%, respectively.&nbsp;Net revenues for MLD decreased 5.8% mainly
 due to the decline in selling prices. </P>
<P style="margin-top:0pt; margin-bottom:10pt; font-family:Times New Roman" align=justify>Net
 revenues by segment market application increased in Computer, Telecom and Automotive
 by approximately 18%, 16% and 7%, respectively, and decreased in both Consumer
 and Industrial and Other by approximately 27% and 11%, respectively.&nbsp;The
 foregoing are estimates within a variance of 5%-to-10% in absolute dollar amounts
 of the relative weighting of each of our targeted market segments. </P>
<P style="margin-top:0pt; margin-bottom:10pt; font-family:Times New Roman" align=justify>By location of order shipment, net revenues in Asia/Pacific increased by 14% while all other regions registered a decrease in their net revenues.&nbsp;Net revenues of Japan, North America, Emerging Markets and Europe decreased by approximately 25%, 13%, 10% and 4%, respectively. </P>
<P style="margin-top:0pt; margin-bottom:10pt; font-family:Times New Roman" align=justify>We had several large customers, with the largest one, the Nokia group of companies, accounting for approximately 24% of our third quarter 2005 net revenues, which was higher than the 17% it accounted for during the third quarter of 2004.&nbsp;Our top ten original equipment manufacturer customers accounted for approximately 51% of our net revenues compared to approximately 44% of our net revenues in the third quarter of 2004. </P>
<P style="margin-top:0pt; margin-bottom:10pt; font-family:Times New Roman" align=justify><I>Sequential comparison</I></P>
<P style="margin-top:0pt; margin-bottom:10pt; font-family:Times New Roman" align=justify>Our third quarter 2005 net revenues recorded a 3.9% increase resulting from a significant increase in sales volume and a more favorable product mix.&nbsp;During the third quarter of 2005, we registered a further decline in selling prices due to ongoing pricing pressure in the semiconductor market and our average selling prices decreased by approximately 4%. </P>
<P style="margin-top:0pt; margin-bottom:10pt; font-family:Times New Roman" align=justify>All
 product segments registered an increase in their net revenues.&nbsp;Net revenues
 for ASG increased 2.3% as a result of higher sales volumes partially offset
 by the average selling price decline; the principal increases in net revenue
 were registered in Imaging, Cellular communication and Data Storage, while Automotive
 net revenues decreased due to seasonal factors.&nbsp;MLD net revenues increased
 2.7% as a result of higher sales volumes and more favorable product mix in most
 of its product groups; the principal increases in our revenues were registered
 in Microcontrollers, Discrete and Power MOSFET products.&nbsp;MPG registered
 the most significant increase in net revenues with 10.5% growth due to higher
 volumes, particularly in Flash products; sales of Flash products increased by
 approximately 17% and Other Memories sales increased by approximately 16%, while
 Smart Card sales decreased by approximately 8%. </P>
<P style="margin-top:0pt; margin-bottom:10pt; font-family:Times New Roman" align=justify>Net revenues by segment market application principally increased in Telecom and Computer by approximately 9%, and 8%, respectively, while Consumer and Industrial and Other remained approximately flat and Automotive decreased by approximately 4%.&nbsp;As a significant portion of our sales are made through distributors, the foregoing are necessarily estimates within a variance of 5%-to-10% in absolute dollar amounts of the relative weighting of each of our targeted market segments. </P>
<P style="margin-top:0pt; margin-bottom:10pt; font-family:Times New Roman" align=justify>By location of order shipment, net revenues were increasing in the Asia/Pacific, Japan and Emerging Markets regions by approximately 14%, 8% and 3%, respectively, while Europe and North America revenues were decreasing by approximately 3% and 11% respectively, due to seasonal factors. </P>
<P style="margin-top:0pt; margin-bottom:10pt; font-family:Times New Roman" align=justify>In the third quarter of 2005, we had several large customers, with the largest one, the Nokia group of companies, accounting for approximately 24% of our net revenues, increasing from the 22% it accounted for during the second quarter of 2005.&nbsp;Our top ten original equipment manufacturer customers accounted for approximately 51% of our net revenues in the third quarter of 2005 compared to approximately 49% of our net revenues in the second quarter of 2005. </P>
<P style="margin-top:0pt; margin-bottom:10pt; font-family:Times New Roman" align=justify><BR>
<BR></P>
<P style="margin:0pt; font-family:Times New Roman" align=center>15</P>
<P style="margin:0pt; font-family:Times New Roman"><BR></P>
<HR style="padding-top:7.2pt; padding-bottom:7.2pt" noshade size=1.333>
<P style="page-break-before:always; margin:0pt; font-family:Times New Roman" align=right><BR></P>
<P style="margin:0pt; font-family:Times New Roman"><BR></P>
<P style="margin-top:0pt; margin-bottom:10pt; font-family:Times New Roman" align=justify><I>Gross profit</I></P>
<TABLE align="center" cellspacing=0 style="font-size:10pt">
 <TR>
 <TD valign=top width=240>&nbsp;</TD>
 <TD valign=top width=302.8 colspan=3><P style="margin:0pt; padding-bottom:3pt; line-height:11pt; font-family:Times New Roman; font-size:9pt; border-bottom:0.5pt solid #000000" align=center><B>Quarter
 Ended</B></P></TD>
 <TD valign=top width=171.267 colspan=2><P style="margin:0pt; padding-bottom:3pt; line-height:11pt; font-family:Times New Roman; font-size:9pt; border-bottom:0.5pt solid #000000" align=center><B>%
 Variation</B></P></TD>
 </TR>
 <TR>
 <TD valign=top width=240>&nbsp;</TD>
 <TD valign=bottom width=95.4><P style="margin:0pt; padding-bottom:3pt; line-height:11pt; font-family:Times New Roman; font-size:9pt; border-bottom:0.5pt solid #000000" align=center><B>October
 1,<br>
 2005</B></P></TD>
 <TD valign=bottom width=92.667><P style="margin:0pt; padding-bottom:3pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=center><B>July
 2,</B></P>
 <P style="margin:0pt; padding-bottom:3pt; line-height:11pt; font-family:Times New Roman; font-size:9pt; border-bottom:0.5pt solid #000000" align=center><B>2005</B></P></TD>
 <TD valign=bottom width=114.733><P style="margin:0pt; padding-bottom:3pt; line-height:11pt; font-family:Times New Roman; font-size:9pt; border-bottom:0.5pt solid #000000" align=center><B>September
 25,<br>
 2004</B></P></TD>
 <TD valign=bottom width=78.2><P style="margin:0pt; padding-bottom:3pt; line-height:11pt; font-family:Times New Roman; font-size:9pt; border-bottom:0.5pt solid #000000" align=center><B>Sequential<BR>
 </B></P></TD>
 <TD valign=bottom width=93.067><P style="margin:0pt; padding-bottom:3pt; line-height:11pt; font-family:Times New Roman; font-size:9pt; border-bottom:0.5pt solid #000000" align=center><B>Year-over-year<BR>
 </B></P></TD>
 </TR>
 <TR>
 <TD valign=top width=240>&nbsp;</TD>
 <TD valign=top width=474.067 colspan=5><P style="margin-top:0pt; margin-bottom:1.5pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=center><B>(unaudited,
 in $ millions)</B></P></TD>
 </TR>
 <TR>
 <TD style="background-color:#DFDFDF" valign=top width=240><P style="margin-top:0pt; margin-bottom:1.5pt; line-height:11pt; font-family:Times New Roman; font-size:9pt">Cost
 of sales</P></TD>
 <TD style="background-color:#DFDFDF" valign=top width=95.4><P style="margin-top:0pt; margin-bottom:1.5pt; padding-right:9pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=right>(1,481)</P></TD>
 <TD style="background-color:#DFDFDF" valign=top width=92.667><P style="margin-top:0pt; margin-bottom:1.5pt; padding-right:9pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=right>&nbsp;(1,448)</P></TD>
 <TD style="background-color:#DFDFDF" valign=top width=114.733><P style="margin-top:0pt; margin-bottom:1.5pt; padding-right:9pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=right>&nbsp;(1,386)</P></TD>
 <TD style="background-color:#DFDFDF" valign=top width=78.2><P style="margin-top:0pt; margin-bottom:1.5pt; padding-right:9pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=right>&nbsp;(2.3%)</P></TD>
 <TD style="background-color:#DFDFDF" valign=top width=93.067><P style="margin-top:0pt; margin-bottom:1.5pt; padding-right:9pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=right>&nbsp;(6.9%)</P></TD>
 </TR>
 <TR>
 <TD valign=top width=240><P style="margin-top:0pt; margin-bottom:1.5pt; line-height:11pt; font-family:Times New Roman; font-size:9pt">Gross
 profit</P></TD>
 <TD valign=top width=95.4><P style="margin-top:0pt; margin-bottom:1.5pt; padding-right:9pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=right>766</P></TD>
 <TD valign=top width=92.667><P style="margin-top:0pt; margin-bottom:1.5pt; padding-right:9pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=right>&nbsp;714</P></TD>
 <TD valign=top width=114.733><P style="margin-top:0pt; margin-bottom:1.5pt; padding-right:9pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=right>&nbsp;845</P></TD>
 <TD valign=top width=78.2><P style="margin-top:0pt; margin-bottom:1.5pt; padding-right:9pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=right>&nbsp;7.3%</P></TD>
 <TD valign=top width=93.067><P style="margin-top:0pt; margin-bottom:1.5pt; padding-right:9pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=right>&nbsp;(9.4%)</P></TD>
 </TR>
 <TR>
 <TD style="background-color:#DFDFDF" valign=top width=240><P style="margin:0pt; line-height:11pt; font-family:Times New Roman; font-size:9pt">Gross
 margin (as a percentage of net revenues)</P></TD>
 <TD style="background-color:#DFDFDF" valign=top width=95.4><P style="margin:0pt; padding-right:9pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=right>&nbsp;34.1%</P></TD>
 <TD style="background-color:#DFDFDF" valign=top width=92.667><P style="margin:0pt; padding-right:9pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=right>&nbsp;33.0%</P></TD>
 <TD style="background-color:#DFDFDF" valign=top width=114.733><P style="margin:0pt; padding-right:9pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=right>&nbsp;37.9%</P></TD>
 <TD style="background-color:#DFDFDF" valign=top width=78.2><P style="margin:0pt; padding-right:9pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=right>&nbsp;</P></TD>
 <TD style="background-color:#DFDFDF" valign=top width=93.067><P style="margin:0pt; padding-right:9pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=right>&nbsp;</P></TD>
 </TR>
</TABLE>
<p style="margin-bottom: 10pt">Our gross profit decreased by 9.4% on a year-over-year
 basis and our gross margin declined from 37.9% in the third quarter of 2004
 to 34.1% in the third quarter of 2005.&nbsp;On a year-over-year basis, negative
 impacts on our gross margin were due to the strong decline in our average selling
 prices and the unfavorable impact of our effective U.S. dollar exchange rate,
 which exceeded the benefits from higher sales volumes and improved manufacturing
 efficiencies. </p>
<P style="margin-top:0pt; margin-bottom:10pt; font-family:Times New Roman" align=justify>On a sequential basis, our gross profit increased 7.3% driven by higher sales volumes, improved product mix and manufacturing performance that were partially compensated by the continuing downward pressure on our selling prices.&nbsp;Due to these factors, our gross margin improved 110 basis points to 34.1%. </P>
<P style="margin-top:0pt; margin-bottom:10pt; font-family:Times New Roman" align=justify><I>Selling, general and administrative expenses</I></P>
<TABLE align="center" cellspacing=0 style="font-size:10pt">
 <TR>
 <TD valign=top width=240.533>&nbsp;</TD>
 <TD valign=top width=302.333 colspan=3><P style="margin:0pt; padding-bottom:3pt; line-height:11pt; font-family:Times New Roman; font-size:9pt; border-bottom:0.5pt solid #000000" align=center><B>Quarter
 Ended</B></P></TD>
 <TD valign=top width=171.733 colspan=2><P style="margin:0pt; padding-bottom:3pt; line-height:11pt; font-family:Times New Roman; font-size:9pt; border-bottom:0.5pt solid #000000" align=center><B>%
 Variation</B></P></TD>
 </TR>
 <TR>
 <TD valign=top width=240.533>&nbsp;</TD>
 <TD valign=bottom width=93.333><P style="margin:0pt; padding-bottom:3pt; line-height:11pt; font-family:Times New Roman; font-size:9pt; border-bottom:0.5pt solid #000000" align=center><B>October
 1,<br>
 2005</B></P></TD>
 <TD valign=bottom width=94.2><P style="margin:0pt; padding-bottom:3pt; line-height:11pt; font-family:Times New Roman; font-size:9pt; border-bottom:0.5pt solid #000000" align=center><B>July
 2, <BR>
 2005</B></P></TD>
 <TD valign=bottom width=114.8><P style="margin:0pt; padding-bottom:3pt; line-height:11pt; font-family:Times New Roman; font-size:9pt; border-bottom:0.5pt solid #000000" align=center><B>September
 25, <br>
 2004</B></P></TD>
 <TD valign=bottom width=78.4><P style="margin:0pt; padding-bottom:3pt; line-height:11pt; font-family:Times New Roman; font-size:9pt; border-bottom:0.5pt solid #000000" align=center><B>Sequential</B></P></TD>
 <TD valign=bottom width=93.333><P style="margin:0pt; padding-bottom:3pt; line-height:11pt; font-family:Times New Roman; font-size:9pt; border-bottom:0.5pt solid #000000" align=center><B>Year-over-year</B></P></TD>
 </TR>
 <TR>
 <TD valign=top width=240.533>&nbsp;</TD>
 <TD valign=top width=474.067 colspan=5><P style="margin-top:0pt; margin-bottom:4.5pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=center><B>(unaudited,
 in $ millions)</B></P></TD>
 </TR>
 <TR>
 <TD style="background-color:#DFDFDF" valign=top width=240.533><P style="margin-top:0pt; margin-bottom:1.5pt; line-height:11pt; font-family:Times New Roman; font-size:9pt">Selling,
 general and administrative expenses</P></TD>
 <TD style="background-color:#DFDFDF" valign=top width=93.333><P style="margin-top:0pt; margin-bottom:1.5pt; padding-right:9pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=right>(248)</P></TD>
 <TD style="background-color:#DFDFDF" valign=top width=94.2><P style="margin-top:0pt; margin-bottom:1.5pt; padding-right:9pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=right>(255)</P></TD>
 <TD style="background-color:#DFDFDF" valign=top width=114.8><P style="margin-top:0pt; margin-bottom:1.5pt; padding-right:9pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=right>(233)</P></TD>
 <TD style="background-color:#DFDFDF" valign=top width=78.4><P style="margin-top:0pt; margin-bottom:1.5pt; padding-right:9pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=right>2.7%</P></TD>
 <TD style="background-color:#DFDFDF" valign=top width=93.333><P style="margin-top:0pt; margin-bottom:1.5pt; padding-right:9pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=right>(6.4%)</P></TD>
 </TR>
 <TR>
 <TD valign=top width=240.533><P style="margin-top:0pt; margin-bottom:1.5pt; line-height:11pt; font-family:Times New Roman; font-size:9pt">As
 a percentage of net revenues</P></TD>
 <TD valign=top width=93.333><P style="margin-top:0pt; margin-bottom:1.5pt; padding-right:9pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=right>(11.0%)</P></TD>
 <TD valign=top width=94.2><P style="margin-top:0pt; margin-bottom:1.5pt; padding-right:9pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=right>(11.8%)</P></TD>
 <TD valign=top width=114.8><P style="margin-top:0pt; margin-bottom:1.5pt; padding-right:9pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=right>(10.4%)</P></TD>
 <TD valign=top width=78.4>&nbsp;</TD>
 <TD valign=top width=93.333>&nbsp;</TD>
 </TR>
</TABLE>
<p style="margin-bottom: 10pt">On a year-over-year basis, our selling, general
 and administrative expenses increased mainly due to the negative impact of our
 effective U.S. dollar exchange rate and to higher expenditures in our general
 and administrative infrastructures. </p>
<P style="margin-top:0pt; margin-bottom:10pt; font-family:Times New Roman" align=justify>Our selling, general and administrative expenses decreased sequentially mainly due to cost control actions and seasonal factors and a more favorable effective euro/dollar exchange rate, leading to an improvement of the third quarter 2005 ratio of 11.0% as a percentage of net revenues compared to 11.8% for the second quarter of 2005. </P>
<P style="margin-top:0pt; margin-bottom:5pt; font-family:Times New Roman" align=justify><I>Research and development expenses</I></P>
<TABLE align="center" cellspacing=0 style="font-size:10pt">
 <TR>
 <TD valign=top width=240.533>&nbsp;</TD>
 <TD valign=top width=308.267 colspan=4><P style="margin:0pt; padding-bottom:3pt; line-height:11pt; font-family:Times New Roman; font-size:9pt; border-bottom:0.5pt solid #000000" align=center><B>Quarter
 Ended</B></P></TD>
 <TD valign=top width=171.733 colspan=4><P style="margin:0pt; padding-bottom:3pt; line-height:11pt; font-family:Times New Roman; font-size:9pt; border-bottom:0.5pt solid #000000" align=center><B>%
 Variation</B></P></TD>
 </TR>
 <TR>
 <TD valign=top width=240.533>&nbsp;</TD>
 <TD valign=bottom width=93.333><P style="margin:0pt; padding-bottom:3pt; line-height:11pt; font-family:Times New Roman; font-size:9pt; border-bottom:0.5pt solid #000000" align=center><B>October
 1,<BR>
 2005</B></P></TD>
 <TD valign=bottom width=94.2 colspan=2><P style="margin:0pt; padding-bottom:3pt; line-height:11pt; font-family:Times New Roman; font-size:9pt; border-bottom:0.5pt solid #000000" align=center><B>July
 2, <BR>
 2005</B></P></TD>
 <TD valign=bottom width=120.733><P style="margin:0pt; padding-bottom:3pt; line-height:11pt; font-family:Times New Roman; font-size:9pt; border-bottom:0.5pt solid #000000" align=center><B>September&nbsp;25,<br>
 2004</B></P></TD>
 <TD valign=bottom width=74.467><P style="margin:0pt; padding-bottom:3pt; line-height:11pt; font-family:Times New Roman; font-size:9pt; border-bottom:0.5pt solid #000000" align=center><B>Sequential</B></P></TD>
 <TD valign=bottom width=97.267 colspan=3><P style="margin:0pt; padding-bottom:3pt; line-height:11pt; font-family:Times New Roman; font-size:9pt; border-bottom:0.5pt solid #000000" align=center><B>Year-over-year</B></P></TD>
 </TR>
 <TR>
 <TD valign=top width=240.533>&nbsp;</TD>
 <TD valign=top width=480 colspan=8><P style="margin-top:0pt; margin-bottom:4.5pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=center><B>(unaudited,
 in $ millions)</B></P></TD>
 </TR>
 <TR>
 <TD style="background-color:#DFDFDF" valign=top width=240.533><P style="margin-top:0pt; margin-bottom:1.5pt; line-height:11pt; font-family:Times New Roman; font-size:9pt">Research
 and development expenses</P></TD>
 <TD style="background-color:#DFDFDF" valign=bottom width=94.267 colspan=2><P style="margin-top:0pt; margin-bottom:1.5pt; padding-right:10.1pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=right>(401)</P></TD>
 <TD style="background-color:#DFDFDF" valign=bottom width=93.267><P style="margin-top:0pt; margin-bottom:1.5pt; padding-right:10.1pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=right>(423)</P></TD>
 <TD style="background-color:#DFDFDF" valign=bottom width=120.733><P style="margin-top:0pt; margin-bottom:1.5pt; padding-right:10.1pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=right>(384)</P></TD>
 <TD style="background-color:#DFDFDF" valign=bottom width=74.467><P style="margin-top:0pt; margin-bottom:1.5pt; padding-right:10.1pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=right>5.1%</P></TD>
 <TD style="background-color:#DFDFDF" valign=bottom width=97.267 colspan=3><P style="margin-top:0pt; margin-bottom:1.5pt; padding-right:10.1pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=right>(4.6%)</P></TD>
 </TR>
 <TR>
 <TD valign=top width=240.533><P style="margin:0pt; line-height:11pt; font-family:Times New Roman; font-size:9pt">As
 a percentage of net revenues</P></TD>
 <TD valign=bottom width=94.267 colspan=2><P style="margin:0pt; padding-right:10.1pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=right>(17.9%)</P></TD>
 <TD valign=bottom width=93.267><P style="margin:0pt; padding-right:10.1pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=right>(19.6%)</P></TD>
 <TD valign=bottom width=120.733><P style="margin:0pt; padding-right:10.1pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=right>(17.2%)</P></TD>
 <TD valign=bottom width=74.467>&nbsp;</TD>
 <TD valign=bottom width=97.267 colspan=3>&nbsp;</TD>
 </TR>
</TABLE>
<p style="margin-bottom: 10pt">On a year-over-year basis, our research and development
 expenses increased due to higher levels of investment in research and development
 activities as well as the negative impact of our effective U.S. dollar exchange
 rate.&nbsp;Our research and development expenses decreased sequentially, mainly
 due to the seasonal effect and the positive impact of the U.S. dollar exchange
 rate.&nbsp;The foregoing impacts translated into a sequential decrease in R&amp;D
 expenses as a percentage of net revenues.&nbsp;</p>
<P style="margin-top:10pt; margin-bottom:10pt; font-family:Times New Roman" align=justify><BR>
<BR></P>
<P style="margin:0pt; font-family:Times New Roman" align=center>16</P>
<P style="margin:0pt; font-family:Times New Roman"><BR></P>
<HR style="padding-top:7.2pt; padding-bottom:7.2pt" noshade size=1.333>
<P style="page-break-before:always; margin:0pt; font-family:Times New Roman" align=right><BR></P>
<P style="margin:0pt; font-family:Times New Roman"><BR></P>
<P style="margin:0pt; font-family:Times New Roman" align=justify><I>Other income and expenses, net</I></P>
<TABLE style="font-size:10pt" cellspacing=0 align=center><TR><TD valign=top width=250>&nbsp;</TD><TD valign=top width=432 colspan=3><P style="margin:0pt; padding-bottom:3pt; line-height:11pt; font-family:Times New Roman; font-size:9pt; border-bottom:0.5pt solid #000000" align=center><B>Quarter Ended</B></P>
</TD></TR>
<TR><TD valign=top width=192>&nbsp;</TD><TD valign=top width=144><P style="margin:0pt; padding-bottom:3pt; line-height:11pt; font-family:Times New Roman; font-size:9pt; border-bottom:0.5pt solid #000000" align=center><B>October 1,<br> 2005</B></P>
</TD><TD valign=top width=144><P style="margin:0pt; padding-bottom:3pt; line-height:11pt; font-family:Times New Roman; font-size:9pt; border-bottom:0.5pt solid #000000" align=center><B>July 2,<BR> 2005</B></P>
</TD><TD valign=top width=144><P style="margin:0pt; padding-bottom:3pt; line-height:11pt; font-family:Times New Roman; font-size:9pt; border-bottom:0.5pt solid #000000" align=center><B>September 25,<br> 2004</B></P>
</TD></TR>
<TR><TD valign=top width=192>&nbsp;</TD><TD valign=top width=432 colspan=3><P style="margin-top:0pt; margin-bottom:4.5pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=center><B>(unaudited, in $ millions)</B></P>
</TD></TR>
<TR><TD style="background-color:#DFDFDF" valign=top width=192><P style="margin-top:0pt; margin-bottom:1.5pt; line-height:11pt; font-family:Times New Roman; font-size:9pt">Research and development funding</P>
</TD><TD style="background-color:#DFDFDF" valign=bottom width=144><P style="margin-top:0pt; margin-bottom:1.5pt; padding-right:34.2pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=right>20</P>
</TD><TD style="background-color:#DFDFDF" valign=bottom width=144><P style="margin-top:0pt; margin-bottom:1.5pt; padding-right:34.2pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=right>13</P>
</TD><TD style="background-color:#DFDFDF" valign=bottom width=144><P style="margin-top:0pt; margin-bottom:1.5pt; padding-right:34.2pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=right>9</P>
</TD></TR>
<TR><TD valign=top width=192><P style="margin-top:0pt; margin-bottom:1.5pt; line-height:11pt; font-family:Times New Roman; font-size:9pt">Start-up costs</P>
</TD><TD valign=bottom width=144><P style="margin-top:0pt; margin-bottom:1.5pt; padding-right:34.2pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=right>(12)</P>
</TD><TD valign=bottom width=144><P style="margin-top:0pt; margin-bottom:1.5pt; padding-right:34.2pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=right>(12)</P>
</TD><TD valign=bottom width=144><P style="margin-top:0pt; margin-bottom:1.5pt; padding-right:34.2pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=right>(13)</P>
</TD></TR>
<TR><TD style="background-color:#DFDFDF" valign=top width=192><P style="margin-top:0pt; margin-bottom:1.5pt; line-height:11pt; font-family:Times New Roman; font-size:9pt">Exchange gain (loss) net</P>
</TD><TD style="background-color:#DFDFDF" valign=bottom width=144><P style="margin-top:0pt; margin-bottom:1.5pt; padding-right:34.2pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=right>(5)</P>
</TD><TD style="background-color:#DFDFDF" valign=bottom width=144><P style="margin-top:0pt; margin-bottom:1.5pt; padding-right:34.2pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=right>(5)</P>
</TD><TD style="background-color:#DFDFDF" valign=bottom width=144><P style="margin-top:0pt; margin-bottom:1.5pt; padding-right:34.2pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=right>10</P>
</TD></TR>
<TR><TD valign=top width=192><P style="margin-top:0pt; margin-bottom:1.5pt; line-height:11pt; font-family:Times New Roman; font-size:9pt">Patent claim costs</P>
</TD><TD valign=bottom width=144><P style="margin-top:0pt; margin-bottom:1.5pt; padding-right:34.2pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=right>(6)</P>
</TD><TD valign=bottom width=144><P style="margin-top:0pt; margin-bottom:1.5pt; padding-right:34.2pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=right>(5)</P>
</TD><TD valign=bottom width=144><P style="margin-top:0pt; margin-bottom:1.5pt; padding-right:34.2pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=right>(7)</P>
</TD></TR>
<TR><TD style="background-color:#DFDFDF" valign=top width=192><P style="margin-top:0pt; margin-bottom:1.5pt; line-height:11pt; font-family:Times New Roman; font-size:9pt">Gain (loss) on sale of non-current assets</P>
</TD><TD style="background-color:#DFDFDF" valign=bottom width=144><P style="margin-top:0pt; margin-bottom:1.5pt; padding-right:34.2pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=right>(2)</P>
</TD><TD style="background-color:#DFDFDF" valign=bottom width=144><P style="margin-top:0pt; margin-bottom:1.5pt; padding-right:34.2pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=right>6</P>
</TD><TD style="background-color:#DFDFDF" valign=bottom width=144><P style="margin-top:0pt; margin-bottom:1.5pt; padding-right:34.2pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=right>&#151;</P>
</TD></TR>
<TR><TD valign=top width=192><P style="margin-top:0pt; margin-bottom:1.5pt; line-height:11pt; font-family:Times New Roman; font-size:9pt">Other, net</P>
</TD><TD valign=bottom width=144><P style="margin-top:0pt; margin-bottom:1.5pt; padding-right:34.2pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=right>2</P>
</TD><TD valign=bottom width=144><P style="margin-top:0pt; margin-bottom:1.5pt; padding-right:34.2pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=right>1</P>
</TD><TD valign=bottom width=144><P style="margin-top:0pt; margin-bottom:1.5pt; padding-right:34.2pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=right>(2)</P>
</TD></TR>
<TR><TD style="background-color:#DFDFDF" valign=top width=192><P style="margin-top:0pt; margin-bottom:1.5pt; line-height:11pt; font-family:Times New Roman; font-size:9pt"><B>Other income and expenses, net</B></P>
</TD><TD style="background-color:#DFDFDF" valign=bottom width=144><P style="margin-top:0pt; margin-bottom:1.5pt; padding-right:34.2pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=right><B>(3)</B></P>
</TD><TD style="background-color:#DFDFDF" valign=bottom width=144><P style="margin-top:0pt; margin-bottom:1.5pt; padding-right:34.2pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=right><B>(2)</B></P>
</TD><TD style="background-color:#DFDFDF" valign=bottom width=144><P style="margin-top:0pt; margin-bottom:1.5pt; padding-right:34.2pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=right><B>(3)</B></P>
</TD></TR>
<TR><TD valign=top width=192><P style="margin:0pt; line-height:11pt; font-family:Times New Roman; font-size:9pt">As a percentage of net revenues</P>
</TD><TD valign=bottom width=144><P style="margin:0pt; padding-right:34.2pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=right>(0.1%)</P>
</TD><TD valign=bottom width=144><P style="margin:0pt; padding-right:34.2pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=right>&#151;</P>
</TD><TD valign=bottom width=144><P style="margin:0pt; padding-right:34.2pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=right>(0.1%)</P>
</TD></TR>
</TABLE>
<P style="margin-top:10pt; margin-bottom:10pt; font-family:Times New Roman" align=justify>&#147;Other income and expenses, net&#148; results remained in line with the previous periods under reference.&nbsp;The main items in the third quarter of 2005 were the research and development funding and start-up costs.&nbsp;Start-up costs in the third quarter of 2005 were related to our 150-mm fab expansion in Singapore and the conversion to 200-mm fab in Agrate (Italy) and the build-up of the 300-mm fab in Catania (Italy).&nbsp;Patent claim costs included costs associated with several ongoing litigations and claims; these costs are categorized either as patent litigation costs or pre-litigation costs, amounting to $5 million and $1 million, respectively. </P>
<P style="margin-top:0pt; margin-bottom:10pt; font-family:Times New Roman" align=justify>See Note 6 to our Unaudited Interim Consolidated Financial Statements.</P>
<P style="margin-top:0pt; margin-bottom:10pt; font-family:Times New Roman" align=justify><I>Impairment, restructuring charges and other related closure costs</I></P>
<TABLE style="font-size:10pt" cellspacing=0 align=center><TR><TD valign=top width=350>&nbsp;</TD><TD valign=top colspan=3><P style="margin:0pt; padding-bottom:3pt; line-height:11pt; font-family:Times New Roman; font-size:9pt; border-bottom:0.5pt solid #000000" align=center><B>Quarter
        Ended</B></P>
</TD></TR>
<TR><TD valign=top width=250>&nbsp;</TD><TD valign=top width=145><P style="margin:0pt; padding-bottom:3pt; line-height:11pt; font-family:Times New Roman; font-size:9pt; border-bottom:0.5pt solid #000000" align=center><B>October 1,<BR> 2005</B></P>
</TD><TD valign=top width=145><P style="margin:0pt; padding-bottom:3pt; line-height:11pt; font-family:Times New Roman; font-size:9pt; border-bottom:0.5pt solid #000000" align=center><B>July 2, <br>2005</B></P>
</TD><TD valign=top width=146><P style="margin:0pt; padding-bottom:3pt; line-height:11pt; font-family:Times New Roman; font-size:9pt; border-bottom:0.5pt solid #000000" align=center><B>September 25, <br>2004</B></P>
</TD></TR>
<TR><TD valign=top width=250>&nbsp;</TD><TD valign=top colspan=3><P style="margin-top:0pt; margin-bottom:2.25pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=center><B>(unaudited, in $ millions)</B></P>
</TD></TR>
<TR><TD style="background-color:#DFDFDF" valign=top width=250><P style="margin-top:0pt; margin-bottom:1.5pt; line-height:11pt; font-family:Times New Roman; font-size:9pt">Impairment, restructuring charges and other related closure costs</P>
</TD><TD style="background-color:#DFDFDF" valign=bottom width=145><P style="margin-top:0pt; margin-bottom:1.5pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=center>(12)</P>
</TD><TD style="background-color:#DFDFDF" valign=bottom width=145><P style="margin-top:0pt; margin-bottom:1.5pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=center>(22)</P>
</TD><TD style="background-color:#DFDFDF" valign=bottom width=146><P style="margin-top:0pt; margin-bottom:1.5pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=center>(12)</P>
</TD></TR>
<TR><TD valign=top width=250><P style="margin:0pt; line-height:11pt; font-family:Times New Roman; font-size:9pt">As a percentage of net revenues</P>
</TD><TD valign=bottom width=145><P style="margin:0pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=center>(0.5%)</P>
</TD><TD valign=bottom width=145><P style="margin:0pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=center>(1.0%)</P>
</TD><TD valign=bottom width=146><P style="margin:0pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=center>(0.6%)</P>
</TD></TR>
</TABLE>
<P style="margin-top:10pt; margin-bottom:10pt; font-family:Times New Roman" align=justify>Our impairment, restructuring charges and other related closure costs of $12 million for the third quarter of 2005 were composed of:</P>
<P style="margin-top:0pt; margin-bottom:-12pt; padding-left:36pt; text-indent:-36pt; font-family:Symbol" align=justify>&#183;</P>
<P style="margin-top:0pt; margin-bottom:10pt; padding-left:36pt; font-family:Symbol" align=justify><FONT FACE="Times New Roman">our new restructuring plan announced in May 2005, which resulted in a $6 million accounting charge in the third quarter 2005 for the relevant portion of involuntary and voluntary employee termination benefits; in the second quarter 2005, this charge was $15 million;</FONT></P>
<P style="margin-top:0pt; margin-bottom:-12pt; padding-left:36pt; text-indent:-36pt; font-family:Symbol" align=justify>&#183;</P>
<P style="margin-top:0pt; margin-bottom:10pt; padding-left:36pt; font-family:Symbol" align=justify><FONT FACE="Times New Roman">our ongoing 2003 restructuring plan and related manufacturing initiatives that generated restructuring charges of approximately $5 million in the third quarter 2005, including $3 million in restructuring charges related to the 150-mm fab plan and $2 million restructuring charges related to back-end activities; in the second quarter, this charge was approximately $6 million; and</FONT></P>
<P style="margin-top:0pt; margin-bottom:-12pt; padding-left:36pt; text-indent:-36pt; font-family:Symbol" align=justify>&#183;</P>
<P style="margin-top:0pt; margin-bottom:10pt; padding-left:36pt; font-family:Symbol" align=justify><FONT FACE="Times New Roman">a $1 million charge for impairment related to purchased technologies primarily associated with ASG. </FONT></P>
<P style="margin-top:0pt; margin-bottom:10pt; font-family:Times New Roman" align=justify>See Note 7 to our Unaudited Interim Consolidated Financial Statements. </P>
<P style="margin-top:0pt; margin-bottom:10pt; font-family:Times New Roman" align=justify><I>Operating income</I></P>
<TABLE style="font-size:10pt" cellspacing=0 align=center><TR><TD valign=top width=192>&nbsp;</TD><TD valign=top width=432 colspan=3><P style="margin:0pt; padding-bottom:3pt; line-height:11pt; font-family:Times New Roman; font-size:9pt; border-bottom:0.5pt solid #000000" align=center><B>Quarter Ended</B></P>
</TD></TR>
<TR><TD valign=top width=192>&nbsp;</TD><TD valign=top width=144><P style="margin:0pt; padding-bottom:3pt; line-height:11pt; font-family:Times New Roman; font-size:9pt; border-bottom:0.5pt solid #000000" align=center><B>October 1,<br> 2005</B></P>
</TD><TD valign=top width=144><P style="margin:0pt; padding-bottom:3pt; line-height:11pt; font-family:Times New Roman; font-size:9pt; border-bottom:0.5pt solid #000000" align=center><B>July 2, <br>2005</B></P>
</TD><TD valign=top width=144><P style="margin:0pt; padding-bottom:3pt; line-height:11pt; font-family:Times New Roman; font-size:9pt; border-bottom:0.5pt solid #000000" align=center><B>September 25, <br>2004</B></P>
</TD></TR>
<TR><TD valign=top width=192>&nbsp;</TD><TD valign=top width=432 colspan=3><P style="margin-top:0pt; margin-bottom:4.5pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=center><B>(unaudited, in $ millions)</B></P>
</TD></TR>
<TR><TD style="background-color:#DFDFDF" valign=top width=192><P style="margin-top:0pt; margin-bottom:1.5pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=justify>Operating income</P>
</TD><TD style="background-color:#DFDFDF" valign=top width=144><P style="margin:0pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=center>102</P>
</TD><TD style="background-color:#DFDFDF" valign=top width=144><P style="margin:0pt; padding-right:7.95pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=center>12</P>
</TD><TD style="background-color:#DFDFDF" valign=top width=144><P style="margin:0pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=center>213</P>
</TD></TR>
<TR><TD valign=top width=192><P style="margin:0pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=justify>As a percentage of net revenues</P>
</TD><TD valign=top width=144><P style="margin:0pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=center>4.5%</P>
</TD><TD valign=top width=144><P style="margin:0pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=center>0.6%</P>
</TD><TD valign=top width=144><P style="margin:0pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=center>9.6%</P>
</TD></TR>
</TABLE>
<P style="margin-top:10pt; margin-bottom:10pt; font-family:Times New Roman" align=justify>Our operating income decreased on a year-over-year basis mainly due to the following factors:</P>
<P style="margin-top:10pt; margin-bottom:10pt; font-family:Times New Roman" align=justify><BR>
<BR></P>
<P style="margin:0pt; font-family:Times New Roman" align=center>17</P>
<P style="margin:0pt; font-family:Times New Roman"><BR></P>
<HR style="padding-top:7.2pt; padding-bottom:7.2pt" noshade size=1.333>
<P style="page-break-before:always; margin:0pt; font-family:Times New Roman" align=right><BR></P>
<P style="margin:0pt; font-family:Times New Roman"><BR></P>
<P style="margin-top:0pt; margin-bottom:-12pt; padding-left:36pt; text-indent:-36pt; font-family:Symbol" align=justify>&#183;</P>
<P style="margin-top:0pt; margin-bottom:10pt; padding-left:36pt; font-family:Symbol" align=justify><FONT FACE="Times New Roman">the negative impact of the ongoing pricing pressure on our net revenues;</FONT></P>
<P style="margin-top:0pt; margin-bottom:-12pt; padding-left:36pt; text-indent:-36pt; font-family:Symbol" align=justify>&#183;</P>
<P style="margin-top:0pt; margin-bottom:10pt; padding-left:36pt; font-family:Symbol" align=justify><FONT FACE="Times New Roman">the negative impact of our effective U.S. dollar exchange rate; and</FONT></P>
<P style="margin-top:0pt; margin-bottom:-12pt; padding-left:36pt; text-indent:-36pt; font-family:Symbol" align=justify>&#183;</P>
<P style="margin-top:0pt; margin-bottom:10pt; padding-left:36pt; font-family:Symbol" align=justify><FONT FACE="Times New Roman">the increase in our total operating expenses mainly related to our continuing investment in research and development. </FONT></P>
<P style="margin-top:0pt; margin-bottom:10pt; font-family:Times New Roman" align=justify>The above negative factors were partially compensated by overall improved efficiencies in our manufacturing activities and higher volume of sales. </P>
<P style="margin-top:0pt; margin-bottom:10pt; font-family:Times New Roman" align=justify>With respect to our product segments, on a year-over-year basis, ASG registered a decrease of its operating income to $81 million compared to its operating income of $137 million in the third quarter of 2004, due to the negative impact of ongoing pricing pressure, the negative impact of our effective U.S. dollar exchange rate and increased operating expenses.&nbsp;MLD operating income decreased from $134 million in the third quarter of 2004 to $68 million in the third quarter of 2005 due to lower sales, continuing price pressure and increased operating expenses.&nbsp;In the third quarter of 2005, MPG registered an operating loss of $17 million, compared to operating income of $14 million in the third quarter of 2004, mainly due to the negative price impact. </P>
<P style="margin-top:0pt; margin-bottom:10pt; font-family:Times New Roman" align=justify>On a sequential basis, our operating profit increased from $12 million in the second quarter of 2005 to $102 million in the third quarter of 2005.&nbsp;In summary, the main contributors to this increase were higher sales volumes, improved product mix and manufacturing efficiencies as well as the seasonal decrease in our total operating expenses that more than compensated for the further decline in our selling prices. </P>
<P style="margin-top:0pt; margin-bottom:10pt; font-family:Times New Roman" align=justify>All
 our three product segments improved their operating result sequentially.&nbsp;ASG
 and MLD improved their operating income in the third quarter of 2005 to $81
 million and $68 million, compared to $72 million and $65 million in the prior
 quarter, respectively, while MPG registered a significant decrease in its operating
 loss to $17 million in the third quarter of 2005 from $66 million in the prior
 quarter.&nbsp;ASG profitability benefited from higher sales and lower operating
 expenses. MLD profitability was mainly driven by higher sales.&nbsp;MPG was
 able to reduce its operating loss mainly due to higher sales and improved manufacturing
 performances. </P>
<P style="margin-top:0pt; margin-bottom:10pt; font-family:Times New Roman" align=justify><I>Interest income, net</I></P>
<TABLE style="font-size:10pt" cellspacing=0 align=center><TR><TD valign=top width=171.8>&nbsp;</TD><TD valign=top width=452.2 colspan=3><P style="margin:0pt; padding-bottom:3pt; line-height:11pt; font-family:Times New Roman; font-size:9pt; border-bottom:0.5pt solid #000000" align=center><B>Quarter Ended</B></P>
</TD></TR>
<TR><TD valign=top width=171.8>&nbsp;</TD><TD valign=top width=150.733><P style="margin:0pt; padding-bottom:3pt; line-height:11pt; font-family:Times New Roman; font-size:9pt; border-bottom:0.5pt solid #000000" align=center><B>October 1, <br>2005</B></P>
</TD><TD valign=top width=150.733><P style="margin:0pt; padding-bottom:3pt; line-height:11pt; font-family:Times New Roman; font-size:9pt; border-bottom:0.5pt solid #000000" align=center><B>July 2, <br>2005</B></P>
</TD><TD valign=top width=150.733><P style="margin:0pt; padding-bottom:3pt; line-height:11pt; font-family:Times New Roman; font-size:9pt; border-bottom:0.5pt solid #000000" align=center><B>September 25, <br>2004</B></P>
</TD></TR>
<TR><TD valign=top width=171.8>&nbsp;</TD><TD valign=top width=452.2 colspan=3><P style="margin-top:0pt; margin-bottom:4.5pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=center><B>(unaudited, in $ millions)</B></P>
</TD></TR>
<TR><TD style="background-color:#DFDFDF" valign=top width=171.8><P style="margin:0pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=justify>Interest income, net</P>
</TD><TD style="background-color:#DFDFDF" valign=top width=150.733><P style="margin:0pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=center>8</P>
</TD><TD style="background-color:#DFDFDF" valign=top width=150.733><P style="margin:0pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=center>8</P>
</TD><TD style="background-color:#DFDFDF" valign=top width=150.733><P style="margin:0pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=center>&#151;</P>
</TD></TR>
</TABLE>
<P style="margin-top:10pt; margin-bottom:10pt; font-family:Times New Roman" align=justify>Our interest income, net remained flat sequentially and increased from the break-even result on a year-over-year basis.&nbsp;The year-over-year improvement reflects the decrease in interest expense due to our repurchases of our 2010 Bonds and our early redemption of the 2009 LYONs that occurred in 2004.&nbsp;In addition, the interest rate on cash and cash equivalents has improved from approximately 1.75% in the third quarter of 2004 to 2.9% in the third quarter 2005. </P>
<P style="margin-top:0pt; margin-bottom:10pt; font-family:Times New Roman" align=justify><I>Loss on equity investments</I></P>
<TABLE style="font-size:10pt" cellspacing=0 align=center><TR><TD valign=top width=171.8>&nbsp;</TD><TD valign=top width=452.2 colspan=3><P style="margin:0pt; padding-bottom:3pt; line-height:11pt; font-family:Times New Roman; font-size:9pt; border-bottom:0.5pt solid #000000" align=center><B>Quarter Ended</B></P>
</TD></TR>
<TR><TD valign=top width=171.8>&nbsp;</TD><TD valign=top width=150.733><P style="margin:0pt; padding-bottom:3pt; line-height:11pt; font-family:Times New Roman; font-size:9pt; border-bottom:0.5pt solid #000000" align=center><B>October 1, 2005</B></P>
</TD><TD valign=top width=150.733><P style="margin:0pt; padding-bottom:3pt; line-height:11pt; font-family:Times New Roman; font-size:9pt; border-bottom:0.5pt solid #000000" align=center><B>July 2, 2005</B></P>
</TD><TD valign=top width=150.733><P style="margin:0pt; padding-bottom:3pt; line-height:11pt; font-family:Times New Roman; font-size:9pt; border-bottom:0.5pt solid #000000" align=center><B>September 25, 2004</B></P>
</TD></TR>
<TR><TD valign=top width=171.8>&nbsp;</TD><TD valign=top width=452.2 colspan=3><P style="margin-top:0pt; margin-bottom:4.5pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=center><B>(unaudited, in $ millions)</B></P>
</TD></TR>
<TR><TD style="background-color:#DFDFDF" valign=top width=171.8><P style="margin:0pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=justify>Loss on equity investments</P>
</TD><TD style="background-color:#DFDFDF" valign=top width=150.733><P style="margin:0pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=center>(2)</P>
</TD><TD style="background-color:#DFDFDF" valign=top width=150.733><P style="margin:0pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=center>&#151;</P>
</TD><TD style="background-color:#DFDFDF" valign=top width=150.733><P style="margin:0pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=center>(2)</P>
</TD></TR>
</TABLE>
<P style="margin-top:10pt; margin-bottom:10pt; font-family:Times New Roman" align=justify>The loss in the third quarter of 2005 is related to our investment as minority shareholder in our joint venture in China with Hynix Semiconductor Inc., which is in a start-up phase.&nbsp;In the third quarter of 2004, a loss of $2 million was accrued in relation to our investment in SuperH Inc., the joint venture we formed with Renesas Ltd., which has subsequently been terminated. </P>
<P style="margin-top:10pt; margin-bottom:10pt; font-family:Times New Roman" align=justify><B><BR>
<BR></B></P>
<P style="margin:0pt; font-family:Times New Roman" align=center>18</P>
<P style="margin:0pt; font-family:Times New Roman"><BR></P>
<HR style="padding-top:7.2pt; padding-bottom:7.2pt" noshade size=1.333>
<P style="page-break-before:always; margin:0pt; font-family:Times New Roman" align=right><BR></P>
<P style="margin:0pt; font-family:Times New Roman"><BR></P>
<P style="margin-top:0pt; margin-bottom:10pt; font-family:Times New Roman" align=justify><I>Income tax benefit (expense)</I></P>
<TABLE style="font-size:10pt" cellspacing=0 align=center><TR><TD valign=top width=180>&nbsp;</TD><TD valign=top width=444 colspan=3><P style="margin:0pt; padding-bottom:3pt; line-height:11pt; font-family:Times New Roman; font-size:9pt; border-bottom:0.5pt solid #000000" align=center><B>Quarter Ended</B></P>
</TD></TR>
<TR><TD valign=top width=180>&nbsp;</TD><TD valign=top width=148><P style="margin:0pt; padding-bottom:3pt; line-height:11pt; font-family:Times New Roman; font-size:9pt; border-bottom:0.5pt solid #000000" align=center><B>October 1, 2005</B></P>
</TD><TD valign=top width=148><P style="margin:0pt; padding-bottom:3pt; line-height:11pt; font-family:Times New Roman; font-size:9pt; border-bottom:0.5pt solid #000000" align=center><B>July 2, 2005</B></P>
</TD><TD valign=top width=148><P style="margin:0pt; padding-bottom:3pt; line-height:11pt; font-family:Times New Roman; font-size:9pt; border-bottom:0.5pt solid #000000" align=center><B>September 25, 2004</B></P>
</TD></TR>
<TR><TD valign=top width=180>&nbsp;</TD><TD valign=top width=444 colspan=3><P style="margin-top:0pt; margin-bottom:4.5pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=center><B>(unaudited, in $ millions)</B></P>
</TD></TR>
<TR><TD style="background-color:#DFDFDF" valign=top width=180><P style="margin:0pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=justify>Income tax benefit (expense)</P>
</TD><TD style="background-color:#DFDFDF" valign=top width=148><P style="margin:0pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=center>(18)</P>
</TD><TD style="background-color:#DFDFDF" valign=top width=148><P style="margin:0pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=center>5</P>
</TD><TD style="background-color:#DFDFDF" valign=top width=148><P style="margin:0pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=center>(20)</P>
</TD></TR>
</TABLE>
<P style="margin-top:10pt; margin-bottom:10pt; font-family:Times New Roman" align=justify>During the third quarter of 2005, we incurred an income tax expense of $18 million, compared to an income tax benefit in the second quarter of 2005 of $5 million, reflecting an $18 million benefit in relation to the application of the Extraterritorial Income Exclusion (ETI) rules in the United States, offset by an increase in our tax provision. </P>
<P style="margin-top:0pt; margin-bottom:10pt; font-family:Times New Roman" align=justify>Our effective tax rate was 17.0% in the third quarter of 2005, compared to 15.9% in the second quarter of 2005 (excluding our tax benefit and increased provision) and compared to 9.5% in the third quarter of 2004.&nbsp;The effective tax rate for the third quarter of 2005 was computed on the basis of expected tax charges in each jurisdiction.&nbsp;Our tax rate is variable and depends on changes in the level of operating income 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.&nbsp;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. </P>
<P style="margin-top:0pt; margin-bottom:10pt; font-family:Times New Roman" align=justify><I>Net income</I></P>
<TABLE style="font-size:10pt" cellspacing=0 align=center><TR><TD valign=top width=180>&nbsp;</TD><TD valign=top width=444 colspan=3><P style="margin:0pt; padding-bottom:3pt; line-height:11pt; font-family:Times New Roman; font-size:9pt; border-bottom:0.5pt solid #000000" align=center><B>Quarter Ended</B></P>
</TD></TR>
<TR><TD valign=top width=180>&nbsp;</TD><TD valign=top width=148><P style="margin:0pt; padding-bottom:3pt; line-height:11pt; font-family:Times New Roman; font-size:9pt; border-bottom:0.5pt solid #000000" align=center><B>October 1, 2005</B></P>
</TD><TD valign=top width=148><P style="margin:0pt; padding-bottom:3pt; line-height:11pt; font-family:Times New Roman; font-size:9pt; border-bottom:0.5pt solid #000000" align=center><B>July 2, 2005</B></P>
</TD><TD valign=top width=148><P style="margin:0pt; padding-bottom:3pt; line-height:11pt; font-family:Times New Roman; font-size:9pt; border-bottom:0.5pt solid #000000" align=center><B>September 25, 2004</B></P>
</TD></TR>
<TR><TD valign=top width=180>&nbsp;</TD><TD valign=top width=444 colspan=3><P style="margin-top:0pt; margin-bottom:4.5pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=center><B>(unaudited, in $ millions)</B></P>
</TD></TR>
<TR><TD style="background-color:#DFDFDF" valign=top width=180><P style="margin:0pt; line-height:11pt; font-family:Times New Roman; font-size:9pt">Net
        income</P>
</TD><TD style="background-color:#DFDFDF" valign=top width=148><P style="margin:0pt; padding-right:41.45pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=right>89</P>
</TD><TD style="background-color:#DFDFDF" valign=top width=148><P style="margin:0pt; padding-right:41.45pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=right>26</P>
</TD><TD style="background-color:#DFDFDF" valign=top width=148><P style="margin:0pt; padding-right:41.45pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=right>189</P>
</TD></TR>
<TR><TD valign=top width=180><P style="margin:0pt; line-height:11pt; font-family:Times New Roman; font-size:9pt">As a percentage of net revenues</P>
</TD><TD valign=top width=148><P style="margin:0pt; padding-right:41.45pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=right>3.9%</P>
</TD><TD valign=top width=148><P style="margin:0pt; padding-right:41.45pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=right>1.2%</P>
</TD><TD valign=top width=148><P style="margin:0pt; padding-right:41.45pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=right>8.5%</P>
</TD></TR>
</TABLE>
<P style="margin-top:10pt; margin-bottom:10pt; font-family:Times New Roman" align=justify>For the third quarter of 2005, we reported net income of $89 million, compared to net income of $26&nbsp;million in the second quarter of 2005 and net income of $189 million in the third quarter of 2004.&nbsp;Basic and diluted earnings per share for the third quarter of 2005 were $0.10 per share compared to basic and diluted earnings per share of $0.03 for the second quarter of 2005 and compared to basic and diluted earnings of $0.21 and $0.20 per share, respectively, for the third quarter of 2004. </P>
<P style="margin-top:0pt; margin-bottom:10pt; font-family:Times New Roman"><B>First Nine Months of 2005 vs. First Nine Months of 2004</B></P>
<P style="margin-top:0pt; margin-bottom:10pt; font-family:Times New Roman" align=justify>Based upon most recently published estimates, semiconductor industry revenue increased in the first nine months of 2005 year-over-year by approximately 6% for the TAM and 5% for the SAM. </P>
<P style="margin-top:0pt; margin-bottom:5pt; font-family:Times New Roman"><B>Net Revenues</B></P>
<TABLE style="font-size:10pt" cellspacing=0 align=center><TR><TD valign=top width=192>&nbsp;</TD><TD valign=top width=288 colspan=2><P style="margin:0pt; padding-bottom:3pt; line-height:11pt; font-family:Times New Roman; font-size:9pt; border-bottom:0.5pt solid #000000" align=center><B>Nine Months Ended</B></P>
</TD><TD width=144><P style="margin:0pt; padding-bottom:3pt; line-height:11pt; font-family:Times New Roman; font-size:9pt; border-bottom:0.5pt solid #000000" align=center>&nbsp;</P></TD></TR>
<TR><TD valign=top width=192>&nbsp;</TD><TD valign=top width=144><P style="margin:0pt; padding-bottom:3pt; line-height:11pt; font-family:Times New Roman; font-size:9pt; border-bottom:0.5pt solid #000000" align=center><B>October 1, 2005</B></P>
</TD><TD valign=top width=144><P style="margin:0pt; padding-bottom:3pt; line-height:11pt; font-family:Times New Roman; font-size:9pt; border-bottom:0.5pt solid #000000" align=center><B>September 25, 2004</B></P>
</TD><TD valign=top width=144><P style="margin:0pt; padding-bottom:3pt; line-height:11pt; font-family:Times New Roman; font-size:9pt; border-bottom:0.5pt solid #000000" align=center><B>% Variation</B></P>
</TD></TR>
<TR><TD valign=top width=192>&nbsp;</TD><TD valign=top width=432 colspan=3><P style="margin-top:0pt; margin-bottom:4.5pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=center><B>(unaudited, in $ millions)</B></P>
</TD></TR>
<TR><TD style="background-color:#DFDFDF" valign=top width=192><P style="margin:0pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=justify>Net sales</P>
</TD><TD style="background-color:#DFDFDF" valign=top width=144><P style="margin:0pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=right>6,489</P>
</TD><TD style="background-color:#DFDFDF" valign=top width=144><P style="margin:0pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=right>6,429</P>
</TD><TD style="background-color:#DFDFDF" valign=top width=144><P style="margin:0pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=right>0.9%</P>
</TD></TR>
<TR><TD valign=top width=192><P style="margin:0pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=justify>Other revenues</P>
</TD><TD valign=top width=144><P style="margin:0pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=right>4</P>
</TD><TD valign=top width=144><P style="margin:0pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=right>3</P>
</TD><TD valign=top width=144><P style="margin:0pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=right>&#151;</P>
</TD></TR>
<TR><TD style="background-color:#DFDFDF" valign=top width=192><P style="margin:0pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=justify>Net revenues</P>
</TD><TD style="background-color:#DFDFDF" valign=top width=144><P style="margin:0pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=right>6,493</P>
</TD><TD style="background-color:#DFDFDF" valign=top width=144><P style="margin:0pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=right>6,432</P>
</TD><TD style="background-color:#DFDFDF" valign=top width=144><P style="margin:0pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=right>0.9%</P>
</TD></TR>
</TABLE>
<P style="margin-top:10pt; margin-bottom:10pt; font-family:Times New Roman" align=justify>Our
 first nine months 2005 revenues slightly increased by 0.9% compared to the first
 nine months of 2004.&nbsp;This was mainly due to the higher sales volume and
 a more favorable product mix that were largely offset by the strong negative
 impact of the decline in selling prices.&nbsp;During the first nine months
 of 2005, due to ongoing pricing pressure in the semiconductor market, our average
 selling prices decreased by approximately 7% compared to the first nine months
 of 2004.&nbsp;ASG net revenues increased 3.2% while MLD and MPG net revenues
 decreased 1.4% and 1.9%, respectively. </P>
<P style="margin-top:0pt; margin-bottom:10pt; font-family:Times New Roman" align=justify><BR>
<BR></P>
<P style="margin:0pt; font-family:Times New Roman" align=center>19</P>
<P style="margin:0pt; font-family:Times New Roman"><BR></P>
<HR style="padding-top:7.2pt; padding-bottom:7.2pt" noshade size=1.333>
<P style="page-break-before:always; margin:0pt; font-family:Times New Roman" align=right><BR></P>
<P style="margin:0pt; font-family:Times New Roman"><BR></P>
<P style="margin-top:0pt; margin-bottom:10pt; font-family:Times New Roman" align=justify>With
 respect to our product segments, in the first nine months of 2005, ASG net revenues
 increased 3.2% over the first nine months of 2004, mainly due to a more favorable
 product mix; such revenue increase was due to higher sales in Imaging, Data
 storage, Automotive and Cellular communication, while Digital Consumer registered
 a decline.&nbsp;First nine months 2005 net revenues for MLD slightly decreased
 1.4% compared to the first nine months of 2004, mainly due to the negative price
 impact that more than offset the sales volume increase in all product groups.&nbsp;MPG net revenues in the first nine months of 2005 decreased 1.9% in comparison
 to the first nine months of 2004, as a result of the strong decline in selling
 prices, which could not be offset by the sales volume increases; however, total
 Flash sales increased approximately 3%. </P>
<P style="margin-top:0pt; margin-bottom:10pt; font-family:Times New Roman" align=justify>Net revenues by segment market application increased in Computer by approximately 12%, and both Telecom and Automotive by approximately 9%, while Consumer and Industrial and Other decreased by approximately 16% and 10%, respectively.&nbsp;The foregoing are estimates within a variance of 5%-to-10% in absolute dollar amounts of the relative weighting of each of our targeted market segments. </P>
<P style="margin-top:0pt; margin-bottom:10pt; font-family:Times New Roman" align=justify>By location of order shipment, major increases in net revenues were registered in Asia/Pacific and Europe, which revenues increased by approximately 8% and 1%, while the Japan, North America and Emerging Markets regions&#146; revenues decreased by approximately 23%, 8% and 6%, respectively. </P>
<P style="margin-top:0pt; margin-bottom:10pt; font-family:Times New Roman" align=justify>In the first nine months of 2005, we had several large customers, with the largest one, the Nokia group of companies, accounting for approximately 22% of our net revenues, significantly increasing from 16% during the first nine months of 2004.&nbsp;Our top ten original equipment manufacturer customers accounted for approximately 49% of our net revenues in the first nine months of 2005 compared to approximately 43% of our net revenues in the first nine months of 2004. </P>
<P style="margin-top:0pt; margin-bottom:10pt; font-family:Times New Roman" align=justify><I>Gross profit</I></P>
<TABLE style="font-size:10pt" cellspacing=0 align=center><TR><TD valign=top width=248>&nbsp;</TD><TD valign=top width=253.667 colspan=2><P style="margin:0pt; padding-bottom:3pt; line-height:11pt; font-family:Times New Roman; font-size:9pt; border-bottom:0.5pt solid #000000" align=center><B>Nine Months Ended</B></P>
</TD><TD valign=top width=122.333><P style="margin:0pt; padding-bottom:3pt; line-height:11pt; font-family:Times New Roman; font-size:9pt; border-bottom:0.5pt solid #000000" align=center>&nbsp;</P></TD></TR>
<TR><TD valign=top width=248>&nbsp;</TD><TD valign=top width=124.6><P style="margin:0pt; padding-bottom:3pt; line-height:11pt; font-family:Times New Roman; font-size:9pt; border-bottom:0.5pt solid #000000" align=center><B>October 1, 2005</B></P>
</TD><TD valign=top width=129.067><P style="margin:0pt; padding-bottom:3pt; line-height:11pt; font-family:Times New Roman; font-size:9pt; border-bottom:0.5pt solid #000000" align=center><B>September 25, 2004</B></P>
</TD><TD valign=top width=122.333><P style="margin:0pt; padding-bottom:3pt; line-height:11pt; font-family:Times New Roman; font-size:9pt; border-bottom:0.5pt solid #000000" align=center><B>% Variation</B></P>
</TD></TR>
<TR><TD valign=top width=248>&nbsp;</TD><TD valign=top width=376 colspan=3><P style="margin-top:0pt; margin-bottom:4.5pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=center><B>(unaudited, in $ millions)</B></P>
</TD></TR>
<TR><TD style="background-color:#DFDFDF" valign=top width=248><P style="margin:0pt; line-height:11pt; font-family:Times New Roman; font-size:9pt">Cost of sales</P>
</TD><TD style="background-color:#DFDFDF" valign=top width=124.6><P style="margin:0pt; padding-right:16.65pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=right>(4,328)</P>
</TD><TD style="background-color:#DFDFDF" valign=top width=129.067><P style="margin:0pt; padding-right:16.65pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=right>(4,056)</P>
</TD><TD style="background-color:#DFDFDF" valign=top width=122.333><P style="margin:0pt; padding-right:16.65pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=right>(6.7%)</P>
</TD></TR>
<TR><TD valign=top width=248><P style="margin:0pt; line-height:11pt; font-family:Times New Roman; font-size:9pt">Gross profit</P>
</TD><TD valign=top width=124.6><P style="margin:0pt; padding-right:16.65pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=right>2,165</P>
</TD><TD valign=top width=129.067><P style="margin:0pt; padding-right:16.65pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=right>2,376</P>
</TD><TD valign=top width=122.333><P style="margin:0pt; padding-right:16.65pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=right>(8.9%)</P>
</TD></TR>
<TR><TD style="background-color:#DFDFDF" valign=top width=248><P style="margin:0pt; line-height:11pt; font-family:Times New Roman; font-size:9pt">Gross margin (as a percentage of net revenues)</P>
</TD><TD style="background-color:#DFDFDF" valign=top width=124.6><P style="margin:0pt; padding-right:16.65pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=right>33.3%</P>
</TD><TD style="background-color:#DFDFDF" valign=top width=129.067><P style="margin:0pt; padding-right:16.65pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=right>36.9%</P>
</TD><TD style="background-color:#DFDFDF" valign=top width=122.333>&nbsp;</TD></TR>
</TABLE>
<P style="margin-top:10pt; margin-bottom:10pt; font-family:Times New Roman" align=justify>Our
 cost of sales increased 6.7% due to the strong sales volume increase and the
 negative impact of our effective U.S. dollar exchange rate.&nbsp;Our gross profit
 was decreasing by 8.9% since the profitable contribution of volumes, improved
 product mix and manufacturing efficiencies were outpaced by the negative impact
 of the decline in selling prices and of our effective U.S. dollar exchange rate.&nbsp;As a result, our gross margin in the first nine months of 2005 decreased
 to 33.3% compared to 36.9%. </P>
<P style="margin-top:10pt; margin-bottom:10pt; font-family:Times New Roman" align=justify><I>Selling, general and administrative expenses</I></P>
<TABLE style="font-size:10pt" cellspacing=0 align=center><TR><TD valign=top width=248.067>&nbsp;</TD><TD valign=top width=250.6 colspan=2><P style="margin:0pt; padding-bottom:3pt; line-height:11pt; font-family:Times New Roman; font-size:9pt; border-bottom:0.5pt solid #000000" align=center><B>Nine Months Ended</B></P>
</TD><TD valign=top width=125.333><P style="margin:0pt; padding-bottom:3pt; line-height:11pt; font-family:Times New Roman; font-size:9pt; border-bottom:0.5pt solid #000000" align=center>&nbsp;</P></TD></TR>
<TR><TD valign=top width=248.067>&nbsp;</TD><TD valign=top width=125.267><P style="margin:0pt; padding-bottom:3pt; line-height:11pt; font-family:Times New Roman; font-size:9pt; border-bottom:0.5pt solid #000000" align=center><B>October 1, 2005</B></P>
</TD><TD valign=top width=125.333><P style="margin:0pt; padding-bottom:3pt; line-height:11pt; font-family:Times New Roman; font-size:9pt; border-bottom:0.5pt solid #000000" align=center><B>September 25, 2004</B></P>
</TD><TD valign=top width=125.333><P style="margin:0pt; padding-bottom:3pt; line-height:11pt; font-family:Times New Roman; font-size:9pt; border-bottom:0.5pt solid #000000" align=center><B>% Variation</B></P>
</TD></TR>
<TR><TD valign=top width=248.067>&nbsp;</TD><TD valign=top width=375.933 colspan=3><P style="margin-top:0pt; margin-bottom:4.5pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=center><B>(unaudited, in $ millions)</B></P>
</TD></TR>
<TR><TD style="background-color:#DFDFDF" valign=top width=248.067><P style="margin:0pt; line-height:11pt; font-family:Times New Roman; font-size:9pt">Selling, general and administrative expenses</P>
</TD><TD style="background-color:#DFDFDF" valign=top width=125.267><P style="margin:0pt; padding-right:33.4pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=right>(766)</P>
</TD><TD style="background-color:#DFDFDF" valign=top width=125.333><P style="margin:0pt; padding-right:33.4pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=right>(702)</P>
</TD><TD style="background-color:#DFDFDF" valign=top width=125.333><P style="margin:0pt; padding-right:33.4pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=right>(9.2%)</P>
</TD></TR>
<TR><TD valign=top width=248.067><P style="margin:0pt; line-height:11pt; font-family:Times New Roman; font-size:9pt">As a percentage of net revenues</P>
</TD><TD valign=top width=125.267><P style="margin:0pt; padding-right:33.4pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=right>(11.8%)</P>
</TD><TD valign=top width=125.333><P style="margin:0pt; padding-right:33.4pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=right>(10.9%)</P>
</TD><TD valign=top width=125.333>&nbsp;</TD></TR>
</TABLE>
<P style="margin-top:10pt; margin-bottom:10pt; font-family:Times New Roman" align=justify>Our selling, general and administrative expenses increased by 9.2% from $702 million in the first nine months of 2004 compared to $766 million in the first nine months of 2005.&nbsp;This increase was mainly related to the negative impact of our effective U.S. dollar exchange rate, the $15 million one-time compensation charges related to our former CEO and three other retired senior executives and the overall increase in our expenditures in our general and administrative infrastructures. </P>
<P style="margin-top:0pt; margin-bottom:10pt; font-family:Times New Roman" align=justify><I>Research and development expenses</I></P>
<TABLE style="font-size:10pt" cellspacing=0 align=center><TR><TD valign=top width=248.067>&nbsp;</TD><TD valign=top width=250.6 colspan=2><P style="margin:0pt; padding-bottom:3pt; line-height:11pt; font-family:Times New Roman; font-size:9pt; border-bottom:0.5pt solid #000000" align=center><B>Nine Months Ended</B></P>
</TD><TD valign=top width=125.333><P style="margin:0pt; padding-bottom:3pt; line-height:11pt; font-family:Times New Roman; font-size:9pt; border-bottom:0.5pt solid #000000" align=center>&nbsp;</P></TD></TR>
<TR><TD valign=top width=248.067>&nbsp;</TD><TD valign=top width=125.267><P style="margin:0pt; padding-bottom:3pt; line-height:11pt; font-family:Times New Roman; font-size:9pt; border-bottom:0.5pt solid #000000" align=center><B>October 1, 2005</B></P>
</TD><TD valign=top width=125.333><P style="margin:0pt; padding-bottom:3pt; line-height:11pt; font-family:Times New Roman; font-size:9pt; border-bottom:0.5pt solid #000000" align=center><B>September 25, 2004</B></P>
</TD><TD valign=top width=125.333><P style="margin:0pt; padding-bottom:3pt; line-height:11pt; font-family:Times New Roman; font-size:9pt; border-bottom:0.5pt solid #000000" align=center><B>% Variation</B></P>
</TD></TR>
<TR><TD valign=top width=248.067>&nbsp;</TD><TD valign=top width=375.933 colspan=3><P style="margin-top:0pt; margin-bottom:4.5pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=center><B>(unaudited, in $ millions)</B></P>
</TD></TR>
<TR><TD style="background-color:#DFDFDF" valign=top width=248.067><P style="margin:0pt; line-height:11pt; font-family:Times New Roman; font-size:9pt">Research and development expenses</P>
</TD><TD style="background-color:#DFDFDF" valign=top width=125.267><P style="margin:0pt; padding-right:26.2pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=right>(1,228)</P>
</TD><TD style="background-color:#DFDFDF" valign=top width=125.333><P style="margin:0pt; padding-right:26.2pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=right>(1,131)</P>
</TD><TD style="background-color:#DFDFDF" valign=top width=125.333><P style="margin:0pt; padding-right:26.2pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=right>(8.6%)</P>
</TD></TR>
<TR><TD valign=top width=248.067><P style="margin:0pt; line-height:11pt; font-family:Times New Roman; font-size:9pt">As a percentage of net revenues</P>
</TD><TD valign=top width=125.267><P style="margin:0pt; padding-right:26.2pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=right>(18.9%)</P>
</TD><TD valign=top width=125.333><P style="margin:0pt; padding-right:26.2pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=right>(17.6%)</P>
</TD><TD valign=top width=125.333>&nbsp;</TD></TR>
</TABLE>
<P style="margin-top:0pt; margin-bottom:9pt; font-family:Times New Roman; font-size:9pt" align=justify><I><BR>
<BR></I></P>
<P style="margin:0pt; font-family:Times New Roman" align=center>20</P>
<P style="margin:0pt; font-family:Times New Roman"><BR></P>
<HR style="padding-top:7.2pt; padding-bottom:7.2pt" noshade size=1.333>
<P style="page-break-before:always; margin:0pt; font-family:Times New Roman" align=right><BR></P>
<P style="margin:0pt; font-family:Times New Roman"><BR></P>
<P style="margin-top:0pt; margin-bottom:10pt; font-family:Times New Roman" align=justify><I><BR>
<BR>
<BR></I></P>
<TABLE style="font-size:10pt" cellspacing=0 align=center></TABLE>
<P style="margin-top:10pt; margin-bottom:10pt; font-family:Times New Roman" align=justify>In the first nine months of 2005, research and development expenses increased by 8.6% compared to the first nine months of 2004, due to the negative impact of our effective U.S. dollar exchange rate and higher levels of investment in research and development activities.&nbsp;In addition, in the first nine months of 2005, research and development expenses included a $5 million one-time termination charge for two former executives recorded in the first quarter of 2005.&nbsp;As a percentage of net revenues, research and development expenses grew at a higher rate than our net revenues, increasing from 17.6% in the first nine months of 2004 up to 18.9% in the first nine months of 2005. </P>
<P style="margin-top:0pt; margin-bottom:10pt; font-family:Times New Roman" align=justify><I>Other income and expenses, net</I></P>
<TABLE style="font-size:10pt" cellspacing=0 align=center><TR><TD valign=top width=312.8>&nbsp;</TD><TD valign=top width=311.2 colspan=2><P style="margin:0pt; padding-bottom:3pt; line-height:11pt; font-family:Times New Roman; font-size:9pt; border-bottom:0.5pt solid #000000" align=center><B>Nine Months Ended</B></P>
</TD></TR>
<TR><TD valign=top width=312.8>&nbsp;</TD><TD valign=top width=149><P style="margin:0pt; padding-bottom:3pt; line-height:11pt; font-family:Times New Roman; font-size:9pt; border-bottom:0.5pt solid #000000" align=center><B>October 1, 2005</B></P>
</TD><TD valign=top width=162.2><P style="margin:0pt; padding-bottom:3pt; line-height:11pt; font-family:Times New Roman; font-size:9pt; border-bottom:0.5pt solid #000000" align=center><B>September 25, 2004</B></P>
</TD></TR>
<TR><TD valign=top width=312.8>&nbsp;</TD><TD valign=top width=311.2 colspan=2><P style="margin-top:0pt; margin-bottom:4.5pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=center><B>(unaudited, in $ millions)</B></P>
</TD></TR>
<TR><TD style="background-color:#DFDFDF" valign=top width=312.8><P style="margin:0pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=justify>Research and development funding</P>
</TD><TD style="background-color:#DFDFDF" valign=top width=149><P style="margin:0pt; padding-right:37.75pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=right>47</P>
</TD><TD style="background-color:#DFDFDF" valign=top width=162.2><P style="margin:0pt; padding-right:37.75pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=right>&nbsp;37</P>
</TD></TR>
<TR><TD valign=top width=312.8><P style="margin:0pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=justify>Start-up costs</P>
</TD><TD valign=top width=149><P style="margin:0pt; padding-right:37.75pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=right>(46)</P>
</TD><TD valign=top width=162.2><P style="margin:0pt; padding-right:37.75pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=right>&nbsp;(45)</P>
</TD></TR>
<TR><TD style="background-color:#DFDFDF" valign=top width=312.8><P style="margin:0pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=justify>Exchange gain (loss), net</P>
</TD><TD style="background-color:#DFDFDF" valign=top width=149><P style="margin:0pt; padding-right:37.75pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=right>4</P>
</TD><TD style="background-color:#DFDFDF" valign=top width=162.2><P style="margin:0pt; padding-right:37.75pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=right>&nbsp;19</P>
</TD></TR>
<TR><TD valign=top width=312.8><P style="margin:0pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=justify>Patent claim costs</P>
</TD><TD valign=top width=149><P style="margin:0pt; padding-right:37.75pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=right>(16)</P>
</TD><TD valign=top width=162.2><P style="margin:0pt; padding-right:37.75pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=right>&nbsp;(21)</P>
</TD></TR>
<TR><TD style="background-color:#DFDFDF" valign=top width=312.8><P style="margin:0pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=justify>Gain on sale of non-current assets</P>
</TD><TD style="background-color:#DFDFDF" valign=top width=149><P style="margin:0pt; padding-right:37.75pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=right>4</P>
</TD><TD style="background-color:#DFDFDF" valign=top width=162.2><P style="margin:0pt; padding-right:37.75pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=right>&nbsp;6</P>
</TD></TR>
<TR><TD valign=top width=312.8><P style="margin:0pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=justify>Other, net</P>
</TD><TD valign=top width=149><P style="margin:0pt; padding-right:37.75pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=right>(4)</P>
</TD><TD valign=top width=162.2><P style="margin:0pt; padding-right:37.75pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=right>&nbsp;(9)</P>
</TD></TR>
<TR><TD style="background-color:#DFDFDF" valign=top width=312.8><P style="margin:0pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=justify><B>Other income and expenses, net</B></P>
</TD><TD style="background-color:#DFDFDF" valign=top width=149><P style="margin:0pt; padding-right:37.75pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=right><B>(11)</B></P>
</TD><TD style="background-color:#DFDFDF" valign=top width=162.2><P style="margin:0pt; padding-right:37.75pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=right><B>&nbsp;(13)</B></P>
</TD></TR>
<TR><TD valign=top width=312.8><P style="margin:0pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=justify>As a percentage of net revenues</P>
</TD><TD valign=top width=149><P style="margin:0pt; padding-right:37.75pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=right>(0.2%)</P>
</TD><TD valign=top width=162.2><P style="margin:0pt; padding-right:37.75pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=right>&nbsp;(0.2%)</P>
</TD></TR>
</TABLE>
<P style="margin-top:10pt; margin-bottom:10pt; font-family:Times New Roman" align=justify>&#147;Other income and expenses, net&#148; resulted in an expense of $11 million in the first nine months of 2005, compared to an expense of $13 million in the first nine months of 2004.&nbsp;The main variations were the increase of research and development funding and the decrease of the net exchange gains related to transactions not designated as cash flow hedge denominated in foreign currencies.&nbsp;Start-up costs in the first nine months of 2005 were related to our 150-mm fab expansion in Singapore and the conversion to 200-mm fab in Agrate (Italy) and build-up of our 300-mm fab in Catania (Italy).&nbsp;Patent claim costs included costs associated with several ongoing litigations and claims.&nbsp;Patent claim costs are categorized either as patent litigation costs or pre-litigation costs, amounting in the first nine months of 2005 to $11 million and $5 million, respectively.&nbsp;In the first nine months of 2005, t
he net gain on sale of non-current assets consisted of a gain of $6 million for the sale of our share in Upek Inc., and a loss of $2 million from the sale of equipment.&nbsp;In the first nine months of 2004, it mainly consisted of a gain of $6 million on the sale of certain financial assets.&nbsp;The net charge of $4 million for miscellaneous charges for the first nine months of 2005 included $4 million for a one-time contribution to a non-profitable charitable institution as decided by our Supervisory Board. </P>
<P style="margin-top:0pt; margin-bottom:10pt; font-family:Times New Roman" align=justify><I>Impairment, restructuring charges and other related closure costs</I></P>
<TABLE style="font-size:10pt" cellspacing=0 align=center><TR><TD valign=top width=330.333>&nbsp;</TD><TD valign=top width=293.667 colspan=2><P style="margin:0pt; padding-bottom:3pt; line-height:11pt; font-family:Times New Roman; font-size:9pt; border-bottom:0.5pt solid #000000" align=center><B>Nine Months Ended</B></P>
</TD></TR>
<TR><TD valign=top width=330.333>&nbsp;</TD><TD valign=top width=146.8><P style="margin:0pt; padding-bottom:3pt; line-height:11pt; font-family:Times New Roman; font-size:9pt; border-bottom:0.5pt solid #000000" align=center><B>October 1, 2005</B></P>
</TD><TD valign=top width=146.867><P style="margin:0pt; padding-bottom:3pt; line-height:11pt; font-family:Times New Roman; font-size:9pt; border-bottom:0.5pt solid #000000" align=center><B>September 25, 2004</B></P>
</TD></TR>
<TR><TD valign=top width=330.333>&nbsp;</TD><TD valign=top width=293.667 colspan=2><P style="margin-top:0pt; margin-bottom:4.5pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=center><B>(unaudited, in $ millions)</B></P>
</TD></TR>
<TR><TD style="background-color:#DFDFDF" valign=top width=330.333><P style="margin:0pt; line-height:11pt; font-family:Times New Roman; font-size:9pt">Impairment, restructuring charges and other related closure costs</P>
</TD><TD style="background-color:#DFDFDF" valign=top width=146.8><P style="margin:0pt; padding-right:30.6pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=right>(113)</P>
</TD><TD style="background-color:#DFDFDF" valign=top width=146.867><P style="margin:0pt; padding-right:30.6pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=right>(57)</P>
</TD></TR>
<TR><TD valign=top width=330.333><P style="margin:0pt; line-height:11pt; font-family:Times New Roman; font-size:9pt">As a percentage of net revenues</P>
</TD><TD valign=top width=146.8><P style="margin:0pt; padding-right:30.6pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=right>(1.7%)</P>
</TD><TD valign=top width=146.867><P style="margin:0pt; padding-right:30.6pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=right>(0.9%)</P>
</TD></TR>
</TABLE>
<P style="margin-top:10pt; margin-bottom:10pt; font-family:Times New Roman" align=justify>In the first nine months of 2005, we recorded impairment, restructuring charges and other related closure costs of $113 million.&nbsp;This expense was mainly composed of:</P>
<P style="margin-top:0pt; margin-bottom:-12pt; padding-left:36pt; text-indent:-36pt; font-family:Symbol" align=justify>&#183;</P>
<P style="margin-top:0pt; margin-bottom:10pt; padding-left:36pt; font-family:Symbol" align=justify><FONT FACE="Times New Roman">Our new restructuring plan announced in May 2005, which resulted in total charges of $22 million mainly for involuntary and voluntary employee termination benefits; the total cost of this restructuring plan is estimated to be in a range of between $100 and $130 million and its completion is expected for mid-2006;</FONT></P>
<P style="margin-top:0pt; margin-bottom:-12pt; padding-left:36pt; text-indent:-36pt; font-family:Symbol" align=justify>&#183;</P>
<P style="margin-top:0pt; margin-bottom:10pt; padding-left:36pt; font-family:Symbol" align=justify><FONT FACE="Times New Roman">Our restructuring and reorganization activities initiated in the first quarter of 2005, which generated a total charge of impairment on goodwill and other intangible assets of $63 million and $8&nbsp;million for restructuring and other related closure costs; this restructuring plan was fully completed in the second quarter of 2005;</FONT></P>
<P style="margin-top:0pt; margin-bottom:-12pt; padding-left:36pt; text-indent:-36pt; font-family:Symbol" align=justify>&#183;</P>
<P style="margin-top:0pt; margin-bottom:10pt; padding-left:36pt; font-family:Symbol" align=justify><FONT FACE="Times New Roman">Our
 ongoing 2003 restructuring plan and related manufacturing initiatives generated
 restructuring charges of approximately $19 million.&nbsp;As of October 1, 2005,
 we have incurred $300 million of the total expected approximate $350 million
 in pre-tax charges in connection with our restructuring plan, which was announced
 in October 2003.&nbsp;We expect to incur the balance in the coming quarters,
 somewhat later than anticipated due to delays in customers&#146; qualifications,
 and to complete the plan by mid-2006; and</FONT></P>
<P style="margin-top:0pt; margin-bottom:10pt; padding-left:36pt; text-indent:-36pt; font-family:Times New Roman" align=justify><BR>
<BR></P>
<P style="margin:0pt; font-family:Times New Roman" align=center>21</P>
<P style="margin:0pt; font-family:Times New Roman"><BR></P>
<HR style="padding-top:7.2pt; padding-bottom:7.2pt" noshade size=1.333>
<P style="page-break-before:always; margin:0pt; font-family:Times New Roman" align=right><BR></P>
<P style="margin:0pt; font-family:Times New Roman"><BR></P>
<P style="margin-top:0pt; margin-bottom:10pt; padding-left:36pt; font-family:Times New Roman" align=justify>&nbsp;</P>
<P style="margin-top:0pt; margin-bottom:-12pt; padding-left:36pt; text-indent:-36pt; font-family:Symbol" align=justify>&#183;</P>
<P style="margin-top:0pt; margin-bottom:10pt; padding-left:36pt; font-family:Symbol" align=justify><FONT FACE="Times New Roman">Our annual impairment review of goodwill and intangible assets that resulted in a charge of $1&nbsp;million.</FONT></P>
<P style="margin-top:0pt; margin-bottom:10pt; font-family:Times New Roman" align=justify>In the first nine months of 2004, we incurred $57 million of impairment, restructuring charges and other related closure costs mainly related to our 2003 restructuring plan. </P>
<P style="margin-top:0pt; margin-bottom:10pt; font-family:Times New Roman" align=justify>See Note 7 to our Unaudited Interim Consolidated Financial Statements. </P>
<P style="margin-top:0pt; margin-bottom:10pt; font-family:Times New Roman" align=justify><I>Operating
  income</I></P>
<TABLE style="font-size:10pt" cellspacing=0 align=center><TR><TD valign=top width=322.733>&nbsp;</TD><TD valign=top width=301.267 colspan=2><P style="margin:0pt; padding-right:-1.8pt; padding-bottom:3pt; line-height:11pt; font-family:Times New Roman; font-size:9pt; border-bottom:0.5pt solid #000000" align=center><B>Nine Months Ended</B></P>
</TD></TR>
<TR><TD valign=top width=322.733>&nbsp;</TD><TD valign=top width=156.867><P style="margin:0pt; padding-bottom:3pt; line-height:11pt; font-family:Times New Roman; font-size:9pt; border-bottom:0.5pt solid #000000" align=center><B>October 1, 2005</B></P>
</TD><TD valign=top width=144.4><P style="margin:0pt; padding-bottom:3pt; line-height:11pt; font-family:Times New Roman; font-size:9pt; border-bottom:0.5pt solid #000000" align=center><B>September 25, 2004</B></P>
</TD></TR>
<TR><TD valign=top width=322.733>&nbsp;</TD><TD valign=top width=301.267 colspan=2><P style="margin-top:0pt; margin-bottom:4.5pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=center><B>(unaudited, in $ millions)</B></P>
</TD></TR>
<TR><TD style="background-color:#DFDFDF" valign=top width=322.733><P style="margin:0pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=justify>Operating
        income</P>
</TD><TD style="background-color:#DFDFDF" valign=top width=156.867><P style="margin:0pt; padding-right:34.3pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=right>47</P>
</TD><TD style="background-color:#DFDFDF" valign=top width=144.4><P style="margin:0pt; padding-right:34.3pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=right>473</P>
</TD></TR>
<TR><TD valign=top width=322.733><P style="margin:0pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=justify>As a percentage of net revenues</P>
</TD><TD valign=top width=156.867><P style="margin:0pt; padding-right:34.3pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=right>0.7%</P>
</TD><TD valign=top width=144.4><P style="margin:0pt; padding-right:34.3pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=right>7.4%</P>
</TD></TR>
</TABLE>
<P style="margin-top:10pt; margin-bottom:10pt; font-family:Times New Roman" align=justify>Our operating income of $473 million in the first nine months of 2004 decreased to operating income of $47 million in the first nine months of 2005, due to the factors impacting our profitability as more fully described above, see &#147;<I>Business Overview</I>&#148;. </P>
<P style="margin-top:0pt; margin-bottom:10pt; font-family:Times New Roman" align=justify>In the first nine months of 2005, ASG registered operating income of $218 million, significantly decreasing from $373 million the first nine months of 2004, as improved sales volume was insufficient to compensate for strong declines in selling prices.&nbsp;MLD operating income decreased to $204 million compared to $314 million in the first nine months of 2004 mainly due to pricing pressure.&nbsp;In the first nine months of 2005, MPG registered an operating loss of $145 million compared to operating income of $40 million in the first nine months of 2004, mainly due to the significant negative price impact on the sales.&nbsp;All the groups were negatively impacted by our effective U.S. dollar exchange rate and increased operating expenses.</P>
<P style="margin-top:0pt; margin-bottom:10pt; font-family:Times New Roman" align=justify><I>Interest income (expense), net</I></P>
<TABLE style="font-size:10pt" cellspacing=0 align=center><TR><TD valign=top width=319.267>&nbsp;</TD><TD valign=top width=304.733 colspan=2><P style="margin:0pt; padding-bottom:3pt; line-height:11pt; font-family:Times New Roman; font-size:9pt; border-bottom:0.5pt solid #000000" align=center><B>Nine Months Ended</B></P>
</TD></TR>
<TR><TD valign=top width=319.267>&nbsp;</TD><TD valign=top width=155.133><P style="margin:0pt; padding-bottom:3pt; line-height:11pt; font-family:Times New Roman; font-size:9pt; border-bottom:0.5pt solid #000000" align=center><B>October 1, 2005</B></P>
</TD><TD valign=top width=149.6><P style="margin:0pt; padding-bottom:3pt; line-height:11pt; font-family:Times New Roman; font-size:9pt; border-bottom:0.5pt solid #000000" align=center><B>September 25, 2004</B></P>
</TD></TR>
<TR><TD valign=top width=319.267>&nbsp;</TD><TD valign=top width=304.733 colspan=2><P style="margin-top:0pt; margin-bottom:4.5pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=center><B>(unaudited, in $ millions)</B></P>
</TD></TR>
<TR><TD style="background-color:#DFDFDF" valign=top width=319.267><P style="margin:0pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=justify>Interest income (expense), net</P>
</TD><TD style="background-color:#DFDFDF" valign=top width=155.133><P style="margin:0pt; padding-right:7.15pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=center>23</P>
</TD><TD style="background-color:#DFDFDF" valign=top width=149.6><P style="margin:0pt; padding-right:7.15pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=center>(8)</P>
</TD></TR>
</TABLE>
<P style="margin-top:10pt; margin-bottom:10pt; font-family:Times New Roman" align=justify>The interest expense of $8 million for the first nine months of 2004 translated into an interest income of $23 million recorded in the first nine months of 2005, reflecting the decrease in interest expense due to the repurchases of our 2010 Bonds and our early redemption of the 2009 LYONs that occurred in 2004 as well as the increase in the interest receivable on our available cash due to rising interest rates. </P>
<P style="margin-top:0pt; margin-bottom:10pt; font-family:Times New Roman" align=justify><I>Loss on equity investments</I></P>
<TABLE style="font-size:10pt" cellspacing=0 align=center><TR><TD valign=top width=310.8>&nbsp;</TD><TD valign=top width=296.733 colspan=2><P style="margin:0pt; padding-bottom:3pt; line-height:11pt; font-family:Times New Roman; font-size:9pt; border-bottom:0.5pt solid #000000" align=center><B>Nine Months Ended</B></P>
</TD></TR>
<TR><TD valign=top width=310.8>&nbsp;</TD><TD valign=top width=151.067><P style="margin:0pt; padding-bottom:3pt; line-height:11pt; font-family:Times New Roman; font-size:9pt; border-bottom:0.5pt solid #000000" align=center><B>October 1, 2005</B></P>
</TD><TD valign=top width=145.667><P style="margin:0pt; padding-bottom:3pt; line-height:11pt; font-family:Times New Roman; font-size:9pt; border-bottom:0.5pt solid #000000" align=center><B>September 25, 2004</B></P>
</TD></TR>
<TR><TD valign=top width=310.8>&nbsp;</TD><TD valign=top width=296.733 colspan=2><P style="margin-top:0pt; margin-bottom:4.5pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=center><B>(unaudited, in $ millions)</B></P>
</TD></TR>
<TR><TD style="background-color:#DFDFDF" valign=top width=310.8><P style="margin:0pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=justify>Loss on equity investments</P>
</TD><TD style="background-color:#DFDFDF" valign=top width=151.067><P style="margin:0pt; padding-right:7.15pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=center>(2)</P>
</TD><TD style="background-color:#DFDFDF" valign=top width=145.667><P style="margin:0pt; padding-right:7.15pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=center>(2)</P>
</TD></TR>
</TABLE>
<P style="margin-top:10pt; margin-bottom:10pt; font-family:Times New Roman" align=justify>The loss in the third quarter of 2005 is related to our investment as minority shareholder in our joint venture in China with Hynix Semiconductor Inc., which is in a start-up phase.&nbsp;In the third quarter of 2004, a loss of $2 million was accrued in relation to our investment in SuperH Inc., the joint venture we formed with Renesas, Ltd., which has subsequently been terminated. </P>
<P style="margin-top:10pt; margin-bottom:10pt; font-family:Times New Roman" align=justify><BR>
<BR></P>
<P style="margin:0pt; font-family:Times New Roman" align=center>22</P>
<P style="margin:0pt; font-family:Times New Roman"><BR></P>
<HR style="padding-top:7.2pt; padding-bottom:7.2pt" noshade size=1.333>
<P style="page-break-before:always; margin:0pt; font-family:Times New Roman" align=right><BR></P>
<P style="margin:0pt; font-family:Times New Roman"><BR></P>
<P style="margin-top:0pt; margin-bottom:10pt; font-family:Times New Roman" align=justify><I>Loss on extinguishment of convertible debt</I></P>
<TABLE style="font-size:10pt" cellspacing=0 align=center><TR><TD valign=top width=223.733>&nbsp;</TD><TD valign=top width=392.6 colspan=2><P style="margin:0pt; padding-bottom:3pt; line-height:11pt; font-family:Times New Roman; font-size:9pt; border-bottom:0.5pt solid #000000" align=center><B>Nine Months Ended</B></P>
</TD></TR>
<TR><TD valign=top width=223.733>&nbsp;</TD><TD valign=top width=196.267><P style="margin:0pt; padding-bottom:3pt; line-height:11pt; font-family:Times New Roman; font-size:9pt; border-bottom:0.5pt solid #000000" align=center><B>October 1, 2005</B></P>
</TD><TD valign=top width=196.333><P style="margin:0pt; padding-bottom:3pt; line-height:11pt; font-family:Times New Roman; font-size:9pt; border-bottom:0.5pt solid #000000" align=center><B>September 25, 2004</B></P>
</TD></TR>
<TR><TD valign=top width=223.733>&nbsp;</TD><TD valign=top width=196.267>&nbsp;</TD><TD valign=top width=196.333>&nbsp;</TD></TR>
<TR><TD style="background-color:#DFDFDF" valign=top width=223.733><P style="margin:0pt; line-height:11pt; font-family:Times New Roman; font-size:9pt">Loss on extinguishment of convertible debt</P>
</TD><TD style="background-color:#DFDFDF" valign=top width=196.267><P style="margin:0pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=center>&#151;</P>
</TD><TD style="background-color:#DFDFDF" valign=top width=196.333><P style="margin:0pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=center>(4)</P>
</TD></TR>
</TABLE>
<P style="margin-top:10pt; margin-bottom:10pt; font-family:Times New Roman" align=justify>We did not incur any loss on extinguishment of convertible debt in the first nine months of 2005.&nbsp;In the first nine months of 2004, a loss of $4 million was recorded in relation to the repurchase of our 2010 Bonds.</P>
<P style="margin-top:0pt; margin-bottom:10pt; font-family:Times New Roman" align=justify><I>Income tax benefit (expense)</I></P>
<TABLE style="font-size:10pt" cellspacing=0 align=center><TR><TD valign=top width=310.8 colspan=2>&nbsp;</TD><TD valign=top width=297.667 colspan=3><P style="margin:0pt; padding-bottom:3pt; line-height:11pt; font-family:Times New Roman; font-size:9pt; border-bottom:0.5pt solid #000000" align=center><B>Nine Months Ended</B></P>
</TD></TR>
<TR><TD valign=top width=0.933>&nbsp;</TD><TD valign=top width=309.867>&nbsp;</TD><TD valign=top width=151.067><P style="margin:0pt; padding-bottom:3pt; line-height:11pt; font-family:Times New Roman; font-size:9pt; border-bottom:0.5pt solid #000000" align=center><B>October 1, 2005</B></P>
</TD><TD valign=top width=146.6 colspan=2><P style="margin:0pt; padding-bottom:3pt; line-height:11pt; font-family:Times New Roman; font-size:9pt; border-bottom:0.5pt solid #000000" align=center><B>September 25, 2004</B></P>
</TD></TR>
<TR><TD valign=top width=0.933>&nbsp;</TD><TD valign=top width=309.867>&nbsp;</TD><TD valign=top width=297.667 colspan=3><P style="margin-top:0pt; margin-bottom:4.5pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=center><B>(unaudited, in $ millions)</B></P>
</TD></TR>
<TR><TD valign=top width=0.933>&nbsp;</TD><TD style="background-color:#DFDFDF" valign=top width=309.867><P style="margin:0pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=justify>Income tax benefit (expense)</P>
</TD><TD style="background-color:#DFDFDF" valign=top width=151.067><P style="margin:0pt; padding-right:7.15pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=center>17</P>
</TD><TD style="background-color:#DFDFDF" valign=top width=146.6 colspan=2><P style="margin:0pt; padding-right:8.55pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=center>(42)</P>
</TD></TR>
</TABLE>
<P style="margin-top:10pt; margin-bottom:10pt; font-family:Times New Roman" align=justify>During the first nine months of 2005, we incurred an income tax benefit of $17 million, which included, in addition to the current tax provision, the reversal of certain tax provisions in the first and second quarters of 2005 for about $10 million following the conclusion of an advanced pricing agreement for the period 2001 through 2007 with the United States Internal Revenue Service and an income tax benefit of $18 million in the United States pursuant to the application of the ETI rules.&nbsp;Our tax rate is variable and depends on changes in the level of operating income 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.&nbsp;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 ra
te could be different in future quarters and may increase in the coming years. </P>
<P style="margin-top:0pt; margin-bottom:10pt; font-family:Times New Roman" align=justify><I>Net income</I></P>
<TABLE style="font-size:10pt" cellspacing=0 align=center>
 <TR>
 <TD valign=top width=303.267>&nbsp;</TD>
 <TD valign=top width=308.733 colspan=2><P style="margin:0pt; padding-bottom:3pt; line-height:11pt; font-family:Times New Roman; font-size:9pt; border-bottom:0.5pt solid #000000" align=center><B>Nine
 Months Ended</B></P></TD>
 </TR>
 <TR>
 <TD valign=top width=303.267>&nbsp;</TD>
 <TD valign=top width=158.133><P style="margin:0pt; padding-bottom:3pt; line-height:11pt; font-family:Times New Roman; font-size:9pt; border-bottom:0.5pt solid #000000" align=center><B>October
 1, 2005</B></P></TD>
 <TD valign=top width=150.6><P style="margin:0pt; padding-bottom:3pt; line-height:11pt; font-family:Times New Roman; font-size:9pt; border-bottom:0.5pt solid #000000" align=center><B>September
 25, 2004</B></P></TD>
 </TR>
 <TR>
 <TD valign=top width=303.267>&nbsp;</TD>
 <TD valign=top width=308.733 colspan=2><P style="margin-top:0pt; margin-bottom:4.5pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=center><B>(unaudited,
 in $ millions)</B></P></TD>
 </TR>
 <TR>
 <TD style="background-color:#DFDFDF" valign=top width=303.267><P style="margin:0pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=justify>Net
 income</P></TD>
 <TD style="background-color:#DFDFDF" valign=top width=158.133><P style="margin:0pt; padding-right:7.15pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=center>83</P></TD>
 <TD style="background-color:#DFDFDF" valign=top width=150.6><P style="margin:0pt; padding-right:7.15pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=center>414</P></TD>
 </TR>
 <TR>
 <TD valign=top width=303.267><P style="margin:0pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=justify>As
 a percentage of net revenues</P></TD>
 <TD valign=top width=158.133><P style="margin:0pt; padding-right:7.15pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=center>1.3%</P></TD>
 <TD valign=top width=150.6><P style="margin:0pt; padding-right:7.15pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=center>6.4%</P></TD>
 </TR>
</TABLE>
<P style="margin-top:10pt; margin-bottom:10pt; font-family:Times New Roman" align=justify>For the first nine months of 2005, we reported net income of $83 million, compared to net income of $414&nbsp;million in the first nine months of 2004.&nbsp;Basic and diluted loss per share for the first nine months of 2005 was $0.09 per share compared to basic and diluted earnings of $0.46 and $0.45 per share, respectively, for the first nine months of 2004. </P>
<P style="margin-top:0pt; margin-bottom:10pt; font-family:Times New Roman"><B>Related-Party Transactions</B></P>
<P style="margin-top:0pt; margin-bottom:10pt; font-family:Times New Roman" align=justify>On February 27, 2005, the board of directors of France Telecom appointed Didier Lombard, member of our Supervisory Board, as its Chairman and CEO.&nbsp;France Telecom and its subsidiaries supply certain services to our company.</P>
<P style="margin-top:0pt; margin-bottom:10pt; font-family:Times New Roman" align=justify>At
 a meeting on April 26, 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.&nbsp;The Supervisory
 Board noted the Managing Board&#146;s assessment of the positive commercial
 benefits of such contract.&nbsp;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.</P>
<P style="margin-top:0pt; margin-bottom:10pt; font-family:Times New Roman" align=justify>At
  a meeting on July 26, 2005, the Managing Board informed the Supervisory Board
  about a development and license agreement to be concluded with Quadrics Limited,
  a company owned by Alenia Aeronautica that is in turn owned by Finmeccanica.
  The Supervisory Board noted that the contract was concluded in the ordinary
  course of business at normal conditions and that it was considered mutually
  beneficial for Quadrics Limited and us. </P>
<P style="margin-top:0pt; margin-bottom:10pt; font-family:Times New Roman"><B>Impact of Changes in Exchange Rates</B></P>
<P style="margin-top:0pt; margin-bottom:10pt; font-family:Times New Roman" align=justify>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. </P>
<P style="margin-top:0pt; margin-bottom:10pt; font-family:Times New Roman" align=justify><BR>
<BR></P>
<P style="margin:0pt; font-family:Times New Roman" align=center>23</P>
<P style="margin:0pt; font-family:Times New Roman"><BR></P>
<HR style="padding-top:7.2pt; padding-bottom:7.2pt" noshade size=1.333>
<P style="page-break-before:always; margin:0pt; font-family:Times New Roman" align=right><BR></P>
<P style="margin:0pt; font-family:Times New Roman"><BR></P>
<P style="margin-top:0pt; margin-bottom:10pt; font-family:Times New Roman" align=justify>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.&nbsp;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.&nbsp;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.&nbsp;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 i
n U.S. dollars. </P>
<P style="margin-top:0pt; margin-bottom:10pt; font-family:Times New Roman" align=justify>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.&nbsp;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.&nbsp;In the first nine
 months of 2005, the average rate of the U.S. dollar declined in value, compared
 to the same period in 2004, particularly against the euro, causing us to report
 higher expenses and negatively impacting both our gross margin and operating
 income. </P>
<P style="margin-top:0pt; margin-bottom:10pt; font-family:Times New Roman" align=justify>Our
 Consolidated Statement of Income for the first nine months of 2005 includes
 income and expense items translated at the average exchange rate for the period.&nbsp;Our
 effective average rate of the euro to the U.S. dollar was &#8364;1.00 for $1.30
 in the first nine months of 2005 and each of the first, second and third quarters
 of 2005, compared to &#8364;1.00 for $1.21 in the third quarter of 2004 and
 &#8364;1.00 for $1.23 in the first nine months of 2004. These effective exchange
 rates reflect the actual exchange rates combined with the impact of hedging
 contracts maturing in the period. </P>
<P style="margin-top:0pt; margin-bottom:10pt; font-family:Times New Roman" align=justify>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.&nbsp;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.&nbsp;Moreover, 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.&nbsp;As of October 1, 2005, these hedging contracts represent a
 deferred loss of $7 million after tax, registered in other comprehensive income
 in shareholders&#146; equity, compared to a deferred loss of $58 million after
 tax as of July 2, 2005 and a deferred profit of $59 million as of December 31,
 2004. As of October 1, 2005, the outstanding hedged amounts to cover manufacturing
 costs is &#8364;330 million and to cover operating expenses is &#8364;240 million,
 both at an average rate of about $1.22 and $1.23 per euro, respectively, maturing
 over the period from October 2005 to March 2006. Our hedging policy is not intended
 to cover the full exposure.&nbsp;In addition, we may not predict in a timely
 fashion the amount of future transactions in the volatile industry environment.
 Consequently, our results of operations have been and may continue to be impacted
 by fluctuations in exchange rates. </P>
<P style="margin-top:0pt; margin-bottom:10pt; font-family:Times New Roman" align=justify>Our management strategies to reduce exchange rate risks are intended to mitigate the impact of exchange rate fluctuations.&nbsp;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 U.S. dollar increases, we will record losses in connection with the loss in value of the remaining hedging instruments at the time.&nbsp;As a result of losses incurred in respect of hedging contracts in the first nine months of 2005, we recorded charges of $50 million to cost of sales, of $18 million to research and development expenses, and of $5 million to selling, general and administrative expenses. </P>
<P style="margin-top:0pt; margin-bottom:10pt; font-family:Times New Roman" align=justify>Assets and liabilities of subsidiaries are, for consolidation purposes, translated into U.S. dollars at the period-end exchange rate.&nbsp;Income and expenses are translated at the average exchange rate for the period.&nbsp;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 euros as their functional currency.&nbsp;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.&nbsp;As of October 1, 2005, our outstanding indebtedness was denominated principally in U.S. dollars and, to a limited extent, in euros and in Singapore dollars. </P>
<P style="margin-top:0pt; margin-bottom:10pt; font-family:Times New Roman" align=justify><BR>
<BR></P>
<P style="margin:0pt; font-family:Times New Roman" align=center>24</P>
<P style="margin:0pt; font-family:Times New Roman"><BR></P>
<HR style="padding-top:7.2pt; padding-bottom:7.2pt" noshade size=1.333>
<P style="page-break-before:always; margin:0pt; font-family:Times New Roman" align=right><BR></P>
<P style="margin:0pt; font-family:Times New Roman"><BR></P>
<P style="margin-top:0pt; margin-bottom:10pt; font-family:Times New Roman" align=justify>For a more detailed discussion, see &#147;Item 3.&nbsp;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. </P>
<P style="margin-top:0pt; margin-bottom:10pt; font-family:Times New Roman"><B>Liquidity and Capital Resources</B></P>
<P style="margin-top:0pt; margin-bottom:10pt; font-family:Times New Roman" align=justify>Treasury
 activities are regulated by our policies, which define procedures, objectives
 and controls.&nbsp;The policies focus on the management of our financial risk
 in terms of exposure to currency rates and interest rates.&nbsp;Most treasury
 activities are centralized, with any local treasury activities subject to oversight
 from our head treasury office.&nbsp;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.&nbsp;Marginal amounts are held in other currencies.&nbsp;See &#147;Item
 11.&nbsp;Quantitative and Qualitative Disclosures about Market Risk&#148; in
 our Form 20-F.&nbsp;As of October 1, 2005, there had been no material changes
 in foreign currency operations and in our hedging transactions policies from
 those disclosed in our Form 20-F. </P>
<P style="margin-top:0pt; margin-bottom:10pt; font-family:Times New Roman" align=justify>As of October 1, 2005, cash and cash equivalents totaled $1,242 million, compared to $1,950 million as of December 31, 2004, and marketable securities totaled $525 million as of October 1, 2005, compared to $0 million as of December 31, 2004.&nbsp;Our available cash decreased in the first nine months of 2005 due to the investment in marketable securities for $525 million, to $20 million negative net operating cash flow and to the payment of dividends of $107 million.&nbsp;In the first nine months of 2005, we invested $525 million in credit-linked deposits issued by several primary banks in order to maximize the return on available cash.&nbsp;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 defau
lt swap of the credit-linked deposit.&nbsp;We determined that this derivative element had no material impact on our interim Consolidated Financial Statements as of October 1, 2005.&nbsp;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.&nbsp;Interest is payable through the final maturity of these instruments scheduled to occur by December&nbsp;31,&nbsp;2005, unless suspended by credit default of the reference debt.&nbsp;Additionally, the carrying value of the instruments depends on the non-default of the reference debt.&nbsp;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.&nbsp;Changes in the instruments adopted to invest our liquidity in future periods may significantly affect our interest income/expense net. </P>
<P style="margin-top:0pt; margin-bottom:10pt; font-family:Times New Roman"><B>Liquidity</B></P>
<P style="margin-top:0pt; margin-bottom:10pt; font-family:Times New Roman" align=justify>We maintain a significant cash position and a low debt to equity ratio, which provide us with adequate financial flexibility.&nbsp;As in the past, our cash management policy is to finance our investment needs mainly with net cash generated from operating activities. </P>
<P style="margin-top:0pt; margin-bottom:10pt; font-family:Times New Roman" align=justify><I>Net cash from operating activities</I>.&nbsp;The major source of cash during the first nine months of 2005 and in prior periods was cash provided by operating activities.&nbsp;Our net cash from operating activities totaled $1,243 million in the first nine months of 2005, compared to $1,697 million in the first nine months of 2004, a decrease due to the lower profitability level and more cash used by our assets and liabilities. </P>
<P style="margin-top:0pt; margin-bottom:10pt; font-family:Times New Roman" align=justify>Changes in our operating assets and liabilities resulted in net cash used of $363 million in the first nine months of 2005, compared to net cash used of $65 million in the first nine months of 2004.&nbsp;The main variations were due to the net cash used for inventory of $152 million and to a less favorable change in trade payables. </P>
<P style="margin-top:0pt; margin-bottom:10pt; font-family:Times New Roman" align=justify><I>Net
 cash used in investing activities</I>.&nbsp;Net cash used in investing activities
 was $1,788 million in the first nine months of 2005, compared to $2,724 million
 in the first nine months of 2004, due to the lower payments for purchase of
 tangible assets as well as the reduced investment in marketable securities.&nbsp;In
 the first nine months of 2005, payments for tangible assets were $1,211 million,
 significantly decreasing from the $1,627 million recorded in the first nine
 months of 2004.&nbsp;In the first nine months of 2005, purchases of marketable
 securities amounted to $525 million compared to $1,030 million in the first
 nine months of 2004.&nbsp;See &#147;<I>Financial Outlook</I>&#148; below. </P>
<P style="margin-top:0pt; margin-bottom:10pt; font-family:Times New Roman" align=justify><I>Net
 operating cash flow</I>.&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.&nbsp;</P>
<P style="margin-top:0pt; margin-bottom:10pt; font-family:Times New Roman" align=justify><BR>
<BR></P>
<P style="margin:0pt; font-family:Times New Roman" align=center>25</P>
<P style="margin:0pt; font-family:Times New Roman"><BR></P>
<HR style="padding-top:7.2pt; padding-bottom:7.2pt" noshade size=1.333>
<P style="page-break-before:always; margin:0pt; font-family:Times New Roman" align=right><BR></P>
<P style="margin:0pt; font-family:Times New Roman"><BR></P>
<P style="margin-top:0pt; margin-bottom:10pt; font-family:Times New Roman" align=justify>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.&nbsp;In addition, our definition of net operating cash flow may differ from definitions used by other companies.&nbsp;Net operating cash flow is determined as follows from our Unaudited Interim Consolidated Statements of Cash Flow:</P>
<TABLE style="font-size:10pt" cellspacing=0 align=center><TR><TD valign=top width=260.067>&nbsp;</TD><TD valign=top width=363.933 colspan=2><P style="margin:0pt; padding-bottom:3pt; line-height:11pt; font-family:Times New Roman; font-size:9pt; border-bottom:0.5pt solid #000000" align=center><B>Nine Months Ended</B></P>
</TD></TR>
<TR><TD valign=top width=260.067>&nbsp;</TD><TD valign=top width=181.933><P style="margin:0pt; padding-bottom:3pt; line-height:11pt; font-family:Times New Roman; font-size:9pt; border-bottom:0.5pt solid #000000" align=center><B>October 1, 2005</B></P>
</TD><TD valign=top width=182><P style="margin:0pt; padding-bottom:3pt; line-height:11pt; font-family:Times New Roman; font-size:9pt; border-bottom:0.5pt solid #000000" align=center><B>September 25, 2004</B></P>
</TD></TR>
<TR><TD valign=top width=260.067>&nbsp;</TD><TD valign=top width=363.933 colspan=2><P style="margin-top:0pt; margin-bottom:4.5pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=center><B>(unaudited, in $ millions)</B></P>
</TD></TR>
<TR><TD style="background-color:#DFDFDF" valign=top width=260.067><P style="margin:0pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=justify>Net cash from operating activities</P>
</TD><TD style="background-color:#DFDFDF" valign=top width=181.933><P style="margin:0pt; padding-right:41.7pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=right>1,243</P>
</TD><TD style="background-color:#DFDFDF" valign=top width=182><P style="margin:0pt; padding-right:41.7pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=right>&nbsp;1,697</P>
</TD></TR>
<TR><TD valign=top width=260.067><P style="margin:0pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=justify>Net cash used in investing activities</P>
</TD><TD valign=top width=181.933><P style="margin:0pt; padding-right:41.7pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=right>(1,788)</P>
</TD><TD valign=top width=182><P style="margin:0pt; padding-right:41.7pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=right>&nbsp;(2,724)</P>
</TD></TR>
<TR><TD style="background-color:#DFDFDF" valign=top width=260.067><P style="margin:0pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=justify>Payment for purchase of marketable securities</P>
</TD><TD style="background-color:#DFDFDF" valign=top width=181.933><P style="margin:0pt; padding-right:41.7pt; padding-bottom:3pt; line-height:11pt; font-family:Times New Roman; font-size:9pt; border-bottom:0.5pt solid #000000" align=right>525</P>
</TD><TD style="background-color:#DFDFDF" valign=top width=182><P style="margin:0pt; padding-right:41.7pt; padding-bottom:3pt; line-height:11pt; font-family:Times New Roman; font-size:9pt; border-bottom:0.5pt solid #000000" align=right>&nbsp;1,030</P>
</TD></TR>
<TR><TD valign=top width=260.067><P style="margin:0pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=justify><B>Net operating cash flow</B></P>
</TD><TD valign=top width=181.933><P style="margin:0pt; padding-right:41.7pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=right><B>(20)</B></P>
</TD><TD valign=top width=182><P style="margin:0pt; padding-right:41.7pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=right>&nbsp;<B>3</B></P>
</TD></TR>
</TABLE>
<P style="margin-top:10pt; margin-bottom:10pt; font-family:Times New Roman" align=justify>As a result of the decrease of the net cash from our operating activities, we generated negative net operating cash flow of $20 million in the first nine months of 2005, which is substantially in line with last year&#146;s result.&nbsp;However, our net operating cash flow improved sequentially from positive $23 million to positive $173 million in the third quarter of 2005, mainly due to increased profitability and the lower value of the payment for purchases of tangible assets. </P>
<P style="margin-top:0pt; margin-bottom:10pt; font-family:Times New Roman" align=justify><I>Net cash used in financing activities</I>.&nbsp;Net cash used in financing activities decreased to $144 million in the first nine months of 2005 compared to $1,368 million used in the first nine months of 2004, mainly due to the lower repayment of long-term debt amounting to $90 million in the first nine months of 2005 compared to $1,263 million in the first nine months of 2004, which represented the repurchase of our 2010 Bonds and 2009 Notes for a total cash amount of $1,263 million during the first nine months of 2004.&nbsp;The major item of cash used in financing activities in the first nine months of 2005 was the payment of the dividends amounting to $107 million, equivalent to the amount paid in 2004. </P>
<P style="margin-top:0pt; margin-bottom:10pt; font-family:Times New Roman"><B>Capital Resources</B></P>
<P style="margin-top:0pt; margin-bottom:10pt; font-family:Times New Roman" align=justify><I>Net financial position</I></P>
<P style="margin-top:0pt; margin-bottom:10pt; font-family:Times New Roman" align=justify>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).&nbsp;Net financial position is not a U.S. GAAP measure.&nbsp;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.&nbsp;The net financial position is determined as follows from our Unaudited Interim Consolidated Balance Sheet as of October 1, 2005:</P>
<TABLE style="font-size:10pt" cellspacing=0 align=center><TR><TD valign=top width=283.6>&nbsp;</TD><TD valign=top width=340.4 colspan=2><P style="margin:0pt; padding-bottom:3pt; line-height:11pt; font-family:Times New Roman; font-size:9pt; border-bottom:0.5pt solid #000000" align=center><B>As of</B></P>
</TD></TR>
<TR><TD valign=top width=283.6>&nbsp;</TD><TD valign=top width=170.2><P style="margin:0pt; padding-bottom:3pt; line-height:11pt; font-family:Times New Roman; font-size:9pt; border-bottom:0.5pt solid #000000" align=center><B>October 1, 2005<BR>
(unaudited)</B></P>
</TD><TD valign=top width=170.2><P style="margin:0pt; padding-bottom:3pt; line-height:11pt; font-family:Times New Roman; font-size:9pt; border-bottom:0.5pt solid #000000" align=center><B>December 31, 2004<BR>
(audited)</B></P>
</TD></TR>
<TR><TD valign=top width=283.6>&nbsp;</TD><TD valign=top width=340.4 colspan=2><P style="margin:0pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=center><B>(in $ millions)</B></P>
</TD></TR>
<TR><TD style="background-color:#DFDFDF" valign=top width=283.6><P style="margin:0pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=justify>Cash and cash equivalents</P>
</TD><TD style="background-color:#DFDFDF" valign=top width=170.2><P style="margin:0pt; padding-right:32.55pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=right>1,242</P>
</TD><TD style="background-color:#DFDFDF" valign=top width=170.2><P style="margin:0pt; padding-right:32.55pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=right>1,950</P>
</TD></TR>
<TR><TD valign=top width=283.6><P style="margin:0pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=justify>Marketable securities</P>
</TD><TD valign=top width=170.2><P style="margin:0pt; padding-right:32.55pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=right>525</P>
</TD><TD valign=top width=170.2><P style="margin:0pt; padding-right:32.55pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=right>---</P>
</TD></TR>
<TR><TD style="background-color:#DFDFDF" valign=top width=283.6><P style="margin-top:2.25pt; margin-bottom:2.25pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=justify><B>Total cash position</B></P>
</TD><TD style="background-color:#DFDFDF" valign=top width=170.2><P style="margin-top:2.25pt; margin-bottom:2.25pt; padding-right:32.55pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=right><B>1,767</B></P>
</TD><TD style="background-color:#DFDFDF" valign=top width=170.2><P style="margin-top:2.25pt; margin-bottom:2.25pt; padding-right:32.55pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=right><B>1,950</B></P>
</TD></TR>
<TR><TD valign=top width=283.6><P style="margin:0pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=justify>Bank overdrafts</P>
</TD><TD valign=top width=170.2><P style="margin:0pt; padding-right:32.55pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=right>(48)</P>
</TD><TD valign=top width=170.2><P style="margin:0pt; padding-right:32.55pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=right>(58)</P>
</TD></TR>
<TR><TD style="background-color:#DFDFDF" valign=top width=283.6><P style="margin:0pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=justify>Current portion of long-term debt</P>
</TD><TD style="background-color:#DFDFDF" valign=top width=170.2><P style="margin:0pt; padding-right:32.55pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=right>(1,527)</P>
</TD><TD style="background-color:#DFDFDF" valign=top width=170.2><P style="margin:0pt; padding-right:32.55pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=right>(133)</P>
</TD></TR>
<TR><TD valign=top width=283.6><P style="margin:0pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=justify>Long-term debt</P>
</TD><TD valign=top width=170.2><P style="margin:0pt; padding-right:32.55pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=right>(263)</P>
</TD><TD valign=top width=170.2><P style="margin:0pt; padding-right:32.55pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=right>(1,767)</P>
</TD></TR>
<TR><TD style="background-color:#DFDFDF" valign=top width=283.6><P style="margin-top:2.25pt; margin-bottom:2.25pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=justify><B>Total financial debt</B></P>
</TD><TD style="background-color:#DFDFDF" valign=top width=170.2><P style="margin-top:2.25pt; margin-bottom:2.25pt; padding-right:32.55pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=right><B>(1,838)</B></P>
</TD><TD style="background-color:#DFDFDF" valign=top width=170.2><P style="margin-top:2.25pt; margin-bottom:2.25pt; padding-right:32.55pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=right><B>(1,958)</B></P>
</TD></TR>
<TR><TD valign=top width=283.6><P style="margin-top:2.25pt; margin-bottom:2.25pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=justify><B>Net financial position</B></P>
</TD><TD valign=top width=170.2><P style="margin-top:2.25pt; margin-bottom:2.25pt; padding-right:32.55pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=right><B>(71)</B></P>
</TD><TD valign=top width=170.2><P style="margin-top:2.25pt; margin-bottom:2.25pt; padding-right:32.55pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=right><B>(8)</B></P>
</TD></TR>
</TABLE>
<P style="margin-top:10pt; margin-bottom:10pt; font-family:Times New Roman" align=justify>The
 net financial position (cash, cash equivalents and marketable securities net
 of total financial debt) as of October 1, 2005 was a net financial debt of $71
 million, compared to the net financial debt of $8 million as of December 31,
 2004.&nbsp;Such increase compared to December 2004 is mainly due to the $107
 million dividends payment.&nbsp;As of October 1, 2005, the aggregate amount
 of our long-term debt was $263 million, excluding the $1,379 million of our
 negative yield zero-coupon senior convertible bonds due 2013 (&#147;2013 Bonds&#148;)
 that were reclassified as &#147;current portion of long-term debt&#148; during
 the third quarter of 2005.&nbsp;Additionally, the aggregate amount of our available
 short-term credit facilities was approximately $1,921 million, under which $48
 million was used as of October 1, 2005.&nbsp;Our long-term financing instruments
 contain standard covenants, but do not impose minimum financial ratios or similar
 obligations on us. </P>
<P style="margin-top:10pt; margin-bottom:10pt; font-family:Times New Roman" align=justify><BR>
<BR></P>
<P style="margin:0pt; font-family:Times New Roman" align=center>26</P>
<P style="margin:0pt; font-family:Times New Roman"><BR></P>
<HR style="padding-top:7.2pt; padding-bottom:7.2pt" noshade size=1.333>
<P style="page-break-before:always; margin:0pt; font-family:Times New Roman" align=right><BR></P>
<P style="margin:0pt; font-family:Times New Roman"><BR></P>
<P style="margin-top:10pt; margin-bottom:10pt; font-family:Times New Roman" align=justify>&nbsp;</P>
<P style="margin-top:0pt; margin-bottom:10pt; font-family:Times New Roman" align=justify>As of October 1, 2005, we have the following credit ratings on our 2013 Bonds:</P>
<TABLE style="font-size:10pt" cellspacing=0 align=center><TR><TD valign=top width=283.6>&nbsp;</TD><TD valign=top width=170.2><P style="margin:0pt; padding-bottom:3pt; line-height:11pt; font-family:Times New Roman; font-size:9pt; border-bottom:0.5pt solid #000000" align=center><B>Moody&#146;s<BR>
Investors Service</B></P>
</TD><TD valign=bottom width=170.2><P style="margin:0pt; padding-bottom:3pt; line-height:11pt; font-family:Times New Roman; font-size:9pt; border-bottom:0.5pt solid #000000" align=center><B>Standard &amp; Poor&#146;s</B></P>
</TD></TR>
<TR><TD style="background-color:#DFDFDF" valign=top width=283.6><P style="margin:0pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=justify>Zero Coupon Senior Convertible Bonds due 2013</P>
</TD><TD style="background-color:#DFDFDF" valign=top width=170.2><P style="margin:0pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=center>A3</P>
</TD><TD style="background-color:#DFDFDF" valign=top width=170.2><P style="margin:0pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=center>A&#150;</P>
</TD></TR>
</TABLE>
<P style="margin-top:10pt; margin-bottom:10pt; font-family:Times New Roman" align=justify>On
 October 11, 2005, Moody&#146;s issued a credit report confirming the above rating
 and updating the outlook from &quot;stable&quot; to &#147;negative&#148;. </P>
<P style="margin-top:10pt; margin-bottom:10pt; font-family:Times New Roman" align=justify>In the event of a downgrade of these ratings, we believe we would continue to have access to sufficient capital resources. </P>
<P style="margin-top:0pt; margin-bottom:10pt; font-family:Times New Roman" align=justify><B><I>Contractual Obligations, Commercial Commitments and Contingencies</I></B></P>
<P style="margin-top:0pt; margin-bottom:10pt; font-family:Times New Roman" align=justify>Our contractual obligations, commercial commitments and contingencies as of October 1, 2005, and for each of the five years to come and thereafter, were as follows:</P>
<P style="margin-top:0pt; margin-bottom:10pt; font-family:Times New Roman" align=justify><BR></P>
<P style="margin-top:0pt; margin-bottom:10pt; font-family:Times New Roman" align=justify><BR></P>
<P style="margin-top:0pt; margin-bottom:10pt; font-family:Times New Roman" align=justify><BR></P>
<P style="margin-top:0pt; margin-bottom:10pt; font-family:Times New Roman" align=justify><B><BR>
<BR></B></P>
<P style="margin:0pt; font-family:Times New Roman" align=center>27</P>
<P style="margin:0pt; font-family:Times New Roman"><BR></P>
<HR style="padding-top:7.2pt; padding-bottom:7.2pt" noshade size=1.333>
<P style="page-break-before:always; margin:0pt; font-family:Times New Roman" align=right><BR></P>
<P style="margin:0pt; font-family:Times New Roman"><BR></P>
<P style="margin-top:0pt; margin-bottom:10pt; font-family:Times New Roman" align=justify><B><BR></B></P>
<TABLE style="font-size:10pt" cellspacing=0 align=center><TR><TD valign=top width=223.2 colspan=2>&nbsp;</TD><TD valign=top width=400.867 colspan=8><P style="margin:0pt; padding-bottom:3pt; line-height:11pt; font-family:Times New Roman; font-size:9pt; border-bottom:0.5pt solid #000000" align=center><B>Payments due by period<BR>
</B></P>
</TD></TR>
<TR><TD valign=top width=223.2 colspan=2>&nbsp;</TD><TD valign=top width=48><P style="margin:0pt; padding-bottom:3pt; line-height:11pt; font-family:Times New Roman; font-size:9pt; border-bottom:0.5pt solid #000000" align=center><B>Total</B></P>
</TD><TD valign=top width=48><P style="margin:0pt; padding-bottom:3pt; line-height:11pt; font-family:Times New Roman; font-size:9pt; border-bottom:0.5pt solid #000000" align=center><B>2005</B></P>
</TD><TD valign=top width=48><P style="margin:0pt; padding-bottom:3pt; line-height:11pt; font-family:Times New Roman; font-size:9pt; border-bottom:0.5pt solid #000000" align=center><B>2006</B></P>
</TD><TD valign=top width=48><P style="margin:0pt; padding-bottom:3pt; line-height:11pt; font-family:Times New Roman; font-size:9pt; border-bottom:0.5pt solid #000000" align=center><B>2007</B></P>
</TD><TD valign=top width=48><P style="margin:0pt; padding-bottom:3pt; line-height:11pt; font-family:Times New Roman; font-size:9pt; border-bottom:0.5pt solid #000000" align=center><B>2008</B></P>
</TD><TD valign=top width=48><P style="margin:0pt; padding-bottom:3pt; line-height:11pt; font-family:Times New Roman; font-size:9pt; border-bottom:0.5pt solid #000000" align=center><B>2009</B></P>
</TD><TD valign=top width=42.867><P style="margin:0pt; padding-bottom:3pt; line-height:11pt; font-family:Times New Roman; font-size:9pt; border-bottom:0.5pt solid #000000" align=center><B>2010</B></P>
</TD><TD valign=top width=70><P style="margin:0pt; padding-bottom:3pt; line-height:11pt; font-family:Times New Roman; font-size:9pt; border-bottom:0.5pt solid #000000" align=center><B>Thereafter</B></P>
</TD></TR>
<TR><TD valign=top width=223.2 colspan=2>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=top width=400.867 colspan=8><P style="margin:0pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=center><B>(unaudited, in $ millions)</B></P>
</TD></TR>
<TR><TD valign=top width=223.2 colspan=2>&nbsp;</TD><TD valign=top width=48>&nbsp;</TD><TD valign=top width=48>&nbsp;</TD><TD valign=top width=48>&nbsp;</TD><TD valign=top width=48>&nbsp;</TD><TD valign=top width=48>&nbsp;</TD><TD valign=top width=48>&nbsp;</TD><TD valign=top width=42.867>&nbsp;</TD><TD valign=top width=70>&nbsp;</TD></TR>
<TR><TD style="background-color:#DFDFDF" valign=bottom width=223.2 colspan=2><P style="margin:0pt; line-height:11pt; font-family:Times New Roman; font-size:9pt">Capital leases<SUP>(2)</SUP></P>
</TD><TD style="background-color:#DFDFDF" valign=bottom width=48><P style="margin:0pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=right>$27</P>
</TD><TD style="background-color:#DFDFDF" valign=bottom width=48><P style="margin:0pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=right>$1</P>
</TD><TD style="background-color:#DFDFDF" valign=bottom width=48><P style="margin:0pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=right>$5</P>
</TD><TD style="background-color:#DFDFDF" valign=bottom width=48><P style="margin:0pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=right>$5</P>
</TD><TD style="background-color:#DFDFDF" valign=bottom width=48><P style="margin:0pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=right>$5</P>
</TD><TD style="background-color:#DFDFDF" valign=bottom width=48><P style="margin:0pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=right>$5</P>
</TD><TD style="background-color:#DFDFDF" valign=bottom width=42.867><P style="margin:0pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=right>$5</P>
</TD><TD style="background-color:#DFDFDF" valign=bottom width=70><P style="margin:0pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=right>$1</P>
</TD></TR>
<TR><TD valign=bottom width=223.2 colspan=2><P style="margin:0pt; line-height:11pt; font-family:Times New Roman; font-size:9pt">Operating leases<SUP>(1)</SUP></P>
</TD><TD valign=bottom width=48><P style="margin:0pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=right>260</P>
</TD><TD valign=bottom width=48><P style="margin:0pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=right>15</P>
</TD><TD valign=bottom width=48><P style="margin:0pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=right>39</P>
</TD><TD valign=bottom width=48><P style="margin:0pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=right>31</P>
</TD><TD valign=bottom width=48><P style="margin:0pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=right>27</P>
</TD><TD valign=bottom width=48><P style="margin:0pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=right>24</P>
</TD><TD valign=bottom width=42.867><P style="margin:0pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=right>21</P>
</TD><TD valign=bottom width=70><P style="margin:0pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=right>103</P>
</TD></TR>
<TR><TD style="background-color:#DFDFDF" valign=bottom width=223.2 colspan=2><P style="margin:0pt; line-height:11pt; font-family:Times New Roman; font-size:9pt">Purchase obligations<SUP>(1)</SUP></P>
</TD><TD style="background-color:#DFDFDF" valign=bottom width=48><P style="margin:0pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=right>877</P>
</TD><TD style="background-color:#DFDFDF" valign=bottom width=48><P style="margin:0pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=right>643</P>
</TD><TD style="background-color:#DFDFDF" valign=bottom width=48><P style="margin:0pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=right>231</P>
</TD><TD style="background-color:#DFDFDF" valign=bottom width=48><P style="margin:0pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=right>3</P>
</TD><TD style="background-color:#DFDFDF" valign=bottom width=48><P style="margin:0pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=right><I>-</I></P>
</TD><TD style="background-color:#DFDFDF" valign=bottom width=48><P style="margin:0pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=right><I>-</I></P>
</TD><TD style="background-color:#DFDFDF" valign=bottom width=42.867><P style="margin:0pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=right><I>-</I></P>
</TD><TD style="background-color:#DFDFDF" valign=bottom width=70><P style="margin:0pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=right><I>-</I></P>
</TD></TR>
<TR><TD valign=bottom width=223.2 colspan=2><P style="margin:0pt; line-height:11pt; font-family:Times New Roman; font-size:9pt">Of which:</P>
</TD><TD valign=bottom width=48>&nbsp;</TD><TD valign=bottom width=48>&nbsp;</TD><TD valign=bottom width=48>&nbsp;</TD><TD valign=bottom width=48>&nbsp;</TD><TD valign=bottom width=48>&nbsp;</TD><TD valign=bottom width=48>&nbsp;</TD><TD valign=bottom width=42.867>&nbsp;</TD><TD valign=bottom width=70>&nbsp;</TD></TR>
<TR><TD style="background-color:#DFDFDF" valign=bottom width=223.2 colspan=2><P style="margin:0pt; padding-left:9pt; line-height:11pt; font-family:Times New Roman; font-size:9pt"><I>Equipment purchase</I></P>
</TD><TD style="background-color:#DFDFDF" valign=bottom width=48><P style="margin:0pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=right><I>562</I></P>
</TD><TD style="background-color:#DFDFDF" valign=bottom width=48><P style="margin:0pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=right><I>367</I></P>
</TD><TD style="background-color:#DFDFDF" valign=bottom width=48><P style="margin:0pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=right><I>195</I></P>
</TD><TD style="background-color:#DFDFDF" valign=bottom width=48><P style="margin:0pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=right><I>-</I></P>
</TD><TD style="background-color:#DFDFDF" valign=bottom width=48><P style="margin:0pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=right><I>-</I></P>
</TD><TD style="background-color:#DFDFDF" valign=bottom width=48><P style="margin:0pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=right><I>-</I></P>
</TD><TD style="background-color:#DFDFDF" valign=bottom width=42.867><P style="margin:0pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=right><I>-</I></P>
</TD><TD style="background-color:#DFDFDF" valign=bottom width=70><P style="margin:0pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=right><I>-</I></P>
</TD></TR>
<TR><TD valign=bottom width=223.2 colspan=2><P style="margin:0pt; padding-left:9pt; line-height:11pt; font-family:Times New Roman; font-size:9pt"><I>Foundry purchase</I></P>
</TD><TD valign=bottom width=48><P style="margin:0pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=right><I>253</I></P>
</TD><TD valign=bottom width=48><P style="margin:0pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=right><I>253</I></P>
</TD><TD valign=bottom width=48><P style="margin:0pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=right><I>-</I></P>
</TD><TD valign=bottom width=48><P style="margin:0pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=right><I>-</I></P>
</TD><TD valign=bottom width=48><P style="margin:0pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=right><I>-</I></P>
</TD><TD valign=bottom width=48><P style="margin:0pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=right><I>-</I></P>
</TD><TD valign=bottom width=42.867><P style="margin:0pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=right><I>-</I></P>
</TD><TD valign=bottom width=70><P style="margin:0pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=right><I>-</I></P>
</TD></TR>
<TR><TD style="background-color:#DFDFDF" valign=bottom width=222><P style="margin:0pt; padding-left:9pt; line-height:11pt; font-family:Times New Roman; font-size:9pt"><I>Software, technology licenses and design</I></P>
</TD><TD style="background-color:#DFDFDF" valign=bottom width=49.2 colspan=2><P style="margin:0pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=right><I>62</I></P>
</TD><TD style="background-color:#DFDFDF" valign=bottom width=48><P style="margin:0pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=right><I>23</I></P>
</TD><TD style="background-color:#DFDFDF" valign=bottom width=48><P style="margin:0pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=right><I>36</I></P>
</TD><TD style="background-color:#DFDFDF" valign=bottom width=48><P style="margin:0pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=right><I>3</I></P>
</TD><TD style="background-color:#DFDFDF" valign=bottom width=48><P style="margin:0pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=right><I>-</I></P>
</TD><TD style="background-color:#DFDFDF" valign=bottom width=48><P style="margin:0pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=right><I>-</I></P>
</TD><TD style="background-color:#DFDFDF" valign=bottom width=42.867><P style="margin:0pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=right><I>-</I></P>
</TD><TD style="background-color:#DFDFDF" valign=bottom width=70><P style="margin:0pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=right><I>-</I></P>
</TD></TR>
<TR><TD valign=bottom width=223.2 colspan=2><P style="margin:0pt; line-height:11pt; font-family:Times New Roman; font-size:9pt">Joint Venture Agreement with Hynix Semiconductor Inc. <SUP>(1)(4)</SUP></P>
</TD><TD valign=bottom width=48><P style="margin:0pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=right>225</P>
</TD><TD valign=bottom width=48><P style="margin:0pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=right>100</P>
</TD><TD valign=bottom width=48><P style="margin:0pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=right>125</P>
</TD><TD valign=bottom width=48><P style="margin:0pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=right><I>-</I></P>
</TD><TD valign=bottom width=48><P style="margin:0pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=right><I>-</I></P>
</TD><TD valign=bottom width=48><P style="margin:0pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=right><I>-</I></P>
</TD><TD valign=bottom width=42.867><P style="margin:0pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=right><I>-</I></P>
</TD><TD valign=bottom width=70><P style="margin:0pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=right><I>-</I></P>
</TD></TR>
<TR><TD style="background-color:#DFDFDF" valign=bottom width=223.2 colspan=2><P style="margin:0pt; line-height:11pt; font-family:Times New Roman; font-size:9pt">Other Obligations<SUP>(1)</SUP></P>
</TD><TD style="background-color:#DFDFDF" valign=bottom width=48><P style="margin:0pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=right>152</P>
</TD><TD style="background-color:#DFDFDF" valign=bottom width=48><P style="margin:0pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=right>26</P>
</TD><TD style="background-color:#DFDFDF" valign=bottom width=48><P style="margin:0pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=right>70</P>
</TD><TD style="background-color:#DFDFDF" valign=bottom width=48><P style="margin:0pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=right>44</P>
</TD><TD style="background-color:#DFDFDF" valign=bottom width=48><P style="margin:0pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=right>5</P>
</TD><TD style="background-color:#DFDFDF" valign=bottom width=48><P style="margin:0pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=right>3</P>
</TD><TD style="background-color:#DFDFDF" valign=bottom width=42.867><P style="margin:0pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=right>1</P>
</TD><TD style="background-color:#DFDFDF" valign=bottom width=70><P style="margin:0pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=right>3</P>
</TD></TR>
<TR><TD valign=bottom width=223.2 colspan=2><P style="margin:0pt; line-height:11pt; font-family:Times New Roman; font-size:9pt">Long-term debt obligations<SUP>(2)(3)</SUP></P>
</TD><TD valign=bottom width=48><P style="margin:0pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=right>263</P>
</TD><TD valign=bottom width=48><P style="margin:0pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=right>-</P>
</TD><TD valign=bottom width=48><P style="margin:0pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=right>117</P>
</TD><TD valign=bottom width=48><P style="margin:0pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=right>50</P>
</TD><TD valign=bottom width=48><P style="margin:0pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=right>25</P>
</TD><TD valign=bottom width=48><P style="margin:0pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=right>22</P>
</TD><TD valign=bottom width=42.867><P style="margin:0pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=right>14</P>
</TD><TD valign=bottom width=70><P style="margin:0pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=right>35</P>
</TD></TR>
<TR><TD style="background-color:#DFDFDF" valign=bottom width=223.2 colspan=2><P style="margin:0pt; line-height:11pt; font-family:Times New Roman; font-size:9pt">Pension obligations<SUP>(2)</SUP></P>
</TD><TD style="background-color:#DFDFDF" valign=bottom width=48><P style="margin:0pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=right>261</P>
</TD><TD style="background-color:#DFDFDF" valign=bottom width=48><P style="margin:0pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=right>29</P>
</TD><TD style="background-color:#DFDFDF" valign=bottom width=48><P style="margin:0pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=right>19</P>
</TD><TD style="background-color:#DFDFDF" valign=bottom width=48><P style="margin:0pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=right>19</P>
</TD><TD style="background-color:#DFDFDF" valign=bottom width=48><P style="margin:0pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=right>23</P>
</TD><TD style="background-color:#DFDFDF" valign=bottom width=48><P style="margin:0pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=right>24</P>
</TD><TD style="background-color:#DFDFDF" valign=bottom width=42.867><P style="margin:0pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=right>21</P>
</TD><TD style="background-color:#DFDFDF" valign=bottom width=70><P style="margin:0pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=right>126</P>
</TD></TR>
<TR><TD valign=bottom width=223.2 colspan=2><P style="margin:0pt; line-height:11pt; font-family:Times New Roman; font-size:9pt">Other non-current liabilities<SUP>(2)</SUP></P>
</TD><TD valign=bottom width=48><P style="margin:0pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=right>20</P>
</TD><TD valign=bottom width=48><P style="margin:0pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=right>1</P>
</TD><TD valign=bottom width=48><P style="margin:0pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=right>5</P>
</TD><TD valign=bottom width=48><P style="margin:0pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=right>3</P>
</TD><TD valign=bottom width=48><P style="margin:0pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=right>4</P>
</TD><TD valign=bottom width=48><P style="margin:0pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=right>3</P>
</TD><TD valign=bottom width=42.867><P style="margin:0pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=right>2</P>
</TD><TD valign=bottom width=70><P style="margin:0pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=right>2</P>
</TD></TR>
<TR><TD style="background-color:#DFDFDF" valign=bottom width=223.2 colspan=2><P style="margin:0pt; line-height:11pt; font-family:Times New Roman; font-size:9pt"><B>Total</B></P>
</TD><TD style="background-color:#DFDFDF" valign=bottom width=48><P style="margin:0pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=right><B>$2,085</B></P>
</TD><TD style="background-color:#DFDFDF" valign=bottom width=48><P style="margin:0pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=right><B>815</B></P>
</TD><TD style="background-color:#DFDFDF" valign=bottom width=48><P style="margin:0pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=right><B>611</B></P>
</TD><TD style="background-color:#DFDFDF" valign=bottom width=48><P style="margin:0pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=right><B>155</B></P>
</TD><TD style="background-color:#DFDFDF" valign=bottom width=48><P style="margin:0pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=right><B>89</B></P>
</TD><TD style="background-color:#DFDFDF" valign=bottom width=48><P style="margin:0pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=right><B>81</B></P>
</TD><TD style="background-color:#DFDFDF" valign=bottom width=42.867><P style="margin:0pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=right><B>64</B></P>
</TD><TD style="background-color:#DFDFDF" valign=bottom width=70><P style="margin:0pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=right><B>270</B></P>
</TD></TR>
</TABLE>
<U><P style="margin:0pt; text-indent:108pt; font-family:Times New Roman"><BR></P></U>
<P style="margin-top:0pt; margin-bottom:-11pt; padding-left:18pt; text-indent:-18pt; line-height:11pt; font-family:Times New Roman; font-size:9pt">(1)</P>
<P style="margin:0pt; padding-left:18pt; line-height:11pt; font-family:Times New Roman; font-size:9pt">Items not reflected on the Unaudited Interim Consolidated Balance Sheet as of October 1, 2005. </P>
<P style="margin-top:0pt; margin-bottom:-11pt; padding-left:18pt; text-indent:-18pt; line-height:11pt; font-family:Times New Roman; font-size:9pt">(2)</P>
<P style="margin:0pt; padding-left:18pt; line-height:11pt; font-family:Times New Roman; font-size:9pt">Items reflected on the Unaudited Interim Consolidated Balance Sheet as of October 1, 2005. </P>
<P style="margin-top:0pt; margin-bottom:-11pt; padding-left:18pt; text-indent:-18pt; line-height:11pt; font-family:Times New Roman; font-size:9pt">(3)</P>
<P style="margin:0pt; padding-left:18pt; line-height:11pt; font-family:Times New Roman; font-size:9pt">See Note 12 to the Unaudited Interim Consolidated Financial Statements as of October 1, 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. </P>
<P style="margin-top:0pt; margin-bottom:-11pt; padding-left:18pt; text-indent:-18pt; line-height:11pt; font-family:Times New Roman; font-size:9pt">(4)</P>
<P style="margin-top:0pt; margin-bottom:7.5pt; padding-left:18pt; line-height:11pt; font-family:Times New Roman; font-size:9pt">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. </P>
<P style="margin-top:0pt; margin-bottom:10pt; font-family:Times New Roman" align=justify>Operating leases are mainly related to building leases.&nbsp;The amount disclosed is composed of minimum payments for future leases from 2005 to 2010 and thereafter.&nbsp;We lease land, buildings, plants and equipment under operating leases that expire at various dates under non-cancelable lease agreements. </P>
<P style="margin-top:0pt; margin-bottom:10pt; font-family:Times New Roman" align=justify>Purchase obligations are primarily comprised of purchase commitments for equipment, for outsourced foundry wafers and for software licenses. </P>
<P style="margin-top:0pt; margin-bottom:10pt; font-family:Times New Roman" align=justify>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.&nbsp;As the business license for the joint venture was obtained in April 2005, we paid $25 million of capital contribution, out of which $17 million was paid in the third quarter.&nbsp;We expect to fulfill our remaining financial obligations up to our total contribution of $250 million later in 2005 and 2006.&nbsp;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.&nbsp;Furthermore, we have contingent future loading obligations to purchase product from the joint venture, which have not been included above because at this stage the amounts remain contingent and non-quantifiable. </P>
<P style="margin-top:0pt; margin-bottom:10pt; font-family:Times New Roman" align=justify>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.&nbsp;They include maximum future amounts that may be redeemable for cash at the option of the holder, at fixed prices.&nbsp;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 or $1,365 million on August 5, 2008 or $1,352 million on August 5, 2010.&nbsp;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.&nbsp;As a result of this cash option, the outstanding amount of 2013 Bonds was classified in the consolidated balance sheet as &#147;current portion of long-term debt&#148; a
t October 1, 2005. </P>
<P style="margin-top:0pt; margin-bottom:10pt; font-family:Times New Roman" align=justify>Pension
 obligations amounting to $261 million 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.&nbsp;The final actual amount to be paid and related timings of such payments
 may vary significantly due to early retirements or terminations.&nbsp;This
 amount does not include the additional pension plan of $8 million granted by
 our Supervisory Board to our former CEO and to a limited number of retired senior
 executives in the first quarter of 2005, which was recorded as current liabilities
 as we are intending to transfer this obligation to an insurance company.&nbsp;We
 accrued the estimated premiums to expenses during the first quarter of 2005.
</P>
<P style="margin-top:0pt; margin-bottom:10pt; font-family:Times New Roman" align=justify><BR>
<BR></P>
<P style="margin:0pt; font-family:Times New Roman" align=center>28</P>
<P style="margin:0pt; font-family:Times New Roman"><BR></P>
<HR style="padding-top:7.2pt; padding-bottom:7.2pt" noshade size=1.333>
<P style="page-break-before:always; margin:0pt; font-family:Times New Roman" align=right><BR></P>
<P style="margin:0pt; font-family:Times New Roman"><BR></P>
<P style="margin-top:0pt; margin-bottom:10pt; font-family:Times New Roman" align=justify>&nbsp;</P>
<P style="margin-top:0pt; margin-bottom:10pt; font-family:Times New Roman" align=justify>Other non-current liabilities include future unused leases and miscellaneous contractual obligations. </P>
<P style="margin-top:0pt; margin-bottom:10pt; font-family:Times New Roman" align=justify>Other obligations primarily relate to contractual firm commitments with respect to cooperation agreements. </P>
<P style="margin-top:0pt; margin-bottom:10pt; font-family:Times New Roman" align=justify>Other than those described above, there are no material off-balance sheet obligations, contractual obligations or other commitments. </P>
<P style="margin-top:0pt; margin-bottom:10pt; font-family:Times New Roman" align=justify><B><I>Financial Outlook</I></B></P>
<P style="margin-top:0pt; margin-bottom:10pt; font-family:Times New Roman" align=justify>We currently expect that capital spending for 2005 will be approximately $1.5 billion, significantly below the $2.05 billion spent in 2004.&nbsp;In the first nine months of 2005, we incurred approximately $1.2 billion in capital spending.&nbsp;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.&nbsp;As of October 1, 2005, we had a total of $562 million in outstanding commitments for equipment purchases for 2005 and 2006. </P>
<P style="margin-top:0pt; margin-bottom:10pt; font-family:Times New Roman" align=justify>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 conversion to 200-mm of our front-end facility in Agrate, Italy; (iii) the capacity expansion of our back-end plants in Muar (Malaysia), Toa Payoh (Singapore) and Malta; (iv) the expansion of our 200-mm front-end facility in Phoenix, Arizona; (v) completion of building and facilities for our 300-mm front-end plant in Catania (Italy); (vi) the expansion of the 300-mm front-end joint project with Philips Semiconductors International B. V. and Freescale Semiconductor Inc., in Crolles, France; and (vii) the capacity expansion of our 200-mm front-end facilities in Rousset, France.&nbsp;We will continue to monitor our level of capital spending by taking into consideration factors such as trends in the semiconductor industry, capacity utilization and ann
ounced additions.&nbsp;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.&nbsp;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.&nbsp;A substantial deterioration of our economic results and consequently of our profitability could generate a deterioration of the cash generated by our operating activities.&nbsp;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
. </P>
<P style="margin-top:0pt; margin-bottom:10pt; font-family:Times New Roman" align=justify>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.&nbsp;The conversion ratio is $985.09 per $1,000 principal amount of 2013 Bonds at August&nbsp;5, 2006, $975.28 at August 5, 2008 and $965.56 at August 5, 2010, subject to adjustments in certain circumstances.&nbsp;The total redeemable amount will be equivalent to $1,379 million on August 5, 2006.&nbsp;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.&nbsp;However, we believe that our ability to meet debt obligations is fully backed by existing liquidity as may be complemented by our cash flow plan. </P>
<P style="margin-top:0pt; margin-bottom:10pt; font-family:Times New Roman" align=justify><B><I>Impact of Recently Issued U.S. Accounting Standards</I></B></P>
<P style="margin-top:0pt; margin-bottom:10pt; font-family:Times New Roman" align=justify>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;).&nbsp;The Statement requires abnormal amounts of idle capacity and spoilage costs to be excluded from the cost of inventory and expensed when incurred.&nbsp;The provisions of FAS 151 are applicable prospectively to inventory costs incurred during fiscal years beginning after June 15, 2005.&nbsp;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. </P>
<P style="margin-top:0pt; margin-bottom:10pt; font-family:Times New Roman" align=justify><BR>
<BR></P>
<P style="margin:0pt; font-family:Times New Roman" align=center>29</P>
<P style="margin:0pt; font-family:Times New Roman"><BR></P>
<HR style="padding-top:7.2pt; padding-bottom:7.2pt" noshade size=1.333>
<P style="page-break-before:always; margin:0pt; font-family:Times New Roman" align=right><BR></P>
<P style="margin:0pt; font-family:Times New Roman"><BR></P>
<P style="margin-top:0pt; margin-bottom:10pt; font-family:Times New Roman" align=justify>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;).&nbsp;This Statement
 amends Opinion No.&nbsp;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.&nbsp;The Statement is effective prospectively for nonmonetary asset exchanges
 occurring in fiscal periods beginning after June 15, 2005, with early application
 permitted.&nbsp;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. </P>
<P style="margin-top:0pt; margin-bottom:10pt; font-family:Times New Roman" align=justify>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;).&nbsp;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.&nbsp;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.&nbsp;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.&nbsp;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.&nbsp;
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.&nbsp;On April 14, 2005, the 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.&nbsp;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.&nbsp;Each method requires the cumulative effect of initially applying FAS 123R to be recognized in the period of adoption.&nbsp;We will be required to adopt FAS 123R in the first quarter of 2006 except if we elect early adoption in the fourth q
uarter of 2005.&nbsp;We plan to adopt FAS 123R using the modified prospective application method.&nbsp;We redefined our equity-based compensation strategy, since it had become minimally effective in motivating and retaining key employees, by no longer granting options but rather issuing non-vested stock.&nbsp;As part of this revised stock compensation policy, we decided in July 2005 to accelerate the vesting period of outstanding unvested stock options, following authorization from our shareholders at the annual general meeting held on March 18, 2005.&nbsp;As a result, options equivalent to approximately 32 million shares became exercisable immediately.&nbsp;Based on the current market price of the shares, all these options had no intrinsic economic value at the date of acceleration.&nbsp;We do not expect to incur any future compensation expense associated with these outstanding options when adopting FAS 123R in the first quarter of 2006 since following this we will not have any outstanding unvested stock op
tions as at the adoption date of FAS 123R.&nbsp;The impact on our financial position and results of operations is illustrated in the information presented in note 15 to our Unaudited Interim Consolidated Financial Statements &#150; &#147;Fair value of stock-based compensation&#148;. </P>
<P style="margin-top:0pt; margin-bottom:10pt; font-family:Times New Roman" align=justify>In May 2005, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 154, <I>Accounting Changes and Error Corrections</I> (&#147;FAS 154&#148;).&nbsp;This Statement supersedes Accounting Principles Board Opinion No.&nbsp;20, <I>Accounting Changes</I> (&#147;APB 20&#148;) and Statement of Financial Accounting Standards No.&nbsp;3, <I>Reporting Accounting Changes in Interim Financial Statements</I> (&#147;FAS 3&#148;).&nbsp;This Statement requires entities that voluntarily make a change in accounting principle to apply that change retrospectively to prior periods&#146; financial statements, unless this would be impracticable, and to report the corresponding adjustment on the opening balance of retained earnings for that period rather than in net income, as previously required by APB 20.&nbsp;FAS 154 also states that changes in the method of depreciation, amortization, or depletion of
 long-lived, non-financial assets, must be accounted for as a change in accounting estimate and no longer as a change in accounting principle.&nbsp;FAS 154 does not change the accounting guidance contained in APB 20 for reporting a change in accounting estimate and the correction of an error in previously issued financial statements, but it makes a distinction between &#147;retrospective application&#148; of an accounting principle and the &#147;restatement&#148; of financial statements to reflect the correction of an error.&nbsp;The Statement is effective for accounting changes and corrections of errors made in fiscal years beginning after December 15, 2005 with early adoption permitted for accounting changes and corrections of errors made in fiscal years beginning after FAS 154 was issued.&nbsp;We adopted FAS 154 in the second quarter of 2005 and reported neither correction of errors nor accounting changes that could have a material effect on our financial position or results of operations. </P>
<P style="margin-top:0pt; margin-bottom:10pt; font-family:Times New Roman" align=justify><B><I>Backlog and Customers</I></B></P>
<P style="margin-top:0pt; margin-bottom:10pt; font-family:Times New Roman" align=justify>We began the fourth quarter of 2005 with a backlog approximately 24% higher than we had entering the fourth quarter of 2004 and with a low single digit percentage increase from the beginning of the third quarter of 2005.&nbsp;</P>
<P style="margin-top:0pt; margin-bottom:10pt; font-family:Times New Roman" align=justify><BR>
<BR></P>
<P style="margin:0pt; font-family:Times New Roman" align=center>30</P>
<P style="margin:0pt; font-family:Times New Roman"><BR></P>
<HR style="padding-top:7.2pt; padding-bottom:7.2pt" noshade size=1.333>
<P style="page-break-before:always; margin:0pt; font-family:Times New Roman" align=right><BR></P>
<P style="margin:0pt; font-family:Times New Roman"><BR></P>
<P style="margin-top:0pt; margin-bottom:10pt; font-family:Times New Roman" align=justify>In the third quarter of 2005, 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 51%, and our largest customer the Nokia group of companies accounted for approximately 24% of our revenues.&nbsp;Distributors accounted for approximately 18% of our net revenues.&nbsp;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.&nbsp;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. </P>
<P style="margin-top:0pt; margin-bottom:10pt; font-family:Times New Roman" align=justify><B><I>Changes to Our Share Capital, Stock Option Grants and Other Matters</I></B></P>
<P style="margin-top:0pt; margin-bottom:10pt; font-family:Times New Roman" align=justify>The following table sets forth changes to our share capital as of October 1, 2005:</P>
<TABLE style="font-size:10pt" cellspacing=0 align=center>
  <TR>
    <TD valign=bottom width=63.733><P style="margin:0pt; padding-bottom:3pt; line-height:11pt; font-family:Times New Roman; font-size:9pt; border-bottom:0.5pt solid #000000" align=center><B>Year</B></P></TD>
    <TD valign=bottom width=76.467><P style="margin:0pt; padding-bottom:3pt; line-height:11pt; font-family:Times New Roman; font-size:9pt; border-bottom:0.5pt solid #000000" align=center><B>Transaction</B></P></TD>
    <TD valign=bottom width=62.4><P style="margin:0pt; padding-bottom:3pt; line-height:11pt; font-family:Times New Roman; font-size:9pt; border-bottom:0.5pt solid #000000" align=center><B>Number
        of shares</B></P></TD>
    <TD valign=bottom width=58.467><P style="margin:0pt; padding-bottom:3pt; line-height:11pt; font-family:Times New Roman; font-size:9pt; border-bottom:0.5pt solid #000000" align=center><B>Nominal
        value (euro)</B></P></TD>
    <TD valign=bottom width=74.4><P style="margin:0pt; padding-bottom:3pt; line-height:11pt; font-family:Times New Roman; font-size:9pt; border-bottom:0.5pt solid #000000" align=center><B>Cumulative
        amount of capital (euro)</B></P></TD>
    <TD valign=bottom width=74.4><P style="margin:0pt; padding-bottom:3pt; line-height:11pt; font-family:Times New Roman; font-size:9pt; border-bottom:0.5pt solid #000000" align=center><B>Cumulative
        number of shares</B></P></TD>
    <TD valign=bottom width=63.733><P style="margin:0pt; padding-bottom:3pt; line-height:11pt; font-family:Times New Roman; font-size:9pt; border-bottom:0.5pt solid #000000" align=center><B>Nominal
        value of increase/ reduction in capital</B></P></TD>
    <TD valign=bottom width=68.4><P style="margin:0pt; padding-bottom:3pt; line-height:11pt; font-family:Times New Roman; font-size:9pt; border-bottom:0.5pt solid #000000" align=center><B>Amount
        of issue premium (euro)</B></P></TD>
    <TD valign=bottom width=83.4><P style="margin:0pt; padding-bottom:3pt; line-height:11pt; font-family:Times New Roman; font-size:9pt; border-bottom:0.5pt solid #000000" align=center><B>Cumulative
        issue premium (euro)</B></P></TD>
  </TR>
  <TR>
    <TD valign=top width=63.733>&nbsp;</TD>
    <TD valign=top width=76.467>&nbsp;</TD>
    <TD valign=top width=62.4>&nbsp;</TD>
    <TD valign=top width=58.467>&nbsp;</TD>
    <TD valign=top width=74.4>&nbsp;</TD>
    <TD valign=top width=74.4>&nbsp;</TD>
    <TD valign=top width=63.733>&nbsp;</TD>
    <TD valign=top width=68.4>&nbsp;</TD>
    <TD valign=top width=83.4>&nbsp;</TD>
  </TR>
  <TR>
    <TD style="background-color:#DFDFDF" valign=top width=63.733><P style="margin:0pt; line-height:11pt; font-family:Times New Roman; font-size:9pt">December
        31, 2004</P></TD>
    <TD style="background-color:#DFDFDF" valign=top width=76.467><P style="margin:0pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=left>LYONs
        conversion</P></TD>
    <TD style="background-color:#DFDFDF" valign=bottom width=62.4><P style="margin:0pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=right>1,761</P></TD>
    <TD style="background-color:#DFDFDF" valign=bottom width=58.467><P style="margin:0pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=right>1.04</P></TD>
    <TD style="background-color:#DFDFDF" valign=bottom width=74.4><P style="margin:0pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=right>941,521,357</P></TD>
    <TD style="background-color:#DFDFDF" valign=bottom width=74.4><P style="margin:0pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=right>905,308,997</P></TD>
    <TD style="background-color:#DFDFDF" valign=bottom width=63.733><P style="margin:0pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=right>1,831</P></TD>
    <TD style="background-color:#DFDFDF" valign=bottom width=68.4><P style="margin:0pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=right>46,225</P></TD>
    <TD style="background-color:#DFDFDF" valign=bottom width=83.4><P style="margin:0pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=right>1,708,949,494</P></TD>
  </TR>
  <TR>
    <TD valign=top width=63.733><P style="margin:0pt; line-height:11pt; font-family:Times New Roman; font-size:9pt">October
        1, 2005</P></TD>
    <TD valign=top width=76.467><P style="margin:0pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=left>Conversion
        of bonds</P></TD>
    <TD valign=bottom width=62.4><P style="margin:0pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=right>59</P></TD>
    <TD valign=bottom width=58.467><P style="margin:0pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=right>1.04</P></TD>
    <TD valign=bottom width=74.4><P style="margin:0pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=right>941,521,418</P></TD>
    <TD valign=bottom width=74.4><P style="margin:0pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=right>905,309,056</P></TD>
    <TD valign=bottom width=63.733><P style="margin:0pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=right>61</P></TD>
    <TD valign=bottom width=68.4><P style="margin:0pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=right>1,448</P></TD>
    <TD valign=bottom width=83.4><P style="margin:0pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=right>1,708,950,942</P></TD>
  </TR>
  <TR>
    <TD style="background-color:#DFDFDF" valign=top width=63.733><P style="margin:0pt; line-height:11pt; font-family:Times New Roman; font-size:9pt">October
        1, 2005</P></TD>
    <TD style="background-color:#DFDFDF" valign=top width=76.467><P style="margin:0pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=left>Exercise
        of options</P></TD>
    <TD style="background-color:#DFDFDF" valign=bottom width=62.4><P style="margin:0pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=right>2,288,093</P></TD>
    <TD style="background-color:#DFDFDF" valign=bottom width=58.467><P style="margin:0pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=right>1.04</P></TD>
    <TD style="background-color:#DFDFDF" valign=bottom width=74.4><P style="margin:0pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=right>943,901,035</P></TD>
    <TD style="background-color:#DFDFDF" valign=bottom width=74.4><P style="margin:0pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=right>907,597,149</P></TD>
    <TD style="background-color:#DFDFDF" valign=bottom width=63.733><P style="margin:0pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=right>2,379,617</P></TD>
    <TD style="background-color:#DFDFDF" valign=bottom width=68.4><P style="margin:0pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=right>23,700,378</P></TD>
    <TD style="background-color:#DFDFDF" valign=bottom width=83.4><P style="margin:0pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=right>1,732,651,320</P></TD>
  </TR>
</TABLE>
<P style="margin-top:10pt; margin-bottom:10pt; font-family:Times New Roman" align=justify>The following table summarizes the amount of stock options authorized to be granted, exercised, cancelled and outstanding as of October 1, 2005:</P>
<TABLE style="font-size:10pt" cellspacing=0 align=center><TR><TD valign=top width=140.333>&nbsp;</TD><TD valign=top width=157.2 colspan=2><P style="margin:0pt; padding-bottom:3pt; line-height:11pt; font-family:Times New Roman; font-size:9pt; border-bottom:0.5pt solid #000000" align=center><B>Employees</B></P>
</TD><TD valign=top width=244.8 colspan=3><P style="margin:0pt; padding-bottom:3pt; line-height:11pt; font-family:Times New Roman; font-size:9pt; border-bottom:0.5pt solid #000000" align=center><B>Supervisory Board</B></P>
</TD><TD valign=top width=81.667><P style="margin:0pt; padding-bottom:3pt; line-height:11pt; font-family:Times New Roman; font-size:9pt; border-bottom:0.5pt solid #000000" align=center>&nbsp;</P></TD></TR>
<TR><TD valign=top width=140.333>&nbsp;</TD><TD valign=top width=78.6><P style="margin:0pt; padding-bottom:3pt; line-height:11pt; font-family:Times New Roman; font-size:9pt; border-bottom:0.5pt solid #000000" align=center><B>1995 Plan</B></P>
</TD><TD valign=top width=78.6><P style="margin:0pt; padding-bottom:3pt; line-height:11pt; font-family:Times New Roman; font-size:9pt; border-bottom:0.5pt solid #000000" align=center><B>2001 Plan</B></P>
</TD><TD valign=top width=81.6><P style="margin:0pt; padding-bottom:3pt; line-height:11pt; font-family:Times New Roman; font-size:9pt; border-bottom:0.5pt solid #000000" align=center><B>1996</B></P>
</TD><TD valign=top width=81.6><P style="margin:0pt; padding-bottom:3pt; line-height:11pt; font-family:Times New Roman; font-size:9pt; border-bottom:0.5pt solid #000000" align=center><B>1999</B></P>
</TD><TD valign=top width=81.6><P style="margin:0pt; padding-bottom:3pt; line-height:11pt; font-family:Times New Roman; font-size:9pt; border-bottom:0.5pt solid #000000" align=center><B>2002</B></P>
</TD><TD valign=top width=81.667><P style="margin:0pt; padding-bottom:3pt; line-height:11pt; font-family:Times New Roman; font-size:9pt; border-bottom:0.5pt solid #000000" align=center><B>Total</B></P>
</TD></TR>
<TR><TD style="background-color:#DFDFDF" valign=bottom width=140.333><P style="margin:0pt; line-height:11pt; font-family:Times New Roman; font-size:9pt">Remaining amount authorized to be granted</P>
</TD><TD style="background-color:#DFDFDF" valign=bottom width=78.6><P style="margin:0pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=right>-</P>
</TD><TD style="background-color:#DFDFDF" valign=bottom width=78.6><P style="margin:0pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=right>16,281,660</P>
</TD><TD style="background-color:#DFDFDF" valign=bottom width=81.6><P style="margin:0pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=right>-</P>
</TD><TD style="background-color:#DFDFDF" valign=bottom width=81.6><P style="margin:0pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=right>-</P>
</TD><TD style="background-color:#DFDFDF" valign=bottom width=81.6><P style="margin:0pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=right>-</P>
</TD><TD style="background-color:#DFDFDF" valign=bottom width=81.667><P style="margin:0pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=right>16,281,660</P>
</TD></TR>
<TR><TD valign=top width=140.333><P style="margin:0pt; line-height:11pt; font-family:Times New Roman; font-size:9pt">Amount exercised</P>
</TD><TD valign=top width=78.6><P style="margin:0pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=right>12,025,232</P>
</TD><TD valign=top width=78.6><P style="margin:0pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=right>9,650</P>
</TD><TD valign=top width=81.6><P style="margin:0pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=right>292,500</P>
</TD><TD valign=top width=81.6><P style="margin:0pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=right>18,000</P>
</TD><TD valign=top width=81.6><P style="margin:0pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=right>-</P>
</TD><TD valign=top width=81.667><P style="margin:0pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=right>12,345,382</P>
</TD></TR>
<TR><TD style="background-color:#DFDFDF" valign=top width=140.333><P style="margin:0pt; line-height:11pt; font-family:Times New Roman; font-size:9pt">Amount cancelled</P>
</TD><TD style="background-color:#DFDFDF" valign=top width=78.6><P style="margin:0pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=right>2,692,293</P>
</TD><TD style="background-color:#DFDFDF" valign=top width=78.6><P style="margin:0pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=right>4,006,193</P>
</TD><TD style="background-color:#DFDFDF" valign=top width=81.6><P style="margin:0pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=right>72,000</P>
</TD><TD style="background-color:#DFDFDF" valign=top width=81.6><P style="margin:0pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=right>63,000</P>
</TD><TD style="background-color:#DFDFDF" valign=top width=81.6><P style="margin:0pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=right>24,000</P>
</TD><TD style="background-color:#DFDFDF" valign=top width=81.667><P style="margin:0pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=right>6,857,486</P>
</TD></TR>
<TR><TD valign=top width=140.333><P style="margin:0pt; line-height:11pt; font-family:Times New Roman; font-size:9pt">Amount outstanding</P>
</TD><TD valign=top width=78.6><P style="margin:0pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=right>16,844,416</P>
</TD><TD valign=top width=78.6><P style="margin:0pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=right>43,718,340</P>
</TD><TD valign=top width=81.6><P style="margin:0pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=right>36,000</P>
</TD><TD valign=top width=81.6><P style="margin:0pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=right>342,000</P>
</TD><TD valign=top width=81.6><P style="margin:0pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=right>372,000</P>
</TD><TD valign=top width=81.667><P style="margin:0pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=right>61,312,756</P>
</TD></TR>
</TABLE>
<P style="margin-top:10pt; margin-bottom:10pt; font-family:Times New Roman" align=justify>We
  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.&nbsp;There
  were no options granted in the second and third quarters of 2005. </P>
<P style="margin-top:0pt; margin-bottom:10pt; font-family:Times New Roman" align=justify>In line with our 2005 AGM shareholders&#146; resolutions, we are transitioning our stock-based compensation plans from stock-option grants to non-vested stock awards.&nbsp;Pursuant to shareholders&#146; resolutions adopted by the 2005 AGM, our Supervisory Board, upon the proposal of the Managing Board and recommendation of the Compensation Committee, took the following actions:</P>
<P style="margin-top:0pt; margin-bottom:-12pt; padding-left:36pt; text-indent:-36pt; font-family:Symbol" align=justify>&#183;</P>
<P style="margin-top:0pt; margin-bottom:10pt; padding-left:36pt; font-family:Symbol" align=justify><FONT FACE="Times New Roman">approved the terms and conditions of the 2005 Supervisory Board Stock-Based Compensation Plan for members and professionals;</FONT></P>
<P style="margin-top:0pt; margin-bottom:-12pt; padding-left:36pt; text-indent:-36pt; font-family:Symbol" align=justify>&#183;</P>
<P style="margin-top:0pt; margin-bottom:10pt; padding-left:36pt; font-family:Symbol" align=justify><FONT FACE="Times New Roman">amended our 2001 Employee Stock Option Plan with the aim of enhancing our ability to retain key employees and motivate them to shareholder value creation;</FONT></P>
<P style="margin-top:0pt; margin-bottom:-12pt; padding-left:36pt; text-indent:-36pt; font-family:Symbol" align=justify>&#183;</P>
<P style="margin-top:0pt; margin-bottom:10pt; padding-left:36pt; font-family:Symbol" align=justify><FONT FACE="Times New Roman">approved the vesting conditions, linked to our future performance and their continued service with us, to apply to non-vested stock awards granted to employees in 2005, the maximum number of which will be four million, within the remaining number of shares authorized for issuance pursuant to the original plan; and</FONT></P>
<P style="margin-top:0pt; margin-bottom:-12pt; padding-left:36pt; text-indent:-36pt; font-family:Symbol" align=justify>&#183;</P>
<P style="margin-top:0pt; margin-bottom:10pt; padding-left:36pt; font-family:Symbol" align=justify><FONT FACE="Times New Roman">accelerated the vesting of all of our outstanding stock options in July 2005 aimed at facilitating the transition to new stock compensation policy with no charge to our interim consolidated statements of income. </FONT></P>
<P style="margin-top:0pt; margin-bottom:10pt; padding-left:36pt; text-indent:-36pt; font-family:Times New Roman" align=justify><BR>
<BR></P>
<P style="margin:0pt; font-family:Times New Roman" align=center>31</P>
<P style="margin:0pt; font-family:Times New Roman"><BR></P>
<HR style="padding-top:7.2pt; padding-bottom:7.2pt" noshade size=1.333>
<P style="page-break-before:always; margin:0pt; font-family:Times New Roman" align=right><BR></P>
<P style="margin:0pt; font-family:Times New Roman"><BR></P>
<P style="margin-top:0pt; margin-bottom:10pt; font-family:Times New Roman" align=justify>We
 intend to use 4.1 million of our shares held by us in treasury (out of the 13.
 4 million currently available) to cover the four million non-vested stock award
 grants pursuant to the 2001 Employee Stock Option Plan as well as the granting
 of up to 100,000 non-vested shares to the sole member of our Managing Board
 that was also approved by shareholders at the 2005 AGM.&nbsp;Following this
 decision, the new plan will generate an additional charge in the income statements
 of the fourth quarter of 2005 and of the first quarter of 2006.&nbsp;This charge
 will correspond to the compensation expense to be recognized for the non-vested
 stock awards from the grant date over the vesting period and will take into
 consideration the probability of the performance achievement.</P>
<P style="margin-top:0pt; margin-bottom:10pt; font-family:Times New Roman"><B>Disclosure Controls and Procedures</B></P>
<P style="margin-top:0pt; margin-bottom:10pt; font-family:Times New Roman" align=justify>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. </P>
<P style="margin-top:0pt; margin-bottom:10pt; font-family:Times New Roman" align=justify>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. </P>
<P style="margin-top:0pt; margin-bottom:10pt; font-family:Times New Roman"><B>Other Reviews</B></P>
<P style="margin-top:0pt; margin-bottom:10pt; font-family:Times New Roman" align=justify>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 SEC. </P>
<P style="margin-top:0pt; margin-bottom:10pt; font-family:Times New Roman"><B>Cautionary Note Regarding Forward-Looking Statements</B></P>
<P style="margin-top:0pt; margin-bottom:10pt; font-family:Times New Roman" align=justify>Some of the statements contained in &#147;Overview&#151;Business Outlook&#148;, &#147;Liquidity and Capital Resources&#151;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) 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:</P>
<P style="margin-top:0pt; margin-bottom:-12pt; padding-left:36pt; text-indent:-36pt; font-family:Symbol" align=justify>&#183;</P>
<P style="margin-top:0pt; margin-bottom:10pt; padding-left:36pt; font-family:Symbol" align=justify><FONT FACE="Times New Roman">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></P>
<P style="margin-top:0pt; margin-bottom:-12pt; padding-left:36pt; text-indent:-36pt; font-family:Symbol" align=justify>&#183;</P>
<P style="margin-top:0pt; margin-bottom:10pt; padding-left:36pt; font-family:Symbol" align=justify><FONT FACE="Times New Roman">pricing pressures, losses or curtailments of purchases from key customers as well as inventory adjustments from distributors or other customers;</FONT></P>
<P style="margin-top:0pt; margin-bottom:-12pt; padding-left:36pt; text-indent:-36pt; font-family:Symbol" align=justify>&#183;</P>
<P style="margin-top:0pt; margin-bottom:10pt; padding-left:36pt; font-family:Symbol" align=justify><FONT FACE="Times New Roman">changes in the exchange rates between the U.S. Dollar and the euro, compared to the effective exchange rate of approximately $1.22= &#8364;1, and between the U.S. Dollar and the currencies of the other major countries in which we have our operating infrastructure;</FONT></P>
<P style="margin-top:0pt; margin-bottom:-12pt; padding-left:36pt; text-indent:-36pt; font-family:Symbol" align=justify>&#183;</P>
<P style="margin-top:0pt; margin-bottom:10pt; padding-left:36pt; font-family:Symbol" align=justify><FONT FACE="Times New Roman">our ability to develop new products in time to obtain design wins as well as our ability to timely supply such products to meet market demand;</FONT></P>
<P style="margin-top:0pt; margin-bottom:-12pt; padding-left:36pt; text-indent:-36pt; font-family:Symbol" align=justify>&#183;</P>
<P style="margin-top:0pt; margin-bottom:10pt; padding-left:36pt; font-family:Symbol" align=justify><FONT FACE="Times New Roman">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 our overall corporate performance; </FONT></P>
<P style="margin-top:0pt; margin-bottom:-12pt; padding-left:36pt; text-indent:-36pt; font-family:Symbol" align=justify>&#183;</P>
<P style="margin-top:0pt; margin-bottom:10pt; padding-left:36pt; font-family:Symbol" align=justify><FONT FACE="Times New Roman">the anticipated benefits of research &amp; development alliances and cooperative activities;</FONT></P>
<P style="margin-top:0pt; margin-bottom:-12pt; padding-left:36pt; text-indent:-36pt; font-family:Symbol" align=justify>&#183;</P>
<P style="margin-top:0pt; margin-bottom:10pt; padding-left:36pt; font-family:Symbol" align=justify><FONT FACE="Times New Roman">the ability of our suppliers to meet our demands for products and to offer competitive pricing; </FONT></P>
<P style="margin-top:0pt; margin-bottom:-12pt; padding-left:36pt; text-indent:-36pt; font-family:Symbol" align=justify>&#183;</P>
<P style="margin-top:0pt; margin-bottom:10pt; padding-left:36pt; font-family:Symbol" align=justify><FONT FACE="Times New Roman">changes in the economic, social, or political environment, as well as natural events such as severe weather, health risks, epidemics or earthquakes in the countries in which we and our key customers operate;</FONT></P>
<P style="margin-top:0pt; margin-bottom:10pt; padding-left:36pt; text-indent:-36pt; font-family:Times New Roman" align=justify><BR>
<BR></P>
<P style="margin:0pt; font-family:Times New Roman" align=center>32</P>
<P style="margin:0pt; font-family:Times New Roman"><BR></P>
<HR style="padding-top:7.2pt; padding-bottom:7.2pt" noshade size=1.333>
<P style="page-break-before:always; margin:0pt; font-family:Times New Roman" align=right><BR></P>
<P style="margin:0pt; font-family:Times New Roman"><BR></P>
<P style="margin-top:0pt; margin-bottom:-12pt; padding-left:36pt; text-indent:-36pt; font-family:Symbol" align=justify>&#183;</P>
<P style="margin-top:0pt; margin-bottom:10pt; padding-left:36pt; font-family:Symbol" align=justify><FONT FACE="Times New Roman">our ability to obtain required licenses on third-party intellectual property; and</FONT></P>
<P style="margin-top:0pt; margin-bottom:-12pt; padding-left:36pt; text-indent:-36pt; font-family:Symbol" align=justify>&#183;</P>
<P style="margin-top:0pt; margin-bottom:10pt; padding-left:36pt; font-family:Symbol" align=justify><FONT FACE="Times New Roman">our ability to make consistent changes in our taxation rate, tax provisions and deferred taxes. </FONT></P>
<P style="margin-top:0pt; margin-bottom:10pt; font-family:Times New Roman" align=justify>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.&nbsp;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;anticipate&#148; or similar expressions or the negative thereof, or other variations thereof, or comparable terminology, or by discussions of strategy, plans or intentions.&nbsp;Some of these risk factors are set forth and are discussed in more detail in &#147;Item 3.&nbsp;Key Information&#151;Risk Factors&#148; in our Annual Report on Form 20-F for the year ended December&nbsp;31, 2004, as filed with the SEC on March&nbsp;23, 2005.&nbsp;Should one or more of these risks or uncertainties materia
lize, or should underlying assumptions prove incorrect, actual results may vary materially from those described in this Form 6-K as anticipated, believed or expected.&nbsp;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. </P>
<P style="margin-top:0pt; margin-bottom:10pt; font-family:Times New Roman" align=justify>Unfavorable changes in the above or other factors listed under &#147;Risk Factors&#148; from time to time in our SEC filings including in our Form&nbsp;20-F could have a material adverse effect on our business and/or financial condition.</P>
<P style="margin-top:0pt; margin-bottom:10pt; font-family:Times New Roman" align=justify><BR>
<BR></P>
<P style="margin:0pt; font-family:Times New Roman" align=center>33</P>
<P style="margin:0pt; font-family:Times New Roman"><BR></P>
<HR style="padding-top:7.2pt; padding-bottom:7.2pt" noshade size=1.333>
<P style="page-break-before:always; margin:0pt; font-family:Times New Roman" align=right><BR></P>
<P style="margin:0pt; font-family:Times New Roman"><BR></P>
<P style="margin-top:0pt; margin-bottom:10pt; font-family:Times New Roman"><B>STMICROELECTRONICS N.V.</B></P>
<P style="margin-top:0pt; margin-bottom:10pt; font-family:Times New Roman"><B>UNAUDITED INTERIM CONSOLIDATED FINANCIAL STATEMENTS</B></P>
<TABLE width="100%" cellspacing=0 style="font-size:10pt">
 <TR><TD valign=top width=571.2>&nbsp;</TD><TD valign=top width=52.8><P style="margin:0pt; font-family:Times New Roman" align=justify>Page</P>
</TD></TR>
<TR><TD valign=top width=571.2><P style="margin:0pt; font-family:Times New Roman" align=justify>Consolidated Statements of Income for the Three Months and the Nine Months Ended</P>
</TD><TD valign=top width=52.8>&nbsp;</TD></TR>
<TR><TD valign=top width=571.2><P style="margin:0pt; font-family:Times New Roman" align=justify>October 1, 2005 and September 25, 2004 (unaudited)</P>
</TD><TD valign=top width=52.8><P style="margin:0pt; font-family:Times New Roman" align=justify>F-2</P>
</TD></TR>
<TR><TD valign=top width=571.2><P style="margin:0pt; font-family:Times New Roman" align=justify>Consolidated Balance Sheets as of October 1, 2005 (unaudited) and December 31, 2004 (audited)</P>
</TD><TD valign=top width=52.8><P style="margin:0pt; font-family:Times New Roman" align=justify>F-4</P>
</TD></TR>
<TR><TD valign=top width=571.2><P style="margin:0pt; font-family:Times New Roman" align=justify>Consolidated Statements of Cash Flows for the Nine Months Ended October 1, 2005 and</P>
<P style="margin:0pt; font-family:Times New Roman" align=justify>September 25, 2004 (unaudited)</P>
</TD><TD valign=top width=52.8><P style="margin:0pt; font-family:Times New Roman" align=justify><BR>
F-5</P>
</TD></TR>
<TR><TD valign=top width=571.2><P style="margin:0pt; font-family:Times New Roman" align=justify>Consolidated Statements of Changes in Shareholders&#146; Equity (unaudited)</P>
</TD><TD valign=top width=52.8><P style="margin:0pt; font-family:Times New Roman" align=justify>F-6</P>
</TD></TR>
<TR><TD valign=top width=571.2><P style="margin:0pt; font-family:Times New Roman" align=justify>Notes to Interim Consolidated Financial Statements (unaudited)</P>
</TD><TD valign=top width=52.8><P style="margin:0pt; font-family:Times New Roman" align=justify>F-7</P>
</TD></TR>
<TR><TD valign=top width=571.2>&nbsp;</TD><TD valign=top width=52.8>&nbsp;</TD></TR>
<TR><TD valign=top width=571.2>&nbsp;</TD><TD valign=top width=52.8>&nbsp;</TD></TR>
</TABLE>
<P style="margin-top:0pt; margin-bottom:10pt; font-family:Times New Roman" align=center><BR>
<BR></P>
<P style="margin:0pt; font-family:Times New Roman" align=center>F-1</P>
<P style="margin:0pt; font-family:Times New Roman"><BR></P>
<HR style="padding-top:7.2pt; padding-bottom:7.2pt" noshade size=1.333>
<P style="page-break-before:always; margin:0pt; font-family:Times New Roman" align=right><BR></P>
<P style="margin:0pt; font-family:Times New Roman"><BR></P>
<P style="margin-top:0pt; margin-bottom:10pt; font-family:Times New Roman" align=center><BR></P>
<TABLE style="font-size:10pt" cellspacing=0 align=center><TR><TD valign=top width=142.067>&nbsp;</TD><TD valign=top width=51.2>&nbsp;</TD><TD valign=top width=77.133>&nbsp;</TD><TD valign=top width=76.467>&nbsp;</TD><TD valign=top width=98.267>&nbsp;</TD><TD valign=top width=98.2>&nbsp;</TD><TD valign=top width=23.067>&nbsp;</TD></TR>
<TR><TD valign=top width=270.4 colspan=3><P style="margin:0pt; line-height:11pt; font-family:Times New Roman; font-size:9pt"><B>STMicroelectronics N.V.</B></P>
</TD><TD valign=top width=76.467>&nbsp;</TD><TD valign=top width=98.267>&nbsp;</TD><TD valign=top width=98.2>&nbsp;</TD><TD valign=top width=23.067>&nbsp;</TD></TR>
<TR><TD valign=top width=543.333 colspan=6><P style="margin:0pt; line-height:11pt; font-family:Times New Roman; font-size:9pt"><B>CONSOLIDATED STATEMENTS OF INCOME</B></P>
</TD><TD valign=top width=23.067>&nbsp;</TD></TR>
<TR><TD valign=top width=142.067>&nbsp;</TD><TD valign=top width=51.2>&nbsp;</TD><TD valign=top width=77.133>&nbsp;</TD><TD valign=top width=76.467>&nbsp;</TD><TD style="border-bottom:1.5pt solid #000000" valign=top width=98.267>&nbsp;</TD><TD style="border-bottom:1.5pt solid #000000" valign=top width=98.2>&nbsp;</TD><TD valign=top width=23.067>&nbsp;</TD></TR>
<TR><TD valign=top width=142.067>&nbsp;</TD><TD valign=top width=51.2>&nbsp;</TD><TD valign=top width=77.133>&nbsp;</TD><TD style="border-right:1.5pt solid #000000" valign=top width=76.467>&nbsp;</TD><TD style="border-right:1.5pt solid #000000" valign=top width=196.467 colspan=2><P style="margin:0pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=center><B>Three months ended</B></P>
</TD><TD valign=top width=23.067>&nbsp;</TD></TR>
<TR><TD valign=top width=142.067>&nbsp;</TD><TD valign=top width=51.2>&nbsp;</TD><TD valign=top width=77.133>&nbsp;</TD><TD style="border-right:1.5pt solid #000000" valign=top width=76.467>&nbsp;</TD><TD style="border-right:1.5pt solid #000000; border-bottom:1.5pt solid #000000" valign=top width=196.467 colspan=2><P style="margin:0pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=center>(unaudited)</P>
</TD><TD valign=top width=23.067>&nbsp;</TD></TR>
<TR><TD style="border-right:1.5pt solid #000000" valign=top width=346.867 colspan=4><P style="margin:0pt; line-height:11pt; font-family:Times New Roman; font-size:9pt"><B>In
 millions of U.S. dollars except per share amounts</B></P>
</TD><TD style="border-right:1.5pt solid #000000; border-bottom:1.5pt solid #000000" valign=top width=98.267><P style="margin:0pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=center><B>October 1,<BR>
2005</B></P>
</TD><TD style="border-right:1.5pt solid #000000; border-bottom:1.5pt solid #000000" valign=top width=98.2><P style="margin:0pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=center><B>September 25,<BR>
2004</B></P>
</TD><TD valign=top width=23.067>&nbsp;</TD></TR>
<TR><TD valign=top width=270.4 colspan=3>&nbsp;</TD><TD valign=top width=76.467>&nbsp;</TD><TD valign=top width=98.267>&nbsp;</TD><TD valign=top width=98.2>&nbsp;</TD><TD valign=top width=23.067>&nbsp;</TD></TR>
<TR><TD valign=top width=142.067>&nbsp;</TD><TD valign=top width=51.2>&nbsp;</TD><TD valign=top width=77.133>&nbsp;</TD><TD valign=top width=76.467>&nbsp;</TD><TD valign=top width=98.267>&nbsp;</TD><TD valign=top width=98.2>&nbsp;</TD><TD valign=top width=23.067>&nbsp;</TD></TR>
<TR><TD valign=bottom width=142.067><P style="margin:0pt; line-height:11pt; font-family:Times New Roman; font-size:9pt">Net sales</P>
</TD><TD valign=top width=51.2>&nbsp;</TD><TD valign=top width=77.133>&nbsp;</TD><TD valign=top width=76.467>&nbsp;</TD><TD valign=bottom width=98.267><P style="margin:0pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=right>2,246
 </P>
</TD><TD valign=bottom width=98.2><P style="margin:0pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=right>2,231</P>
</TD><TD valign=bottom width=23.067>&nbsp;</TD></TR>
<TR><TD style="background-color:#DFDFDF" valign=bottom width=142.067><P style="margin:0pt; line-height:11pt; font-family:Times New Roman; font-size:9pt">Other revenues</P>
</TD><TD style="background-color:#DFDFDF" valign=top width=51.2>&nbsp;</TD><TD style="background-color:#DFDFDF" valign=top width=77.133>&nbsp;</TD><TD style="background-color:#DFDFDF" valign=top width=76.467>&nbsp;</TD><TD style="background-color:#DFDFDF; border-bottom:0.5pt solid #000000" valign=bottom width=98.267><P style="margin:0pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=right>1</P>
</TD><TD style="background-color:#DFDFDF; border-bottom:0.5pt solid #000000" valign=bottom width=98.2><P style="margin:0pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=right>0&nbsp;</P>
</TD><TD style="background-color:#DFDFDF" valign=bottom width=23.067>&nbsp;</TD></TR>
<TR><TD valign=bottom width=142.067><P style="margin:0pt; line-height:11pt; font-family:Times New Roman; font-size:9pt"><B>Net revenues </B></P>
</TD><TD valign=top width=51.2>&nbsp;</TD><TD valign=top width=77.133>&nbsp;</TD><TD valign=top width=76.467>&nbsp;</TD><TD valign=bottom width=98.267><P style="margin:0pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=right><B>2,247</B></P>
</TD><TD valign=bottom width=98.2><P style="margin:0pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=right><B>2,231&nbsp;</B></P>
</TD><TD valign=bottom width=23.067>&nbsp;</TD></TR>
<TR><TD style="background-color:#DFDFDF" valign=bottom width=142.067><P style="margin:0pt; line-height:11pt; font-family:Times New Roman; font-size:9pt">Cost of sales</P>
</TD><TD style="background-color:#DFDFDF" valign=top width=51.2>&nbsp;</TD><TD style="background-color:#DFDFDF" valign=top width=77.133>&nbsp;</TD><TD style="background-color:#DFDFDF" valign=top width=76.467>&nbsp;</TD><TD style="background-color:#DFDFDF; border-bottom:0.5pt solid #000000" valign=bottom width=98.267><P style="margin:0pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=right>(1,481)</P>
</TD><TD style="background-color:#DFDFDF; border-bottom:0.5pt solid #000000" valign=bottom width=98.2><P style="margin:0pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=right>(1,386)</P>
</TD><TD style="background-color:#DFDFDF" valign=bottom width=23.067>&nbsp;</TD></TR>
<TR><TD valign=bottom width=142.067><P style="margin:0pt; line-height:11pt; font-family:Times New Roman; font-size:9pt"><B>Gross profit</B></P>
</TD><TD valign=top width=51.2>&nbsp;</TD><TD valign=top width=77.133>&nbsp;</TD><TD valign=top width=76.467>&nbsp;</TD><TD valign=bottom width=98.267><P style="margin:0pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=right><B>766</B></P>
</TD><TD valign=bottom width=98.2><P style="margin:0pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=right><B>845&nbsp;</B></P>
</TD><TD valign=bottom width=23.067>&nbsp;</TD></TR>
<TR><TD style="background-color:#DFDFDF" valign=bottom width=193.267 colspan=2><P style="margin:0pt; line-height:11pt; font-family:Times New Roman; font-size:9pt">Selling, general and administrative</P>
</TD><TD style="background-color:#DFDFDF" valign=top width=77.133>&nbsp;</TD><TD style="background-color:#DFDFDF" valign=top width=76.467>&nbsp;</TD><TD style="background-color:#DFDFDF" valign=bottom width=98.267><P style="margin:0pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=right>(248)</P>
</TD><TD style="background-color:#DFDFDF" valign=bottom width=98.2><P style="margin:0pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=right>(233)</P>
</TD><TD style="background-color:#DFDFDF" valign=bottom width=23.067>&nbsp;</TD></TR>
<TR><TD valign=bottom width=142.067><P style="margin:0pt; line-height:11pt; font-family:Times New Roman; font-size:9pt">Research and development </P>
</TD><TD valign=top width=51.2>&nbsp;</TD><TD valign=top width=77.133>&nbsp;</TD><TD valign=top width=76.467>&nbsp;</TD><TD valign=bottom width=98.267><P style="margin:0pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=right>(401)</P>
</TD><TD valign=bottom width=98.2><P style="margin:0pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=right>(384)</P>
</TD><TD valign=bottom width=23.067>&nbsp;</TD></TR>
<TR><TD style="background-color:#DFDFDF" valign=bottom width=193.267 colspan=2><P style="margin:0pt; line-height:11pt; font-family:Times New Roman; font-size:9pt">Other income and expenses, net</P>
</TD><TD style="background-color:#DFDFDF" valign=top width=77.133>&nbsp;</TD><TD style="background-color:#DFDFDF" valign=top width=76.467>&nbsp;</TD><TD style="background-color:#DFDFDF" valign=bottom width=98.267><P style="margin:0pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=right>(3)</P>
</TD><TD style="background-color:#DFDFDF" valign=bottom width=98.2><P style="margin:0pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=right>(3)</P>
</TD><TD style="background-color:#DFDFDF" valign=bottom width=23.067>&nbsp;</TD></TR>
<TR><TD valign=bottom width=346.867 colspan=4><P style="margin:0pt; line-height:11pt; font-family:Times New Roman; font-size:9pt">Impairment, restructuring charges and other related closure costs</P>
</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=98.267><P style="margin:0pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=right>(12)</P>
</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=98.2><P style="margin:0pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=right>(12)</P>
</TD><TD valign=bottom width=23.067>&nbsp;</TD></TR>
<TR><TD style="background-color:#DFDFDF" valign=bottom width=142.067><P style="margin:0pt; line-height:11pt; font-family:Times New Roman; font-size:9pt"><B>Operating income </B></P>
</TD><TD style="background-color:#DFDFDF" valign=top width=51.2>&nbsp;</TD><TD style="background-color:#DFDFDF" valign=top width=77.133>&nbsp;</TD><TD style="background-color:#DFDFDF" valign=top width=76.467>&nbsp;</TD><TD style="background-color:#DFDFDF" valign=bottom width=98.267><P style="margin:0pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=right><B>102</B></P>
</TD><TD style="background-color:#DFDFDF" valign=bottom width=98.2><P style="margin:0pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=right><B>213</B></P>
</TD><TD style="background-color:#DFDFDF" valign=bottom width=23.067>&nbsp;</TD></TR>
<TR><TD valign=bottom width=142.067><P style="margin:0pt; line-height:11pt; font-family:Times New Roman; font-size:9pt">Interest income, net</P>
</TD><TD valign=top width=51.2>&nbsp;</TD><TD valign=top width=77.133>&nbsp;</TD><TD valign=top width=76.467>&nbsp;</TD><TD valign=bottom width=98.267><P style="margin:0pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=right>8</P>
</TD><TD valign=bottom width=98.2><P style="margin:0pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=right>0</P>
</TD><TD valign=bottom width=23.067>&nbsp;</TD></TR>
<TR><TD style="background-color:#DFDFDF" valign=bottom width=142.067><P style="margin:0pt; line-height:11pt; font-family:Times New Roman; font-size:9pt">Loss on equity investments</P>
</TD><TD style="background-color:#DFDFDF" valign=top width=51.2>&nbsp;</TD><TD style="background-color:#DFDFDF" valign=top width=77.133>&nbsp;</TD><TD style="background-color:#DFDFDF" valign=top width=76.467>&nbsp;</TD><TD style="background-color:#DFDFDF; border-bottom:0.5pt solid #000000" valign=bottom width=98.267><P style="margin:0pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=right>(2)</P>
</TD><TD style="background-color:#DFDFDF; border-bottom:0.5pt solid #000000" valign=bottom width=98.2><P style="margin:0pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=right>(2)</P>
</TD><TD style="background-color:#DFDFDF" valign=bottom width=23.067>&nbsp;</TD></TR>
<TR><TD valign=bottom width=270.4 colspan=3><P style="margin:0pt; line-height:11pt; font-family:Times New Roman; font-size:9pt"><B>Income before income taxes and minority interests</B></P>
</TD><TD valign=top width=76.467>&nbsp;</TD><TD valign=bottom width=98.267><P style="margin:0pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=right><B>108</B></P>
</TD><TD valign=bottom width=98.2><P style="margin:0pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=right><B>211</B></P>
</TD><TD valign=bottom width=23.067>&nbsp;</TD></TR>
<TR><TD style="background-color:#DFDFDF" valign=bottom width=142.067><P style="margin:0pt; line-height:11pt; font-family:Times New Roman; font-size:9pt">Income tax expense</P>
</TD><TD style="background-color:#DFDFDF" valign=top width=51.2>&nbsp;</TD><TD style="background-color:#DFDFDF" valign=top width=77.133>&nbsp;</TD><TD style="background-color:#DFDFDF" valign=top width=76.467>&nbsp;</TD><TD style="background-color:#DFDFDF; border-bottom:0.5pt solid #000000" valign=bottom width=98.267><P style="margin:0pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=right>(18)</P>
</TD><TD style="background-color:#DFDFDF; border-bottom:0.5pt solid #000000" valign=bottom width=98.2><P style="margin:0pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=right>(20)</P>
</TD><TD style="background-color:#DFDFDF" valign=bottom width=23.067>&nbsp;</TD></TR>
<TR><TD valign=bottom width=193.267 colspan=2><P style="margin:0pt; line-height:11pt; font-family:Times New Roman; font-size:9pt"><B>Income before minority interests</B></P>
</TD><TD valign=top width=77.133>&nbsp;</TD><TD valign=top width=76.467>&nbsp;</TD><TD valign=bottom width=98.267><P style="margin:0pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=right><B>90</B></P>
</TD><TD valign=bottom width=98.2><P style="margin:0pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=right><B>191</B></P>
</TD><TD valign=bottom width=23.067>&nbsp;</TD></TR>
<TR><TD style="background-color:#DFDFDF" valign=bottom width=142.067><P style="margin:0pt; line-height:11pt; font-family:Times New Roman; font-size:9pt">Minority interests</P>
</TD><TD style="background-color:#DFDFDF" valign=top width=51.2>&nbsp;</TD><TD style="background-color:#DFDFDF" valign=top width=77.133>&nbsp;</TD><TD style="background-color:#DFDFDF" valign=top width=76.467>&nbsp;</TD><TD style="background-color:#DFDFDF" valign=bottom width=98.267><P style="margin:0pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=right>(1)</P>
</TD><TD style="background-color:#DFDFDF" valign=bottom width=98.2><P style="margin:0pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=right>(2)</P>
</TD><TD style="background-color:#DFDFDF" valign=bottom width=23.067>&nbsp;</TD></TR>
<TR><TD valign=bottom width=142.067><P style="margin:0pt; line-height:11pt; font-family:Times New Roman; font-size:9pt"><B>Net income </B></P>
</TD><TD valign=top width=51.2>&nbsp;</TD><TD valign=top width=77.133>&nbsp;</TD><TD valign=top width=76.467>&nbsp;</TD><TD style="border-bottom:1.5pt solid #000000" valign=bottom width=98.267><P style="margin:0pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=right><B>89</B></P>
</TD><TD style="border-bottom:1.5pt solid #000000" valign=bottom width=98.2><P style="margin:0pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=right><B>189</B></P>
</TD><TD valign=bottom width=23.067>&nbsp;</TD></TR>
<TR><TD style="background-color:#DFDFDF" valign=bottom width=142.067>&nbsp;</TD><TD style="background-color:#DFDFDF" valign=top width=51.2>&nbsp;</TD><TD style="background-color:#DFDFDF" valign=top width=77.133>&nbsp;</TD><TD style="background-color:#DFDFDF" valign=top width=76.467>&nbsp;</TD><TD style="background-color:#DFDFDF" valign=bottom width=98.267>&nbsp;</TD><TD style="background-color:#DFDFDF" valign=bottom width=98.2>&nbsp;</TD><TD style="background-color:#DFDFDF" valign=bottom width=23.067>&nbsp;</TD></TR>
<TR><TD valign=bottom width=193.267 colspan=2><P style="margin:0pt; line-height:11pt; font-family:Times New Roman; font-size:9pt"><B>Earnings&nbsp;per share (Basic)</B></P>
</TD><TD valign=top width=77.133>&nbsp;</TD><TD valign=top width=76.467>&nbsp;</TD><TD style="border-bottom:1.5pt solid #000000" valign=bottom width=98.267><P style="margin:0pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=right>0.10</P>
</TD><TD style="border-bottom:1.5pt solid #000000" valign=bottom width=98.2><P style="margin:0pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=right>0.21</P>
</TD><TD valign=bottom width=23.067>&nbsp;</TD></TR>
<TR><TD style="background-color:#DFDFDF" valign=bottom width=193.267 colspan=2><P style="margin:0pt; line-height:11pt; font-family:Times New Roman; font-size:9pt"><B>Earnings per share (Diluted)</B></P>
</TD><TD style="background-color:#DFDFDF" valign=top width=77.133>&nbsp;</TD><TD style="background-color:#DFDFDF" valign=top width=76.467>&nbsp;</TD><TD style="background-color:#DFDFDF; border-bottom:0.5pt solid #000000" valign=bottom width=98.267><P style="margin:0pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=right>0.10</P>
</TD><TD style="background-color:#DFDFDF; border-bottom:0.5pt solid #000000" valign=bottom width=98.2><P style="margin:0pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=right>0.20</P>
</TD><TD style="background-color:#DFDFDF" valign=bottom width=23.067>&nbsp;</TD></TR>
<TR><TD valign=top width=142.067>&nbsp;</TD><TD valign=top width=51.2><P style="margin:0pt; line-height:11pt; font-family:Times New Roman; font-size:9pt"><B>&nbsp;</B></P>
</TD><TD valign=top width=77.133>&nbsp;</TD><TD valign=top width=76.467>&nbsp;</TD><TD valign=top width=98.267><P style="margin:0pt; line-height:11pt; font-family:Times New Roman; font-size:9pt">&nbsp;</P>
</TD><TD valign=top width=98.2><P style="margin:0pt; line-height:11pt; font-family:Times New Roman; font-size:9pt">&nbsp;</P>
</TD><TD valign=top width=23.067>&nbsp;</TD></TR>
<TR><TD valign=top width=142.067>&nbsp;</TD><TD valign=top width=51.2>&nbsp;</TD><TD valign=top width=77.133>&nbsp;</TD><TD valign=top width=76.467>&nbsp;</TD><TD valign=top width=98.267>&nbsp;</TD><TD valign=top width=98.2>&nbsp;</TD><TD valign=top width=23.067>&nbsp;</TD></TR>
<TR><TD valign=bottom width=566.4 colspan=7><P style="margin:0pt; line-height:10pt; font-family:Times New Roman; font-size:8pt" align=center>The accompanying notes are an integral part of these unaudited interim consolidated financial statements</P>
</TD></TR>
<TR><TD valign=top width=142.067>&nbsp;</TD><TD valign=top width=51.2>&nbsp;</TD><TD valign=top width=77.133>&nbsp;</TD><TD valign=top width=76.467>&nbsp;</TD><TD valign=top width=98.267>&nbsp;</TD><TD valign=top width=98.2>&nbsp;</TD><TD valign=top width=23.067>&nbsp;</TD></TR>
<TR><TD valign=top width=142.067>&nbsp;</TD><TD valign=top width=51.2>&nbsp;</TD><TD valign=top width=77.133>&nbsp;</TD><TD valign=top width=76.467>&nbsp;</TD><TD valign=top width=98.267>&nbsp;</TD><TD valign=top width=98.2>&nbsp;</TD><TD valign=top width=23.067>&nbsp;</TD></TR>
</TABLE>
<P style="margin-top:0pt; margin-bottom:10pt; font-family:Times New Roman" align=center><BR>
<BR></P>
<P style="margin:0pt; font-family:Times New Roman" align=center>F-2</P>
<P style="margin:0pt; font-family:Times New Roman"><BR></P>
<HR style="padding-top:7.2pt; padding-bottom:7.2pt" noshade size=1.333>
<P style="page-break-before:always; margin:0pt; font-family:Times New Roman" align=right><BR></P>
<P style="margin:0pt; font-family:Times New Roman"><BR></P>
<P style="margin-top:0pt; margin-bottom:10pt; font-family:Times New Roman" align=center><BR></P>
<TABLE style="font-size:10pt" cellspacing=0 align=center><TR><TD valign=top width=26.867>&nbsp;</TD><TD valign=top width=180.2>&nbsp;</TD><TD valign=top width=51.2>&nbsp;</TD><TD valign=top width=77.067>&nbsp;</TD><TD valign=top width=76.533>&nbsp;</TD><TD valign=top width=98.2>&nbsp;</TD><TD valign=top width=98.267>&nbsp;</TD><TD valign=top width=23>&nbsp;</TD></TR>
<TR><TD valign=top width=26.867>&nbsp;</TD><TD valign=top width=180.2><P style="margin:0pt; line-height:11pt; font-family:Times New Roman; font-size:9pt"><B>STMicroelectronics N.V.</B></P>
</TD><TD valign=top width=51.2>&nbsp;</TD><TD valign=top width=77.067>&nbsp;</TD><TD valign=top width=76.533>&nbsp;</TD><TD valign=top width=98.2>&nbsp;</TD><TD valign=top width=98.267>&nbsp;</TD><TD valign=top width=23>&nbsp;</TD></TR>
<TR><TD valign=bottom width=26.867>&nbsp;</TD><TD valign=bottom width=308.467 colspan=3><P style="margin:0pt; line-height:11pt; font-family:Times New Roman; font-size:9pt"><B>CONSOLIDATED STATEMENTS OF INCOME</B></P>
</TD><TD valign=bottom width=76.533>&nbsp;</TD><TD valign=bottom width=98.2>&nbsp;</TD><TD valign=bottom width=98.267>&nbsp;</TD><TD valign=bottom width=23>&nbsp;</TD></TR>
<TR><TD valign=top width=26.867>&nbsp;</TD><TD valign=top width=180.2>&nbsp;</TD><TD valign=top width=51.2>&nbsp;</TD><TD valign=top width=77.067>&nbsp;</TD><TD valign=top width=76.533>&nbsp;</TD><TD style="border-bottom:1.5pt solid #000000" valign=top width=98.2>&nbsp;</TD><TD style="border-bottom:1.5pt solid #000000" valign=top width=98.267>&nbsp;</TD><TD valign=top width=23>&nbsp;</TD></TR>
<TR><TD valign=top width=26.867>&nbsp;</TD><TD valign=top width=180.2>&nbsp;</TD><TD valign=top width=51.2>&nbsp;</TD><TD valign=top width=77.067>&nbsp;</TD><TD style="border-right:1.5pt solid #000000" valign=top width=76.533>&nbsp;</TD><TD style="border-right:1.5pt solid #000000" valign=top width=196.467 colspan=2><P style="margin:0pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=center><B>Nine months ended</B></P>
</TD><TD valign=top width=23>&nbsp;</TD></TR>
<TR><TD valign=top width=26.867>&nbsp;</TD><TD valign=top width=180.2>&nbsp;</TD><TD valign=top width=51.2>&nbsp;</TD><TD valign=top width=77.067>&nbsp;</TD><TD style="border-right:1.5pt solid #000000" valign=top width=76.533>&nbsp;</TD><TD style="border-right:1.5pt solid #000000; border-bottom:1.5pt solid #000000" valign=top width=196.467 colspan=2><P style="margin:0pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=center>(unaudited)</P>
</TD><TD valign=top width=23>&nbsp;</TD></TR>
<TR><TD valign=top width=26.867>&nbsp;</TD><TD valign=top width=180.2>&nbsp;</TD><TD valign=top width=51.2>&nbsp;</TD><TD valign=top width=77.067>&nbsp;</TD><TD style="border-right:1.5pt solid #000000" valign=top width=76.533>&nbsp;</TD><TD style="border-right:1.5pt solid #000000" valign=top width=98.2><P style="margin:0pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=center><B>October 1,</B></P>
</TD><TD style="border-right:1.5pt solid #000000" valign=top width=98.267><P style="margin:0pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=center><B>September 25, </B></P>
</TD><TD valign=top width=23>&nbsp;</TD></TR>
<TR><TD valign=top width=26.867>&nbsp;</TD><TD valign=bottom width=308.467 colspan=3><P style="margin:0pt; line-height:11pt; font-family:Times New Roman; font-size:9pt"><B>In
 millio</B><strong>ns</strong><B> of U.S. dollars except per share amounts</B></P>
</TD><TD style="border-right:1.5pt solid #000000" valign=top width=76.533>&nbsp;</TD><TD style="border-right:1.5pt solid #000000; border-bottom:1.5pt solid #000000" valign=top width=98.2><P style="margin:0pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=center><B>2005</B></P>
</TD><TD style="border-right:1.5pt solid #000000; border-bottom:1.5pt solid #000000" valign=top width=98.267><P style="margin:0pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=center><B>2004</B></P>
</TD><TD valign=top width=23>&nbsp;</TD></TR>
<TR><TD valign=top width=26.867>&nbsp;</TD><TD valign=top width=180.2>&nbsp;</TD><TD valign=top width=51.2>&nbsp;</TD><TD valign=top width=77.067>&nbsp;</TD><TD valign=top width=76.533>&nbsp;</TD><TD valign=top width=98.2>&nbsp;</TD><TD valign=top width=98.267>&nbsp;</TD><TD valign=top width=23>&nbsp;</TD></TR>
<TR><TD valign=top width=26.867>&nbsp;</TD><TD valign=bottom width=180.2><P style="margin:0pt; line-height:11pt; font-family:Times New Roman; font-size:9pt">Net sales</P>
</TD><TD valign=top width=51.2>&nbsp;</TD><TD valign=top width=77.067>&nbsp;</TD><TD valign=top width=76.533>&nbsp;</TD><TD valign=bottom width=98.2><P style="margin:0pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=right>6,489</P>
</TD><TD valign=bottom width=98.267><P style="margin:0pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=right>6,429</P>
</TD><TD valign=top width=23>&nbsp;</TD></TR>
<TR><TD style="background-color:#DFDFDF" valign=top width=26.867>&nbsp;</TD><TD style="background-color:#DFDFDF" valign=bottom width=180.2><P style="margin:0pt; line-height:11pt; font-family:Times New Roman; font-size:9pt">Other revenues</P>
</TD><TD style="background-color:#DFDFDF" valign=top width=51.2>&nbsp;</TD><TD style="background-color:#DFDFDF" valign=top width=77.067>&nbsp;</TD><TD style="background-color:#DFDFDF" valign=top width=76.533>&nbsp;</TD><TD style="background-color:#DFDFDF" valign=bottom width=98.2><P style="margin:0pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=right>4</P>
</TD><TD style="background-color:#DFDFDF" valign=bottom width=98.267><P style="margin:0pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=right>3</P>
</TD><TD style="background-color:#DFDFDF" valign=top width=23>&nbsp;</TD></TR>
<TR><TD valign=top width=26.867>&nbsp;</TD><TD valign=bottom width=180.2><P style="margin:0pt; line-height:11pt; font-family:Times New Roman; font-size:9pt"><B>Net revenues </B></P>
</TD><TD valign=top width=51.2>&nbsp;</TD><TD valign=top width=77.067>&nbsp;</TD><TD valign=top width=76.533>&nbsp;</TD><TD valign=bottom width=98.2><P style="margin:0pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=right><B>6,493</B></P>
</TD><TD valign=bottom width=98.267><P style="margin:0pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=right><B>6,432</B></P>
</TD><TD valign=top width=23>&nbsp;</TD></TR>
<TR><TD style="background-color:#DFDFDF" valign=top width=26.867>&nbsp;</TD><TD style="background-color:#DFDFDF" valign=bottom width=180.2><P style="margin:0pt; line-height:11pt; font-family:Times New Roman; font-size:9pt">Cost of sales</P>
</TD><TD style="background-color:#DFDFDF" valign=top width=51.2>&nbsp;</TD><TD style="background-color:#DFDFDF" valign=top width=77.067>&nbsp;</TD><TD style="background-color:#DFDFDF" valign=top width=76.533>&nbsp;</TD><TD style="background-color:#DFDFDF" valign=bottom width=98.2><P style="margin:0pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=right>(4,328)</P>
</TD><TD style="background-color:#DFDFDF" valign=bottom width=98.267><P style="margin:0pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=right>(4,056)</P>
</TD><TD style="background-color:#DFDFDF" valign=top width=23>&nbsp;</TD></TR>
<TR><TD valign=top width=26.867>&nbsp;</TD><TD valign=bottom width=180.2><P style="margin:0pt; line-height:11pt; font-family:Times New Roman; font-size:9pt"><B>Gross profit</B></P>
</TD><TD valign=top width=51.2>&nbsp;</TD><TD valign=top width=77.067>&nbsp;</TD><TD valign=top width=76.533>&nbsp;</TD><TD valign=bottom width=98.2><P style="margin:0pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=right><B>2,165</B></P>
</TD><TD valign=bottom width=98.267><P style="margin:0pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=right><B>2,376</B></P>
</TD><TD valign=top width=23>&nbsp;</TD></TR>
<TR><TD style="background-color:#DFDFDF" valign=top width=26.867>&nbsp;</TD><TD style="background-color:#DFDFDF" valign=bottom width=231.4 colspan=2><P style="margin:0pt; line-height:11pt; font-family:Times New Roman; font-size:9pt">Selling, general and administrative</P>
</TD><TD style="background-color:#DFDFDF" valign=top width=77.067>&nbsp;</TD><TD style="background-color:#DFDFDF" valign=top width=76.533>&nbsp;</TD><TD style="background-color:#DFDFDF" valign=bottom width=98.2><P style="margin:0pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=right>(766)</P>
</TD><TD style="background-color:#DFDFDF" valign=bottom width=98.267><P style="margin:0pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=right>(702)</P>
</TD><TD style="background-color:#DFDFDF" valign=top width=23>&nbsp;</TD></TR>
<TR><TD valign=top width=26.867>&nbsp;</TD><TD valign=bottom width=180.2><P style="margin:0pt; line-height:11pt; font-family:Times New Roman; font-size:9pt">Research and development </P>
</TD><TD valign=top width=51.2>&nbsp;</TD><TD valign=top width=77.067>&nbsp;</TD><TD valign=top width=76.533>&nbsp;</TD><TD valign=bottom width=98.2><P style="margin:0pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=right>(1,228)</P>
</TD><TD valign=bottom width=98.267><P style="margin:0pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=right>(1,131)</P>
</TD><TD valign=top width=23>&nbsp;</TD></TR>
<TR><TD style="background-color:#DFDFDF" valign=top width=26.867>&nbsp;</TD><TD style="background-color:#DFDFDF" valign=bottom width=180.2><P style="margin:0pt; line-height:11pt; font-family:Times New Roman; font-size:9pt">Other income and expenses, net</P>
</TD><TD style="background-color:#DFDFDF" valign=top width=51.2>&nbsp;</TD><TD style="background-color:#DFDFDF" valign=top width=77.067>&nbsp;</TD><TD style="background-color:#DFDFDF" valign=top width=76.533>&nbsp;</TD><TD style="background-color:#DFDFDF" valign=bottom width=98.2><P style="margin:0pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=right>(11)</P>
</TD><TD style="background-color:#DFDFDF" valign=bottom width=98.267><P style="margin:0pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=right>(13)</P>
</TD><TD style="background-color:#DFDFDF" valign=top width=23>&nbsp;</TD></TR>
<TR><TD valign=top width=26.867>&nbsp;</TD><TD valign=bottom width=385 colspan=4><P style="margin:0pt; line-height:11pt; font-family:Times New Roman; font-size:9pt">Impairment, restructuring charges and other related closure costs</P>
</TD><TD valign=bottom width=98.2><P style="margin:0pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=right>(113)</P>
</TD><TD valign=bottom width=98.267><P style="margin:0pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=right>(57)</P>
</TD><TD valign=top width=23>&nbsp;</TD></TR>
<TR><TD style="background-color:#DFDFDF" valign=top width=26.867>&nbsp;</TD><TD style="background-color:#DFDFDF" valign=bottom width=180.2><P style="margin:0pt; line-height:11pt; font-family:Times New Roman; font-size:9pt"><B>Operating income</B></P>
</TD><TD style="background-color:#DFDFDF" valign=top width=51.2>&nbsp;</TD><TD style="background-color:#DFDFDF" valign=top width=77.067>&nbsp;</TD><TD style="background-color:#DFDFDF" valign=top width=76.533>&nbsp;</TD><TD style="background-color:#DFDFDF" valign=bottom width=98.2><P style="margin:0pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=right><B>47</B></P>
</TD><TD style="background-color:#DFDFDF" valign=bottom width=98.267><P style="margin:0pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=right><B>473</B></P>
</TD><TD style="background-color:#DFDFDF" valign=top width=23>&nbsp;</TD></TR>
<TR><TD valign=top width=26.867>&nbsp;</TD><TD valign=bottom width=180.2><P style="margin:0pt; line-height:11pt; font-family:Times New Roman; font-size:9pt">Interest income (expense), net</P>
</TD><TD valign=top width=51.2>&nbsp;</TD><TD valign=top width=77.067>&nbsp;</TD><TD valign=top width=76.533>&nbsp;</TD><TD valign=bottom width=98.2><P style="margin:0pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=right>23</P>
</TD><TD valign=bottom width=98.267><P style="margin:0pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=right>(8)</P>
</TD><TD valign=top width=23>&nbsp;</TD></TR>
<TR><TD style="background-color:#DFDFDF" valign=top width=26.867>&nbsp;</TD><TD style="background-color:#DFDFDF" valign=bottom width=180.2><P style="margin:0pt; line-height:11pt; font-family:Times New Roman; font-size:9pt">Loss on equity investments</P>
</TD><TD style="background-color:#DFDFDF" valign=top width=51.2>&nbsp;</TD><TD style="background-color:#DFDFDF" valign=top width=77.067>&nbsp;</TD><TD style="background-color:#DFDFDF" valign=top width=76.533>&nbsp;</TD><TD style="background-color:#DFDFDF" valign=bottom width=98.2><P style="margin:0pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=right>(2)</P>
</TD><TD style="background-color:#DFDFDF" valign=bottom width=98.267><P style="margin:0pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=right>(2)</P>
</TD><TD style="background-color:#DFDFDF" valign=top width=23>&nbsp;</TD></TR>
<TR><TD valign=top width=26.867>&nbsp;</TD><TD valign=bottom width=231.4 colspan=2><P style="margin:0pt; line-height:11pt; font-family:Times New Roman; font-size:9pt">Loss on extinguishment of convertible debt</P>
</TD><TD valign=top width=77.067>&nbsp;</TD><TD valign=top width=76.533>&nbsp;</TD><TD valign=bottom width=98.2><P style="margin:0pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=right>0</P>
</TD><TD valign=bottom width=98.267><P style="margin:0pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=right>(4)</P>
</TD><TD valign=top width=23>&nbsp;</TD></TR>
<TR><TD style="background-color:#DFDFDF" valign=top width=26.867>&nbsp;</TD><TD style="background-color:#DFDFDF" valign=bottom width=308.467 colspan=3><P style="margin:0pt; line-height:11pt; font-family:Times New Roman; font-size:9pt"><B>Income before income taxes and minority interests</B></P>
</TD><TD style="background-color:#DFDFDF" valign=top width=76.533>&nbsp;</TD><TD style="background-color:#DFDFDF" valign=bottom width=98.2><P style="margin:0pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=right><B>68</B></P>
</TD><TD style="background-color:#DFDFDF" valign=bottom width=98.267><P style="margin:0pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=right><B>459</B></P>
</TD><TD style="background-color:#DFDFDF" valign=top width=23>&nbsp;</TD></TR>
<TR><TD valign=top width=26.867>&nbsp;</TD><TD valign=bottom width=180.2><P style="margin:0pt; line-height:11pt; font-family:Times New Roman; font-size:9pt">Income tax benefit (expense)</P>
</TD><TD valign=top width=51.2>&nbsp;</TD><TD valign=top width=77.067>&nbsp;</TD><TD valign=top width=76.533>&nbsp;</TD><TD valign=bottom width=98.2><P style="margin:0pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=right>17</P>
</TD><TD valign=bottom width=98.267><P style="margin:0pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=right>(42)</P>
</TD><TD valign=top width=23>&nbsp;</TD></TR>
<TR><TD style="background-color:#DFDFDF" valign=top width=26.867>&nbsp;</TD><TD style="background-color:#DFDFDF" valign=bottom width=180.2><P style="margin:0pt; line-height:11pt; font-family:Times New Roman; font-size:9pt"><B>Income before minority interests</B></P>
</TD><TD style="background-color:#DFDFDF" valign=top width=51.2>&nbsp;</TD><TD style="background-color:#DFDFDF" valign=top width=77.067>&nbsp;</TD><TD style="background-color:#DFDFDF" valign=top width=76.533>&nbsp;</TD><TD style="background-color:#DFDFDF" valign=bottom width=98.2><P style="margin:0pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=right><B>85 </B></P>
</TD><TD style="background-color:#DFDFDF" valign=bottom width=98.267><P style="margin:0pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=right><B>417</B></P>
</TD><TD style="background-color:#DFDFDF" valign=top width=23>&nbsp;</TD></TR>
<TR><TD valign=top width=26.867>&nbsp;</TD><TD valign=bottom width=180.2><P style="margin:0pt; line-height:11pt; font-family:Times New Roman; font-size:9pt">Minority interests</P>
</TD><TD valign=top width=51.2>&nbsp;</TD><TD valign=top width=77.067>&nbsp;</TD><TD valign=top width=76.533>&nbsp;</TD><TD valign=bottom width=98.2><P style="margin:0pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=right>(2)</P>
</TD><TD valign=bottom width=98.267><P style="margin:0pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=right>(3)</P>
</TD><TD valign=top width=23>&nbsp;</TD></TR>
<TR><TD style="background-color:#DFDFDF" valign=top width=26.867>&nbsp;</TD><TD style="background-color:#DFDFDF" valign=bottom width=180.2><P style="margin:0pt; line-height:11pt; font-family:Times New Roman; font-size:9pt"><B>Net income </B></P>
</TD><TD style="background-color:#DFDFDF" valign=top width=51.2>&nbsp;</TD><TD style="background-color:#DFDFDF" valign=top width=77.067>&nbsp;</TD><TD style="background-color:#DFDFDF" valign=top width=76.533>&nbsp;</TD><TD style="background-color:#DFDFDF" valign=bottom width=98.2><P style="margin:0pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=right><B>83 </B></P>
</TD><TD style="background-color:#DFDFDF" valign=bottom width=98.267><P style="margin:0pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=right><B>414</B></P>
</TD><TD style="background-color:#DFDFDF" valign=top width=23>&nbsp;</TD></TR>
<TR><TD valign=top width=26.867>&nbsp;</TD><TD valign=bottom width=180.2>&nbsp;</TD><TD valign=top width=51.2>&nbsp;</TD><TD valign=top width=77.067>&nbsp;</TD><TD valign=top width=76.533>&nbsp;</TD><TD valign=bottom width=98.2>&nbsp;</TD><TD valign=bottom width=98.267>&nbsp;</TD><TD valign=top width=23>&nbsp;</TD></TR>
<TR><TD style="background-color:#DFDFDF" valign=top width=26.867>&nbsp;</TD><TD style="background-color:#DFDFDF" valign=bottom width=180.2><P style="margin:0pt; line-height:11pt; font-family:Times New Roman; font-size:9pt"><B>Earnings per share (Basic)</B></P>
</TD><TD style="background-color:#DFDFDF" valign=top width=51.2>&nbsp;</TD><TD style="background-color:#DFDFDF" valign=top width=77.067>&nbsp;</TD><TD style="background-color:#DFDFDF" valign=top width=76.533>&nbsp;</TD><TD style="background-color:#DFDFDF" valign=bottom width=98.2><P style="margin:0pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=right>0.09</P>
</TD><TD style="background-color:#DFDFDF" valign=bottom width=98.267><P style="margin:0pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=right>0.46</P>
</TD><TD style="background-color:#DFDFDF" valign=top width=23>&nbsp;</TD></TR>
<TR><TD valign=top width=26.867>&nbsp;</TD><TD valign=bottom width=180.2><P style="margin:0pt; line-height:11pt; font-family:Times New Roman; font-size:9pt"><B>Earnings per share (Diluted)</B></P>
</TD><TD valign=top width=51.2>&nbsp;</TD><TD valign=top width=77.067>&nbsp;</TD><TD valign=top width=76.533>&nbsp;</TD><TD valign=bottom width=98.2><P style="margin:0pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=right>0.09</P>
</TD><TD valign=bottom width=98.267><P style="margin:0pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=right>0.45</P>
</TD><TD valign=top width=23>&nbsp;</TD></TR>
<TR><TD valign=top width=26.867>&nbsp;</TD><TD valign=top width=180.2>&nbsp;</TD><TD valign=top width=51.2><P style="margin:0pt; line-height:11pt; font-family:Times New Roman; font-size:9pt"><B>&nbsp;</B></P>
</TD><TD valign=top width=77.067>&nbsp;</TD><TD valign=top width=76.533>&nbsp;</TD><TD valign=top width=98.2><P style="margin:0pt; line-height:11pt; font-family:Times New Roman; font-size:9pt">&nbsp;</P>
</TD><TD valign=top width=98.267><P style="margin:0pt; line-height:11pt; font-family:Times New Roman; font-size:9pt">&nbsp;</P>
</TD><TD valign=top width=23>&nbsp;</TD></TR>
<TR><TD valign=top width=26.867>&nbsp;</TD><TD valign=top width=180.2>&nbsp;</TD><TD valign=top width=51.2>&nbsp;</TD><TD valign=top width=77.067>&nbsp;</TD><TD valign=top width=76.533>&nbsp;</TD><TD valign=top width=98.2>&nbsp;</TD><TD valign=top width=98.267>&nbsp;</TD><TD valign=top width=23>&nbsp;</TD></TR>
<TR><TD valign=top width=26.867>&nbsp;</TD><TD valign=top width=581.467 colspan=6><P style="margin:0pt; line-height:10pt; font-family:Times New Roman; font-size:8pt" align=center>The accompanying notes are an integral part of these unaudited interim consolidated financial statements</P>
</TD><TD valign=top width=23>&nbsp;</TD></TR>
<TR><TD valign=top width=26.867>&nbsp;</TD><TD valign=top width=180.2>&nbsp;</TD><TD valign=top width=51.2>&nbsp;</TD><TD valign=top width=77.067>&nbsp;</TD><TD valign=top width=76.533>&nbsp;</TD><TD valign=top width=98.2>&nbsp;</TD><TD valign=top width=98.267>&nbsp;</TD><TD valign=top width=23>&nbsp;</TD></TR>
<TR><TD valign=top width=26.867>&nbsp;</TD><TD valign=top width=180.2>&nbsp;</TD><TD valign=top width=51.2>&nbsp;</TD><TD valign=top width=77.067>&nbsp;</TD><TD valign=top width=76.533>&nbsp;</TD><TD valign=top width=98.2>&nbsp;</TD><TD valign=top width=98.267>&nbsp;</TD><TD valign=top width=23>&nbsp;</TD></TR>
</TABLE>
<P style="margin:0pt; font-family:Times New Roman" align=center><BR>
<BR></P>
<P style="margin:0pt; font-family:Times New Roman" align=center>F-3</P>
<P style="margin:0pt; font-family:Times New Roman"><BR></P>
<HR style="padding-top:7.2pt; padding-bottom:7.2pt" noshade size=1.333>
<P style="page-break-before:always; margin:0pt; font-family:Times New Roman" align=right><BR></P>
<P style="margin:0pt; font-family:Times New Roman"><BR></P>
<P style="margin:0pt; font-family:Times New Roman; font-size:5pt" align=center><BR></P>
<TABLE style="font-size:10pt" cellspacing=0 align=center><TR><TD valign=top width=369.267><P style="margin:0pt; line-height:11pt; font-family:Times New Roman; font-size:9pt"><B>STMicroelectronics N.V.</B></P>
</TD><TD valign=top width=118.267>&nbsp;</TD><TD valign=top width=118.267 colspan=2>&nbsp;</TD></TR>
<TR><TD valign=top width=369.267><P style="margin:0pt; line-height:11pt; font-family:Times New Roman; font-size:9pt"><B>CONSOLIDATED BALANCE SHEETS</B></P>
</TD><TD valign=top width=118.267>&nbsp;</TD><TD valign=top width=118.267 colspan=2>&nbsp;</TD></TR>
<TR><TD style="border-right:1.5pt solid #000000" valign=top width=369.267>&nbsp;</TD><TD style="border-top:1.5pt solid #000000; border-right:1.5pt solid #000000; border-bottom:1.5pt solid #000000" valign=top width=220.8 colspan=2><P style="margin:0pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=center><B>As of </B></P>
</TD><TD valign=top width=15.733>&nbsp;</TD></TR>
<TR><TD style="border-right:1.5pt solid #000000" valign=bottom width=369.267>&nbsp;</TD><TD style="border-right:1.5pt solid #000000" valign=top width=118.267><P style="margin:0pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=center><B>October 1,</B></P>
</TD><TD style="border-right:1.5pt solid #000000" valign=top width=102.533><P style="margin:0pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=center><B>December 31, </B></P>
</TD><TD valign=top width=15.733>&nbsp;</TD></TR>
<TR><TD style="border-right:1.5pt solid #000000" valign=top width=369.267><P style="margin:0pt; line-height:11pt; font-family:Times New Roman; font-size:9pt"><B>In
 millions of U.S. dollars</B></P>
</TD><TD style="border-right:1.5pt solid #000000; border-bottom:1.5pt solid #000000" valign=bottom width=118.267><P style="margin:0pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=center><B>2005<BR>
</B>(unaudited)</P>
</TD><TD style="border-right:1.5pt solid #000000; border-bottom:1.5pt solid #000000" valign=bottom width=102.533><P style="margin:0pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=center><B>2004<BR>
</B>(audited)</P>
</TD><TD valign=bottom width=15.733>&nbsp;</TD></TR>
<TR><TD valign=bottom width=369.267>&nbsp;</TD><TD valign=bottom width=118.267>&nbsp;</TD><TD valign=bottom width=102.533>&nbsp;</TD><TD valign=bottom width=15.733>&nbsp;</TD></TR>
<TR><TD style="background-color:#DFDFDF" valign=bottom width=369.267><P style="margin:0pt; line-height:11pt; font-family:Times New Roman; font-size:9pt"><B>Assets</B></P>
</TD><TD style="background-color:#DFDFDF" valign=top width=118.267>&nbsp;</TD><TD style="background-color:#DFDFDF" valign=top width=118.267 colspan=2>&nbsp;</TD></TR>
<TR><TD valign=bottom width=369.267><P style="margin:0pt; line-height:11pt; font-family:Times New Roman; font-size:9pt"><B>Current assets:</B></P>
</TD><TD valign=top width=118.267>&nbsp;</TD><TD valign=top width=118.267 colspan=2>&nbsp;</TD></TR>
<TR><TD style="background-color:#DFDFDF" valign=bottom width=369.267><P style="margin:0pt; line-height:11pt; font-family:Times New Roman; font-size:9pt">Cash and cash equivalents</P>
</TD><TD style="background-color:#DFDFDF" valign=bottom width=118.267><P style="margin:0pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=right>1,242</P>
</TD><TD style="background-color:#DFDFDF" valign=bottom width=102.533><P style="margin:0pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=right>1,950</P>
</TD><TD style="background-color:#DFDFDF" valign=bottom width=15.733>&nbsp;</TD></TR>
<TR><TD valign=bottom width=369.267><P style="margin:0pt; line-height:11pt; font-family:Times New Roman; font-size:9pt">Marketable securities</P>
</TD><TD valign=bottom width=118.267><P style="margin:0pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=right>525</P>
</TD><TD valign=bottom width=102.533><P style="margin:0pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=right>0</P>
</TD><TD valign=bottom width=15.733>&nbsp;</TD></TR>
<TR><TD style="background-color:#DFDFDF" valign=bottom width=369.267><P style="margin:0pt; line-height:11pt; font-family:Times New Roman; font-size:9pt">Trade accounts receivable, net</P>
</TD><TD style="background-color:#DFDFDF" valign=bottom width=118.267><P style="margin:0pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=right>1,483</P>
</TD><TD style="background-color:#DFDFDF" valign=bottom width=102.533><P style="margin:0pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=right>1,408</P>
</TD><TD style="background-color:#DFDFDF" valign=bottom width=15.733>&nbsp;</TD></TR>
<TR><TD valign=bottom width=369.267><P style="margin:0pt; line-height:11pt; font-family:Times New Roman; font-size:9pt">Inventories, net</P>
</TD><TD valign=bottom width=118.267><P style="margin:0pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=right>1,398</P>
</TD><TD valign=bottom width=102.533><P style="margin:0pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=right>1,344</P>
</TD><TD valign=bottom width=15.733>&nbsp;</TD></TR>
<TR><TD style="background-color:#DFDFDF" valign=bottom width=369.267><P style="margin:0pt; line-height:11pt; font-family:Times New Roman; font-size:9pt">Deferred tax assets</P>
</TD><TD style="background-color:#DFDFDF" valign=bottom width=118.267><P style="margin:0pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=right>182</P>
</TD><TD style="background-color:#DFDFDF" valign=bottom width=102.533><P style="margin:0pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=right>140</P>
</TD><TD style="background-color:#DFDFDF" valign=bottom width=15.733>&nbsp;</TD></TR>
<TR><TD valign=bottom width=369.267><P style="margin:0pt; line-height:11pt; font-family:Times New Roman; font-size:9pt">Other receivables and assets </P>
</TD><TD style="border-bottom:1pt solid #000000" valign=bottom width=118.267><P style="margin:0pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=right>610</P>
</TD><TD style="border-bottom:1pt solid #000000" valign=bottom width=102.533><P style="margin:0pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=right>785</P>
</TD><TD valign=bottom width=15.733>&nbsp;</TD></TR>
<TR><TD style="background-color:#DFDFDF" valign=bottom width=369.267><P style="margin:0pt; line-height:11pt; font-family:Times New Roman; font-size:9pt"><B>Total current assets</B></P>
</TD><TD style="background-color:#DFDFDF; border-bottom:1pt solid #000000" valign=bottom width=118.267><P style="margin:0pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=right><B>5,440</B></P>
</TD><TD style="background-color:#DFDFDF; border-bottom:1pt solid #000000" valign=bottom width=102.533><P style="margin:0pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=right><B>5,627</B></P>
</TD><TD style="background-color:#DFDFDF" valign=bottom width=15.733>&nbsp;</TD></TR>
<TR><TD valign=bottom width=369.267><P style="margin:0pt; line-height:11pt; font-family:Times New Roman; font-size:9pt">Goodwill</P>
</TD><TD valign=bottom width=118.267><P style="margin:0pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=right>223</P>
</TD><TD valign=bottom width=102.533><P style="margin:0pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=right>264</P>
</TD><TD valign=bottom width=15.733>&nbsp;</TD></TR>
<TR><TD style="background-color:#DFDFDF" valign=bottom width=369.267><P style="margin:0pt; line-height:11pt; font-family:Times New Roman; font-size:9pt">Other intangible assets, net</P>
</TD><TD style="background-color:#DFDFDF" valign=bottom width=118.267><P style="margin:0pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=right>227</P>
</TD><TD style="background-color:#DFDFDF" valign=bottom width=102.533><P style="margin:0pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=right>291</P>
</TD><TD style="background-color:#DFDFDF" valign=bottom width=15.733>&nbsp;</TD></TR>
<TR><TD valign=bottom width=369.267><P style="margin:0pt; line-height:11pt; font-family:Times New Roman; font-size:9pt">Property, plant and equipment, net</P>
</TD><TD valign=bottom width=118.267><P style="margin:0pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=right>6,412</P>
</TD><TD valign=bottom width=102.533><P style="margin:0pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=right>7,442</P>
</TD><TD valign=bottom width=15.733>&nbsp;</TD></TR>
<TR><TD style="background-color:#DFDFDF" valign=bottom width=369.267><P style="margin:0pt; line-height:11pt; font-family:Times New Roman; font-size:9pt">Long-term deferred tax assets</P>
</TD><TD style="background-color:#DFDFDF" valign=bottom width=118.267><P style="margin:0pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=right>53</P>
</TD><TD style="background-color:#DFDFDF" valign=bottom width=102.533><P style="margin:0pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=right>59</P>
</TD><TD style="background-color:#DFDFDF" valign=bottom width=15.733>&nbsp;</TD></TR>
<TR><TD valign=bottom width=369.267><P style="margin:0pt; line-height:11pt; font-family:Times New Roman; font-size:9pt">Investments and other non-current assets</P>
</TD><TD style="border-bottom:1pt solid #000000" valign=bottom width=118.267><P style="margin:0pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=right>137</P>
</TD><TD style="border-bottom:1pt solid #000000" valign=bottom width=102.533><P style="margin:0pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=right>117</P>
</TD><TD valign=bottom width=15.733>&nbsp;</TD></TR>
<TR><TD style="background-color:#DFDFDF" valign=bottom width=369.267>&nbsp;</TD><TD style="background-color:#DFDFDF" valign=bottom width=118.267><P style="margin:0pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=right><B>7,052</B></P>
</TD><TD style="background-color:#DFDFDF" valign=bottom width=102.533><P style="margin:0pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=right><B>8,173</B></P>
</TD><TD style="background-color:#DFDFDF" valign=bottom width=15.733>&nbsp;</TD></TR>
<TR><TD valign=bottom width=369.267><P style="margin:0pt; line-height:11pt; font-family:Times New Roman; font-size:9pt"><B>Total assets</B></P>
</TD><TD style="border-bottom:1.5pt solid #000000" valign=bottom width=118.267><P style="margin:0pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=right><B>12,492</B></P>
</TD><TD style="border-bottom:1.5pt solid #000000" valign=bottom width=102.533><P style="margin:0pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=right><B>13,800</B></P>
</TD><TD valign=bottom width=15.733>&nbsp;</TD></TR>
<TR><TD style="background-color:#DFDFDF" valign=bottom width=369.267>&nbsp;</TD><TD style="background-color:#DFDFDF" valign=bottom width=118.267>&nbsp;</TD><TD style="background-color:#DFDFDF" valign=bottom width=118.267 colspan=2>&nbsp;</TD></TR>
<TR><TD valign=bottom width=369.267><P style="margin:0pt; line-height:11pt; font-family:Times New Roman; font-size:9pt"><B>Liabilities and shareholders' equity</B></P>
</TD><TD valign=bottom width=118.267>&nbsp;</TD><TD valign=bottom width=118.267 colspan=2>&nbsp;</TD></TR>
<TR><TD style="background-color:#DFDFDF" valign=bottom width=369.267><P style="margin:0pt; line-height:11pt; font-family:Times New Roman; font-size:9pt"><B>Current liabilities:</B></P>
</TD><TD style="background-color:#DFDFDF" valign=bottom width=118.267>&nbsp;</TD><TD style="background-color:#DFDFDF" valign=bottom width=118.267 colspan=2>&nbsp;</TD></TR>
<TR><TD valign=bottom width=369.267><P style="margin:0pt; line-height:11pt; font-family:Times New Roman; font-size:9pt">Bank overdrafts</P>
</TD><TD valign=bottom width=118.267><P style="margin:0pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=right>48</P>
</TD><TD valign=bottom width=102.533><P style="margin:0pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=right>58</P>
</TD><TD valign=bottom width=15.733>&nbsp;</TD></TR>
<TR><TD style="background-color:#DFDFDF" valign=bottom width=369.267><P style="margin:0pt; line-height:11pt; font-family:Times New Roman; font-size:9pt">Current portion of long-term debt</P>
</TD><TD style="background-color:#DFDFDF" valign=bottom width=118.267><P style="margin:0pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=right>1,527</P>
</TD><TD style="background-color:#DFDFDF" valign=bottom width=102.533><P style="margin:0pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=right>133</P>
</TD><TD style="background-color:#DFDFDF" valign=bottom width=15.733>&nbsp;</TD></TR>
<TR><TD valign=bottom width=369.267><P style="margin:0pt; line-height:11pt; font-family:Times New Roman; font-size:9pt">Trade accounts payable</P>
</TD><TD valign=bottom width=118.267><P style="margin:0pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=right>987</P>
</TD><TD valign=bottom width=102.533><P style="margin:0pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=right>1,352</P>
</TD><TD valign=bottom width=15.733>&nbsp;</TD></TR>
<TR><TD style="background-color:#DFDFDF" valign=bottom width=369.267><P style="margin:0pt; line-height:11pt; font-family:Times New Roman; font-size:9pt">Other payables and accrued liabilities </P>
</TD><TD style="background-color:#DFDFDF" valign=bottom width=118.267><P style="margin:0pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=right>712</P>
</TD><TD style="background-color:#DFDFDF" valign=bottom width=102.533><P style="margin:0pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=right>776</P>
</TD><TD style="background-color:#DFDFDF" valign=bottom width=15.733>&nbsp;</TD></TR>
<TR><TD valign=bottom width=369.267><P style="margin:0pt; line-height:11pt; font-family:Times New Roman; font-size:9pt">Deferred tax liabilities</P>
</TD><TD valign=bottom width=118.267><P style="margin:0pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=right>9</P>
</TD><TD valign=bottom width=102.533><P style="margin:0pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=right>17</P>
</TD><TD valign=bottom width=15.733>&nbsp;</TD></TR>
<TR><TD style="background-color:#DFDFDF" valign=bottom width=369.267><P style="margin:0pt; line-height:11pt; font-family:Times New Roman; font-size:9pt">Accrued income tax</P>
</TD><TD style="background-color:#DFDFDF; border-bottom:1pt solid #000000" valign=bottom width=118.267><P style="margin:0pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=right>163</P>
</TD><TD style="background-color:#DFDFDF; border-bottom:1pt solid #000000" valign=bottom width=102.533><P style="margin:0pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=right>176</P>
</TD><TD style="background-color:#DFDFDF" valign=bottom width=15.733>&nbsp;</TD></TR>
<TR><TD valign=bottom width=369.267><P style="margin:0pt; line-height:11pt; font-family:Times New Roman; font-size:9pt"><B>Total current liabilities</B></P>
</TD><TD style="border-bottom:1pt solid #000000" valign=bottom width=118.267><P style="margin:0pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=right><B>3,446</B></P>
</TD><TD style="border-bottom:1pt solid #000000" valign=bottom width=102.533><P style="margin:0pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=right><B>2,512</B></P>
</TD><TD valign=bottom width=15.733>&nbsp;</TD></TR>
<TR><TD style="background-color:#DFDFDF" valign=bottom width=369.267>&nbsp;</TD><TD style="background-color:#DFDFDF" valign=bottom width=118.267>&nbsp;</TD><TD style="background-color:#DFDFDF" valign=bottom width=102.533>&nbsp;</TD><TD style="background-color:#DFDFDF" valign=bottom width=15.733>&nbsp;</TD></TR>
<TR><TD valign=bottom width=369.267><P style="margin:0pt; line-height:11pt; font-family:Times New Roman; font-size:9pt">Long-term debt</P>
</TD><TD valign=bottom width=118.267><P style="margin:0pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=right>263</P>
</TD><TD valign=bottom width=102.533><P style="margin:0pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=right>1,767</P>
</TD><TD valign=bottom width=15.733>&nbsp;</TD></TR>
<TR><TD style="background-color:#DFDFDF" valign=bottom width=369.267><P style="margin:0pt; line-height:11pt; font-family:Times New Roman; font-size:9pt">Reserve for pension and termination indemnities</P>
</TD><TD style="background-color:#DFDFDF" valign=bottom width=118.267><P style="margin:0pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=right>261</P>
</TD><TD style="background-color:#DFDFDF" valign=bottom width=102.533><P style="margin:0pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=right>285</P>
</TD><TD style="background-color:#DFDFDF" valign=bottom width=15.733>&nbsp;</TD></TR>
<TR><TD valign=bottom width=369.267><P style="margin:0pt; line-height:11pt; font-family:Times New Roman; font-size:9pt">Long-term deferred tax liabilities</P>
</TD><TD valign=bottom width=118.267><P style="margin:0pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=right>69</P>
</TD><TD valign=bottom width=102.533><P style="margin:0pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=right>63</P>
</TD><TD valign=bottom width=15.733>&nbsp;</TD></TR>
<TR><TD style="background-color:#DFDFDF" valign=bottom width=369.267><P style="margin:0pt; line-height:11pt; font-family:Times New Roman; font-size:9pt">Other non-current liabilities</P>
</TD><TD style="background-color:#DFDFDF; border-bottom:1pt solid #000000" valign=bottom width=118.267><P style="margin:0pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=right>20</P>
</TD><TD style="background-color:#DFDFDF; border-bottom:1pt solid #000000" valign=bottom width=102.533><P style="margin:0pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=right>15</P>
</TD><TD style="background-color:#DFDFDF" valign=bottom width=15.733>&nbsp;</TD></TR>
<TR><TD valign=bottom width=369.267>&nbsp;</TD><TD style="border-bottom:1pt solid #000000" valign=bottom width=118.267><P style="margin:0pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=right><B>613</B></P>
</TD><TD style="border-bottom:1pt solid #000000" valign=bottom width=102.533><P style="margin:0pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=right><B>2,130</B></P>
</TD><TD valign=bottom width=15.733>&nbsp;</TD></TR>
<TR><TD style="background-color:#DFDFDF" valign=bottom width=369.267><P style="margin:0pt; line-height:11pt; font-family:Times New Roman; font-size:9pt"><B>Total liabilities</B></P>
</TD><TD style="background-color:#DFDFDF; border-bottom:1pt solid #000000" valign=bottom width=118.267><P style="margin:0pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=right><B>4,059</B></P>
</TD><TD style="background-color:#DFDFDF; border-bottom:1pt solid #000000" valign=bottom width=102.533><P style="margin:0pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=right><B>4,642</B></P>
</TD><TD style="background-color:#DFDFDF" valign=bottom width=15.733>&nbsp;</TD></TR>
<TR><TD valign=bottom width=369.267><P style="margin:0pt; line-height:11pt; font-family:Times New Roman; font-size:9pt">Commitment and contingencies</P>
</TD><TD style="border-bottom:1pt solid #000000" valign=bottom width=118.267>&nbsp;</TD><TD style="border-bottom:1pt solid #000000" valign=bottom width=102.533>&nbsp;</TD><TD valign=bottom width=15.733>&nbsp;</TD></TR>
<TR><TD style="background-color:#DFDFDF" valign=bottom width=369.267><P style="margin:0pt; line-height:11pt; font-family:Times New Roman; font-size:9pt"><B>Minority interests</B></P>
</TD><TD style="background-color:#DFDFDF; border-bottom:1pt solid #000000" valign=bottom width=118.267><P style="margin:0pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=right><B>50</B></P>
</TD><TD style="background-color:#DFDFDF; border-bottom:1pt solid #000000" valign=bottom width=102.533><P style="margin:0pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=right><B>48</B></P>
</TD><TD style="background-color:#DFDFDF" valign=bottom width=15.733>&nbsp;</TD></TR>
<TR><TD valign=bottom width=369.267>&nbsp;</TD><TD valign=bottom width=118.267>&nbsp;</TD><TD valign=bottom width=102.533>&nbsp;</TD><TD valign=bottom width=15.733>&nbsp;</TD></TR>
<TR><TD style="background-color:#DFDFDF" valign=top width=369.267><P style="margin:0pt; line-height:11pt; font-family:Times New Roman; font-size:9pt">Common stock (preferred stock: 540,000,000 shares authorized, not issued; common stock: Euro 1.04 nominal value, 1,200,000,000 shares authorized, 907,597,149 shares issued, 894,197,149 shares outstanding)</P>
</TD><TD style="background-color:#DFDFDF" valign=top width=118.267><P style="margin:0pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=right>1,153</P>
</TD><TD style="background-color:#DFDFDF" valign=top width=102.533><P style="margin:0pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=right>1,150</P>
</TD><TD style="background-color:#DFDFDF" valign=top width=15.733>&nbsp;</TD></TR>
<TR><TD valign=bottom width=369.267><P style="margin:0pt; line-height:11pt; font-family:Times New Roman; font-size:9pt">Capital surplus</P>
</TD><TD valign=bottom width=118.267><P style="margin:0pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=right>1,953</P>
</TD><TD valign=bottom width=102.533><P style="margin:0pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=right>1,924</P>
</TD><TD valign=bottom width=15.733>&nbsp;</TD></TR>
<TR><TD style="background-color:#DFDFDF" valign=bottom width=369.267><P style="margin:0pt; line-height:11pt; font-family:Times New Roman; font-size:9pt">Accumulated result</P>
</TD><TD style="background-color:#DFDFDF" valign=bottom width=118.267><P style="margin:0pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=right>5,244</P>
</TD><TD style="background-color:#DFDFDF" valign=bottom width=102.533><P style="margin:0pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=right>5,268</P>
</TD><TD style="background-color:#DFDFDF" valign=bottom width=15.733>&nbsp;</TD></TR>
<TR><TD valign=bottom width=369.267><P style="margin:0pt; line-height:11pt; font-family:Times New Roman; font-size:9pt">Accumulated other comprehensive income</P>
</TD><TD valign=bottom width=118.267><P style="margin:0pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=right>381</P>
</TD><TD valign=bottom width=102.533><P style="margin:0pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=right>1,116</P>
</TD><TD valign=bottom width=15.733>&nbsp;</TD></TR>
<TR><TD style="background-color:#DFDFDF" valign=bottom width=369.267><P style="margin:0pt; line-height:11pt; font-family:Times New Roman; font-size:9pt">Treasury stock</P>
</TD><TD style="background-color:#DFDFDF; border-bottom:1pt solid #000000" valign=bottom width=118.267><P style="margin:0pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=right>(348)</P>
</TD><TD style="background-color:#DFDFDF; border-bottom:1pt solid #000000" valign=bottom width=102.533><P style="margin:0pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=right>(348)</P>
</TD><TD style="background-color:#DFDFDF" valign=bottom width=15.733>&nbsp;</TD></TR>
<TR><TD valign=bottom width=369.267><P style="margin:0pt; line-height:11pt; font-family:Times New Roman; font-size:9pt"><B>Shareholders' equity</B></P>
</TD><TD style="border-bottom:1pt solid #000000" valign=bottom width=118.267><P style="margin:0pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=right><B>8,383</B></P>
</TD><TD style="border-bottom:1pt solid #000000" valign=bottom width=102.533><P style="margin:0pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=right><B>9,110</B></P>
</TD><TD valign=bottom width=15.733>&nbsp;</TD></TR>
<TR><TD valign=bottom width=369.267>&nbsp;</TD><TD valign=bottom width=118.267>&nbsp;</TD><TD valign=bottom width=102.533>&nbsp;</TD><TD valign=bottom width=15.733>&nbsp;</TD></TR>
<TR><TD style="background-color:#DFDFDF" valign=bottom width=369.267><P style="margin:0pt; line-height:11pt; font-family:Times New Roman; font-size:9pt"><B>Total liabilities and shareholders' equity</B></P>
</TD><TD style="background-color:#DFDFDF; border-bottom:1.5pt solid #000000" valign=bottom width=118.267><P style="margin:0pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=right><B>12,492</B></P>
</TD><TD style="background-color:#DFDFDF; border-bottom:1.5pt solid #000000" valign=bottom width=102.533><P style="margin:0pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=right><B>13,800</B></P>
</TD><TD style="background-color:#DFDFDF" valign=bottom width=15.733>&nbsp;</TD></TR>
<TR><TD valign=top width=369.267>&nbsp;</TD><TD valign=top width=118.267>&nbsp;</TD><TD valign=top width=102.533>&nbsp;</TD><TD valign=top width=15.733>&nbsp;</TD></TR>
<TR><TD valign=top width=605.8 colspan=4><P style="margin:0pt; line-height:10pt; font-family:Times New Roman; font-size:8pt" align=center>The accompanying notes are an integral part of these unaudited interim consolidated financial statements</P>
</TD></TR>
</TABLE>
<P style="margin:0pt; font-family:Times New Roman" align=center><BR>
<BR></P>
<P style="margin:0pt; font-family:Times New Roman" align=center>F-4</P>
<P style="margin:0pt; font-family:Times New Roman"><BR></P>
<HR style="padding-top:7.2pt; padding-bottom:7.2pt" noshade size=1.333>
<P style="page-break-before:always; margin:0pt; font-family:Times New Roman" align=right><BR></P>
<P style="margin:0pt; font-family:Times New Roman"><BR></P>
<P style="margin:0pt; font-family:Times New Roman; font-size:8pt" align=center><BR></P>
<TABLE style="font-size:10pt" cellspacing=0 align=center><TR><TD valign=top width=26>&nbsp;</TD><TD valign=top width=26>&nbsp;</TD><TD valign=top width=309>&nbsp;</TD><TD valign=top colspan=2>&nbsp;</TD><TD valign=top colspan=2>&nbsp;</TD><TD valign=top colspan=2>&nbsp;</TD><TD valign=top width=163>&nbsp;</TD><TD valign=top width=14>&nbsp;</TD></TR>
<TR><TD valign=top colspan=3><P style="margin:0pt; line-height:11pt; font-family:Times New Roman; font-size:9pt"><B>STMicroelectronics N.V.</B></P>
</TD><TD valign=top colspan=2>&nbsp;</TD><TD valign=top colspan=2>&nbsp;</TD><TD valign=top colspan=2>&nbsp;</TD><TD valign=top width=163>&nbsp;</TD><TD valign=top width=14>&nbsp;</TD></TR>
<TR><TD valign=top colspan=5><P style="margin:0pt; line-height:11pt; font-family:Times New Roman; font-size:9pt"><B>CONSOLIDATED STATEMENTS OF CASH FLOWS</B></P>
</TD><TD valign=top colspan=2>&nbsp;</TD><TD style="border-bottom:1.5pt solid #000000" valign=top colspan=2>&nbsp;</TD><TD style="border-bottom:1.5pt solid #000000" valign=top width=163>&nbsp;</TD><TD valign=top width=14>&nbsp;</TD></TR>
<TR><TD valign=top width=26>&nbsp;</TD><TD valign=top width=26>&nbsp;</TD><TD valign=top width=309>&nbsp;</TD><TD valign=top colspan=2>&nbsp;</TD><TD style="border-right:1.5pt solid #000000" valign=top colspan=2>&nbsp;</TD><TD style="border-right:1.5pt solid #000000" valign=top colspan=3><P style="margin:0pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=center><B>Nine Months Ended </B></P>
</TD><TD valign=top width=14>&nbsp;</TD></TR>
<TR><TD valign=top width=26>&nbsp;</TD><TD valign=top width=26>&nbsp;</TD><TD valign=top width=309>&nbsp;</TD><TD valign=top colspan=2>&nbsp;</TD><TD style="border-right:1.5pt solid #000000" valign=top colspan=2>&nbsp;</TD><TD style="border-right:1.5pt solid #000000; border-bottom:1.5pt solid #000000" valign=top colspan=3><P style="margin:0pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=center>(unaudited)</P>
</TD><TD valign=top width=14>&nbsp;</TD></TR>
<TR><TD valign=bottom colspan=3><P style="margin:0pt; line-height:11pt; font-family:Times New Roman; font-size:9pt"><B>In
 millions of U.S. dollars</B></P>
</TD><TD valign=top colspan=2>&nbsp;</TD><TD style="border-right:1.5pt solid #000000" valign=top colspan=2>&nbsp;</TD><TD style="border-right:1.5pt solid #000000; border-bottom:1.5pt solid #000000" valign=bottom colspan=2><P style="margin:0pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=center><B>October 1, 2005</B></P>
</TD><TD style="border-right:1.5pt solid #000000; border-bottom:1.5pt solid #000000" valign=bottom width=163><P style="margin:0pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=center><B>September 25, 2004</B></P>
</TD><TD valign=top width=14>&nbsp;</TD></TR>
<TR><TD valign=top width=26>&nbsp;</TD><TD valign=top width=26>&nbsp;</TD><TD valign=top width=309>&nbsp;</TD><TD valign=top colspan=2>&nbsp;</TD><TD valign=top colspan=2>&nbsp;</TD><TD valign=top colspan=2>&nbsp;</TD><TD valign=top width=163>&nbsp;</TD><TD valign=top width=14>&nbsp;</TD></TR>
<TR><TD valign=bottom colspan=3><P style="margin:0pt; line-height:11pt; font-family:Times New Roman; font-size:9pt"><B>Cash flows from operating activities:</B></P>
</TD><TD valign=top colspan=2>&nbsp;</TD><TD valign=top colspan=2>&nbsp;</TD><TD valign=top colspan=2>&nbsp;</TD><TD valign=top width=163>&nbsp;</TD><TD valign=top width=14>&nbsp;</TD></TR>
<TR><TD style="background-color:#DFDFDF" valign=bottom width=26>&nbsp;</TD><TD style="background-color:#DFDFDF" valign=bottom colspan=2><P style="margin:0pt; line-height:11pt; font-family:Times New Roman; font-size:9pt">Net income </P>
</TD><TD style="background-color:#DFDFDF" valign=top colspan=2>&nbsp;</TD><TD style="background-color:#DFDFDF" valign=top colspan=2>&nbsp;</TD><TD style="background-color:#DFDFDF" valign=bottom colspan=2><P style="margin:0pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=right>83 </P>
</TD><TD style="background-color:#DFDFDF" valign=bottom width=163><P style="margin:0pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=right>414</P>
</TD><TD style="background-color:#DFDFDF" valign=top width=14>&nbsp;</TD></TR>
<TR><TD valign=bottom width=26>&nbsp;</TD><TD valign=bottom colspan=4><P style="margin:0pt; line-height:11pt; font-family:Times New Roman; font-size:9pt">Items to reconcile net income and cash flows from operating activities:</P>
</TD><TD valign=top colspan=2>&nbsp;</TD><TD valign=bottom colspan=2>&nbsp;</TD><TD valign=bottom width=163>&nbsp;</TD><TD valign=top width=14>&nbsp;</TD></TR>
<TR><TD style="background-color:#DFDFDF" valign=bottom width=26>&nbsp;</TD><TD style="background-color:#DFDFDF" valign=bottom width=26>&nbsp;</TD><TD style="background-color:#DFDFDF" valign=bottom width=309><P style="margin:0pt; line-height:11pt; font-family:Times New Roman; font-size:9pt">Depreciation and amortization</P>
</TD><TD style="background-color:#DFDFDF" valign=top colspan=2>&nbsp;</TD><TD style="background-color:#DFDFDF" valign=top colspan=2>&nbsp;</TD><TD style="background-color:#DFDFDF" valign=bottom colspan=2><P style="margin:0pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=right>1,482 </P>
</TD><TD style="background-color:#DFDFDF" valign=bottom width=163><P style="margin:0pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=right>1,319</P>
</TD><TD style="background-color:#DFDFDF" valign=top width=14>&nbsp;</TD></TR>
<TR><TD valign=bottom width=26>&nbsp;</TD><TD valign=bottom width=26>&nbsp;</TD><TD valign=bottom width=309><P style="margin:0pt; line-height:11pt; font-family:Times New Roman; font-size:9pt">Amortization of discount on convertible debt</P>
</TD><TD valign=top colspan=2>&nbsp;</TD><TD valign=top colspan=2>&nbsp;</TD><TD valign=bottom colspan=2><P style="margin:0pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=right>3 </P>
</TD><TD valign=bottom width=163><P style="margin:0pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=right>28</P>
</TD><TD valign=top width=14>&nbsp;</TD></TR>
<TR><TD style="background-color:#DFDFDF" valign=bottom width=26>&nbsp;</TD><TD style="background-color:#DFDFDF" valign=bottom width=26>&nbsp;</TD><TD style="background-color:#DFDFDF" valign=bottom width=309><P style="margin:0pt; line-height:11pt; font-family:Times New Roman; font-size:9pt">Loss on extinguishment of convertible debt</P>
</TD><TD style="background-color:#DFDFDF" valign=top colspan=2>&nbsp;</TD><TD style="background-color:#DFDFDF" valign=top colspan=2>&nbsp;</TD><TD style="background-color:#DFDFDF" valign=bottom colspan=2><P style="margin:0pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=right>- </P>
</TD><TD style="background-color:#DFDFDF" valign=bottom width=163><P style="margin:0pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=right>4</P>
</TD><TD style="background-color:#DFDFDF" valign=top width=14>&nbsp;</TD></TR>
<TR><TD valign=bottom width=26>&nbsp;</TD><TD valign=bottom width=26>&nbsp;</TD><TD valign=bottom width=309><P style="margin:0pt; line-height:11pt; font-family:Times New Roman; font-size:9pt">Other non-cash items</P>
</TD><TD valign=top colspan=2>&nbsp;</TD><TD valign=top colspan=2>&nbsp;</TD><TD valign=bottom colspan=2><P style="margin:0pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=right>7 </P>
</TD><TD valign=bottom width=163><P style="margin:0pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=right>(3)</P>
</TD><TD valign=top width=14>&nbsp;</TD></TR>
<TR><TD style="background-color:#DFDFDF" valign=bottom width=26>&nbsp;</TD><TD style="background-color:#DFDFDF" valign=bottom width=26>&nbsp;</TD><TD style="background-color:#DFDFDF" valign=bottom width=309><P style="margin:0pt; line-height:11pt; font-family:Times New Roman; font-size:9pt">Minority interest in net income of subsidiaries</P>
</TD><TD style="background-color:#DFDFDF" valign=top colspan=2>&nbsp;</TD><TD style="background-color:#DFDFDF" valign=top colspan=2>&nbsp;</TD><TD style="background-color:#DFDFDF" valign=bottom colspan=2><P style="margin:0pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=right>2 </P>
</TD><TD style="background-color:#DFDFDF" valign=bottom width=163><P style="margin:0pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=right>3</P>
</TD><TD style="background-color:#DFDFDF" valign=top width=14>&nbsp;</TD></TR>
<TR><TD valign=bottom width=26>&nbsp;</TD><TD valign=bottom width=26>&nbsp;</TD><TD valign=bottom width=309><P style="margin:0pt; line-height:11pt; font-family:Times New Roman; font-size:9pt">Deferred income tax</P>
</TD><TD valign=top colspan=2>&nbsp;</TD><TD valign=top colspan=2>&nbsp;</TD><TD valign=bottom colspan=2><P style="margin:0pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=right>(40)</P>
</TD><TD valign=bottom width=163><P style="margin:0pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=right>(16)</P>
</TD><TD valign=top width=14>&nbsp;</TD></TR>
<TR><TD style="background-color:#DFDFDF" valign=bottom width=26>&nbsp;</TD><TD style="background-color:#DFDFDF" valign=bottom width=26>&nbsp;</TD><TD style="background-color:#DFDFDF" valign=bottom width=309><P style="margin:0pt; line-height:11pt; font-family:Times New Roman; font-size:9pt">Loss on equity investments</P>
</TD><TD style="background-color:#DFDFDF" valign=top colspan=2>&nbsp;</TD><TD style="background-color:#DFDFDF" valign=top colspan=2>&nbsp;</TD><TD style="background-color:#DFDFDF" valign=bottom colspan=2><P style="margin:0pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=right>2 </P>
</TD><TD style="background-color:#DFDFDF" valign=bottom width=163><P style="margin:0pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=right>2</P>
</TD><TD style="background-color:#DFDFDF" valign=top width=14>&nbsp;</TD></TR>
<TR><TD valign=bottom width=26>&nbsp;</TD><TD valign=bottom width=26>&nbsp;</TD><TD valign=bottom colspan=5><P style="margin:0pt; line-height:11pt; font-family:Times New Roman; font-size:9pt">Impairment, restructuring charges and other related closure costs, net of cash payments</P>
</TD><TD valign=bottom colspan=2><P style="margin:0pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=right>67 </P>
</TD><TD valign=bottom width=163><P style="margin:0pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=right>11</P>
</TD><TD valign=top width=14>&nbsp;</TD></TR>
<TR><TD style="background-color:#DFDFDF" valign=bottom width=26>&nbsp;</TD><TD style="background-color:#DFDFDF" valign=bottom colspan=2><P style="margin:0pt; line-height:11pt; font-family:Times New Roman; font-size:9pt">Changes in assets and liabilities:</P>
</TD><TD style="background-color:#DFDFDF" valign=top width=129>&nbsp;</TD><TD style="background-color:#DFDFDF" valign=top colspan=3>&nbsp;</TD><TD style="background-color:#DFDFDF" valign=bottom colspan=2>&nbsp;</TD><TD style="background-color:#DFDFDF" valign=bottom width=163>&nbsp;</TD><TD style="background-color:#DFDFDF" valign=top width=14>&nbsp;</TD></TR>
<TR><TD valign=bottom width=26>&nbsp;</TD><TD valign=bottom width=26>&nbsp;</TD><TD valign=bottom width=309><P style="margin:0pt; line-height:11pt; font-family:Times New Roman; font-size:9pt">Trade receivables, net</P>
</TD><TD valign=top width=129>&nbsp;</TD><TD valign=top colspan=3>&nbsp;</TD><TD valign=bottom colspan=2><P style="margin:0pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=right>(119)</P>
</TD><TD valign=bottom width=163><P style="margin:0pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=right>(256)</P>
</TD><TD valign=top width=14>&nbsp;</TD></TR>
<TR><TD style="background-color:#DFDFDF" valign=bottom width=26>&nbsp;</TD><TD style="background-color:#DFDFDF" valign=bottom width=26>&nbsp;</TD><TD style="background-color:#DFDFDF" valign=bottom width=309><P style="margin:0pt; line-height:11pt; font-family:Times New Roman; font-size:9pt">Inventories, net</P>
</TD><TD style="background-color:#DFDFDF" valign=top width=129>&nbsp;</TD><TD style="background-color:#DFDFDF" valign=top colspan=3>&nbsp;</TD><TD style="background-color:#DFDFDF" valign=bottom colspan=2><P style="margin:0pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=right>(152)</P>
</TD><TD style="background-color:#DFDFDF" valign=bottom width=163><P style="margin:0pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=right>(77)</P>
</TD><TD style="background-color:#DFDFDF" valign=top width=14>&nbsp;</TD></TR>
<TR><TD valign=bottom width=26>&nbsp;</TD><TD valign=bottom width=26>&nbsp;</TD><TD valign=bottom width=309><P style="margin:0pt; line-height:11pt; font-family:Times New Roman; font-size:9pt">Trade payables</P>
</TD><TD valign=top width=129>&nbsp;</TD><TD valign=top colspan=3>&nbsp;</TD><TD valign=bottom colspan=2><P style="margin:0pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=right>(33)</P>
</TD><TD valign=bottom width=163><P style="margin:0pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=right>309 </P>
</TD><TD valign=top width=14>&nbsp;</TD></TR>
<TR><TD style="background-color:#DFDFDF" valign=bottom width=26>&nbsp;</TD><TD style="background-color:#DFDFDF" valign=bottom width=26>&nbsp;</TD><TD style="background-color:#DFDFDF" valign=bottom width=309><P style="margin:0pt; line-height:11pt; font-family:Times New Roman; font-size:9pt">Other assets and liabilities, net</P>
</TD><TD style="background-color:#DFDFDF" valign=top width=129>&nbsp;</TD><TD style="background-color:#DFDFDF" valign=top colspan=3>&nbsp;</TD><TD style="background-color:#DFDFDF; border-bottom:1pt solid #000000" valign=bottom colspan=2><P style="margin:0pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=right>(59)</P>
</TD><TD style="background-color:#DFDFDF; border-bottom:1pt solid #000000" valign=bottom width=163><P style="margin:0pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=right>(41)</P>
</TD><TD style="background-color:#DFDFDF" valign=top width=14>&nbsp;</TD></TR>
<TR><TD valign=bottom colspan=3><P style="margin:0pt; line-height:11pt; font-family:Times New Roman; font-size:9pt"><B>Net cash from operating activities</B></P>
</TD><TD valign=top width=129>&nbsp;</TD><TD valign=top colspan=3>&nbsp;</TD><TD valign=bottom colspan=2><P style="margin:0pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=right><B>1,243</B></P>
</TD><TD valign=bottom width=163><P style="margin:0pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=right><B>1,697</B></P>
</TD><TD valign=top width=14>&nbsp;</TD></TR>
<TR><TD style="background-color:#DFDFDF" valign=bottom width=26>&nbsp;</TD><TD style="background-color:#DFDFDF" valign=bottom width=26>&nbsp;</TD><TD style="background-color:#DFDFDF" valign=bottom width=309>&nbsp;</TD><TD style="background-color:#DFDFDF" valign=top width=129>&nbsp;</TD><TD style="background-color:#DFDFDF" valign=top colspan=3>&nbsp;</TD><TD style="background-color:#DFDFDF" valign=bottom colspan=2>&nbsp;</TD><TD style="background-color:#DFDFDF" valign=bottom width=163>&nbsp;</TD><TD style="background-color:#DFDFDF" valign=top width=14>&nbsp;</TD></TR>
<TR><TD valign=bottom colspan=3><P style="margin:0pt; line-height:11pt; font-family:Times New Roman; font-size:9pt"><B>Cash flows from investing activities:</B></P>
</TD><TD valign=top width=129>&nbsp;</TD><TD valign=top colspan=3>&nbsp;</TD><TD valign=bottom colspan=2>&nbsp;</TD><TD valign=bottom width=163>&nbsp;</TD><TD valign=top width=14>&nbsp;</TD></TR>
<TR><TD style="background-color:#DFDFDF" valign=bottom width=26>&nbsp;</TD><TD style="background-color:#DFDFDF" valign=bottom colspan=2><P style="margin:0pt; line-height:11pt; font-family:Times New Roman; font-size:9pt">Payment for purchases of tangible assets</P>
</TD><TD style="background-color:#DFDFDF" valign=top width=129>&nbsp;</TD><TD style="background-color:#DFDFDF" valign=top colspan=3>&nbsp;</TD><TD style="background-color:#DFDFDF" valign=bottom colspan=2><P style="margin:0pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=right>(1,211)</P>
</TD><TD style="background-color:#DFDFDF" valign=bottom width=163><P style="margin:0pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=right>(1,627)</P>
</TD><TD style="background-color:#DFDFDF" valign=top width=14>&nbsp;</TD></TR>
<TR><TD valign=bottom width=26>&nbsp;</TD><TD valign=bottom colspan=2><P style="margin:0pt; line-height:11pt; font-family:Times New Roman; font-size:9pt">Payment for purchases of marketable securities</P>
</TD><TD valign=top width=129>&nbsp;</TD><TD valign=top colspan=3>&nbsp;</TD><TD valign=bottom colspan=2><P style="margin:0pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=right>(525)</P>
</TD><TD valign=bottom width=163><P style="margin:0pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=right>(1,030)</P>
</TD><TD valign=top width=14>&nbsp;</TD></TR>
<TR><TD style="background-color:#DFDFDF" valign=bottom width=26>&nbsp;</TD><TD style="background-color:#DFDFDF" valign=bottom colspan=2><P style="margin:0pt; line-height:11pt; font-family:Times New Roman; font-size:9pt">Investment in intangible and financial assets</P>
</TD><TD style="background-color:#DFDFDF" valign=top width=129>&nbsp;</TD><TD style="background-color:#DFDFDF" valign=top colspan=3>&nbsp;</TD><TD style="background-color:#DFDFDF" valign=bottom colspan=2><P style="margin:0pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=right>(52)</P>
</TD><TD style="background-color:#DFDFDF" valign=bottom width=163><P style="margin:0pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=right>(64)</P>
</TD><TD style="background-color:#DFDFDF" valign=top width=14>&nbsp;</TD></TR>
<TR><TD valign=bottom width=26>&nbsp;</TD><TD valign=bottom colspan=2><P style="margin:0pt; line-height:11pt; font-family:Times New Roman; font-size:9pt">Payment for acquisitions, net of cash received</P>
</TD><TD valign=top width=129>&nbsp;</TD><TD valign=top colspan=3>&nbsp;</TD><TD style="border-bottom:1pt solid #000000" valign=bottom colspan=2><P style="margin:0pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=right>&nbsp;- </P>
</TD><TD style="border-bottom:1pt solid #000000" valign=bottom width=163><P style="margin:0pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=right>(3)</P>
</TD><TD valign=top width=14>&nbsp;</TD></TR>
<TR><TD style="background-color:#DFDFDF" valign=bottom colspan=3><P style="margin:0pt; line-height:11pt; font-family:Times New Roman; font-size:9pt"><B>Net cash used in investing activities</B></P>
</TD><TD style="background-color:#DFDFDF" valign=top width=129>&nbsp;</TD><TD style="background-color:#DFDFDF" valign=top colspan=3>&nbsp;</TD><TD style="background-color:#DFDFDF; border-bottom:1pt solid #000000" valign=bottom colspan=2><P style="margin:0pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=right><B>(1,788)</B></P>
</TD><TD style="background-color:#DFDFDF; border-bottom:1pt solid #000000" valign=bottom width=163><P style="margin:0pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=right><B>(2,724)</B></P>
</TD><TD style="background-color:#DFDFDF" valign=top width=14>&nbsp;</TD></TR>
<TR><TD valign=bottom width=26>&nbsp;</TD><TD valign=bottom width=26>&nbsp;</TD><TD valign=bottom width=309>&nbsp;</TD><TD valign=top width=129>&nbsp;</TD><TD valign=top colspan=3>&nbsp;</TD><TD valign=bottom colspan=2>&nbsp;</TD><TD valign=bottom width=163>&nbsp;</TD><TD valign=top width=14>&nbsp;</TD></TR>
<TR><TD style="background-color:#DFDFDF" valign=bottom colspan=3><P style="margin:0pt; line-height:11pt; font-family:Times New Roman; font-size:9pt"><B>Cash flows from financing activities:</B></P>
</TD><TD style="background-color:#DFDFDF" valign=top width=129>&nbsp;</TD><TD style="background-color:#DFDFDF" valign=top colspan=3>&nbsp;</TD><TD style="background-color:#DFDFDF" valign=bottom colspan=2>&nbsp;</TD><TD style="background-color:#DFDFDF" valign=bottom width=163>&nbsp;</TD><TD style="background-color:#DFDFDF" valign=top width=14>&nbsp;</TD></TR>
<TR><TD valign=bottom width=26>&nbsp;</TD><TD valign=bottom colspan=2><P style="margin:0pt; line-height:11pt; font-family:Times New Roman; font-size:9pt">Proceeds from issuance of long-term debt</P>
</TD><TD valign=top width=129>&nbsp;</TD><TD valign=top colspan=3>&nbsp;</TD><TD valign=bottom colspan=2><P style="margin:0pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=right>25 </P>
</TD><TD valign=bottom width=163><P style="margin:0pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=right>22 </P>
</TD><TD valign=top width=14>&nbsp;</TD></TR>
<TR><TD style="background-color:#DFDFDF" valign=bottom width=26>&nbsp;</TD><TD style="background-color:#DFDFDF" valign=bottom colspan=2><P style="margin:0pt; line-height:11pt; font-family:Times New Roman; font-size:9pt">Repayment of long-term debt</P>
</TD><TD style="background-color:#DFDFDF" valign=top width=129>&nbsp;</TD><TD style="background-color:#DFDFDF" valign=top colspan=3>&nbsp;</TD><TD style="background-color:#DFDFDF" valign=bottom colspan=2><P style="margin:0pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=right>(90)</P>
</TD><TD style="background-color:#DFDFDF" valign=bottom width=163><P style="margin:0pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=right>(1,263)</P>
</TD><TD style="background-color:#DFDFDF" valign=top width=14>&nbsp;</TD></TR>
<TR><TD valign=bottom width=26>&nbsp;</TD><TD valign=bottom colspan=2><P style="margin:0pt; line-height:11pt; font-family:Times New Roman; font-size:9pt">Decrease in short-term facilities</P>
</TD><TD valign=top width=129>&nbsp;</TD><TD valign=top colspan=3>&nbsp;</TD><TD valign=bottom colspan=2><P style="margin:0pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=right>(5)</P>
</TD><TD valign=bottom width=163><P style="margin:0pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=right>(37)</P>
</TD><TD valign=top width=14>&nbsp;</TD></TR>
<TR><TD style="background-color:#DFDFDF" valign=bottom width=26>&nbsp;</TD><TD style="background-color:#DFDFDF" valign=bottom colspan=2><P style="margin:0pt; line-height:11pt; font-family:Times New Roman; font-size:9pt">Capital increase</P>
</TD><TD style="background-color:#DFDFDF" valign=top width=129>&nbsp;</TD><TD style="background-color:#DFDFDF" valign=top colspan=3>&nbsp;</TD><TD style="background-color:#DFDFDF" valign=bottom colspan=2><P style="margin:0pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=right>32 </P>
</TD><TD style="background-color:#DFDFDF" valign=bottom width=163><P style="margin:0pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=right>17</P>
</TD><TD style="background-color:#DFDFDF" valign=top width=14>&nbsp;</TD></TR>
<TR><TD valign=bottom width=26>&nbsp;</TD><TD valign=bottom colspan=2><P style="margin:0pt; line-height:11pt; font-family:Times New Roman; font-size:9pt">Dividends paid</P>
</TD><TD valign=top width=129>&nbsp;</TD><TD valign=top colspan=3>&nbsp;</TD><TD valign=bottom colspan=2><P style="margin:0pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=right>(107)</P>
</TD><TD valign=bottom width=163><P style="margin:0pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=right>(107)</P>
</TD><TD valign=top width=14>&nbsp;</TD></TR>
<TR><TD style="background-color:#DFDFDF" valign=bottom width=26>&nbsp;</TD><TD style="background-color:#DFDFDF" valign=bottom colspan=2><P style="margin:0pt; line-height:11pt; font-family:Times New Roman; font-size:9pt">Other financing activities</P>
</TD><TD style="background-color:#DFDFDF" valign=top width=129>&nbsp;</TD><TD style="background-color:#DFDFDF" valign=top colspan=3>&nbsp;</TD><TD style="background-color:#DFDFDF; border-bottom:1pt solid #000000" valign=bottom colspan=2><P style="margin:0pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=right>1 </P>
</TD><TD style="background-color:#DFDFDF; border-bottom:1pt solid #000000" valign=bottom width=163><P style="margin:0pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=right>&nbsp;- </P>
</TD><TD style="background-color:#DFDFDF" valign=top width=14>&nbsp;</TD></TR>
<TR><TD valign=bottom colspan=3><P style="margin:0pt; line-height:11pt; font-family:Times New Roman; font-size:9pt"><B>Net cash used in financing activities</B></P>
</TD><TD valign=top width=129>&nbsp;</TD><TD valign=top colspan=3>&nbsp;</TD><TD style="border-bottom:1pt solid #000000" valign=bottom colspan=2><P style="margin:0pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=right><B>(144)</B></P>
</TD><TD style="border-bottom:1pt solid #000000" valign=bottom width=163><P style="margin:0pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=right><B>(1,368)</B></P>
</TD><TD valign=top width=14>&nbsp;</TD></TR>
<TR><TD style="background-color:#DFDFDF" valign=top width=26>&nbsp;</TD><TD style="background-color:#DFDFDF" valign=top colspan=2><P style="margin:0pt; line-height:11pt; font-family:Times New Roman; font-size:9pt">Effect of changes in exchange rates</P>
</TD><TD style="background-color:#DFDFDF" valign=top width=129>&nbsp;</TD><TD style="background-color:#DFDFDF" valign=top colspan=3>&nbsp;</TD><TD style="background-color:#DFDFDF; border-bottom:1pt solid #000000" valign=top colspan=2><P style="margin:0pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=right>(19)</P>
</TD><TD style="background-color:#DFDFDF; border-bottom:1pt solid #000000" valign=top width=163><P style="margin:0pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=right>(2)</P>
</TD><TD style="background-color:#DFDFDF" valign=top width=14>&nbsp;</TD></TR>
<TR><TD valign=top colspan=3><P style="margin:0pt; line-height:11pt; font-family:Times New Roman; font-size:9pt"><B>Net cash decrease</B></P>
</TD><TD valign=top width=129>&nbsp;</TD><TD valign=top colspan=3>&nbsp;</TD><TD style="border-bottom:1.5pt solid #000000" valign=top colspan=2><P style="margin:0pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=right><B>(708)</B></P>
</TD><TD style="border-bottom:1.5pt solid #000000" valign=top width=163><P style="margin:0pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=right><B>(2,397)</B></P>
</TD><TD valign=top width=14>&nbsp;</TD></TR>
<TR><TD style="background-color:#DFDFDF" valign=top colspan=3><P style="margin:0pt; line-height:11pt; font-family:Times New Roman; font-size:9pt"><B>Cash and cash equivalents at beginning of&nbsp;the period</B></P>
</TD><TD style="background-color:#DFDFDF" valign=top width=129>&nbsp;</TD><TD style="background-color:#DFDFDF" valign=top colspan=3>&nbsp;</TD><TD style="background-color:#DFDFDF; border-bottom:1pt solid #000000" valign=top colspan=2><P style="margin:0pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=right><B>1,950</B></P>
</TD><TD style="background-color:#DFDFDF; border-bottom:1pt solid #000000" valign=top width=163><P style="margin:0pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=right><B>2,998</B></P>
</TD><TD style="background-color:#DFDFDF" valign=top width=14>&nbsp;</TD></TR>
<TR><TD valign=top colspan=3><P style="margin:0pt; line-height:11pt; font-family:Times New Roman; font-size:9pt"><B>Cash and cash equivalents at end of&nbsp;the period</B></P>
</TD><TD valign=top width=129>&nbsp;</TD><TD valign=top colspan=3>&nbsp;</TD><TD style="border-bottom:1.5pt solid #000000" valign=top colspan=2><P style="margin:0pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=right><B>1,242</B></P>
</TD><TD style="border-bottom:1.5pt solid #000000" valign=top width=163><P style="margin:0pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=right><B>601</B></P>
</TD><TD valign=top width=14>&nbsp;</TD></TR>
<TR><TD valign=top width=26>&nbsp;</TD><TD valign=top width=26>&nbsp;</TD><TD valign=top width=309>&nbsp;</TD><TD valign=top width=129>&nbsp;</TD><TD valign=top colspan=3>&nbsp;</TD><TD valign=top colspan=2>&nbsp;</TD><TD valign=top width=163>&nbsp;</TD><TD valign=top width=14>&nbsp;</TD></TR>
<TR><TD valign=top width=26>&nbsp;</TD><TD valign=top width=26>&nbsp;</TD><TD valign=top width=309>&nbsp;</TD><TD valign=top width=129>&nbsp;</TD><TD valign=top colspan=3>&nbsp;</TD><TD valign=top colspan=2>&nbsp;</TD><TD valign=top width=163>&nbsp;</TD><TD valign=top width=14>&nbsp;</TD></TR>
<TR><TD valign=top colspan=10><P style="margin:0pt; line-height:10pt; font-family:Times New Roman; font-size:8pt" align=center>The accompanying notes are an integral part of these unaudited interim consolidated financial statements</P>
</TD><TD valign=top width=14>&nbsp;</TD></TR>
<TR><TD valign=top width=26>&nbsp;</TD><TD valign=top width=26>&nbsp;</TD><TD valign=top width=309>&nbsp;</TD><TD valign=top width=129>&nbsp;</TD><TD valign=top colspan=2>&nbsp;</TD><TD valign=top colspan=2>&nbsp;</TD><TD valign=top colspan=2>&nbsp;</TD><TD valign=top width=14>&nbsp;</TD></TR>
</TABLE>
<P style="margin-top:0pt; margin-bottom:10pt; font-family:Times New Roman" align=center><BR>
<BR></P>
<P style="margin:0pt; font-family:Times New Roman" align=center>F-5</P>
<P style="margin:0pt; font-family:Times New Roman"><BR></P>
<HR style="padding-top:7.2pt; padding-bottom:7.2pt" noshade size=1.333>
<P style="page-break-before:always; margin:0pt; font-family:Times New Roman" align=right><BR></P>
<P style="margin:0pt; font-family:Times New Roman"><BR></P>
<P style="margin-top:0pt; margin-bottom:10pt; font-family:Times New Roman" align=center><BR></P>
<TABLE style="font-size:10pt" cellspacing=0 align=center><TR><TD valign=bottom width=563.267 colspan=6><P style="margin:0pt; line-height:11pt; font-family:Times New Roman; font-size:9pt"><B>CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS&#146; EQUITY</B></P>
</TD><TD valign=bottom width=63.8>&nbsp;</TD><TD valign=bottom width=11.6>&nbsp;</TD></TR>
<TR><TD valign=top width=563.267 colspan=6>&nbsp;</TD><TD valign=top width=63.8>&nbsp;</TD><TD valign=top width=11.6>&nbsp;</TD></TR>
<TR><TD valign=top width=345.4 colspan=3>&nbsp;</TD><TD valign=top width=61.867>&nbsp;</TD><TD valign=top width=72>&nbsp;</TD><TD valign=top width=84>&nbsp;</TD><TD valign=top width=63.8>&nbsp;</TD><TD valign=top width=11.6>&nbsp;</TD></TR>
<TR><TD valign=top width=345.4 colspan=3>&nbsp;</TD><TD valign=top width=61.867>&nbsp;</TD><TD valign=top width=72>&nbsp;</TD><TD valign=top width=84>&nbsp;</TD><TD valign=top width=63.8>&nbsp;</TD><TD valign=top width=11.6>&nbsp;</TD></TR>
<TR><TD valign=top width=345.4 colspan=3><P style="margin:0pt; line-height:11pt; font-family:Times New Roman; font-size:9pt"><B>In
 millions of U.S. dollars, except per share amounts</B></P>
</TD><TD valign=top width=61.867>&nbsp;</TD><TD valign=top width=72>&nbsp;</TD><TD valign=top width=84><P style="margin:0pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=center><B>Accumulated</B></P>
</TD><TD valign=top width=63.8>&nbsp;</TD><TD valign=top width=11.6>&nbsp;</TD></TR>
<TR><TD valign=top width=221.667>&nbsp;</TD><TD valign=top width=61.867>&nbsp;</TD><TD valign=top width=61.867>&nbsp;</TD><TD valign=top width=61.867>&nbsp;</TD><TD valign=top width=72>&nbsp;</TD><TD valign=top width=84><P style="margin:0pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=center><B>Other</B></P>
</TD><TD valign=top width=63.8>&nbsp;</TD><TD valign=top width=11.6>&nbsp;</TD></TR>
<TR><TD valign=top width=221.667>&nbsp;</TD><TD valign=top width=61.867><P style="margin:0pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=center><B>Common</B></P>
</TD><TD valign=top width=61.867><P style="margin:0pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=center><B>Capital</B></P>
</TD><TD valign=top width=61.867><P style="margin:0pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=center><B>Treasury</B></P>
</TD><TD valign=top width=72><P style="margin:0pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=center><B>Accumulated</B></P>
</TD><TD valign=top width=84><P style="margin:0pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=center><B>Comprehensive</B></P>
</TD><TD valign=top width=75.4 colspan=2><P style="margin:0pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=center><B>Shareholders'</B></P>
</TD></TR>
<TR><TD valign=top width=221.667>&nbsp;</TD><TD valign=top width=61.867><P style="margin:0pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=center><B>Stock</B></P>
</TD><TD valign=top width=61.867><P style="margin:0pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=center><B>Surplus</B></P>
</TD><TD valign=top width=61.867><P style="margin:0pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=center><B>Stock</B></P>
</TD><TD valign=top width=72><P style="margin:0pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=center><B>Result</B></P>
</TD><TD valign=top width=84><P style="margin:0pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=center><B>income (loss)</B></P>
</TD><TD valign=top width=63.8><P style="margin:0pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=center><B>Equity</B></P>
</TD><TD valign=top width=11.6>&nbsp;</TD></TR>
<TR><TD style="background-color:#DFDFDF" valign=top width=221.667><P style="margin:0pt; line-height:11pt; font-family:Times New Roman; font-size:9pt"><B>Balance as of December 31, 2003 (audited)</B></P>
</TD><TD style="background-color:#DFDFDF; border-bottom:1.5pt solid #000000" valign=bottom width=61.867><P style="margin:0pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=right><B>1,146</B></P>
</TD><TD style="background-color:#DFDFDF; border-bottom:1.5pt solid #000000" valign=bottom width=61.867><P style="margin:0pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=right><B>1,905</B></P>
</TD><TD style="background-color:#DFDFDF; border-bottom:1.5pt solid #000000" valign=bottom width=61.867><P style="margin:0pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=right><B>(348)</B></P>
</TD><TD style="background-color:#DFDFDF; border-bottom:1.5pt solid #000000" valign=bottom width=72><P style="margin:0pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=right><B>4,774</B></P>
</TD><TD style="background-color:#DFDFDF; border-bottom:1.5pt solid #000000" valign=bottom width=84><P style="margin:0pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=right><B>623</B></P>
</TD><TD style="background-color:#DFDFDF; border-bottom:1.5pt solid #000000" valign=bottom width=63.8><P style="margin:0pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=right><B>8,100</B></P>
</TD><TD style="background-color:#DFDFDF" valign=top width=11.6>&nbsp;</TD></TR>
<TR><TD valign=bottom width=221.667><P style="margin:0pt; line-height:11pt; font-family:Times New Roman; font-size:9pt">Capital increase</P>
</TD><TD valign=bottom width=61.867><P style="margin:0pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=right><B>4</B></P>
</TD><TD valign=bottom width=61.867><P style="margin:0pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=right><B>19</B></P>
</TD><TD valign=bottom width=61.867>&nbsp;</TD><TD valign=bottom width=72>&nbsp;</TD><TD valign=bottom width=84>&nbsp;</TD><TD valign=bottom width=63.8><P style="margin:0pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=right><B>23</B></P>
</TD><TD valign=top width=11.6>&nbsp;</TD></TR>
<TR><TD style="background-color:#DFDFDF" valign=bottom width=221.667><P style="margin:0pt; line-height:11pt; font-family:Times New Roman; font-size:9pt">Comprehensive income:</P>
</TD><TD style="background-color:#DFDFDF" valign=bottom width=61.867>&nbsp;</TD><TD style="background-color:#DFDFDF" valign=bottom width=61.867>&nbsp;</TD><TD style="background-color:#DFDFDF" valign=bottom width=61.867>&nbsp;</TD><TD style="background-color:#DFDFDF" valign=bottom width=72>&nbsp;</TD><TD style="background-color:#DFDFDF" valign=bottom width=84>&nbsp;</TD><TD style="background-color:#DFDFDF" valign=bottom width=63.8>&nbsp;</TD><TD style="background-color:#DFDFDF" valign=top width=11.6>&nbsp;</TD></TR>
<TR><TD valign=bottom width=221.667><P style="margin:0pt; line-height:11pt; font-family:Times New Roman; font-size:9pt">&nbsp;Net Income</P>
</TD><TD valign=bottom width=61.867>&nbsp;</TD><TD valign=bottom width=61.867>&nbsp;</TD><TD valign=bottom width=61.867>&nbsp;</TD><TD valign=bottom width=72><P style="margin:0pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=right><B>601</B></P>
</TD><TD valign=bottom width=84>&nbsp;</TD><TD valign=bottom width=63.8><P style="margin:0pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=right><B>601</B></P>
</TD><TD valign=top width=11.6>&nbsp;</TD></TR>
<TR><TD style="background-color:#DFDFDF" valign=bottom width=283.533 colspan=2><P style="margin:0pt; line-height:11pt; font-family:Times New Roman; font-size:9pt">&nbsp;Other comprehensive income, net of tax</P>
</TD><TD style="background-color:#DFDFDF" valign=bottom width=61.867>&nbsp;</TD><TD style="background-color:#DFDFDF" valign=bottom width=61.867>&nbsp;</TD><TD style="background-color:#DFDFDF" valign=bottom width=72>&nbsp;</TD><TD style="background-color:#DFDFDF" valign=bottom width=84><P style="margin:0pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=right><B>493</B></P>
</TD><TD style="background-color:#DFDFDF" valign=bottom width=63.8><P style="margin:0pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=right><B>493</B></P>
</TD><TD style="background-color:#DFDFDF" valign=top width=11.6>&nbsp;</TD></TR>
<TR><TD valign=bottom width=221.667><P style="margin:0pt; line-height:11pt; font-family:Times New Roman; font-size:9pt">Comprehensive income</P>
</TD><TD valign=bottom width=61.867>&nbsp;</TD><TD valign=bottom width=61.867>&nbsp;</TD><TD valign=bottom width=61.867>&nbsp;</TD><TD valign=bottom width=72>&nbsp;</TD><TD valign=bottom width=84>&nbsp;</TD><TD style="border-top:0.75pt solid #000000" valign=bottom width=63.8><P style="margin:0pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=right><B>1,094</B></P>
</TD><TD valign=top width=11.6>&nbsp;</TD></TR>
<TR><TD style="background-color:#DFDFDF" valign=bottom width=221.667><P style="margin:0pt; line-height:11pt; font-family:Times New Roman; font-size:9pt">Dividends, $0.12 per share</P>
</TD><TD style="background-color:#DFDFDF; border-bottom:0.75pt solid #000000" valign=bottom width=61.867>&nbsp;</TD><TD style="background-color:#DFDFDF; border-bottom:0.75pt solid #000000" valign=bottom width=61.867>&nbsp;</TD><TD style="background-color:#DFDFDF; border-bottom:0.75pt solid #000000" valign=bottom width=61.867>&nbsp;</TD><TD style="background-color:#DFDFDF; border-bottom:0.75pt solid #000000" valign=bottom width=72><P style="margin:0pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=right>(107)</P>
</TD><TD style="background-color:#DFDFDF; border-bottom:0.75pt solid #000000" valign=bottom width=84>&nbsp;</TD><TD style="background-color:#DFDFDF; border-bottom:0.75pt solid #000000" valign=bottom width=63.8><P style="margin:0pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=right>(107)</P>
</TD><TD style="background-color:#DFDFDF" valign=top width=11.6>&nbsp;</TD></TR>
<TR><TD valign=bottom width=221.667><P style="margin:0pt; line-height:11pt; font-family:Times New Roman; font-size:9pt"><B>Balance as of December 31, 2004 (audited)</B></P>
</TD><TD style="border-bottom:1.5pt solid #000000" valign=bottom width=61.867><P style="margin:0pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=right><B>1,150</B></P>
</TD><TD style="border-bottom:1.5pt solid #000000" valign=bottom width=61.867><P style="margin:0pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=right><B>1,924</B></P>
</TD><TD style="border-bottom:1.5pt solid #000000" valign=bottom width=61.867><P style="margin:0pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=right><B>(348)</B></P>
</TD><TD style="border-bottom:1.5pt solid #000000" valign=bottom width=72><P style="margin:0pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=right><B>5,268</B></P>
</TD><TD style="border-bottom:1.5pt solid #000000" valign=bottom width=84><P style="margin:0pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=right><B>1,116</B></P>
</TD><TD style="border-bottom:1.5pt solid #000000" valign=bottom width=63.8><P style="margin:0pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=right><B>9,110</B></P>
</TD><TD valign=top width=11.6>&nbsp;</TD></TR>
<TR><TD style="background-color:#DFDFDF" valign=bottom width=221.667><P style="margin:0pt; line-height:11pt; font-family:Times New Roman; font-size:9pt">Capital increase</P>
</TD><TD style="background-color:#DFDFDF" valign=bottom width=61.867><P style="margin:0pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=right><B>3</B></P>
</TD><TD style="background-color:#DFDFDF" valign=bottom width=61.867><P style="margin:0pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=right><B>29</B></P>
</TD><TD style="background-color:#DFDFDF" valign=bottom width=61.867>&nbsp;</TD><TD style="background-color:#DFDFDF" valign=bottom width=72>&nbsp;</TD><TD style="background-color:#DFDFDF" valign=bottom width=84>&nbsp;</TD><TD style="background-color:#DFDFDF" valign=bottom width=63.8><P style="margin:0pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=right><B>32</B></P>
</TD><TD style="background-color:#DFDFDF" valign=top width=11.6>&nbsp;</TD></TR>
<TR><TD valign=bottom width=221.667><P style="margin:0pt; line-height:11pt; font-family:Times New Roman; font-size:9pt">Comprehensive income (loss):</P>
</TD><TD valign=bottom width=61.867>&nbsp;</TD><TD valign=bottom width=61.867>&nbsp;</TD><TD valign=bottom width=61.867>&nbsp;</TD><TD valign=bottom width=72>&nbsp;</TD><TD valign=bottom width=84>&nbsp;</TD><TD valign=bottom width=63.8>&nbsp;</TD><TD valign=top width=11.6>&nbsp;</TD></TR>
<TR><TD style="background-color:#DFDFDF" valign=bottom width=221.667><P style="margin:0pt; line-height:11pt; font-family:Times New Roman; font-size:9pt">&nbsp;Net income</P>
</TD><TD style="background-color:#DFDFDF" valign=bottom width=61.867>&nbsp;</TD><TD style="background-color:#DFDFDF" valign=bottom width=61.867>&nbsp;</TD><TD style="background-color:#DFDFDF" valign=bottom width=61.867>&nbsp;</TD><TD style="background-color:#DFDFDF" valign=bottom width=72><P style="margin:0pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=right><B>83</B></P>
</TD><TD style="background-color:#DFDFDF" valign=bottom width=84>&nbsp;</TD><TD style="background-color:#DFDFDF" valign=bottom width=63.8><P style="margin:0pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=right><B>83</B></P>
</TD><TD style="background-color:#DFDFDF" valign=top width=11.6>&nbsp;</TD></TR>
<TR><TD valign=bottom width=221.667><P style="margin:0pt; line-height:11pt; font-family:Times New Roman; font-size:9pt">&nbsp;Other comprehensive loss, net of tax</P>
</TD><TD valign=bottom width=61.867>&nbsp;</TD><TD valign=bottom width=61.867>&nbsp;</TD><TD valign=bottom width=61.867>&nbsp;</TD><TD valign=bottom width=72>&nbsp;</TD><TD valign=bottom width=84><P style="margin:0pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=right><B>(735)</B></P>
</TD><TD valign=bottom width=63.8><P style="margin:0pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=right><B>(735)</B></P>
</TD><TD valign=top width=11.6>&nbsp;</TD></TR>
<TR><TD style="background-color:#DFDFDF" valign=bottom width=221.667><P style="margin:0pt; line-height:11pt; font-family:Times New Roman; font-size:9pt">Comprehensive income (loss)</P>
</TD><TD style="background-color:#DFDFDF" valign=bottom width=61.867>&nbsp;</TD><TD style="background-color:#DFDFDF" valign=bottom width=61.867>&nbsp;</TD><TD style="background-color:#DFDFDF" valign=bottom width=61.867>&nbsp;</TD><TD style="background-color:#DFDFDF" valign=bottom width=72>&nbsp;</TD><TD style="background-color:#DFDFDF" valign=bottom width=84>&nbsp;</TD><TD style="background-color:#DFDFDF; border-top:0.75pt solid #000000" valign=bottom width=63.8><P style="margin:0pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=right><B>(652)</B></P>
</TD><TD style="background-color:#DFDFDF" valign=top width=11.6>&nbsp;</TD></TR>
<TR><TD valign=bottom width=221.667><P style="margin:0pt; line-height:11pt; font-family:Times New Roman; font-size:9pt">Dividends, $0.12 per share</P>
</TD><TD style="border-bottom:0.75pt solid #000000" valign=bottom width=61.867>&nbsp;</TD><TD style="border-bottom:0.75pt solid #000000" valign=bottom width=61.867>&nbsp;</TD><TD style="border-bottom:0.75pt solid #000000" valign=bottom width=61.867>&nbsp;</TD><TD style="border-bottom:0.75pt solid #000000" valign=bottom width=72><P style="margin:0pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=right>(107)</P>
</TD><TD style="border-bottom:0.75pt solid #000000" valign=bottom width=84>&nbsp;</TD><TD style="border-bottom:0.75pt solid #000000" valign=bottom width=63.8><P style="margin:0pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=right>(107)</P>
</TD><TD valign=top width=11.6>&nbsp;</TD></TR>
<TR><TD style="background-color:#DFDFDF" valign=bottom width=221.667><P style="margin:0pt; line-height:11pt; font-family:Times New Roman; font-size:9pt"><B>Balance as of October 1, 2005 (unaudited)</B></P>
</TD><TD style="background-color:#DFDFDF; border-bottom:1.5pt solid #000000" valign=bottom width=61.867><P style="margin:0pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=right><B>1,153</B></P>
</TD><TD style="background-color:#DFDFDF; border-bottom:1.5pt solid #000000" valign=bottom width=61.867><P style="margin:0pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=right><B>1,953</B></P>
</TD><TD style="background-color:#DFDFDF; border-bottom:1.5pt solid #000000" valign=bottom width=61.867><P style="margin:0pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=right><B>(348)</B></P>
</TD><TD style="background-color:#DFDFDF; border-bottom:1.5pt solid #000000" valign=bottom width=72><P style="margin:0pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=right><B>5,244</B></P>
</TD><TD style="background-color:#DFDFDF; border-bottom:1.5pt solid #000000" valign=bottom width=84><P style="margin:0pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=right><B>381</B></P>
</TD><TD style="background-color:#DFDFDF; border-bottom:1.5pt solid #000000" valign=bottom width=63.8><P style="margin:0pt; line-height:11pt; font-family:Times New Roman; font-size:9pt" align=right><B>8,383</B></P>
</TD><TD style="background-color:#DFDFDF" valign=top width=11.6>&nbsp;</TD></TR>
<TR><TD valign=top width=221.667>&nbsp;</TD><TD valign=bottom width=61.867>&nbsp;</TD><TD valign=bottom width=61.867>&nbsp;</TD><TD valign=bottom width=61.867>&nbsp;</TD><TD valign=bottom width=72>&nbsp;</TD><TD valign=bottom width=84>&nbsp;</TD><TD valign=bottom width=63.8>&nbsp;</TD><TD valign=top width=11.6>&nbsp;</TD></TR>
<TR><TD valign=top width=221.667>&nbsp;</TD><TD valign=top width=61.867>&nbsp;</TD><TD valign=top width=61.867>&nbsp;</TD><TD valign=top width=61.867>&nbsp;</TD><TD valign=top width=72>&nbsp;</TD><TD valign=top width=84>&nbsp;</TD><TD valign=top width=63.8>&nbsp;</TD><TD valign=top width=11.6>&nbsp;</TD></TR>
<TR><TD valign=top width=221.667>&nbsp;</TD><TD valign=top width=61.867>&nbsp;</TD><TD valign=top width=61.867>&nbsp;</TD><TD valign=top width=61.867>&nbsp;</TD><TD valign=top width=72>&nbsp;</TD><TD valign=top width=84>&nbsp;</TD><TD valign=top width=63.8>&nbsp;</TD><TD valign=top width=11.6>&nbsp;</TD></TR>
<TR><TD valign=top width=221.667>&nbsp;</TD><TD valign=top width=61.867>&nbsp;</TD><TD valign=top width=61.867>&nbsp;</TD><TD valign=top width=61.867>&nbsp;</TD><TD valign=top width=72>&nbsp;</TD><TD valign=top width=84>&nbsp;</TD><TD valign=top width=63.8>&nbsp;</TD><TD valign=top width=11.6>&nbsp;</TD></TR>
<TR><TD valign=top width=563.267 colspan=6><P style="margin:0pt; line-height:10pt; font-family:Times New Roman; font-size:8pt" align=center>The accompanying notes are an integral part of these unaudited interim consolidated financial statements</P>
</TD><TD valign=top width=63.8>&nbsp;</TD><TD valign=top width=11.6>&nbsp;</TD></TR>
<TR><TD valign=top width=221.667>&nbsp;</TD><TD valign=top width=61.867>&nbsp;</TD><TD valign=top width=61.867>&nbsp;</TD><TD valign=top width=61.867>&nbsp;</TD><TD valign=top width=72>&nbsp;</TD><TD valign=top width=84>&nbsp;</TD><TD valign=top width=63.8>&nbsp;</TD><TD valign=top width=11.6>&nbsp;</TD></TR>
<TR><TD valign=top width=221.667>&nbsp;</TD><TD valign=top width=61.867>&nbsp;</TD><TD valign=top width=61.867>&nbsp;</TD><TD valign=top width=61.867>&nbsp;</TD><TD valign=top width=72>&nbsp;</TD><TD valign=top width=84>&nbsp;</TD><TD valign=top width=63.8>&nbsp;</TD><TD valign=top width=11.6>&nbsp;</TD></TR>
</TABLE>
<P style="margin-top:0pt; margin-bottom:10pt; font-family:Times New Roman" align=center><B><BR>
<BR></B></P>
<P style="margin:0pt; font-family:Times New Roman" align=center>F-6</P>
<P style="margin:0pt; font-family:Times New Roman"><BR></P>
<HR style="padding-top:7.2pt; padding-bottom:7.2pt" noshade size=1.333>
<P style="page-break-before:always; margin:0pt; font-family:Times New Roman" align=right><BR></P>
<P style="margin:0pt; font-family:Times New Roman"><BR></P>
<P style="margin-top:0pt; margin-bottom:10pt; font-family:Times New Roman" align=center><B>STMicroelectronics N.V.</B></P>
<P style="margin-top:0pt; margin-bottom:10pt; font-family:Times New Roman" align=center><B>Notes to Interim Consolidated Financial Statements (unaudited) </B></P>
<P style="margin-top:0pt; margin-bottom:10pt; font-family:Times New Roman" align=justify><BR></P>
<P style="margin-top:0pt; margin-bottom:10pt; font-family:Times New Roman"><B>1. The Company</B></P>
<P style="margin-top:0pt; margin-bottom:10pt; font-family:Times New Roman" align=justify>STMicroelectronics N.V. (the &quot;Company&quot;) is registered in The Netherlands with its statutory domicile in Amsterdam. The Company was formed in 1987 with the original name of SGS-THOMSON Microelectronics by the combination of the semiconductor business of SGS Microelettronica (then owned by Societ&#224; 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.&nbsp;</P>
<P style="margin-top:0pt; margin-bottom:10pt; font-family:Times New Roman" align=justify>The Company is a global independent semiconductor company that designs, develops, manufactures and markets a broad range of semiconductor integrated circuits (&quot;ICs&quot;) and discrete devices. The Company offers a diversified product portfolio and develops products for a wide range of market applications, including automotive products, computer peripherals, telecommunications systems, consumer products, industrial automation and control systems.&nbsp;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.</P>
<P style="margin-top:0pt; margin-bottom:10pt; font-family:Times New Roman"><B>2. Fiscal year</B></P>
<P style="margin-top:0pt; margin-bottom:10pt; font-family:Times New Roman" align=justify>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 ended on July 2, its third quarter on October 1 and its fourth quarter will end on December 31. </P>
<P style="margin-top:0pt; margin-bottom:10pt; font-family:Times New Roman"><B>3. Basis of Presentation</B></P>
<P style="margin-top:0pt; margin-bottom:10pt; font-family:Times New Roman" align=justify>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. </P>
<P style="margin-top:0pt; margin-bottom:10pt; font-family:Times New Roman" align=justify>All balances and values in the current and prior periods are in millions of dollars, except share and per-share amounts.</P>
<P style="margin-top:0pt; margin-bottom:10pt; font-family:Times New Roman" align=justify>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.</P>
<P style="margin-top:0pt; margin-bottom:10pt; font-family:Times New Roman"><B>4. Use of Estimates</B></P>
<P style="margin-top:0pt; margin-bottom:10pt; font-family:Times New Roman" align=justify>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. </P>
<P style="margin-top:0pt; margin-bottom:10pt; font-family:Times New Roman" align=justify><BR>
<BR></P>
<P style="margin:0pt; font-family:Times New Roman" align=center>F-7</P>
<P style="margin:0pt; font-family:Times New Roman"><BR></P>
<HR style="padding-top:7.2pt; padding-bottom:7.2pt" noshade size=1.333>
<P style="page-break-before:always; margin:0pt; font-family:Times New Roman" align=right><BR></P>
<P style="margin:0pt; font-family:Times New Roman"><BR></P>
<P style="margin-top:0pt; margin-bottom:10pt; font-family:Times New Roman" align=justify>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.</P>
<P style="margin-top:0pt; margin-bottom:10pt; font-family:Times New Roman"><B>5. Recent Accounting Pronouncements</B></P>
<P style="margin-top:0pt; margin-bottom:10pt; font-family:Times New Roman" align=justify>In
  November 2004, the Financial Accounting Standards Board issued Statement of
  Financial Accounting Standards No. 151, <em>Inventory Costs, an amendment of
  ARB No. 43, Chapter 4</em> (&#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, the Company believes
  that FAS 151 will have no material effect on its financial position or results
  of operations.</P>
<P style="margin-top:0pt; margin-bottom:10pt; font-family:Times New Roman" align=justify>In
  December 2004, the Financial Accounting Standards Board issued Statement of
  Financial Accounting Standards No. 153, <em>Exchanges of Nonmonetary Assets,
  an amendment of APB Opinion No. 29</em> (&#147;FAS 153&#148;).&nbsp;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. </P>
<P style="margin-top:0pt; margin-bottom:10pt; font-family:Times New Roman" align=justify>In
  December 2004, the Financial Accounting Standards Board issued Statement of
  Financial Accounting Standards No. 123 (revised 2004), <em>Share-Based Payment</em>
  (&#147;FAS 123R&#148;). This Statement revises FASB Statement No. 123, <em>Accounting
  for Stock-Based Compensation</em> and supersedes APB Opinion No. 25, <em>Accounting
  for Stock Issued to Employees</em>, 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 be required to adopt
  FAS 123R in the first quarter of 2006 except if it elects early adoption in
  the fourth quarter of 2005. The Company plans to adopt FAS 123R using the modified
  prospective application method. The Company redefined its equity-based compensation
  strategy, since it had become minimally effective in motivating and retaining
  key-employees, by no longer granting options but rather issuing non-vested stock.
  As part of this revised stock compensation policy, the Company decided in July
  2005 to accelerate the vesting period of outstanding unvested stock options,
  following authorization from the Company&#146;s shareholders at the annual general
  meeting held on March 18, 2005. As a result, options equivalent to approximately
  32 million shares became exercisable immediately. Based on the current market
  price of the shares, all these options had no intrinsic economic value at the
  date of acceleration.&nbsp;The Company does not expect to incur any future compensation
  expense associated with these outstanding options when adopting FAS 123R in
  the first quarter 2006 since following this the Company will not have any outstanding
  unvested stock options as at the adoption date of FAS123R.&nbsp;The impact on
  the Company&#146;s financial position and results of operations is further illustrated
  in the information presented in note 15 &#150; Fair value of stock-based compensation.
</P>
<P style="margin-top:0pt; margin-bottom:10pt; font-family:Times New Roman" align=justify>In
  May 2005, the Financial Accounting Standards Board issued Statement of Financial
  Accounting Standards No. 154, <em>Accounting Changes and Error Corrections</em>
  (&#147;FAS 154&#148;).&nbsp;This Statement supersedes Accounting Principles
  Board Opinion No. 20, <em>Accounting Changes</em> (&#147;APB 20&#148;) and Statement
  of Financial Accounting Standards No. 3, <em>Reporting Accounting Changes in
  Interim Financial Statements</em> (&#147;FAS 3&#148;). </P>
<P style="margin-top:0pt; margin-bottom:10pt; font-family:Times New Roman" align=justify><BR>
<BR></P>
<P style="margin:0pt; font-family:Times New Roman" align=center>F-8</P>
<P style="margin:0pt; font-family:Times New Roman"><BR></P>
<HR style="padding-top:7.2pt; padding-bottom:7.2pt" noshade size=1.333>
<P style="page-break-before:always; margin:0pt; font-family:Times New Roman" align=right><BR></P>
<P style="margin:0pt; font-family:Times New Roman"><BR></P>
<P style="margin-top:0pt; margin-bottom:10pt; font-family:Times New Roman" align=justify>This
 Statement requires entities that voluntarily make a change in accounting principle
 to apply that change retrospectively to prior periods&#146; financial statements,
 unless this would be impracticable, and to report the corresponding adjustment
 on the opening balance of retained earnings for that period rather than in net
 income, as previously required by APB 20. FAS 154 also states that changes in
 the method of depreciation, amortization, or depletion of long-lived, non financial
 assets, must be accounted for as a change in accounting estimate and no longer
 as a change in accounting principle. FAS 154 does not change the accounting
 guidance contained in APB 20 for reporting a change in accounting estimate and
 the correction of an error in previously issued financial statements, but it
 makes a distinction between &#147;retrospective application&#148; of an accounting
 principle and the &#147;restatement&#148; of financial statements to reflect
 the correction of an error. The Statement is effective for accounting changes
 and corrections of errors made in fiscal years beginning after December 15,
 2005, with early adoption permitted for accounting changes and corrections of
 errors made in fiscal years beginning after FAS 154 was issued. The Company
 early adopted FAS 154 in the second quarter of 2005 and did report neither corrections
 of errors nor accounting changes that could have a material effect on its financial
 position or results of operations. </P>
<P style="margin-top:0pt; margin-bottom:10pt; font-family:Times New Roman"><B>6. Other Income and Expenses, Net</B></P>
<P style="margin-top:0pt; margin-bottom:10pt; font-family:Times New Roman" align=justify>Other income and expenses, net consisted of the following:</P>
<TABLE style="font-size:10pt" cellspacing=0 align=center><TR><TD style="border-top:0.5pt solid #000000; border-bottom:0.5pt solid #000000" valign=top width=184.333>&nbsp;</TD><TD style="border-top:0.5pt solid #000000; border-bottom:0.5pt solid #000000" valign=top width=227.867 colspan=2><P style="margin:0pt; text-indent:9pt; font-family:Times New Roman" align=center>(unaudited)</P>
</TD><TD style="border-top:0.5pt solid #000000; border-bottom:0.5pt solid #000000" valign=top width=231 colspan=2><P style="margin:0pt; text-indent:9pt; font-family:Times New Roman" align=center>(unaudited)</P>
</TD></TR>
<TR><TD valign=top width=184.333>&nbsp;</TD><TD valign=top width=227.867 colspan=2><P style="margin:0pt; text-indent:9pt; font-family:Times New Roman" align=center>Three months ended</P>
</TD><TD valign=top width=231 colspan=2><P style="margin:0pt; text-indent:9pt; font-family:Times New Roman" align=center>Nine months ended</P>
</TD></TR>
<TR><TD style="border-bottom:0.5pt solid #000000" valign=top width=184.333><P style="margin:0pt; text-indent:9pt; font-family:Times New Roman">In
 millions of U.S dollars</P>
</TD><TD style="border-bottom:0.5pt solid #000000" valign=top width=116.333><P style="margin:0pt; text-indent:9pt; font-family:Times New Roman" align=center><B>October 1, 2005</B></P>
</TD><TD style="border-bottom:0.5pt solid #000000" valign=top width=111.533><P style="margin:0pt; text-indent:9pt; font-family:Times New Roman" align=center>Sept. 25,2004</P>
</TD><TD style="border-bottom:0.5pt solid #000000" valign=top width=122.8><P style="margin:0pt; text-indent:9pt; font-family:Times New Roman" align=center><B>October 1, 2005</B></P>
</TD><TD style="border-bottom:0.5pt solid #000000" valign=top width=108.2><P style="margin:0pt; text-indent:9pt; font-family:Times New Roman" align=center>Sept. 25,2004</P>
</TD></TR>
<TR><TD valign=top width=184.333>&nbsp;</TD><TD valign=top width=116.333>&nbsp;</TD><TD valign=top width=111.533>&nbsp;</TD><TD valign=top width=122.8>&nbsp;</TD><TD valign=top width=108.2>&nbsp;</TD></TR>
<TR><TD style="background-color:#DFDFDF" valign=top width=184.333><P style="margin:0pt;font-family:Times New Roman">Research and development funding</P>
</TD><TD style="background-color:#DFDFDF" valign=top width=116.333><P style="margin:0pt; text-indent:9pt; font-family:Times New Roman" align=right><B>20</B></P>
</TD><TD style="background-color:#DFDFDF" valign=top width=111.533><P style="margin:0pt; text-indent:9pt; font-family:Times New Roman" align=center>9</P>
</TD><TD style="background-color:#DFDFDF" valign=top width=122.8><P style="margin:0pt; text-indent:9pt; font-family:Times New Roman" align=right><B>47</B></P>
</TD><TD style="background-color:#DFDFDF" valign=top width=108.2><P style="margin:0pt; text-indent:9pt; font-family:Times New Roman" align=center>37</P>
</TD></TR>
<TR><TD valign=top width=184.333><P style="margin:0pt; font-family:Times New Roman">Start-up costs</P>
</TD><TD valign=top width=116.333><P style="margin:0pt; text-indent:9pt; font-family:Times New Roman" align=right><B>(12)</B></P>
</TD><TD valign=top width=111.533><P style="margin:0pt; text-indent:9pt; font-family:Times New Roman" align=center>(13)</P>
</TD><TD valign=top width=122.8><P style="margin:0pt; text-indent:9pt; font-family:Times New Roman" align=right><B>(46)</B></P>
</TD><TD valign=top width=108.2><P style="margin:0pt; text-indent:9pt; font-family:Times New Roman" align=center>(45)</P>
</TD></TR>
<TR><TD style="background-color:#DFDFDF" valign=top width=184.333><P style="margin:0pt; font-family:Times New Roman">Exchange gain (loss), net</P>
</TD><TD style="background-color:#DFDFDF" valign=top width=116.333><P style="margin:0pt; text-indent:9pt; font-family:Times New Roman" align=right><B>(5)</B></P>
</TD><TD style="background-color:#DFDFDF" valign=top width=111.533><P style="margin:0pt; text-indent:9pt; font-family:Times New Roman" align=center>10</P>
</TD><TD style="background-color:#DFDFDF" valign=top width=122.8><P style="margin:0pt; text-indent:9pt; font-family:Times New Roman" align=right><B>4</B></P>
</TD><TD style="background-color:#DFDFDF" valign=top width=108.2><P style="margin:0pt; text-indent:9pt; font-family:Times New Roman" align=center>19</P>
</TD></TR>
<TR><TD valign=top width=184.333><P style="margin:0pt; font-family:Times New Roman">Patent claim costs</P>
</TD><TD valign=top width=116.333><P style="margin:0pt; text-indent:9pt; font-family:Times New Roman" align=right><B>(6)</B></P>
</TD><TD valign=top width=111.533><P style="margin:0pt; text-indent:9pt; font-family:Times New Roman" align=center>(7)</P>
</TD><TD valign=top width=122.8><P style="margin:0pt; text-indent:9pt; font-family:Times New Roman" align=right><B>(16)</B></P>
</TD><TD valign=top width=108.2><P style="margin:0pt; text-indent:9pt; font-family:Times New Roman" align=center>(21)</P>
</TD></TR>
<TR><TD style="background-color:#DFDFDF" valign=top width=184.333><P style="margin:0pt; font-family:Times New Roman">Gain (loss) on sale of non-current assets</P>
</TD><TD style="background-color:#DFDFDF" valign=top width=116.333><P style="margin:0pt; text-indent:9pt; font-family:Times New Roman" align=right><B>(2)</B></P>
</TD><TD style="background-color:#DFDFDF" valign=top width=111.533><P style="margin:0pt; text-indent:9pt; font-family:Times New Roman" align=center>-</P>
</TD><TD style="background-color:#DFDFDF" valign=top width=122.8><P style="margin:0pt; text-indent:9pt; font-family:Times New Roman" align=right><B>4</B></P>
</TD><TD style="background-color:#DFDFDF" valign=top width=108.2><P style="margin:0pt; text-indent:9pt; font-family:Times New Roman" align=center>6</P>
</TD></TR>
<TR><TD valign=top width=184.333><P style="margin:0pt; font-family:Times New Roman">Other, net</P>
</TD><TD valign=top width=116.333><P style="margin:0pt; text-indent:9pt; font-family:Times New Roman" align=right><B>2</B></P>
</TD><TD valign=top width=111.533><P style="margin:0pt; text-indent:9pt; font-family:Times New Roman" align=center>(2)</P>
</TD><TD valign=top width=122.8><P style="margin:0pt; text-indent:9pt; font-family:Times New Roman" align=right><B>(4)</B></P>
</TD><TD valign=top width=108.2><P style="margin:0pt; text-indent:9pt; font-family:Times New Roman" align=center>(9)</P>
</TD></TR>
<TR><TD style="background-color:#DFDFDF; border-bottom:0.5pt solid #000000" valign=top width=184.333>&nbsp;</TD><TD style="background-color:#DFDFDF; border-bottom:0.5pt solid #000000" valign=top width=116.333>&nbsp;</TD><TD style="background-color:#DFDFDF; border-bottom:0.5pt solid #000000" valign=top width=111.533>&nbsp;</TD><TD style="background-color:#DFDFDF; border-bottom:0.5pt solid #000000" valign=top width=122.8>&nbsp;</TD><TD style="background-color:#DFDFDF; border-bottom:0.5pt solid #000000" valign=top width=108.2>&nbsp;</TD></TR>
<TR><TD style="border-bottom:0.5pt solid #000000" valign=top width=184.333><P style="margin:0pt; text-indent:9pt; font-family:Times New Roman"><B>Total</B></P>
</TD><TD style="border-bottom:0.5pt solid #000000" valign=top width=116.333><P style="margin:0pt; text-indent:9pt; font-family:Times New Roman" align=right><B>(3)</B></P>
</TD><TD style="border-bottom:0.5pt solid #000000" valign=top width=111.533><P style="margin:0pt; text-indent:9pt; font-family:Times New Roman" align=center>(3)</P>
</TD><TD style="border-bottom:0.5pt solid #000000" valign=top width=122.8><P style="margin:0pt; text-indent:9pt; font-family:Times New Roman" align=right><B>(11)</B></P>
</TD><TD style="border-bottom:0.5pt solid #000000" valign=top width=108.2><P style="margin:0pt; text-indent:9pt; font-family:Times New Roman" align=center>(13)</P>
</TD></TR>
</TABLE>
<P style="margin-top:0pt; margin-bottom:10pt; font-family:Times New Roman" align=justify><BR></P>
<P style="margin-top:0pt; margin-bottom:10pt; font-family:Times New Roman" align=justify>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 six months after the fabrication line&#146;s quality qualification.
 For the third quarter and first nine months of 2005, start-up costs mainly related
 to the 200mm fab in Agrate and the 300mm fab in Catania (Italy) and the 150mm
 fab in Ang Mo Kio (Singapore). For the third quarter of 2004, start-up costs
 mainly related to the upgrading of 200mm fab in Agrate (Italy), the launch of
 150mm fab in Ang Mo Kio (Singapore) and the build-up of 300mm fab in Catania
 (Italy). For the first nine months of 2004, start-up costs also included costs
 related the 300mm pilot line in Crolles (France), which reached a minimum level
 of production at the end of the second quarter of 2004.&nbsp;</P>
<P style="margin-top:0pt; margin-bottom:10pt; font-family:Times New Roman" align=justify>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 and Singapore agencies.&nbsp;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.</P>
<P style="margin-top:0pt; margin-bottom:10pt; font-family:Times New Roman" align=justify>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 third quarter of 2005, patent litigation costs and patent pre-litigation
 costs amounted to $5 million and $1 million respectively, while in the third
 quarter of 2004, they respectively totaled $5 million and $2 million. On a year-to-date
 basis, patent litigation costs amounted to $11 million in 2005 compared to $17
 million in the previous year. For the nine months ended 2005, patent pre-litigation
 totaled $5 million while they amounted to $4 million for the first nine months
 of 2004.</P>
<P style="margin-top:0pt; margin-bottom:10pt; font-family:Times New Roman" align=justify><BR>
<BR></P>
<P style="margin:0pt; font-family:Times New Roman" align=center>F-9</P>
<P style="margin:0pt; font-family:Times New Roman"><BR></P>
<HR style="padding-top:7.2pt; padding-bottom:7.2pt" noshade size=1.333>
<P style="page-break-before:always; margin:0pt; font-family:Times New Roman" align=right><BR></P>
<P style="margin:0pt; font-family:Times New Roman"><BR></P>
<P style="margin-top:0pt; margin-bottom:10pt; font-family:Times New Roman" align=justify>&nbsp;</P>
<P style="margin-top:0pt; margin-bottom:10pt; font-family:Times New Roman" align=justify>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.&nbsp;</P>
<P style="margin-top:0pt; margin-bottom:10pt; font-family:Times New Roman"><B>7. Impairment, Restructuring Charges and Other Related Closure Costs</B></P>
<P style="margin-top:0pt; margin-bottom:10pt; font-family:Times New Roman" align=justify>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 150mm 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 fi
ner geometry wafer capacity. This plan is currently on-going, with the majority of the steps already completed. The Company is expected to incur the balance of the restructuring charges related to this plan in the coming quarters, somewhat later than originally anticipated because of delays in customers&#146; qualifications.</P>
<P style="margin-top:0pt; margin-bottom:10pt; font-family:Times New Roman" align=justify>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. Additional restructuring initiatives were also implemented in the first quarter of 2005 such as the closure of a research and development design center in Karlsruhe (Germany) and in Malvern (USA) and the discontinuation of a development project in Singapore.&nbsp;This plan has already been completed.</P>
<P style="margin-top:0pt; margin-bottom:10pt; font-family:Times New Roman" align=justify>In May 2005, the Company announced additional restructuring efforts to improve profitability.&nbsp;These initiatives cumulated with other already announced initiatives will address 3,000 people of the Company&#146;s workforce by mid-2006, out of which 2,300 are in Europe.&nbsp;The Company plans to reorganize its European activities by optimizing on a global scale its EWS activities (wafer test); harmonizing its support functions; reducing its costs and rationalizing its activities outside its manufacturing areas and by disengaging from certain activities. </P>
<P style="margin-top:0pt; margin-bottom:10pt; font-family:Times New Roman" align=justify><BR>
<BR></P>
<P style="margin:0pt; font-family:Times New Roman" align=center>F-10</P>
<P style="margin:0pt; font-family:Times New Roman"><BR></P>
<HR style="padding-top:7.2pt; padding-bottom:7.2pt" noshade size=1.333>
<P style="page-break-before:always; margin:0pt; font-family:Times New Roman" align=right><BR></P>
<P style="margin:0pt; font-family:Times New Roman"><BR></P>
<P style="margin-top:0pt; margin-bottom:10pt; font-family:Times New Roman" align=justify>Impairment, restructuring charges and other related closure costs incurred in the third quarter of 2005 and the first nine months of 2005 are summarized as follows:</P>
<TABLE style="font-size:10pt" cellspacing=0 align=center>
  <TR>
    <TD style="border-top:0.5pt solid #000000; border-bottom:0.5pt solid #000000" valign=top width=167.8><P style="margin:0pt; font-family:Times New Roman"><B>Three
        months ended </B></P>
      <P style="margin:0pt; font-family:Times New Roman"><B>October 1, 2005</B></P></TD>
    <TD style="border-top:0.5pt solid #000000; border-bottom:0.5pt solid #000000" valign=top width=113.667><P style="margin:0pt; font-family:Times New Roman" align=center><B>Impairment</B></P></TD>
    <TD style="border-top:0.5pt solid #000000; border-bottom:0.5pt solid #000000" valign=top width=109.4><P style="margin:0pt; font-family:Times New Roman" align=center><B>Restructuring
        charges</B></P></TD>
    <TD style="border-top:0.5pt solid #000000; border-bottom:0.5pt solid #000000" valign=top width=91.133><P style="margin:0pt; font-family:Times New Roman" align=center><B>Other
        related closure costs</B></P></TD>
    <TD style="border-top:0.5pt solid #000000; border-bottom:0.5pt solid #000000" valign=top width=134.2><P style="margin:0pt; font-family:Times New Roman" align=center><B>Total&nbsp;impairment,
        restructuring charges and other related closure costs</B></P></TD>
  </TR>
  <TR>
    <TD style="background-color:#DFDFDF" valign=top width=167.8><P style="margin:0pt; font-family:Times New Roman">150mm
        fab operations</P></TD>
    <TD style="background-color:#DFDFDF" valign=top width=113.667><P style="margin:0pt; font-family:Times New Roman" align=center>-</P></TD>
    <TD style="background-color:#DFDFDF" valign=top width=109.4><P style="margin:0pt; font-family:Times New Roman" align=center>(2)</P></TD>
    <TD style="background-color:#DFDFDF" valign=top width=91.133><P style="margin:0pt; font-family:Times New Roman" align=center>(1)</P></TD>
    <TD style="background-color:#DFDFDF" valign=top width=134.2><P style="margin:0pt; font-family:Times New Roman" align=center>(3)</P></TD>
  </TR>
  <TR>
    <TD valign=top width=167.8><P style="margin:0pt; font-family:Times New Roman">Back-end
        operations</P></TD>
    <TD valign=top width=113.667><P style="margin:0pt; font-family:Times New Roman" align=center>-</P></TD>
    <TD valign=top width=109.4><P style="margin:0pt; font-family:Times New Roman" align=center>(2)</P></TD>
    <TD valign=top width=91.133><P style="margin:0pt; font-family:Times New Roman" align=center>-</P></TD>
    <TD valign=top width=134.2><P style="margin:0pt; font-family:Times New Roman" align=center>(2)</P></TD>
  </TR>
  <TR>
    <TD style="background-color:#DFDFDF" valign=top width=167.8><P style="margin:0pt; font-family:Times New Roman">Intangible
        assets and investments</P></TD>
    <TD style="background-color:#DFDFDF" valign=top width=113.667><P style="margin:0pt; font-family:Times New Roman" align=center>(1)</P></TD>
    <TD style="background-color:#DFDFDF" valign=top width=109.4><P style="margin:0pt; font-family:Times New Roman" align=center>-</P></TD>
    <TD style="background-color:#DFDFDF" valign=top width=91.133><P style="margin:0pt; font-family:Times New Roman" align=center>-</P></TD>
    <TD style="background-color:#DFDFDF" valign=top width=134.2><P style="margin:0pt; font-family:Times New Roman" align=center>(1)</P></TD>
  </TR>

  <TR>
    <TD style=" border-bottom:0.5pt solid #000000" valign=top>2005 restructuring
      plan</TD>
    <TD style=" border-bottom:0.5pt solid #000000" valign=top><div align="center">-</div></TD>
    <TD style=" border-bottom:0.5pt solid #000000" valign=top><div align="center">(6)</div></TD>
    <TD style=" border-bottom:0.5pt solid #000000" valign=top><div align="center">-</div></TD>
    <TD style=" border-bottom:0.5pt solid #000000" valign=top><div align="center">(6)</div></TD>
  </TR>
  <TR>
    <TD style=" border-bottom:0.5pt solid #000000" valign=top>&nbsp;</TD>
    <TD style=" border-bottom:0.5pt solid #000000" valign=top>&nbsp;</TD>
    <TD style=" border-bottom:0.5pt solid #000000" valign=top>&nbsp;</TD>
    <TD style=" border-bottom:0.5pt solid #000000" valign=top>&nbsp;</TD>
    <TD style=" border-bottom:0.5pt solid #000000" valign=top>&nbsp;</TD>
  </TR>
  <TR>
    <TD style="background-color:#DFDFDF; border-bottom:0.5pt solid #000000" valign=top width=167.8><P style="margin:0pt; font-family:Times New Roman">Total</P></TD>
    <TD style="background-color:#DFDFDF; border-bottom:0.5pt solid #000000" valign=top width=113.667><P style="margin:0pt; font-family:Times New Roman" align=center>(1)</P></TD>
    <TD style="background-color:#DFDFDF; border-bottom:0.5pt solid #000000" valign=top width=109.4><P style="margin:0pt; font-family:Times New Roman" align=center>(10)</P></TD>
    <TD style="background-color:#DFDFDF; border-bottom:0.5pt solid #000000" valign=top width=91.133><P style="margin:0pt; font-family:Times New Roman" align=center>(1)</P></TD>
    <TD style="background-color:#DFDFDF; border-bottom:0.5pt solid #000000" valign=top width=134.2><P style="margin:0pt; font-family:Times New Roman" align=center>(12)</P></TD>
  </TR>
  <TR>
    <TD style="border-bottom:0.5pt solid #000000" valign=top width=167.8>&nbsp;</TD>
    <TD style="border-bottom:0.5pt solid #000000" valign=top width=113.667>&nbsp;</TD>
    <TD style="border-bottom:0.5pt solid #000000" valign=top width=109.4>&nbsp;</TD>
    <TD style="border-bottom:0.5pt solid #000000" valign=top width=91.133>&nbsp;</TD>
    <TD style="border-bottom:0.5pt solid #000000" valign=top width=134.2>&nbsp;</TD>
  </TR>
  <TR>
    <TD style="background-color:#DFDFDF; border-bottom:0.5pt solid #000000" valign=top width=167.8><P style="margin:0pt; font-family:Times New Roman"><B>Nine
        months ended </B></P>
      <P style="margin:0pt; font-family:Times New Roman"><B>October 1, 2005</B></P></TD>
    <TD style="background-color:#DFDFDF; border-bottom:0.5pt solid #000000" valign=top width=113.667><P style="margin:0pt; font-family:Times New Roman" align=center><B>Impairment</B></P></TD>
    <TD style="background-color:#DFDFDF; border-bottom:0.5pt solid #000000" valign=top width=109.4><P style="margin:0pt; font-family:Times New Roman" align=center><B>Restructuring
        charges</B></P></TD>
    <TD style="background-color:#DFDFDF; border-bottom:0.5pt solid #000000" valign=top width=91.133><P style="margin:0pt; font-family:Times New Roman" align=center><B>Other
        related closure costs</B></P></TD>
    <TD style="background-color:#DFDFDF; border-bottom:0.5pt solid #000000" valign=top width=134.2><P style="margin:0pt; font-family:Times New Roman" align=center><B>Total&nbsp;impairment,
        restructuring charges and other related closure costs</B></P></TD>
  </TR>
  <TR>
    <TD valign=top width=167.8><P style="margin:0pt; font-family:Times New Roman">150mm
        fab operations</P></TD>
    <TD valign=top width=113.667><P style="margin:0pt; font-family:Times New Roman" align=center>-</P></TD>
    <TD valign=top width=109.4><P style="margin:0pt; font-family:Times New Roman" align=center>(6)</P></TD>
    <TD valign=top width=91.133><P style="margin:0pt; font-family:Times New Roman" align=center>(6)</P></TD>
    <TD valign=top width=134.2><P style="margin:0pt; font-family:Times New Roman" align=center>(12)</P></TD>
  </TR>
  <TR>
    <TD style="background-color:#DFDFDF" valign=top width=167.8><P style="margin:0pt; font-family:Times New Roman">Back-end
        operations</P></TD>
    <TD style="background-color:#DFDFDF" valign=top width=113.667><P style="margin:0pt; font-family:Times New Roman" align=center>-</P></TD>
    <TD style="background-color:#DFDFDF" valign=top width=109.4><P style="margin:0pt; font-family:Times New Roman" align=center>(4)</P></TD>
    <TD style="background-color:#DFDFDF" valign=top width=91.133><P style="margin:0pt; font-family:Times New Roman" align=center>(1)</P></TD>
    <TD style="background-color:#DFDFDF" valign=top width=134.2><P style="margin:0pt; font-family:Times New Roman" align=center>(5)</P></TD>
  </TR>
  <TR>
    <TD valign=top width=167.8><P style="margin:0pt; font-family:Times New Roman">Intangible
        assets and investments</P></TD>
    <TD valign=top width=113.667><P style="margin:0pt; font-family:Times New Roman" align=center>(64)</P></TD>
    <TD valign=top width=109.4><P style="margin:0pt; font-family:Times New Roman" align=center>-</P></TD>
    <TD valign=top width=91.133><P style="margin:0pt; font-family:Times New Roman" align=center>-</P></TD>
    <TD valign=top width=134.2><P style="margin:0pt; font-family:Times New Roman" align=center>(64)</P></TD>
  </TR>
  <TR>
    <TD style="background-color:#DFDFDF" valign=top width=167.8><P style="margin:0pt; font-family:Times New Roman">2005
        restructuring plan</P></TD>
    <TD style="background-color:#DFDFDF" valign=top width=113.667><P style="margin:0pt; font-family:Times New Roman" align=center>-</P></TD>
    <TD style="background-color:#DFDFDF" valign=top width=109.4><P style="margin-top:0pt; margin-bottom:10pt; font-family:Times New Roman" align=center>(21)</P></TD>
    <TD style="background-color:#DFDFDF" valign=top width=91.133><P style="margin-top:0pt; margin-bottom:10pt; font-family:Times New Roman" align=center>(1)</P></TD>
    <TD style="background-color:#DFDFDF" valign=top width=134.2><P style="margin:0pt; font-family:Times New Roman" align=center>(22)</P></TD>
  </TR>
  <TR>
    <TD style="border-bottom:0.5pt solid #000000" valign=top width=167.8><P style="margin:0pt; font-family:Times New Roman">Other</P></TD>
    <TD style="border-bottom:0.5pt solid #000000" valign=top width=113.667><P style="margin:0pt; font-family:Times New Roman" align=center>-</P></TD>
    <TD style="border-bottom:0.5pt solid #000000" valign=top width=109.4><P style="margin-top:0pt; margin-bottom:10pt; font-family:Times New Roman" align=center>(9)</P></TD>
    <TD style="border-bottom:0.5pt solid #000000" valign=top width=91.133><P style="margin-top:0pt; margin-bottom:10pt; font-family:Times New Roman" align=center>(1)</P></TD>
    <TD style="border-bottom:0.5pt solid #000000" valign=top width=134.2><P style="margin:0pt; font-family:Times New Roman" align=center>(10)</P></TD>
  </TR>
  <TR>
    <TD style="background-color:#DFDFDF; border-bottom:0.5pt solid #000000" valign=top width=167.8><P style="margin:0pt; font-family:Times New Roman">Total</P></TD>
    <TD style="background-color:#DFDFDF; border-bottom:0.5pt solid #000000" valign=top width=113.667><P style="margin:0pt; font-family:Times New Roman" align=center>(64)</P></TD>
    <TD style="background-color:#DFDFDF; border-bottom:0.5pt solid #000000" valign=top width=109.4><P style="margin:0pt; font-family:Times New Roman" align=center>(40)</P></TD>
    <TD style="background-color:#DFDFDF; border-bottom:0.5pt solid #000000" valign=top width=91.133><P style="margin:0pt; font-family:Times New Roman" align=center>(9)</P></TD>
    <TD style="background-color:#DFDFDF; border-bottom:0.5pt solid #000000" valign=top width=134.2><P style="margin:0pt; font-family:Times New Roman" align=center>(113)</P></TD>
  </TR>
</TABLE>
<P style="margin-top:0pt; margin-bottom:10pt; font-family:Times New Roman" align=justify><BR></P>
<P style="margin-top:0pt; margin-bottom:10pt; font-family:Times New Roman" align=justify>Impairment, restructuring charges and other related closure costs incurred in the third quarter of 2004 and the nine months of 2004 are summarized as follows:</P>
<TABLE style="font-size:10pt" cellspacing=0 align=center>
  <TR>
    <TD style="border-top:0.5pt solid #000000; border-bottom:0.5pt solid #000000" valign=top width=167.667><P style="margin:0pt; font-family:Times New Roman"><B>Three
        months ended </B></P>
      <P style="margin:0pt; font-family:Times New Roman"><B>Sept. 25, 2004</B></P></TD>
    <TD style="border-top:0.5pt solid #000000; border-bottom:0.5pt solid #000000" valign=top width=113.667><P style="margin:0pt; font-family:Times New Roman" align=center><B>Impairment</B></P></TD>
    <TD style="border-top:0.5pt solid #000000; border-bottom:0.5pt solid #000000" valign=top width=109.4><P style="margin:0pt; font-family:Times New Roman" align=center><B>Restructuring
        charges</B></P></TD>
    <TD style="border-top:0.5pt solid #000000; border-bottom:0.5pt solid #000000" valign=top width=91.2><P style="margin:0pt; font-family:Times New Roman" align=center><B>Other
        related closure costs</B></P></TD>
    <TD style="border-top:0.5pt solid #000000; border-bottom:0.5pt solid #000000" valign=top width=134.267><P style="margin:0pt; font-family:Times New Roman" align=center><B>Total&nbsp;impairment,
        restructuring charges and other related closure costs</B></P></TD>
  </TR>
  <TR>
    <TD style="background-color:#DFDFDF" valign=top width=167.667><P style="margin:0pt; font-family:Times New Roman">150mm
        fab operations</P></TD>
    <TD style="background-color:#DFDFDF" valign=top width=113.667><P style="margin:0pt; font-family:Times New Roman" align=center>-</P></TD>
    <TD style="background-color:#DFDFDF" valign=top width=109.4><P style="margin:0pt; font-family:Times New Roman" align=center>(1)</P></TD>
    <TD style="background-color:#DFDFDF" valign=top width=91.2><P style="margin:0pt; font-family:Times New Roman" align=center>(8)</P></TD>
    <TD style="background-color:#DFDFDF" valign=top width=134.267><P style="margin:0pt; font-family:Times New Roman" align=center>(9)</P></TD>
  </TR>
  <TR>
    <TD valign=top width=167.667><P style="margin:0pt; font-family:Times New Roman">Back-end
        operations</P></TD>
    <TD valign=top width=113.667><P style="margin:0pt; font-family:Times New Roman" align=center>-</P></TD>
    <TD valign=top width=109.4><P style="margin:0pt; font-family:Times New Roman" align=center>-</P></TD>
    <TD valign=top width=91.2><P style="margin:0pt; font-family:Times New Roman" align=center>(1)</P></TD>
    <TD valign=top width=134.267><P style="margin:0pt; font-family:Times New Roman" align=center>(1)</P></TD>
  </TR>
  <TR>
    <TD style="background-color:#DFDFDF; border-bottom:0.5pt solid #000000" valign=top width=167.667><P style="margin:0pt; font-family:Times New Roman">Intangible
        assets and investments</P></TD>
    <TD style="background-color:#DFDFDF; border-bottom:0.5pt solid #000000" valign=top width=113.667><P style="margin:0pt; font-family:Times New Roman" align=center>(2)</P></TD>
    <TD style="background-color:#DFDFDF; border-bottom:0.5pt solid #000000" valign=top width=109.4><P style="margin:0pt; font-family:Times New Roman" align=center>-</P></TD>
    <TD style="background-color:#DFDFDF; border-bottom:0.5pt solid #000000" valign=top width=91.2><P style="margin:0pt; font-family:Times New Roman" align=center>-</P></TD>
    <TD style="background-color:#DFDFDF; border-bottom:0.5pt solid #000000" valign=top width=134.267><P style="margin:0pt; font-family:Times New Roman" align=center>(2)</P></TD>
  </TR>
  <TR>
    <TD style="border-bottom:0.5pt solid #000000" valign=bottom>&nbsp;</TD>
    <TD style="border-bottom:0.5pt solid #000000" valign=top>&nbsp;</TD>
    <TD style="border-bottom:0.5pt solid #000000" valign=top>&nbsp;</TD>
    <TD style="border-bottom:0.5pt solid #000000" valign=top>&nbsp;</TD>
    <TD style="border-bottom:0.5pt solid #000000" valign=top>&nbsp;</TD>
  </TR>
  <TR bgcolor="#DFDFDF">
    <TD width=167.667 valign=bottom style="border-bottom:0.5pt solid #000000">
      <P style="margin:0pt; font-family:Times New Roman">Total</P></TD>
    <TD width=113.667 valign=top style="border-bottom:0.5pt solid #000000">
      <P style="margin:0pt; font-family:Times New Roman" align=center>(2)</P></TD>
    <TD width=109.4 valign=top style="border-bottom:0.5pt solid #000000">
      <P style="margin:0pt; font-family:Times New Roman" align=center>(1)</P></TD>
    <TD width=91.2 valign=top style="border-bottom:0.5pt solid #000000">
      <P style="margin:0pt; font-family:Times New Roman" align=center>(9)</P></TD>
    <TD width=134.267 valign=top style="border-bottom:0.5pt solid #000000">
      <P style="margin:0pt; font-family:Times New Roman" align=center>(12)</P></TD>
  </TR>
  <TR>
    <TD style=" border-bottom:0.5pt solid #000000" valign=top>&nbsp;</TD>
    <TD style=" border-bottom:0.5pt solid #000000" valign=top>&nbsp;</TD>
    <TD style=" border-bottom:0.5pt solid #000000" valign=top>&nbsp;</TD>
    <TD style=" border-bottom:0.5pt solid #000000" valign=top>&nbsp;</TD>
    <TD style=" border-bottom:0.5pt solid #000000" valign=top>&nbsp;</TD>
  </TR>
  <TR>
    <TD style="background-color:#DFDFDF; border-bottom:0.5pt solid #000000" valign=top width=167.667><P style="margin:0pt; font-family:Times New Roman"><B>Nine
        months ended </B></P>
      <P style="margin:0pt; font-family:Times New Roman"><B>Sept. 25, 2004</B></P></TD>
    <TD style="background-color:#DFDFDF; border-bottom:0.5pt solid #000000" valign=top width=113.667><P style="margin:0pt; font-family:Times New Roman" align=center><B>Impairment</B></P></TD>
    <TD style="background-color:#DFDFDF; border-bottom:0.5pt solid #000000" valign=top width=109.4><P style="margin:0pt; font-family:Times New Roman" align=center><B>Restructuring
        charges</B></P></TD>
    <TD style="background-color:#DFDFDF; border-bottom:0.5pt solid #000000" valign=top width=91.2><P style="margin:0pt; font-family:Times New Roman" align=center><B>Other
        related closure costs</B></P></TD>
    <TD style="background-color:#DFDFDF; border-bottom:0.5pt solid #000000" valign=top width=134.267><P style="margin:0pt; font-family:Times New Roman" align=center><B>Total&nbsp;impairment,
        restructuring charges and other related closure costs</B></P></TD>
  </TR>
  <TR>
    <TD valign=top width=167.667><P style="margin:0pt; font-family:Times New Roman">150mm
        fab operations</P></TD>
    <TD valign=top width=113.667><P style="margin:0pt; font-family:Times New Roman" align=center>-</P></TD>
    <TD valign=top width=109.4><P style="margin:0pt; font-family:Times New Roman" align=center>(26)</P></TD>
    <TD valign=top width=91.2><P style="margin:0pt; font-family:Times New Roman" align=center>(23)</P></TD>
    <TD valign=top width=134.267><P style="margin:0pt; font-family:Times New Roman" align=center>(49)</P></TD>
  </TR>
  <TR>
    <TD style="background-color:#DFDFDF" valign=top width=167.667><P style="margin:0pt; font-family:Times New Roman">Back-end
        operations</P></TD>
    <TD style="background-color:#DFDFDF" valign=top width=113.667><P style="margin:0pt; font-family:Times New Roman" align=center>-</P></TD>
    <TD style="background-color:#DFDFDF" valign=top width=109.4><P style="margin:0pt; font-family:Times New Roman" align=center>-</P></TD>
    <TD style="background-color:#DFDFDF" valign=top width=91.2><P style="margin:0pt; font-family:Times New Roman" align=center>(3)</P></TD>
    <TD style="background-color:#DFDFDF" valign=top width=134.267><P style="margin:0pt; font-family:Times New Roman" align=center>(3)</P></TD>
  </TR>
  <TR>
    <TD valign=top width=167.667><P style="margin:0pt; font-family:Times New Roman">Intangible
        assets and investments</P></TD>
    <TD valign=top width=113.667><P style="margin:0pt; font-family:Times New Roman" align=center>(3)</P></TD>
    <TD valign=top width=109.4><P style="margin:0pt; font-family:Times New Roman" align=center>-</P></TD>
    <TD valign=top width=91.2><P style="margin:0pt; font-family:Times New Roman" align=center>-</P></TD>
    <TD valign=top width=134.267><P style="margin:0pt; font-family:Times New Roman" align=center>(3)</P></TD>
  </TR>
  <TR>
    <TD style="background-color:#DFDFDF; border-bottom:0.5pt solid #000000" valign=bottom width=167.667><P style="margin:0pt; font-family:Times New Roman">Other</P></TD>
    <TD style="background-color:#DFDFDF; border-bottom:0.5pt solid #000000" valign=top width=113.667>&nbsp;</TD>
    <TD style="background-color:#DFDFDF; border-bottom:0.5pt solid #000000" valign=top width=109.4><P style="margin:0pt; font-family:Times New Roman" align=center>(2)</P></TD>
    <TD style="background-color:#DFDFDF; border-bottom:0.5pt solid #000000" valign=top width=91.2>&nbsp;</TD>
    <TD style="background-color:#DFDFDF; border-bottom:0.5pt solid #000000" valign=top width=134.267><P style="margin:0pt; font-family:Times New Roman" align=center>(2)</P></TD>
  </TR>
  <TR>
    <TD style="border-bottom:0.5pt solid #000000" valign=bottom width=167.667><P style="margin:0pt; font-family:Times New Roman">Total</P></TD>
    <TD style="border-bottom:0.5pt solid #000000" valign=top width=113.667><P style="margin:0pt; font-family:Times New Roman" align=center>(3)</P></TD>
    <TD style="border-bottom:0.5pt solid #000000" valign=top width=109.4><P style="margin:0pt; font-family:Times New Roman" align=center>(28)</P></TD>
    <TD style="border-bottom:0.5pt solid #000000" valign=top width=91.2><P style="margin:0pt; font-family:Times New Roman" align=center>(26)</P></TD>
    <TD style="border-bottom:0.5pt solid #000000" valign=top width=134.267><P style="margin:0pt; font-family:Times New Roman" align=center>(57)</P></TD>
  </TR>
</TABLE>
<P style="margin-top:0pt; margin-bottom:10pt; font-family:Times New Roman" align=justify><BR></P>
<P style="margin-top:0pt; margin-bottom:8.35pt; padding-left:36pt; font-family:Times New Roman" align=justify>Impairment charges</P>
<P style="margin-top:0pt; margin-bottom:10pt; font-family:Times New Roman" align=justify>In
 the first nine months of 2005, the Company recorded impairment charges of $64
 million, of which $63 million were incurred in the first quarter of 2005 primarily
 pursuant to the decision of the Company to reduce its Access technology products
 for Customer Premises Equipment (&#147;CPE&#148;) modem products. </P>
<P style="margin-top:0pt; margin-bottom:10pt; font-family:Times New Roman" align=justify><BR>
<BR></P>
<P style="margin:0pt; font-family:Times New Roman" align=center>F-11</P>
<P style="margin:0pt; font-family:Times New Roman"><BR></P>
<HR style="padding-top:7.2pt; padding-bottom:7.2pt" noshade size=1.333>
<P style="page-break-before:always; margin:0pt; font-family:Times New Roman" align=right><BR></P>
<P style="margin:0pt; font-family:Times New Roman"><BR></P>
<P style="margin-top:0pt; margin-bottom:10pt; font-family:Times New Roman" align=justify>The
 Company reports CPE business as part of the Access reporting unit, included
 in the Application Specific Products Group (&#147;ASG&#148;). 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 between the Access reporting unit and the business to be disposed
 of according to their relative fair values using market comparables. The reassessment
 resulted in a $39 million goodwill impairment. Additionally $22 million of purchased
 technologies were identified without an 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. Moreover, impairment charges of $2 million for
 technologies and other intangible assets were incurred pursuant to the decision
 of the Company to close its research and development design center in Karlsruhe
 (Germany) and the discontinuation of a development project in Singapore. </P>
<P style="margin-top:0pt; margin-bottom:10pt; font-family:Times New Roman" align=justify>In the third quarter of 2005, the Company performed the annual review for impairment of goodwill and other intangible assets. As a result of this review, an impairment charge of approximately $1 million was recorded during the third quarter of 2005, relating to purchased technologies primarily associated with the Home, Personal, Communication Sector segment (&#147;HPC&#148;), technologies that were determined to be obsolete.</P>
<P style="margin-top:0pt; margin-bottom:10pt; font-family:Times New Roman" align=justify>In the first nine months of 2004, the Company recorded an impairment charge of $3 million, of which $2 million were incurred in the third quarter of 2004 for financial assets of the Company which reported other-than-temporary losses. </P>
<P style="margin-top:0pt; margin-bottom:8.35pt; padding-left:36pt; font-family:Times New Roman" align=justify>Restructuring charges and other related closure costs</P>
<P style="margin-top:0pt; margin-bottom:10pt; font-family:Times New Roman" align=justify>Provisions for restructuring charges and other related closure costs as at October 1, 2005 are summarized as follows:</P>
<TABLE style="font-size:10pt" cellspacing=0 align=center><TR><TD style="border-top:0.5pt solid #000000; border-bottom:0.5pt solid #000000" valign=top width=157.933>&nbsp;</TD><TD style="border-top:0.5pt solid #000000; border-bottom:0.5pt solid #000000" width=209.867 colspan=3><P style="margin:0pt; line-height:9pt; font-family:Times New Roman; font-size:7pt" align=center><B>150mm fab operations</B></P>
</TD><TD style="border-top:0.5pt solid #000000; border-bottom:0.5pt solid #000000" width=56.733><P style="margin:0pt; line-height:9pt; font-family:Times New Roman; font-size:7pt" align=center><B>Back-end operations</B></P>
</TD><TD style="border-top:0.5pt solid #000000; border-bottom:0.5pt solid #000000" width=60.6><P style="margin:0pt; line-height:9pt; font-family:Times New Roman; font-size:7pt" align=center><B>2005 restructuring plan</B></P>
</TD><TD style="border-top:0.5pt solid #000000; border-bottom:0.5pt solid #000000" width=60.6><P style="margin:0pt; line-height:9pt; font-family:Times New Roman; font-size:7pt" align=center><B>Other</B></P>
</TD><TD style="border-top:0.5pt solid #000000; border-bottom:0.5pt solid #000000" width=60.067><P style="margin:0pt; line-height:9pt; font-family:Times New Roman; font-size:7pt" align=center><B>Total restructuring &amp; other related closure costs</B></P>
</TD></TR>
<TR><TD style="border-bottom:0.5pt solid #000000" valign=top width=157.933>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" width=92.533><P style="margin:0pt; line-height:9pt; font-family:Times New Roman; font-size:7pt" align=center>Restructuring</P>
</TD><TD style="border-bottom:0.5pt solid #000000" width=56.733><P style="margin:0pt; line-height:9pt; font-family:Times New Roman; font-size:7pt" align=center>Other related closure cost</P>
</TD><TD style="border-bottom:0.5pt solid #000000" width=60.6><P style="margin:0pt; line-height:9pt; font-family:Times New Roman; font-size:7pt" align=center>Total</P>
</TD><TD style="border-bottom:0.5pt solid #000000" width=56.733>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" width=60.6>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" width=60.6>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" width=60.067>&nbsp;</TD></TR>
<TR><TD style="background-color:#DFDFDF; border-bottom:2pt double #000000" width=157.933><P style="margin:0pt; line-height:9pt; font-family:Times New Roman; font-size:7pt"><B>Provision
 as at December 31, 2004</B></P>
</TD><TD style="background-color:#DFDFDF; border-bottom:2pt double #000000" width=92.533><P style="margin:0pt; line-height:10pt; font-family:Times New Roman; font-size:8pt" align=center><B>36</B></P>
</TD><TD style="background-color:#DFDFDF; border-bottom:2pt double #000000" width=56.733><P style="margin:0pt; line-height:10pt; font-family:Times New Roman; font-size:8pt" align=center><B>1</B></P>
</TD><TD style="background-color:#DFDFDF; border-bottom:2pt double #000000" width=60.6><P style="margin:0pt; line-height:10pt; font-family:Times New Roman; font-size:8pt" align=center><B>37</B></P>
</TD><TD style="background-color:#DFDFDF; border-bottom:2pt double #000000" width=56.733><P style="margin:0pt; line-height:10pt; font-family:Times New Roman; font-size:8pt" align=center><B>-</B></P>
</TD><TD style="background-color:#DFDFDF; border-bottom:2pt double #000000" width=60.6><P style="margin:0pt; line-height:10pt; font-family:Times New Roman; font-size:8pt" align=center><B>-</B></P>
</TD><TD style="background-color:#DFDFDF; border-bottom:2pt double #000000" width=60.6><P style="margin:0pt; line-height:10pt; font-family:Times New Roman; font-size:8pt" align=center><B>3</B></P>
</TD><TD style="background-color:#DFDFDF; border-bottom:2pt double #000000" width=60.067><P style="margin:0pt; line-height:10pt; font-family:Times New Roman; font-size:8pt" align=center><B>40</B></P>
</TD></TR>
<TR><TD width=157.933><P style="margin:0pt; line-height:9pt; font-family:Times New Roman; font-size:7pt" align=center>Charges incurred in 2005</P>
</TD><TD width=92.533><P style="margin:0pt; line-height:10pt; font-family:Times New Roman; font-size:8pt" align=center>6</P>
</TD><TD width=56.733><P style="margin:0pt; line-height:10pt; font-family:Times New Roman; font-size:8pt" align=center>6</P>
</TD><TD width=60.6><P style="margin:0pt; line-height:10pt; font-family:Times New Roman; font-size:8pt" align=center>12</P>
</TD><TD width=56.733><P style="margin:0pt; line-height:10pt; font-family:Times New Roman; font-size:8pt" align=center>5</P>
</TD><TD width=60.6><P style="margin:0pt; line-height:10pt; font-family:Times New Roman; font-size:8pt" align=center>22</P>
</TD><TD width=60.6><P style="margin:0pt; line-height:10pt; font-family:Times New Roman; font-size:8pt" align=center>10</P>
</TD><TD width=60.067><P style="margin:0pt; line-height:10pt; font-family:Times New Roman; font-size:8pt" align=center>(49)</P>
</TD></TR>
<TR><TD style="background-color:#DFDFDF" width=157.933><P style="margin:0pt; line-height:9pt; font-family:Times New Roman; font-size:7pt" align=center>Amounts paid</P>
</TD><TD style="background-color:#DFDFDF" width=92.533><P style="margin:0pt; line-height:10pt; font-family:Times New Roman; font-size:8pt" align=center>(19)</P>
</TD><TD style="background-color:#DFDFDF" width=56.733><P style="margin:0pt; line-height:10pt; font-family:Times New Roman; font-size:8pt" align=center>(7)</P>
</TD><TD style="background-color:#DFDFDF" width=60.6><P style="margin:0pt; line-height:10pt; font-family:Times New Roman; font-size:8pt" align=center>(26)</P>
</TD><TD style="background-color:#DFDFDF" width=56.733><P style="margin:0pt; line-height:10pt; font-family:Times New Roman; font-size:8pt" align=center>(5)</P>
</TD><TD style="background-color:#DFDFDF" width=60.6><P style="margin:0pt; line-height:10pt; font-family:Times New Roman; font-size:8pt" align=center>(5)</P>
</TD><TD style="background-color:#DFDFDF" width=60.6><P style="margin:0pt; line-height:10pt; font-family:Times New Roman; font-size:8pt" align=center>(10)</P>
</TD><TD style="background-color:#DFDFDF" width=60.067><P style="margin:0pt; line-height:10pt; font-family:Times New Roman; font-size:8pt" align=center>(46)</P>
</TD></TR>
<TR><TD style="border-bottom:0.5pt solid #000000" width=157.933><P style="margin:0pt; line-height:9pt; font-family:Times New Roman; font-size:7pt" align=center>Currency translation effect</P>
</TD><TD style="border-bottom:0.5pt solid #000000" width=92.533><P style="margin:0pt; line-height:10pt; font-family:Times New Roman; font-size:8pt" align=center>(3)</P>
</TD><TD style="border-bottom:0.5pt solid #000000" width=56.733><P style="margin:0pt; line-height:10pt; font-family:Times New Roman; font-size:8pt" align=center>-</P>
</TD><TD style="border-bottom:0.5pt solid #000000" width=60.6><P style="margin:0pt; line-height:10pt; font-family:Times New Roman; font-size:8pt" align=center>(3)</P>
</TD><TD style="border-bottom:0.5pt solid #000000" width=56.733><P style="margin:0pt; line-height:10pt; font-family:Times New Roman; font-size:8pt" align=center>-</P>
</TD><TD style="border-bottom:0.5pt solid #000000" width=60.6><P style="margin:0pt; line-height:10pt; font-family:Times New Roman; font-size:8pt" align=center>-</P>
</TD><TD style="border-bottom:0.5pt solid #000000" width=60.6><P style="margin:0pt; line-height:10pt; font-family:Times New Roman; font-size:8pt" align=center>-</P>
</TD><TD style="border-bottom:0.5pt solid #000000" width=60.067><P style="margin:0pt; line-height:10pt; font-family:Times New Roman; font-size:8pt" align=center>(3)</P>
</TD></TR>
<TR><TD style="background-color:#DFDFDF; border-bottom:0.5pt solid #000000" width=157.933><P style="margin:0pt; line-height:9pt; font-family:Times New Roman; font-size:7pt"><B>Provision
 as at October 1, 2005 </B></P>
</TD><TD style="background-color:#DFDFDF; border-bottom:0.5pt solid #000000" width=92.533><P style="margin:0pt; line-height:10pt; font-family:Times New Roman; font-size:8pt" align=center><B>20</B></P>
</TD><TD style="background-color:#DFDFDF; border-bottom:0.5pt solid #000000" width=56.733><P style="margin:0pt; line-height:10pt; font-family:Times New Roman; font-size:8pt" align=center><B>0</B></P>
</TD><TD style="background-color:#DFDFDF; border-bottom:0.5pt solid #000000" width=60.6><P style="margin:0pt; line-height:10pt; font-family:Times New Roman; font-size:8pt" align=center><B>20</B></P>
</TD><TD style="background-color:#DFDFDF; border-bottom:0.5pt solid #000000" width=56.733><P style="margin:0pt; line-height:10pt; font-family:Times New Roman; font-size:8pt" align=center><B>0</B></P>
</TD><TD style="background-color:#DFDFDF; border-bottom:0.5pt solid #000000" width=60.6><P style="margin:0pt; line-height:10pt; font-family:Times New Roman; font-size:8pt" align=center><B>17</B></P>
</TD><TD style="background-color:#DFDFDF; border-bottom:0.5pt solid #000000" width=60.6><P style="margin:0pt; line-height:10pt; font-family:Times New Roman; font-size:8pt" align=center><B>3</B></P>
</TD><TD style="background-color:#DFDFDF; border-bottom:0.5pt solid #000000" width=60.067><P style="margin:0pt; line-height:10pt; font-family:Times New Roman; font-size:8pt" align=center><B>40</B></P>
</TD></TR>
</TABLE>
<p>&nbsp;</p><P style="margin-top:0pt; margin-bottom:10pt; font-family:Times New Roman" align=justify><BR></P>
<P style="margin-top:0pt; margin-bottom:8.35pt; padding-left:36pt; font-family:Times New Roman" align=justify>150mm fab operations:</P>
<P style="margin-top:0pt; margin-bottom:10pt; font-family:Times New Roman" align=justify>Restructuring charges incurred in the first nine months of 2005 primarily related to $6 million in termination benefits for the sites of Agrate (Italy) and Rousset (France) and $6 million of other closure costs for the transfer of production from the sites of Rennes (France), Rousset (France) and Carrollton (USA).&nbsp;</P>
<P style="margin-top:0pt; margin-bottom:10pt; font-family:Times New Roman" align=justify>During the first nine months of 2004, the Company recorded restructuring charges of $49 million for its 150mm fab operations, of which $31 million was incurred in the first quarter, $9 million in the second quarter and $9 million in the third quarter, primarily relating to the discontinuation of Rennes. </P>
<P style="margin-top:0pt; margin-bottom:8.35pt; padding-left:36pt; font-family:Times New Roman" align=justify>Back-end operations:</P>
<P style="margin-top:0pt; margin-bottom:10pt; font-family:Times New Roman" align=justify>During the first nine months of 2005, $4 million of involuntary termination benefits were paid in the Company&#146;s back-end site in Morocco, of which $2 million were incurred in the third quarter of 2005. The Company also recorded in the nine months ended October 1, 2005 approximately $1 million of transfer costs related to its back-end operations. During the first nine months of last year, transfer costs amounting to $3 million were paid for back-end sites in Morocco, of which $1 million were incurred in the third quarter of 2004.</P>
<P style="margin-top:0pt; margin-bottom:10pt; font-family:Times New Roman" align=justify><BR>
</P>
<P style="margin:0pt; font-family:Times New Roman" align=center>F-12</P>
<P style="margin:0pt; font-family:Times New Roman"><BR></P>
<HR style="padding-top:7.2pt; padding-bottom:7.2pt" noshade size=1.333>
<P style="page-break-before:always; margin:0pt; font-family:Times New Roman" align=right><BR></P>
<P style="margin:0pt; font-family:Times New Roman"><BR></P>
<p style="margin-top:0pt; margin-bottom:8.35pt; padding-left:36pt; font-family:Times New Roman" align=justify>2005
 restructuring plan:</p>
<p style="margin-top:0pt; margin-bottom:10pt; font-family:Times New Roman" align=justify>Pursuant
 to its announcement of new restructuring initiatives aimed at improving its
 competitiveness and financial performance, the Company started in the second
 quarter of 2005 to define a plan of reorganization and optimization of its activities.
 This plan focuses on workforce reduction, mainly in Europe, but will, whenever
 possible, encourage voluntary redundancy such as early retirement measures and
 other special termination arrangements with the employees. The plan also includes
 the non-renewal of some temporary positions. For the nine months ended October
 1, 2005, the Company recorded a total restructuring charge for its new restructuring
 plan amounting to $22 million, of which $16 million in the second quarter and
 $6 million in the third quarter, mainly related to involuntary and voluntary
 termination benefits. This total charge includes the provision amounting approximately
 to $10 million for contractual and legal termination benefits for an estimated
 number of employees at one of the Company&#146;s European subsidiaries. It also
 includes termination incentives for certain employees in Europe, who accepted
 special termination arrangements, for a total amount of $11 million. In addition,
 the total charge includes a $1 million charge generated by the discontinuation
 of the Company&#146;s Field Programmable Gate Array (&#147;FPGA&#148;) non-core
 development program.</p>
<P style="margin-top:0pt; margin-bottom:8.35pt; padding-left:36pt; font-family:Times New Roman" align=justify>Other:</P>
<P style="margin-top:0pt; margin-bottom:10pt; font-family:Times New Roman" align=justify>Pursuant to the decision of reducing its Access technology products for Customer Premises Equipment (&#147;CPE&#148;) modem products, the Company committed in the first quarter of 2005 to an exit plan in Zaventem (Belgium) and recorded $4 million of workforce termination benefits in the first nine months of 2005.</P>
<P style="margin-top:0pt; margin-bottom:10pt; font-family:Times New Roman" align=justify>In addition, charges totaling $2 million were paid in the first nine months of 2005 and 2004 by the Company for voluntary termination benefits in France.&nbsp;</P>
<P style="margin-top:0pt; margin-bottom:10pt; font-family:Times New Roman" align=justify>Moreover, in order to rationalize its research and development sites, the Company decided in the first quarter of 2005 to cease its activities in two locations, Karlsruhe (Germany) and Malvern (USA). The Company incurred in the first nine months of 2005 $3 million restructuring charges corresponding to employee termination costs and $1 million of unused lease charges relating to the closure of these two sites. </P>
<P style="margin-top:0pt; margin-bottom:8.35pt; padding-left:36pt; font-family:Times New Roman" align=justify>Total impairment, restructuring charges and other related closure costs:</P>
<P style="margin-top:0pt; margin-bottom:10pt; font-family:Times New Roman" align=justify>In the first nine months of 2005, total amounts paid for restructuring and related closure costs amounted to $46 million. </P>
<P style="margin-top:0pt; margin-bottom:10pt; font-family:Times New Roman" align=justify>The
 2003 restructuring plan and related manufacturing initiatives are expected to
 be largely completed in mid-2006. Of the total $350 million expected pre-tax
 charges to be incurred under the plan, $300 million have been incurred as of
 October 1, 2005 ($19 million in 2005, $76 million in 2004 and $205 million in
 2003). </P>
<P style="margin-top:0pt; margin-bottom:10pt; font-family:Times New Roman" align=justify>The additional reorganization and restructuring actions commenced in the first quarter of 2005 were fully completed in the second quarter of 2005, resulting in impairment and restructuring charges of $71 million for the nine months ended October 1, 2005. </P>
<P style="margin-top:0pt; margin-bottom:10pt; font-family:Times New Roman" align=justify>The 2005 restructuring plan is estimated to result in charges in the range of $100 to $130 million and is expected to be largely completed by mid-2006. This new plan resulted in the second quarter of 2005 in restructuring charges totaling $16 million and $6 million in the third quarter of 2005. </P>
<P style="margin-top:0pt; margin-bottom:10pt; font-family:Times New Roman" align=justify>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.</P>
<P style="margin-top:0pt; margin-bottom:10pt; font-family:Times New Roman"><B>8. Interest income (expense), net</B></P>
<P style="margin-top:0pt; margin-bottom:10pt; font-family:Times New Roman" align=justify>Interest income (expense), net consisted of the following:</P>
<TABLE style="font-size:10pt" cellspacing=0 align=center><TR><TD style="border-top:0.5pt solid #000000; border-bottom:0.5pt solid #000000" valign=top width=216.467>&nbsp;</TD><TD style="border-top:0.5pt solid #000000; border-bottom:0.5pt solid #000000" valign=top width=196.8 colspan=2><P style="margin:0pt; font-family:Times New Roman" align=center><B>(unaudited)</B></P>
</TD><TD style="border-top:0.5pt solid #000000; border-bottom:0.5pt solid #000000" valign=top width=196.8 colspan=2><P style="margin:0pt; font-family:Times New Roman" align=center><B>(unaudited)</B></P>
</TD></TR>
<TR><TD style="background-color:#DFDFDF" valign=top width=216.467>&nbsp;</TD><TD style="background-color:#DFDFDF; border-bottom:0.5pt solid #000000" valign=top width=196.8 colspan=2><P style="margin:0pt; text-indent:9pt; font-family:Times New Roman" align=center>Three months ended</P>
</TD><TD style="background-color:#DFDFDF; border-bottom:0.5pt solid #000000" valign=top width=196.8 colspan=2><P style="margin:0pt; text-indent:9pt; font-family:Times New Roman" align=center>Nine months ended</P>
</TD></TR>
<TR><TD valign=top width=216.467>&nbsp;</TD><TD valign=top width=98.4><P style="margin:0pt; text-indent:9pt; font-family:Times New Roman" align=center><B>October 1, 2005</B></P>
</TD><TD valign=top width=98.4><P style="margin:0pt; font-family:Times New Roman" align=center>Sept.
 25, 2004</P>
</TD><TD valign=top width=98.4><P style="margin:0pt; text-indent:9pt; font-family:Times New Roman" align=center><B>October 1, 2005</B></P>
</TD><TD valign=top width=98.4><P style="margin:0pt; font-family:Times New Roman" align=center>Sept.
 25, 2004</P>
</TD></TR>
<TR><TD style="background-color:#DFDFDF; border-bottom:0.5pt solid #000000" valign=top width=216.467><P style="margin-top:1.65pt; margin-bottom:0pt; font-family:Times New Roman">In
 millions of U.S dollars</P>
</TD><TD style="background-color:#DFDFDF; border-bottom:0.5pt solid #000000" valign=top width=98.4>&nbsp;</TD><TD style="background-color:#DFDFDF; border-bottom:0.5pt solid #000000" valign=top width=98.4>&nbsp;</TD><TD style="background-color:#DFDFDF; border-bottom:0.5pt solid #000000" valign=top width=98.4>&nbsp;</TD><TD style="background-color:#DFDFDF; border-bottom:0.5pt solid #000000" valign=top width=98.4>&nbsp;</TD></TR>
<TR><TD valign=top width=216.467><P style="margin:0pt; font-family:Times New Roman">Income</P>
</TD><TD valign=top width=98.4><P style="margin:0pt; font-family:Times New Roman" align=right><B>12</B></P>
</TD><TD valign=top width=98.4><P style="margin:0pt; font-family:Times New Roman" align=center>11</P>
</TD><TD valign=top width=98.4><P style="margin:0pt; font-family:Times New Roman" align=right><B>37</B></P>
</TD><TD valign=top width=98.4><P style="margin:0pt; font-family:Times New Roman" align=center>31</P>
</TD></TR>
<TR><TD style="background-color:#DFDFDF; border-bottom:0.5pt solid #000000" valign=top width=216.467><P style="margin:0pt; font-family:Times New Roman">Expense</P>
</TD><TD style="background-color:#DFDFDF; border-bottom:0.5pt solid #000000" valign=top width=98.4><P style="margin:0pt; font-family:Times New Roman" align=right><B>(4)</B></P>
</TD><TD style="background-color:#DFDFDF; border-bottom:0.5pt solid #000000" valign=top width=98.4><P style="margin:0pt; font-family:Times New Roman" align=center>(11)</P>
</TD><TD style="background-color:#DFDFDF; border-bottom:0.5pt solid #000000" valign=top width=98.4><P style="margin:0pt; font-family:Times New Roman" align=right><B>(14)</B></P>
</TD><TD style="background-color:#DFDFDF; border-bottom:0.5pt solid #000000" valign=top width=98.4><P style="margin:0pt; font-family:Times New Roman" align=center>(39)</P>
</TD></TR>
<TR><TD style="border-bottom:0.5pt solid #000000" valign=top width=216.467><P style="margin-top:1.65pt; margin-bottom:0pt; font-family:Times New Roman"><B>Total</B></P>
</TD><TD style="border-bottom:0.5pt solid #000000" valign=top width=98.4><P style="margin-top:1.65pt; margin-bottom:0pt; font-family:Times New Roman" align=right><B>8</B></P>
</TD><TD style="border-bottom:0.5pt solid #000000" valign=top width=98.4><P style="margin-top:1.65pt; margin-bottom:0pt; font-family:Times New Roman" align=center>0</P>
</TD><TD style="border-bottom:0.5pt solid #000000" valign=top width=98.4><P style="margin-top:1.65pt; margin-bottom:0pt; font-family:Times New Roman" align=right><B>23</B></P>
</TD><TD style="border-bottom:0.5pt solid #000000" valign=top width=98.4><P style="margin-top:1.65pt; margin-bottom:0pt; font-family:Times New Roman" align=center>(8)</P>
</TD></TR>
</TABLE>
<P style="margin-top:0pt; margin-bottom:10pt; font-family:Times New Roman" align=justify><BR>
<BR></P>
<P style="margin:0pt; font-family:Times New Roman" align=center>F-13</P>
<P style="margin:0pt; font-family:Times New Roman"><BR></P>
<HR style="padding-top:7.2pt; padding-bottom:7.2pt" noshade size=1.333>
<P style="page-break-before:always; margin:0pt; font-family:Times New Roman" align=right><BR></P>
<P style="margin:0pt; font-family:Times New Roman"><BR></P>
<P style="margin-top:0pt; margin-bottom:10pt; font-family:Times New Roman" align=justify><BR>
<BR>
<BR></P>
<TABLE style="font-size:10pt" cellspacing=0 align=center></TABLE>
<P style="margin-top:1.65pt; margin-bottom:0pt; font-family:Times New Roman" align=right><BR></P>
<P style="margin-top:0pt; margin-bottom:10pt; font-family:Times New Roman" align=justify>Interest expense also included charges related to the amortization of issuance costs incurred by the Company for the outstanding convertible bonds.</P>
<P style="margin-top:0pt; margin-bottom:10pt; font-family:Times New Roman"><B>9. Marketable securities </B></P>
<P style="margin-top:0pt; margin-bottom:10pt; font-family:Times New Roman" align=justify>Marketable securities totaled $525 million as at October 1, 2005. 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 October 1, 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 t
hese 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.</P>
<P style="margin-top:0pt; margin-bottom:10pt; font-family:Times New Roman"><B>10. Inventories, net</B></P>
<P style="margin-top:0pt; margin-bottom:10pt; font-family:Times New Roman" align=justify>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. </P>
<P style="margin-top:0pt; margin-bottom:10pt; font-family:Times New Roman" align=justify>Provisions
 for obsolescence are estimated for uncommitted inventories based on the previous
 quarter sales, orders backlog and production plans.</P>
<P style="margin-top:0pt; margin-bottom:10pt; font-family:Times New Roman" align=justify>Inventories,
 net of reserve consisted of the following:</P>
<TABLE style="font-size:10pt" cellspacing=0 align=center>
 <TR>
 <TD style="border-top:0.5pt solid #000000" valign=bottom width=370.733>&nbsp;</TD>
 <TD style="border-top:0.5pt solid #000000; border-bottom:0.5pt solid #000000" valign=top width=168><P style="margin-top:1.65pt; margin-bottom:0pt; font-family:Times New Roman" align=center><B>(Unaudited)</B></P></TD>
 <TD style="border-top:0.5pt solid #000000; border-bottom:0.5pt solid #000000" valign=top width=15.733>&nbsp;</TD>
 <TD style="border-top:0.5pt solid #000000; border-bottom:0.5pt solid #000000" valign=top width=152.267><P style="margin-top:1.65pt; margin-bottom:0pt; font-family:Times New Roman" align=center>(Audited)</P></TD>
 </TR>
 <TR>
 <TD style="border-bottom:0.5pt solid #000000" valign=bottom width=370.733><P style="margin-top:1.65pt; margin-bottom:0pt; padding-right:12.6pt; font-family:Times New Roman">In
 millions of U.S. dollars</P></TD>
 <TD style="border-bottom:0.5pt solid #000000" valign=top width=168><P style="margin-top:1.65pt; margin-bottom:0pt; font-family:Times New Roman" align=center><B>As
 at October 1, 2005</B></P></TD>
 <TD style="border-bottom:0.5pt solid #000000" valign=top width=15.733>&nbsp;</TD>
 <TD style="border-bottom:0.5pt solid #000000" valign=top width=152.267><P style="margin-top:1.65pt; margin-bottom:0pt; font-family:Times New Roman" align=center>As
 at December 31, 2004</P></TD>
 </TR>
 <TR>
 <TD valign=bottom width=370.733>&nbsp;</TD>
 <TD valign=top width=168>&nbsp;</TD>
 <TD valign=top width=15.733>&nbsp;</TD>
 <TD valign=top width=152.267>&nbsp;</TD>
 </TR>
 <TR>
 <TD valign=bottom width=370.733><P style="margin:0pt; padding-left:2.95pt; text-indent:-0.65pt; font-family:Times New Roman">Raw
 materials</P></TD>
 <TD valign=bottom width=168><P style="margin:0pt; padding-right:58.25pt; font-family:Times New Roman" align=right><B>68</B></P></TD>
 <TD valign=top width=15.733>&nbsp;</TD>
 <TD valign=bottom width=152.267><P style="margin-top:1.65pt; margin-bottom:0pt; padding-right:49.25pt; font-family:Times New Roman" align=right>70</P></TD>
 </TR>
 <TR>
 <TD style="background-color:#DFDFDF" valign=bottom width=370.733><P style="margin:0pt; padding-left:2.95pt; text-indent:-0.65pt; font-family:Times New Roman">Work-in-process</P></TD>
 <TD style="background-color:#DFDFDF" valign=bottom width=168><P style="margin:0pt; padding-right:58.25pt; font-family:Times New Roman" align=right><B>907</B></P></TD>
 <TD style="background-color:#DFDFDF" valign=top width=15.733>&nbsp;</TD>
 <TD style="background-color:#DFDFDF" valign=bottom width=152.267><P style="margin-top:1.65pt; margin-bottom:0pt; padding-right:49.25pt; font-family:Times New Roman" align=right>874</P></TD>
 </TR>
 <TR>
 <TD valign=bottom width=370.733><P style="margin:0pt; padding-left:2.95pt; text-indent:-0.65pt; font-family:Times New Roman">Finished
 products</P></TD>
 <TD valign=bottom width=168><P style="margin:0pt; padding-right:58.25pt; font-family:Times New Roman" align=right><B>423</B></P></TD>
 <TD valign=top width=15.733>&nbsp;</TD>
 <TD valign=bottom width=152.267><P style="margin-top:1.65pt; margin-bottom:0pt; padding-right:49.25pt; font-family:Times New Roman" align=right>400</P></TD>
 </TR>
 <TR>
 <TD style="background-color:#DFDFDF; border-bottom:0.5pt solid #000000" valign=bottom width=370.733>&nbsp;</TD>
 <TD style="background-color:#DFDFDF; border-bottom:0.5pt solid #000000" valign=bottom width=168>&nbsp;</TD>
 <TD style="background-color:#DFDFDF; border-bottom:0.5pt solid #000000" valign=top width=15.733>&nbsp;</TD>
 <TD style="background-color:#DFDFDF; border-bottom:0.5pt solid #000000" valign=bottom width=152.267>&nbsp;</TD>
 </TR>
 <TR>
 <TD style="border-bottom:0.5pt solid #000000" valign=bottom width=370.733>
 <P style="margin:0pt; font-family:Times New Roman" align=justify><B>Total</B></P></TD>
 <TD style="border-bottom:0.5pt solid #000000" valign=bottom width=168><P style="margin:0pt; padding-right:58.25pt; font-family:Times New Roman" align=right><B>1,398</B></P></TD>
 <TD style="border-bottom:0.5pt solid #000000" valign=top width=15.733>&nbsp;</TD>
 <TD style="border-bottom:0.5pt solid #000000" valign=bottom width=152.267><P style="margin-top:1.65pt; margin-bottom:0pt; padding-right:49.25pt; font-family:Times New Roman" align=right>1,344</P></TD>
 </TR>
</TABLE>
<P style="margin-top:0pt; margin-bottom:10pt; font-family:Times New Roman" align=justify><BR></P>
<P style="margin-top:0pt; margin-bottom:10pt; font-family:Times New Roman"><B>11. Investments and other non-current assets</B></P>
<P style="margin-top:0pt; margin-bottom:10pt; font-family:Times New Roman" align=justify>&nbsp;Investments and other non-current assets consisted of the following:</P>
<TABLE style="font-size:10pt" cellspacing=0 align=center>
 <TR>
 <TD style="border-top:0.5pt solid #000000" valign=bottom width=370.733>&nbsp;</TD>
 <TD style="border-top:0.5pt solid #000000; border-bottom:0.5pt solid #000000" valign=top width=168><P style="margin-top:1.65pt; margin-bottom:0pt; font-family:Times New Roman" align=center><B>(Unaudited)</B></P></TD>
 <TD style="border-top:0.5pt solid #000000; border-bottom:0.5pt solid #000000" valign=top width=15.733>&nbsp;</TD>
 <TD style="border-top:0.5pt solid #000000; border-bottom:0.5pt solid #000000" valign=top width=152.267><P style="margin-top:1.65pt; margin-bottom:0pt; font-family:Times New Roman" align=center>(Audited)</P></TD>
 </TR>
 <TR>
 <TD style="border-bottom:0.5pt solid #000000" valign=bottom width=370.733><P style="margin-top:1.65pt; margin-bottom:0pt; font-family:Times New Roman">In
 millions of U.S. dollars</P></TD>
 <TD style="border-bottom:0.5pt solid #000000" valign=top width=168><P style="margin-top:1.65pt; margin-bottom:0pt; font-family:Times New Roman" align=center><B>As
 at October 1, 2005</B></P></TD>
 <TD style="border-bottom:0.5pt solid #000000" valign=top width=15.733>&nbsp;</TD>
 <TD style="border-bottom:0.5pt solid #000000" valign=top width=152.267><P style="margin-top:1.65pt; margin-bottom:0pt;font-family:Times New Roman" align=center>As
 at December 31, 2004</P></TD>
 </TR>
 <TR>
 <TD valign=bottom width=370.733>&nbsp;</TD>
 <TD valign=top width=168>&nbsp;</TD>
 <TD valign=top width=15.733>&nbsp;</TD>
 <TD valign=top width=152.267>&nbsp;</TD>
 </TR>
 <TR>
 <TD valign=top width=370.733><P style="margin:0pt; font-family:Times New Roman">Equity-method
 investments</P></TD>
 <TD valign=bottom width=168><P style="margin:0pt; padding-right:58.25pt; font-family:Times New Roman" align=right><B>23</B></P></TD>
 <TD valign=top width=15.733>&nbsp;</TD>
 <TD valign=bottom width=152.267><P style="margin-top:1.65pt; margin-bottom:0pt; padding-right:49.25pt; font-family:Times New Roman" align=right>6</P></TD>
 </TR>
 <TR>
 <TD style="background-color:#DFDFDF" valign=bottom width=370.733><P style="margin:0pt; font-family:Times New Roman">Cost
 investments</P></TD>
 <TD style="background-color:#DFDFDF" valign=bottom width=168><P style="margin:0pt; padding-right:58.25pt; font-family:Times New Roman" align=right><B>35</B></P></TD>
 <TD style="background-color:#DFDFDF" valign=top width=15.733>&nbsp;</TD>
 <TD style="background-color:#DFDFDF" valign=bottom width=152.267><P style="margin-top:1.65pt; margin-bottom:0pt; padding-right:49.25pt; font-family:Times New Roman" align=right>34</P></TD>
 </TR>
 <TR>
 <TD valign=bottom width=370.733><P style="margin:0pt; font-family:Times New Roman">Deposits
 and long-term receivables related to funding</P></TD>
 <TD valign=bottom width=168><P style="margin:0pt; padding-right:58.25pt; font-family:Times New Roman" align=right><B>75</B></P></TD>
 <TD valign=top width=15.733>&nbsp;</TD>
 <TD valign=bottom width=152.267><P style="margin-top:1.65pt; margin-bottom:0pt; padding-right:49.25pt; font-family:Times New Roman" align=right>69</P></TD>
 </TR>
 <TR>
 <TD style="background-color:#DFDFDF; border-bottom:0.5pt solid #000000" valign=bottom width=370.733><P style="margin:0pt; font-family:Times New Roman">Debt issuance costs, net</P></TD>
 <TD style="background-color:#DFDFDF; border-bottom:0.5pt solid #000000" valign=bottom width=168><P style="margin:0pt; padding-right:58.25pt; font-family:Times New Roman" align=right><B>4</B></P></TD>
 <TD style="background-color:#DFDFDF; border-bottom:0.5pt solid #000000" valign=top width=15.733>&nbsp;</TD>
 <TD style="background-color:#DFDFDF; border-bottom:0.5pt solid #000000" valign=bottom width=152.267><P style="margin-top:1.65pt; margin-bottom:0pt; padding-right:49.25pt; font-family:Times New Roman" align=right>8</P></TD>
 </TR>
 <TR>
 <TD style="border-bottom:0.5pt solid #000000" valign=bottom width=370.733>
 <P style="margin:0pt; font-family:Times New Roman" align=justify><B>Total</B></P></TD>
 <TD style="border-bottom:0.5pt solid #000000" valign=bottom width=168><P style="margin:0pt; padding-right:58.25pt; font-family:Times New Roman" align=right><B>137</B></P></TD>
 <TD style="border-bottom:0.5pt solid #000000" valign=top width=15.733>&nbsp;</TD>
 <TD style="border-bottom:0.5pt solid #000000" valign=bottom width=152.267><P style="margin-top:1.65pt; margin-bottom:0pt; padding-right:49.25pt; font-family:Times New Roman" align=right>117</P></TD>
 </TR>
</TABLE>
<P style="margin-top:0pt; margin-bottom:10pt; font-family:Times New Roman" align=justify><BR></P>
<P style="margin-top:0pt; margin-bottom:10pt; font-family:Times New Roman" align=justify><BR>
<BR></P>
<P style="margin:0pt; font-family:Times New Roman" align=center>F-14</P>
<P style="margin:0pt; font-family:Times New Roman"><BR></P>
<HR style="padding-top:7.2pt; padding-bottom:7.2pt" noshade size=1.333>
<P style="page-break-before:always; margin:0pt; font-family:Times New Roman" align=right><BR></P>
<P style="margin:0pt; font-family:Times New Roman"><BR></P>
<P style="margin-top:0pt; margin-bottom:10pt; font-family:Times New Roman" align=justify><I>SuperH Joint Venture</I></P>
<P style="margin-top:0pt; margin-bottom:10pt; font-family:Times New Roman" align=justify>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 accounted 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 October 1, 2005.</P>
<P style="margin-top:0pt; margin-bottom:10pt; font-family:Times New Roman" align=justify>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 exposure will result from this liquidation. </P>
<P style="margin-top:0pt; margin-bottom:10pt; font-family:Times New Roman" align=justify><I>UPEK Inc.</I></P>
<P style="margin-top:0pt; margin-bottom:10pt; font-family:Times New Roman" align=justify>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 required 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%. The Company accounted
 for its share in UPEK, Inc. under the equity method. </P>
<P style="margin-top:0pt; margin-bottom:10pt; font-family:Times New Roman" align=justify>On June 30, 2005, the Company sold its interest in Upek Inc. for $13 million and recorded in the second quarter of 2005 a gain amounting to $6 million in &#147;Other income and expenses, net&#148; of its interim consolidated statement of income. Additionally, on June 30, 2005, the Company was granted warrants for 2,000,000 shares of Upek, Inc. at an exercise price of $0.01 per share. The warrants are not limited in time but can only be exercised in the event of a change of control or an Initial Public Offering of Upek Inc. with a valuation of the company at or over $39 million. The Company estimated that such conditions for exercise were not met as at October 1, 2005 and that such warrants have no material impact on its interim consolidated financial statements as at October 1, 2005.</P>
<P style="margin-top:0pt; margin-bottom:10pt; font-family:Times New Roman" align=justify><I>Hynix Joint Venture</I></P>
<P style="margin-top:0pt; margin-bottom:10pt; font-family:Times New Roman" align=justify>Pursuant to the joint-venture agreement signed in 2004 by the Company with Hynix Semiconductor Inc. to build a front-end memory-manufacturing facility in Wuxi City, Jiangsu Province, China, the Company made during the nine months ended October 1, 2005 capital contributions to the joint venture totaling $25 million , of which $17 million were paid in the third quarter. Under the agreement, Hynix Semiconductor Inc. will contribute $500 million for a 67% interest and the Company will contribute $250 million for a 33% interest. In addition, the Company committed to grant $250 million in long-term financing to the new joint venture guaranteed by the subordinated collateral of the joint-venture&#146;s assets. </P>
<P style="margin-top:0pt; margin-bottom:10pt; font-family:Times New Roman" align=justify>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 accounts for its share in the Hynix joint venture under the equity method based on the actual results of the joint venture and recorded losses totaling $2 million in the third quarter of 2005 as &#147;loss on equity investments&#148;.</P>
<P style="margin-top:0pt; margin-bottom:10pt; font-family:Times New Roman" align=justify><I>DNP Photomask Europe S.p.A</I></P>
<P style="margin-top:0pt; margin-bottom:10pt; font-family:Times New Roman" align=justify>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.&nbsp;The joint venture, DNP Photomask Europe S.p.A, was
 initially capitalized with the Company&#8217;s contribution of &#8364;2 million
 of cash. Dai Nippon Printing Co, Ltd contributed &#8364;8 million of cash for
 an 81% interest.&nbsp;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 October 1, 2005, the Company&#146;s
 total capital investment in 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.</P>
<P style="margin-top:0pt; margin-bottom:10pt; font-family:Times New Roman" align=justify><BR>
<BR></P>
<P style="margin:0pt; font-family:Times New Roman" align=center>F-15</P>
<P style="margin:0pt; font-family:Times New Roman"><BR></P>
<HR style="padding-top:7.2pt; padding-bottom:7.2pt" noshade size=1.333>
<P style="page-break-before:always; margin:0pt; font-family:Times New Roman" align=right><BR></P>
<P style="margin:0pt; font-family:Times New Roman"><BR>
</P>
<P style="margin-top:0pt; margin-bottom:10pt; font-family:Times New Roman" align=justify>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.&nbsp;The Company estimates that no future loss exposure will result from the joint venture.</P>
<P style="margin-top:0pt; margin-bottom:10pt; font-family:Times New Roman"><B>12. Long-term Debt </B></P>
<P style="margin-top:0pt; margin-bottom:10pt; font-family:Times New Roman" align=justify>Long-term debt consisted of the following:</P>
<TABLE style="font-size:10pt" cellspacing=0 align=center>
 <TR>
 <TD style="border-top:0.5pt solid #000000; border-bottom:0.5pt solid #000000" valign=top width=324>&nbsp;</TD>
 <TD style="border-top:0.5pt solid #000000; border-bottom:0.5pt solid #000000" valign=top width=156.467><P style="margin-top:1.65pt; margin-bottom:0pt; text-indent:-0.5pt; font-family:Times New Roman" align=center><B>(Unaudited)</B></P></TD>
 <TD style="border-top:0.5pt solid #000000; border-bottom:0.5pt solid #000000" valign=top width=144><P style="margin-top:1.65pt; margin-bottom:0pt; text-indent:-0.85pt; font-family:Times New Roman" align=center>(Audited)</P></TD>
 </TR>
 <TR>
 <TD valign=bottom width=324><P style="margin-top:0pt; margin-bottom:5pt; font-family:Times New Roman">In
 millions of U.S dollars</P></TD>
 <TD valign=top width=156.467><P style="margin:0pt; padding-right:0.85pt; font-family:Times New Roman" align=center><B>As
 at October 1, 2005</B></P></TD>
 <TD valign=top width=144><P style="margin-top:0pt; margin-bottom:10pt; font-family:Times New Roman" align=center>As
 at December 31, 2004</P></TD>
 </TR>
 <TR>
 <TD valign=top width=324><P style="margin:0pt; font-family:Times New Roman">&nbsp;</P></TD>
 <TD valign=top width=156.467>&nbsp;</TD>
 <TD valign=top width=144>&nbsp;</TD>
 </TR>
 <TR>
 <TD valign=top width=324><P style="margin:0pt; font-family:Times New Roman"><B>Bank
 loans:</B></P></TD>
 <TD valign=top width=156.467>&nbsp;</TD>
 <TD valign=top width=144>&nbsp;</TD>
 </TR>
 <TR>
 <TD valign=top width=324><P style="margin:0pt; font-family:Times New Roman">&nbsp;</P></TD>
 <TD valign=top width=156.467>&nbsp;</TD>
 <TD valign=top width=144>&nbsp;</TD>
 </TR>
 <TR>
 <TD style="background-color:#DFDFDF" valign=top width=324><P style="margin:0pt; font-family:Times New Roman">2.53%
 (weighted average) due 2007, fixed interest rate</P></TD>
 <TD style="background-color:#DFDFDF" valign=top width=156.467><P style="margin:0pt; padding-right:57.9pt; font-family:Times New Roman" align=right>118</P></TD>
 <TD style="background-color:#DFDFDF" valign=top width=144><P style="margin:0pt; padding-right:54.85pt; font-family:Times New Roman" align=right>153</P></TD>
 </TR>
 <TR>
 <TD valign=top width=324><P style="margin:0pt; font-family:Times New Roman">2.46%
 (weighted average) due 2006, floating interest rate at Libor + 0.30</P></TD>
 <TD valign=top width=156.467><P style="margin:0pt; padding-right:57.9pt; font-family:Times New Roman" align=right>52</P></TD>
 <TD valign=top width=144><P style="margin:0pt; padding-right:54.85pt; font-family:Times New Roman" align=right>105</P></TD>
 </TR>
 <TR>
 <TD style="background-color:#DFDFDF" valign=top width=324><P style="margin:0pt; font-family:Times New Roman">4.33%
 (weighted average) due 2007, floating interest rate</P></TD>
 <TD style="background-color:#DFDFDF" valign=top width=156.467><P style="margin:0pt; padding-right:57.9pt; font-family:Times New Roman" align=right>38</P></TD>
 <TD style="background-color:#DFDFDF" valign=top width=144><P style="margin:0pt; padding-right:54.85pt; font-family:Times New Roman" align=right>44</P></TD>
 </TR>
 <TR>
 <TD valign=top width=324><P style="margin:0pt; font-family:Times New Roman">4.05%
 (weighted average) due 2008, floating interest rate</P></TD>
 <TD valign=top width=156.467><P style="margin:0pt; padding-right:57.9pt; font-family:Times New Roman" align=right>25</P></TD>
 <TD valign=top width=144><P style="margin:0pt; padding-right:54.85pt; font-family:Times New Roman" align=right>-</P></TD>
 </TR>
 <TR>
 <TD style="background-color:#DFDFDF" valign=top width=324><P style="margin:0pt; font-family:Times New Roman">&nbsp;</P></TD>
 <TD style="background-color:#DFDFDF" valign=top width=156.467>&nbsp;</TD>
 <TD style="background-color:#DFDFDF" valign=top width=144>&nbsp;</TD>
 </TR>
 <TR>
 <TD valign=top width=324><P style="margin:0pt; font-family:Times New Roman"><B>Funding
 program loans:</B></P></TD>
 <TD valign=top width=156.467>&nbsp;</TD>
 <TD valign=top width=144>&nbsp;</TD>
 </TR>
 <TR>
 <TD style="background-color:#DFDFDF" valign=top width=324><P style="margin:0pt; font-family:Times New Roman">&nbsp;</P></TD>
 <TD style="background-color:#DFDFDF" valign=top width=156.467>&nbsp;</TD>
 <TD style="background-color:#DFDFDF" valign=top width=144>&nbsp;</TD>
 </TR>
 <TR>
 <TD valign=top width=324><P style="margin:0pt; font-family:Times New Roman">1.09%
 (weighted average), due 2009, fixed interest rate</P></TD>
 <TD valign=top width=156.467><P style="margin:0pt; padding-right:57.9pt; font-family:Times New Roman" align=right>82</P></TD>
 <TD valign=top width=144><P style="margin:0pt; padding-right:54.85pt; font-family:Times New Roman" align=right>102</P></TD>
 </TR>
 <TR>
 <TD style="background-color:#DFDFDF" valign=top width=324><P style="margin:0pt; font-family:Times New Roman">0.83%
 (weighted average), due 2017, fixed interest rate</P></TD>
 <TD style="background-color:#DFDFDF" valign=top width=156.467><P style="margin:0pt; padding-right:57.9pt; font-family:Times New Roman" align=right>49</P></TD>
 <TD style="background-color:#DFDFDF" valign=top width=144><P style="margin:0pt; padding-right:54.85pt; font-family:Times New Roman" align=right>55</P></TD>
 </TR>
 <TR>
 <TD valign=top width=324><P style="margin:0pt; font-family:Times New Roman">3.15%
 (weighted average), due 2012, fixed interest rate</P></TD>
 <TD valign=top width=156.467><P style="margin:0pt; padding-right:57.9pt; font-family:Times New Roman" align=right>13</P></TD>
 <TD valign=top width=144><P style="margin:0pt; padding-right:54.85pt; font-family:Times New Roman" align=right>14</P></TD>
 </TR>
 <TR>
 <TD style="background-color:#DFDFDF" valign=top width=324><P style="margin:0pt; font-family:Times New Roman">5.35%
 (weighted average), due 2006, fixed interest rate</P></TD>
 <TD style="background-color:#DFDFDF" valign=top width=156.467><P style="margin:0pt; padding-right:57.9pt; font-family:Times New Roman" align=right>7</P></TD>
 <TD style="background-color:#DFDFDF" valign=top width=144><P style="margin:0pt; padding-right:54.85pt; font-family:Times New Roman" align=right>13</P></TD>
 </TR>
 <TR>
 <TD valign=top width=324><P style="margin:0pt; font-family:Times New Roman">&nbsp;</P></TD>
 <TD valign=top width=156.467>&nbsp;</TD>
 <TD valign=top width=144>&nbsp;</TD>
 </TR>
 <TR>
 <TD style="background-color:#DFDFDF" valign=top width=324><P style="margin:0pt; font-family:Times New Roman"><B>Capital
 leases:</B></P></TD>
 <TD style="background-color:#DFDFDF" valign=top width=156.467>&nbsp;</TD>
 <TD style="background-color:#DFDFDF" valign=top width=144>&nbsp;</TD>
 </TR>
 <TR>
 <TD valign=top width=324><P style="margin:0pt; font-family:Times New Roman">&nbsp;</P></TD>
 <TD valign=top width=156.467>&nbsp;</TD>
 <TD valign=top width=144>&nbsp;</TD>
 </TR>
 <TR>
 <TD style="background-color:#DFDFDF" valign=top width=324><P style="margin:0pt; font-family:Times New Roman">4.78%
 due 2011, fixed interest rate</P></TD>
 <TD style="background-color:#DFDFDF" valign=top width=156.467><P style="margin:0pt; padding-right:57.9pt; font-family:Times New Roman" align=right>27</P></TD>
 <TD style="background-color:#DFDFDF" valign=top width=144><P style="margin:0pt; padding-right:54.85pt; font-family:Times New Roman" align=right>35</P></TD>
 </TR>
 <TR>
 <TD valign=top width=324><P style="margin:0pt; font-family:Times New Roman">&nbsp;</P></TD>
 <TD valign=top width=156.467>&nbsp;</TD>
 <TD valign=top width=144>&nbsp;</TD>
 </TR>
 <TR>
 <TD style="background-color:#DFDFDF" valign=top width=324><P style="margin:0pt; font-family:Times New Roman"><B>Convertible
 debt:</B></P></TD>
 <TD style="background-color:#DFDFDF" valign=top width=156.467>&nbsp;</TD>
 <TD style="background-color:#DFDFDF" valign=top width=144>&nbsp;</TD>
 </TR>
 <TR>
 <TD valign=top width=324><P style="margin:0pt; font-family:Times New Roman">&nbsp;</P></TD>
 <TD valign=top width=156.467>&nbsp;</TD>
 <TD valign=top width=144>&nbsp;</TD>
 </TR>
 <TR>
 <TD style="background-color:#DFDFDF" valign=top width=324><P style="margin:0pt; font-family:Times New Roman">-0.50%
 convertible bonds due 2013</P></TD>
 <TD style="background-color:#DFDFDF" valign=top width=156.467><P style="margin:0pt; padding-right:57.9pt; font-family:Times New Roman" align=right>1,379</P></TD>
 <TD style="background-color:#DFDFDF" valign=top width=144><P style="margin:0pt; padding-right:54.85pt; font-family:Times New Roman" align=right>1,379</P></TD>
 </TR>
 <TR>
 <TD style="border-bottom:0.5pt solid #000000" valign=top width=324>&nbsp;</TD>
 <TD style="border-bottom:0.5pt solid #000000" valign=top width=156.467>&nbsp;</TD>
 <TD style="border-bottom:0.5pt solid #000000" valign=top width=144>&nbsp;</TD>
 </TR>
 <TR>
 <TD style="background-color:#DFDFDF" valign=top width=324>&nbsp;</TD>
 <TD style="background-color:#DFDFDF" valign=top width=156.467>&nbsp;</TD>
 <TD style="background-color:#DFDFDF" valign=top width=144>&nbsp;</TD>
 </TR>
 <TR>
 <TD valign=top width=324><P style="margin:0pt; font-family:Times New Roman"><B>Total
 long-term debt</B></P></TD>
 <TD valign=top width=156.467><P style="margin:0pt; padding-right:57.9pt; font-family:Times New Roman" align=right><B>1,790</B></P></TD>
 <TD valign=top width=144><P style="margin:0pt; padding-right:54.85pt; font-family:Times New Roman" align=right>1,900</P></TD>
 </TR>
 <TR>
 <TD style="background-color:#DFDFDF; border-bottom:0.5pt solid #000000" valign=top width=324><P style="margin:0pt; font-family:Times New Roman">Less
 current portion</P></TD>
 <TD style="background-color:#DFDFDF; border-bottom:0.5pt solid #000000" valign=top width=156.467><P style="margin:0pt; padding-right:57.9pt; font-family:Times New Roman" align=right>1,527</P></TD>
 <TD style="background-color:#DFDFDF; border-bottom:0.5pt solid #000000" valign=top width=144><P style="margin:0pt; padding-right:54.85pt; font-family:Times New Roman" align=right>133</P></TD>
 </TR>
 <TR>
 <TD style="border-bottom:0.5pt solid #000000" valign=top width=324><P style="margin:0pt; font-family:Times New Roman"><B>Total
 long-term debt, less current portion</B></P></TD>
 <TD style="border-bottom:0.5pt solid #000000" valign=top width=156.467><P style="margin:0pt; padding-right:57.9pt; font-family:Times New Roman" align=right><B>263</B></P></TD>
 <TD style="border-bottom:0.5pt solid #000000" valign=top width=144><P style="margin:0pt; padding-right:54.85pt; font-family:Times New Roman" align=right>1,767</P></TD>
 </TR>
</TABLE>
<P style="margin-top:0pt; margin-bottom:10pt; font-family:Times New Roman" align=justify><BR></P>
<P style="margin-top:0pt; margin-bottom:10pt; font-family:Times New Roman" align=justify>Pursuant to the terms of the convertible bonds due 2013 (the &#147;2013 Bonds&#148;), the Company may be required to purchase, at the option of the holder, the convertible bonds for cash on August 5, 2006 at a price of $985.09 per convertible bond, and/or August 5, 2008 and/or August 5, 2010 at a price of $975.28 and $965.56 per convertible bond, respectively. As a result of this cash option, the outstanding amount of 2013 Bonds totaling $1,379 million was classified in the consolidated balance sheet as &#147;current portion of long-term debt&#148; at October 1, 2005.</P>
<P style="margin-top:0pt; margin-bottom:10pt; font-family:Times New Roman" align=justify><BR>
<BR></P>
<P style="margin:0pt; font-family:Times New Roman" align=center>F-16</P>
<P style="margin:0pt; font-family:Times New Roman"><BR></P>
<HR style="padding-top:7.2pt; padding-bottom:7.2pt" noshade size=1.333>
<P style="page-break-before:always; margin:0pt; font-family:Times New Roman" align=right><BR></P>
<P style="margin:0pt; font-family:Times New Roman"><BR></P>
<p style="margin-top:0pt; margin-bottom:10pt; font-family:Times New Roman"><b>13.
 Earnings per Share </b></p>
<p style="margin-top:0pt; margin-bottom:10pt; font-family:Times New Roman" align=justify>Basic
 net earnings per share is computed based on net income available to common shareholders
 using the weighted-average number of common shares outstanding during the reported
 period; the number of outstanding shares does not include treasury shares. Diluted
 earnings 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.&nbsp;</P>
<P style="margin-top:0pt; margin-bottom:10pt; font-family:Times New Roman" align=justify>(In millions of U.S. dollars, except per share amounts):</P>
<TABLE align="center" cellspacing=0 style="font-size:10pt">
 <TR><TD style="border-top:0.5pt solid #000000; border-bottom:0.5pt solid #000000" valign=bottom width=252>&nbsp;</TD><TD style="border-top:0.5pt solid #000000; border-bottom:0.5pt solid #000000" valign=top width=192 colspan=2><P style="margin:0pt; line-height:10pt; font-family:Times New Roman; font-size:8pt" align=center>(unaudited)</P>
</TD><TD style="border-top:0.5pt solid #000000; border-bottom:0.5pt solid #000000" valign=top width=180 colspan=2><P style="margin:0pt; line-height:10pt; font-family:Times New Roman; font-size:8pt" align=center>(unaudited)</P>
</TD></TR>
<TR><TD valign=bottom width=252>&nbsp;</TD><TD valign=top width=192 colspan=2><P style="margin-top:1.35pt; margin-bottom:0pt; padding-right:-14.4pt; padding-bottom:3pt; text-indent:-5.4pt; line-height:10pt; font-family:Times New Roman; font-size:8pt" align=center>Three Months Ended</P>
</TD><TD valign=top width=180 colspan=2><P style="margin-top:1.35pt; margin-bottom:0pt; padding-right:-14.4pt; padding-bottom:3pt; text-indent:-5.4pt; line-height:10pt; font-family:Times New Roman; font-size:8pt" align=center>Nine Months Ended</P>
</TD></TR>
<TR><TD valign=bottom width=252><P style="margin-top:1.35pt; margin-bottom:0pt; padding-bottom:3pt; text-indent:0.8pt; line-height:10pt; font-family:Times New Roman; font-size:8pt; border-bottom:0.5pt solid #000000" align=center>&nbsp;</P></TD><TD valign=top width=108><P style="margin-top:1.35pt; margin-bottom:0pt; padding-bottom:3pt; text-indent:0.8pt; line-height:10pt; font-family:Times New Roman; font-size:8pt; border-bottom:0.5pt solid #000000" align=center><B>October 1, 2005</B></P>
</TD><TD valign=top width=84><P style="margin-top:1.35pt; margin-bottom:0pt; padding-bottom:3pt; line-height:10pt; font-family:Times New Roman; font-size:8pt; border-bottom:0.5pt solid #000000" align=center>Sept.
 25, 2004</P>
</TD><TD valign=top width=96><P style="margin-top:1.35pt; margin-bottom:0pt; padding-right:-5.4pt; padding-bottom:3pt; line-height:10pt; font-family:Times New Roman; font-size:8pt; border-bottom:0.5pt solid #000000" align=center><B>October 1, 2005</B></P>
</TD><TD valign=top width=84><P style="margin-top:1.35pt; margin-bottom:0pt; padding-right:-5.4pt; padding-bottom:3pt; line-height:10pt; font-family:Times New Roman; font-size:8pt; border-bottom:0.5pt solid #000000" align=center>Sept.
 25, 2004</P>
</TD></TR>
<TR><TD valign=bottom width=252>&nbsp;</TD><TD valign=top width=108>&nbsp;</TD><TD valign=top width=84>&nbsp;</TD><TD valign=top width=96>&nbsp;</TD><TD valign=top width=84>&nbsp;</TD></TR>
<TR><TD style="background-color:#DFDFDF" valign=bottom width=252><P style="margin:0pt; font-family:Times New Roman"><B>Basic Earnings per Share:</B></P>
</TD><TD style="background-color:#DFDFDF" valign=top width=108>&nbsp;</TD><TD style="background-color:#DFDFDF" valign=top width=84>&nbsp;</TD><TD style="background-color:#DFDFDF" valign=top width=96>&nbsp;</TD><TD style="background-color:#DFDFDF" valign=top width=84>&nbsp;</TD></TR>
<TR><TD valign=bottom width=252><P style="margin:0pt; font-family:Times New Roman">Net income</P>
</TD><TD valign=bottom width=108><P style="margin:0pt; padding-left:-5.4pt; padding-right:-5.4pt; font-family:Times New Roman" align=center>89</P>
</TD><TD valign=top width=84><P style="margin:0pt; padding-right:-5.4pt; font-family:Times New Roman" align=center>189</P>
</TD><TD valign=top width=96><P style="margin:0pt; padding-right:-5.4pt; font-family:Times New Roman" align=center>83</P>
</TD><TD valign=top width=84><P style="margin:0pt; padding-right:-5.4pt; font-family:Times New Roman" align=center>414</P>
</TD></TR>
<TR><TD style="background-color:#DFDFDF" valign=bottom width=252><P style="margin:0pt; font-family:Times New Roman">Weighted average shares outstanding </P>
</TD><TD style="background-color:#DFDFDF" valign=bottom width=108><P style="margin:0pt; font-family:Times New Roman" align=center>892,834,332</P>
</TD><TD style="background-color:#DFDFDF" valign=top width=84><P style="margin:0pt; font-family:Times New Roman" align=center>891,446,812</P>
</TD><TD style="background-color:#DFDFDF" valign=top width=96><P style="margin:0pt; font-family:Times New Roman" align=center>892,256,549</P>
</TD><TD style="background-color:#DFDFDF" valign=top width=84><P style="margin:0pt; font-family:Times New Roman" align=center>891,015,308</P>
</TD></TR>
<TR><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=252>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=108>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=top width=84>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=top width=96>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=top width=84>&nbsp;</TD></TR>
<TR><TD style="background-color:#DFDFDF; border-bottom:0.5pt solid #000000" valign=bottom width=252><P style="margin:0pt; font-family:Times New Roman"><B>Earnings per Share (basic)</B></P>
</TD><TD style="background-color:#DFDFDF; border-bottom:0.5pt solid #000000" valign=bottom width=108><P style="margin:0pt; font-family:Times New Roman" align=center><B>0.10</B></P>
</TD><TD style="background-color:#DFDFDF; border-bottom:0.5pt solid #000000" valign=top width=84><P style="margin:0pt; font-family:Times New Roman" align=center><B>0.21</B></P>
</TD><TD style="background-color:#DFDFDF; border-bottom:0.5pt solid #000000" valign=top width=96><P style="margin:0pt; font-family:Times New Roman" align=center><B>0.09</B></P>
</TD><TD style="background-color:#DFDFDF; border-bottom:0.5pt solid #000000" valign=top width=84><P style="margin:0pt; font-family:Times New Roman" align=center><B>0.46</B></P>
</TD></TR>
<TR><TD valign=bottom width=252>&nbsp;</TD><TD valign=bottom width=108>&nbsp;</TD><TD valign=top width=84>&nbsp;</TD><TD valign=top width=96>&nbsp;</TD><TD valign=top width=84>&nbsp;</TD></TR>
<TR><TD style="background-color:#DFDFDF" valign=bottom width=252><P style="margin:0pt; font-family:Times New Roman">Diluted Earnings per Share:</P>
</TD><TD style="background-color:#DFDFDF" valign=bottom width=108>&nbsp;</TD><TD style="background-color:#DFDFDF" valign=top width=84>&nbsp;</TD><TD style="background-color:#DFDFDF" valign=top width=96>&nbsp;</TD><TD style="background-color:#DFDFDF" valign=top width=84>&nbsp;</TD></TR>
<TR><TD valign=bottom width=252><P style="margin-top:0pt; margin-bottom:-12pt; font-family:Times New Roman">Net income</P>
<P style="margin:0pt; text-indent:72pt; font-family:Times New Roman"><BR></P>
</TD><TD valign=bottom width=108><P style="margin:0pt; padding-left:-5.4pt; padding-right:-5.4pt; font-family:Times New Roman" align=center>89</P>
</TD><TD valign=top width=84><P style="margin:0pt; padding-left:-5.4pt; padding-right:-5.4pt; font-family:Times New Roman" align=center>189</P>
</TD><TD valign=top width=96><P style="margin:0pt; padding-left:-5.4pt; padding-right:-5.4pt; font-family:Times New Roman" align=center>83</P>
</TD><TD valign=top width=84><P style="margin:0pt; padding-left:-5.4pt; padding-right:-5.4pt; font-family:Times New Roman" align=center>414</P>
</TD></TR>
<TR><TD style="background-color:#DFDFDF" valign=bottom width=252><P style="margin:0pt; font-family:Times New Roman">Interest expense on convertible debt, <BR>
net of tax&nbsp;</P>
</TD><TD style="background-color:#DFDFDF" valign=bottom width=108><P style="margin:0pt; font-family:Times New Roman" align=center>1</P>
</TD><TD style="background-color:#DFDFDF" valign=top width=84><P style="margin:0pt; font-family:Times New Roman" align=center><BR></P>
<P style="margin:0pt; font-family:Times New Roman" align=center>1</P>
</TD><TD style="background-color:#DFDFDF" valign=top width=96><P style="margin:0pt; font-family:Times New Roman" align=center><BR></P>
<P style="margin:0pt; font-family:Times New Roman" align=center>4</P>
</TD><TD style="background-color:#DFDFDF" valign=top width=84><P style="margin:0pt; font-family:Times New Roman" align=center><BR></P>
<P style="margin:0pt; font-family:Times New Roman" align=center>3</P>
</TD></TR>
<TR><TD valign=bottom width=252><P style="margin:0pt; font-family:Times New Roman">Net income, adjusted </P>
</TD><TD valign=bottom width=108><P style="margin:0pt; padding-left:-5.4pt; padding-right:-5.4pt; font-family:Times New Roman" align=center>90</P>
</TD><TD valign=top width=84><P style="margin:0pt; padding-left:-5.4pt; padding-right:-5.4pt; font-family:Times New Roman" align=center>190</P>
</TD><TD valign=top width=96><P style="margin:0pt; padding-left:-5.4pt; padding-right:-5.4pt; font-family:Times New Roman" align=center>87</P>
</TD><TD valign=top width=84><P style="margin:0pt; padding-left:-5.4pt; padding-right:-5.4pt; font-family:Times New Roman" align=center>417</P>
</TD></TR>
<TR><TD style="background-color:#DFDFDF" valign=bottom width=252>&nbsp;</TD><TD style="background-color:#DFDFDF" valign=bottom width=108>&nbsp;</TD><TD style="background-color:#DFDFDF" valign=top width=84>&nbsp;</TD><TD style="background-color:#DFDFDF" valign=top width=96>&nbsp;</TD><TD style="background-color:#DFDFDF" valign=top width=84>&nbsp;</TD></TR>
<TR><TD valign=bottom width=252><P style="margin:0pt; font-family:Times New Roman">Weighted average shares outstanding </P>
</TD><TD valign=bottom width=108><P style="margin:0pt; font-family:Times New Roman" align=center>892,834,332</P>
</TD><TD valign=top width=84><P style="margin:0pt; font-family:Times New Roman" align=center>891,446,812</P>
</TD><TD valign=top width=96><P style="margin:0pt; font-family:Times New Roman" align=center>892,256,549</P>
</TD><TD valign=top width=84><P style="margin:0pt; font-family:Times New Roman" align=center>891,015,308</P>
</TD></TR>
<TR><TD style="background-color:#DFDFDF" valign=bottom width=252><P style="margin:0pt; font-family:Times New Roman">Dilutive effect of stock options </P>
</TD><TD style="background-color:#DFDFDF" valign=bottom width=108><P style="margin:0pt; font-family:Times New Roman" align=center>757,576</P>
</TD><TD style="background-color:#DFDFDF" valign=top width=84><P style="margin:0pt; font-family:Times New Roman" align=center>1,604,142</P>
</TD><TD style="background-color:#DFDFDF" valign=top width=96><P style="margin:0pt; font-family:Times New Roman" align=center>898,554</P>
</TD><TD style="background-color:#DFDFDF" valign=top width=84><P style="margin:0pt; font-family:Times New Roman" align=center>3,971,242</P>
</TD></TR>
<TR><TD valign=bottom width=252><P style="margin:0pt; font-family:Times New Roman">Dilutive effect of convertible debt </P>
</TD><TD valign=bottom width=108><P style="margin:0pt; font-family:Times New Roman" align=center>41,880,101</P>
</TD><TD valign=top width=84><P style="margin:0pt; font-family:Times New Roman" align=center>41,880,160</P>
</TD><TD valign=top width=96><P style="margin:0pt; font-family:Times New Roman" align=center>41,880,105</P>
</TD><TD valign=top width=84><P style="margin:0pt; font-family:Times New Roman" align=center>41,880,160</P>
</TD></TR>
<TR><TD style="background-color:#DFDFDF" valign=bottom width=252><P style="margin:0pt; font-family:Times New Roman">Number of shares used in calculating Earnings per Share </P>
</TD><TD style="background-color:#DFDFDF" valign=bottom width=108><P style="margin:0pt; font-family:Times New Roman" align=center>935,472,009</P>
</TD><TD style="background-color:#DFDFDF" valign=bottom width=84><P style="margin:0pt; font-family:Times New Roman" align=center>934,931,114</P>
</TD><TD style="background-color:#DFDFDF" valign=bottom width=96><P style="margin:0pt; font-family:Times New Roman" align=center>935,035,208</P>
</TD><TD style="background-color:#DFDFDF" valign=bottom width=84><P style="margin:0pt; font-family:Times New Roman" align=center>936,866,710</P>
</TD></TR>
<TR><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=252>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=108>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=top width=84>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=top width=96>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=top width=84>&nbsp;</TD></TR>
<TR><TD style="background-color:#DFDFDF; border-bottom:0.5pt solid #000000" valign=bottom width=252><P style="margin:0pt; font-family:Times New Roman"><B>Earnings per Share (diluted)&nbsp;</B></P>
</TD><TD style="background-color:#DFDFDF; border-bottom:0.5pt solid #000000" valign=bottom width=108><P style="margin:0pt; padding-right:-5.4pt; font-family:Times New Roman" align=center><B>0.10</B></P>
</TD><TD style="background-color:#DFDFDF; border-bottom:0.5pt solid #000000" valign=top width=84><P style="margin:0pt; padding-right:-5.4pt; font-family:Times New Roman" align=center><B>0.20</B></P>
</TD><TD style="background-color:#DFDFDF; border-bottom:0.5pt solid #000000" valign=top width=96><P style="margin:0pt; padding-right:-5.4pt; font-family:Times New Roman" align=center><B>0.09</B></P>
</TD><TD style="background-color:#DFDFDF; border-bottom:0.5pt solid #000000" valign=top width=84><P style="margin:0pt; padding-right:-5.4pt; font-family:Times New Roman" align=center><B>0.45</B></P>
</TD></TR>
</TABLE>
<P style="margin-top:0pt; margin-bottom:2pt; font-family:Times New Roman; font-size:2pt" align=justify><BR></P>
<P style="margin-top:0pt; margin-bottom:10pt; font-family:Times New Roman" align=justify>As
 of October 1, 2005, common shares issued were 907,597,149 shares, of which 13,400,000
 shares were owned by the Company as treasury stock. 4,100,000 of these treasury
 shares will be utilized for the Company&#146;s non-vested Stock Award Plan.</P>
<P style="margin-top:0pt; margin-bottom:10pt; font-family:Times New Roman" align=justify>As
 of October 1, 2005, there were outstanding stock options exercisable into the
 equivalent of&nbsp;61,312,756 common shares; the vesting period of 31,889,165
 stock options was accelerated in the third quarter of 2005. Moreover there was
 the equivalent of 41,880,101 common shares for convertible debt. </P>
<P style="margin-top:0pt; margin-bottom:10pt; font-family:Times New Roman"><B>14. Retirement plans</B></P>
<P style="margin-top:0pt; margin-bottom:10pt; font-family:Times New Roman" align=justify>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. </P>
<P style="margin-top:0pt; margin-bottom:10pt; font-family:Times New Roman" align=justify>The components of the net periodic benefit cost include the following:</P>
<TABLE style="font-size:10pt" cellspacing=0 align=center><TR><TD style="border-top:0.5pt solid #000000; border-bottom:0.5pt solid #000000" valign=top width=271.8><P style="margin:0pt; text-indent:7.8pt; font-family:Times New Roman">&nbsp;</P>
</TD><TD style="border-top:0.5pt solid #000000; border-bottom:0.5pt solid #000000" valign=bottom width=169.667 colspan=2><P style="margin:0pt; font-family:Times New Roman" align=center>(Unaudited)</P>
</TD><TD style="border-top:0.5pt solid #000000; border-bottom:0.5pt solid #000000" valign=bottom width=169.667 colspan=2><P style="margin:0pt; font-family:Times New Roman" align=center>(Unaudited)</P>
</TD></TR>
<TR><TD valign=top width=271.8>&nbsp;</TD><TD valign=bottom width=169.667 colspan=2><P style="margin:0pt; font-family:Times New Roman" align=center>Three Months ended</P>
</TD><TD valign=bottom width=169.667 colspan=2><P style="margin:0pt; font-family:Times New Roman" align=center>Nine Months ended</P>
</TD></TR>
<TR><TD style="border-bottom:0.5pt solid #000000" valign=top width=271.8><P style="margin:0pt; text-indent:7.8pt; font-family:Times New Roman">In
 millions of U.S dollars</P>
</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=82.4><P style="margin:0pt; font-family:Times New Roman" align=center><B>October 1, 2005</B></P>
</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=87.267><P style="margin:0pt; font-family:Times New Roman" align=center>September 25, 2004</P>
</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=82.4><P style="margin:0pt; font-family:Times New Roman" align=center><B>October 1, 2005</B></P>
</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=87.267><P style="margin:0pt; font-family:Times New Roman" align=center>September 25, 2004</P>
</TD></TR>
<TR><TD valign=top width=271.8>&nbsp;</TD><TD valign=bottom width=82.4>&nbsp;</TD><TD valign=bottom width=87.267>&nbsp;</TD><TD valign=bottom width=82.4>&nbsp;</TD><TD valign=bottom width=87.267>&nbsp;</TD></TR>
<TR><TD style="background-color:#DFDFDF" valign=top width=271.8><P style="margin:0pt; text-indent:7.8pt; font-family:Times New Roman">Service cost</P>
</TD><TD style="background-color:#DFDFDF" valign=top width=82.4><P style="margin:0pt; font-family:Times New Roman" align=center><B>5</B></P>
</TD><TD style="background-color:#DFDFDF" valign=top width=87.267><P style="margin:0pt; font-family:Times New Roman" align=center>3</P>
</TD><TD style="background-color:#DFDFDF" valign=top width=82.4><P style="margin:0pt; font-family:Times New Roman" align=center><B>11</B></P>
</TD><TD style="background-color:#DFDFDF" valign=top width=87.267><P style="margin:0pt; font-family:Times New Roman" align=center>11</P>
</TD></TR>
<TR><TD valign=top width=271.8><P style="margin:0pt; text-indent:7.8pt; font-family:Times New Roman">Interest cost </P>
</TD><TD valign=top width=82.4><P style="margin:0pt; font-family:Times New Roman" align=center><B>3</B></P>
</TD><TD valign=top width=87.267><P style="margin:0pt; font-family:Times New Roman" align=center>3</P>
</TD><TD valign=top width=82.4><P style="margin:0pt; font-family:Times New Roman" align=center><B>10</B></P>
</TD><TD valign=top width=87.267><P style="margin:0pt; font-family:Times New Roman" align=center>9</P>
</TD></TR>
<TR><TD style="background-color:#DFDFDF" valign=top width=271.8><P style="margin:0pt; text-indent:7.8pt; font-family:Times New Roman">Expected return on plan assets </P>
</TD><TD style="background-color:#DFDFDF" valign=top width=82.4><P style="margin:0pt; font-family:Times New Roman" align=center><B>(3)&nbsp;</B></P>
</TD><TD style="background-color:#DFDFDF" valign=top width=87.267><P style="margin:0pt; font-family:Times New Roman" align=center>(2)&nbsp;</P>
</TD><TD style="background-color:#DFDFDF" valign=top width=82.4><P style="margin:0pt; font-family:Times New Roman" align=center><B>(9)&nbsp;</B></P>
</TD><TD style="background-color:#DFDFDF" valign=top width=87.267><P style="margin:0pt; font-family:Times New Roman" align=center>(7)&nbsp;</P>
</TD></TR>
<TR><TD valign=top width=271.8><P style="margin:0pt; text-indent:7.8pt; font-family:Times New Roman">Amortization of net (gain) and loss&nbsp;</P>
</TD><TD valign=top width=82.4><P style="margin:0pt; font-family:Times New Roman" align=center><B>2</B></P>
</TD><TD valign=top width=87.267><P style="margin:0pt; font-family:Times New Roman" align=center>3</P>
</TD><TD valign=top width=82.4><P style="margin:0pt; font-family:Times New Roman" align=center><B>4</B></P>
</TD><TD valign=top width=87.267><P style="margin:0pt; font-family:Times New Roman" align=center>7</P>
</TD></TR>
<TR><TD style="background-color:#DFDFDF; border-bottom:0.5pt solid #000000" valign=top width=271.8>&nbsp;</TD><TD style="background-color:#DFDFDF; border-bottom:0.5pt solid #000000" valign=top width=82.4>&nbsp;</TD><TD style="background-color:#DFDFDF; border-bottom:0.5pt solid #000000" valign=top width=87.267>&nbsp;</TD><TD style="background-color:#DFDFDF; border-bottom:0.5pt solid #000000" valign=top width=82.4>&nbsp;</TD><TD style="background-color:#DFDFDF; border-bottom:0.5pt solid #000000" valign=top width=87.267>&nbsp;</TD></TR>
<TR><TD style="border-bottom:0.5pt solid #000000" valign=top width=271.8><P style="margin:0pt; text-indent:7.8pt; font-family:Times New Roman">Net periodic benefit cost </P>
</TD><TD style="border-bottom:0.5pt solid #000000" valign=top width=82.4><P style="margin:0pt; font-family:Times New Roman" align=center><B>7</B></P>
</TD><TD style="border-bottom:0.5pt solid #000000" valign=top width=87.267><P style="margin:0pt; font-family:Times New Roman" align=center>7</P>
</TD><TD style="border-bottom:0.5pt solid #000000" valign=top width=82.4><P style="margin:0pt; font-family:Times New Roman" align=center><B>16</B></P>
</TD><TD style="border-bottom:0.5pt solid #000000" valign=top width=87.267><P style="margin:0pt; font-family:Times New Roman" align=center>20</P>
</TD></TR>
</TABLE>
<P style="margin-top:0pt; margin-bottom:10pt; font-family:Times New Roman" align=justify><BR>
<BR></P>
<P style="margin:0pt; font-family:Times New Roman" align=center>F-17</P>
<P style="margin:0pt; font-family:Times New Roman"><BR></P>
<HR style="padding-top:7.2pt; padding-bottom:7.2pt" noshade size=1.333>
<P style="page-break-before:always; margin:0pt; font-family:Times New Roman" align=right><BR></P>
<P style="margin:0pt; font-family:Times New Roman"><BR></P>
<P style="margin-top:0pt; margin-bottom:12pt; font-family:Times New Roman; font-size:12pt" align=justify><BR>
<BR></P>
<TABLE style="font-size:10pt" cellspacing=0 align=center></TABLE>
<P style="margin-top:12pt; margin-bottom:12pt; font-family:Times New Roman; font-size:12pt" align=justify><BR></P>
<P style="margin-top:0pt; margin-bottom:10pt; font-family:Times New Roman" align=justify>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.</P>
<P style="margin-top:0pt; margin-bottom:10pt; font-family:Times New Roman"><B>15. Fair value of stock-based compensation </B></P>
<P style="margin-top:0pt; margin-bottom:10pt; font-family:Times New Roman" align=justify>At
  October 1, 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.&nbsp;The Company applies the intrinsic-value-based method
  prescribed by Accounting Principles Board Opinion No. 25 <em>Accounting for
  Stock Issued to Employees</em> (APB 25), and related Interpretations, in accounting
  for stock-based awards to employees.&nbsp;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.&nbsp;Pro forma information regarding net income and earnings
  per share (EPS) is required by Statement of Financial Accounting Standards Board
  No. 123 <em>Accounting for Stock-Based Compensation</em> (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. </P>
<P style="margin-top:0pt; margin-bottom:10pt; font-family:Times New Roman" align=justify>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.
 The fair value was estimated using the following weighted-average assumptions:</P>
<TABLE style="font-size:10pt" cellspacing=0 align=center>
 <TR>
 <TD style="border-top:0.5pt solid #000000;" width="176" valign=top>&nbsp;</TD>
 <TD style="border-top:0.5pt solid #000000;" colspan="2" valign=top><div align="center">(Unaudited)</div></TD>
 <TD style="border-top:0.5pt solid #000000;" colspan=2 valign=top><div align="center">(Unaudited)</div></TD>
 </TR>
 <TR>
 <TD style="border-bottom:0.5pt solid #000000; border-top:0.5pt solid #000000" valign=top>&nbsp;</TD>
 <TD style="border-bottom:0.5pt solid #000000; border-top:0.5pt solid #000000" colspan="2" valign=top><div align="center">&nbsp;Three
 months ended</div></TD>
 <TD style="border-bottom:0.5pt solid #000000; border-top:0.5pt solid #000000" colspan=2 valign=top><div align="center">&nbsp;Nine
 months ended</div></TD>
 </TR>
 <TR>
 <TD valign=top>&nbsp;</TD>
 <TD valign=top width=100> <P style="margin:0pt; padding-left:-2.15pt; text-indent:9pt; font-family:Times New Roman" align=center><B>October
 1,<br>
 2005</B></P></TD>
 <TD valign=top width=100> <P style="margin:0pt; font-family:Times New Roman" align=center>Sept.
 25,<br>
 2004</P></TD>
 <TD width="100" valign=top> <P style="margin:0pt; text-indent:9pt; font-family:Times New Roman" align=center><B>October
 1,<br>
 2005</B></P></TD>
 <TD valign=top width=100> <P style="margin:0pt; font-family:Times New Roman" align=center>Sept.
 25,<br>
 2004</P></TD>
 </TR>
 <TR>
 <TD style="background-color:#DFDFDF; border-bottom:0.5pt solid #000000; border-top:0.5pt solid #000000" valign=top><P style="margin:0pt; padding-left:-2.15pt; font-family:Times New Roman">In
 millions of U.S dollars</P></TD>
 <TD style="background-color:#DFDFDF; border-bottom:0.5pt solid #000000; border-top:0.5pt solid #000000" valign=top width=100>&nbsp;</TD>
 <TD style="background-color:#DFDFDF; border-bottom:0.5pt solid #000000; border-top:0.5pt solid #000000; border-top:0.5pt solid #000000" valign=top width=100>&nbsp;</TD>
 <TD width="100" valign=top style="background-color:#DFDFDF; border-bottom:0.5pt solid #000000; border-top:0.5pt solid #000000">&nbsp;</TD>
 <TD style="background-color:#DFDFDF; border-bottom:0.5pt solid #000000; border-top:0.5pt solid #000000" valign=top width=100>&nbsp;</TD>
 </TR>
 <TR>
 <TD valign=top>&nbsp;</TD>
 <TD valign=top width=100>&nbsp;</TD>
 <TD valign=top width=100>&nbsp;</TD>
 <TD width="100" valign=top>&nbsp;</TD>
 <TD valign=top width=100>&nbsp;</TD>
 </TR>
 <TR>
 <TD style="background-color:#DFDFDF" valign=top><P style="margin:0pt; padding-left:-2.15pt; font-family:Times New Roman">Expected
 life (years)</P></TD>
 <TD style="background-color:#DFDFDF" valign=top width=100> <P style="margin:0pt; padding-left:-2.15pt; font-family:Times New Roman" align=center><B>-</B></P></TD>
 <TD style="background-color:#DFDFDF" valign=top width=100> <P style="margin:0pt; font-family:Times New Roman" align=center>6</P></TD>
 <TD width="100" valign=top style="background-color:#DFDFDF"> <P style="margin:0pt; font-family:Times New Roman" align=center>6</P></TD>
 <TD style="background-color:#DFDFDF" valign=top width=100> <P style="margin:0pt; font-family:Times New Roman" align=center>6</P></TD>
 </TR>
 <TR>
 <TD valign=top><P style="margin:0pt; padding-left:-2.15pt; font-family:Times New Roman">Volatility</P></TD>
 <TD valign=top width=100> <P style="margin:0pt; padding-left:-2.15pt; font-family:Times New Roman" align=center><B>-</B></P></TD>
 <TD valign=top width=100> <P style="margin:0pt; font-family:Times New Roman" align=center>56.1%</P></TD>
 <TD width="100" valign=top> <P style="margin:0pt; font-family:Times New Roman" align=center>52.9%</P></TD>
 <TD valign=top width=100> <P style="margin:0pt; font-family:Times New Roman" align=center>56.4%</P></TD>
 </TR>
 <TR>
 <TD style="background-color:#DFDFDF" valign=top><P style="margin:0pt; padding-left:-2.15pt; font-family:Times New Roman">Risk-free
 interest rate</P></TD>
 <TD style="background-color:#DFDFDF" valign=top width=100> <P style="margin:0pt; padding-left:-2.15pt; font-family:Times New Roman" align=center><B>-</B></P></TD>
 <TD style="background-color:#DFDFDF" valign=top width=100> <P style="margin:0pt; font-family:Times New Roman" align=center>3.32%</P></TD>
 <TD width="100" valign=top style="background-color:#DFDFDF"> <P style="margin:0pt; font-family:Times New Roman" align=center>3.84%</P></TD>
 <TD style="background-color:#DFDFDF" valign=top width=100> <P style="margin:0pt; font-family:Times New Roman" align=center>3.57%</P></TD>
 </TR>
 <TR>
 <TD style="border-bottom:0.5pt solid #000000" valign=top><P style="margin:0pt; padding-left:-2.15pt; font-family:Times New Roman">Dividend
 yield</P></TD>
 <TD style="border-bottom:0.5pt solid #000000" valign=top width=100> <P style="margin:0pt; padding-left:-2.15pt; font-family:Times New Roman" align=center><B>-</B></P></TD>
 <TD style="border-bottom:0.5pt solid #000000" valign=top width=100> <P style="margin:0pt; font-family:Times New Roman" align=center>0.6%</P></TD>
 <TD style="border-bottom:0.5pt solid #000000" width="100" valign=top> <P style="margin:0pt; font-family:Times New Roman" align=center>0.69%</P></TD>
 <TD style="border-bottom:0.5pt solid #000000" valign=top width=100> <P style="margin:0pt; font-family:Times New Roman" align=center>0.5%</P></TD>
 </TR>
</TABLE>
<br>
<P style="margin-top:0pt; margin-bottom:10pt; font-family:Times New Roman" align=justify>There were no stock-based awards granted in the third quarter of 2005. The weighted average fair value of options granted in the third quarter of 2004 was $9.07. </P>
<P style="margin-top:0pt; margin-bottom:10pt; font-family:Times New Roman" align=justify>In connection with a revision to the Company&#146;s equity-based compensation policy, the Company decided to issue in the future non-vested shares. As part of this revised compensation policy, the Company also accelerated the vesting period of all outstanding unvested stock options, which were all underwater options. </P>
<P style="margin-top:0pt; margin-bottom:10pt; font-family:Times New Roman" align=justify>The following table illustrates the effect on net income and earnings per share if the Company had applied the fair value recognition provisions of FAS 123 to employee stock-based compensation, which consists of applying the amortization of the fair-value of stock-based compensation over the vesting period. It also includes the effect of accelerating the vesting period of all outstanding unvested stock options during the third quarter of 2005, which has been recognized immediately in the 2005 proforma result for the amount that otherwise would have been recognized for services received over the remainder of the vesting period.</P>
<P style="margin-top:0pt; margin-bottom:10pt; font-family:Times New Roman" align=justify><BR>
<BR></P>
<P style="margin:0pt; font-family:Times New Roman" align=center>F-18</P>
<P style="margin:0pt; font-family:Times New Roman"><BR></P>
<HR style="padding-top:7.2pt; padding-bottom:7.2pt" noshade size=1.333>
<P style="page-break-before:always; margin:0pt; font-family:Times New Roman" align=right><BR></P>
<P style="margin:0pt; font-family:Times New Roman"><BR></P>
<P style="margin-top:0pt; margin-bottom:10pt; font-family:Times New Roman" align=justify><BR>
<BR>
<BR></P>
<TABLE align="center" cellspacing=0 style="font-size:10pt">
 <TR><TD style="border-top:0.5pt solid #000000; border-bottom:0.5pt solid #000000" valign=bottom width=252>&nbsp;</TD><TD style="border-top:0.5pt solid #000000; border-bottom:0.5pt solid #000000" valign=top width=192 colspan=2><P style="margin:0pt; line-height:10pt; font-family:Times New Roman; font-size:8pt" align=center>(unaudited)</P>
</TD><TD style="border-top:0.5pt solid #000000; border-bottom:0.5pt solid #000000" valign=top width=180 colspan=2><P style="margin:0pt; line-height:10pt; font-family:Times New Roman; font-size:8pt" align=center>(unaudited)</P>
</TD></TR>
<TR><TD valign=bottom width=252>&nbsp;</TD><TD valign=top width=192 colspan=2><P style="margin-top:1.35pt; margin-bottom:0pt; padding-right:-14.4pt; padding-bottom:3pt; text-indent:-5.4pt; line-height:10pt; font-family:Times New Roman; font-size:8pt" align=center>Three Months Ended</P>
</TD><TD valign=top width=180 colspan=2><P style="margin-top:1.35pt; margin-bottom:0pt; padding-right:-14.4pt; padding-bottom:3pt; text-indent:-5.4pt; line-height:10pt; font-family:Times New Roman; font-size:8pt" align=center>Nine Months Ended</P>
</TD></TR>
<TR><TD valign=bottom width=252><P style="margin-top:1.35pt; margin-bottom:0pt; padding-right:-5.4pt; padding-bottom:3pt; text-indent:0.1pt; line-height:10pt; font-family:Times New Roman; font-size:8pt; border-bottom:0.5pt solid #000000" align=center><B>&nbsp;</B></P></TD><TD valign=top width=108><P style="margin-top:1.35pt; margin-bottom:0pt; padding-right:-5.4pt; padding-bottom:3pt; text-indent:0.1pt; line-height:10pt; font-family:Times New Roman; font-size:8pt; border-bottom:0.5pt solid #000000" align=center><B>October 1, 2005</B></P>
</TD><TD valign=top width=84><P style="margin-top:1.35pt; margin-bottom:0pt; padding-right:-4.05pt; padding-bottom:3pt; line-height:10pt; font-family:Times New Roman; font-size:8pt; border-bottom:0.5pt solid #000000" align=center>Sept. 25,2004</P>
</TD><TD valign=top width=96><P style="margin-top:1.35pt; margin-bottom:0pt; padding-right:-4.85pt; padding-bottom:3pt; line-height:10pt; font-family:Times New Roman; font-size:8pt; border-bottom:0.5pt solid #000000" align=center><B>October 1, 2005</B></P>
</TD><TD valign=top width=84><P style="margin-top:1.35pt; margin-bottom:0pt; padding-right:-3.45pt; padding-bottom:3pt; line-height:10pt; font-family:Times New Roman; font-size:8pt; border-bottom:0.5pt solid #000000" align=center>Sept. 25,2004</P>
</TD></TR>
<TR><TD valign=bottom width=252>&nbsp;</TD><TD valign=top width=108>&nbsp;</TD><TD valign=top width=84>&nbsp;</TD><TD valign=top width=96>&nbsp;</TD><TD valign=top width=84>&nbsp;</TD></TR>
<TR><TD style="background-color:#DFDFDF" valign=bottom width=252><P style="margin:0pt; font-family:Times New Roman">Net income, as reported<B> </B></P>
</TD><TD style="background-color:#DFDFDF" valign=top width=108><P style="margin:0pt; font-family:Times New Roman" align=center>89</P>
</TD><TD style="background-color:#DFDFDF" valign=top width=84><P style="margin:0pt; font-family:Times New Roman" align=center>189</P>
</TD><TD style="background-color:#DFDFDF" valign=top width=96><P style="margin:0pt; padding-right:-5.4pt; font-family:Times New Roman" align=center>83</P>
</TD><TD style="background-color:#DFDFDF" valign=top width=84><P style="margin:0pt; font-family:Times New Roman" align=center>414</P>
</TD></TR>
<TR><TD valign=bottom width=252><P style="margin:0pt; font-family:Times New Roman">Deduct: </P>
 <P style="margin-top:0pt; font-family:Times New Roman">Total stock-based
 employee compensation expense, determined under FAS 123, net of related
 tax effects<BR>
 </P>
</TD><TD valign=bottom width=108><P style="margin:0pt; padding-right:-5.4pt; font-family:Times New Roman" align=center>(182)</P>
</TD><TD valign=bottom width=84><P style="margin:0pt; padding-right:-5.4pt; font-family:Times New Roman" align=center>(40)</P>
</TD><TD valign=bottom width=96><P style="margin:0pt; padding-right:-5.4pt; font-family:Times New Roman" align=center>(244)</P>
</TD><TD valign=bottom width=84><P style="margin:0pt; padding-right:-5.4pt; font-family:Times New Roman" align=center>(127)</P>
</TD></TR>
<TR><TD style="background-color:#DFDFDF" valign=bottom width=252>&nbsp;</TD><TD style="background-color:#DFDFDF" valign=bottom width=108>&nbsp;</TD><TD style="background-color:#DFDFDF" valign=top width=84>&nbsp;</TD><TD style="background-color:#DFDFDF" valign=top width=96>&nbsp;</TD><TD style="background-color:#DFDFDF" valign=top width=84>&nbsp;</TD></TR>
<TR><TD valign=bottom width=252><P style="margin:0pt; font-family:Times New Roman">Net income (loss) , pro forma</P>
</TD><TD valign=bottom width=108><P style="margin:0pt; padding-right:-5.4pt; font-family:Times New Roman" align=center>(93)</P>
</TD><TD valign=top width=84><P style="margin:0pt; padding-right:-5.4pt; font-family:Times New Roman" align=center>149</P>
</TD><TD valign=top width=96><P style="margin:0pt; padding-right:-5.4pt; font-family:Times New Roman" align=center>(161)</P>
</TD><TD valign=top width=84><P style="margin:0pt; padding-right:-5.4pt; font-family:Times New Roman" align=center>287</P>
</TD></TR>
<TR><TD style="background-color:#DFDFDF" valign=bottom width=252><P style="margin:0pt; font-family:Times New Roman">Earnings (loss) per share:</P>
</TD><TD style="background-color:#DFDFDF" valign=bottom width=108>&nbsp;</TD><TD style="background-color:#DFDFDF" valign=top width=84>&nbsp;</TD><TD style="background-color:#DFDFDF" valign=top width=96>&nbsp;</TD><TD style="background-color:#DFDFDF" valign=top width=84>&nbsp;</TD></TR>
<TR><TD valign=bottom width=252><P style="margin:0pt; font-family:Times New Roman">Basic,
 as reported </P>
</TD><TD valign=bottom width=108><P style="margin:0pt; padding-right:-5.4pt; font-family:Times New Roman" align=center>0.10</P>
</TD><TD valign=top width=84><P style="margin:0pt; padding-left:-5.4pt; padding-right:-5.4pt; font-family:Times New Roman" align=center>0.21</P>
</TD><TD valign=top width=96><P style="margin:0pt; font-family:Times New Roman" align=center>0.09</P>
</TD><TD valign=top width=84><P style="margin:0pt; padding-left:-5.4pt; padding-right:-5.4pt; font-family:Times New Roman" align=center>0.46</P>
</TD></TR>
<TR><TD style="background-color:#DFDFDF" valign=bottom width=252><P style="margin:0pt; font-family:Times New Roman">Basic,
 pro forma</P>
</TD><TD style="background-color:#DFDFDF" valign=bottom width=108><P style="margin:0pt; padding-left:-5.4pt; padding-right:-5.4pt; font-family:Times New Roman" align=center>(0.11)</P>
</TD><TD style="background-color:#DFDFDF" valign=top width=84><P style="margin:0pt; padding-left:-5.4pt; padding-right:-5.4pt; font-family:Times New Roman" align=center>0.17</P>
</TD><TD style="background-color:#DFDFDF" valign=top width=96><P style="margin:0pt; padding-left:-5.4pt; padding-right:-5.4pt; font-family:Times New Roman" align=center>(0.18)</P>
</TD><TD style="background-color:#DFDFDF" valign=top width=84><P style="margin:0pt; padding-left:-5.4pt; padding-right:-5.4pt; font-family:Times New Roman" align=center>0.32</P>
</TD></TR>
<TR><TD valign=bottom width=252>&nbsp;</TD><TD valign=bottom width=108>&nbsp;</TD><TD valign=top width=84>&nbsp;</TD><TD valign=top width=96>&nbsp;</TD><TD valign=top width=84>&nbsp;</TD></TR>
<TR><TD style="background-color:#DFDFDF" valign=bottom width=252><P style="margin:0pt; font-family:Times New Roman">Diluted,
 as reported</P>
</TD><TD style="background-color:#DFDFDF" valign=bottom width=108><P style="margin:0pt; font-family:Times New Roman" align=center>0.10</P>
</TD><TD style="background-color:#DFDFDF" valign=top width=84><P style="margin:0pt; font-family:Times New Roman" align=center>0.20</P>
</TD><TD style="background-color:#DFDFDF" valign=top width=96><P style="margin:0pt; font-family:Times New Roman" align=center>0.09</P>
</TD><TD style="background-color:#DFDFDF" valign=top width=84><P style="margin:0pt; font-family:Times New Roman" align=center>0.45</P>
</TD></TR>
<TR><TD valign=bottom width=252><P style="margin:0pt; font-family:Times New Roman">Diluted,
 pro forma</P>
</TD><TD valign=bottom width=108><P style="margin:0pt; padding-left:-5.4pt; padding-right:-5.4pt; font-family:Times New Roman" align=center>(0.11)</P>
</TD><TD valign=top width=84><P style="margin:0pt; padding-left:-5.4pt; padding-right:-5.4pt; font-family:Times New Roman" align=center>0.16</P>
</TD><TD valign=top width=96><P style="margin:0pt; padding-left:-5.4pt; padding-right:-5.4pt; font-family:Times New Roman" align=center>(0.18)</P>
</TD><TD valign=top width=84><P style="margin:0pt; padding-left:-5.4pt; padding-right:-5.4pt; font-family:Times New Roman" align=center>0.31</P>
</TD></TR>
<TR><TD style="background-color:#DFDFDF; border-bottom:0.5pt solid #000000" valign=bottom width=252>&nbsp;</TD><TD style="background-color:#DFDFDF; border-bottom:0.5pt solid #000000" valign=bottom width=108>&nbsp;</TD><TD style="background-color:#DFDFDF; border-bottom:0.5pt solid #000000" valign=top width=84>&nbsp;</TD><TD style="background-color:#DFDFDF; border-bottom:0.5pt solid #000000" valign=top width=96>&nbsp;</TD><TD style="background-color:#DFDFDF; border-bottom:0.5pt solid #000000" valign=top width=84>&nbsp;</TD></TR>
</TABLE>
<P style="margin-top:0pt; margin-bottom:10pt; font-family:Times New Roman" align=justify><BR></P>
<P style="margin-top:0pt; margin-bottom:10pt; font-family:Times New Roman"><B>16. Dividends</B></P>
<P style="margin-top:0pt; margin-bottom:10pt; font-family:Times New Roman" align=justify>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 $107 million was paid in the second quarter of 2005. </P>
<P style="margin-top:0pt; margin-bottom:10pt; font-family:Times New Roman" align=justify>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.&nbsp;</P>
<P style="margin-top:0pt; margin-bottom:10pt; font-family:Times New Roman"><B>17. Treasury Stock</B></P>
<P style="margin-top:0pt; margin-bottom:10pt; font-family:Times New Roman" align=justify>In
 2002, the Company repurchased 13,400,000 of its own shares, for a total amount
 of $348 million, which were reflected at cost as a reduction of the shareholders&#146;
 equity. 4,100,000 of these repurchased shares have been designated to be used
 for the Company&#146;s share-based remuneration programs on non-vested shares.</P>
<P style="margin-top:0pt; margin-bottom:10pt; font-family:Times New Roman" align=justify>As of October 1, 2005, none of the common shares repurchased had been transferred to employees under the Company&#146;s share-based remuneration programs.</P>
<P style="margin-top:0pt; margin-bottom:10pt; font-family:Times New Roman"><B>18. Contingencies</B></P>
<P style="margin-top:0pt; margin-bottom:10pt; font-family:Times New Roman" align=justify>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, including a specific tax claim in the United States.
 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.</P>
<P style="margin-top:0pt; margin-bottom:10pt; font-family:Times New Roman"><B>19. Claims and Legal proceedings</B></P>
<P style="margin-top:0pt; margin-bottom:10pt; font-family:Times New Roman" align=justify>The
 Company has received and may in the future receive communications alleging possible
 infringements, in particular in case of patents and similar intellectual property
 rights of others. Furthermore, the Company may become involved in costly litigation
 brought against the Company regarding patents, mask works, 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.</P>
<P style="margin-top:0pt; margin-bottom:10pt; font-family:Times New Roman" align=justify><BR>
<BR></P>
<P style="margin:0pt; font-family:Times New Roman" align=center>F-19</P>
<P style="margin:0pt; font-family:Times New Roman"><BR></P>
<HR style="padding-top:7.2pt; padding-bottom:7.2pt" noshade size=1.333>
<P style="page-break-before:always; margin:0pt; font-family:Times New Roman" align=right><BR></P>
<P style="margin:0pt; font-family:Times New Roman"><BR></P>
<P style="margin-top:0pt; margin-bottom:10pt; font-family:Times New Roman" align=justify>&nbsp;</P>
<P style="margin-top:0pt; margin-bottom:10pt; font-family:Times New Roman" align=justify>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 impac
t its operations or financial condition at the time it were to materialize.</P>
<P style="margin-top:0pt; margin-bottom:10pt; font-family:Times New Roman" align=justify>During
 2004, the Company settled certain disputes with respect to claims and litigation
 relating to possible infringements of patents and similar intellectual property
 rights of others.&nbsp;An accrual of $10 million was recorded as at December
 31, 2004 for such claims, which was paid in 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.</P>
<P style="margin-top:0pt; margin-bottom:10pt; font-family:Times New Roman" align=justify>The Company is currently a party to legal proceedings with SanDisk Corporation (&#147;SanDisk&#148;). Based on management&#146;s current assumptions made with support of the Company&#146;s outside attorneys, the Company does not believe that the SanDisk litigation will result in a probable loss.</P>
<P style="margin-top:0pt; margin-bottom:10pt; font-family:Times New Roman" align=center><BR></P>
<P style="margin-top:0pt; margin-bottom:10pt; font-family:Times New Roman" align=center><B><BR>
<BR></B></P>
<P style="margin:0pt; font-family:Times New Roman" align=center>F-20</P>
<P style="margin:0pt; font-family:Times New Roman"><BR></P>
<HR style="padding-top:7.2pt; padding-bottom:7.2pt" noshade size=1.333>
<P style="page-break-before:always; margin:0pt; font-family:Times New Roman" align=right><BR></P>
<P style="margin:0pt; font-family:Times New Roman"><BR></P>
<P style="margin-top:0pt; margin-bottom:10pt; font-family:Times New Roman" align=center><B>SIGNATURES</B></P>
<P style="margin-top:0pt; margin-bottom:10pt; font-family:Times New Roman" align=justify>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. </P>
<P style="margin-top:0pt; margin-bottom:10pt; font-family:Times New Roman" align=justify>&nbsp;</P>
<P style="margin-top:0pt; margin-bottom:10pt; font-family:Times New Roman" align=justify>&nbsp;</P>
<TABLE style="font-size:10pt" cellspacing=0 align=center>
 <TR>
 <TD valign=top width=205>&nbsp;</TD>
 <TD valign=top width=88>&nbsp;</TD>
 <TD valign=top width=321><P style="margin:0pt; font-family:Times New Roman"><B>STMicroelectronics
 N.V.</B></P></TD>
 </TR>
 <TR>
 <TD valign=top width=205>&nbsp;</TD>
 <TD valign=top width=88>&nbsp;</TD>
 <TD valign=top width=321>&nbsp;</TD>
 </TR>
 <TR>
 <TD valign=top width=205>Date: November 9, 2005</TD>
 <TD valign=top width=88><P style="margin:0pt; font-family:Times New Roman">By:</P></TD>
 <TD style ="border-bottom:0.5pt solid #000000" valign=top width=321><P style="margin:0pt; font-family:Times New Roman"><B>/s/Carlo
 Bozotti</B></P></TD>
 </TR>
 <TR>
 <TD valign=top width=205><P style="margin-top:0pt; margin-bottom:-12pt; font-family:Times New Roman">&nbsp;</P></TD>
 <TD valign=top width=88>&nbsp;</TD>
 <TD valign=top width=321>&nbsp;</TD>
 </TR>
 <TR>
 <TD valign=top width=205>&nbsp;</TD>
 <TD valign=top width=88>Name:</TD>
 <TD valign=top width=321><P style="margin:0pt; font-family:Times New Roman"><strong>Carlo
 Bozotti </strong></P></TD>
 </TR>
 <TR>
 <TD valign=top width=205>&nbsp;</TD>
 <TD valign=top width=88>Title:</TD>
 <TD valign=top width=321><b>President and Chief Executive Officer and Sole
 Member of our Managing Board</b></TD>
 </TR>
</TABLE>
<P style="margin-top:0pt; margin-bottom:10pt; font-family:Times New Roman" align=justify><BR>
</P>
<P style="margin-top:0pt; margin-bottom:10pt; font-family:Times New Roman" align=justify>&nbsp;</P>
<P style="margin-top:0pt; margin-bottom:10pt; font-family:Times New Roman" align=justify>Enclosure:&nbsp;STMicroelectronics N.V.&#146;s Third Quarter 2005:</P>
<P style="margin-top:0pt; margin-bottom:-10pt; padding-left:72pt; text-indent:-36pt; line-height:10pt; font-family:Times New Roman; font-size:8pt">&#9679;</P>
<P style="margin-top:0pt; margin-bottom:10pt; padding-left:72pt; font-family:Times New Roman; font-size:10pt">Operating and Financial Review and Prospects;</P>
<P style="margin-top:0pt; margin-bottom:-10pt; padding-left:72pt; text-indent:-36pt; line-height:10pt; font-family:Times New Roman; font-size:8pt">&#9679;</P>
<P style="margin-top:0pt; margin-bottom:10pt; padding-left:72pt; font-family:Times New Roman; font-size:10pt">Unaudited Interim Consolidated Statements of Income, Balance Sheets, Statements of Cash Flow and Statements of Changes in Shareholders&#146; Equity and related Notes; and</P>
<P style="margin-top:0pt; margin-bottom:-10pt; padding-left:72pt; text-indent:-36pt; line-height:10pt; font-family:Times New Roman; font-size:8pt">&#9679;</P>
<P style="margin-top:0pt; margin-bottom:10pt; padding-left:72pt; font-family:Times New Roman; font-size:10pt">Certifications pursuant to Sections 302 and 906 of the Sarbanes-Oxley Act of 2002, submitted to the Commission on a voluntary basis.</P>
<P style="margin-top:0pt; margin-bottom:10pt; padding-left:72pt; text-indent:-36pt; font-family:Times New Roman"><BR>
<BR></P>
<P style="margin:0pt; font-family:Times New Roman"><BR></P>
<P style="margin:0pt; font-family:Times New Roman"><BR></P>
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<DOCUMENT>
<TYPE>EX-12.1
<SEQUENCE>2
<FILENAME>ex121.htm
<DESCRIPTION>EXHIBIT 12.1
<TEXT>
<!doctype html public "-//IETF//DTD HTML//EN">
<HTML>
<HEAD>
<TITLE>Converted by EDGARwiz</TITLE>
<META NAME="date" CONTENT="11/03/2005">
</HEAD>
<BODY leftmargin="60" rightmargin="60" style="line-height:12pt; font-size:10pt; color:#000000">
<P style="margin-top:0pt; margin-bottom:10pt; padding-left:36pt; font-family:Times New Roman" align=right><B>Exhibit 12.1</B></P>
<P style="margin-top:0pt; margin-bottom:10pt; font-family:Times New Roman" align=justify><B>VOLUNTARY CERTIFICATION</B></P>
<P style="margin-top:0pt; margin-bottom:10pt; font-family:Times New Roman" align=justify>I, Carlo Bozotti, certify that:</P>
<P style="margin-top:0pt; margin-bottom:-12pt; padding-left:36pt; text-indent:-36pt; font-family:Times New Roman" align=justify>1)</P>
<P style="margin-top:0pt; margin-bottom:10pt; padding-left:36pt; font-family:Times New Roman" align=justify>I have reviewed this report on Form 6-K of STMicroelectronics N.V;</P>
<P style="margin-top:0pt; margin-bottom:-12pt; padding-left:36pt; text-indent:-36pt; font-family:Times New Roman" align=justify>2)</P>
<P style="margin-top:0pt; margin-bottom:10pt; padding-left:36pt; font-family:Times New Roman" align=justify>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;</P>
<P style="margin-top:0pt; margin-bottom:-12pt; padding-left:36pt; text-indent:-36pt; font-family:Times New Roman" align=justify>3)</P>
<P style="margin-top:0pt; margin-bottom:10pt; padding-left:36pt; font-family:Times New Roman" align=justify>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;</P>
<P style="margin-top:0pt; margin-bottom:-12pt; padding-left:36pt; text-indent:-36pt; font-family:Times New Roman" align=justify>4)</P>
<P style="margin-top:0pt; margin-bottom:10pt; padding-left:36pt; font-family:Times New Roman" align=justify>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:</P>
<P style="margin-top:0pt; margin-bottom:-12pt; padding-left:72pt; text-indent:-36pt; font-family:Times New Roman" align=justify>(a)</P>
<P style="margin-top:0pt; margin-bottom:10pt; padding-left:72pt; font-family:Times New Roman" align=justify>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;</P>
<P style="margin-top:0pt; margin-bottom:-12pt; padding-left:72pt; text-indent:-36pt; font-family:Times New Roman" align=justify>(b)</P>
<P style="margin-top:0pt; margin-bottom:10pt; padding-left:72pt; font-family:Times New Roman" align=justify>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</P>
<P style="margin-top:0pt; margin-bottom:-12pt; padding-left:72pt; text-indent:-36pt; font-family:Times New Roman" align=justify>(c)</P>
<P style="margin-top:0pt; margin-bottom:10pt; padding-left:72pt; font-family:Times New Roman" align=justify>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</P>
<P style="margin-top:0pt; margin-bottom:-12pt; padding-left:36pt; text-indent:-36pt; font-family:Times New Roman" align=justify>5)</P>
<P style="margin-top:0pt; margin-bottom:10pt; padding-left:36pt; font-family:Times New Roman" align=justify>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):</P>
<P style="margin-top:0pt; margin-bottom:-12pt; padding-left:72pt; text-indent:-36pt; font-family:Times New Roman" align=justify>(a)</P>
<P style="margin-top:0pt; margin-bottom:10pt; padding-left:72pt; font-family:Times New Roman" align=justify>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</P>
<P style="margin-top:0pt; margin-bottom:-12pt; padding-left:72pt; text-indent:-36pt; font-family:Times New Roman" align=justify>(b)</P>
<P style="margin-top:0pt; margin-bottom:20pt; padding-left:72pt; font-family:Times New Roman" align=justify>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. </P>
<TABLE style="font-size:10pt" cellspacing=0 align=center><TR>
    <TD valign=top width=205.333>Date: November 9, 2005</TD>
    <TD valign=top width=89.933><P style="margin:0pt; font-family:Times New Roman">By:</P>
</TD><TD valign=top width=320.933><P style="margin:0pt; font-family:Times New Roman"><B>/s/
        <U>Carlo Bozotti</U></B></P>
</TD></TR>
<TR><TD valign=top width=205.333>&nbsp;</TD><TD valign=top width=89.933>&nbsp;</TD><TD valign=top width=320.933>&nbsp;</TD></TR>
<TR><TD valign=top width=205.333><P style="margin-top:0pt; margin-bottom:-12pt; font-family:Times New Roman">&nbsp;</P>
</TD><TD valign=top width=89.933><P style="margin:0pt; font-family:Times New Roman">Name:</P>
</TD><TD valign=top width=320.933><P style="margin:0pt; font-family:Times New Roman"><B>Carlo Bozotti</B></P>
</TD></TR>
<TR><TD valign=top width=205.333>&nbsp;</TD>
    <TD valign=top width=89.933>Title:</TD>
    <TD valign=top width=320.933><P style="margin:0pt; font-family:Times New Roman"><B>President and Chief Executive Officer and Sole Member of our Managing Board</B></P>
</TD></TR>
<TR><TD valign=top width=205.333>&nbsp;</TD><TD valign=top width=89.933>&nbsp;</TD><TD valign=top width=320.933>&nbsp;</TD></TR>
</TABLE>
<P style="margin:0pt; font-family:Times New Roman"><BR></P>
<P style="margin:0pt; font-family:Times New Roman"><BR>
<BR></P>
<P style="margin:0pt; font-family:Times New Roman"><BR></P>
<P style="margin:0pt; font-family:Times New Roman"><BR></P>
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<DOCUMENT>
<TYPE>EX-12.2
<SEQUENCE>3
<FILENAME>ex122.htm
<DESCRIPTION>EXHIBIT 12.2
<TEXT>
<!doctype html public "-//IETF//DTD HTML//EN">
<HTML>
<HEAD>
<TITLE>Converted by EDGARwiz</TITLE>
<META NAME="date" CONTENT="11/03/2005">
</HEAD>
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<P style="margin-top:0pt; margin-bottom:10pt; font-family:Times New Roman" align=right><B>Exhibit 12.2</B></P>
<P style="margin-top:0pt; margin-bottom:10pt; font-family:Times New Roman" align=justify><B>VOLUNTARY CERTIFICATION</B></P>
<P style="margin-top:0pt; margin-bottom:10pt; font-family:Times New Roman" align=justify>I, Carlo Ferro, certify that:</P>
<P style="margin-top:0pt; margin-bottom:-12pt; padding-left:36pt; text-indent:-36pt; font-family:Times New Roman" align=justify>1)</P>
<P style="margin-top:0pt; margin-bottom:10pt; padding-left:36pt; font-family:Times New Roman" align=justify>I have reviewed this report on Form 6-K of STMicroelectronics N.V.;</P>
<P style="margin-top:0pt; margin-bottom:-12pt; padding-left:36pt; text-indent:-36pt; font-family:Times New Roman" align=justify>2)</P>
<P style="margin-top:0pt; margin-bottom:10pt; padding-left:36pt; font-family:Times New Roman" align=justify>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;</P>
<P style="margin-top:0pt; margin-bottom:-12pt; padding-left:36pt; text-indent:-36pt; font-family:Times New Roman" align=justify>3)</P>
<P style="margin-top:0pt; margin-bottom:10pt; padding-left:36pt; font-family:Times New Roman" align=justify>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;</P>
<P style="margin-top:0pt; margin-bottom:-12pt; padding-left:36pt; text-indent:-36pt; font-family:Times New Roman" align=justify>4)</P>
<P style="margin-top:0pt; margin-bottom:10pt; padding-left:36pt; font-family:Times New Roman" align=justify>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:</P>
<P style="margin-top:0pt; margin-bottom:-12pt; padding-left:72pt; text-indent:-36pt; font-family:Times New Roman" align=justify>(a)</P>
<P style="margin-top:0pt; margin-bottom:10pt; padding-left:72pt; font-family:Times New Roman" align=justify>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;</P>
<P style="margin-top:0pt; margin-bottom:-12pt; padding-left:72pt; text-indent:-36pt; font-family:Times New Roman" align=justify>(b)</P>
<P style="margin-top:0pt; margin-bottom:10pt; padding-left:72pt; font-family:Times New Roman" align=justify>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</P>
<P style="margin-top:0pt; margin-bottom:-12pt; padding-left:72pt; text-indent:-36pt; font-family:Times New Roman" align=justify>(c)</P>
<P style="margin-top:0pt; margin-bottom:10pt; padding-left:72pt; font-family:Times New Roman" align=justify>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</P>
<P style="margin-top:0pt; margin-bottom:-12pt; padding-left:36pt; text-indent:-36pt; font-family:Times New Roman" align=justify>5)</P>
<P style="margin-top:0pt; margin-bottom:10pt; padding-left:36pt; font-family:Times New Roman" align=justify>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):</P>
<P style="margin-top:0pt; margin-bottom:-12pt; padding-left:72pt; text-indent:-36pt; font-family:Times New Roman" align=justify>(a)</P>
<P style="margin-top:0pt; margin-bottom:10pt; padding-left:72pt; font-family:Times New Roman" align=justify>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</P>
<P style="margin-top:0pt; margin-bottom:-12pt; padding-left:72pt; text-indent:-36pt; font-family:Times New Roman" align=justify>(b)</P>
<P style="margin-top:0pt; margin-bottom:20pt; padding-left:72pt; font-family:Times New Roman" align=justify>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. </P>
<TABLE style="font-size:10pt" cellspacing=0 align=center><TR>
    <TD valign=top width=205.333>Date: November 9, 2005</TD>
    <TD valign=top width=89.933><P style="margin:0pt; font-family:Times New Roman">By:</P>
</TD><TD valign=top width=320.933><P style="margin:0pt; font-family:Times New Roman"><B>/s/
        <u>Carlo Ferro</u></B></P>
</TD></TR>
<TR><TD valign=top width=205.333>&nbsp;</TD><TD valign=top width=89.933>&nbsp;</TD><TD valign=top width=320.933>&nbsp;</TD></TR>
<TR><TD valign=top width=205.333><P style="margin-top:0pt; margin-bottom:-12pt; font-family:Times New Roman">&nbsp;</P>
</TD><TD valign=top width=89.933><P style="margin:0pt; font-family:Times New Roman">Name:</P>
</TD><TD valign=top width=320.933><P style="margin:0pt; font-family:Times New Roman"><B>Carlo Ferro</B></P>
</TD></TR>
<TR><TD valign=top width=205.333>&nbsp;</TD>
    <TD valign=top width=89.933>Title: </TD>
    <TD valign=top width=320.933><P style="margin:0pt; font-family:Times New Roman"><B>Executive Vice President and Chief Financial Officer</B></P>
</TD></TR>
<TR><TD valign=top width=205.333>&nbsp;</TD><TD valign=top width=89.933>&nbsp;</TD><TD valign=top width=320.933>&nbsp;</TD></TR>
</TABLE>
<P style="margin-top:0pt; margin-bottom:10pt; font-family:Times New Roman" align=right>&nbsp;</P>
<P style="margin-top:0pt; margin-bottom:10pt; font-family:Times New Roman" align=right><BR>
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<P style="margin:0pt; font-family:Times New Roman"><BR></P>
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<TYPE>EX-13.1
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<DESCRIPTION>EXHIBIT 13.1
<TEXT>
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<P style="margin-top:0pt; margin-bottom:10pt; font-family:Times New Roman" align=right><B>Exhibit 13.1</B></P>
<P style="margin-top:0pt; margin-bottom:10pt; font-family:Times New Roman" align=justify>VOLUNTARY CERTIFICATION OF CARLO BOZOTTI, PRESIDENT AND CHIEF EXECUTIVE OFFICER AND SOLE MEMBER OF OUR 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 SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002</P>
<P style="margin-top:0pt; margin-bottom:10pt; font-family:Times New Roman" align=justify>In connection with the Report on Form 6-K of STMicroelectronics N.V. (the &#147;Company&#148;) for the period ending October 1, 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:</P>
<P style="margin-top:0pt; margin-bottom:10pt; font-family:Times New Roman" align=justify>The Report fully complies with the requirements of Section 13(a) of the Securities Exchange Act of 1934; and</P>
<P style="margin-top:0pt; margin-bottom:10pt; font-family:Times New Roman" align=justify>The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. </P>
<TABLE style="font-size:10pt" cellspacing=0 align=center><TR>
    <TD valign=top width=205.333>Date: November 9, 2005</TD>
    <TD valign=top width=89.933><P style="margin:0pt; font-family:Times New Roman">By:</P>
</TD><TD valign=top width=320.933><P style="margin:0pt; font-family:Times New Roman"><B>/s/
        <U>Carlo Bozotti</u></B></P>
</TD></TR>
<TR><TD valign=top width=205.333>&nbsp;</TD><TD valign=top width=89.933>&nbsp;</TD><TD valign=top width=320.933>&nbsp;</TD></TR>
<TR><TD valign=top width=205.333><P style="margin-top:0pt; font-family:Times New Roman">&nbsp;</P>
</TD><TD valign=top width=89.933><P style="margin:0pt; font-family:Times New Roman">Name:</P>
</TD><TD valign=top width=320.933><P style="margin:0pt; font-family:Times New Roman"><B>Carlo Bozotti</B></P>
</TD></TR>
<TR><TD valign=top width=205.333>&nbsp;</TD><TD valign=top width=89.933><P style="margin:0pt; font-family:Times New Roman">Title
        :</P>
</TD><TD valign=top width=320.933><P style="margin:0pt; font-family:Times New Roman"><B>President and Chief Executive Officer and Sole Member of our Managing Board</B></P>
</TD></TR>
<TR><TD valign=top width=205.333>&nbsp;</TD><TD valign=top width=89.933>&nbsp;</TD><TD valign=top width=320.933>&nbsp;</TD></TR>
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<P style="margin-top:0pt; margin-bottom:10pt; font-family:Times New Roman" align=justify><BR></P>
<TABLE style="font-size:10pt" cellspacing=0 align=center><TR>
    <TD valign=top width=205.333>Date: November 9, 2005</TD>
    <TD valign=top width=89.933><P style="margin:0pt; font-family:Times New Roman">By:</P>
</TD><TD valign=top width=320.933><P style="margin:0pt; font-family:Times New Roman"><B>/s/
        <U>Carlo Ferro</u></B></P>
</TD></TR>
<TR><TD valign=top width=205.333>&nbsp;</TD><TD valign=top width=89.933>&nbsp;</TD><TD valign=top width=320.933>&nbsp;</TD></TR>
<TR><TD valign=top width=205.333><P style="margin-top:0pt; font-family:Times New Roman">&nbsp;</P>
</TD><TD valign=top width=89.933><P style="margin:0pt; font-family:Times New Roman">Name:</P>
</TD><TD valign=top width=320.933><P style="margin:0pt; font-family:Times New Roman"><B>Carlo Ferro</B></P>
</TD><A NAME="OLE_LINK2"></A><A NAME="OLE_LINK4"></A></TR>
<TR><TD valign=top width=205.333>&nbsp;</TD>
    <TD valign=top width=89.933>Title:</TD>
    <TD valign=top width=320.933><P style="margin:0pt; font-family:Times New Roman"><B>Executive Vice President and Chief Financial Officer</B></P>
</TD></TR>
<TR><TD valign=top width=205.333>&nbsp;</TD><TD valign=top width=89.933>&nbsp;</TD><TD valign=top width=320.933>&nbsp;</TD></TR>
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<P style="margin-top:0pt; margin-bottom:10pt; font-family:Times New Roman" align=justify><BR></P>
<P style="margin:0pt; font-family:Times New Roman"><BR></P>
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