-----BEGIN PRIVACY-ENHANCED MESSAGE-----
Proc-Type: 2001,MIC-CLEAR
Originator-Name: webmaster@www.sec.gov
Originator-Key-Asymmetric:
 MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen
 TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB
MIC-Info: RSA-MD5,RSA,
 PetPgwJA6gIEDUnbuFiqc1WSBdiXqiP3Jmrb0h5uEgs7CwgM8spDUWqc0zpLZkjq
 jZl//eD9F8G7ET3+oX7Zhg==

<SEC-DOCUMENT>0000950123-07-004661.txt : 20070329
<SEC-HEADER>0000950123-07-004661.hdr.sgml : 20070329
<ACCEPTANCE-DATETIME>20070329122807
ACCESSION NUMBER:		0000950123-07-004661
CONFORMED SUBMISSION TYPE:	6-K
PUBLIC DOCUMENT COUNT:		4
CONFORMED PERIOD OF REPORT:	20070329
FILED AS OF DATE:		20070329
DATE AS OF CHANGE:		20070329

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:		07726569

	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>y01685e6vk.htm
<DESCRIPTION>FORM 6-K
<TEXT>
<HTML>
<HEAD>
<TITLE>6-K</TITLE>
</HEAD>
<BODY bgcolor="#FFFFFF">
<!-- PAGEBREAK -->
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>
<DIV style="font-family: 'Times New Roman',Times,serif">


<DIV style="width: 100%; border-bottom: 2pt solid black; font-size: 1pt">&nbsp;</DIV>
<DIV style="width: 100%; border-bottom: 1pt solid black; font-size: 1pt">&nbsp;</DIV>




<DIV align="center" style="font-size: 14pt; margin-top: 12pt"><B>SECURITIES AND EXCHANGE COMMISSION</B>
</DIV>

<DIV align="center" style="font-size: 12pt"><B>Washington, D.C. 20549</B>
</DIV>

<DIV align="center" style="font-size: 18pt; margin-top: 12pt"><B>FORM 6-K</B>
</DIV>


<DIV align="center" style="font-size: 12pt; margin-top: 12pt"><B>REPORT OF FOREIGN PRIVATE ISSUER<BR>
PURSUANT TO RULE 13a-16 or 15d-16 OF<BR>
THE SECURITIES EXCHANGE ACT OF 1934</B>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 12pt"><B>Report on Form&nbsp;6-K dated March&nbsp;29, 2007</B></DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 12pt"><DIV align="center"><DIV style="font-size: 3pt; margin-top: 16pt; width: 26%; border-top: 1px solid #000000">&nbsp;</DIV></DIV></DIV>

<DIV align="center" style="font-size: 24pt; margin-top: 12pt"><B>STMicroelectronics N.V.</B>
</DIV>

<DIV align="center" style="font-size: 10pt">(Name of Registrant)</DIV>


<DIV align="center" style="font-size: 10pt; margin-top: 12pt">39, Chemin du Champ-des-Filles<BR>
1228 Plan-les-Ouates, Geneva, Switzerland<BR>
(Address of Principal Executive Offices)</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 12pt"><DIV align="center"><DIV style="font-size: 3pt; margin-top: 16pt; width: 26%; border-top: 1px solid #000000">&nbsp;</DIV></DIV></DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Indicate by check mark whether the registrant files or will file annual reports under cover of Form
20-F or Form 40-F.
</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="40%">&nbsp;</TD>
    <TD width="10%">&nbsp;</TD>
    <TD width="40%">&nbsp;</TD>
</TR>
<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD align="right" valign="top"><DIV style="margin-left:0px; text-indent:-0px">Form&nbsp;20-F <FONT face="Wingdings">&#254;</FONT>
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Form&nbsp;40-F <FONT face="Wingdings">&#111;</FONT></TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by
Regulation&nbsp;S-T Rule&nbsp;101(b)(7):
</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="40%">&nbsp;</TD>
    <TD width="10%">&nbsp;</TD>
    <TD width="40%">&nbsp;</TD>
</TR>
<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD align="right" valign="top"><DIV style="margin-left:0px; text-indent:-0px">Yes <FONT face="Wingdings">&#111;</FONT>
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">No <FONT face="Wingdings">&#254;</FONT></TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">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&nbsp;12g3-2(b) under the
Securities Exchange Act of 1934.
</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="40%">&nbsp;</TD>
    <TD width="10%">&nbsp;</TD>
    <TD width="40%">&nbsp;</TD>
</TR>
<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD align="right" valign="top"><DIV style="margin-left:0px; text-indent:-0px">Yes <FONT face="Wingdings">&#111;</FONT>
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">No <FONT face="Wingdings">&#254;</FONT></TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">If &#147;Yes&#148; is marked, indicate below the file number assigned to the registrant in connection with
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 12pt">Rule&nbsp;12g3-2(b): 82-_______</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Enclosure: Shareholder materials for STMicroelectronics&#146; Annual General Meeting of Shareholders
(&#147;AGM&#148;) of April&nbsp;26, 2007, including: (i)&nbsp;AGM Agenda; (ii)&nbsp;Statutory Annual Report of
STMicroelectronics N.V. (Dutch holding company) for the year ended December&nbsp;31, 2006 (IFRS); (iii)
Proposed AGM Resolutions; (iv)&nbsp;Proposed Supervisory Board Member Data Forms; (v)&nbsp;Proxy Forms and
Instruction Cards; and (vi)&nbsp;Proposed Amendments to the Articles of Association.
</DIV>


<DIV style="width: 100%; border-bottom: 1pt solid black; margin-top: 10pt; font-size: 1pt">&nbsp;</DIV>
<DIV style="width: 100%; border-bottom: 2pt solid black; font-size: 1pt">&nbsp;</DIV>








<P align="center" style="font-size: 10pt"><!-- Folio --><!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>
<DIV style="font-family: 'Times New Roman',Times,serif">


<DIV align="left" style="font-size: 10pt; margin-top: 12pt">STMicroelectronics
</DIV>



<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 65%"><IMG src="y01685y0168502.gif" alt="(ST LOGO)">
</DIV>

<DIV align="Center" style="font-size: 10pt; margin-top: 6pt"><B>Annual General Meeting of Shareholders</B>

</DIV>

<DIV align="Center" style="font-size: 10pt; margin-top: 6pt"><B>2007</B>

</DIV>

<DIV align="Center" style="font-size: 10pt; margin-top: 6pt"><U><B>Agenda</B></U>

</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>Annual General Meeting of Shareholders (&#147;AGM&#148;) of STMicroelectronics N.V.,<BR>
established in Amsterdam, the Netherlands, to be held on April&nbsp;26, 2007 at 10.30<BR>
a.m. at the Pulitzer Hotel, Amsterdam, the Netherlands.</B>
</DIV>


<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">1.</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Call to order and opening</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">2.</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Report of our Managing Board on the 2006 financial year and discussion thereof</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">3.</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Report of our Supervisory Board on the 2006 financial year and discussion
thereof</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">4.</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

</TABLE>
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="6%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">a.</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Discussion on and adoption of our statutory annual accounts for the 2006
financial year.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="6%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">b.</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Adoption of a dividend of US $0.30 per ordinary share</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="6%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">c.</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Discharge of the sole member of our Managing Board</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="6%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">d.</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Discharge of the members of our Supervisory Board</TD>
</TR>

</TABLE>
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">5.</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Appointment of two members of our Supervisory Board</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">6.</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Approval of the modification of the Stock-Based Compensation Plan for the members
and professionals of our Supervisory Board</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">7.</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Approval of the stock-based portion of the compensation of our President and CEO</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">8.</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Delegation to our Supervisory Board, for five years as of our 2007 AGM, of the
authority to issue new shares, to grant rights to subscribe for new shares and to limit
and/or exclude existing shareholders&#146; pre-emptive rights</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">9.</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Authorization to our Managing Board, for eighteen months as of our 2007 AGM, to
repurchase our shares, subject to the approval of our Supervisory Board</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">10.</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Amendment to our Articles of Association<SUP style="font-size: 85%; vertical-align: text-top">1</SUP></TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">11.</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Question time<BR></TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">12.</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Close</TD>
</TR>

</TABLE>
</DIV>
<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Copies of our statutory annual accounts, which include the reports of our Managing and
Supervisory Boards, the personal data of the proposed members of our Supervisory Board as
referred to in section 2:142 subsection 3 of the Dutch Civil Code, the draft deed of amendment to
our Articles of Association, including an unofficial English translation thereof, and other
information included pursuant to law and the proposed resolutions (including shareholders&#148;
information) will be deposited for inspection by our shareholders and other persons entitled to
attend the meeting at the offices of the Company at Schiphol Airport as of March&nbsp;29, 2007 up to
and including the date of the meeting. The documents are also available on our website
<U>www.st.com</U>.
</DIV>



<DIV align="left">
<DIV style="font-size: 3pt; margin-top: 16pt; width: 18%; border-top: 1px solid #000000">&nbsp;</DIV>
</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR>
    <TD width="3%"></TD>
    <TD width="1%"></TD>
    <TD width="96"></TD>
</TR>

<TR valign="top">
    <TD nowrap align="left"><SUP style="font-size: 85%; vertical-align: text-top">1</SUP></TD>
    <TD>&nbsp;</TD>
    <TD>With respect to this item the meeting shall also be considered as a meeting of
holders of ordinary shares<BR></TD>
</TR>

</TABLE>


<P align="center" style="font-size: 10pt"><!-- Folio -->&nbsp;<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">






<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>STMicroelectronics</B>
</DIV>



<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 65%"><IMG src="y01685y0168502.gif" alt="(ST LOGO)">
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt">ST Mission: to offer strategic independence to our<BR>
partners worldwide, as a profitable and viable<BR>
broad range semiconductor supplier.
</DIV>




<P align="center" style="font-size: 10pt"><!-- Folio -->&nbsp;<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>
<DIV style="font-family: 'Times New Roman',Times,serif">


<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>STMICROELECTRONICS N.V.</B>
</DIV>


<DIV align="Center" style="font-size: 10pt; margin-top: 6pt"><B>STATUTORY ANNUAL REPORT</B>

</DIV>

<DIV align="Center" style="font-size: 10pt; margin-top: 6pt"><B>DECEMBER 31, 2006</B>

</DIV>

<P align="center" style="font-size: 10pt"><!-- Folio -->&nbsp;<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">
<DIV align="left">
<!-- TOC -->
</DIV>
<DIV align="left">
<A name="tocpage"></A>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>STMICROELECTRONICS N.V.<BR>
STATUTORY ANNUAL REPORT<BR>
DECEMBER 31, 2006</B>
</DIV>


<DIV align="Center" style="font-size: 10pt; margin-top: 6pt"><U><B>TABLE OF CONTENTS</B></U>

</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="95%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>Page</B></TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><A href="#101"><B>THE MANAGING BOARD IN 2006</B></A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><A href="#102"><B>THE SUPERVISORY BOARD IN 2006</B></A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><A href="#103"><B>REPORT OF THE SUPERVISORY BOARD</B></A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">7</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><A href="#104"><B>REPORT OF THE MANAGING BOARD</B></A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">21</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><A href="#105"><B>CORPORATE GOVERNANCE</B></A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">27</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><A href="#106"><B>INTERNAL CONTROL</B></A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">31</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><A href="#107"><B>EXECUTIVE SUMMARY</B></A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">34</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><A href="#108"><B>ANNOUNCEMENTS ON THE BASIS OF ARTICLE 1 OF THE DUTCH DECREE ON
ARTICLE 10 OF THE TAKEOVER DIRECTIVE</B></A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">44</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><A href="#109"><B>LIQUIDITY AND FINANCIAL POSITION</B></A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">50</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><A href="#110"><B>STATUTORY FINANCIAL STATEMENTS</B></A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">56</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px"><A href="#111">&#151; <B>CONSOLIDATED FINANCIAL STATEMENTS</B></A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">57</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px"><A href="#112">&#151; <B>COMPANY FINANCIAL STATEMENTS</B></A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">128</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><A href="#113"><B>OTHER INFORMATION</B></A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">141</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">&#151; <B>AUDITOR&#146;S REPORT</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">141</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>

<DIV align="left">
<!-- /TOC -->
</DIV>

<P align="center" style="font-size: 10pt"><!-- Folio -->- 2 -<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>THIS 2006 STATUTORY ANNUAL REPORT HAS BEEN APPROVED FOR PRESENTATION TO THE STMICROELECTRONICS
ANNUAL GENERAL MEETING OF SHAREHOLDERS AND DULY SIGND ON MARCH THE 20</B><SUP style="font-size: 85%; vertical-align: text-top"><B>TH</B></SUP><B> 2007 BY:</B>
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="25%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="70%">&nbsp;</TD>
</TR>
<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px"><B>THE MANAGING BOARD</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top" align="center"><DIV style="margin-left:0px; text-indent:-0px">/s/</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px"><DIV style="font-size: 1pt; border-top: 1px solid #000000">&nbsp;</DIV>
&#149; &nbsp;Carlo Bozotti
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px"><B>THE SUPERVISORY BOARD</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top" align="center"><DIV style="margin-left:0px; text-indent:-0px">/s/</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px"><DIV style="font-size: 1pt; border-top: 1px solid #000000">&nbsp;</DIV>
&#149; &nbsp;G&#233;rald Arbola
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top" align="center"><DIV style="margin-left:0px; text-indent:-0px">/s/</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px"><DIV style="font-size: 1pt; border-top: 1px solid #000000">&nbsp;</DIV>
&#149; &nbsp;Bruno Steve
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top" align="center"><DIV style="margin-left:0px; text-indent:-0px">/s/</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px"><DIV style="font-size: 1pt; border-top: 1px solid #000000">&nbsp;</DIV>
&#149; &nbsp;Tom de Waard
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top" align="center"><DIV style="margin-left:0px; text-indent:-0px">/s/</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px"><DIV style="font-size: 1pt; border-top: 1px solid #000000">&nbsp;</DIV>
&#149; &nbsp;Matteo del Fante
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top" align="center"><DIV style="margin-left:0px; text-indent:-0px">/s/</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px"><DIV style="font-size: 1pt; border-top: 1px solid #000000">&nbsp;</DIV>
&#149; &nbsp;Douglas Dunn
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top" align="center"><DIV style="margin-left:0px; text-indent:-0px">/s/</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px"><DIV style="font-size: 1pt; border-top: 1px solid #000000">&nbsp;</DIV>
&#149; &nbsp;Didier Lamouche
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top" align="center"><DIV style="margin-left:0px; text-indent:-0px">/s/</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px"><DIV style="font-size: 1pt; border-top: 1px solid #000000">&nbsp;</DIV>
&#149; &nbsp;Didier Lombard
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top" align="center"><DIV style="margin-left:0px; text-indent:-0px">/s/</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px"><DIV style="font-size: 1pt; border-top: 1px solid #000000">&nbsp;</DIV>
&#149; &nbsp;Antonino Turicchi
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top" align="center"><DIV style="margin-left:0px; text-indent:-0px">/s/</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px"><DIV style="font-size: 1pt; border-top: 1px solid #000000">&nbsp;</DIV>
&#149; &nbsp;Robert M. White
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<P align="center" style="font-size: 10pt"><!-- Folio -->- 3 -<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="left">
<A name="101"></A>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>THE MANAGING BOARD IN 2006</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>Carlo Bozotti (1952)</B>

</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">President and Chief Executive Officer, serving as the Sole Member of the Managing Board upon
his appointment at the 2005 annual general meeting of shareholders held on March&nbsp;18, 2005.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Italian nationality
</DIV>

<P align="center" style="font-size: 10pt"><!-- Folio -->- 4 -<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="left">
<A name="102"></A>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>THE SUPERVISORY BOARD IN 2006</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">G&#233;rald Arbola (1948) &#151; Chairman<BR>
First appointed 2004<BR>
Managing Director of Areva S.A.<BR>
Current term expires at the 2008 AGM<BR>
French nationality

</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Bruno Steve (1941) &#151; Vice Chairman<BR>
First appointed 1989<BR>
Former Managing Director of Finmeccanica<BR>
Current term expires at the 2008 AGM<BR>
Italian nationality

</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Tom de Waard (1946)<BR>
First appointed 1998<BR>
Partner of Clifford Chance<BR>
Current term expires at the 2008 AGM<BR>
Dutch nationality

</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Matteo del Fante (1966)<BR>
First appointed 2005<BR>
Chief Financial Officer of Cassa Depositi e Prestiti S.p.A. in Rome<BR>
Current term expires at the 2008 AGM<BR>
Italian nationality

</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Douglas Dunn (1944)<BR>
First appointed 2001<BR>
Chairman of the Board of Directors of ARM Holdings plc<BR>
Current term expires at the 2009 AGM<BR>
British nationality

</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Francis Gavois (1935)<BR>
First appointed 1998<BR>
Former Chairman of the Board of Directors and Chief Executive Officer of Banque<BR>
Fran&#231;aise du Commerce Ext&#233;rieur (BFCE)<BR>
Term expired at the 2006 AGM<BR>
French nationality

</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Didier Lamouche (1959)<BR>
First appointed in 2006<BR>
Chairman and CEO of Groupe Bull<BR>
Current term expires at the 2009 AGM<BR>
French nationality

</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Didier Lombard (1941)<BR>
First appointed 2004<BR>
Chairman and Chief Executive Officer of France Telecom<BR>
Current term expires at the 2008 AGM<BR>
French nationality

</DIV>

<P align="center" style="font-size: 10pt"><!-- Folio -->- 5 -<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Antonino Turicchi (1965)<BR>
First appointed 2005<BR>
Managing Director of Cassa Depositi e Prestiti S.p.A. in Rome<BR>
Current term expires at the 2008 AGM<BR>
Italian nationality

</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Robert M. White (1938)<BR>
First appointed 1996<BR>
University Professor Emeritus Carnegie Mellon University<BR>
Current term expires at the 2007 AGM<BR>
American nationality

</DIV>

<P align="center" style="font-size: 10pt"><!-- Folio -->- 6 -<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">
<DIV align="left">
<A name="103"></A>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>REPORT OF THE SUPERVISORY BOARD</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The supervision of the policies and actions of the Managing Board is entrusted to the Supervisory
Board, which, in the two-tier corporate structure under Dutch law, is a separate body and fully
independent of the Managing Board. This independence is also reflected in the requirement that
members of the Supervisory Board be neither a member of the Managing Board nor an employee of the
Company. In fulfilling their duties under Dutch law, our Supervisory Board members serve the best
interests of all the Company&#146;s shareholders, as well as those of our business. The Supervisory
Board supervises and advises the Managing Board in performing its management tasks and setting the
direction of the Company&#146;s affairs and business. The members of the Supervisory Board are carefully
selected on the basis of their combined expertise, their knowledge of the Company and its affairs,
and of the business in which we operate. The Supervisory Board is empowered to recommend to the
general meeting of shareholders persons to be appointed as members of the Supervisory Board or of
the Managing Board. According to Article&nbsp;16 paragraph 1 sub (i)&nbsp;of the Company&#146;s articles of
association, certain management decisions, including our pluri-annual plans and budget, require the
approval of the Supervisory Board. The Supervisory Board through its various committees including
the Strategic Committee, the Audit Committee, the Compensation Committee and the Nominating and
Corporate Governance Committee which all report to it, further supervises the structure and
management of systems of internal business controls and the financial reporting process. It
determines the remuneration of the sole member of the Managing Board within the remuneration policy
adopted by the general meeting of shareholders. The activities of the Supervisory Board Committees
are described in this report.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">As in prior years, the Supervisory Board discussed developments in the area of corporate governance
in 2006. Furthermore, the Supervisory Board discussed the implementation of section 404 of the US
Sarbanes-Oxley Act and its requirements regarding assessment, review and monitoring of internal
controls over financial reporting.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Meetings and activities of the Supervisory Board</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The Supervisory Board met 11 times in the course of 2006, including meetings by telephone
conference; as outlined by the table below, all of its members who were in office during the full
year participated in 7 or more of these meetings. The sole member of the Managing Board, President
and Chief Executive Officer (&#147;CEO&#148;) assisted by the Chief Operating Officer (&#147;COO&#148;), our Chief
Financial Officer (&#147;CFO&#148;) and our Director of Strategy were also present at the meetings of the
Supervisory Board except when they discussed the composition, functioning and remuneration of the
Managing Board. On several occasions other members of the executive management team gave
presentations on their area of business to the Supervisory Board.
</DIV>

<P align="center" style="font-size: 10pt"><!-- Folio -->- 7 -<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="28%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Nominating</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>and Corporate</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="left"><B>Number of meetings</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Full</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Compensation</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Strategic</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Audit</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Governance</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Ad hoc</B></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="left" style="border-bottom: 1px solid #000000"><B>attended in 2006</B><SUP style="font-size: 85%; vertical-align: text-top"><B>(1)</B></SUP></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>Board</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>Committee</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>Committee</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>Committee</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>Committee</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>Committee</B></TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">G&#233;rald Arbola</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">11</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">8</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Matteo del Fante<SUP style="font-size: 85%; vertical-align: text-top">(3)</SUP></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">11</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">13</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Tom de Waard</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">11</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">14</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">8</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Douglas Dunn</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">7</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Francis Gavois<SUP style="font-size: 85%; vertical-align: text-top">(2)(3)</SUP></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Didier Lamouche<SUP style="font-size: 85%; vertical-align: text-top">(2)(3)(4)</SUP></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">7</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Didier Lombard</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">8</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Bruno Steve</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">11</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">7</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Antonino Turicchi</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">11</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">7</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Robert M. White</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">10</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">13</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>



<DIV align="left">
<DIV style="font-size: 3pt; margin-top: 16pt; width: 18%; border-top: 1px solid #000000">&nbsp;</DIV>
</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR>
    <TD width="3%"></TD>
    <TD width="1%"></TD>
    <TD width="96"></TD>
</TR>

<TR valign="top">
    <TD nowrap align="left">(1)</TD>
    <TD>&nbsp;</TD>
    <TD>Includes meetings attended by way of conference call.</TD>
</TR>

<TR style="font-size: 3pt"><TD>&nbsp;</TD></TR>

<TR valign="top">
    <TD nowrap align="left">(2)</TD>
    <TD>&nbsp;</TD>
    <TD>Mr.&nbsp;Francis Gavois, who was a Supervisory Board member until the 2006 annual general meeting of
shareholders on April&nbsp;27, 2006, was replaced by Mr.&nbsp;Didier Lamouche immediately following the
annual general meeting of shareholders.</TD>
</TR>

<TR style="font-size: 3pt"><TD>&nbsp;</TD></TR>

<TR valign="top">
    <TD nowrap align="left">(3)</TD>
    <TD>&nbsp;</TD>
    <TD>Appointed as non-voting observer to Audit Committee.</TD>
</TR>

<TR style="font-size: 3pt"><TD>&nbsp;</TD></TR>

<TR valign="top">
    <TD nowrap align="left">(4)</TD>
    <TD>&nbsp;</TD>
    <TD>Mr.&nbsp;Lamouche&#146;s total attendance of seven Supervisory Board meetings includes two meetings in
which he was represented by Mr.&nbsp;Arbola.</TD>
</TR>

</TABLE>



<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The remuneration of the Supervisory Board members is described in Notes 16 and 31 to the
Company&#146;s 2006 Consolidated Financial Statements.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Biographies of the Supervisory Board members are available in Annex 1 of this Supervisory Board
Report as well as on the Company&#146;s website.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">In 2006, the Supervisory Board&#146;s activities included, <I>inter alia</I>:
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Approval of the Company&#146;s consolidated accounts, profit and loss accounts, balance
sheet and cash-flow statement in U.S. GAAP as published quarterly by the management,
including review and approval of the associated press release.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Approval of the Company&#146;s 2005 statutory annual accounts under IFRS.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Approval of the proposal to appoint members to the Supervisory Board as submitted to
our 2006 annual general meeting of shareholders, as well as the appointment of members
for the Committees of the Supervisory Board.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Approval of the amount and final conditions for the Company&#146;s 2016 Convertible Bond
Offering and resolution upon the issuance of the number of shares to serve the relevant
conversion. Approval of the amount, terms and conditions of the 2013 Senior Bond
Offering, issued by a new finance subsidiary and guaranteed by the Company.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Approval of the amendment to the Supervisory Board Stock-Based Compensation Plan.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Approval of the compensation policy for Mr.&nbsp;Carlo Bozotti as sole member of the
Managing Board, President and CEO and Mr.&nbsp;Alain Dutheil as COO, outside the presence of
Mr.&nbsp;Bozotti and Mr.&nbsp;Dutheil and pursuant to the Compensation Policy as approved by the
general meeting of shareholders.</TD>
</TR>

</TABLE>
</DIV>
<P align="center" style="font-size: 10pt"><!-- Folio -->- 8 -<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">


<DIV style="margin-top: 6pt"><TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">


<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Review of the CEO and COO performance in 2006 with respect to the defined
performance criteria, outside the presence of Mr.&nbsp;Bozotti and Mr.&nbsp;Dutheil.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Approval of the terms and conditions of the Key Employee Unvested Stock Award Plan
for 2006 (the &#147;Employee Plan&#148;), pursuant to an authorization granted by the 2006 annual
general meeting of shareholders; such terms and conditions also included, upon the
recommendation of the Compensation Committee, certain changes concerning the rights of
beneficiaries in the event of termination of employment by the Company for reasons not
attributable to personal performance, as well as upon change of control.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Approval of the amount of unvested stock awards to be granted to the CEO, subject to
shareholder approval, and to the COO, and delegation to the Compensation Committee of
the power to (i)&nbsp;approve the list of other beneficiaries under the Employee Plan upon
the proposal of the Managing Board and (ii)&nbsp;to grant to the Managing Board the right to
make exceptional awards to key employees under the &#147;Employee Plan&#148;.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Approval of the conditions linked to the Company&#146;s performance in sales, operating
income and return on net assets, which condition the vesting of unvested stock awards
granted under the Employee Plan, to the CEO, COO and other key employees.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Approval of the Company&#146;s decision to terminate the Option Agreement with
STMicroelectronics Holding II B.V. and to set up an independent foundation, Stichting
Continu&#239;teit ST, to offer protection to the Company against actions considered hostile
by the Managing Board and the Supervisory Board, such as a creeping acquisition or an
unsolicited offer on the Company&#146;s ordinary shares, which are unsupported by the
Managing Board and the Supervisory Board and which the board of the foundation
determines would be contrary to the interests of the Company, its shareholders or other
stakeholders, all in accordance with the provisions of Dutch law.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Approval of entering into an option agreement with Stichting Continu&#239;teit ST, to
replace a substantially similar option agreement dated May&nbsp;31, 1999, as amended,
between the Company and STMicroelectronics Holding II B.V.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Review of the Company&#146;s long-term strategy and business prospects, and approval of
the general guidelines as well as of the Company&#146;s 2007 Budget.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Review of the plans and progress of the Company in the area of Research and
Development (&#147;R&#038;D&#148;) effectiveness and Key Projects.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Review of the proposals by the Nominating and Corporate Governance Committee
regarding nominations for a new Supervisory Board member.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Review outside the presence of management of the functioning of the Supervisory
Board and its individual members and discussion of the conclusions including the
conclusions as regards the independence of the Supervisory Board members.</TD>
</TR>

</TABLE>
</DIV>
<P align="center" style="font-size: 10pt"><!-- Folio -->- 9 -<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">


<DIV style="margin-top: 6pt"><TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">



</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Furthermore, in 2006, the Supervisory Board, mandated the Audit Committee under the responsibility
of its Chairman, to fully investigate the fraud which had occurred in the Company&#146;s treasury
department when under the responsibility of the Company&#146;s former treasurer who retired at the end
of 2005, and which had led the Managing Board to file a criminal complaint with the Public
Prosecutor in Lugano. The Supervisory Board noted that the fraudulent transactions did not have a
material impact on the Company&#146;s previously published financial statements. It also endorsed the
changes in the Company&#146;s treasury department, and enhanced internal control of treasury activities
designed to prevent the occurrence of similar actions in the future.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Finally, the Supervisory Board devoted significant time to review the strategy, the market,
business and financial risks and challenges of the Company. Such review was conducted in part by
the Strategic Committee which monitored the new developments in the semiconductor market,
evaluating both opportunities as presented by the CEO to strengthen the Company&#146;s product offerings
and portfolio and options for best securing the future of the Company&#146;s flash memory business.
These led in December&nbsp;2006 to the Company&#146;s decision to set up a new Flash Memory Group which
incorporates all Flash Memory Operations, including R&#038;D and product related activities, front and
back end manufacturing, marketing and sales.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The Audit Committee as part of its quarterly review also considered a report by the Company
management on its key business risks.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The Supervisory Board&#146;s committees were indeed very active in 2006.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Compensation Committee</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The Compensation Committee, whose current members are Messrs.&nbsp;Arbola (Chairman), Steve, Turicchi,
Lombard and de Waard, met six times in 2006.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The Compensation Committee specifically reviewed and approved the Company&#146;s Managing Board
compensation policy and the compensation package of the President and CEO for the year 2006, and
proposed to the 2006 AGM, which approved it, the compensation policy for the President, CEO and
sole member of the Managing Board.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">At the beginning of 2006, the Compensation Committee reviewed the 2005 performance of the President
and CEO in light of objectives and bonus eligibility criteria, and proposed to the Supervisory
Board the adoption of the bonus for the President and CEO for his performance in 2005. In March
2006, the Compensation Committee fixed the eligibility criteria for the President and CEO to
receive a bonus for his performance during 2006, which are based on the Company&#146;s commercial,
financial and market performances over the course of such fiscal year.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Consequently, the remuneration of the sole member of the Managing Board, President and CEO of the
Company, comprises:
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>A base salary originally fixed at US$100,000 but paid in euros, as
remuneration for the position of sole member of the Managing Board.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>A base salary originally fixed at US$600,000 but paid in Swiss francs
as the remuneration for the position of President and CEO. Such base
remuneration is completed by:</TD>
</TR>

</TABLE>
</DIV>
<P align="center" style="font-size: 10pt"><!-- Folio -->- 10 -<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">


<DIV style="margin-top: 6pt"><TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">



</TABLE>
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">o</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>A bonus which may reach up to 150% of the total base salary of US$700,000 subject to
the realization of certain conditions fixed by the Compensation Committee, and approved by
the Supervisory Board relating to the Company&#146;s financial business and R&#038;D performances.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">o</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>A stock award which offers to the President and CEO the right to receive up to 100,000
free shares, pursuant to the 2006 Employee Stock Based Compensation Plan for Key Employees
approved by the general meeting of shareholders. The vesting of the unvested stock awards
granted under such Plan is conditional upon certain predetermined performance criteria
fixed by the Compensation Committee having been met, and continued presence with us. The
predetermined performance criteria concerned Company revenues, operating income, and return
on net assets.</TD>
</TR>

</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The President and CEO further benefits from a pension plan that was granted in line with the
pension benefits granted to all employees of ST in Switzerland, of which the Compensation Committee
has been informed, and will be a beneficiary under a supplementary pension plan for the President
and CEO and other top executive management as approved by the Supervisory Board in February&nbsp;2006.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The sole member of the Managing Board, President and CEO, like the members of the Supervisory Board
do not benefit from any loans or guarantees granted by the Company.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The Compensation Committee also proposed to the Supervisory Board:
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>An amendment to the Supervisory Board
Stock-Based Compensation Plan to clarify
that if a beneficiary ceases to be a
member or professional of the
Supervisory Board, other than in case of
voluntary resignation or dismissal for
cause, the beneficiary is entitled to
exercise the option rights within the
duration of the Plan.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>The approval of the Unvested Stock Award
Plan for Key Employees, including an
amendment to provide for (i)&nbsp;continued
vesting rights after termination of an
employee&#146;s contract by the Company for
reasons not attributable to such
employee&#146;s behavior, performance or
actions and (ii)&nbsp;accelerated vesting in
the event of change of control.</TD>
</TR>

</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">In 2006, the Compensation Committee granted to members of the Supervisory Board and professionals
options to purchase Company shares at their nominal value pursuant to the three-year stock-based
compensation plan for the Supervisory Board members and professionals approved by the 2006 annual
general meeting of shareholders.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Furthermore, in 2006, the Compensation Committee proposed to the Supervisory Board to maintain the
same compensation for Supervisory Board members as was fixed at the 2005 annual general meeting of
shareholders.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">For 2007, the Compensation Committee based on a benchmark of comparable companies performed by a
leading consultant, proposed to the Supervisory Board to maintain the compensation of Supervisory
Board members and professionals in 2007, but to fix at 15,000 the number of stock options
authorizing the subscription of shares in the Company&#146;s share capital at their nominal value
awarded to Supervisory Board members and to fix at 7,500 the number of stock options authorizing
the subscription of shares in the Company&#146;s share capital at their nominal value awarded to
professionals of the Supervisory Board.
</DIV>

<P align="center" style="font-size: 10pt"><!-- Folio -->- 11 -<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The reports of the Compensation Committee on these subjects were presented from time to time and
discussed by the Supervisory Board as a whole.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Strategic Committee</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The Strategic Committee, whose current members are Messrs.&nbsp;Arbola (Chairman), Steve, Turicchi,
Lombard and White, met four times in 2006, in the presence of the CEO, the COO, the Director of
Strategy and the CFO. Among its main activities, the Strategic Committee reviewed the Company&#146;s
long-term plans and prospects and various possible scenarios and opportunities to meet the
challenges of the semiconductor market, including the evaluation of possible acquisitions,
combinations or joint ventures, as well as the market and business risks faced by the Company as
presented by management.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">In 2006, the Strategic Committee monitored the Company&#146;s plans for the Flash memory business, which
lead to the announcement in December&nbsp;2006 of the strategic repositioning of such activities and the
creation of a new Flash Memories Group.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The Strategic Committee also was consulted on various other matters.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The reports of the Strategic Committee were presented from time to time and discussed by the
Supervisory Board as a whole.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Audit Committee</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The current members of the Audit Committee are Messrs. de Waard (Chairman), Dunn and White and the
current non-voting observers are Messrs. del Fante and Lamouche. The Audit Committee met 14 times
during 2006 and operated in accordance with its Charter published on the Company&#146;s website. At many
of these meetings, the Audit Committee received presentations on current financial and accounting
issues and had the opportunity to interview the President and CEO, the CFO, the General Counsel and
external and internal auditors. On several occasions, the Audit Committee met with outside U.S.
legal counsel, who explained and analyzed actions required by the new NYSE&#146;s final and amended
corporate governance rules and the Sarbanes-Oxley Act. In addition, the Audit Committee regularly
discussed the progress of implementation of internal controls over financial reporting and reviewed
management&#146;s conclusions as to the adequacy and appropriateness of internal controls, including the
progress of the Company with Section&nbsp;404 of the Sarbanes Oxley Act.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">At the end of each quarter, prior to each Supervisory Board meeting to approve the results and
quarterly earnings press release which are published by the Company with reference to US GAAP
General Accounting Standards, the Audit Committee reviewed the interim financial information and
the proposed press release and had the opportunity to raise questions to management and the
independent registered public accounting firm. In addition, the Audit Committee reviewed the
quarterly &#147;Operating and Financial Review and Prospects&#148; and the interim Consolidated Financial
Statements (and notes thereto) before they were filed with the SEC and voluntarily certified by the
CEO and the CFO (pursuant to sections 302 and 906 of the Sarbanes-Oxley Act).
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The Audit Committee also reviewed the annual Consolidated Financial Statements under U.S. GAAP for
the year ended December&nbsp;31, 2006 and the associated press release published on January&nbsp;23, 2007 as
well as the Company&#146;s 2006 Annual Report on Form 20-F as filed with the Securities and Exchange
Commission (the &#147;SEC&#148;) on March&nbsp;14, 2007.
</DIV>

<P align="center" style="font-size: 10pt"><!-- Folio -->- 12 -<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">In its 2006 meetings, the Audit Committee reviewed periodically matters relating to accounting
policies and compliance with accounting standards. Compliance with statutory and legal requirements
and regulations, particularly in the financial domain, was also reviewed. Important findings and
identified risks were examined thoroughly in order to allow appropriate measures to be taken. With
regard to the internal audit, the Audit Committee reviewed the internal audit charter, audit plan,
audit scope and its coverage in relation to the scope of the external audit, as well as the
staffing, independence and organizational structure of the internal audit function and held
separate meetings with the head of Internal Audit and the Company&#146;s Auditors. With regard to the
external audit, the Audit Committee reviewed the proposed audit scope, approach and fees, the
independence of the external auditors, their performance, non-audit services provided by the
external auditors. The Audit Committee also considered the report of the external auditors with
respect to the annual financial statements and advised on the Supervisory Board&#146;s statement to
shareholders in the annual accounts.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The Audit Committee also performed its annual self-assessment and reviewed and updated its Charter
to reflect its duties in relation to internal and external auditors.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The Audit Committee reviewed the Company&#146;s 2006 statutory annual accounts using IFRS accounting
principles which have been drawn up by management examined and audited by PricewaterhouseCoopers
Accountants N.V., and proposed such accounts for the approval of the Supervisory Board.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The Audit Committee noted that such accounts contain significant differences to the accounts
published by the Company using U.S. Generally Accepted Accounting Principles, as contained in the
Annual Report on Form 20-F filed by the Company with the SEC on March&nbsp;14, 2007, and approved the
intention of management to continue to use U.S. GAAP as its primary reporting standard to ensure
continuity and consistency in its financial reporting.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">After discovery of a fraud by the Company&#146;s former treasurer, which led the Company to file a
criminal complaint with the Prosecutor in Lugano, the Audit Committee selected, with the approval
of the Supervisory Board, an independent US law firm to conduct an independent investigation into
treasury management procedures and controls designed to ensure that the wrong doings were limited
to the Company&#146;s former treasurer and that the necessary procedures and controls were in place to
prevent the repetition of such occurrence. Such investigation has led to an in-depth review of the
Company&#146;s procedures and several meetings of the independent investigators, the audit committee and
the auditors outside the presence of the management.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The reports of the Audit Committee on these subjects were presented from time to time and discussed
by the Supervisory Board as a whole.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Nominating and Corporate Governance Committee</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The current members of the Nominating and Corporate Governance Committee are Messrs. de Waard
(Chairman) Arbola, Steve and Turicchi. In 2006, the Nominating and Corporate Governance Committee
met two times before the 2006 annual general meeting of shareholders and five times after the 2006
annual general meeting of shareholders.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The Nominating and Corporate Governance Committee reviewed the desired profile, competence,
structure and composition of the Supervisory Board in general and in view of the pending expiration
of the term of Mr.&nbsp;White. The report of the Nominating and Corporate
</DIV>

<P align="center" style="font-size: 10pt"><!-- Folio -->- 13 -<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">



<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Governance Committee was presented to and discussed in the Supervisory Board. The Nominating and
Corporate Governance Committee met to evaluate the profiles of candidates, appointed a leading
consultant to search for candidates corresponding to the selected profile, and examined proposals
to fill the position up for renewal at the 2007 annual general meeting of shareholders.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">In addition, on March&nbsp;19, 2007, Mr.&nbsp;Turicchi communicated his resignation from his position on the
Supervisory Board with effect as of the next annual general shareholders meeting, due to the
increasing and significant time being required to perform his duties as Managing Director of Cassa
Depositi e Prestiti. The Nominating and Corporate Governance Committee, therefore, considered
possible candidates to fill the additional vacancy that would arise from Mr Turicchi&#146;s resignation.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">In this respect, the Nominating and Corporate Governance Committee advised the Supervisory Board on
recommendations for the appointment of two new members of the Supervisory Board, to be submitted
for approval at the annual general meeting of shareholders, to replace Messrs.&nbsp;White and Turicchi.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The Nominating and Corporate Governance Committee also evaluated the validity and enforceability of
the Option Agreement relating to the Company&#146;s preference shares, met with Dutch lawyers and
designated individuals to discuss the organization and set-up of an independent Dutch foundation or
Stichting, which has been set up to take over the rights and obligations of STMicroelectronics
Holding II B.V. pursuant to the Option Agreement between the Company and STMicroelectronics Holding
II B.V. relating to the preference shares.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The reports of the Nominating and Corporate Governance Committee on these subjects were presented
from time to time and discussed by the Supervisory Board as a whole.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Ad Hoc Committees</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">In the course of 2006, the Supervisory Board set up two ad hoc committees. The first comprised of
Messrs. del Fante, Gavois and de Waard met three times to review and approve the conditions
relating to the Company&#146;s refinancing which occurred in the first quarter of 2006 and involved the
issue of new Convertible Bonds and Senior Debt.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The second comprised of Messrs.&nbsp;Arbola and Steve, Chairman and Vice Chairman of the Supervisory
Board met with the board members of Stichting Continu&#239;teit ST before their appointment.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Proposed Supervisory Board Member Appointments</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Pursuant to extensive research conducted by the Nominating and Corporate Governance Committee, on
March&nbsp;19, 2007, the Nominating and Corporate Governance Committee submitted its report to the
Supervisory Board, identifying a candidate for the Supervisory Board position up for renewal at the
2007 annual general meeting of shareholders. In addition, the Nominating and Corporate Governance
Committee recommended a candidate to fill the additional vacancy that would be created as a result
of the resignation of Mr.&nbsp;Turicchi.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">In view of the recommendations made by the Nominating and Corporate Governance Committee, the
Supervisory Board proposes to the general meeting of shareholders the
</DIV>

<P align="center" style="font-size: 10pt"><!-- Folio -->- 14 -<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">



<DIV align="left" style="font-size: 10pt; margin-top: 6pt">appointment for a three-year term, until the 2010 annual general meeting of shareholders, of Mr.
Ray Bingham and Mr.&nbsp;Alessandro Ovi as new members of the Supervisory Board in replacement of Mr.
Robert White and Mr.&nbsp;Antonino Turicchi.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Mr.&nbsp;Ray Bingham was selected based on his international experience in management functions for
international technology companies, pursuant to the criteria established by the Supervisory Board
as set out in the Company&#146;s Corporate Governance Charter. Mr.&nbsp;Alessandro Ovi, who served as
Supervisory Board member of the Company for several years until the 2005 annual general meeting of
shareholders, was proposed due to his valued expertise in the semiconductor industry and the
Company.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The Supervisory Board wishes to warmly thank Mr.&nbsp;Robert White for his significant contributions to
the works of the Supervisory Board, and in particular its Audit Committee since his appointment in
1996. The Supervisory Board also expresses its gratitude to Mr.&nbsp;Antonino Turicchi for his valued
contributions and expertise to the discussions of the Supervisory Board and its committees.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Proposed 2007 Cash Dividend and Retained Earnings and Dividend Policy</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Upon the proposal of the Managing Board, the Supervisory Board decided to recommend to the 2007
annual general meeting of shareholders a cash dividend of $0.30 per share, representing an increase
of 150% with respect to last year cash dividend distribution.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">This recommendation is consistent with the Company&#146;s dividend policy as communicated and discussed
at the 2005 annual general meeting of shareholders whereby:
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">a)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>The Company seeks to use its available cash in order to develop and enhance its position in
the very capital-intensive semiconductor market while at the same time managing its cash
resources to reward its shareholders for their investment and trust in the Company;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">b)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Based on its annual results, projected capital requirements as well as business conditions
and prospects, the Managing Board proposes each year to the Supervisory Board the allocation
of its earnings involving whenever deemed possible and desirable in line with the Company&#146;s
objectives and financial situation, the distribution of a cash dividend; and</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">c)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>The Supervisory Board, upon the proposal of the Managing Board, decides each year, in
accordance with this policy, which portion of the profits shall be retained in reserves to
fund future growth or for other purposes and makes a proposal to the shareholders concerning
the amount, if any, of the annual cash dividend.</TD>
</TR>

</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Financial Statements 2006</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The financial statements of the Company for 2006, as presented by the Managing Board have been
audited by PricewaterhouseCoopers Accountants N.V., independent auditors. Their report has been
included in the Other Information section of this Annual Report. We have approved the financial
statements for submission to the annual general meeting of shareholders.
</DIV>

<P align="center" style="font-size: 10pt"><!-- Folio -->- 15 -<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Resolutions submitted to the 2007 annual general meeting of shareholders</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">As in the past, the Supervisory Board has prepared with the Managing Board, the resolutions to be
submitted for adoption at the Company&#146;s annual general meeting of shareholders to be held on April
26, 2007 in Amsterdam, the Netherlands. The text of the proposed resolutions and shareholder
information is available on the Company&#146;s website. Except as stated below, the resolutions are in
line with the resolutions presented for shareholder adoption at prior annual general meetings of
shareholders. The Supervisory Board Report proposes also to refer to the commentaries contained in
the &#147;proposed resolutions and shareholder information&#148; published on the Company&#146;s website.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Upon the proposal of its Compensation Committee and based on a benchmark of the practices of
similar international companies, the Supervisory Board is proposing to increase the stock-based
portion of the remuneration offered to its members, in order to attract and retain suitable
candidates for this demanding position in a multinational environment and to modify accordingly the
three year stock-based compensation plan for members and professionals of the Supervisory Board
approved by the 2005 annual general meeting.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Upon the proposal of the Managing Board, the Supervisory Board is proposing to authorize the
Managing Board with the prior approval of the Supervisory Board to repurchase shares, when such
repurchase shall be considered as being in the best interest of the Company&#146;s shareholders and
other stakeholders, for creating long-term value.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Pursuant to changes in Dutch Law following the implementation of the Thirteenth EU Directives on
public takeovers and other anticipated changes in Dutch legislation which will become effective in
the near future, the Supervisory Board is proposing to update the Company&#146;s articles of
association, as regards:
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">i)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>The power of the general meeting of shareholders to reduce the issued share capital,
and to fix the modalities of repayment for preference shares;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">ii)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>The rules regarding the allocation of profits to the holders of preference shares if
and when issued;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">iii)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>The power of the Managing Board and Supervisory Board to set a registration date for
determining who shall be authorized to attend the Company&#146;s general meetings of
shareholders as well as to authorize shareholders entitled to vote and other persons
entitled to vote at general meetings of shareholders to vote by electronic means of
communication within a period prior to the general meeting of shareholders;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">iv)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>The authorized use of electronic means of communications, including electronic voting,
and webcasts of proceedings at a general meeting of shareholders, subject to decision by
the Managing Board and approval of the Supervisory Board; and</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">v)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>The rules relating to the preparation period and time of publication of the statutory
annual accounts, the annual report, the statement of the Company&#146;s external accountant as
well as all other financial documents which must be made generally available together with
the statutory annual accounts pursuant to a statutory obligation.</TD>
</TR>

</TABLE>
</DIV>
<P align="center" style="font-size: 10pt"><!-- Folio -->- 16 -<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">


<DIV style="margin-top: 6pt"><TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">



</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Conclusion</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Finally, the Supervisory Board, in conjunction with the Managing Board, prepared the agenda for the
upcoming 2007 annual general meeting of shareholders. The Supervisory Board also voted on March&nbsp;20,
2007 to adopt this report and recommend for adoption of the proposed resolutions. The agenda,
proposed resolutions and other information regarding the upcoming 2007 annual general meeting of
shareholders are available on the Company&#146;s website and in print to any shareholder upon request.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Approved by the Supervisory Board on March&nbsp;20, 2007.
</DIV>

<P align="center" style="font-size: 10pt"><!-- Folio -->- 17 -<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>ANNEX 1</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Current members of the Company&#146;s Supervisory Board</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">G&#233;rald Arbola was appointed to our Supervisory Board at the 2004 annual shareholders&#146; meeting and
was reelected at the 2005 annual shareholders&#146; meeting. Mr.&nbsp;Arbola was appointed the Chairman of
our Supervisory Board on March&nbsp;18, 2005. Mr.&nbsp;Arbola previously served as Vice Chairman of our
Supervisory Board from April&nbsp;23, 2004 until March&nbsp;18, 2005. Mr.&nbsp;Arbola is also Chairman of our
Supervisory Board&#146;s Compensation Committee and Strategic Committee, and serves on its Nominating
and Corporate Governance Committee. Mr.&nbsp;Arbola is now Managing Director of Areva S.A., where he had
also served as Chief Financial Officer, and is a member of the Executive Board of Areva since his
appointment on July&nbsp;3, 2001. Mr.&nbsp;Arbola joined the Cogema group in 1982 as Director of Planning and
Strategy for SGN, then served as Chief Financial Officer at SGN from 1985 to 1989, becoming
Executive Vice President of SGN in 1988 and Chief Financial Officer of Cogema in 1992. He was
appointed as a member of the executive committee in 1999, and also served as Chairman of the Board
of SGN in 1997 and 1998. Mr.&nbsp;Arbola is currently a member of the boards of directors of Cogema,
Framatome ANP, Areva T&#038;D Holdings and Chairman of Areva Finance Gestion S.A. and Cogerap. Mr.
Arbola is a graduate of the Institut d&#146;Etudes Politiques de Paris and holds an advanced degree in
economics. Mr.&nbsp;Arbola is the Chairman of the Board of Directors of FT1CI and was the Chairman until
his resignation on November&nbsp;15, 2006 of the Supervisory Board of ST Holding, our largest
shareholder.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Bruno Steve has been a member of our Supervisory Board since 1989 and was appointed Vice Chairman
of our Supervisory Board on March&nbsp;18, 2005, and previously served as Chairman of our Supervisory
Board from March&nbsp;27, 2002 through March&nbsp;18, 2005, from July&nbsp;1990 through March&nbsp;1993, and from June
1996 until May&nbsp;1999. He also served as Vice Chairman of the Supervisory Board from 1989 to July
1990 and from May&nbsp;1999 through March&nbsp;2002. Mr.&nbsp;Steve serves on our Supervisory Board&#146;s Compensation
Committee as well as on its Nominating and Corporate Governance and Strategic Committees. He was
with Istituto per la Ricostruzione Industriale-IRI S.p.A. (&#147;IRI&#148;), a former shareholder of
Finmeccanica, Finmeccanica and other affiliates of I.R.I. in various senior positions for over 17
years. Mr.&nbsp;Steve is currently Chairman of Statutory Auditors of Selex S. &#038; A. S. S.p.A., Chairman
of Surveillance Body of Selex S. &#038; A. S. S.p.A and member of Statutory Auditors of Pirelli Tyres
S.p.A. Until December&nbsp;1999, he served as Chairman of MEI. He served as the Chief Operating Officer
of Finmeccanica from 1988 to July&nbsp;1997 and Chief Executive Officer from May&nbsp;1995 to July&nbsp;1997. He
was Senior Vice President of Planning, Finance and Control of I.R.I. from 1984 to 1988. Prior to
1984, Mr.&nbsp;Steve served in several key executive positions at Telecom Italia. He is also a professor
at LUISS Guido Carli University in Rome. Mr.&nbsp;Steve was Vice Chairman from May&nbsp;1999 to March&nbsp;2002,
Chairman from March&nbsp;2002 to May&nbsp;2003 and member until his resignation on April&nbsp;21, 2004 of the
Supervisory Board of ST Holding, our largest shareholder.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Tom de Waard has been a member of our Supervisory Board since 1998. Mr. de Waard was appointed
Chairman of the Audit Committee by the Supervisory Board in 1999 and Chairman of the Nominating and
Corporate Governance Committee in 2004 and 2005, respectively. He also serves on our Supervisory
Board&#146;s Compensation Committee. Mr. de Waard has been a partner of Clifford Chance, a leading
international law firm, since March&nbsp;2000 and was the Managing Partner of Clifford Chance Amsterdam
office from May&nbsp;1, 2002 until May&nbsp;1, 2005. From January&nbsp;1, 2005 until January&nbsp;1, 2007 he was a
member of the Management Committee of Clifford Chance. Prior to joining Clifford Chance, he was a
partner at Stibbe, where he
</DIV>

<P align="center" style="font-size: 10pt"><!-- Folio -->- 18 -<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">



<DIV align="left" style="font-size: 10pt; margin-top: 6pt">held several positions since 1971 and gained extensive experience working with major international
companies, particularly with respect to corporate finance. He is a member of the Amsterdam bar and
was President of the Netherlands Bar Association from 1993 through 1995. He received his law degree
from Leiden University in 1971. Mr. de Waard is a member of the Supervisory Board of BE
Semiconductor Industries N.V. (&#147;BESI&#148;) and of its audit and nominating committees. He is also
chairman of BESI&#146;s compensation committee. Mr. de Waard is a member of the board of the foundation
&#147;Stichting Sport en Zaken&#148;.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Matteo del Fante was appointed to our Supervisory Board at our 2005 annual shareholders&#146; meeting.
Mr. del Fante is also a non-voting observer on its Audit Committee. Mr. del Fante has served as the
Chief Financial Officer of CDP in Rome since the end of 2003. Prior to joining CDP, Mr. del Fante
held several positions at JPMorgan Chase in London, England, where he became Managing Director in
1999. During his 13&nbsp;years with JPMorgan Chase, Mr. del Fante worked with large European clients on
strategic and financial operations. Mr. del Fante obtained his degree in Economics and Finance from
Universit&#224; Bocconi in Milan in 1992, and followed graduate specialization courses at New York
University&#146;s Stern Business School. Mr. del Fante was the Vice Chairman until his resignation on
November&nbsp;15, 2006 of the Supervisory Board of ST Holding, our largest shareholder.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Douglas Dunn has been a member of our Supervisory Board since 2001. He is a member of its Audit
Committee since such date. He was formerly President and Chief Executive Officer of ASML Holding
N.V. (&#147;ASML&#148;), an equipment supplier in the semiconductor industry, a position from which he
retired effective October&nbsp;1, 2004. Mr.&nbsp;Dunn was appointed Chairman of the Board of Directors of ARM
Holdings plc (United Kingdom) in October&nbsp;2006. In 2005, Mr.&nbsp;Dunn was appointed to the board of
Philips-LG LCD (Korea), TomTom N.V. (Netherlands) and OMI, a privately-held company (Ireland), and
also serves as a non-executive director on the board of SOITEC (France). He is also a member of the
audit committees of ARM Holdings plc, SOITEC and TomTom N.V. In 2005, Mr.&nbsp;Dunn resigned from his
position as a non-executive director on the board of Sendo plc (United Kingdom). Mr.&nbsp;Dunn was a
member of the Managing Board of Royal Philips Electronics in 1998. From 1996 to 1998 he was
Chairman and Chief Executive Officer of Philips Consumer Electronics and from 1993 to 1996 Chairman
and Chief Executive Officer of Philips Semiconductors (now NXP Semiconductors). From 1980 to 1993
he held various positions at Plessey Semiconductors.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Didier Lamouche has been a member of our Supervisory Board since 2006. Mr.&nbsp;Lamouche is currently a
non-voting observer on the Audit Committee of our Supervisory Board. Mr.&nbsp;Lamouche is a graduate of
Ecole Centrale de Lyon and holds a PhD in semi-conductor technology. He has 25&nbsp;years experience in
the semiconductor industry. Mr.&nbsp;Lamouche started his career in 1984 in the R&#038;D department of
Philips before joining IBM Microelectronics where he held several positions in France and the
United States. In 1995, he became Director of Operations of Motorola&#146;s Advanced Power IC unit in
Toulouse (France). Three years later, 1998, he joined IBM as General Manager of the largest
European semiconductor site in Corbeil (France) to lead its turn around and transformation into a
joint venture between IBM and Infineon: Altis Semiconductor. He managed Altis Semiconductor as a
CEO for four years. From 2003 to end 2004, Mr.&nbsp;Lamouche joined back IBM as Vice-President for
WorldWide Semiconductor Operations, based in New York (United States). Since December&nbsp;2004, Mr.
Lamouche has been the Chairman and CEO of Groupe Bull, a France-based global company operating in
the IT sector. He is also a member of the Board of Directors of CAMECA and SOITEC.
</DIV>

<P align="center" style="font-size: 10pt"><!-- Folio -->- 19 -<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Didier Lombard was first appointed to our Supervisory Board at the 2004 annual shareholders&#146;
meeting and was reelected at our 2005 annual shareholders&#146; meeting. He serves on the Compensation
and Strategic Committees of our Supervisory Board. Mr.&nbsp;Lombard was appointed Chairman and Chief
Executive Officer of France Telecom in March&nbsp;2005. Mr.&nbsp;Lombard began his career in the Research and
Development division of France Telecom in 1967. From 1989 to 1990, he served as scientific and
technological director at the Ministry of Research and Technology. From 1991 to 1998, he served as
General Director for industrial strategies at the French Ministry of Economy, Finances and
Industry, and from 1999 to 2003 he served as Ambassador at large for foreign investments in France
and as President of the French Agency for International Investments. From 2003 through February
2005, he served as France Telecom&#146;s Senior Executive Vice President in charge of technologies,
strategic partnerships and new usages and as a member of France Telecom&#146;s Executive Committee. Mr.
Lombard also spent several years as Ambassador in charge of foreign investment in France. Mr.
Lombard is also Chairman of the Board of Directors of Orange and a member of the Board of Directors
of Thales and Thomson, one of our important customers, as well as a member of the Supervisory Board
of Radiall. Mr.&nbsp;Lombard was also a member until his resignation on November&nbsp;15, 2006 of the
Supervisory Board of ST Holding, our largest shareholder. Mr.&nbsp;Lombard is a graduate of the Ecole
Polytechnique and the Ecole Nationale Sup&#233;rieure des T&#233;l&#233;communications.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Antonino Turicchi was appointed as a member of our Supervisory Board at our 2005 annual
shareholders&#146; meeting. He serves on its Compensation and Strategic Committees. Mr.&nbsp;Turicchi earned
a degree cum laude in Economics and Business from the University of Rome and, after receiving a
scholarship from Istituto San Paolo di Torino, he attended the masters&#146; program in Economics at the
University of Turin in 1991 and 1992. In 1993, he was awarded a grant from the European Social Fund
to attend the masters&#146; program in International Finance and Foreign Trade. Mr.&nbsp;Turicchi has been
Managing Director of CDP in Rome since June&nbsp;2002. From 1994, Mr.&nbsp;Turicchi held positions with the
Italian Ministry of the Treasury (now known as the Ministry of the Economy and Finance). In 1999,
he was promoted to director responsible for conducting securitization operations and managing
financial operations as part of the treasury&#146;s debt management functions. Between 1999 and June
2002, Mr.&nbsp;Turicchi was also a member of the board of Mediocredito del Friuli; from 1998 until 2000,
he served on the board of Mediocredito di Roma, and from 2000 until 2003, he served on the board of
EUR S.p.A.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Robert M. White has been a member of our Supervisory Board since 1996. He serves on its Strategic
and Audit Committees. Mr.&nbsp;White is a University Professor Emeritus at Carnegie Mellon University
and serves as a member of several corporate boards, including SGI Federal. He is a former director
of Read-Rite Corporation, which filed for bankruptcy in July&nbsp;2003. Mr.&nbsp;White is a member of the
U.S. National Academy of Engineering and the recipient of the American Physical Society&#146;s Pake
Prize for research and technology management in 2004. From 1990 to 1993, Mr.&nbsp;White served as Under
Secretary of Commerce for Technology in the United States government. Prior to 1990, Mr.&nbsp;White
served in several key executive positions, including Principal Scientist for Xerox Corporation and
Vice President and Chief Technology Officer for Control Data Corporation. He received a doctoral
degree in Physics from Stanford University and graduated with a degree in physics from
Massachusetts Institute of Technology.
</DIV>

<P align="center" style="font-size: 10pt"><!-- Folio -->- 20 -<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">
<DIV align="left">
<A name="104"></A>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>REPORT OF THE MANAGING BOARD</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Dear Shareholder,

</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">In 2006, pursuing the initiatives launched last year, we have made significant headway in
delivering on our most important business and strategic imperatives in our effort to strengthen and
reshape ST into a stronger and more competitive industry leader.
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Our product portfolio has continued to strengthen, and in 2006, with a
sales growth of 11% year over year, we grew our market share, both
with respect to the overall market which in 2006 grew by approximately
9%, and with respect to the market served by our products which grew
by approximately 8% over 2005 levels.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Our capital intensity has decreased with our capex to sales ratio down
to 15.6% in 2006 from over 20% just a few years ago. Furthermore last
October we initiated a new target of 12% capex to sales ratio which
we are seeking to achieve through a combination of a less capital
intensive product portfolio, increased usage of foundries for non
proprietary technologies and optimization of our manufacturing
facilities.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Our NOR and NAND Flash Business has as from January&nbsp;1, 2007 been
organized into a stand alone segment, following initiatives launched
in 2006, and we are moving ahead on creating a separate legal entity
in connection with our strategic repositioning of this business.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Our net operating cash flow generated in 2006 reached $666&nbsp;million as
described in the Liquidity and Financial Position section of our
Annual Report.</TD>
</TR>

</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Our initiatives and resulting achievements have enabled us to realize our primary objectives for
2006: gaining market share while simultaneously improving financial performance in terms of return
on assets and cash flow.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Financial Performance in 2006</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>US GAAP and Dutch Statutory annual report</B>

</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Our results and performance for the purpose of this statutory report under Dutch law are presented
using IFRS figures as required pursuant to European Commission regulation 1606/2002. Our results
using IFRS differ significantly from our results as reported using US GAAP, in particular as
concerns capitalization and amortization of development expenses required under IFRS and the
accounting for compound financial instruments.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">We would like to recall that our quarterly, semi-annual and annual financial results as presented
to our investors and the general public, are Consolidated Financial Statements prepared under U.S.
GAAP, which is the accounting standard we have used since our creation in 1987. We believe that the
reference to U.S. GAAP in our financial reporting is particularly important in our industry and in
the mind of our investors to ensure the comparability of our performance and results to those of
our competitors, and to ensure the continuity in the reporting of our financial performance. Copies
of our U.S. GAAP annual report, based on Form 20-F, quarterly releases and other information, can
be obtained from our offices and are also available on ST&#146;s website at www.st.com.
</DIV>

<P align="center" style="font-size: 10pt"><!-- Folio -->- 21 -<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Full Year 2006 Results Highlights</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">We are approaching the $10&nbsp;billion revenue milestone. Our net revenues for the year ended December
31, 2006 were $9.85&nbsp;billion, representing an increase of about 11% compared to the $8.88&nbsp;billion
recorded in 2005. Year-over-year sales growth was driven by double-digit increases in wireless and
industrial, with mid-single digit contributions from our automotive, computer and consumer
segments.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Both gross and operating profit increased sharply. Gross profit increased 16% to $3.48&nbsp;billion in
2006 compared to $3.00&nbsp;billion in 2005. Operating profit more than doubled to $988&nbsp;million, or
10.0% of net revenues, up from to $394&nbsp;million in 2005 or 4.4% of net revenues in 2005.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">R&#038;D costs for 2006 were $ 1,388&nbsp;million, or 14.1% of net revenues, compared to $1.411, or 15.9% of
net revenues in 2005. R&#038;D expenses are net of the development capitalization, which started in
2005. Selling, general and administrative (&#147;SG&#038;A&#148;) expenses were $1,083&nbsp;million or 11.0% of net
revenues in 2006, compared to $1,069&nbsp;million or 12.0% of net revenues in 2005. 2005 SG&#038;A included
$18&nbsp;million in one-time compensation and pension charges, $47&nbsp;million in charges related to the
accelerated vesting of stock options and $5&nbsp;million in other stock-based compensation costs. 2006
SG&#038;A included $22&nbsp;million in stock based compensation cost. The Company posted $68&nbsp;million of
impairment, restructuring charges, and other related closure costs in 2006, compared to $98&nbsp;million
in 2005.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Net profit attributable to the shareholders of the Company for 2006 increased significantly to $964
million, or $1.07 per diluted share. In the prior year, net profit attributable to the shareholders
of the Company was $347&nbsp;million, or $0.39 per diluted share.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">For ST, the 2006 effective average exchange rate of the euro versus the U.S. dollar which reflects
current exchange rate levels and the impact of certain hedging contracts was for the full year 2006
approximately $1.24 to &#128;1, compared to approximately $1.28 to &#128;1 in 2005. The effective
exchange rate is calculated based upon average exchange rates during the year in combination with
the impact of hedging contracts.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Net cash from operating activities increased by $703&nbsp;million to $2.69&nbsp;billion for 2006, compared to
$1.98&nbsp;billion in 2005. Capital expenditures, net of sales proceeds were $1,533&nbsp;million in 2006
compared to $1,441&nbsp;million in 2005. Net operating cash flow for 2006 was a record $666&nbsp;million,
compared to $270&nbsp;million in 2005.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">At December&nbsp;31, 2006, our cash and cash equivalents, marketable securities, short term deposits and
restricted cash equaled $2.9&nbsp;billion. Total Financial Debt was $1.9.&nbsp;billion. Our net financial
position improved by approximately $767&nbsp;million in 2006 to $1,015&nbsp;million, as described in the
Liquidity and Financial Position section of our Annual Report. Shareholders equity stood at $10.1
billion at December&nbsp;31, 2006.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Turning to 2007 we want to share our key business objectives by making certain forward looking
statements which, we would remind you, are subject to certain risks and uncertainties, as
highlighted in the Internal Control Section.
</DIV>

<P align="center" style="font-size: 10pt"><!-- Folio -->- 22 -<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">In 2007, we expect notwithstanding the tougher environment as the semiconductor market works
through inventory in selected applications in the first half of 2007, to make further important
progress in our ongoing key initiatives for sales expansion, new product introduction and asset
leverage, which, we believe, will strengthen the Company&#146;s market opportunities and financial
position.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">We are also currently budgeting about $1.2&nbsp;billion for ST&#146;s capital spending which is expected to
further reduce the Company&#146;s capex to sales ratio from the 2006 level.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Corporate Governance and Internal Controls</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">We confirm to our shareholders, and other stakeholders, that management at ST is committed to the
highest standards on corporate governance and internal controls issues. We are continuing to review
our processes, and we are planning in 2007 to launch a program of internal awareness on these
issues. Our corporate strategy, and associated market, business, operational and financial risks is
periodically discussed with our Supervisory Board and its Committees, in particular, the strategic
committee and the audit committee. We consider these issues all the more relevant, that as a
company subject to the laws of various jurisdictions which may in certain cases have conflicting
requirements in terms of best practices, we need to ensure that our position on these important
items is well communicated and understood. The sections on Corporate Governance and Internal
Controls in our Annual Report describe our activities in these areas.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>2006 Key Events</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>New Products Pipeline</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Our key focus during 2006 was on developing new leading edge product which drive stronger gross
margins, better operating margins and improved net results. As a leader in Wireless, Industrial and
Automotive markets in addition to a number of other areas, we are currently introducing a wave of
new products designed to reinforce our areas of product leadership and importantly, strengthen our
financial performance.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">From new digital consumer set top box product offerings to wireless connectivity solutions and
system-on-a chip offerings in the data storage field, we have launched a focused R&#038;D initiative,
and in 2006 we pursued the redeployment of 1,000 R&#038;D engineers to such areas, <BR>including; ,
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>In Wireless and consumer platforms, where multimedia convergence solutions are the
driving force of silicon growth, and our customer relationships, product know-how and long
standing presence play a key factor.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>In computer peripherals, and more specifically for us, data storage and printers, where
new applications are driving growing volumes, and</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>In Power applications, for the Automotive, Industrial, power supply and motor control
fields where our technologies offer a perfect match to market needs and where our
positioning and continued momentum in this segment are tied to our historical leadership in
the analog market.</TD>
</TR>

</TABLE>
</DIV>
<P align="center" style="font-size: 10pt"><!-- Folio -->- 23 -<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">


<DIV style="margin-top: 6pt"><TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">



</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">In 2006, we have designed a number of new products for the cellular communications market starting
with our 3G digital baseband offerings, which we will begin shipping to a market leading customer
during 2007 and pursuing with Nomadik, where we are currently shipping to one wireless customer,
with 2 more ramping during 2007. Finally, in the area of connectivity, which for us is Bluetooth
and wireless LAN offerings, we are building on our successes in 2006, and are targeting to double
sales in these products in 2007.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Moving to digital consumer, our effort to focus on 90 nanometer product development continues to
pay off, with continuing positive results in the set top box market. Here we have been first in the
industry with a single chip at this technology, and we are rolling out the 65 nanometer solution
ahead of the competition as well. We have our Digital TV offering with design wins throughout Asia,
and have the low cost version coming out in 2007.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Technology Development and Manufacturing</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">To support our new products we continue to invest in the development of advanced manufacturing
technology.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">We also have a diversified leading edge manufacturing infrastructure comprising front end and back
end facilities, capable of producing silicon wafers using our broad process technology portfolio,
including our CMOS and BICMOS technologies as well as our memories and discrete technologies.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">In 2006, we substantially completed our 6 inch restructuring and are now enjoying the lower costs
from our 6 inch mega facility in Ang Mo Kio 6, and have also completed the redeployment to Asia of
our electric wafer sort (EWS)&nbsp;resources while in the back-end we have established programs to
compensate for the drastic and dramatic increase in the costs of raw materials.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Marketing</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">In 2006, we launched a major initiative in China by establishing a new Greater China Region
focusing more and more on domestic customers, while also supporting our traditional customers that
have moved portions of their operations to China for lower cost manufacturing.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">We also launched an initiative in Japan, where we grew by more than 30% during 2006, while the
market grew by only 5%. Importantly, this result is attributable in part to a change of our market
coverage strategy, which now involves working more and more directly, rather than through
distributors, with our major customers.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">We have also launched two major initiatives directed towards our customers. The first concerns a
marketing plan to address all the mid size and small customers that are beyond our traditional top
50 customers, and the second is to target new key accounts, particularly in the US and Asia.
</DIV>

<P align="center" style="font-size: 10pt"><!-- Folio -->- 24 -<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Quality</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">We continue to focus on our product quality performance, and over the course of 2006 we have
started to see important recognitions from our customers, in particular our automotive and
communication customers, underscoring the ongoing improvement in our product quality.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">We reinforced our commitment to continuous quality improvement ensuring that it is comprehensive
and well structured. We are focused on establishing a complete loop, commencing with robust product
design &#151; which is the origin of good quality, on robust processes, &#151; on robust quality management
and on robust and mutually beneficial partnership with our customers to address, resolve and
further enhance quality. We have also launched an ongoing company wide initiative &#147;Quality
Excellence in Mind&#148; and during 2006 held training activities with 4,000 employees.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Corporate Responsibility</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">For more than fifteen years, the principles of Corporate Responsibility have been embedded in our
values, and we have always been conscious of our responsibility toward all our stakeholders. This
we define as Sustainable Excellence, and we have a number of important initiatives ongoing, two of
which are worth a specific mention.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The first one is the continuation of our energy consumption reduction program, where we have set
for ourselves the target of reducing the energy we use for each unit of production by 5% per year.
In 2006 the actual reduction was as high as 6%, bringing the compound average annual reduction of
our energy intensity since 1994 to 5.3% per year.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">In 2006 we also launched our new initiative on Health, with the aim of protecting the health of our
people &#151; both inside and outside their workplace &#151; through periodic medical examinations and
specific health monitoring.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Employees</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">As of December&nbsp;31, 2006 we had approximately 51,770 employees worldwide including 10,300 employees
employed in R&#038;D activities worldwide, 2,850 employed in marketing and sales and 33,420 employed in
manufacturing.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Conclusion</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">2007 will mark a very special year for ST: it is our 20<SUP style="font-size: 85%; vertical-align: text-top">th</SUP> anniversary, a period during
which we grew our sales by more than ten times, improved our ranking in the semiconductor industry
from position number 15 to position number 5 in 2006, and established a financially solid industry
player.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">On the operating front, we aim to continue to build on our strength in 2007, seeking to outperform
the market and to gain market share, through sales and marketing initiatives supported by the
strength of our of new products roll-outs.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">At the same time, we will also drove important strategic initiatives during 2007.
</DIV>

<P align="center" style="font-size: 10pt"><!-- Folio -->- 25 -<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The 1<SUP style="font-size: 85%; vertical-align: text-top">st</SUP> important strategic initiative is about NOR and NAND Flash Memories. In this
memory business, particularly when manufacturing is moving to 12 inch wafers, volumes really matter
and that of reaching adequate dimensions of scale is an absolutely crucial prerequisite to be able
and compete successfully on the global marketplace. For this reason we have initiated a process of
industrial consolidation and financial deconsolidation of our Flash memory business. We have
decided to separate the Flash business with the objective of achieving, together with a partner,
that indispensable dimension of scale and of significantly improving competitiveness. In
preparation for this move, we have established a new organization, the Flash Memory Group, and we
are creating a separate legal entity which will include not only all product related activities,
but also technology development, front-end and back-end manufacturing and sales and marketing
activities worldwide.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The 2<SUP style="font-size: 85%; vertical-align: text-top">nd</SUP> important strategic initiative concerns our capital investment program, where we
have set a new target: 12% of our sales, driven by the need to reduce (i)&nbsp;capital intensity because
of the reduced structural growth of the semiconductor market (ii)&nbsp;our dependence on the market
cycles which leads to non-optimal loading and increased manufacturing costs at our fabs, and (iii)
the burden of depreciation, still very high for us, on the financial performance of our company.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The 3<SUP style="font-size: 85%; vertical-align: text-top">rd</SUP> important area concerns our R&#038;D cooperation in Crolles2 where we have been
working with two partners, NXP Semiconductors and Freescale Semiconductor for the last 5&nbsp;years and
where our cooperation agreement will expire at the end of 2007.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Beyond that date, ST will remain strongly committed to Crolles for future technology development,
particularly in derivative technologies which are absolutely instrumental to the further
development of our new product portfolio and to the success of our company. The main focus will be
in the areas of convergence CMOS, with onboard radio frequency capabilities and analogue features,
as well as in the field of CMOS image sensor technology. Furthermore, as we proceed in the
transition from 90 nm to 60 nm, we will focus also on embedded Flash technology. With respect to
core CMOS process development below 45 nanometers, we have chosen to participate in a consortium
which will allow us to stay at the forefront of technological development. We are considering
potential partnership options, and a decision will be made in the first half of 2007.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">In summary, as STMicroelectronics enters its 20<SUP style="font-size: 85%; vertical-align: text-top">th</SUP> year of activity, we are convinced
that the Company is solidly tracking to plan for strengthening its performance and that the
foundations on which we are building our next future are quite solid. Thanks to our improved R&#038;D
focus, we have one of the strongest pipeline of new products in our history. This enhanced product
offering complements our marketing initiatives already in progress, opening up, by this
combination, new and exciting opportunities. This, enhanced by our relentless cost reduction
programs and further focus on asset management, will certainly bring the Company to new value
creation for its shareholders.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Carlo Bozotti
</DIV>

<P align="center" style="font-size: 10pt"><!-- Folio -->- 26 -<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">
<DIV align="left">
<A name="105"></A>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>CORPORATE GOVERNANCE</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Since our creation in 1987, we have demonstrated a consistent commitment to the principles of good
corporate governance, evidenced by:
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Our corporate organization under Dutch law that entrusts our
management to a Managing Board acting under the supervision and
control of a Supervisory Board totally independent from the
Managing Board. Members of our Managing Board and of our
Supervisory Board are appointed and dismissed by our shareholders;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Our early adoption of policies on important issues such as
business ethics and conflicts of interest and our strict policies,
implemented since our 1994 initial public offering, to comply with
applicable regulatory requirements concerning financial reporting,
insider trading and public disclosures;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Our compliance with United States, French and Italian securities
laws, because our shares are listed in these jurisdictions, and
with Dutch securities laws, because we are a company incorporated
under the laws of the Netherlands, as well as our compliance with
the corporate, social and financial laws applicable to our
subsidiaries in the countries in which we do business; and</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Our broad-based activities in the field of corporate social
responsibility, encompassing environmental, social, health,
safety, educational and other related issues.</TD>
</TR>

</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">As a Dutch company, STMicroelectronics N.V. (the &#147;Company&#148; or &#147;ST&#148;), became subject to the Dutch
Corporate Governance Code effective January&nbsp;1, 2004. As we are listed on the NYSE, Euronext Paris,
the Borsa Italiana in Milan, and also in Luxembourg but not in the Netherlands, our corporate
governance principles and guidelines seek to achieve compliance with the relevant practices in a
variety of jurisdictions, always keeping in mind the best interests of the shareholders, employees
and other stockholders. As a result the corporate governance practices differ in certain cases
from the &#147;best practices&#148; recommended by the Dutch Corporate Governance Code. However, by
explaining the corporate governance practices in the Corporate Governance Charter, the Company has
endeavored to comply with the Dutch Corporate Governance Code. We have summarized our policies and
practices in the field of corporate governance in the ST Corporate Governance Charter, including
our corporate organization, the remuneration principles which apply to our Managing and Supervisory
Boards, our information policy and our corporate policies relating to business ethics and conflicts
of interest. Our Charter was discussed with and approved by our shareholders at our 2004 AGM. The
ST Corporate Governance Charter is periodically reviewed with our Supervisory Board and updated and
expanded whenever necessary or advisable. We are committed to inform our shareholders of any
significant changes in our corporate governance policies and practices at our AGM. Along with our
Supervisory Board Charter (which includes the charters of our Supervisory Board Committees) which
was last updated by our Supervisory Board in December&nbsp;2006 and our Code of Business Conduct and
Ethics, the current version of our ST Corporate Governance Charter is posted on our website, at
http:/www.st.com/stonline/company/governance/index.htm, and these documents are available in print
to any shareholder who may request them.
</DIV>

<P align="center" style="font-size: 10pt"><!-- Folio -->- 27 -<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">ST&#146;s corporate governance provisions, as highlighted by the ST Corporate Governance and Supervisory
Board Charters posted on the website under &#147;Corporate Governance&#148; can differ from the best practice
provisions in the Dutch Corporate Governance Code. The areas concern primarily remuneration, where
like many of the Company&#146;s peer companies in the high-tech industry and due to the fiscal
legislation in the various main countries in which the Company operates, there is neither a
requirement for a minimum three-year vesting period for share-based compensation (best practice
provisions II.2.1 and II.2.2 of the Dutch Corporate Governance Code), nor a three-year minimum
(five years for Managing Board members) holding requirement (best practice provision II.2.3 of the
Dutch Corporate Governance Code). Furthermore, ST believes that Supervisory Board members&#146;
compensation should include stock-based compensation in order to ensure that they best identify
with the interests of all shareholders in line with international practices (best practice
provision III.7.1 of the Dutch Corporate Governance Code) and to attract new members with an
international background.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>ST&#146;s Supervisory Board and Corporate Governance</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">ST has adopted a profile for its Supervisory Board members, the composition of the Supervisory
Board committees, as well as a definition of independence regarding the status of Supervisory Board
members which is described in the Supervisory Board Charter. Since the Company&#146;s creation in 1987,
STMicroelectronics Holding N.V. (&#147;ST Holding&#148;), through its wholly-owned subsidiary
STMicroelectronics Holding II B.V. (&#147;ST Holding II&#148;), has always been one of the major
shareholders, and some of the members of the Supervisory Board have or have had long-standing
relationships with both the shareholders and with the Company. Such relationships are described in
their biographies, which are posted on our website. One of the Company&#146;s Supervisory Board members
has been in office since 1987, which is more than twelve years (best practice provision III.3.5).
Additionally, the Chairman of the Supervisory Board is also the President of the Company&#146;s
Supervisory Board&#146;s Compensation Committee. This is due to the system of alternating the position
of President of the Supervisory Board (best practice provision III.5.11 of the Dutch Corporate
Governance Code).
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The Supervisory Board is carefully selected based upon the combined experience and expertise of its
members. Certain of our Supervisory Board members, as disclosed in their biographies attached to
the Supervisory Board report, have existing relationships or past relationships with Areva, Cassa
Depositi e Prestiti (&#147;CDP&#148;) and/or Finmeccanica, who are currently parties to the ST Holding
Shareholders&#146; Agreement as described below. Such relationships may give rise to potential
conflicts of interest. However, in fulfilling their duties under Dutch law, Supervisory Board
members serve the best interests of all of ST&#146;s stakeholders and of ST&#146;s business and must act
independently in their supervision of ST&#146;s management.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Our Supervisory Board held several meetings in 2003 to discuss the new Dutch Corporate Governance
Code, the implementing rules and corporate governance standards of the SEC and of the NYSE. In 2003
it created an Ad Hoc Committee which considered our independence criteria, Corporate Governance
Charter and Supervisory Board Charter. Based on the work of the Ad Hoc Committee, our Supervisory
Board also considered, with respect to corporate governance standards, our unique history as a
European company incorporated in the Netherlands following the combination of the Italian and
French semiconductor businesses, as well as our shareholding structure, with over 72% of our shares
held by the
</DIV>

<P align="center" style="font-size: 10pt"><!-- Folio -->- 28 -<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">



<DIV align="left" style="font-size: 10pt; margin-top: 6pt">public and approximately 27.5% indirectly held by French and Italian state-controlled companies.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Based on all these factors, in 2005, the Supervisory Board established the following independence
criteria for its members: Supervisory Board members must have no material relationship with
STMicroelectronics N.V., or any of our consolidated subsidiaries, or our management. A &#147;material
relationship&#148; can include commercial, industrial, banking, consulting, legal, accounting,
charitable and familial relationships, among others, but does not include a relationship with
direct or indirect shareholders.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The Supervisory Board also adopted specific bars to independence. On that basis, the Supervisory
Board in March&nbsp;2005 concluded, in its business judgment that all members qualified as independent
based on the criteria set forth above. The same conclusion has been confirmed in March&nbsp;2007.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The above mentioned independence criteria differ to a certain extent from best practice provision
III.2.2 of the Dutch Corporate Governance Code.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">On November&nbsp;27, 2006, our Supervisory Board approved entering into an option agreement with an
independent foundation, Stichting Continu&#239;teit ST (the &#147;Stichting&#148;), to terminate a substantially
similar option agreement dated May&nbsp;31, 1999, as amended, between our Company and ST Holding II. Our
Managing Board and our Supervisory Board, along with the board of the Stichting, have declared that
they are jointly of the opinion that the Stichting is independent of our Company. Our Supervisory
Board approved the new option agreement to reflect changes in Dutch legal requirements, not in
response to any hostile takeover attempt. On February&nbsp;7, 2007, the 31 May&nbsp;1999 option agreement, as
amended, was terminated. On January&nbsp;22, 2007 the new option agreement with the Stichting was
concluded. The new option agreement provides for the issuance of up to a maximum 540,000,000
preference shares, the same number as the agreement it is replacing. Any such shares would be
issued to the Stichting upon its request and in its sole discretion and upon payment of at least
25% of the par value of the preference shares to be issued. The shares would be issuable in the
event of actions considered hostile by our Managing Board and our Supervisory Board, such as a
creeping acquisition or an offer on our ordinary shares, which are unsupported by our Managing
Board and our Supervisory Board and which the board of the Stichting determines would be contrary
to the interests of the Company, the Company&#146;s shareholders or other stakeholders. The preference
shares may remain outstanding for no longer than two years. No preference shares have been issued
to date. The effect of the preference shares may be to create a level-playing field in the event
actions which are considered to be hostile by our Managing Board and our Supervisory Board, as
described above, occur and which the board of the Stichting determines to be contrary to the
interests of the Company, the Company&#146;s shareholders or other stakeholders.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Commitment to Corporate Governance</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">We have demonstrated a consistent commitment to the principles of good corporate governance
evidenced by our early adoption of policies on important issues such as conflicts of interest.
Pursuant to our Supervisory Board Charter, the Supervisory Board is responsible for handling and
deciding on potential reported conflicts of interest between the Company on the one hand and
members of the Supervisory Board and Managing Board on the other hand.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">For example, in 2005 our Managing Board requested that our Supervisory Board decide upon the
renewal of a contract for the provision of various telecom-related services with Equant, a
</DIV>

<P align="center" style="font-size: 10pt"><!-- Folio -->- 29 -<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">



<DIV align="left" style="font-size: 10pt; margin-top: 6pt">subsidiary of France Telecom. One of our Supervisory Board members is Chairman and CEO of France
Telecom. The Supervisory Board noted the Managing Board&#146;s assessment of the positive commercial
benefits of such contract and 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.
Additionally in 2005, our Managing Board requested that our Supervisory Board decide upon a
development and license agreement to be concluded with Quadrics Limited, a company owned by Alenia
Aeronautica that is in turn owned by Finmeccanica, one of our principal shareholders. 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.
Additionally, one of our Supervisory Board members is a member of the Board of Directors of
Thomson, which is one of our strategic customers. One of our Supervisory Board members is non
executive Chairman of the Board of Directors of ARM Holdings PLC, with whom we have key technology
license agreements, and SOITEC one of our customers, and one is a member of the Supervisory Board
of BE Semiconductor Industries N.V. (&#147;BESI&#148;), one of our suppliers We believe that the
transactions with Thomson, ARM, SOITEC and BESI are made on an arm&#146;s length basis in line with
market practices and conditions with neither Thomson, ARM, SOITEC, BESI nor us benefiting from
terms any more favorable than those which could be obtained in a <I>bona fide </I>transaction with a third
party (best practice provisions III.6.4, II.3.2., II.3.3. and II.3.4. have consequently been
complied with).
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">We prepared and published, in 2004, the Corporate Governance Charter, which explains in detail the
corporate organization, the remuneration principles that apply to the Managing and Supervisory
Boards, the information policy and highlights the corporate policies relating to business ethics
and conflicts of interest. The Corporate Governance Charter, which was approved by the
shareholders at the 2004 AGM, and has since been updated, as well as the current policies relating
to business ethics and conflict of interest, are available on the Company&#146;s website as well as in
print to any shareholder who may request a copy.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The Company has applied all best practices provisions and for completeness sake and in accordance
with the Dutch Corporate Governance Code, has explained all deviations from the Code in this
report. The Company&#146;s Corporate Governance Charter and the aforementioned deviations from the
Dutch Corporate Governance Code were approved by the 2004 AGM.
</DIV>

<P align="center" style="font-size: 10pt"><!-- Folio -->- 30 -<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">
<DIV align="left">
<A name="106"></A>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>INTERNAL CONTROL</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">As Sole Member of our Managing Board, Mr.&nbsp;Carlo Bozotti is responsible for the design,
implementation and operation of the Company&#146;s internal risk management and control systems. Our
disclosure controls and procedures are also established and maintained under the responsibility of
the Company&#146;s Executive Vice President and Chief Financial Officer who reports to Mr.&nbsp;Bozotti.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The objective of the Company&#146;s internal controls and procedures is to ensure that material
information relating to the Company and its consolidated subsidiaries is made known to the Chief
Executive Officer and the Chief Financial Officer during each reporting period.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The effectiveness of the Company&#146;s internal controls and procedures is evaluated periodically, and
changes to such internal controls and procedures, as well as any significant deficiencies and
material weaknesses in the design or operation of internal control over financial reporting which
are reasonably likely to affect the Company&#146;s ability to record, process or summarize and report
financial information are disclosed to our auditors and to the Audit Committee of our Supervisory
Board. Likewise 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 are
disclosed to our auditors, and to the Audit Committee of our Supervisory Board.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">In the various areas of business risk management we have established corporate policies and
procedures which set forth principles, business rules of behavior and conduct which are considered
to be consistent with proper business management, in line with our mission and strategic
objectives.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">We have also adopted Corporate Standard Operating Procedures to describe the operational flow of
actions (outlining responsibilities for each step) to perform a task or activity, or to implement a
policy within a given functional field. We have over one hundred standard operating procedures
which cover a wide range of activities such as approvals, authorizations, verifications,
reconciliations, review of operating performance, security of assets and segregation of duties,
which are deployed throughout our organization, and which may be completed as and when required by
local operating procedures.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">We also have an internal audit organization, which performs general scope internal audits covering
various areas, such as information technology, logistics and inventory management, human resources
and payroll, internal control systems, security, purchasing, treasury, <I>etc</I>. The audit plans for
our internal audit organization are reviewed at least once a year by the Audit Committee of our
Supervisory Board.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Summary</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">In summary, our internal risk management and control system cannot provide absolute assurance, but
aims at a reasonable level of assurance, that realization of strategic and operational objectives
is monitored, the financial reporting is reliable and where relevant applicable laws and
regulations are complied with.
</DIV>

<P align="center" style="font-size: 10pt"><!-- Folio -->- 31 -<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Our management has assessed the effectiveness of its internal control over financial reporting as
of December&nbsp;31, 2006 based on the framework established in Internal Control &#151; Integrated Framework
issued by the Committee of Sponsoring Organizations of the Treadway Commission (&#147;COSO&#148;). Based on
this assessment, and in accordance with the requirements of best practice provision II.1.4 of the
Dutch Corporate Governance Code and the recommendation of the Corporate Governance Monitoring
Committee on the application thereof, our Managing Board, to the best of its knowledge, believes
that with regard to financial reporting risks, our internal risk management and controls systems
provide a reasonable level of assurance that they do not contain material inaccuracies, have
operated effectively in the year 2006 and that there are no indications that they will not operate
properly in the current year. Because of its inherent limitations, internal control over financial
reporting may not prevent or detect all misstatements, fraud and non-compliance with laws and
regulations. Therefore, even those systems determined to be effective can only provide reasonable
assurance with respect to the financial statement preparation and presentation.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">In addition to the aforementioned statement, our Managing Board has issued a statement regarding
the adequacy and effectiveness of the Company&#146;s internal controls over financial reporting in the
Company&#146;s Annual Report on Form 20-F regarding the 2006 financial year, as filed with the
Securities and Exchange Commission (the &#147;SEC&#148;) on March&nbsp;14, 2007, in accordance with and as
required by the Sarbanes-Oxley Act, Section&nbsp;404.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Our internal risk management and control systems were discussed on several occasions with the Audit
Committee and the Supervisory Board during 2006.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Main Risk Factors</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The business performance and results of ST and the ability of management to predict the future are
also affected by several risks factors such as those described below:
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>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;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>pricing pressures, losses or curtailments of purchases from key
customers all of which are highly variable and difficult to
predict;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>the financial impact of obsolete or excess inventories if actual
demand differs from our anticipations;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>changes in the exchange rates between the U.S. dollar and the euro
and between the U.S. dollar and the currencies of the other major
countries in which we have our operating infrastructure;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>our ability to manage in an intensely competitive and cyclical
industry where a high percentage of our costs are fixed and
difficult to reduce in the short term, including our ability to
adequately utilize and operate our manufacturing facilities at
sufficient levels to cover fixed operating costs;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>our ability to perform the announced strategic repositioning of
our Flash memories business in line with the requirements of our
customers and without adverse effect on existing alliances or
other agreements relating to this business;</TD>
</TR>

</TABLE>
</DIV>
<P align="center" style="font-size: 10pt"><!-- Folio -->- 32 -<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">


<DIV style="margin-top: 6pt"><TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">


<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>our ability in an intensely competitive environment to secure
customer acceptance and to achieve our pricing expectations for
high volume supplies of new products in whose development we have
or are currently investing;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>the anticipated benefits of research and development alliances and
cooperative activities, as well as the uncertainties concerning
the modalities, conditions and financial impact beyond 2007 of the
R&#038;D and manufacturing activities in Crolles 2 following the
termination of our current agreement with NXP Semiconductors, and
Freescale Semiconductor;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>the ability of our suppliers to meet our demands for supplies and
materials and to offer competitive pricing;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>significant variations in our gross margin compared to
expectations based on changes in revenue levels, product mix and
pricing, capacity utilization, variations in inventory valuation,
excess or obsolete inventory, manufacturing yields, changes in
unit costs, impairments of long-lived assets, including
manufacturing, assembly/test and intangible assets, and the timing
and execution of the manufacturing ramp and associated costs,
including start-up costs;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>changes in the economic, social or political environment,
including military conflict and/or terrorist activities, as well
as natural events such as severe weather, health risks, epidemics
or earthquakes in the countries in which we, our key customers and
our suppliers operate;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>changes in our overall tax position as a result of changes in tax
laws or the outcome of tax audits, and our ability to accurately
estimate tax credits, benefits, deductions and provisions and to
realize deferred tax assets;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>our ability to obtain required licenses on third-party
intellectual property on reasonable terms and conditions, the
impact of potential claims by third parties involving intellectual
property rights relating to our business, and the outcome of
litigation; and</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>the results of actions by our competitors, including new product
offerings and our ability to react thereto.</TD>
</TR>

</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Our Annual Report on Form 20-F as filed with the SEC on March&nbsp;14, 2007, which is available on our
website, contains a more detailed list of risk factors which may affect our business and
operations, and future performance.
</DIV>

<P align="center" style="font-size: 10pt"><!-- Folio -->- 33 -<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">
<DIV align="left">
<A name="107"></A>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>EXECUTIVE SUMMARY</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">We are a multinational group of companies that designs, develops, manufactures and markets a broad
range of products used in a wide variety of microelectronic applications, including
telecommunications systems, computer systems, consumer goods, automotive products and industrial
automation and control systems. We are organized in a matrix structure with geographical regions
interacting with product divisions, both being supported by central functions, bringing all levels
of management closer to the customer and facilitating communication among research and development,
production, marketing and sales organizations.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">While STMicroelectronics N.V. is the parent company, we also conduct our operations through our
subsidiaries. With the exception of our subsidiaries in Shenzhen, China, in which we own 60% of the
shares and voting rights; Hynix, ST (China), a joint venture company, in which we own a 33% equity
participation; Shanghai Blue Media Co. Ltd (China), in which we own 65%; and Incard do Brazil, in
which we own 50% of the shares and voting rights, STMicroelectronics N.V. owns directly or
indirectly 100% of all of our significant operating subsidiaries&#146; shares and voting rights, which
have their own organization and management bodies, and are operated independently in compliance
with the laws of their country of incorporation. We provide certain administrative, human
resources, legal, treasury, strategy, manufacturing, marketing and other overhead services to our
consolidated subsidiaries pursuant to service agreements for which we receive compensation.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">We are a global independent semiconductor company that designs, develops, manufactures and markets
a broad range of semiconductor products used in a wide variety of microelectronic applications,
including automotive products, computer peripherals, telecommunications systems, consumer products,
industrial automation and control systems. According to provisional industry data published by
iSuppli, we have been ranked the world&#146;s fifth largest semiconductor company based on forecasted
2006 total market sales and we held leading positions in sales of Analog Products, Application
Specific Integrated Circuits (or &#147;ASICs&#148;) and Application Specific Standard Products (or &#147;ASSPs&#148;).
Based on provisional 2006 results published by iSuppli, we believe we were number one in industrial
products, number two in analog products and number three in wireless, automotive electronics and
NOR Flash. Based on industry results, we also believe we ranked as a leading supplier of
semiconductors in 2006 for set-top boxes, Smart cards and power management devices. Furthermore,
based on our relationship with Hewlett-Packard, which has a leading position in the printhead
market, we believe that we are a leading supplier of integrated circuits for printheads.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The semiconductor industry has historically been a cyclical one and we have responded through
emphasizing balance in our product portfolio, in the applications we serve, and in the regional
markets we address. Consequently, from 1994 through 2006, our revenues grew at a compounded annual
growth rate of 11.6% compared to 7.7% for the industry as a whole.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">We offer a broad and diversified product portfolio and develop products for a wide range of market
applications to reduce our dependence on any single product, application or end market. Within our
diversified portfolio, we have focused on developing products that leverage our technological
strengths in creating customized, system-level solutions with high-growth digital and mixed-signal
content. Our product families include differentiated application-specific products (which we define
as being our dedicated analog, mixed signal and digital ASIC and ASSP offerings and semicustom
devices), power microcontrollers and discrete products and nonvolatile memory and Smart cards.
Application Specific Products,
</DIV>

<P align="center" style="font-size: 10pt"><!-- Folio -->- 34 -<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">



<DIV align="left" style="font-size: 10pt; margin-top: 6pt">which are generally less vulnerable to market cycles than standard commodity products, accounted
for approximately 55% of our net revenues in 2006. Memory Product sales accounted for approximately
22% of our net revenues in 2006, while sales of Micro, Power and Analog products accounted for
approximately 23% of our net revenues in 2006.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Our products are manufactured and designed using a broad range of manufacturing processes and
proprietary design methods. We use all of the prevalent function-oriented process technologies,
including complementary metal oxide semiconductor (&#147;CMOS&#148;), bipolar and nonvolatile memory
technologies. In addition, by combining basic processes, we have developed advanced
systems-oriented technologies that enable us to produce differentiated and application-specific
products, including bipolar CMOS technologies (&#147;BiCMOS&#148;) for mixed signal applications, and
diffused metal oxide semiconductor (&#147;DMOS&#148;) technology and Bipolar, CMOS and DMOS (&#147;BCD
technologies&#148;) for intelligent power applications and embedded memory technologies. This broad
technology portfolio, a cornerstone of our strategy for many years, enables us to meet the
increasing demand for System-on-Chip (&#147;SoC&#148;) solutions. Complementing this depth and diversity of
process and design technology is our broad intellectual property portfolio that we also use to
enter into important patent cross-licensing agreements with other major semiconductor companies.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Effective January&nbsp;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. Since this date and
until the end of 2006, we report our sales and operating income in three product group segments:
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>the Application Specific Product Group (&#147;ASG&#148;) segment, comprised of three product
lines &#150; our Home, Personal and Communication Products (&#147;HPC&#148;), our Computer Peripherals
Products (&#147;CPG&#148;) and our Automotive Products (&#147;APG&#148;). Our HPC Sector is comprised of
the telecommunications, audio and digital consumer groups. Our CPG products cover
computer peripherals products, specifically disk drives and printers, and our APG
products comprised of all of our major complex products related to automotive
applications;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>the Memory Products Group (&#147;MPG&#148;) segment, comprised of our memories and Smart card
businesses; and</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>the Micro, Power, Analog Product Group (&#147;MPA&#148;) segment, comprised of discrete and
standard products plus standard microcontroller and industrial devices (including the
programmable systems memories (&#147;PSM&#148;) division); this segment was previously known as
Micro, Linear and Discrete Product Group, but no change has occurred in the segment&#146;s
perimeter or organization.</TD>
</TR>

</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Effective January&nbsp;1, 2007, to meet the evolving requirements of the market together with the
pursuit of a strategic repositioning in Flash memory, we have reorganized our product segment
groups into the Application Specific Product Groups, the Industrial and Multisegment Sector and the
Flash Memories Group.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">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. All our product segments share common research and development for
process technology and manufacturing capacity for most of their products. However, beginning
January&nbsp;1, 2007, the stand-alone Flash Memories Group (FMG), incorporates all the Flash memory
operations (both NOR and NAND), including Technology
</DIV>

<P align="center" style="font-size: 10pt"><!-- Folio -->- 35 -<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">



<DIV align="left" style="font-size: 10pt; margin-top: 6pt">R&#038;D, all product related activities, front-end and back-end manufacturing, marketing and sales
worldwide. Keeping the same overall perimeter, our Application Specific Groups (ASG)&nbsp;will now be
comprised of the newly created Mobile, Multimedia &#038; Communications Group (MMC)&nbsp;and the Home
Entertainment &#038; Displays Group (HED)&nbsp;as well as the existing Automotive Product Group (APG)&nbsp;and
Computer Peripherals Group (CPG). While former MPA segment plus non-Flash memory products (formerly
under MPG) and Micro-Electro-Mechanical Systems (MEMS)&nbsp;activity, have been combined to form a new
sector, called Industrial and Multisegment Sector (IMS).
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">In the past two years, we have pursued various initiatives to reshape our company by (i)
reorganizing our management team and setting up an executive committee, (ii)&nbsp;increasing our
research and development effectiveness through a program focusing on 20 key initiatives, improved
project control and redeployment of certain resources with the aim to improve time-to-market for
both technologies and products, (iii)&nbsp;promoting sales expansion for mass market applications and
new major key accounts with a special focus on the Chinese and Japanese markets with a view to
increased overall efficiencies, (iv)&nbsp;improving our manufacturing competitiveness through the
restructuring of our 150-mm wafer production capacity, (v)&nbsp;launching and implementing various
cost-reduction initiatives through procurement savings, improved asset management, general and
administration centralization and headcount restructuring, and (vi)&nbsp;establishing a less capital
intensive business model.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Our reported R&#038;D expenses are mainly in the areas of product design, technology and development and
do not include marketing design center costs, which are accounted for as selling expenses, or
process engineering, pre-production and process-transfer costs, which are accounted for as cost of
sales.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Major Shareholders</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The following table sets forth certain information with respect to the ownership of our issued
common shares based on information available to us as of December&nbsp;31, 2006:
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="76%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="7" style="border-bottom: 1px solid #000000"><B>Common Shares Owned</B></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="left" style="border-bottom: 0px solid #000000"><B>Shareholders</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>Number</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>%</B></TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">STMicroelectronics Holding II B.V. (&#147;ST Holding II&#148;)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">250,704,754</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">27.5</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Public</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">553,818,764</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">60.8</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Brandes Investment Partners</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">92,871,524</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">10.2</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Treasury shares</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">12,762,891</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1.4</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Our principal shareholders do not have different voting rights from those of our other
shareholders.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">ST Holding II is a wholly-owned subsidiary of STMicroelectronics Holding N.V. (&#147;ST Holding&#148;). As of
December&nbsp;31, 2006, FT1CI (the &#147;French Shareholder&#148;) and a consortium of Italian shareholders (the
&#147;Italian Shareholders&#148;) made up of CDP and Finmeccanica directly held 50% each in ST Holding based
on voting rights. CDP held 30% in ST Holding and Finmeccanica held 20% in ST Holding based on
voting rights. The indirect interest of FT1CI and the Italian Shareholders is split on a 50%-50%
basis. Through a structured tracking stock system implemented in the articles of association of ST
Holding and ST Holding II, FT1CI indirectly held 99,318,236 of our common shares, representing
10.9% of our issued share capital as of December&nbsp;31, 2006, CDP indirectly held 91,644,941 of our
common shares, representing 10.1% of our issued share capital as of December&nbsp;31, 2006 and
Finmeccanica indirectly held 59,741,577 of our common shares, representing 6.6% of our issued share
capital as of December&nbsp;31, 2006. Any disposals or, as the case may be, acquisitions by ST
</DIV>

<P align="center" style="font-size: 10pt"><!-- Folio -->- 36 -<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">



<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Holding II on behalf of respectively FT1CI, CDP and Finmeccanica, will decrease or, as the case may
be, increase the indirect interest of respectively FT1CI, CDP and Finmeccanica in our issued share
capital. FT1CI was formerly a jointly held company set up by Areva and France Telecom to control
the interest of the French shareholders in ST Holding. Following the transactions described below,
Areva is currently the sole shareholder of FT1CI. Areva (formerly known as CEA-Industrie) is a
corporation controlled by the French atomic energy commission. Areva is listed on Euronext Paris in
the form of Investment Certificates. CDP is an Italian corporation 70% owned by the Italian
<I>Ministero dell&#146;Economia e delle Finanze </I>(the &#147;Ministry of Economy and Finance&#148;) and 30% owned by a
consortium of 66 Italian banking foundations. Finmeccanica is a listed Italian holding company
majority owned by the Italian Ministry of Economy and Finance and the public. Finmeccanica is
listed on the Italian Mercato Telematico Azionario (&#147;MTA&#148;) and is included in the S&#038;P/MIB 30 stock
index.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">ST Holding II owned 90% of our shares before our initial public offering in 1994, and has since
then gradually reduced its participation, going below the 66% threshold in 1997 and below the 50%
threshold in 1999. ST Holding II may further dispose its shares as provided below in &#147;&#151;
Shareholders&#146; Agreements &#151; STH Shareholders&#146; Agreement&#148; and &#147;&#151; Disposals of our Common Shares&#148; and
pursuant to the eventual conversion of our outstanding convertible instruments. Set forth below is
a table of ST Holding II&#146;s holdings in us as of the end of each of the past three financial years:
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="76%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="7" style="border-bottom: 1px solid #000000"><B>Common Shares Owned</B></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>Number</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>%</B></TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">December&nbsp;31, 2006</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">250,704,754</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">27.5</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">December&nbsp;31, 2005</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">250,704,754</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">27.6</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">December&nbsp;31, 2004</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">278,483,280</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">30.8</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Announcements about additional disposals of our shares by ST Holding II on behalf of one or
more of its indirect shareholders, Areva, CDP, FT1CI or Finmeccanica may come at any time.
</DIV>

<P align="center" style="font-size: 10pt"><!-- Folio -->- 37 -<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>


<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The chart below illustrates the shareholding structure as of December&nbsp;31, 2006:
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><IMG src="y01685y0168501.gif" alt="(FLOW CHART)">
</DIV>



<DIV align="left">
<DIV style="font-size: 3pt; margin-top: 16pt; width: 18%; border-top: 1px solid #000000">&nbsp;</DIV>
</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR>
    <TD width="3%"></TD>
    <TD width="1%"></TD>
    <TD width="96"></TD>
</TR>

<TR valign="top">
    <TD nowrap align="left">(1)</TD>
    <TD>&nbsp;</TD>
    <TD>FT1CI owns 50% of ST Holding and indirectly holds 99,318,236 of our ordinary shares.</TD>
</TR>

<TR style="font-size: 3pt"><TD>&nbsp;</TD></TR>

<TR valign="top">
    <TD nowrap align="left">(2)</TD>
    <TD>&nbsp;</TD>
    <TD>Not a legal entity, purely for illustrative purposes.</TD>
</TR>

<TR style="font-size: 3pt"><TD>&nbsp;</TD></TR>

<TR valign="top">
    <TD nowrap align="left">(3)</TD>
    <TD>&nbsp;</TD>
    <TD>CDP and Finmeccanica own 50% of ST Holding and indirectly hold 91,644,941 and 59,741,577 of our
ordinary shares, respectively.</TD>
</TR>

<TR style="font-size: 3pt"><TD>&nbsp;</TD></TR>

<TR valign="top">
    <TD nowrap align="left">(4)</TD>
    <TD>&nbsp;</TD>
    <TD>CDP owns 30% of ST Holding, while Finmeccanica owns 20% of ST Holding.</TD>
</TR>

<TR style="font-size: 3pt"><TD>&nbsp;</TD></TR>

<TR valign="top">
    <TD nowrap align="left">(5)</TD>
    <TD>&nbsp;</TD>
    <TD>The 71.1% owned by the public includes the 10.2% shareholding of Brandes Investment Partners.</TD>
</TR>

<TR style="font-size: 3pt"><TD>&nbsp;</TD></TR>

<TR valign="top">
    <TD nowrap align="left">(6)</TD>
    <TD>&nbsp;</TD>
    <TD>ST Holding II owns 27.5% of our shares, the Public owns 71.1% of our shares and we hold the
remaining 1.4% as Treasury Shares.</TD>
</TR>

</TABLE>


<P align="center" style="font-size: 10pt"><!-- Folio -->- 38 -<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">






<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Strategy</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The semiconductor industry is undergoing several significant structural changes characterized by:
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>the changing long-term structural growth of the overall market for semiconductor
products, which has moved from double-digit growth to single-digit average growth over
the last several years;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>the strong development of new emerging applications in areas such as wireless
communications, solid-state storage, digital TV and video products and games;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>the increasing importance of the Asia Pacific region and emerging countries,
particularly China, which represents the fastest growing regional market;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>the importance of convergence between wireless, consumer and computer applications,
which drives customer demand to seek new system-level, turnkey solutions from
semiconductor suppliers;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>the evolution of the customer base from original equipment manufacturers (&#147;OEM&#148;) to
a mix of OEM, electronic manufacturing service providers (&#147;EMS&#148;) and original design
manufacturers (&#147;ODM&#148;);</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>the expansion of available manufacturing capacity through third-party providers; and</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>the increased participation in the semiconductor industry of private equity firms,
exemplified by the takeovers in 2006 of two of the top ten semiconductor companies,
which may lead to strategic repositionings of those companies and reorganization
amongst industry players.</TD>
</TR>

</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Our strategy within this challenging environment is designed to focus on the following
complementary key elements:
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><I>Broad, balanced market exposure. </I>We offer a diversified product portfolio and develop products for
a wide range of market applications using a variety of technologies, thereby reducing our
dependence on any single product, application or end market. Within our diversified portfolio, we
have focused on developing products that leverage our technological strengths in creating
customized, system-level solutions for high-growth digital and mixed-signal applications. We target
five key markets comprised of: (i)&nbsp;communications, including wireless connectivity, mobile phone
imaging, portable multimedia and infrastructure; (ii)&nbsp;computer peripherals, including data storage,
printers, monitors, displays and optical mice; (iii)&nbsp;digital consumer, including set-top boxes,
DVDs, digital TVs, digital cameras and digital audio; (iv)&nbsp;automotive, including engine, body and
safety, car radio, car multimedia and telematics; and (v)&nbsp;industrial and Multisegment products,
including power supplies, and motor-control, lighting, metering, banking and Smart card.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><I>Product strategy and innovation. </I>We aim to be leaders in multimedia convergence and power
applications. In order to serve these segments, our plan is to maintain and further establish
existing leadership positions for (i)&nbsp;platforms and chipset solutions for digital consumer,
cellular phone and car navigation; and (ii)&nbsp;power applications, which are driving system
</DIV>

<P align="center" style="font-size: 10pt"><!-- Folio -->- 39 -<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">



<DIV align="left" style="font-size: 10pt; margin-top: 6pt">solutions for a wide consumer base in the field of industrial applications, motor control, factory
automation, lighting, power supply and automotive, in particular, and which require less research
and development effort and manufacturing capital intensity than more advanced and complex
application-specific devices.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">We also dedicate significant resources to product innovation. We have identified our key product
offerings in each of the targeted market segments and have concentrated our R&#038;D resources to
develop leading-edge products for each. Examples include: digital-base band and multi-media
solutions for wireless, digital consumer products focused on set-top boxes, SoC offerings in data
storage and system-oriented products for the multisegment sector. We are also targeting new end
markets, such as medical applications.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Finally, we have decided to strategically reposition our participation in the Flash memory business
in order to limit our exposure to the capital intensity of the industry as well as to achieve the
appropriate economies of scale which are demanded in this competitive segment.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><I>Customer-based initiatives. </I>There are three tenets to our sales strategy. First, we work with our
key customers to identify evolving needs and new applications and to develop innovative products
and product features. We have formal alliances with certain strategic customers that allow us and
our customers (with whom we jointly share certain product developments) to exchange information and
which give our customers access to our process technologies and manufacturing infrastructure. We
have formed alliances with customers including Alcatel, Bosch, Hewlett-Packard, Marelli, Nokia,
Nortel, Pioneer, Seagate, Siemens VDO, Thomson and Western Digital. Our strategic alliances have
been historically a major growth driver for us. In 2004, 2005 and 2006, revenues from strategic
customer alliances accounted for approximately 39%, 44% and 41% respectively of our net revenues.
Secondly, we are targeting new major key accounts, where we can leverage our position as a supplier
of application-specific products with a broad range product portfolio to better address the
requirements of large users of semiconductor products with whom our penetration has historically
been quite low. Finally, we have targeted the mass market, or those customers outside of our
traditional top 50 customers, who require system-level solutions for multiple market segments. In
addition, we have focused on two regions as key ingredients in future sales growth, Greater China
and Japan, where we have reorganized regional management.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><I>Global integrated manufacturing infrastructure. </I>We have a diversified, leading-edge manufacturing
infrastructure, comprising front-end and back-end facilities, capable of producing silicon wafers
using our broad process technology portfolio, including our CMOS and BiCMOS technologies as well as
our memories and discretes technologies. Assembling, testing and packaging of our semiconductor
products take place in our large and modern back-end facilities, which generally are located in
low-cost areas. We have also developed relationships with outside contractors for foundry and
back-end services. In 2006, while confirming our mission to remain an integrated device
manufacturing company, we decided to reduce our capital intensity in order to optimize
opportunities between internal and external front-end production, reduce our dependence on market
cycles that impact the loading of our fabs, and decrease the burden of depreciation on our
financial performance.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><I>Research and development partnerships. </I>The semiconductor industry is increasingly characterized by
higher costs and technological risks involved in the research and development of state-of-the-art
processes. These higher costs and technological risks have driven us to enter into cooperative
partnerships. From 2000 until now, we have been jointly developing advanced CMOS technologies in
Crolles (France) with Freescale Semiconductor and NXP Semiconductors. At the end of 2006, one of
our partners notified us of their intention to continue their participation in the Crolles2
alliance only through the end of 2007.
</DIV>


<P align="center" style="font-size: 10pt"><!-- Folio -->- 40 -<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>
<DIV style="font-family: 'Times New Roman',Times,serif">


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">We remain convinced that the shared R&#038;D business model contributes to the fast acceleration of
semiconductor process technology development, and we therefore remain committed to our strategy of
alliances to reinforce cooperation in the area of technology development.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><I>Integrated presence in key regional markets. </I>We have sought to develop a competitive advantage by
building an integrated presence in each of the world&#146;s economic zones that we target: Europe, Asia,
China and America. An integrated presence means having manufacturing and design, as well as sales
and marketing capabilities in each region, in order to ensure that we are well positioned to
anticipate and respond to our customers&#146; business requirements. We also have design and marketing
capabilities in our Japan and Emerging Markets regions. We have front-end manufacturing facilities
in Europe, in the United States and in Asia. Our more labor-intensive back-end facilities are
located in Malaysia, Malta, Morocco, Singapore and China, enabling us to take advantage of more
favorable production cost structures, particularly lower labor costs. Major design centers and
local sales and marketing groups are within close proximity of key customers in each region, which
we believe enhances our ability to maintain strong relationships with our customers.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><I>Product quality excellence. </I>We aim to develop the quality excellence of our products and in the
various applications we serve and we have launched a company-wide Product Quality Awareness program
built around a three-pronged approach: (i)&nbsp;the improvement of our full product cycle involving
robust design and manufacturing, improved detection of potential defects, and better anticipation
of failures through improved risk assessment, particularly in the areas of product and process
changes; (ii)&nbsp;improved responsiveness to customer demands; and (iii)&nbsp;ever increasing focus on
quality and discipline in execution.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><I>Return on capital employed. </I>We remain focused on providing our shareholders with value creation,
measured in particular in terms of return on net assets compared to the weighted average cost of
capital.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>2006 Business Overview</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">In 2006, the semiconductor market experienced a higher increase in total sales compared to 2005
supported by a solid economic environment in the major world economies.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">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).
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Based upon recently published data by the World Semiconductor Trade Statistics (&#147;WSTS&#148;),
semiconductor industry revenues increased year-over-year by approximately 9% for the TAM and 8% for
the SAM in 2006, to reach approximately $248&nbsp;billion and approximately $165&nbsp;billion, respectively.
This increase was driven by unit demand while average selling prices remained declined compared to
2005. In the fourth quarter of 2006, the TAM and the SAM increased approximately 9% and 4%
year-over-year, respectively, while the TAM increased by approximately 2% and the SAM decreased
approximately 1% sequentially.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Our 2006 revenues were characterized by significant high volume demand and improved product mix,
which did not translate into an equivalent revenue performance due to persisting negative impact of
price pressure in the market we serve. As a result, our revenues increased by approximately 11% to
$9,854&nbsp;million compared to $8,882&nbsp;million in 2005. Strong growth
</DIV>

<P align="center" style="font-size: 10pt"><!-- Folio -->-41-<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">



<DIV align="left" style="font-size: 10pt; margin-top: 6pt">in revenues was driven by double-digit increases in Wireless and Industrial applications with
mid-single digit contributions from the Automotive, Consumer and Computer segments. Our 2006 sales
performance was above the TAM and the SAM growth rates. With reference to the quarterly results,
our fourth quarter 2006 revenues performance was below the TAM and flat with the SAM, both on a
year-over-year basis and on a sequential basis.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">In 2006, our effective average U.S. dollar exchange rate was <FONT face="'Times New Roman',times,serif">&#128;</FONT>1.00 for $1.24, which reflects the
actual exchange rate levels and the impact of certain hedging contracts, compared to our 2005
effective average exchange rate of <FONT face="'Times New Roman',times,serif">&#128;</FONT>1.00 for $1.28.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">On a total year basis, our gross margin increased in 2006 due to overall improvements in volume,
manufacturing performances and product mix, which were partially offset by the declining selling
prices.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Our operating expenses combining selling, general and administrative expenses and research and
development were slightly lower in 2006 compared to 2005 mainly due to higher development cost
capitalized in 2006.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">In summary, our financial results for 2006 compared to the results of 2005 were favorably impacted
by the following factors:
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>higher sales volume and a more favorable product mix in our revenues, which
contributed to a solid increase in our net revenues;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>continuous strong improvement of our manufacturing performance;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>a more favorable effective exchange rate for the U.S. dollar;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>net interest income;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>lower impairment, restructuring charges and other related closure costs;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>and higher Other income and expense, net.</TD>
</TR>

</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Our financial results in 2006 were negatively affected by the following factors:
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>negative pricing trends due to a persisting overcapacity in the industry, which
translated into our average selling prices declining by approximately 8%, as a pure
pricing effect;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>and share-based compensation charges related to 2005 and 2006 grants;</TD>
</TR>

</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">In 2006, we continued to invest in upgrading and expanding our manufacturing capacity. Total
capital expenditures in 2006 were $1,533&nbsp;million, which were financed entirely by net cash
generated from operating activities.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Looking at the fourth quarter and the near term environment, the current market correction underway
in some of the key applications that we serve is more pronounced than forecasted. Our wireless
results, in particular, came in well below historical seasonal patterns and were also negatively
impacted by product mix shift towards the low end, which put additional pressure on our margins and
operating performance in the quarter. However, for the full year, we achieved double digit
year-over-year sales growth in a market that appears to be growing in the high single digits. This
is a clear signal that the evolution of our product portfolio is
</DIV>

<P align="center" style="font-size: 10pt"><!-- Folio -->-42-<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">



<DIV align="left" style="font-size: 10pt; margin-top: 6pt">delivering results with higher revenues, improved profitability, better leverage of our research
and development and capital investments, and expansion of our market share.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">During 2006, we made significant headway in delivering on our most important business and strategic
imperatives. Our product portfolio continues to strengthen. We are driving a significant reduction
in our capital intensity. This is visible in our 2006 results, with our capital investments to
sales ratio down to 15.6% from over 20% on average for 2004 and 2005. Further, we have initiated a
new mid-term target of 12% through a combination of a less capital-intensive product portfolio,
increased usage of foundries for non-proprietary technologies and optimization of our manufacturing
facilities. As of January&nbsp;1, 2007, we have organized our NOR and NAND FLASH business into a
stand-alone segment and are moving ahead on creating a separate legal entity in connection with our
strategic repositioning of this business. In summary, we achieved our primary objectives for 2006:
gaining market share while simultaneously improving financial performance in terms of return on
assets and cash flow.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B><I>Business Outlook</I></B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Notwithstanding the current tougher environment as the market works through inventory in selected
applications in the first half of 2007, we believe we are poised to make further important progress
on our ongoing key initiatives for sales expansion, new product introduction and asset leverage,
which will strengthen our market opportunities and financial position.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Our capital expenditures are currently budgeted to be $1.2&nbsp;billion for 2007, which is expected to
further reduce our capital expenditure to sales ratio from the previous year&#146;s level.
</DIV>

<P align="center" style="font-size: 10pt"><!-- Folio -->-43-<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">
<DIV align="left">
<A name="108"></A>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>DUTCH DECREE ON ARTICLE 10 OF THE TAKEOVER DIRECTIVE</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Announcements on the basis of Article&nbsp;1 of the Dutch Decree on Article&nbsp;10 of the Takeover
Directive:
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">a.</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>The authorized share capital of STMicroelectronics N.V. (the &#147;Company&#148;) amounts to EUR
1,809,600,000, divided into 1,200,000,000 ordinary shares and 540,000,000 preference shares,
with a nominal value of EUR 1.04 per share. As of 31 December&nbsp;2006, 910,157,933 ordinary
shares were issued of which 12,762,891 were repurchased. As of December&nbsp;31, 2006, no
preference shares were issued and outstanding.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">b.</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>The Company does not have restrictions on the transfer of its ordinary and preference shares.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">c.</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Holdings in the Company that are subject to a disclosure obligation pursuant to Chapter&nbsp;5.3
of the Dutch Financial Markets Supervision Act (&#147;<I>Wet op het financieel </I>toezicht&#148;) are:</TD>
</TR>

</TABLE>
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">(i)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>STMicroelectronics Holding N.V 250,704,754 ordinary shares or 27.55% (through
its wholly-owned subsidiary STMicroelectronics Holding II B.V.) (diluted to 17.29% if
the option for preference shares held by Stichting Continu&#239;teit ST is fully exercised);</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">(ii)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Brandes Investment Partners 92,871,524 ordinary shares or 10.20% (diluted to
6.40% if the option for preference shares held by Stichting Continu&#239;teit ST is fully
exercised); and</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">(iii)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Stichting Continu&#239;teit ST option for 540,000,000 preference shares,
representing up to 37.24% if fully exercised.</TD>
</TR>

</TABLE>
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">d.</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>The Company does not have special controlling rights attached to its ordinary or preference
shares.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">e.</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>The Company does not have any scheme granting rights to employees to subscribe for or acquire
shares in the Company&#146;s share capital or the share capital of a subsidiary where the control
is not directly exercised by the employees.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">f.</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>The Company does not have any restrictions on voting rights nor has it cooperated in the
issuance of depositary receipts for shares. The Company&#146;s articles of association currently
provide that in order to be able to attend a shareholders&#146; meeting, address the meeting and,
if applicable, exercise their voting rights at such meeting, shareholders and other persons
entitled to attend shareholders&#146; meetings must notify the Company in writing of their
intention to do so no later than on the day and at the place mentioned in the notice convening
the shareholders&#146; meeting, which typically is three days prior to the meeting. Shareholders
and other persons entitled to attend shareholders&#146; meetings may only exercise said rights at
the meeting for the shares from which they can derive said rights both on the day of referred
to above and on the day of the meeting. The current articles of association do not provide
that the Managing Board or the Supervisory Board may determine a registration date and the</TD>
</TR>

</TABLE>
</DIV>
<P align="center" style="font-size: 10pt"><!-- Folio -->-44-<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">


<DIV style="margin-top: 6pt"><TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR valign="top" style="font-size: 10pt; color: #textcolor#; background: #bgcolor#">
    <TD width="1%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>shareholders&#146; meeting has not authorized the Managing Board or the Supervisory Board to do
so. On the Company&#146;s website, <u>www.st.com,</u> under the caption &#147;Investor Information &#150; Annual
General Meeting &#150; How to vote at Annual General Meeting&#148; further information is provided for
(beneficial)&nbsp;shareholders holding shares through Euroclear France or Cede &#038; Co as nominee of
the Depositary Trust Company.</TD>
</TR>

</TABLE>
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">g.</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>The Company does not have any agreements with shareholders that may give rise to restrictions
on the transfer of shares or restrictions of voting rights. The Company has been informed that
the shareholders&#146; agreement among STMicroelectronics Holding N.V.&#146;s shareholders (the &#147;STH
Shareholders&#146; Agreement&#148;), to which the Company is not a party, governs relations between the
Company&#146;s current indirect shareholders Areva Group (&#147;Areva&#148;), Cassa Depositi e Prestiti
S.p.A. (&#147;CDP&#148;) and Finmeccanica S.p.A. (&#147;Finmeccanica&#148;), each of which is ultimately
controlled by the French or Italian government. The STH Shareholders&#146; Agreement includes
provisions requiring the unanimous approval by shareholders of STMicroelectronics Holding N.V.
before STMicroelectronics Holding N.V. can make any decision with respect to certain actions
to be taken by the Company. The STH Shareholders&#146; Agreement, permits the respective French and
Italian indirect shareholders to cause STMicroelectronics Holding II B.V. to dispose of its
stake in the Company at its sole discretion at any time from their current level, and to
reduce the current level of their respective indirect interests in the Company&#146;s ordinary
shares to 9.5%.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Furthermore, as permitted by the
Company&#146;s articles of association, the
Supervisory Board has specified selected
actions by the Managing Board that
require the approval of the Supervisory
Board. These requirements for the prior
approval of various actions to be taken
by the Company and the Company&#146;s
subsidiaries may give rise to a conflict
of interest between the Company&#146;s
interests and investors&#146; interests, on
the one hand, and the interests of the
individual shareholders approving such
actions, on the other, and may affect
the ability of the Managing Board to
respond as may be necessary in the
rapidly changing environment of the
semiconductor industry. Furthermore, the
Company&#146;s ability to issue new shares or
other securities may be limited by the
existing shareholders&#146; desire to
maintain their proportionate
shareholding at a certain minimum level.
Such approval process is, however,
subject to the provisions of Dutch law
requiring members of the Supervisory
Board to act independently.
Also, CDP and Finmeccanica. are a party
to a shareholders&#146; agreement which
regards their joint interest in
STMicroelectronics Holding N.V. The
Company is not a party to that
shareholders&#146; agreement.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">h.</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>(i)&nbsp;Managing Board.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>The Managing Board consists of such number
of members as resolved by the shareholders&#146;
meeting upon the proposal of the
Supervisory Board. The members of the
Managing Board are appointed for three-year
terms, as defined in the Company&#146;s articles
of association, upon a non-binding proposal
by the Supervisory Board, by a simple
majority of the votes cast at a meeting
where at least 15% of the issued and
outstanding share capital is present or
represented. If the Managing Board were to
consist of more than one member, the
Supervisory Board would appoint one of the
members of the Managing Board to be
chairman of the Managing Board for a
three-year term, as defined in the
Company&#146;s articles of association (upon
approval of at</TD>
</TR>

</TABLE>
</DIV>
<P align="center" style="font-size: 10pt"><!-- Folio -->-45-<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">


<DIV style="margin-top: 6pt"><TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>least three-quarters of the members of the
Supervisory Board in office). The
shareholders&#146; meeting may suspend or
dismiss one or more members of the Managing
Board at a meeting at which at least
one-half of the outstanding share capital
is present or represented. If the quorum is
not present, a further meeting shall be
convened, to be held within four weeks
after the first meeting, which shall be
entitled, irrespective of the share capital
represented, to pass a resolution with
regard to the suspension or dismissal. Such
a quorum is not required if a suspension or
dismissal is proposed by the Supervisory
Board. In that case, a resolution to
dismiss or to suspend a member of the
Managing Board can be taken by a simple
majority of the votes cast at a meeting
where at least 15% of the issued and
outstanding share capital is present or
represented. The Supervisory Board may
suspend members of the Managing Board, but
a shareholders&#146; meeting must be convened
within three months after such suspension
to confirm or reject the suspension.</TD>
</TR>

</TABLE>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">(ii)&nbsp;Supervisory Board.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">The Supervisory Board consists of at least six members, the number to be
determined by the shareholders&#146; meeting upon the proposal of the Supervisory
Board. Members of the Supervisory Board are appointed by the shareholders&#146;
meeting for a three-year term, as defined in the Company&#146;s articles of
association, upon the proposal of the Supervisory Board, by a simple
majority of the votes cast at a meeting where at least 15% of the issued and
outstanding share capital is present or represented. Members of the
Supervisory Board may be suspended or dismissed by the shareholders&#146; meeting
by a simple majority of the votes cast at a meeting where at least 15% of
the issued and outstanding share capital is present or represented. The
Supervisory Board may make a proposal to the shareholders&#146; meeting for the
suspension or dismissal of one or more of its members.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">(iii)&nbsp;Amendment of the Company&#146;s articles of association.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">The company&#146;s articles of association can be amended by the shareholders&#146; meeting, upon the
proposal of the Supervisory Board, by a simple majority of the votes cast at a meeting where
at least 15% of the issued and outstanding share capital is present or represented. If the
relevant amendment affects the rights of holders of ordinary shares or holders of preference
shares, the approval of the meeting of holders of ordinary shares and the meeting of holders
of preference shares, respectively, is required.
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">i.</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>For a complete overview of the powers of the Managing Board pursuant to the Company&#146;s
articles of association, reference is made to the Company&#146;s articles of association, which are
posted on the company&#146;s website, <u>www.st.com.</u> Hereinafter a description is provided for certain
powers of the Managing Board as well as certain restrictions thereto.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Under Dutch law, the Managing Board is entrusted with the Company&#146;s general management and
the representation of the Company. The Managing Board must seek prior approval from the
shareholders&#146; meeting for decisions regarding a significant change in the identity or nature
of the Company. Under the Company&#146;s articles of association, the Managing Board must obtain
prior approval from the Supervisory Board for (i)&nbsp;all proposals to be submitted to a vote at
a shareholders&#146; meeting; (ii)&nbsp;the formation of all companies, acquisition or sale of any
participation, and conclusion of any cooperation and participation agreement; (iii)&nbsp;all of
the Company&#146;s multi-year</TD>
</TR>

</TABLE>
</DIV>

<P align="center" style="font-size: 10pt"><!-- Folio -->-46-<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">plans and the budget for the coming year, covering investment policy, policy regarding
research and development, as well as commercial policy and objectives, general financial
policy, and policy regarding personnel; and (iv)&nbsp;all acts, decisions or operations covered
by the foregoing and constituting a significant change with respect to decisions already
taken by the Supervisory Board. In addition, under the Company&#146;s articles of association,
the Supervisory Board and the shareholders&#146; meeting each may specify by resolution certain
additional actions by the Managing Board that require its prior approval.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">In accordance with the Company&#146;s corporate governance charter, which is posted on the
Company&#146;s website, <u>www.st.com</u> under the caption &#147;Investor Information &#150; Corporate Governance
at ST&#148;, the sole member of the Managing Board and the Executive Officers may not serve on
the board of a public company without the prior approval of the Supervisory Board.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">Pursuant to the charter adopted by the Supervisory Board, which is posted on the Company&#146;s
website, <u>www.st.com</u> under the caption &#147;Investor Information &#150; Corporate Governance at ST&#148;,
the following decisions by the Managing Board with regards to the Company and any of the
Company&#146;s direct or indirect subsidiaries require prior approval from the Supervisory Board:
(i)&nbsp;any modification of the Company&#146;s articles of association other than those of the
Company&#146;s wholly-owned subsidiaries; (ii)&nbsp;any change in the Company&#146;s authorized share
capital, issue, acquisition or disposal of the Company&#146;s own shares, change in any
shareholder rights or issue of any instruments granting an interest in the Company&#146;s capital
or profits other than those of the Company&#146;s wholly-owned subsidiaries; (iii)&nbsp;any
liquidation or disposal of all or a substantial and material part of the Company&#146;s assets or
any shares the Company holds in any of its subsidiaries; (iv)&nbsp;entering into any merger,
acquisition or joint venture agreement (and, if substantial and material, any agreement
relating to intellectual property) or formation of a new company; (v)&nbsp;approval of such
company&#146;s draft consolidated balance sheets and financial statements or any profit
distribution by such company; (vi)&nbsp;entering into any agreement that may qualify as a
related-party transaction, including any agreement with STMicroelectronics Holding N.V., its
wholly-owned subsidiary STMicroelectronics Holding II B.V., or its shareholders Areva
through its wholly-owned subsidiary FT1CI, Cassa Depositi e Prestiti S.p.A. and Finmeccanica
S.p.A.; (vii)&nbsp;the key challenges of the Company&#146;s five-year plans and its consolidated
annual budgets, as well as any significant modifications to said plans and budgets, or any
one of the matters set forth in article 16 paragraph 1 of the Company&#146;s articles of
association and not included in the approved plans or budgets; (viii)&nbsp;approval of operations
of exceptional importance which have to be submitted for Supervisory Board prior approval
although their financing was provided for in the approved annual budget; and (ix)&nbsp;approval
of the quarterly, semi-annual and annual consolidated financial statements prepared in
accordance with U.S. GAAP and beginning with the 2005 annual accounts IFRS, prior to
submission for shareholder adoption.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">During a meeting held on September&nbsp;23, 2000, the Supervisory Board authorized the Managing
Board to proceed with acquisitions without prior consent of the Supervisory Board subject to
a maximum amount of $25&nbsp;million per transaction,
</DIV>

<P align="center" style="font-size: 10pt"><!-- Folio -->-47-<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>provided the Managing Board keeps the Supervisory Board informed of progress regarding such
transactions and gives a full report once the transaction is completed.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Pursuant to the Company&#146;s articles of association, the Managing Board cannot be designated
by the shareholders&#146; meeting as the corporate body authorized to issue shares, grant rights
to subscribe for shares and to exclude existing shareholders&#146; preemptive rights, but the
Supervisory Board can be. Pursuant to a shareholders&#146; resolution adopted at the Company&#146;s
annual shareholders&#146; meeting held on April&nbsp;27, 2006, the Supervisory Board has been
authorized for a period of five years to resolve to (i)&nbsp;issue any number of common shares
and/or preference shares as comprised in the company&#146;s authorized share capital as this
shall read from time to time; (ii)&nbsp;to fix the terms and conditions of share issuance; (iii)
to exclude or to limit preemptive rights of existing shareholders; and (iv)&nbsp;to grant rights
to subscribe for common shares and/or preference shares, all for a period of five years from
the date of such annual shareholders&#146; meeting.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Currently the shareholders&#146; meeting has not authorized the Managing Board to repurchase any
shares in the Company&#146;s share capital. However, pursuant to article 5 paragraph 2 of the
Company&#146;s articles of association, the Managing Board may, without being authorized thereto
by the shareholders&#146; meeting but subject to the approval of the Supervisory Board, acquire
shares in the Company&#146;s own share capital in order to transfer those shares to the employees
of the Company or a group company under a scheme applicable to such employees.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">j.</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>The Company is not a party to any significant agreements which are effectuated, changed or
dissolved subject to the condition of a change of control of the Company following a takeover
bid. However, the Company is a party to an option agreement with Stichting Continu&#239;teit ST
(the &#147;Stichting&#148;) regarding the Company&#146;s preference shares. on November&nbsp;27, 2006, the
Supervisory Board approved entering into an option agreement with an the Stichting, to
terminate a substantially similar option agreement dated May&nbsp;31, 1999, as amended, between the
Company and STMicroelectronics Holding II B.V. The Managing Board and the Supervisory Board,
along with the board of the Stichting, have declared that they are jointly of the opinion that
the Stichting is independent of the Company. The Supervisory Board approved the new option
agreement to reflect changes in Dutch legal requirements, not in response to any hostile
takeover attempt. On February&nbsp;7, 2007, the May&nbsp;31, 1999 option agreement, as amended, was
terminated. On February&nbsp;22, 2007, the new option agreement with the Stichting was concluded.
The new option agreement provides for the issuance of up to a maximum 540,000,000 preference
shares, the same number as the agreement it is replacing. Any such shares would be issued to
the Stichting upon its request and in its sole discretion and upon payment of at least 25% of
the par value of the preference shares to be issued. The shares would be issuable in the
event of actions considered hostile by the Managing Board and the Supervisory Board, such as a
creeping acquisition or an offer on the Company&#146;s ordinary shares, which are unsupported by
the Managing Board and the Supervisory Board and which the board of the Stichting determines
would be contrary to the interests of the Company, the Company&#146;s shareholders or other
stakeholders. The preference shares may remain outstanding for no longer than two years. No
preference shares have been issued to date. The effect of the preference shares may be to
create a level-playing field in the event actions which are considered to be hostile by the
Managing Board</TD>
</TR>

</TABLE>
</DIV>
<P align="center" style="font-size: 10pt"><!-- Folio -->-48-<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">


<DIV style="margin-top: 6pt"><TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR valign="top" style="font-size: 10pt; color: #textcolor#; background: #bgcolor#">
    <TD width="1%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>and the Supervisory Board, as described above, occur and which the board of the Stichting
determines to be contrary to the interests of the Company and the Company&#146;s shareholders and
other stakeholders.<DIV style="font-size:6pt">&nbsp;</DIV></TD>
</TR>
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">k.</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>The employment contract of the Company&#146;s President and CEO provides that upon a change of
control following a takeover bid (i)&nbsp;all unvested stock awards granted to him will fully vest
and (ii)&nbsp;the bonus payable under the Company&#146;s Executive Incentive Plan will be due for the
full amount, which is 150% of the executive gross annual salary. Such benefits are not linked
to termination of the employment agreement.</TD>
</TR>

</TABLE>
</DIV>

<P align="center" style="font-size: 10pt"><!-- Folio -->-49-<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">
<DIV align="left">
<A name="109"></A>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>LIQUIDITY AND FINANCIAL POSITION</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">At December&nbsp;31, 2006, cash and cash equivalents totalled $1,963&nbsp;million, compared to $2,027&nbsp;million
as of December&nbsp;31, 2005. At December&nbsp;31, 2006, the Company had $250&nbsp;million invested in short term
deposits with a maturity between three months and one year. These deposits are held at various
banks with a A3/A- minimum long term rating. Interest on these deposits is paid at maturity with
interest rates fixed at inception for the duration of the deposits. The principal will be repaid at
final maturity. At December&nbsp;31, 2006, the Company had a total investment of $190&nbsp;million and Euro
205&nbsp;million of existing cash in floating rate notes issued by primary banks rated at minimum &#147;A1&#148;.
These floating notes are very liquid short term investments and are subjects only to the risk of
deterioration of the credit quality of the issuer. These marketable securities are classified as
available-for-sale and are reported at fair value with changes in fair value recognized as a
separate component of &#147;other reserves&#148; in the consolidated statement of changes in shareholders&#146;
equity. We did not have marketable securities at December&nbsp;31, 2005. Changes in the instruments
adopted to invest our liquidity in future periods may occur and may significantly affect our
finance income (costs).
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Liquidity
<DIV style="font-size:6pt">&nbsp;</DIV>
We maintain a significant cash position and a low debt to equity ratio, which provide us with
adequate financial flexibility. As in the past, our cash management policy is to finance our
investment needs mainly with net cash generated from operating activities.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><I>Net cash from operating activities</I>. Net cash from operating activities totalled $2,687&nbsp;million in
2006, compared to $1,984&nbsp;million in 2005.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><I>Net cash used in investing activities</I>. Net cash used in investing activities was $2,949&nbsp;million in
2006, compared to $1,714&nbsp;million in 2005. The main utilization of cash was for payments for
purchases of tangible assets, amounting to $1,555&nbsp;million in 2006 and compared to $1,523&nbsp;million in
2005; the payments of marketable securities, amounting to $460&nbsp;million in 2006 and compared to $0
million in 2005, and the investment in intangible and financial assets, amounting to $398&nbsp;million
in 2006 and compared to $287 in 2005. At December&nbsp;31, 2006 the investment in short-term deposit
net of proceeds from matured short-term deposits totalled $250&nbsp;million. In 2006, cash used for
capital contributions to associates was $213&nbsp;million.
</DIV>
<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Capital expenditures for 2006 were principally allocated to:
</DIV>


<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>the expansion of the 300-mm front-end joint project with Philips Semiconductor International
B.V. and Freescale Semiconductor Inc., in Crolles2 (France).</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>the facilitization of a portion of our 300-mm front-end plant in Catania (Italy);</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>the capacity expansion and the upgrading to finer geometry technologies of our 200-mm front-end
facility in Rousset (France);</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>the capacity expansion and upgrading of our 200-mm front-end facilities in Singapore;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>the upgrading of our 200-mm fab and pilot line in in Agrate (Italy); and</TD>
</TR>

</TABLE>
</DIV>

<P align="center" style="font-size: 10pt"><!-- Folio -->-50-<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>the capacity expansion of our back-end plants in Muar (Malaysia), Shenzhen (China) and Bouskoura
(Morocco);</TD>
</TR>

</TABLE>
</DIV>
<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Capital expenditures for 2005 were principally allocated to:
</DIV>


<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>the capacity expansion of our 200-mm and 150-mm front-end facilities in Singapore;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>the conversion to 200-mm of our front-end facility in Agrate (Italy);</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>the capacity expansion of our back-end plants in Muar (Malaysia), Shenzhen (China), Toa Payoh
(Singapore) and Malta;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>the expansion of our 200-mm front-end facility in Phoenix (Arizona);</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>the capacity expansion of our 200-mm front-end facility in Rousset (France);</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>the completion of building and continuation of facilities for our 300-mm front-end plant in
Catania (Italy);</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>the expansion of our 150-mm front-end facility and the start of a 200-mm pilot line in Tours
(France); and</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>the expansion of the 300-mm front-end joint project with Philips Semiconductor International
B.V. and Freescale Semiconductor Inc., in Crolles2 (France).</TD>
</TR>

</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><I>Net operating cash flow. </I>We define net operating cash flow as net cash from operating activities
minus net cash used in investing activities, excluding restricted cash, payment for purchases of
and proceeds from the sale of marketable securities and investment in and proceed from short-term
deposits. We believe net operating cash flow provides useful information for investors because it
measures our capacity to generate cash from our operating activities to sustain our investments for
our operating activities. Net operating cash flow is determined as follows from our Consolidated
Statements of Cash Flow:
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="76%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>2006</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>2005</B></TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Net cash from operating activities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,687</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,984</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Net cash used in investing activities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(2,021</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(1,714</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Net operating cash flow</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>666</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>270</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Restricted cash, payment for purchase and proceeds
from sale of marketable securities and investment in
and proceed from short-term deposits</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(928</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Due to the capacity of our operating activities to generate cash in excess of our investing
activities, we generated net operating cash flow of $666&nbsp;million in 2006, compared to net operating
cash flow of $270&nbsp;million in 2005.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><I>Net cash used in financing activities. </I>Net cash used in financing activities was $143&nbsp;million in
2006 compared to $131&nbsp;million in 2005. The major item of the cash used in 2006 was the repurchase
of substantially all outstanding 2013 Convertible Bonds for an amount paid of $1,377&nbsp;million
aggregate principal amount. The major items of cash proceeds were related to the issuance of zero
coupon senior convertible bonds due in 2016 for an amount of $974
</DIV>

<P align="center" style="font-size: 10pt"><!-- Folio -->-51-<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">



<DIV align="left" style="font-size: 10pt; margin-top: 6pt">million and to the issuance of floating rate senior bonds due in 2013 for a principal amount of
<FONT face="'Times New Roman',times,serif">&#128;</FONT>500&nbsp;million. The major item of the cash used in 2005 was the payment of the dividends amounting
to $107&nbsp;million.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B><I>Capital Resources</I></B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><I>Net financial position</I>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">We define our net financial position as the difference between our total cash position (cash
and cash equivalents, marketable securities, short-term deposits and restricted cash) net of total
financial debt (bank overdrafts, current portion of long-term debt and long-term debt). We believe
our net financial position provides useful information for investors because it gives evidence of
our global position either in terms of net indebtedness or net cash by measuring our capital
resources based on cash and cash equivalents and the total level of our financial indebtedness. The
net financial position is determined as follows from our Consolidated Balance Sheets as December
31, 2006 and 2005 :
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="76%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>2006</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>2005</B></TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Cash and cash equivalents</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,963</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,027</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Marketable securities and short term deposits</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">710</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Restricted cash for equity investments</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">218</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Total cash position</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,891</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,027</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Bank overdrafts</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(11</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Current portion of long-term debt</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(136</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(1,499</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Long-term debt</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(1,740</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(269</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Total financial debt</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(1,876</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(1,779</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Net financial position</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,015</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">248</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The net financial position (total cash position net of total financial debt) as of December
31, 2006 amounted to a net financial cash position of $1,015&nbsp;million, compared to a net financial
position of $248&nbsp;million as of December&nbsp;31, 2005. The improvement of the net financial position
mainly results from favourable net operating cash flow generated during 2006 and from the proceeds
from the 2016 senior convertible bond and the 2013 floating rate senior bond, net of repayment for
the 2013 convertible bond.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Pursuant to the terms of the convertible bonds due 2013, the Company was required to purchase, at
the option of the holders, 1,397,493 convertible bonds, at a price of $985.09 each between August 7
and August&nbsp;9, 2006. This resulted in a cash payment of $1,377&nbsp;million. The Company may be required
to purchase, at the option of the holder, the outstanding convertible bonds for cash on August&nbsp;5,
2008 and/or August&nbsp;5, 2010 at a price of $975.28 and $965.56 per convertible bond, respectively.
The outstanding long term debt corresponding to the 2013 convertible debt amounted to approximately
$2&nbsp;million as at December&nbsp;31, 2006, corresponding to the remaining 2,505 bonds.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">In February&nbsp;2006, the Company issued $974&nbsp;million principal amount at maturity of zero coupon
senior convertible bonds due in February&nbsp;2016. The bonds were issued at 100% of principal with a
yield to maturity of 1.5% and resulted in net proceeds to the Company of $974&nbsp;million less
transaction fees. The bonds are convertible by the holder at any time prior to maturity at a
conversion rate of 43.118317 shares per one thousand dollars face value of the bonds corresponding
to 41,997,240 equivalent shares. The holders can also redeem the
</DIV>

<P align="center" style="font-size: 10pt"><!-- Folio -->-52-<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">



<DIV align="left" style="font-size: 10pt; margin-top: 6pt">convertible bonds on February&nbsp;23, 2011 at a price of $1,077.58, on February&nbsp;23, 2012 at a price of
$1,093.81 and on February&nbsp;24, 2014 at a price of $1,126.99 per one thousand dollars face value of
the bonds. The Company can call the bonds at any time after March&nbsp;10, 2011 subject to the Company&#146;s
share price exceeding 130% of the accreted value divided by the conversion rate for 20 out of 30
consecutive trading days. The Company may redeem for cash at the principal amount at issuance plus
accumulated gross yield all, but not a portion, of the convertible bonds at any time if 10% or less
of the aggregate principal amount at issuance of the convertible bonds remain outstanding in
certain circumstances or in the event of changes to the tax laws of the Netherlands or any
successor jurisdiction.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">On March&nbsp;17, 2006, STMicroelectronics Finance B.V. (&#147;ST BV&#148;), a wholly owned subsidiary of the
Company, issued floating rate senior bonds with a principal amount of Euro 500&nbsp;million at an issue
price of 99.873%. The notes, which mature on March&nbsp;17, 2013, pay a coupon rate of the three-month
Euribor plus 0.40% on the 17<SUP style="font-size: 85%; vertical-align: text-top">th</SUP> of June, September, December and March of each year
through maturity. In the event of changes to the tax laws of the Netherlands or any successor
jurisdiction, ST BV or the Company, may redeem the full amount of senior bonds for cash. In the
event of certain change in control triggering events, the holders can cause ST BV or the Company to
repurchase all or a portion of the bonds outstanding.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">At December&nbsp;31, 2006, the aggregate amount of our long-term debt was approximately $1,740&nbsp;million,
including $737&nbsp;million of 2016 Bonds and <FONT face="'Times New Roman',times,serif">&#128;</FONT>500&nbsp;million of Floating Rate Senior Bonds due 2013.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B><I>Financial Outlook</I></B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">We currently expect that capital spending for 2007 will be approximately $1.2&nbsp;billion, below the
$1.5&nbsp;billion net of sales proceeds spent in 2006. We have the flexibility to modulate our
investments up or down in response to changes in market conditions. At December&nbsp;31, 2006, we had
$467&nbsp;million in outstanding commitments for equipment purchases for 2007.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The most significant of our 2007 capital expenditure projects are expected to be: (a)&nbsp;for the
front-end facilities: (i)&nbsp;a dedicated investment, both in manufacturing and R&#038;D, in Agrate (Italy),
Phoenix (USA), Rousset (France) and Catania (Italy) to secure and develop our system oriented
proprietary technologies portfolio (Mixed-signal) required by our strategic customers through
specific initiatives both in term of volumes growth and Fabs multi sourcing; (ii)&nbsp;a specific
program of capacity growth devoted to MEMS in Agrate (Italy) to support the significant growth
opportunity in this new technology; (iii)&nbsp;completion of the current investment of the 300-mm joint
project with Philips Semiconductor International B.V. and Freescale Semiconductor Inc. on advanced
logic processes in Crolles2 (France) for the manufacturing robustness of 90nm and 65nm leading edge
technologies; (iv)&nbsp;in memory, the exploitation of Ang Mo Kio (Singapore) for the introduction and
industrialization of 65nm Flash processes; and (b)&nbsp;for the back-end facilities, the capital
expenditures will be mainly dedicated to the technology evolution to support the ICs path to
package size reduction in Shenzhen (China) and Muar (Malaysia) and to prepare the room for future
years capacity growth by completing the new production area in Muar and &#150; depending on demand
evolution &#151; starting the new plant in Longgang (Greater China).
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">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 announced additions. We expect to
have significant capital requirements in the coming years and in addition we
</DIV>

<P align="center" style="font-size: 10pt"><!-- Folio -->-53-<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">



<DIV align="left" style="font-size: 10pt; margin-top: 6pt">intend to continue to devote a substantial portion of our net revenues to R&#038;D. We plan to fund our
capital requirements from cash provided by operating activities, 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, convertible bonds or additional equity securities. A
substantial deterioration of our economic results and consequently of our profitability could
generate a deterioration of the cash generated by our operating activities. Therefore, there can be
no assurance that, in future periods, we will generate the same level of cash as in the previous
years to fund our capital expenditures for expansion plans, our working capital requirements, R&#038;D
and industrialization costs.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The zero coupon senior convertible bonds due in February&nbsp;2016 were issued at 100% of principal with
a yield to maturity of 1.5% and resulted in net proceeds to the Company of $974&nbsp;million less
transaction fees. The bonds are convertible by the holder at any time prior to maturity at a
conversion rate of 43.118317 shares per one thousand dollars face value of the bonds corresponding
to 41,997,240 equivalent shares. The holders can also redeem the convertible bonds on February&nbsp;23,
2011 at a price of $1,077.58, on February&nbsp;23, 2012 at a price of $1,093.81 and on February&nbsp;24, 2014
at a price of $1,126.99 per one thousand dollars face value of the bonds. The Company can call the
bonds at any time after March&nbsp;10, 2011 subject to the Company&#146;s share price exceeding 130% of the
accreted value divided by the conversion rate for 20 out of 30 consecutive trading days. The
Company may redeem for cash at the principal amount at issuance plus accumulated gross yield all,
but not a portion, of the convertible bonds at any time if 10% or less of the aggregate principal
amount at issuance of the convertible bonds remain outstanding in certain circumstances or in the
event of changes to the tax laws of the Netherlands or any successor jurisdiction.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt">Market Risk &#151; About Financial Instruments
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">We are exposed to changes in financial market conditions in the normal course of business due to
our operations in different foreign currencies and our ongoing investing and financing activities.
Market risk is the uncertainty to which future earnings or asset/liability values are exposed due
to operating cash flows denominated in foreign currencies and various financial instruments used in
the normal course of operations. The major risks to which we are exposed are related to the
fluctuations of the U.S. dollar exchange rate compared to the euro and the other major currencies,
the coverage of our foreign currency exposures, the variation of the interest rates and the risks
associated to the investments of our available cash. We have established policies, procedures and
internal processes governing our management of market risks and the use of financial instruments to
manage our exposure to such risks.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Our Income Statement is exposed to the fluctuations of the exchange rates such as the U.S. dollar,
the euro and the other major currencies since our revenues are mainly denominated in U.S. dollars
while a large part of our costs is denominated in euros or other major currencies. We enter into
cash flow hedges to cover a portion of our costs denominated in euros. Our balance sheet is also
exposed to these exchange rates fluctuations since the functional currency of our subsidiaries is
generally the local currency and as such, foreign exchange fluctuations are generating adjustments
for the translation into U.S. dollar consolidated reporting of their assets and liabilities.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">We have exposures in foreign currencies since our operating cash flows are denominated in various
foreign currencies as a result of our international business activities and certain of our
borrowings are exposed to changes in foreign exchange rates. The functional currency of our
</DIV>

<P align="center" style="font-size: 10pt"><!-- Folio -->-54-<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">



<DIV align="left" style="font-size: 10pt; margin-top: 6pt">subsidiaries is either the local currency or the U.S. dollar. We continuously evaluate our foreign
currency exposures based on current market conditions and the business environment. In order to
mitigate the impact of changes in foreign currency exchange rates, we enter into forward exchange
and currency options contracts. The magnitude and nature of such outstanding instruments are
detailed in Note 30 to our Consolidated Financial Statements. Forward contracts and currency
options outstanding as of December&nbsp;31, 2006 have remaining terms of 4&nbsp;days to 5&nbsp;months, which
mature on average after less than 2&nbsp;months. The notional amounts of outstanding foreign exchange
forward contracts and currency options totalled $824&nbsp;million and $2,200&nbsp;million in 2006 and 2005,
respectively. The principal currencies covered are the U.S. dollar, the euro, the Japanese yen, the
myr and the Singapore dollar. The risk of loss associated with these forward contracts is equal to
the exchange rate differential from the date the contract is made until the time it is settled.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">We are exposed to changes in interest rates primarily as a result of our borrowing activities which
include long-term debt used to fund business operations. We borrow in U.S. dollars as well as in
other currencies from banks and other sources. We primarily enter into debt obligations to support
general corporate and local purposes including capital expenditures and working capital needs. The
nature and amount of our long-term debt can be expected to vary as a result of future business
requirements, market conditions, and other factors. The principal risks are related to interest
rates variations to which we are exposed in regard to our long-term obligations. We primarily
utilize fixed-rate debt and do not expect changes in interest rates to have a material effect on
income or cash flows in 2007.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">We place our cash and cash equivalents, or a part of it, with high credit quality financial
institutions with at least a single &#147;A&#148; rating, mainly on a short-term basis; as such we are
exposed to the fluctuations of the market interest rates on our placement and our cash, which can
have an impact on our accounts. We manage the credit risks associated with financial instruments
through credit approvals, investment limits and centralized monitoring procedures but do not
normally require collateral or other security from the parties to the financial instruments.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">We do not anticipate any material adverse effect on our financial position, result of operations or
cash flows resulting from the use of our instruments in the future. There can be no assurance that
these strategies will be effective or that transaction losses can be minimized or forecasted
accurately.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The information above summarizes our market risks associated with cash equivalents, debt
obligations, and other significant financial instruments as of December&nbsp;31, 2006. The information
above should be read in conjunction with Note 30 to the Consolidated Financial Statements.
</DIV>


<P align="center" style="font-size: 10pt"><!-- Folio -->-55-<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>
<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="88%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>STATUTORY FINANCIAL STATEMENTS</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px"><B>CONSOLIDATED FINANCIAL STATEMENTS</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>57</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><A href="#300">CONSOLIDATED STATEMENTS OF INCOME FOR THE YEARS ENDED DECEMBER 31, 2006 AND 2005</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">58</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><A href="#301">CONSOLIDATED BALANCE SHEETS AS OF DECEMBER 31, 2006 AND 2005</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">59</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><A href="#302">CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY FOR THE YEARS ENDED DECEMBER 31, 2006 AND 2005</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">60</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><A href="#303">CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE YEARS ENDED DECEMBER 31, 2006 AND 2005</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">61</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><A href="#304">NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">62</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px"><B>COMPANY FINANCIAL STATEMENTS</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>128</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><A href="#305">COMPANY BALANCE SHEETS AS OF DECEMBER 31, 2006 AND 2005</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">129</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><A href="#306">ABBREVIATED COMPANY STATEMENTS OF INCOME FOR THE YEARS ENDED DECEMBER 31, 2006 AND 2005</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">130</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><A href="#307">NOTES TO THE COMPANY FINANCIAL STATEMENTS</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">131</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>OTHER INFORMATION</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>141</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><A href="#308">AUDITOR&#146;S REPORT</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">141</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><A href="#309">APPROPRIATION OF RESULT</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">141</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><A href="#310">PROPOSED CASH DIVIDEND</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">141</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><A href="#311">SUBSEQUENT EVENTS</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">141</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<P align="center" style="font-size: 10pt"><!-- Folio -->- 56 -<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="left">
<A name="110"></A>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>STATUTORY FINANCIAL STATEMENTS</B>
</DIV>

<DIV align="left">
<A name="111"></A>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>&nbsp;&nbsp;&nbsp;&nbsp;CONSOLIDATED FINANCIAL STATEMENTS</B>
</DIV>
<DIV align="left" style="font-size: 10pt; margin-top: 6pt">CONSOLIDATED STATEMENTS OF INCOME FOR THE YEARS ENDED DECEMBER 31, 2006 AND 2005
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">CONSOLIDATED BALANCE SHEETS AS OF DECEMBER 31, 2006 AND 2005
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY FOR THE YEARS ENDED DECEMBER 31, 2006 AND 2005
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE YEARS ENDED DECEMBER 31, 2006 AND 2005
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
</DIV>


<P align="center" style="font-size: 10pt"><!-- Folio -->- 57 -<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">




<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>STMICROELECTRONICS N.V. AND ITS SUBSIDIARIES</B>
</DIV>

<DIV align="left">
<A name="300"></A>
</DIV>
<DIV align="center" style="font-size: 10pt"><B>CONSOLIDATED STATEMENTS OF INCOME</B></DIV>


<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="64%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Year Ended December</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Year Ended December</B></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="left" style="border-bottom: 1px solid #000000">In million of U.S. dollars except per share amounts</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>Note</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>31, 2006</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>31, 2005</B></TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Sales</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">9,838</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">8,876</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Other revenues</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">16</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Total revenues</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>9,854</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>8,882</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Cost of sales</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">21</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(6,373</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(5,882</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Gross profit</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>3,481</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>3,000</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Selling, general and administrative</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">21</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(1,083</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(1,069</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Research and development</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">21</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(1,388</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(1,411</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Other income</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">19</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">138</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">104</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Other expenses</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">19</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(92</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(132</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Impairment, restructuring charges and other related
closure costs</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">20</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(68</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(98</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Operating profit</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>988</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>394</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Finance income</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">22</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">143</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">53</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Finance costs</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">22</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(96</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(57</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Share of loss of associates</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(7</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(3</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Profit before income tax</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>1,028</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>387</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Income tax expense</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">23</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(62</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(39</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Net profit</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>966</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>348</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Attributable to:</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Equity holders of the Company</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>964</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>347</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Minority interest</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>2</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>1</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Earnings per share (Basic)</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">18</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>1.08</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>0.39</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Earnings per share (Diluted)</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">18</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>1.07</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>0.39</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt">The accompanying notes are an integral part of these consolidated financial statements.
</DIV>


<P align="center" style="font-size: 10pt"><!-- Folio -->- 58 -<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">




<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>STMICROELECTRONICS N.V. AND ITS SUBSIDIARIES</B>
</DIV>

<DIV align="left">
<A name="301"></A>
</DIV>
<DIV align="center" style="font-size: 10pt"><B>CONSOLIDATED BALANCE SHEETS</B></DIV>


<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="64%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="7" style="border-bottom: 1px solid #000000"><B>As at</B></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="left" style="border-bottom: 1px solid #000000">In million of U.S. dollars</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>Note</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>December 31, 2006</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>December 31, 2005</B></TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>ASSETS</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Non-current assets:</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Property, plant and equipment</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">10</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6,426</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6,179</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Goodwill</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">8</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">176</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">174</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Intangible assets</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">9</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">729</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">458</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Deferred income tax assets</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">23</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">214</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">160</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Derivative financial instruments</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">30</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Investments in associates</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">261</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">35</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Restricted cash for equity investments</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">218</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Investments and other non-current assets</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">11</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">143</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">118</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Total non-current assets</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>8,171</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>7,124</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Current assets:</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Inventories</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,640</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,413</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Trade accounts receivable</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,589</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,490</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Derivative financial instruments</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">30</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">14</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Other receivables and assets</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">7</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">592</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">586</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Available for sale financial assets</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">460</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Short-term deposits</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">25</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">250</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Cash and cash equivalent</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">24</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,963</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,027</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Total current assets</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>6,508</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>5,519</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>TOTAL ASSETS</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>14,679</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>12,643</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>LIABILITIES AND EQUITY</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Equity attributable to the shareholders of the Company</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">16</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">10,128</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">8,650</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Minority interests</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">52</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">50</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Total equity</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>10,180</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>8,700</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Liabilities</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Non-current liabilities:</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Long-term debt</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">14</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,740</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">269</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Retirement benefit obligations</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">13</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">343</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">300</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Deferred income tax liabilities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">23</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">130</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">83</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Other non-current liabilities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">15</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">320</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">16</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Total non-current liabilities</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>2,533</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>668</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Current liabilities:</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Current portion of long-term debt</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">14</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">136</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,499</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Trade accounts payable</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,044</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">965</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Derivative financial instruments</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">30</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">31</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Other payables, accrued liabilities and provisions</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">12</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">673</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">617</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Current income tax liabilities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">112</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">152</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Bank overdrafts</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">11</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>1,966</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>3,275</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Total liabilities</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>4,499</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>3,943</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>TOTAL LIABILITIES AND EQUITY</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>14,679</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>12,643</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt">The accompanying notes are an integral part of these consolidated financial statements.
</DIV>


<P align="center" style="font-size: 10pt"><!-- Folio -->- 59 -<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">




<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>STMICROELECTRONICS N.V. AND ITS SUBSIDIARIES</B>
</DIV>

<DIV align="left">
<A name="302"></A>
</DIV>
<DIV align="center" style="font-size: 10pt"><B>CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY</B></DIV>


<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="20%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="19" style="border-bottom: 1px solid #000000"><B>Equity attributable to the shareholders of the Company</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="left">In million of U.S. dollars, except</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Ordinary</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Capital</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Treasury</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Retained</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Other</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Minority</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Total</B></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="left" style="border-bottom: 1px solid #000000">per share amounts</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>Note</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>Shares</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>Surplus</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>Shares</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>Earnings</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>Reserves</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>Interests</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>Equity</B></TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Balance as of December&nbsp;31,
2004</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>1,150</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>1,924</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right"><B>(348</B></TD>
    <TD nowrap><B>)</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>5,068</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>1,234</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>48</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>9,076</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Fair value of equity
component of convertible
debt classified as financial
liability</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">14</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">60</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">60</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Adjusted balance as of
January&nbsp;1, 2005</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>1,150</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>1,924</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right"><B>(348</B></TD>
    <TD nowrap><B>)</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>5,128</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>1,234</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>48</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>9,136</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Unrealized loss on cash flow
hedge, net of tax</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">17</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(67</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(67</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Foreign currency translation
difference</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">17</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(764</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(763</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Net income recognized
directly in equity</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right"><I>(831</I></TD>
    <TD nowrap><I>)</I></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><I>1</I></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right"><I>(830</I></TD>
    <TD nowrap><I>)</I></TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Net profit</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">347</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">348</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Total recognized income for
2005</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>347</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right"><B>(831</B></TD>
    <TD nowrap><B>)</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>2</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right"><B>(482</B></TD>
    <TD nowrap><B>)</B></TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Employee share award scheme:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Value of services provided</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">16</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">118</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">118</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Exercise of share options</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">16</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">32</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">35</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Dividends, $0.12 per share</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">17</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(107</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(107</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>3</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>32</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right"><B>(107</B></TD>
    <TD nowrap><B>)</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>118</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>46</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Balance as of December&nbsp;31,
2005</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>1,153</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>1,956</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right"><B>(348</B></TD>
    <TD nowrap><B>)</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>5,368</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>521</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>50</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>8,700</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Unrealized profit on cash
flow hedge, net of tax</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">17</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">14</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">14</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Foreign currency translation
difference</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">17</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">532</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">532</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Net income recognized
directly in equity</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">546</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">546</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Net profit</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">964</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">966</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Total recognized income for
2006</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>964</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>546</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>2</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>1,512</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Employee share award scheme:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Value of services provided</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">16</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">46</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">46</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Distribution of treasury
shares</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">16</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">17</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(16</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Exercise of stock options</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">16</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">25</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">28</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Dividends, $0.12 per share</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">17</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(107</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(107</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>3</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>25</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>17</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right"><B>(123</B></TD>
    <TD nowrap><B>)</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>46</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>&#151;</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right"><B>(32</B></TD>
    <TD nowrap><B>)</B></TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Balance as of December&nbsp;31,
2006</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>1,156</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>1,981</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right"><B>(331</B></TD>
    <TD nowrap><B>)</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>6,209</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>1,113</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>52</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>10,180</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt">The accompanying notes are an integral part of these consolidated financial statements.
</DIV>


<P align="center" style="font-size: 10pt"><!-- Folio -->- 60 -<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">




<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>STMICROELECTRONICS N.V. AND ITS SUBSIDIARIES</B>
</DIV>

<DIV align="left">
<A name="303"></A>
</DIV>
<DIV align="center" style="font-size: 10pt"><B>CONSOLIDATED STATEMENTS OF CASH FLOWS</B></DIV>


<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="64%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Year Ended December 31,</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Year Ended December 31,</B></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="left" style="border-bottom: 1px solid #000000">In million of U.S. dollars</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>Note</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>2006</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>2005</B></TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Cash flows from operating activities:</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Cash generated from operations</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">26</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,833</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,091</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Interest paid</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(29</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(17</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Income tax paid</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(117</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(90</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Net cash from operating activities</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>2,687</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>1,984</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Cash flows from investing activities:</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Payment for purchase of tangible assets</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">10</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(1,555</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(1,523</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Proceeds from the sale of tangible assets</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">10</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">22</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">82</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Investment in intangible and financial assets</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" nowrap>9, 11</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(398</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(287</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Proceeds from the sales of affiliates</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">7</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Capital contributions to associates</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(213</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(38</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Restricted cash for equity investments</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(218</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Investment in short-term deposits</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">25</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(903</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Proceeds from maturity of short-term deposits</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">25</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">653</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Purchase of available for sale financial assets</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(460</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Interest received</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">116</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">52</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Net cash used in investing activities</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right"><B>(2,949</B></TD>
    <TD nowrap><B>)</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right"><B>(1,714</B></TD>
    <TD nowrap><B>)</B></TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Cash flows from financing activities:</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Proceeds from issuance of ordinary shares</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">16</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">28</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">35</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Proceeds from issuance of convertible bonds</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">14</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">962</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Proceeds from issuance of long-term debt</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">14</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">782</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">50</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Repayment of convertible bonds</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">14</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(1,377</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Repayment of long-term debt</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">14</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(145</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(110</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Dividends paid to the Company&#146;s shareholders</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">17</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(107</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(107</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Other financing activities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Net cash used in financing activities</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>143</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right"><B>(131</B></TD>
    <TD nowrap><B>)</B></TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Effect of changes in exchange rates</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">66</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(15</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Net cash increase (decrease)</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right"><B>(53</B></TD>
    <TD nowrap><B>)</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>124</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Cash and cash equivalents at beginning of period</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>2,016</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>1,892</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Cash and cash equivalents at end of period</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>1,963</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>2,016</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Reconciliation of cash and cash equivalents</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Cash and cash equivalents for balance sheet purposes</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,963</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,027</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Bank overdrafts</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(11</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Cash and cash equivalents for cash flow statement
purposes</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>1,963</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>2,016</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt">The accompanying notes are an integral part of these consolidated financial statements.
</DIV>


<P align="center" style="font-size: 10pt"><!-- Folio -->- 61 -<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">



<DIV align="left">
<A name="304"></A>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>NOTES TO CONSOLIDATED FINANCIAL STATEMENTS</B><BR>
(in millions of U.S. dollars, except per share amounts)
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>1 &#151; GENERAL INFORMATION</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">STMicroelectronics N.V. (the &#147;Company&#148;) is registered in The Netherlands with its statutory
domicile in Amsterdam. The Company was formed in 1987 to be the holding company for 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.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The Company and its subsidiaries (together &#147;the Group&#148;) are a global independent semiconductor
company that designs, develops, manufactures and markets a broad range of semiconductor integrated
circuits (&#147;ICs&#148;) and discrete devices. The Group offers a diversified product portfolio and
develops products for a wide range of market applications, including automotive products, computer
peripherals, telecommunications systems, consumer products, industrial automation and control
systems. Within its diversified portfolio, the Group has focused on developing products that
leverage its technological strengths in creating customized, system-level solutions with
high-growth digital and mixed-signal content.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">These consolidated financial statements have been approved for submission to the annual general
meeting of the shareholders by the Supervisory Board on March&nbsp;20, 2007.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>2 &#151; SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The principal accounting policies applied in the preparation of these consolidation financial
statements are set out below. These policies have been consistently applied to all the years
presented, unless otherwise stated.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Certain prior year items have been reclassified to conform with current year presentation. The
disclosure contained within the consolidated statement of changes in shareholders&#146; equity has been
amended to more appropriately reflect the categorization of other reserves and retained earnings.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt">2.1 &#151; Basis of preparation
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">These consolidated financial statements, prepared for Dutch statutory purposes, have been prepared
in accordance with International Financial Reporting Standards (&#147;IFRS&#148;) as adopted by the European
Union. In accordance with Article&nbsp;402, Title 9, Book 2 of the Dutch Civil Code the statement of
income is presented in abbreviated form for the Company&#146;s accounts further presented in these
statutory financial statements.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">All balances and values in the current and prior periods are in millions of dollars, except share
and per-share amounts or unless otherwise stated. Under Article&nbsp;35 of the Company&#146;s Articles of
Association, the financial year extends from January 1 to December&nbsp;31, which is the period-end of
each fiscal year. Interim periods are established for accounting purposes on a thirteen-week basis.
In 2006, the Company&#146;s first quarter ended on April&nbsp;1, its second quarter ended on July&nbsp;1, its
third quarter ended on September&nbsp;30 and its fourth quarter ended on December&nbsp;31.
</DIV>

<P align="center" style="font-size: 10pt"><!-- Folio -->- 62 -<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">For internal and external reporting purposes, the Group follows accounting principles generally
accepted in the United States of America (&#147;U.S. GAAP&#148;). U.S. GAAP is the Group&#146;s primary accounting
standard for the setting of financial and operational performance targets.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The consolidated financial statements have been prepared under the historical cost convention, as
modified by available-for-sale financial assets and certain financial assets and financial
liabilities (including derivative instruments) at fair value. The preparation of consolidated
financial statements in conformity with IFRS requires the use of certain critical accounting
estimates. It also requires management to exercise its judgment in the process of applying the
Group&#146;s accounting policies. The areas involving a higher degree of judgment or complexity, or
areas where assumptions and estimates are significant to the consolidated financial statements are
disclosed in Note 2.23.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt">2.2 &#151;Consolidation
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The Group&#146;s consolidated financial statements include the assets, liabilities, results of
operations and cash flows of its majority-owned subsidiaries. The ownership of other interest
holders is reflected as minority interests. Intergroup balances and transactions have been
eliminated in consolidation.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><I>Subsidiaries</I>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Subsidiaries are all entities over which the Group has the power to govern the financial and
operating policies generally accompanying a shareholding of more than one half of the voting
rights. The existence and effect of potential voting rights that are currently exercisable or
convertible are considered when assessing whether the Group controls another entity.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Subsidiaries are fully consolidated from the date on which control is transferred to the Group.
They are de-consolidated from the date that control ceases.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The purchase method of accounting is used to account for the acquisition of subsidiaries by the
Group. The cost of an acquisition is measured at the fair value of the assets given, equity
instruments issued and liabilities incurred or assumed at the date of exchange, plus costs directly
attributable to the acquisition. Identifiable assets acquired and liabilities and contingent
liabilities assumed in a business combination are measured initially at their fair values at the
acquisition date, irrespective of any minority interest. The excess of the cost of acquisition over
the fair value of the Company&#146;s share of the identifiable net assets acquired is recorded as
goodwill (Note 2.13). If the cost of acquisition is lower than the fair value of the Company&#146;s
share in the net assets of the entity acquired, the difference is recognized directly in the income
statement.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><I>Transactions and minority interests</I>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The Group applies a policy of treating transactions with minority interest as transactions with
parties external to the Group. Disposals to minority interest result in gains and losses for the
Group that are recorded in the income statement. Purchases from minority interest result in
goodwill, being the difference between any consideration paid and the relevant share acquired of
the carrying value of net assets of the subsidiary.
</DIV>

<P align="center" style="font-size: 10pt"><!-- Folio -->- 63 -<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><I>Associates</I>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Associates include all entities over which the Group has significant influence but not control,
generally accompanying a shareholding of between 20% and 50% of the voting rights. These
investments are accounted for by the equity method of accounting and are initially recognized at
cost. They are presented on the face of the consolidated balance sheet as &#147;Investments in
associates&#148;.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The Group&#146;s share in its associates&#146; profit and losses is recognized in the income statement as
&#147;Share of loss of associates&#148; and in the balance sheet as an adjustment against the carrying amount
of the associate. When the Group&#146;s share of losses in an associate equals or exceeds its interest
in the associate, including any unsecured receivable, the Group does not recognize further losses,
unless it has incurred obligations or made payments on behalf of the associate.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Unrealized gains on transaction between the Group and its associates are eliminated to the extent
of the Group&#146;s interest in the associates. Unrealised losses are also eliminated unless the
transaction provides evidence of an impairment of the assets transferred. Accounting policies of
associated have been changed where necessary to ensure consistency with policies adopted by the
Group.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt">2.3 &#151; Foreign currency translation
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><I>Functional and presentation currency</I>

</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The U.S. dollar is the presentation currency for the Group and the functional currency for the
Company, which is the currency of the primary economic environment in which the Company operates.
The worldwide semiconductor industry uses the U.S. dollar as a currency of reference for actual
pricing in the market. Furthermore, the majority of the Group&#146;s transactions are denominated in
U.S. dollars, and revenues from external sales in U.S. dollars largely exceed revenues in any other
currency. However, labor costs are concentrated primarily in the countries that have adopted the
euro currency.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><I>Translation and balances</I>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The functional currency of each subsidiary throughout the group is either the local currency or the
US dollar, determined on the basis of the economical environment in which each subsidiary operates.
For consolidation purposes, assets and liabilities included in the financial statements of the
Company&#146;s subsidiaries having the local currency as functional currency are translated at current
rates of exchange at the balance sheet date. Income and expense items and cash flow items are
translated at the monthly average exchange rate of the period, which has been determined to be
representative of the exchange rates at the date of the respective transactions. The effects of
translating the financial position and results of operations from local functional currencies are
reported as a component of &#147;other reserves&#148; in the consolidated statements of changes in equity.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Assets, liabilities, revenues, expenses, gains or losses arising from foreign currency transactions
are recorded in the functional currency of the recording entity at the exchange rate during the
month of the transaction. At each balance sheet date, recorded balances denominated in a currency
other than the recording entity&#146;s functional currency are re-
</DIV>

<P align="center" style="font-size: 10pt"><!-- Folio -->- 64 -<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">



<DIV align="left" style="font-size: 10pt; margin-top: 6pt">measured into the functional currency at the exchange rate prevailing at the balance sheet date.
The related exchange gains and losses are recorded in the consolidated statements of income as
&#147;Other income and expenses, net&#148;.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Goodwill and fair value adjustments arising on the acquisition of a foreign entity are treated as
assets and liabilities of the foreign entity and translated at the closing rate.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt">2.4 &#151; Revenue Recognition
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Revenue comprises the fair value of the consideration received or receivable for the sale of goods
and services, net of value-added tax, rebates and discounts and after eliminating intercompany
sales within the Group.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The Group recognises revenue when the amount of revenue can be reliably measured, it is probable
that future economic benefits will flow to the entity and specific criteria have been met for each
of the Group&#146;s activities as described below. The amount of revenue is not considered to be
reliably measurable until all contingencies relating to the sale have been resolved. In
particular, revenue is recognized as follows:
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><I>Sales</I>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Revenue from the sale of products is recognized upon transfer of significant risks and rewards of
ownership to the customer. This usually occurs at the time of shipment. Distribution costs are
recorded in &#147;cost of sales&#148;.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><I>Other revenues</I>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Other revenues primarily consist of license revenue and patent royalty income, which are recognized
ratably over the term of the agreements.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><I>Fundings</I>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Fundings received by the Group are mainly from governmental agencies and income is recorded when
all qualifying expenditures have been performed and the Group has obtained sufficient evidence from
the relevant authorities that the credit will be granted. The Group&#146;s primary sources for
government funding are French, Italian and other European Union (&#147;EU&#148;) governmental entities, and
Singapore agencies. Such funding is generally provided to encourage research and development
activities, industrialization and local economic development. The EU has developed model contracts
for research and development funding that require beneficiaries to disclose the results to third
parties on reasonable terms. The conditions for receipt of government funding may include
eligibility restrictions, approval by EU authorities, annual budget appropriations, compliance with
European Commission regulations, as well as specifications regarding objectives and results.
Certain specific contracts contain obligations to maintain a minimum level of employment and
investment during a certain period 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. In accordance with the Group&#146;s revenue recognition policy,
funding related to these contracts is recorded when the conditions required by the contracts are
met. The Group&#146;s funding programs are classified under three general categories: funding for
research and development activities, capital investment, and loans.
</DIV>

<P align="center" style="font-size: 10pt"><!-- Folio -->- 65 -<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Funding for research and development activities is the most common form of funding that the Group
receives. Public funding for such activities is recorded as &#147;other income&#148; in the Group&#146;s
consolidated statements of income. Public funding is recognized ratably as the related costs are
incurred once the agreement with the respective governmental agency has been signed and all
applicable conditions are met. No major public funding is received for development projects
recognized by the Group as intangible assets, which would have supposed that the Group would have
recognized such funding as a reduction of the corresponding intangible assets.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The Group receives certain specific project-related research tax credits in some of its tax
jurisdictions. Such credits can be recovered through the reduction of income tax to be paid for the
year. Nevertheless, the Group is entitled to receive in cash such credit even if no income tax is
expected to be paid. As such the Group recognizes these credits as research and development
funding, which are included in &#147;other income&#148; in the consolidated statements of income.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Capital investment funding is recorded as a reduction of &#147;property, plant and equipment&#148; and is
recognized in the Group&#146;s consolidated statements of income according to the depreciation charges
of the funded assets during their useful lives. The Group also receives capital funding in Italy,
which is recovered through the reduction of various government liabilities, including income taxes,
value-added tax and employee-related social charges. The funding has been classified as long-term
receivable and is reflected in the balance sheet at its discounted net present value. The
subsequent accretion of the discount is recorded as non-operating profit in &#147;Finance cost&#148;.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The Group receives certain loans, mainly related to large capital investment projects, at
preferential interest rates. The Group records these loans at their nominal value as debt in its
consolidated balance sheets, which has also been determined to approximate its effective rate based
on the term outstanding.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt">2.5 &#151; Research and development
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Research and development expenditures include costs incurred by the Group, the Group&#146;s share of
costs incurred by other research and development interest groups and costs associated with
co-development alliances entered with other companies for joint research initiatives. Research and
development expenses do not include marketing design center costs, which are accounted for as
selling expenses and process engineering, pre-production or process transfer costs which are
recorded as cost of sales. Research costs are charged to expense as incurred.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Expenditures incurred on development projects, mainly related to the design and testing of new or
improved products are recognized as intangible assets when it is probable that the project will be
a success, considering its commercial and technological feasibility, and costs can be measured
reliably. Development expenditures recognized as assets are amortized over their estimated useful
lives, not exceeding three years (Note 2.12). Other development costs are recognized as an expense
as incurred. Development costs recognized as an expense are not recognized as an asset in a
subsequent period. The amortization expense recognized on capitalized development costs is recorded
as cost of sales. Amortization expense on technologies and licenses purchased by the Group from
third parties to facilitate the Group&#146;s research is recorded as research and development expenses.
</DIV>

<P align="center" style="font-size: 10pt"><!-- Folio -->- 66 -<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="left" style="font-size: 10pt; margin-top: 12pt">2.6 &#151; Start-up costs
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Start-up costs represent costs incurred in the start-up and testing of the Group&#146;s new
manufacturing facilities, before reaching the earlier of a minimum level of production or 6-months
after the fabrication line&#146;s quality qualification. No sales are associated with these costs. As
such, they are not included as part of cost of sales and are presented in &#147;other expenses&#148; in the
consolidated statements of income.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt">2.7 &#151; Income taxes
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Income tax expense represents the income taxes expected to be paid or the benefit expected to be
received related to the current year income or loss in each individual tax jurisdiction. Income tax
expense for specific tax assessments are also estimated and recorded when an additional tax payment
is determined probable. Deferred tax assets and liabilities are recorded, using the liability
method, for temporary differences arising between the tax and book bases of assets and liabilities
and for the benefits of tax credits and operating loss carry-forwards. However, deferred income tax
is not accounted for if it arises from initial recognition of an asset or liability in a
transaction other than a business combination that, at the time of the transaction, affects neither
accounting nor taxable profit or loss. Deferred income tax is determined using tax rates and laws
that have been enacted or substantially enacted by the balance sheet date and are expected to apply
when the related deferred income tax asset is realized or the deferred income tax liability is
settled.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Deferred income tax assets are recognized to the extent that it is probable that future taxable
profit will be available against which the temporary differences can be utilized.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The Group does not provide deferred income taxes on temporary differences arising on investments in
subsidiaries and associates because the timing of the reversal of the temporary difference is
controlled by the Group, and it is probable that the temporary difference will not reverse in the
foreseeable future, or if reversed, will not be subject to tax.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Certain specific research tax credits received in some of the tax jurisdictions of the Group are
recognized as research and development funding and included in &#147;other income&#148; in the consolidated
statements of income since the Group is entitled to receive in cash such credit even if no income
tax is expected to be paid for the year in which the research tax credit must be recognized.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt">2.8 &#151; Earnings per share
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Basic earnings per share are computed by dividing net profit by the weighted average number of
ordinary shares outstanding during the period. Diluted earnings per share are computed using the
treasury stock method by dividing net profit (adding-back interest expense, net of tax effects,
related to convertible debt if determined to be dilutive) by the weighted average number of
ordinary shares and potential ordinary shares outstanding during the period. The weighted average
shares used to compute diluted earnings per share include the incremental shares of ordinary shares
relating to stock options granted, nonvested shares and convertible debt to the extent such
incremental shares are dilutive. Nonvested shares with performance or market conditions are
included in the computation of diluted earnings per share if their conditions have been satisfied
at the balance sheet date and if the awards are dilutive.
</DIV>

<P align="center" style="font-size: 10pt"><!-- Folio -->- 67 -<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="left" style="font-size: 10pt; margin-top: 12pt">2.9 &#151; Cash and cash equivalents
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Cash and cash equivalents represents cash on hand, deposits at call with banks, highly liquid
investments with insignificant interest rate risk purchased with an original maturity of ninety
days or less. For cash flow presentation purposes, cash and cash equivalents includes bank
overdrafts. Bank overdrafts are shown as part of current liabilities on the consolidated balance
sheet.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt">2.10 &#151; Trade accounts receivable
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The accounts receivable are initially recognized at fair value, and subsequently measured at
amortized cost using the effective interest method, less a provision for impairment. The Group
maintains a provision for impairment of receivables for estimated losses resulting from its
customers&#146; inability to make required payments. The amount of provision is the difference between
the asset&#146;s carrying amount and the present value of the estimated present cash flows, discounted
at the effective interest rate. The amount of the provision is recognized in the income statement
as &#147;selling, general and administrative expenses&#148;.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt">2.11 &#151; Inventories
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Inventories are stated at the lower of cost or net realizable value. Cost is based on the weighted
average cost by adjusting standard cost to approximate actual manufacturing costs on a quarterly
basis; the cost is therefore dependent on the Group&#146;s manufacturing performance. In the case of
underutilization of manufacturing facilities, the costs associated with the excess capacity are not
included in the valuation of inventories but charged directly to cost of sales. Net realizable
value is the estimated selling price in the ordinary course of business, less applicable variable
selling expenses.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The Company performs on a continuous basis inventory write-off of products, which have the
characteristics of slow-moving, old production date and technical obsolescence. Additionally, the
Group evaluates its product inventory to identify obsolete or slow-selling stock by computing any
excess inventory based on the previous quarter sales, orders&#146; backlog and production plans.
Inventory associated with obsolete or uncommitted inventory is expensed to cost of sales.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt">2.12 &#151; Intangible assets subject to amortization
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Intangible assets subject to amortization include the cost of technologies and licenses purchased
from third parties, purchased software, internally developed software which is capitalized and
costs incurred on other development projects that meet all capitalization criteria as defined in
IAS 38 (revised), <I>Intangible Assets</I>. Intangible assets subject to amortization are reflected net of
any impairment losses. The carrying value of intangible assets subject to amortization is evaluated
whenever changes in circumstances indicate that the carrying amount may not be recoverable. An
impairment loss is recognized in the income statement for the amount by which the asset&#146;s carrying
amount exceeds its recoverable amount. The recoverable amount is the higher of an asset&#146;s fair
value and value in use. The fair value would normally be estimated based on independent market
appraisals, the value in use corresponds to the sum of discounted future cash flows to be derived
from the particular asset or to the cash-regenerating unit to which it relates.
</DIV>

<P align="center" style="font-size: 10pt"><!-- Folio -->- 68 -<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Amortization is computed using the straight-line method over the following estimated useful lives:
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="88%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
</TR>
<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Technologies &#038; licenses</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top" nowrap>3-7 years</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Purchased software</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top" nowrap>3-4 years</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Internally developed software</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">4 years</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Capitalized development costs</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">3 years</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The Group evaluates the remaining useful life of an intangible asset at each reporting period
to determine whether events and circumstances warrant a revision to the remaining period of
amortization.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The capitalization of costs for internally generated software developed for the Group&#146;s internal
use begins when preliminary project stage is completed and when the Group, implicitly or
explicitly, authorizes and commits to funding a computer software project since it will be probable
that the project will be completed and will be used to perform the function intended.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Expenditures incurred on development projects, mainly related to the design and testing of new or
improved products, are recognised as intangible assets net of any material government funding
directly attributable to the specific projects when the Group can demonstrate all of the following:
(i)&nbsp;the technical feasibility of completing the item under development so that it will be available
for use or sale; (ii)&nbsp;its intention to complete the item under development and to use it or sell
it; (iii)&nbsp;its ability to use or sell the intangible asset under construction; (iv)&nbsp;how the item
under development will generate probable future economic benefits; (v)&nbsp;the availability of adequate
technical, financial and other resources to complete the development and to use or sell the item
under development; and (vi)&nbsp;its ability to measure reliably the expenditure attributable to the
project during its development. Development costs that have been capitalized are amortized on a
straight-line basis over the period of their expected benefits, not exceeding three years.
Development costs incurred before the Group can demonstrate the compliance with the capitalization
criteria described above and after the commencement of the generation of benefits through the use
or production of the developed item are not capitalized and are recognized in the consolidated
statements of income as research and development expenses.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt">2.13 &#151; Goodwill
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Goodwill recognized in business combinations is not amortized but rather is subject to an
impairment test to be performed on an annual basis or more frequently if indicators of impairment
exist, in order to assess the recoverability of its carrying value. Goodwill subject to potential
impairment is allocated to cash-generating units (&#147;CGUs&#148;) for the purpose of impairment testing.
These CGUs, which represent a component of an operating segment for which discrete financial
information is available and is subject to regular review by segment management are further
described in detail in Note 8. This impairment test determines whether the recoverable amount of
each cash-generating unit, which is the higher of its assets&#146; net selling price and its value in
use, is lower than its total carrying amount. If lower, an impairment loss is recognized for the
excess of the carrying amount over the recoverable amount. If the impairment loss exceeds the book
value of goodwill, allocation is made on a pro rata basis to assets. In determining the value in
use of a cash-generating unit, the Group usually estimates the expected discounted future cash
flows associated with the unit.
</DIV>

<P align="center" style="font-size: 10pt"><!-- Folio -->- 69 -<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">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
cash-generating unit&#146;s market penetration, the market acceptance of certain new technologies,
relevant cost structure, the discount rates applied using a weighted average cost of capital and
the perpetuity rates used in calculating cash flow terminal values.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt">2.14 &#151; Property, plant and equipment
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Property, plant and equipment are stated at historical cost, net of government fundings,
depreciation and any impairment losses. Major additions and improvements are capitalized, minor
replacements and repairs are charged to the consolidated statement of income.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Land is not depreciated. Depreciation on fixed assets is computed using the straight-line method
over the following estimated useful lives:
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="88%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
</TR>
<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Buildings</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top" nowrap>33 years</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Facilities &#038; leasehold improvements</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top" nowrap>5-10 years</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Machinery and equipment</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">3-6 years</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Computer and R&#038;D equipment</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">3-6 years</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Other</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">2-5 years</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The Group evaluates each period whether there is reason to suspect that tangible assets or
groups of assets might not be recoverable. Several impairment indicators exist for making this
assessment, such as: significant changes in the technological, market, economic or legal
environment in which the Group operates or in the market to which the asset is dedicated, or
available evidence of obsolescence of the asset, or indication that its economic performance is, or
will be, worse than expected. For the purposes of assessing impairment, assets are grouped at the
lowest levels for which there are separately identifiable cash flows (cash-generating units). An
impairment loss is recognized in the income statement for the amount by which the asset&#146;s carrying
amount exceeds its recoverable amount. The recoverable amount is the higher of an asset&#146;s fair
value less costs to sell and value in use. The fair value is normally estimated by the Group based
on independent market appraisals. The value in use corresponds to the sum of discounted future cash
flows to be derived from the particular asset, using market assumptions such as the utilization of
the Group&#146;s fabrication facilities and the ability to upgrade such facilities, change in the
selling price and the adoption of new technologies. The Group also evaluates, and adjusts if
appropriate, the assets&#146; useful lives, at each balance sheet date or when impairment indicators
exist. Assets classified as held for sale are reflected at the lower of their carrying amount or
fair value less selling costs and are not depreciated during the selling period. Costs to sell
include incremental direct costs to transact the sale that would not have been incurred except for
the decision to sell.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">When property, plant and equipment are retired or otherwise disposed of, the net book value of the
assets is removed from the Group&#146;s books and the net gain or loss is included in &#147;other income&#148; in
the consolidated statements of income.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Leasing agreements in which a significant portion of the risks and rewards of ownership are
retained by the Group are classified as finance leases. These leases are included in &#147;property,
plant and equipment&#148; and depreciated over the shorter of the estimated useful life or the lease
term. Leasing agreements classified as operating leases are arrangements in which the lessor
retains a significant portion of the risks and rewards of ownership of the leased asset.
</DIV>

<P align="center" style="font-size: 10pt"><!-- Folio -->- 70 -<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Payments made under operating leases are charged to the income statement on a straight-line basis
over the period of the lease.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Borrowing costs incurred for the construction of any qualifying asset are capitalized during the
period of time that is required to complete and prepare the asset for its intended use. Other
borrowing costs are expensed.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt">2.15 &#151; Financial Assets
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The Group classifies its financial assets in the following categories: financial assets at fair
value through profit and loss, loans and receivables and available-for-sale financial assets. The
classification depends on the purpose for which the investments were acquired. Management
determines the classification of its investments at initial recognition and re-evaluates this
designation at each reporting date.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><I>Financial assets at fair value through profit and loss</I>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">A financial asset is classified in this category if acquired principally for the purpose of selling
in the short term or if so designated by management. Assets in this category are classified as
current assets when they are expected to be realized within twelve months of the balance sheet
date.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><I>Loans and receivables</I>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Loans and receivables are non-derivative financial assets with fixed or determinable payments that
are not quoted in an active market. They arise when the Group provides money, goods or services
directly to a debtor with no intention of trading the receivable. They are included in current
assets, except for maturities greater than twelve months after the balance sheet date, which are
classified as non-current assets. Their discounted value, net of any provision for impairment, is
assumed to approximate their fair value. Loans and receivables are carried at amortized cost using
the effective interest method.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><I>Available-for-sale financial assets</I>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">For those financial assets with a readily determinable fair value and that are classified as
available-for-sale, the marketable securities are reported at fair value with changes in fair value
recognized as a separate component of &#147;other reserves&#148; in the consolidated statements of changes in
equity. Impairment losses are recorded in net profit based on the Group&#146;s assessment of any
significant, sustained reductions in the investment&#146;s market value, and of the market indicators
affecting the securities. Gains and losses on marketable securities sold are computed for each
specific asset and are recorded as &#147;other income&#148; or &#147;other expenses&#148; in the consolidated statement
of income.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Purchases and sales of investments are recognized on trade date, which is the date on which the
Group commits to purchase or sell the asset. Investments are derecognized when the rights to
receive cash flows from the investments have expired or have been transferred and the Group has
transferred substantially all risks and rewards of ownership.
</DIV>

<P align="center" style="font-size: 10pt"><!-- Folio -->- 71 -<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="left" style="font-size: 10pt; margin-top: 12pt">2.16 &#151; Derivative Instruments
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><I>Foreign Currency Forward Contracts and Currency Options Not Designated as a Hedge</I>

</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The Group conducts its business on a global basis in various major international currencies. As a
result, the Group is exposed to adverse movements in foreign currency exchange rates. The Group
enters into foreign currency forward contracts and currency options to reduce its exposure to
changes in exchange rates and the associated risk arising from the denomination of certain assets
and liabilities in foreign currencies at the Company&#146;s subsidiaries. In addition forward contracts
and currency options are also used by the Company to reduce its exposure to U.S. dollar
fluctuations in euro-denominated forecasted intercompany transactions that cover a large part of
research and development expenditures and certain corporate expenses incurred on the Company&#146;s
behalf by subsidiaries. These intercompany transactions are not closely limited to ultimate
transactions with third parties. These instruments do not qualify as hedging instruments and are
marked-to-market at each period-end with the associated changes in fair value recognized in &#147;other
income&#148; or &#147;other expenses&#148; in the consolidated statements of income.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><I>Cash Flow Hedges</I>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">To further reduce its exposure to U.S. dollar exchange rate fluctuations, the Company also hedged
in 2006 and 2005 a portion of its euro-denominated forecasted intercompany purchases of products
whose underlying front-end manufacturing production costs of semi-finished goods are incurred in
euros. The foreign currency forward contracts and the currency options used to hedge exposures are
reflected at their fair value in the consolidated balance sheet and meet the criteria for
designation as cash flow hedges. The criteria for designating a derivative as a hedge include the
instrument&#146;s effectiveness in risk reduction, close link to ultimate sales to third parties and, in
most cases, a one-to-one matching of the derivative instrument to its underlying transaction.
Foreign currency forward contracts and currency options used as hedges are effective at reducing
the euro/U.S. dollar currency fluctuation risk and are designated as a hedge at the inception of
the contract. For these derivatives, the gain or loss from the effective portion of the hedge is
reported as a component of &#147;other reserves&#148; in the consolidated statements of changes in equity and
is reclassified into earnings in the same period in which the hedged transaction affects earnings,
and within the same income statement line item as the impact of the hedged transaction. The gain or
loss is recognized immediately in &#147;other income&#148; and &#147;other expenses&#148; in the consolidated
statements of income when an ineffective portion of the hedge is identified.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><I>Fair Value Hedges</I>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">In 2006, the Company entered into cancellable swaps with a combined notional value of $200&nbsp;million
to hedge the fair value of a portion of the convertible bonds due 2016 carrying a fixed interest
rate. The cancellable swaps convert the fixed rate interest expense recorded on the convertible
bond due to 2016 to a variable interest rate based upon adjusted LIBOR. As of December&nbsp;31, 2006 the
cancellable swaps met the criteria for designation as a fair value hedge and, as such, both the
swaps and the hedged portion of the bonds are reflected at their fair values in the consolidated
balance sheet. The criteria for designating a derivative as a hedge include evaluating whether the
instrument is highly effective at offsetting changes in the fair value of the hedged item
attributable to the hedged risk. Hedged effectiveness is assessed on both a prospective and
retrospective basis at each reporting period. At December&nbsp;31, 2006 the cancellable swaps are
highly effective for hedging the change in fair value of the
</DIV>

<P align="center" style="font-size: 10pt"><!-- Folio -->- 72 -<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">hedged bonds attributable to changes in interest rates. Any ineffectiveness of the hedge
relationship is recorded as a gain or loss on derivatives as a component of &#147;other income and
expenses, net&#148;. If the hedge becomes no longer highly effective, the hedged portion of the bonds
will discontinue being marked to fair value while the changes in the fair value of the cancellable
swaps will continue to be recorded in the consolidated income statement.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt">2.17 &#151; Employee benefits
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><I>Pension obligations</I>

</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The Group sponsors various pension schemes for its employees. These schemes conform to local
regulations and practices of the countries in which the Group operates. They are generally funded
through payments to insurance companies or trustee-administered funds, determined by periodic
actuarial calculations. Such plans include both defined benefit and defined contribution plans. A
defined benefit plan is a pension plan that defines the amount of pension benefit that an employee
will receive on retirement, usually dependent on one or more factors such as age, years of service
and compensation. A defined contribution plan is a pension plan under which the Group pays fixed
contributions into a separate entity. The Group has no legal or constructive obligations to pay
further contributions if the fund does not hold sufficient assets to pay all employees the benefits
relating to employee service in the current and prior periods.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The liability recognized in the consolidated balance sheet in respect of defined pension plans is
the present value of the defined benefit obligation at the balance sheet date less the fair value
of plan assets, together with adjustments for unrecognized actuarial gains and losses and past
service costs. Significant estimates are used in determining the assumptions incorporated in the
calculation of the pension obligations, which is supported by input from independent actuaries. The
defined benefit obligation is calculated annually by independent actuaries using the projected unit
credit method. The present value of the defined benefit obligation is determined by discounting the
estimated future cash outflows using interest rates of high-quality corporate bonds that are
denominated in the currency in which the benefits will be paid, and that have terms to maturity
approximating the terms of the related pension liability. Actuarial gains and losses arising from
experience adjustments and changes in actuarial assumptions in excess of the greater of 10% of the
value of plan assets or 10% of the defined benefit obligation are charged or credited to income
over the employees&#146; expected average remaining working lives. Past-service costs are recognized
immediately in income, unless the changes to the pension scheme are conditional on the employees
remaining in service for a specified period of time (the vesting period). In this case, the
past-service costs are amortized on a straight-line basis over the vesting period.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">For defined contribution plans, the Group pays contributions to publicly or privately administered
pension insurance plans on a mandatory, contractual or voluntary basis. The Group has no further
payment obligations once the contributions have been paid. The contributions are recognized as
employee benefit expense when they are due. Prepaid contributions are recognized as an asset to the
extent that a cash refund or a reduction in the future payments is available.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><I>Termination benefits</I>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Termination benefits are payable when employment is terminated before the normal retirement date,
or whenever an employee accepts voluntary redundancy in exchange for
</DIV>

<P align="center" style="font-size: 10pt"><!-- Folio -->- 73 -<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">



<DIV align="left" style="font-size: 10pt; margin-top: 6pt">these benefits. The Group recognizes termination benefits when it is demonstrably committed to
either: terminating the employment of current employees according to a detailed formal plan without
possibility of withdrawal; or providing termination benefits as an offer made to encourage
voluntary redundancy. Benefits falling due more than twelve months after the balance sheet date are
discounted to present value. In the case of an offer made to encourage voluntary redundancy, the
Group bases the measurement of termination benefits on the number of employees expected to accept
the offer.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><I>Profit-sharing and bonus plans</I>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The Group recognizes a liability and an expense for bonuses and profit-sharing plans when it is
contractually obliged or where there is a past practice that has created a constructive obligation.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><I>Share-based compensation</I>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The fair value of the employee services received in exchange for the grant of share-based awards is
recognized as an expense and as a corresponding increase in shareholders&#146; equity. The total amount
to be expensed over the vesting period is determined by reference to the fair value of the awards
granted. Any applicable employee social charges are also expensed ratably over the same period as
the share-based compensation expense.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><I>Share Options</I>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">At December&nbsp;31, 2006, the Group had five employee and Supervisory Board share-option plans,
which are described in detail in Note 16. In 2005, the Group redefined its equity-based
compensation strategy by no longer granting options but rather issuing non-vested shares. In July
2005, the Group amended its latest Share Option Plans for employees, Supervisory Board and
Professionals of the Supervisory Board accordingly. As part of this revised share compensation
policy, the Group decided in July&nbsp;2005 to accelerate the vesting period of all outstanding unvested
share options, following authorization from the Group&#146;s shareholders at the annual general meeting
held on March&nbsp;18, 2005. As a result, underwater options equivalent to approximately 32&nbsp;million
shares became exercisable immediately in July&nbsp;2005. The fair value of the share options granted was
measured using a Black&#151;Scholes pricing model. The number of awards used to measured compensation
expense was based on the best estimate of the number of share options expected to vest. Total
compensation expense was recognized ratably through graded vesting. At acceleration of the vesting
of all unvested share options, the corresponding compensation charge was recognized immediately in
the consolidated statement of income for the year ended December&nbsp;31, 2005 for the amount that
otherwise would have been recognized for services received over the remainder of the vesting
period.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><I>Nonvested Shares</I>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">During 2005 and 2006 the Group granted nonvested shares to senior executives, selected
employees and members of the Supervisory Board to be issued upon vesting from treasury shares. The
shares were granted for free to employees and at their nominal value for the members of the
Supervisory Board. The awards granted in 2005 to employees will contingently vest upon achieving
market or performance conditions and progressively upon completion of a three-year service period.
The awards granted in 2006 to employees will contingently vest upon achieving performance
conditions only and a three years service
</DIV>

<P align="center" style="font-size: 10pt"><!-- Folio -->- 74 -<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">



<DIV align="left" style="font-size: 10pt; margin-top: 6pt">period. Shares granted to the Supervisory Board vest unconditionally along the same vesting period
as employees. Since nonvested shares granted to Supervisory Board members are not forfeited, even
if the service period is not completed, their associated compensation cost has been recorded
immediately at grant. The Group records compensation expense for the nonvested shares based on the
fair value of the awards at grant date. The fair value of the nonvested shares affected by a market
condition reflects a discount, using a Monte Carlo path-dependent pricing model, to measure the
probability of achieving the market condition. Nonvested shares are further explained in Note 16.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt">2.18 &#151; Financial Debt
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><I>Compound Financial Instruments</I>

</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">At December&nbsp;31, 2006, the Group had two compound financial instruments consisting in convertible
bonds issued in 2003 and 2006 respectively, on a ten-year maturity period each.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Compound financial instruments are assessed for separate accounting into debt and equity components
based on the circumstances at the inception of the instruments. The Company recognizes separately
the components of the financial instrument that a) creates a financial liability and b) grants an
option to the holder of the instrument to convert it into an equity instrument of the Company. A
conversion option embedded in the compound financial instrument is an equity instrument when the
Company has an unconditional right through this option to avoid settlement in cash or another
financial asset. When separate accounting is applied, the fair value of the liability portion of
the convertible debt is determined using a market interest rate for an equivalent non-convertible
debt over the period of future probable cash flows as estimated on the date of issuance. This
amount is recognized as a liability on an amortized cost basis until redeemed, extinguished on
conversion or on the maturity of the bonds. The remainder of the proceeds is allocated to the
conversion option. When separate accounting cannot be applied because settlement in cash or another
financial asset cannot be avoided, the conversion option is recorded at fair value and reported as
a liability component as part of non-current liabilities on the consolidated balance sheet. Changes
in fair value are recognized immediately at each reporting date on the line &#147;other income or &#147;other
expenses&#148; in the consolidated financial statements of income.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">For the 2013 and 2016 convertible bonds, the bond terms enable the holder to receive a cash
settlement under certain circumstances, and consequently, the Group has classified the share
conversion option as a financial liability. Based on the existing market conditions at issuance,
management estimated that separately valuing the embedded share conversion option would not be
materially different from calculating this share conversion value as the residual amount of the
total bond proceeds, less the fair value of the debt component. The Group determined the debt
portion of the convertible debt using a market interest rate for an equivalent non-convertible debt
with a term corresponding to the instrument&#146;s estimated probable cash flows.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Debt issuance and other transaction costs that relate to the issue of a compound financial
instrument are allocated to the liability and equity components of the instrument in proportion to
the allocation of proceeds. The costs allocated to the liability component of the financial
instrument are amortized in &#147;finance cost&#148; until extinguishment of the liability component.
</DIV>

<P align="center" style="font-size: 10pt"><!-- Folio -->- 75 -<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><I>Bank loans and Senior bonds</I>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Bank loans including Senior bonds, are recognized initially at fair value, net of transaction costs
incurred. They are subsequently stated at amortized cost; any difference between the proceeds (net
of transaction costs) and the redemption value is recognized in the consolidated statement of
income over the period of the borrowings using the effective interest method.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Borrowings are classified as current liabilities unless the Group has an unconditional right to
defer settlement of the liability for at least twelve months after the balance sheet date.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt">2.19 &#151; Share capital
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Ordinary shares are classified as equity. Incremental costs directly attributable to the issue of
new shares or options are shown in equity as a deduction, net of tax, from the proceeds.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Where any subsidiary purchases the Group&#146;s equity share capital (treasury shares), the
consideration paid, including any directly attributable incremental costs, (net of income taxes),
is deducted from equity attributable to the Group&#146;s shareholders until the shares are cancelled,
reissued or disposed of. Where such shares are subsequently sold or reissued, any consideration
received net of directly attributable incremental transaction costs and the related income tax
effect is included in equity attributable to the Group&#146;s shareholders.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Dividend distribution to the Company&#146;s shareholders is recognised as a liability in the Group&#146;s
financial statements in the period in which the dividends were approved by the Company&#146;s
shareholders.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt">2.20 &#151; Other reserves
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Other reserves correspond to changes in equity of a business during a period except those resulting
from investment by shareholders and distributions to shareholders. In the accompanying consolidated
financial statements, &#147;other reserves&#148; consists of fair value of services provided under share
award schemes, unrealized gains or losses on marketable securities classified as available-for-sale
and the unrealized gain (loss)&nbsp;on derivative instruments designated as cash flow hedge, all net of
tax as well as foreign currency translation adjustments.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt">2.21 &#151; Provisions
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Provisions for restructuring costs, and legal claims are recognized when: the Group has a present
legal or constructive obligation as a result of past events; it is more likely than not that an
outflow of resources will be required to settle the obligation; and the amount has been reliably
estimated. Restructuring provisions comprise lease termination penalties and employee termination
payments. Provisions are not recognized for future operating losses.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Where there are a number of similar obligations, the likelihood that an outflow will be required in
settlements is determined by considering the class of obligations as a whole. A provision is
recognized even if the likelihood of the outflow with respect to any one item included in the same
class of obligations may be small.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Provisions are measured at the present value of the expenditures expected to be required to settle
the obligation using a pre tax rate that reflects current market assessments of the time
</DIV>

<P align="center" style="font-size: 10pt"><!-- Folio -->- 76 -<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">



<DIV align="left" style="font-size: 10pt; margin-top: 6pt">value of money and the risk specific to the obligation. The increase in the provision due to
passage of time is recognized as finance cost.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt">2.22 &#151; Segment reporting
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">A business segment is a group of assets and operations engaged in providing products that are
subject to risk and returns that are different from those of other business segments. A
geographical segment is engaged in providing products within a particular economic environment that
are subject to risks and returns that are different from those of segments operating in other
economic environments.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt">2.23 &#151; Critical accounting estimates and judgments
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Estimates and judgments are continually evaluated and are based on historical experience and other
factors, including expectations of future events that are believed to be reasonable under
circumstances
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The Group makes estimates and assumptions concerning the future. The resulting accounting estimates
will, by definition, seldom equal the related actual results. Estimates and assumptions that have a
significant risk of causing material adjustments to the carrying amounts of assets and liabilities
within the next financial year are described below.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><I>Provision for sales returns and sales deductions</I>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Consistent with standard business practice in the semiconductor industry, price protection is
granted to distribution customers on their existing inventory of the Group&#146;s products to compensate
them for declines in market prices. The ultimate decision to authorize a distributor refund remains
fully within the control of the Group. The Group accrues a provision for price protection based on
a rolling historical price trend computed on a monthly basis as a percentage of gross distributor
sales. This historical price trend represents differences in recent months between the invoiced
price and the final price to the distributor, adjusted if required, to accommodate a significant
move in the current market price. The short outstanding inventory time period, visibility into the
standard inventory product pricing (as opposed to certain customized products) and long distributor
pricing history have enabled the Group to reliably estimate price protection provisions at
period-end. The Group records the accrued amounts as a deduction of revenue at the time of the
sale.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The Group&#146;s customers occasionally return the Group&#146;s products for technical reasons. The Group&#146;s
standard terms and conditions of sale provide that if the Group determines that products are
non-conforming, the Group will repair or replace the non-conforming products, or issue a credit or
rebate of the purchase price. Quality returns are not related to any technological obsolescence
issues and are identified shortly after sale in customer quality control testing. Quality returns
are always associated with end-user customers, not with distribution channels. The Group provides
for such returns when they are considered as probable and can be reasonably estimated. The Group
records the accrued amounts as a reduction of revenue.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The Group&#146;s insurance policy relating to product liability only covers physical damage and other
direct damages caused by defective products. The Group does not carry insurance against immaterial
non consequential damages. The Group records a provision for warranty costs as a charge against
cost of sales, based on historical trends of warranty costs incurred as
</DIV>

<P align="center" style="font-size: 10pt"><!-- Folio -->- 77 -<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">



<DIV align="left" style="font-size: 10pt; margin-top: 6pt">a percentage of sales, which management has determined to be a reasonable estimate of the probable
losses to be incurred for warranty claims in a period. Any potential warranty claims are subject to
the Group&#146;s determination that the Group is at fault for damages, and such claims usually must be
submitted within a short period following the date of sale. This warranty is given in lieu of all
other warranties, conditions or terms expressed or implied by statute or common law. The Group&#146;s
contractual terms and conditions limit its liability to the sales value of the products which gives
rise to the claims.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The Company, when acting as a guarantor, recognizes, at the inception of a guarantee, a liability
for the fair value of the obligation the Company assumes under the guarantee, in compliance with
IAS 39, <I>Financial Instruments: Recognition and Measurements</I>. When the guarantee is issued in
conjunction with the formation of a partially owned business or a venture accounted for under the
equity method, the recognition of the liability for the guarantee results in an increase to the
carrying amount of the investment. The liabilities recognized for the obligations of the guarantees
undertaken by the Company are measured subsequently on each reporting date, in accordance with IAS
37 <I>Provisions, Contingent Liabilities and Contingent Assets </I>the initial liability being reduced as
the Company, as guarantor, is released from the risk underlying the guarantee.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><I>Trade receivables</I>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The Group maintains impairment for doubtful accounts for estimated losses resulting from its
customers&#146; inability to make required payments. The Group bases its estimates on historical
collection trends. Furthermore, the Group is required to evaluate its customers&#146; credit ratings
from time to time and take an additional provision for any specific account that it estimates as
doubtful. Although the Group has determined that its most significant customers are creditworthy,
if the financial condition of these customers were to deteriorate, resulting in an impairment of
their ability to make payments, additional allowances could be required.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><I>Income taxes</I>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The Group is required to assess the likelihood of recovery of deferred tax assets. As of December
31, 2006, the Group believes that all of the deferred tax assets as recorded on the consolidated
balance sheet, would ultimately be recovered. However, should there be a change in the Group&#146;s
ability to recover deferred tax assets or in the tax rates applicable in the various jurisdictions,
this could have an impact on the Group&#146;s future tax provision in the periods in which these changes
could occur.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">In addition, the calculation of tax liabilities involves dealing with uncertainties in the
application of complex tax regulations. The Group recognizes liabilities for anticipated tax audit
issues based on estimates that probable additional taxes will be due. The Group reverses the
liability and recognizes a tax benefit during the period if it ultimately determines that the
liability is no longer necessary. An additional charge is recorded in income tax expense in the
period in which the Group determines that the recorded tax liability is less than the Group expects
the ultimate assessment to be.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><I>Inventory</I>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The valuation of inventory requires the Group to estimate obsolete or excess inventory as well as
inventory that is not of saleable quality. Inventory is reduced to the expected realizable value
for any excess uncommitted inventories based on the previous quarter sales,
</DIV>

<P align="center" style="font-size: 10pt"><!-- Folio -->- 78 -<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">



<DIV align="left" style="font-size: 10pt; margin-top: 6pt">order backlog and production plans. To the extent that future negative market conditions generate
order backlog cancellations and declining sales, or if future conditions are less favorable than
the projected revenue assumptions, the Group could be required to record additional inventory
adjustments, which would have a negative impact on the gross margin.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><I>Impairment of long-lived assets</I>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Long-lived assets are tested or reviewed for impairment in accordance with accounting policies
stated in Notes 2.12, 2.13 and 2.14. Considerable management judgments are necessary to identify
impairment indicators and to estimate future sales and expenses, which underlie the discounted
future cash flow projections. Factors such as changes in the planned use of property, plant and
equipment, the closure of fab, lower than anticipated sales for products which capitalize rights,
the change in the use or in the market acceptance of certain new technologies, could result in
shortened useful lives or impairment charges to be recognized in the period in which such
determination is made.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><I>Pension obligations</I>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The Group sponsors various pension schemes for its employees. The expense incurred under the
defined benefit retirement plans is based upon statistical and actuarial calculations, and is
impacted by assumptions on discount rates used to reach the present value of future pension
liabilities, expected return that will be made on existing pension assets, future salary increases
as well as future pension increases and statistical-based assumptions covering future withdrawals
of participants from the plan and estimates of life expectancy. The actuarial assumptions used may
differ materially from actual results due to changes in market and economic conditions, higher or
lower withdrawal rates or longer or shorter life spans of participants and significantly impact the
amount of pension costs and pension liabilities to be recognized in the period in which such
determination is made.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><I>Restructuring charges</I>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The Group has undertaken, and may continue to undertake, significant restructuring initiatives,
which have required, or may require in the future, to develop formalized plans for exiting
activities or to dispose of certain activities. In accordance with IAS 37 accounting requirements,
the Group recognizes 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. Given the
significance and the timing of the execution of such activities, the process is complex and
involves periodic reviews of estimates made at the time the original decisions were taken. As the
Group operates in a highly cyclical industry, it continues to evaluate business conditions. If
broader or new initiatives, which could include production curtailment or closure of other
manufacturing facilities, were to be taken, the Group may be required to incur additional charges
as well as to change estimates of amounts previously recorded in the period in which such
determination is made.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt">2.24 &#151; Recent accounting pronouncements
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><I>a) Amendments to published standards effective in 2006 and early adopted in 2005:</I>

</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The Group early adopted in 2005 IAS 39 (Amendment), Cash Flow Hedge Accounting of Forecast
Intragroup Transactions, effective from January&nbsp;1, 2006. The amendment allows the foreign currency
risk of highly probable forecast intragroup transaction to qualify as a hedged
</DIV>

<P align="center" style="font-size: 10pt"><!-- Folio -->- 79 -<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">item in the consolidated financial statements, provided that: (a)&nbsp;the transaction is denominated in
a currency other than the functional currency of the entity entering into that transaction; and (b)
the foreign currency risk will affect consolidated profit and loss. This amendment is relevant to
the Group&#146;s operations, as the Group uses forward contracts to reduce its exposure to U.S. dollar
fluctuations in euro-denominated forecasted intercompany transactions related to front-end
manufacturing production costs of semi-finished goods incurred on behalf of the Company by
subsidiaries. The foreign currency forward contracts used to hedge exposures meet the criteria for
designation as cash flow hedges.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The Company also entered into forward contracts in 2006 and 2005 to minimize the exposure to euro
denominated expenses incurred related to corporate expenses and R&#038;D costs. These intercompany
transactions are not closely linked to ultimate transactions with third parties and these forward
contracts do not qualify as hedging instruments.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><I>b) Amendments to published standards and interpretations effective in 2006 and relevant for the
Group&#146;s operations:</I>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">IAS 19 (Amendment), Employee Benefits is mandatory for the Group&#146;s accounting periods beginning on
or after January&nbsp;1, 2006. It introduces the option of an alternative recognition approach for
actuarial gains and losses. It may impose additional recognition requirements for multi-employer
plans where insufficient information is available to apply defined benefit accounting. It also adds
new disclosure requirements. As the Group does not intend to change accounting policies adopted for
recognition of actuarial gains and losses and does not participate in any multi-employer plans,
adoption of this amendment only impacted the format and extent of disclosures presented in its
consolidated financial statements.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">IAS 39 (Amendment), The fair Value Option is mandatory for the Group&#146;s accounting periods beginning
on or after January&nbsp;1, 2006. This amendment changes the definition of financial instruments
classified at fair value through profit or loss and restricts the ability to designate financial
instruments as part of this category. Adoption of this amendment had no impact on the
classification of the Group&#146;s financial instruments.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">IAS 39 and IFRS 4 (Amendment), Financial Guarantee Contracts, is mandatory for the Group&#146;s
accounting periods beginning on or after January&nbsp;1, 2006. This amendment requires issued financial
guarantees, other than those previously asserted by the entity to be insurance contracts, to be
initially recognized at their fair value and subsequently measured at the higher of; (a)&nbsp;the
unamortized balance of the related fees received and deferred, and (b)&nbsp;the expenditure required to
settle the commitment at the balance sheet date. The Group applied this amendment in 2006, after
assessing the impact of arrangements within the scope of IAS 39, as amended.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">IFRIC Interpretation No.&nbsp;4, determining whether an Arrangement contains a Lease (&#147;IFRIC 4&#148;) is
mandatory for the Group&#146;s accounting periods beginning on or after January&nbsp;1, 2006, with early
application permitted. This interpretation gives guidance on determining whether arrangements that
do not take the legal form of a lease should nonetheless be accounted for in accordance with
International Accounting Standard No.&nbsp;17, Leases (&#147;IAS 17&#148;). It specifies that an arrangement
contains a lease if it depends on the use of a specific asset and conveys a right to control the
use of that asset. The Group adopted IFRIC 4 in 2006 and, after assessing the impact of
arrangements within the scope of IFRIC 4 concluded that IFRIC 4 did not have any impact on its
financial position and results of operations.
</DIV>

<P align="center" style="font-size: 10pt"><!-- Folio -->- 80 -<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">IFRIC Interpretation No.&nbsp;6, Liabilities arising from Participating in a Specific Market &#150; Waste
Electrical and Electronic Equipment (&#147;IFRIC 6&#148;) is mandatory for the Group&#146;s accounting periods
beginning on or after December&nbsp;1, 2005, with early application permitted. This interpretation gives
guidance on the accounting for liabilities for waste management costs and clarifies when producers
of electrical goods will need to recognize a liability for the cost of waste management relating to
the decommissioning of waste electrical and electronic equipment supplied to private households.
Upon adoption of IFRIC 6, the Group identified its obligations for waste management costs and
determined that none had an effect on its financial position or results of operations.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><I>c) Standards, amendments to published standards and interpretations effective in 2006 but not
relevant for the Group&#146;s operations:</I>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The following standards, amendments and interpretations are mandatory for accounting periods
beginning on or after January&nbsp;1, 2006 but are not relevant for the Group&#146;s operations:
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">O</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>IFRS 6, Exploration for and Evaluation of Mineral Resources;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">O</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>IAS 21 (Amendment), Net Investment in a Foreign Operation;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">O</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>IFRS 1 (Amendment), First-time Adoption of International Financial Reporting Standards
and IFRS 6 (Amendment), Exploration for and Evaluation of Mineral Resources; and</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">O</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>IFRIC 5, Rights to Interests arising from Decommissioning, Restoration and
Environmental Rehabilitation Funds;</TD>
</TR>

</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><I>d) Interpretations that are not yet effective and have been early adopted by the Group:</I>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">IFRIC Interpretation No.&nbsp;8, Scope of IFRS 2 (&#147;IFRIC 8&#148;) is effective for annual periods beginning
on or after May&nbsp;1, 2006, with early application permitted. This Interpretation states that
International Financial Reporting Standard No.&nbsp;2, Share-Based Payment (&#147;IFRS 2&#148;) applies to
arrangements whereby an entity makes share-based payments for apparently zero or inadequate
consideration. IFRIC 8 specifies that if the identifiable consideration appears to be less than the
fair value of the issued equity or the incurred liability, it is an indication that other
consideration has been or will be received and should therefore be accounted under IFRS 2. The
Group early adopted IFRIC 8 in 2006. This early adoption did not have any material impact on the
Group&#146;s financial position or results of operations.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">IFRIC Interpretation No.&nbsp;9, Reassessment of Embedded Derivatives (&#147;IFRIC 9&#148;) is applicable for
annual periods beginning on or after June&nbsp;1, 2006, with early application permitted. This
Interpretation applies to all embedded derivatives under IAS 39 to clarify whether the treatment of
an embedded derivative has to be reassessed if certain events occur. IFRIC 9 concludes that
reassessment is prohibited unless there is a change in the terms of the contract that significantly
modifies the cash flows that otherwise would have been required under the contract, in which case
reassessment is required. The Group early adopted IFRIC 9 in 2006. Such adoption did not have any
material impact on the Group&#146;s financial position and results of operations.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">IFRIC Interpretation No.&nbsp;11, Group and Treasury Share Transactions (&#147;IFRIC 11&#148;) is effective for
annual periods beginning on or after March&nbsp;1, 2007, with early application
</DIV>

<P align="center" style="font-size: 10pt"><!-- Folio -->- 81 -<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">



<DIV align="left" style="font-size: 10pt; margin-top: 6pt">permitted. This Interpretation addresses how to apply IFRS 2 to share-based payment arrangements
involving an entity&#146;s own equity instruments or equity instruments of another entity in the same
group. Specifically the Interpretation:
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#150;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>requires a share-based payment arrangement in which an entity receives goods or
services as consideration for its own equity-instruments to be accounted for as an
equity-settled share-based payment transaction, regardless of how the equity instruments
needed are obtained;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#150;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>provides guidance on whether share-based payment arrangements in which suppliers of
goods or services of an entity are provided with equity instruments of the entity&#146;s parent
should be accounted for as cash-settled or equity-settled in the entity&#146;s financial
statements.</TD>
</TR>

</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">This Interpretation is relevant for the Company&#146;s stock-award plans, since the Company granted in
2006 and 2005 rights to its equity instruments to the employees of its subsidiaries. The
Company early adopted IFRIC 11 in 2006.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><I>e) Standards that are not yet effective and have not been early adopted by the Group:</I>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">International Financial Reporting Standard No.&nbsp;7, Financial Instruments: Disclosures (&#147;IFRS 7&#148;) is
effective for annual periods beginning on or after January&nbsp;1, 2007, with early adoption permitted.
Its main objective is the revision and enhancement of the disclosures in International Accounting
Standard No.&nbsp;30, Disclosures in the Financial Statements of Banks and Similar Financial
Institutions (&#147;IAS 30&#148;) and International Accounting Standard No.&nbsp;32, Financial Instruments:
Disclosure and Presentation (&#147;IAS 32&#148;). IFRS 7 requires disclosure of the significance of financial
instruments for an entity&#146;s financial position and performance, which incorporate many of the
requirements previously in IAS 32. IFRS 7 also requires qualitative and quantitative information
about exposure to risks arising from financial instruments, including specified minimum disclosures
about credit risk, liquidity risk and market risk. The Group will adopt IFRS 7 in 2007 and is
currently evaluating the effect of IFRS 7 on its disclosures concerning financial instruments.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">International Financial Reporting Standard No.&nbsp;8, <I>Operating Segments </I>(&#147;IFRS 8&#148;), is effective for
annual periods beginning on or after January&nbsp;1, 2009. IFRS 8 replaces International Accounting
Standard No.&nbsp;14, <I>Segment Reporting </I>(&#147;IAS 14&#148;) and aligns segment reporting with the requirements of
the US standard Statement of Financial Accounting Standard No.&nbsp;131, <I>Disclosures about Segments of
an Enterprise and Related Information </I>(&#147;FAS 131&#148;). IFRS 8 requires an entity to adopt the
&#147;management approach&#148; to reporting on the financial performance of its operating segments. The
adoption of IFRS 8 will only impact the format and extent of disclosures presented in the Company&#146;s
consolidated financial statements on segment information, which is currently presented in Note 32.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><I>f) Interpretations that are not yet effective and not relevant for the Group&#146;s operations:</I>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The following interpretations to existing standards that have been published are mandatory for the
Group&#146;s accounting periods on or after March&nbsp;2006 or later periods but are not relevant for the
Group&#146;s operations:
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">o</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>IFRIC 7, Applying the Restatement Approach under IAS 29, Financial
Reporting in Hyperinflationary Economies;</TD>
</TR>

</TABLE>
</DIV>
<P align="center" style="font-size: 10pt"><!-- Folio -->- 82 -<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">


<DIV style="margin-top: 6pt"><TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">


<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">o</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>IFRIC 10, Interim Financial Reporting and Impairment</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">o</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>IFRIC 12, Service Concession Arrangements</TD>
</TR>

</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>3 &#151; INVESTMENTS IN ASSOCIATES</B>
</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="76%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>December 31, 2006</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>December 31, 2005</B></TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Beginning of the year</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>35</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>6</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Acquisition of investments:</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Hynix ST Investment</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>212</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>38</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Hynix ST Guarantee</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>15</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>&#151;</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Sale of investments:</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">UPEK, Inc.</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>&#151;</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right"><B>(6</B></TD>
    <TD nowrap><B>)</B></TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Share of loss of associates</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right"><B>(7</B></TD>
    <TD nowrap><B>)</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right"><B>(3</B></TD>
    <TD nowrap><B>)</B></TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Foreign currency translation differences</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>6</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>&#151;</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>End of the year</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>261</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>35</B></TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The Group&#146;s share of the results of its principal associates, all of which are unlisted, and
its share of the assets, are detailed as follows:
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt">December&nbsp;31, 2006
</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="28%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Country of</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="center" style="border-bottom: 1px solid #000000"><B>Nam</B>e</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>incorporation</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>Assets</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>Liabilities</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>Revenues</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>Profit/(loss)</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>% interest held</B></TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Hynix ST Investment</DIV></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center">China</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,100</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,360</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">243</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(19</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">33</TD>
    <TD nowrap>%</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt">December&nbsp;31, 2005
</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="28%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Country of</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="center" style="border-bottom: 1px solid #000000"><B>Name</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>incorporation</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>Assets</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>Liabilities</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>Revenues</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>Profit/(loss)</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>% interest held</B></TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Hynix ST Investment</DIV></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center">China</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">117</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">14</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(10</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">33</TD>
    <TD nowrap>%</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><I>Hynix ST Investment</I>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The Company signed in 2004 an agreement with Hynix Semiconductor Inc. to build a front-end memory
manufacturing facility in Wuxi City, Jiangsu Province, China. Under the agreement, Hynix
Semiconductor Inc. will contribute $500&nbsp;million for a 67% equity interest and the Company will
contribute $250&nbsp;million for a 33% equity interest. In addition, the Company committed to grant a
financial guarantee on $250&nbsp;million in long-term financing to the venture guaranteed by the
subordinated collateral of the venture&#146;s assets. The Company contributed the total $250&nbsp;million as
previously planned in the venture agreement by December&nbsp;31, 2006. Due to regulatory and withholding
issues the Company could not directly provide the venture with the $250&nbsp;million long-term financing
as originally planned. As a consequence, in the fourth quarter of 2006, the Company entered into a
ten-year term debt guarantee agreement with an external financial institution through which the
Company guaranteed the repayment of the loan by the venture to the bank. The guarantee agreement
includes the Company placing up to $250&nbsp;million in cash on a deposit account. The guarantee deposit
will be used by the bank in case of repayment failure from the venture, being $250&nbsp;million the
maximum potential amount of future payments the Company, as guarantor, could be required to make
under the guarantee. In 2006 the Company placed $218&nbsp;million of cash on the guarantee deposit
account, which was reported as &#147;restricted cash for equity
</DIV>

<P align="center" style="font-size: 10pt"><!-- Folio -->- 83 -<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">investments&#148; on the consolidated balance sheet as at December&nbsp;31, 2006. The debt guarantee was
evaluated under IAS 39, <I>Financial Instruments: Recognition and Measurements</I>. It resulted in the
recognition of a $15&nbsp;million liability, corresponding to the fair value of the guarantee at
inception of the transaction. The liability was reported on the line &#147;Other non-current
liabilities&#148; in the consolidated balance sheet as at December&nbsp;31, 2006 and was recorded against the
value of the equity investment.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The Company accounts for its share in the Hynix ST venture under the equity method based on
the actual results of the venture. Total equity investment amounted to $261&nbsp;million as of December
31, 2006, after losses totalling $7&nbsp;million in the year ended December&nbsp;31, 2006 recorded as &#147;share
of loss of associates&#148; and including the $15&nbsp;million for the fair value of the guarantee agreement.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>4 &#151; AVAILABLE-FOR-SALE FINANCIAL ASSETS</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">In 2006, the Company invested $460&nbsp;million of existing cash in eleven floating rate notes with
primary financial institutions with minimum rating &#147;A1/A&#043;&#148; with a maturity between twenty one
months and six years. These marketable securities were reported as current assets as at December
31, 2006 since they represent investments of funds available for current operations. These
financial assets are classified as available-for-sale and are recorded at fair value, which is
slightly lower than the carrying value as at December&nbsp;31, 2006, with changes in fair value
recognized as a separate component of &#147;Other Reserves&#148; in the consolidated statement of changes in
shareholders&#146; equity. Subsequently, the Company entered into a basis asset swap for one floating
rate note for a notional amount of $50&nbsp;million purchased at par. Even if strictly related to the
underlying note, the swap is contractually transferable independently of the marketable security to
which it is attached. As such, the asset swap was recorded separately from the underlying financial
asset and was reflected at its fair value in the consolidated balance sheet on the line &#147;Other
receivables and assets&#148; as at December&nbsp;31, 2006. The changes in the fair value of this derivative
instrument were recorded in the consolidated statement of income as part of &#147;Other income and
expenses, net&#148; and did not exceed $1&nbsp;million for the year ended December&nbsp;31, 2006.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">In 2006 and 2005, no financial asset classified as available-for-sale was sold. As at December&nbsp;31,
2005, the Company did not report any financial assets classified as available-for-sale.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>5 &#151; TRADE ACCOUNTS RECEIVABLE</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Trade accounts receivable consisted of the following:
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="76%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>December 31, 2006</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>December 31, 2005</B></TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Trade accounts receivable</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>1,620</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>1,517</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Provision for impairment</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right"><B>(31</B></TD>
    <TD nowrap><B>)</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right"><B>(27</B></TD>
    <TD nowrap><B>)</B></TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Total</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>1,589</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>1,490</B></TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Impairment losses recognized in 2006 and 2005 were $7&nbsp;million and $7&nbsp;million, respectively. In
2006 and 2005, one customer, the Nokia group of companies, represented 21.8% and 22.4% of
consolidated total revenues, respectively. Creation and release of provision for impaired
receivables have been reported as selling, general and administrative expenses in the consolidated
statements of income.
</DIV>

<P align="center" style="font-size: 10pt"><!-- Folio -->- 84 -<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>6 &#151; INVENTORIES</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Inventories consisted of the following:
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="76%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>December 31, 2006</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>December 31, 2005</B></TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Raw materials</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>80</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>60</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Work-in-process</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>1,033</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>881</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Finished products</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>527</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>472</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Total</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>1,640</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>1,413</B></TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>7 &#151; OTHER RECEIVABLES AND ASSETS</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Other receivables and assets consisted of the following:
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="76%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>December 31, 2006</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>December 31, 2005</B></TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Receivables from government agencies</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>230</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>226</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Taxes and other government receivables</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>194</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>189</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Advances to suppliers</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>5</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>2</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Advances to employees</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>13</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>10</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Prepaid expenses</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>37</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>48</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Sundry debtors</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>39</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>67</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Other</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>74</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>44</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Total</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>592</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>586</B></TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The carrying amounts are assumed to approximate fair value. Receivables from government
agencies relate to research and development contracts, research tax credits, industrialization
contracts and capital investment projects. As at December&nbsp;31, 2006, the Company identified certain
machinery and equipment to be disposed of by sale, amounted to $4&nbsp;million, located in its back-end
sites in Morocco and Malaysia, following the decision of the Company to get disengaged from certain
activities as part of its latest restructuring initiatives. These assets are reflected at their
carrying value, which did not exceed their selling price less selling costs. These long-lived
assets are not depreciated until disposal by sale which is expected to occur within one year. As at
December&nbsp;31, 2005, assets held for sale amounted to $4&nbsp;million and primarily consisted of land to
be disposed of by sale located in France. The property was sold as originally planned in 2006 and
generated a gain on sale of non-current assets amounting to $3&nbsp;million.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>8 &#151; GOODWILL</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Changes in the carrying amount of goodwill are presented in the following segment-level summary of
goodwill allocation:
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="52%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Application Specific</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Memory</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>Products</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>Products</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>Other</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>Total</B></TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>December&nbsp;31, 2004</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>123</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>64</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>1</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>188</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Goodwill Impairment</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(10</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(10</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Foreign currency translation</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(3</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(1</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(4</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>December&nbsp;31, 2005</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>113</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>61</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>&#151;</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>174</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Goodwill Impairment</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(6</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(6</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Foreign currency translation</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">8</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">8</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>December&nbsp;31, 2006</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>107</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>69</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>&#151;</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>176</B></TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<P align="center" style="font-size: 10pt"><!-- Folio -->- 85 -<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Goodwill is allocated to the Group&#146;s cash-generating units (&#147;CGUs&#148;). The recoverable amount of
a CGU is determined based on value-in-use calculations. These calculations use cash flow
projections, on a pre-tax basis, based on financial budgets approved by management covering a
five-year period.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The key-assumptions used for value-in-use calculations are based on a five-year plan of each CGU
tested including average annual revenues growth, in aggregate for relevant CGUs, higher than
Group&#146;s average by approximately 7% resulting from the forecasted faster growth for these
businesses and their incoming new products, and an average gross margin over the five-year period
within a range of 30% and 48%. A mid-point 12% discount rate has been applied to the cash flow
projections.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">These assumptions have been used, as applicable, for the analysis of each CGU within the product
segments. Management determined budgeted gross margin based on past performance and its
expectations for the market development. The average yearly growth rates used are consistent with
the forecasts included in industry reports. The discount rates used are pre-tax and reflect
specific risks relating to the relevant CGUs.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">In 2006, the Company decided to cease product development from technologies inherited from Tioga
business acquisition. The Company reports Tioga business as part of the Application Specific
Product Groups (&#147;ASG&#148;) product segment. Following this decision, the Company incurred in 2006 a $6
million impairment charge corresponding to the write-off of Tioga goodwill. This impairment charge
was reported on the line &#147;Impairment, restructuring charges and other related closure costs&#148; of the
consolidated statement of income for the year ended December&nbsp;31, 2006 (see Note 20).
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">In 2005, the Group decided to reduce its Access technology products for Customer Premises Equipment
(&#147;CPE&#148;) modem products. The Group reports CPE business as part of the Access CGU, included in the
Application Specific Products Group (&#147;ASG&#148;) segment. Following the decision to discontinue a
portion of this CGU, the Group, in compliance with IAS 36, Impairment of Assets, re-measured using
market comparables goodwill associated with the business to be discontinued on the basis of the
relative values of the business to be discontinued and the portion of the CGU retained. The
reassessment resulted in a $10&nbsp;million goodwill impairment in 2005.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>9 &#151; INTANGIBLE ASSETS</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Intangible assets consisted of the following:
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="64%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Accumulated Amortization</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="left" style="border-bottom: 1px solid #000000"><B>December 31, 2006</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>Gross Cost</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>and Impairments</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>Net Cost</B></TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Purchased technologies &#038; licenses</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>353</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right"><B>(258</B></TD>
    <TD nowrap><B>)</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>95</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Purchased software</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>193</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right"><B>(149</B></TD>
    <TD nowrap><B>)</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>44</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Internally developed software</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>134</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right"><B>(62</B></TD>
    <TD nowrap><B>)</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>72</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Capitalized development costs</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>543</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right"><B>(25</B></TD>
    <TD nowrap><B>)</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>518</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Total</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>1,223</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right"><B>(494</B></TD>
    <TD nowrap><B>)</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>729</B></TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>



<P align="center" style="font-size: 10pt"><!-- Folio -->- 86 -<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>
<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="64%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Accumulated Amortization</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="left" style="border-bottom: 1px solid #000000"><B>December 31, 2005</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>Gross Cost</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>and Impairments</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>Net Cost</B></TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Purchased technologies &#038; licenses</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>309</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right"><B>(199</B></TD>
    <TD nowrap><B>)</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>110</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Purchased software</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>162</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right"><B>(114</B></TD>
    <TD nowrap><B>)</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>48</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Internally developed software</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>114</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right"><B>(48</B></TD>
    <TD nowrap><B>)</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>66</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Capitalized development costs</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>238</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right"><B>(4</B></TD>
    <TD nowrap><B>)</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>234</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Total</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>823</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right"><B>(365</B></TD>
    <TD nowrap><B>)</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>458</B></TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Changes in the net carrying amount of intangible assets are detailed as follows:
</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="40%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Purchased</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Internally</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Capitalized</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>technologies &#038;</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Purchased</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>developed</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>development</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>licenses</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>software</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>software</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>costs</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>Total</B></TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>December&nbsp;31, 2004</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>176</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>48</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>67</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>&#151;</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>291</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Additions</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">18</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">15</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">29</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">238</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">300</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Disposals</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(2</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(3</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(4</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Transfers</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">12</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(12</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Amortization expense</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(59</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(25</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(14</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(4</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(102</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Impairment charges</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(22</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(22</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Foreign currency translation</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(1</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(3</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(1</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(5</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>December&nbsp;31, 2005</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>110</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>48</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>66</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>234</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>458</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Additions</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">34</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">7</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">40</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">311</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">392</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Disposals</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(12</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(1</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Transfers</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">9</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(9</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Amortization expense</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(52</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(28</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(14</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(21</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(115</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Impairment charges</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(4</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(6</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(10</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Foreign currency translation</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>December&nbsp;31, 2006</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>95</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>44</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>72</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>518</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>729</B></TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The aggregate amortization expense in 2006 and 2005 was $115&nbsp;million and $102&nbsp;million,
respectively. The 2006 amortization expense included $34&nbsp;million in costs of sales, $50&nbsp;million in
research and development and $31&nbsp;million in selling general and administrative. The 2005
amortization expense included $10&nbsp;million in costs of sales, $61&nbsp;million in research and
development and $31&nbsp;million in selling general and administrative.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Pursuant to its decision to cease product development from technologies inherited from Tioga
business acquisition, the Company recorded in 2006 a $4&nbsp;million impairment charge on technologies
purchased as part of Tioga business acquisition, which were determined to be without any
alternative use. This impairment charge was reported on the line &#147;Impairment, restructuring charges
and other related closure costs&#148; of the consolidated statement of income for the year ended
December&nbsp;31, 2006 (see Note 20).
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>10 &#151; PROPERTY, PLANT AND EQUIPMENT</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Property, plant and equipment consisted of the following:
</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="64%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="left" style="border-bottom: 1px solid #000000"><B>December 31, 2006</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>Gross Cost</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>Accumulated Depreciation</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>Net Cost</B></TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Land</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>91</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>&#151;</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>91</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Buildings</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>1,208</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right"><B>(319</B></TD>
    <TD nowrap><B>)</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>889</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Buildings under finance lease</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>61</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right"><B>(39</B></TD>
    <TD nowrap><B>)</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>22</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Facilities and leasehold improvements</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>3,135</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right"><B>(1,668</B></TD>
    <TD nowrap><B>)</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>1,467</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Machinery and equipment</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>14,463</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right"><B>(10,940</B></TD>
    <TD nowrap><B>)</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>3,523</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Computer and R&#038;D equipment</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>551</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right"><B>(441</B></TD>
    <TD nowrap><B>)</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>110</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Other tangible fixed assets</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>156</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right"><B>(118</B></TD>
    <TD nowrap><B>)</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>38</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Construction in progress</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>289</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right"><B>(3</B></TD>
    <TD nowrap><B>)</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>286</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Total</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>19,954</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right"><B>(13,528</B></TD>
    <TD nowrap><B>)</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>6,426</B></TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<P align="center" style="font-size: 10pt"><!-- Folio -->- 87 -<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="64%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="left" style="border-bottom: 1px solid #000000"><B>December 31, 2005</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>Gross Cost</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>Accumulated Depreciation</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>Net Cost</B></TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Land</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>84</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>&#151;</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>84</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Buildings</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>1,071</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right"><B>(267</B></TD>
    <TD nowrap><B>)</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>804</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Buildings under finance lease</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>55</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right"><B>(29</B></TD>
    <TD nowrap><B>)</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>26</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Facilities and leasehold improvements</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>2,715</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right"><B>(1,294</B></TD>
    <TD nowrap><B>)</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>1,421</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Machinery and equipment</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>12,473</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right"><B>(9,063</B></TD>
    <TD nowrap><B>)</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>3,410</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Computer and R&#038;D equipment</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>492</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right"><B>(381</B></TD>
    <TD nowrap><B>)</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>111</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Other tangible fixed assets</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>131</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right"><B>(103</B></TD>
    <TD nowrap><B>)</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>28</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Construction in progress</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>295</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>&#151;</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>295</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Total</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>17,316</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right"><B>(11,137</B></TD>
    <TD nowrap><B>)</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>6,179</B></TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Changes in the net carrying amount of tangible assets are detailed as follows:
</DIV>

<DIV align="center">
<TABLE style="font-size: 7pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="19%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>
<TR style="font-size: 6pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Buildings</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">&nbsp;</TD>
</TR>
<TR style="font-size: 6pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>under</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Facilities and</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Machinery</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Computer</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Other</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">&nbsp;</TD>
</TR>
<TR style="font-size: 6pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>finance</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>leasehold</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>and</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>and R&#038;D</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>tangible</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Construction</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">&nbsp;</TD>
</TR>
<TR style="font-size: 6pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>Lands</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>Buildings</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>lease</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>improvements</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>equipment</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>equipment</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>fixed assets</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>in progress</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>Total</B></TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>December&nbsp;31, 2004</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>93</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>771</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>35</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>1,576</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>4,317</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>134</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>17</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>503</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>7,446</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Additions</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">65</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">822</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">43</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">95</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">394</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,419</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Disposals</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(2</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(22</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(4</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(105</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(1</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(78</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(2</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(214</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Transfers</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">174</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">190</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">190</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(562</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Other</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(6</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(6</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Depreciation expense</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(35</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(252</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(1,494</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(54</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(11</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(1,846</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Foreign currency translation</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(8</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(84</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(3</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(154</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(320</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(13</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(38</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(620</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>December&nbsp;31, 2005</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>84</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>804</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>26</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>1,421</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>3,410</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>111</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>28</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>295</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>6,179</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Additions</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(4</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">81</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,126</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">42</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">51</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">282</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,579</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Disposals</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(1</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(14</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(34</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(4</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(48</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Transfers</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(1</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">53</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">133</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">116</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(307</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Other</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(6</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(4</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(1</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(11</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Depreciation expense</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(35</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(265</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(1,311</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(52</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(10</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(3</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(1,676</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Foreign currency translation</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">67</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">102</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">197</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">8</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(2</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">23</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">403</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>December&nbsp;31, 2006</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>91</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>889</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>22</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>1,467</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>3,523</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>110</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>38</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>286</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>6,426</B></TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The depreciation charge in 2006 and 2005 was $1,676&nbsp;million and $1,846&nbsp;million respectively.
The 2006 depreciation charge included $1,471&nbsp;million in costs of sales, $177&nbsp;million in research
and development and $28&nbsp;million in selling general and administrative. The 2005 depreciation charge
included $1,656&nbsp;million in costs of sales, $156&nbsp;million in research and development and $34&nbsp;million
in selling general and administrative.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Capital investment funding has totalled $15&nbsp;million and $38&nbsp;million in the years ended December&nbsp;31,
2006 and 2005, respectively. Public grant funding , recognised over the useful life of the asset as
reduction of depreciation expense, reduced the depreciation charge by $54&nbsp;million and $66&nbsp;million
in 2006 and 2005, respectively.
</DIV>


<P align="center" style="font-size: 10pt"><!-- Folio -->- 88 -<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">




<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>11 &#151; INVESTMENTS AND OTHER NON-CURRENT ASSETS</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Investments and other non-current assets consisted of the following:
</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="76%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>December 31, 2006</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>December 31, 2005</B></TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Investments</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">39</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">36</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Long-term receivables related to funding</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">36</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">33</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Long-term receivables related to tax refund</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">33</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">27</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Deposits and other long-term receivables</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">35</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">22</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Total</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>143</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>118</B></TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The funding has been classified as long-term receivable and is reflected in the balance sheet
at its discounted net present value. The effective interest rates on non-current receivables were
as follows:
</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="76%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>December 31, 2006</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>December 31, 2005</B></TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Long-term rate related to funding receivables</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">4.03</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">1.26</TD>
    <TD nowrap>%</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>12 &#151; OTHER PAYABLES, ACCRUED LIABILITIES AND PROVISIONS</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Other payables, accrued liabilities and provisions consisted of the following:
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="76%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>December 31, 2006</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>December 31, 2005</B></TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Provisions:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Provision for restructuring (Note 20)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">29</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">41</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Provision for legal claims</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Provision for warranty cost</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">7</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Total provisions</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">35</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">48</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Taxes other than income taxes</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">78</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">77</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Salaries and wages</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">308</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">248</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Social charges</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">135</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">113</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Advances received on government fundings</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">28</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">24</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Termination and defined contribution plan benefits</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">10</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">21</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Other accrued liabilities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">79</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">86</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Total</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>673</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>617</B></TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Other accrued liabilities are composed of individually not material amounts at December&nbsp;31,
2006 and 2005 respectively.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">In addition to the provisions listed above, at December&nbsp;31, 2006 and 2005 the Company had a total
provision related to income tax potential claims and risk exposures for an amount of $70&nbsp;million
and $123&nbsp;million, respectively. These amounts are reflected in the &#147;current income tax liabilities&#148;
in the Company consolidated balance sheets.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>13 &#151; RETIREMENT BENEFIT OBLIGATIONS</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The Group has 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. The Group uses at end
</DIV>

<P align="center" style="font-size: 10pt"><!-- Folio -->- 89 -<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">



<DIV align="left" style="font-size: 10pt; margin-top: 6pt">periods, measurement date for all its plans. Eligibility is generally determined in accordance with
local statutory requirements. The amounts recognized in the balance sheet are determined as
follows:
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="76%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>December 31, 2006</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>December 31, 2005</B></TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Benefit obligations wholly or partially funded</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(353</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(303</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Fair value of plan assets</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">241</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">194</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Benefit obligations wholly unfunded</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(220</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(207</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom">
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Unrecognized actuarial gain and loss</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(13</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">16</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Unrecognized past service cost</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">9</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Total pension liabilities</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right"><B>(336</B></TD>
    <TD nowrap><B>)</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right"><B>(300</B></TD>
    <TD nowrap><B>)</B></TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The movement in the liability recognized in the consolidated balance sheet is as follows:
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="76%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>2006</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>2005</B></TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Beginning of the year</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">300</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">303</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Exchange differences</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">31</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(23</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Total expense charged in the income statement</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">63</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">50</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Contributions paid</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(58</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(30</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>End of year</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>336</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>300</B></TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The actual return on plan assets was $15&nbsp;million in 2006 and $21&nbsp;million in 2005.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The weighted average assumptions used in the determination of the benefit obligations were as
follows:
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="76%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="left" style="border-bottom: 1px solid #000000"><B>Assumptions</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>2006</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>2005</B></TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Discount rate</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">4.34</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">4.71</TD>
    <TD nowrap>%</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Future salary increases</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">3.34</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">3.14</TD>
    <TD nowrap>%</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The amounts recognized in the income statement are as follows:
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="76%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Year ended</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Year ended</B></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>December 31, 2006</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>December 31, 2005</B></TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Current service cost</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">40</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">40</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Interest cost</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">25</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">21</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Expected return on plan assets</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(13</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(11</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Amortization of unrecognized prior
service cost</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">12</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Amortization of actuarial net loss (gain)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Gain on plan settlement</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(5</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Total pension costs</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>63</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>50</B></TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The weighted average assumptions used in the determination of pension costs were as follows:
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="76%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="left" style="border-bottom: 1px solid #000000"><B>Assumptions</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>2006</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>2005</B></TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Discount rate</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">4.74</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">4.34</TD>
    <TD nowrap>%</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Expected long-term rate of return on funds for the
pension expense of the year</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">6.05</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">6.34</TD>
    <TD nowrap>%</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Future salary increases</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">3.14</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">3.34</TD>
    <TD nowrap>%</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<P align="center" style="font-size: 10pt"><!-- Folio -->- 90 -<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The discount rate was determined by comparison against long-term corporate bond rates
applicable to the respective country of each plan. In developing the expected long-term rate of
return on assets, the Group modelled the expected long-term rates of return for broad categories of
investments held by the plan against a number of various potential economic scenarios.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Assumptions regarding future mortality experience are set based on advice from published statistics
and experience in each territory.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The Company pension plan asset allocation at December&nbsp;31, 2006 and 2005 and target allocation for
2006 are as follows:
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="64%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">Target</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="7">Percentage of Plan Assets</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">allocation</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="7" style="border-bottom: 1px solid #000000">at December</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="left" style="border-bottom: 1px solid #000000">Asset Category</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000">2006</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000">2006</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000">2005</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Equity securities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">53</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">55</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">61</TD>
    <TD nowrap>%</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Fixed income securities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">33</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">33</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">37</TD>
    <TD nowrap>%</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Real estate</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">5</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">4</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">2</TD>
    <TD nowrap>%</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Other</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">9</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">8</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Total</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">100</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">100</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">100</TD>
    <TD nowrap>%</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The Company&#146;s investment strategy for its pension plans is to maximize the long-term rate of return
on plan assets with an acceptable level of risk in order to minimize the cost of providing pension
benefits while maintaining adequate funding levels. The Company&#146;s practice is to periodically
conduct a review in each subsidiary of its asset allocation strategy. A portion of the fixed income
allocation is reserved in short-term cash to provide for expected benefits to be paid. The
Company&#146;s equity portfolios are managed in such a way as to achieve optimal diversity. The Company
does not manage any assets internally.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The expected return on plan assets was determined by considering the expected returns available on
the assets underlying the current investment policy. Expected yield on fixed interest investments
are based on gross redemption yields as at the balance sheet date. Expected returns on equity and
property investments reflect long-term real rates of return experienced in the respective markets.
</DIV>

<P align="center" style="font-size: 10pt"><!-- Folio -->- 91 -<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>14 &#151; LONG-TERM DEBT</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Long-term debt consisted of the following:
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="76%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>December 31,</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>December 31,</B></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>2006</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>2005</B></TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Bank loans:</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">3.42% (weighted average), due 2006, floating interest
rate at Libor &#043; 0.30%</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>0</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">45</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">2.54% (weighted average), due 2007, fixed interest rate</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>65</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">120</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">5.68% (weighted average), due 2007, variable interest rate</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>30</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">36</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">5.72% due 2008, floating interest rate at Libor &#043; 0.40%</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>49</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">25</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">5.81% due 2009, floating interest rate at Libor &#043; 0.40%</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>35</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">5.81% due 2010, floating interest rate at Libor &#043; 0.40%</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">25</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Funding program loans (held at nominal amount):</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">5.35% (weighted average), due 2006, fixed interest rate</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>&#151;</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">1.43% (weighted average), due 2009, fixed interest rate</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>18</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">22</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">0.90% (weighted average), due 2011, fixed interest rate</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>45</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">50</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">2.87% (weighted average), due 2012, fixed interest rate</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>12</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">12</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">0.50% (weighted average), due 2014, fixed interest rate</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>8</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">0.83% (weighted average), due 2017, fixed interest rate</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>53</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">47</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">5.38% due 2014, floating interest rate at Libor &#043; 0.017%</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>140</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Finance leases:</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">4.89%, due 2011, fixed interest rate</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>23</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">26</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Senior Bonds:</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">4.08%, due 2013, floating interest rate at EURIBOR &#043; 0.40%</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>659</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Convertible debt:</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">-0.50% convertible bonds due 2013</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>2</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,356</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">1.5% convertible bonds due 2016</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>737</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Total long-term debt</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,876</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,768</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Less current portion</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(136</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(1,499</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Total long-term debt, less current portion</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>1,740</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">269</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Long-term debt is denominated in the following currencies:
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="76%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>December 31,</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>December 31,</B></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>2006</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>2005</B></TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">U.S. dollar</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>988</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>1,431</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Euro</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>818</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>206</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Singapore dollar</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>65</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>120</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Other</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>5</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>11</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Total</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>1,876</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>1,768</B></TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Aggregate future maturities of long-term debt outstanding are as follows:
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="88%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>December 31,</B></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>2006</B></TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">2006</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>136</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">2007</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>89</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">2008</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>83</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">2009</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>45</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">2010</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>30</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Thereafter</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>1,493</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Total</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>1,876</B></TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt">Convertible debt
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">In August&nbsp;2003, the Group issued $1,332&nbsp;million principal amount at maturity of zero coupon
unsubordinated convertible bonds due 2013. The bonds were issued with a negative yield of
</DIV>

<P align="center" style="font-size: 10pt"><!-- Folio -->- 92 -<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">0.5% that resulted in a higher principal amount at issuance of $1,400&nbsp;million and net proceeds of
$1,386&nbsp;million. The bonds are convertible at any time by the holders at the rate of 29.9144 shares
of the Group&#146;s ordinary shares for each one thousand dollar face value of the bonds. The holders
had the option to redeem their convertible bonds on August&nbsp;5, 2006 at a price of $985.09, on August
5, 2008 at $975.28 and on August&nbsp;5, 2010 at $965.56 per one thousand dollar face value of the
notes. As a result of this holder&#146;s redemption option in August&nbsp;2006, the outstanding amount of
2013 bonds was classified in the consolidated balance sheet as &#147;current portion of long-term debt&#148;
as of December&nbsp;31, 2005. At any time from August&nbsp;20, 2006 the Group had the option to redeem for
cash at their negative accreted value all or a portion of the convertible bonds subject to the
level of the Group&#146;s share price.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">When applying the first-time adoption requirements as set out in IFRS 1, the Group assessed for
separate accounting in 2005 the two elements of equity and liability for the 2013 convertible bond,
because it was the only convertible debt outstanding at the IAS 32 / 39 transition date on January
1, 2005. The fair value of the liability component and the equity conversion component were
determined at issuance of the bond. The bond terms enable the holder to receive cash settlement
under certain circumstances and, consequently, the Group has classified the share conversion option
as a financial liability. The value at issuance of this share conversion option was $114&nbsp;million,
which has been reduced and fully reflected in adjusted retained earnings at January&nbsp;1, 2005 because
of the market expectation that the bond will be redeemed without any holder converting. Adjusted
retained earnings at January&nbsp;1, 2005 also included the cumulative amortized interest cost recorded
on the bond totalling $54&nbsp;million. The fair value of the debt component of the convertible debt
amounted to $1,356&nbsp;million as of December&nbsp;31, 2005. Based on the existing market conditions at
issuance, management estimated that separately valuing the embedded share conversion option would
not be materially different from calculating the share conversion value as the residual amount of
the total bond proceeds, after deducting the fair value of the debt component. The Group determined
the fair value of the debt component using a market interest rate for an equivalent non-convertible
debt over the period of future probable cash flows as estimated on the date of issuance. This was
determined to be a three-year timeframe corresponding to the period to the first date of redemption
for cash at the option of the holder. The fair value was calculated using cash flows discounted at
a rate based on the non-convertible debt rate of 2.96%. The embedded rights of the bond holder to
extend the bond beyond the probable three year period, by not exercising their redemption option,
were measured at fair value through profit and loss. The fair value of these embedded rights was
not material at the end of 2005.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Pursuant to the terms of the convertible bonds due 2013, the Company was required to purchase, at
the option of the holders, 1,397,493 convertible bonds, at a price of $985.09 each between August 7
and August&nbsp;9, 2006. This resulted in a cash payment of $1,377&nbsp;million. The Company may be required
to purchase, at the option of the holder, the outstanding convertible bonds for cash on August&nbsp;5,
2008 and/or August&nbsp;5, 2010 at a price of $975.28 and $965.56 per convertible bond, respectively.
The outstanding 2013 convertible debt amounted to approximately $2&nbsp;million as at December&nbsp;31, 2006,
corresponding to the remaining 2,505 bonds.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">In February&nbsp;2006, the Company issued $974&nbsp;million principal amount at maturity of zero coupon
senior convertible bonds due in February&nbsp;2016. The bonds were issued at 100% of principal with a
yield to maturity of 1.5% and resulted in net proceeds to the Company of $974&nbsp;million less
transaction fees. The bonds are convertible by the holder at any time prior to maturity at a
conversion rate of 43.118317 shares per one thousand dollars face value of
</DIV>

<P align="center" style="font-size: 10pt"><!-- Folio -->- 93 -<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">



<DIV align="left" style="font-size: 10pt; margin-top: 6pt">the bonds corresponding to 41,997,240 equivalent shares. In the event of any change in control, the
holder has the right to require the Company to purchase for cash all or any part of the holder&#146;s
convertible bonds at its accreted value. The holders can also redeem the convertible bonds on
February&nbsp;23, 2011 at a price of $1,077.58, on February&nbsp;23, 2012 at a price of $1,093.81 and on
February&nbsp;24, 2014 at a price of $1,126.99 per one thousand dollars face value of the bonds. The
Company can call the bonds at any time after March&nbsp;10, 2011 subject to the Company&#146;s share price
exceeding 130% of the accreted value divided by the conversion rate for 20 out of 30 consecutive
trading days. The Company may redeem for cash at the principal amount at issuance plus accumulated
gross yield all, but not a portion, of the convertible bonds at any time if 10% or less of the
aggregate principal amount at issuance of the convertible bonds remain outstanding in certain
circumstances or in the event of changes to the tax laws of the Netherlands or any successor
jurisdiction.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The Group assessed for separate accounting at issuance of the bond the two elements of equity and
liability of the compound instrument. The bond terms enable the holder to receive cash settlement
under certain circumstances and, consequently, the Group has classified the share conversion option
as a financial liability in &#147;Other non-current liabilities&#148;, which was reported at fair value
through profit and loss in the consolidated balance sheet at December&nbsp;31, 2006. Based on the
existing market conditions at issuance, management estimated that separately valuing the embedded
share conversion option would not be materially different from calculating this share conversion
value as the residual amount of the total bond proceeds, less the fair value of the debt component.
The fair value of the debt component of the convertible debt amounted to $700&nbsp;million at issuance
and includes the value of the holder&#146;s redemption option and the Company&#146;s call options since these
embedded derivatives were considered to be closely related to the host debt contract and could not
be accounted for separately as freestanding derivatives. The Group determined the fair value of the
liability component using a market interest rate for an equivalent non-convertible debt over the
period of future probable cash flows as estimated on the date of issuance. This was determined to
be a ten-year timeframe corresponding to the period from issuance to maturity. The fair value was
calculated using cash flows discounted at a rate based on the non-convertible debt rate of 5.50%,
reduced by 0.58% corresponding to the value of the put and call options.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">In 2006, the Company entered into cancellable swaps with a combined notional value of $200&nbsp;million
to hedge the fair value of a portion of the convertible bonds due 2016 carrying a fixed interest
rate. The cancellable swaps convert the fixed rate interest expense recorded on the convertible
bond due to 2016 to a variable interest rate based upon adjusted LIBOR. These interest rate swap
hedging transactions are described in further detail in Note 30.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The convertible debt recognized in the balance sheet is calculated as follows:
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Convertible debt 2013:
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="88%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>December 31,</B></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>2006</B></TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Face value of the convertible debt issued on August&nbsp;2003</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,400</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Conversion option classified as a financial liability</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(136</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Accumulated interest recognized on retained earnings</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">91</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Repayment in cash at redemption date</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(1,377</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Liability component at issuance</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right"><B>(22</B></TD>
    <TD nowrap><B>)</B></TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Interest expense recognized in 2006 consolidated
statement of income</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">24</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Convertible debt 2013 as of December&nbsp;31, 2006</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>2</B></TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<P align="center" style="font-size: 10pt"><!-- Folio -->- 94 -<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Convertible debt 2016:
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="88%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>December 31,</B></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>2006</B></TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Face value of the convertible debt issued in February&nbsp;2006</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">974</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Conversion option classified as a financial liability</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(274</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Liability component at issuance</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>700</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Interest expense recognized in 2006 consolidated
statement of income</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">37</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Convertible debt 2016 as of December&nbsp;31, 2006</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>737</B></TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt">Senior Bonds
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">In March&nbsp;2006, STMicroelectronics Finance B.V. (&#147;ST BV&#148;), a wholly owned subsidiary of the Company,
issued floating rate senior bonds with a principal amount of Euro 500&nbsp;million at an issue price of
99.873%. The notes, which mature on March&nbsp;17, 2013, pay a coupon rate of the three-month Euribor
plus 0.40% on the 17th of June, September, December and March of each year through maturity. In
the event of changes to the tax laws of the Netherlands or any successor jurisdiction, ST BV or the
Company, may redeem the full amount of senior bonds for cash. In the event of certain change in
control triggering events, the holders can cause ST BV or the Company to repurchase all or a
portion of the bonds outstanding.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt">Credit facilities
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The Company and its subsidiaries has uncommitted short-term credit facilities with several
financial institutions totalling $1,107&nbsp;million at December&nbsp;31, 2006. The Company has also a $323
million long-term credit facility with the European Investment Bank as part of a funding program
loan, of which $140&nbsp;million were used as at December&nbsp;31, 2006. The Company maintains also
uncommitted foreign exchange facilities totalling $846&nbsp;million at December&nbsp;31, 2006. At December
31, 2006, amounts available under the short-term lines of credit were not reduced by any borrowing.
As at December&nbsp;31, 2005, amounts available under the lines of credit were reduced by borrowings of
$11&nbsp;million at a weighted average interest rate of 4.40%
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>15 &#151; OTHER NON CURRENT LIABILITIES</B>
</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="76%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Year ended</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Year ended</B></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>December 31,</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>December 31,</B></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>2006</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>2005</B></TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Share conversion option of convertible
debt 2016 classified as financial
liability</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">277</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>&#151;</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Other</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">43</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">16</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Balance as of December&nbsp;31, 2006</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>320</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>16</B></TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>16 &#151; SHARE CAPITAL</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The changes in share capital are detailed as follows:
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="40%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Number of</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Ordinary</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Capital</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Treasury</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>Shares outstanding</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>shares</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>Surplus</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>shares</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>Total</B></TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Balance as of January&nbsp;1, 2005</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>891,908,997</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>1,150</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>1,924</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right"><B>(348</B></TD>
    <TD nowrap><B>)</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>2,726</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Employee share award scheme:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Exercise of share options</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>2,515,223</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>3</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>32</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>&#151;</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>35</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Conversion of bonds</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>59</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>&#151;</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>&#151;</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>&#151;</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>&#151;</B></TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<P align="center" style="font-size: 10pt"><!-- Folio -->- 95 -<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="40%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Number of</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Ordinary</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Capital</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Treasury</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>Shares outstanding</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>shares</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>Surplus</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>shares</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>Total</B></TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Balance as of December&nbsp;31, 2005</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>894,424,279</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>1,153</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>1,956</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right"><B>(348</B></TD>
    <TD nowrap><B>)</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>2,761</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Employee share award scheme:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Rights acquired on vested share-award</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>637,109</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>&#151;</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>&#151;</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>17</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>17</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Exercise of share options</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>2,333,654</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>3</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>25</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>&#151;</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>28</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Conversion of bonds</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>&#151;</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>&#151;</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>&#151;</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Balance as of December&nbsp;31, 2006</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>897,395,042</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>1,156</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>1,981</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right"><B>(331</B></TD>
    <TD nowrap><B>)</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>2,806</B></TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt">16.1 &#151; Outstanding shares
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The authorized share capital of the Company is <FONT face="'Times New Roman',times,serif">&#128;</FONT>1,810&nbsp;million consisting of 1,200,000,000 ordinary
shares and 540,000,000 preference shares, each with a nominal value of <FONT face="'Times New Roman',times,serif">&#128;</FONT>1.04. As of December&nbsp;31,
2006 the number of ordinary shares issued was 910,157,933 shares (907,824,279 at December&nbsp;31,
2005). All issued shares are fully paid. As of December&nbsp;31, 2006 the number of shares of common
stock outstanding was 897,395,042 (894,424,279 at December&nbsp;31, 2005).
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt">16.2 &#151; Authorized Preference shares
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The 540,000,000 preference shares, when issued, will entitle a holder to full voting rights and to
a preferential right to dividends and distributions upon liquidation. On May&nbsp;31, 1999, the Company
entered into an option agreement with STMicroelectronics Holding II B.V. in order to protect the
Company from a hostile takeover or other similar action. The option agreement provided for
540,000,000 preference shares to be issued to STMicroelectronics Holding II B.V. upon their request
based on approval by the Company&#146;s Supervisory Board. STMicroelectronics Holding II B.V. would be
required to pay at least 25% of the par value of the preference shares to be issued, and to retain
ownership of at least 30% of the Company&#146;s issued share capital. An amendment was signed in
November&nbsp;2004 which reduced the threshold required for STMicroelectronics Holding II B.V. to
exercise its right to subscribe preference shares of the Company, down to 19% issued share capital
compared to the previous requirement of at least 30%.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">On November&nbsp;27, 2006 the Supervisory Board of the Company approved the termination of the existing
option agreement between the Company and STMicroelectronics Holding II B.V. and the substitution of
such agreement by a new agreement of substantially similar terms between the Company and a Dutch
independent Foundation, Stichting Continu&#239;teit ST. The new option agreement provides for the
issuance of 540,000,000 preference shares. Any such shares would be issued by the Company to the
Foundation, upon its request and in its sole discretion, upon payment of at least 25% of the par
value of the preference shares to be issued. The issuing of the preference shares is conditional
upon (i)&nbsp;the Company receiving an unsolicited offer or there being the threat of such an offer;
(ii)&nbsp;the Company&#146;s Managing and Supervisory Boards deciding not to support such an offer and; (iii)
the Board of the Foundation determining that such an offer or acquisition would be contrary to the
interests of the Company and its stakeholders. The preference shares may remain outstanding for no
longer than two years. There was no preference shares issued as of December&nbsp;31, 2006. The effect of
the preference shares may be to create a level-playing field in the event actions which are
considered to be hostile by the Managing Board and the Supervisory Board, as described above, occur
and which the board of the Stichting determines to be contrary to the interests of the Company and
the Company&#146;s shareholders and other stakeholders.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt">16.3 &#151; Treasury shares
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">In 2002 and 2001, 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. No treasury
shares were acquired in 2003, 2004, 2005 and 2006.
</DIV>

<P align="center" style="font-size: 10pt"><!-- Folio -->- 96 -<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The treasury shares have been designated for allocation under the Company&#146;s share based
remuneration programs on non-vested shares including such plans as approved by the 2005 and 2006
Annual General Meeting of Shareholders. As of December&nbsp;31, 2006, 637,109 of these treasury shares
were transferred to employees under the Company&#146;s share based remuneration programs, following the
vesting as of April&nbsp;27, 2006 of the first tranche of the stock award plan granted in 2005 and the
acceleration of the vesting of a limited number of stock awards.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt">16.4 &#151; Stock option plans
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">In 1995, the Shareholders voted to adopt the 1995 Employee Share Option Plan (the &#147;1995 Plan&#148;)
whereby options for up to 33,000,000 shares may be granted in instalments over a five-year period.
Under the 1995 Plan, the options may be granted to purchase ordinary shares at a price not lower
than the market price of the shares on the date of grant. At December&nbsp;31, 2006, under the 1995
Plan, 7,663,650 of the granted options outstanding originally vest 50% after three years and 50%
after four years following the date of the grant; 6,189,852 of the granted options vest 32% after
two years, 32% after three years and 36% after four years following the date of the grant. The
options expire 10&nbsp;years after the date of grant. During 2005, the vesting periods for all options
under the plan were accelerated.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">In 1996, the Shareholders voted to adopt the Supervisory Board Option Plan whereby each member of
the Supervisory Board was eligible to receive, during the three-year period 1996-1998, 18,000
options for 1996 and 9,000 options for both 1997 and 1998, to purchase ordinary shares at the
closing market price of the shares on the date of the grant. In the same three-year period, the
professional advisors to the Supervisory Board were eligible to receive 9,000 options for 1996 and
4,500 options for both 1997 and 1998. Under the Plan, the options vest over one year and are
exercisable for a period expiring eight years from the date of grant.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">In 1999, the Shareholders voted to renew the Supervisory Board Option Plan whereby each member of
the Supervisory Board may receive, during the three-year period 1999-2001, 18,000 options for 1999
and 9,000 options for both 2000 and 2001 to purchase shares of capital stock at the closing market
price of the shares on the date of the grant. In the same three-year period, the professional
advisors to the Supervisory Board may receive 9,000 options for 1999 and 4,500 options for both
2000 and 2001. Under the Plan, the options vest over one year and are exercisable for a period
expiring eight years from the date of grant.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The reason for granting share options to Supervisory Board Members and other share-based
compensation is disclosed in the Company&#146;s Governance charter. The Company believes that such
compensation to Supervisory Board Members enables better identification with shareholder interest
and that share-based compensation is conducive to attracting and retaining the most suitable
candidates to accept service as Supervisory Board Members in light of worldwide practices in the
semiconductor and technology industries. Share-based compensation for Supervisory Board Members is
subject to a prior shareholders&#146; approval.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">In 2001, the Shareholders voted to adopt the 2001 Employee Share Option Plan (the &#147;2001 Plan&#148;)
whereby options for up to 60,000,000 shares may be granted in instalments over a five-year period.
The options may be granted to purchase ordinary shares at a price not lower than the market price
of the shares on the date of grant. In connection with a revision of its equity-based compensation
policy, the Company decided in 2005 to accelerate the vesting
</DIV>

<P align="center" style="font-size: 10pt"><!-- Folio -->- 97 -<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">



<DIV align="left" style="font-size: 10pt; margin-top: 6pt">period of all outstanding unvested share options. The options expire ten years after the date of
grant.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">In 2002, the Shareholders voted to adopt a Share Option Plan for Supervisory Board Members and
Professionals of the Supervisory Board. Under this plan, 12,000 options can be granted per year to
each member of the Supervisory Board and 6,000 options per year to each professional advisor to the
Supervisory Board. Options will vest 30&nbsp;days after the date of grant. The options expire ten years
after the date of grant.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">A summary of share option activity for the plans for the two years ended December&nbsp;31, 2006 and 2005
follows:
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="64%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="7" style="border-bottom: 1px solid #000000"><B>Price Per Share</B></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Weighted</B></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>Number of Shares</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>Range</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>Average</B></TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Outstanding at December&nbsp;31, 2004</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">65,424,207</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD nowrap align="right">12.03-$62.01</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">29.18</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Options granted:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">2001 Plan</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">42,200</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD nowrap align="right">16.73-$17.31</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">16.91</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Supervisory Board
Plan</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Options forfeited</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(2,364,862</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD nowrap align="right">12.03-$62.01</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">29.65</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Options exercised</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(2,542,978</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD nowrap align="right">12.03-$14.23</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">13.88</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Outstanding at December&nbsp;31, 2005</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>60,558,567</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>$</B></TD>
    <TD nowrap align="right"><B>12.03-$62.01</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>$</B></TD>
    <TD align="right"><B>29.80</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Options granted:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">2001 Plan</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Supervisory Board
Plan</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Options expired</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(16,832</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">12.03</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">12.03</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Options forfeited</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(1,912,584</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD nowrap align="right">12.03-$62.01</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">30.66</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Options exercised</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(2,303,899</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD nowrap align="right">12.03-$17.08</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">12.03</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Outstanding at December&nbsp;31, 2006</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>56,325,252</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>$</B></TD>
    <TD nowrap align="right"><B>12.03-$62.01</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>$</B></TD>
    <TD align="right"><B>30.50</B></TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The related weighted average market price of options at the time of exercise was $16.00 and
$17.13 for the years ended December&nbsp;31, 2006 and December&nbsp;31, 2005, respectively.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Share options exercisable following acceleration of vesting for all outstanding unvested share
options were as follows:
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="76%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>December 31,</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>December 31,</B></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>2006</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>2005</B></TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Options exercisable</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>56,325,252</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>60,558,567</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Weighted average exercise price</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">30.50</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">29.80</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The weighted average remaining contractual life of options outstanding as of December&nbsp;31, 2006
and 2005 was 4.7 and 5.5, respectively.
</DIV>


<P align="center" style="font-size: 10pt"><!-- Folio -->- 98 -<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The range of exercise prices, the weighted average exercise price and the weighted average
remaining contractual life of options exercisable as of December&nbsp;31, 2006 were as follows:
</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Weighted average</B></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Weighted average</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>remaining</B></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>Number of shares</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>Option price range</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>exercise price</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>contractual life</B></TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD>&nbsp;</TD>
    <TD align="right">189,455</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD nowrap align="right">12.03-$17.31</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">17,04</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">7.8</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD>&nbsp;</TD>
    <TD align="right">29,716,135</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD nowrap align="right">19.18-$24.88</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">22,04</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5.2</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD>&nbsp;</TD>
    <TD align="right">217,360</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD nowrap align="right">25.90-$29.70</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">27,20</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6.2</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD>&nbsp;</TD>
    <TD align="right">19,990,687</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD nowrap align="right">31.09-$44.00</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">34,37</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4.9</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD>&nbsp;</TD>
    <TD align="right">6,211,615</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD nowrap align="right">50.69-$62.01</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">59,08</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1.6</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="15" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD>&nbsp;</TD>
    <TD align="right"><B>56,325,252</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>$</B></TD>
    <TD nowrap align="right"><B>12.03-$62.01</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>$</B></TD>
    <TD align="right"><B>30.50</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>4.7</B></TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The range of exercise prices, the weighted average exercise price and the weighted average
remaining contractual life of options exercisable as of December&nbsp;31, 2005 were as follows:
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Weighted average</B></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Weighted average</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>remaining</B></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>Number of shares</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>Option price range</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>exercise price</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>contractual life</B></TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD>&nbsp;</TD>
    <TD align="right">2,523,511</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD nowrap align="right">12.03-$17.31</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">12.43</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1.2</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD>&nbsp;</TD>
    <TD align="right">30,682,918</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD nowrap align="right">19.18-$24.88</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">22.03</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6.2</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD>&nbsp;</TD>
    <TD align="right">236,990</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD nowrap align="right">25.90-$29.70</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">27.18</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">7.3</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD>&nbsp;</TD>
    <TD align="right">20,679,858</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD nowrap align="right">31.09-$44.00</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">34.37</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5.9</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD>&nbsp;</TD>
    <TD align="right">6,435,290</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD nowrap align="right">50.69-$62.01</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">59.08</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2.6</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="15" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD>&nbsp;</TD>
    <TD align="right"><B>60,558,567</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>$</B></TD>
    <TD nowrap align="right"><B>12.03-$62.01</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>$</B></TD>
    <TD align="right"><B>29.80</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>5.5</B></TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The fair value of the Company&#146;s share options was estimated under IFRS 2 using a Black-Scholes
option pricing model since the simple characteristics of the share options did not require complex
assumptions. The Group has amortized the compensation expense incurred on the grant of share
options over the nominal vesting period for employees based on the graded vesting of each plan. The
compensation expense recorded for the year ended December&nbsp;31, 2005 included a charge of $80&nbsp;million
relating to the effect of accelerating the vesting period of all outstanding unvested share options
during the third quarter of 2005, which has been recognized immediately for the amount that
otherwise would have been recognized ratably over the remaining vesting period. Consequently no
compensation expense was recognised in 2006 on share options. The fair value of share options under
IFRS 2 provisions was estimated using the following weighted-average assumptions:
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="76%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>December 31, 2006</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>December 31, 2005</B></TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Expected option life (years)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6.1</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Weighted average share price</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">16.91</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Historical Company share price volatility</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">41.5</TD>
    <TD nowrap>%</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Risk-free interest rate</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">3.8</TD>
    <TD nowrap>%</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Dividend yield</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">0.69</TD>
    <TD nowrap>%</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Share options were issued at market price. The Company has determined the historical share
price volatility to be the most appropriate estimate of future price activity. The historical share
price volatility is based on statistical analysis of daily share prices over the expected option
life. The weighted average fair value of share options granted during 2005 was $5.24.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The following table illustrates the classification of share-based compensation included in the
consolidated statement of income for grants of employee share options during the years ended
December&nbsp;31, 2006 and December&nbsp;31, 2005:
</DIV>

<P align="center" style="font-size: 10pt"><!-- Folio -->- 99 -<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="76%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>December 31, 2006</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>December 31, 2005</B></TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Cost of sales</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(25</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Selling, general and administrative</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(47</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Research and development</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(35</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Total compensation expense</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>&#151;</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right"><B>(107</B></TD>
    <TD nowrap><B>)</B></TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt">16.5 &#151; Nonvested share awards
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">In 2005, the Company redefined its equity-based compensation strategy by no longer granting options
but rather issuing nonvested shares. In July&nbsp;2005, the Company amended its latest Stock Option
Plans for employees, Supervisory Board and Professionals of the Supervisory Board accordingly.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt">2005 Share award plan
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">As part of this revised stock-based compensation policy, the Company granted on October&nbsp;25, 2005
3,940,065 nonvested shares to senior executives and selected employees, to be issued upon vesting
from treasury stock (&#147;The Employee 2005 Plan&#148;). The Compensation Committee also authorized the
future grant of 219,850 additional shares to selected employees upon nomination by the Managing
Board of the Company. These additional shares were granted in 2006. The shares were granted for
free to employees and would vest upon completion of market and internal performance conditions.
Under the program, if the defined market condition was met in the first quarter of 2006, each
employee would receive 100% of the nonvested shares granted. If the market condition was not
achieved, the employee could earn one third of the grant for each of the two performance
conditions. If neither the market or performance conditions were met, the employee would receive
none of the grant. In addition to the market and performance conditions, the nonvested shares vest
over the following requisite service period: 32% after 6&nbsp;months, 32% after 18&nbsp;months and 36% after
30&nbsp;months following the date of the grant. In 2006, the Company failed to meet the market condition
while the performance conditions were reached. Consequently, one third of the shares granted,
amounting to 1,364,902 shares, was lost for vesting. In addition, in compliance with the graded
vesting of the grant, the first tranche of the plan, representing 637,109 shares, vested as at
April&nbsp;27, 2006 and were transferred to employees from the 4,100,000 treasury shares owned by the
Company. At December&nbsp;31, 2006 1,993,444 nonvested shares were outstanding. In March&nbsp;2006 the
Company decided to modify the original plan to create a subplan for the employees in one of its
European subsidiaries for statutory payroll tax purposes. The original plan terms and conditions
were modified to extend for these employees the requisite service period as follows: 64% of the
granted stock awards vest as at April&nbsp;27, 2007 and 36% as at April&nbsp;27, 2008 following the date of
the grant. In addition, the sale by the employees of the shares once vested is restricted over an
additional two-year period, during which the employees must still be rendering service to the
Company in order to be entitled to the full rights of the shares. At December&nbsp;31, 2006, out of the
total 1,993,444 outstanding nonvested shares of the granted plan, 694,257 were outstanding as part
of the newly created subplan.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">On October&nbsp;25, 2005, the Compensation Committee granted 66,000 stock-based awards to the members of
the Supervisory Board and professionals of the Supervisory Board (&#147;The 2005 Supervisory Board
Plan&#148;). These awards are granted at the nominal value of the share of <FONT face="'Times New Roman',times,serif">&#128;</FONT>1.04 and vest over the
following period: 32% after 6&nbsp;months, 32% after 18&nbsp;months and 36% after 30&nbsp;months following the
date of the grant. Nevertheless, they are not subject to any market, performance or service
conditions. As such, their associated compensation cost was recorded immediately at grant. In 2006,
in compliance with the graded vesting of the grant,
</DIV>

<P align="center" style="font-size: 10pt"><!-- Folio -->- 100 -<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">



<DIV align="left" style="font-size: 10pt; margin-top: 6pt">the first tranche of the plan, representing 17,000 shares, vested as at April&nbsp;27, 2006. As of
December&nbsp;31 2006, 34,000 awards were outstanding.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt">2006 Share award plan
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">On April&nbsp;29, 2006, the Compensation Committee granted 66,000 stock-based awards to the members of
the Supervisory Board and professionals of the Supervisory Board (&#147;The 2006 Supervisory Board
Plan&#148;). These awards are granted at the nominal value of the share of <FONT face="'Times New Roman',times,serif">&#128;</FONT>1.04 and vest over the
following period: 32% after 12&nbsp;months, 32% after 24&nbsp;months and 36% after 36&nbsp;months following the
date of the grant. Nevertheless, they are not subject to any market, performance or service
conditions. As such, their associated compensation cost was recorded immediately at grant. As of
December&nbsp;31, 2006, 51,000 awards were outstanding.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">On September&nbsp;29, 2006 the Company granted 4,854,280 nonvested shares to senior executives (of which
100,000 shares to the sole Member of the Managing Board) and selected employees to be issued upon
vesting from treasury stock (&#147;The 2006 Employee Plan&#148;). The Compensation Committee also authorized
on September&nbsp;29, 2006 the future grant of 245,720 shares to selected employees upon nomination by
the Managing Board of the Company. The shares were granted for free to employees, and will vest
upon completion of three internal performance conditions, each weighting for one third of the total
number of awards granted. Except for employees in one of the Company&#146;s European subsidiaries for
whom a subplan was simultaneously created on September&nbsp;29, 2006, the nonvested shares vest over the
following requisite service period: 32% as at April&nbsp;27, 2007, 32% as at April&nbsp;27, 2008 and 36% as
at April&nbsp;27, 2009. The following requisite service period is required for the nonvested shares
granted under the local subplan: 64% of the granted stock awards vest as at April&nbsp;27, 2008 and 36%
as at April&nbsp;27, 2009. In addition, the sale by the employees of the shares once vested is
restricted over an additional two-year period, during which the employees must still be rendering
service to the Company in order to be entitled to the full rights of the shares. At December&nbsp;31,
2006 4,735,850 nonvested shares were outstanding, of which 1,224,440 under the local subplan.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">On December&nbsp;19, 2006, the Compensation Committee granted additional 62,360 shares to selected
employees designated by the Managing Board of the Company as part of the 2006 Employee Plan. This
additional grant has the same terms and conditions as the original plan. At December&nbsp;31, 2006
62,360 nonvested shares were outstanding as part of this additional grant, of which 34,600 under
the local subplan.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">A summary of the nonvested share activity for the years ended December&nbsp;31, 2006 and 2005 is
presented below:
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="76%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="left" style="border-bottom: 1px solid #000000"><B>Nonvested Shares</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>Number of Shares</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>Price</B></TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Awards granted-2005 share award plan</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">2005 Employees Plan</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,940,065</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">0</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">2005 Supervisory Board Plan</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">66,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><FONT face="'Times New Roman',times,serif">&#128;</FONT></TD>
    <TD align="right">1,04</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Awards forfeited</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">2005 Employees Plan</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(25,845</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">0</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">2005 Supervisory Board Plan</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(15,000</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><FONT face="'Times New Roman',times,serif">&#128;</FONT></TD>
    <TD align="right">1,04</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Awards vested</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Outstanding at December&nbsp;31, 2005</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>3,965,220</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>$</B></TD>
    <TD nowrap align="right"><B>0-<FONT face="'Times New Roman',times,serif">&#128;</FONT>1.04</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Awards granted-2006 share award plan</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">2005 Employees Plan</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">219,850</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">0</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">2006 Employees Plan</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,916,640</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">0</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">2006 Supervisory Board Plan</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">66,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><FONT face="'Times New Roman',times,serif">&#128;</FONT></TD>
    <TD align="right">1,04</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Awards forfeited</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<P align="center" style="font-size: 10pt"><!-- Folio -->- 101 -<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="76%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="left" style="border-bottom: 1px solid #000000"><B>Nonvested Shares</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>Number of Shares</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>Price</B></TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">2005 Employees Plan</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(138,615</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">0</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">2006 Employees Plan</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(118,430</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">0</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">2006 Supervisory Board Plan</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(15,000</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><FONT face="'Times New Roman',times,serif">&#128;</FONT></TD>
    <TD align="right">1,04</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Awards Cancelled on failed vesting conditions:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">2005 Employees Plan</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(1,364,902</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">0</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Awards vested</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">2005 Employees Plan</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(637,109</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">0</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">2005 Supervisory Board Plan</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(17,000</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><FONT face="'Times New Roman',times,serif">&#128;</FONT></TD>
    <TD align="right">1,04</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Outstanding at December&nbsp;31, 2006</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>6,876,654</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>$</B></TD>
    <TD nowrap align="right"><B>0-<FONT face="'Times New Roman',times,serif">&#128;</FONT>1.04</B></TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The weighted average grant date fair value of nonvested shares granted to employees under the
2006 Employee Plan was $17.28. On the 2006 Employee Plan, the fair value of the nonvested shares
granted, did not reflect any discount since they are not affected by a market condition. On the
contrary, the Company estimates the number of awards expected to vest by assessing the probability
of achieving the performance conditions. As at December&nbsp;31, 2006, the Company determined that one
of the three performance conditions was met and estimated that it was probable that the other two
performance conditions would be achieved. Consequently, the compensation expense recorded on the
2006 Employee Plan reflects the assumption that all of the awards granted will vest, as far as the
service condition is met.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">For the 2005 share award plan, the Company recorded compensation expense for the nonvested share
awards based on the fair value of the awards at the grant date, which represents the $16.61 share
price at the date of the grant. The fair value of the nonvested shares affected by a market
condition, reflects a discount of 49.50%, using a Monte Carlo path-dependent pricing model to
measure the probability of achieving the market condition.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The following assumptions were incorporated into the Monte Carlo pricing model to estimate the
49.50% discount:
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="88%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>2005 grant</B></TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Historical share price volatility</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">27.74</TD>
    <TD nowrap>%</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Historical volatility of reference index</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">25.5</TD>
    <TD nowrap>%</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Three-year average dividend yield</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">0.55</TD>
    <TD nowrap>%</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Risk-free interest rates used</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right"><FONT style="white-space: nowrap">4.21%-4.33</FONT></TD>
    <TD>%</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Consistent with fair value calculations of stock option grants in prior years, the Company has
determined the historical share price volatility to be the most appropriate estimate of future
price activity. The weighted average grant-date fair value of nonvested shares granted in 2005 was
$8.50.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">In 2006, the Company evaluated the impact of the modification of the Employee 2005 Plan following
the creation of a local sub-plan in one of its subsidiary. However, in compliance with IFRS No.&nbsp;2,
<I>Share-Based Payment, </I>and considering that the modification of the plan did not result in an
increase of the awards fair value, the Company continued to recognize the compensation expense of
the whole original plan over the remaining original requisite service period. No incremental cost
is recognized over the modified extended service period.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The following table illustrates the classification of share-based compensation included in the
statement of income for grants of nonvested shares during the years ended at December&nbsp;31, 2006 and
2005:
</DIV>

<P align="center" style="font-size: 10pt"><!-- Folio -->- 102 -<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="76%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 0px solid #000000"><B>December 31, 2006</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 0px solid #000000"><B>December 31, 2005</B></TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Cost of sales</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">10</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Selling, general and administrative</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">22</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Research and development</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">13</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Total share-based compensation expense</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>45</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>9</B></TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The compensation expense recorded for nonvested shares in 2006 and 2005 included a reduction
for estimated forfeitures, reflecting the historical trend of forfeitures on past stock award
plans. This estimate will be adjusted for actual forfeitures. For employees eligible for
retirement during the requisite service period, the Company records compensation expense over the
applicable shortened period. For awards for which vesting was accelerated in 2006, the Company
recorded immediately the unrecognized compensation expense as at the acceleration date.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">In 2006 and 2005, the Company recognized in the income statement total deferred income tax benefit
related to nonvested share compensation expense amounting to $11&nbsp;million and $2&nbsp;million
respectively. It also recognized in total equity excess tax benefits amounting to $0&nbsp;million as at
December&nbsp;31, 2006 and $1&nbsp;million 2005. Compensation cost capitalized as part of inventory was $5
million and $2&nbsp;million at December&nbsp;31, 2006 and 2005. As of December&nbsp;31, 2006 there was $76&nbsp;million
of total unrecognized compensation cost related to the grant of nonvested shares, which is expected
to be recognized over a weighted average period of 13&nbsp;months.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>17 &#151; OTHER RESERVES</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">17.1 &#151; Other reserves
<DIV style="font-size:6pt">&nbsp;</DIV>
The accumulated balances related to each component of other reserves were as follows:
</DIV>
<DIV align="center">
<TABLE style="font-size: 8pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="28%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Foreign</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Unrealized</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>currency</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>gain on</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Unrealized</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Convertible</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Share-based</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>translation</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>available-for-sale</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>gain (loss) on</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Total other</B></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>debt</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>payment</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>difference</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>securities</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>derivatives</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>reserves</B></TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Balance as of December&nbsp;31, 2004</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>&#151;</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>78</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>1,097</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>&#151;</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>59</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>1,234</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Convertible debt &#151; equity component</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>&#151;</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>&#151;</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Employee share awards schemes:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Value of services provided</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">118</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">118</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Foreign currency translation
differences</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(764</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(764</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Cash flow hedge:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Transfer to net income</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(59</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(59</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Unrealized loss</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(14</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(14</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Tax effect</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Balance as of December&nbsp;31, 2005</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>&#151;</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>196</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>333</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>&#151;</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right"><B>(8</B></TD>
    <TD nowrap><B>)</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>521</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Convertible debt &#151; equity component</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>&#151;</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>&#151;</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Employee share awards schemes:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>&#151;</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Value of services provided</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">46</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">46</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Foreign currency translation
differences</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">532</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">532</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Cash flow hedge:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Transfer to net income</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">8</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">8</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Unrealized profit</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">7</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">7</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Tax effect</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(1</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(1</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Balance as of December&nbsp;31, 2006</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>&#151;</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>242</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>865</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>&#151;</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>6</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>1,113</B></TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Certain prior year items have been reclassified to conform with current year presentation. The
disclosure contained within the consolidated statement of changes in shareholders&#146; equity has been
amended to more appropriately reflect the categorization of other reserves and retained earnings.
</DIV>

<P align="center" style="font-size: 10pt"><!-- Folio -->- 103 -<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="left" style="font-size: 10pt; margin-top: 12pt">17.2 &#151; Dividends
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">At the Annual General Meeting of Shareholders on April&nbsp;27, 2006, shareholders approved the
distribution of $0.12 per share in cash dividends. The dividend amount of approximately $107
million was paid in the second quarter of 2006.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">At the Annual General Meeting of Shareholders on March&nbsp;18, 2005, shareholders approved the
distribution of $0.12 per share in cash dividends. The dividend amount of approximately $107
million was paid in the second quarter of 2005.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>18 &#151; EARNINGS PER SHARE</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">For the years ended December&nbsp;31, 2006 and 2005, earnings per share (&#147;EPS&#148;) were calculated as
follows:
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="76%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Year ended</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Year ended</B></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>December 31,</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>December 31,</B></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>2006</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>2005</B></TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Basic EPS</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Net profit attributable to shareholders of the Company</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>964</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">347</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Weighted average shares outstanding</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>896,136,969</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">892,760,520</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Basic EPS</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>1.08</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.39</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Diluted EPS</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Net profit attributable to shareholders of the Company</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>964</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">347</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Convertible debt interest, net of tax</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>62</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Net profit attributable to shareholders of the Company adjusted</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>1,026</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">347</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Weighted average shares outstanding</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>896,136,969</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">892,760,520</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Dilutive effect of share options</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>1,631</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">648,186</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Dilutive effect of nonvested shares</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>2,409,309</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,516,646</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Dilutive effect of convertible debt</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>60,941,996</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Number of shares used in calculating diluted EPS</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>959,489,905</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">895,925,352</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Diluted EPS</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>1.07</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.39</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>19 &#151; OTHER INCOME AND EXPENSES</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">19.1 &#151; Other income
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Other income consisted of the following:
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="76%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Year ended</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Year ended</B></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>December 31,</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>December 31,</B></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>2006</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>2005</B></TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Research and development funding</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>110</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">92</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Exchange gain</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>17</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Gain on sale of non-current assets</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>2</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">12</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Gain on sale of investment in Accent</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>6</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Other</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>3</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Total</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>138</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">104</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>



<P align="center" style="font-size: 10pt"><!-- Folio -->- 104 -<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="left" style="font-size: 10pt; margin-top: 12pt">19.2 &#151; Other expenses
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Other expenses consisted of the following:
</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="76%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Year ended</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Year ended</B></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>December 31,</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>December 31,</B></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>2006</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>2005</B></TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Start-up costs</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right"><B>(57</B></TD>
    <TD nowrap><B>)</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(56</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Exchange loss</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(51</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Patent litigation costs</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right"><B>(22</B></TD>
    <TD nowrap><B>)</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(14</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Patent pre-litigation costs</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right"><B>(7</B></TD>
    <TD nowrap><B>)</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(8</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Change in fair value of non
current liability portion of
convertible debt 2016</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right"><B>(6</B></TD>
    <TD nowrap><B>)</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Other expenses</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(3</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Total</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right"><B>(92</B></TD>
    <TD nowrap><B>)</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(132</TD>
    <TD nowrap>)</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Patent litigation costs include legal and attorney fees and payment of claims, and patent
pre-litigation costs 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.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">On June&nbsp;29, 2006, the Company sold to Sofinnova Capital V its participation in Accent Srl, a
subsidiary based in Italy. Accent Srl, in which the Company held a 51% interest, was jointly formed
with Cadence Design Systems Inc. and is specialized in hardware and software design and consulting
services for integrated circuit design and fabrication. The total consideration amounting to $7
million was received in cash on June&nbsp;29, 2006. Net of consolidated carrying amount and transactions
related expenses, the divestiture resulted in a net pre-tax gain of $6&nbsp;million which was recorded
in &#147;Other income&#148; in the 2006 consolidated statement of income. In addition the Company
simultaneously entered into a license agreement with Accent by which the Company granted to Accent,
for a total agreed lump sum amount of $3&nbsp;million, the right to use &#147;as is&#148; and with no right to
future development certain specific intellectual property of the Company that are currently used in
Accent&#146;s business activities. The total consideration was recognized immediately in 2006 and
recorded as &#147;Other revenues&#148; in the consolidated statement of income. The Company was also granted
warrants for 6,675 new shares of Accent. Such warrants expire after 15&nbsp;years and can only be
exercised in the event of a change of control or an Initial Public Offering of Accent above a
predetermined value.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>20 &#151; IMPAIRMENT, RESTRUCTURING CHARGES AND OTHER RELATED CLOSURE COSTS</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">In the recent years, the Group has incurred charges related to the following main items: (i)&nbsp;the
150mm restructuring plan started in 2003; (ii)&nbsp;the streamlining of certain activities decided in
the first quarter of 2005; (iii)&nbsp;the headcount reduction plan announced in the second quarter of
2005; and (iv)&nbsp;the yearly impairment review.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">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 finer geometry 200mm wafer fabs. The plan
includes the discontinuation of the 150 mm production of Rennes (France), the closure as soon as
operationally feasible of the 150mm wafer pilot line in Castelletto (Italy) and the downsizing by
approximately one-half of the 150mm wafer fab in Carrollton, Texas. Furthermore, the 150mm wafer
fab productions in Agrate (Italy) and Rousset (France) will be gradually phased-out in favor of
200mm wafer ramp-ups at existing facilities in these locations, which will be expanded or upgraded
to accommodate additional finer geometry wafer capacity. The Company is expecting to incur the
balance of the restructuring charges related to this manufacturing restructuring plan in
</DIV>

<P align="center" style="font-size: 10pt"><!-- Folio -->- 105 -<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">



<DIV align="left" style="font-size: 10pt; margin-top: 6pt">early 2007, later than originally anticipated to accommodate unforeseen qualification requirements
of the Company&#146;s customers.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">In the first quarter of 2005, the Group 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.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">In May&nbsp;2005, the Group announced additional restructuring efforts to improve profitability. These
initiatives aimed to reduce the Group&#146;s workforce by 3,000 outside Asia by the end of 2006, of
which 2,300 are planned for Europe. The Group plans to reorganize its European activities by
optimizing on a global scale its EWS activities (wafer testing); harmonizing its support functions;
streamlining its activities outside its manufacturing areas and by disengaging from certain
activities.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">In 2006, the Company performed the impairment test on an annual basis in order to assess
recoverability of the carrying value of goodwill and other intangible assets. In addition, the
Company decided to cease product development from technologies inherited from Tioga business
acquisition.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Impairment, restructuring charges and other related closure costs incurred in 2006 and 2005 are
summarized as follows:
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="52%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Total impairment,</B></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>restructuring</B></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>charges and other</B></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="center"><B>Year ended</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Restructuring</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Other related</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>related closure</B></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="center" style="border-bottom: 1px solid #000000"><B>December 31, 2006</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>Impairment</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>charges</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>closure costs</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>costs</B></TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">150mm fab plan</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(1</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(6</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(12</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(19</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">2005 restructuring initiatives</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(1</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(33</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(5</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(39</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">2006 impairment review</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(10</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(10</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Total</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right"><B>(12</B></TD>
    <TD nowrap><B>)</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right"><B>(39</B></TD>
    <TD nowrap><B>)</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right"><B>(17</B></TD>
    <TD nowrap><B>)</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right"><B>(68</B></TD>
    <TD nowrap><B>)</B></TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="52%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Total impairment,</B></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>restructuring</B></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>charges and other</B></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="center"><B>Year ended</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Restructuring</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Other related</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>related closure</B></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="center" style="border-bottom: 1px solid #000000"><B>December 31, 2005</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>Impairment</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>charges</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>closure costs</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>costs</B></TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">150mm fab plan</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(4</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(5</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(9</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">2005 restructuring initiatives</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(37</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(49</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(2</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(88</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Other</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(1</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(1</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Total</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right"><B>(38</B></TD>
    <TD nowrap><B>)</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right"><B>(53</B></TD>
    <TD nowrap><B>)</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right"><B>(7</B></TD>
    <TD nowrap><B>)</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right"><B>(98</B></TD>
    <TD nowrap><B>)</B></TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><I>Impairment charges</I>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">In 2006, the Company performed the annual review for impairment of goodwill and other
intangible assets. As a result of this review and pursuant to the decision of the Company to
discontinue product development from technologies inherited from Tioga business acquisition, an
impairment charge of approximately $10&nbsp;million was recorded in the third quarter of 2006, of which
$6&nbsp;million corresponded to the write-off of Tioga goodwill and $4
</DIV>

<P align="center" style="font-size: 10pt"><!-- Folio -->- 106 -<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">



<DIV align="left" style="font-size: 10pt; margin-top: 6pt">million to impairment charges on technologies purchased as part of Tioga business acquisition which
were determined to be without any alternative use.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">In addition, impairment charges of approximately $2&nbsp;million were recorded during 2006, following
the decision of the Company to discontinue a production line in one of its back-end facilities and
for equipment and machinery identified without any alternative use in one of the Company&#146;s European
150 mm site.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">In 2006, the Company identified certain machinery and equipment to be disposed of by sale in one of
its back-end sites in Morocco, following the decision of the Company to get disengaged from SPG
activities as part of its latest restructuring initiatives. These assets did not generate any
impairment charge and were reflected at their carrying value on the line &#147;Other receivables and
assets&#148; of the consolidated balance sheet as at December&nbsp;31, 2006.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">In 2005, the Group recorded impairment charges as follows:
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>$10&nbsp;million impairment of goodwill pursuant
to the decision of the Group to reduce its
Access technology products for Customer
Premises Equipment modem products. The Group
reports CPE business as part of the Access
CGU, included in the Application Specific
Products Group (&#147;ASG&#148;) segment. Following
the decision to discontinue a portion of
this CGU, the Group, in compliance with IAS
36, <I>Impairment of Assets</I>, re-measured using
market comparables goodwill associated with
the business to be discontinued and the
portion of the CGU retained, which resulted
in a $10&nbsp;million goodwill impairment in
2005;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>$22&nbsp;million of purchased technologies were
identified without an alternative use
following the discontinuation of CPE product
lines;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>$6&nbsp;million for technologies and other
intangible assets pursuant to the decision
of the Group to close its research and
development design center in Karlsruhe
(Germany), the discontinuation of a
development project in Singapore, the
optimization of its EWS (wafer testing) in
the United States and other intangibles
determined to be obsolete.</TD>
</TR>

</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">All fabrication sites affected by the restructuring plan are owned by the Group and, with the
exception of the Rancho Bernardo, California facility, were assessed for impairment using the
held-for-use model since these facilities did not satisfy all of the criteria required for
held-for-sale status, as set forth in IFRS 5, Non-Current Assets Held for Sale and Discontinued
Operations.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><I>Restructuring charges and other related closure costs</I>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Restructuring charges and other related closure costs as at December&nbsp;31, 2006 are summarized
as follows:
</DIV>

<P align="center" style="font-size: 10pt"><!-- Folio -->- 107 -<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="28%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Total</B></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>restructuring</B></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>150mm fab</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>2005</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>&#038; other</B></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>plan</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Other related</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>restructuring</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>related</B></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>Restructuring</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>closure costs</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>Total</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>initiatives</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>Other</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>closure costs</B></TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Provision as at December&nbsp;31, 2002</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>&#151;</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>&#151;</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>&#151;</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>&#151;</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>&#151;</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>&#151;</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Charges incurred in 2003</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">9</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">13</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Amounts paid</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(2</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(2</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(6</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(8</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Currency translation effect</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Provision as at December&nbsp;31, 2003</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>1</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>1</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>2</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>&#151;</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>3</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>5</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Charges incurred in 2004</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">52</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">21</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">73</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">77</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Amounts paid</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(21</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(21</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(42</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(4</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(46</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Currency translation effect</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Provision as at December&nbsp;31, 2004</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>34</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>1</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>35</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>&#151;</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>3</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>38</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Charges incurred in 2005</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">10</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">15</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">51</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">66</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Reversal of provision</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(6</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(6</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(6</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Amounts paid</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(23</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(6</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(29</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(21</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(2</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(52</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Currency translation effect</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(4</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(4</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(4</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Provision as at December&nbsp;31, 2005</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>11</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>&#151;</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>11</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>30</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>1</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>42</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Charges incurred in 2006</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">12</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">18</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">38</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">56</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Amounts paid</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(7</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(12</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(19</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(51</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(1</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(71</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Currency translation effect</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Provision as at December&nbsp;31, 2006</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>11</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>&#151;</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>11</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>18</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>&#151;</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>29</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt">150mm fab plan:
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Restructuring charges incurred in the year ended December&nbsp;31, 2006 primarily related to $6&nbsp;million
termination benefits and $12&nbsp;million of other closure cost mainly related to maintenance and
decontamination incurred in Agrate (Italy) and Rousset (France) sites.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Restructuring charges incurred in 2005 amounted to $10&nbsp;million, mainly related to termination
benefits, and $5&nbsp;million related to other closure costs. In 2005 management decided to continue a
specific back-end fabrication line in Rennes (France), which had originally been designated for
full closure. The decision to continue arose due to unexpected difficulties in qualifying the line
at an alternative back-end facility. This decision resulted in a $6&nbsp;million reversal of the
provision relating to the 2003 restructuring plan.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">2005 restructuring initiatives:
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The Group commenced several restructuring initiatives during 2005, including:
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Pursuant to the decision of reducing its Access technology products for Customer
Premises Equipment (&#147;CPE&#148;) modem products, the Group committed to an exit plan in
Zaventem (Belgium) and recorded $4&nbsp;million of workforce termination benefits. No
additional cost was incurred in 2006.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>In order to streamline its research and development sites, the Group decided to cease
its activities in two locations, Karlsruhe (Germany) and Malvern (USA). The Group
incurred in 2005 $1&nbsp;million restructuring charges corresponding to employee termination
costs and $1&nbsp;million of unused lease charges relating to the closure of these two
sites. These restructuring initiatives were completed in 2005.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>In addition, charges totaling $2&nbsp;million were paid in 2005 by the Group for voluntary
termination benefits for certain employees. The Group also incurred a $2&nbsp;million charge
in 2005 related to additional restructuring initiatives, mainly in the United States
and Mexico. No additional cost was incurred in 2006.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>The Group defined a plan of reorganization and optimization of its activities. This
plan focuses on workforce reduction, mainly in Europe, but will, whenever possible,</TD>
</TR>

</TABLE>
</DIV>
<P align="center" style="font-size: 10pt"><!-- Folio -->- 108 -<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">


<DIV style="margin-top: 6pt"><TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">


<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>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 year ended December&nbsp;31, 2006 and 2005 the Group recorded a
total restructuring charge for its new restructuring plan amounting to $38&nbsp;million, of which
$33&nbsp;million corresponded to workforce reduction initiatives in Europe and $5&nbsp;million were
related to reorganization actions aiming at optimizing the Company&#146;s EWS activities. In
2005, the Company recorded $41&nbsp;million mainly related to termination incentives for two of
the Company&#146;s subsidiaries in Europe, who accepted special termination arrangements.</TD>
</TR>

</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Total impairment, restructuring charges and other related closure costs:
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The 2003 restructuring plan and related manufacturing initiatives are expected to be largely
completed in early 2007, later than originally anticipated because of unforeseen customer
qualification requirements.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">In 2006, total amounts paid for restructuring and related closure costs amounted to $71&nbsp;million
compared to $52&nbsp;million in 2005.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>21 &#151; EXPENSES BY NATURE</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Expenses recorded as cost of sales and operating expenses other than &#147;impairment, restructuring
charges and other related closure costs&#148; and &#147;other income and expenses&#148; are detailed as follows:
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="76%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Year ended</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Year ended</B></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>December 31,</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>December 31,</B></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>2006</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>2005</B></TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Depreciation and amortization</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right"><B>(1,791</B></TD>
    <TD nowrap><B>)</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(1,948</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Employee benefit expense</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right"><B>(2,578</B></TD>
    <TD nowrap><B>)</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(2,395</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Purchase of materials and subcontracting services</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right"><B>(3,591</B></TD>
    <TD nowrap><B>)</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(3,141</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Changes in inventories</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>161</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">170</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Transportation</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right"><B>(115</B></TD>
    <TD nowrap><B>)</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(99</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Royalties and patents</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right"><B>(96</B></TD>
    <TD nowrap><B>)</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(98</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Advertising costs</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right"><B>(14</B></TD>
    <TD nowrap><B>)</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(14</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Other expenses</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right"><B>(820</B></TD>
    <TD nowrap><B>)</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(837</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Total cost of sales, research and development,
and selling, general and administrative
expenses</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right"><B>(8,844</B></TD>
    <TD nowrap><B>)</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(8,362</TD>
    <TD nowrap>)</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Employee benefit expense is detailed as follows:
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="76%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Year ended</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Year ended</B></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>December 31,</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>December 31,</B></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>2006</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>2005</B></TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Wages and salaries</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right"><B>(2,041</B></TD>
    <TD nowrap><B>)</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(1,707</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Compensation of Sole Member of the Managing Board</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right"><B>(2</B></TD>
    <TD nowrap><B>)</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(7</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Social security costs</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right"><B>(444</B></TD>
    <TD nowrap><B>)</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(494</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Stock-based compensation expense</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right"><B>(28</B></TD>
    <TD nowrap><B>)</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(116</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Pension cost</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right"><B>(63</B></TD>
    <TD nowrap><B>)</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(71</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Total employee benefit expense included in cost
of sales, research and development, and selling,
general and administrative expenses</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right"><B>(2,578</B></TD>
    <TD nowrap><B>)</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(2,395</TD>
    <TD nowrap>)</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The Compensation of Sole Member of the Managing Board includes a $1&nbsp;million bonus paid to the
sole member of the Managing Board and President and CEO during the 2006 financial
</DIV>

<P align="center" style="font-size: 10pt"><!-- Folio -->- 109 -<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">



<DIV align="left" style="font-size: 10pt; margin-top: 6pt">year that was approved by the Compensation Committee and approved by the Supervisory Board in
respect of 2005 financial year based on fulfilment of a number of predefined objectives for 2005.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The Compensation of Sole Member of the Managing Board includes a $6&nbsp;million bonus paid to the
former sole member of the Managing Board and President and CEO during the 2005 financial year that
was approved by the Compensation Committee and approved by the Supervisory Board in respect of 2004
financial year based on fulfilment of a number of predefined objectives for 2004 and in recognition
of his career with the Group.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>22 &#151; FINANCE INCOME AND FINANCE COSTS</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Total finance income and finance costs consisted of the following:
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="76%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Year ended</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Year ended</B></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>December 31,</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>December 31,</B></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>2006</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>2005</B></TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Interest income</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>143</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">53</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Total finance income</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>143</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">53</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Interest expense</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right"><B>(96</B></TD>
    <TD nowrap><B>)</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(57</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Total Finance costs</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right"><B>(96</B></TD>
    <TD nowrap><B>)</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(57</TD>
    <TD nowrap>)</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">No borrowing cost was capitalized in 2006, while capitalized interest was $2&nbsp;million in 2005.
The capitalization rate used to determine the amount of borrowing costs eligible for capitalization
was approximately 2.50% for the year ended December&nbsp;31, 2005.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">For the period ended December&nbsp;31, 2006 $24&nbsp;million and $37&nbsp;million correspond to the interest
expense of the liability component of the 2013 convertible debt and the 2016 convertible debt
respectively. For the year ended December&nbsp;31, 2005 $38&nbsp;million correspond to the interest expense
of the liability component of the 2013 convertible debt.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">In 2006, the Group repurchased substantially all outstanding 2013 Convertible Bonds for an amount
paid of $1,377&nbsp;million. The repurchased convertible bonds were equivalent to 42&nbsp;million shares and
were cancelled. The outstanding long term debt corresponding to 2013 convertible debt amounted to
approximately $2&nbsp;million as at December&nbsp;31, 2006, corresponding to the remaining 2,505 bonds valued
at the August&nbsp;5, 2008 redemption price.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Interest expense also included charges related to the amortization of issuance costs incurred by
the Company for the outstanding bonds.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Interest income on floating rate notes classified as available-for-sale marketable securities
amounted to $5&nbsp;million for the year ended December&nbsp;31, 2006. In 2005 the Company invested available
cash in credit-linked deposits issued by several primary banks, which maturity was scheduled before
year-end. Interest income on these marketable securities for the year ended December&nbsp;31, 2005
amounted to $18&nbsp;million.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>23 &#151; INCOME TAX</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Profit before income tax expense is comprised of the following:
</DIV>


<P align="center" style="font-size: 10pt"><!-- Folio -->- 110 -<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>
<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="76%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Year ended</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Year ended</B></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>December 31,</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>December 31,</B></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>2006</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>2005</B></TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Profit (loss)&nbsp;recorded in The Netherlands</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(64</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(60</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Profit from foreign operations</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,092</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">447</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Profit before income tax expense</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>1,028</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>387</B></TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The Company and its subsidiaries are individually liable for income taxes in their
jurisdictions. Tax losses can only offset profits generated by the taxable entity incurring such
loss.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Income tax benefit (expense)&nbsp;is comprised of the following:
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="76%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Year ended</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Year ended</B></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>December 31,</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>December 31,</B></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>2006</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>2005</B></TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">The Netherlands taxes &#151; current</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(7</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(6</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Foreign taxes &#151; current</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(47</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(49</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Current taxes</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right"><B>(54</B></TD>
    <TD nowrap><B>)</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right"><B>(55</B></TD>
    <TD nowrap><B>)</B></TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Foreign deferred taxes</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(8</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">16</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Income tax expense</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right"><B>(62</B></TD>
    <TD nowrap><B>)</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right"><B>(39</B></TD>
    <TD nowrap><B>)</B></TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The principal items comprising the differences in income taxes computed at The Netherlands
statutory rate and the effective income tax rate are the following:
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="76%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Year ended</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Year ended</B></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>December 31,</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>December 31,</B></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>2006</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>2005</B></TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Income tax expense computed at statutory rate</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(306</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(95</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Non deductible expenses</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(27</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(26</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Valuation allowance adjustments</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(8</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Impact of final tax assessments relating to prior years</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">63</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">28</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Effects of change in tax rates on deferred taxes</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Current year credits</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Other tax and credits</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(1</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(2</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Benefits from tax holidays</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">134</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">48</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Earnings of subsidiaries taxed at different rates</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">79</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Income tax expense</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right"><B>(62</B></TD>
    <TD nowrap><B>)</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right"><B>(39</B></TD>
    <TD nowrap><B>)</B></TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The tax holidays represent a tax exemption period aimed to attract foreign technological
investment in certain tax jurisdictions. The effect of the tax benefits on basic earnings per share
was $0.15 and $0.05 for the years ended December&nbsp;31, 2006 and 2005 respectively. These agreements
are present in various countries and include programs that reduce up to and including 100% of taxes
in years affected by the agreements. The Group&#146;s tax holidays expire at various dates through the
year ending December&nbsp;31, 2013.
</DIV>

<P align="center" style="font-size: 10pt"><!-- Folio -->- 111 -<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Deferred tax assets and liabilities consisted of the following:
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="76%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>December 31,</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>December 31,</B></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>2006</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>2005</B></TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Tax loss carry forwards and investment credits</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">95</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">57</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Inventory valuation</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">25</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">28</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Impairment charges and restructuring</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">17</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">25</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Fixed asset depreciation in arrears</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">81</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">73</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Receivables for government funding</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">9</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">8</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Pension service costs</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">29</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">21</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Commercial accruals</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">11</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">11</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Other temporary differences</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">63</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">47</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Deferred tax assets</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">330</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">270</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Accelerated fixed assets depreciation</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(118</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(116</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Acquired intangible assets</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(72</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(27</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Advances of government funding</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(25</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(31</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Other temporary differences</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(31</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(19</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Deferred tax liabilities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(246</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(193</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Net deferred income tax asset</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>84</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>77</B></TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The gross movement of the deferred tax account is as follow:
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="76%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>2006</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>2005</B></TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Beginning of the year</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">77</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">65</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Exchange differences</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">16</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(10</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Income statement benefit (charge)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(8</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">16</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Tax charge to equity</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(1</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">End of the year</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">84</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">77</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">As of December&nbsp;31, 2006, the Company and its subsidiaries have net operating loss carry
forwards and investment credits that expire starting 2007, as follows:
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="88%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="left" style="border-bottom: 1px solid #000000"><B>Year</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">2007</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">50</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">2008</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">2009</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">2010</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Thereafter</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">42</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Total</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">95</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Deferred tax assets not recognized in the consolidated balance sheet total $975&nbsp;million and
mainly relate to an agreement granting the Group certain tax credits for capital investments
purchased through the year ending December&nbsp;31, 2006. Any unused tax credits granted under the
agreement will continue to increase yearly by a legal inflationary index (currently 7% per annum).
The credits may be utilized through 2020 or later depending on the Group meeting certain program
criteria. In addition to this agreement, the Group will continue to receive tax credits on future
years&#146; capital investments, which may be used to offset that year&#146;s tax liabilities. However,
pursuant to the inability to utilize these credits currently and in future years, the Group did not
recognize any of these deferred tax assets in its consolidated balance sheets as of December&nbsp;31,
2006 and 2005.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">In addition, other tax loss carryforwards for an amount of $54&nbsp;million were not recognized in the
consolidated balance sheet and corresponded to net operating losses acquired in business
combinations and that will more likely than not, not be utilized against future profits.
</DIV>

<P align="center" style="font-size: 10pt"><!-- Folio -->- 112 -<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The amount of deferred tax expense (benefit)&nbsp;recorded in other reserves was $1&nbsp;million expense and
$6&nbsp;million benefit in 2006 and 2005, respectively. This related primarily to the tax effects of
unrealized gains (losses)&nbsp;on derivatives (Note 17.1).
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>24 &#151; CASH AND CASH EQUIVALENTS</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Cash and cash equivalents consisted of the following:
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="76%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Year ended</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Year ended</B></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>December 31,</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>December 31,</B></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>2006</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>2005</B></TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Cash at bank and in hand</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>205</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">438</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Deposits at call with banks</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>1,758</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,589</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Cash and cash equivalents</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>1,963</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,027</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The weighted average interest rate for the year 2006 and 2005 was 4.28% and 2.28%,
respectively.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>25 &#151; SHORT TERM DEPOSITS</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">In the first quarter of 2006, the Company invested $903&nbsp;million in short term deposits with a
maturity between three months and one year. These deposits are held at various banks with a A3/A-
minimum long term rating from at least two major rating agencies. Interest on these deposits is
paid at maturity with interest rates fixed at inception for the duration of the deposits. The
principal will be repaid at final maturity. In 2006, the Company did not roll over $653&nbsp;million of
these short-term deposits, primarily pursuant to the early redemption in cash of 2013 convertible
bonds at the option of the holders which occurred on August&nbsp;7, 2006. At December&nbsp;31, 2006 the total
amount of short term deposit was $250&nbsp;million.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>26 &#151; CASH GENERATED FROM OPERATIONS</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Cash generated from operations is detailed as follows:
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="76%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Year ended</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Year ended</B></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>December 31,</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>December 31,</B></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>2006</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>2005</B></TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Net profit</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">966</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">348</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Depreciation and amortization</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,791</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,948</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Amortization of discount of convertible debt</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">18</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Loss on extinguishment of convertible debt</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Other non-cash items</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">126</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">163</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Deferred income tax</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">8</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(16</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Accrued income tax</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">56</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">69</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Share of loss of associates</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">7</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Impairment, restructuring charges and other
related closure costs, net of cash payments</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(3</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">46</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Trade receivables, net</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(104</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(117</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Inventories, net</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(161</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(170</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Trade payables</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">36</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(71</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Other assets and liabilities, net</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">93</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(117</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Cash generated from operations</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>2,833</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>2,091</B></TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<P align="center" style="font-size: 10pt"><!-- Folio -->- 113 -<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">


<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>27 &#151; COMMITMENTS</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The Group&#146;s commitments as of December&nbsp;31, 2006 were as follows:
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="23%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>Total</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>2007</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>2008</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>2009</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>2010</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>2011</B></TD>
    <TD nowrap align="center" colspan="7" style="border-bottom: 1px solid #000000"><B>Thereafter</B></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="27" style="border-bottom: 1px solid #000000"><B>(in millions)</B></TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Operating leases</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">304</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">54</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">44</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">40</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">31</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">28</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">107</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Purchase obligations</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,052</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">959</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">68</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">25</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px"><I>Of which:</I></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:45px; text-indent:-15px"><I>Equipment purchase</I></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">467</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">467</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:45px; text-indent:-15px"><I>Foundry purchase</I></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">373</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">373</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:45px; text-indent:-15px"><I>Software,
technology
licenses and
design</I></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">212</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">119</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">68</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">25</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Hynix ST Investment</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">32</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">32</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Other obligations</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">110</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">67</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">23</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">11</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Total</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>1,498</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>1,112</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>135</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>76</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>36</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>29</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>110</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The Group leases land, buildings, plants, and equipment under operating leases that expire at
various dates under non-cancellable lease agreements. Operating lease expense was $56&nbsp;million in
2006 and $61&nbsp;million in 2005, respectively.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">As described in Note 3, the Company and Hynix Semiconductor signed on November&nbsp;16, 2004 a
joint-venture agreement to build a front-end memory-manufacturing facility in Wuxi City, Jiangsu
Province, China. The business license was obtained in April&nbsp;2005 and the Company paid $213&nbsp;million,
including $1&nbsp;million of deal-related expenses in 2006 and $38&nbsp;million of capital contributions in
2005. The Company has also entered into a debt guarantee agreement with a third party financial
institution which will loan up to $250&nbsp;million to the joint venture. Repayment of the loan by the
joint venture is guaranteed by a deposit from the Company to the bank in an offsetting amount. As
of December&nbsp;31, 2006, $218&nbsp;million has been loaned to the joint venture and a deposit placed by the
Company with the bank in a like amount. The remaining $32&nbsp;million is expected to be loaned to the
joint venture, with an offsetting deposit by the Company in the first quarter of 2007.
Furthermore, the Company has contingent future loading obligations to purchase products from the
joint venture, which have not been included in the table above because at this stage the amounts
remain contingent and non-quantifiable
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Other obligations primarily relate to contractual firm commitments with respect to cooperation
agreements.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>28 &#151; CONTINGENCIES</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">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,
breach of contract claims, claims for unauthorized use of third party intellectual property, tax
claims and provisions for specifically identified income tax exposures as well as claims for
environmental damages. In determining loss contingencies, the Company considers the likelihood of a
loss of an asset or the incurrence of a liability as well as the ability to reasonably estimate the
amount of such loss or liability. An estimated loss is recorded when it is probable that a
liability has been incurred and when the amount of the loss can be reasonably estimated. The
Company regularly reevaluates claims to determine whether provisions need to be readjusted based on
the most current information available to the Company. Changes in these evaluations could result in
adverse, material impact on the
</DIV>

<P align="center" style="font-size: 10pt"><!-- Folio -->- 114 -<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">



<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Company&#146;s results of operations, cash flows or its financial position for the period in which they
occur.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The Company previously received a tax assessment from the United States tax authorities, which was
under an appeals process. In 2006, the Company received the final settlement from the Joint
Committee on Taxation with no adjustment to filed tax returns. This resulted in a reversal of $90
million in income tax provisions that the Company had previously recorded to cover any potential
losses associated with the claim.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The Company has issued guarantees totaling $790&nbsp;million related to its subsidiaries&#146; debt.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>29 &#151; CLAIMS AND LEGAL PROCEEDINGS</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The Group 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 Group may become involved in costly litigation brought against the Group regarding
patents, mask works, copyrights, trademarks or trade secrets. In the event that the outcome of any
litigation would be unfavorable to the Group, the Group 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 Group&#146;s results of operations, cash flows or financial
position and ability to compete.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The Group 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
Group has accrued for these loss contingencies when the loss is probable and can be estimated. The
Group 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
Group. Legal costs associated with claims are expensed as incurred. In the event of litigation
which is adversely determined with respect to the Group&#146;s interests, or in the event the Group
needs to change its evaluation of a potential third-party claim, based on new evidence or
communications, a material adverse effect could impact its operations or financial condition at the
time it were to materialize.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The Company is currently a party to legal proceedings with SanDisk Corporation (&#147;SanDisk&#148;) and
Tessera, Technologies, Inc. (&#147;Tessera&#148;). Based on management&#146;s current assumptions made with
support of the Company&#146;s outside attorneys, the Company is not currently in a position to evaluate
any probable loss, which may arise out of such litigation.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">On September&nbsp;15, 2006 the Company filed a criminal complaint with the public prosecutor of the
Canton of Lugano, Switzerland, against its former Treasurer for misuse of the Company&#146;s funds in
relation to certain foreign exchange transactions. Following such complaint, four people have been
arrested and charged including the Company&#146;s former Treasurer. The Company is confident that
pursuant to such proceedings, it will be able to recover all the diverted funds which have been
misappropriated for personal and individual use following a fraud organized by the Company&#146;s former
Treasurer.
</DIV>

<P align="center" style="font-size: 10pt"><!-- Folio -->- 115 -<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>30 &#151; FINANCIAL INSTRUMENTS AND RISK MANAGEMENT</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The Group is exposed to changes in financial market conditions in the normal course of business due
to its operations in different foreign currencies and its ongoing investing and financing
activities. Market risk is the uncertainty to which future earnings or asset/liability values are
exposed due to operating cash flows denominated in foreign currencies and various financial
instruments used in the normal course of operations.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Effective January&nbsp;2006, Corporate Treasury has been reorganized under the lead of a newly appointed
Corporate Treasurer, reporting to the Chief Financial Officer. Simultaneously, a Treasury Committee
was created to steer treasury activities and to ensure compliance with corporate policies. Treasury
activities are regulated by the Group&#146;s policies, which define procedures, objectives and controls.
The policies focus on the management of financial risk in terms of exposure to currency rates and
interest rates. Treasury controls are subject to internal audits. Most treasury activities are
centralized, with any local treasury activities subject to oversight from head treasury office. The
majority of cash and cash equivalent is held in U.S. dollars and Euro and is placed with financial
institutions rated at least a single &#147;A&#148; long term rating from two of the major rating agencies,
meaning at least A3 from Moody&#146;s Investor Service and A- from Standard &#038; Poor&#146;s and Fitch Ratings.
Marginal amounts are held in other currencies. Foreign currency operations and hedging transactions
are performed only to hedge exposures deriving from industrial and commercial activities.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt">30.1 &#151; Foreign Currency Risk
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The Group conducts its business on a global basis in various major international currencies. As a
result, the Group is exposed to adverse movements in foreign currency exchange rates.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><I>Foreign Currency Forward Contract and Currency Options Not Designated as a Hedge</I>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The Group enters into foreign currency forward contracts and currency options to reduce its
exposure to changes in exchange rates and the associated risk arising from the denomination of
certain assets and liabilities in foreign currencies at the Company&#146;s subsidiaries. In addition,
forward contracts and currency options are also used by the Group to reduce its exposure to U.S.
dollar fluctuations in euro-denominated forecasted intercompany transactions that cover a large
part of research and development expenditures and certain corporate expenses incurred on the
Group&#146;s behalf by subsidiaries. These intercompany transactions are not closely linked to ultimate
transactions with third parties. Consequently, these instruments do not qualify as hedging
instruments.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">At December&nbsp;31, 2006, foreign currency forward contracts and currency options were outstanding. The
notional amount of these contracts (foreign currency forward contracts and currency options)
totalled $574&nbsp;million at December&nbsp;31, 2006 and $1,834&nbsp;million at December&nbsp;31, 2005. The principal
currencies covered are the Euro, the SGD, the MYR and the Japanese yen.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Foreign currency forward contracts and currency options not designated as cash flow hedge
outstanding as of December&nbsp;31, 2006 have remaining terms of 5&nbsp;days to 5&nbsp;months, maturing on average
after 35&nbsp;days.
</DIV>

<P align="center" style="font-size: 10pt"><!-- Folio -->- 116 -<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The risk of loss associated with forward contracts is equal to the exchange rate differential from
the time the contract is entered into until the time it is settled while the risk of loss linked to
currency options is limited to the premium paid to purchase the options.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><I>Cash Flow Hedges</I>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">To further reduce its exposure to U.S. dollar exchange rate fluctuations, the Group also
hedged in 2006 and 2005 a portion of its euro-denominated forecasted intercompany purchases of
products whose underlying front-end manufacturing production costs of semi-finished goods are
incurred in euros.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">For the period ended December&nbsp;31, 2006 the Group recorded a positive impact on cost of sales of $5
million related to the realized profit incurred on such hedged transactions. For the period ended
December&nbsp;31, 2006 the Group did not discontinued any of its cash flow hedges. For the year ended
December&nbsp;31, 2005 the Group recorded as cost of sales $51&nbsp;million related to the realized loss
incurred on such hedged transactions. In addition, after determining that it was not probable that
certain forecasted transactions would occur by the end of the originally specified time period, the
Group discontinued in the first quarter of 2005 certain of its cash flow hedges and reclassified a
net loss of $23&nbsp;million as &#147;other expenses&#148; into the statement of income from &#147;Other reserves&#148;.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The notional amount of foreign currency forward contracts and currency options designated as cash
flow hedges and executed totaled $1,217&nbsp;million as at December&nbsp;31, 2006 and $1,048&nbsp;million for
2005. The forecasted transactions hedged as at December&nbsp;31, 2006 were determined to be probable of
occurrence.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">As of December&nbsp;31, 2006, $6&nbsp;million of deferred profits on derivative instruments, net of tax of $1
million, included in other reserves are expected to be reclassified as earnings during the next six
months based on the monthly forecasted semi-finished manufacturing costs.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">At December&nbsp;31, 2006, foreign currency forward contracts and currency option contracts were
outstanding. The notional amount of these foreign currency forward contracts and currency option
contracts totalled $250&nbsp;million at December&nbsp;31, 2006 and $366&nbsp;million at December&nbsp;31, 2005.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Foreign currency forward contracts and currency options designated as cash flow hedges outstanding
as of December&nbsp;31, 2006 have remaining terms of 4&nbsp;days to 4&nbsp;months, maturing on average after 44
days.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><I>Fair Value Hedges</I>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">In 2006, the Company entered into cancellable swaps with a combined notional value of $200
million to hedge the fair value of a portion of the convertible bonds due 2016 carrying a fixed
interest rate. The cancellable swaps convert the fixed rate interest expense recorded on the
convertible bond due to 2016 to a variable interest rate based upon adjusted LIBOR.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">As of December&nbsp;31, 2006 the cancellable swaps met the criteria for designation as a fair value
hedge and, as such, both the swaps and the hedged portion of the bonds are reflected at their fair
values in the consolidated balance sheet. The criteria for designating a derivative as a hedge
include evaluating whether the instrument is highly effective at offsetting changes in the fair
value of the hedged item attributable to the hedged risk. Hedged effectiveness is assessed on both
a prospective and retrospective basis at each reporting period. At December
</DIV>

<P align="center" style="font-size: 10pt"><!-- Folio -->- 117 -<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">31, 2006 the cancellable swaps are highly effective for hedging the change in fair value of the
hedged bonds attributable to changes in interest rates.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Any ineffectiveness of the hedge relationship is recorded as a gain or loss on derivatives as a
component of &#147;other income&#148; or &#147;other expenses&#148; as appropriate. If the hedge becomes no longer
highly effective, the hedged portion of the bonds will discontinue being marked to fair value while
the changes in the fair value of the cancellable swaps will continue to be recorded in the
consolidated income statement.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The net loss recognized in &#147;other income and expenses, net&#148; for the year ended December&nbsp;31, 2006 as
a result of the ineffective portion of this fair value hedge was not material.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt">30.2 &#151; Concentration of credit risk
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Financial instruments that potentially subject the Company to concentrations of credit risk consist
primarily of interest-bearing investments, foreign currency contracts and trade receivables.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The company selects banks and/or financial institutions that operate with the ST group based on the
criteria of single &#147;A&#148; long term rating from two of the major rating agencies, meaning at least A3
from Moody&#146;s Investor Service and A- from Standard &#038; Poor&#146;s and Fitch Ratings. A monthly review of
the counterparty banks is conducted to verify that the credit criteria still apply and prompt
action is taken, if needed. The Company also sets limits for each instrument used. The maximum
outstanding amount per instrument with each individual bank is set to a 20% threshold of the total
outstanding. The Company monitors and manages its Treasury activities within these limits. The
credit risk exposure is calculated on 100% of cash and debt capital market instruments and on
positive marked to market for foreign exchange forwards, interest rate swaps and currency and
interest rate options.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">At December&nbsp;31, 2006 and 2005, one customer, the Nokia Group of companies, represented 26.2% and
27.3% of trade accounts receivable, net respectively. Any remaining concentrations of credit risk
with respect to trade receivables are limited due to the large number of customers and their
dispersion across many geographic areas. The Company monitors the creditworthiness of its
customers to which it grants credit terms in the normal course of business. The Company does not
anticipate non-performance by counterparties, which could have a significant impact on its
financial position or results of operations.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt">30.3 &#151; Fair value of financial instruments
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The estimates of fair value were obtained using prevailing financial market information resulting
from various valuation techniques.
</DIV>

<P align="center" style="font-size: 10pt"><!-- Folio -->- 118 -<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="52%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="7" style="border-bottom: 1px solid #000000"><B>2006</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="7" style="border-bottom: 1px solid #000000"><B>2005</B></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Carrying</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Estimated</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Carrying</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Estimated</B></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>Amount</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>Fair Value</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>Amount</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>Fair Value</B></TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Long-term debt</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&#151; Bank loans (including current portion)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>478</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>466</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">412</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">400</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&#151; Senior Bond</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>659</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>655</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&#151; Long Term debt component of
convertible debt</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>739</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>1,010</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,356</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,342</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Other receivables and assets</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&#151; Foreign exchange forward contracts
and currency options</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>14</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>14</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Other investments and other non current
assets</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&#151; Cancellable swaps designated as fair
value hedge</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>4</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>4</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Other payables and accrued liabilities</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&#151; Foreign exchange forward contracts
and currency options</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>1</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>1</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">31</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">31</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The methodologies used to estimate fair value are as follows:
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Cash and cash equivalents, accounts receivable, bank overdrafts, short-term borrowings, accounts
payable
<DIV style="font-size:6pt">&nbsp;</DIV>
The carrying amounts reflected in the consolidated financial statements are reasonable estimates of
fair value due to the relatively short period of time between the origination of the instruments
and their expected realization.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Long-term debt and current portion of long-term debt
<DIV style="font-size:6pt">&nbsp;</DIV>
The fair values of long-term debt were determined based on quoted market prices, and by estimating
future cash flows on a borrowing-by-borrowing basis and discounting these future cash flows using
the Group&#146;s incremental borrowing rates for similar types of borrowing arrangements. The estimated
fair value of the convertible debt corresponds to the value of the compound financial instrument
before separating for accounting purposes the long-term debt portion from the non current liability
component.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Foreign exchange forward contracts and currency options
<DIV style="font-size:6pt">&nbsp;</DIV>
The fair values of these instruments are estimated based upon quoted market prices for the same or
similar instruments.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt">Cancellable swaps
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The fair values of these instruments are estimated based upon market prices for similar
instruments.
</DIV>

<P align="center" style="font-size: 10pt"><!-- Folio -->- 119 -<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>31 &#151; RELATED PARTY TRANSACTIONS</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Transactions with significant shareholders, their affiliates and other related parties were as
follows:
</DIV>


<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="76%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>December 31,</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>December 31,</B></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>2006</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>2005</B></TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Sales &#038; other services</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">118</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">158</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Research and development expenses</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(43</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(48</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Other purchases</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(70</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(16</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Other income and expenses</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(21</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(12</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Accounts receivable</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">20</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">29</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Accounts payable</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">20</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">12</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Other assets</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">11</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">For the years ended December&nbsp;31, 2006 and 2005, the related party transactions were primarily
with significant shareholders of the Company, or their subsidiaries and companies in which
management of the Company perform similar policymaking functions. These include, but are not
limited to: Areva, France Telecom, Equant, Orange, Finmeccanica, Cassa Depositi e Prestiti and
Thomson.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Additionally the Company incurred in 2006 significant amounts from Hynix Semiconductor Inc, with
which the Company has a significant equity investment, Hynix ST joint venture, described in detail
in Note 3. In 2006, Hynix Semiconductor Inc. increased its business transactions with the Company
in order to supply products on behalf of the joint venture, which was not ready to fully produce
and supply the requested volumes to the Company. The amount of purchases and other expenses made in
2006 from Hynix Semiconductor Inc. was $161&nbsp;million. The Company had a payable amount of $13
million as at December&nbsp;31, 2006.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">In addition the Group participates in an Economic Interest Group (&#147;E.I.G.&#148;) in France with Areva
and France Telecom to share the costs of certain research and development activities, which are not
included in the previous table. The share of income (expense)&nbsp;recorded by the Group as research and
development expenses incurred by E.I.G during 2006 amounted to $1&nbsp;million expense and to $5&nbsp;million
expense in 2005. At December&nbsp;31, 2006, the Company had no receivable or payable amount. At December
31, 2005, the Company had a net receivable amount of $1&nbsp;million.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The Group contributed cash amounts totalling $1&nbsp;million for the period ended December&nbsp;31, 2006 and
$1&nbsp;million for the year ended December&nbsp;31, 2005 to the ST Foundation, a non-profit organization
established to deliver and coordinate independent programs in line with its mission. Certain
members of the Foundation&#146;s Board are senior members of the Group&#146;s management.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">In addition pursuant to the Supervisory Board&#146;s approval, the Group paid in 2005 a special
contribution amounting to $4&nbsp;million to a non-profit charitable institution in the field of
sustainable development and social responsibility on behalf of its former President and Chief
Executive Officer.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The individual remuneration paid to the sole member and the former sole member of the Managing
Board was as follows:
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="76%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>December 31, 2006</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>December 31, 2005</B></TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Wages and salaries</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Bonus</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The bonus paid to the former sole member of the Managing Board and President and CEO during
the 2005 financial year was approved by the Compensation Committee and approved
</DIV>

<P align="center" style="font-size: 10pt"><!-- Folio -->- 120 -<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">by the Supervisory Board in respect of 2004 financial year and in recognition of his career with
the Group, based on fulfilment of a number of predefined objectives for 2004.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The Sole member of the Managing Board was granted in 2006 and in 2005 for free 100,000 nonvested
shares subject to the achievement of performance objectives
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The total amount paid as compensation in 2006 to the Company&#146;s 23 executive officers, including the
sole Member of the Managing Board, and the total amount paid as compensation in 2005 to the
Company&#146;s 22 executive officers, including the sole Member of the Managing Board, was as follows:
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="76%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>December 31, 2006</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>December 31, 2005</B></TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Wages and salaries</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">9</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">9</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Bonus</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Other Benefits</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Termination Benefits</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Social Charges</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The Company&#146;s 23 executive officers, including the sole Member of the Managing Board, were
granted in 2006 for free 803,000 nonvested shares subject to the achievement of performance
objectives. The Company&#146;s 22 executive officers, including the sole Member of the Managing Board,
were granted in 2005 for free 665,000 nonvested shares subject to the achievement of performance
objectives.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The bonus paid to the Company&#146;s executive officers corresponds to a Corporate Executive Incentive
Program (the &#147;EIP&#148;) established in 1989 that entitles selected executives to a yearly bonus based
upon the individual performance of such executives. The maximum bonus awarded under the EIP is
based upon a percentage of the executives&#146; salary and is adjusted to reflect the Groups&#146; overall
performance. The participants in the EIP must satisfy certain personal objectives that are focused
on return on net assets, customer service, profit, cash and market share.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The executive officers and the Managing Board were covered in 2006 and 2005 under certain Group
life and medical insurance programs, pension, state-run retirement and other similar benefit
programs and other miscellaneous allowances that are included in the $5&nbsp;million of social charges
and other benefits for the year ended December&nbsp;31, 2006 and 2005.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">At the end of the year 2005, the Compensation Committee recommended and the Supervisory Board
decided to grant an additional pension benefit plan to the Company&#146;s former President and Chief
Executive Officer and sole member of the Managing Board and a limited number of senior executives
that have made key contributions to the Group&#146;s success. Pursuant to this plan, the Group will make
annual contributions of $200,000 to both its former and current President and Chief Executive
Officers, $150,000 to its Chief Operating Officer and up to $100,000 to each other beneficiary per
year. In order to meet the Group&#146;s future payment obligations under this plan or to insure for
them, the Group paid an initial amount of $10&nbsp;million in 2006 (of which $3&nbsp;million to fund payments
for the former President and Chief Executive Officer and the balance for the other senior
executives designated as beneficiaries).
</DIV>

<P align="center" style="font-size: 10pt"><!-- Folio -->- 121 -<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Individual remuneration paid to Supervisory Board Members in 2006 and 2005 was:
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="76%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>2006</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>2005</B></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>US$</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>US$</B></TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">B. Steve</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">205,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">92,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">F. Gavois</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">120,500</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">78,500</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">A. Ovi</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">62,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">R. Gallo</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">9,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">71,500</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">R. White</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">125,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">88,500</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">T. de Waard</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">213,500</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">92,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">M. Del Fante</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">111,500</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">G. Arbola</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">205,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">68,500</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">D. Lombard</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">120,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">48,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">D. Dunn</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">111,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">64,500</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">A. Turicchi</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">110,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>1,336,500</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>665,500</B></TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Stock awards granted to Supervisory Board Members in 2006 and 2005 were:
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="52%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="7" style="border-bottom: 1px solid #000000"><B>2006</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="7" style="border-bottom: 1px solid #000000"><B>2005</B></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Number of stock</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Acquisition price</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Number of awards</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Granted price</B></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>awards granted</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>EUR</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>granted</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>EUR</B></TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">B. Steve</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1.04</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1.04</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">M. Del Fante*</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1.04</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1.04</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">A. Turicchi*</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1.04</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1.04</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">F. Gavois</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1.04</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">D. Lamouche</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1.04</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">R. White</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1.04</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1.04</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">T. de Waard</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1.04</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1.04</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">G. Arbola</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1.04</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1.04</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">D. Lombard</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1.04</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1.04</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">D. Dunn</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1.04</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1.04</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>



<DIV align="left">
<DIV style="font-size: 3pt; margin-top: 16pt; width: 18%; border-top: 1px solid #000000">&nbsp;</DIV>
</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR>
    <TD width="3%"></TD>
    <TD width="1%"></TD>
    <TD width="96"></TD>
</TR>

<TR valign="top">
    <TD nowrap align="left">*</TD>
    <TD>&nbsp;</TD>
    <TD>In 2006 and 2005, they declined their grants of stock awards</TD>
</TR>

</TABLE>



<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>32 &#151; SEGMENT INFORMATION</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Primary Reporting Format &#151; Business Segments
<DIV style="font-size:6pt">&nbsp;</DIV>

The Company operates in two business areas: Semiconductors and Subsystems.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">In the Semiconductors business area, the Company designs, develops, manufactures and markets 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. In addition, the Company further participates in the manufacturing value chain of
Smart card products through its divisions, which include the production and sale of both silicon
chips and Smart cards.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The Company reports its semiconductor sales and operating income in three segments:
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Application Specific Product Group (&#147;ASG&#148;) segment, comprised of three product lines
&#150; Home, Personal and Communication Sector (&#147;HPC&#148;), Computer Peripherals Group
(&#147;CPG&#148;) and new Automotive Product Group (&#147;APG&#148;);</TD>
</TR>

</TABLE>
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Memory Products Group (&#147;MPG&#148;) segment; and</TD>
</TR>

</TABLE>
</DIV>
<P align="center" style="font-size: 10pt"><!-- Folio -->- 122 -<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">


<DIV style="margin-top: 6pt"><TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">



</TABLE>
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Micro, Power, Analog (&#147;MPA&#148;), previously known as Micro, Linear and Discrete (&#147;MLD&#148;)
segment, has been subsequently renamed with no substantial change in its perimeter
or organization.</TD>
</TR>

</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The Group&#146;s 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. These decisions are not made by product groups, but on the basis
of the Semiconductor Business area. All these product groups share common research and development
for process technology and manufacturing capacity for most of their products.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">In the Subsystems business area, the Group designs, develops, manufactures and markets subsystems
and modules for the telecommunications, automotive and industrial markets including mobile phone
accessories, battery chargers, ISDN power supplies and in-vehicle equipment for electronic toll
payment. Based on its immateriality to its business as a whole, the Subsystems segment does not
constitute a reportable segment.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The following tables present the Group&#146;s consolidated total revenues and consolidated net profit by
semiconductor product segment. For the computation of the product segments&#146; internal financial
measurements, the Group uses certain internal rules of allocation for the costs not directly
chargeable to the Groups, including cost of sales, selling, general and administrative expenses and
a significant part of research and development expenses. Additionally, in compliance with its
internal policies, certain cost items are not charged to the product segments, including
impairment, restructuring charges and other related closure costs, start-up costs of new
manufacturing facilities, some strategic and special research and development programs or other
corporate-sponsored initiatives, including certain corporate level operating expenses and certain
other miscellaneous charges. Starting in the first quarter of 2005, the Group allocated the
start-up costs to expand its marketing and design presence in new developing areas to each product
segment. There are no intersegment sales.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt">Total consolidated revenues by product segment
</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="76%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>December 31,</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>December 31,</B></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>2006</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>2005</B></TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Application Specific Product Groups segment</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>5,396</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,991</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Memory Products Group segment</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>2,137</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,948</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Micro, Power, Analog segment</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>2,243</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,882</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Others <SUP style="font-size: 85%; vertical-align: text-top">(1)</SUP></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>78</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">61</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Total consolidated revenues</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>9,854</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">8,882</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>



<DIV align="left">
<DIV style="font-size: 3pt; margin-top: 16pt; width: 18%; border-top: 1px solid #000000">&nbsp;</DIV>
</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR>
    <TD width="3%"></TD>
    <TD width="1%"></TD>
    <TD width="96"></TD>
</TR>

<TR valign="top">
    <TD nowrap align="left">(1)</TD>
    <TD>&nbsp;</TD>
    <TD>Includes revenues from sales of subsystems mainly and other products not allocated to
product groups.</TD>
</TR>

</TABLE>


<P align="center" style="font-size: 10pt"><!-- Folio -->- 123 -<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">






<DIV align="left" style="font-size: 10pt; margin-top: 12pt">The product segment results for the year ended December&nbsp;31, 2006
</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="40%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Micro,</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Power and</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Application</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Analog</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Specific Product</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Memory Product</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Group</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Other </B><SUP style="font-size: 85%; vertical-align: text-top"><B>(1)</B></SUP></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>Groups segment</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>Group segment</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>segment</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>Unallocated</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>Group</B></TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Operating profit</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>635</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>81</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>383</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right"><B>(111</B></TD>
    <TD nowrap><B>)</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>988</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Finance income</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">143</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Finance cost</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(96</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Share of loss of associates</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(7</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Profit before income taxes</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>1,028</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Income tax expense</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(62</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Net profit</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>966</B></TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>



<DIV align="left">
<DIV style="font-size: 3pt; margin-top: 16pt; width: 18%; border-top: 1px solid #000000">&nbsp;</DIV>
</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR>
    <TD width="3%"></TD>
    <TD width="1%"></TD>
    <TD width="96"></TD>
</TR>

<TR valign="top">
    <TD nowrap align="left">(1)</TD>
    <TD>&nbsp;</TD>
    <TD>Operating profit (loss)&nbsp;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&#038;D, formerly in the &#147;Others&#148; category, are now being allocated
to the groups; comparable amounts reported in this category have been reclassified accordingly
in the above table.</TD>
</TR>

</TABLE>



<DIV align="left" style="font-size: 10pt; margin-top: 12pt">The product segment results for the year ended December&nbsp;31, 2005
</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="40%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Micro,</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Power and</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Application</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Analog</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Specific Product</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Memory Product</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Group</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Other</B><SUP style="font-size: 85%; vertical-align: text-top"><B>(1)</B></SUP></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>Groups segment</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>Group segment</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>segment</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>Unallocated</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>Group</B></TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Operating profit</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>395</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right"><B>(118</B></TD>
    <TD nowrap><B>)</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>256</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right"><B>(139</B></TD>
    <TD nowrap><B>)</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>394</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Finance income</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">53</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Finance cost</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(57</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Share of loss of associates</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(3</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Profit before income taxes</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>387</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Income tax expense</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(39</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Net profit</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>348</B></TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>



<DIV align="left">
<DIV style="font-size: 3pt; margin-top: 16pt; width: 18%; border-top: 1px solid #000000">&nbsp;</DIV>
</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR>
    <TD width="3%"></TD>
    <TD width="1%"></TD>
    <TD width="96"></TD>
</TR>

<TR valign="top">
    <TD nowrap align="left">(1)</TD>
    <TD>&nbsp;</TD>
    <TD>Operating profit (loss)&nbsp;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&#038;D, formerly in the &#147;Others&#148; category, are now being allocated
to the groups; comparable amounts reported in this category have been reclassified accordingly
in the above table.</TD>
</TR>

</TABLE>



<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The following tables present the Group&#146;s consolidated total assets and liabilities by
semiconductor product segment as they result from allocation keys.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Inventories, goodwill and capitalized development are directly attributed to each business segment.
Receivables are allocated by business segment revenues which represent a specific and approximate
allocation basis. However, the three product segments share the Group&#146;s significant Semiconductor
business area resources, namely manufacturing capacity and process developments, throughout the
useful life of fabs, production equipment and common technologies. The majority of these assets and
related liabilities are therefore Group resources that are utilized based on short and medium term
Semiconductor area manufacturing resource planning. Such assets and liabilities cannot be directly
attributed or specifically allocated to the business segments. The Group internally adopts certain
allocation methodologies to establish a performance benchmark to measure the financial return on
assets at various levels of accountability. As a result such methodologies are not the most
appropriate accounting methodology to apply to historic financial results by product segment. A
mathematical
</DIV>

<P align="center" style="font-size: 10pt"><!-- Folio -->- 124 -<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">



<DIV align="left" style="font-size: 10pt; margin-top: 6pt">computation has been adopted in this financial report by allocating these assets based on revenues,
as revenues enable a weighting to both volumes produced and average unit selling prices achieved.
Volume is a reasonable measure of the use of such assets and average selling prices allows some
weighting of the allocation towards more complex and recent technologies. This measure therefore
gives some account to the greater capital intensity of the modern process equipment such products
may require. The allocation key however might not accurately reflect the significant differences in
the capital intensity of the various businesses. Assets and liabilities by product segments, as
reported, might consequently be inaccurate and cannot be adopted as a basis to compute the return
on capital of each product segment. Consequently, the Company has not allocated and disclosed the
depreciation and amortization charges by product segment.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Based on a similar allocation by revenues, the capital expenditures at December&nbsp;31, 2006 of $1,555
million would have been allocated as follows: 55% on ASG segment, 21% on MPG segment, 23% on MPA
segment and 1% on the &#147;Other&#148; segment. Additionally, depreciation and amortization have been
allocated to the operating profit by product segment as follows: $981&nbsp;million on ASG segment, $388
million on MPG segment, $408&nbsp;million on MPA segment and $14&nbsp;million on the &#147;Others&#148; segment.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt">Total consolidated Assets by product segment
</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="76%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>December 31,</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>December 31,</B></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>2006</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>2005</B></TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Application Specific Product Groups segment</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>7,805</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">7,039</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Memory Products Group segment</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>3,600</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,897</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Micro, Power and Analog Group segment</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>3,067</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,526</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Others</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>207</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">181</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Total consolidated assets</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>14,679</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">12,643</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt">Total consolidated Liabilities by product segment
</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="76%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>December 31,</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>December 31,</B></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>2006</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>2005</B></TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Application Specific Product Groups segment</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>2,463</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,216</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Memory Products Group segment</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>976</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">865</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Micro, Power and Analog Group segment</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>1,024</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">835</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Others</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>36</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">27</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Total consolidated liabilities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>4,499</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,943</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt">Secondary Reporting Format &#151; Geographical Segments
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The following is a summary of operations by entities located within the indicated geographic areas
for 2006 and 2005. Total revenues represent sales to third parties from the country in which each
entity is located. A significant portion of property, plant and equipment expenditures is
attributable to front-end and back-end facilities, located in the different countries in which the
Group operates. As such, the Group mainly allocates capital spending resources according to
geographic areas rather than along product segment areas. Consequently, depreciation and
amortization expense is also reported according to the geographic segments. In addition, the
balance sheet positions of assets and liabilities are managed and reviewed internally by geographic
segments, as reported in the tables below.
</DIV>

<P align="center" style="font-size: 10pt"><!-- Folio -->- 125 -<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="left" style="font-size: 10pt; margin-top: 12pt">Total consolidated revenues
</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="76%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>December 31,</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>December 31,</B></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>2006</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>2005</B></TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">The Netherlands</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>3,114</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,864</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">France</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>240</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">268</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Italy</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>230</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">203</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">USA</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>1.030</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,066</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Singapore</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>4,698</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,041</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Japan</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>400</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">306</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Other countries</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>142</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">134</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Total consolidated revenues</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>9,854</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">8,882</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt">Capital expenditure
</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="76%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>December 31,</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>December 31,</B></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>2006</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>2005</B></TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">The Netherlands</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>1</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">France</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>473</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">294</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Italy</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>292</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">336</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Other European countries</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>96</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">56</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">USA</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>116</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">160</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Singapore</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>382</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">492</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Malaysia</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>114</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">95</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Other countries</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>81</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">87</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Total</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>1,555</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,523</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt">Total consolidated Assets
</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="76%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>December 31,</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>December 31,</B></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>2006</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>2005</B></TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">The Netherlands</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>3,657</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,962</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">France</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>2,875</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,254</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Italy</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>2,581</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,310</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Other European countries</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>451</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">372</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">USA</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>774</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">737</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Singapore</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>3,155</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,946</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Malaysia</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>595</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">527</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Other countries</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>591</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">535</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Total</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>14,679</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">12,643</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>33 &#151; SIGNIFICANT CATEGORIES OF REVENUE</B>
</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="76%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>December 31,</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>December 31,</B></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>2006</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>2005</B></TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Sales of goods</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>9,838</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">8,876</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">License revenue and patent royalty income</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>16</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Research and development funding</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>110</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">92</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Finance income</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>143</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">53</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Total</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>10,107</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">9,027</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<P align="center" style="font-size: 10pt"><!-- Folio -->- 126 -<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">


<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>34 &#151; SUBSEQUENT EVENTS</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">On January&nbsp;22, 2007, a new option agreement was enacted with an independent foundation, Stichting
Continuiteit ST (the &#145;&#145;Stichting&#146;&#146;), which will have an independent board. The new option agreement
provides for the issuance of up to a maximum of 540,000,000 preference shares. The Stichting would
have the option, which it shall exercise in its sole discretion, to take up the preference shares.
The preference shares would be issuable if the board of the Stichting determines that hostile
actions, such as a creeping acquisition or an unsolicited offer for the Company&#146;s common shares,
would be contrary to the interests of the Company, its shareholders, or its other stakeholders. If
the Stichting exercises its call option and acquires preference shares, it must pay at least 25% of
the par value of such preference shares. The new option agreement with the Stichting reflects
changes in Dutch legal requirements, not a response to any hostile takeover attempt.
</DIV>

<P align="center" style="font-size: 10pt"><!-- Folio -->- 127 -<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="left">
<A name="112"></A>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>COMPANY FINANCIAL STATEMENTS</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">COMPANY BALANCE SHEETS AS AT DECEMBER 31, 2006 AND 2005
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">COMPANY STATEMENTS OF INCOME FOR THE YEAR ENDED DECEMBER 31, 2006 AND 2005
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">NOTES TO THE COMPANY FINANCIAL STATEMENTS
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>OTHER INFORMATION</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">AUDITOR&#146;S REPORT
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">APPROPRIATION OF RESULT
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">PROPOSED CASH DIVIDENDS
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">SUBSEQUENT EVENTS
</DIV>

<P align="center" style="font-size: 10pt"><!-- Folio -->- 128 -<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>STMICROELECTRONICS N.V. COMPANY BALANCE SHEETS AS AT</B>
</DIV>

<DIV align="left">
<A name="305"></A>
</DIV>
<DIV align="center" style="font-size: 10pt"><B>DECEMBER 31</B></DIV>


<DIV align="center" style="font-size: 10pt"><B>(before proposed appropriation of income)</B></DIV>


<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="33%">&nbsp;</TD>
    <TD width="1">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="45%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="7" style="border-bottom: 1px solid #000000"><B>As at</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="7" style="border-bottom: 1px solid #000000"><B>As at</B></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Dec. 31,</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Dec. 31,</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Dec. 31,</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Dec. 31,</B></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="left" style="border-bottom: 1px solid #000000">In million of U.S. dollars</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>Note</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>2006</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>2005</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left" style="border-bottom: 1px solid #000000">In million of U.S. dollars</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>Note</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>2006</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>2005</B></TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px"><B>ASSETS</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top"><B>SHAREHOLDERS&#146; EQUITY AND LIABILITIES</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:0px; text-indent:-0px"><B>Non-current assets:</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top"><B>Shareholders&#146; equity</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:0px; text-indent:-0px">Goodwill</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">128</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">128</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Issued and paid in capital</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,247</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,118</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:0px; text-indent:-0px">Other intangibles assets</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">681</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">413</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Additional paid in capital</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,585</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,561</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:0px; text-indent:-0px">Property, plant and
equipment</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">7</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">9</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Retained earnings</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5,121</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5,182</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:0px; text-indent:-0px">Investments in subsidiaries</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">7,438</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">7,241</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Legal reserve</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">621</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(84</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:0px; text-indent:-0px">Investments in
associates</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">261</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Other Reserves</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">588</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">526</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:0px; text-indent:-0px">Restricted cash for equity
investments</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">218</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">44</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Income for the year</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">966</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">347</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 0px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 0px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:0px; text-indent:-0px">Investments and other
non-current assets</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">38</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">12</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top"><B>Total shareholders&#146; equity</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">11</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>10,128</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>8,650</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:0px; text-indent:-0px"><B>Total fixed assets</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>8,771</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>7,847</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top"><B>LONG-TERM LIABILITIES</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:0px; text-indent:-0px"><B>Non-current assets</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Long-term debt</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">12</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">877</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:0px; text-indent:-0px">Long-term deferred tax assets</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Retirement benefit obligations</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">8</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:0px; text-indent:-0px"><B>Total non-current assets</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>3</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>2</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Deferred tax liabilities</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">71</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">25</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:0px; text-indent:-0px"><B>Current assets</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Other long-term liabilities</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">296</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 0px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 0px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:0px; text-indent:-0px">Inventories</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">7</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">97</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">73</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top"><B>Total long-term liabilities</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>1,252</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>33</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 0px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 0px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:0px; text-indent:-0px">Trade account receivable</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">8</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">431</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">392</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top"><B>Short-term liabilities</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:0px; text-indent:-0px">Group
companies short-term loans</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">9</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">66</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">123</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Current portion of long-term debt</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">12</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,356</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:0px; text-indent:-0px">Other group companies receivable</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">10</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,514</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,306</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Trade accounts payable</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">20</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">14</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:0px; text-indent:-0px">Other receivable and assets</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">61</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">36</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Group companies short-term loans</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">10</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">10</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">11</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:0px; text-indent:-0px">Available for sale financial assets</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">15</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">460</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Other group companies payable</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">10</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,230</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,511</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:0px; text-indent:-0px">Short-Term deposits</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">16</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">250</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Other payables and accrued liabilities</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">50</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">96</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:0px; text-indent:-0px">Cash and cash equivalents</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,072</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,898</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Accrued income tax</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">33</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:0px; text-indent:-0px"><B>Total current assets</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>3,951</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>3,828</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Total short-term liabilities</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>1,345</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>2,994</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="bottom"><DIV style="margin-left:0px; text-indent:-0px"><B>TOTAL ASSETS</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>12,725</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>11,677</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top"><B>TOTAL SHAREHOLDERS&#146; EQUITY AND LIABILITIES</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>12,725</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>11,677</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The accompanying notes are an integral part of these financial statements.
</DIV>

<P align="center" style="font-size: 10pt"><!-- Folio -->- 129 -<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>STMICROELECTRONICS N.V. COMPANY</B>
</DIV>

<DIV align="left">
<A name="306"></A>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 1pt"><B>STATEMENTS OF INCOME FOR THE YEAR ENDED DECEMBER 31</B>
</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="76%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="left" style="border-bottom: 0px solid #000000">(In millions of U.S. dollars)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>2006</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>2005</B></TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Profit after taxes</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">496</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">208</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Income from subsidiaries</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">470</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">139</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Net Profit</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>966</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>347</B></TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The accompanying notes are an integral part of these financial statements.
</DIV>

<P align="center" style="font-size: 10pt"><!-- Folio -->- 130 -<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>STMICROELECTRONICS N.V.
</B>
</DIV>

<DIV align="left">
<A name="307"></A>
</DIV>


<DIV align="center" style="font-size: 10pt; margin-top: 1pt"><B>NOTES TO THE COMPANY FINANCIAL STATEMENTS</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>1 &#151; GENERAL</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">A description of STMicroelectronics N.V. (&#147;the Company&#148;), its activities and group structure are
included in the Consolidated Financial Statements, prepared on the basis of accounting policies
that conform with International Financial Reporting Standards (&#147;IFRS&#148;) as endorsed by European
Union. The Company holds investments in subsidiaries operating in the semiconductor manufacturing
industry. Additionally, the Company operates through a branch in Switzerland, which markets a broad
range of semiconductor integrated circuits and devices used in a wide variety of microelectronic
applications.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>2 &#151; BASIS OF PRESENTATION</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The functional and presentation currency of the Company is the U.S. dollar.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Certain prior year items have been reclassified to conform with current year presentation. Other
and legal reserves at January 1st 2006 have been amended to more appropriately reflect
categorization.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>3 &#151; SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">General
<DIV style="font-size:6pt">&nbsp;</DIV>
In accordance with article 2:362 Part&nbsp;8 of the Netherlands Civil Code, STMicroelectronics N.V.
(&#147;the Company&#148;), has prepared its company financial statements in accordance with accounting
principles generally accepted in the Netherlands applying the accounting principles as adopted in
the consolidated financial statements.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt">Valuation of Subsidiaries
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Investments in subsidiaries are stated at net asset value as the Company effectively controls the
operational and financial activities of these investments. The net asset value is determined on the
basis of the IFRS accounting principles applied by the Company in its consolidated financial
statements.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The Company provides for any negative net asset values in its subsidiaries.
</DIV>

<P align="center" style="font-size: 10pt"><!-- Folio -->- 131 -<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>4 &#151; INTANGIBLE FIXED ASSETS</B>
</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="52%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Technologies and</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>licenses, internally</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>developed software</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>and purchase</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Capitalized</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="left" style="border-bottom: 0px solid #000000">(USD in millions)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>Goodwill</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>software</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>development costs</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>Total</B></TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>HISTORICAL COST</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Balance at January&nbsp;1, 2006</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">128</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">420</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">236</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">784</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Additions</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">70</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">311</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">381</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Disposal</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(13</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(13</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Impairments</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(17</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(6</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(23</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Balance at December&nbsp;31, 2006</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>128</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>460</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>541</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>1,129</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>ACCUMULATED AMORTIZATION</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Balance at January&nbsp;1, 2006</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">241</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">243</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Charge for the year</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">69</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">21</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">90</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Impairments</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(13</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(13</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Balance at December&nbsp;31, 2006</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>&#151;</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>297</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>23</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>320</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>NET BOOK VALUE</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">At December&nbsp;31, 2006</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>128</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>163</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>518</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>809</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">At December&nbsp;31, 2005</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>128</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>179</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>234</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>541</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>5 &#151; TANGIBLE FIXED ASSETS</B>
</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="52%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Furniture and</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Computer and </B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="left" style="border-bottom: 1px solid #000000"><B>(USD in millions)</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>fixtures</B></TD>
    <TD>&nbsp;</TD>

<TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>R&#038;D equipment</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>Other</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>Total</B></TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>HISTORICAL COST</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Balance at January&nbsp;1, 2006</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">16</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">21</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Additions</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(1</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Disposals</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(4</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(4</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Balance at December&nbsp;31, 2006</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>2</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>12</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>3</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>17</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>ACCUMULATED DEPRECIATION</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Balance at January&nbsp;1, 2006</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">9</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">12</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Charge for the year</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(1</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Disposals</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(4</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(4</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Balance at December&nbsp;31, 2006</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>1</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>7</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>2</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>10</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>NET BOOK VALUE</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">At December&nbsp;31, 2006</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>1</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>5</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>1</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>7</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>NET BOOK VALUE</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">At December&nbsp;31, 2005</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>1</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>7</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>1</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>9</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>6 &#151; INVESTMENTS IN SUBSIDIARIES</B>
</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="76%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="left" style="border-bottom: 1px solid #000000"><B>(USD in millions)</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>2006</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>2005</B></TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Balance January 1</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">7,241</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">7,696</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Income from subsidiaries</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">470</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">139</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Other reserves</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">47</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(1</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Dividends paid</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(953</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(608</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Capital increase*</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">107</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">778</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Translation effect of exchange rates</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">526</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(763</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Balance</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>7,438</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>7,241</B></TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<P align="center" style="font-size: 10pt"><!-- Folio -->- 132 -<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">



<DIV align="left">
<DIV style="font-size: 3pt; margin-top: 16pt; width: 18%; border-top: 1px solid #000000">&nbsp;</DIV>
</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR>
    <TD width="3%"></TD>
    <TD width="1%"></TD>
    <TD width="96"></TD>
</TR>

<TR valign="top">
    <TD nowrap align="left">*</TD>
    <TD>&nbsp;</TD>
    <TD>2006 capital increase mainly relates to capital contribution to subsidiaries in Canada and
China, for a total amount of $105&nbsp;million. 2005 capital increase mainly relates to capital
contribution to subsidiaries in Singapore, for a total amount of $750&nbsp;million.</TD>
</TR>

</TABLE>



<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The investments in significant consolidated group companies as at December&nbsp;31, 2006 are
presented below:
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="30%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="50%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Percentage Ownership</B></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="left" style="border-bottom: 1px solid #000000"><B>Legal Seat</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left" style="border-bottom: 1px solid #000000"><B>Name</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>(Direct or Indirect)</B></TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Australia &#151; Sydney</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">STMicroelectronics PTY Ltd</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">100</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Belgium &#151; Zaventem</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">STMicroelectronics Belgium N.V.</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">100</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Belgium &#151; Zaventem</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Proton World International N.V.</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">100</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Brazil &#151; Sao Paolo</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">STMicroelectronics Ltda</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">100</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Brazil &#151; Sao Paolo</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Incard do Brasil Ltda</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">50</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Canada &#151; Ottawa</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">STMicroelectronics (Canada), Inc.</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">100</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">China &#151; Shenzhen</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Shenzhen STS Microelectronics Co. Ltd</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">60</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">China &#151; Shenzhen</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">STMicroelectronics (Shenzhen) Co. Ltd</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">100</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">China &#151; Shenzhen</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">STMicroelectronics (Shenzhen)
Manufacturing Co. Ltd</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">100</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">China &#151; Shenzhen</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">STMicroelectronics (Shenzhen) R&#038;D Co. Ltd</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">100</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">China &#151; Shanghai</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">STMicroelectronics (Shanghai) Co. Ltd</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">100</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">China &#151; Shanghai</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">STMicroelectronics (Shanghai) R&#038;D Co. Ltd</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">100</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">China &#151; Shanghai</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Shanghai Blue Media Co. Ltd</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">65</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">China &#151; Shanghai</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">STMicroelectronics (China) Investment Co. Ltd</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">100</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">China &#151; Beijing</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">STMicroelectronics (Beijing) R&#038;D Co. Ltd</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">100</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Czech Republic &#151; Prague</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">STMicroelectronics Design and Application s.r.o.</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">100</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Finland &#151; Lohja</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">STMicroelectronics OY</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">100</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">France &#151; Crolles</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">STMicroelectronics (Crolles 2) SAS</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">100</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">France &#151; Montrouge</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">STMicroelectronics SA</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">100</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">France &#151; Rousset</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">STMicroelectronics (Rousset) SAS</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">100</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">France &#151; Tours</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">STMicroelectronics (Tours) SAS</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">100</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">France &#151; Grenoble</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">STMicroelectronics (Grenoble) SAS</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">100</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Germany &#151; Grasbrunn</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">STMicroelectronics GmbH</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">100</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Germany &#151; Grasbrunn</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">STMicroelectronics Design and Application GmbH</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">100</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Hong Kong &#151; Hong Kong</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">STMicroelectronics LTD</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">100</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">India &#151; Noida</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">STMicroelectronics Pvt Ltd</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">100</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Israel &#151; Netanya</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">STMicroelectronics Ltd</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">100</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Italy &#151; Catania</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">CO.RI.M.ME.</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">100</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Italy &#151; Aosta</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">DORA S.p.A.</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">100</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Italy &#151; Agrate Brianza</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">ST Incard S.r.l.</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">100</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Italy &#151; Naples</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">STMicroelectronics Services S.r.l.</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">100</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Italy &#151; Agrate Brianza</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">STMicroelectronics S.r.l.</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">100</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Japan &#151; Tokyo</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">STMicroelectronics KK</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">100</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Malaysia &#151; Kuala Lumpur</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">STMicroelectronics Marketing SDN BHD</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">100</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Malaysia &#151; Muar</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">STMicroelectronics SDN BHD</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">100</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Malta &#151; Kirkop</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">STMicroelectronics Ltd</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">100</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Mexico &#151; Guadalajara</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">STMicroelectronics Marketing, S. de R.L. de C.V.</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">100</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Mexico &#151; Guadalajara</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">STMicroelectronics Design and Applications, S. de R.L. de C.V.</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">100</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Morocco &#151; Rabat</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Electronic Holding S.A.</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">100</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Morocco &#151; Casablanca</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">STMicroelectronics S.A.</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">100</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Netherlands &#151; Amsterdam</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">STMicroelectronics Finance B.V.</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">100</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Singapore &#151; Ang Mo Kio</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">STMicroelectronics ASIA PACIFIC Pte Ltd</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">100</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Singapore &#151; Ang Mo Kio</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">STMicroelectronics Pte Ltd</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">100</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Spain &#151; Madrid</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">STMicroelectronics S.A.</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">100</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Sweden &#151; Kista</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">STMicroelectronics A.B.</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">100</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Switzerland &#151; Geneva</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">STMicroelectronics SA</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">100</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Switzerland &#151; Geneva</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">INCARD SA</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">100</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Switzerland &#151; Geneva</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">INCARD Sales &#038; Marketing SA</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">100</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<P align="center" style="font-size: 10pt"><!-- Folio -->- 133 -<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="30%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="50%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Percentage Ownership</B></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="left" style="border-bottom: 1px solid #000000"><B>Legal Seat</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left" style="border-bottom: 1px solid #000000"><B>Name</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>(Direct or Indirect)</B></TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Turkey &#151; Istanbul</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">STMicroelectronics Elektronik Arastirma ve Gelistirme Anonim Sirketi</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">100</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">United Kingdom &#151; Marlow</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">STMicroelectronics Limited</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">100</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">United Kingdom &#151; Marlow</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">STMicroelectronics (Research &#038; Development) Limited</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">100</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">United Kingdom &#151; Marlow</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Synad Technologies Limited</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">100</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">United Kingdom &#151; Bristol</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Inmos Limited</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">100</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">United States &#151; Carrollton</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">STMicroelectronics Inc.</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">100</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">United States &#151; Wilmington</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">STMicroelectronics (North America) Holding, Inc.</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">100</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">United States &#151; Wilsonville</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">The Portland Group, Inc.</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">100</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>7 &#151; INVENTORIES</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The balance for inventories contains only finished goods.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>8 &#151; TRADE RECEIVABLES</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Trade receivables are expected to be recovered within one year except for a $5.5&nbsp;million receivable
expected to be paid in 2008. This amount has been discounted in order to reflect its net present
value.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>9 &#151; SHORT-TERM INTERCOMPANY LOANS</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Short-term intercompany loans consist of the following:
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="76%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>December 31, 2006</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>December 31, 2005</B></TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>ST Incard Srl (Italy)</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Loan due 2006 bearing interest at 3-month LIBOR plus 0.50%</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">59</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">53</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>STMicroelectronics Ltd. (Israel)</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Loan due 2006 bearing interest at 3-month LIBOR plus 0.50%</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>ST Microelectronics Inc. (Canada)</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Loan due 2006 bearing interest at 3-month LIBOR plus 0.375%</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">65</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>ST Microelectronics A.S. (Turkey)</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Loan due 2006 bearing interest at 1-month LIBOR plus 0.063%</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Total short-term intercompany loans</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>66</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>123</B></TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>10 &#151; GROUP COMPANIES</B>
</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="76%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="left" style="border-bottom: 1px solid #000000"><B>(USD in millions)</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>December 31, 2006</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>December 31 2005</B></TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Trade receivables</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,293</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,101</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Other receivables</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">221</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">205</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Total group companies Receivables</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>1,514</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>1,306</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Trade payables</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,015</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,277</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Short-term notes payable</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">10</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">11</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Other payables</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">215</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">234</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Total group companies payables</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>1,240</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>1,522</B></TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<P align="center" style="font-size: 10pt"><!-- Folio -->- 134 -<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">


<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>11 &#151; SHAREHOLDERS&#146; EQUITY</B>
</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="20%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Issued</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Addition</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Income</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>and paid</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>al paid</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Retained</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Treasury</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Other</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Legal</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>for the</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="left" style="border-bottom: 1px solid #000000">(USD in millions)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>in capital</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>in capital</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>earnings</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>Shares</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>Reserves</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>Reserve</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>year</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>Total</B></TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Balance January&nbsp;1, 2006</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,118</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,561</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5,182</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(348</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">874</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(84</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">347</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">8,650</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Net income</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">347</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(347</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Rights acquired on vested
stock awards</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">16</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">16</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Issuance of shares **</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">24</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">27</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Stock-based compensation</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(16</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">46</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">30</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Dividends paid</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(107</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(107</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Net income</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">966</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">966</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Development expenditures</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(285</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">285</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Unrealized gain on
derivatives, net of tax</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">14</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">14</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Translation adjustment*</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">126</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">406</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">532</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Balance December&nbsp;31, 2006</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>1,247</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>1,585</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>5,121</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right"><B>(332</B></TD>
    <TD nowrap><B>)</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>920</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>621</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>966</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>10,128</B></TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>



<DIV align="left">
<DIV style="font-size: 3pt; margin-top: 16pt; width: 18%; border-top: 1px solid #000000">&nbsp;</DIV>
</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR>
    <TD width="3%"></TD>
    <TD width="1%"></TD>
    <TD width="96"></TD>
</TR>

<TR valign="top">
    <TD nowrap align="left">*</TD>
    <TD>&nbsp;</TD>
    <TD>The share capital of the Company is denominated in euros and the period-end balance is
translated into U.S. dollars at the year-end exchange rate (euro/USD 1.317). The translation
differences are taken to the non-distributable cumulative translation adjustment account.</TD>
</TR>

<TR style="font-size: 3pt"><TD>&nbsp;</TD></TR>

<TR valign="top">
    <TD nowrap align="left">**</TD>
    <TD>&nbsp;</TD>
    <TD>Issuance of shares is free of tax.</TD>
</TR>

</TABLE>



<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Certain prior year items have been reclassified to conform with current year presentation.
Other and legal reserves at January 1st 2006 have been amended to more appropriately reflect
categorization.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Other reserves and legal reserve consist of fair value of services provided under share award
schemes, unrealized gains or losses on marketable securities classified as available-for-sale and
foreign currency translation adjustments, all net of tax.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Ordinary shares: Euro 1.04 nominal value, 1,200,000,000 shares authorized, 910,157,933 shares
issued, 897,395,042 shares outstanding.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Preferred shares: 540,000,000 shares authorized not issued.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The euro equivalent of the issued share capital at December&nbsp;31, 2006 amounts to euro 946,564,250
(2005: euro: 944,137,250). For the changes in issued and paid in capital, additional paid in
capital and other reserves, see the consolidated financial statements of the Company.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt">Treasury stock
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">In 2002 and 2001, 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. No treasury
shares were acquired in 2003, 2004, 2005 and 2006.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Treasury shares of 9,200,000 have been designated to be used for the Company&#146;s share-based
remuneration programs. As of December&nbsp;31, 2006, 637,109 of the ordinary shares repurchased had been
transferred to employees under the Company&#146;s share-based remuneration programs, following the
vesting as of April&nbsp;27, 2006 of the first tranche of the stock award plan granted in 2005. For
details on the Company&#146;s stock award plans, see the consolidated financial statements of the
Company.
</DIV>

<P align="center" style="font-size: 10pt"><!-- Folio -->- 135 -<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>12 &#151; LONG-TERM LOANS</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">In August&nbsp;2003, the Group issued $1,332&nbsp;million principal amount at maturity of zero coupon
unsubordinated convertible bonds due 2013. The bonds were issued with a negative yield of 0.5% that
resulted in a higher principal amount at issuance of $1,400&nbsp;million and net proceeds of $1,386
million. The bonds are convertible at any time by the holders at the rate of 29.9144 shares of the
Group&#146;s ordinary shares for each one thousand dollar face value of the bonds. The holders had the
option to redeem their convertible bonds on August&nbsp;5, 2006 at a price of $985.09, on August&nbsp;5, 2008
at $975.28 and on August&nbsp;5, 2010 at $965.56 per one thousand dollar face value of the notes. As a
result of this holder&#146;s redemption option in August&nbsp;2006, the outstanding amount of 2013 bonds was
classified in the consolidated balance sheet as &#147;current portion of long-term debt&#148; as of December
31, 2005. At any time from August&nbsp;20, 2006 the Group had the option to redeem for cash at their
negative accreted value all or a portion of the convertible bonds subject to the level of the
Group&#146;s share price.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">When applying the first-time adoption requirements as set out in IFRS 1, the Group assessed for
separate accounting in 2005 the two elements of equity and liability for the 2013 convertible bond,
because it was the only convertible debt outstanding at the IAS 32 / 39 transition date on January
1, 2005. The fair value of the liability component and the equity conversion component were
determined at issuance of the bond. The bond terms enable the holder to receive cash settlement
under certain circumstances and, consequently, the Group has classified the share conversion option
as a financial liability. The value at issuance of this share conversion option was $114&nbsp;million,
which has been reduced and fully reflected in adjusted retained earnings at January&nbsp;1, 2005 because
of the market expectation that the bond will be redeemed without any holder converting. Adjusted
retained earnings at January&nbsp;1, 2005 also included the cumulative amortized interest cost recorded
on the bond totalling $54&nbsp;million. The fair value of the liability component of the convertible
debt amounted to $1,356&nbsp;million as of December&nbsp;31, 2005. Based on the existing market conditions at
issuance, management estimated that separately valuing the embedded share conversion option would
not be materially different from calculating the share conversion value as the residual amount of
the total bond proceeds, after deducting the fair value of the debt component. The Group determined
the fair value of the debt component using a market interest rate for an equivalent non-convertible
debt over the period of future probable cash flows as estimated on the date of issuance. This was
determined to be a three-year timeframe corresponding to the period to the first date of redemption
for cash at the option of the holder. The fair value was calculated using cash flows discounted at
a rate based on the non-convertible debt rate of 2.96%. The embedded rights of the bond holder to
extend the bond beyond the probable three year period, by not exercising their redemption option,
were measured at fair value through profit and loss. The fair value of these embedded rights was
not material at the end of 2005.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Pursuant to the terms of the convertible bonds due 2013, the Company was required to purchase, at
the option of the holders, 1,397,493 convertible bonds, at a price of $985.09 each between August 7
and August&nbsp;9, 2006. This resulted in a cash payment of $1,377&nbsp;million. The Company may be required
to purchase, at the option of the holder, the outstanding convertible bonds for cash on August&nbsp;5,
2008 and/or August&nbsp;5, 2010 at a price of $975.28 and $965.56 per convertible bond, respectively.
The outstanding 2013 convertible debt amounted to approximately $2&nbsp;million as at December&nbsp;31, 2006,
corresponding to the remaining 2,505 bonds.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">In February&nbsp;2006, the Company issued $974&nbsp;million principal amount at maturity of zero coupon
senior convertible bonds due in February&nbsp;2016. The bonds were issued at 100% of
</DIV>

<P align="center" style="font-size: 10pt"><!-- Folio -->- 136 -<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">



<DIV align="left" style="font-size: 10pt; margin-top: 6pt">principal with a yield to maturity of 1.5% and resulted in net proceeds to the Company of $974
million less transaction fees. The bonds are convertible by the holder at any time prior to
maturity at a conversion rate of 43.118317 shares per one thousand dollars face value of the bonds
corresponding to 41,997,240 equivalent shares. In the event of any change in control, the holder
has the right to require the Company to purchase for cash all or any part of the holder&#146;s
convertible bonds at its accreted value. The holders can also redeem the convertible bonds on
February&nbsp;23, 2011 at a price of $1,077.58, on February&nbsp;23, 2012 at a price of $1,093.81 and on
February&nbsp;24, 2014 at a price of $1,126.99 per one thousand dollars face value of the bonds. The
Company can call the bonds at any time after March&nbsp;10, 2011 subject to the Company&#146;s share price
exceeding 130% of the accreted value divided by the conversion rate for 20 out of 30 consecutive
trading days. The Company may redeem for cash at the principal amount at issuance plus accumulated
gross yield all, but not a portion, of the convertible bonds at any time if 10% or less of the
aggregate principal amount at issuance of the convertible bonds remain outstanding in certain
circumstances or in the event of changes to the tax laws of the Netherlands or any successor
jurisdiction.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The Group assessed for separate accounting at issuance of the bond the two elements of equity and
liability of the compound instrument. The bond terms enable the holder to receive cash settlement
under certain circumstances and, consequently, the Group has classified the share conversion option
as a financial liability in &#147;Other non-current liabilities&#148;, which was reported at fair value
through profit and loss in the consolidated balance sheet at December&nbsp;31, 2006. Based on the
existing market conditions at issuance, management estimated that separately valuing the embedded
share conversion would not be materially different from calculating the residual amount of the
equity conversion as total bond proceeds, after deducting the fair value of the debt component. The
fair value of the liability component of the convertible debt amounted to $700&nbsp;million at issuance
and includes the value of the holder&#146;s redemption option and the Company&#146;s call options since these
embedded derivatives were considered to be closely related to the host debt contract and could not
be accounted for separately as freestanding derivatives. The Group determined the fair value of the
liability component using a market interest rate for an equivalent non-convertible debt over the
period of future probable cash flows as estimated on the date of issuance. This was determined to
be a ten-year timeframe corresponding to the period from issuance to maturity. The fair value was
calculated using cash flows discounted at a rate based on the non-convertible debt rate of 5.50%,
reduced by 0.58% corresponding to the value of the put and call options.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">In 2006, the Company entered into cancellable swaps with a combined notional value of $200&nbsp;million
to hedge the fair value of a portion of the convertible bonds due 2016 carrying a fixed interest
rate. The cancellable swaps convert the fixed rate interest expense recorded on the convertible
bond due to 2016 to a variable interest rate based upon adjusted LIBOR. These interest rate swap
hedging transactions are described in further detail in Note 30.
</DIV>

<P align="center" style="font-size: 10pt"><!-- Folio -->- 137 -<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The convertible debt recognized in the balance sheet is calculated as follows:
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt">Convertible debt 2013:
</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="88%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>December 31,</B></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>2006</B></TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Face value of the convertible debt issued on August&nbsp;2003</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,400</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Conversion option classified as a financial liability</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(136</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Accumulated interest recognized on retained earnings</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">91</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Repayment in cash at redemption date</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(1,377</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Liability component at issuance</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right"><B>(22</B></TD>
    <TD nowrap><B>)</B></TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Interest
expense recognized in 2006 consolidated statement of income</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">24</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Convertible debt 2013 as of December&nbsp;31, 2006</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>2</B></TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt">Convertible debt 2016:
</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="88%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>December 31,</B></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>2006</B></TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Face value of the convertible debt issued in February&nbsp;2006</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">974</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Conversion option classified as a financial liability</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(274</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Liability component at issuance</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>700</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Interest expense recognized in 2006 consolidated
statement of income</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">37</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Effect of interest rate swap</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Convertible debt 2016 as of December&nbsp;31, 2006</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>737</B></TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>13 &#151; LOANS AND BANKS</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The Company has revolving lines of credit agreements with several financial institutions totalling
$269&nbsp;million at December&nbsp;31, 2006 (2005: $221&nbsp;million). At December&nbsp;31, 2006 no amounts were drawn
on these available lines of credit (2005: nil).
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>14 &#150; GUARANTEES</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Guarantees given by the Company to its subsidiaries for the benefit of third parties amounted to
approximately $1,379&nbsp;million at December&nbsp;31, 2006 (2005: $906&nbsp;million).
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>15  &#151; AVAILABLE-FOR-SALE FINANCIAL ASSETS</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">In 2006, the Company invested $460&nbsp;million of existing cash in eleven floating rate notes with
primary financial institutions with minimum rating &#147;A1/A&#043;&#148; with a maturity between twenty one
months and six years. These marketable securities were reported as current assets as at December
31, 2006 since they represent investments of funds available for current operations. These
financial assets are classified as available-for-sale and are recorded at fair value, which is
slightly lower than the carrying value as at December&nbsp;31, 2006, with changes in fair value
recognized as a separate component of &#147;other reserves&#148; in the consolidated statement of changes in
shareholders&#146; equity. Subsequently, the Company entered into a basis asset swap for one floating
rate note for a notional amount of $50&nbsp;million purchased at par. Even if strictly related to the
underlying note, the swap is contractually transferable independently of the marketable security to
which it is attached. As such, the asset swap was recorded separately from the underlying financial
asset and was reflected at its fair value in the consolidated balance sheet on the line &#147;Other
receivables and assets&#148; as at December&nbsp;31, 2006. The changes in the fair value of this derivative
instrument were recorded in the consolidated statement of income as part of &#147;Other income and
expenses, net&#148; and did not exceed $1&nbsp;million for the year ended December&nbsp;31, 2006.
</DIV>

<P align="center" style="font-size: 10pt"><!-- Folio -->- 138 -<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">In 2006 and 2005, no financial asset classified as available-for-sale was sold. As at December&nbsp;31,
2005, the Company did not report any financial assets classified as available-for-sale.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>16 &#151; SHORT TERM DEPOSITS</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">In the first quarter of 2006, the Company invested $903&nbsp;million in short term deposits with a
maturity between three months and one year. These deposits are held at various banks with a A3/A-
minimum long term rating from at least two major rating agencies. Interest on these deposits is
paid at maturity with interest rates fixed at inception for the duration of the deposits. The
principal will be repaid at final maturity. In 2006, the Company did not roll over $653&nbsp;million of
these short-term deposits, primarily pursuant to the early redemption in cash of 2013
convertible bonds at the option of the holders which occurred on August&nbsp;7, 2006. At December
31, 2006 the total amount of short term deposit was $250&nbsp;million.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>17  &#151; WAGES, SALARIES AND SOCIAL CHARGES</B>
</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="76%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="left" style="border-bottom: 1px solid #000000">(USD in millions)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>2006</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>2005</B></TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Wages and salaries</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">43</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">43</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Social charges</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Stock award compensation expense</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">7</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Pension service costs</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">8</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Complementary pension scheme for executives</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(2</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">9</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Other employee benefits</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">57</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">74</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The average number of persons employed by the Company during the year ended December&nbsp;31, 2006
was 254 out of which 235 outside The Netherlands (2005: 259 out of which 239 outside The
Netherlands).
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>18  &#151; REMUNERATION TO MANAGING BOARD AND SUPERVISORY BOARD MEMBERS</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">For details on the remuneration to Managing Board and Supervisory Board members, see the
consolidated financial statements of the Company (Note 31).
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">March&nbsp;20, 2007
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Sole Member of the Managing Board,
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Carlo Bozotti
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Members of the Supervisory Board:
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">G&#233;rald Arbola
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Bruno Steve
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Tom de Waard
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Matteo Del Fante
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Douglas Dunn
</DIV>

<P align="center" style="font-size: 10pt"><!-- Folio -->- 139 -<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Didier Lamouche
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Didier Lombard
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Antonino Turicchi
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Robert M. White
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Francis Gavois (Retired on April&nbsp;27, 2006)
</DIV>

<P align="center" style="font-size: 10pt"><!-- Folio -->- 140 -<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>STMICROELECTRONICS N.V.</B>
</DIV>

<DIV align="left">
<A name="113"></A>
</DIV>


<DIV align="Center" style="font-size: 10pt; margin-top: 6pt"><B>OTHER INFORMATION</B>

</DIV>

<DIV align="Center" style="font-size: 10pt; margin-top: 6pt"><B>DECEMBER 31, 2006</B>

</DIV>
<DIV align="left">
<A name="308"></A>
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left"><B>1.</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD><B>AUDITORS&#146; REPORT</B></TD>
</TR>

</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The report of the auditors, PricewaterhouseCoopers Accountants N.V., is presented in the following
pages.
</DIV>
<DIV align="left">
<A name="309"></A>
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left"><B>2.</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD><B>APPROPRIATION OF RESULT &#151; PROVISIONS IN COMPANY&#146;S ARTICLES OF ASSOCIATION</B></TD>
</TR>

</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The Managing Directors, with the approval of the Supervisory Board, are allowed to allocate net
profit to a reserve fund. The Articles of Association provide that the net result for the year,
after deduction of the aforementioned allocation to the reserve fund, is subject to the disposition
by the AGM.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">In the case that a net loss for the year exceeds retained earnings, no dividend payments are
allowed until the loss has been recovered from net profit in future years.
</DIV>
<DIV align="left">
<A name="310"></A>
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left"><B>3.</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD><B>PROPOSED 2006 CASH DIVIDEND AND RETAINED EARNINGS AND DIVIDEND POLICY</B></TD>
</TR>

</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Upon the proposal of the Managing Board, the Supervisory Board decided to recommend to the 2007 AGM
a cash dividend of $0.30 per share.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">This recommendation is consistent with the Company&#146;s dividend policy as communicated and discussed
at the 2005 AGM whereby:
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">a.</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>The Company seeks to use its available cash in order to develop and enhance its
position in the very capital-intensive semiconductor market while at the same time
managing its cash resources to reward its shareholders for their investment and trust in
the Company.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">b.</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Based on its annual results, projected capital requirements as well as business
conditions and prospects, the Managing Board proposes each year to the Supervisory Board
the allocation of its earnings involving whenever deemed possible and desirable in line
with the Company&#146;s objectives and financial situation, the distribution of a cash
dividend, and</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">c.</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>The Supervisory Board, upon the proposal of the Managing Board, decides each
year, in accordance with this policy, which portion of the profits shall be retained in
reserves to fund future growth or for other purposes and makes a proposal to the
shareholders concerning the amount, if any, of the annual cash dividend.</TD>
</TR>

</TABLE>
</DIV>
<P align="center" style="font-size: 10pt"><!-- Folio -->- 141 -<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">


<DIV style="margin-top: 6pt"><TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">



</TABLE>
</DIV>
<DIV align="left">
<A name="311"></A>
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left"><B>4.</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD><B>SUBSEQUENT EVENTS</B></TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>On January&nbsp;22, 2007, a new option agreement was enacted with an independent foundation,
Stichting Continuite&#239;t ST (the &#145;&#145;Stichting&#146;&#146;), which will have an independent board. The new
option agreement provides for the issuance of up to a maximum of 540,000,000 preference
shares. The Stichting would have the option, which it shall exercise in its sole discretion,
to take up the preference shares. The preference shares would be issuable if the board of the
Stichting determines that hostile actions, such as a creeping acquisition or an unsolicited
offer for the Company&#146;s common shares, would be contrary to the interests of the Company, its
shareholders, or its other stakeholders. If the Stichting exercises its call option and
acquires preference shares, it must pay at least 25% of the par value of such preference
shares. The new option agreement with the Stichting reflects changes in Dutch legal
requirements, not a response to any hostile takeover attempt.</TD>
</TR>

</TABLE>
</DIV>
<P align="center" style="font-size: 10pt"><!-- Folio -->- 142 -<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">


<DIV style="margin-top: 6pt"><TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">



</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>To the General Meeting of Shareholders of</B><br>
<B>STMicroelectronics N.V.</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>AUDITOR&#146;S REPORT</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>Report on the financial statements</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">We have audited the accompanying financial statements 2006 of STMicroelectronics N.V., Amsterdam as
set out on pages 57 to 140. The financial statements consist of the consolidated financial
statements and the company financial statements. The consolidated financial statements comprise the
consolidated balance sheet as at 31 December&nbsp;2006, the profit and loss account, statement of
changes in equity and cash flow statement for the year then ended, and a summary of significant
accounting policies and other explanatory notes. The company financial statements comprise the
company balance sheet as at 31 December&nbsp;2006, the company profit and loss account for the year then
ended and the notes.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%"><I>The directors&#146; responsibility</I>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The directors of the company are responsible for the preparation and fair presentation of the
financial statements in accordance with International Financial Reporting Standards as adopted by
the European Union and with Part&nbsp;9 of Book 2 of the Netherlands Civil Code, and for the preparation
of the management board report in accordance with Part&nbsp;9 of Book 2 of the Netherlands Civil Code.
This responsibility includes: designing, implementing and maintaining internal control relevant to
the preparation and fair presentation of the financial statements that are free from material
misstatement, whether due to fraud or error; selecting and applying appropriate accounting
policies; and making accounting estimates that are reasonable in the circumstances.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%"><I>Auditor&#146;s responsibility</I>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Our responsibility is to express an opinion on the financial statements based on our audit. We
conducted our audit in accordance with Dutch law. This law requires that we comply with ethical
requirements and plan and perform the audit to obtain reasonable assurance whether the financial
statements are free from material misstatement.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">An audit involves performing procedures to obtain audit evidence about the amounts and disclosures
in the financial statements. The procedures selected depend on the auditor&#146;s judgment, including
the assessment of the risks of material misstatement of the financial statements, whether due to
fraud or error. In making those risk assessments, the auditor considers internal control relevant
to the company&#146;s preparation and fair presentation of the financial statements in order to design
audit procedures that are appropriate in the circumstances, but not for the purpose of expressing
an opinion on the effectiveness of the company&#146;s internal control. An audit also includes
evaluating the appropriateness of accounting policies used and the reasonableness of accounting
estimates made by the directors, as well as evaluating the overall presentation of the financial
statements.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">We believe that the audit evidence we have obtained is sufficient and appropriate to provide a
basis for our audit opinion.
</DIV>

<P align="center" style="font-size: 10pt"><!-- Folio -->- 143 -<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%"><I>Opinion with respect to the consolidated financial statements</I>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">In our opinion, the consolidated financial statements give a true and fair view of the financial
position of STMicroelectronics N.V. as at 31 December&nbsp;2006, and of its result and its cash flows
for in accordance with International Financial Reporting Standards as adopted by the European Union
and with Part&nbsp;9 of Book 2 of the Netherlands Civil Code.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%"><I>Opinion with respect to the company financial statements</I>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">In our opinion, the company financial statements give a true and fair view of the financial
position of STMicroelectronics N.V. as at 31 December&nbsp;2006, and of its result in accordance with
Part&nbsp;9 of Book 2 of the Netherlands Civil Code.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Report on other legal and regulatory requirements</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Pursuant to the legal requirement under 2:393 sub 5 part e of the Netherlands Civil Code, we
report, to the extent of our competence, that the report of the managing board is consistent with
the financial statements as required by 2:391 sub 4 of the Netherlands Civil Code.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt">Amsterdam, 23 March&nbsp;2007
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">PricewaterhouseCoopers Accountants N.V.

</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">R.M. van Tongeren RA

</DIV>


<P align="center" style="font-size: 10pt"><!-- Folio -->- 144 -<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>
<DIV style="font-family: 'Times New Roman',Times,serif">


<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><IMG src="y01685y0168500.gif" alt="(ST LOGO)">
</DIV>


<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><U><B>Proposed resolutions and shareholders&#146; information</B></U><BR>
<U><B>for the Annual General Meeting of Shareholders (&#147;AGM&#148;) of STMicroelectronics N.V.<BR>
(the &#147;Company&#148;) to be held on April&nbsp;26, 2007 in Amsterdam, the Netherlands</B></U>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Our Supervisory Board proposes:
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><U><B>Agenda item 4-a</B></U> - <B>Resolution 1</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">To adopt our statutory annual accounts for the 2006 financial year, as drawn up by our Managing
Board, examined and audited by our independent external auditors, PricewaterhouseCoopers
Accountants N.V., and approved by our Supervisory Board. Our statutory annual accounts, which
include the reports of our Managing and Supervisory Boards, have been prepared in English
consistent with the Company&#146;s prior practice, and in accordance with IFRS Accounting Standards, as
IFRS constitute our statutory reporting standards.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><U><B>Agenda item 4-b</B></U> - <B>Resolution 2</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">To distribute a dividend in cash of US $0.30 per ordinary share, in line with our dividend policy
as communicated.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><U><B>Agenda item 4-c</B></U> - <B>Resolution 3</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">To discharge the sole member of our Managing Board for his management during the 2006 financial
year.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><U><B>Agenda item 4-d</B></U> - <B>Resolution 4</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">To discharge the members of our Supervisory Board for their supervision during the 2006 financial
year.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><U><B>Agenda item 5</B></U> - <B>Resolution 5</B>
</DIV>


<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="left">a.</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>To appoint Mr.&nbsp;Alessandro Ovi as a member of our Supervisory Board for a three-year term
effective as of our 2007 AGM to expire at the end of our 2010 AGM.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="left">b.</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>To appoint Mr.&nbsp;Ray Bingham as a member of our Supervisory Board for a three-year term
effective as of our 2007 AGM to expire at the end of our 2010 AGM.</TD>
</TR>

</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><U><B>Agenda item 6</B></U> - <B>Resolution 6 and shareholders&#146; information</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">To approve the modification to the three year Stock-Based Compensation Plan for members and
professionals of our Supervisory Board with respect to its remaining year, by fixing the number of
newly issued ordinary shares which may be granted to each Supervisory Board member at 15,000 and to
each professional of our Supervisory Board at 7,500. The price per share shall continue to be EUR
1.04, being the par value of an ordinary share.
</DIV>

<P align="center" style="font-size: 10pt"><!-- Folio -->&nbsp;<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><IMG src="y01685y0168500.gif" alt="(ST LOGO)">
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">This modification is proposed following a benchmarking study of the practices of similar
international companies performed under the control of the Compensation Committee of our
Supervisory Board and is intended to attract and retain suitable candidates for this demanding
position in an international environment .
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><U><B>Agenda item 7</B></U> - <B>Resolution 7 and shareholders&#146; information</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">To approve the delegation to our Supervisory Board of the power to grant Mr.&nbsp;C. Bozotti up to a
maximum number of 100,000 ordinary shares, in the form of Unvested Stock Awards, for services to be
rendered in 2007 as our President and CEO, whereby the vesting of such Unvested Stock Awards will
be tied to Company performance, according to predetermined and quantifiable criteria to be fixed by
our Supervisory Board upon the recommendation of its Compensation Committee, with the objective of
creating long-term value for our shareholders.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The Unvested Stock Awards are intended to provide an incentive to our President and CEO to increase
his efforts for the success of our Company by offering him an opportunity to obtain or increase his
proprietary interest in our Company through the vesting of the up to 100,000 Unvested Stock Awards
to be granted to him, provided the performance conditions attached to vesting of such Awards are
met.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><U><B>Agenda item 8</B></U> - <B>Resolution 8 and shareholders&#146; information</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">To designate our Supervisory Board as the corporate body authorized to resolve upon (i)&nbsp;issuance of
any number of shares as comprised in the authorized share capital of our Company as this shall read
from time to time, (ii)&nbsp;upon the terms and conditions of an issuance of shares, (iii)&nbsp;upon
limitation and/or exclusion of pre-emptive rights of existing shareholders upon issuance of shares,
and (iv)&nbsp;upon the granting of rights to subscribe for shares, all for a five-year period as of the
date of our 2007 AGM.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">During our 2006 AGM our Supervisory Board was designated as the authority empowered to decide upon
the issue of new shares within the limits of our authorized share capital referred to in article 3
of our articles of association. This decision was taken upon the recommendation of our Managing and
Supervisory Boards, as referred to in article 3 of our Articles of Association, in line with past
Company practice, with a view to allowing us to benefit from the best available conditions for our
financing requirements as may be offered by international capital markets so as to best serve our
interest and that of all of our shareholders and other stakeholders in the most efficient manner.
We propose to renew such designation in favor of our Supervisory Board for a new five-year period.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><U><B>Agenda item 9</B></U> - <B>Resolution 9 and shareholders&#146; information</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">To authorize our Managing Board to acquire for a consideration on a stock exchange or otherwise up
to such a number of fully paid-up ordinary shares and/or preference shares in our share capital as
is permitted by law and our articles of association as per the moment of such acquisition &#151; other
than acquisition of shares pursuant to article 5 paragraph 2 of our Articles of Association &#151; for
a price (i)&nbsp;per ordinary share which at such moment is within a range between the par value of an
ordinary share and 110% of the share price per ordinary share on Eurolist by Euronext&#153; Paris, the
New York Stock Exchange or Borsa Italiana, whichever at such moment
</DIV>

<P align="center" style="font-size: 10pt"><!-- Folio -->2<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><IMG src="y01685y0168500.gif" alt="(ST LOGO)">
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">is the highest, and (ii)&nbsp;per preference share which is calculated in accordance with article 5
paragraph 5 of our Articles of Association, taking into account the amendment to our Articles of
Association as proposed in agenda item 10, all subject to the approval of our Supervisory Board,
for a period of eighteen months as of the date of our 2007 AGM.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">This authorization is requested to offer our Managing Board with the approval of our Supervisory
Board the possibility to repurchase, when it is in the best interest of the Company&#146;s shareholders
and other stakeholders for creating long term value, a number of fully paid-up ordinary and/or
preference shares, within the legal limits which are currently set at 10% of the issued share
capital.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><U><B>Agenda item 10</B></U> - <B>Resolution 10 and shareholders&#146; information</B><SUP style="font-size: 85%; vertical-align: text-top"><B>1</B></SUP>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">To amend our Articles of Association in conformity with the draft notarial deed prepared by De
Brauw Blackstone Westbroek N.V., dated February&nbsp;15, 2007 (Dutch wording) and to authorize any and
all lawyers practicing with De Brauw Blackstone Westbroek N.V. to apply to the Dutch Ministry of
Justice for the required declaration of no-objection as well as to execute the notarial deed of
amendment.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The amendments result, among others, from changes in Dutch law effective as of January&nbsp;1, 2007 or
proposed changes in Dutch law which will become effective in the near future. The amendments mainly
concern the following items:
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Written requests of qualified shareholders regarding a request to convene a general
meeting of shareholders or to include items on the agenda may not be submitted
electronically (<I>e.g. </I>via e-mail);</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Notices convening meetings of holders of preference shares may also be sent via e-mail
if the relevant holder(s) of preference shares so agree(s); furthermore, our Managing
Board, subject to the approval of our Supervisory Board may also determine that holders of
preference shares entitled to vote on such shares and other persons entitled to vote on
preference shares may adopt written resolutions outside a meeting via an electronic means
of communication (<I>e.g. </I>e-mail); our Managing Board, subject to the approval of our
Supervisory Board, may attach conditions to the use of such electronic means of
communication.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Our Managing Board may, subject to the approval of our Supervisory Board, determine that
our shareholders and other persons entitled to attend our general meetings of shareholders
are authorized to directly take note of the business transacted at a general meeting of
shareholders via an electronic means of communication (<I>e.g. </I>webcast).</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>With respect to determining who is authorized to attend our general meeting of
shareholders, our Managing Board or Supervisory Board may determine a registration</TD>
</TR>

</TABLE>
</DIV>


<DIV align="left">
<DIV style="font-size: 3pt; margin-top: 16pt; width: 18%; border-top: 1px solid #000000">&nbsp;</DIV>
</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR>
    <TD width="3%"></TD>
    <TD width="1%"></TD>
    <TD width="96"></TD>
</TR>

<TR valign="top">
    <TD nowrap align="left"><SUP style="font-size: 85%; vertical-align: text-top">1</SUP></TD>
    <TD>&nbsp;</TD>
    <TD>With respect to this agenda item the meeting shall also be considered as a meeting of holders of ordinary shares</TD>
</TR>

</TABLE>


<P align="center" style="font-size: 10pt"><!-- Folio -->3<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">






<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><IMG src="y01685y0168500.gif" alt="(ST LOGO)">
</DIV>


<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>date for such a meeting; the registration date may not be set earlier than the thirtieth day
prior to the meeting.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>If our Managing Board or Supervisory Board determines a registration date as referred to
in the previous bullet point, it may also determine that persons entitled to attend and
vote at our general meetings of shareholders may vote via an electronic means of
communication (<I>e.g. </I>via e-mail or the internet) within a certain period prior to our
general meeting of shareholders; this period shall be determined by our Managing Board or
Supervisory Board but cannot commence earlier than the registration date as referred to in
the previous bullet point; votes cast in this manner are equal to votes cast at the
meeting.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Our Managing Board may, subject to the approval of our Supervisory Board, determine that
each person entitled to attend and vote at our general meetings of shareholders is
authorized to vote via an electronic means of communication (<I>e.g. </I>via e-mail or the
internet); to be able to vote in this manner, the person entitled to attend and vote at our
general meetings of shareholders must be identified via the electronic means of
communication and be able to directly take note of the business transacted at our general
meeting of shareholders; our Managing Board may, subject to the approval of our Supervisory
Board, attach conditions the use of the electronic means of communication to certain rules;
if so, these rules shall be announced in the notice convening our general meeting of
shareholders and posted on our website.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Our Managing Board must prepare our statutory annual accounts within four months after
the end of our financial year; furthermore, our Managing Board must prepare the annual
report together with our Supervisory Board within the same period.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Annually, no later than four months after the close of our financial year, our Managing
Board shall make generally available: (i)&nbsp;our statutory annual accounts, (ii)&nbsp;our annual
report, (iii)&nbsp;the statement of our external accountant, as well as (iv)&nbsp;all other annual
financial documents which we must make generally available together with our statutory
annual accounts, pursuant to a statutory obligation.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>The provisions regarding the distributions on our preference shares, if and when issued
and outstanding, are updated to reflect current market practice. Our preference shares
shall become <I>inter alia </I>cumulative of nature.</TD>
</TR>

</TABLE>
</DIV>


<P align="center" style="font-size: 10pt"><!-- Folio -->4<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">


<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><U><B>PERSONAL DATA</B></U><BR>
<U><B>MR. BINGHAM</B></U>
</DIV>


<DIV align="Center" style="font-size: 10pt; margin-top: 6pt">(Section&nbsp;2:142, subsection 3 Dutch Civil Code)

</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="16%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="75%">&nbsp;</TD>
</TR>
<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">name
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">:
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Ray Bingham</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">age
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">:
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">60</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">nationality
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">:
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">American</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">profession
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">:
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Since 2006, Mr.&nbsp;Bingham has been a Managing Director with General Atlantic LLC, a global private
equity firm.</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">other positions
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">:
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Mr. Bingham currently serves as director of three public companies: Oracle Corporation,
Flextronics International Ltd., and LKA Tencor.</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">previous positions
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">:
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Mr. Bingham earned a Bachelor of Science degree with Honors from
to the extent relevant Weber State University and a Master&#146;s Degree in Business Administration from
the Harvard Business School. Mr.&nbsp;Bingham&#146;s career of more than 30&nbsp;years has spanned businesses in
high tech, chemical engineering, and hospitality real estate development with accomplishments in
mergers and acquisitions, global trade and venture capital. He has held senior management roles
with the Marriott Corporation, Red Lion Hotels and Inns, Agrico Overseas Investment Company and
N-ReN International. From 1993 to 2005, he served in executive management roles at Cadence Design
Systems and was named executive chairman in May&nbsp;2004 after serving as president and chief executive
officer since May&nbsp;1999.</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">supervisory board
member of
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">:
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Oracle Corporation, Flextronics International Ltd., and LKA Tencor</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">motivation
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">:
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">The candidacy of Mr.&nbsp;Bingham as a Supervisory Board member is being proposed on the basis
of his specific financial and technical expertise, prior professional experience,
soundness of judgment, ability to make analytical enquiries and willingness to devote the
time required to adequately perform his activities as a Supervisory Board member.</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Mr.&nbsp;Bingham does not hold any shares or rights to subscribe for shares in the share capital of
STMicroelectronics N.V.
</DIV>



<P align="center" style="font-size: 10pt"><!-- Folio --><!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">




<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><U><B>PERSONAL DATA </B></U><BR>
<U><B>MR. OVI</B></U>
</DIV>


<DIV align="center" style="font-size: 10pt; margin-top: 18pt">(Section&nbsp;2:142, subsection 3 Dutch Civil Code)
</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="30%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="60%">&nbsp;</TD>
</TR>
<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">name
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">:
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Alessandro Ovi</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">age
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">:
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">63</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">nationality
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">:
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Italian</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">profession
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">:
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Special Advisor for
Innovation Policies to
the Italian Prime
Minister</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">other positions
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">:
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Mr. Ovi is a supervisory
board member of Telecom
Italia Media S.p.A. and
Assicurazioni Generali
S.p.A. Guala Closures
SpA, ENIA SpA, NWF,
E.U.P.A.C. NPF (Capital
Group Funds) as well as
a life trustee of
Carnegie Mellon
University and a member
of the Media Lab
Visiting Committee of
Massachusetts Institute
of Technology.</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">previous positions to the
extent relevant
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">:
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Mr. Ovi was a member of
the Supervisory Board
from 1994 until his term
expired at our annual
general meeting of
shareholders on March
18, 2005. He received a
doctoral degree in
Nuclear Engineering from
the Politecnico in Milan
and a masters degree in
operations research from
Massachusetts Institute
of Technology. He has
been Special Advisor to
the President of the
European Community for
five years and served on
the boards of Telecom
Italia S.p.A,
Finmeccanica SpA,
Alitalia SpA. Until
April&nbsp;2000, Mr.&nbsp;Ovi was
the Chief Executive
Officer of Tecnitel
S.p.A., a subsidiary of
Telecom Italia Group.
Prior to joining
Tecnitel S.p.A., Mr.&nbsp;Ovi
was the Senior Vice
President of
International Affairs
and Communications at
I.R.I.</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">supervisory board member of
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">:
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Telecom Italia Media
S.p.A. and Assicurazioni
Generali S.p.A. Guala
Closures SpA, ENIA SpA,
NWF, E.U.P.A.C. NPF
(Capital Group Funds)</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">motivation
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">:
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">The candidacy of Mr.&nbsp;Ovi
as a Supervisory Board
member is being proposed
on the basis of his
specific financial and
technical expertise,
prior professional
experience, soundness of
judgment, ability to
make analytical
enquiries and
willingness to devote
the time required to
adequately perform his
activities as a
Supervisory Board
member.</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Mr.&nbsp;Ovi does not hold any shares in the share capital of STMicroelectronics N. V. Mr.&nbsp;Ovi holds a
right to acquire 72,000 shares in the share capital of STMicroelectronics N.V.
</DIV>


<P align="center" style="font-size: 10pt"><!-- Folio -->&nbsp;<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">



<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><U><B>Proxy Forms and Instruction Cards</B></U>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 12pt">Instructions
to holders of STMicroelectronics N.V.<BR>NY Shares traded on the New
York Stock Exchange
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><U><B>Proposed resolutions for the Annual General Meeting of Shareholders (&#147;AGM&#148;) of <BR>
STMicroelectronics N.V. (the &#147;Company&#148;) to be held on
April&nbsp;26, 2007 in Amsterdam</B></U>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>- Resolution 1</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">To adopt our statutory annual accounts for the 2006 financial year, as drawn up by our Managing
Board, examined and audited by our independent external auditors, PricewaterhouseCoopers
Accountants N.V., and approved by our Supervisory Board. Our statutory annual accounts, which
include the reports of our Managing and Supervisory Boards, have been prepared in English
consistent with the Company&#146;s prior practice, and in accordance with IFRS Accounting Standards, as
IFRS constitute our statutory reporting standards.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>- Resolution 2</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">To distribute a dividend in cash of US $0.30 per ordinary share, in line with our dividend policy
as communicated.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>- Resolution 3</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">To discharge the sole member of our Managing Board for his management during the 2006 financial
year.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>- Resolution 4</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">To discharge the members of our Supervisory Board for their supervision during the 2006 financial year.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>- Resolution 5</B>
</DIV>


<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">a.</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>To appoint Mr.&nbsp;Alessandro Ovi as a member of our Supervisory Board for a
three-year term effective as of our 2007 AGM to
expire at the end of our 2010 AGM.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">b.</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>To appoint Mr.&nbsp;Ray Bingham as a member of our Supervisory Board for a three-year
term effective as of our 2007 AGM to
expire at the end of our 2010 AGM.</TD>
</TR>

</TABLE>
</DIV>
<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>- Resolution 6 and shareholders&#146; information</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">To approve the modification to the three year Stock-Based Compensation Plan for members and
professionals of our Supervisory Board with respect to its remaining year, by fixing the number of
newly issued ordinary shares which may be granted to each Supervisory Board member at 15,000 and to
each professional of our Supervisory Board at 7,500. The price per share shall continue to be EUR
1.04, being the par value of an ordinary share.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">This modification is proposed following a benchmarking study of the practices of similar
international companies performed under the control of the Compensation Committee of our
Supervisory Board and is intended to attract and retain suitable candidates for this demanding
position in an international environment
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>- Resolution 7 and shareholders&#146; information</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">To approve the delegation to our Supervisory Board of the power to grant Mr.&nbsp;C. Bozotti up to a
maximum number of 100,000 ordinary shares, in the form of Unvested Stock Awards, for services to be
rendered in 2007 as our President and CEO, whereby the vesting of such Unvested Stock Awards will
be tied to Company performance, according to predetermined and quantifiable criteria to be fixed by
our Supervisory Board upon the recommendation of its Compensation Committee, with the objective of
creating long-term value for our shareholders.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The Unvested Stock Awards are intended to provide an incentive to our President and CEO to increase
his efforts for the success of our Company by offering him an opportunity to obtain or increase his
proprietary interest in our Company through the vesting of the up to 100,000 Unvested Stock Awards
to be granted to him, provided the performance conditions attached to vesting of such Awards are
met.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>- Resolution 8 and shareholders&#146; information</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">To designate our Supervisory Board as the corporate body authorized to resolve upon (i)&nbsp;issuance of
any number of shares as comprised in the authorized share capital of our Company as this shall read
from time to time, (ii)&nbsp;upon the terms and conditions of an issuance of shares, (iii)&nbsp;upon
limitation and/or exclusion of pre-emptive rights of existing shareholders upon issuance of shares,
and (iv)&nbsp;upon the granting of rights to subscribe for shares, all for a five-year period as of the
date of our 2007 AGM.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">During our 2006 AGM our Supervisory Board was designated as the authority empowered to decide upon
the issue of new shares within the limits of our authorized share capital referred to in article 3
of our articles of association. This decision was taken upon the recommendation of our Managing and
Supervisory Boards, as referred to in article 3 of our Articles of Association, in line with past
Company practice, with a view to allowing us to benefit from the best available conditions for our
financing requirements as may be offered by international capital markets so as to best serve our
interest and that of all of our shareholders and other stakeholders in the most efficient manner.
We propose to renew such designation in favor of our Supervisory Board for a new five-year period.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>- Resolution 9 and shareholders&#146; information</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">To authorize our Managing Board to acquire for a consideration on a stock exchange or otherwise up
to such a number of fully paid-up ordinary shares and/or preference shares in our share capital as
is permitted by law and our articles of association as per the moment of such acquisition -other
than acquisition of shares pursuant to article 5 paragraph 2 of our Articles of Association &#151; for a
price (i)&nbsp;per ordinary share which at such moment is within a range between the par value of an
ordinary share and 110% of the share price per ordinary share on Eurolist by Euronext&#153; Paris, the
New York Stock Exchange or Borsa Italiana, whichever at such moment is the highest, and (ii)&nbsp;per
preference share which is calculated in accordance with article 5 paragraph 5 of our Articles of
Association, taking into account the amendment to our Articles of Association as proposed in agenda
item 10, all subject to the approval of our Supervisory Board, for a period of eighteen months as
of the date of our 2007 AGM.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">This authorization is requested to offer our Managing Board with the approval of our Supervisory
Board the possibility to repurchase, when it is in the best interest of the Company&#146;s shareholders
and other stakeholders for creating long term value, a number of fully paid-up ordinary and/or
preference shares, within the legal limits which are currently set at 10% of the issued share
capital.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>- Resolution 10 and shareholders&#146; information<SUP style="font-size: 85%; vertical-align: text-top">1</SUP></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">To amend our Articles of Association in conformity with the draft notarial deed prepared by De
Brauw Blackstone Westbroek N.V., dated February&nbsp;15, 2007 (Dutch wording) and to authorize any and
all lawyers practicing with De Brauw Blackstone Westbroek N.V. to apply to the Dutch Ministry of
Justice for the required declaration of no-objection as well as to execute the notarial deed of
amendment.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The
amendments result, among others, from changes in Dutch law effective as of January&nbsp;1, 2007 or
proposed changes in Dutch law which will become effective in the near future. The amendments
mainly concern the following items:
</DIV>



<DIV align="left">
<DIV style="font-size: 3pt; margin-top: 16pt; width: 18%; border-top: 1px solid #000000">&nbsp;</DIV>
</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR>
    <TD width="3%"></TD>
    <TD width="1%"></TD>
    <TD width="96"></TD>
</TR>

<TR valign="top">
    <TD nowrap align="left"><SUP style="font-size: 85%; vertical-align: text-top">1</SUP></TD>
    <TD>&nbsp;</TD>
    <TD>With respect to this agenda item the meeting shall also be considered as a meeting of
holders of ordinary shares<BR></TD>
</TR>

</TABLE>


<P align="center" style="font-size: 10pt"><!-- Folio -->&nbsp;<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">






<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Written requests of qualified shareholders regarding a request to convene a
general meeting of shareholders or to include items on the agenda may not be
submitted electronically (e.g. via e-mail);</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Notices convening meetings of holders of preference shares may
also be sent via e-mail if the relevant holder(s) of preference shares so
agree(s); furthermore, our Managing Board, subject to the approval of our
Supervisory Board may also determine that holders of preference shares
entitled to vote on such shares and other persons entitled to vote on
preference shares may adopt written resolutions outside a meeting via an
electronic means of communication (e.g. e-mail); our Managing Board, subject
to the approval of our Supervisory Board, may attach conditions to the use of
such electronic means of communication.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Our Managing Board may, subject to the approval of our Supervisory Board,
determine that our shareholders and other persons entitled to attend our
general meetings of shareholders are authorized to directly take note of
the business transacted at a general meeting of shareholders via an
electronic means of communication (e.g. webcast).</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>With respect to determining who is authorized to attend our
general meeting of shareholders, our Managing Board or Supervisory Board may
determine a registration date for such a meeting; the registration date may
not be set earlier than the thirtieth day prior to the meeting.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>If our Managing Board or Supervisory Board determines a
registration date as referred to in the previous bullet point, it may also
determine that persons entitled to attend and vote at our general meetings of
shareholders may vote via an electronic means of communication (e.g. via
e-mail or the internet) within a certain period prior to our general meeting
of shareholders; this period shall be determined by our Managing Board or
Supervisory Board but cannot commence earlier than the registration date as
referred to in the previous bullet point; votes cast in this manner are equal
to votes cast at the meeting.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Our Managing Board may, subject to the approval of our
Supervisory Board, determine that each person entitled to attend and vote
at our general meetings of shareholders is authorized to vote via an
electronic means of communication (e.g. via e-mail or the internet); to be
able to vote in this manner, the person entitled to attend and vote at our
general meetings of shareholders must be identified via the electronic
means of communication and be able to directly take note of the business
transacted at our general meeting of shareholders; our Managing Board may,
subject to the approval of our Supervisory Board, attach conditions the use
of the electronic means of communication to certain rules; if so, these
rules shall be announced in the notice convening our general meeting of
shareholders and posted on our website.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Our Managing Board must prepare our statutory annual accounts
within four months after the end of our financial year; furthermore, our
Managing Board must prepare the annual report together with our Supervisory
Board within the same period.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Annually, no later than four months after the close of our
financial year, our Managing Board shall make generally available: (i)&nbsp;our
statutory annual accounts, (ii)&nbsp;our annual report, (iii)&nbsp;the statement of our
external accountant, as well as (iv)&nbsp;all other annual financial documents
which we must make generally available together with our statutory annual
accounts, pursuant to a statutory obligation.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>The provisions regarding the distributions on our preference
shares, if and when issued and outstanding, are updated to reflect current
market practice. Our preference shares shall become inter alia cumulative of
nature.</TD>
</TR>

</TABLE>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><FONT face="Wingdings">&#111;</FONT> &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; <FONT face="Wingdings">&#226;</FONT>  &nbsp; DETACH PROXY CARD HERE &nbsp; <FONT face="Wingdings">&#226;</FONT>
</DIV>
<DIV align="left">
<DIV style="font-size: 1pt; margin-top: 1pt; width: 100%; border-top: 1px solid #000000">&nbsp;</DIV>
</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="30%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="65%">&nbsp;</TD>
</TR>
<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Mark, Sign, Date and Return
the Proxy Card Promptly Using the
Enclosed Envelope.
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top"><FONT face="Wingdings">&#120;</FONT> </TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Votes must be indicated<br>
(x)&nbsp;in Black or Blue ink.</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>

    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>

    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>

    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>

    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>

    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>

    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>

    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center"><B>FOR</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center"><B>AGAINST</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center"><B>ABSTAIN</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center"><B>FOR</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center"><B>AGAINST</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center"><B>ABSTAIN</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center"><B>FOR</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center"><B>AGAINST</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center"><B>ABSTAIN</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center"><B>FOR</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center"><B>AGAINST</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center"><B>ABSTAIN</B></TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">1.</DIV></TD>
    <TD>&nbsp;</TD>

<TD align="center" valign="top"><FONT face="Wingdings">&#111;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top"><FONT face="Wingdings">&#111;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top"><FONT face="Wingdings">&#111;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">4.</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top"><FONT face="Wingdings">&#111;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top"><FONT face="Wingdings">&#111;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top"><FONT face="Wingdings">&#111;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">6.</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top"><FONT face="Wingdings">&#111;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top"><FONT face="Wingdings">&#111;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top"><FONT face="Wingdings">&#111;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">9.</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top"><FONT face="Wingdings">&#111;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top"><FONT face="Wingdings">&#111;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top"><FONT face="Wingdings">&#111;</FONT></TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">2.</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top"><FONT face="Wingdings">&#111;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top"><FONT face="Wingdings">&#111;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top"><FONT face="Wingdings">&#111;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">5.a.</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top"><FONT face="Wingdings">&#111;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top"><FONT face="Wingdings">&#111;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top"><FONT face="Wingdings">&#111;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">7.</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top"><FONT face="Wingdings">&#111;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top"><FONT face="Wingdings">&#111;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top"><FONT face="Wingdings">&#111;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">10.</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top"><FONT face="Wingdings">&#111;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top"><FONT face="Wingdings">&#111;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top"><FONT face="Wingdings">&#111;</FONT></TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">3.</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top"><FONT face="Wingdings">&#111;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top"><FONT face="Wingdings">&#111;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top"><FONT face="Wingdings">&#111;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">5.b.</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top"><FONT face="Wingdings">&#111;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top"><FONT face="Wingdings">&#111;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top"><FONT face="Wingdings">&#111;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">8.</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top"><FONT face="Wingdings">&#111;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top"><FONT face="Wingdings">&#111;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top"><FONT face="Wingdings">&#111;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>



<DIV align="CENTER" style="font-size: 10pt; margin-top: 6pt; margin-left: 55%">To change your address, please mark this box. &nbsp;&nbsp;&nbsp;&nbsp;&nbsp; <FONT face="Wingdings">&#111;</FONT>
</DIV>
<P><DIV style="position: relative; float: left; width: 50%">
</DIV>
<DIV style="position: relative; float: right; width: 45%">
<P>
<DIV style="width: 100%; border: 1px solid black; padding: 11px;">



<DIV align="center" style="font-size: 12pt; margin-top: 6pt"><B>SCAN LINE</B>
</DIV>

</DIV>


</DIV>
<BR clear="all"><BR>
<P><DIV style="position: relative; float: left; width: 40%">
<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The Voting
Instruction must be
signed by the
person in whose
name the relevant
Receipt is
registered on the
books of the
Depositary. In the
case of a
Corporation, the
Voting Instruction
must be executed by
a duly authorized
Officer or
Attorney.
</DIV>

</DIV>
<DIV style="position: relative; float: right; width: 40%">
</DIV>
<BR clear="all"><BR>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="45%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="30%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="18%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="18%">&nbsp;</TD>
</TR>
<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top"><DIV style="font-size: 1pt; border-top: 1px solid #000000">&nbsp;</DIV>
Date&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Share Owner sign here
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top"><DIV style="font-size: 1pt; border-top: 1px solid #000000">&nbsp;</DIV>
Co-Owner sign here
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<P align="center" style="font-size: 10pt"><!-- Folio -->&nbsp;<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>STMicroelectronics N.V.<BR>
Proxy Appointment and Voting Instruction Card<BR>
(Must be presented at the meeting or received by mail prior to 3:00 pm<BR>
(eastern standard time) on April&nbsp;24, 2007)</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The undersigned registered holder of common shares of New York Registry (each
representing one common share of Euro 1.04 nominal amount of STMicroelectronics
N.V.), hereby appoints
<U>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</U>


or The Bank of New York, as New York Transfer Agent and Registrar,


through its agent, as the proxy of the undersigned to attend and address the Annual
General Meeting of Shareholders of STMicroelectronics N.V. to be held in Amsterdam,
The Netherlands, on April&nbsp;26, 2007 and, in general, to exercise all rights the
undersigned could exercise in respect of such common shares if personally present
thereat upon all matters which may properly come before such Meeting and every
adjournment thereof, and instructs such proxy to endeavor, in so far as practicable,
to vote or cause to be voted on a poll (if a poll shall be taken) the common shares
of STMicroelectronics N.V. represented by Shares of New York Registry registered in
the name of the undersigned on the books of the New York Transfer Agent and
Registrar as of the close of business on March&nbsp;30, 2007, at such Meeting in respect
of the resolutions specified on the reverse side hereof.
</DIV>


<DIV align="left" style="margin-top: 12pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt; background: transparent; color: #000000">
<TR>
    <TD width="3%"></TD>
    <TD width="1%"></TD>
    <TD></TD>
</TR>
<TR valign="top">
    <TD nowrap align="left"><B>NOTE:</B></TD>
    <TD>&nbsp;</TD>
    <TD><B>Please direct your proxy how it is to vote by placing an X in the
appropriate box opposite the resolutions specified on the reverse side hereof.
If you do not fill in the blank provided above, then you will have appointed
The Bank of New York as your proxy.</B></TD>
</TR>
</TABLE>
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="45%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="35%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="35%">&nbsp;</TD>
</TR>
<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top"><B>STMicroelectronics N.V.</B>
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top"><B>P.O. BOX 11473</B></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top"><B>NEW YORK, N.Y. 10203-0473</B></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">To include any comments, please mark this box. &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; <FONT face="Wingdings">&#111;</FONT>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>Please complete and date this proxy on
the reverse side and return it promptly in the accompanying envelope.</B>
</DIV>


<P align="center" style="font-size: 10pt"><!-- Folio -->&nbsp;<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="Center" style="font-size: 10pt; margin-top: 6pt"><U><B>PROXY</B></U>

</DIV>

<DIV align="Center" style="font-size: 10pt; margin-top: 6pt"><U><B>REGISTERED SHAREHOLDER</B></U>

</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><U><B>The undersigned:</B></U>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">(full name shareholder):<BR>
(private address/business address):

</DIV>
<DIV align="left" style="font-size: 10pt; margin-top: 6pt">acting for
the purposes hereof as holder of .......... (number) shares (in case type II: serial number of the share
certificates: ..................), each share having a par value of EUR 1.04, in the share capital of STMicroelectronics N.V.,
established in Amsterdam, the Netherlands, hereinafter: the <B>&#147;Company&#148;,</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><U><B>declares</B></U> to give the following instructions and to grant full power of attorney to:
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">0 &nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Mr C.W, de Monchy, civil law notary practising in Rotterdam, the Netherlands, or one of the
lawyers in the
office of Mr C.W. de Monchy; or
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">0 &nbsp;&nbsp;&nbsp;&nbsp;&nbsp; (fill out name of person designated by you):
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">especially to, on behalf and in the name of the undersigned in his above mentioned capacity, attend
the Annual General Meeting of shareholders of the Company, to be held on April&nbsp;26, 2007 to sign the
attendance-book of such meeting, to address the meeting and to vote on all shares mentioned above
regarding the following items included in the agenda of such meeting:
</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="21%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="60%">&nbsp;</TD>
</TR>
<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Item number 4a &#151; Resolution 1</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px"><DIV style="font-size: 1pt; border-top: 1px solid #000000">&nbsp;</DIV>
in favour / against / abstention *
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Item number 4b &#151; Resolution 2
<DIV style="font-size: 1pt; border-top: 1px solid #000000">&nbsp;</DIV>
in favour / against / abstention *
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Item number 4c &#151; Resolution 3
<DIV style="font-size: 1pt; border-top: 1px solid #000000">&nbsp;</DIV>
in favour / against / abstention *
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Item number 4d &#151; Resolution 4
<DIV style="font-size: 1pt; border-top: 1px solid #000000">&nbsp;</DIV>
in favour / against / abstention *
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Item number 5 &#151; Resolution 5a
<DIV style="font-size: 1pt; border-top: 1px solid #000000">&nbsp;</DIV>
in favour / against / abstention *
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Item number 5 &#151; Resolution 5b
<DIV style="font-size: 1pt; border-top: 1px solid #000000">&nbsp;</DIV>
in favour / against / abstention *
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Item number 6 &#151; Resolution 6</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD valign="top" style="border-top: 1px solid #000000"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top" style="border-top: 0px solid #000000"><DIV style="margin-left:0px; text-indent:-0px">in favour / against / abstention *</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Item number 7 &#151; Resolution 7
<DIV style="font-size: 1pt; border-top: 1px solid #000000">&nbsp;</DIV>
in favour / against / abstention *
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Item number 8 &#151; Resolution 8
<DIV style="font-size: 1pt; border-top: 1px solid #000000">&nbsp;</DIV>
in favour / against / abstention *
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<P align="center" style="font-size: 10pt"><!-- Folio -->&nbsp;<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="25%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="60%">&nbsp;</TD>
</TR>
<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Item number 9 &#151; Resolution 9
<DIV style="font-size: 1pt; border-top: 1px solid #000000">&nbsp;</DIV>
in favour / against / abstention *
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Item number 10 &#151; Resolution 10**
<DIV style="font-size: 1pt; border-top: 1px solid #000000">&nbsp;</DIV>
in favour / against / abstention *
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>



<DIV align="left">
<DIV style="font-size: 3pt; margin-top: 16pt; width: 18%; border-top: 1px solid #000000">&nbsp;</DIV>
</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR>
    <TD width="3%"></TD>
    <TD width="1%"></TD>
    <TD width="96"></TD>
</TR>

<TR valign="top">
    <TD nowrap align="left">**</TD>
    <TD>&nbsp;</TD>
    <TD>With respect to this agenda item the meeting shall also be considered as a meeting of
holders of ordinary shares. Consequently, your vote will regard the general meeting of shareholders
(as a whole) as well as the meeting of holders of ordinary shares.</TD>
</TR>

</TABLE>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The attorney is also empowered to address the meeting regarding all other matters to be
discussed at the meeting, and furthermore to vote on all shares mentioned above regarding all items
to be brought up for voting at such meeting.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt">This proxy is granted with the right of substitution.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Executed in &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; on &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 2007.
</DIV>



<DIV align="left">
<DIV style="font-size: 3pt; margin-top: 6pt; width: 18%; border-top: 0px solid #000000">&nbsp;</DIV>
</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR>
    <TD width="3%"></TD>
    <TD width="1%"></TD>
    <TD width="96"></TD>
</TR>

<TR valign="top">
    <TD nowrap align="left">*</TD>
    <TD>&nbsp;</TD>
    <TD>Please indicate your choice.</TD>
</TR>

</TABLE>




<P align="center" style="font-size: 10pt"><!-- Folio -->&nbsp;<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>
<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="center" style="font-size: 10pt; margin-top: 6pt">Instructions
to holders of ordinary shares in the share capital of
STMicroelectronics NV traded <BR>on Euronext Paris / Milan Stock Exchange holding their shares through a securities account
with <BR>a financial intermediary
</DIV>


<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>STMICROELECTRONICS N.V.<BR>
ANNUAL GENERAL MEETING OF SHAREHOLDERS</B></DIV>
<DIV align="center" style="font-size: 10pt; margin-top: 6pt"><B>TO BE HELD ON APRIL 26, 2007</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">As shareholder holding STMicroelectronics NV ordinary shares through a securities account
with a financial intermediary, you may vote your shares by following one of the two procedures
described below:
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt">1) Voting in person
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">If you would like to attend the annual general meeting of shareholders and would like to vote at
the meeting you will have to obtain a power of attorney from Euroclear France and to complete
and sign appendix I (the request for a power of attorney to Euroclear France). By obtaining the
power of attorney you will obtain the legal ownership rights of Euroclear France to vote your
STMicroelectronics NV ordinary shares. If you obtain a power of attorney from Euroclear France
your shares will be blocked and cannot be transferred until April&nbsp;27, 2007.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt">2) Voting by proxy
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">You may also give Euroclear France your voting instructions for the annual general meeting of
shareholders. You must therefore provide Euroclear France with your voting instructions by
completing and signing Appendix&nbsp;II. If you give voting instructions to Euroclear France, your
shares will be blocked and cannot be transferred until April&nbsp;27, 2007.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Appendix&nbsp;I or II has to be received by your account holder or intermediary (not
STMicroelectronics N.V. or Euroclear France) <B>by April&nbsp;23, 2007 at the latest.</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>If you wish to attend the meeting, please make sure you return appendix I to your account holder
or intermediary on time. Do not use appendix II.</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>If you wish to give voting instructions to Euroclear France, please make sure that you return
appendix II to your account holder or intermediary on time. Do not use appendix I.</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt">Amsterdam, April&nbsp;5, 2007
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">on behalf of<BR>
STMicroelectronics N.V.

</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Netherlands Management Company B.V.<BR>
Registrar

</DIV>

<P align="center" style="font-size: 10pt"><!-- Folio -->&nbsp;<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Appendix&nbsp;I REQUEST FOR A POWER OF ATTORNEY</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>YOU SHOULD COMPLETE THIS FORM IF YOU WISH TO ATTEND THE ANNUAL GENERAL MEETING OF
SHAREHOLDERS OF STMICROELECTRONICS N.V.</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">This form has to be received by your account holder or intermediary by April&nbsp;23,
2007 at the latest.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>Mr/Mrs&nbsp;.................... will attend the annual general meeting of
shareholders of STMicroelectronics N.V. in Amsterdam, the Netherlands, at April&nbsp;26,
2007.</B>
</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="48%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="46%">&nbsp;</TD>
</TR>
<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">NAME AND ADDRESS OF UNDERSIGNED &#147;INDIRECT&#148; SHAREHOLDER
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">NUMBER OF STMICROELECTRONICS N.V. SHARES IN RESPECT OF WHICH A POWER OF
ATTORNEY IS REQUESTED</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">SECURITIES ACCOUNT NUMBER WITH ACCOUNT HOLDER OR INTERMEDIAIRY (please
provide only the number of the account in which you hold STMicroelectronics
N.V. shares)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">EUROCLEAR FRANCE ACCOUNT (to be filled in by your <BR>account holder or
intermediary)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">TELEPHONE NUMBER AND CONTACT PERSON OF ACCOUNT HOLDER OR INTERMEDIARY<BR>
(to be filled in by your account holder or intermediary)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">By signing this appendix, the undersigned hereby requests Euroclear France to
grant a power of attorney to the undersigned (or its representative).
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">By signing this appendix, the undersigned undertakes not to transfer the above-mentioned
shares during the period from the date this appendix is signed until April&nbsp;27, 2007.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt">Executed at <U>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</U> on <U>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</U> 2007
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><U>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</U><U>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</U><U>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</U>

</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 0pt">Signature

</DIV>

<P align="center" style="font-size: 10pt"><!-- Folio -->&nbsp;<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Appendix&nbsp;II VOTING INSTRUCTIONS FORM</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>YOU SHOULD COMPLETE THIS FORM IF YOU DO NOT WISH TO ATTEND THE ANNUAL GENERAL MEETING
OF SHAREHOLDERS OF STMICROELECTRONICS N.V. TO BE HELD ON APRIL 26, 2007 BUT DO WISH
TO GIVE VOTING INSTRUCTIONS TO EUROCLEAR FRANCE.</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><I>This form has to be received by your account holder or intermediary by April
23, 2007 at the latest.</I>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">EUROCLEAR FRANCE S.A. WILL EXECUTE THESE VOTING INSTRUCTIONS AS DIRECTED. IF NO
DIRECTION IS MADE, EUROCLEAR FRANCE S.A. WILL VOTE IN ACCORDANCE WITH THE
RECOMMENDATIONS OF THE SUPERVISORY BOARD AND BOARD OF MANAGEMENT OF
STMICROELECTRONICS N.V., WHICH RECOMMEND A VOTE <U>FOR</U> EACH OF PROPOSALS LISTED BELOW
</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="48%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
</TR>
<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">

<TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">NAME
AND ADDRESS OF UNDERSIGNED &#147;INDIRECT&#148; <BR>SHAREHOLDER</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">

<TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">NUMBER
OF STMICROELECTRONICS N.V. SHARES IN <BR>RESPECT OF WHICH VOTING
INSTRUCTIONS ARE GIVEN</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">

<TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">SECURITIES
ACCOUNT NUMBER WITH ACCOUNT HOLDER <BR>OR INTERMEDIARY (please
provide only the number of the account <BR>
in which you hold STMicroelectronics
N.V. shares)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">

<TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">EUROCLEAR
FRANCE ACCOUNT <BR>(to be filled in by your account holder or
intermediary)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">

<TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">NAME
AND ADDRESS OF ACCOUNT HOLDER OR <BR>INTERMEDIARY</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">

<TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">TELEPHONE
NUMBER AND CONTACT PERSON OF <BR>ACCOUNT HOLDER OR INTERMEDIARY &nbsp;<BR>
(to be filled in by your account holder or intermediary)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The undersigned hereby authorises Euroclear France to exercise the voting
instructions on the undersigned&#146;s behalf with regard to the above-mentioned shares
concerning the following items on the agenda of the annual general meeting of
shareholders of STMicroelectronics N.V. on April&nbsp;26, 2007.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><FONT face="Wingdings">&#254;</FONT> Please mark your vote as shown in this example.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><U>Item number 4a &#151; Resolution 1</U>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Adoption of the statutory annual accounts for the 2006 financial year
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><FONT face="Wingdings">&#111;</FONT> FOR &nbsp;&nbsp;&nbsp;&nbsp;&nbsp; <FONT face="Wingdings">&#111;</FONT> AGAINST&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; <FONT face="Wingdings">&#111;</FONT> ABSTAIN
</DIV>




<P align="center" style="font-size: 10pt"><!-- Folio -->&nbsp;<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">




<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><u>Item
number 4b &#151; Resolution 2</u></DIV>
<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Adoption of a dividend of $0.30 per ordinary share
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><FONT face="Wingdings">&#111;</FONT> FOR &nbsp;&nbsp;&nbsp;&nbsp;&nbsp; <FONT face="Wingdings">&#111;</FONT> AGAINST&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; <FONT face="Wingdings">&#111;</FONT> ABSTAIN
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><U>Item number 4c &#151; Resolution 3</U>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Discharge of the sole member of the Managing Board for his management during the 2006
financial year
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><FONT face="Wingdings">&#111;</FONT> FOR &nbsp;&nbsp;&nbsp;&nbsp;&nbsp; <FONT face="Wingdings">&#111;</FONT> AGAINST&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; <FONT face="Wingdings">&#111;</FONT> ABSTAIN
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><U>Item number 4d &#151; Resolution 4</U>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Discharge of the members of the Supervisory Board for their supervision during the 2006
financial year
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><FONT face="Wingdings">&#111;</FONT> FOR &nbsp;&nbsp;&nbsp;&nbsp;&nbsp; <FONT face="Wingdings">&#111;</FONT> AGAINST&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; <FONT face="Wingdings">&#111;</FONT> ABSTAIN
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><U>Item number 5 &#151; Resolution 5</U>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">a. Appointment of Mr.&nbsp;Alessandro Ovi as a member of the Supervisory Board for a three
year term effective as of the 2007 annual meeting of shareholders to expire at the end of the
2010 annual general meeting of shareholders
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><FONT face="Wingdings">&#111;</FONT> FOR &nbsp;&nbsp;&nbsp;&nbsp;&nbsp; <FONT face="Wingdings">&#111;</FONT> AGAINST&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; <FONT face="Wingdings">&#111;</FONT> ABSTAIN
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">b. Appointment of Mr.&nbsp;Ray Bingham as a member of the Supervisory Board for a three
year term effective as of the 2007 annual general meeting to expire at the end of the 2010
annual general meeting
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><FONT face="Wingdings">&#111;</FONT> FOR &nbsp;&nbsp;&nbsp;&nbsp;&nbsp; <FONT face="Wingdings">&#111;</FONT> AGAINST&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; <FONT face="Wingdings">&#111;</FONT> ABSTAIN
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><U>Item number 6 &#151; Resolution 6</U>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Approval of the modification to the three year Stock-Based Compensation Plan for members
and professionals of the Supervisory Board with respect to its remaining year
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><FONT face="Wingdings">&#111;</FONT> FOR &nbsp;&nbsp;&nbsp;&nbsp;&nbsp; <FONT face="Wingdings">&#111;</FONT> AGAINST&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; <FONT face="Wingdings">&#111;</FONT> ABSTAIN
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><U>Item number 7 &#151; Resolution 7</U>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Approval of the delegation to the Supervisory Board of the power to grant Mr C. Bozotti, President
and CEO, up to a maximum of 100,000 ordinary shares in the form of Unvested Stock Awards.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><FONT face="Wingdings">&#111;</FONT> FOR &nbsp;&nbsp;&nbsp;&nbsp;&nbsp; <FONT face="Wingdings">&#111;</FONT> AGAINST&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; <FONT face="Wingdings">&#111;</FONT> ABSTAIN
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><U>Item number 8 &#151; Resolution 8</U>

</DIV>
<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Delegation to the Supervisory Board for five years as of the 2007 annual general meeting of
shareholders of the authority to issue new shares, to grant rights to subscribe for new shares and
to limit and/or exclude existing shareholders&#146; pre-emptive rights
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><FONT face="Wingdings">&#111;</FONT> FOR &nbsp;&nbsp;&nbsp;&nbsp;&nbsp; <FONT face="Wingdings">&#111;</FONT> AGAINST&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; <FONT face="Wingdings">&#111;</FONT> ABSTAIN
</DIV>




<P align="center" style="font-size: 10pt"><!-- Folio -->&nbsp;<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">




<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><U>Item number 9 &#151; Resolution 9</U>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Authorisation to the Managing Board for eighteen months as of the 2007 annual general meeting of
shareholders to repurchase ordinary and/or preference shares in the share capital of
STMicroelectronics N.V., subject to the approval of the Supervisory Board.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><FONT face="Wingdings">&#111;</FONT> FOR &nbsp;&nbsp;&nbsp;&nbsp;&nbsp; <FONT face="Wingdings">&#111;</FONT> AGAINST&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; <FONT face="Wingdings">&#111;</FONT> ABSTAIN
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><U>Item number 10 &#151; Resolution 10*</U>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Amendment to the articles of association in conformity with the draft deed prepared by De Brauw
Blackstone Westbroek N.V. dated February&nbsp;15, 2007 (Dutch wording), including authorization to
execute the notarial deed of amendment.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><FONT face="Wingdings">&#111;</FONT> FOR &nbsp;&nbsp;&nbsp;&nbsp;&nbsp; <FONT face="Wingdings">&#111;</FONT> AGAINST&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; <FONT face="Wingdings">&#111;</FONT> ABSTAIN
</DIV>
<DIV align="left">
<DIV style="font-size: 3pt; margin-top: 16pt; width: 18%; border-top: 1px solid #000000">&nbsp;</DIV>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left:15; text-indent:-15">* With respect to this agenda item the meeting shall also be considered as a meeting of
holders of ordinary shares. Consequently your vote will regard the general meeting of shareholders
(as a whole) as well as the meeting of holders of ordinary shares.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">By signing this appendix, the undersigned undertakes not to transfer the above-mentioned
shares from the date this appendix is signed until April&nbsp;27, 2007
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt">Executed at <U>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</U> on <U>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</U> 2007
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><U>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</U><U>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</U><U>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</U><BR>
Signature

</DIV>

<P align="center" style="font-size: 10pt"><!-- Folio -->&nbsp;<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><U><B>PROPOSED AMENDMENTS<BR>
TO THE ARTICLES OF ASSOCIATION<BR>
STMICROELECTRONICS N.V.</B></U>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The proposed amendments to our Articles of Association are in conformity with the draft notarial
deed prepared by De Brauw Blackstone Westbroek N.V., dated February&nbsp;15, 2007 (Dutch wording). The
amendments result, among others, from changes in Dutch law effective as of January&nbsp;1, 2007 or
proposed changes in Dutch law which will become effective in the near future. The amendments mainly
concern the following items:
</DIV>


<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Written requests of qualified shareholders regarding a request to convene a general
meeting of shareholders or to include items on the agenda may not be submitted electronically <I>(e.g. </I>via
e-mail);</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Notices convening meetings of holders of preference shares may also be sent via e-mail
if the relevant holder(s) of preference shares so agree(s); furthermore, our Managing Board, subject to the
approval of our Supervisory Board may also determine that holders of preference shares entitled to vote on such
shares and other persons entitled to vote on preference shares may adopt written resolutions outside a
meeting via an electronic means of communication <I>(e.g. </I>e-mail); our Managing Board, subject to the
approval of our Supervisory Board, may attach conditions to the use of such electronic means of
communication.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Our Managing Board may, subject to the approval of our Supervisory Board, determine that our
shareholders and other persons entitled to attend our general meetings of shareholders are
authorized to
directly take note of the business transacted at a general meeting of shareholders via an
electronic
means of communication <I>(e.g. </I>webcast).</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>With respect to determining who is authorized to attend our general meeting of
shareholders, our
Managing Board or Supervisory Board may determine a registration date for such a meeting; the
registration date may not be set earlier than the thirtieth day prior to the meeting.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>If our Managing Board or Supervisory Board determines a registration date as referred to in the
previous bullet point, it may also determine that persons entitled to attend and vote at our general
meetings of shareholders may vote via an electronic means of communication <I>(e.g. </I>via e-mail or the
internet) within a certain period prior to our general meeting of shareholders; this period shall be
determined by our Managing Board or Supervisory Board but cannot commence earlier than the
registration date as referred to in the previous bullet point; votes cast in this manner are equal to votes
cast at the meeting.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Our Managing Board may, subject to the approval of our Supervisory Board, determine that each
person entitled to attend and vote at our general meetings of shareholders is authorized to
vote via an
electronic means of communication <I>(e.g. </I>via e-mail or the internet); to be able to vote in
this manner,
the person entitled to attend and vote at our general meetings of shareholders must be
identified via the
electronic means of communication and be able to directly take note of the business
transacted at our
general meeting of shareholders; our Managing Board may, subject to the approval of our
Supervisory
Board, attach conditions the use of the electronic means of communication to certain rules;
if so, these
rules shall be announced in the notice convening our general meeting of shareholders and
posted on our
website.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Our Managing Board must prepare our statutory annual accounts within four months after
the end of
our financial year; furthermore, our Managing Board must prepare the annual report together
with our
Supervisory Board within the same period.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Annually, no later than four months after the close of our financial year, our Managing
Board shall
make generally available: (i)&nbsp;our statutory annual accounts, (ii)&nbsp;our annual report, (iii)
the statement of
our external accountant, as well as (iv)&nbsp;all other annual financial documents which we must
make
generally available together with our statutory annual accounts, pursuant to a statutory
obligation.</TD>
</TR>




</TABLE>
</DIV>
<P align="center" style="font-size: 10pt"><!-- Folio -->&nbsp;<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">


<DIV style="margin-top: 6pt"><TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">


<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>The provisions regarding the distributions on our preference shares, if and when
issued and
outstanding, are updated to reflect current market practice. Our preference shares shall
become <I>inter alia </I>cumulative of nature.</TD>
</TR>

</TABLE>
</DIV>
<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Attached in Annex A is an unofficial English translation of our Articles of Association
incorporating the proposed amendments as described above.
</DIV>



<P align="center" style="font-size: 10pt"><!-- Folio -->&nbsp;<!-- /Folio -->
</DIV>


<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>
<DIV style="font-family: 'Times New Roman',Times,serif">


<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><U><B>ANNEX A</B></U>
</DIV>


<DIV align="Center" style="font-size: 10pt; margin-top: 6pt"><U><B>UNOFFICIAL TRANSLATION</B></U><BR>
<U><B>DRAFT DATED FEBRUARY 15, 2007</B></U><BR>
<U><B>ARTICLES OF ASSOCIATION</B></U><BR>
of:<BR>
<U>STMicroelectronics N.V.</U><BR>
<U> with corporate seat in Amsterdam</U>

</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><U><B>Name, seat and duration. </B></U><BR>
<U><B>Article&nbsp;1.</B></U>

</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">1.1.</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>The name of the company is: STMicroelectronics N.V.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">1.2.</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>The company is established in Amsterdam.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">1.3.</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>The company will continue for an indefinite period.</TD>
</TR>

</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><U><B>Objects. </B></U><BR>
<U><B>Article&nbsp;2.</B></U>

</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The objects of the company shall be to participate or take in any manner any interests in other
business enterprises, to manage such enterprises, to carry on the business in semi-conductors and
electronic devices, to take and grant licenses and other industrial property interests, assume
commitments in the name of any enterprises with which it may be associated within a group of
companies, to take financial interests in such enterprises and to take any other action, such as
but not limited to the granting of securities or the undertaking of obligations on behalf of third
parties, which in the broadest sense of the term, may be related or contribute to the aforesaid
objects.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><U><B>Share capital.</B></U><BR>
<U><B>Article&nbsp;3.</B></U>

</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">3.1.</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>The authorized capital of the company amounts to one billion eight hundred nine million
six hundred thousand euro (EUR 1,809,600,000), consisting of one billion two hundred
million (1,200,000,000) ordinary shares and five hundred forty million (540,000,000)
cumulative preference shares, hereinafter referred to as: preference shares, of one euro
and four eurocents (EUR 1.04) each.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">3.2.</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Where in these articles of association reference is made to shares and shareholders this
shall include the shares of each class as well as the holders of shares of each class
respectively, unless explicitly provided otherwise.</TD>
</TR>

</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><U><B>Issue of shares. </B></U><BR>
<U><B>Article&nbsp;4.</B></U>

</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">4.1.</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>The supervisory board shall have the power to issue shares and to determine the terms and
conditions of such issue if and in so far as the supervisory board has been designated by the
general meeting of shareholders as the authorized body for this purpose. A designation as
referred to above shall only take place for a specific period of no more than five years and
may not be extended by more than five years on each occasion.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">4.2.</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>If a designation as referred to in the first paragraph is not in force, the general meeting
of shareholders shall have the power, upon the proposal of and on the terms and conditions set
by the supervisory board to resolve to issue shares.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">4.3.</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>In the event of an issue of ordinary shares, shareholders shall have a pre-emptive right in
proportion to the number of ordinary shares which they own, notwithstanding the provisions of
the law. In respect of the issue of shares there shall be no pre-emptive right to shares
issued against a contribution other than in cash or issued to employees of the company or of a
group company.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>In the event of an issue of preference shares none of the shareholders shall have a
pre-emptive
right.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>The supervisory board shall have the power to limit or exclude the pre-emptive right
accruing to
shareholders, if and in so far as the supervisory board has also been designated by the
general
meeting of shareholders for this purpose as the authorized body for the period of such
designation.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>The provisions in the second sentence of the first paragraph shall equally apply.</TD>
</TR>

</TABLE>
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">



</TABLE>
</DIV>
<P align="center" style="font-size: 10pt"><!-- Folio -->&nbsp;<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">


<DIV style="margin-top: 6pt"><TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">



</TABLE>
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">4.4.</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>If a designation as referred to in the third paragraph is not in force, the general
meeting of shareholders shall have the power, upon the proposal of the supervisory board,
to limit or exclude the pre-emptive right accruing to shareholders.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">4.5.</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>A resolution of the general meeting of shareholders to limit or exclude pre-emptive rights or
to designate the supervisory board as authorized to resolve upon limiting or excluding of
pre-emptive rights requires a majority of at least two-thirds of the votes cast in a meeting
if in such meeting less than one-half of the issued share capital is present or represented.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">4.6.</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Without prejudice to what has been provided in section 80, paragraph 2, Book 2, Dutch Civil
Code shares shall at no time be issued below par.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">4.7.</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Ordinary shares shall be issued only against payment in full; preference shares may be issued
against partial payment, provided that the proportion of the nominal amount that must be paid
on each preference share, irrespective of when it was issued, shall be the same and that at
least one quarter of the nominal amount is paid up in full when the share is subscribed for.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">4.8.</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Payment must be made in cash to the extent that no other contribution has been agreed upon.
If the company so consents, payment in cash can be made in a foreign currency.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>In the event of payment in a foreign currency the obligation to pay is for the amount
which can be freely exchanged into Dutch currency. The decisive factor is the rate of
exchange on the day of payment, or as the case may be after application of the next
sentence, on the day mentioned therein. The company can require payment at the rate of
exchange on a certain day within two months prior to the last day when payment shall have
to be made provided that the shares or depositary receipts for shares after having been
issued &#151; shall immediately be incorporated in the price list of an exchange abroad.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">4.9.</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>This article shall equally apply to the granting of rights to subscribe for shares, but shall
not apply to the issue of shares to someone who exercises a previously acquired right to
subscribe for shares.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">4.10.</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>The managing board shall determine, subject to the approval by the supervisory board, when
and in what amount further payment is to be made in respect of partially paid preference
shares. The managing board shall notify the shareholders concerned thereof in writing at least
thirty days before the date on which the payment must finally be made.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">4.11.</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>All notifications to shareholders will be made in accordance with the provisions relating to
giving of notice to convene a general meeting of shareholders as set out in article 27.2.</TD>
</TR>

</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><U><B>Repurchase and cancellation of shares. </B></U><BR>
<U><B>Article&nbsp;5.</B></U>

</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">5.1.</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>The company may acquire, for valuable consideration, shares in its own share capital if and
in so far as:</TD>
</TR>

</TABLE>
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">a.</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>its equity less the purchase price of these shares is not less than the
aggregate amount of the paid up and called up capital and the reserves which must be
maintained pursuant to the law;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">b.</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>the par value of the shares in its capital which the company acquires,
holds or holds in pledge, or which are held by a subsidiary company, amounts to no
more than one-tenth of the issued share capital; and</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">c.</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>the general meeting of shareholders has authorized the managing board to
acquire such shares, which authorization may be given for no more than eighteen
months on each occasion,
</TD>
</TR>



<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD nowrap align="left" colspan="4">
notwithstanding the further statutory provisions.</TD>
</TR>

</TABLE>

</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">5.2.</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>The company may, without being authorized thereto by the general meeting of shareholders and
notwithstanding to what is provided in paragraph 1 under a and b, acquire shares in its own
share capital in order to transfer those shares to the employees of the company or a group
company under a scheme applicable to such employees.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">5.3.</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Shares thus acquired may again be disposed of. The company shall not acquire shares in its
own share capital as referred to in paragraph 1 &#151; if an authorization as referred to in such
paragraph is in force &#151; or as referred to in paragraph 2 without the prior approval of the
supervisory board. The company shall also not dispose of shares in
its own share capital &#151;
with the exception of shares in the company&#146;s own share capital acquired pursuant to paragraph
2 &#151; without the prior approval of the supervisory board.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>If depositary receipts for shares in the company have been issued, such depositary
receipts shall for the application of the provisions of this paragraph and the
preceding paragraph be treated as shares.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">5.4.</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>In the general meeting of shareholders no votes may be cast in respect of (a)&nbsp;share(s) held
by the company or a subsidiary company; no votes may be cast in respect of a share the
depositary</TD>
</TR>


</TABLE>
</DIV>
<P align="center" style="font-size: 10pt"><!-- Folio -->&nbsp;<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">


<DIV style="margin-top: 6pt"><TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">



</TABLE>
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>receipt for which is held by the company or a subsidiary company. However, the
holders of a right of usufruct and the holders of a right of pledge on shares held by the
company and its subsidiary companies, are nonetheless not excluded from the right to vote
such shares, if the right of usufruct or the right of pledge was granted prior to the time
such share was held by the company or a subsidiary company. Neither the company nor a
subsidiary company may cast votes in respect of
a share on which it holds a right of usufruct or a right of pledge.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Shares in respect of which voting rights may not be exercised by law or by the articles of
association shall not be taken into account, when determining to what extent the shareholders cast
votes, to what extent they are present or represented or to what extent the share capital is
provided or represented.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">5.5.</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Upon the proposal of the supervisory board the general meeting of
shareholders shall, with due
regard of the provisions of section 99, Book 2, Dutch Civil Code, have the power to decide
to reduce the issued share capital by canceling shares or by reducing the par value of
shares by an amendment to the articles of association. Cancellation of shares with
repayment or partial repayment or a release from the obligation to pay up may also take
place solely in respect of preference shares. In case of cancellation of preference shares
with repayment, a payment on the relevant shares shall be made in the amount of:</TD>
</TR>

</TABLE>
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">a.</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>the amount paid up on the relevant shares; increased with</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">b.</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>an amount equal to the dividend not yet declared calculated over the period
up to and including the day of repayment, such in the manner as determined in article
37, paragraph 2, sub e.</TD>
</TR>

</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><U><B>Shares, share certificates, share register. </B></U><BR>
<U><B>Article&nbsp;6.</B></U>

</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">6.1.</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Shares shall be in registered form.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">6.2.</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Ordinary shares shall be available:</TD>
</TR>

</TABLE>
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">-</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>in the form of an entry in the share register without issue of a share certificate; shares
of this type are referred to in these articles of association as type I shares; </TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"> -</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>and - should the supervisory board so decide &#151; in the form of an entry in the share register
with issue of a certificate, which certificate shall consist of a main part without
dividend coupon; shares of this type and share certificates of this type are referred to
in these articles of association as type II shares. </TD>
</TR>


<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD align="left" colspan="3"> Preference shares shall only be made
available in the form of type I shares.</TD>
</TR>

</TABLE>
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">6.3.</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>The supervisory board can decide that the registration of type I shares may only take place
for one or more quantities of shares &#151; which quantities are to be specified by the supervisory
board &#151; at the same time.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">6.4.</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Type II share certificates shall be available in such denominations as the supervisory board
shall determine.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">6.5.</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>All share certificates shall be signed by or on behalf of a managing director; the signature
may be effected by printed facsimile. Furthermore type II share certificates shall, and all
other share certificates may, be countersigned by one or more persons designated by the
managing board for that purpose.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">6.6.</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>All share certificates shall be identified by numbers and/or letters.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">6.7.</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>The supervisory board can determine that for the purpose of effecting trading or transfer of
shares at foreign exchanges share certificates shall be issued in such form as the supervisory
board may determine, complying with the requirements set by said foreign exchange(s) and not
provided with any dividend sheet.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">6.8.</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>The expression &#147;share certificate&#148; as used in these articles of association shall
include a share certificate in respect of more than one share.</TD>
</TR>

</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><U><B>Article&nbsp;7.</B></U>
</DIV>


<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">7.1.</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Upon written request from a shareholder, missing or damaged share certificates, or parts
thereof, may be replaced by new certificates or by duplicates bearing the same numbers and/or
letters, provided the applicant proves his title and, in so far as applicable, his loss to the
satisfaction of the supervisory board, and further subject to such conditions as the managing
board may deem fit.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">7.2.</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>In appropriate cases, at its own discretion, the managing board may stipulate that the
identifying numbers and/or letters of missing documents be published three times, at intervals
of at least one month, in at least three newspapers to be indicated by the managing board
announcing the application made; in such a case new certificates or duplicates may not be
issued until six months have expired since the last publication, always provided that the
original documents have not been produced to the managing board before that time.</TD>
</TR>

</TABLE>
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">


</TABLE>
</DIV>
<P align="center" style="font-size: 10pt"><!-- Folio -->&nbsp;<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">


<DIV style="margin-top: 6pt"><TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">



</TABLE>
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">7.3.</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>The issue of new certificates or duplicates shall render the original document invalid.</TD>
</TR>

</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><U><B>Article&nbsp;8.</B></U>
</DIV>


<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">8.1.</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Notwithstanding the statutory provisions in respect of registered shares a register shall
be kept by or on behalf of the company, which register shall be regularly updated and, at the
discretion of the managing board, may, in whole or in part, be kept in more than one copy and
at more than one place.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>A part of the register may be kept abroad in order to meet requirements set out by
foreign statutory provisions or provisions of the foreign exchange.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">8.2.</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Each shareholder&#146;s name, his address and such further data as the managing board
deems desirable, whether at the request of a shareholder or not, shall be entered in
the register.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">8.3.</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>The form and the contents of the share register shall be determined by the managing board
with due regard to the provisions of paragraphs 1 and 2 of this article.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>The managing board may determine that the records shall vary as to their form and
contents according to whether they relate to type I shares or to type II shares.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">8.4.</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Upon request a shareholder shall be given free of charge a declaration of what is stated in
the register with regard to the shares registered in his name, which declaration may be signed
by one of the specially authorized persons to be appointed by the managing board for this
purpose.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">8.5.</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>The provisions of the last four paragraphs shall equally apply to those who hold a right of
usufruct or of pledge on one or more registered shares, with the proviso that the other data
required by law must be entered in the register.</TD>
</TR>

</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><U><B>Article&nbsp;9.</B></U>
</DIV>


<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">9.1.</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Subject to the provisions of article 6, the holder of an entry in the share register for
one or more type I shares may, upon his request and at his option, have issued to him one or
more type II share certificates for the same nominal amount.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">9.2.</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Subject to the provisions of article 6, the holder of a type II share certificate registered
in his name may, after lodging the share certificate with the company, upon his request and at
his option, either have one or more type I shares entered in the share register for the same
nominal amount.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">9.3.</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>A request as mentioned in this article shall, if the supervisory board so requires, be made
on a form obtainable from the company free of charge, which shall be signed by the applicant.</TD>
</TR>

</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><U><B>Transfer of shares. </B></U><BR>
<U><B>Article&nbsp;10.</B></U>

</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">10.1.</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>The transfer of a registered share shall be effected either by service upon the
company of the instrument of transfer or by written acknowledgement of the transfer by
the company, subject however to the provisions of the following paragraphs of this
article.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">10.2.</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Where a transfer of a type II share is effected by service of an instrument of transfer on
the company, the company shall, at the discretion of the managing board, either endorse the
transfer on the share certificate or cancel the share certificate and issue to the transferee
one or more new share certificates registered in his name to the same nominal amount.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">10.3.</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>The company&#146;s written acknowledgement of a transfer of a type II share shall, at the
discretion of the managing board, be effected either by endorsement of the transfer on the
share certificates or by the issue to the transferee of one or more new share certificates
registered in his name to the same nominal amount.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">10.4.</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>The provisions of the foregoing paragraphs of this article shall equally apply to the
allotment of registered shares in the event of a judicial partition of any community of
property or interests, the transfer of a registered share as a consequence of a judgment
execution and the creation of limited rights in rem on a registered share.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>If a share certificate has been issued, the acknowledgement can only be effected either by
putting an endorsement to that effect on this document, signed by or on behalf of the
company, or by replacing this document by a new certificate in the name of the acquirer.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">10.5.</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>The submission of requests and the lodging of documents referred to in articles 7 to 10
inclusive shall be made at a place to be indicated by the managing board and in any case the
places where the company is admitted to a stock exchange.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Different places may be indicated for the different classes and types of shares
and share certificates.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">10.6.</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>The company is authorized to charge amounts to be determined by the managing board not
exceeding cost price to those persons who request any services to be carried out by
virtue of articles 7 up to and including 10.</TD>
</TR>

</TABLE>
</DIV>

<P align="center" style="font-size: 10pt"><!-- Folio -->&nbsp;<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><U><B>Usufructuaries, pledgees, holders of depositary receipts. </B></U><BR>
<U><B>Article&nbsp;11.</B></U>

</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">11.1.</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>The usufructuary, who in conformity with the provisions of section 88, Book 2, Dutch Civil
Code has no right to vote, and the pledgee who in conformity with the provisions of section
89, Book 2, Dutch Civil Code has no right to vote, shall not be entitled to the rights which
by law have been conferred on holders of depositary receipts for shares issued with the
cooperation of the company.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">11.2.</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Where in these articles of association persons are mentioned, entitled to attend meetings of
shareholders, this shall include holders of depositary receipts for shares issued with the
cooperation of the company and persons who in pursuance of paragraph 4 in section 88 or
section 89, Book 2, Dutch Civil Code have the rights that by law have been conferred on
holders of depositary receipts for shares issued with the cooperation of the company.</TD>
</TR>

</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><U><B>Managing board. </B></U><BR>
<U><B>Article&nbsp;12.</B></U>

</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">12.1.</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>The company shall be managed by a managing board consisting of one or more managing
directors under the supervision of the supervisory board. The number of members of the
managing board shall be resolved upon by the general meeting of shareholders upon the proposal
of the supervisory board. The members of the managing board shall be appointed for three
years, a year being understood as meaning the period between two general meetings of
shareholders in which the annual accounts of the previous financial year are adopted.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">12.2.</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Managing directors shall be appointed by the general meeting of shareholders upon the
proposal of the supervisory board for each vacancy to be filled.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">12.3.</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Without prejudice to the provisions of article 28, paragraph 2, a proposal to appoint one or
more managing directors to the managing board may be placed on the agenda of a general meeting
of shareholders by the supervisory board.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">12.4.</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>The company has a policy regarding the compensation of the managing board. The policy will
be adopted by the general meeting of shareholders upon the proposal of the supervisory board.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">12.5.</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>The supervisory board shall determine the compensation of the individual managing directors,
within the scope of the compensation policy referred to in the previous paragraph. The
supervisory board will submit for approval by the general meeting of shareholders a proposal
regarding the compensation in the form of shares or rights to acquire shares. This proposal
sets forth at least how many shares or rights to acquire shares may be awarded to the managing
board and which criteria apply to an award or a modification.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">12.6.</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>The general meeting of shareholders shall decide in accordance with the provisions of
article 32, paragraph 1.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Votes in respect of persons who have not been so nominated shall be invalid.</TD>
</TR>

</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><U><B>Article&nbsp;13.</B></U>

</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">13.1.</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>The general meeting of shareholders shall be entitled to suspend or dismiss one or more
managing directors, provided that at least half of the issued share capital is represented at
the meeting. No such quorum shall be required where the suspension or dismissal is proposed by
the supervisory board.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">13.2.</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Where a quorum under paragraph 1 is required but is not present, a further meeting shall be
convened, to be held within four weeks after the first meeting, which shall be entitled,
irrespective of the share capital represented, to pass a resolution in regard to the
suspension or dismissal.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">13.3.</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>The managing directors can be jointly or individually suspended by the supervisory board.
After suspension a general meeting of shareholders shall be convened within three months, at
which meeting it shall be decided whether the suspension shall be cancelled or maintained.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>The person involved shall be given the opportunity to account for his actions at that
meeting.</TD>
</TR>

</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><U><B>Representation.</B></u><BR>
<u><B>Article&nbsp;14.</B></U>

</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">14.1.</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>The entire managing board as well as each managing director may represent the company.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">14.2.</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>The managing board may grant powers of attorney to persons, whether or not in the service of
the company, to represent the company and shall thereby determine the scope of such powers of
attorney and the titles of such persons.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">14.3.</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>The managing board shall have power to perform legal acts as specified in section 94,
paragraph 1, Book 2, Dutch Civil Code in so far as such power is not expressly excluded or
limited by any provision of these articles of association or by any resolution of the
supervisory board.</TD>
</TR>

</TABLE>
</DIV>


<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">



</TABLE>
</DIV>
<P align="center" style="font-size: 10pt"><!-- Folio -->&nbsp;<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">


<DIV style="margin-top: 6pt"><TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">



</TABLE>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><U><B>Article&nbsp;15.</B></U>
</DIV>


<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">15.1.</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>The supervisory board shall appoint one of the managing directors as chairman of the
managing board. Appointment of the chairman shall be resolved with the majority mentioned
in article 22, paragraph 1.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">15.2.</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Resolutions of the managing board shall be passed by simple majority of votes. In the event
of a tie of votes the chairman of the managing board shall have a casting vote.</TD>
</TR>

</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><U><B>Article&nbsp;16.</B></U>
</DIV>


<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">16.1.</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Without prejudice to provisions made elsewhere in these articles of association, the
managing board shall require the prior express approval:</TD>
</TR>

</TABLE>
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">(i)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>from the supervisory board for decisions relating to:</TD>
</TR>

</TABLE>
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="8%" style="background: transparent">&nbsp;</TD>
    <TD width="2%" nowrap align="left">1.</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>all proposals to be submitted to a vote at the general meeting of shareholders;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="8%" style="background: transparent">&nbsp;</TD>
    <TD width="2%" nowrap align="left">2.</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>the formation of all companies, acquisition or sale of
any participation, and conclusion of any cooperation and participation
agreement;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="8%" style="background: transparent">&nbsp;</TD>
    <TD width="2%" nowrap align="left">3.</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>all pluri-annual plans of the company and the budget for the first coming year,
covering the following
matters:</TD>
</TR>

</TABLE>
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="11%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">-</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>investment
policy;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="11%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">-</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>policy regarding research and development, as well as commercial policy
and objectives;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="11%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">-</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>general financial policy;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="11%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">-</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>policy regarding personnel;</TD>
</TR>

</TABLE>
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="8%" style="background: transparent">&nbsp;</TD>
    <TD width="2%" nowrap align="left">4.</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>all acts, decisions or operations covered by the above
list and constituting a significant change with respect to decisions
already adopted by the supervisory board or not provided for in the above
list and as specifically laid down by the supervisory board by resolution
passed by it to that effect.</TD>
</TR>

</TABLE>
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">(ii)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>from the general meeting of shareholders with respect to resolutions: regarding
a significant change in the identity or nature of the company or the enterprise,
including in any event (a)&nbsp;transferring the enterprise or practically the entire
enterprise to a third party, (b)&nbsp;entering into or canceling any long-term
cooperation between the company or a subsidiary <I>(&#147;dochtermaatschappij&#148;) </I>and any
other legal person or company or as a fully liable general partner of a limited
partnership or a general partnership, provided that such cooperation or the
cancellation thereof is of essential importance to the company, and (c)&nbsp;the company
or a subsidiary <I>(dochtermaatschappij) </I>acquiring or disposing of a participating
interest in the capital of a company with a value of at least one-third of the
company&#146;s total assets according to the consolidated balance sheet and notes thereto
in the most recently adopted annual accounts of the company;<BR>
<BR style="font-size:6pt">
the absence of the approval provided for above may not be raised by or against third
parties.</TD>
</TR>

</TABLE>
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">16.2.</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Without prejudice to provisions made elsewhere in these articles of association, the
managing board shall require the approval of the general meeting of shareholders according to
the law and the provisions of these articles of association as well as such resolutions as are
clearly defined by a resolution of the general meeting of shareholders to that effect.</TD>
</TR>

</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><U><B>Article&nbsp;17.</B></U>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">In the event of the absence or inability to act of one of more managing directors the remaining
managing directors or managing director shall temporarily be responsible for the entire management.
In the event of the absence or inability to act of all managing directors, one or more persons
appointed by the supervisory board for this purpose at any time shall be temporarily responsible
for the management.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><U><B>Supervisory board.</B></U><BR>
<U> <B>Article&nbsp;18.</B></U>

</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">18.1.</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>The supervisory board shall be responsible for supervising the policy pursued by the
managing board and the general course of affairs of the company and the business enterprise
which it operates.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>The supervisory board shall assist the managing board with advice relating to the general
policy aspects connected with the activities of the company. In fulfilling their duties
the supervisory directors shall serve the interests of the company and the business
enterprise which it operates.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">18.2.</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>The managing board shall provide the supervisory board in good time with all relevant
information as well as the information the supervisory board requests, in connection with
the exercise of its duties.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">18.3.</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>At least once per year the managing board shall inform the supervisory board in writing of
the main features of the strategic policy, the general and financial risks and the management
and control systems of the company.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>The managing board shall then submit to the supervisory board for approval:</TD>
</TR>

</TABLE>
</DIV>


<P align="center" style="font-size: 10pt"><!-- Folio -->&nbsp;<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">




<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">a)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>the operational and financial objectives of the company;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">b)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>the strategy designed to achieve the objectives; and</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">c)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>the parameters to be applied in relation to the strategy, <I>inter alia, </I>regarding financial
ratios.</TD>
</TR>

</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><U><B>Article&nbsp;19.</B></U>
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">19.1.</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>The supervisory board shall consist of at least six members, to be appointed by the general
meeting of shareholders upon the proposal of the supervisory board for each vacancy to be
filled. The number of supervisory directors shall without prejudice to the preceding sentence
be resolved upon by the general meeting of shareholders upon the proposal of the supervisory
board.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">19.2.</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>The general meeting of shareholders shall decide in accordance with the provisions of
article 32, paragraph 1.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">19.3.</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Without prejudice to the provisions of article 28, paragraph 2, a proposal to appoint one or
more supervisory directors to the supervisory board may be placed on the agenda of the general
meeting of shareholders by the supervisory board.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">19.4.</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>The supervisory board shall appoint from among their midst a chairman and a vice-chairman of
the supervisory board with the majority mentioned in article 22, paragraph 1.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">19.5.</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Upon the appointment of the supervisory directors the particulars as referred to in section
142, paragraph 3, Book 2, Dutch Civil Code shall be made available for prior inspection.</TD>
</TR>

</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><U><B>Article&nbsp;20.</B></U>
</DIV>


<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">20.1.</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>The supervisory board may appoint one or more of its members as delegate supervisory
director in charge of supervising the managing board on a regular basis. They shall report
their findings to the supervisory board. The offices of chairman of the supervisory board and
delegate supervisory director are compatible.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">20.2.</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>With due observance of these articles of association, the supervisory board may adopt
rules regulating the division of its duties among its various supervisory directors.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>The supervisory board may also delegate certain of its powers to committees which
exclusively consist of members of the supervisory board, such as an audit committee, a
compensation committee or any other committee as the supervisory board may resolve to
install. In case the authority to resolve upon the issuance of new shares is delegated to
the supervisory board, the supervisory board may install a pricing committee which shall
exclusively consist of members of the supervisory board and which shall be authorized
within the range set in the delegation mentioned above to determine on behalf of the
supervisory board the price and conditions for newly issued shares.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">20.3.</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>The supervisory board may decide that one or more of its members shall have access to all
premises of the company and shall be authorized to examine all books, correspondence and other
records and to be fully informed of all actions which have taken place, or may decide that one
or more of its supervisory directors shall be authorized to exercise a portion of such powers.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">20.4.</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>At the expense of the company, the supervisory board may obtain such advice from experts as
the supervisory board deems desirable for the proper fulfillment of its duties.</TD>
</TR>

</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><U><B>Article&nbsp;21.</B></U>
</DIV>


<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">21.1.</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>A supervisory director shall retire no later than at the first ordinary general
meeting of shareholders held after a period of three years following his appointment.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>A retired supervisory director may immediately be re-elected.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">21.2.</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>The supervisory board may establish a rotation scheme.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">21.3.</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>The supervisory directors may be suspended or dismissed by the general meeting of
shareholders. The supervisory board may make a proposal to the general meeting of shareholders
for the suspension or dismissal of one or more of its supervisory directors.</TD>
</TR>

</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><U><B>Article&nbsp;22.</B></U>
</DIV>


<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">22.1.</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>The supervisory board may pass resolutions by at least three quarters of the votes of the
members in office. Each supervisory director has the right to cast one vote. In case of
absence a supervisory director may issue a proxy, however, only to another supervisory
director. The proxy should explicitly indicate in which way the vote must be cast. The
supervisory board may pass resolutions in writing without holding a meeting provided that the
proposals for such resolutions have been communicated in writing to all supervisory directors
and no supervisory director is opposed to this method of passing a resolution.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">22.2.</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>A certificate signed by two supervisory directors to the effect that the supervisory board
has passed a particular resolution shall constitute evidence of such a resolution in dealings
with third parties.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">22.3.</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>The managing directors shall attend meetings of the supervisory board at the latter&#146;s
request.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">22.4.</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>The supervisory board shall meet whenever two or more of its members or the managing board
so requests. Meetings of the supervisory board shall be convened by the chairman of the
supervisory</TD>
</TR>

</TABLE>
</DIV>

<P align="center" style="font-size: 10pt"><!-- Folio -->&nbsp;<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>board, either on request of two or more supervisory directors or on request of the
managing board, or by the supervisory directors requesting the meeting to be held. If the
chairman fails to convene a meeting to be held within four weeks of the receipt of the
request, the supervisory board members making the request are entitled to convene the
meeting.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">22.5.</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>The supervisory board shall draw up standing orders regulating inter alia the manner
of convening board meetings and the internal procedure at such meetings. These meetings may be held
by telephone as well as by video.</TD>
</TR>

</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><U><B>Article&nbsp;23.</B></U>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The general meeting of shareholders determines the compensation of the members of the supervisory
board or of one or more of its members. The meeting shall have authority to decide whether such
compensation will consist of a fixed amount and/or an amount that is variable in proportion to
profits or any other factor. The supervisory board members shall be reimbursed for their expenses.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><U><B>Indemnification.</B></U>

</DIV>

<DIV align="left" style="font-size: 10pt"><U><B>Article&nbsp;24.</B></U></DIV>



<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">24.1.</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>The company shall indemnify any person who was or is a party or is threatened to be made a
party to any threatened, pending or completed action, suit or proceeding, whether civil,
criminal, administrative or investigative (other than an action by or in the right of the
company) by reason of the fact that he is or was a supervisory director, managing director,
officer or agent of the company, or was serving at the request of the company as a supervisory
director, managing director, officer or agent of another company, a partnership, joint
venture, trust or other enterprise, against all expenses (including attorneys&#146; fees)
judgments, fines and amounts paid in settlement actually and reasonably incurred by him in
connection with such action, suit or proceeding if he acted in good faith and in a manner he
reasonably believed to be in or not opposed to the best interests of the company, and, with
respect to any criminal action or proceeding, had no reasonable cause to believe his conduct
was unlawful or out of his mandate. The termination of any action, suit or proceeding by a
judgment, order, settlement, conviction, or upon a plea of nolo contendere or its equivalent,
shall not, of itself, create a presumption that the person did not act in good faith and not
in a manner which he reasonably believed to be in or not opposed to the best interests of the
company, and, with respect to any criminal action or proceeding, had reasonable cause to
believe that his conduct was unlawful.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">24.2.</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>The company shall indemnify any person who was or is a party or is threatened to be made a
party to any threatened, pending or completed action or proceeding by or in the right of the
company to procure a judgment in its favor, by reason of the fact that he is or was a
supervisory director, managing director, officer or agent of the company, or is or was serving
at the request of the company as a supervisory director, managing director, officer or agent
of another company, a partnership, joint venture, trust or other enterprise, against expenses
(including attorneys&#146; fees) actually and reasonably incurred by him in connection with the
defense or settlement of such action or proceeding if he acted in good faith and in a manner
he reasonably believed to be in or not opposed to the best interests of the company and except
that no indemnification shall be made in respect of any claim, issue or matter as to which
such person shall have been adjudged to be liable for gross negligence or willful misconduct
in the performance of his duty to the company, unless and only to the extent that the court in
which such action or proceeding was brought or any other court having appropriate jurisdiction
shall determine upon application that, despite the adjudication of liability but in view of
all the circumstances of the case, such person is fairly and reasonably entitled to
indemnification against such expenses which the court in which such action or proceeding was
brought or such other court having appropriate jurisdiction shall deem proper.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">24.3.</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>To the extent that a supervisory director, managing director, officer or agent of the
company has been successful on the merits or otherwise in defense of any action, suit of
proceeding, referred to in paragraphs 1 and 2, or in defense of any claim, issue or matter
therein, he shall be indemnified against expenses (including attorney&#146;s fees) actually and
reasonable incurred by him in connection therewith.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">24.4.</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Any indemnification by the company referred to in paragraphs 1 and 2 shall (unless ordered
by a court) only be made upon a determination that indemnification of the supervisory
director, managing director, officer or agent is proper in the circumstances because he had
met the applicable standard of conduct set forth in paragraphs 1 and 2. Such determination
shall be made:</TD>
</TR>

</TABLE>
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">a.</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>either by the supervisory board by a majority vote in a meeting in
which a quorum as
mentioned in article 22, paragraph 1, and consisting of supervisory directors who
where not parties to such action, suit or proceeding, is present;</TD>
</TR>

</TABLE>
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">



</TABLE>
</DIV>
<P align="center" style="font-size: 10pt"><!-- Folio -->&nbsp;<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">


<DIV style="margin-top: 6pt"><TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">



</TABLE>
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">b.</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>or, if such a quorum is not obtainable or although such a quorum is obtained if
the majority passes a resolution to that effect, by independent legal counsel in a
written opinion;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">c.</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>or by the general meeting of shareholders.</TD>
</TR>

</TABLE>
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">24.5.</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Expenses incurred in defending a civil or criminal action, suit or proceeding may be paid by
the company in advance of the final disposition of such action, suit or proceeding upon a
resolution of the supervisory board with respect to the specific case upon receipt of an
undertaking by or on behalf of the supervisory director, managing director, officer or agent
to repay such amount unless it shall ultimately be determined that he is entitled to be
indemnified by the company as authorized in this article.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">24.6.</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>The indemnification provided for by this article shall not be deemed exclusive of any other
right to which a person seeking indemnification may be entitled under any by-laws, agreement,
resolution of the general meeting of shareholders or of the disinterested supervisory
directors or otherwise, both as to actions in his official capacity and as to actions in
another capacity while holding such position, and shall continue as to a person who has ceased
to be a supervisory director, managing director, officer or agent and shall also inure to the
benefit of the heirs, executors and administrators of such a person.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">24.7.</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>The company shall have the power to purchase and maintain insurance on behalf of any person
who is or was a supervisory director, managing director, officer or agent of the company, or
is or was serving at the request of the company as a supervisory director, managing director,
officer, employee or agent of another company, a partnership, joint venture, trust or other
enterprise, against any liability asserted against him and incurred by him in any such
capacity or arising out of his capacity as such, whether or not the company would have the
power to indemnify him against such liability under the provisions of this article.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">24.8.</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Whenever in this article reference is being made to the company, this shall include, in
addition to the resulting or surviving company also any constituent company (including any
constituent company of a constituent company) absorbed in a consolidation or merger which, if
its separate existence had continued, would have had the power to indemnify its supervisory
directors, managing directors, officers and agents, so that any person who is or was a
supervisory director, managing director, officer or agent of such constituent company, or is
or was serving at the request of such constituent company as a supervisory director, managing
director, officer or agent of another company, a partnership, joint venture, trust or other
enterprise, shall stand in the same position under the provisions of this article with respect
to the resulting or surviving company as he would have with respect to such constituent
company if its separate existence had continued.</TD>
</TR>

</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><U><B>General meeting of shareholders.</B></U><BR>
<U><B>Article&nbsp;25.</B></U>

</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">25.1.</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>The ordinary general meeting of shareholders shall be held each year within six months after
the close of the financial year.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">25.2.</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>At this general meeting of shareholders shall be dealt with:</TD>
</TR>

</TABLE>
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">a.</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>the written report of the managing board on the course of business of the
company and the conduct of its affairs during the past financial year, and the report
of the supervisory board on the annual accounts;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">b.</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>adoption of the annual accounts and the declaration of dividend in the
manner laid down in article 37;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">c.</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>granting of discharge to the managing directors for their management during
the past financial year and to the members of the supervisory board for their
supervision on such management;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">d.</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>filling vacancies in the managing board in accordance with the provisions of article
12;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">e.</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>filling vacancies in the supervisory board in accordance with the provisions of article
19;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">f.</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>the proposals placed on the agenda by the managing board or by the
supervisory board, together with proposals made by shareholders in accordance with
the provisions of these articles of association.</TD>
</TR>

</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><U><B>Article&nbsp;26.</B></U>
</DIV>


<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">26.1.</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Extraordinary general meetings of shareholders shall be held as often as deemed necessary by
the supervisory board and shall be held if one or more shareholders and other persons entitled
to attend the meetings of shareholders jointly representing at least one-tenth of the issued
share capital make a written request to that effect to the managing board or supervisory
board, specifying in detail the business to be dealt with.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">26.2.</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>If the managing board or supervisory board fail to comply with a request under paragraph 1
above in such manner that the general meeting of shareholders can be held within six weeks
after the</TD>
</TR>

</TABLE>
</DIV>

<P align="center" style="font-size: 10pt"><!-- Folio -->&nbsp;<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>request, the persons making the request may be authorized by the President of the Court
within whose jurisdiction the company is established to convene the meeting themselves.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">26.3.</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Written requests as referred to in paragraph 1 of this article, section 110,
paragraph 1, Book 2, Dutch Civil Code and article 28 paragraphs 2 and 3 may not be submitted
electronically.</TD>
</TR>

</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><U><B>Article&nbsp;27.</B></U>
</DIV>


<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">27.1.</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>General meetings of shareholders shall be held in Amsterdam,
IIaarlemmermeer (Schiphol
Airport), Rotterdam or The Hague; the notice convening the meeting shall inform the
shareholders and other persons entitled to attend the meetings of shareholders accordingly.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">27.2.</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>The notice convening a general meeting of shareholders shall be published by advertisement
which shall at least be published in a national daily newspaper and abroad in at least one
daily newspaper appearing in each of these countries other than the United States, where, on
the application of the company, the shares have been admitted for official quotation. In
addition, shareholders and other persons entitled to attend the meetings of shareholders shall
be notified by letter that the meeting is being convened.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">27.3.</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>The notice convening the meeting shall be issued by the managing board, by the
supervisory board or by those who according to the law or these articles of association
are entitled thereto.</TD>
</TR>

</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><U><B>Article&nbsp;28.</B></U>
</DIV>


<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">28.1.</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>The notice convening the meeting referred to in the foregoing article shall be issued no
later than eight days prior to the registration date, as referred to in article 30, paragraph
4, though in any event no later than on the twenty-first day prior to the meeting.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">28.2.</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>The agenda shall contain such business as may be placed thereon by the person(s) entitled to
convene the meeting, and furthermore such business as one or more shareholders, representing
at least one-tenth of the issued share capital, have requested the managing board or
supervisory board to place on the agenda at least five days before the date on which the
meeting is convened. Nominations for appointment to the managing board and the supervisory
board cannot be placed on the agenda by the managing board. No resolution shall be passed at
the meeting in respect of matters not on the agenda.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">28.3.</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Notwithstanding paragraph 2, proposals of persons who are entitled to attend the meetings of
shareholders will be included in the agenda, if such proposal is made in writing to the
managing board within a period of sixty days before that meeting by persons who are entitled
to attend the meetings of shareholders, who solely or jointly, represent at least one per cent
(1%) of the company&#146;s issued share capital or a market value of at least fifty million euro
(EUR 50,000,000), unless the company determines that such proposal would conflict with
substantial interests of the company.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">28.4.</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Without prejudice to the relevant provisions of law, dealing with reduction of share capital
and amendments to articles of association, the notice convening the meeting shall either
mention the business on the agenda or state that the agenda is open to inspection by the
shareholders and other persons entitled to attend the meetings of shareholders at the office
of the company.</TD>
</TR>

</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><U><B>Article&nbsp;29.</B></U>
</DIV>


<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">29.1.</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>General meetings of shareholders shall be presided over by the chairman of the supervisory
board or in his absence by the vice-chairman of the supervisory board. In case of absence of
the chairman and the vice-chairman of the supervisory board the meeting shall be presided by
any other person nominated by the supervisory board.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">29.2.</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Minutes shall be kept of the business transacted at a general meeting of shareholders,
which minutes shall be drawn up and signed by the chairman and by a person appointed by
him immediately after the opening of the meeting.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">29.3.</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Where the minutes are drawn up before a civil-law notary, the chairman&#146;s signature, together
with that of the civil-law notary, shall be sufficient.</TD>
</TR>

</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><U><B>Article&nbsp;30.</B></U>
</DIV>


<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">30.1.</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>All shareholders and other persons entitled to attend the meetings of shareholders are
entitled to
attend the general meetings of shareholders, to address the general meeting of
shareholders and, if applicable, to vote. Subject to the approval of the supervisory
board, the managing board may resolve that holders of shares and other persons entitled to
attend the meetings of shareholders are authorized to directly take note of the business
transacted at the meeting via an electronic means of communication.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>The general meeting of shareholders may lay down rules regulating, inter alia, the length
of time for which shareholders may speak. In so far as such rules are not applicable, the
chairman may regulate the time for which shareholders may speak if he considers this to be
desirable with a view to the orderly conduct of the meeting.</TD>
</TR>

</TABLE>
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">



</TABLE>
</DIV>
<P align="center" style="font-size: 10pt"><!-- Folio -->&nbsp;<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">


<DIV style="margin-top: 6pt"><TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">



</TABLE>
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">30.2.</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>In order to exercise the rights mentioned in paragraph 1, the holders of shares and
other persons entitled to attend the meetings of shareholders shall notify the company in
writing of their intention to do so no later than three business days prior to the meeting
and furthermore at the place mentioned in the notice convening the meeting, and also &#151; in
so far as type II shares are concerned &#151; stating the serial number of the share
certificate. They may only exercise said rights at the meeting for the shares from which
they can derive said rights both on the day referred to above and on the day of the
meeting, unless the corporate body convening the general meeting of shareholders has
determined a registration date in accordance with paragraph 4 of this article.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">30.3.</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>The company shall send a card of admission to the meeting to holders of shares and other
persons entitled to attend the meetings of shareholders who have notified the company of their
intention in accordance with the provisions in the foregoing as well as the following
paragraph or, if applicable, the company will provide access to the electronic means of
communication, as referred to in the second sentence of paragraph 1 of this article, for
purposes of directly taking note of the business transacted at the meeting.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">30.4.</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>In deviation of the provisions of paragraph 2 of this article, the corporate body convening
the general meeting of shareholders may determine that holders of shares and other persons
entitled to attend the meetings of shareholders are those persons who have such rights at a
determined date and as such are registered in a register designated by the corporate body
convening the general meeting of shareholders, regardless of who is a shareholder or otherwise
a person entitled to attend the meetings of shareholders at the time of the meeting if a
registration date as referred to in this paragraph had not been determined. The registration
date cannot be set earlier than on the thirtieth day prior to the meeting.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>In the notice convening the meeting the time of registration shall be mentioned as well as
the manner in which holders of shares and other persons entitled to attend the meetings of
shareholders can register themselves and the manner in which they can exercise their
rights.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">30.5.</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>If and to the extent that the relevant corporate body convening the general meeting of
shareholders makes use of the provisions of the preceding paragraph of this article, such
corporate body may also resolve that persons entitled to attend and vote at the meetings of
shareholders may vote via an electronic means of communication determined by such corporate
body within a period to be set by the aforementioned corporate body prior to the general
meeting of shareholders, which period cannot commence earlier than the registration date as
referred to in the preceding paragraph of this article. Votes cast in accordance with the
provisions of the preceding sentence are equal to votes cast at the meeting.</TD>
</TR>

</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><U><B>Article&nbsp;31.</B></U>
</DIV>


<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">31.1.</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Shareholders and other persons entitled to attend the meetings of shareholders may be
represented by proxies with written authority. If the meeting rights are exercised in
accordance with article 30, paragraph 2 by a person authorized in writing in addition to the
prescribed notification and notwithstanding the requirement of filing, the proxy with written
authority must be received by the person designated by the corporate body the general meeting
of shareholders no later than the third business day prior to the meeting. If the meeting
rights are exercised in accordance with article 30, paragraph 4 by a person authorized in
writing, the proxy with written authority must be received by the person designated by the
corporate body convening the general meeting of shareholders no later than the relevant
registration date as referred to in article 30, paragraph 4.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">31.2.</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>All matters regarding the admittance to the general meeting of shareholders, the exercise of
voting rights and the result of votings, as well as any other matters regarding the affairs at
the general meeting of shareholders shall be decided upon by the chairman of that meeting,
with due observance of the provisions of section 13, Book 2, Dutch
Civil Code.</TD>
</TR>

</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><U><B>Article&nbsp;32.</B></U>
</DIV>


<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">32.1.</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Unless otherwise stated in these articles, resolutions shall be adopted by simple majority
of votes of the shareholders having the right to vote in a meeting of shareholders where at
least fifteen per cent of the issued capital is present or represented. Blank and invalid
votes shall not be counted. The chairman shall decide on the method of voting and on the
possibility of voting by acclamation.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">32.2.</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Where the voting concerns appointments, further polls shall, if necessary, be taken until
one of the nominees has obtained a simple majority, such with due observance of the provision
of paragraph 1 of this article. The further poll or polls may, at the chairman&#146;s discretion,
be taken at a subsequent meeting.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">32.3.</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Except as provided in paragraph 2, in case of an equality of the votes cast the relevant
proposal shall be deemed to have been rejected.</TD>
</TR>

</TABLE>
</DIV>



<P align="center" style="font-size: 10pt"><!-- Folio -->&nbsp;<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">



<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><U><B>Article&nbsp;33.</B></U>
</DIV>


<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">33.1.</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>At the general meeting of shareholders each share shall confer the right to cast one vote.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">33.2.</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>The managing board may, subject to the approval of the supervisory board, resolve that each
person entitled to attend and vote at the meetings of shareholders is authorized to vote via
an electronic means of communication, either in person or by a person authorized in writing,
provided that such person can be identified via the electronic means of communication and
furthermore provided that such person can directly take note of the business transacted at the
meeting. The managing board may, subject to the approval of the supervisory board, attach
conditions to the use of the electronic means of communication, which conditions shall be
announced in the notice convening the general meeting of shareholders and shall posted on the
company&#146;s website.</TD>
</TR>

</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><U><B>Meetings of holders of shares of a particular class. </B></U><BR>
<U><B>Article&nbsp;34.</B></U>

</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">34.1.</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>A meeting of holders of preference shares shall be held whenever required by virtue of the
provisions of these articles of association and further whenever the managing board and/or the
supervisory board shall decide, and also whenever one or more holders of preference shares so
request the managing board and/or the supervisory board in writing, stating the items of
business to be transacted.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>If after receipt of a request as referred to in the preceding sentence neither the
managing board nor the supervisory board has called a meeting in such a way that the
meeting is held within four weeks of receipt, the applicant(s) shall be authorized to call
the meeting themselves, with due observance of the relevant provisions of these articles
of association.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">34.2.</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>The managing directors and the supervisory directors shall have the right to attend meetings
of holders of preference shares; in that capacity they shall have an advisory vote. Notice of
a meeting of holders of preference shares shall be given by letters sent to all holders of
preference shares. The notice shall state the items of business to be transacted.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">34.3.</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Articles 27 up to and including 33 shall apply <I>mutatis mutandis </I>to meetings of holders of
preference shares, with the proviso that the notice convening such a meeting shall only take
place by letter or &#151; if the relevant person entitled to attend such meeting so agrees &#151; via a
legible and reproducible message sent by electronic mail to the address notified for this
purpose to the company by the relevant person entitled to attend such meetings.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">34.4.</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>At a meeting of holders of preference shares at which the entire issued capital in shares of
that class is represented, valid resolutions may be adopted, provided that they are passed by
unanimous vote, even if the requirements in respect of the place of the meeting, the manner of
notice, the term of notice and the stating in the notice of the items of business to be
transacted, have not been observed.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">34.5.</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>All resolutions which may be adopted by the holders of preference shares at a meeting may
also be adopted outside a meeting.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Resolutions may be adopted outside a meeting only if all holders of preference shares and
other persons entitled to vote on preference shares have declared themselves in favor of
the proposal by letter or telecopier.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>The resolution shall be recorded in the minute book of the meeting of holders of
preference shares by a managing director.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">34.6.</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>The managing board may, subject to the approval of the supervisory board, resolve that
written resolutions as referred to in the preceding paragraph of this article may be adopted
via an electronic means of communication. The managing board may, subject to the approval of
the supervisory board, attach conditions to the use of the electronic means of communication,
which conditions shall be notified in writing to all holders of preference shares and other
persons entitled to vote on preference shares.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">34.7.</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>A meeting of holders of ordinary shares shall be held whenever required by virtue of the
provisions of these articles of association. Articles 27 up to and including 33 shall apply
<I>mutatis mutandis </I>to meetings of holders of ordinary shares.</TD>
</TR>

</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><U><B>Annual accounts, annual report and distributions.</B></U><BR>
<U><B>Article&nbsp;35.</B></U>

</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">35.1.</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>The financial year shall run from the first day of January up to and including the
thirty-first day of December.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">35.2.</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Annually, within four months after the close of each financial year, the managing board
shall draw up the annual accounts. Within this period the managing board shall also draw up
the annual report together with the supervisory board.</TD>
</TR>

</TABLE>
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">



</TABLE>
</DIV>
<P align="center" style="font-size: 10pt"><!-- Folio -->&nbsp;<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><U><B>Article&nbsp;36.</B></U>
</DIV>


<DIV style="font-family: 'Times New Roman',Times,serif">


<DIV style="margin-top: 6pt"><TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">



</TABLE>
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">36.1.</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>The supervisory board shall cause the annual accounts to be examined by one or
more registered accountant(s) designated for the purposes by the general meeting of
shareholders or other experts designated for the purpose in accordance with section 393,
Book 2, Dutch Civil Code, and shall report to the general meeting of shareholders on the
annual accounts, notwithstanding the provisions of the law. The accountant, as referred to
in this paragraph, is authorized to attend the general meeting of shareholders in which a
resolution about the adoption of the annual accounts shall be adopted and to address that
meeting.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">36.2.</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Annually, no later than four months after the close of the financial year the managing
board, in accordance with the statutory obligations to which the company is subject, shall
make generally available: (i)&nbsp;the annual accounts, (ii)&nbsp;the annual report, (iii)&nbsp;the
accountant&#146;s statement as referred to in paragraph 1 of this article, as well as (iv)&nbsp;other
annual financial accounting documents which the company, under or pursuant to the law, must
make generally available together with the annual accounts.</TD>
</TR>

</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><U><B>Profit and loss. </B></U><BR>
<U><B>Article&nbsp;37.</B></U>

</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">37.1.</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Distribution of profits pursuant to this article shall be made following approval of
the annual accounts which show that the distribution is permitted.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>The company may only make distributions to shareholders and other persons entitled to
distributable profits to the extent that its equity exceeds the total amount of its issued
capital and the reserves which must be maintained by law. </TD>
</TR>



<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>A deficit may only be offset
against the reserves prescribed by law in so far as permitted by law.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">37.2.</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><DIV style="margin-left:25px; text-indent:-25px">a.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; From the profits shall first, if possible, be distributed on the preference shares
the percentage
as specified hereinafter under b below of the compulsory amount paid up or to be
paid up on these shares as at the commencement of the financial year for which the
distribution is made or &#151; if the shares are issued during that financial year &#151; as
at the day on which such shares are issued.</div></TD>
</TR>

</TABLE>
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">b.</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>The percentage as referred to above under a shall be equal to Euribor (Euro
Interbank Offered Rate) for deposit loans with a term of one year, established per
the day which is two bank business days prior to the day of the first issue of the
preference shares, such at eleven o&#146;clock ante meridiem Central European Time,
increased with a rise of maximum one hundred and fifty basis points, determined by
the managing board, subject to the approval of the supervisory board.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>If in the course of the financial year for which the distribution is made the
compulsory amount to be paid on the preference shares has been decreased or,
pursuant to a resolution for additional payments, increased, then the distribution
shall be decreased or, if possible, increased by an amount equal to the
aforementioned percentage of the amount of the decrease or increase as the case may
be, calculated from the date of the decrease or from the day when the additional
payment became compulsory, as the case may be.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">c.</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>If and to the extent that the profits are not sufficient to make the
distribution as referred to in this article in full, the deficit shall be distributed
from the reserves to the extent by doing so paragraph 1 of this article is not
contravened.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>If and to the extent the distribution as referred to in the first sentence of this
paragraph also cannot be made out of the reserves, then out of the profits realized
in the following years first such a distribution shall be made to the holders of
preference shares to make good for the entire deficit before the provisions of the
following paragraphs shall apply.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">d.</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>No further distributions shall be made on the preference shares then
as determined in this article and article 39.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">e.</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>If the profits for a financial year are being determined and if in that
financial year one or more preference shares have been cancelled with repayment, the
persons who according to the shareholders&#146; register as referred to in article 8 at
the time of such cancellation were recorded as the holders of these preference
shares, shall have an inalienable right to a distribution of profit as described
hereinafter. The profits which, if sufficient, shall be distributed to such a person
shall be equal to the amount of the distribution to which he would be entitled
pursuant to the provisions of this paragraph if at the time of the determination of
the profits he had still been the holder of the preference shares as referred to
above, calculated on a time- proportionate basis for the period during which he held
preference shares in that financial year, which distribution shall be decreased with
the amount of the distribution which is made on the preference shares in accordance
with article 39 paragraph 1.</TD>
</TR>

</TABLE>
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">



</TABLE>
</DIV>
<P align="center" style="font-size: 10pt"><!-- Folio -->&nbsp;<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">


<DIV style="margin-top: 6pt"><TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">



</TABLE>
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">f.</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>If in the course of any financial year preference shares have been
issued, the dividend on preference shares for that financial year shall be decreased
time-proportionately calculated over the period that the relevant preference shares
were not issued.</TD>
</TR>

</TABLE>
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">37.3.</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Upon proposal of the managing board, the supervisory board shall determine what portion of
the remaining profits shall be retained by way of reserve.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">37.4.</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>The portion of the profits that remains after application of paragraph 2 and paragraph 3,
shall be at the disposal of the general meeting of shareholders, with due observance of the
provisions of article 38, paragraph 2.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">37.5.</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>The general meeting of shareholders is empowered either to distribute the profits in cash or
in kind or to withhold distribution of the said portion of the profit in whole or in part.</TD>
</TR>

</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><U><B>Article&nbsp;38.</B></U>
</DIV>


<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">38.1.</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Upon the proposal of the supervisory board, the general meeting of shareholders shall be
entitled to resolve to make distributions charged to the share premium reserve or charged to
the other reserves shown in the annual accounts not prescribed by the law, with due observance
of the provisions of paragraph 2 of this article, provided that the balance of the relevant
reserve is not required to make the distribution as referred to in article 36, paragraph 2,
sub c, first sentence in conjunction with article 36, paragraph 2, sub a.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">38.2.</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>The supervisory board shall be entitled to resolve that distributions, the amount of which
distributions has been resolved upon by the general meeting of shareholders, to holders of
shares under article 37, article 38, paragraph 1 and article 39, paragraph 1 may be made in
full or partially in the form of the issue of shares in the share capital of the company. The
distribution to a shareholder according to the preceding sentence shall be made to a
shareholder in cash or in the form of ordinary shares in the share capital of the company, or
partially in cash and partially in the form of shares in the share capital of the company,
such, if the supervisory board so resolves, at the option of the relevant shareholder.</TD>
</TR>

</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><U><B>Article&nbsp;39.</B></U>
</DIV>


<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">39.1.</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>At its own discretion and subject to section 105, paragraph 4, Book 2, Dutch Civil Code, the
supervisory board may resolve to distribute one or more interim distributions on the shares
before the annual accounts for any financial year have been adopted at a general meeting of
shareholders. Interim distributions may also be made on either preference shares or ordinary
shares.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">39.2.</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>In case of a cancellation of preference shares with repayment a distribution on the
cancelled shares shall be made on the day of repayment, which distribution shall be calculated
in accordance with the provisions of article 37 and over the period up to the day of
repayment, such in accordance with section 105, paragraph 4, Book 2, Dutch Civil Code.</TD>
</TR>

</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><U><B>Article&nbsp;40.</B></U>
</DIV>


<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">40.1.</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Distributions under articles 37, 38 or 39 shall be payable as from a date to be determined
by the supervisory board. The date of payment set in respect of shares for which certificates
are outstanding or in respect of type I shares may differ from the date of payment set in
respect of shares for which type II share certificates are outstanding.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">40.2.</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Distributions under articles 37, 38 or 39 shall be made payable at a place or
places, to be determined by the supervisory board; at least one place shall be
designated thereto in the Netherlands.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">40.3.</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>The supervisory board may determine the method of payment in respect of cash distributions
on type I shares.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">40.4.</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Cash distributions under articles 37, 38 or 39 in respect of shares for which a type II
share certificate is outstanding shall, if such distributions are made payable only outside
the Netherlands, be paid in the currency of a country where the shares of the company are
listed on a stock exchange not being the Euro, converted at the rate of exchange determined by
the European Central Bank at the close of business on a day to be fixed for that purpose by
the supervisory board. If and in so far as on the first day on which a distribution is
payable, the company is unable, in consequence of any governmental action or other exceptional
circumstances beyond its control, to make payment at the place designated outside the
Netherlands or in the relevant currency, the supervisory board may in that event designate one
or more places in the Netherlands instead. In such event the provisions of the first sentence
of this paragraph shall no longer apply.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">40.5.</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>The person entitled to a distribution under articles 37, 38 or 39 on registered shares shall
be the person in whose name the share is registered at the date to be fixed for that purpose
by the supervisory board in respect of each distribution for the different types of shares.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">40.6.</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Notice of distributions and of the dates and places as referred to in the preceding
paragraphs of this article shall at least be published in a national daily newspaper and
abroad in at least one daily newspaper appearing in each of those countries other than the
United States, where the</TD>
</TR>

</TABLE>
</DIV>



<P align="center" style="font-size: 10pt"><!-- Folio -->&nbsp;<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>shares, on the application of the company, have been admitted for official quotation, and
further in such manner as the supervisory board may deem desirable.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">40.7.</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Distributions in cash under articles 37, 38 or 39 that have not been collected within
five years after they have become due and payable shall revert to the Company.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">40.8.</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>In the case of a distribution under article 38, paragraph 2, any shares in the company not
claimed within a period to be determined by the supervisory board shall be sold for the
account of the persons entitled to the distribution who failed to claim the shares. The period
and manner of sale to be determined by the supervisory board, as mentioned in the preceding
sentence, shall be notified according to paragraph 6. The net proceeds of such sale shall
thereafter be held at the disposal of the above persons in proportion to their entitlement;
distributions that have not been collected within five years after the initial distributions
in shares have become due and payable shall revert to the company.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">40.9.</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>In the case of a distribution in the form of shares in the company under article 38,
paragraph 2, on registered shares, those shares shall be added to the share register. A type
II share certificate for a nominal amount equal to the number of shares added to the register
shall be issued to holders of type II shares.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">40.10.</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>The provisions of paragraph 5 shall apply equally in respect of distributions &#151; including
pre-emptive subscription rights in the event of a share issue &#151; made otherwise than under
articles 37, 38 or 39, provided that in addition thereto in the Dutch Official Gazette
<I>(Staatscourant) </I>shall be announced the issue of shares with a pre-emptive subscription right
and the period of time within which such can be exercised.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Such pre-emptive subscription right can be executed during at least two weeks after the
day of notice in the Dutch Official Gazette <I>(Staatscourant).</I></TD>
</TR>

</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><U><B>Amendments to the articles of association, winding up, liquidation. </B></U><BR>
<U><B>Article&nbsp;41.</B></U>

</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">41.1.</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>A resolution to alter the articles of association or to wind up the company shall be
valid only provided that:</TD>
</TR>

</TABLE>
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">a.</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>the proposal to such a resolution has been proposed to the general meeting
of shareholders by the supervisory board;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">b.</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>the full proposals have been deposited for inspection by shareholders and
other persons entitled to attend meetings of shareholders, at the office of the
company as from the day on which the notice is served until the close of that
meeting.</TD>
</TR>

</TABLE>
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">41.2.</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>A resolution to amend the articles of association by which the rights conferred on
holders of shares of a specific class as such are changed shall require the approval of
the relevant class meeting.</TD>
</TR>

</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><U><B>Article&nbsp;42.</B></U>
</DIV>


<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">42.1.</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>If the company is wound up, the liquidation shall be carried out by any person designated
for that purpose by the general meeting of shareholders, under the supervision of the
supervisory board.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">42.2.</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>In passing a resolution to wind up the company, the general meeting of shareholders shall
upon the proposal of the supervisory board fix the remuneration payable to the liquidators and
to those responsible for supervising the liquidation.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">42.3.</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>The liquidation shall take place with due observance of the provisions of the law.
During the liquidation period these articles of association shall, to the extent possible,
remain in full force and effect.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">42.4.</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>After settling the liquidation, the liquidators shall render account in accordance
with the provisions of the law.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">42.5.</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>After the liquidation has ended, the books and records of the company shall remain in the
custody of the person designated for that purpose by the liquidators during a seven-year
period.</TD>
</TR>

</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><U><B>Article&nbsp;43.</B></U>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">From what is left of the company&#146;s assets after all debts have been settled, including any debts
incurred in
connection with the liquidation, first, if possible, all holders of preference shares shall have
returned to them
the paid up part of the nominal amount of their preference shares, increased with the missing
dividend on the
relevant preference shares at the time of liquidation calculated over the period up to and
including the day on
which the balance is made payable.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The residue shall be divided amongst the holders of ordinary shares <I>pro rata </I>to the par value of
their
respective holdings of ordinary shares.
</DIV>


<P align="center" style="font-size: 10pt"><!-- Folio -->&nbsp;<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">


<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><U><B>Article&nbsp;44.</B></U>
</DIV>




<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Any amounts payable to shareholders or due to creditors which have not been claimed within six
months after the last distribution was made payable, shall be deposited with the Public
Administrator of Unclaimed Debts <I>(consignatiekas).</I>
</DIV>



<P align="center" style="font-size: 10pt"><!-- Folio -->&nbsp;<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>
<DIV style="font-family: 'Times New Roman',Times,serif">


<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>SIGNATURES</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Pursuant to the requirements of the Securities Exchange Act of 1934, STMicroelectronics N.V.
has duly caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
</DIV>

<TABLE width="100%" border="0" cellspacing="0" cellpadding="0" style="font-size: 10pt">
<TR>
    <TD width="48%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="35%">&nbsp;</TD>
    <TD width="15%">&nbsp;</TD>
</TR>
<TR>
    <TD valign="top" align="left">&nbsp;</TD>
    <TD colspan="3" align="left"><B>STMicroelectronics N.V.</B><BR>
&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR><TR>
    <TD align="left">Date: March 29, 2007&nbsp;</TD>
    <TD valign="top">By:&nbsp;&nbsp;</TD>
    <TD colspan="2" style="border-bottom: 1px solid #000000" align="left">/s/ Carlo Ferro
&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR><TR>
    <TD align="left">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD valign="top">Name:&nbsp;&nbsp;</TD>
    <TD align="left">Carlo Ferro&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR><TR>
    <TD align="left">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD valign="top">Title:&nbsp;&nbsp;</TD>
    <TD align="left">Executive Vice President and<BR>
Chief Executive Officer&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>
</TABLE>


<P align="center" style="font-size: 10pt"><!-- Folio --><!-- /Folio -->
</DIV>


</BODY>
</HTML>
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>GRAPHIC
<SEQUENCE>2
<FILENAME>y01685y0168502.gif
<DESCRIPTION>GRAPHIC
<TEXT>
begin 644 y01685y0168502.gif
M1TE&.#EA-0`@`,0``%]?7Y^?G^_O[P\/#R\O+Z^OKV]O;\_/ST]/3X^/CQ\?
M'S\_/]_?W[^_OW]_?P```/___P``````````````````````````````````
M`````````````````````````"'Y!```````+``````U`"````7_("2.9&F>
M:*JN$-.\L/LZ3E,[`$X'35#;#`=C02NP2(W%8\E4-!\#A3.J&#P`"BP305`^
M%@#7$<(LF\_H]%+A<AR3ZKB\['X='0^%<,Q'-EAX"WV#+40"*PP``(2##$:`
M;(Q\#0H+#"P&;I)C#`B'+`L!)0DPI2\\IX\D/S8V$`$(ERL-#W\C#$YS7R6T
M9@M`LBI*)GASD2.]98(0-,$HO9JK<\LD9W^N@$LTQ'*BR%YE?[\L!P1,82=G
MN0_.`>!+@C\LR=HG<`-6:WLC`&8#1C58%#!71D&``R?PY<M30L"[+P(<>%L1
M((TE$P/IE"@F90D``>A8$#PS@,#$$169O9P<LB97@P345LRQ12*`DYBO^C59
MQ,!9BF)R:(HH%DW$PP="%!TYFJ8$+IP0'K+I>20`@$PY=&1U@"`'"0$&'IQL
MH)..`*N?-J4`6XM$(E\N$J15B^)`283\U(%U@)<N"@`$Y@H8"8^!`%5^3RP8
M@#.L&07,%B4V8:,2L4IZB/S9=Z=!SV:"@-#85C0(-GM%4[11HJC2ER\.B`!0
DLH#(:"<TB&09/=KGK!;`8`AY(0:"#8DS;/B00>//210A```[
`
end
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>GRAPHIC
<SEQUENCE>3
<FILENAME>y01685y0168501.gif
<DESCRIPTION>GRAPHIC
<TEXT>
begin 644 y01685y0168501.gif
M1TE&.#EA+0)B`>9_`,K*RF1D8Z:FINSL[*RLK,3$Q-;6U<[.SH.#@]+2TKR\
MO/7U]8N+BVQL:W)R<I&1D;:VM>;FYGM[>YZ>G>'AX=W=W4='1UU=75E96965
ME:&AH=C8V"\O+U134]K:VK*RL9F9F4Y.39R;FV9F9I>8F,O+RV%A8*"?H+>W
MM\?(Q^/CXUQ<7+BWN)^@GZ2DI,?'QY"0D(>(AY23E-34U.3DY'!P<-O;VVEI
M:9R<G,S,S:^NKW^`?VYN;HZ.CM?7UXF)B("`@+Z_OX^0CYB8F,S,S-33TY^?
MGI.3DZ.DI%]>7YN;F[2SLUA86,C(R)24E'EX>*>GIZ.CHU965C\_/I>7EIR;
MG%%04(^0D+>XMV=H9Y>8E]C8UW=X=XB'B%Q;7-_?WX>&AJ^PKUY?7Z:GIYR<
MG=G9V6!?8%M:6L'!P:BIJ9>7EZ2CI*"@H'^`@)"/D+FYN>#@X&AH:7Y^?FAG
M:(:&AM?7UHB)B;"PL-S<W-/3TW9V=G=V=GAW>%A76)^?G____R'Y!`$``'\`
M+``````M`F(!``?_@'^"@X2%AH>(B8@J&XV.CY"1DI.4E9:7F)9EBIP>F9^@
MH:*CCA&<IX8#I*NLK:!E"X<+9:ZUMK>-'@.HO+V^OX,%-R/$Q<;'R,G*R\S-
MSL_-26G`?VA6T-C9VMO<Q374B042W>3EYMDF#X<(8N?N[_#$67+@]?:]/6D>
M^_S]_O\``PH<2+"@08(&,%!#@."@PX<0(TKD-^)>(1A0)FK<R/&A#RF'.ACH
M2+*DR7T?@%A<R7+0@R8M8\JD=F$AB9DX<R9J$/,(`)U`@_Y1:,B$T*,Y`3A!
MRO3/RZ90[=4$AN!FU*N^>+;TB;4K+Z*%C'H=RTDIV9D$#)Q=2X@.-0T?_]BR
M5==2AP^Y;!$<8H!7K@\=?2T^#3QVZJ^JA+UJ9<DU<5>PA,0Z[FIV,K#!EJ$:
M]H4X<]/%*QNC6E`@UB$`*OY0X#0`P(%!"W(42#3`=+T!>9KL^GI(LJ(-"<KX
ML$$V@>X_>5[8)K0@P7)@E3WSPBS]Z.9>G:L+!6U1]"D59G+\B?":D`0W?V8K
MJF"EPR`\4W@DTD5(A7I>`]Q0<7.7=]%3+]P!UQ1NU0.!16D(T(!X#$@1000E
M%'*`%!78$YUVBE"'H4[7\9+=ACEQ=X]WG$3PA%HU4%$(`!GPX@`+"@ARQ`P3
M]%(`7[T<$():OD`VB&^'I+#8'0?68X(+]UCQ1_]M?Y308A,8T$"(#S=46,^%
M(!JB898R=8C*AUS&)*(])"KR11PS_&'!&1$$(0<63:K!@!4#/`!"'@IP@(4`
MMLEG`PH4N($"3R584(852K#A@0$6Y'#''%/\(84%%3!Q0Q<<?$`$!WK]X8$<
M#<`)``=$_.*C($`:\D8`A42`0`U1+'!!#5!`L``;/'2P@!\\($!#&B&\(0&G
M?\"@`P!`+#`%!`1,04$4=9KRQP)#W*#&#"AP0%>3+3HPA0^N:K!`'3C(FL$;
M>B`P0+,O(/&<(5B&*4A:\N)4X"]PU2O3MBO9U4L$/7SQ!QYO_`%!"1+\\=<?
M=&S0!``Q_('`'7=L,,C_$7]4\$8:$!30PW@!+_PQ"C8\,<`+"A/PAP%[1,!7
M!'$)\O$?(*CFAK38[576#X4LX<$?_HY@`!T^.+$```:HO#`,*JM8308J]*!"
M!F@P_$<:!I01<]*"["`Q(1O<X>D2?Q!A@!,^4,!`!`00X,$+>L0(Q`$5<[*P
MOB[!A'=+7IX"YM[UC%E/F;3]H%8"&OQ!!146_&&6&"\HX80#?]24082"?).T
M$$1\P-,`#!B0AP!_R(?#`5%,P!<`ZK!>31H9_"1('((\<0"55O9RZA^I%N(!
MY8*\@8<2KW&51.4#:*`!&ZX#@#'M?P!/@`L^!/`[8`FS<4`.2@C2!%WNG4&(
M_Y-_Y%#S!P2,0`3N#[Q@P`0[3/,-".(I$J^\6P;5Z61]<_*W3E`(@0D<<!]!
M8$!E@OB`DA20N\_T1':H@(,97E,"-41/4G]X`5^D8(37*$E)HC$#`18`A3W\
M00!*@H,8#N"`FHDA`@%`&`S3PY<;"<(!`LC#(%3R!R!$(`$[,E5O3D&!Q"TA
M!@-P00).N$0E26%T%6A``DAW`#8,A6P\F(8?:K`K#TA!`P4(@>)*\#U!',`/
MF?N#D@;Q@H^5(`"N^@,.'`!$`\C!"&'8@@.4`(#&Y8\0]PO3'W/BLI_QSR9,
M"<)4)E`>05QH=TP1'#@(AX@-F.!C97@"#2QI`C.8H/^367B#$S[I20840"LO
MX`'/`""E#QB%DR;@RR=GR0.!E>$&>.#!"'[FNK:8P6)E,('%>C3$4VS`##CZ
M0PQN4#43U.`+#_AD'(BC@!%$S`4FB,L=>.9*0<1@ED;Y``/*X(#5_.$.9K#@
M$D8PLS_H09@4T(/%?D#*6?+EF[/\P`<29K^E`&Z0.+G<$P:1A@*@+`*E^H%Z
MCH"'#Q00*?U3Q/]R\H4;"`)K1\A#&K!001T4:041>``%(@""_1U%DM2@9'5.
MT$B6[*YW@+N2/_<&T)GXA`*=6H(%4)"&"6C@"`(@'00DH(,W!($%FD$D4Z2P
M`CXXQP43,$`#"C"%)7P`,&?_6(`>7@"$'$@`#Y%\()<>0`>PRN2E,6V)68RP
M@K:Z]:TK6)!TZ,64-XAA!0BL0(S28(4+^(`&&8@`#@0!!@P4K"GW\D6^D'(`
MDWJ`;`\(V\I4II>*\0PJ_+*(O])Z#Y,.(IF<M<?==B:=FL:$?'\XP&`3\(`%
MR$$)3,*"`J:!A`2H-JE4L<I1!@`\07#O#PT@7QF9\`>?L"H"[]()2H&A4HN4
MX`5-:((.JX-63LP`N@9([B":D!I!(/<[!6C""PZ@74388+JI**\O`EF(-YBA
MM'H[R@XZ(*4?2($&:IA"`@JP@S7L`@_`2T`&')"%W4!4J4?1``?J-YXAN,$"
M"E##_P-.5P)M2<$!=``!!'"V';'FY`D=@`$?>NN9ZBJB!A9X0-L4X8!V)H##
MB,#!%-S0`P=LP1<06.,@8O2',AC80C-5Q!M@&AC3MN0`ROE#`I2S@=+\80-2
M$H0Y5S9>]<XDHHF8*$Y4\`(.T^!A`_@R<2(`W1=T.0=6ELER?]'<>Y1Q`3"V
MC(D3,81.D=@038#!+]8I"";YXCH6C0E["3%D^(96*@@^]"_6[(LVVZ,)>FB"
M&,;S``OT@`)`P``:%E"")U!K24^8PQ(6$,LT+$$!XD(`!U@``PX`)B=S1L02
M`B#>STD@L`C`0`'8<#0GB*&L%GA!`&IPA`H-8`(AX`#F4/_0`1T$X#40P(`$
M*F"`$"3`"A-`@!4*("X(9',%"TC#"&Q0``XD[`$`$`8&5$!2YKUA`'CP@K7+
M$N1$%-HS1E;T(;",""WK>R<>QDD3I``#,2HA!PCE9QJBL($0'(`.-J"7`);X
M+2D$80BEZL,?6(!`6!=3$3E(<0_4(#H02*!&'$@`%9[;AQ8YY6%G4(%\E)@`
M.>SF#1:00`AFPX<TKMQU"P8!$2JR!#JE`03$U4IM'1`C(?2`/;?3`>0.$.<5
MU1L1]\Y,OO]-"'ZO0[=<1P6C>^'H*ZGC+DZ0G58$H(`-X+(&&U,+2X'+N^+^
M9`EO6$%08GV(D@IB=`I`@0:&\(?_XZ$;TC-+>PE45!&22L#`$!C!+&*A!T',
M88QF\<(?TJ[W/X@!#FG(@4+D\P<HS*`!,7)##`YP^=$5X0WEI#<JLFX9NH:=
M%XGMQ6)O?XK,WF.S..':'Q3@'CB@8;##KX#::(!N-,#A#V^HT,=X1J^D10PH
MGA4$:!%QAQ8(PO@^DZQ;TL(U=:1E87QY07>#<5E!$-XI?_A`&;BF%[M<GPY:
M^P-?Z,+`!XB'`*&G%U\0!%`0?\.4"*.E""70?I:Q=;?G=8;@;[PW"&/'"V4'
M#B80`BN0!&XQ`04B`4EP%T40`GDP.@P3![-A!0U``WK@`E$`/4*W=Q^7"!)@
M!4F0!/3`_S#M@0$68`10@`%2P`00(`<8T!XK8`$$``([,``X,`)*8!H"($:#
MX`-),%""0`<=8`4\2`4"L`)X,`<78`%`@`8C$`)IH`'T@$)`DP0'$D!_4`16
M8`$W@"2R=PJT-QD.&'806`@2.(%TMQ40Y!D10`7KYW'_@10Y=#6)8QF#-@AW
MZ!AYR'5[2`A].($5B`H7N!8,@`!5=U8S&!01H`8!H`3$P8A7=PB/F!B1^&^3
M.`B5R'N7>`J9>'M\YX>(T(C!0V1]L8KZUHJ"\(JW%XN<,(MA5XNV""^GJ"JZ
MB!<P$%_'N&^)]HR$((P9$HC22`C&>(V.DXSMM8QRD09IHHV%D/][O*`!12*.
M@B`#,0&.Z$B)A\"`[?AD8G,*"U@=(.``^)B/^KB/_-B/_OB/^V@!*P"0!%F0
M!JF/\T`-`L`$!]F0#KF/)F`!#SF1#BD3"D"1&$F0(V`!<9"1'LF/N7((*W`#
M'UF2)GF2_%@#WV"'WAB/@L`$+>62OP`?,AD3!F`%2U23^I**.CD(<<!@/=D+
MG1>4]E`!-]`?1)DE/!F48L!C28D*0_F4P%`!<5`'4@DB2]F337F5IQ"57,D+
M5&F57UD=6:F3=`"48SF.:?DOE[:6GE&/7[F5;ED(7OF,0H`R?Z`"0E"((>5R
MOA"6<VD99<EU"U`!MO$@BB"7MU<!/Q;_$W5IBP+```S0!`L@F0R0DP8CF=DE
M`*377(#Y"X@Y+889F$`QF*$5!7AI`S>`?#X@`3/S`58RCY[GE%QW`#=0,`10
M-81``>HQ`$NP"P.0!HV)"(]YC`,@`-)R`'3X!^[Q!TQ``2=@%'50`,-)")_9
M"VCP!";P?!,0!]/@F\`IG*2Y$J;)65.`,=%3!W4@!P:0`77`+$!0!OR4@[-Y
M>SE`!P:P"R&0>Q)P61*@!&YA`&J09G]0G+9X)((0!(TS",TI/F^`!GG06IQP
MG:B0;@:@`3@0`SY0!SU0!@@``G:P,EI`H./)">695J@E/H5'/BSR!Q+P`LQ'
M"(JI;Q3P!@4@_S".@YZ#<%N4I@(&X'N)8*!^2`<Z$`MH$#J#$`4&4`!@@0:S
M\7R)0*&]@`4I4!%R1'4/H`)+()MS60%/(`<:D`<J``-R<`<^N@/B\@=+H)NH
MV)*<E:*"D`0LNA0_P4@R2IN*U@5@H`!L,!N]M*/=,XUF!97QJ`:8PYR#$)Q6
MH)L"4#7<1C:((*6\`!)B<3J#4"7C.0"EZ`#-^`=Y!A(]@#(H=:(Q)5E?\P=@
M(%EW,P!!L`#@R3!H>6@$@`*35:N$\%B$@`:K40:0R@GD^(P#$`53AD:#8`"-
MY'+.5R.(`#!3Y@LJ<5D04(JZ^F2].I=XX`1LHQ9_844,-*V)`)=^N/]X@M"<
M4I!GGHH>[K0+$@`"'S.CBN8&*9!!JZ.C9H1\&T<Y%9`&96"O02J.,E`#.F"8
M*AD#IE``%.``:6`::*";R=.LA2"IJ,`%0R$(,0@!!5,!`N`&5A284.!'/\$Z
M$2`':_`$%``'?#"HW7B,4B`!L4`%!Y``4*`"'W``"E`U%&`$,H(`J^&NAX8&
M37``3OH'+J`'L>"J?]`L:K$`.@"E`*".75FBD5J5P*!Y1^L#!P`!%*"T3`ND
M:XD!Z':N?;841F&ERGB,$P`%NQ`!/B4(,^`'17(?\"8(/'MHJL5C`J`!IC``
M:J$#;)"W*,L+0DJ:$,L)]Z$#.)"WI0BU@^#_`)9J/JI!!;M`.7?FB&X:CW.[
MEH$;F(.KN.!0!L0P`10P`#$P!P2P"PD0!8+P`D]P6&4;EW@ZEYG;I5++N7)!
MJNAXEE#[JU#+K+0K%^!ZE9>;EK'KEIO;NU%AN^(8O&,YO&M9O,;;%,BKC<K[
ME<R;EE3)(\\[%M%[C=/+E<3UO#8P`DB9O5UA5V/9O5?9`1BPONS;ONXK!5;0
M!^X[O_1;O_9[O_B;O_J[O_S+OB$P!:Q+OEB!!5DPEK@KP(9@`^=XE08@!?W[
MP!`<P?/;!U80`A)\P1B<P?O;<5R)OK2;`,N)P(D!!!P@PH?FP9Q[NB;L&"2\
MPIR%PHJKPBX<&"T\_\.``\-0*\,V+!<UO,/Z@L,EJL,^?!8]/,1A`L3C*<1&
M[!5%O,0@<L`NK#%.3!9L0+93O"%(3)I*?,50T<1<+!U9')A;_,5(X<5D;!EA
M/)=C?,9!8<9LG!AI[)9K_,8YX<9TW!=QO)9S?,<R8<=\S!9YG)9[_,<LX<>$
M3!90O,)2?,@Z4<6,3!B!/):#_,CU8,B4?!61_)63?,G`8,F<W!29S)6;_,F]
MX,FD?!2A?)6C?,JG8,JL#!2I+)6K_,J)X,JT;"^QBL"+?,O@X,B\C,FOB\"S
M_,N$8,O$S!*Q_)0'T`4D>LR"L``-4,+.S!3)G!AHH`1!E<W:O,W<W,W>_/_-
MW,P`,P;.Y%S.YAQ4$^`T[\H&Y]S.[@S.#S`%'.`'[US/]NP$#DO'U4P8/>`"
M)?C/`!W0`CW0!%W0`CT#HF/0"KW0#%V"!Z!Q^N9P#3W1%*W0)1`$%9W1&IT'
M25"=;+S/16:-VGAYO?B5I$?((+V+(GV-)*UHOGB-)_W'B:QOP(>.[71HNMN3
M7/O1P1Q:7QN/+7UH+RV-,<W'*8T7/]V.01U:0_V,17W'1RT728V.2\U937V,
M3ZW//<U94RV.59U65VV+6?W&43T7*RV-7QU38>V'8\W&,ZUH-2V.-QU:.:V3
M.WW&9;T673W2K&C2C)S79['7U+"#5M`B@:H3AXW_$VD-.%A&!#>```>`KKZ`
M!V*@O@=4#^\G"'YI"!H0`@Z,O:A0,^\1P(;0UGB]U6DEV,!P`"<P,*2](8N]
M-_VS``JP-IL'$I>A-PKPVK[0DJSB3JBPDH*P<JA@VF0,V&2AVK^`.,-WM`I`
M`U00`04#LDN$5,/W:FG0EG<@-8Y$-B^@,D%PM+CY`)ACJ"P1VWC3/P80!U92
M`0<2`0*P"P#@!M,-`]I4K6EWJ3U6!4LB`"KP98+`?`@TWT'0!)*I7SK0<23%
M85I1>>HG"*\&-%1@`VDP!6_#!C1@!5X#4,;]Q<@]%LKM"R\P!5:@.9+7`'V`
M`ALV!?^Y`BP@6PKP`4O@_P(S$`5IH`,]T`5Z00%I$`-00`,A0`!!H`!2!0$?
MT`0\<3E#L`D6@=[ZHMYST$!PL`0:$`,VH`0OX`!EH`9-$`=O``$>T$[Y/3L4
M<`<',*!.$`(+(%Z;UP0&D`8V@`-9#N1A-``?X8HY0)]JXL`5$@4A$%)O``,T
M"P%I0``ST`%A)@4+4`-(,@%S70@=SL5O?6AQ#0X*K#B"0'T&0']':P!_L01M
M!07JG-CGU`%(HF?Y=P0U/0(=@%[V\.AIE=-?T`,PM@$8P`5YT`"KD0<!8"4]
M@`$%".%(V0-P<`,7D#`VQ'P1L+$3D.O=I0[7MS\=<`$Z!G^#<*01X``KD(9=
MX/\2F0XT=R%\B'#7QXW:,17BO2#$1I%V920^+\$BQ..J\N&J<A`!3!+C.D`/
ME'-;/'`Y&?,'M-.I3=[7B(!3.5D;27,`9N"J=,"R`T`'#F"GWVMW?48')B@E
M.J!W'E`#%<!#?,#P`V51DS:Q!O0'."H(@791;6<&_5$;4R`V@6847%%&B1#I
M5_SA7H'N+L(#NU'A,&`%"/`"4O``'``!,*`')7`!'S`&(&``"B``$-!D<D`'
M%4+E#&`!;C`%.M`$9_!@#.`$%GNT:M`!E3?P)4T;2X`#./";`X`"#Z8'*[`\
M`)`$&G`'+-(#4V`*$;`"Q'8$$S``$0`%(``3'V`!@RC_G`)P!&F`!D1@`E#P
M`2/>`Q:0!Q_``>61`4.`NH)`57A941<P`$?``'6Z`[:C)F_#`3>B$GK@(#7_
MU^;^3V?]"P5`7H*PI$TP^POP`NGF`5]V-`L`!_V1!])B`#-@&F1F9@7@`[D/
M7<"?N,_EC/7@Y/6"90-P``>P&[E?`-I/7@-0`#E9!F96M`"@^P`@+0-0/P2@
M``M0_-."-$OR`CI$`P95`JI0`-*R`$1@&[S970,`""4S?P,'-'\438=_``,T
M!104!XPO"W^7F)@\F9R=GI^@H:*CI*6FIZBE8@JIK:ZOH0\`L+2UMI]SM[J[
MF1>\J%%2O\.<F\3'R,FWJ\K-_Z:RSM&VN=+5F+[6F`4QV;3&W>#AM<SBTM#E
MZ)G4Z<?8[.^@W_#S['0Y],<Z/OCA/?R[=/[A>R"PH#5R!FV=2^AL'<-6[AZ*
MDR>QXC)6%ETMS#C,(<=1$3]*HRBR)"F$)D=M3%G+(TM.(5\>(RFS)LJ:G5;B
M3.429\R=NV@"-7ESZ!^=1DGUK/DSJ3>G+XL.10H5U%*93:NV$JI5HCVM^KJ2
M8N`TH%A:&<Y^E`J439\`<./*G4NWKMV[<YF(P<NWK]^X4DPXM7+FK^'#>$U@
M,(&XL>,`%F:IM<@6*``4F#-KWLRYL^?/FMF820.ZM.G3F=]`'8`%M>O7H#^8
M.`*[MO]M%`H&3*:,<7>V!!I\"\\T8=+PXZ\J(Q\&?+GOXLZCJ^HM_5CSZF*A
M8]_.Z2OW87A4?X<*P<;X[\K/M[JN?JCV]M+3PS?%?G[-]_:1R\\OJC[_E/C]
MY]M^NY$%P!YZ-/''!\']80`!ZS4H((#&C5*!`^;)T8!Y:!#T1P%M3,@1@6=%
MP(8)>/#@004\E$''`6S\(8>"J?@G(D<!?O+%!)<(]@</%1"@@1L+W$'!C;QA
M)T`>#UQH0P4-^%``%GA\\((K-B)948Z=-!&%`$3\08T#?R@@P!]*?*!E1=Y%
M-P`:"P@0008T1-`#'']$\(4_KH2WYD?EC4(``GE\$,$1EU#_08@E(.CV)T,D
M=G6#FF<`P<,"%<QAP"40L*)`!35*^*A$7'+R0(QJ$$'F'ZO^X<*1.J0Q:D&1
M:O6#&6)P8(4)%50PPJ98!`?<"*'.NF6%H#@QRQ"J7K)J&@$5($$0$!J+3ZUB
MV?&'!TK@@(5N<FQ`2!JRHG*`J-86I,0]_;EPA!(#%)#&$5%LBX:C)?P`:KKS
M8-M5!)?XL,\E1UXR@"7F-@`POP6YD``I%0"P\`P`6')P)@LS_(Z_$ZK@``9G
MA"SRR"27;/+)**>L\LHLMTPR!U.X+//,-+OL0,$:`]5FSO!-H";/0-O"<="3
M`<$CT4BW,G3271G-]-/30<V=TU)7_^W)TE8/17767&/--4Y;?UWUSF(+QP8$
M95OM==HIA<UVTFN_+9+;<@<==]T9T8UWSG?O+9'>?O/;=^`)`4ZXL8,?+I#A
MBC]*=N-MH0WY4!0D8/GEF&>N^>:<=YYY%D1X+OKHI&,NKM4+&%#ZZJQG?@,`
MK<>^N@$(3ZZ+#6&XH/ONO/?N^^_`!]_[#T,(;_SQR/.^`[M2'Q""$\E'+SWO
M;CPP_?71,U"N[;=D(-ER$?@H]0MRU'[<`&=PK\L#-#J75=!->.A<$NK?PKYT
M[P,=OW3TUU_+_=')'\_V%YW^^0\6!-A4=,PBM0=)AX$'U$C[EB/`G!$P&@/8
MUR4PI<$_8/_*?-8P8`1;`4#W6>V"S1C`#^:@`RC\(0H,F,,<[G")-"!@#FQP
M%,$*$`T1CA`5):3@">77#"T8P`!"L("8#G#$#<@*`7HP0!G(@@D!X$P9/OSA
M,R:(G`IJ#(7)Z$`GY'$!"+BA"X2@XB6(U4,MDI"+^```#3X`(1<FPXL,`R,R
M8B(/,[QA"!:(0@%T^(<&2".+;A24`@6"!@IL`(V*2@8$G^9`9P"A$XC"!!T`
M0(`')`"$:FS&)!.I$CC.PP,:L(1@*""'.PXQ&JW$Q!!8E0D)#.`!,/!$*+%(
MRE,$\1=NX$`<;L`!(E@@`!P0@P4JL0,:#8`-#4#`!;)@``Z\X`#_.,B3&"Z!
M`5=638_(`$$"#J`$0G3``0<X@!,NT0!#<L*=;>QE*7[Y"R9<X@4#\,`?!&.#
M`0Q`#R4@Q`_T^0<!Y#(*E@L.$"RP*7@2`X_\`N<Q!B``$5P"#P*8@`A$L#`6
ML*`3WW,&(N7I"7KR0AA0&,0E`I`)ASEH!'C`!,`0N@`U&,`#"1B`!*XX#(BF
M2Z*^&2E)367*77#`#!RH'4LQX5(#P)03"/T0SEJ@#)]:"Z@&8=\;IH"&/Z1/
M##200P$6`*-4"'6HF##I+M(W`QTN]1(">%@9;F`>1LPBJM:PJK&P*A`:X.!-
MS/J#!GY03@,$P9\$("0ISHK6/R0P&;',_P0",@&!X"S@#1"R`0XB,``8$+0:
MHTQ:)4VQ#2?TH%$#&!@Q-J!83#APCI;P00@F$2^`?0H5H6UL6HMZBQYPX&>7
MF``'='`)&JR``P:SP0IP8)X<<(`/V=#KK/C:B32$```OT,,"%M#:75S,$R_P
M1P&H&`0.=/4/;)@$7DW!6+2JU3?2'15U.0&!`"R@#)8HP0`,4(&+22RF$;#$
M`G)@L1(\;`"ANT0$3D<$?V[W`)9H0L7R-`D;@&`!`;B`N#YP@33`@0?[6,`8
MOH"*]@[UO;N)[Z/FFPD%6$`"(>BJ',@5@C3PR`$7T$`/<%!.$(#@"!'0`!6\
M,(`T#(&?=%#"$O\&$,@-$,!C!L`"#`)P@`C@P`]J\EXF!..0!)RIQ+H%!8HG
MH^(_L1@3;^C`"QYPCP.<X`\=&(!@LKL`"T1@FQSP`@=R`((_X.$`/`+5`!@0
M`B`L(`[UDH!C#6#(`-<4`]T,<";T6=<-=E<4)B;IF-52YC6=F5-O_4-9;[!/
M1B`J?2OX`_TJ4`)%50#0?\`3`13@5#S<X`X'8&D"-W$P/O_!"\C(M#P?NT"K
MC;84;VB58YV0714`H0EI4,,"'!`!!/@`"D30003>4(+<!($(734`EAVP!#W(
MJ@=-&$(0[M#M`43@#DV@]C%R&^9-GZ736OKTAT+)``;T(`8O,"@#)C#_@!X<
M@`#:5L,A$I`6!\WR$@!P`P,D[D(!2#RQ5%!I$]Q@\&,(NY?V%@N^D:1OJ'R<
ME"'ORLAO5'*GG#R1*=?*RD74\J2\W(TQK\K,)U1SH]Q<B\1V#KV#=FSD#+VQ
M4"C,8Y9>EQ'HBNE0G\L*+EFU/$@AZE@/P!2.F76HF\&>81;(!?(0]H0X@#IE
MWTX6F)=V?@!!<FW?3N(>E0<+D(F[Q>#1ET-!`1X$@``+N$'&1(&&$'S"#RC`
MQ,U^P;BX#V?N?QI``Q1T`*IF(KRD\`&9@FRG;)9"&)YH`3P1,%E>--[Q`T)[
MV3(04"98@`)PD`.)`>"$.P3G`*6/428&$-D__WAY"9A0`H24H`,:`,`%Y?R#
M&2+`K@KP`51I(%,%%!`!LR2?1U56`@+"A(K3FP+N!P0"$"0@!^";@@+G;;$$
M8H0&/)6B!SSTA(3@D'Y=/(X3.`#"+"2`@"/1X$IYPG:S<@?B@@`NY$**X`/$
M]001,`$1`"%TT`,TD`*9$`,880`.\'"-Q'P0$`(*\`(J0`,*$@,/`((1$%"R
M$@1?\']$4`,0`B%H(P`K4``0(@$ND`IG$PH5(`%74"824"W5\@?F]P>*]@$;
M=CJV,P(_\`=\@"ZB``!T8#X*0$,/\``N1EI+Z`E3(!X><`$JI0O*D5*7<$D1
ML`,;T`!/0#MHL'?&PO]ZIO8'-M``R`4`B,)2+,`#AB<'-O54F$`#=[``M/<'
MOC``=F`!9&$%?_`#(6`&,9($T58"[E0#?Y`&,]``JL$'AW@#)E`&?]!--1`!
M/%4*C*-H#@(A2\``!&`'DT4#>G`)FT(#MW8)=#!XC4,$#_<'K#4`7P``/%0!
M6+!['S``,Q`#A"1\F2")F/`!H-*+_K1D?]!JF5``\6<"JL%#:6``J74)/(0L
MJ:`<:&!'W?0',!`_.$`!?L(O5!!0`$`05B@&$1"(`1`!4!`$Q/($#D*,G%`<
MS1$'+S0DZY1J_F8<V\0LR$@F"50#JC$!^G(&%>).1-``]2>*1_,)#,")Z\C_
M304@`&?2<+_V!TT0`F#W!-RH."]@!1)0A!8`!#'P`12``@-0:$,`,%VP3`9@
M`FX0A$6B+9<@!O>3!F6@&RL@!A!V7[)"!!T``\1%`'S@`(=@2P3P!`C@`&4@
M`%@`,!W0`"'5C:K'"2H`(=MT%$V`=PUP:6N"!U,`785'`TL0`QS@`#<P!0C`
M`6F@`PSP7!:P`C[@!9OR`EY@!PR@`PO0`61A>!^P`RM@`7&9!A2@!@Q`!,ZE
M!E1@!D'0`WYY%!V`!G)@!U,@!@.``#'`0S!@>#70`WX0BJ/`.`NP!"I0`@V7
M/D>B`8EW"6#G!.7"!^#7."\@!0A`BE:P!#_0`7$0_R,F8`3,`D\&(`8>X&^9
ML''Z9$\`D!8U,`72V`&'P`%X^(P=\`7!.0D)0&T(\`:&5`8-@`='U4V8!POR
M08=F<`D`-`1H,P`Q92P1H`0+DP,1$`%40`,ZX`0@\`!*0$,$@`/\V6?VR2D`
M!`*3$)L$H`9#<`0T@#9+0%Q_@`+$14,T\`"'<`!]=J'N>0G5\@&)AP)!V'T3
M"0HF`(U>=5$_`#`>H!NEIV!^H#ZVF`D`V04`*!@$B0DS\$2WB`FDM@F`!@5W
M$`<`0(>7,`4ZH!O0.`<NE0`(,`!TH`#&@`(VT`$N*6J>EQQ;R0D$``#I\P<,
M<"5H("L4H`1LA'J[T'AE,/\!%PEGE^`&YN$"0W`F=G0))4"+C6,"W'!/'``!
M%*`!&7`E%B!D-Z`'0^`&%```%C!%Q@`$#@`"0N`!;X!<?-D`3H`!8H``4Q`F
M6*`&XF4!7V`!>G!:#-`""S`%47!:<C!;>O``1Y($NZ25H$`$()`&*O`'=$`"
M0U`)$2`!F[(`:4!J:)JF)<H)/P9A/O`$0Z`#9`<!I9<`=""A/Q0#&;`P!=`#
MLI(&P0$`,'"#-TA_?Z`"#'`DY:("75!ZXQ6N5X(`/T`'"-`#5T(#/X`G5/`#
MD<!#&M`@#("O[`I[YQ4#5("GIV!YGX!".3>LKN`"0]@)")!^:(``$BJM"X*P
M,L'_`S\P`QB;L1J[L1S;L1[[L2`+L@5P`"%;LB9[LBB;LBJ[LBS;LB[[L5)P
MFQ0K'$4&!39[LSB;LSJ[LSS;LS[KLU,P`3\[M$1;M$9[M$B;M$J[M$S;LR,Z
MLX<CK%`[M5DCM51[M4]CM5B[M4&CM5S[M0SCM6`[MK,BMF1[MEIBMFB[M@*B
MMFS[MO/AMG`[M^,AMW1[M]5AMWB[M\BAMWS[M[OAMX`[N,U0`-53A8B;N(J[
MN(S;N(ZKN%-PN(\[N91;N0_@!FQ(N'3;`Q/0!)[[N:`;NJ([NJ1;NJ%;`"E@
MNJJ[NJP+NJ&FN7.K9<[!%;![M@08'9E4N[&;E<-!N[H+_[:RNQR^^[M<&[R@
M4`AW^@=E0`1$4`)APGR9,&";\EVDL`!Y`$*NT$%;0;QP:[R>,`!W,`%JH`=Y
M<`%R`)<A\`(:P`'Q]R$<X`9_T%:F,``UP+N8T%^EL*6F,+S<>[7>VPFLZ8K[
M-0,/L``>H`(#$`!-8!Q*(`$"6`JE,HF+E`S\V[]3>[NB<%N8``=NL#````(5
M(!YJ4!XV(`>W>@-\0`$.$`20(`$WH$\4(`'ZQ`(QY0'FMP2&9`!6D`<V@#9W
MX`$W<$E+<$G!D0&*@@8\(`.3V``?50JY:\%D^[^>,`&NZHHW0&)_\`;QB`(+
ML`-_@`-5=J+VN"1H,`4>`%U_P/\%&Z`&W?D')W``>8``XQH$9A0%<)`$AM`!
MFT"*K80`?3`#+M0!#N0`!'`'>5"GHU#!4$RQ4OP)>V#%6/P&)C!HC/;%DU`<
MJ78)&_<'H+<"!V`!1Q`C;RP%#N`/-Q";$OP'('`/2]5-;M`$F"<&1OH'+Y`!
M!*!:B;S(9]O(,L5]_.@@.(`P"C`"P-H%^@0=Q9$^D'"1B-B)1!"%EZ`!":`'
MCC("<'>-@O4P/B(,1P``^R/+!%$N:0"_I:#(NHRFO.R*3%`#?78)>6`%"F1=
ME^`//F`%"5`&'="*3\`*-W`!H"(!SQ=K<O``$?`Q?]`#"!"""&`62U+/2^A\
MK00!%@#_!0F0!`X0`AF`!HJ6!CEV"N9\SHZ7SFKQT2#==B)]%B1=TF6'P<OQ
MQ"I-M2<]"O>I8'BZ"!Y4`=C["1F#OWT(,'7R"RG]TKH5TZ+P!*LB!\IV"7$0
M?QX@!0>@BZ,0`/L2`J("!))(!Q>`Q;H0U$*-5D0="C[`!9<`Q)T`!;GD01)0
M"62)"5*@>VEP@YA@`^M9`5:PUMO;U3!MOZBP!`[P!5_0QA%0`TA@"49:D1*P
M`3,`!Q'P`F6`TPO@`CJ`A',@`3QD!]O#3I?0>[?`U7@M3U\="L(4!U-@CSM`
M``3P`:M)!6E``,)%`3W``"7``4#P`P:``SI@`31T"7I@`P!G_P"7[5A$\+2;
MW=E3^]F?L`0\@+'-PD;=;(O`M@`2(&&(T@$1P"Q!@'N9$``H0`%.0,B<D`-*
M`'J\P-G$G4@L#0MP_0=J\`=[>HTV3'7ZH(!@NB!EH`+VF@E7P'TCT+[%]0(+
MJPLN7=ZH9]R>4`-+)0%Q)@!,A`81T`=R@`-Y<`!ZH`%1,`40P`%W\`%F(``&
M@"P<<#0/H!IXER@!13!;+>",K->GH``8H0`$`"ILD%@OE%@"P`8"D*\N8.,/
M\P8@0``VCL5QQ0GPB0EXH$,1"0ODC>(C1.#$4'K4/!%*/JQ,/@P1``2"BPQ)
M'N7^,^5#D>5:KC[G?1Q$].5E!Z_.`?\`S4SF:7<'2=#F;O[F<![G<C[G=`[G
MQX4!=9[G>K[G;IZI:O[2O_SG@GX,5S[HAFX*A7[HBAX*B;[HCLX)C?[HDA[I
MDN[HE%[IBNZU`Y`;$'<..C`$FQ(!#T-AF*[F7@L`(0`J%"``10H`2N`#P>W:
M&@`J;5KJ6NZU-:E//"`K@"RLJPP$3F``>*#$MO[EY)P)*M`#MYK1L=8AE_`!
M91`!DQ"KQ2[@7EL&(Z!/#B`KONU.:E#B"9!+>6#7U5[2USX'VL[M:>#M`?6!
M"_`%\U+N*.ZU,R#(B9@!!X`&"M`#'G``0^`#"P`#@T#`R"COQ.VU%'#?`T``
M(A!_2S`!@S#_`*/N>P)K\"I]Z18?Y1B?\3,KC'GP\2`?\B(_\B1?\B8O\A(`
MQR>_\BS?\A\_`SG-\8<#`C^@D39_\SB?\SJ_\SR?\W0P`3T?]$(_]#8O`6@D
M\[9#%9,A9]6!!N+W]%`?]5(_]51?]59_]5B?]5CO?B#-Y4#AY3*A`#LP`61?
M]F9_]FB?]FJ_]FS?]F[_]FV_`_I+O%Z_$V#_$C?PV\,1K"5=]SAQ]RSA@M%!
M``6ORV$^'`&.^$<N'&B0^/T;TS.M8'GR]=(A^,Y!^'VOXIBP`1+``VB0`$Y0
M`PS0`#!0I`V[P?WG9^2>"8UD"[Q5SI4OW,*!^5VO^7_`)!T.!P,`_P`?\`,'
MH`@1$`*1]`?.15LQ_PGK`@H:/`HV[0J`GQ*6OQRT?\XB'0%=4'\&<,67@`5Z
MX&5Y(@-@#(B6D`!AF4[BHCH"M@66\,;;8@/;90`@>``<4#$EL``4L``),`B+
MC;^O!@A_`WD'?RH'<'^*BXR-/(V0D9*3E)66EYB2-029G9Z?H)X$-:&EIJ>H
MJ:JKK*L9`)9X8&^+!C=?BF\C`SH#"'\X!Q$!1`0:#0=R'$H$:2Y.$503;G\G
M!P0_<GE1/VXO-`$Y$6=-!4,N:6D'(6)8+PI6-!,"#2\.9&B9CZW\_9:;_@(*
M7#1JH,&#"!,J_/3J4@0\U/[8PO7GC8D($O_JW`!6:,(!,8(6-'FR@(FB"P>F
M!'!0[8"4$&86-$"Q*,V,/TH*C5"TX@^,-$VH)0&0X4^$)7T\[5O(]!/`IE`Q
M%8Q*M:K5JY'N;,C40Q&%?(H.=&U"`\(?"#;^H+#Q2Y$/'7\D*$*PX<ZB-WB,
M+(H!2Q&:1'C_Q%`$Y(\.'P8XQ4C,"`R;3$>P2E9T!.QDJV@B7][,N3.JAI2(
M6/C@08,B(E,2*)HP19$>B5-TE+%@[$`:.!KT+!"0(`<T-'EZ+``2(@,:*'!H
MZ`"A2`T1`['_.,EA($T$/1^:[,EA00&!`TI`]'ECV=)2STV?HF<Z=;W[]^]!
M3QJ01LF211$F1`C_.^&TT0E+Y`?7!#>=P,9^+BBQWP`"1#```?U%D(,BXH05
M07X?&,7,'P=,$,0`&BAQPAL&^/%'&1K<IP]\"ZEG4!H_@.#"`(Q$(`0%BRCP
M6'D*M<?BCT!:)5^0`9U'I#\N#F2`%$0D(-<B"SCPPB(52/%'(DWY>.267/HS
M9)>K&`FF*DD.U(`B<2P`P`(&&.`$`!7^D<0`4PZ00R$):3GFGGQV\F6?I8@)
M:"AE"C2%$U`40,,*`!"P0@]/@'`$#7)"%X$+()C0(RF#=NII(UJ%(H``BD!!
M!46+/##A'S3TH$($JE$"P`\%_`$%J5[]``,(M3+"`!4#W,$`GJ=H]FDH_Y4I
M)`$`-QGFPQ\_$``7`0;\0<<?#.#!PA\X)I39L>`.^B<F>NR@"!TWT,B(!FHH
M$F4*"^Q'"0T8J/"'`X4ILD$(`N0``AZ,3$#2!A;(>XJ@X?[#24+G/=#$'R8X
M_$</4U[P1P`=LL=IPAQS.>XE=!1E2+X&$$$C$>T:4,&;`-`0P0L+T+C``054
MZ]I<0S!BTQ\>,0*`9F>H@G#'FBQ\T)+JGI5="&E``(`2-N!A01,60)%&#DIL
M2O3607YL20\A//!`!W;\X=T04$0`7@XR3(`!`'KT<``'3AQHA!(=='7S'PB0
MP$@&?,#0@`(UXA#!!V:E,C37C!3J#P%4;$40#/]4''5$"7]@T<,#0L!0!G-:
M,R[Z>EY7PD`-333AP+6O_2'"`1UF4$*4J</PAQ0&R,Z2$JO^T7K?`0O0Q`%M
M+4)%"4$+/3HECB^OY_+0"]G7)R$K0D-AK;\>.^8.-V$[!G\<`4`0-SR["$M\
MM^NN&LW&T0@$:.2K>/21-#_Z\_3GOU#IE(RPCP,=^,+9TN:`$;#@"##H@`,<
M8`48<.`.5-`#`=A@K"9,84K^6T0"IL"'!PSA`8+(PR)D=Y>#Z:]Q1M,?_D[(
M0H&$"A0S:-8,2D"CDM'H!41@4Q->\()RE,,'$6B"#@X`@&VQJ@#VBB&4"M!#
MD_TA9OA9P"(`9@ICG3#_62S\5@NW>!#^#413?YC#9!8W.ON);H5<3&,JO"B0
M"MS`8F/<HAD9AT8UVC$4;-P:&44W1Z[5\8Z`S$0>B;9'QO5Q:W\,I"(I,<B.
M%9)KAR1:(A=)25!)[H0@;"$63ZC%2GK2$@R0@`A&2<I2FO*4J$RE*DW)!ARL
M\I6PC"4I,]"!+8(@#K+,I2Y+B8-6[O*7N8P#Z#Y)3$G``0"P2Z8RE\G,9CKS
MF<SDP!&@2<UJ6C.9R-RBFJ[)S6XNTP+>#&<WUU3,<J+G3.;DF!?2R<XT;J2=
MX`(?/.>9OW?2LU/RO*<^&1>1??:I>/X,J$`64(<R*&(`/O!!TA1A@(7RPYX"
M_P53/B5A@`U(,137<A2W'!K18AIA#F<:P`/B@($GA>4&]^&A7X*P"HAV=$L3
MA40!YM"!0JA``PN-@(+^8(/$_2$*%#(-&C@QU)>FLPQXP(,$%A"U-)@T#1VH
M`"\4T("'(0!5J'"I48,4TT90H`(,N!8`0H#5`UA`A!J`@%P*H"(PQD41`=@J
M.ZVD"`40RS!0L%<:"#``.;1"JW)E45<;L0`=4&H#-Z#B(J*@&@!TA3&*L-("
M\"#/G@2VF!6(:V0C\=3^L`*PEW7/8!F1L3_480Z*501C==:K>_'T!FE0!/I"
M6\D((,`RM82$^[A%`"E23!6@I:UG1KN(TIXVM3^-U?\?0*`B%QBE!@LH@Q2C
MX%/A$A,ND,#5$PK!'`54(!7]M*Y[`!H)%4R)6T<P6%V_JX@G[2`!SJ6)>#\9
M`CWX@0.*R"<-HIL'TRC"N8H0PL-2$=SY3H:X<UE$#CAPUP1PH"].(,@.>F?@
M2J9#`(DCPB*:,(`/X$H@!:[P51#<B`<MU,3^640*1,SB3H2XQ5$A,8QG[`\+
M3%.<.,ZQCG><8Q[R^,=`AET(.$KC(OL#`GZ8@)*7S.0F._G)4(ZRE*=,Y2I;
M^<I//H,>L,SE+GOYR1JPF9''3.818J[,:$[SGDBHYC:[&4AL?K.<Y\R9.-/Y
MSGB.BIWSS.<^#V3/?@ZTH-?_>.9!&_K0H``THA?-:$@HNM&07O2C(TUI04^Z
MTIC.\Z4SS6DY;[K3H`;D`8Y`ZE*;^M2H3K6J5WWJL>F!U;".M:Q-C=U0VYI%
M4>@!`';-ZU[[^M?`#K:P?5V`)@S[V,A.=J_)>^MF=T8"W3KA3IQ-[6=O48S5
MSO9D3'I";&O[VU7AMOZ\#>YR,T7<DX#=5A)P`'8?8``42$#2!F``@*GW$GBP
M%RH&<-%0D-O<`#\(#BY!@0DPP*\.F$#"@5``-(P@0XHH``^J\(="8V("69,$
MI3`A55/H+>`@'PBZ(_$(/+3K,5;XPU_^P`$0T&@`4)C"@#U!!)-(8K8&^7?(
M=\Z*_Y%#P@"U5D3R%"&&X_V!"$-HW6/,YM<@4$0!?%@$<T^R7/]&00(%2`$'
MW)"#+D@=='I1Q!=8^@<^L+0"3Q#9)73.\[:?PN>0>(`>6CO1GL@A7G_8QP5F
MU@0@$``+4P`!`S(4!8P8X`,L#4`:6'"`!QSF`(_I`">DX(`-R"$"/B##`J8P
M`@3XP`8!\`$"*L"#,D@`#4.W!-O=SOI/P!T2%9CV'^I^.Z3_X9U/>,LB;+"3
M/)`*OB$@@!-P-(<82($-:(#!S$'RASB@(6-Y0,``3/!W,XBT#*V;&`2(+(G5
MM_[[EW@])%+.$T98S``:V,\^)*#[NIZ)#K_7@%N;WX.%,?_@!1'0<!+0=/2<
M)<`!$7`#00`!6;`;-C!;"X`#Y+=VX->`GC!P_V`'/]`M06`%N$(`(4`X3^(`
M72$!/6`C94,`M10!/6`'L;4$,5`K0R`%!2```"8`/Z!A$D`%]P)"!?`##``+
MDG<``2`'??`$$Y""?]`!,'!OE/!Q#IB$E"!^BR`^BT`$$>!3$6!Q?W`?*'`?
M+<,A9*`(/[,(V&47AB%?$%!K8`AQ.H!=9%`($)`!AF,8UC,]#*B$<B@)3,@X
MWC>'25B'7'.'>-B`>M@423$#4/`'#P"'`\&'??A]?[@0::!AN?4%PY1SB9B(
MBV@*$I`X'3"(BG`'%G`B'6!2=&7_`9QB60>!B)/H=A!H$#J023_%")GT`0;5
M7HJ0!OXE/P:!A*>8APCA!BBU`!FP=(J`3D.@88K`&XQ``6HGB;DHAY58"ET`
M`!_P&.:R"&@0(`*P4+NU&G=UB,O(C`AA!P\P``P`!OZU"`T``*SH%8S`;PEA
MBMT(<LT8"@@0$='!""[P!JUE%>[XC@`7CZ!P`^@$`4MW7GFW"'G`?>W(CP[H
MCY_@`;%H%(J@;]RR".Q(%?NHD."6BB>$BQC9=@QY+!?9D=GVD9\2DB));23I
M*29YDLVV`PZ0.C`9DS(YDS19DS9YDSB9DSJ9DS+&DMKF6&(3E$(YE$19E$9Y
BE$B9E$JY&91*&5L^^910&952.9546956>958F95,$0@`.S\_
`
end
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>GRAPHIC
<SEQUENCE>4
<FILENAME>y01685y0168500.gif
<DESCRIPTION>GRAPHIC
<TEXT>
begin 644 y01685y0168500.gif
M1TE&.#EA=@!&`/<``.WW^G7(WI;5Y?/X^*+8Y7_+X=SQ]H#*W5R]UYG6Y=OP
M]6/`V>;U^/+V]^7R]&[&W++=YN_X^?S\^T6UTJG=ZN/N\??Z^KGAZN_V]MGN
M\VG"VKSC[%Z^V+#>Z,+E[BVKS"2GROCZ^K;B[9'3Y#VRT4&QT,+CZ5F\UJS:
MY?S^^U&YU<WK\TNWTNCT]X3.X%S`V)/3X_K\^ZS?ZL[I[\#F\"6HRVO$VO#X
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M_O[^_AVDR?[__QZDR?___R'Y!```````+`````!V`$8```C_`/\)'$BPH,&"
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M_5XG'!A=(4PB'`;?'DPYL.7EX/_Z_Z#!*/IFC?H8P5244Y.C1HZY^YM4.;S]
MOG0K'\"0R/SFD9Q4U\\?]_`CB6^7^#.:8/S0=]^#=LU%@@S]#9>>1HKTDX@E
M^R3`@H$',O@-!P?40PHDID"BXHHLMNCBBS#&**.+I)CB"RDH!`.3?U)UQ@E,
M^^2T#@<@#!8B/_!`0(L!+43@9`211"GEE%16:>656&99Y9,1)!$#0XS\MX\B
M&:*GCPA*,,?/%LML8,\ZG>2T2")D#F<G1>@D9$DB?#(2YF$Q*1+D(OJ\!$^1
M@T$C@`(Q+"+H(H2.F<B=E$*$249C*C**16U)ND]("BGPX5Q;%*)`3#M:LE&A
M&U7J:D%S)O]"5::<2K40J_WHL\\(5O@&1``**$)50OKLF>M+E/8#*4,+_:,K
M3,M.!YM&F`J4T:P,U6H35<_&]L8)B/`#PC`\L$>5(I_062:R=_:S)T@O8;HG
MG86Z9I!"\;)WT:O.8OO/(A"44)<2,L2424*))",HJO;:J:$BGG"H#Y]C>F*=
M;*W>.VRNY?%8Z84+=6((%OY`44P+8^[8T$L3)P(3I1.7":9"EY()$U6P%7=Q
MKOS>NL^E5`0VP3.>T-1?;/_(&6O#KS&RL#Z"<EN>S=D^E&NW2+]Z:WG_J#$8
M/P7,496``RU$<[)/@^3G=`DM[#%!5Z<W$K\:8C(=<G5!T`.&D\;_ULE"BV#0
M!`XX5&+XX8@GKGCB.&!#N#E<I)?>/YTDG1$7BQMN#COF=-YY/ORF1^<_5]A5
M`S7I36W)OHRLLX<?J8&WBEU^C'!1LYUPDB$C&!RP5V_-!28,W1KM&<_7S:PP
MTN0#)2*("A$N1QH8NO@Y.49\RD`"7Y-(HJ8_%1"_CP5R@%!?\AJ&5%Z8_:1R
M3!?1=Q=8:8+)4D@;?FJT_ICK7%,#7P9B#@A($`)^_8-,!C#&U_S1C%ZX3%BW
MRHDEV&"%^=G&.Z21S"-4,81,>/!6_5I$%!8`0`RN@0!O<Y@B4N&!#Z@I>9A2
M!"?HI)$9]`$6WE%39;X3&;I(0AR12T0F_UXB@9$DX@'$R"!@`G.)*41@4J^B
M"@!@H"9^8,$#K(AA?PHU`#'0P4`&BL_7>`B9N=0@"A98VL^VR`4?;$*)>0F-
M%?;@D=#I`QP3J"(_"/`&3$%-$9IP5!(Z(`T<\N8N%I0,/SB@`%7QB5N32H0`
M7$%&1(("%`>BPZE2.)Q^,.`(FX@?&UI!L4^(1!$O4<@`.M"-^B"RDH^Q@Q>2
ML">?Z:0?`T#`'>!XETOR8Q##V!'=:&"#'2[0$!3P!"8@II"X":H-%YA`@NH2
MN].08`40"PFV&#*#"?`2,)+`@Q2&Q2\DP,"%KJP+(=A@C87TATS6"Y(^/K$$
M)MS!2+XYC1>R\/\)4RZ$$71:1`R,@075?#,P($``!M*CB/\,ZU8-R<`[$#E&
M8L`@`@P1R-$TXK)]A&())[C##C-H&0:19GZ'$((G1-(M1=B-"G1(#2RK6`0!
M]`N*;>&8LO91G']H3SN7N(UWWN$!YI4M6OT(10-R`<NYC.9["6H0/R[Q`.K@
M3*=?T$'P]A*8/LS`67\ZC$:4U8E'6>`,VE&0$C?!`CDT+Y4""M(_ECK-KP$O
MJEN]##_"%QNXL@>@<*BK7T`@`&EQ<B)CZH?=ID,#%?!C%HXYJ6`F400YK$UG
MQ'):)'N``#_,)YW<J69@Z&,(]00I6T%*2.F^UQ<.S`$3(.GD/C01G>+_+&($
M=LCK$OU!AR9<!"0Y.:7+HJ.)`2P`!&0LZ1@%<XE*7`03G:B&0.9V/+N*$3!V
MN(9./#*GS2S"8M9CA`BR$U5_K.*;ET`$Z%+RKW]H8A]?V-YWONF/3<"!$;0M
MCCM5E01D4&8[?6D'#6"2"$\,)['<TL<YOI'#Y.:0!7_0T$(RI(B#_0M?9!@!
M_!ZC@W,,5S;[W8<!CB%5^MIE"&[(2")D(Z8`+0(=\U#!+N?K#T)(5CZ_T`(`
M8IBA?XP"(YC(PBX.(1C'T&<[^61"!O17RXR\P@.E2"1?5#$'3TSX4TSK2$Q2
MP-T$N.)`H7GE;@>SA@0`0%!FP\A.!96%+]2"_YK?`V,IOA`#A?R13Y!B0`&\
MA\%O\J$-F'*4=-#S#U8<JC=AQ@\B?2`%!K"T*LZB$T;J(!>2CK$$&]A(H&(%
M*1Z,(3!'LJ!@L'`!)+QENW:2#2T`@1M^@,('`F!`MO14+#3KPP*T^+1\&`2%
M!0Q`)W^,52*2,`0_S"4U\<$@=TZ@@)X)*Q'#&$1NM(&+-8S`&IUQ%[5NU8\D
MY"$6"UQ@%88`*IUTE$]&F,*Q94K2YL3B"+>(XCY^S`#'*F<,0R##IXYU6HSL
M@PBJ8,[W,G,T1YT[!!YH1&@BZ^#!!&(%H>-3/UR@U3!.)GAST<$#]!T;JGAB
MH_MP1P?\P6?F$.,!8_]5R(\2@8E$9(`/R!YCF'/HCSPPX+"`2D@2FH&H:O8P
M@)89Q,8U9-ILS>D'ZGBC!340!%-&)R0_\T0GCJ"*F0<F=CS\P`Y>@?.<)J0)
MNIF+]^[R@73T`QWN_1M5-L0G.%AP$V?8@=P$@K%%A.`,#:HB7UX@+5>-9!GS
M,;%?%A0A?JQ!$*=N2+/^<3R\CD$+9IMN0@))`Q\`F)IB],XE*M#W2B6U`6-6
M)&_R.1A9`"-,DLZL(CJ!!D3NIT(7F1J?RF"'OP@F'AWO>H_LX;7/AB>,BE59
M0V*2"*\]8A:3(,$VEN>GQ3)B#AQPD%]N`X&$]-3O*P!"6L,=]AJH(B-]C=3_
MGO!Q2'ZD(1QER@15[%8<"GQ#X%REBQW:0%M/9(Q2`!C!)513>.5``0QF\#,9
MHBH,$2_QT!QWL`'TH`CJ<31;Y``',&/T-1?1$`!_,T-9-AQ(8`^40`E!X(%/
MT($B.((D6((F2`U&T`GO!20W,T]"\#^#\0[V,":Z8@G1L0\SY"$TEQ>!H629
MD#2R\BI7@V;<UBY4H0G!QH))0`MUI0<WD!'L\3**$`(V\`$[N$0U(`P_8&Z$
M$D5KARTBT2[$DH2)80`!8!=X<`KVARG#M0^GP&KQLQ=K<`&8L'8OXRK#(BM1
MN'@6(A(U\5`P@007T`7QD09ND"LTE#(*<0[2QEIZ_Y%0`]`):]=C?H<PDO(L
M=R(W_>$TMN8&:4!R_H`%8O`#B&@S;5-OR]47>$`.B1`*Y4$3NG<8'#)<G?<?
MM56*5'$#(E`+4J4!1F`="F&#"),.53`_/$1S]Q`'\M17&6A`,#,VZK$(C)`-
MO,`!SI$#2<`>;;@>.P<%)D47CG$D_D`,\M`9'<,ASNB,<D,L+W$+4N!&@L$-
M$R9$:$8HB0`!(()!H3%ZEN&+#"$@L9B.;;&.L5$<V+%`EW`%.,A1ME8>@-<;
MKN14AU07<!<"TCA=`BF0^_"#%[$#`0`_>></MM``_Y)*&P(I_5`!#`)GEX`+
MRE!%$R`".S(=.I.1450>EK#0`'D0",=X"6BP8F-3$KTW7Y,0.X3P5/QP``U@
M5!<1D#;)$<3W#R^P!:07DA6@$XQ@"1G2&2YC"_!G4'I!`D?P;"MF'K7XE*\1
M,_W``]/P!"%(":WPEA8`$QBX3?OPEA[X@4'P@208!$20!0QA"2W'/M>'EG:R
M,7ZB,]Q"+!DB:=P"5QTG<4%2'.MC6L2B+N7Q7MIBF+;8+\-R53=X-<N39E?3
/+`G6$(LYAL0"C)L1$``[
`
end
</TEXT>
</DOCUMENT>
</SEC-DOCUMENT>
-----END PRIVACY-ENHANCED MESSAGE-----
