<HTML>
<HEAD>
<TITLE>FORM 20-F</TITLE>
</HEAD>
<BODY bgcolor="#FFFFFF">
<!-- PAGEBREAK -->
<H5 align="left" style="page-break-before:always"><A HREF="#toc">Table of Contents</A></H5><P>

<HR size="4" noshade color="#000000" style="margin-top: -5px">
<HR size="1" noshade color="#000000" style="margin-top: -10px">






<P align="center"><FONT size="4"><B>UNITED STATES<BR>
SECURITIES AND EXCHANGE COMMISSION</B>
</FONT>

<DIV align="center"><FONT size="3"><B>Washington, D.C. 20549</B>
</FONT></DIV>
<P align="center"><FONT size="5"><B>FORM 20-F</B>
</FONT>

<CENTER>
<TABLE cellspacing="0" border="0" cellpadding="0" width="100%">
<TR valign="bottom">
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="96%">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><FONT size="3"><FONT Face="wingdings">o</Font></FONT></TD>
    <TD><FONT size="3">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="3">
<B>REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR (g)&nbsp;OF THE SECURITIES EXCHANGE ACT OF 1934</B></FONT></TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><FONT size="3">&nbsp;</FONT></TD>
    <TD><FONT size="3">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="3">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><FONT size="2"><B>OR</B></FONT></TD>
    <TD><FONT size="3">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="3">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><FONT size="3">&nbsp;</FONT></TD>
    <TD><FONT size="3">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="3">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><FONT size="3"><FONT Face="wingdings">x</Font></FONT></TD>
    <TD><FONT size="3">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="3">
<B>ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934</B></FONT></TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><FONT size="3">&nbsp;</FONT></TD>
    <TD><FONT size="3">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">
<B>For the fiscal year ended December&nbsp;31, 2002</B></FONT></TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><FONT size="3">&nbsp;</FONT></TD>
    <TD><FONT size="3">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="3">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><FONT size="2"><B>OR</B></FONT></TD>
    <TD><FONT size="3">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="3">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><FONT size="3">&nbsp;</FONT></TD>
    <TD><FONT size="3">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="3">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><FONT size="3"><FONT Face="wingdings">o</Font></FONT></TD>
    <TD><FONT size="3">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="3">
<B>TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934</B></FONT></TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><FONT size="3">&nbsp;</FONT></TD>
    <TD><FONT size="3">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">
<B>For the transition period from &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;to &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;.</B></FONT></TD>
</TR>
</TABLE>
</CENTER>
<P align="center"><FONT size="2"><B>Commission file number: 0-31052</B>
</FONT>

<P align="center"><FONT size="6"><B>Gemplus International S.A.</B>
</FONT>

<DIV align="center"><FONT size="2">(Exact name of registrant as specified in its charter)
</FONT></DIV>
<P align="center"><FONT size="2"><B>Not Applicable</B><BR>
(Translation of registrant&#146;s name into English)
</FONT>

<P align="center"><FONT size="2"><B>Grand Duchy of Luxembour</B>g<BR>
(Jurisdiction of incorporation or organization)
</FONT>

<P align="center"><FONT size="2"><B>Aerogolf Center<BR>
1 A, Hohenhof<BR>
L-2633 Senningerberg<BR>
Grand Duchy of Luxembourg</B><BR>
(Address of principal executive offices)
</FONT>

<P align="left"><FONT size="2"><B>Securities registered or to be registered pursuant to Section&nbsp;12(b) of the Act:</B>
None.
</FONT>
<P align="left"><FONT size="2"><B>Securities registered or to be registered pursuant to Section&nbsp;12(g) of the Act:</B>
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Ordinary Shares, without par value
</FONT>

<P align="left"><FONT size="2"><B>Securities for which there is a reporting obligation pursuant to Section&nbsp;15(d)
of the Act: </B>None</FONT>
<DIV align="left"><FONT size="2"><B>Indicate the number of outstanding shares of each of the issuer&#146;s classes of
capital or common stock as of the close of the period covered by the annual
report:</B>
</FONT></DIV>
<CENTER>
<TABLE cellspacing="0" border="0" cellpadding="0" width="85%">
<TR valign="bottom">
    <TD width="10%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="75%">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><FONT size="2">633,570,938</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">
Ordinary Shares, without par value</FONT></TD>
</TR>
</TABLE>
</CENTER>
<P align="left"><FONT size="2"><B>Indicate by check mark whether the registrant: (1)&nbsp;has filed all reports
required to be filed by Section&nbsp;13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12&nbsp;months (or for such shorter period that the
registrant was required to file such reports) and (2)&nbsp;has been subject to such
filing requirements for the past 90&nbsp;days.</B>
</FONT>
<CENTER>
<TABLE cellspacing="0" border="0" cellpadding="0" width="75%">
<TR valign="bottom">
    <TD width="45%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="45%">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><FONT size="2"><FONT Face="wingdings">x</Font>&nbsp;&nbsp;Yes</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">
<FONT Face="wingdings">o</Font>&nbsp;&nbsp;No</FONT></TD>
</TR>
</TABLE>
</CENTER>
<P align="left"><FONT size="2"><B>Indicate by check mark which financial statement item the registrant has
elected to follow.</B>
</FONT>
<CENTER>
<TABLE cellspacing="0" border="0" cellpadding="0" width="75%">
<TR valign="bottom">
    <TD width="45%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="45%">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><FONT size="2"><FONT Face="wingdings">o</Font>&nbsp;&nbsp; Item&nbsp;17</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">
<FONT Face="wingdings">x</Font> &nbsp;&nbsp; Item&nbsp;18</FONT></TD>
</TR>
</TABLE>
</CENTER>
<P align="center"><FONT size="2">1</FONT>
<!-- PAGEBREAK -->
<P><HR noshade><P>

<!-- TOC -->
<A name="toc"><DIV align="CENTER" style="page-break-before:always"><U><B>TABLE OF CONTENTS</B></U></DIV></A>

<P><CENTER>
<TABLE border="0" width="90%" cellpadding="0" cellspacing="0">
<TR>
	<TD width="3%"></TD>
	<TD width="3%"></TD>
	<TD width="3%"></TD>
	<TD width="3%"></TD>
	<TD width="3%"></TD>
	<TD width="3%"></TD>
	<TD width="3%"></TD>
	<TD width="3%"></TD>
	<TD width="76%"></TD>
</TR>
<TR><TD colspan="9"><A HREF="#000">Special Note Regarding Forward-Looking Statements</A></TD></TR>
<TR><TD colspan="9"><A HREF="#001">Summary</A></TD></TR>
<TR><TD colspan="9"><A HREF="#002">PART I</A></TD></TR>
<TR><TD></TD><TD colspan="8"><A HREF="#003">Item&nbsp;1. Identity of Directors, Senior Management and Advisors</A></TD></TR>
<TR><TD></TD><TD colspan="8"><A HREF="#004">Item&nbsp;2. Offer Statistics and Expected Timetable</A></TD></TR>
<TR><TD></TD><TD colspan="8"><A HREF="#005">Item&nbsp;3. Key Information</A></TD></TR>
<TR><TD></TD><TD colspan="8"><A HREF="#006">Item&nbsp;4. Information on the Company</A></TD></TR>
<TR><TD></TD><TD colspan="8"><A HREF="#007">Item&nbsp;5. Operating and Financial Review and Prospects</A></TD></TR>
<TR><TD></TD><TD colspan="8"><A HREF="#008">Item&nbsp;6. Directors, Senior Management and Employees</A></TD></TR>
<TR><TD></TD><TD colspan="8"><A HREF="#009">Item&nbsp;7. Major Shareholders and Related Party Transactions</A></TD></TR>
<TR><TD></TD><TD colspan="8"><A HREF="#010">Item&nbsp;8. Financial Information</A></TD></TR>
<TR><TD></TD><TD colspan="8"><A HREF="#011">Item&nbsp;9. The Offer and Listing</A></TD></TR>
<TR><TD></TD><TD colspan="8"><A HREF="#012">Item&nbsp;10. Additional Information</A></TD></TR>
<TR><TD></TD><TD colspan="8"><A HREF="#013">Item&nbsp;11. Quantitative and Qualitative Disclosures About Market Risk</A></TD></TR>
<TR><TD></TD><TD colspan="8"><A HREF="#014">Item&nbsp;12. Description of Securities Other than Equity Securities</A></TD></TR>
<TR><TD colspan="9"><A HREF="#015">PART II</A></TD></TR>
<TR><TD></TD><TD colspan="8"><A HREF="#016">Item&nbsp;13. Defaults, Dividend Arrearages and Delinquencies</A></TD></TR>
<TR><TD></TD><TD colspan="8"><A HREF="#017">Item&nbsp;14. Material Modifications to the Rights of Security Holders and Use of Proceeds</A></TD></TR>
<TR><TD></TD><TD colspan="8"><A HREF="#018">Item&nbsp;15. Controls and Procedures</A></TD></TR>
<TR><TD></TD><TD colspan="8"><A HREF="#019">Item&nbsp;16. &#091;Reserved&#093;.</A></TD></TR>
<TR><TD colspan="9"><A HREF="#020">PART III</A></TD></TR>
<TR><TD></TD><TD colspan="8"><A HREF="#021">Item&nbsp;17. Financial Statements</A></TD></TR>
<TR><TD></TD><TD colspan="8"><A HREF="#022">Item&nbsp;18. Financial Statements</A></TD></TR>
<TR><TD></TD><TD colspan="8"><A HREF="#023">Item&nbsp;19. Exhibits</A></TD></TR>
</TABLE>
</CENTER>
<!-- /TOC -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#toc">Table of Contents</A></H5><P>






<P align="center">
<B><FONT size="2">TABLE OF CONTENTS</FONT></B>

<CENTER>
<TABLE width="60%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="90%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Special Note Regarding Forward-Looking Statements
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom">
    <FONT size="2">4
    </FONT></TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Summary
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom">
    <FONT size="2">4
    </FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">PART&nbsp;1
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Item&nbsp;1. Identity of Directors, Senior
    Management and Advisors
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom">
    <FONT size="2">7
    </FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Item&nbsp;2. Offer Statistics and Expected
    Timetable
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom">
    <FONT size="2">7
    </FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Item&nbsp;3. Key Information
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom">
    <FONT size="2">7
    </FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Item&nbsp;4. Information on the Company
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom">
    <FONT size="2">21
    </FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Item&nbsp;5. Operating and Financial Review and
    Prospects
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom">
    <FONT size="2">43
    </FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Item&nbsp;6. Directors, Senior Management and
    Employees
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom">
    <FONT size="2">61
    </FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Item&nbsp;7. Major Shareholders and Related Party
    Transactions
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom">
    <FONT size="2">78
    </FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Item&nbsp;8. Financial Information
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom">
    <FONT size="2">82
    </FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Item&nbsp;9. The Offer and Listing
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom">
    <FONT size="2">86
    </FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Item&nbsp;10. Additional Information
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom">
    <FONT size="2">88
    </FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Item&nbsp;11. Quantitative and Qualitative
    Disclosures About Market Risk
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom">
    <FONT size="2">97
    </FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Item&nbsp;12. Description of Securities Other
    than Equity Securities
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom">
    <FONT size="2">100
    </FONT></TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">PART II
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Item&nbsp;13. Defaults, Dividend Arrearages and
    Delinquencies
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom">
    <FONT size="2">100
    </FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Item&nbsp;14. Material Modifications to the
    Rights of Security Holders and Use of Proceeds
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom">
    <FONT size="2">100
    </FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Item&nbsp;15. Controls and Procedures
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom">
    <FONT size="2">100
    </FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Item&nbsp;16. [Reserved]
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom">
    <FONT size="2">100
    </FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">PART III
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Item&nbsp;17. Financial Statements
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom">
    <FONT size="2">100
    </FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Item&nbsp;18. Financial Statements
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom">
    <FONT size="2">100
    </FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Item&nbsp;19. Exhibits
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom">
    <FONT size="2">101
    </FONT></TD>
</TR>

</TABLE>
</CENTER>



<P align="center"><FONT size="2">2</FONT>
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#toc">Table of Contents</A></H5><P>

<!-- link1 "Special Note Regarding Forward-Looking Statements" -->
<DIV align="left"><A NAME="000"></A></DIV>
<P align="center"><FONT size="2"><B>SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS</B>
</FONT>

<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Some of the statements in this Annual Report constitute forward-looking
statements. These statements relate to future events or our future financial
performance and involve assumptions, known and unknown risks, uncertainties,
and other factors that may cause our or our industry&#146;s actual results, levels
of activity, performance or achievements to be materially different from any
future results, levels of activities, performance or achievements expressed or
implied by such forward-looking statements. In some cases, you can identify
forward-looking statements by terminology such as &#147;may,&#148; &#147;will,&#148; &#147;predicts,&#148;
&#147;potential,&#148; or &#147;continue&#148; or the negative of such terms or other comparable
terminology. These statements are only predictions. Actual events or results
may differ materially.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The assumptions, risks and uncertainties involved in forward-looking
statements include without limitation: economic, competitive and technological factors affecting
markets, services, and prices; changes in spending on technology and technology
upgrades; the extent and timing of a potential recovery in the
telecommunications industry segment; continued demand for smart cards and
related solutions; development of new markets for wireless communications
products, financial services and network systems products using chip card
technology; success of restructuring efforts; chip card technology being
adopted in wireless transmission standards and other technology
standards; political, regulatory and commercial risks inherent in international
operations, including the risk of currency exchange rate fluctuations; and
general economic and business conditions in various regions of the world.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Although we believe that the expectations reflected in the forward-looking
statements are reasonable, we cannot guarantee future results, levels of
activity, performance or achievements. Factors that could cause actual results
to differ materially from those estimated by the forward-looking statements
contained in this Annual Report include, but are not limited to, the risk
factors set forth under &#147;Item&nbsp;3. Key Information &#151; Risk Factors&#148;, &#147;Item&nbsp;5.
Operating and Financial Review and Prospects&#148; and elsewhere in this Annual
Report.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;You are cautioned not to place undue reliance on forward-looking
statements, which speak only as of the date of this Annual Report. We are not
under any obligation, and we expressly disclaim any obligation, to update or
alter any forward looking statements, whether as a result of new information,
future events or otherwise, except to the extent that, as a result of
fulfilling our disclosure obligations under applicable U.S. securities laws and
regulations, we determine that such an update is necessary.
</FONT>
<!-- link1 "Summary" -->
<DIV align="left"><A NAME="001"></A></DIV>
<P align="center"><FONT size="2"><B>SUMMARY</B></FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>The following summary should be read together with the more detailed
information regarding Gemplus International S.A. and our consolidated financial
statements and notes thereto appearing elsewhere in this Annual Report.</I>
</FONT>
<P align="left"><FONT size="2"><B>Our Business</B>
</FONT>

<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We are a leading provider of technology, products and services that enable
wireless network operators to offer their customers secure communications and
transactions through mobile phones, and that enable companies, financial
institutions and public entities to provide customized services to their
customers and employees through a range of systems, including financial card
networks, loyalty programs, identification and Internet security systems.
</FONT>
<P align="center"><FONT size="2">4</FONT>
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#toc">Table of Contents</A></H5><P>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We currently have two main business segments:
</FONT>
<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">
<TR valign="top">
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" align="left" nowrap><FONT size="2">&#149;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="93%"><FONT size="2"><B>Telecommunications</B>, which includes our wireless products and
services, as well as prepaid telephone cards and other products; and</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" align="left" nowrap><FONT size="2">&#149;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="93%"><FONT size="2"><B>Financial Services and Security</B>, which includes systems and
services based on chip card technology in areas such as financial
services, identification, health care, corporate security, loyalty
programs, transportation access, pay-television applications,
e-business security activities as well as magnetic stripe
(&#147;conventional&#148;) cards for banking applications.</FONT></TD>
</TR>
</TABLE>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our wireless products and services are used in the Global System for
Mobile Communications standard (GSM), which is the mobile phone transmission
standard that is dominant in Europe and the most widely used in the world. Our
wireless products consist primarily of subscriber identity modules (SIM cards), which are small plastic modules with embedded microcontroller chips that
are inserted in mobile phones. These microcontroller chips are capable of
storing and processing data like a miniature computer, transferring processed
data to a network reader and running software programs or &#147;applets&#148; that
interact remotely with server-based applications.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The wireless communication market is entering a new era during which
mobile telephone operators increasingly use their wireless networks for data
transmission in addition to voice transmission services. We believe that this
shift in the wireless communication market will accelerate as wireless operators
construct and develop networks that use new wireless transmission standards.
These new generation networks will allow wireless operators to provide data
transmission services that go well beyond what existing mobile telephones
provide, including high speed Internet access and mobile commerce. Because of
its security, portability and flexibility, identification module technology has
been included in the specifications for the new wireless transmission standards
in many regions, including Europe and most of Asia, and we anticipate that
wireless operators in other regions, including the United States and other
parts of Asia, will also choose to adopt this technology for their new wireless
networks.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our chip card technology also offers a platform for a variety of service
applications over other network systems. In the financial services market, for
example, banks can issue credit and debit cards with embedded chips to reduce
fraud and to provide their customers with premium value services, including
e-purse applications (meaning applications that store cash values that can be
used to make purchases) and mobile banking services. In the identification
systems and security networks markets, plastic cards with embedded chips can be
used to provide more secure access to restricted facilities or computer
networks and to increase the effectiveness of identification and security
systems.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In our core telecommunications and financial services and security
segments, we provide a broad range of software and services that allow our
customers to implement and manage sophisticated systems that take advantage of
our chip card technology. Our services include customization, technical
support, consulting, system design and integration and system operation.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We also provide non-chip card products and services in other areas related
to our main telecommunications and financial services and security segments,
such as magnetic stripe credit cards for banks, card based transportation
access products and authentification and non-repudiation software.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our revenues totaled <FONT face="'Times New Roman',Times">&#128;</FONT>787.4&nbsp;million in 2002. Sales of our wireless
products and services represented 51% of our overall revenues in 2002, while
sales of our chip card products and services in our financial services and
security segment represented approximately 31%. Based on the 2002 worldwide
chip card vendor shipments ranking of Gartner Dataquest, an industry analyst,
we are the leading provider of chip cards with a global market share of
approximately 32% in terms of units sold. Based on
</FONT>
<P align="center"><FONT size="2">5</FONT>
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#toc">Table of Contents</A></H5><P>
<P align="left"><FONT size="2">information published by Eurosmart, a chip card industry association, in
April 2003, we estimate that our global market share was approximately 31.6% in
terms of units sold in 2002.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We are registered with the Registrar of Commerce in Luxembourg under RC
No.&nbsp;B73145. Our registered office is located at Aerogolf Center, 1 A
Hohenhof, L-2633 Senningerberg, Grand Duchy of Luxembourg and our telephone
number is &#043;352.26.34.61.00. Our World Wide Web site address is
www.gemplus.com. The information in our Web site is not incorporated by
reference into this Annual Report.
</FONT>
<P align="center"><FONT size="2">6</FONT>
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#toc">Table of Contents</A></H5><P>
<!-- link1 "PART I" -->
<DIV align="left"><A NAME="002"></A></DIV>
<P align="center"><FONT size="2"><B>PART I</B>
</FONT>

<!-- link2 "Item&nbsp;1. Identity of Directors, Senior Management and Advisors" -->
<DIV align="left"><A NAME="003"></A></DIV>
<P align="left"><FONT size="2"><B>Item&nbsp;1. Identity of Directors, Senior Management and Advisors</B>
</FONT>

<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Not applicable.
</FONT>
<!-- link2 "Item&nbsp;2. Offer Statistics and Expected Timetable" -->
<DIV align="left"><A NAME="004"></A></DIV>
<P align="left"><FONT size="2"><B>Item&nbsp;2. Offer Statistics and Expected Timetable</B>
</FONT>

<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Not applicable.
</FONT>
<!-- link2 "Item&nbsp;3. Key Information" -->
<DIV align="left"><A NAME="005"></A></DIV>
<P align="left"><FONT size="2"><B>Item&nbsp;3. Key Information</B>
</FONT>

<P align="center"><FONT size="2"><B>SELECTED CONSOLIDATED FINANCIAL DATA</B>
</FONT>

<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The selected consolidated financial data set forth below has been derived
from, and is qualified in its entirety by reference to our audited consolidated
financial statements and notes thereto, which have been prepared in accordance
with international accounting standards, commonly referred to as IAS, which
differ in certain significant respects from U.S. generally accepted accounting
principles, commonly referred to as U.S. GAAP. Note 32 to our audited
consolidated financial statements describes the principal differences between
IAS and U.S. GAAP as they relate to us, and reconciles our net income and
shareholders&#146; equity to U.S. GAAP. All references below are in millions, except
per share amounts or as otherwise stated.
</FONT>
<CENTER>
<TABLE cellspacing="0" border="0" cellpadding="0" width="95%">
<TR valign="bottom">
    <TD width="3%">&nbsp;</TD>
    <TD width="47%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&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="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&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 valign="bottom">
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="7"><FONT size="1"><B>Year ended</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom">
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="23"><FONT size="1"><B>and as at December 31,</B></FONT></TD>
</TR>
<TR valign="bottom">
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>1998</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>1999</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>2000</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>2001</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="7"><FONT size="1"><B>2002</B></FONT></TD>
</TR>
<TR valign="bottom">
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="3"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="3"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="3"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="3"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="7"><HR size="1" noshade></TD>
</TR>
<TR valign="bottom">
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B><FONT face="'Times New Roman',Times">&#128;</FONT></B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B><FONT face="'Times New Roman',Times">&#128;</FONT></B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B><FONT face="'Times New Roman',Times">&#128;</FONT></B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B><FONT face="'Times New Roman',Times">&#128;</FONT></B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B><FONT face="'Times New Roman',Times">&#128;</FONT></B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>$<SUP>(1)</SUP></B></FONT></TD>
</TR>
<TR valign="bottom">
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="3"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="3"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="3"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="3"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="3"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="3"><HR size="1" noshade></TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2"><B>INCOME STATEMENT DATA:</B></FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Net sales</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">583</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">767</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">1,205</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">1,023</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">787</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">869</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Cost of sales</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(383</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(487</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(751</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(716</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(587</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(649</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR valign="bottom">
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Gross profit</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">200</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">280</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">454</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">307</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">200</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">220</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Research and development expenses</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(45</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(62</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(91</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(113</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(92</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(102</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR valign="bottom">
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Reversal of research credit allowance</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">12</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Selling and marketing expenses</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(78</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(97</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(159</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(165</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(112</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(124</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR valign="bottom">
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">General and administrative expenses</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(48</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(64</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(90</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(111</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(90</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(99</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Litigation expenses</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(18</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Management severance expenses</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(26</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Restructuring expenses</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(28</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(90</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(99</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR valign="bottom">
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Goodwill amortization and impairments</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(5</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(7</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(11</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(27</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(47</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(52</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Legal reorganization expense</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(65</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Operating income (loss)</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">24</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(15</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">116</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(181</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(232</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(256</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">

<TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Financial income</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">0</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">1</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">21</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">28</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">28</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">32</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">

<TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Financial expense</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(5</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(5</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(9</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(8</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(80</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(88</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Other income (expense), net</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">12</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(1</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">0</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">46</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(29</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(32</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR valign="bottom">
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Income (loss)&nbsp;before taxes</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">31</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(20</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">129</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(114</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(312</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(344</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Provision for income taxes</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(7</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(12</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(30</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">14</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(9</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(10</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR valign="bottom">
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Net income (loss)</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">24</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(32</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">99</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(100</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(321</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(354</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Net income (loss)&nbsp;per share<SUP> (2)</SUP></FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD><FONT size="2">&nbsp;</FONT></TD>

<TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&#150; Basic</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">0.08</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(0.10</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">0.20</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(0.16</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(0.53</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(0.58</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&#150; Diluted</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">0.08</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(0.10</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">0.18</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(0.16</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(0.53</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(0.58</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
</TR>
</TABLE>
</CENTER>
<P align="center"><FONT size="2">7</FONT>
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#toc">Table of Contents</A></H5><P>

<CENTER>
<TABLE cellspacing="0" border="0" cellpadding="0" width="95%">
<TR valign="bottom">
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="43%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&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 valign="bottom">
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="7"><FONT size="1"><B>Year ended</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom">
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="7"><FONT size="1"><B>and as at December 31,</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom">
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>1998</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>1999</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>2000</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>2001</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="7"><FONT size="1"><B>2002</B></FONT></TD>
</TR>
<TR valign="bottom">
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="3"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="3"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="3"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="3"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="7"><HR size="1" noshade></TD>
</TR>
<TR valign="bottom">
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B><FONT face="'Times New Roman',Times">&#128;</FONT></B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B><FONT face="'Times New Roman',Times">&#128;</FONT></B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B><FONT face="'Times New Roman',Times">&#128;</FONT></B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B><FONT face="'Times New Roman',Times">&#128;</FONT></B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B><FONT face="'Times New Roman',Times">&#128;</FONT></B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>$<SUP>(1)</SUP></B></FONT></TD>
</TR>
<TR valign="bottom">
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="3"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="3"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="3"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="3"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="3"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="3"><HR size="1" noshade></TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
    <TD colspan="3"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2"><B>Amount in accordance with U.S. GAAP</B></FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&#150; Net income (loss)&nbsp;per U.S. GAAP</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">23</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(44</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(123</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(49</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(282</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(311</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&#150; Net income (loss)&nbsp;per share <SUP>(2)</SUP></FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&#150; Basic</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">0.08</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(0.14</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(0.25</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(0.08</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(0.46</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(0.51</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&#150; Diluted</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">0.07</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(0.14</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(0.25</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(0.08</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(0.46</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(0.51</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR valign="bottom">
    <TD colspan="3"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2"><B>OTHER DATA:</B></FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">

<TD colspan="3"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Adjusted
EBITDA<SUP>(3)</SUP></FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">69</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">104</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">195</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(60</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(98</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(109</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR valign="bottom">
    <TD colspan="3"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Net cash from (used for) operating
activities</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">85</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">75</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">69</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(23</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(63</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(69</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD colspan="3"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Net cash (used for) investing activities</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(41</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(74</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(266</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(65</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(47</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(52</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR valign="bottom">
    <TD colspan="3"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Net cash from (used for) financing
activities</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(61</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">29</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">818</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(35</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">4</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">4</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD colspan="3"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2"><B>BALANCE SHEET DATA:</B></FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD colspan="3"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Cash and cash equivalents</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">18</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">27</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">636</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">491</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">417</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">461</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD colspan="3"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Trade accounts receivable, net</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">151</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">201</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">311</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">189</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">145</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">160</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD colspan="3"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Other current assets</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">29</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">46</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">97</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">104</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">93</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">107</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD colspan="3"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Inventory, net</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">56</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">96</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">174</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">140</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">97</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">103</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD colspan="3"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Total assets</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">495</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">667</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">1,909</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">1,531</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">1,218</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">1,344</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD colspan="3"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Long-term debt, less current portion</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">10</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">8</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">6</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD colspan="3"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Minority interest</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">5</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">9</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">17</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">17</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">15</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">17</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD colspan="3"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Shareholders&#146; equity</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">260</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">294</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">1,385</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">1,168</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">860</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">950</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD colspan="3"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Total assets under U.S. GAAP</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">500</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">671</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">1,767</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">1,441</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">1,234</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">1,362</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD colspan="3"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Shareholders&#146; equity under U.S. GAAP</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">265</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">298</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">1,243</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">1,078</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">879</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">970</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
</TABLE>
</CENTER>
<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">
<TR valign="top">
    <TD width="1%" align="left" nowrap><FONT size="2">(1)</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="96%"><FONT size="2">Dollar amounts have been translated for convenience at the Noon Buying Rate
on April&nbsp;25, 2003, of US $1.00 = <FONT face="'Times New Roman',Times">&#128;</FONT>0.91.</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="1%" align="left" nowrap><FONT size="2">(2)</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="96%"><FONT size="2">Basic net income per share under IAS and U.S. GAAP is calculated by
dividing net income by the weighted average number of our ordinary shares
outstanding during each period, in each case adjusted for a fifty-for-one
share split that took place on June&nbsp;21, 2000. The weighted average number
of shares used in calculating the basic net income per share was
298,523,800, 313,120,400 497,523,946, 636,992,392 and 606,222,660 for the
years ended December&nbsp;31, 1998, 1999, 2000, 2001 and 2002. Diluted net
income per share under IAS and U.S. GAAP is calculated in the same manner
as basic net income per share, except that dilutive effect of the exercise
of our outstanding share options and warrants is included in the
determination of the weighted average number of shares outstanding for
each period. The weighted average number of shares used in calculating
the diluted net income per share was 307,274,750, 313,120,400,
539,256,206, 636,992,392 and 606,222,660 for the years ended December&nbsp;31,
1998, 1999, 2000, 2001 and 2002.</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="1%" align="left" nowrap><FONT size="2">(3)</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="96%"><FONT size="2">Adjusted EBITDA is defined as earnings before interest expense (net of
interest income), provision for income taxes and depreciation and
amortization expense and legal reorganization expense. We believe that
Adjusted EBITDA is a useful indicator of operational strength and
performance of our business. However, Adjusted EBITDA is not a
measurement of operating performance calculated in accordance with IAS or
U.S. GAAP, and should not be considered a substitute for operating income
or net income as a measure of profitability, or a substitute for cash
flows from operating activities as a measure of liquidity, in each case
determined in accordance with IAS or U.S. GAAP. Because all companies do
not calculate EBITDA identically, and because our adjustments relate to a
legal reorganization that is unique to our company, the presentation of
Adjusted EBITDA contained herein may not be comparable to similarly
entitled measures of other companies.</FONT></TD>
</TR>
</TABLE>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The reconciliation of the adjusted EBITDA with the operating income
is as follows:
</FONT>



<CENTER>
<TABLE cellspacing="0" border="0" cellpadding="0" width="95%">
<TR valign="bottom">
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="43%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&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 valign="bottom">
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>1998</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>1999</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>2000</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>2001</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="7"><FONT size="1"><B>2002</B></FONT></TD>
</TR>
<TR valign="bottom">
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="3"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="3"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="3"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="3"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="7"><HR size="1" noshade></TD>
</TR>
<TR valign="bottom">
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B><FONT face="'Times New Roman',Times">&#128;</FONT></B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B><FONT face="'Times New Roman',Times">&#128;</FONT></B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B><FONT face="'Times New Roman',Times">&#128;</FONT></B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B><FONT face="'Times New Roman',Times">&#128;</FONT></B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B><FONT face="'Times New Roman',Times">&#128;</FONT></B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>$<SUP>(1)</SUP></B></FONT></TD>
</TR>
<TR valign="bottom">
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="3"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="3"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="3"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="3"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="3"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="3"><HR size="1" noshade></TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">

<TD colspan="3"><FONT size="2">Operating
income (loss)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">24</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(15</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">116</FONT></TD>
    <TD nowrap><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(181</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(232</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(256</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR valign="bottom">
    <TD colspan="3"><FONT size="2">Depreciation, amortization and
impairment</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">45</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">54</FONT></TD>
    <TD nowrap><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">79</FONT></TD>
    <TD nowrap><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">121</FONT></TD>
    <TD nowrap><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">134</FONT></TD>
    <TD nowrap><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">147</FONT></TD>
    <TD nowrap><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD colspan="3"><FONT size="2">Legal reorganization expense</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">65</FONT></TD>
    <TD nowrap><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD nowrap><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD nowrap><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD nowrap><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD nowrap><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="3"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="3"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="3"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="3"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="3"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="3"><HR size="1" noshade></TD>
</TR>

<TR valign="bottom">
    <TD colspan="3"><FONT size="2">Adjusted EBITDA</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">69</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">104</FONT></TD>
    <TD nowrap><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">195</FONT></TD>
    <TD nowrap><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(60</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(98</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(109</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
</TR>
<TR valign="bottom">
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="3"><HR size="4" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="3"><HR size="4" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="3"><HR size="4" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="3"><HR size="4" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="3"><HR size="4" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="3"><HR size="4" noshade></TD>
</TR>


</TABLE>
</CENTER>


<P align="center"><FONT size="2">8</FONT>
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#toc">Table of Contents</A></H5><P>

<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>Exchange Rate Information And The European Monetary System</B>
</FONT>

<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Under the provisions of the Treaty on European Monetary Union negotiated
at Maastricht in 1991 and signed by the then 12 member states of the European
Union in early 1992, a European Monetary Union, known as EMU, was implemented
on January&nbsp;1, 1999, and a single European currency, known as the euro, was
introduced. The following 11 member states participate in EMU and have adopted
the euro as their national currency: Austria, Belgium, Finland, France,
Germany, Ireland, Italy, Luxembourg, the Netherlands, Portugal and Spain.
Greece joined the EMU in January 2001. The legal rate of conversion between
French francs and the euro was fixed on December&nbsp;31, 1998, at <FONT face="'Times New Roman',Times">&#128;</FONT>1.00 = FF
6.55957.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;For your convenience, this Annual Report contains translations of certain
euro amounts into U.S. dollars. Unless otherwise indicated, dollar amounts
have been translated from euros at the rate of US $1.00 = <FONT face="'Times New Roman',Times">&#128;</FONT>0.91, the Noon
Buying Rate for the euro on April&nbsp;25, 2003. The &#147;Noon Buying Rate&#148; is the noon
buying rate in New York City for cable transfers in foreign currencies as
certified for customs purposes by the Federal Reserve Bank of New York. This
does not mean that we actually converted these amounts into U.S. dollars at
that rate, and you should not assume that they could have been converted at
that or any other rate.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Fluctuations in the exchange rate between the euro and the U.S. dollar
will affect the U.S. dollar price of our American Depositary Shares (ADSs) on
the Nasdaq National Market.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our reporting currency during 1998 and 1999 was the French franc. We
began reporting in euros on January&nbsp;1, 2000. The following table shows the
French franc/U.S. dollar and euro/U.S. dollar exchange rates based on the Noon
Buying Rate expressed in French francs per U.S. dollar and euros per U.S.
dollar.
</FONT>
<CENTER>
<TABLE cellspacing="0" border="0" cellpadding="0" width="75%">
<TR valign="bottom">
    <TD width="5%">&nbsp;</TD>
    <TD width="15%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="15"><FONT size="1"><B>French francs</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="15"><FONT size="1"><B>euros</B></FONT></TD>
</TR>
<TR valign="bottom">
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="15"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="15"><HR size="1" noshade></TD>
</TR>
<TR valign="bottom">
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>Period-</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>Average</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>Period-</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>Average</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom">
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>end Rate</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>Rate<SUP>(1)</SUP></B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>High</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>Low</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>end Rate</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>Rate</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>High</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>Low</B></FONT></TD>
</TR>
<TR valign="bottom">
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="3"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="3"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="3"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="3"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="3"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="3"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="3"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="3"><HR size="1" noshade></TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">1998</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">5.59</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">5.90</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">6.21</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">5.39</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">1999<SUP>(2)</SUP></FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">6.51</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">6.16</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">6.56</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">5.49</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">1.00</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">0.94</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">1.00</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">0.84</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">2000</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">1.07</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">1.08</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">1.21</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">0.97</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">2001</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">1.12</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">1.12</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">1.19</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">1.05</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">2002</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">0.95</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">1.06</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">1.16</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">0.95</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>


<TR valign="bottom" bgcolor="#eeeeee">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">December</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">1.00</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">1.06</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">1.45</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">0.82</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">2003</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">January</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">0.96</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">1.03</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">1.16</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">0.92</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">February</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">0.84</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">0.88</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">1.01</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">0.81</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">March</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">0.83</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">0.77</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">0.89</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">0.63</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">April</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">0.94</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">0.87</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">1.00</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">0.79</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">May</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">1.29</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">1.08</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">1.35</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">0.95</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

<TR valign="bottom">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" colspan="5"><FONT size="2">June 1 - through June 26</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">1.17</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">1.20</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">1.17</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">1.13</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

</TR>
</TABLE>
</CENTER>
<P>
<HR size="1" width="18%" align="left" noshade>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">
<TR valign="top">
    <TD width="1%" align="left" nowrap><FONT size="2">(1)</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="96%"><FONT size="2">The average of the Noon Buying Rates on the last business day of each
month (or portion thereof) during the relevant period.</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="1%" align="left" nowrap><FONT size="2">(2)</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="96%"><FONT size="2">The Federal Reserve Bank of New York stopped publishing Noon Buying Rates
for the French franc on January&nbsp;15, 1999. Noon Buying Rates for French
francs for periods subsequent to January&nbsp;15, 1999 have been calculated by
applying the fixed exchange rate of FF 6.55957 per <FONT face="'Times New Roman',Times">&#128;</FONT>1.00 to the Noon
Buying Rate for euros.</FONT></TD>
</TR>
</TABLE>
<P align="center"><FONT size="2">9</FONT>
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#toc">Table of Contents</A></H5><P>


<P align="center"><FONT size="2"><B>RISK FACTORS</B>
</FONT>

<P align="left"><FONT size="2"><B>Risks Related to Our Business</B>
</FONT>

<P align="left"><FONT size="2"><B><I>The significant downturn in the wireless communications industry may continue
to adversely affect our business.</I></B>
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our business is significantly affected by trends in the wireless
communications industry, because a substantial portion of our revenues is
derived from sales of wireless products and services, which accounted for
approximately 51% of our revenues in 2002. Although the wireless
communications industry experienced tremendous growth through 2000, demand for
wireless products and services fell abruptly in 2001 and continued to fall in
2002, particularly in Europe and the United States, resulting in a 19% decline
in our overall revenues in 2002 compared to 2001. Because we typically earn
our highest margins from sales of wireless products, reduced demand for
wireless products also affected our profitability, resulting in an operating
loss of <FONT face="'Times New Roman',Times">&#128;</FONT>232&nbsp;million in 2002. In addition, the slowdown in the wireless
industry has led wireless operators to delay making the necessary investments
for the introduction of new wireless systems and technologies, which may limit
our ability to return to profitability through the introduction of new products
and services. If the slowdown in the wireless industry continues, our business
may be adversely affected.
</FONT>
<P align="left"><FONT size="2"><B><I>The markets that we target for a substantial part of our future growth are in
very early stages of development, and may not develop rapidly or at all.</I></B>
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Many of the markets that we target for our future growth are currently
small or non-existent and need to develop if we are to achieve our growth
objectives. If some or all of these markets do not develop, or if they develop
more slowly than we anticipate, then our business may be adversely
affected. For example:
</FONT>
<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">
<TR valign="top">
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" align="left" nowrap><FONT size="2">&#149;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="93%"><FONT size="2">We are seeking to take advantage of the development of new
markets for wireless communications products and services, including
mobile commerce, mobile banking and mobile Internet services. These
markets are only just starting to develop. Since early 2001, these
markets have experienced a significant slowdown in investment
levels, and companies in these markets have had limited access to
capital.</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" align="left" nowrap><FONT size="2">&#149;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="93%"><FONT size="2">We are also developing chip card products and services for
the financial services market. Chip card technology has not yet
been widely adopted by the financial services industry outside
France, Germany and the United Kingdom, largely due to the cost of
the necessary infrastructure, lack of internationally compatible
standards and the relatively limited capabilities of all but the
newest chip cards.</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" align="left" nowrap><FONT size="2">&#149;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="93%"><FONT size="2">We are investing in identification and security networks
products and services, but so far we have not deployed our systems
on a widespread basis. Our businesses in all of these markets
currently represent start-up operations, and we do not know whether
these operations will be profitable. The development of these
markets will depend on many factors that are beyond our control,
including the factors that are discussed below.</FONT></TD>
</TR>
</TABLE>
<P align="center"><FONT size="2">10</FONT>
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#toc">Table of Contents</A></H5><P>




<P align="left"><FONT size="2"><B><I>In 2001 and 2002 we had rapid and significant changes in our senior management,
and while we do not expect similar changes to occur in the near term, we cannot
be assured such changes will not occur.</I></B>
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We believe that having stable management is important to the management of
our company. In 2001 and 2002 we had rapid and significant changes in our
senior management, and although we do not expect similar changes to occur in
the near term, we cannot be assured that such changes will not occur and
adversely affect our business. Improvements in our performance and
operations depend significantly on the success of a
management team including a new Chief Executive Officer, who joined our company in September 2002, and a
new Executive Vice President of Operations, who joined our company in February
2003.
</FONT>
<P align="left"><FONT size="2"><B><I>Our restructuring and repositioning strategies, or our implementation of those
strategies, may fail to provide positive results.</I></B>
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We implemented a restructuring plan in the second quarter of 2001 to address
the effects on our business of the global slowdown in the wireless
communications industry, which slowdown has led to a decline in sales of our
wireless products and services and an increase in our operating costs. We also
implemented a second restructuring plan in February 2002, which included
reducing approximately 1,140 employees from our workforce. In December 2002,
we announced and began consultations and implementation of a third
restructuring plan by which we aim to reduce our workforce by an additional
1,100 employees. If we are not able to reduce our operating costs and increase
our productivity because our restructuring plans do not provide the results
that we expect or are not implemented adequately, we may continue to experience
difficulties in growing our business.
</FONT>
<P align="left"><FONT size="2"><B><I>Chip card technology may not be adopted in new wireless transmission standards
and infrastructure or in the financial services industry, such that we may lose
some of our existing customers or not obtain future customers.</I></B>
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our ability to grow depends significantly on whether government and
industry organizations adopt chip card technology as part of their new
standards. These standards include the wireless 2G, 2.5G and 3G standards
promoted by various organizations around the world. If these organizations do
not adopt chip card technology, then we might not be able to penetrate some of
the new markets we are targeting, or we might lose some of our existing
customer base.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In order for us to achieve our growth objectives, chip card technology
must be adopted in a variety of areas, including:
</FONT>
<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">
<TR valign="top">
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" align="left" nowrap><FONT size="2">&#149;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="93%"><FONT size="2">some wireless communication devices that are currently not
equipped to read smart cards;</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" align="left" nowrap><FONT size="2">&#149;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="93%"><FONT size="2">bank credit and debit card systems, which in most countries
still use magnetic stripe cards as their main technology;</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" align="left" nowrap><FONT size="2">&#149;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="93%"><FONT size="2">computer equipment, which must include chip card readers as
standard equipment if the use of chip cards for Internet and other
applications is to become common;</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" align="left" nowrap><FONT size="2">&#149;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="93%"><FONT size="2">widely used digital signature information technology security systems; and</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" align="left" nowrap><FONT size="2">&#149;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="93%"><FONT size="2">national identity card programs.</FONT></TD>
</TR>
</TABLE>
<P align="center"><FONT size="2">11</FONT>
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#toc">Table of Contents</A></H5><P>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The decisions of standard setting bodies that may decide whether to
adopt chip card technology are likely to be based on factors such as:
</FONT>
<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">
<TR valign="top">
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" align="left" nowrap><FONT size="2">&#149;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="93%"><FONT size="2">the cost of adopting chip card technology relative to alternative systems;</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" align="left" nowrap><FONT size="2">&#149;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="93%"><FONT size="2">the degree of security provided by chip card technology;</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" align="left" nowrap><FONT size="2">&#149;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="93%"><FONT size="2">the development of competing technology to provide security and premium value services;</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" align="left" nowrap><FONT size="2">&#149;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="93%"><FONT size="2">the relative ease or difficulty of implementing chip card technology; and</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" align="left" nowrap><FONT size="2">&#149;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="93%"><FONT size="2">whether chip card technology becomes generally accepted by businesses and consumers.</FONT></TD>
</TR>
</TABLE>
<P align="left"><FONT size="2"><B><I>We need to maintain and further develop our position as a provider of software
and services to earn higher margins from our technology.</I></B>
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The increasing sophistication of chip card technology places a premium on
providing innovative software, systems and  specialized consulting and services to
customers, in addition to manufacturing and supplying chip cards. Although we
have had some early success positioning ourselves as a provider of services and
systems, we cannot assure you that we will continue to be successful with this
strategy, or that we will be able to capture a significant share of the market
for the sophisticated services and systems that we believe are likely to
produce more attractive margins in the future. A significant portion of the
value of chip card technology lies in the development of operating systems and
applications that will permit the use of chip cards in new markets. In
contrast, the margins involved in manufacturing and selling chip cards can be
relatively small, and might not be sufficient to permit us to earn an
attractive return on our development investments.
</FONT>
<P align="left"><FONT size="2"><B><I>We may fail to optimally manage our inventories of microcontroller chips or
suffer distruptions in our supply chain.</I></B>
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our technology is based principally on microcontroller chips that run
software and downloaded applications. Because the wireless communications
industry has proven volatile in the past few years, experiencing rapid growth
in 2000, a sudden downturn in 2001, and a continued slowdown in 2002, we have
had difficulty managing our inventory levels of microcontroller chips.
Although in 2002 we reduced our inventory to more acceptable levels, managing
our inventory supply in the future, particularly if the industry undergoes
tremendous and rapid change, will remain a challenge to our procurement
strategy.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In addition, if the wireless communications industry experiences a sudden
upturn with significant levels of growth in the future, we will need to secure
adequate supplies of microcontroller chips to expand our production. If we are
not able to secure these supplies, or experience supply problems with the
newest generation of microcontroller chips that generate our highest margins,
we may record lower revenues and profits and lose market share to
competitors that have secured adequate chip supplies.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Until 1999, STMicroelectronics and Infineon were the only two major
silicon suppliers for the smart card industry, covering roughly 90% of market
needs. In 2000, we invested in an intensive multisourcing program to enlarge
our supplier base to include Atmel, Infineon and Philips.
</FONT>
<P align="center"><FONT size="2">12</FONT>
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#toc">Table of Contents</A></H5><P>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In 2002, we purchased approximately 90% of our microcontroller chips from
those three suppliers. While there are several other chip suppliers in the
market, the failure by one or more of our three main suppliers to continue to
meet our needs could have a material adverse affect on our business.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In order to secure an adequate supply of chips in the future, we may also
decide to provide financing for the expansion of a chip supplier&#146;s capacity by
pre-purchasing chips, which could expose us to the supplier&#146;s credit risk.
</FONT>
<P align="left"><FONT size="2"><B><I>If we are unable to keep up with rapid changes in chip card technology, our
existing products and services could become obsolete or not competitive.</I></B>
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The market for our products and services is marked by rapid technological
change, frequent new product introductions and chip card technology
enhancements, uncertain product life cycles, changes in client demands and
evolving industry standards. New products and services based on new or
improved technologies or new industry standards can render existing products
and services obsolete and unmarketable. To succeed, we will need to enhance
our current products and service offerings and develop new products and
services on a timely basis to keep pace with developments related to chip card
technology and to satisfy the increasingly sophisticated requirements of our
customers. Any delays in developing and releasing enhanced or new products and
services or in keeping pace with continuous technological change may cause us
to lose our existing customer base.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The introduction of non-portable security devices onto PC motherboards
could limit the use of smart card technology as a means of securing computer
networks.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The process of developing our products and services is extremely complex
and requires significant continuing development efforts and investements. Our
investments in research and development have been considerable and may need to
increase, and may adversely affect our operating results and financial
condition.
</FONT>
<P align="left"><FONT size="2"><B><I>Our quarterly financial results fluctuate and are difficult to predict, and if
our future results are below the expectations of investors, the price of our
shares or ADSs may decline.</I></B>
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our operating results have varied substantially from quarter to quarter,
and we anticipate that this pattern will continue, particularly as we develop
our products and services in new markets. This variability makes it difficult
to use our quarterly results of operations as an indicator of possible trends.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Although these quarterly variations are a historical part of our business,
they could affect the market price of our shares or ADSs. In particular, if
our results of operations in any quarter are below the expectations of
investors, the trading price of our shares or ADSs may decrease materially.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In addition to general economic factors and factors that affect companies
generally, a number of factors specific to us are likely to cause quarterly
variations, including:
</FONT>
<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">
<TR valign="top">
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" align="left" nowrap><FONT size="2">&#149;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="93%"><FONT size="2">the mix of products and services that we are able to provide,
including in particular whether we are able to increase our higher
margin product and services, such as those we provide in the
wireless communications market, as a percentage of our sales;</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" align="left" nowrap><FONT size="2">&#149;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="93%"><FONT size="2">the geographical mix of our sales, including the relative
extent of our growth in countries where our products and services
are sold at the most attractive prices;</FONT></TD>
</TR>
</TABLE>
<P align="center"><FONT size="2">13</FONT>
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#toc">Table of Contents</A></H5><P>


<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">
<TR valign="top">
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" align="left" nowrap><FONT size="2">&#149;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="93%"><FONT size="2">costs related to possible acquisitions of technology or
businesses, including costs related to the integration of acquired
businesses into our operations; and</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" align="left" nowrap><FONT size="2">&#149;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="93%"><FONT size="2">success in maintaining and enhancing existing relationships
and developing new relationships with strategic partners, including
operating systems developers, systems integrators and other
implementation partners.</FONT></TD>
</TR>
</TABLE>
<P align="left"><FONT size="2"><B><I>The period between our initial contact with a potential customer and a sale of
our products or services tends to be long and may be subject to delays.</I></B>
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The period between our initial contact with a potential customer and the
purchase of our products and services is often long and subject to delays
associated with the budgeting, approval and competitive evaluation processes
that frequently accompany significant capital expenditures. A lengthy sales
cycle may have an impact on the timing of our revenue, which may cause our
quarterly operating results to fall below investor expectations. We believe
that a customer&#146;s decision to purchase our products and services is often
discretionary, involves a significant commitment of resources, and is
influenced by customer budgetary cycles. To successfully sell our products and
services, we generally must educate our potential customers regarding their use
and benefits, which can require significant time and resources. There can be
no assurance that this significant expenditure of time and resources will
result in actual sales of our software and services.
</FONT>
<P align="left"><FONT size="2"><B><I>If our products contain defects or if we make errors in providing services, we
could lose customers and revenue and become subject to costly claims.</I></B>
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Complex chip card based products such as ours can contain errors and
defects, particularly when first introduced or when new versions or
enhancements are released. Similarly, our services involve sophisticated
decisions that result in our customers making significant investments and
changes to their business organizations. Serious defects or errors in our
products or services could result in lost revenues or a delay in market
acceptance and would be detrimental to our reputation, which would harm our
business, operating results and financial condition.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Defects or other performance problems in our products and services could
also result in financial or other losses to our customers, in which case our
customers could seek compensation for losses from us. If these kinds of claims
were to occur, they could be time consuming and costly to defend and could harm
our reputation, which could result in a loss of our customers and a decrease in
our revenues. Although our sales and services agreements typically contain
provisions designed to limit our exposure to claims, existing or future laws or
unfavorable judicial decisions could potentially limit the effectiveness of
these limitation of liability provisions.
</FONT>
<P align="left"><FONT size="2"><B><I>If our strategic relationships terminate or do not develop, we may lose
important sales and marketing opportunities.</I></B>
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We have established strategic relationships with telecommunications
carriers, operating systems and security software developers, financial
institutions and several government agencies and organizations. These
organizations are not always obligated to continue their relations with us, and
could terminate those relations at any time to work instead with our
competitors, or they could terminate their programs that use our products and
technology. If our strategic relationships are terminated, we might lose
important sales and marketing opportunities. These relationships expose our
products and services to many potential customers to which we may not otherwise
have access. In addition, these relationships provide us with insights into
new technology and with access to third-party service providers that our
customers can use for implementation assistance.
</FONT>
<P align="center"><FONT size="2">14</FONT>
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#toc">Table of Contents</A></H5><P>
<P align="left"><FONT size="2"><B><I>Challenges to our intellectual property rights could cause us to incur costly
litigation, and if we are not successful, could result in our losing valuable
assets or market share.</I></B>
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our success depends, in part, upon our proprietary technology and other
intellectual property rights. If we are not able to defend successfully our
industrial or intellectual property rights, we might lose rights to technology
that we need to develop our business, which may cause us to lose market share,
or we might be required to pay significant license fees for the use of such
technology. To date, we have relied primarily on a combination of patent,
trade secret and copyright laws, as well as nondisclosure and other contractual
restrictions on copying, reverse engineering and distribution to protect our
proprietary technology. We regularly prepare patent applications for
technology related to our chip cards, but there can no assurance that these
applications will be successful.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Litigation to enforce our intellectual property rights or protect our
trade secrets could result in substantial costs and may not be successful. Any
inability to protect intellectual property in our technology could seriously
harm our business, operating results and financial condition. In addition, the
laws of certain foreign countries may not protect our intellectual property
rights to the same extent as do the laws of France or the United States. Our
means of protecting our intellectual property rights in France, the United
States or any other country in which we operate may not be adequate to fully
protect our intellectual property rights. Similarly, if third parties claim
that we infringe on their intellectual property rights, we might be required to
incur significant costs and to devote substantial resources to the defense of
such claims, and if we are unsuccessful we could suffer costly judgments and
injunctions that could materially adversely affect our business, operating
results or financial condition.
</FONT>
<P align="left"><FONT size="2"><B><I>We might be forced to change our product and service offerings or to pay higher
costs if the third-party technology that we use in our products changes or if
the price of such technology increases.</I></B>
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Most of our products integrate third-party technology that we license or
otherwise obtain the right to use, including:
</FONT>
<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">
<TR valign="top">
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" align="left" nowrap><FONT size="2">&#149;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="93%"><FONT size="2">third party operating systems;</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" align="left" nowrap><FONT size="2">&#149;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="93%"><FONT size="2">security and cryptography technology for card operating
systems, which prevents unauthorized parties from tampering with our
cards; and</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" align="left" nowrap><FONT size="2">&#149;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="93%"><FONT size="2">public key infrastructure technology that is used in Internet
and corporate security networks.</FONT></TD>
</TR>
</TABLE>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Technology providers frequently change their products and cease supporting
prior versions of their products. Should such cessation of support occur, we
cannot be assured that we will be able to adapt our products and services to
accommodate changes in the third party technology that we use. If not, we may
have to change the features of our products and services or to discontinue some
or all of them. Some changes in technology are accompanied by significant
price increases, which could increase our costs.
</FONT>
<P align="left"><FONT size="2"><B><I>We have multinational operations that are subject to risks inherent in
international operations, including currency exchange rate fluctuations.</I></B>
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We conduct our business in all regions of the world, including in many
countries outside the United States and the European Union. As a result, we
are subject to political, regulatory and commercial risks inherent in
international operations, including the risk of currency exchange rate
fluctuations,
</FONT>
<P align="center"><FONT size="2">15</FONT>
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#toc">Table of Contents</A></H5><P>
<P align="left"><FONT size="2">particularly in relation to the U.S. dollar, the British pound, the
Chinese renminbi and the Singapore dollar.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our operations are subject to the risks associated with international operations, which include:
</FONT>
<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">
<TR valign="top">
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" align="left" nowrap><FONT size="2">&#149;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="93%"><FONT size="2">slowdown or recession in global, regional or national economic growth;</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" align="left" nowrap><FONT size="2">&#149;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="93%"><FONT size="2">tariffs and trade barriers;</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" align="left" nowrap><FONT size="2">&#149;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="93%"><FONT size="2">exchange controls;</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" align="left" nowrap><FONT size="2">&#149;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="93%"><FONT size="2">fluctuations in national currencies;</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" align="left" nowrap><FONT size="2">&#149;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="93%"><FONT size="2">social and political risks;</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" align="left" nowrap><FONT size="2">&#149;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="93%"><FONT size="2">national and regional labor disputes;</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" align="left" nowrap><FONT size="2">&#149;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="93%"><FONT size="2">required compliance with a variety of foreign laws, regulations and standards; and</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" align="left" nowrap><FONT size="2">&#149;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="93%"><FONT size="2">the difficulty of enforcing legal claims and agreements through certain legal systems.</FONT></TD>
</TR>
</TABLE>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Furthermore, our regional businesses are subject to cyclical fluctuations
in the industries and economies in which they operate. Any of the risks
discussed above could adversely affect our results of operations.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In 2002, we earned 12% of our revenues in China, and we expect to continue
to earn a material portion of our revenues in China. Conducting business and
manufacturing activities in the China is subject to special risks that may not
arise in other countries, including:
</FONT>
<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">
<TR valign="top">
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" align="left" nowrap><FONT size="2">&#149;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="93%"><FONT size="2">the possible failure to adopt, or the adoption of
inconsistent or ineffectual, market-oriented economic reforms by the
government;</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" align="left" nowrap><FONT size="2">&#149;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="93%"><FONT size="2">uncertainties regarding the interpretation and enforcement of
laws and regulations; and</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" align="left" nowrap><FONT size="2">&#149;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="93%"><FONT size="2">the devaluation of the local currency or the imposition of
restrictions on currency conversion or expatriation of profits.</FONT></TD>
</TR>
</TABLE>
<P align="center"><FONT size="2">16</FONT>
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#toc">Table of Contents</A></H5><P>


<P align="left"><FONT size="2"><B><I>Future acquisitions may adversely affect our business.</I></B>
</FONT>

<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our strategy to achieve growth may lead us to make significant
acquisitions of businesses that are believed to be complementary to our own.
Future acquisitions may require us to use significant financial resources, to
make potentially dilutive issuances of equity securities, to incur debt and to
incur amortization expenses related to goodwill and other intangible assets.
Acquisitions involve numerous other risks, including difficulties in
integrating the operations, technologies and products acquired and the
employees of the acquired businesses, the diversion of management&#146;s attention
from other business concerns, the risk of entering geographic markets in which
we have no prior experience, and the potential loss of key employees of
acquired businesses.
</FONT>
<P align="left"><FONT size="2"><B>Risks Related to Our Industry</B>
</FONT>

<P align="left"><FONT size="2"><B><I>Our markets are highly competitive and competition could harm our ability to
sell products and services and could reduce our margins and market share.</I></B>
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The market for chip card products and services is rapidly changing and
intensely competitive. We expect competition to increase as the industry grows
and as chip card technology begins to converge with the wireless communications
and information technology industries. Recently, intense competition among
suppliers has led to increase pricing pressures on our products. We may not be
able to compete successfully against current or future competitors. The
competitive pressures facing us may harm our business, operating results and
financial condition.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our current principal competitors include, among others, chip card product
and service providers such as Schlumberger, Giesecke &#038; Devrient, Oberthur Card
Systems and Orga Kartensysteme. We are experiencing the presence of new
entrants in the industry with low-cost operating models, especially in China,
with aggressive pricing policies that could threaten our market share in the
future. As the market for chip card products and services in the wireless,
financial services and Internet security industries grows, and as these markets
converge, we may experience competition from companies that are currently our
suppliers, customers and strategic partners, including:
</FONT>
<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">
<TR valign="top">
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" align="left" nowrap><FONT size="2">&#149;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="93%"><FONT size="2">operating system developers, such as Microsoft and IBM;</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" align="left" nowrap><FONT size="2">&#149;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="93%"><FONT size="2">electronic security product and service providers, such as
Baltimore Technologies, Entrust, RSA and Verisign;</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" align="left" nowrap><FONT size="2">&#149;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="93%"><FONT size="2">wireless device manufacturers, such as Nokia, Motorola, Samsung and Sony-Ericsson;
</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" align="left" nowrap><FONT size="2">&#149;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="93%"><FONT size="2">
systems integrators, such as IBM, Siemens and EDS;</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" align="left" nowrap><FONT size="2">&#149;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="93%"><FONT size="2">microcontroller chip manufacturers, such as
STMicroelectronics, Infineon, Philips, Atmel, Samsung and Sony; and</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" align="left" nowrap><FONT size="2">&#149;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="93%"><FONT size="2">wireless infrastructure software providers, such as Sonera
SmarTrust.</FONT></TD>
</TR>
</TABLE>
<P align="center"><FONT size="2">17</FONT>
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#toc">Table of Contents</A></H5><P>


<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Some of our competitors and potential competitors have larger technical
staffs, larger customer bases, more established distribution channels, greater
brand recognition and greater financial, marketing and other resources than we
do. Our competitors may be able to develop products and services that are
superior to our products and services, that achieve greater customer acceptance
or that have significantly improved functionality as compared to our existing
and future chip card products and services. In addition, our competitors may
be able to negotiate strategic relationships on more favorable terms than we
are able to negotiate. Many of our competitors may also have well-established
relationships with our existing and prospective customers. Increased
competition may result in reduced margins, loss of sales or decreased market
shares, which in turn could harm our business, operating results and financial
condition.
</FONT>
<P align="left"><FONT size="2"><B><I>The Internet and other communications networks may not expand as a commerce and
business medium.</I></B>
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our growth will suffer if the use of the Internet for commercial
transactions does not grow, or if wireless devices do not become an accepted
method of accessing the Internet for commercial transactions.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The acceptance and use of the Internet and wireless communications
networks for Internet commerce, mobile banking and mobile commerce could be
limited by a number of factors, including:
</FONT>
<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">
<TR valign="top">
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" align="left" nowrap><FONT size="2">&#149;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="93%"><FONT size="2">inadequate development of network infrastructure;</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" align="left" nowrap><FONT size="2">&#149;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="93%"><FONT size="2">inconsistent quality of service;</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" align="left" nowrap><FONT size="2">&#149;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="93%"><FONT size="2">excessive cost of high-speed service;</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" align="left" nowrap><FONT size="2">&#149;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="93%"><FONT size="2">concerns about transaction security and fraud or theft of
stored data and information communicated on the Internet and
wireless communications networks;</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" align="left" nowrap><FONT size="2">&#149;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="93%"><FONT size="2">increased government regulation and taxation of transactions
conducted over the Internet and wireless communications networks;
and</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" align="left" nowrap><FONT size="2">&#149;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="93%"><FONT size="2">delays in development or adoption of new standards or
protocols to handle increased levels of activity.</FONT></TD>
</TR>
</TABLE>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In addition, companies and government agencies that have already invested
substantial resources in other methods of conducting business may be reluctant
to adopt new Internet-based or wireless-based methods.
</FONT>
<P align="left"><FONT size="2"><B><I>Future regulations could be enacted that either directly restrict our business
or indirectly affect our business by limiting the growth of Internet and mobile
commerce.</I></B>
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our products and services are sold in numerous markets around the world,
each of which imposes regulations affecting our operations, including product
controls, trade restrictions, tariffs and charges, and labor and other social
controls. Many countries impose regulatory restrictions or bans on the use or
transfer of cryptography, which is an essential part of our chip card products
and services. Regulation of the Internet in general, and of e-commerce and
mobile commerce in particular is largely unsettled.
</FONT>
<P align="center"><FONT size="2">18</FONT>
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#toc">Table of Contents</A></H5><P>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;As Internet and mobile commerce evolves, we expect that various
governmental entities will enact or revise laws, rules and regulations covering
issues such as user privacy, consumer fraud, pricing, content and quality of
products and services and the use of cryptography. If enacted or revised, such
laws, rules or regulations could increase the costs or administrative burdens
of doing business using the Internet and wireless communications networks and
cause companies to seek alternative means of transacting business. The
limitations on the use and transfer of cryptography and the enactment of laws
increasing the cost or burdens of using the Internet or wireless communications
would limit the market for our products and services.
</FONT>
<P align="left"><FONT size="2"><B><I>New developments may render chip card encryption technology inadequate or
ineffective.</I></B>
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Chip cards use cryptographic technology to secure transactions and
exchange confidential information. Each chip card is equipped with its own
secret key that is required to encrypt and decode messages through the
application of algorithms. The security afforded by this technology depends on
the integrity of a user&#146;s secret key and the complexity of the algorithms used
to encrypt and decode information. Any significant advance in techniques for
attacking cryptographic systems, including the successful decoding of
cryptographic messages or the misappropriation of private keys, could result in
a decline in the security of our technology and affect the market&#146;s acceptance
of or demand for our products.
</FONT>
<P align="left"><FONT size="2"><B><I>The role of chip cards may be relegated to that of simple identity tokens with
limited additional added value.</I></B>
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The primary role of chip cards has historically been to ensure
authentication, and they are widely used as identity tokens. Chip cards can
also provide additional value with on-board applications running in a
stand-alone or in a client-server mode. This value is created if:
</FONT>
<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">
<TR valign="top">
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" align="left" nowrap><FONT size="2">&#149;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="93%"><FONT size="2">chip cards are technically enabled to play an effective role in applications; and</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" align="left" nowrap><FONT size="2">&#149;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="93%"><FONT size="2">applications relying on chip cards are actually developed and used.</FONT></TD>
</TR>
</TABLE>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;If an insufficient number of applications rely on the chip cards, chip
cards risk having their role reduced to that of simple identity tokens,
providing limited additional value. In these circumstances, the value of chip
cards would be greatly diminished and that could materially adversely affect
our business operating results and financial condition.
</FONT>
<P align="center"><FONT size="2">19</FONT>
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#toc">Table of Contents</A></H5><P>
<P align="left"><FONT size="2"><B>Risks Related To Trading of Our Shares and ADSs</B>
</FONT>

<P align="left"><FONT size="2"><B><I>Technology-related stock prices are especially volatile, and this volatility
may depress our stock price and the trading in our shares and ADSs often
experience low volumes.</I></B>
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Because we operate in the highly volatile technology sector, the market
price of our shares and ADSs is likely to continue to be highly volatile. In
addition, there is often low market volume in our shares or ADSs.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;If we are unable to meet the continued listing standards of the exchanges
or quotation systems on which our securities trade, we may be required to
delist and investors may not be able to as easily resell their shares or ADSs.
</FONT>
<P align="left"><FONT size="2"><B><I>Because several existing stockholders own a large percentage of our voting
stock, other stockholders&#146; effective voting power may be limited.</I></B>
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;As of April&nbsp;29, 2003, our executive officers, directors and their
affiliates beneficially own or control approximately 7.24% of our shares
(excluding shares held by Texas Pacific Group and its affiliates and the Quandt
family) and have options to acquire an additional 2.4% of our shares. In
addition, Texas Pacific Group and the Quandt family own or control 26.4% and
19.1% of our shares, respectively, or 23.3% and 16.9% on a fully diluted basis,
respectively. As of June&nbsp;18, 2003, Sagem Group was the beneficial owner of
9.62% of our shares. If some or all of such persons act together, they can
have the ability to control matters submitted to our shareholders for approval,
including the election and removal of directors and the approval of any merger,
consolidation or sale of all or substantially all of our assets. This
potential concentration of control can affect the value of our traded
securities.
</FONT>
<P align="left"><FONT size="2"><B><I>If we are deemed a passive foreign investment company certain unfavorable U.S.
tax rules may apply.</I></B>
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Due to the decline in our market capitalization, comparatively minor
changes in our assets or share price could result in our becoming a &#147;passive
foreign investment company&#148; or &#147;PFIC&#148; for U.S. tax purposes for reasons outside
our control. Certain unfavorable U.S. tax rules apply to shareholders in
companies that are PFICs in respect of even a single year. See &#147;Item&nbsp;10.
Additional Information &#151; Taxation &#151; United States Federal Income Tax
Considerations &#151; Passive Foreign Investment Company Considerations.&#148;
</FONT>

<P align="center"><FONT size="2">20</FONT>




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

<!-- link2 "Item&nbsp;4. Information on the Company" -->
<DIV align="left"><A NAME="006"></A></DIV>
<P align="left"><FONT size="2"><B>Item&nbsp;4. Information on the Company</B>
</FONT>

<P align="center"><FONT size="2"><B>HISTORY AND DEVELOPMENT OF THE COMPANY</B>
</FONT>

<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our business was founded in 1988 by Dr.&nbsp;Marc Lassus, our former Chairman
of the board of directors, who pioneered chip card technology while working for
Motorola and SGS-Thompson in the early 1980s. We started our chip card
operations in 1988 as a major supplier of prepaid phonecards in France and
elsewhere. Because of our strength in the prepaid phonecard market during the
1990s, we developed strong ties with the telecommunications industry and, as a
result, we helped pioneer the development of chip card technology for wireless
communications.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our business was originally conducted through a French limited partnership
known as Gemplus SCA. In December 1999, we merged Gemplus Associates, the
general partner of Gemplus SCA, into Gemplus SCA and transformed the surviving
entity into a French corporation, Gemplus SA. In February 2000, we reorganized
our corporate structure with a new holding company, Gemplus International SA, a
Luxembourg corporation created in December 1999. The shareholders of Gemplus
SA contributed to Gemplus International SA substantially all of the shares of
Gemplus SA in exchange for shares of our capital stock. As a result of these
transactions, as of December&nbsp;31, 2002, our company held 98.1% of the
outstanding shares of Gemplus SA, which is our largest operating subsidiary.
Texas Pacific Group became a shareholder of our company at the time of its
equity contribution in February 2000. In December 2000, we completed an
initial public offering of our capital stock, in the form of ordinary shares
and ADSs.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our company is organized under the laws of the Grand Duchy of Luxembourg.
Our company&#146;s registered office is located at Aerogolf Center, 1 A Hohenhof,
L-2633 Senningerberg, Grand Duchy of Luxembourg, telephone &#043;352.26.34.61.00.
Our agent for U.S. federal securities law purposes is Gemplus Corp., located at
1350 Old Bayshore Hwy., Suite&nbsp;445, Burlingame, California 94010, telephone
&#043;1.650.373.0200.
</FONT>
<P align="left"><FONT size="2"><B>Capital Expenditures and Divestitures</B>
</FONT>

<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The following table sets forth our capital expenditures, before
retirements and disposals, for each year in the three-year period ended
December&nbsp;31, 2002.
</FONT>
<CENTER>
<TABLE cellspacing="0" border="0" cellpadding="0" width="65%">
<TR valign="bottom">
    <TD width="5%">&nbsp;</TD>
    <TD width="64%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="11"><FONT size="1"><B>Year ended December 31,</B></FONT></TD>
</TR>
<TR valign="bottom">
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="11"><HR size="1" noshade></TD>
</TR>
<TR valign="bottom">
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>2000</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>2001</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>2002</B></FONT></TD>
</TR>
<TR valign="bottom">
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="3"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="3"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="3"><HR size="1" noshade></TD>
</TR>
<TR valign="bottom">
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="center" colspan="11"><FONT size="1"><B>(millions of euros)</B></FONT></TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Research and development equipment</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">4.7</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">5.2</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">1.8</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Manufacturing</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">57.7</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">18.1</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">12.1</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Buildings</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">16.8</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">63.0</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">17.7</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Other</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">23.3</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">16.3</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">0.3</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR>
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Total capital expenditures</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">102.5</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">102.6</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">31.9</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR>
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
</TABLE>
</CENTER>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In 2002, we implemented a second, and began consultations and
implementation of third, restructuring and rationalization program. These
plans include the rationalization of office facilities on a worldwide basis.
In 2002, capital expenditures were made primarily in Europe, and included
principally <FONT face="'Times New Roman',Times">&#128;</FONT>17.7&nbsp;million related to a research and development and office
building located in La Ciotat, France, which was mainly financed through a
sale-leaseback transaction.
</FONT>
<P align="center"><FONT size="2">21</FONT>
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#toc">Table of Contents</A></H5><P>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We have budgeted limited capital expenditures of approximately <FONT face="'Times New Roman',Times">&#128;</FONT>10&nbsp;million
for the year ended December&nbsp;31, 2003, including <FONT face="'Times New Roman',Times">&#128;</FONT>7&nbsp;million related to equipment
for our manufacturing and research and development activities.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;On July&nbsp;31, 2001, we completed the sale of our Tag electronic smart labels
solutions business to Axa Private Equity, for <FONT face="'Times New Roman',Times">&#128;</FONT>3,007 thousand. On August&nbsp;23,
2001, we completed the sale of our subsidiary SkiData A.G., our electronic
access-control solutions business unit, to Kudelski SA, for <FONT face="'Times New Roman',Times">&#128;</FONT>117,500 thousand,
of which <FONT face="'Times New Roman',Times">&#128;</FONT>33,500 thousand was received in cash and <FONT face="'Times New Roman',Times">&#128;</FONT>84,000 thousand was
received in shares, which we immediately resold for <FONT face="'Times New Roman',Times">&#128;</FONT>84,000 thousand to a
designee of Kudelski.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;See &#147;Item&nbsp;5. Operating and Financial Review and Prospects&#151;Liquidity and
Capital Resources&#148; for a description of our sources of financing for our
budgeted capital expenditures.
</FONT>

<P align="center"><FONT size="2"><B>BUSINESS OVERVIEW</B>
</FONT>

<P align="left"><FONT size="2"><B>Overview</B>
</FONT>

<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We are a leading provider of technology, products and services that enable
wireless network operators to offer their customers secure communications and
transactions through mobile phones, and that enable companies, financial
institutions and public entities to provide customized services to their
customers and employees through a range of systems, including financial card
networks, loyalty and bonus point programs, identification and Internet
security systems.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We currently have two main business segments:
</FONT>
<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">
<TR valign="top">
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" align="left" nowrap><FONT size="2">&#149;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="93%"><FONT size="2">Telecommunications, which includes our wireless products such
as subscriber identification modules (SIM), software and services,
as well as prepaid phonecards; and</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" align="left" nowrap><FONT size="2">&#149;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="93%"><FONT size="2">Financial Services and Security, which includes our chip card
products and services centered around payment applications such as
financial services and retail, and security applications for
governments and other large nationwide identity or health care
programs and corporations or other closed user groups for physical
and logical identification.</FONT></TD>
</TR>
</TABLE>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Within our telecommunications business segment, our wireless products and
services are based on subscriber identification modules (SIMs), which are small
plastic modules with embedded microcontroller chips, and related systems.
Subscriber identification modules are used in the Global System for Mobile
(GSM)&nbsp;wireless communication standard, which is dominant in Europe and the most
widely used in the world, in terms of both the number of subscribers and number
of countries. SIMs are also increasingly used in other wireless
communications systems standards, such as in CDMAOne, WCDMA and CDMA2000.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our chip card technology enables a variety of service
applications over network systems. Our chip card products and services
are used in financial, retail, government and other businesses to provide a
wide array of services, and management of customer relationships and databases.
In the financial services market, for example, banks can issue credit and
debit cards with embedded chips to reduce fraud and to provide their customers
with premium value services, including e-purse applications (i.e., applications
that store cash values that can be used to make purchases) and mobile banking
services. In the identification systems and security networks markets, plastic
cards with
</FONT>
<P align="center"><FONT size="2">22</FONT>
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#toc">Table of Contents</A></H5><P>


<P align="left"><FONT size="2"> embedded chips can be used to provide secure access to restricted
facilities or computer networks and to increase the effectiveness of
identification and security systems.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In both our telecommunications and financial services and security
businesses we provide a broad range of software and services that allow our
customers to implement and manage sophisticated systems. Our software includes
card management systems that allow our customers to manage card issuance,
update data, download applications and obtain user information. Our services
include customization, technical support, consulting, system design and
integration and system operation.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We also provide non-chip card products and services in other areas that
are related to our main telecommunications, financial services and security
segments, such as magnetic stripe credit cards for banks, card based
transportation access products and authentication and non-repudiation software.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our revenues totaled <FONT face="'Times New Roman',Times">&#128;</FONT>787.4&nbsp;million in 2002. Sales of wireless products
and services in the telecommunications segment represented 51% of our overall
revenues in 2002, while sales of our chip card products and services in our
financial services and security segment represented 31% of our overall
revenues. Based on the 2002 worldwide chip card vendor shipments ranking of
Gartner Dataquest, an industry analyst, we are the leading provider of chip
cards with a global market share of approximately 32% in terms of units sold.
Based on information published by Eurosmart, a smart card industry
organization, in April 2003 we estimate that our global market share was
approximately 31.6% in terms of units sold in 2002.
</FONT>
<P align="left"><FONT size="2"><B>Our Strategy</B>
</FONT>

<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We are pursuing a vision of expanding and enabling the market for safe
electronic services involving our products, including a broad set of services
delivered through wireless or fixed wire networks, while increasing the use of
high-volume, portable, secure and personalizable devices.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our strategy for attaining this vision is to be a leading provider of
applications and services enabled by chip cards. We will seek to grow our core
businesses, while restoring and maintaining their profitability.
Simultaneously, we will seek stronger positions in new promising markets
involving the use of chip cards and related software in identity, corporate
security and wireless local area network systems (WLANs).
</FONT>
<P align="left"><FONT size="2"><B><I>Restoring the company to profitable growth through restructuring, improved
efficiency and increased market share:</I></B>
</FONT>
<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">
<TR valign="top">
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" align="left" nowrap><FONT size="2">&#149;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="93%"><FONT size="2">We are working to adapt our cost structure and increase our
competitiveness in an environment where price is an overriding factor.</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" align="left" nowrap><FONT size="2">&#149;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="93%"><FONT size="2">We are restructuring in the effort to adapt our industrial,
operational and administrative structures while limiting impacts on
research and development and on our sales force. Certain of our key
industrial and customer support processes are being re-engineered for
improved efficiency.</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" align="left" nowrap><FONT size="2">&#149;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="93%"><FONT size="2">We are working on increasing our market share in the wireless
communications market, in particular, by working closely with key
customers, enhancing our product mix, improving our supply chain and
customer business processes, and using differentiating account
strategies.</FONT></TD>
</TR>
</TABLE>
<P align="center"><FONT size="2">23</FONT>
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#toc">Table of Contents</A></H5><P>




<P align="left"><FONT size="2"><B><I>Differentiating on value</I></B>
</FONT>

<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">
<TR valign="top">
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" align="left" nowrap><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="93%"><FONT size="2">Our strategic plan focuses on a number of promising high-value markets:</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="top">
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" align="left" nowrap><FONT size="2">&#149;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="93%"><FONT size="2">Software and services in wireless communications, including SIM
administration, content delivery, mobile-payment, and over the air
(OTA)&nbsp;platform markets. Our position as a supplier of OTA platforms
should enable us to further strengthen our relationships with our
customers.</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" align="left" nowrap><FONT size="2">&#149;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="93%"><FONT size="2">Identity. These card programs represent a large and fast-growing
opportunity for us. Our potential in this area, together with
strategic partnerships, should help further our success.</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" align="left" nowrap><FONT size="2">&#149;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="93%"><FONT size="2">Corporate security (controlling access to buildings and
information). Many organizations have found that smart card enabled
technology is the best way to secure their networks. With our leading
skills in relevant security technologies, we hope to
become a major player in this field.</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" align="left" nowrap><FONT size="2">&#149;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="93%"><FONT size="2">WLAN (wireless local area network). The functionality of this
technology is enhanced by using the smart cards as a key to access
control. Our research and development capabilities should help provide
us a leading position in the development of this segment. The
deployment of this new technology is facing major issues regarding
security, roaming and billing. The SIM card offers an excellent point
of access control for WLAN operators to enable secured authentication
while seeking to use the roaming and billing capabilities of the
existing telecom networks.</FONT></TD>
</TR>
</TABLE>
<P align="left"><FONT size="2"><B><I>Getting closer to our customers</I></B>
</FONT>

<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We are strengthening our regional structures in order to improve customer
responsiveness worldwide. We believe that improved regional sales and sales
support functions will enhance customer relationships by combining the ability
to design and deliver complex high-end solutions with the support of efficient
local offices and direct supply chain management on commodities.
</FONT>
<P align="left"><FONT size="2"><B><I>Excelling in execution is a key goal</I></B>
</FONT>

<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We are re-engineering our organizational structure and its processes in
the effort to further improve accountability, and monitor and reach employee,
customer and shareholder satisfaction targets.
</FONT>
<P align="left"><FONT size="2"><B>Technology Overview</B>
</FONT>

<P align="left"><FONT size="2"><B><I>Chip Card Technology</I></B></FONT>

<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our products and services are part of a class of technology that involves
small modules or cards with embedded electronic chips known as chip cards or
smart cards. Chip card technology has evolved significantly since chip cards
were first introduced in France in the 1970s. Our founder, Dr.&nbsp;Marc Lassus,
was instrumental in the initial development of chip cards, and since our
inception in 1988, we have played, and continue to play, an important role in
the evolution of chip cards and related applications.
</FONT>
<P align="center"><FONT size="2">24</FONT>
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#toc">Table of Contents</A></H5><P>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;There are two major categories of chip cards:
</FONT>
<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">
<TR valign="top">
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" align="left" nowrap><FONT size="2">&#149;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="93%"><FONT size="2">Memory cards, which contain chips that provide only secure
storage of data, that can be modified at a special reading terminal.
Memory cards are used for single applications that do not require
sophisticated data processing functions, such as prepaid phonecards
and loyalty cards.</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" align="left" nowrap><FONT size="2">&#149;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="93%"><FONT size="2">Microcontroller cards, which contain chips that are capable
of storing and processing data like a miniature computer,
transferring processed data to a network and running software
programs or &#147;applets&#148; that interact remotely with server-based
applications. The most sophisticated new chip cards, such as
subscriber identification modules (SIMs) used in wireless
communications, are all microcontroller cards.</FONT></TD>
</TR>
</TABLE>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Chip card technology is developing rapidly as the capability of
microcontroller chips to conduct sophisticated operations continually expands.
Some of the most important recent technological developments in chip card
technology include:
</FONT>
<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">
<TR valign="top">
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" align="left" nowrap><FONT size="2">&#149;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="93%"><FONT size="2">The development of operating systems for microcontroller
chips that allow card issuers to load multiple applets on a single
card. This allows our customers to offer their users several
functions on the same card. For example, a single multi-application
card can be used to access facilities or computer networks, to make
payments as a debit or credit card, to store bonus points that can
be used to make purchases and to authenticate Internet transactions.</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" align="left" nowrap><FONT size="2">&#149;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="93%"><FONT size="2">The development of open standards for chip card operating
systems. These operating systems contain an embedded virtual
machine or interpreter, which interacts with the operating system
and a documented application programming interface (API)&nbsp;to execute
applets. The API allows software programmers to design new applets
in a standardized format, without reference to the technical
specifications of the virtual machine, improving ease of use and
programming time. Microcontroller chips based on open operating
systems are interoperable with more systems. This means that
software programmers can create new applications based on a standard
language or protocol, which can be used to provide services through
the chip cards of different manufacturers. The most widely used
open platforms today are based on Java Card technology, a software
API specification for chip cards based on technology from Sun
Microsystems and adopted by the smart card industry.</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" align="left" nowrap><FONT size="2">&#149;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="93%"><FONT size="2">The development of sophisticated card management software for
chip cards, which helps card issuers use new chip card capabilities
by enabling them to manage their cards remotely, and to update,
download and install new information or applets as they become
available without replacing the card. These new software
capabilities have also created a demand for system design,
integration and management services that allow card technology
companies to develop closer ties with their customers.</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" align="left" nowrap><FONT size="2">&#149;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="93%"><FONT size="2">Significant advances in the memory structure and capacity of
microcontroller chips with the development of silicon-based flash
memory technology. Such chips are able to store substantially more
information, conduct more sophisticated operations and load a higher
number of applets. In addition to greater memory capacity, the
flash memory chips give card manufacturers increased flexibility to
modify the chip&#146;s operating system.</FONT></TD>
</TR>
</TABLE>
<P align="center"><FONT size="2">25</FONT>
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#toc">Table of Contents</A></H5><P>


<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">
<TR valign="top">
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" align="left" nowrap><FONT size="2">&#149;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="93%"><FONT size="2">The development of chip cards designed to work with the most
advanced security technologies, such as public key infrastructure
(PKI)&nbsp;systems and secure downloadable applets. Cards with public
key infrastructure capability can be offered to customers requiring
the highest level of security, such as individuals or companies that
conduct transactions or business over the Internet, and banks
implementing mobile payment systems.</FONT></TD>
</TR>
</TABLE>
<P>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We believe that chip card products and related services include
features that are attractive to customers in the sophisticated wireless,
financial, Internet and corporate security markets. The features we
believe are most significant include:</FONT>
<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">
<TR valign="top">
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" align="left" nowrap><FONT size="2">&#149;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="93%"><FONT size="2"><I>Security</I>. Chip cards are capable of storing complex
algorithms that can be used to identify a user or to encrypt
information, such as a digital certificate. Because a user needs
both a card and an activation mechanism, such as a personal
identification number (PIN), to use a card, security is not
entirely compromised by either the loss of a card or the communication of a
PIN. As a result, chip cards can be used to authenticate mobile and
electronic commerce transactions, significantly reducing the
incidence of fraud. In addition, microcontroller chips can contain
sophisticated cryptographic algorithms and functions that prevent
unauthorized parties from tampering with the contents of the card.</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" align="left" nowrap><FONT size="2">&#149;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="93%"><FONT size="2"><I>Portability</I>. Chip cards can be easily transferred from one
device to another. As a result, for example, a mobile phone
subscriber can purchase a new mobile phone without changing his
service subscription, a feature that mobile phone operators find
attractive as it reduces customer churn. Similarly, a chip card
used to authenticate the user of a company&#146;s computer network can be
inserted into any computer equipped with a reader, and include
certain user profile information so the user is not limited to a
particular computer.</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" align="left" nowrap><FONT size="2">&#149;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="93%"><FONT size="2"><I>Flexibility</I>. The newest chip cards can carry and run
multiple applets that can be updated remotely without the need to
replace the card. This increases the flexibility of banks and their
companies to use chip cards as customer management tools by changing
applications in response to changes in product offerings or customer
preferences. This also allows them to offer multiple services on a
single platform, such as wireless, banking, payment and loyalty
applications.</FONT></TD>
</TR>
</TABLE>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Despite these advantages, chip card technology has not yet been widely
deployed in some areas, particularly in financial services. This is primarily
because the replacement of existing terminals with devices capable of reading
chip cards, and the implementation of related network infrastructure, can be
costly and time consuming. See &#147;Item&nbsp;3. Key Information&#151;Risk Factors&#151;Risks
Related to Our Business.&#148; The markets that we target for a substantial part of
our future growth are in very early stages of development, and if they do not
develop our business may be adversely affected.
</FONT>
<P align="left"><FONT size="2"><B><I>Use of Our Chip Card Technology in Wireless Communications</I></B>
</FONT>

<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Currently, one of the largest uses for chip card technology is in wireless
communications, due to the security and flexibility provided by chip cards.
There are various wireless network standards:
</FONT>
<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">
<TR valign="top">
    <TD width="6%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" align="left" nowrap><FONT size="2">&#149;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="90%"><FONT size="2">Wireless 2G standards are the second major type of
technology used of wireless communication. 2G standards mainly
support voice transmission, as well as some data transmission
capability. The Global System for Mobile communications (GSM)
is the most widely used 2G standard both in terms of number of
subscribers and number of countries. The GSM standard requires
the use of subscriber identification module (SIM)&nbsp;technology.</FONT></TD>
</TR>
</TABLE>
<P align="center"><FONT size="2">26</FONT>
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#toc">Table of Contents</A></H5><P>


<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">
<TR valign="top">
    <TD width="6%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" align="left" nowrap><FONT size="2">&#149;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="90%"><FONT size="2">Wireless 2.5G standards support higher data
transmission capability than GSM and other 2G standards.
Wireless 2.5G standards incorporate identification module
technology similar to that used in 2G SIM cards. The technology
is included in a removable card or in the telephone handset. In
the transition from 2G to 2.5G, some operators located outside of
Europe are migrating to the European GSM-originated standard.</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="6%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" align="left" nowrap><FONT size="2">&#149;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="90%"><FONT size="2">Wireless 3G standards, in particular WCDMA and
CDMA2000, with higher data transmission capability than 2.5G, are
in the process of being deployed. As with 2.5G, the wireless 3G
standards incorporate identification module technology similar to
that used in SIM cards, either as a removable card or in the
telephone handset.</FONT></TD>
</TR>
</TABLE>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The following table generally summarizes the principal 2G, 2.5G and 3G
transmission standards, indicating the principal geographical regions where
they are used or are anticipated to be used, and whether they incorporate
removable identification module technology. Some countries use more than one
standard, and thus are listed in more than one place in the table.
</FONT>
<CENTER>
<TABLE cellspacing="0" border="0" cellpadding="0" width="85%">
<TR valign="bottom">
    <TD width="30%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="30%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="30%">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center"><FONT size="1"><B>Use of Removable Card</B></FONT></TD>
</TR>
<TR valign="bottom">
    <TD nowrap align="center"><FONT size="1"><B>Transmission Standard</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center"><FONT size="1"><B>Principal Regions</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center"><FONT size="1"><B>Identification Modules</B></FONT></TD>
</TR>
<TR valign="bottom">
    <TD nowrap align="center"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center"><HR size="1" noshade></TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><FONT size="2"><B><I>2G</I></B><BR>
GSM</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2"><BR>
Europe, Asia
(including China),<BR>
several regions in the
United<BR> States
</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="bottom"><FONT size="2">Yes</FONT></TD>
</TR>
<TR valign="bottom">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><FONT size="2">CDMA</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">
United States, China
</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">No</FONT></TD>
</TR>
<TR valign="bottom">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><FONT size="2">TDMA</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">
United States
</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">No</FONT></TD>
</TR>
<TR valign="bottom">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><FONT size="2"><B><I>2.5G</I></B></FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><FONT size="2">GPRS (based on GSM)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">
Europe, most of Asia
</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">Yes</FONT></TD>
</TR>
<TR valign="bottom">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><FONT size="2">CDMAOne</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">
United States, China,
South <BR>Korea
</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">Yes in China and South
Korea;
Operator-specific in
United States</FONT></TD>
</TR>
<TR valign="bottom">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><FONT size="2">IDEN</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">
United-States
</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">Yes</FONT></TD>
</TR>
<TR valign="bottom">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><FONT size="2"><B><I>3G</I></B><BR>
WCDMA</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2"><BR>
Europe, Asia
(including Japan),<BR>
United States
</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="bottom"><FONT size="2">Yes</FONT></TD>
</TR>
<TR valign="bottom">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><FONT size="2">CDMA2000</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">
United States, Asia
</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">Operator-specific</FONT></TD>
</TR>
</TABLE>
</CENTER>
<P align="left"><FONT size="2"><B>Market Overview</B>
</FONT>

<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The market for chip card technology, products and services is developing
rapidly, both in terms of size and sophistication. According to Eurosmart,
1,786&nbsp;million chip cards &#150; including microcontroller cards and memory cards &#150;
were sold worldwide in 2002, and we believe that we are the world&#146;s largest
chip card provider, with 31.6% of the global market in terms of volume in 2002.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;As the market has grown, the capability of chip cards to carry
sophisticated functions has also increased. As a result, a new market is
developing for designing and implementing integrated systems and services based
on chip card technology and software, and for providing services to assist
users in taking advantage of the enhanced capabilities of chip cards.
</FONT>
<P align="center"><FONT size="2">27</FONT>
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#toc">Table of Contents</A></H5><P>
<P align="left"><FONT size="2"><B><I>Wireless Market</I></B>
</FONT>

<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The wireless communications market, particularly the GSM wireless market,
recorded strong growth prior to 2001, primarily as a result of a significant
increase in the use of mobile phones around the world for voice transmission.
Since then, growth in the wireless communications market has slowed
significantly as, among other things, the market and the technology for
wireless voice transmission services have matured, although demand for wireless
data transmission services has begun to increase. According to Eurosmart,
approximately 430&nbsp;million SIM cards were sold in 2002, as compared to 390
million in 2001.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Wireless communication operators are seeking to enhance their offerings
with new premium value services based on the increasing demand for wireless
data transmission services. For example, Short Message Service (SMS)&nbsp;allows
text messaging through mobile phones. In anticipation of the growing demand
for wireless data services, including the provision of pictures, streaming
audio and video, and high-speed Internet access through mobile phones,
operators have made significant investments in 3G licenses, and are beginning
to develop the infrastructures necessary to deliver 3G services. We believe
that the growth of the wireless data market may be important for the growth of
the chip card market, and that demand for new wireless data services could
increase demand for more sophisticated chip cards. Because identification
module technology allows wireless operators to facilitate and control the
access between wireless subscribers and content providers, we believe that our
chip card products, software and services represent a core technology for our
wireless customers to address this new market.
</FONT>
<P align="left"><FONT size="2"><B><I>Financial Services and Security Market</I></B>
</FONT>

<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;According to Eurosmart, approximately 175&nbsp;million chip cards were sold in
the financial services industry in 2002 and we estimate that we are we are one
of the top three providers of financial chip cards with approximately 20% of
the market in terms of units sold. We believe that demand for chip card
products and services in the financial services market will continue to grow
due to increasing concerns regarding security and fraud and due to growth in
the use of e-commerce and e-banking services, which allow end-users to conduct
commercial and banking transactions over the Internet.
</FONT>
<P align="left"><FONT size="2"><B>Our Products and Services</B>
</FONT>

<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The following table sets forth our revenues for the year ended December&nbsp;31,
2002:
</FONT>
<CENTER>
<TABLE cellspacing="0" border="0" cellpadding="0" width="55%">
<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="4%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="7"><FONT size="1"><B>Revenues -Year ended</B></FONT></TD>
</TR>
<TR valign="bottom">
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="7"><FONT size="1"><B>December 31, 2002</B></FONT></TD>
</TR>
<TR valign="bottom">
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="7"><HR size="1" noshade></TD>
</TR>
<TR valign="bottom">
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>(millions of</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>(as a % of total</B></FONT></TD>
</TR>
<TR valign="bottom">
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>euros)</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>revenues)</B></FONT></TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Telecommunications</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">544.5</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">69</FONT></TD>
    <TD nowrap><FONT size="2">%</FONT></TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Financial Services and Security</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">242.9</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">31</FONT></TD>
    <TD nowrap><FONT size="2">%</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Total</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">787.4</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">100</FONT></TD>
    <TD nowrap><FONT size="2">%</FONT></TD>
</TR>
<TR>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
</TABLE>
</CENTER>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;See &#147;Item&nbsp;5. Operating and Financial Review and Prospects&#148; for a
discussion of our total revenues, broken down by category of activity and
geographic market, for each of the last three financial years.
</FONT>
<P align="center"><FONT size="2">28</FONT>
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#toc">Table of Contents</A></H5><P>
<P align="left"><FONT size="2"><B><I>Delivering a complete solution</I></B>
</FONT>

<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We provide our customers with a portfolio of products, software and
services that can enable the delivery of turnkey solutions:
</FONT>
<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">
<TR valign="top">
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" align="left" nowrap><FONT size="2">&#149;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="93%"><FONT size="2">Products: we provide a complete range of chip card products,
from low-end to high-end, with proprietary and open operating
systems, offering various amounts of available memory, with features
and embedded applications dedicated to specific markets. Our chip
card reader products and software development tools are a direct
complement to our chip cards.</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" align="left" nowrap><FONT size="2">&#149;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="93%"><FONT size="2">Software: we provide software products that help manage the
client-server architecture and enable interactions between the
applets stored on the chip cards and the card issuer&#146;s central
computing system. We also provide card management systems that
enable the tracking of issued cards and the management of
information stored on the chip card.</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" align="left" nowrap><FONT size="2">&#149;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="93%"><FONT size="2">Technical Support: we provide our customers with a full range
of maintenance and technical support and help desk services for their
card solutions. Our regional Gemplus service centers are responsible
for our help desk services in their applicable region, with several
sub-regional or local technical support staffs as needed.</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" align="left" nowrap><FONT size="2">&#149;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="93%"><FONT size="2">Consulting, System Design, Customization and Integration: our
consulting services focus on key topics and issues in the development
and implementation of chip card systems, including marketing and
commercial analysis and recommendations, feasibility studies and
possible implementation scenarios and training in chip card
technology and applications.</FONT></TD>
</TR>
</TABLE>
<CENTER>
<TABLE cellspacing="0" border="0" cellpadding="0" width="100%">
<TR valign="bottom">
    <TD width="6%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="77%">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">
o
</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">Our system design services provide our
customers with an overall design of chip card systems,
including security parameters and detailed component
design.</FONT></TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">
o
</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">Our customization services include the
development of customized software applets for particular
card issuers.</FONT></TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">
o
</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">We provide system integration services to
deliver complete systems through a project management
approach. This involves coordinating with contractors to
obtain and integrate the required system components,
including customized software applications and operational
system support during acceptance testing, pilot programs
and the roll-out of the final, customized card system.</FONT></TD>
</TR>
</TABLE>
</CENTER>
<P align="center"><FONT size="2">29</FONT>
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#toc">Table of Contents</A></H5><P>

<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">
<TR valign="top">
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" align="left" nowrap><FONT size="2">&#149;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="93%"><FONT size="2">Personalization: our personalization services involve the
process of loading personal data or premium value applications onto
the memory or microcontroller chips embedded in cards. We also
emboss and print customized card bodies for our customers, and
customize the card carriers used to deliver cards to end-users. We
prepare and distribute products directly to end-users on behalf of
our customers.</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" align="left" nowrap><FONT size="2">&#149;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="93%"><FONT size="2">Outsourced Operations: we provide our customers with the
flexibility to outsource to us a variety of operations associated
with the administration of a card management system, including
network management, server management and data archiving. We also
provide other operational services for chip card system managers,
such as certificate authority and management services for trusted
third party systems and certification authorities.</FONT></TD>
</TR>
</TABLE>
<P align="left"><FONT size="2"><B><I>Telecommunications Products and Services</I></B>
</FONT>

<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our telecommunications products and services consist primarily of
SIM-based products, software and services for wireless communications
operators, and chip-based prepaid phonecards for public pay telephone
operators.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Wireless Products, Software and Services</I>
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;SIM cards were introduced to provide standardized and secure subscriber
identification and authentication. Technology evolution and subscriber demand
has helped turn the SIM into a wireless data service enabler within an open
client-server architecture.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;SIM cards are well adapted for applications that need to be highly
personalized, secure and portable. SIM-enabled systems can be used to enhance
customer relationships, to enable content delivery and to secure mobile
transactions. We design many of our products around interoperable SIM
platforms that connect to networks and remote applications and over the air
(OTA)&nbsp;platform technology. These telecommunications products include:
</FONT>
<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">
<TR valign="top">
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" align="left" nowrap><FONT size="2">&#149;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="93%"><FONT size="2">GemXplore - the card platform and its immediate environment.
We offer a range of products for all major wireless network
types and generations. Working primarily with open, Java-based
operating systems, we provide developers with software development
tools to create and test applications.</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" align="left" nowrap><FONT size="2">&#149;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="93%"><FONT size="2">GemConnect - software modules and agents that communicate
with remote content and services. Our open OTA infrastructure is an
essential link between subscribers and personalized content. Our
device manager provides a remote, automatic handset configuration
for settings such as WAP (wireless application protocol), GPRS
(global pocket radio service) and MMS (multi-media messaging).</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" align="left" nowrap><FONT size="2">&#149;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="93%"><FONT size="2">GemSuite - market-facing applications. Gemplus, customer and
trusted partner applications, which are integrated to the OTA
platform, include predictive CRM (customer relationship management),
customer care and mobile payment (electronic prepaid reload and
M-payment).</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" align="left" nowrap><FONT size="2">&#149;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="93%"><FONT size="2">SIMXplore - access to partnered applications and services.
Integrates third party solutions by uniting our expertise with
content and application providers selected for their expertise and
innovative applications. This portfolio includes mobile
entertainment, location-based services, corporate, instant messaging
and other services.</FONT></TD>
</TR>
</TABLE>
<P align="center"><FONT size="2">30</FONT>
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#toc">Table of Contents</A></H5><P>


<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">
<TR valign="top">
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" align="left" nowrap><FONT size="2">&#149;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="93%"><FONT size="2">GemServices - professional services and outsourcing. Our
professional services group provides the expertise to design,
develop and deploy mobile services. These services cover all phases
from consulting, development, integration to post-installation,
support and training for wireless communication operators. We are
able to operate services on our customers&#146; behalf, offering large
service portfolios, while limiting infrastructure and resource
investments. Operators can access our equipment, technology and
expertise through a connection to our hosting center.</FONT></TD>
</TR>
</TABLE>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Phonecards</I>
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Based on information published by Eurosmart, we believe we are one of the
world&#146;s leading manufacturers of prepaid phonecards and associated phonecard
security products with a 37% share of the worldwide phonecard market in 2002.
As of May, 30 2003, we have produced 3&nbsp;billion phonecards since our inception
in 1988. Our main customers include more than 20 major telecommunications
operators, including CANTV, China Telecom, France Telecom, and Telmex. Our
multi-application solutions help operators take advantage of the convergence of
telephony with banking, loyalty and transportation applications. These
products generate increased revenues by helping to enable innovative marketing
opportunities. For example, CANTV, the Venezuelan national telecommunications
carrier, currently uses a line of our prepaid phonecards that allow public
telephony customers to use phonecards to pay for other consumer products, such
as soft drinks and snacks, at designated points of sale.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Scratch Cards</I>
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We provide a range of scratch cards under the name GemScratch, which are
cards that incorporate a scratch-off panel revealing unique numbers to be used
by the end-user of the card. We sell our GemScratch cards primarily to our
wireless customers, who want to provide prepaid services. Our GSM Prepaid Kit
includes a SIM card and a scratch card in a single package, allowing wireless
operators to offer their subscribers an integrated communications package. Our
scratch-off products are also used by fixed-line telecommunications operators
to provide calling card services to their customers.
</FONT>
<P align="left"><FONT size="2"><B><I>Financial Services</I></B>
</FONT>

<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Secure chip card technology offers a platform for a variety of financial
and banking service applications, such as credit/debit cards and e-purse cards
(cards that store cash values that can be used to make purchases),
multi-application services and mobile banking services. Credit/debit cards and
e-purse cards contain an embedded microcontroller chip that processes
transaction information received at the point of sale and carries information
that allows a card reader to accept or reject a transaction up to a specified
amount without on-line authorization. Because the smart card is inserted into a
reader at a point of sale and the cardholder enters a PIN code with the reader
rather than signing a printed card receipt, chip cards reduce fraud associated
with existing magnetic stripe card based systems by helping to prevent, among
other things, the use of stolen cards to make unauthorized purchases. In
addition, microcontroller chips contain sophisticated cryptographic algorithms
and functions that help to prevent unauthorized parties from tampering with
their contents, in contrast with the more limited security safeguards of
magnetic stripe cards.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Microcontroller chips were first embedded in credit/debit cards in France,
where microcontroller chip technology was introduced as a standard for
credit/debit cards in the early 1990s, and the technology has expanded into
Germany and now the United Kingdom. According to Eurosmart, approximately 175
million chip cards were sold in the financial services industry in 2002, and we
believe that we are one of the largest providers of financial chip cards with
20% of the market in terms of units sold.
</FONT>
<P align="center"><FONT size="2">31</FONT>
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#toc">Table of Contents</A></H5><P>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Several large bank and financial card systems, including American Express,
Visa International and MasterCard International, have introduced chip cards in
their systems. Banking and credit card associations in countries around the
world, such as in Australia, Austria, Brazil, China, Denmark, Taiwan, Korea,
Finland, Spain and Switzerland, have recently announced plans to adopt chip
cards to replace magnetic stripe cards. The adoption of chip card technology
in these countries represents a new phase in the financial services industry,
which has been slow to adopt this technology outside France and a few other
countries, in large part due to the cost of associated infrastructure. We
believe that new developments have the potential to accelerate the adoption of
this technology in the financial services industry, including:
</FONT>
<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">
<TR valign="top">
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" align="left" nowrap><FONT size="2">&#149;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="93%"><FONT size="2">Interoperability. An obstacle to the widespread adoption of
microcontroller chip technology in the financial services market has
been the fact that card specifications have been adopted by each
country on an individual basis, which prevents the interoperability
of credit/debit chip cards issued in different countries. To
address this problem, in 1996, the major global credit card payment
associations, Europay International, MasterCard International and
Visa International (together known as EMV), adopted standard
controller specifications for credit/debit chip cards, which enable
interoperability between different payment systems. Migration to
the EMV standard is now a well-established expectation in the
industry that could contribute to a structural change in the
financial services market.</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" align="left" nowrap><FONT size="2">&#149;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="93%"><FONT size="2">New Services. The capabilities of microcontroller chip
technology can permit banks to offer their customers new services
that were not available when they initially studied the technology.
Areas in which banks can offer their customers new services include
online authentication, instant rewards and more advanced loyalty
programs, mobile banking, mobile commerce and other services
available with the development of multi-application cards, such as
multiple payment options and loyalty programs on a single card.</FONT></TD>
</TR>
</TABLE>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Single Application Cards</I>
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We design and develop chip card products and services that enable
financial card issuers to offer a wide range of single-application services to
their clients. Our financial services products are designed to meet the
requirements and specifications of the most important industry standards, such
as the EMV specifications for credit/debit cards. In addition, our chip card
products have been individually certified by the major financial and banking
organizations and bodies, such as Visa International, Europay International,
MasterCard International, Cartes Bancaires (France), Banksys (Belgium) and
APACS (United Kingdom). Our main product offering includes:
</FONT>
<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">
<TR valign="top">
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" align="left" nowrap><FONT size="2">&#149;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="93%"><FONT size="2">GemVision, a range of credit/debit cards developed for banks
that are members of Visa International; and</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" align="left" nowrap><FONT size="2">&#149;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="93%"><FONT size="2">GemShare, a range of credit/debit cards developed for members
of Europay International and MasterCard International.</FONT></TD>
</TR>
</TABLE>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We also develop and market a full range of chip cards for e-purse systems,
which involve cards that store cash values that can be used to make payments.
Our e-purse products have been individually certified by the major e-purse
system operators, such as CEPS, Zentral Kredit Auschuss (Germany), Proton World
International, Visa International and Mondex. Our main product offerings
include Geldkarte, an e-purse card developed for German e-purse systems, and
Mondex E-Purse, which is an e-purse application developed for the Multos
multi-application card and mainly used in the United Kingdom, Latin America,
South Korea, Australia and the Philippines.
</FONT>
<P align="center"><FONT size="2">32</FONT>
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#toc">Table of Contents</A></H5><P>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Multi-Application Cards</I>
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;One of our main multi-application cards for financial services is based on
MPCOS, a multi-application standard, commonly used in Asia. This card contains
credit/debit and e-purse applications, loyalty programs and transportation
ticketing, and is also available in a contact/contactless mode under the
designation &#147;GemCombi&#148; that allows interaction with the card using radio
frequencies. We have also developed a line of multi-application Java-based
cards that provide our customers with the flexibility to quickly develop and
bring to market new financial and other services. Our line of Java-based
financial cards, GemXpresso Lite, is also targeted to retail banking and
e-commerce payment applications.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We believe that in 2002 we were the leader in providing major banking
institutions and retailers in the United States with multi-application chip
card products. These products support debit/credit, e-purse, web
authentication as well as loyalty applications. Major banks in the United
States, however, have not been as responsive as their European counterparts in
adopting chip card technology, and some have reduced or suspended their chip
card technology programs.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Loyalty and Retail</I>
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We have developed chip card products for a wide variety of loyalty and
retail programs, including bonus point and reward programs, such as our
microcontroller chip card based system for Boots, a United Kingdom retailer,
Shell U.K., and Esso Netherlands. Our loyalty applications can also be
combined with other applications, such as credit/debit cards and e-purse
applications, by using our multi-application chip cards. We believe that chip
cards should facilitate the next generation of loyalty programs because they
enable retailers to set up card based programs to offer customers a combination
of in-store and Internet-based benefits, such as instant rewards, online
coupons and privileged access to websites and points systems.</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Bank Conventional Cards</I>
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In addition to chip cards, we provide our customers with magnetic stripe
(&#147;conventional&#148;) cards that do not contain embedded microchips, mostly for our
banking customers. Our conventional card operations were launched in 1995 with
our acquisition of the United States and European conventional card and
personalization operations of DataCard, a conventional card manufacturer with
substantial sales in the United States and Europe. We decided to enter the
conventional card market to strengthen our position both in the financial
services market and in several geographic markets in which conventional cards
are the principal product in the local card industry, such as the United
States. We hope to leverage our position in the conventional card market to
assume a prominent role in the transition of these conventional card markets to
chip card network systems.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We offer a wide range of magnetic stripe and encoding options to meet the
demands of our different customers. We delivered over 100&nbsp;million magnetic
stripe cards to our customers in the banking sector in 2002. We also provide
certified card personalization and production and disaster recovery services to
MasterCard, Visa and American Express card issuers in various regions around
the world.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Other Businesses</I>
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In addition to conventional cards for banks, we also serve customers where
our cards are used for identification together with a payment application such
as:</FONT>

<P align="center"><FONT size="2">33</FONT>
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#toc">Table of Contents</A></H5><P>

<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">
<TR valign="top">
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" align="left" nowrap><FONT size="2">&#149;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="93%"><FONT size="2">transportation access, which includes contactless chip
systems that are used for highway tolls and access to metros and
other transportation facilities;</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" align="left" nowrap><FONT size="2">&#149;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="93%"><FONT size="2">pay television chip cards, which are used to give pay
television subscribers access to programs and services over cable
and satellite television systems; and</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" align="left" nowrap><FONT size="2">&#149;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="93%"><FONT size="2">loyalty and identification programs that do not use chip
cards.</FONT></TD>
</TR>
</TABLE>
<P align="left"><FONT size="2"><B><I>Identity and Security</I></B>
</FONT>

<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The smart card is not simply a security device, it can serve as a valuable
component in enabling management systems for governments and corporations.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The security and portability of chip cards make them well suited as
security products, particularly in developing markets for business conducted
over the Internet, which we call e-business security. According to the
International Data Corporation, the success of the e-business market depends on
the development of secure identification, encryption and transaction systems.
Chip card technology allows users to access corporate and external networks,
identify themselves, send encrypted messages and digitally &#147;sign&#148; transactions
and documents.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The most recent generation of chip cards has been designed to work with
the most sophisticated security technologies, such as public key infrastructure
(PKI)&nbsp;systems, which are used to control access to computer networks and to
secure e-business transactions. Chip cards can store digital certificates that
identify users of computer networks and parties to e-business transactions, as
well as keys or mathematical algorithms that facilitate secure information
exchange between trading partners over the Internet and authenticate
transactions. Microcontroller chip technology also permits certificate
authorities to revoke certificates and change authorization levels remotely,
without issuing new cards.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We are working actively with our corporate customers to design security
software and services based on microcontroller chip technology to control
access to corporate computer networks and to permit the secure exchange of
information.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We have identified three demands in this market:
</FONT>

<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Internal Security</I></FONT>


<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In this segment we offer cards, readers, software and services, such as
personalization or consulting. The infrastructure can be based on contact or
contactless technology, so our cards and readers can use either of these
technologies. The cards can also include digital signature capability for
electronic business transactions. Our software functions with chip card based
password management and chip card based user-authentication. In this market,
we typically offer solutions and project management to a customer, and not only
card products.
</FONT>

<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Government to Business</I></FONT>

<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Using chip card technology, electronic information can be securely
accessed, and exchanged. The chip card can help build a network of trust,
facilitating authentication, authorization and non-repudiation. Our customers in
this market typically order complete solutions composed of some secure chip
cards with digital signatures enabled, the associated readers in our &#147;PC link&#148;
range for logical access control (connecting to computer serial ports, and
other ports such as those complying with universal serial bus or Personal
Computer Memory Card International Association specifications), and software in
our
</FONT>
<P align="center"><FONT size="2">34</FONT>
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#toc">Table of Contents</A></H5><P>


<P align="left"><FONT size="2"> GemSafe line (GemSafe Libraries for user authentication, GemSafe Logon for
password management, and GemSafe eSigner for card enabled digital signature).
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We provide server software that manages verification, time stamping and logging
of all operations performed with digital signatures, as well as client
software. These products enable trusted parties such as post offices,
government agencies or major financial institutions to provide the security
levels necessary to support secure, non-repudiable delivery of on-line
documents and the completion of transactions.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Government to Citizens</I></FONT>

<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In this market, programs include identification (including passports and
driver&#146;s licenses), healthcare services, citizens&#146; rights projects, freedom and
privacy, and fraud prevention.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Typical applications include:
</FONT>
<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">
<TR valign="top">
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" align="left" nowrap><FONT size="2">&#149;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="93%"><FONT size="2">Chip card based vehicle registration and driver&#146;s license
systems for government agencies allowing authorities to keep a
closer track of vehicle ownership and driving records, and to verify
fines and offenses.</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" align="left" nowrap><FONT size="2">&#149;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="93%"><FONT size="2">Chip card systems for accurate identification of travelers at
borders and other ports of entry into a country, enabling
authorities to facilitate the entry of millions of foreign travelers
or workers while helping to ensure compliance with national
immigration regulations. With our Automated Border Clearance
system, an electronic visa is stored on a microcontroller chip
embedded in an immigration card, which interacts with a secure
automated access control reader at a country&#146;s ports of entry using
contactless technology. In Singapore, for example, the Ministry of
Home Affairs is using our Automated Border Clearance system to
facilitate entry to cross-border workers from Malaysia.</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" align="left" nowrap><FONT size="2">&#149;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="93%"><FONT size="2">Chip card based national identification programs that involve
the issuance of chip cards by national governments to their
residents. In the Sultanate of Oman, for example, we have signed an
agreement to provide consultancy, project management and integration
services, as well as software and chip cards for a broad-based
national identification card program.</FONT></TD>
</TR>
</TABLE>
<P align="left"><FONT size="2"><B><I>Health Care</I></B>
</FONT>

<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We provide systems integration services that allow health care and
insurance providers to use our chip cards for on-site access to, and management
of, medical and insurance information. We sell our health care products
primarily in Europe, particularly in France, Germany, Belgium and Slovenia.
Our health card systems help enable an automated and secure insurance claim
system that allows the electronic transfer of claims from the point of care to
insurance providers, generating significant administrative cost savings and
reduced paperwork for health care providers and insurers.
</FONT>
<P align="left"><FONT size="2"><B><I>GemVentures</I></B>
</FONT>

<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;To further promote the use of chip card technology and applications across
a broad range of markets, we have created GemVentures, a wholly owned venture
capital company. GemVentures has invested in start-up and developing companies
that create and market innovative technologies, applications and services in
our core markets, such as wireless communications and computer security
infrastructure and service providers. GemVentures leverages our management&#146;s
expertise in the chip card industry to provide target companies with strategic
advice and support in the development of new chip card technologies,
applications and services.
</FONT>
<P align="center"><FONT size="2">35</FONT>
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#toc">Table of Contents</A></H5><P>
<P align="left"><FONT size="2"><B>Customers</B>
</FONT>

<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We have a broad base of customers, including many of the largest wireless
operators in each of the markets where we operate, as well as major banking and
financial institutions around the world. Some principal customers in each
of our major business lines include:
</FONT>
<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">
<TR valign="top">
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" align="left" nowrap><FONT size="2">&#149;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="93%"><FONT size="2"><B><I>Telecommunications </I></B>&#150; China Mobile, China Telecom, China
Unicom, France Telecom, MTS, Nextel, STC, Telemar, Telmex, Turkcell
and Vodafone;</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" align="left" nowrap><FONT size="2">&#149;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="93%"><FONT size="2"><B><I>Financial Services </I></B>&#150; BNP Paribas, Soci&#233;t&#233; G&#233;n&#233;rale, Banques
Populaires, MBNA Europe, Lloyds TSB, Halifax, FDR, Personix
Saint-Paul, Target Corporation, DSV, Raiffeisendr&#252;ckerei, PPC Card
and ICBC;</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" align="left" nowrap><FONT size="2">&#149;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="93%"><FONT size="2"><B><I>Loyalty and Retail &#150; </I></B>Banpol SA, Total Fina Elf, Royal
Dutch/Shell Group, Compuworks ; and</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" align="left" nowrap><FONT size="2">&#149;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="93%"><FONT size="2"><B><I>Identity and Security &#150; </I></B>Argentina, Germany, France, Royal
Oman Police, Singapore, for government to citizen and government to
business programs.</FONT></TD>
</TR>
</TABLE>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In 2002,
our largest customer represented 7.5% of our total revenues, our five
largest customers together represented 19.5% of our total revenues,
our ten largest customers together represented approximately 28% and
our fifteen largest customers together represented approximately 35%
of our total revenues. No single customer accounted for more than 10% of our
revenues in 2002.
</FONT>
<P align="left"><FONT size="2"><B>Suppliers</B>
</FONT>

<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We rely on a number of different suppliers of materials and components to
manufacture our products. The three basic components of our products are
electronic chips, plastic cards and other materials used in the manufacturing
process, such as lamination film and inks.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We have restructured our chip-purchasing strategy by implementing balanced
sourcing with three major suppliers (Atmel, Infineon and Philips) that we
anticipate should be able to meet our requirements in terms of cost and
volumes. Our main plastic supplier is Bayer, which produces several types of
resins for injection-molding in Europe, Asia and the United States. We also
have supply arrangements for specific types of plastic with BASF, Dupont,
General Electric and several other plastic suppliers. We have diverse supply
arrangements for our other materials, including lamination film, for each of
which we have at least two supply sources.
</FONT>
<P align="left"><FONT size="2"><B>Competition</B>
</FONT>

<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The chip card market is highly competitive. We face competition in all of
our markets from chip card manufacturers, software developers, security
providers and chip manufacturers. Moreover, our customers and companies with
whom we currently have strategic relationships may become competitors in the
future.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Chip card manufacturers are currently our main source of competition in
all of our markets. According to Gartner Dataquest, our overall share of the
global chip card market was approximately 32% in terms of chip card units sold
on a worldwide basis in 2002, followed by Schlumberger with 23.1%, Giesecke &#038;
Devrient with 14% Oberthur Card Systems with 7%, Orga Kartensysteme with 4% and
Incard with 4%. The relative strengths and market shares of each of our
competitors, however, vary in each of the chip card markets, depending on their
core competencies and strategic alliances and partnerships. In 2002, we also
experienced new entrants into the industry with low-cost operating
</FONT>
<P align="center"><FONT size="2">36</FONT>
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#toc">Table of Contents</A></H5><P>


<P align="left"><FONT size="2"> models, especially in China, with aggressive pricing policies that could
threaten our market share and profit margins in the future.
</FONT>
<P align="left"><FONT size="2"><B><I>Telecommunications Markets</I></B>
</FONT>

<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Wireless Products and Services</I>
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The market for wireless infrastructure products and services is
characterized by intense competition and rapidly changing technology. Our main
competitors in this market include Schlumberger, Giesecke &#038; Devrient, Oberthur
Card Systems and Orga Kartensysteme.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Success in the market for wireless infrastructure products and services is
determined by the ability to consistently provide products and software at
attractive prices that enable our customers to provide premium value services
to their clients. We believe that our extensive research and development
activities allow us to be positioned as an innovator in SIM technology, and our
global manufacturing capacity provides us with production volumes that enable
us to offer competitive prices. Because wireless infrastructure providers work
closely with wireless operators to design and implement customized SIM-based
systems, the development of strong customer relationships and the joint
creation of product development plans are also important elements in competing
in this market.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Because of the enhanced capabilities of microcontroller chip technology,
we will also face new competition from operating system and software
application developers. The development of open operating systems or platforms
will lead to the creation of a new market for application development tools, in
which software development providers create and market premium value
applications, either as generic packages or customized software for specific
customers. The enhanced capabilities of chip cards will create the potential
for a variety of products and services that may attract a number of new
competitors into software, services and infrastructure markets, including:
</FONT>
<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">
<TR valign="top">
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" align="left" nowrap><FONT size="2">&#149;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="93%"><FONT size="2">operating system developers, such as Microsoft and IBM;</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" align="left" nowrap><FONT size="2">&#149;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="93%"><FONT size="2">electronic security product and service providers, such as
Baltimore Technologies, Entrust, RSA and Verisign;</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" align="left" nowrap><FONT size="2">&#149;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="93%"><FONT size="2">wireless device manufacturers, such as Nokia, Motorola, Samsung and Sony-Ericsson;</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" align="left" nowrap><FONT size="2">&#149;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="93%"><FONT size="2">systems integrators, such as IBM, Siemens and EDS;</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" align="left" nowrap><FONT size="2">&#149;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="93%"><FONT size="2">silicon chip manufacturers, such as STMicroelectronics, Infineon, Philips and Atmel; and</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" align="left" nowrap><FONT size="2">&#149;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="93%"><FONT size="2">wireless infrastructure software providers, such as Sonera SmarTrust.</FONT></TD>
</TR>
</TABLE>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Phonecards</I>
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Public telephony is a mature market, and is highly competitive. Our
presence in this market since its origins in the late 1980s
has allowed us to become a leading provider of phonecards on a worldwide basis.
According to Eurosmart, approximately 950&nbsp;million phonecards were sold
worldwide in 2002. Our main competitor in this market is Schlumberger,
followed by other chip card manufacturers such as Giesecke &#038; Devrient and
Oberthur Card Systems. The ability to deliver large volumes of phonecards at
competitive prices, as well as the capability of meeting changing customer
demands, such as increased requirements, in the short term are key competitive
factors in this market. We
</FONT>
<P align="center"><FONT size="2">37</FONT>
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#toc">Table of Contents</A></H5><P>


<P align="left"><FONT size="2"> believe that our global manufacturing capacity has enabled us to meet our
customers&#146; requirements in the past, which has allowed us to develop strong
ties with the public telephony industry.
</FONT>
<P align="left"><FONT size="2"><B><I>Financial Services and Security Markets</I></B>
</FONT>

<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Financial Services</I>
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The financial services market is currently fragmented and subject to
intense competition. Many of the companies that provide chip card products and
services to banks also manufacture plastic bank cards with magnetic stripes.
Our competitors include Giesecke &#038; Devrient, Oberthur Card Systems and
Schlumberger. The financial chip card market is currently focused in Europe,
where competitors such as Oberthur Card Systems have a strong presence in the
banking industry. The financial chip card market in the United States is
beginning to emerge due to the deployment of multi-application cards, and we
believe that Oberthur Card Systems will be among our competitors in this
market. We expect that our worldwide presence in the financial chip card
market may allow us to take a prominent position in the migration to chip cards
in the global financial services industry.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Identity and Security</I>
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The market for identification and security products is currently in its
development stage. There are a number of contracts for government
identification and security chip card based systems that are currently being
offered through public tender procedures. We and our competitors compete in
these tenders in association with major system integrators to provide the chip
card products used in these systems.
</FONT>
<P align="left"><FONT size="2"><B>Marketing</B>
</FONT>

<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We use a direct sales force to market and sell our products and services.
In addition, we use some local distributors in certain markets.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Strategic relationships are an important part of our overall marketing
strategy, in addition to sales through our other channels. Through our Gemplus
Partners Program we facilitate new product development, collaborative marketing
initiatives and joint sales efforts with a select group of value added
resellers, systems integrators, consultants and developers.
</FONT>
<P align="left"><FONT size="2"><B>Intellectual Property</B>
</FONT>

<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We seek to take appropriate and reasonable measures under the intellectual
property laws of applicable jurisdictions to protect our rights to our chip
card technology. Performance in the chip card industry can depend, among other
factors, on patent protection. Our policy is to regularly identify patentable
subject matter developed within our company and to systematically seek to
acquire patent rights upon such technologies. Many of our current patents
expire between 2008 and 2021. We mainly develop and patent technology in the
fields of card body manufacturing, chip operating software, card readers, chip
design and cryptographic processes. We seek to obtain a reasonably broad
territorial protection for our patented technologies. We usually file initial
patent applications in France, and subsequently extend such protection to
European countries, the United States, Canada and Japan, as well as China and
other foreign countries depending on the relevant circumstances. We also hold
co-ownership rights in patents developed through joint venture companies
established with our business partners. Proprietary rights in technologies
developed through such joint ventures usually vest in the jointly owned
companies.
</FONT>
<P align="center"><FONT size="2">38</FONT>
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#toc">Table of Contents</A></H5><P>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We have entered into non-exclusive licenses from third parties for
technologies relevant to our business, such as from Sun Microsystems with
respect to Java Card technology, from IBM with respect to IBM mask data for
certain chip cards operating systems, and from Bull CP8 with respect to Bull
mask data for banking chip cards. See &#147;Item&nbsp;3. Key Information&#151;Risk Factors.&#148;
We include third party technology in our products, and our business would be
harmed if we were not able to continue using this third party technology.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Despite our efforts to protect our intellectual property rights,
unauthorized parties may attempt to copy aspects of our products or to obtain
and use information that we regard as proprietary. Policing unauthorized use
of our property is difficult, and while we are sometimes able to determine and
reduce the extent to which misappropriation of our intellectual property rights
exists, such infringement can be expected to be a persistent problem. In
addition, the laws of some foreign countries do not protect our proprietary
rights to as great an extent as do the laws of countries like France and the
United States. Our means of protecting our proprietary rights may not be
adequate and our competitors may independently develop similar technology,
duplicate our products or design around patents issued to us or our other
intellectual property rights.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Due to the importance of proprietary technology in the chip card industry,
our business involves a substantial risk of overlap with third party patents
and subsequent litigation with competitors or patent-holders. Any claims, with
or without merit, could be time-consuming, result in costly litigation, cause
product shipment delays or require us to enter into royalty bearing licensing
agreements.
</FONT>
<P align="left"><FONT size="2"><B>Regulation</B>
</FONT>

<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Although our chip card products and services are not directly subject to
any regulations, our security enabling technology could be affected by laws and
regulations imposing controls on the development and transfer of encryption
technology, while our manufacturing and personalization activities could be
subject to environmental laws and regulations.
</FONT>
<P align="left"><FONT size="2"><B><I>Encryption Technology Controls</I></B>
</FONT>

<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our security products and services rely on the ability of our chip cards
to perform cryptographic functions, such as the encryption and decryption of
information sent by chip card users over the Internet. The domestic use and
transfer, and the export of systems and equipment, with encryption
capabilities, including hardware, software, modules and cards, have been
subject recently to national regulation and international controls. As a
result, the domestic use and transfer and the export of cryptographic products
are subject in many countries to strict controls and governmental scrutiny,
often requiring the user or transferor to obtain special licenses.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In the effort to reduce delays arising from the above restrictions in the
development and delivery of our chip card based security technology, in 2001,
we created a centralized organization within our company to coordinate all of
our operations that involve the transfer of our cryptographic-enabled products
and services and ensure compliance with all relevant laws and regulations.
</FONT>
<P align="left"><FONT size="2"><B><I>Environmental Matters</I></B>
</FONT>

<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our manufacturing and personalization operations may be subject to
extensive, evolving and increasingly stringent environmental and occupational
health and safety laws and regulations in a number of jurisdictions, including
regulations governing the management, use and release or discharge of hazardous
and toxic materials into the environment. Compliance with current and future
environmental,
</FONT>
<P align="center"><FONT size="2">39</FONT>
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#toc">Table of Contents</A></H5><P>


<P align="left"><FONT size="2"> health and safety laws and regulations could result in significant costs
and could restrict our ability to modify or expand our facilities or continue
production.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;To avoid incurring liability under applicable environmental, health and
safety laws and regulations, we have adopted global environment, health and
safety guidelines for the layout, construction and operation of our facilities.
These guidelines have been defined to comply with current laws and regulations
and are to be completed or modified by our local environment, health and safety
officers to ensure compliance with all applicable local laws and regulations.
If there are no local environmental, health and safety laws or regulations, or
if our guidelines contain environmental, health and safety rules that are
stricter than local laws or regulations, our guidelines will be generally
applied in those localities.
</FONT>
<P align="left"><FONT size="2"><B>Geographic Organization</B>
</FONT>

<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We are a global company, with headquarters located in Luxembourg. Our
largest operating subsidiary is located in France, and we have operations and
facilities located throughout Europe, North America, South America and Asia.
We have organized our global operations into three world regions:
</FONT>
<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">
<TR valign="top">
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" align="left" nowrap><FONT size="2">&#149;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="93%"><FONT size="2">EMEA, which consists of Europe, the Middle East and Africa;</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" align="left" nowrap><FONT size="2">&#149;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="93%"><FONT size="2">Americas, which consists of North, Central and South America and the Caribbean; and</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" align="left" nowrap><FONT size="2">&#149;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="93%"><FONT size="2">Asia, which consists of three sub regions: PACAS (composed of
South Asia and the Pacific; Japan and Korea; and Greater China
(composed of China, Hong Kong and Taiwan).</FONT></TD>
</TR>
</TABLE>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our manufacturing and research and development activities are organized on
a global basis, while our sales and marketing activities are organized on a
regional basis. As of December&nbsp;31, 2002, we operated 46 sales offices in over
33 countries, 17 personalization centers and 17 manufacturing centers in 14
countries worldwide and 4 research and development centers in 3 countries. We
own most of our properties. We have implemented several restructuring plans
including staff reductions and rationalization of office facilities on a
worldwide basis. See &#147;Item&nbsp;6. Directors, Senior Management and
Employees&#151;Employees.&#148;
</FONT>
<P align="left"><FONT size="2"><B>Organizational Structure</B>
</FONT>

<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our company is the sole parent company of its
group with approximately 70 direct and indirect subsidiaries located
throughout the world. The following table sets forth our significant direct
and indirect subsidiaries as of December&nbsp;31, 2002:
</FONT>
<CENTER>
<TABLE cellspacing="0" border="0" cellpadding="0" width="85%">
<TR valign="bottom">
    <TD width="88%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD nowrap align="center"><FONT size="1"><B>Name of Company</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>Percentage Owned</B></FONT></TD>
</TR>
<TR valign="bottom">
    <TD nowrap align="center"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="3"><HR size="1" noshade></TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Gemplus SA, a French corporation</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">98.1</FONT></TD>
    <TD nowrap><FONT size="2">%<SUP>(1)</SUP></FONT></TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Gemplus GmbH, a German corporation</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">100.0</FONT></TD>
    <TD nowrap><FONT size="2">%<SUP>(2)</SUP></FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Gemplus Limited, a British corporation</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">100.0</FONT></TD>
    <TD nowrap><FONT size="2">%<SUP>(2)</SUP></FONT></TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Gemplus Electronics SA, a French corporation</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">100.0</FONT></TD>
    <TD nowrap><FONT size="2">%<SUP>(2)</SUP></FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Gemplus Technologies Asia Limited, a Singapore corporation</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">100.0</FONT></TD>
    <TD nowrap><FONT size="2">%<SUP>(2)</SUP></FONT></TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Gemplus Electronics Asia Limited, a Singapore corporation</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">100.0</FONT></TD>
    <TD nowrap><FONT size="2">%<SUP>(2)</SUP></FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Tianjin Gemplus Smart Card Company Limited, a Chinese corporation</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">51.0</FONT></TD>
    <TD nowrap><FONT size="2">%<SUP>(2)</SUP></FONT></TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Gemplus Tianjin New Technologies Company Limited, a Chinese corporation</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">100.0</FONT></TD>
    <TD nowrap><FONT size="2">%<SUP>(2)</SUP></FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Gemplus Corp., a Delaware corporation</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">100.0</FONT></TD>
    <TD nowrap><FONT size="2">%<SUP>(2)</SUP></FONT></TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Gemplus Card International de Mexico SA de C.V., a Mexican corporation</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">100.0</FONT></TD>
    <TD nowrap><FONT size="2">%<SUP>(2)</SUP></FONT></TD>
</TR>
</TABLE>
</CENTER>
<P align="center"><FONT size="2">40</FONT>
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#toc">Table of Contents</A></H5><P>

<CENTER>
<TABLE cellspacing="0" border="0" cellpadding="0" width="85%">
<TR valign="bottom">
    <TD width="88%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD nowrap align="center"><FONT size="1"><B>Name of Company</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>Percentage Owned</B></FONT></TD>
</TR>
<TR valign="bottom">
    <TD nowrap align="center"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="3"><HR size="1" noshade></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Gemplus Finance SA, a Luxembourg corporation</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">100.0</FONT></TD>
    <TD nowrap><FONT size="2">%</FONT></TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Gemplus Pologne S.P.Z.o.o., a Polish corporation</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">100.0</FONT></TD>
    <TD nowrap><FONT size="2">%</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Zenzus Holdings Ltd., a Gibraltar corporation</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">100.0</FONT></TD>

    <TD nowrap><FONT size="2">%</FONT></TD>
</TR>
</TABLE>
</CENTER>
<P>
<HR size="1" width="18%" align="left" noshade>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">
<TR valign="top">
    <TD width="1%" align="left" nowrap><FONT size="2">(1)</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="96%"><FONT size="2">The remaining shares are mainly held by our employees pursuant to
the exercise of stock options, who may contribute to our company the
shares of Gemplus SA received upon exercise of these options in
exchange for shares of our company. For accounting purposes, these
shares are already assumed to be a component of the company&#146;s
shareholder&#146;s equity.</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="1%" align="left" nowrap><FONT size="2">(2)</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="96%"><FONT size="2">A subsidiary of Gemplus SA.</FONT></TD>
</TR>
</TABLE>
<P align="left"><FONT size="2"><B>Property, Plants and Equipment</B>
</FONT>

<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our manufacturing operations are organized on a global basis with a view
to achieving timely and cost-efficient production and delivery of our products
in each of our world regions. We have developed a high degree of
sophistication in the manufacturing of chip cards. Our expertise in chip card
manufacturing includes:
</FONT>
<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">
<TR valign="top">
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" align="left" nowrap><FONT size="2">&#149;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="93%"><FONT size="2">Chip Design: we work with our main suppliers to design chips
that meet our customer&#146;s requirements, including chip geometry,
speed and circuit and architecture design. We have dedicated a part
of our research and development activities to the conception of chip
designs, which we seek to protect with the relevant industrial
property authorities.</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" align="left" nowrap><FONT size="2">&#149;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="93%"><FONT size="2">Micro-electronics: we receive memory and microcontroller
chips from our suppliers in wafer form. In clean rooms that have a
high level of dust filtration, we proceed to assemble our chip
micromodules, each of which consists of a chip and a printed circuit
board, using microelectronic technologies.</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" align="left" nowrap><FONT size="2">&#149;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="93%"><FONT size="2">Embedding: the printed card body is prepared for the
assembled chip micromodule, which is then embedded onto the card
body using various techniques.</FONT></TD>
</TR>
</TABLE>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our chip cards are subject to in-process visual inspections designed to
ensure that each card meets the customer&#146;s physical specifications. We perform
a series of electric tests on our micromodules prior to embedding them onto the
card body designed for electrical functionality of our chip cards. We also
perform a final visual inspection of our chip cards to ensure quality control
and compliance with our chip card specifications.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;As of December&nbsp;31, 2002, we operated 17 card manufacturing centers,
located in 14 countries throughout the world with a global annual production
capacity of 1.3&nbsp;billion cards. Our main chip card manufacturing centers are
currently located in France, Germany, Poland, China, Singapore, Mexico and the
United States. All of these centers have microcontroller and memory card
manufacturing capabilities. Our main plastic card manufacturing centers are
located in China, Germany, Singapore, the United Kingdom and the United States.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We constantly seek to enhance the efficiency of our global manufacturing
operations in order to increase production capacity, to reduce production and
delivery time and to lower operational costs through upgrades in our chip card
manufacturing technology, by outsourcing non-critical manufacturing processes
and constructing new manufacturing capacity in lower-cost regions. To further
these goals, in the second quarter of 2001, we implemented a plan to
restructure our manufacturing operations. This restructuring included the
closure of a factory in Seebach, Germany and a reallocation of our production
requirements among our manufacturing and other facilities around the world. In
February 2002, we announced a further restructuring program to rationalize our
production and sourcing strategy. In
</FONT>
<P align="center"><FONT size="2">41</FONT>
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#toc">Table of Contents</A></H5><P>


<P align="left"><FONT size="2"> addition, in December 2002, we announced a further plan to restructure our
operations worldwide, affecting all organizations within our company, including
the manufacturing organization. See &#147;Item&nbsp;6. Directors, Senior Management and
Employees&#151;Employees.&#148;
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We own or lease 17 manufacturing facilities around the world. Except as
noted for in &#147;Item&nbsp;5. Operating and Financial Review and Prospects&#148; regarding
the La Ciotat facility, there are no material encumbrances on these assets.
</FONT>

<P align="center"><FONT size="2">42</FONT>



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

<!-- link2 "Item&nbsp;5. Operating and Financial Review and Prospects" -->
<DIV align="left"><A NAME="007"></A></DIV>
<P align="left"><FONT size="2"><B>Item&nbsp;5. Operating and Financial Review and Prospects</B>
</FONT>

<P align="center"><FONT size="2"><B>OPERATING RESULTS</B>
</FONT>

<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The financial information included in the discussion below for the three
years prior to December&nbsp;31, 2002, is derived from the audited consolidated
financial statements included in this Annual Report. You should read the
following discussion together with the audited consolidated financial
statements and related notes. Our audited consolidated financial statements
have been prepared in accordance with IAS, which differs from U.S. GAAP. Note
32 to our audited consolidated financial statements describes the principal
differences between IAS and U.S. GAAP as they relate to our company, and
reconcile our net income and shareholders&#146; equity to U.S. GAAP.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The year 2002 was a difficult one, as we generated lower revenues than in
2001 and increased net loss. However, 2002 was also a transition year for our
company, as we implemented a strategy designed to restore profitable growth.
We have taken considerable steps to adapt our company to the current
market conditions, and our results show that we may have made some progress
on the path to restoring profitability. Given the continuing price pressure,
our 2002 results also reflect our need to further significantly reduce costs.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our revenues decreased 23%, from <FONT face="'Times New Roman',Times">&#128;</FONT>1,023&nbsp;million in 2001 to <FONT face="'Times New Roman',Times">&#128;</FONT>787.4&nbsp;million
in 2002. Operational performance was affected by weak sales in our financial
services and security segment and continuous pricing pressure in the
telecommunications segment, particularly in the wireless segment in Asia. This
unfavorable trend was partly offset by encouraging growth in software and
services, primarily in the telecommunications segment.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our operating income declined, as we recorded an operating loss of <FONT face="'Times New Roman',Times">&#128;</FONT>231.8
million in 2002 as compared to an operating loss of <FONT face="'Times New Roman',Times">&#128;</FONT>180.8&nbsp;million in 2001.
Both operational and non-recurring factors impacted our operating loss in 2002.
The principal non-recurring factor was the <FONT face="'Times New Roman',Times">&#128;</FONT>90&nbsp;million restructuring charge
associated with the implementation of our first and second restructuring
programs. Implementation of the third restructuring program is currently
underway.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The factors affecting our operating income were primarily:
</FONT>
<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">
<TR valign="top">
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" align="left" nowrap><FONT size="2">&#149;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="93%"><FONT size="2">continuous pricing pressure on our products used in wireless communications;</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" align="left" nowrap><FONT size="2">&#149;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="93%"><FONT size="2">weak sales in the financial services and security segment; and</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" align="left" nowrap><FONT size="2">&#149;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="93%"><FONT size="2">unfavorable currency fluctuations.</FONT></TD>
</TR>
</TABLE>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;These three unfavorable operational factors were partly offset by higher
wireless cards shipments, lower purchase prices for wireless microcontroller
chips and significant reduction in our operating expenses following the
implementation of our restructuring programs.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our financial position remained strong in 2002. Excluding non-recurring
items, which included the use of cash to finance our restructuring programs, we
reduced cash outflows during 2002. Our capital expenditures were limited to
approximately one-third of the 2001 level, mainly driven by limited expenditure
on facility expansion. Cash and cash equivalents were <FONT face="'Times New Roman',Times">&#128;</FONT>417.2&nbsp;million at
December&nbsp;31, 2002, as compared to <FONT face="'Times New Roman',Times">&#128;</FONT>490.7&nbsp;million at December&nbsp;31, 2001.
</FONT>
<P align="center"><FONT size="2">43</FONT>
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#toc">Table of Contents</A></H5><P>
<P align="left"><FONT size="2"><B>Factors Affecting Revenues</B>
</FONT>

<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Most of our historical revenues have been earned from sales of our
products, which are typically invoiced to customers on the basis of the number
of cards supplied. We generally record revenues from our product sales when we
transfer title and risk of loss to the customer. We have begun to provide
systems design and integration services, for which we recognize revenues as the
services are completed.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our sales of wireless products continue to represent a large percentage of
our sales. Our prices for our most sophisticated wireless identification
modules are higher than our prices for our earlier generation wireless
identification modules. When we introduce a new card, it can initially have
the effect of decreasing our average prices, because our prices decline for our
earlier generation cards before our sales volumes migrate to the new cards.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In our financial services and security segment, which includes systems and
services based on chip card technology in areas such as financial services,
identification, health care, corporate security, loyalty programs,
transportation access, pay-television applications, e-business security
activities as well as magnetic stripe (&#147;conventional&#148;) cards for banking
applications, our sales declined in 2002, resulting mainly from the fact that
2001 included significant revenues in the banking and retail sectors that
did not recur in 2002. Our revenues in this segment can vary over the life of
our contracts to design, develop and implement chip card based systems. We
typically record a larger share of our revenues early in the life of a
contract, when we receive progress and completion revenues for the
implementation of a system, and card sale revenues to supply the initial needs
of a customer. As a contract matures, our revenues consist to a greater extent of sales of
cards as new cardholders join the system and replace cards that expire or are
lost. We also provide ongoing services such as technical support, which we
bill separately.
</FONT>
<P align="left"><FONT size="2"><B>Factors Affecting Operating Income</B>
</FONT>

<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our operating income is affected by a number of factors. Until 2001, the
most significant factor in recent years has been our product mix, as our
wireless products and services generated margins that were higher than many of
our other products and services, particularly our magnetic stripe bank cards.
Historically, as our sales of wireless products and services have grown, our
gross margin and operating margin have also grown. Starting in 2001, however, the
overall market decline led us to reduce our prices on wireless communications
products, which reduced our gross margin. While margins are still higher in
our telecommunications segment than in other segments, the difference has
become smaller.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our cost of sales consists principally of the cost of our microcontroller
chips, the plastic that is used in our cards, tools and equipment used to
manufacture and personalize our chip cards and personnel related to
manufacturing, supply, logistics and management of production. Our margins are
significantly impacted by the extent to which we are able to match our
inventory and production capacity with demand for our products. Our operating
income is also affected by our selling and marketing, research and development
and administrative expenses, all of which are typically a function of planning
that is based on projected capacity needs and business demand.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;When we initiate a major card program or open a new manufacturing
facility, we typically incur costs in connection with the establishment of the
program or the facility, including the cost of manufacturing tools and
equipment and personnel who are trained to implement the program or hired to
operate the new facility. Depending on when the start up phase occurs in
relation to our accounting periods, we may incur significant startup costs in a
period before we earn substantial revenues. When this happens, our operating
income is negatively affected during the startup period. In contrast, once the
program begins to generate revenues or the new manufacturing facility begins to
run, our operating income typically increases.
</FONT>
<P align="center"><FONT size="2">44</FONT>
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#toc">Table of Contents</A></H5><P>
<P align="left"><FONT size="2"><B>Impact of Exchange Rates</B>
</FONT>

<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We report our financial statements in euros. Because we earn a
significant portion of revenues in countries where the euro is not the local
currency, results of operations can be significantly impacted by exchange rate
movements between the euro and other currencies, primarily the Chinese
renminbi, the U.S. dollar, the Singapore dollar and the British pound. In
2002, we earned 12% of our revenues in China, 10% in the United States, 10% in
Asia outside China, and 6% in the United Kingdom. A substantial portion of
sales to the rest of Asia, other than China, is denominated in Singapore
dollars and in U.S. dollars.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The following table sets forth information relating to the average
exchange rates between the euro and the British pound, the Chinese renminbi,
the U.S. dollar and the Singapore dollar since January&nbsp;1, 2000, calculated
based on daily indicative fixing publicly supplied by European Central Bank
(&#147;ECB&#148;) and indicative quotations supplied on Internet sites of bank
counterparties for currencies ECB does not establish fixing on.
</FONT>
<CENTER>
<TABLE cellspacing="0" border="0" cellpadding="0" width="100%">
<TR valign="bottom">
    <TD width="43%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="11"><FONT size="1"><B>December 31,</B></FONT></TD>
</TR>
<TR valign="bottom">
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="11"><HR size="1" noshade></TD>
</TR>
<TR valign="bottom">
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>2002</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>2001</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>2000</B></FONT></TD>
</TR>
<TR valign="bottom">
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="3"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="3"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="3"><HR size="1" noshade></TD>
</TR>
<TR valign="bottom">
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="center" colspan="7"><FONT size="1"><B>(in euros per unit of foreign currency)</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">British Pound</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">1.58881</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">1.60836</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">1.64133</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Chinese Renminbi</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">0.12787</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">0.13502</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">0.13116</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">US Dollar</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">1.05419</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">1.11735</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">1.08742</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Singapore Dollar</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">0.59074</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">0.62351</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">0.62903</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
</TABLE>
</CENTER>
<P align="left"><FONT size="2"><B>Reporting segments</B>
</FONT>

<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;As of January&nbsp;1, 2002, we elected to change the reporting of our business
segments. All the activities formerly reported as part of our network systems
segment and our other operating segment have been transferred to our financial
services and security segment, except the access control systems activities of
our former subsidiary SkiData and the electronic smart labels solutions
activities of our former Tag subsidiary, which have been reported separately
under &#147;Disposed Operations&#148;, as they were sold during the third quarter of
2001. Consequently, the financial services and security segment includes
systems and services based on chip card technology in areas such as financial
services, identification, health care, corporate security, loyalty programs,
transportation access, pay-television applications as well as magnetic stripe
cards for banking applications. Our activities in this segment also include
the sales of smart card readers to our customers as well as smart card
interfacing technologies to device manufacturers. There is no change with
respect to the telecommunications segment, which includes our wireless
solutions, as well as prepaid telephone cards and other products. This change
in business segment reporting is consistent with the changes in our financial
reporting structure incorporated in our management reporting.
</FONT>
<P align="left"><FONT size="2"><B>Recent Developments</B>
</FONT>

<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In addition to the restructuring programs that were put into place in 2001
and in February 2002, we announced in December 2002 a third restructuring and
rationalization program. This new program needed to be implemented in response
to further market deterioration and price erosion beyond what was anticipated.
It involves the termination of about 1,100 employees around the world
(including 500 in France) and the rationalization of production sites of office
facilities and a worldwide basis. This program is expected to deliver savings
in the range of <FONT face="'Times New Roman',Times">&#128;</FONT>100&nbsp;million, the full benefit of which is expected
</FONT>
<P align="center"><FONT size="2">45</FONT>
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#toc">Table of Contents</A></H5><P>


<P align="left"><FONT size="2"> to be seen in 2004. We believe that we will be able to achieve the costs
savings objectives associated with this restructuring program. However, our
ability to reach this objective will depend on a number of factors, including
the actual expenses that we incur as the program is fully implemented and the
impact of market conditions.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We have filed press releases that include
our announcement of our results
of operations for the first quarter of 2003. See &#147;Item&nbsp;10. Additional
Information&#151;Documents on Display&#148; for instructions on how to obtain copies of
our Forms 6-K filed with the U.S.&nbsp;Securities and Exchange
Commission. Our Form 6-K&#146;s are not incorporated by reference into this Annual Report.</FONT>
<P align="left"><FONT size="2"><B>Year ended December&nbsp;31, 2002 compared to year ended December&nbsp;31, 2001</B>
</FONT>
<P align="left"><FONT size="2"><B><I>Net Sales</I></B>
</FONT>

<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Net sales for the year ended December&nbsp;31, 2002 amounted to <FONT face="'Times New Roman',Times">&#128;</FONT>787.4&nbsp;million,
a 23% decrease compared with net sales of <FONT face="'Times New Roman',Times">&#128;</FONT>1,023&nbsp;million for the year ended
December&nbsp;31, 2001. After adjusting for currency fluctuations and discontinued
operations, net sales decreased by 17%.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The following table shows the breakdown of our net sales in 2002 and 2001 by
market segment:
</FONT>
<CENTER>
<TABLE cellspacing="0" border="0" cellpadding="0" width="100%">
<TR valign="bottom">
    <TD width="63%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD nowrap align="center"><FONT size="1"><B>Years ended December 31</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>2002</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>2001</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>% change</B></FONT></TD>
</TR>
<TR valign="bottom">
    <TD nowrap align="center">&nbsp;</TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="3"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="3"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="3"><HR size="1" noshade></TD>
</TR>
<TR valign="bottom">
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="center" colspan="7"><FONT size="1"><B>(in millions of euros)</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Telecommunications</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">544.5</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">681.9</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(20</FONT></TD>
    <TD nowrap><FONT size="2">%)</FONT></TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Financial Services and Security</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

    <TD align="right"><FONT size="2">242.9</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">296.8</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(18</FONT></TD>
    <TD nowrap><FONT size="2">%)</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Disposed Operations (*)</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">44.3</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Total</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">787.4</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">1,023.0</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(23</FONT></TD>
    <TD nowrap><FONT size="2">%)</FONT></TD>
</TR>
<TR>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
</TABLE>
</CENTER>
<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">
<TR valign="top">
    <TD width="96%"><FONT size="2">(*) including SkiData and Tag activities, which divestitures occurred during
the third quarter of 2001.</FONT></TD>
</TR>
</TABLE>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Net sales in our telecommunications segment declined 20%, from <FONT face="'Times New Roman',Times">&#128;</FONT>681.9
million in 2001 to <FONT face="'Times New Roman',Times">&#128;</FONT>544.5&nbsp;million in 2002. After adjusting for currency
fluctuations, net sales in this segment decreased by 17%. This decrease was
primarily due to a 19% decline in sales of wireless products, from <FONT face="'Times New Roman',Times">&#128;</FONT>491.7
million in 2001 to <FONT face="'Times New Roman',Times">&#128;</FONT>400.6&nbsp;million in 2002, resulting mainly from a continuous
pricing pressure in this activity. While there was a shift to high-end
wireless products in 2002 and stronger demand for wireless products, including
software and services, this impact was not sufficient to overcome the pricing
pressure. Other cards sales decreased significantly in 2002 compared to 2001,
mainly driven by lower demand for phonecard products and stronger price
pressure. Excluding SkiData and Tag activities, the telecommunications segment
represented 69% of our revenue in 2002, as compared to 70% in 2001.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Net sales in our financial services and security segment declined 18%,
from <FONT face="'Times New Roman',Times">&#128;</FONT>296.8&nbsp;million in 2001 to <FONT face="'Times New Roman',Times">&#128;</FONT>242.9&nbsp;million in 2002 (excluding SkiData and
Tag activities). After adjusting for currency fluctuations, net sales in this
segment decreased by 16%. The decline in our financial services and security
segment resulted mainly from a significant decline in revenues from the banking
and retail sectors in the United States compared to 2001. The financial
services and security segment represented 31% of our revenue in 2002, as
compared to 30% in 2001, excluding SkiData and Tag activities.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The following table breaks down our net sales among our three regions:
</FONT>

<P align="center"><FONT size="2">46</FONT>


<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#toc">Table of Contents</A></H5><P>
<CENTER>
<TABLE cellspacing="0" border="0" cellpadding="0" width="100%">
<TR valign="bottom">
    <TD width="62%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD nowrap align="center"><FONT size="1"><B>Years ended December 31</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>2002</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>2001</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>% change</B></FONT></TD>
</TR>
<TR valign="bottom">
    <TD nowrap align="center">&nbsp;</TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="3"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="3"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="3"><HR size="1" noshade></TD>
</TR>
<TR valign="bottom">
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="center" colspan="7"><FONT size="1"><B>(in millions of euros)</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Europe, Middle-East and Africa</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">416.2</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">474.0</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(12</FONT></TD>
    <TD nowrap><FONT size="2">%)</FONT></TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Asia</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">199.5</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">273.1</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(27</FONT></TD>
    <TD nowrap><FONT size="2">%)</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Americas</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">171.7</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">231.6</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(26</FONT></TD>
    <TD nowrap><FONT size="2">%)</FONT></TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Disposed Operations (*)</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">44.3</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Total</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">787.4</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">1,023.0</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(23</FONT></TD>
    <TD nowrap><FONT size="2">%)</FONT></TD>
</TR>
<TR>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
</TABLE>
</CENTER>
<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">
<TR valign="top">
    <TD width="96%"><FONT size="2">(*) including SkiData and Tag activities, which divestitures occurred during
the third quarter of 2001.</FONT></TD>
</TR>
</TABLE>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The decline in net sales in the Europe, Middle-East and Africa region,
which represented 53% of our revenue in 2002, was primarily due to the poor
performance of the wireless segment which was partly offset by an increase of
the sales in the banking sector. In Asia, lower sales reflected a
deterioration of pricing conditions in the wireless segment. In Americas, we
experienced a significant decrease in our financial services chip cards
sales to United States banks and retailers.
</FONT>
<P align="left"><FONT size="2"><B><I>Gross profit</I></B>
</FONT>

<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Gross profit decreased by 35%, from <FONT face="'Times New Roman',Times">&#128;</FONT>307.5&nbsp;million in 2001 to <FONT face="'Times New Roman',Times">&#128;</FONT>199.7
million in 2002 (the decrease was 31%, excluding disposed operations). Our
gross margin decreased from 30.1% in 2001 to 25.4% in 2002. This decrease was
mainly due to pricing pressure in the telecommunications segment. In addition,
in 2001, our gross profit was impacted by a <FONT face="'Times New Roman',Times">&#128;</FONT>10.6&nbsp;million one-time favorable
adjustment resulting from the partial reversal of a provision for a patent
claim that was settled in 2001. However, the decline in our gross profit was
partially offset by a better regional and product mix, the depletion of
expensive microcontroller chip inventories purchased during prior periods, as
well as higher sales volumes and productivity gains.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The following table breaks down our gross profit and gross margin by segment.
</FONT>
<CENTER>
<TABLE cellspacing="0" border="0" cellpadding="0" width="100%">
<TR valign="bottom">
    <TD width="45%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD nowrap align="center"><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="7"><FONT size="1"><B>2002</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="7"><FONT size="1"><B>2001</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>

    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom">
    <TD nowrap align="center">&nbsp;</TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="7"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="7"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom">
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>% change</B></FONT></TD>
</TR>
<TR valign="bottom">
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>(millions</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>(millions</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>in gross</B></FONT></TD>
</TR>
<TR valign="bottom">
    <TD nowrap align="center"><FONT size="1"><B>Years ended December 31</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>of euros)</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>(% of sales)</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>of euros)</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>(% of sales)</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>profit</B></FONT></TD>
</TR>
<TR valign="bottom">
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="3"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="3"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="3"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="3"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="3"><HR size="1" noshade></TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Telecommunications</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">154.5</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">28.4</FONT></TD>
    <TD nowrap><FONT size="2">%</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">228.8</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">33.6</FONT></TD>
    <TD nowrap><FONT size="2">%</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(32</FONT></TD>
    <TD nowrap><FONT size="2">%)</FONT></TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Financial Services and
Security</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">45.2</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">18.6</FONT></TD>
    <TD nowrap><FONT size="2">%</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">62.6</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">21.1</FONT></TD>
    <TD nowrap><FONT size="2">%</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(28</FONT></TD>
    <TD nowrap><FONT size="2">%)</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Disposed Operations (*)</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">16.1</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">36.3</FONT></TD>
    <TD nowrap><FONT size="2">%</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Total</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">199.7</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">25.4</FONT></TD>
    <TD nowrap><FONT size="2">%</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">307.5</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">30.1</FONT></TD>
    <TD nowrap><FONT size="2">%</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(35</FONT></TD>
    <TD nowrap><FONT size="2">%)</FONT></TD>
</TR>
<TR>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
</TABLE>
</CENTER>
<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">
<TR valign="top">
    <TD width="96%"><FONT size="2">(*) including SkiData and Tag activities, which divestitures occurred during
the third quarter of 2001.</FONT></TD>
</TR>
</TABLE>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The gross margin of our telecommunications segment decreased from 33.6% in
2001 to 28.4% in 2002. This decrease resulted primarily from the strong price
pressure in the wireless segment. This decrease was only partially offset by
lower purchase prices for wireless microcontroller chips, and higher sales
volumes in the wireless segment, including in related software and services
which generate higher margins. In addition, in 2001, our gross margin was
favorably impacted by the one-time royalty expense adjustment described above.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The decrease in our financial services and security segment gross margin,
from 21.1% in 2001 to 18.6% in 2002, resulted primarily from lower sales
volumes, lower prices, unfavorable product mix and
</FONT>
<P align="center"><FONT size="2">47</FONT>
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#toc">Table of Contents</A></H5><P>


<P align="left"><FONT size="2"> customer mix for smart card products. The lower purchase prices for
microcontroller chips only partially offset this decrease.
</FONT>
<P align="left"><FONT size="2"><B><I>Operating income (loss)</I></B>
</FONT>

<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We recorded an operating loss of <FONT face="'Times New Roman',Times">&#128;</FONT>231.8&nbsp;million in 2002 compared to an
operating loss of <FONT face="'Times New Roman',Times">&#128;</FONT>180.8&nbsp;million in 2001. The 2002 operating loss resulted
from declining sales, declining gross margins in both our segments and higher
restructuring expenses. Restructuring expenses in 2002 amounted to <FONT face="'Times New Roman',Times">&#128;</FONT>90&nbsp;million
compared to <FONT face="'Times New Roman',Times">&#128;</FONT>28.5&nbsp;million in 2001. This increase was partly offset by a
significant decrease of our operating expenses which represented <FONT face="'Times New Roman',Times">&#128;</FONT>294.4&nbsp;million
in 2002 compared to <FONT face="'Times New Roman',Times">&#128;</FONT>388.8&nbsp;million in 2001 (excluding goodwill amortization
expense in 2002 and 2001 and two one-time items incurred in 2001: the
management severance expenses amounting to <FONT face="'Times New Roman',Times">&#128;</FONT>25.7&nbsp;million, and the litigation
expenses amounting to <FONT face="'Times New Roman',Times">&#128;</FONT>18.1&nbsp;million). The operating expenses decrease
reflected the effect of the restructuring plans announced in 2001 and in 2002
combined with other cost saving programs.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;For the year as a whole, research and development expenses decreased by
18%, from <FONT face="'Times New Roman',Times">&#128;</FONT>112.9&nbsp;million in 2001 to <FONT face="'Times New Roman',Times">&#128;</FONT>92.2&nbsp;million in 2002, while general and
administrative expenses decreased by 19%, from <FONT face="'Times New Roman',Times">&#128;</FONT>110.7&nbsp;million in 2001 to <FONT face="'Times New Roman',Times">&#128;</FONT>89.9
million in 2002. Selling and marketing expenses fell more aggressively by 32%
from <FONT face="'Times New Roman',Times">&#128;</FONT>165.3&nbsp;million in 2001 to <FONT face="'Times New Roman',Times">&#128;</FONT>112.2&nbsp;million in 2002.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Goodwill amortization amounted to <FONT face="'Times New Roman',Times">&#128;</FONT>47.1&nbsp;million in 2002, as compared to
<FONT face="'Times New Roman',Times">&#128;</FONT>27.2&nbsp;million in 2001. In 2002, goodwill amortization included a goodwill
write-down of <FONT face="'Times New Roman',Times">&#128;</FONT>22.1&nbsp;million following an impairment testing. This write-down
concerned the goodwill generated following the acquisition of SLP InfoWare SA
(&#147;SLP&#148;) in October 2000 and was due to significantly declining sales of SLP
software. (See Note 8 to our consolidated financial statements). Goodwill
amortization recorded in 2001 included a one-time <FONT face="'Times New Roman',Times">&#128;</FONT>1.1&nbsp;million charge resulting
from a write-off of goodwill previously recorded from the acquisition of a 21%
equity interest in Softcard due to Softcard&#146;s decision to cease its operations.
</FONT>
<P align="left"><FONT size="2"><B><I>Restructuring expenses</I></B>
</FONT>

<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The deteriorating economic conditions and the continuation of the turmoil
in the telecommunications industry led us to announce a second restructuring
plan in February 2002 and a third plan in December 2002. As in 2001, we
responded to the rapidly changing environment by implementing a program to
control costs and restructure our activities. The program involved a reduction
of our workforce and the rationalization of office operations on a worldwide
basis. In 2002 we recorded a restructuring charge of <FONT face="'Times New Roman',Times">&#128;</FONT>90&nbsp;million, of which
<FONT face="'Times New Roman',Times">&#128;</FONT>80.8&nbsp;million were related to our second restructuring plan. The goal of the
program was to achieve <FONT face="'Times New Roman',Times">&#128;</FONT>100&nbsp;million in annualized cost savings, an objective
that we continue to maintain. Our ability to reach this objective will depend
on a number of factors, including the actual expenses that we incur as the
program is fully implemented and the impact of market conditions.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Despite progress on cost saving efforts initiated in 2001 and 2002, a
third restructuring program needed to be implemented in response to further
market deterioration and price erosion beyond what could have previously been
anticipated. This program was announced in December 2002, and will impact most
parts of the company. This program is expected to deliver annual savings in
the range of <FONT face="'Times New Roman',Times">&#128;</FONT>100&nbsp;million, the full benefit of which is expected to be seen in
the second half of 2004. The restructuring charge of <FONT face="'Times New Roman',Times">&#128;</FONT>90&nbsp;million recorded in
2002 included an amount of <FONT face="'Times New Roman',Times">&#128;</FONT>7.7&nbsp;million relating to this plan.
</FONT>

<P align="center"><FONT size="2">48</FONT>
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#toc">Table of Contents</A></H5><P>
<P align="left"><FONT size="2"><B><I>Net financial income and expense</I></B>
</FONT>



<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We recorded net financial expense of <FONT face="'Times New Roman',Times">&#128;</FONT>51.1&nbsp;million in 2002 compared to
<FONT face="'Times New Roman',Times">&#128;</FONT>20.7&nbsp;million net income in 2001. Net financial expense and income were
impacted by the following specific factors:
</FONT>
<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">
<TR valign="top">
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" align="left" nowrap><FONT size="2">&#149;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="93%"><FONT size="2">Provision for a loan to the former Chairman of the
board. In 2000, one of our indirect subsidiaries granted a loan
to Dr.&nbsp;Lassus, our former Chairman of the board. Pursuant to an
agreement dated December&nbsp;19, 2001, as of January&nbsp;10, 2002 Mr.&nbsp;Lassus
ceased his office as Chairman of our board of directors and resigned
from all other positions that he held with our company and any of its
affiliates, except for his position as a non-executive director of
our company. As of January&nbsp;10, 2002, Mr.&nbsp;Lassus was no longer an
employee of our company or any of its affiliates. Effective June&nbsp;30, 2002, we
recorded in financial expense a <FONT face="'Times New Roman',Times">&#128;</FONT>67.6&nbsp;million non-cash charge to
cover the risk of possible non-reimbursement of the loan.
Our company has not forgiven the loan and is seeking
repayment by Dr.&nbsp;Lassus through legal proceedings (see Note 9 to
our consolidated financial statements).</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" align="left" nowrap><FONT size="2">&#149;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="93%"><FONT size="2">Interest receivable on loans to senior management. Net
financial expense incurred in 2001 included <FONT face="'Times New Roman',Times">&#128;</FONT>4.9&nbsp;million of
interest income on the loans granted in 2000 by one of our
indirect subsidiaries to Mr.&nbsp;Antonio Perez, our former Chief
Executive Officer, and to Dr.&nbsp;Lassus. During 2001, Mr.&nbsp;Perez
partially reimbursed the loans that were granted to him and the
unreimbursed portion of the loans was charged to our Consolidated
Statement of Income. Net interest accrued in 2002 on the loan
granted to Dr.&nbsp;Lassus was <FONT face="'Times New Roman',Times">&#128;</FONT>1.7&nbsp;million corresponding to interest
accrued in the first half of 2002.</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" align="left" nowrap><FONT size="2">&#149;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="93%"><FONT size="2">Amortized cost of an advance made to a trade supplier.
Net interest income incurred in 2001 included a <FONT face="'Times New Roman',Times">&#128;</FONT>2.0&nbsp;million
interest expense following the measurement at amortized cost of
an advance made to a trade supplier, as compared to <FONT face="'Times New Roman',Times">&#128;</FONT>1.9&nbsp;million
of interest income following such measurement in 2002 (see Note 6
to our consolidated financial statements).</FONT></TD>
</TR>
</TABLE>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Excluding these specific items, net financial income reported in 2002
amounted to <FONT face="'Times New Roman',Times">&#128;</FONT>12.9&nbsp;million, as compared to net financial income of <FONT face="'Times New Roman',Times">&#128;</FONT>17.8&nbsp;million
in 2001, reflecting primarily the decrease in our cash balances and the
decrease in the market interest rate.
</FONT>
<P align="left"><FONT size="2"><B><I>Other income and expense, net</I></B>
</FONT>

<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We recorded net other expense of <FONT face="'Times New Roman',Times">&#128;</FONT>28.9&nbsp;million in 2002 compared to a net
other income of <FONT face="'Times New Roman',Times">&#128;</FONT>45.7&nbsp;million in 2001. In 2001, net other income primarily
included a one-time <FONT face="'Times New Roman',Times">&#128;</FONT>68.3&nbsp;million gain generated from the divestiture of our
SkiData and Tag activities, which was only partially offset by foreign exchange
losses and minority interests. Net other expense in 2002 was primarily
attributable to foreign exchange losses (<FONT face="'Times New Roman',Times">&#128;</FONT>15.1&nbsp;million), losses on investments
(<FONT face="'Times New Roman',Times">&#128;</FONT>6.4&nbsp;million) and minority interests (<FONT face="'Times New Roman',Times">&#128;</FONT>4.3&nbsp;million).
</FONT>
<P align="left"><FONT size="2"><B><I>Income tax</I></B>
</FONT>

<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We recorded an income tax expense of <FONT face="'Times New Roman',Times">&#128;</FONT>9.1&nbsp;million in 2002. This tax
expense reflected the fact that we did not recognize additional deferred income
taxes on the losses incurred in France in 2002, and that a provision for tax
risks amounting to <FONT face="'Times New Roman',Times">&#128;</FONT>5.9&nbsp;million had been recorded following a tax audit in
France. In 2001, we recorded an income tax credit of <FONT face="'Times New Roman',Times">&#128;</FONT>14.2&nbsp;million, reflecting
an effective tax rate of 16.3%. In 2001, our effective tax rate was impacted
by the management severance expenses which created losses in certain countries
with low effective tax rates and by the one-time <FONT face="'Times New Roman',Times">&#128;</FONT>68.3&nbsp;million gain from the
SkiData and Tag divestitures.
</FONT>
<P align="left"><FONT size="2"><B><I>Net loss</I></B>
</FONT>

<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We recorded a net loss of <FONT face="'Times New Roman',Times">&#128;</FONT>320.9&nbsp;million in 2002, or <FONT face="'Times New Roman',Times">&#128;</FONT>0.53 per share, as
compared to a net loss of <FONT face="'Times New Roman',Times">&#128;</FONT>100.2&nbsp;million in 2001, or <FONT face="'Times New Roman',Times">&#128;</FONT>0.16 per share. Net loss
recorded in 2002 primarily reflected the <FONT face="'Times New Roman',Times">&#128;</FONT>90&nbsp;million
</FONT>
<P align="center"><FONT size="2">49</FONT>
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#toc">Table of Contents</A></H5><P>


<P align="left"><FONT size="2"> restructuring charge, the <FONT face="'Times New Roman',Times">&#128;</FONT>67.6&nbsp;million non-cash write-down of a loan
granted in 2000 to one of our directors and the decline in our gross margin,
which were, however, significantly offset by the reduction of our operating
expenses as a result of our restructuring program. Net loss recorded in 2001
primarily reflected the decrease of our operating income, the <FONT face="'Times New Roman',Times">&#128;</FONT>28.5&nbsp;million
restructuring expense and the <FONT face="'Times New Roman',Times">&#128;</FONT>18.1&nbsp;million one-time charge for the Humetrix
lawsuit, which were partially offset by the impact of the <FONT face="'Times New Roman',Times">&#128;</FONT>68.3&nbsp;million
one-time gains from our SkiData and Tag divestitures.
</FONT>
<P align="left"><FONT size="2"><B>Year ended December&nbsp;31, 2001 compared to year ended December&nbsp;31, 2000</B>
</FONT>
<P align="left"><FONT size="2"><B><I>Net Sales</I></B>
</FONT>

<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Net sales for the year ended December&nbsp;31, 2001 amounted to <FONT face="'Times New Roman',Times">&#128;</FONT>1,023&nbsp;million,
a 15% decrease compared with net sales of <FONT face="'Times New Roman',Times">&#128;</FONT>1,204.6&nbsp;million for the year ended
December&nbsp;31, 2000. Excluding SkiData and Tag activities, net sales decreased
12%, from <FONT face="'Times New Roman',Times">&#128;</FONT>1,117&nbsp;million in 2000 to <FONT face="'Times New Roman',Times">&#128;</FONT>978.7&nbsp;million in 2001.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The following table shows the breakdown of our net sales in 2001 and 2000
by market segment:
</FONT>
<CENTER>
<TABLE cellspacing="0" border="0" cellpadding="0" width="100%">
<TR valign="bottom">
    <TD width="5%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="41%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>Years ended December 31</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>2001</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>2000</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>% change</B></FONT></TD>
</TR>
<TR valign="bottom">
    <TD colspan="3">&nbsp;</TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="3"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="3"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="3"><HR size="1" noshade></TD>
</TR>
<TR valign="bottom">
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="center" colspan="7"><FONT size="1"><B>(millions of euros)</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>

</TR>
<TR valign="bottom" bgcolor="#eeeeee">
    <TD colspan="3"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Telecommunications</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">681.9</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">883.7</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(23</FONT></TD>
    <TD nowrap><FONT size="2">%)</FONT></TD>
</TR>
<TR>
    <TD colspan="3"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom">
    <TD colspan="3"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Network systems
</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
     <TD><FONT size="2">&nbsp;</FONT></TD>
   <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">
Continuing businesses</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">188.7</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">115.3</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">64</FONT></TD>
    <TD nowrap><FONT size="2">%</FONT></TD>
</TR>

<TR valign="bottom">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">SkiData</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">40.6</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">81.1</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(50</FONT></TD>
    <TD nowrap><FONT size="2">%)</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Total</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">229.3</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">196.4</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">17</FONT></TD>
    <TD nowrap><FONT size="2">%</FONT></TD>
</TR>
<TR>
    <TD colspan="3"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom">
    <TD colspan="3"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Other
</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">
Continuing businesses</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">108.1</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">118.0</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(8</FONT></TD>
    <TD nowrap><FONT size="2">%)</FONT></TD>
</TR>

<TR valign="bottom">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Tag</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">3.7</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">6.5</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(43</FONT></TD>
    <TD nowrap><FONT size="2">%)</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Total</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">111.8</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">124.5</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(10</FONT></TD>
    <TD nowrap><FONT size="2">%)</FONT></TD>
</TR>
<TR>
    <TD colspan="3"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom">
    <TD colspan="3"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Total</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">1,023.0</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">1,204.6</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(15</FONT></TD>
    <TD nowrap><FONT size="2">%)</FONT></TD>
</TR>
<TR>
    <TD colspan="3"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
</TABLE>
</CENTER>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Net sales in our telecommunications segment declined 23%, from <FONT face="'Times New Roman',Times">&#128;</FONT>883.7
million in 2000 to <FONT face="'Times New Roman',Times">&#128;</FONT>681.9&nbsp;million in 2001, primarily due to a 30% decline in
sales of wireless products, from <FONT face="'Times New Roman',Times">&#128;</FONT>698.5&nbsp;million in 2000 to <FONT face="'Times New Roman',Times">&#128;</FONT>491.7&nbsp;million in
2001, including sales of our next generation network products for <FONT face="'Times New Roman',Times">&#128;</FONT>9.5&nbsp;million
and <FONT face="'Times New Roman',Times">&#128;</FONT>32&nbsp;million, in 2000 and 2001, respectively. The decrease in net sales in
2001 resulted primarily from the decrease in wireless product sales and
declining sales prices, both of which were the result of a dramatic drop in
mobile telephone sales and high levels of SIM card inventories accumulated by
mobile telecommunications operators in 2000. While there was a shift to
high-end wireless products in 2001, the impact was not sufficient to overcome
the overall condition of the market. Phone card sales remained stable in 2001
compared to 2000, although we experienced a shift between regions, as growth in
Latin America offset weaker demand in Asia. Excluding SkiData and Tag
activities, the telecommunications segment represented 70% of our revenues in
2001 as compared to 79% in 2000.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Net sales in our network systems segment grew by 17%, from <FONT face="'Times New Roman',Times">&#128;</FONT>196.4&nbsp;million
in 2000 to <FONT face="'Times New Roman',Times">&#128;</FONT>229.3&nbsp;million in 2001, or by 64% excluding sales from SkiData.
Growth in our network systems segment resulted mainly from a significant
increase in sales of chip cards to the banking sector in the United States and
Germany and to retailers in the United States. As a result of strong sales in
our network systems
</FONT>
<P align="center"><FONT size="2">50</FONT>
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#toc">Table of Contents</A></H5><P>


<P align="left"><FONT size="2"> segment and decreased sales in our telecommunications segment, our network
systems segment generated 19% of our revenues in 2001, as compared to 10% in
2000, in each case excluding SkiData and Tag activities.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Net sales in our other segment decreased by 10% in 2001 compared to 2000,
reflecting weaker demand for magnetic stripe cards and a shift in our
pay-television chip card activities, where in 2001 we embedded chips in cards
that were consigned to us by some of our customers, rather than producing and
selling the cards to them. Net sales in this segment represented 11% of our
revenues in 2001, as compared to 10% in 2000, in each case excluding sales from
our Tag and SkiData units.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our revenue decline was most pronounced in Europe and Asia, where the
dominant mobile telephone systems incorporate our SIM card technology to a much
greater degree than in the Americas. Our sales increased in the Americas in
2001 due to the network systems segment. The following table breaks down our
net sales among our three regions:
</FONT>
<CENTER>
<TABLE cellspacing="0" border="0" cellpadding="0" width="100%">
<TR valign="bottom">
    <TD width="59%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD nowrap align="center"><FONT size="1"><B>Years ended December 31</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>2001</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>2000</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>% change</B></FONT></TD>
</TR>
<TR valign="bottom">
    <TD nowrap align="center">&nbsp;</TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="3"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="3"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="3"><HR size="1" noshade></TD>
</TR>
<TR valign="bottom">
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="center" colspan="7"><FONT size="1"><B>(millions of euros)</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Europe, Middle East and Africa</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">518.3</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">701.3</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(26</FONT></TD>
    <TD nowrap><FONT size="2">%)</FONT></TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Asia</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">273.1</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">317.9</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(14</FONT></TD>
    <TD nowrap><FONT size="2">%)</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Americas</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">231.6</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">185.4</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">25</FONT></TD>
    <TD nowrap><FONT size="2">%</FONT></TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Total</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">1,023.0</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">1,204.6</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(15</FONT></TD>
    <TD nowrap><FONT size="2">%)</FONT></TD>
</TR>
<TR>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
</TABLE>
</CENTER>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The decline in net sales in the Europe, Middle East and Africa region,
which represented 51% of our revenues in 2001, resulted primarily from the
slowdown in the wireless industry and the sale of SkiData, which were only
partially offset by growth in financial services smart card sales in Central
and Eastern Europe. In Asia, decreased sales primarily reflected a decline in
wireless product sales and a deterioration of pricing conditions throughout the
region, as Asian wireless network operators, particularly those in China,
reduced their SIM card inventories to better match lower demand for wireless
products. An increase in sales in the network systems segment in Asia
partially offset decreased sales in our telecommunications segment. The
increase in net sales in the Americas region resulted primarily from the
significant growth in our financial services chip card sales to U.S. banks and
retailers and from increased sales of phone cards in Latin America.
</FONT>
<P align="left"><FONT size="2"><B><I>Gross profit</I></B>
</FONT>

<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Gross profit decreased 32%, from <FONT face="'Times New Roman',Times">&#128;</FONT>453.9&nbsp;million in 2000 to <FONT face="'Times New Roman',Times">&#128;</FONT>307.5&nbsp;million
in 2001. Our gross margin decreased from 37.7% in 2000 to 30.1% in 2001,
resulting both from declining gross margins in our telecommunications segment
and the shift in our business mix between our telecommunications and network
systems segments. Because network systems gross margins remain lower than
gross margins of wireless products and services, decreased sales in our
telecommunications segment adversely affected our gross margins. Excluding a
one-time favorable adjustment of a <FONT face="'Times New Roman',Times">&#128;</FONT>10.6&nbsp;million royalty expense resulting from
the partial reversal of a provision for a patent claim that was settled in
2001, our gross margin would have been 29% in 2001.
</FONT>
<P align="center"><FONT size="2">51</FONT>
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#toc">Table of Contents</A></H5><P>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The following table breaks down our gross profit and gross margin by
segment.
</FONT>
<CENTER>
<TABLE cellspacing="0" border="0" cellpadding="0" width="100%">
<TR valign="bottom">
    <TD width="5%">&nbsp;</TD>
    <TD width="40%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD nowrap align="center" colspan="2"><FONT size="1"><B>Years ended December 31</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="7"><FONT size="1"><B>2001</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="7"><FONT size="1"><B>2000</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom">
    <TD colspan="2">&nbsp;</TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="7"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="7"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom">
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>% change</B></FONT></TD>
</TR>
<TR valign="bottom">
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>(millions of</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>(% of</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>(millions of</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>(% of</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>in gross</B></FONT></TD>
</TR>
<TR valign="bottom">
    <TD nowrap align="center" colspan="2"><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>euros)</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>sales)</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>euros)</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>sales)</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>profit</B></FONT></TD>
</TR>
<TR valign="bottom">
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="3"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="3"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="3"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="3"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="3"><HR size="1" noshade></TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Telecommunications</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">228.8</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">33.6</FONT></TD>
    <TD nowrap><FONT size="2">%</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">378.9</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">42.9</FONT></TD>
    <TD nowrap><FONT size="2">%</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(40</FONT></TD>
    <TD nowrap><FONT size="2">%)</FONT></TD>
</TR>
<TR>
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom">
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Network systems
</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">
Continuing businesses</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">50.5</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">26.7</FONT></TD>
    <TD nowrap><FONT size="2">%</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">31.5</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">27.3</FONT></TD>
    <TD nowrap><FONT size="2">%</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">60</FONT></TD>
    <TD nowrap><FONT size="2">%</FONT></TD>
</TR>


<TR valign="bottom">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">SkiData</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">16.6</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">40.9</FONT></TD>
    <TD nowrap><FONT size="2">%</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">30.5</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">37.6</FONT></TD>
    <TD nowrap><FONT size="2">%</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(45</FONT></TD>
    <TD nowrap><FONT size="2">%)</FONT></TD>
</TR>
<TR>
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Total</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">67.1</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">29.3</FONT></TD>
    <TD nowrap><FONT size="2">%</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">62.0</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">31.6</FONT></TD>
    <TD nowrap><FONT size="2">%</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">8</FONT></TD>
    <TD nowrap><FONT size="2">%</FONT></TD>
</TR>

<TR valign="bottom">
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Other
</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">
Continuing businesses</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">12.2</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">11.3</FONT></TD>
    <TD nowrap><FONT size="2">%</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">12.2</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">10.3</FONT></TD>
    <TD nowrap><FONT size="2">%</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">0</FONT></TD>
    <TD nowrap><FONT size="2">%</FONT></TD>
</TR>


<TR valign="bottom">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Tag</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(0.6</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">n.s.</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">0.8</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">12.3</FONT></TD>
    <TD nowrap><FONT size="2">%</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">n.s.</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR>
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Total</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">11.6</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">10.4</FONT></TD>
    <TD nowrap><FONT size="2">%</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">13.0</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">10.4</FONT></TD>
    <TD nowrap><FONT size="2">%</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(11</FONT></TD>
    <TD nowrap><FONT size="2">%)</FONT></TD>
</TR>

<TR valign="bottom">
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Total</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">307.5</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">30.1</FONT></TD>
    <TD nowrap><FONT size="2">%</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">453.9</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">37.7</FONT></TD>
    <TD nowrap><FONT size="2">%</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(32</FONT></TD>
    <TD nowrap><FONT size="2">%)</FONT></TD>
</TR>
<TR>
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
</TABLE>
</CENTER>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The gross margin of our telecommunications segment decreased from 42.9% in
2000 to 33.6% in 2001. This decrease resulted primarily from unfavorable
manufacturing variances reflecting overcapacity, primarily in our
European-based factories, overcapacity of high cost inventory that we purchased
or ordered in 2000 and declining prices of wireless products due to the
downturn in the telecommunications market. This decrease was only partially
offset by the favorable impact of the one-time royalty expense adjustment
described above.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The decrease in our network systems gross margin, from 31.6% in 2000 to
29.3% in 2001, resulted primarily from the disposal of our SkiData activities,
where we typically generated higher margins. Excluding SkiData, the gross
margin of the network systems segment remained stable, representing 26.7% in
2001, as compared to 27.3% in 2000.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In our other activities segment, gross margins remained essentially stable
from 2000 to 2001.
</FONT>
<P align="left"><FONT size="2"><B><I>Operating income (loss)</I></B>
</FONT>

<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We recorded an operating loss of <FONT face="'Times New Roman',Times">&#128;</FONT>180.8&nbsp;million in 2001 compared to
operating income of <FONT face="'Times New Roman',Times">&#128;</FONT>116.2&nbsp;million in 2000. Before goodwill amortization, the
operating loss amounted to <FONT face="'Times New Roman',Times">&#128;</FONT>153.6&nbsp;million in 2001 compared to operating income
of <FONT face="'Times New Roman',Times">&#128;</FONT>127.4&nbsp;million in 2000. The 2001 operating loss resulted from declining
gross margins in our telecommunications segment and from several non-recurring
charges, described below, which were only partially offset by the <FONT face="'Times New Roman',Times">&#128;</FONT>10.6&nbsp;million
one-time royalty expense adjustment described above. Excluding these one-time
factors, our operating loss was <FONT face="'Times New Roman',Times">&#128;</FONT>119.1&nbsp;million in 2001. Our operating income
in 2000 benefited from a one-time recognition of a <FONT face="'Times New Roman',Times">&#128;</FONT>12.5&nbsp;million credit
corresponding to French research tax credits from previous years.
</FONT>
<P align="center"><FONT size="2">52</FONT>
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#toc">Table of Contents</A></H5><P>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our operating loss resulted from a combination of our lower sales and
gross margins, as well as the expansion of our operating structure during the
second half of 2000 in anticipation of continued growth. The costs associated
with our operating structure were reduced in the second half of 2001 after we
began to implement our restructuring plan. For the year as a whole, research
and development expenses grew by 24%, from <FONT face="'Times New Roman',Times">&#128;</FONT>90.8&nbsp;million in 2000 (excluding the
impact of the research tax credit) to <FONT face="'Times New Roman',Times">&#128;</FONT>112.9&nbsp;million in 2001, while general and
administrative expenses increased by 23%, from <FONT face="'Times New Roman',Times">&#128;</FONT>89.7&nbsp;million in 2000 to <FONT face="'Times New Roman',Times">&#128;</FONT>110.7
million in 2001 excluding one-time charges described below. Selling and
marketing expenses also grew, but more modestly on a percentage basis.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our operating loss reflected the impact of three non-recurring factors.
First, we implemented a major restructuring program in 2001. Second, we
incurred costs in connection with a change in our management at the end of
2001. Third, we recorded costs in connection with the loss of a significant
litigation matter. We also recorded a <FONT face="'Times New Roman',Times">&#128;</FONT>10.6&nbsp;million one-time favorable royalty
expense adjustment, which only partially offset these three unfavorable
factors, impacting our gross margin, as described above.
</FONT>

<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Goodwill amortization amounted to <FONT face="'Times New Roman',Times">&#128;</FONT>27.2&nbsp;million in 2001, compared to <FONT face="'Times New Roman',Times">&#128;</FONT>11.2
million in 2000, as a result of acquisitions in 2000, particularly the
acquisitions of Celocom Limited and SLP InfoWare SA, which were completed
during the last quarter of 2000. In addition, goodwill amortization recorded
in 2001 included a one-time <FONT face="'Times New Roman',Times">&#128;</FONT>1.1&nbsp;million charge resulting from a write-off of
goodwill previously recorded from the acquisition of a 21% equity interest in
Softcard due to Softcard&#146;s decision to cease its operations.
</FONT>


<P align="left"><FONT size="2"><B><I>Restructuring expenses</I></B>
</FONT>

<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In 2001, we responded to the rapidly changing telecommunications market by
implementing a program to control costs and restructure our activities. The
program, announced on May&nbsp;2, 2001, involved the closure of a manufacturing
facility, the downsizing of a research and development facility, a reduction of
our workforce following the combination of our financial services and Internet
security activities, and the rationalization of office operations on a
worldwide basis. We recorded a restructuring charge of <FONT face="'Times New Roman',Times">&#128;</FONT>28.5&nbsp;million in the
second quarter of 2001 as a result of the restructuring plan. The goal of the
program was to achieve <FONT face="'Times New Roman',Times">&#128;</FONT>40&nbsp;million in annualized cost savings, an objective
that we completed during 2002.
</FONT>
<P align="left"><FONT size="2"><B><I>Management severance expenses</I></B>
</FONT>

<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;On December&nbsp;19, 2001, we announced changes in our management, as our Chief
Executive Officer, Mr.&nbsp;Antonio Perez, and our Chairman of the board, Dr.&nbsp;Marc
Lassus, ceased their functions as Chief Executive Officer and Chairman of the
board, respectively, and new members of management were appointed. In
connection with these changes, we recorded a <FONT face="'Times New Roman',Times">&#128;</FONT>25.7&nbsp;million charge in the fourth
quarter of 2001. The charge reflected several factors. First, we recorded a
charge of <FONT face="'Times New Roman',Times">&#128;</FONT>6.8&nbsp;million in connection with the cancellation of a portion of
certain loans made to Mr.&nbsp;Perez by one of our indirect subsidiaries, Zenzus
Holdings Ltd., to permit Mr.&nbsp;Perez to exercise stock options and pay taxes
relating to his receipt of a grant of free shares in 2000. The charge reflects
the difference between the loan balance at the time Mr.&nbsp;Perez resigned and the
fair market value of the shares that Mr.&nbsp;Perez transferred to the indirect
subsidiary of our company. Those shares were transferred to the indirect
finance subsidiary pursuant to two agreements, the first signed in October and
the second at the time of Mr.&nbsp;Perez&#146;s resignation in December. Second, we
recorded a charge of <FONT face="'Times New Roman',Times">&#128;</FONT>6.5&nbsp;million in respect of a payment to Mr.&nbsp;Perez to
compensate for the tax consequences of the loan forgiveness. Third, we
recorded a <FONT face="'Times New Roman',Times">&#128;</FONT>1.2&nbsp;million charge with respect to a severance payment due to Mr.
Perez. Fourth, we recorded a charge of <FONT face="'Times New Roman',Times">&#128;</FONT>11.2&nbsp;million with respect to Dr.
Lassus, representing the fulfillment of an agreement signed in 2000 that
required us to make such payment upon the replacement of Dr.&nbsp;Lassus as our
Chairman of the board.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;There was no accruals in 2002 for management severance expenses relating
to Messrs.&nbsp;Perez and Lassus.
</FONT>
<P align="center"><FONT size="2">53</FONT>
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#toc">Table of Contents</A></H5><P>
<P align="left"><FONT size="2"><B><I>Litigation Expense</I></B>
</FONT>

<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In October 2001, the United States Court of Appeals for the Ninth Circuit
affirmed a district court judgment against us in favor of Humetrix Inc. based
on a claim by Humetrix that we had breached an agreement to jointly market
several products in the U.S. health care sector. The judgment was in the
amount of US $15&nbsp;million plus interest. Our petition seeking a rehearing was
denied in November 2001. As a result of this decision, we recorded a charge of
<FONT face="'Times New Roman',Times">&#128;</FONT>18.1&nbsp;million in 2001. No further action is possible with respect to this
litigation.
</FONT>

<P align="left"><FONT size="2"><B><I>Net financial income and expense</I></B>
</FONT>

<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We recorded net financial income of <FONT face="'Times New Roman',Times">&#128;</FONT>20.7&nbsp;million in 2001 compared to
<FONT face="'Times New Roman',Times">&#128;</FONT>12.6&nbsp;million in 2000. The increase reflected principally interest earned on
the proceeds of the initial public offering of our ordinary shares in December
2000 and other capital contributions from the exercise of warrants and stock
options by our shareholders and employees, as well as substantial equity
investments by the Texas Pacific Group in February and May 2000.
</FONT>
<P align="left"><FONT size="2"><B><I>Other income and expense, net</I></B>
</FONT>

<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We recorded net other income of <FONT face="'Times New Roman',Times">&#128;</FONT>45.7&nbsp;million in 2001 compared to net
other expense of <FONT face="'Times New Roman',Times">&#128;</FONT>28 thousand in 2000. This increase resulted primarily from a
one-time <FONT face="'Times New Roman',Times">&#128;</FONT>68.3&nbsp;million gain generated from our SkiData and Tag divestitures,
which was only partially offset by foreign exchange losses and minority
interests. Net other expense in 2000 was primarily attributable to minority
interests and gains on investments.
</FONT>
<P align="left"><FONT size="2"><B><I>Income tax</I></B>
</FONT>

<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We recorded an income tax credit of <FONT face="'Times New Roman',Times">&#128;</FONT>14.2&nbsp;million in 2001, reflecting an
effective tax rate of 16.3%. In 2000, we recorded an income tax expense of
<FONT face="'Times New Roman',Times">&#128;</FONT>29.6&nbsp;million, which reflected an effective tax rate of 21.2%. Our effective
tax rate in 2001 declined mainly due to the management severance expenses which
created losses in certain countries with low effective tax rates.
</FONT>
<P align="left"><FONT size="2"><B><I>Net income (loss)</I></B>
</FONT>

<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We recorded a net loss of <FONT face="'Times New Roman',Times">&#128;</FONT>100.2&nbsp;million in 2001, or <FONT face="'Times New Roman',Times">&#128;</FONT>0.16 per share, as
compared to net income of <FONT face="'Times New Roman',Times">&#128;</FONT>99.1&nbsp;million in 2000, or <FONT face="'Times New Roman',Times">&#128;</FONT>0.18 per diluted share.
The net loss primarily reflected the decline in our operating income, which was
only partially offset by the one-time gain from the SkiData and Tag activities
divestitures.
</FONT>
<P align="center"><FONT size="2">54</FONT>
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#toc">Table of Contents</A></H5><P>
<P align="center"><FONT size="2"><B>LIQUIDITY AND CAPITAL RESOURCES</B>
</FONT>

<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our financial position remained strong in 2002. Cash and cash equivalents
were <FONT face="'Times New Roman',Times">&#128;</FONT>417.2&nbsp;million at December&nbsp;31, 2002, as compared to a <FONT face="'Times New Roman',Times">&#128;</FONT>490.7&nbsp;million at
December&nbsp;31, 2001. Excluding non-recurring items, primarily restructuring
charges, one-time royalty prepayment, amounts paid in connection with a
litigation expense and management severance costs accrued in 2001, cash
outflows during 2002 were contained. We also used limited amounts of cash to
fund our purchases of property, plant and equipment and investments.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Operating activities used <FONT face="'Times New Roman',Times">&#128;</FONT>62.7&nbsp;million of cash in 2002, compared to <FONT face="'Times New Roman',Times">&#128;</FONT>23.3
million in 2001. Net cash used in operating activities in 2002 was impacted by
four non-recurring items:
</FONT>
<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">
<TR valign="top">
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" align="left" nowrap><FONT size="2">(i)</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="93%"><FONT size="2"><FONT face="'Times New Roman',Times">&#128;</FONT>33.4&nbsp;million paid in connection with our restructuring
programs;</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" align="left" nowrap><FONT size="2">(ii)</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="93%"><FONT size="2"><FONT face="'Times New Roman',Times">&#128;</FONT>11.2&nbsp;million of a one-time royalty prepayment for the period
through 2005;</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" align="left" nowrap><FONT size="2">(iii)</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="93%"><FONT size="2"><FONT face="'Times New Roman',Times">&#128;</FONT>18.1&nbsp;million paid with respect to the exceptional costs
relating to the Humetrix litigation; and</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" align="left" nowrap><FONT size="2">(iv)</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="93%"><FONT size="2"><FONT face="'Times New Roman',Times">&#128;</FONT>10.6&nbsp;million paid in management severance costs accrued in
2001.</FONT></TD>
</TR>
</TABLE>

<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Excluding these exceptional items, 2002 operating activities generated
<FONT face="'Times New Roman',Times">&#128;</FONT>10.6&nbsp;million, as a result of significant improvements produced by working
capital management. Accounts receivable declined <FONT face="'Times New Roman',Times">&#128;</FONT>43.7&nbsp;million as compared to
December&nbsp;31, 2001, reflecting the lower revenue levels. Our days of sales outstanding, at an average of 53
days, compared to 57&nbsp;days at the end of December 2001. Inventory levels
as of December&nbsp;31, 2002 declined by <FONT face="'Times New Roman',Times">&#128;</FONT>43.3&nbsp;million as compared to December&nbsp;31, 2001, representing
111&nbsp;days of supply compared to 110&nbsp;days of supply as of December&nbsp;31, 2001.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Net cash used in investing activities in 2002 was <FONT face="'Times New Roman',Times">&#128;</FONT>47.1&nbsp;million compared
to <FONT face="'Times New Roman',Times">&#128;</FONT>65.3&nbsp;million in 2001. Cash used in 2001 included a cash inflow of <FONT face="'Times New Roman',Times">&#128;</FONT>108.7
million net of fees due to the divestiture of our SkiData and Tag businesses.
Excluding this one-time item, net cash used in investing activities in 2001
amounted to <FONT face="'Times New Roman',Times">&#128;</FONT>174&nbsp;million. The decrease in cash used in investing activities in
2002 was primarily due to the decrease in capital expenditures as compared to
2001. Capital expenditures were <FONT face="'Times New Roman',Times">&#128;</FONT>31.9&nbsp;million in 2002 as compared to <FONT face="'Times New Roman',Times">&#128;</FONT>102.6
million in 2001. In 2002, capital expenditures were made primarily in Europe,
and included principally <FONT face="'Times New Roman',Times">&#128;</FONT>17.7&nbsp;million related to a research and development
and office building located in La Ciotat, France, which was mainly financed
through a sale-leaseback transaction. Cash used in investing activities also
included <FONT face="'Times New Roman',Times">&#128;</FONT>14.7&nbsp;million in connection with investments in start-up technology
companies. Cash used in investing activities in 2001 also included a <FONT face="'Times New Roman',Times">&#128;</FONT>13
million cash disbursement for the purchase of 20% of SkiData&#146;s issued share
capital in anticipation of the sale of this subsidiary which was completed
during the third quarter of 2001, and investments made primarily in two
technology companies in the wireless communications market. In addition, in
March 2001, we extended a <FONT face="'Times New Roman',Times">&#128;</FONT>14&nbsp;million loan to Mr.&nbsp;Perez, our former Chief
Executive Officer, to fund tax liabilities relating to his receipt of a grant
of free shares in 2000. This loan was later partially reimbursed in the form
of Gemplus International S.A. shares (see Note 31 to our consolidated financial
statements).
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Financing activities generated <FONT face="'Times New Roman',Times">&#128;</FONT>3.8&nbsp;million of cash during 2002, compared
to <FONT face="'Times New Roman',Times">&#128;</FONT>34.7&nbsp;million cash used in 2001. The 2002 figure was primarily the result
of the <FONT face="'Times New Roman',Times">&#128;</FONT>15.9&nbsp;million proceeds generated by a sale-leaseback transaction entered
into to finance land and a research and development and office building located
in La Ciotat, France. Cash generated by financing activities in 2002 was also
impacted by the payment of dividends to minority shareholders of one of our
Asian subsidiaries in the amount of <FONT face="'Times New Roman',Times">&#128;</FONT>6.2&nbsp;million. Negative cash flow from
financing activities in 2001 principally resulted from the initial
</FONT>
<P align="center"><FONT size="2">55</FONT>
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#toc">Table of Contents</A></H5><P>


<P align="left"><FONT size="2"> implementation of our share repurchase program, pursuant to which we
repurchased shares of our outstanding common stock for <FONT face="'Times New Roman',Times">&#128;</FONT>15.1&nbsp;million, the
purchase at fair market value of shares of Gemplus SA held by two of our former
executive officers for <FONT face="'Times New Roman',Times">&#128;</FONT>14.5&nbsp;million, the payment of <FONT face="'Times New Roman',Times">&#128;</FONT>8.1&nbsp;million for expenses
incurred in 2000 in connection with sales of equity securities to Texas Pacific
Group and our initial public offering, and the payment of <FONT face="'Times New Roman',Times">&#128;</FONT>4.3&nbsp;million in
dividends to minority shareholders of one of our Asian subsidiaries.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In 1999, we entered into a <FONT face="'Times New Roman',Times">&#128;</FONT>150&nbsp;million revolving credit facility with a
syndicate of international banking institutions that bore interest at a
floating rate, out of which <FONT face="'Times New Roman',Times">&#128;</FONT>73.1&nbsp;million was available as at December&nbsp;31,
2002. We had never drawn any amount under this revolving credit facility and
in January 2003 we terminated it before its due date.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We believe that our existing cash resources and our anticipated cash flow
from operations are sufficient to provide for our foreseeable near term and
medium term liquidity needs. At December&nbsp;31, 2002, cash and cash equivalents
amounted to <FONT face="'Times New Roman',Times">&#128;</FONT>417.2&nbsp;million. Our off balance sheet commitments at December&nbsp;31,
2002 were not significant.
</FONT>
<P align="left"><FONT size="2"><B>Critical accounting policies</B>
</FONT>

<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The significant accounting policies that we believe are the most critical
to assist in fully understanding and evaluating our reported financial results
include the following:
</FONT>
<P align="left"><FONT size="2"><B><I>Revenue Recognition</I></B>
</FONT>

<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Revenues from product sales are recorded upon transfer of title and risk
of loss provided that no significant obligations of the company remain and
collection of the resulting receivable is probable. We record deferred revenue
for sales invoiced which are delayed at the buyer&#146;s request where transfer of
title and risk of loss have not occurred. We regularly review our procedures
to ensure that the policy is consistently applied throughout our subsidiaries
worldwide.
</FONT>
<P align="left"><FONT size="2"><B><I>Goodwill</I></B>
</FONT>

<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Goodwill is reviewed for impairment based on expectations of future cash
flows, which are uncertain, at each balance sheet date, or whenever events or
changes in circumstances indicate that the carrying value may not be
recoverable. We consider significant underperformance relative to expected
historical or projected future operating results, significant change in the
manner of our use of the acquired assets or the strategy for our overall
business, and significant negative industry or economic trends. Under the
current assumptions we believe that no further material impairment of goodwill
exists.
</FONT>
<P align="left"><FONT size="2"><B><I>Loans and receivables</I></B>
</FONT>

<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;According to International Accounting Standards, we adjust the carrying
amount of loans and receivables to their estimated recoverable amount when it
is probable that we will not be able to collect all amounts due &#150; principal and
interest &#150; according to the contractual terms of such loans and receivables.
</FONT>
<P align="left"><FONT size="2"><B><I>Inventory</I></B>
</FONT>

<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our industry is highly competitive and characterized by rapid
technological change, frequent new product development, and rapid product
obsolescence. We regularly review inventory quantities on hand and record
provisions for excess and obsolete inventory based primarily on our estimated
forecast of product demand and production requirements.
</FONT>
<P align="center"><FONT size="2">56</FONT>
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#toc">Table of Contents</A></H5><P>

<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Inventories are carried at the lower of cost or market, with cost being
determined principally on the weighted-average cost basis. Cost elements
included in inventories are raw materials, labor and manufacturing overhead
excluding the impact of low activity, if any. A significant component of the
cost of production relates to the acquisition of microcontroller chips. The
cost of microcontroller chips decreased significantly in recent months.
Our provision for microcontroller chips inventory is determined based on the
anticipated net realizable value of finished products which includes cost of
production, raw materials, labor and manufacturing overheads.
</FONT>
<P align="left"><FONT size="2"><B><I>Research and Development</I></B>
</FONT>

<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Development costs are recognized as an expense when incurred, except for
development costs incurred from the time technological feasibility is
established until the product under development is produced and future
profitability is demonstrated. Judgment is exercised in determining
technological feasibility and future profitability, the capitalization of such
costs being reviewed on a quarterly basis. In addition, we continually
evaluate the recoverability of capitalized costs and make write-downs when
necessary.
</FONT>
<P align="left"><FONT size="2"><B><I>Restructuring</I></B>
</FONT>

<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;As required by International Accounting Standards, we record restructuring
expenses only when, prior to the date of the financial statements, the
enterprise is committed to the plan of termination, the benefits that current
employees will receive upon termination are established and the benefit
arrangements are communicated.
</FONT>
<P align="left"><FONT size="2"><B><I>Special Purpose Entities</I></B>
</FONT>

<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We have not had any transactions involving special purpose entities as an
investment vehicle. We do not intend to enter into transactions with such
entities.
</FONT>
<P align="left"><FONT size="2"><B>Market Risk</B>
</FONT>

<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In the conduct of our business, we are exposed to a number of market
risks, including currency exchange risks, interest rate risks and credit risks.
To hedge our market risk exposures, we use several types of derivative
instruments. We discuss our exposure to market risks and our hedging
activities in &#147;Item&nbsp;11. Quantitative and Qualitative Disclosures About Market
Risk.&#148;
</FONT>
<P align="left"><FONT size="2"><B>U.S. GAAP Reconciliation</B>
</FONT>

<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We prepare our audited consolidated financial statements in accordance
with IAS, which differ in several respects from U.S. GAAP. As a result, our
net income and shareholders&#146; equity are different under U.S. GAAP and under
IAS.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The following table sets forth our consolidated net income under IAS and
under U.S. GAAP for the periods indicated.
</FONT>
<CENTER>
<TABLE cellspacing="0" border="0" cellpadding="0" width="85%">
<TR valign="bottom">
    <TD width="52%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="11"><FONT size="1"><B>Year ended December 31,</B></FONT></TD>
</TR>
<TR valign="bottom">
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="11"><HR size="1" noshade></TD>
</TR>
<TR valign="bottom">
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>2000</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>2001</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>2002</B></FONT></TD>
</TR>
<TR valign="bottom">
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="3"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="3"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="3"><HR size="1" noshade></TD>
</TR>
<TR valign="bottom">
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="center" colspan="11"><FONT size="1"><B>(millions of euros)</B></FONT></TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">IAS net income (loss)</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">99.1</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(100.2</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(320.9</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">U.S. GAAP net income (loss)</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(123.2</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(49.5</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(279.7</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
</TR>
</TABLE>
</CENTER>
<P align="center"><FONT size="2">57</FONT>
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#toc">Table of Contents</A></H5><P>

<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;One of the principal differences affecting the determination of our net
income under U.S. GAAP compared with IAS resulted in 2000 and 2001 from the
granting of share options to our executive officers and employees. In
accordance with IAS, the issuance of share options do not have any impact on
net income at the time of grant or of exercise of the options. Under IAS, upon
exercise of the options, the price paid for the underlying shares is allocated
to share capital and paid-in-capital. Under U.S. GAAP the difference between
the exercise price and the fair market value of our shares at the time the
options are granted generates compensation expense. In addition, in connection
with the issuance of stock options to our former Chief Executive Officer and
our former Chairman of the board in the second half of 2000, we made several
loans to these individuals for the exercise of these options, as described
under &#147;Item&nbsp;7. Major Shareholders and Related Party Transactions&#151;Related Party
Transactions.&#148; Because these loans may be prepaid prior to maturity, the
amount of interest to be paid on the loans was uncertain and, as a result, the
ultimate option price was also uncertain. Under U.S. GAAP, the issuance of
stock options with an unknown exercise price must be accounted for as a
variable plan, which requires us to measure compensation in each period based
on the difference between the exercise price and the fair market value of the
shares. A compensation expense of <FONT face="'Times New Roman',Times">&#128;</FONT>94.1&nbsp;million was recorded in 2000 with
respect to the options granted to these individuals, which was reversed in 2001
when the fair market value of the stock went below the exercise price of the
options. No compensation expense or benefit was recorded in 2002 with respect
to such issuance.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Consequently, the accounting for share options in accordance with U.S.
GAAP resulted in a compensation expense of <FONT face="'Times New Roman',Times">&#128;</FONT>2.9&nbsp;million for the year ended
December&nbsp;31, 2002, as compared to a net total benefit of <FONT face="'Times New Roman',Times">&#128;</FONT>69.3&nbsp;million for the
year ended December&nbsp;31, 2001 and a net compensation expense of <FONT face="'Times New Roman',Times">&#128;</FONT>229.7&nbsp;million
for the year ended December&nbsp;31, 2000.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Another significant difference affecting the determination of our net
income under U.S. GAAP compared with IAS results from goodwill amortization.
As a result of the adoption of SFAS 142 as of January&nbsp;1, 2002, our company no
longer amortizes goodwill under U.S. GAAP.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;One of the principal differences affecting the determination of our
shareholders&#146; equity under U.S. GAAP are the impact of several loans made to
our former Chief Executive Officer and our former Chairman of the board for the
exercise of the stock options granted in the second half of 2000, which, in
aggregate, amounted to <FONT face="'Times New Roman',Times">&#128;</FONT>4.9&nbsp;million, <FONT face="'Times New Roman',Times">&#128;</FONT>71.9&nbsp;million and <FONT face="'Times New Roman',Times">&#128;</FONT>143.7&nbsp;million and are
recorded as a decrease in shareholders&#146; equity under U.S. GAAP as at December
31, 2002, 2001 and 2000, respectively.
</FONT>
<P align="center"><FONT size="2">58</FONT>
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#toc">Table of Contents</A></H5><P>

<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The following table sets forth our shareholders&#146; equity under IAS and U.S.
GAAP as of the dates indicated.
</FONT>
<CENTER>
<TABLE cellspacing="0" border="0" cellpadding="0" width="85%">
<TR valign="bottom">
    <TD width="59%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="11"><FONT size="1"><B>Year ended December 31,</B></FONT></TD>
</TR>
<TR valign="bottom">
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="11"><HR size="1" noshade></TD>
</TR>
<TR valign="bottom">
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>2000</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>2001</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>2002</B></FONT></TD>
</TR>
<TR valign="bottom">
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="3"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="3"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="3"><HR size="1" noshade></TD>
</TR>
<TR valign="bottom">
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="center" colspan="11"><FONT size="1"><B>(millions of euros)</B></FONT></TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">IAS shareholders&#146; equity</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">1,385.0</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">1,167.8</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">860.5</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">U.S. GAAP shareholders&#146; equity</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">1,242.8</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">1,078.3</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">878.8</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
</TABLE>
</CENTER>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;For a discussion of the differences between IAS and U.S. GAAP as they
relate to our consolidated net income and shareholders&#146; equity, see Note 32 to
our audited consolidated financial statements.
</FONT>
<P align="center"><FONT size="2"><B>RESEARCH AND DEVELOPMENT</B>
</FONT>

<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We maintain a longstanding commitment to investing in a broad range of
research and development initiatives to strengthen our leadership in the
development of chip card technology and software, such as open operating
systems, cryptographic processes and application development and remote
management tools. The focus of our research and development is to develop new
software and integrated systems based on our microcontroller chip technology
and to reduce the time required to bring new products and applications to
market.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We carry out our research and development activities through two main
groups:
</FONT>
<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">
<TR valign="top">
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" align="left" nowrap><FONT size="2">&#149;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="93%"><FONT size="2">Product Development, which coordinates the development of
enabling software and software-related technology, such as operating
systems, server software applications and applets; and</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" align="left" nowrap><FONT size="2">&#149;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="93%"><FONT size="2">the Applied Research &#038; Security Center, which, coordinates
our long-term research and development regarding advanced security,
embedded software and hardware technologies.</FONT></TD>
</TR>
</TABLE>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our research and development activities are organized on a global basis,
with our main research and development centers located in France, Singapore,
and China. We have one of the largest research and development teams in the
chip card industry. As of December&nbsp;31, 2002, we had 711 engineers working in
our research and development centers around the world, compared to 760
engineers as of December&nbsp;31, 2001 and 924 engineers as of December&nbsp;31, 2000.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In 2002, our gross research and development expenditures were <FONT face="'Times New Roman',Times">&#128;</FONT>95.3
million, or approximately 12.1% of our net sales, compared to gross research
and development expenditures of <FONT face="'Times New Roman',Times">&#128;</FONT>124.6&nbsp;million, or approximately 12.2% of our
net sales in 2001, and of <FONT face="'Times New Roman',Times">&#128;</FONT>104.3&nbsp;million, or approximately 8.7% of our net
sales in 2000. A portion of these expenditures was financed through grants and
research tax credits available under certain government programs, which
amounted to <FONT face="'Times New Roman',Times">&#128;</FONT>5.6&nbsp;million in 2002, <FONT face="'Times New Roman',Times">&#128;</FONT>9.6&nbsp;million in 2001 and <FONT face="'Times New Roman',Times">&#128;</FONT>6.7&nbsp;million in
2000.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We also maintain certain licenses to third parties technologies. See
&#147;Item&nbsp;4. Information on the Company&#151;Business Overview&#151;Intellectual Property.&#148;
</FONT>
<P align="center"><FONT size="2">59</FONT>
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#toc">Table of Contents</A></H5><P>
<P align="center"><FONT size="2"><B>TREND INFORMATION</B>
</FONT>

<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We believe that there are some signs of a recovery in the
telecommunications market, showing potential single-digit unit volume growth.
Continuous price pressure from factors such as new competition, especially in
Asia, may affect this growth. Such price pressure may be offset, at least to
some extent, by improvements in our product mix towards higher margin products.
A shift to higher margin products may be assisted by the continued adoption of
open standards that can encourage our customers to invest in systems that use
newer and higher-value products that we offer in both our reporting segments.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Year 2003 will be a challenging for our financial services and security
segment. For example, EMV migration remains slow, and the anticipated growth
in revenues from such development will consequently be slower than we would
hope. Also, the markets for corporate and government security and identity
products are building relatively gradually, although there has appeared to be
some acceleration in the growth of such markets recently.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In addition, it is possible that recent
unfavorable currency fluctuations between the euro and U.S. dollar
may continue to negatively affect our revenue, along with other currency fluctuations.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;See Special Note regarding Forward Looking Statements on page 4 of this
Annual Report.
</FONT>
<P align="center"><FONT size="2">60</FONT>

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


<!-- link2 "Item&nbsp;6. Directors, Senior Management and Employees" -->
<DIV align="left"><A NAME="008"></A></DIV>
<P align="left"><FONT size="2"><B>Item&nbsp;6. Directors, Senior Management and Employees</B>
</FONT>

<P align="center"><FONT size="2"><B>BOARD OF DIRECTORS</B>
</FONT>

<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Under Luxembourg law, the board of directors is vested with broad powers
to manage our company. All powers not expressly reserved by law or by the
articles of incorporation to the shareholders fall within the powers of the
board of directors.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our board of directors currently has twelve members. Members of the board
are appointed by the shareholders to serve terms not to exceed three years and
may be re-appointed for consecutive terms. They may resign at any time, and
their functions as members of the board may be terminated at any time by a
simple majority of the votes of the shareholders voting at a general meeting.
Under Luxembourg law, a director may be an individual or a corporation. Our
board of directors met fourteen times during 2002, with an attendance rate in 2002 (physically or by telephone) of approximately 85%.
Prior to April&nbsp;29, 2003,
the board members were elected by cumulative voting. On April&nbsp;29, 2003, our
shareholders voted to eliminate cumulative voting and to accordingly amend our
articles of incorporation.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;As of January&nbsp;1, 2002, our board of directors consisted of Mr.&nbsp;David
Bonderman, Dr.&nbsp;Marc Lassus, Mr.&nbsp;William S. Price III, Mr.&nbsp;Abel Halpern, Mr.
Kheng Nam Lee, Mr.&nbsp;Randy Christofferson and Dr.&nbsp;Hasso von Falkenhausen. Dr.
Hasso von Falkenhausen became our Chairman of the board on January&nbsp;10, 2002
(Dr. von Falkenhausen&#146;s and Mr.&nbsp;Bonderman&#146;s election by the board to fill
vacancies on December&nbsp;19, 2001 was subject to definitive election by the
shareholders). At our annual general shareholders meeting on April&nbsp;17, 2002,
our shareholders approved a resolution to increase the number of board members
to thirteen, elected Mr.&nbsp;Thierry Dassault, Dr.&nbsp;Peter Kraljic, Mr.&nbsp;Daniel Le
Gal, Mr.&nbsp;Gilles Lisimaque, Mr.&nbsp;Ronald W. Mackintosh and Mr.&nbsp;Ziad Takieddine to
the board of directors and ratified the election of Mr.&nbsp;David Bonderman and Dr.
Hasso von Falkenhausen to the board of directors. The resolutions to increase
the number of board members and to elect Mr.&nbsp;Bonderman were ratified at a
further extraordinary general meeting of shareholders on May&nbsp;15, 2002.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;At the board of directors meeting held on June&nbsp;21, 2002, Mr.&nbsp;Gilles
Lisimaque resigned from our board of directors, with effect as of that date,
and Mr.&nbsp;Dominique Vignon was elected by the board to fill the vacancy and was
appointed as Chairman of the board with immediate effect, succeeding Dr.&nbsp;Hasso
von Falkenhausen who resigned as Chairman with immediate effect and as director
with effect as of September&nbsp;23, 2002, due to the age limit of 70&nbsp;years in the
company&#146;s by-laws.</FONT>

<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The board of directors elected Mr.&nbsp;Alex Mandl as a director on October&nbsp;29,
2002. Mr.&nbsp;Mandl&#146;s appointment was further ratified by the extraordinary
general meeting of shareholders on December&nbsp;19, 2002. On December&nbsp;19, 2002,
Dr.&nbsp;Marc Lassus and Mr.&nbsp;Ziad Takieddine resigned from our board, the number of
board members was reduced from thirteen to twelve and Dr.&nbsp;Johannes Fritz was
appointed as director by the shareholders at the extraordinary general meeting
of shareholders.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our board of directors conducts its activities in accordance with governance
principles set forth in applicable regulations, exchange rules, and the
company&#146;s articles of incorporation, committee charters and other adopted
practices.
</FONT>

<P align="center"><FONT size="2">61</FONT>

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

<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The following table sets forth the name, age, date of appointment and
occupation of each of our twelve directors as of April&nbsp;29, 2003:
</FONT>
<CENTER>
<TABLE cellspacing="0" border="0" cellpadding="0" width="100%">
<TR valign="bottom">
    <TD width="28%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="18%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="10%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="29%">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center"><FONT size="1"><B>Date of</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center"><FONT size="1"><B>Expiration</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom">
    <TD nowrap align="center"><FONT size="1"><B>Name</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>Age</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center"><FONT size="1"><B>appointment</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center"><FONT size="1"><B>of Term</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center"><FONT size="1"><B>Occupation</B></FONT></TD>
</TR>
<TR valign="bottom">
    <TD nowrap align="center"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="3"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center"><HR size="1" noshade></TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><FONT size="2">Mr. Dominique Vignon</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right" valign="top"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top"><FONT size="2">
55</FONT></TD>
    <TD valign="top"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">June&nbsp;21, 2002
</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">April 2004
</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">Chairman of our board of
directors</FONT></TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right" valign="top"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top"><FONT size="2">&nbsp;</FONT></TD>
    <TD valign="top"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><FONT size="2">Mr. Alex Mandl</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right" valign="top"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top"><FONT size="2">
59</FONT></TD>
    <TD valign="top"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">October&nbsp;29, 2002
</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">April 2004
</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">Chief Executive Officer</FONT></TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right" valign="top"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top"><FONT size="2">&nbsp;</FONT></TD>
    <TD valign="top"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><FONT size="2">Mr. David Bonderman</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right" valign="top"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top"><FONT size="2">
60</FONT></TD>
    <TD valign="top"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">December&nbsp;19, 2001
</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">April 2004
</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">Vice-Chairman of our
board of directors;
Managing Partner, Texas
Pacific Group</FONT></TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right" valign="top"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top"><FONT size="2">&nbsp;</FONT></TD>
    <TD valign="top"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><FONT size="2">Mr. Randy Christofferson</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right" valign="top"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top"><FONT size="2">
45</FONT></TD>
    <TD valign="top"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">November&nbsp;13, 2000
</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">April 2004
</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">Managing Director, MIOGA
Ventures, L.L.C.</FONT></TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right" valign="top"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top"><FONT size="2">&nbsp;</FONT></TD>
    <TD valign="top"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><FONT size="2">Mr. Thierry Dassault</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right" valign="top"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top"><FONT size="2">
45</FONT></TD>
    <TD valign="top"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">April&nbsp;17, 2002
</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">April 2004
</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">Chairman and Chief
Executive Officer,
Dassault Multim&#233;dia</FONT></TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right" valign="top"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top"><FONT size="2">&nbsp;</FONT></TD>
    <TD valign="top"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><FONT size="2">Mr. Abel Halpern</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right" valign="top"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top"><FONT size="2">
35</FONT></TD>
    <TD valign="top"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">February&nbsp;1, 2000
</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">April 2004
</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">Partner, HMD, Partners LP</FONT></TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right" valign="top"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top"><FONT size="2">&nbsp;</FONT></TD>
    <TD valign="top"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><FONT size="2">Dr. Peter Kraljic</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right" valign="top"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top"><FONT size="2">
64</FONT></TD>
    <TD valign="top"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">April&nbsp;17, 2002
</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">April 2004
</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">Member of the McKinsey
Advisory Board</FONT></TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right" valign="top"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top"><FONT size="2">&nbsp;</FONT></TD>
    <TD valign="top"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><FONT size="2">Mr. Daniel Le Gal</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right" valign="top"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top"><FONT size="2">
52</FONT></TD>
    <TD valign="top"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">April&nbsp;17, 2002
</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">April 2004
</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">Partner and Managing
Director, Finadvance</FONT></TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right" valign="top"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top"><FONT size="2">&nbsp;</FONT></TD>
    <TD valign="top"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><FONT size="2">Mr. Kheng Nam Lee</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right" valign="top"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top"><FONT size="2">
54</FONT></TD>
    <TD valign="top"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">October&nbsp;12, 2000
</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">April 2004
</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">President, Vertex
Venture Holding Ltd and
Vickers Capital Ltd</FONT></TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right" valign="top"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top"><FONT size="2">&nbsp;</FONT></TD>
    <TD valign="top"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><FONT size="2">Mr. Ronald W. Mackintosh</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right" valign="top"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top"><FONT size="2">
54</FONT></TD>
    <TD valign="top"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">April&nbsp;17, 2002 *
</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">April 2004
</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">Chairman, Differentis</FONT></TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right" valign="top"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top"><FONT size="2">&nbsp;</FONT></TD>
    <TD valign="top"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><FONT size="2">Mr. William S. Price</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right" valign="top"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top"><FONT size="2">
45</FONT></TD>
    <TD valign="top"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">February&nbsp;1, 2000
</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">April 2004
</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">Managing Director, Texas<BR>
Pacific Group</FONT></TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right" valign="top"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top"><FONT size="2">&nbsp;</FONT></TD>
    <TD valign="top"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><FONT size="2">Mr. Johannes Fritz</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right" valign="top"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top"><FONT size="2">
48</FONT></TD>
    <TD valign="top"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">December&nbsp;19, 2002
</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">April 2004
</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">Managing Director,<BR>
Quandt family office</FONT></TD>
</TR>
</TABLE>
</CENTER>
<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">
<TR valign="top">
    <TD width="1%" align="left" nowrap><FONT size="2">*</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="96%"><FONT size="2">Ronald W. Mackintosh had been a board member since April&nbsp;18, 2001 and
resigned from such position on December&nbsp;19, 2001 due to his appointment as
interim Chief Executive Officer of our company; he was then re-elected as a
board member on April&nbsp;17, 2002.</FONT></TD>
</TR>
</TABLE>
<P align="center"><FONT size="2">62</FONT>
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#toc">Table of Contents</A></H5><P>

<P align="left"><FONT size="2"><B>Board Committees</B>
</FONT>

<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our board of directors has three committees: an Audit Committee, a
Compensation Committee and a Strategy Committee.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Audit Committee</I>
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Audit Committee consists of Mr.&nbsp;William S. Price III (Chairman)<SUP>1</SUP>, Mr.
Randy Christofferson, Mr.&nbsp;Kheng Nam Lee and Dr.&nbsp;Johannes Fritz. This committee
was created by the board of directors on October&nbsp;12, 2000, and met five times
during 2002, with an attendance rate in 2002 (physically or by telephone) of approximately 81%. The activity of the committee is governed by a specific committee
charter. This committee reviews our budgets and financial statements and any
potential conflicts of interests with a director or any other related party and
all other activities as required by law and securities exchange rules. During
2002, the Audit Committee reviewed, among other items, our financial statements
for 2001 and our quarterly statements for 2002, reviewed the quarterly
accounting judgments and the quarterly audit comments made by our auditors, as
well as the status of our goodwill, and analyzed related party transactions.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Main off-balance sheet liabilities (and particularly guarantees and
foreign exchange operation) are regularly reviewed by the members of the Audit
Committee and our Chief Executive Officer.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Luxembourg laws require our auditors to be appointed by the shareholders;
therefore, our shareholders appoint the auditors upon recommendation of the
Audit Committee.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Compensation Committee</I>
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Compensation Committee consists
of Mr.&nbsp;Dominique Vignon (Chairman), Mr.&nbsp;Thierry Dassault, Mr.&nbsp;David Bonderman and Mr.&nbsp;Kheng Nam Lee. This
committee was created by the board of directors on October&nbsp;12, 2000, and met
four times during 2002, with an attendance rate in 2002 (physically or by telephone) of approximately 93%. The activity of the committee is governed by a
specific committee charter. This committee reviews our Chief Executive Officer
compensation, makes recommendations on the compensation of executive officers
and directors and supervises the administration of stock option plans for our
employees. The Compensation Committee follows guidelines that generally call for the
adjustable portion of executive compensation to vary between 50% and 100% of the
applicable salary depending on the executive&#146;s position. Generally, half of
this bonus depends on the operating income of the group and the other half
depends on achievement criteria based on pre-set objectives related to the
activities of the individual executive. Stock options are granted to executives
when they are hired, and potential additional grants are subject to annual
review based on individual and collective company achievement criteria.
The committee also evaluates and recommends candidates for new
board members and for the selection of our Chairman and Chief Executive
Officer. During 2002, the Compensation Committee reviewed, among other items,
the expenses related to our Chief Executive Officer and the process of grant of
stock options to top managers and senior executives and analyzed our future
stock options needs, the stock option and rollover plans and the stock option
reserve.
</FONT>

<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Strategy Committee</I>
</FONT>

<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Strategy Committee consists of
Mr.&nbsp;Dominique Vignon (Chairman), Mr.&nbsp;Peter Kraljic,
Mr.&nbsp;Daniel Le Gal, Mr.&nbsp;Alex Mandl and
Mr.&nbsp;William&nbsp;S. Price&nbsp;III. The activity of the
committee is governed by a specific committee charter. The Strategy
Committee&#146;s role is to advise the Board concerning the Company&#146;s strategies, major plans of action and significant acquisitions or divestitures.</FONT>

<P>
<HR size="1" width="18%" align="left" noshade>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">
<TR valign="top">
    <TD width="1%" align="left" nowrap><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="96%"><FONT size="2"><SUP>1</SUP> Mr.&nbsp;Price is a shareholder of the general partner of Texas Pacific Group, one
of our major shareholders, and, as a result, it is not certain whether Mr.
Price may be considered an &#147;independent director&#148; in accordance with Rule&nbsp;4350
of the NASD Manual. See &#147;Item&nbsp;7. Major Shareholders and Related Party
Transactions&#151;Major Shareholders.&#148; Our board of directors determined that the
appointment of Mr.&nbsp;Price to the Audit Committee in November 2000 is in the best
interests of our company and our shareholders because Mr.&nbsp;Price has extensive
experience in finance and management and has served as a director of a
significant number of public and privately-held companies in the United States
and abroad. See &#147;Item&nbsp;6. Directors, Senior Management and Employees&#151;Director
and Executive Officer Biographies&#148; for a description of Mr.&nbsp;Price&#146;s
professional and academic background.</FONT></TD>
</TR>
</TABLE>

<P align="center"><FONT size="2">63</FONT>


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

<P align="center"><FONT size="2"><B>SENIOR MANAGEMENT</B>
</FONT>

<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our board of directors has, with the authorization of our shareholders,
delegated the day-to-day management of our company, including the power to act
on behalf of our company, to the Chief Executive Officer, except for any
matters that exceed <FONT face="'Times New Roman',Times">&#128;</FONT>30&nbsp;million, subject to powers expressly reserved by law to
the board of directors or our shareholders.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In December 2001, Mr.&nbsp;Antonio Perez resigned from his position as Chief
Executive Officer and was replaced by Mr.&nbsp;Ronald W. Mackintosh, who served as
interim Chief Executive Officer until his resignation effective on August&nbsp;31,
2002. In February 2002, Mr.&nbsp;William Lloyd resigned from his position as Chief
Technology Officer and was replaced by Mr.&nbsp;Tony Engberg. In February 2002, Mr.
Phil Faraci resigned from his position as Executive Vice President, General
Manager of the Telecommunications Business Unit and was replaced by Mr.
Philippe Vall&#233;e. In March 2002, Mr.&nbsp;Steven Gomo resigned from his position as
Chief Financial Officer and was replaced by Mr.&nbsp;Yves Guillaumot, as interim
Chief Financial Officer. Mr.&nbsp;Fr&#233;d&#233;ric Spagnou who served as our Vice President
in charge of business development resigned in March 2002.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;On August&nbsp;29, 2002, the board of directors appointed Mr.&nbsp;Alex Mandl as
Chief Executive Officer, with effect as of September&nbsp;9, 2002, in replacement of
Mr.&nbsp;Mackintosh. In November 2002, our Chief Executive Officer, Mr.&nbsp;Mandl
announced a management reorganization, appointing Mr.&nbsp;Jacques Villi&#232;res as
Executive Vice President Operations and confirming Mr.&nbsp;Stephen Juge as
Executive Vice President General Counsel, Mr.&nbsp;Didier Lachaud as Executive Vice
President Human Resources, Mr.&nbsp;Gilles Michel as Executive Vice President
Financial and Security Services Business Unit, Mr.&nbsp;Philippe Vall&#233;e as Executive
Vice President Telecom Business Unit and Mr.&nbsp;Yves Guillaumot as interim Chief
Financial Officer.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In February 2003, Mr.&nbsp;Mandl announced a reorganization, appointing Mr.
Jacques S&#233;n&#233;ca as Executive Vice President Business Development Group, Mr.&nbsp;Philippe Combes as Executive Vice President Operations, replacing Mr.&nbsp;Jacques
Villi&#232;res who decided to retire from Gemplus as of April&nbsp;15, 2003, and Mr.&nbsp;Guillaumot as Executive Vice President and Chief Financial Officer. Mr.&nbsp;Tony
Engberg resigned as Executive Vice President, Research and Development as of
March&nbsp;15, 2003, and his responsibilities have been transferred to the Business
Development Group. In July 2003, Mr.&nbsp;Mandl announced the
appointment of Mr.&nbsp;Philippe Duranton as Executive Vice President
Human Resources, replacing Mr.&nbsp;Didier Lachaud.
</FONT>
<P align="center"><FONT size="2">64</FONT>
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#toc">Table of Contents</A></H5><P>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The following table sets forth the name, age and current position of each
of our executive officers as of July&nbsp;10, 2003:
</FONT>
<CENTER>
<TABLE cellspacing="0" border="0" cellpadding="0" width="65%">
<TR valign="bottom">
    <TD width="30%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="57%">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD nowrap align="center"><FONT size="1"><B>Name</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>Age</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center"><FONT size="1"><B>Position</B></FONT></TD>
</TR>
<TR valign="bottom">
    <TD nowrap align="center"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="3"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center"><HR size="1" noshade></TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><FONT size="2">Mr. Alex Mandl</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right" valign="top"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top"><FONT size="2">
59</FONT></TD>
    <TD valign="top"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">Chief Executive Officer</FONT></TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><FONT size="2">Mr. Philippe Combes</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right" valign="top"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top"><FONT size="2">
49</FONT></TD>
    <TD valign="top"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">Executive Vice President, Operations</FONT></TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><FONT size="2">Mr. Philippe Duranton</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right" valign="top"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top"><FONT size="2">
43</FONT></TD>
    <TD valign="top"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">Executive Vice President, Human Resources</FONT></TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><FONT size="2">Mr. Yves Guillaumot</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right" valign="top"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top"><FONT size="2">
44</FONT></TD>
    <TD valign="top"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">Executive Vice President, Chief Financial<BR>
Officer</FONT></TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><FONT size="2">Mr. Stephen Juge</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right" valign="top"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top"><FONT size="2">
49</FONT></TD>
    <TD valign="top"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">Executive Vice President, General<BR>
Counsel</FONT></TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><FONT size="2">Dr. Gilles Michel</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right" valign="top"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top"><FONT size="2">
51</FONT></TD>
    <TD valign="top"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">Executive Vice President, Financial and<br>
Security Services Business Unit</FONT></TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><FONT size="2">Mr. Jacques S&#233;n&#233;ca</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right" valign="top"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top"><FONT size="2">
43</FONT></TD>
    <TD valign="top"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">Executive Vice President, Business<BR>
Development Group</FONT></TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><FONT size="2">Mr. Philippe Vall&#233;e</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right" valign="top"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top"><FONT size="2">
38</FONT></TD>
    <TD valign="top"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">Executive Vice President, Telecom Business<BR>
Unit</FONT></TD>
</TR>
</TABLE>
</CENTER>
<P align="center"><FONT size="2"><B>DIRECTOR AND EXECUTIVE OFFICER BIOGRAPHIES</B>
</FONT>

<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Dominique Vignon </I>has served as Chairman of the board of directors since
June&nbsp;21, 2002. Mr.&nbsp;Vignon served as Chairman of the board of directors and
Chief Executive Officer of the Framatome Group from 1996 to the end of 2001,
where he also developed that group&#146;s connector business. From the end of 2000
to the end of 2001, he served as President of Framatome ANP and led the merger
of the Framatome and Siemens corresponding activities. From 1990 to 2001, Mr.
Vignon held various management positions within the Framatome Group. From 1995
to 1996, he was President of Framatome&#146;s nuclear business. From 1993 to 1995,
he was Chairman of Jeumont Industrie. From 1990 to 1993, Mr.&nbsp;Vignon was General
Manager of Nuclear Power International (NPI), the joint venture of Framatome
and Siemens. From 1975 to 1990, he worked at Electricit&#233; de France, where he
was in charge of major new generation projects in France and abroad. Mr.
Vignon is a graduate of France&#146;s Ecole Polytechnique, and of the leading French
Engineering School, the Ecole Nationale des Ponts et Chauss&#233;es. He also holds
a master in Economics. Mr.&nbsp;Vignon serves on the board of Completel Europe N.V.
</FONT>
<P align="center"><FONT size="2">65</FONT>
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#toc">Table of Contents</A></H5><P>


<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Alex
Mandl </I>has served as Chief Executive Officer since September 2002, and
as director since October&nbsp;29, 2002. Previously, Mr.&nbsp;Mandl served as Chairman
and Chief Executive Officer of Teligent. Prior to Teligent, Mr.&nbsp;Mandl served
as President and Chief Operating Officer of AT&#038;T, where he was responsible for
directing the company&#146;s long distance, wireless and local communications
services, as well as Direct TV, credit card and Internet businesses. Earlier,
Mr.&nbsp;Mandl served as AT&#038;T&#146;s Chief Financial Officer and Group Executive.
Between 1987 and 1991, Mr.&nbsp;Mandl was Chairman and Chief Executive Officer of
Sea-Land Services, Inc., the world&#146;s leading global provider of ocean transport
and distribution services. Mr.&nbsp;Mandl began his business career in 1969, when
he joined Boise Cascade Corp., as a merger and acquisition analyst. He held
various financial posts with increasing responsibilities during the next eleven
years. In 1980, he joined Seaboard Coast Line Industries, a diversified
transportation company, as Senior Vice President and Chief Financial Officer.
After Seaboard merged with Chessie Systems to become CSX Corp., Mr.&nbsp;Mandl was
named Senior Vice President in charge of corporate development, human resources
and chief information officer. In addition, he had operating responsibility
for three transportation and information technology subsidiaries. Mr.&nbsp;Mandl
holds an M.B.A. from the University of California at Berkeley and a B.A. in
economics from Willamette University in Salem, Oregon. Mr.&nbsp;Mandl serves on the
boards of Dell Computer Corporation, the Walter A. Haas School of Business at
the University of California at Berkeley, Willamette University and the
American Enterprise Institute for Public Policy Research.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>David Bonderman </I>has served as Vice-Chairman of the board of directors
since December 2001. He is a principal, general partner and one of the
founders of Texas Pacific Group (&#147;TPG&#148;). Prior to forming TPG, Mr.&nbsp;Bonderman
was Chief Operating Officer of the Robert M. Bass Group, Inc. (now doing
business as Keystone, Inc.) (&#147;RMBG&#148;) in Fort Worth, Texas. Prior to joining
RMBG in 1983, Mr.&nbsp;Bonderman was a partner in the law firm of Arnold &#038; Porter in
Washington, DC where he specialized in corporate, securities, bankruptcy, and
antitrust litigation. From 1969 to 1970, Mr.&nbsp;Bonderman was a Fellow in Foreign
and Comparative Law in conjunction with Harvard University and from 1968 to
1969, he was Special Assistant to the U.S. Attorney General in the Civil Rights
Division. From 1967 to 1968, Mr.&nbsp;Bonderman was Assistant Professor at Tulane
University School of Law in New Orleans. Mr.&nbsp;Bonderman graduated magna cum
laude from Harvard Law School in 1966. He was a member of the Harvard Law
Review and a Sheldon Fellow. He is a 1963 graduate of the University of
Washington in Seattle. Mr.&nbsp;Bonderman serves on the boards of Continental
Airlines, Inc., ProQuest Company, Ducati Motor Holding, S.p.A., Co-Star Group,
Inc., Denbury Resources, Inc., Ryanair Holdings, plc, Oxford Health Plans,
Inc., ON Semiconductors, Magellan Health Services, Inc., Paradyne Networks,
Inc., and Korea First Bank. He also serves on the boards of The Wilderness
Society, the Grand Canyon Trust, and the American Himalayan Foundation. In
addition, he serves on the board of directors of the University of Washington
Foundation as well as the Harvard Law School Dean&#146;s Advisory Board.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Randy L. Christofferson </I>has served as a director since November 2000. Mr.
Christofferson has been the Managing Director of MIOGA Ventures since 2000.
From August 1999 to September 2000, Mr.&nbsp;Christofferson served as Chief
Executive Officer of Walker Digital. From 1995 to 1999, Mr.&nbsp;Christofferson
served as President of First USA Bank. From 1990 to 1995, Mr.&nbsp;Christofferson
held several senior management positions at the American Express Company,
including President of Amex Relationship Services, Senior Vice President of
Worldwide Quality and Reengineering and Senior Vice President of Corporate
Strategy and Advanced Technology. Prior to 1990, Mr.&nbsp;Christofferson was a
partner of Bain &#038; Company. Mr.&nbsp;Christofferson received his Master of Business
Administration from Harvard University and graduated with highest honors from
Michigan State University, where he earned a B.S. in Chemical Engineering. Mr.
Christofferson serves on the boards of directors of IntelliRisk Management
Corporation, FineStationery.com, DeNovo, Inc. and the Delaware Art Museum.
</FONT>
<P align="center"><FONT size="2">66</FONT>
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#toc">Table of Contents</A></H5><P>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Philippe Combes </I>was appointed Executive Vice President Operations on
February&nbsp;12, 2003, with effect as of February&nbsp;24, 2003. In 1998, he had pursued
his international career as CEO of Philips Displays in Holland, and most
recently has been running his own Executive Coaching consultancy. In 1975 he
had joined Schlumberger Industries where he held various operational
responsibilities in France, Brazil and Indonesia. Mr.&nbsp;Combes graduated from
ENSAM (Ecole Nationale Sup&#233;rieure d&#146;Arts et M&#233;tiers) with a degree in robotics
and electronic.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Thierry Dassault </I>has served as a director since April 2002.
He currently serves as the Chairman and Chief Executive Officer of Dassault
Multimedia, a venture capital company that holds investments in companies such
as Infogrames, Hi-M&#233;dia, Net2one and Welcome Real Time. Prior to that, from
1985 to 1993, he was Producer Partner at Claude Delon Productions Company.
From 1982 to 1984, he was General Manager in an alarm systems company, and from
1979 to 1981, he was director of the Equipements Civils pour l&#146;Electronique
Serge Dassault company in Brazil. Mr.&nbsp;Dassault has served on the supervisory
board of Gemplus SA since 1998 and as Vice-Chairman since March 2001. He
serves on the boards of various companies, including Cdandco, Chapitre.com,
Dassault Multimedia, FCC and SERF (BFM), Gaumont and Groupe Industriel Marcel
Dassault. He also serves on the supervisory board of Soci&#233;t&#233; du Journal des
Finances.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Philippe Duranton </I>has served as our Executive Vice President, Human Resources
since July 2003. Prior to joining Gemplus, Mr.&nbsp;Duranton served as Human
Resources EVP at Canal&#043; and Co-Managing Director, General Affairs, for the
Television and Film Division of Vivendi Universal from 1998 to 2002. Prior to
joining Canal&#043;, Mr.&nbsp;Duranton spent nine years (1989 to 1998) at Thales where he
held numerous Human Resource management positions across the company&#146;s
divisions. Mr.&nbsp;Duranton began his career in education and held
various positions
from 1985 to 1988 in both the public and private sectors. Mr.&nbsp;Duranton holds a variety of academic distinctions including a D.E.S.S. diploma
in Human Resource Management from the Institute of Administration for Business,
Bordeaux, France, and a master&#146;s degree in History.
</FONT>

<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Dr.&nbsp;Johannes Fritz </I>has served as a director since December 2002. He is
the general head of the Quandt family office since June 2000. From 1991 to
June 2000, he was a managing director responsible for all financial affairs of
the Quandt family office and running its day-to-day-business. In 1989 he
joined the Quandt family office. Prior to that, he spent five years at KPMG
covering financial institutions and industrial companies. From 1982 to 1983,
he worked with Bertelsmann AG in the area of human resources. Dr.&nbsp;Fritz
studied at Mannheim University where he was awarded a Master and Doctor degree
in Business Administration. As a research associate he followed a postgraduate
education at the business school of the New York University. Dr.&nbsp;Fritz earned
a degree as a tax advisor and a certified public accountant (CPA). He serves
on the advisory board of Drees &#038; Sommer AG, as a member of the regional council
of Deutsche Bank and on the advisory board of ING BHF-Bank.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Yves Guillaumot </I>has served as our Executive Vice President Chief Financial
Officer from November 2002, and as Vice President, Interim Chief Financial
Officer from March 2002 to November 2002. Mr.&nbsp;Guillaumot joined our company in
July 1998 as Corporate Controller. He was promoted to Vice President in March
2001. Prior to joining Gemplus, from 1987 to 1998, Mr.&nbsp;Guillaumot held various
financial management positions with Digital Equipment, including as director of
Finance for Southern Europe, Middle East and Africa from 1997 to 1998 and
Controller of the PC division from 1996 to 1997. Prior to 1996, Mr.&nbsp;Guillaumot
held positions with Arthur Andersen and Arthur Young. Mr.&nbsp;Guillaumot graduated
from the Ecole de Hautes Etudes Commerciales du Nord in France.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Abel G. Halpern </I>has served as a director since December 2001 and served as
Vice-Chairman of the board of directors from February 2000 to December 2001.
Mr.&nbsp;Halpern is a partner with HMD Partners LP, a private equity investment firm
focused on middle market companies in Europe. From 1994 through 2002, Mr.
Halpern was with Texas Pacific Group, where he was a partner and served as
Managing Director of their European activities. Mr.&nbsp;Halpern remains a
consultant to Texas Pacific Group. Prior to joining Texas Pacific Group, Mr.
Halpern was a management and strategy consultant with Bain &#038; Company, an
international strategic consultancy firm. Mr.&nbsp;Halpern received a Masters of
Business Administration from Harvard University and a Bachelor of Arts degree
magna cum laude and
</FONT>
<P align="center"><FONT size="2">67</FONT>
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#toc">Table of Contents</A></H5><P>


<P align="left"><FONT size="2"> with distinction from Yale University. In addition to Gemplus
International SA, Mr.&nbsp;Halpern&#146;s directorships include Bally International and
Ducati Motor Holding, among others.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Stephen Juge </I>has served as our Executive Vice President, General Counsel
since November 2000. Prior to joining Gemplus, Mr.&nbsp;Juge served from January to
October 2000, as Senior Vice President and General Counsel of Walt Disney
Europe. From April 1996 to January 2000, Mr.&nbsp;Juge served as Senior Vice
President and European Legal Counsel of The Walt Disney Company (Europe) SA.
From November 1987 to March 1996, Mr.&nbsp;Juge served as Vice President and General
Counsel of Disneyland Paris (Euro Disney S.C.A.). Prior to joining Disneyland
Paris, Mr.&nbsp;Juge was an associate at the international law firm of Coudert
Fr&#232;res in Paris between 1981 and 1987. Mr.&nbsp;Juge attended Louisiana State
University, received a Juris Doctor degree from the Tulane University School of
Law and studied comparative law at the University of Oxford on a Marshall
Foundation Fellowship.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Dr.&nbsp;Peter Kraljic </I>has served as a director since April 2002. He is a
member of the McKinsey Advisory Board. He retired as a senior director with
McKinsey &#038; Company, Inc., D&#252;sseldorf, Germany in June 2002. Dr.&nbsp;Kraljic joined
McKinsey in 1970 and has worked extensively on strategic, organizational,
operational and restructuring programs for industrial companies in Germany,
Austria, France as well as in Central and Eastern Europe. From 1993 to 1998,
he was responsible for McKinsey&#146;s activities in France as &#147;Directeur G&#233;n&#233;ral&#148;.
Prior to joining McKinsey, Dr.&nbsp;Kraljic worked as researcher in La Continentale
Nucleaire, Luxembourg, as well as for the Welding Institute Ljubljana,
Slovenia. Dr.&nbsp;Kraljic holds a degree in metallurgy from the University of
Ljubljana, a Doctorate from the Technical University Hanover and a Masters in
Business Administration from INSEAD, Fontainebleau, France. Dr.&nbsp;Kraljic serves
on the supervisory board of the Wolfsburg AG association, LEK d.d. and of the
IEDC Bled Management School.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Didier Lachaud </I>has served as our Executive Vice President, Human Resources
since September 1997. Prior to joining Gemplus, Mr.&nbsp;Lachaud served as
Corporate Human Resources Manager at Fives-Lille from September 1995 to August
1997. Prior to August 1997, Mr.&nbsp;Lachaud held several senior management
positions at Air Liquide from September 1990, and served as Personnel Manager
at Schlumberger from 1985. Mr.&nbsp;Lachaud holds a Degree from the Institut
d&#146;Etudes Politiques de Paris.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Daniel Le Gal </I>has served as a director since April 2002. He currently
serves as a partner and Managing Director of Finadvance. One of our
co-founders in 1988, Mr.&nbsp;Le Gal served as our Chief Executive Officer from 1997
to 1999, prior to which he held several management positions in Sales,
Marketing and Strategic Planning for our company. Prior to founding our
company, from 1982 to 1987, Mr.&nbsp;Le Gal served as Marketing Manager in the
Telecommunication Unit of Thomson Semiconductors. From 1975 to 1982, he held
various positions at France Telecom. Daniel Le Gal holds an Engineering Degree
from Supelec, in Paris, France. Mr.&nbsp;Le Gal serves on the boards of directors
of Tornado, T.O.D, Qualicontrol and S.E.A.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Kheng Nam Lee </I>has served as a director since October 2000. Mr.&nbsp;Lee is the
President of Vertex Group and of Vickers Capital. Prior to serving as
President of the Vertex Group, Mr.&nbsp;Lee managed several venture capital funds of
the Vertex Group since 1988. Prior to joining the Vertex Group, Mr.&nbsp;Lee served
as head of strategic and venture capital investments at the Singapore
Technologies Group. He holds a Bachelor of Science degree in Mechanical
Engineering (with First Class honors) from Queen&#146;s University, Canada, and a
Master of Science in Operations Research and Systems Analysis (with
distinction) from the U.S. Naval Postgraduate School. Mr.&nbsp;Lee serves on the
boards of directors of Creative Technology Ltd., GRIC Communications Inc.,
Activcard SA, and Innomedia Pte. Ltd.
</FONT>
<P align="center"><FONT size="2">68</FONT>
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#toc">Table of Contents</A></H5><P>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Ronald W. Mackintosh </I>was elected as a director in April 2001. He also
served as interim Chief Executive Officer from December&nbsp;19, 2001 (when he
resigned as a director) until August&nbsp;31, 2002 and was re-elected director at
the annual general meeting of shareholders held on April&nbsp;17, 2002. Mr.
Mackintosh was the Chief Executive Officer of Differentis from July 2000
through December 2001, when he resigned from that position in order to take the
interim role at Gemplus. Since completing the interim role for Gemplus he has
returned to Differentis as Chairman. Mr.&nbsp;Mackintosh served as Chief Executive
Officer of Computer Sciences Corporation, European Business since October 1992.
From June 1990 to September 1992, Mr.&nbsp;Mackintosh served as Chief Executive,
CSC UK. From November 1987 to June 1990, Mr.&nbsp;Mackintosh served as Chief
Executive Officer at Index Group Europe. Prior to October 1987, Mr.&nbsp;Mackintosh
was a Partner at Nolan Norton &#038; Co. Europe. Mr.&nbsp;Mackintosh serves on the board
of directors of Differentis. Mr.&nbsp;Mackintosh graduated from Arbroath High
School, Scotland.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Dr.&nbsp;Gilles Michel </I>has served as President and General Manager of our
Financial and Security Services Business Unit since May 2001. Prior to May
2001, Dr.&nbsp;Michel served as Executive Vice President, Financial Services from
November 2000 and as Senior Vice President, Strategy, Mergers and Acquisitions
from February 2000. Prior to joining Gemplus, Dr.&nbsp;Michel served as Vice
President, Regional Business Segment (North and South America) at Schlumberger
from September 1999 to January 2000. Prior to September 1999, Dr.&nbsp;Michel held
various senior management positions at Schlumberger, including Vice President,
Marketing and Vice President, Engineering and Manufacturing. Dr.&nbsp;Michel holds
a Degree in Physics from the Ecole Sup&#233;rieure de Physique et de Chimie, Paris,
France, and a Ph.D. in Computer Science from the University of Paris VI.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>William S. Price, III </I>has served as a director since February 2000. Mr.
Price was a founding partner of TPG in 1992. Prior to forming TPG, Mr.&nbsp;Price
was Vice President of Strategic Planning and Business Development for General
Electric Capital Corporation. From 1985 to 1991, Mr.&nbsp;Price was employed by the
management consulting firm of Bain &#038; Company, attaining partnership status and
acting as co-head of the Financial Services Practice. Prior to 1985, Mr.&nbsp;Price
was employed as an associate specializing in corporate securities transactions
with the law firm of Gibson, Dunn &#038; Crutcher LLP. Mr.&nbsp;Price is a member of the
California Bar and graduated with honors in 1981 from the Boalt Hall School of
Law at the University of California, Berkeley. He is a 1978 Phi Beta Kappa
graduate of Stanford University. Mr.&nbsp;Price serves on the boards of directors
of Continental Airlines, Inc, Del Monte Foods, Denbury Resources, Inc, Belden &#038;
Blake Corp. Bally, DoveBid, Petco Animal Supplies, Inc, and Findexa.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Jacques S&#233;n&#233;ca </I>has served as our Executive Vice President, Business
Development Unit since January 2003. Prior to that date, he served as General
Manager of our GemVentures Services Unit from September&nbsp;1, 2001, and continues
in that role. Mr.&nbsp;S&#233;n&#233;ca joined Gemplus in 1989 as Project Manager. He has
held several management positions as Products Department Manager, General
Manager for Sales and Manufacturing Operations in Germany, General Manager for
the Telecom Business Division, and as Executive Vice President for Gemplus
Marketing &#038; Technology. Prior to joining our company, he worked with
ST-Microelectronics where he held various positions in the fields of
manufacturing, marketing and business development. Mr.&nbsp;S&#233;n&#233;ca holds a
Bachelors degree from ENSAM (Ecole Nationale Sup&#233;rieure d&#146;Arts et M&#233;tiers) and
a Business Administration degree from IAE of Aix-en-Provence in France.
</FONT>
<P align="center"><FONT size="2">69</FONT>
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#toc">Table of Contents</A></H5><P>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Philippe Vall&#233;e </I>has served as our Executive Vice President, General
Manager of our Telecom Business Unit since February 2002. He was
Vice-President Marketing of the Telecom Business Unit from May 2001 to February
2002. He was previously based in Singapore as Executive Vice-President of
Gemplus Technologies Asia, and headed the marketing and development activities
and professional services operations of Gemplus Asia Pacific. Mr.&nbsp;Vall&#233;e has
10&nbsp;years of experience in the smart card industry and has served in various
marketing, product management and sales capacities in our company. Prior to
joining our company, Mr.&nbsp;Vall&#233;e served as product manager on the first
generation of GSM mobile phones for Matra Communications (now Lagard&#232;re Group)
in France. Mr.&nbsp;Vall&#233;e has a Bachelor&#146;s degree in Electronics and
Telecommunications Engineering and a Masters of Science in Marketing Management
from ESSEC.
</FONT>
<P align="center"><FONT size="2"><B>COMPENSATION OF DIRECTORS AND PRINCIPAL EXECUTIVE OFFICERS</B>
</FONT>

<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Aggregate compensation paid by us with respect to our directors and
executive officers as a group for the fiscal year ended December&nbsp;31, 2002 was
approximately <FONT face="'Times New Roman',Times">&#128;</FONT>11,800 thousand. This amount includes compensation paid to Dr.
Lassus who ceased serving as our Chairman of the board in December 2001, with
effect as of January&nbsp;10, 2002 and who remained a director of our company until
December&nbsp;19, 2002, to Mr.&nbsp;Gilles Lisimaque who resigned as a director on June
21, 2002, to Mr.&nbsp;Steven Gomo, Mr.&nbsp;Phil Faraci, Mr.&nbsp;William Lloyd and Mr.
Fr&#233;d&#233;ric Spagnou, all of whom resigned in February and March 2002. Total
compensation excludes amounts related to the forgiveness of loans we made to
certain of our executive officers in 2000 and 2001. For a discussion of these
loans, see &#147;Item&nbsp;7. Major Shareholders and Related Party Transactions&#151;Related
Party Transactions&#148; and Note 31 to our consolidated financial statements.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The following table presents the compensation paid for the fiscal year
ended December&nbsp;31, 2002 to our <I>mandataires sociaux </I>(as defined under French
law), which include our Chief Executive Officer and certain directors of our
company*:
</FONT>
<CENTER>
<TABLE cellspacing="0" border="0" cellpadding="0" width="55%">
<TR valign="bottom">
    <TD width="69%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="12%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="13%">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>Total amount in</B></FONT></TD>
</TR>
<TR valign="bottom">
    <TD nowrap align="center"><FONT size="1"><B>Name</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>euros</B></FONT></TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Mr.&nbsp;Bertrand Cambou</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">725,000</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Mr.&nbsp;Randy Christofferson</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">40,000</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Dr.&nbsp;Hasso von Falkenhaussen</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">138,000</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Dr.&nbsp;Marc Lassus</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">2,000,000</FONT></TD>
    <TD align="left"><FONT size="2">**</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Mr.&nbsp;Gilles Lisimaque</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">167,000</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Mr.&nbsp;Ronald W. Mackintosh</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">837,000</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Mr.&nbsp;Alex Mandl</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">987,000</FONT></TD>
    <TD><FONT size="2">***</FONT></TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Mr.&nbsp;Antonio Perez</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">1,161,000</FONT></TD>
    <TD><FONT size="2">**</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Mr.&nbsp;Dominique Vignon</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">184,000</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Total</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">6,239,000</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
</TABLE>
</CENTER>
<P align="left"><FONT size="2">*Directors not listed did not receive any compensation from our company for the year 2002.
</FONT>

<P align="left"><FONT size="2">**Includes compensation paid for sums accrued in 2001.</FONT>

<P align="left"><FONT size="2">***Includes a signing bonus and housing fees.</FONT>

<P align="center"><FONT size="2">70</FONT>
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#toc">Table of Contents</A></H5><P>



<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;At an extraordinary meeting of the shareholders held on April&nbsp;17, 2002,
our shareholders approved the compensation to be paid to our directors in 2002
in an aggregate amount of <FONT face="'Times New Roman',Times">&#128;</FONT> 900,000. On April&nbsp;17, 2002, our board of directors
decided to allocate compensation to individual directors amounting to <FONT face="'Times New Roman',Times">&#128;</FONT>40
thousand per year per director as compensation in connection with services
performed as a member of our board and an additional annual payment of <FONT face="'Times New Roman',Times">&#128;</FONT>10
thousand to the chairman of each board committee for services in that capacity.
However, on December&nbsp;7, 2002 each director was asked to renounce personally
and individually his compensation for 2002 due to the financial situation of
the company. As of April&nbsp;29, 2003, all but two board members have renounced
their compensation. Our current Chairman of the board, Mr.&nbsp;Dominique Vignon,
receives annual compensation of <FONT face="'Times New Roman',Times">&#128;</FONT>300 thousand (net of social charges). For
2002, Mr.&nbsp;Vignon was paid a pro rata portion of such amount for his service
beginning June&nbsp;21, 2002.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;During 2002, our company issued to directors and executive officers an
aggregate of 13,160,000 options to subscribe for our ordinary shares. Of the
aggregate number of options issued to directors and executive officers in 2002,
Mr.&nbsp;Mandl was granted 12,000,000 stock options as of August&nbsp;29, 2002, Mr.
Vignon was granted 1,000,000 stock options as of July&nbsp;14, 2002, and as of July
14, 2002, Mr.&nbsp;von Falkenhausen was granted 160,000 stock options that vested
immediately. None of them had exercised any options, and all options were
still outstanding as of April&nbsp;29, 2003.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;None of
the non-employee directors have any agreement with our company that
provides for benefits upon termination of service (Mr.&nbsp;Vignon is an employee of
our company).
</FONT>
<P align="center"><FONT size="2"><B>STOCK OPTIONS</B>
</FONT>

<P align="left"><FONT size="2"><B>In General</B>
</FONT>

<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;On July&nbsp;27, 2000, we adopted a stock option plan that provides for the
grant of stock options to any employees who are employed by our company or its
affiliates. The term of the options granted under the plan are determined by
the notice of grant, but will not exceed ten years from the date of the grant
of the option. Pursuant to an authorization of the shareholders during an
extraordinary general meeting held on April&nbsp;29, 2003, options may be granted
under the current plan until May&nbsp;31, 2006.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The maximum number of shares of common stock that may be issued under the
stock option plan is 50,000,000. As of March&nbsp;31, 2003, 29,662,859 stock
options were outstanding.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our employees are also currently beneficiaries under the stock option
plans previously adopted for Gemplus SA, our main operating subsidiary in
France. Our employees may contribute to our company the stock options or the
shares of Gemplus SA received upon exercise of these options in exchange for
options or shares, as applicable, of our company. As of March&nbsp;31, 2003,
472,019 options for subscription of shares of Gemplus SA were outstanding under
the old plans. If such Gemplus SA stock options outstanding as of March&nbsp;31,
2003 were exercised or exchanged for options of our company and if all the
shares resulting from the exercise of these options were contributed to our
company, the beneficiaries would be the holders of 23,600,950 of our shares.
In addition, certain employees of Gemplus SA have elected to receive stock
options of our company in exchange for their Gemplus SA stock options. As of
March&nbsp;31, 2003, 2,877,500 options resulting from the conversion of Gemplus SA
stock options were outstanding. Consequently, as at March&nbsp;31, 2003, a total of
26,478,450 stock options were outstanding in relation to the Gemplus SA stock
options plans.
</FONT>
<P align="center"><FONT size="2">71</FONT>
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#toc">Table of Contents</A></H5><P>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The terms and conditions of Gemplus SA&#146;s stock option plans are
substantially consistent with those of our stock option plan as described
below, except for the method of determination of the option exercise price and
the vesting period. The exercise price was determined at the time of issuance
of the options based on the fair market value of the securities as determined
by the board of directors of Gemplus SA. One-third of the options vest each
year over a three-year term for beneficiaries in France under the Gemplus SA
stock option plan issued to employees in France in 1999 and 2000, while 25% of
the options vest each year over a four-year term for beneficiaries outside of
France. No more options may be granted under the Gemplus SA stock option
plans.
</FONT>
<P align="left"><FONT size="2"><B>Plan Administration</B>
</FONT>

<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our company&#146;s stock option plans are administered by the Stock
Administration Committee that reports plan activities to the Compensation
Committee of our board of directors on a quarterly basis. Under the option
plan and other guidelines, the Stock Administration Committee has limited
authority to determine, in its discretion:
</FONT>
<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">
<TR valign="top">
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" align="left" nowrap><FONT size="2">&#149;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="93%"><FONT size="2">the persons to whom options are granted
(except grant of options to directors and senior executive
officers, which is under the authority of the Compensation
Committee);</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" align="left" nowrap><FONT size="2">&#149;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="93%"><FONT size="2">the number of shares of common stock
underlying each option;</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" align="left" nowrap><FONT size="2">&#149;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="93%"><FONT size="2">the vesting schedule and conditions under
which the options may be exercised, including any lockup
periods; and</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" align="left" nowrap><FONT size="2">&#149;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="93%"><FONT size="2">any other matters necessary or desirable
for the administration of the option plan.</FONT></TD>
</TR>
</TABLE>
<P align="left"><FONT size="2"><B>Vesting Period</B>
</FONT>

<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Unless otherwise decided by the Stock Administration Committee, the
vesting period for options granted under the company&#146;s stock option plans will
be four years, with 25% of the granted options vesting in each year,
exercisable upon each anniversary of the date of grant, subject to specific
provisions pursuant to local regulations as applicable.
</FONT>
<P align="left"><FONT size="2"><B>Option Exercise Price</B>
</FONT>

<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our company&#146;s stock option plans require that the exercise price for
issued options be 100% of the fair market value of the underlying shares of
common stock on the date of grant as determined by the Compensation Committee
or the Stock Administration Committee subject to specific provisions pursuant
to local regulations as applicable. The exercise price may not be less than
100% of the value of the underlying shares on the relevant stock exchange on
the date of grant, subject to applicable law.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;On April&nbsp;17, 2002, our board of directors approved a plan whereby our
employees were offered the opportunity to waive and cancel 0%, 50% or 100% of
the stock options previously granted between July 2000 and December&nbsp;31, 2001
and to receive newly issued options. This plan was launched on May&nbsp;23, 2002.
On June&nbsp;5, 2002, 17,106,162 options were cancelled according to the
instructions of the option holders. On December&nbsp;10, 2002, 17,034,084 new
options were granted. The new exercise price was <FONT face="'Times New Roman',Times">&#128;</FONT>1.13, corresponding to the
fair market value of our shares on the date the new options were granted. The
new options will vest over a period of 3.5&nbsp;years subject to the following
schedule: 25% will vest after 6&nbsp;months from the date of grant, 25% will vest
after 1.5&nbsp;years from the date of grant, 25% will vest after 2.5&nbsp;years from the
date of grant, 25% will vest after 3.5&nbsp;years from the date of grant (subject to
certain
</FONT>
<P align="center"><FONT size="2">72</FONT>
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#toc">Table of Contents</A></H5><P>


<P align="left"><FONT size="2"> specific provisions pursuant to local regulations). Out of the 16,784,084
stock options granted on December&nbsp;10, 2002, 16,037,819 stock options were
outstanding on March&nbsp;31, 2003.
</FONT>
<P align="left"><FONT size="2"><B>General Plan Provisions</B>
</FONT>

<P align="left"><FONT size="2"><B><I>Share Counting</I></B>. If any outstanding option expires, terminates or is canceled
for any reason, the shares of common stock subject to the unexercised portion
of such option will become available for future grants under the option plan.
</FONT>
<P align="left"><FONT size="2"><B><I>Effect of Termination of Employment</I></B>. If an option holder&#146;s employment is
terminated:
</FONT>
<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">
<TR valign="top">
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" align="left" nowrap><FONT size="2">(i)</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="93%"><FONT size="2">for any reason other than the option holder&#146;s death, he or
she may exercise options which were exercisable at the time of the
option holder&#146;s termination within twelve months after such
termination, and all other options will expire at such time;</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" align="left" nowrap><FONT size="2">(ii)</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="93%"><FONT size="2">on account of the death of the option holder, his or her
designated beneficiary may exercise all options granted to the
beneficiary within six months following the option holder&#146;s death.</FONT></TD>
</TR>
</TABLE>
<P align="left"><FONT size="2"><B><I>Adjustments upon Changes in Capitalization</I></B><I>. </I>Our company&#146;s stock option plans
provide for an adjustment in the number of shares of common stock available to
be issued under the plans, the number of shares subject to options and the
exercise prices of options upon changes in the capitalization of our company.
</FONT>
<P align="left"><FONT size="2"><B><I>No Assignment or Transfer</I></B>. During an option holder&#146;s lifetime, each option
granted to an option holder is exercisable only by him or her and is not
transferable.
</FONT>
<P align="left"><FONT size="2"><B><I>Amendment</I></B>. The Stock Administration Committee may at any time amend the stock
option plans to adjust to or comply with applicable local legal, tax and
accounting requirements. However, any modification or adaptation that would
impair the rights of an option holder requires the prior consent of that option
holder.
</FONT>
<P align="left"><FONT size="2"><B>Senior Management Stock Options</B>
</FONT>

<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;On November&nbsp;10, 2000, our shareholders authorized our board of directors
to increase our share capital and issue up to 60,000,000 shares to directors
and executive officers of our company (including any of its subsidiaries or
affiliates) in the form of stock options or, except in the case of directors,
in the form of free shares, in each case on terms and conditions determined by
our board of directors in its sole discretion. Our board of directors may
issue these stock options and free shares from time to time over a five-year
period from the date of publication of the shareholder resolution and in
accordance with Luxembourg law. As of March&nbsp;31, 2003, 16,937,500 such stock
options were outstanding. The stock options issued pursuant to this
shareholder resolution are not subject to the terms and conditions of our stock
option plans, but are subject to the terms of a separate plan for this reserve
of stock options.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;On April&nbsp;17, 2002, our board of directors approved a plan whereby members
of our senior management were offered the opportunity to waive and cancel 0%,
50% or 100% of the stock options previously granted between July, 2000 and
December&nbsp;31, 2001 and receive newly issued options. This plan was launched on
May&nbsp;23, 2002. On June&nbsp;5, 2002, 250,000 options were cancelled according to the
instructions of the holders. On December&nbsp;10, 2002, 250,000 new options were
granted. The new exercise price was <FONT face="'Times New Roman',Times">&#128;</FONT>1.13, corresponding to the fair market
value of our shares on the date the new options were granted. The new options
will vest over a period of 3.5&nbsp;years subject to the following schedule: 25%
will
</FONT>
<P align="center"><FONT size="2">73</FONT>
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#toc">Table of Contents</A></H5><P>


<P align="left"><FONT size="2"> vest after 6&nbsp;months from the date of grant, 25% will vest after 1.5&nbsp;years
from the date of grant, 25% will vest after 2.5&nbsp;years from the date of grant,
and 25% will vest after 3.5&nbsp;years from the date of grant (subject to certain
specific provisions pursuant to local regulations). All stock options granted
on December&nbsp;10, 2002, were outstanding on April&nbsp;29, 2003.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The following table sets forth certain information with respect to: (i)
stock options granted to the ten employees of the company (excluding the
officers identified above) who received the largest number of stock options
granted in 2002; and (ii)&nbsp;the exercise of these options by them:
</FONT>
<CENTER>
<TABLE cellspacing="0" border="0" cellpadding="0" width="100%">
<TR valign="bottom">
    <TD width="32%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="9%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="9%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="26%">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>Weighted average</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom">
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>Total amount</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>price of the</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom">
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>of options</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>options granted</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom">
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>granted or</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>or shares</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom">
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>shares</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>subscribed or</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom">
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>subscribed</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>acquired</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom">
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>or acquired *</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>(in <FONT face="'Times New Roman',Times">&#128;</FONT>)</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center"><FONT size="1"><B>Stock Option Plan</B></FONT></TD>
</TR>
<TR valign="bottom">
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="3"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="3"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center"><HR size="1" noshade></TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><FONT size="2">Options for shares in Gemplus International S.A. granted in
2002</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right" valign="top"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top"><FONT size="2">
814,200</FONT></TD>
    <TD valign="top"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right" valign="top"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top"><FONT size="2">2.06</FONT></TD>
    <TD valign="top"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">Plans adopted on
July&nbsp;27 and on
November&nbsp;10, 2000</FONT></TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right" valign="top"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top"><FONT size="2">&nbsp;</FONT></TD>
    <TD valign="top"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right" valign="top"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top"><FONT size="2">&nbsp;</FONT></TD>
    <TD valign="top"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><FONT size="2">Options for shares in Gemplus International S.A. exercised
in 2002</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right" valign="top"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top"><FONT size="2">
0</FONT></TD>
    <TD valign="top"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="3" align="center" valign="top"><FONT size="2">Not applicable</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">Plans adopted on
July&nbsp;27 and on
November&nbsp;10, 2000</FONT></TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right" valign="top"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top"><FONT size="2">&nbsp;</FONT></TD>
    <TD valign="top"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right" valign="top"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top"><FONT size="2">&nbsp;</FONT></TD>
    <TD valign="top"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><FONT size="2">Options for shares in Gemplus SA exercised
in 2002</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right" valign="top"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top"><FONT size="2">
358,350</FONT></TD>
    <TD valign="top"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right" valign="top"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top"><FONT size="2">1.60</FONT></TD>
    <TD valign="top"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">Gemplus SA plans
adopted on December
17, 1997 and on
December&nbsp;31,1997</FONT></TD>
</TR>
</TABLE>
</CENTER>
<P>
<HR size="1" width="18%" align="left" noshade>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">
<TR valign="top">
    <TD width="1%" align="left" nowrap><FONT size="2">*</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="96%"><FONT size="2">Excluding stock options in relation to the options exchanged under an
option exchange plan.</FONT></TD>
</TR>
</TABLE>
<P align="center"><FONT size="2"><B>SHARE OWNERSHIP</B>
</FONT>

<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;As of April&nbsp;29, 2003, while Mr.&nbsp;Kheng Nam Lee disclaimed beneficial
ownership of any of our shares, he was the President of Vertex Group and
Vickers Capital, which together held 10,308,174 of our shares representing 1.7%
of the shares outstanding. While Messrs.&nbsp;Bonderman, Halpern and Price
disclaimed beneficial ownership of any of our shares, Mr.&nbsp;Bonderman was a
Managing Director of Texas Pacific Group, Mr.&nbsp;Halpern was a consultant to Texas
Pacific Group and Mr.&nbsp;Price was a Managing Director of Texas Pacific Group,
affiliates of which held 159,305,600 of our shares representing 26.4% of the
shares outstanding. While Mr.&nbsp;Thierry Dassault disclaimed beneficial ownership
of any of our shares, Mr.&nbsp;Dassault was the Chairman and Chief Executive Officer
of Dassault Multim&#233;dia which held 32,737,666 of our shares, representing
approximately 5.4% of the shares outstanding. None of our other officers or
directors was the beneficial owner of more than 1% of our capital stock. See
also &#147;Item&nbsp;7. Major Shareholders and Related Party Transactions&#151;Major
Shareholders.&#148;
</FONT>
<P align="center"><FONT size="2">74</FONT>
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#toc">Table of Contents</A></H5><P>
<P align="center"><FONT size="2"><B>EMPLOYEES</B>
</FONT>

<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The following table sets forth the number of employees and a breakdown of
employees by main category of activity and geographic location as of the end of
each year in the three-year period ended December&nbsp;31, 2002:
</FONT>
<CENTER>
<TABLE cellspacing="0" border="0" cellpadding="0" width="65%">
<TR valign="bottom">
    <TD width="5%">&nbsp;</TD>
    <TD width="56%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="11"><FONT size="1"><B>December 31,</B></FONT></TD>
</TR>
<TR valign="bottom">
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="11"><HR size="1" noshade></TD>
</TR>
<TR valign="bottom">
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>2000</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>2001</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>2002</B></FONT></TD>
</TR>
<TR valign="bottom">
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="3"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="3"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="3"><HR size="1" noshade></TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Number of employees</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">7,870</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">6,721</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">5,680</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Category of activity</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Manufacturing</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">4,312</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">3,745</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">3,241</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Research and Development</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">993</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">819</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">702</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Sales and Marketing</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">1,353</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">897</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">745</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Services</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">270</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">309</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">242</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">General and Administrative</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">942</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">951</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">750</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Geographic location</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">France</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">2,922</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">2,778</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">2,187</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Rest of Europe</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">2,067</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">1,340</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">1,208</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Asia</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">1,617</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">1,562</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">1,527</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Americas</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">1,264</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">1,041</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">758</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
</TABLE>
</CENTER>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Following the announcement of our restructuring program on May&nbsp;2, 2001,
the workers&#146; committee of our main operating subsidiary in France, Gemplus SA,
commenced an &#147;alert&#148; procedure under French labor law based upon alleged
concerns about the financial situation of Gemplus SA. An accounting firm
appointed by the workers&#146; committee issued a report about these alleged
concerns. The management of Gemplus SA believes that these alleged concerns
were unfounded. The &#147;alert&#148; procedure was completed with a review of the
report at a Gemplus SA shareholders meeting on May&nbsp;28, 2002.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;On March&nbsp;7, 2003, the workers&#146; committee of Gemplus SA filed an action
before the Marseille Commercial Court requesting the court to nominate an
expert to analyze certain decisions allegedly taken by the management or the
supervisory board of Gemplus SA, to prohibit Gemplus SA from taking or
implementing certain of such alleged decisions and to appoint a
court-designated representative to monitor such requested prohibition. On
April&nbsp;2, 2003, the court nominated two experts qualified to act before the
French Supreme Court. The court rejected the workers&#146; committee&#146;s other
requests. The purpose of this proceeding under French law is to permit the
workers&#146; committee to obtain information regarding the alleged management
decisions cited. Our company believes that the workers&#146; committee already had
sufficient information regarding the alleged management decisions cited and
intends to cooperate fully with the experts&#146; mission. See &#147;Item&nbsp;8. Financial
Information&#151;Legal Proceedings&#148; for additional details.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;On May&nbsp;19, 2003, the company was informed that the workers&#146; committee of
Gemplus SA had initiated legal proceedings regarding an alleged unlawful
failure of the company to adequately inform and consult the workers&#146; committee
in November 1999 regarding the exchange by shareholders of Gemplus SA of their
shares for shares of our company to occur in early 2000. The company
believes that the information and consultation process was adequate.
</FONT>
<P align="center"><FONT size="2">75</FONT>
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#toc">Table of Contents</A></H5><P>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;On February&nbsp;6, 2002, we had announced plans for a further restructuring of
our operations and production and procurement processes in order to improve our
financial competitiveness. These plans called for targeted savings of <FONT face="'Times New Roman',Times">&#128;</FONT>100
million per year and a one-time restructuring charge of <FONT face="'Times New Roman',Times">&#128;</FONT>65&nbsp;million and
included proposed staff reductions of approximately 1,140 positions worldwide.
As of December&nbsp;31, 2002, Gemplus had completed staff reductions of 1,010 under
these plans. See &#147;Item&nbsp;5. Operating and Financial Review and
Prospects&#151;Results of Operations&#151;Recent Developments.&#148; In connection with this
plan, on February&nbsp;14, 2002, Gemplus SA initiated the process of consultation
with its workers&#146; committee and union representatives regarding a plan for the
reduction of approximately 416 positions in France. The first phase of this
consultation process was completed on March&nbsp;22, 2002, and the second phase
began on May&nbsp;6, 2002, and was completed on June&nbsp;5, 2002, in accordance with the
French plan requirements. Following the end of the second phase, the content
of the plan was determined precisely and communicated to the employees. The
employees concerned by the 2002 restructuring plan started leaving their employment in
the middle of July 2002. As of February&nbsp;24, 2003, all such employees have
terminated their employment except for approximately 10 employees under the
plans.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;On December&nbsp;9, 2002, we announced a third restructuring program. This
plan calls for targeted savings of <FONT face="'Times New Roman',Times">&#128;</FONT>108&nbsp;million per year (out of which <FONT face="'Times New Roman',Times">&#128;</FONT>66
million is expected through workforce reductions) and a one-time restructuring
charge of <FONT face="'Times New Roman',Times">&#128;</FONT>90&nbsp;million. This restructuring program affects all areas within the
company (manufacturing, selling, marketing, research and development and
general and administrative functions). The overall reduction of the workforce
(including temporary employees and independent) is broken down as follows: (i)
manufacturing organization 695 employees; (ii)&nbsp;general and administrative
functions 183 employees; (iii) selling and marketing organization 95 employees;
and (iv)&nbsp;research and development organization 127 employees. The majority of
employees terminated are located in France, Germany, the United States,
Singapore and Mexico. As of February&nbsp;24, 2003, 168 employees were terminated on
a worldwide basis: China (143 persons), United States (25 persons), and the
restructuring is in process in Singapore and Mexico. In France and Germany, we
are required to engage in consultations with employee representatives before
implementing workforce reductions. See &#147;Item&nbsp;5. Operating and Financial
Review and Prospects&#151;Results of Operations&#151;Recent Developments.&#148; In connection
with this plan, on December&nbsp;18, 2002, Gemplus SA initiated the process of
consultation with its workers&#146; committee and union representatives regarding a
plan for the reduction of approximately 483 positions in France. This
consultation process was completed in May 2003.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;During May 2003, some of the employees of Gemplus SA (mainly manufacturing workers)
engaged in a strike for approximately one week.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;On
May&nbsp;15, 2003, Gemplus SA entered into an agreement with certain
labor unions representing some members of its workforce in France
that amended and replaced a previous agreement dated April&nbsp;15,
2003, and that provides for a period of three years for
minimum production volumes in the manufacturing
facilities of Gemplus SA located in G&#233;menos and La Ciotat, France, on condition
of such facilities meeting certain productivity criteria. The
agreement also provides for maintaining certain marketing, research and development, new
product introduction and related administrative functions in the
G&#233;menos and La Ciotat areas.
</FONT>
<P align="center"><FONT size="2">76</FONT>
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#toc">Table of Contents</A></H5><P>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Under French law, all employers of more than 20 employees in France are
required to implement a 35-hour workweek. In February 1999, we entered into an
agreement to implement the 35-hour workweek mandated by French law. Under this
agreement, employees could work more than 35 hours in some weeks, but in
exchange were required to reduce the number of hours worked in other weeks to
ensure that they do not work more than 35 hours per week on an annual basis.
This agreement was modified in the beginning of 2000. Under the new agreement,
the number of hours worked during the week is not modified (i.e., employees can
work 40 hours a week), but the employees are entitled to 22 additional paid
days off a year. Although the workweek is shorter on average and we have not
reduced salaries, the agreement allows us greater flexibility than before to
organize the use of employee time. We believe this added flexibility partly
compensates for the reduction in hours, and that the mandated 35-hour week
should not have a material adverse effect on our operations or financial
condition.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We use temporary labor from time to time to provide short-term increases
in capacity as and when required. During 2002 we did not employ a significant
number of full time equivalent temporary staff.
</FONT>
<P align="center"><FONT size="2">77</FONT>
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#toc">Table of Contents</A></H5><P>
<!-- link2 "Item&nbsp;7. Major Shareholders and Related Party Transactions" -->
<DIV align="left"><A NAME="009"></A></DIV>
<P align="left"><FONT size="2"><B>Item&nbsp;7. Major Shareholders and Related Party Transactions</B>
</FONT>

<P align="center"><FONT size="2"><B>MAJOR SHAREHOLDERS</B>
</FONT>

<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The capital stock of our company consists of ordinary shares, with no par
value, which are issued in registered form. Under our articles of
incorporation, each ordinary share represents one vote. The following table
sets forth information with respect to the beneficial ownership of our shares
as of April&nbsp;29, 2003 by each person who is known by us to own beneficially more
than 2% of our outstanding shares. The existence of treasury shares accounts
for the difference between outstanding shares percentage and voting rights
percentage.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Beneficial ownership of shares after April&nbsp;29, 2003 is determined in
accordance with the rules of the U.S.&nbsp;Securities and Exchange
Commission, based on factors including voting and investment power with respect
to shares. Shares subject to options currently exercisable, or exercisable
within 60&nbsp;days of the date of this Annual Report, are deemed outstanding for
purposes of computing the percentage of shares owned by the person holding such
options, but are not deemed outstanding for purposes of computing the
percentage of shares owned by any other person. Unless otherwise indicated in
the footnotes to the below table, the following people have sole voting and
sole investment control with respect to the shares they beneficially own.
</FONT>
<P align="center"><FONT size="2">78</FONT>
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#toc">Table of Contents</A></H5><P>
<CENTER>
<TABLE cellspacing="0" border="0" cellpadding="0" width="100%">
<TR valign="bottom">
    <TD width="25%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD align="left"><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="11"><FONT size="1"><B>Number of shares</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="11"><FONT size="1"><B>Percentage of outstanding shares</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="11"><FONT size="1"><B>Percentage of voting rights</B></FONT></TD>
</TR>
<TR valign="bottom">
    <TD align="center"><FONT size="1"><B>Name of</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="11"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="11"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="11"><HR size="1" noshade></TD>
</TR>
<TR valign="bottom">
    <TD align="center"><FONT size="1"><B>Beneficial</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>Dec. 31,</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>Dec. 31,</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>April 29,</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>Dec. 31,</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>Dec. 31,</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>April 29,</B></FONT></TD>
</TR>
<TR valign="bottom">
    <TD align="center"><FONT size="1"><B>Ownership</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>Dec. 31, 2001</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>Dec. 31, 2002</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>Apr. 29, 2003</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>2001</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>2002</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>2003</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>2001</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>2002</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>2003</B></FONT></TD>
</TR>
<TR valign="bottom">
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="3"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="3"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="3"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="3"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="3"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="3"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="3"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="3"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="3"><HR size="1" noshade></TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">

<TD align="left" nowrap><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Dr.&nbsp;Marc Lassus</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">108,842,529 </FONT></TD>
    <TD nowrap><FONT size="2">(1)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">5,875,050</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">5,875,050</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">17.1</FONT></TD>
    <TD nowrap><FONT size="2">%</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">0.9</FONT></TD>
    <TD nowrap><FONT size="2">%</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">1</FONT></TD>
    <TD nowrap><FONT size="2">%</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">18.1</FONT></TD>
    <TD nowrap><FONT size="2">%</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">1</FONT></TD>
    <TD nowrap><FONT size="2">%</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">1</FONT></TD>
    <TD nowrap><FONT size="2">%</FONT></TD>
</TR>

<TR valign="bottom">

<TD align="left"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Quandt family(2)</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">115,508,200</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">115,508,200</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">115,508,200</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">18.2</FONT></TD>
    <TD nowrap><FONT size="2">%</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">18.2</FONT></TD>
    <TD nowrap><FONT size="2">%</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">19.1</FONT></TD>
    <TD nowrap><FONT size="2">%</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">19.3</FONT></TD>
    <TD nowrap><FONT size="2">%</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">19.2</FONT></TD>
    <TD nowrap><FONT size="2">%</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">19.2</FONT></TD>
    <TD nowrap><FONT size="2">%</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD align="left"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Sagem (3)</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">60,888,639</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">63,252,839</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">0</FONT></TD>
    <TD nowrap><FONT size="2">%</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">9.6</FONT></TD>
    <TD nowrap><FONT size="2">%</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">10.5</FONT></TD>
    <TD nowrap><FONT size="2">%</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">0</FONT></TD>
    <TD nowrap><FONT size="2">%</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">10.1</FONT></TD>
    <TD nowrap><FONT size="2">%</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">10.5</FONT></TD>
    <TD nowrap><FONT size="2">%</FONT></TD>
</TR>

<TR valign="bottom">

<TD align="left"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Texas Pacific Group(4)</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">159,305,600</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">159,305,600</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">159,305,600</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">25.1</FONT></TD>
    <TD nowrap><FONT size="2">%</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">25.1</FONT></TD>
    <TD nowrap><FONT size="2">%</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">26.4</FONT></TD>
    <TD nowrap><FONT size="2">%</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">26.6</FONT></TD>
    <TD nowrap><FONT size="2">%</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">26.5</FONT></TD>
    <TD nowrap><FONT size="2">%</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">26.5</FONT></TD>
    <TD nowrap><FONT size="2">%</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">

<TD align="left"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Centro Bank Group</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">9,624,444</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">26,977,423</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">27,167,181</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">1.5</FONT></TD>
    <TD nowrap><FONT size="2">%</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">4.3</FONT></TD>
    <TD nowrap><FONT size="2">%</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">4.5</FONT></TD>
    <TD nowrap><FONT size="2">%</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">1.6</FONT></TD>
    <TD nowrap><FONT size="2">%</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">4.5</FONT></TD>
    <TD nowrap><FONT size="2">%</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">4.5</FONT></TD>
    <TD nowrap><FONT size="2">%</FONT></TD>
</TR>

<TR valign="bottom">
    <TD align="left"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">GE Capital</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">24,443,311</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">24,443,311</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">24,443,311</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">3.8</FONT></TD>
    <TD nowrap><FONT size="2">%</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">3.9</FONT></TD>
    <TD nowrap><FONT size="2">%</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">4.1</FONT></TD>
    <TD nowrap><FONT size="2">%</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">4.1</FONT></TD>
    <TD nowrap><FONT size="2">%</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">4.1</FONT></TD>
    <TD nowrap><FONT size="2">%</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">4.1</FONT></TD>
    <TD nowrap><FONT size="2">%</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">

<TD align="left"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Groupe Dassault</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">28,300,000</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">28,300,000</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">32,737,666</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">4.5</FONT></TD>
    <TD nowrap><FONT size="2">%</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">4.5</FONT></TD>
    <TD nowrap><FONT size="2">%</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">5.4</FONT></TD>
    <TD nowrap><FONT size="2">%</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">4.7</FONT></TD>
    <TD nowrap><FONT size="2">%</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">4.7</FONT></TD>
    <TD nowrap><FONT size="2">%</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">5.4</FONT></TD>
    <TD nowrap><FONT size="2">%</FONT></TD>
</TR>

<TR valign="bottom">

<TD align="left" nowrap><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Brunei
Investment Agency</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">22,500,000</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">22,500,000</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">22,500,000</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">3.5</FONT></TD>
    <TD nowrap><FONT size="2">%</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">3.6</FONT></TD>
    <TD nowrap><FONT size="2">%</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">3.7</FONT></TD>
    <TD nowrap><FONT size="2">%</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">3.8</FONT></TD>
    <TD nowrap><FONT size="2">%</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">3.7</FONT></TD>
    <TD nowrap><FONT size="2">%</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">3.7</FONT></TD>
    <TD nowrap><FONT size="2">%</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">

<TD align="left"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Treasury shares (5)</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">35,524,586</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">31,545,751</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">1,319,229</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">5.6</FONT></TD>
    <TD nowrap><FONT size="2">%</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">5.0</FONT></TD>
    <TD nowrap><FONT size="2">%</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">0.2</FONT></TD>
    <TD nowrap><FONT size="2">%</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">

<TD align="left"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Other shareholders</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">131,233,627</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">158,226,964</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">151,428,333</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">20.7</FONT></TD>
    <TD nowrap><FONT size="2">%</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">25.0</FONT></TD>
    <TD nowrap><FONT size="2">%</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">25.1</FONT></TD>
    <TD nowrap><FONT size="2">%</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">21.9</FONT></TD>
    <TD nowrap><FONT size="2">%</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">26.2</FONT></TD>
    <TD nowrap><FONT size="2">%</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">25.1</FONT></TD>
    <TD nowrap><FONT size="2">%</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">

<TD align="left"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Outstanding shares (6)</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">635,282,297</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">633,570,938</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">603,537,409</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
</TABLE>
</CENTER>
<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">
<TR valign="top">
    <TD width="1%" align="left" nowrap><FONT size="2">(1)</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="96%"><FONT size="2">Includes 25,864,000 shares held of
record by Sormiou Holdings. Dr.&nbsp;Marc Lassus sold a portion of his shares in December 2002, and remains the beneficial owner of
5,875,050 shares.</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="1%" align="left" nowrap><FONT size="2">(2)</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="96%"><FONT size="2">Mr.&nbsp;Stefan Quandt was a member of the board of directors of Gemplus SA from July 1999 to February 2000, and of our board of directors from February to November 2000. On
May&nbsp;2, 2002, the Quandt family reorganized their holdings of our shares. As of that date, 100 shares were held of record by Stefan Quandt and 100 shares were held of record
by Johanna Quandt. In addition, 33,236,428 shares were held by Acton 1 Beteiligungs GmbH, 35,700,770 shares by Acton 2 Beteiligungs GmbH and 46,570,802 shares by Acton 3
Beteiligungs GmbH, all companies controlled by members of the Quandt family.</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="1%" align="left" nowrap><FONT size="2">(3)</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="96%"><FONT size="2">In December 2002, Sagem Group acquired 60,888,639 shares. 11,053,465 shares were held by Sagem SA, 45,402,562 shares were held by Sagem International and 4,432,612
shares were held by TREL PARTICIPATION, Sagem International and TREL PARTICIPATION being companies affiliated with Sagem SA. To our knowledge a substantial portion of these shares were acquired from Dr. Marc Lassus.</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="1%" align="left" nowrap><FONT size="2">(4)</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="96%"><FONT size="2">Texas Pacific Group is a group of investment funds founded by Messrs.&nbsp;David Bonderman, James G. Coulter and William S. Price III to pursue public and private investment
opportunities through a variety of methods, including leveraged buyouts, recapitalizations, joint ventures, restructurings and strategic public securities investments.
Messrs.&nbsp;Bonderman, Coulter and Price are the shareholders of the general partner of the Texas Pacific Group funds. Each of Messrs.&nbsp;Bonderman, Coulter and Price disclaims
beneficial ownership of the shares of our company held by Texas Pacific Group. Messrs.&nbsp;Bonderman and Price are also directors of our company. Mr.&nbsp;Abel Halpern, a
consultant to Texas Pacific Group, is also a director of our company.</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="1%" align="left" nowrap><FONT size="2">(5)</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="96%"><FONT size="2">Including 30,743,679 shares, following the transfer of shares made by our former Chief Executive Officer in 2001, and cancelled as of March&nbsp;10, 2003.</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="1%" align="left" nowrap><FONT size="2">(6)</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="96%"><FONT size="2">Excludes ordinary shares issuable upon the contribution of shares of Gemplus SA held by our employees.</FONT></TD>
</TR>
</TABLE>
<P align="center"><FONT size="2">79</FONT>
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#toc">Table of Contents</A></H5><P>




<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;To our knowledge, there are no other shareholders holding more than 2% of
our voting rights as of April&nbsp;29, 2003.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;As of May&nbsp;7, 2003, there were 4,302,091 of our ADSs outstanding,
representing 8,604,182 ordinary shares, or 1.43% of our total shares
outstanding. There are currently 28 record holders of our ADSs of which 27
have registered addresses in the United States and one in Canada. In addition,
as of May&nbsp;7, 2003, 159,380,179, or approximately 26%, of our ordinary shares
were held by 11 record holders with registered addresses in the United States.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;As of April&nbsp;29, 2003 our total amount of shares was divided into 381,845,746 shares held under street name held
through Euroclear and 221,691,663 registered shares.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In 2002 we ordered a partial bearer share register through Euroclear for
shareholders holding more than 100,000 shares as of July&nbsp;18, 2002. We also
ordered a complete bearer share register through Euroclear as of October 1st
2002, listing 31,851 bearer shareholders.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;From our last bearer share register we note that less than 4% of our
outstanding shares are held by financial institutions based in Luxembourg. We
have no other shareholders who are residents of Luxembourg.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;As of
December 31, 2002, approximately 5% of our registered shares were
held by French residents. To our knowledge, approximately 9.6% of our shares are held by Sagem through Euroclear. Out of the remaining 50.9% of our shares held through Euroclear, the percentage of those shares held by French residents cannot be identified.
</FONT>


<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;See also &#147;Item&nbsp;6. Directors, Senior Management and Employees&#151;Share
Ownership.&#148;
</FONT>

<P align="center"><FONT size="2"><B>RELATED PARTY TRANSACTIONS</B>
</FONT>

<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We have engaged in the following transactions with our directors, senior
executives and shareholders.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;During 2002, our company paid amounts totaling <FONT face="'Times New Roman',Times">&#128;</FONT>10,629 thousand in
connection with the resignation and cessation, respectively, of its former
Chief Executive Officer, Mr.&nbsp;Perez, on December&nbsp;19, 2001, and its former
Chairman of the board of directors, Dr.&nbsp;Lassus, on January&nbsp;10, 2002.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;During 2000, we entered into loan agreements with certain of our senior
executives officers. One of our indirect subsidiaries, Zenzus Holdings Ltd,
extended these loans to Mr.&nbsp;Antonio Perez, our former Chief Executive Officer,
and Dr.&nbsp;Marc Lassus, our former Chairman of the board of directors, to allow
them to exercise stock options granted to them in 2000, and to allow Mr.&nbsp;Perez
to pay taxes due in connection with the grant to him of free shares. We
granted to each of Mr.&nbsp;Perez and Dr.&nbsp;Lassus 10,247,893 free shares and
20,495,786 stock options with an exercise price of <FONT face="'Times New Roman',Times">&#128;</FONT>3.51 per share in 2000.
These loans were partially reimbursed in 2001, as discussed in Note 31 to our
audited consolidated financial statements. In December 2001, we recorded
severance expenses in the amount of <FONT face="'Times New Roman',Times">&#128;</FONT>25,691 thousand relating to Mr.&nbsp;Perez and
to Dr.&nbsp;Lassus in connection with their resignation as Chief Executive Officer
and cessation as Chairman of the board of directors, respectively, as described
in Note 31 to our audited consolidated financial statements. See &#147;Item&nbsp;8.
Financial Information&#151;Legal Proceedings&#148; for additional information on Dr.
Lassus loan.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Pursuant to the terms of the loans granted to Messrs.&nbsp;Perez and Lassus in
2000, one of the company&#146;s indirect subsidiaries has agreed to arrange for the
interest on these loans to be forgiven from July 1st to December&nbsp;31, 2001, and
to assume any income tax resulting from this forgiveness. As described in Note
13 to our audited consolidated financial statements, interest related to the
loans was
</FONT>
<P align="center"><FONT size="2">80</FONT>
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#toc">Table of Contents</A></H5><P>


<P align="left"><FONT size="2">accrued in the Consolidated Statement of Income, totaling <FONT face="'Times New Roman',Times">&#128;</FONT>3,139 thousand in
2000, <FONT face="'Times New Roman',Times">&#128;</FONT>4,877 thousand in 2001 and <FONT face="'Times New Roman',Times">&#128;</FONT>1,706 thousand in 2002. Income tax
resulting from the forgiveness of interest from July 1st to December&nbsp;31, 2001
was accrued in our 2001 Consolidated Statement of Income, resulting in a
compensation expense of <FONT face="'Times New Roman',Times">&#128;</FONT>3,585 thousand reflected under general and
administrative expenses.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;During 2001, we entered into an agreement with a service company whose
chief executive officer, Mr.&nbsp;Ronald Mackintosh, also served on our board of
directors. Mr.&nbsp;Mackintosh served as our interim chief executive officer from
December&nbsp;19, 2001 to August&nbsp;31, 2002 and resigned as chief executive officer of
the service company effective on December&nbsp;19, 2001. He remains a member of its
board of directors and of our board of directors. This service company was
appointed to provide an independent review of our management, information,
organization and business systems as well as identification and recommendation
of improvements. In 2002, our company continued to use the services of this
service company and the total cost recorded in our consolidated statement of
income in 2002 for this arrangement amounted to <FONT face="'Times New Roman',Times">&#128;</FONT>1,737 thousand. During 2000,
we granted loans to Mr.&nbsp;Steven Gomo and Mr.&nbsp;Phil Faraci, two of our former
executive officers. Pursuant to their employment agreements, each obtained a
US $300 thousand interest-free loan to be forgiven in 24&nbsp;monthly installments
effective from the date of their employment. Upon their resignations in 2002,
we forgave the entire loan balances that were still outstanding at the time
they left our company. As a result, we recorded <FONT face="'Times New Roman',Times">&#128;</FONT>6,000 in compensation expense
in 2000, <FONT face="'Times New Roman',Times">&#128;</FONT>150 thousand in compensation expense in 2001 and <FONT face="'Times New Roman',Times">&#128;</FONT>144 thousand in
compensation expense in 2002.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In 2001, we provided three interest-bearing loans to three executive
officers, to assist them to cover certain advance income tax payments they were
required to make in France by acceleration upon their relocation from our
offices in France to those in Switzerland, in accordance with our policy
regarding expatriation assignments. One loan in the amount of <FONT face="'Times New Roman',Times">&#128;</FONT>122 thousand
was made to Mr.&nbsp;Didier Lachaud, another in the amount of <FONT face="'Times New Roman',Times">&#128;</FONT>97 thousand was made
to Mr.&nbsp;Jacques S&#233;n&#233;ca and another in the amount of <FONT face="'Times New Roman',Times">&#128;</FONT>98 thousand was made to Mr.
Stephen Juge. As of March&nbsp;1, 2003, the three loans had been fully repaid.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In 2001, we provided an interest-bearing loan in the amount of <FONT face="'Times New Roman',Times">&#128;</FONT>43
thousand to Mr.&nbsp;Philippe Vall&#233;e, one of our executive officers, to cover
certain advance income tax payments he was required to make in Singapore by
acceleration upon his relocation from our offices in Singapore to those in
France, in accordance with our policy regarding expatriation assignments. This
loan was fully repaid in July 2002.
</FONT>

<P align="center"><FONT size="2">81</FONT>




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

<!-- link2 "Item&nbsp;8. Financial Information" -->
<DIV align="left"><A NAME="010"></A></DIV>

<P align="left"><FONT size="2"><B>Item&nbsp;8. Financial Information</B>
</FONT>

<P align="center"><FONT size="2"><B>AUDITED CONSOLIDATED FINANCIAL STATEMENTS</B>
</FONT>

<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;See &#147;Item&nbsp;18. Financial Statements&#148; and pages F-1 through F-67.
</FONT>
<P align="center"><FONT size="2"><B>OTHER FINANCIAL INFORMATION</B>
</FONT>

<P align="left"><FONT size="2"><B>Legal Proceedings</B>
</FONT>

<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We are involved in litigation from time to time in the ordinary course of
business. We believe that none of the ordinary course litigation in which we
are currently involved will have a material adverse effect on our results of
operations, liquidity or financial condition.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In October 2001, the United States Court of Appeals for the Ninth Circuit
affirmed a district court judgment against us in favor of Humetrix Inc. based
on a claim by Humetrix that we had breached an agreement to jointly market
several products in the U.S. health care sector. The judgment was in the
amount of US $15&nbsp;million plus interest. Our petition seeking a rehearing was
denied in November 2001, and the parties entered into a Mutual Release and
Settlement Agreement on March&nbsp;25, 2002. As a result of the above decision, we
recorded a charge of <FONT face="'Times New Roman',Times">&#128;</FONT>18.1&nbsp;million, adversely impacting our 2001 operating
results and resulting in a total current liability (including a previously
existing provision) of <FONT face="'Times New Roman',Times">&#128;</FONT>19.4&nbsp;million in the balance sheet as at December&nbsp;31,
2001. Our company paid all amounts due under the Mutual Release and Settlement
Agreement in 2002, and no further obligations remain.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;A former director of our company, Mr.&nbsp;Ziad Takieddine, who resigned from
the board of directors on December&nbsp;19, 2002, has initiated certain legal
proceedings against our company before the commercial court in Luxembourg. On
October&nbsp;1, 2002, Mr.&nbsp;Takieddine filed an injunction-type lawsuit (or &#147;r&#233;f&#233;r&#233;&#148;
proceeding) seeking the annulment of the effects of the board meeting of
September&nbsp;23, 2002, or alternatively the cancellation or suspension of the
effects of the decisions of the board meeting of September&nbsp;23, 2002, on various
procedural grounds. Such procedural grounds include: the alleged failure to
send documents to board members sufficiently in advance of the meeting; alleged
failure to provide to the board, or for the board to approve, draft minutes of
previous board meetings; the holding of the meeting by telephone conference
call rather than in person; the alleged unjustified attendance at the meeting
of non-board members; and other procedural grounds. On October&nbsp;17, 2002, the
court ordered the suspension of the effects of the board meeting of September
23, 2002. At a meeting on October&nbsp;29, 2002, the board re-adopted and
re-approved most of the decisions of the board meeting of September&nbsp;23, 2002.
Our company contests and has appealed the court&#146;s order of October&nbsp;17, 2002,
and on May&nbsp;13, 2003 a hearing was held on the appeal. The court will issue its
decision on June&nbsp;24, 2003.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;On November&nbsp;5, 2002, Mr.&nbsp;Takieddine filed a second injunction-type lawsuit
seeking the annulment of the effects of the board meeting of October&nbsp;29, 2002,
or alternatively cancellation or suspension of the effects of the decisions of
the board meeting of October&nbsp;29, 2002, on similar grounds to those involved in
his initial lawsuit mentioned above. On November&nbsp;18, 2002, the court rejected
and dismissed Mr.&nbsp;Takieddine&#146;s claims. Our company is not aware of any appeal
of this decision.
</FONT>
<P align="center"><FONT size="2">82</FONT>
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#toc">Table of Contents</A></H5><P>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;On October&nbsp;23, 2002, Mr.&nbsp;Takieddine filed a lawsuit on the merits
challenging the validity and requesting the annulment of the decisions of the
board at its meetings of July&nbsp;30, August&nbsp;29 and September&nbsp;23, 2002, and the
board&#146;s decision on October&nbsp;29, 2002, to convene a shareholders meeting on
November&nbsp;21, 2002 (later adjourned and re-scheduled for unrelated reasons to
December&nbsp;19, 2002). At a hearing on January&nbsp;22, 2003, which had been set on an
expedited basis at Mr.&nbsp;Takieddine&#146;s request, this lawsuit was stricken without
prejudice from the current docket by the court for failure by the plaintiff to
actively prosecute the case. Either party may petition the court to set a
future hearing date. Our company has not been informed of any step by Mr.
Takieddine to request the court to set a new hearing date. Our company
believes that the claims asserted by Mr.&nbsp;Takieddine in each of these three
legal proceedings are without merit.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In 2000, one of our indirect subsidiaries made a loan to Dr.&nbsp;Lassus to
assist Dr.&nbsp;Lassus to exercise stock options, pursuant to his then current terms
of employment. Pursuant to an
agreement dated December&nbsp;19, 2001, as of January&nbsp;10, 2002 Mr.&nbsp;Lassus
ceased his office as Chairman of our board of directors and resigned
from all other positions that he held with our company and any of its
affiliates, except for his position as a non-executive director of
our company. As of January&nbsp;10, 2002, Mr.&nbsp;Lassus was no longer an
employee of our company or any of its affiliates. We have not yet received the guarantees of reimbursement
(including a pledge of Dr.&nbsp;Lassus&#146;s option shares) that Dr.&nbsp;Lassus was required
to provide, <I>inter alia</I>, as confirmed in a letter agreement dated December&nbsp;19,
2001. Although we recorded an expense of
<FONT face="'Times New Roman',Times">&#128;</FONT>67.6&nbsp;million
effective June&nbsp;30, 2002, following the write-down of the loan, we have not forgiven the loan. A special
committee of our board of directors recommended that our indirect subsidiary
initiate legal action to seek security for the loan and its repayment. Our
board of directors agreed with the special committee&#146;s recommendations, also
based on the opinion of special independent legal counsel, and an <I>ad hoc</I>
arbitration proceeding was commenced by our company and its indirect subsidiary
against Dr.&nbsp;Lassus in London, England, in January 2003.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In November 2002, three French subsidiaries of our company, including
Gemplus SA, received a tax assessment from the French tax authority primarily
relating to the fiscal years 1998 through 2000. The major components of the
assessment relate to intercompany transactions, including transfer pricing, the
invoicing of management fees and forgiveness of intercompany debt, as well as
the adequacy of documentation relating to certain commissions paid to agents.
Although the aggregate assessment, including interest and penalties, originally
approximated <FONT face="'Times New Roman',Times">&#128;</FONT>120&nbsp;million, we believe that significant aspects of the claim are
without justification and intend to vigorously contest the assessment. By
reason of the assessment, we increased our provision for tax risks at December
31, 2002 by <FONT face="'Times New Roman',Times">&#128;</FONT>5.9
million, and transferred the amount of
<FONT face="'Times New Roman',Times">&#128;</FONT>20.3 million from a valuation allowance against deferred tax assets to provision for tax
risks (see Note 19 to our consolidated financial statements). By letter in
April 2003, the French tax authority reduced the tax assessment to
approximately <FONT face="'Times New Roman',Times">&#128;</FONT>83.5&nbsp;million. Our company does not believe that the assessment
will have a material effect on our company&#146;s liquidity and notes that certain
of the taxes assessed result from timing adjustments that could reduce taxes in
subsequent periods.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In December 1997, Mr.&nbsp;Alain Nicola&#239; brought a legal action before the
Marseille Commercial Court against Gemplus S.A. on the one hand, and the
companies Gaming Chips International S.A.R.L. (&#147;G.C.I.&#148;) and F.N.2.C. S.A. on
the other hand, alleging a breach of a contract relating the promotion of a
smart card reading system device in the area of casino slot machines. Mr.
Nicola&#239; requested the Commercial Court to nominate an expert to determine the
amount of his damages. G.C.I. and F.N.2.C. then adopted the arguments developed by
Mr.&nbsp;Nicola&#239;, joined in the request for designation of an expert and, in
addition, sought an order for the payment by Gemplus S.A. to them respectively
of FRF 3&nbsp;million (<FONT face="'Times New Roman',Times">&#128;</FONT>457 thousand) and FRF 21,250 thousand (<FONT face="'Times New Roman',Times">&#128;</FONT>3,240 thousand) as
a provisional advance on damages. On June&nbsp;21, 2000, the Marseille Commercial
Court (i)&nbsp;rejected all of Mr.&nbsp;Nicola&#239;&#146;s claims; (ii)&nbsp;found that Mr.&nbsp;Nicola&#239;&#146;s
contract rights had been transferred to G.C.I. and F.N.2.C.; (iii)&nbsp;appointed an
expert; and (iv)&nbsp;awarded G.C.I. and F.N.2.C. a provisional advance on damages
respectively of FRF 500 thousand (<FONT face="'Times New Roman',Times">&#128;</FONT>76 thousand) and FRF 400 thousand (<FONT face="'Times New Roman',Times">&#128;</FONT> 61
thousand). Gemplus S.A. appealed this decision before the Aix en Provence
Court of Appeal.
</FONT>
<P align="center"><FONT size="2">83</FONT>
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#toc">Table of Contents</A></H5><P>

<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In April 2003, the expert transmitted to the parties a preliminary report
indicating that the amount estimated by the expert of the plaintiffs&#146; damages would be
on the order of <FONT face="'Times New Roman',Times">&#128;</FONT>13&nbsp;million. Gemplus S.A. immediately formally contested this
evaluation on the grounds that the expert (i)&nbsp;had not responded to the subject
matter of the assignment given to him by the Commercial Court; (ii)&nbsp;had not
answered the challenges raised by Gemplus S.A. in its prior submissions to the
expert; and (iii)&nbsp;had not given any details on the evolution of the price of smart
cards, on the number of cards necessary for each device per year and on the
number of gambling machines already equipped with smart cards systems in the
world. In conclusion, Gemplus S.A. relied upon the absence of a significant
market for smart cards applications in the area of casino slot machines. Under
these circumstances, Gemplus S.A. made a provision for this litigation in the
first quarter of 2003 in an amount of <FONT face="'Times New Roman',Times">&#128;</FONT>1,800 thousand.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;On March&nbsp;7, 2003, the workers&#146; committee of Gemplus SA, our main French
subsidiary, filed an action before the Marseille Commercial Court with the
support of Sagem SA, one of our main shareholders, requesting the Commercial
Court to nominate an expert to analyze certain decisions allegedly taken by the
management or the supervisory board of Gemplus SA, to prohibit Gemplus SA from
taking or implementing certain of such alleged decisions and to appoint a
Court-designated representative to monitor such requested prohibition. On
April&nbsp;2, 2003, the Commercial Court nominated two experts qualified to act
before the French Supreme Court, with the mission to analyze, and to prepare
and file with the Commercial Court a report within three months, regarding (i)
the alleged re-capitalization of the U.S. subsidiaries of Gemplus SA; (ii)&nbsp;a
list of the tax credits and tax subsidies received by Gemplus SA and of patents
and trademarks filed by Gemplus SA during the fiscal years 1998-2002, and to
describe the intragroup transfers and licenses of such patents, related know
how and trademarks during such period; and (iii)&nbsp;whether during the period
1999-2002 the evolution in the level of the workforce of Gemplus SA was
proportional to the evolution of the level of activity and revenue; whether the
variation in the size of the workforce was the result of management decisions
or seems to have been dictated by market conditions; and whether internal
forecasts of management would appear to indicate future significant staff
reductions. The Commercial Court rejected the workers&#146; committee&#146;s other
requests. The purpose of this proceeding under French law is to permit the
workers&#146; committee to obtain information regarding the alleged management
decisions cited. Our company believes that the workers&#146; committee already had
sufficient information regarding the alleged management decisions cited and
intends to cooperate fully with the experts&#146; mission.
</FONT>
<P align="left"><FONT size="2"><B>Insurance</B>
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The company maintains certain liability insurance with respect to our
operations and trading losses under appropriate insurance plans with high
credit rated first-class insurance companies.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The company also maintains certain insurance plans with respect to liabilities
and claims arising from acts or omissions of directors and officers acting in
their respective capacities for the company. On November&nbsp;13, 2000 the board of
directors authorized the company to purchase additional insurance with respect
to liabilities and claims arising from acts or omissions of directors or
officers related to the listing of the company&#146;s securities in December 2000.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The company&#146;s facilities and their activities as a whole are covered under
group plans. These plans include among other items: (i)&nbsp;liability insurance
called &#147;operations/after delivery&#148; (each entity, however, purchases a local
insurance plan for operation risks); (ii)&nbsp;damages to trading assets/trading
losses coverage (some entities, however, purchase a local insurance plan with
respect to these risks); (iii)&nbsp;fraud/intentional acts coverage; and (iv)
transport coverage.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The company also maintains local insurance plans covering certain types of
risks or lesser amounts than those applicable for our group insurance plans.
Under certain circumstances, the company&#146;s group plans may be an alternative to
local plans after a local plan is exhausted.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Casualties
with respect to assets and resulting trading losses are
covered under a casualty insurance plan with a compensation cap of
approximately <FONT face="'Times New Roman',Times">&#128;</FONT>230&nbsp;million for each incident and each facility, with certain
exclusions and limitation provisions that we consider standard for companies of
similar size and activities.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;With respect to the company&#146;s third party liability insurance, the company
believes that it maintains an appropriate level of insurance for the risks of
third party claims that the company faces.
</FONT>

<P align="left"><FONT size="2"><B>Dividend Policy</B>
</FONT>

<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We have not declared any dividends on our ordinary shares since our
inception, and do not anticipate paying dividends in the foreseeable future.
We currently expect to retain all future earnings, if any, for use in the
operation and expansion of our business.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We may declare dividends out of funds or reserves legally available for
distributions upon the recommendation of our board of directors and the
approval of our shareholders at their annual general meeting. In general,
under Luxembourg law, only realized profits or distributable reserves
(including profits that are carried forward) determined in accordance with
Luxembourg accounting principles are available for distribution as dividends.
Luxembourg law requires us to allocate 5% of our annual net profits to a legal
reserve. We must make this annual allocation until the legal reserve reaches
10% of our subscribed capital.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We discuss certain aspects of Luxembourg and U.S. taxation of dividends in
&#147;Item&nbsp;10. Additional Information&#151;Taxation&#148; in this Annual Report.
</FONT>

<P align="center"><FONT size="2">84</FONT>
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#toc">Table of Contents</A></H5><P>
<P align="center"><FONT size="2"><B>SIGNIFICANT CHANGES</B>
</FONT>



<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;For a discussion of recent developments, see &#147;Item&nbsp;5. Operating and
Financial Review and Prospects&#151;Results of Operations&#151;Recent Developments.&#148;
</FONT>
<P align="center"><FONT size="2">85</FONT>
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#toc">Table of Contents</A></H5><P>
<!-- link2 "Item&nbsp;9. The Offer and Listing" -->
<DIV align="left"><A NAME="011"></A></DIV>

<P align="left"><FONT size="2"><B>Item&nbsp;9. The Offer and Listing</B>
</FONT>

<P align="center"><FONT size="2"><B>NATURE OF TRADING MARKET</B>
</FONT>

<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Deutsche Bank Trust Company Americas is currently the depositary for our
American Depositary Shares (ADSs) pursuant to a Supplemental Agreement to
Deposit Agreement dated February&nbsp;11, 2003. Our ADSs have been traded on the
Nasdaq National Market under ticker symbol GEMP and our ordinary shares have
been traded on the <I>Premier March&#233; </I>of Euronext Paris under
the ticker symbol LU0121&nbsp;706294-GEM since December&nbsp;11, 2000.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The following table sets forth, for the periods indicated, the reported
high and low sales prices for the ordinary shares and ADSs from December&nbsp;11,
2000, the first day on which our ordinary shares traded on the <I>Premier March&#233;</I>
and our ADSs traded on the Nasdaq National Market. See &#147;Item&nbsp;3. Key
Information&#151;Exchange Rate Information&#148; with respect to rates of exchange
between the dollar and the euro applicable during the periods set forth below.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>Monthly Highs and Lows</B>
</FONT>
<CENTER>
<TABLE cellspacing="0" border="0" cellpadding="0" width="65%">
<TR valign="bottom">
    <TD width="5%">&nbsp;</TD>
    <TD width="41%">&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="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="7"><FONT size="1"><B>Euronext Paris</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="7"><FONT size="1"><B>Nasdaq National Market</B></FONT></TD>
</TR>
<TR valign="bottom">
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="7"><FONT size="1"><B><FONT face="'Times New Roman',Times">&#128;</FONT> per share</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="7"><FONT size="1"><B>U.S.$ per ADS</B></FONT></TD>
</TR>
<TR valign="bottom">
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="7"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="7"><HR size="1" noshade></TD>
</TR>
<TR valign="bottom">
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>High</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>Low</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>High</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>Low</B></FONT></TD>
</TR>
<TR valign="bottom">
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="3"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="3"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="3"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="3"><HR size="1" noshade></TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">2000</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">From December&nbsp;11, 2000</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2"><FONT face="'Times New Roman',Times">&#128;</FONT>9.99</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2"><FONT face="'Times New Roman',Times">&#128;</FONT>6.55</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">$</FONT></TD>
    <TD align="right"><FONT size="2">18.88</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">$</FONT></TD>
    <TD align="right"><FONT size="2">12.00</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">2001</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">First Quarter</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2"><FONT face="'Times New Roman',Times">&#128;</FONT>9.90</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2"><FONT face="'Times New Roman',Times">&#128;</FONT>5.13</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">$</FONT></TD>
    <TD align="right"><FONT size="2">17.88</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">$</FONT></TD>
    <TD align="right"><FONT size="2">9.25</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Second Quarter</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">6.00</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">3.20</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">10.19</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">5.80</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Third Quarter</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">3.60</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">2.42</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">6.18</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">4.35</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Fourth Quarter</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">3.86</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">1.93</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">6.90</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">3.60</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">2002</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">First Quarter</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2"><FONT face="'Times New Roman',Times">&#128;</FONT>3.08</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2"><FONT face="'Times New Roman',Times">&#128;</FONT>3.08</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">$</FONT></TD>
    <TD align="right"><FONT size="2">5.47</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">$</FONT></TD>
    <TD align="right"><FONT size="2">3.15</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Second Quarter</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">2.16</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">1.32</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">3.88</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">2.63</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Third Quarter</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">1.50</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">0.37</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">2.86</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">0.77</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Fourth Quarter</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">1.45</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">0.45</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">3.08</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">0.90</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">2003</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">January</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2"><FONT face="'Times New Roman',Times">&#128;</FONT>1.16</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2"><FONT face="'Times New Roman',Times">&#128;</FONT>0.92</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">$</FONT></TD>
    <TD align="right"><FONT size="2">2.48</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">$</FONT></TD>
    <TD align="right"><FONT size="2">2.00</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">February</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">1.01</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">0.81</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">2.10</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">1.76</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">March</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">0.89</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">0.63</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">2.00</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">1.47</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">April</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">1.00</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">0.79</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">2.25</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">1.68</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">May</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">1.35</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">0.95</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">3.20</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">2.16</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD><FONT size="2">&nbsp;</FONT></TD>

<TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">June</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

<TD align="right"><FONT size="2"><FONT face="'Times New Roman',Times"></FONT>1.46</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

<TD align="right"><FONT size="2"><FONT face="'Times New Roman',Times"></FONT>1.08</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">3.40</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">2.53</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>




</TABLE>
</CENTER>
<P align="center"><FONT size="2">86</FONT>
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#toc">Table of Contents</A></H5><P>

<P align="left"><FONT size="2">Trading on the <I>Premier March&#233;</I>
</FONT>

<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;On September&nbsp;22, 2000, the <I>Soci&#233;t&#233; des Bourses Fran&#231;aises SA </I>(known as the
ParisBourse<SUP>SBF</SUP> SA), Amsterdam Exchange N.V. and the <I>Soci&#233;t&#233; de la Bourse de
Valeurs Mobili&#232;res de Bruxelles SA </I>merged to create Euronext N.V., a Dutch
holding company and the first pan-European stock exchange. Subsequently,
PariBourse<SUP>SBF</SUP> SA changed its name to Euronext Paris. Securities quoted on any
of the stock exchanges participating in Euronext will be traded through a
common Euronext platform, with central clearinghouse, settlement and custody
structures. However, these securities will remain listed on their respective
local exchanges. Euronext Paris retains responsibility for the admission of
securities to its trading markets, as well as the regulation of these markets.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Securities approved for listing by Euronext Paris are traded in one of two
regulated markets, the <I>Bourse de Paris</I>, which in turn comprises the <I>Premier
March&#233; </I>and the <I>Second March&#233;</I>, and the <I>Nouveau March&#233;</I>. These markets are all
operated and managed by Euronext Paris, a market operator (<I>entreprise de
march&#233;</I>) responsible for the admission of securities and the supervision of
trading in listed securities. Euronext Paris publishes a daily official price
list that includes price information on listed securities. The securities of
most large public companies are listed on the <I>Premier March&#233;</I>, with the <I>Second
March&#233; </I>available for small and medium-sized companies. Trading on the <I>Nouveau
March&#233; </I>was introduced in March 1996 to allow small capitalization and start-up
companies to access the stock market. In addition, the securities of certain
other companies are traded on a non-regulated, over-the-counter market, the
<I>March&#233; Libre OTC</I>.
</FONT>


<P align="left"><FONT size="2"><B>Trading by our company in our own shares</B>
</FONT>

<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Under Luxembourg law, we may not issue shares to our company, but we may
purchase our shares in limited cases. See &#147;Item&nbsp;10. Additional
Information&#151;Articles of Incorporation.&#148;
</FONT>
<P align="center"><FONT size="2">87</FONT>
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#toc">Table of Contents</A></H5><P>
<!-- link2 "Item&nbsp;10. Additional Information" -->
<DIV align="left"><A NAME="012"></A></DIV>

<P align="left"><FONT size="2"><B>Item&nbsp;10. Additional Information</B>
</FONT>

<P align="center"><FONT size="2"><B>ARTICLES OF INCORPORATION</B>
</FONT>

<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The following description summarizes several aspects of our articles of
incorporation and our share capital, which consists of ordinary shares only.
For information regarding Organization and Register, Objects and Purposes,
Disclosure of Interests, Indivisibility, General Meetings of Shareholders,
Liquidation, Preferential Subscription Rights, No Limitation on Foreign
Ownership, Change in Control, see our Annual Report on Form&nbsp;20-F dated July&nbsp;1,
2002. A copy of our articles of incorporation has been filed as an exhibit to
this Annual Report.
</FONT>
<P align="left"><FONT size="2"><B>Directors</B>
</FONT>

<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our articles of incorporation provide that in the case of a conflict of
interest of a director, the director must inform the board of directors of the
conflict, have a record of his statement included in the minutes of the
meeting, and refrain from deliberating and voting on the matter. At the
following general meeting, a special report shall be made on any transactions
in which any of the directors has had an interest conflicting with our own.
Our articles of incorporation provide that the age limit of directors is
seventy (70)&nbsp;years. There is no share ownership requirement for directors.
See &#147;Item&nbsp;6. Directors, Senior Management and Employees&#151;Board of Directors&#148;
for additional information about our board of directors. There is no explicit
restriction in the articles of incorporation on the borrowing power of
directors. Director compensation is determined by the Compensation Committee
or the board.
</FONT>
<P align="left"><FONT size="2"><B>Share Capital</B>
</FONT>

<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;As of April&nbsp;29, 2003, our subscribed capital is fixed at <FONT face="'Times New Roman',Times">&#128;</FONT>127,787,050.4
consisting of 603,537,409 shares with no par value. As of April&nbsp;29, 2003, our
authorized share capital was <FONT face="'Times New Roman',Times">&#128;</FONT>400&nbsp;million, consisting of 2&nbsp;billion shares with
no par value. Our authorized share capital may be increased or reduced by
resolution passed with a two-thirds majority vote at a meeting of shareholders.
Luxembourg law provides that shareholders have preemptive rights to subscribe
for any new share issued by us for cash consideration.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;On
November&nbsp;10, 2000, our shareholders authorized our board of directors to
increase our share capital by a maximum amount of <FONT face="'Times New Roman',Times">&#128;</FONT>394&nbsp;million and issue up to
1.97&nbsp;billion new shares on terms and conditions and at such times as it deems
appropriate, during a three-year period from the date of publication of the
minutes of the extraordinary general meeting, except for issues of shares for
any of the purposes listed below, which may occur within five years of this
date:
</FONT>
<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">
<TR valign="top">
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" align="left" nowrap><FONT size="2">&#149;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="93%"><FONT size="2">the issuance of a maximum of 20&nbsp;million shares in
exchange for shares of Gemplus SA at a ratio of 50 shares of our
company for 1 share of Gemplus SA;</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" align="left" nowrap><FONT size="2">&#149;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="93%"><FONT size="2">the issuance of a maximum of 56,845,700 shares in
exchange for shares of Gemplus SA to be issued under any of
Gemplus SA&#146;s stock option plans in existence on or prior to
February&nbsp;1, 2000, at a ratio of 50 shares of our company for 1
share of Gemplus SA, or with respect to options to be issued by
us to subscribe for shares in our company on terms identical to
those existing for options issued under any of these stock option
plans against surrender or exchange of, or renunciation to, these
stock options in the same amounts on an adjusted basis (subject
to the applicable ratio);</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" align="left" nowrap><FONT size="2">&#149;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="93%"><FONT size="2">the issuance of a maximum of 50&nbsp;million shares with
respect to the options granted to the employees or officers of
our company (including any of its subsidiaries or affiliates) in</FONT></TD>
</TR>
</TABLE>
<P align="center"><FONT size="2">88</FONT>
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#toc">Table of Contents</A></H5><P>


<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">
<TR valign="top">
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" align="left" nowrap><FONT size="2"><FONT size="2">&nbsp;</FONT></FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="93%"><FONT size="2">accordance with the stock option plans as from time to time adopted
by the board of directors, subject to such further conditions as
may be imposed by a general meeting of our shareholders; and</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" align="left" nowrap><FONT size="2">&#149;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="93%"><FONT size="2">the issuance of a maximum of 60&nbsp;million shares without
nominal value to senior management, board members and/or
executives of our company (including any of its subsidiaries or
affiliates) in the form of stock options or, except in the case
of board members, in the form of free shares, on terms and
conditions determined by the board of directors in its sole
discretion. Upon any issues of free shares, we will be required
to record an amount equal to the accounting par value of these
shares in our shareholders&#146; equity and deduct an equivalent
amount from our realized profits or distributable reserves, which
may limit our ability to pay dividends or make other
distributions to our shareholders.</FONT></TD>
</TR>
</TABLE>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our shareholders have waived their preemptive subscription rights with
respect to any issuance of these authorized new shares.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;On December&nbsp;5, 2000, our shareholders authorized our board of directors to
issue a maximum of 30&nbsp;million shares to be sold in connection with our initial
public offering, with no pre-emptive subscription rights for existing
shareholders. On December&nbsp;7, 2000, our board of directors resolved that up to
15&nbsp;million shares be issued in connection with our initial public offering with
no pre-emptive subscription rights for existing shareholders. These 15&nbsp;million
shares were subsequently issued in our initial public offering on December&nbsp;13,
2000.
</FONT>
<P align="left"><FONT size="2"><B>Form, Ownership and Transfer</B>
</FONT>

<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our shares are issued in registered form. Pursuant to
Luxembourg law, we keep a register of all of the holders of our registered
shares. Ownership of registered shares will be established by inscription in
the register and confirmations of these inscriptions are issued to our
shareholders upon request. We may appoint registrars in different
jurisdictions, each of whom will maintain a separate register for the shares
entered in each of these registers. Holders of our shares may elect to be
entered into one of these registers and to transfer their shares from one
register to another. We currently have no separate registers other than our
Luxembourg share register.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The transfer of our shares is governed by Luxembourg law and our articles
of incorporation. Transfers of our shares are carried out by means of a
declaration of transfer entered into the register, dated and signed by the
transferor and the transferee or by their duly authorized representatives.
Transfers will be accepted and entered into the register by presentation of
correspondence or other documents recording the agreement between the
transferor and the transferee.
</FONT>
<P align="left"><FONT size="2"><B>Voting Rights</B>
</FONT>

<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Each share is entitled to one vote. The shareholders shall vote on each
candidate individually. Board members are elected by the simple majority of
votes of the shareholders present or presented and voting at the relevant
meeting pursuant to the simple majority rules for election of directors under
applicable Luxembourg law. A shareholder may appear and act at any general
meeting of shareholders by appointing a proxy in writing, cable, telegram,
telex or telefax sent to our registered office. The board of directors may
establish other conditions that must be fulfilled by shareholders to take part
in any
</FONT>
<P align="center"><FONT size="2">89</FONT>
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#toc">Table of Contents</A></H5><P>


<P align="left"><FONT size="2"> general meeting of shareholders, including the determination of the record
date on which a shareholder needs to be registered to be convened to a
shareholders&#146; meeting.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Shareholder resolutions at an annual general meeting are approved by a
simple majority of the shares represented at the meeting in person or by proxy.
There are no quorum requirements applicable to annual general meetings.
Amendments to our articles of incorporation require approval at an
extraordinary general meeting, at which at least 50% of the voting shares must
be present or represented, by shareholders present in person or by proxy,
holding at least two thirds of the voting shares present or represented. If
the quorum requirement for an extraordinary shareholders&#146; meeting is not met,
the resolution to amend the articles may be passed at a second extraordinary
shareholders&#146; meeting with no quorum requirement. Amendments to change our
jurisdiction or to impose additional financial obligations on the shareholders
may only be approved with the unanimous consent of all shareholders.
</FONT>
<P align="left"><FONT size="2"><B>Dividend Rights/Exchange Controls</B>
</FONT>

<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our shares will be entitled to any dividends declared by the shareholders
at a general shareholders&#146; meeting or by our board of directors out of funds or
reserves legally available for distributions. In general, under Luxembourg
law, only realized profits or distributable reserves (including profits that
are carried forward) determined in accordance with Luxembourg accounting
principles are available for distribution as dividends. Interim dividends can
be declared by our board of directors up to two times in any fiscal year if a
financial statement prepared for the declaration of interim dividends shows
that there are sufficient funds available for distribution.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Luxembourg law requires us to allocate 5% of our annual net profits to a
legal reserve. We must make this annual allocation until the legal reserve
reaches 10% of our subscribed capital. If we issue new shares, we will be
required to continue making this annual allocation until the legal reserve
reaches 10% of our subscribed capital once more. The legal reserve is not
available for dividends.
</FONT>
<P align="left"><FONT size="2"><B>Purchase of and Trading in our Own Shares</B>
</FONT>

<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In accordance with Luxembourg law, we may repurchase our own shares
subject to certain limits and conditions, including, in several cases, the
prior approval of a general meeting of shareholders. At the general meeting
held on April&nbsp;29, 2003, our shareholders authorized us to repurchase our shares
from time to time through October&nbsp;28, 2004, in an aggregate amount of up to 10%
of our issued shares of capital stock. These shares can be purchased at prices
ranging from <FONT face="'Times New Roman',Times">&#128;</FONT>0.01 to <FONT face="'Times New Roman',Times">&#128;</FONT>20 per share. Under Luxembourg law, we cannot lend or
grant security for, or give financial assistance in the purchase of, our own
shares, except for any loans, guarantees or other financial assistance provided
to our employees.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our share repurchase program was implemented during the third quarter of
2001, we started the implementation of our share repurchase program, as
approved by the Annual General Meeting held on April&nbsp;18, 2001 and authorized by
the Commission des Op&#233;rations de Bourse on May&nbsp;4, 2001. During 2001 and 2002, we
repurchased 6,073,715 shares of our outstanding common stock, at an average
price of <FONT face="'Times New Roman',Times">&#128;</FONT>3.06 per share. In addition, as described in Note 31 to our
consolidated financial statements, our former Chief Executive Officer, Mr.
Perez, returned all of the 30,743,679 shares that he had received in August and
September 2000 to an indirect subsidiary of our company, in reimbursement of
the loans that such indirect subsidiary had made to him in 2000 and in 2001.
As at December&nbsp;31, 2001, we held 35,705,936 shares of our outstanding common
stock. At the Extraordinary General Meeting of Shareholders held on April&nbsp;17,
2002, our shareholders approved the cancellation of 4,634,859 shares held
directly and purchased pursuant to our stock repurchase program, as well as the
cancellation of the 30,743,679 shares held by our indirect subsidiary at the
time as such shares may be transferred to us. The 4,634,859 shares were
cancelled on April&nbsp;17, 2002 without reduction of our issued share capital but
with a consequential</FONT>
<P align="center"><FONT size="2">90</FONT>
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#toc">Table of Contents</A></H5><P>

<P align="left"><FONT size="2">increase of the accounting par of the shares in issue. During the third
quarter of 2002, we purchased 656,024 shares of our outstanding common stock
from two former Celocom Limited employees pursuant to the provisions of the
2000 Celocom Limited share purchase agreement. As at December&nbsp;31, 2002, we
held 31,727,101 shares of our outstanding common stock. The 30,743,679 shares
transferred by Mr.&nbsp;Perez to our company&#146;s indirect subsidiary were distributed
to our company and cancelled on March&nbsp;10, 2003. As of April&nbsp;29, 2003, we held
2,319,229 shares of our outstanding common stock.
</FONT>
<P align="center"><FONT size="2"><B>MATERIAL CONTRACTS</B>
</FONT>

<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;On
July&nbsp;12, 2000, we entered into an employment agreement (as amended on
September&nbsp;1, 2000 and July&nbsp;11, 2001) with Mr.&nbsp;Antonio Perez, regarding his
employment as our Chief Executive Officer. Pursuant to this agreement, we
granted Mr.&nbsp;Perez 10,247,893 shares of our company and options to purchase
20,495,786 shares at a purchase price of <FONT face="'Times New Roman',Times">&#128;</FONT>3.51 per share. One of our indirect
finance subsidiaries, Zenzus Holdings Ltd., granted Mr.&nbsp;Perez several loans to
assist him in exercising these options.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;On October&nbsp;20, 2001, we entered into a loan repayment agreement with Mr.
Perez, and on December&nbsp;19, 2001, we entered into an additional agreement with
Mr.&nbsp;Perez. Pursuant to these agreements, Mr.&nbsp;Perez returned all of the
10,247,893 shares granted to him pursuant to his employment agreement and
the 20,495,786 shares purchased upon the exercise of options as satisfaction in full
of the loans extended to him by Zenzus Holdings Ltd. Mr.&nbsp;Perez resigned from
his position as our Chief Executive Officer on December&nbsp;19, 2001.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;By letter agreement dated December&nbsp;19, 2001, between our company and Dr.
Lassus in connection with his cessation as our Chairman of the board, we agreed
to pay Dr.&nbsp;Lassus US$12&nbsp;million. The amounts agreed to be paid to Dr.&nbsp;Lassus
represented amounts we were obligated to pay under certain circumstances
pursuant to the terms of an agreement in connection with his appointment as our
Chairman, and Dr.&nbsp;Lassus agreed to regularize the arrangements for his existing
option loans, which one of our indirect finance subsidiaries, Zenzus Holdings
Ltd., had granted to him in connection with the grant of options to him in
2000. See &#147;Item&nbsp;8. Financial Information&#151;Legal Proceedings.&#148;
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We entered into a four-year employment agreement with Mr.&nbsp;Alex Mandl,
dated August&nbsp;29, 2002, the compensation-related terms of which were approved by
our shareholders on December&nbsp;19, 2002. That agreement provides essentially the
following:
</FONT>
<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">
<TR valign="top">
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" align="left" nowrap><FONT size="2">&#149;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="93%"><FONT size="2">Mr.&nbsp;Mandl will serve as the President and Chief Executive Officer
of the company with a base salary of <FONT face="'Times New Roman',Times">&#128;</FONT>600 thousand and an annual
performance bonus of up to 120% of his base salary, guaranteed for one
year. Mr.&nbsp;Mandl also received a signing bonus of <FONT face="'Times New Roman',Times">&#128;</FONT>500 thousand that he
must repay if he voluntarily terminates his employment or is terminated
for Good Cause (as defined in the agreement) prior to September&nbsp;9,
2003. The company will provide Mr.&nbsp;Mandl with benefits comparable to
those generally made available to senior company executives. The
company also agreed to reimburse Mr.&nbsp;Mandl for his legal and accounting
costs in preparing the agreement up to a maximum of US$50 thousand.</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" align="left" nowrap><FONT size="2">&#149;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="93%"><FONT size="2">Mr.&nbsp;Mandl is required to and has purchased, directly and indirectly
company shares having a market value of US$200 thousand at the public
market price.</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" align="left" nowrap><FONT size="2">&#149;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="93%"><FONT size="2">Mr.&nbsp;Mandl will be entitled to receive directly or indirectly two
tranches of options to purchase a total of 12,000,000 shares of company
common stock, 8,000,000 of which will be granted with an exercise price
of <FONT face="'Times New Roman',Times">&#128;</FONT>0.84 and the remaining 4,000,000 of which will be granted with an
exercise</FONT></TD>
</TR>
</TABLE>
<P align="center"><FONT size="2">91</FONT>
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#toc">Table of Contents</A></H5><P>


<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">
<TR valign="top">
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" align="left" nowrap><FONT size="2"><FONT size="2">&nbsp;</FONT></FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="93%"><FONT size="2">price equal to <FONT face="'Times New Roman',Times">&#128;</FONT>2.25. The options shall vest in equal twenty five
percent annual installments beginning on August&nbsp;29, 2003, except that if
the company is sold fifty percent of the options shall vest immediately
prior to the consummation of such sale.</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" align="left" nowrap><FONT size="2">&#149;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="93%"><FONT size="2">The company will reimburse Mr.&nbsp;Mandl for certain costs and losses
in the operation and sale of his former home in the United States as a
result of his relocation to Geneva, Switzerland. These amounts,
depending on specific circumstances, may be up to US $4,920 thousand.
As of April&nbsp;29, 2003, Mr.&nbsp;Mandl has not sold this former home.</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" align="left" nowrap><FONT size="2">&#149;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="93%"><FONT size="2">If Mr.&nbsp;Mandl&#146;s employment is terminated by our company without Good
Cause, by Mr.&nbsp;Mandl for Good Reason (as defined in the agreement,
including if Mr.&nbsp;Mandl is not permitted to sell shares of our company
which he owns, directly or through vested options, in connection with a
sale of more than 50% of the shares of the company by certain major
shareholders) or due to his death or disability, our company will pay
him (or his estate) an amount equal to between one and two years&#146; base
salary, incentive bonus, and benefits. He will also receive up to
twenty-four months&#146; vesting on his options. If Mr.&nbsp;Mandl voluntarily
terminates his employment with our company or is terminated for Good
Cause, our company will pay him his base salary and annual incentive
bonus through the date of termination. All options that have not
vested as of such date will be forfeited. In the event Mr.&nbsp;Mandl is
subject to any excise tax pursuant to Section&nbsp;280G of the United States
Internal Revenue Code (due on certain severance payments made after a
change of control of the company), our company will pay Mr.&nbsp;Mandl a
gross-up payment equaling such amount.</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" align="left" nowrap><FONT size="2">&#149;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="93%"><FONT size="2">Mr.&nbsp;Mandl is bound by a confidentiality agreement, an intellectual
property agreement, a non-competition and non-solicitation agreement
and an arbitration clause.</FONT></TD>
</TR>
</TABLE>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;See also &#147;Item&nbsp;5. Operating and Financial Review and Prospects&#151;Operating
Income (Loss)&#151;Management severance expenses&#148; and &#147;Item&nbsp;7. Major Shareholders
and Related Party Transactions&#151;Related Party Transactions.&#148;
</FONT>
<P align="center"><FONT size="2">92</FONT>
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#toc">Table of Contents</A></H5><P>

<P align="center"><FONT size="2"><B>TAXATION</B>
</FONT>

<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The following is a summary of the principal Luxembourg and U.S. federal
income tax considerations that are likely to be material to the ownership and
disposition of ordinary shares or ADSs. The summary does not purport to be a
comprehensive description of all of the tax considerations that may be relevant
to the ownership and disposition of ordinary shares or ADSs. This summary
applies to you only if you hold ordinary shares or ADSs as capital assets for
tax purposes, and does not apply to you if you are a member of a class of
holders subject to special rules, such as:
</FONT>
<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">
<TR valign="top">
    <TD width="1%" align="left" nowrap><FONT size="2">&#149;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="96%"><FONT size="2">a dealer in securities or currencies;</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="1%" align="left" nowrap><FONT size="2">&#149;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="96%"><FONT size="2">a trader in securities that elects to use a mark-to-market method of accounting for your securities holdings;</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="1%" align="left" nowrap><FONT size="2">&#149;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="96%"><FONT size="2">a bank;</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="1%" align="left" nowrap><FONT size="2">&#149;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="96%"><FONT size="2">a life insurance company;</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="1%" align="left" nowrap><FONT size="2">&#149;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="96%"><FONT size="2">a tax-exempt organization;</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="1%" align="left" nowrap><FONT size="2">&#149;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="96%"><FONT size="2">a person that holds ordinary shares or ADSs that are a hedge or that are hedged against interest rate or currency risks;</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="1%" align="left" nowrap><FONT size="2">&#149;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="96%"><FONT size="2">a person that holds ordinary shares or ADSs as part of a straddle or conversion transaction for tax purposes;</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="1%" align="left" nowrap><FONT size="2">&#149;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="96%"><FONT size="2">a person whose functional currency for tax purposes is not the U.S. dollar; or</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="1%" align="left" nowrap><FONT size="2">&#149;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="96%"><FONT size="2">a person that holds ordinary shares or ADSs and owns or is deemed to own ten percent or more of any class of our stock.</FONT></TD>
</TR>
</TABLE>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The summary is based on laws, treaties and regulatory interpretations in
effect on the date hereof, all of which are subject to change. You should
consult your own advisers regarding the tax consequences of owning or disposing
of the ordinary shares or ADSs in the light of your particular circumstances,
including the effect of any state, local, or other national laws.
</FONT>
<P align="left"><FONT size="2"><B>Luxembourg Tax Considerations</B>
</FONT>

<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The following is a summary of the principal Luxembourg tax considerations
that are likely to be material to the ownership and disposition of ordinary
shares or ADSs by you if you are not domiciled, resident, or formerly resident
in Luxembourg and do not hold ordinary shares or ADSs in connection with a
permanent establishment or fixed base in Luxembourg.
</FONT>
<P align="left"><FONT size="2"><B><I>Dividends on Ordinary Shares or ADSs</I></B>
</FONT>

<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Dividends paid by us to you are generally subject to Luxembourg
withholding tax at a 20&nbsp;percent rate. You may, however, qualify for a reduced
rate of withholding under an applicable income tax treaty. If you so qualify,
you may be able to claim a refund of the difference between the amount
initially withheld and the amount determined by applying the applicable treaty
rate. The income tax treaty between Luxembourg and the United States (the
&#147;Treaty&#148;) generally provides for Luxembourg withholding tax at a reduced rate
of 15&nbsp;percent. You should consult your own tax advisers regarding the specific
procedures for claiming a refund of Luxembourg withholding tax.
</FONT>
<P align="center"><FONT size="2">93</FONT>
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#toc">Table of Contents</A></H5><P>
<P align="left"><FONT size="2"><B><I>Sale or other Disposition of Ordinary Shares or ADSs</I></B>
</FONT>

<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Holders of ordinary shares or ADSs that (i)&nbsp;are not Luxembourg residents,
(ii)&nbsp;have not formerly been Luxembourg residents, and (iii)&nbsp;have never owned
(alone or together with a spouse or any children under age, directly or
indirectly) more than 10% of our ordinary shares or ADSs, will not be subject
to Luxembourg tax on capital gains on a disposal of such ordinary shares or
ADSs.
</FONT>
<P align="left"><FONT size="2"><B>United States Federal Income Tax Considerations</B>
</FONT>

<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The following is a summary of the principal U.S. federal income tax
considerations that are likely to be material to the ownership and disposition
of ordinary shares or ADSs by you if you are a U.S. holder. You are a U.S.
holder if you are a resident of the United States for the purposes of, and
fully eligible for benefits under, the Treaty. You will generally be entitled
to Treaty benefits in respect of ordinary shares or ADSs if you are:
</FONT>
<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">
<TR valign="top">
    <TD width="1%" align="left" nowrap><FONT size="2">&#149;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="96%"><FONT size="2">the beneficial owner of the ordinary shares or ADSs (and any dividends
paid with respect thereto);</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="1%" align="left" nowrap><FONT size="2">&#149;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="96%"><FONT size="2">(i)&nbsp;an individual citizen or resident of the United States that has a
substantial presence, permanent home, or habitual abode in the United
States, or (ii)&nbsp;a U.S. corporation;</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="1%" align="left" nowrap><FONT size="2">&#149;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="96%"><FONT size="2">not also a resident of Luxembourg for Luxembourg tax purposes; and</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="1%" align="left" nowrap><FONT size="2">&#149;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="96%"><FONT size="2">not subject to an anti-treaty shopping article that applies under limited circumstances.</FONT></TD>
</TR>
</TABLE>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The treaty benefits discussed herein generally are not available to
holders that hold ordinary shares or ADSs in connection with the conduct of a
business through a permanent establishment, or the performance of personal
services through a fixed base, in Luxembourg. This summary does not discuss
the treatment of such holders.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Comparatively minor changes in our assets or share price could result in
our becoming a passive foreign investment company. See &#147;Item&nbsp;3. Key
Information&#151;Passive Foreign Investment Company Considerations.&#148;
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In general, if you hold ADSs, you will be treated as the holder of the
ordinary shares represented by those ADSs for U.S. federal income tax purposes.
</FONT>
<P align="left"><FONT size="2"><B><I>Dividends on Ordinary Shares or ADSs</I></B>
</FONT>

<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The gross amount of any dividends distributed by us with respect to
ordinary shares or ADSs (including amounts withheld in respect of Luxembourg
tax) generally will be subject to U.S. federal income taxation as ordinary
income to a U.S. holder. Such dividends generally will be treated as foreign
source income and will generally be classified as passive income for U.S.
foreign tax credit purposes. A U.S. holder will include dividends paid in a
currency other than the U.S. dollar in income in a dollar amount calculated by
reference to the exchange rate in effect on the date a U.S. holder received the
dividends (or, in the case of ADSs, the date the depositary receives them). If
dividends paid in a foreign currency are converted into dollars on the date of
receipt, the U.S. holder should not be required to recognize foreign currency
gain or loss in respect of the dividend income. A U.S. holder may be required
to recognize foreign currency gain or loss on the receipt of a refund of
Luxembourg withholding tax pursuant to the Treaty to the extent the dollar
value of the refund differs from the dollar equivalent of that amount on the
date of receipt of the underlying dividend.
</FONT>
<P align="center"><FONT size="2">94</FONT>
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#toc">Table of Contents</A></H5><P>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Subject to generally applicable limitations under U.S. law, Luxembourg
withholding tax at the rate provided under the Treaty will constitute a foreign
income tax that is eligible for credit against a U.S. holder&#146;s U.S. federal
income tax liability or, at the election of the recipient, may be deducted in
computing taxable income. Foreign tax credits will not be allowed for
withholding taxes imposed in respect of certain short-term or hedged positions
and arrangements in which the U.S. holder&#146;s expected economic profit is
insubstantial.
</FONT>
<P align="left"><FONT size="2"><B><I>Sale or other Disposition of Ordinary Shares or ADSs</I></B>
</FONT>

<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Subject to the discussion below under &#147;Item&nbsp;3. Key Information&#151;Passive
Foreign Investment Company Considerations&#148;, for U.S. federal income tax
purposes, gain or loss realized by a U.S. holder on the sale or other
disposition of ordinary shares or ADSs will be capital gain or loss, and will
be long-term capital gain or loss if the ordinary shares or ADSs were held for
more than one year. The net amount of long-term capital gain recognized by an
individual U.S. holder generally is subject to taxation at a maximum rate of
20%. A U.S. holder&#146;s ability to use capital losses to offset ordinary income
is limited.
</FONT>
<P align="left"><FONT size="2"><B><I>Passive Foreign Investment Company Considerations</I></B>
</FONT>

<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Unfavorable U.S. tax rules apply to companies that are considered passive
foreign investment companies (&#147;PFICs&#148;). We will be classified as a PFIC in a
particular taxable year if either:
</FONT>
<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">
<TR valign="top">
    <TD width="1%" align="left" nowrap><FONT size="2">&#149;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="96%"><FONT size="2">75% or more of our gross income is treated as passive income for purposes of the PFIC rules; or</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="1%" align="left" nowrap><FONT size="2">&#149;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="96%"><FONT size="2">the average percentage of the value of our assets that produce or are held for the production of passive income is at least
50%.</FONT></TD>
</TR>
</TABLE>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The decline in our market capitalization has increased the relative
proportion of our assets that would be considered to produce passive income for
purposes of the PFIC rules. Comparatively minor changes in our assets or share
price could result in our becoming a PFIC for reasons outside our control.
Although we continue to believe that we should not be classified as a PFIC in
the current year, investors should consult their own tax advisers regarding the
advisability of making a mark-to-market election, as described below.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;If we are a PFIC in respect of any year, then a U.S. holder who holds
shares during that year and does not make a mark-to-market election will be
subject to a special tax at ordinary income tax rates on certain dividends
received from us and on gains realized on a sale of ordinary shares or ADSs
(&#147;excess distributions&#148;) in all subsequent years, without regard to whether we
were a PFIC in the year an excess distribution was received. The amount of
this tax will be increased by an interest charge to compensate for tax
deferral, calculated as if the excess distribution had been earned ratably over
the period the U.S. holder held its ordinary shares or ADSs. Classification as
a PFIC may also have other adverse tax consequences, including the denial of a
step-up in the basis of ordinary shares and ADSs at death.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;A U.S. holder may avoid the unfavorable rules described above by electing
to mark such U.S. holder&#146;s ordinary shares or ADSs to market. For any year in
which we are a PFIC, a U.S. holder who makes a mark-to-market election would
include as ordinary income the excess of the fair market value of the ordinary
shares or ADSs at year-end over the holder&#146;s basis in those ordinary shares or
ADSs. In addition, any gain recognized upon a sale of ordinary shares or ADSs
would be taxed as ordinary income in the year of sale.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We do not intend to furnish holders with the information necessary to make
a qualified electing fund election.
</FONT>
<P align="center"><FONT size="2">95</FONT>
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#toc">Table of Contents</A></H5><P>

<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;A U.S. holder should consult its own tax advisers regarding the U.S.
federal income tax considerations discussed above and should carefully consider
whether to make a mark-to-market election.
</FONT>
<P align="left"><FONT size="2"><B><I>U.S. Information Reporting and Backup Withholding Rules</I></B>
</FONT>

<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Payments in respect of the ordinary shares or ADSs that are made in the
United States or by a U.S. related financial intermediary will be subject to
information reporting and may be subject to a backup withholding unless you:
</FONT>
<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">
<TR valign="top">
    <TD width="1%" align="left" nowrap><FONT size="2">&#149;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="96%"><FONT size="2">are a corporation or other exempt recipient; or</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="1%" align="left" nowrap><FONT size="2">&#149;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="96%"><FONT size="2">provide a taxpayer identification number and certify that no loss of
exemption from backup withholding has occurred.</FONT></TD>
</TR>
</TABLE>
<P align="left"><FONT size="2">If you are not a U.S. person, you generally are not subject to these rules, but
may be required to provide certification of non-U.S. status in order to
establish that you are exempt.
</FONT>
<P align="center"><FONT size="2"><B>DOCUMENTS ON DISPLAY</B>
</FONT>

<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We are subject to the reporting requirements of the Securities Exchange
Act of 1934, as amended. In accordance with these requirements, we file
reports and other information with the U.S. Securities and Exchange Commission.
These materials, including this Annual Report and the exhibits thereto, may be
inspected and copied at the SEC&#146;s public reference room at 450 Fifth Street,
N.W., Washington D.C. 20549. Please call the SEC at 1-800-SEC-0330 for more
information on the public reference room and their copy charges. Our SEC
filings are also available on the Internet at the SEC&#146;s website at
http://www.sec.gov.
</FONT>
<P align="center"><FONT size="2">96</FONT>
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#toc">Table of Contents</A></H5><P>
<!-- link2 "Item&nbsp;11. Quantitative and Qualitative Disclosures About Market Risk" -->
<DIV align="left"><A NAME="013"></A></DIV>
<P align="left"><FONT size="2"><B>Item&nbsp;11. Quantitative and Qualitative Disclosures About Market Risk</B>
</FONT>

<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We develop products in our worldwide manufacturing centers and sell these
products and provide related services around the world. Generally, our sales
are made in the local currency of the place of delivery or where the service is
rendered, and part of our manufacturing costs are incurred in the local
currency of the place of each of our manufacturing sites. As a result, our
results of operations are affected by factors such as changes in foreign
currency exchange rates or weak economic conditions in foreign markets. To
minimize the impact of these factors on the profitability of our business and
our overall financial performance, we seek to provide cost efficient funding to
our business and our subsidiaries and to identify, evaluate and hedge financial
risks in cooperation with our subsidiaries around the world.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our policy is to hedge against changes in foreign currency rates. The
management of our hedging activity is carried out centrally by our corporate
treasury in accordance with the objectives and procedures established by
management and approved by our Audit Committee. Our operating policies cover
specific areas such as foreign exchange risk (including the use of derivative
financial instruments), interest rate risk and credit risk. Affiliated
companies are not permitted to enter into derivative contracts other than with
our corporate treasury. Derivative instruments are used for hedging purposes
only.
</FONT>
<P align="left"><FONT size="2"><B>Foreign exchange risk</B>
</FONT>

<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We measure our foreign exchange exposure based on anticipated and
identified transactions, both on purchases and sales. Each of our subsidiaries
regularly measures its exposure and reports it to our corporate treasury. Our
corporate treasury department seeks to hedge our foreign currency exposure on
most of our firm and anticipated purchases and sales commitments denominated in
currencies other than the subsidiaries&#146; functional currencies for periods
commensurate with their known or forecasted transactions. Our foreign currency
hedging contracts generally mature within twelve months. Our corporate
treasury uses currency derivative instruments such as foreign exchange forward
contracts and foreign exchange option contracts. These derivative instruments
are generally traded over-the-counter with major financial institutions. From
its trade date, each hedging operation is allocated to an underlying exposure.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The financing of most of our subsidiaries is managed by our corporate
treasury through inter-company current accounts, using foreign exchange spot
and forward transactions to convert our cash denominated in euros into the
subsidiary&#146;s functional currency. We place any excess liquidity in money
market investments with not more than three-month maturity dates. Our money
market investments are placed with major financial institutions in order to
reduce our credit risk exposure.
</FONT>


<P align="left"><FONT size="2"><B>Net exposure to foreign exchange risk</B>
</FONT>

<CENTER>
<TABLE cellspacing="0" border="0" cellpadding="0" width="100%">
<TR valign="bottom">
    <TD width="47%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="47%">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><FONT size="2"><I>As of December&nbsp;31, 2002,
in thousands of currencies</I></FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
</TABLE>
</CENTER>
<CENTER>
<TABLE cellspacing="0" border="0" cellpadding="0" width="100%">
<TR valign="bottom">
    <TD width="25%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="20%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="20%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="20%">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center"><FONT size="1"><B>USD and USD area<SUP>(1)</SUP></B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center"><FONT size="1"><B>JPY</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center"><FONT size="1"><B>GBP</B></FONT></TD>
</TR>
<TR valign="bottom">
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center"><HR size="1" noshade></TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><FONT size="2"><B>Net balance sheet position before hedging</B></FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">
USD 283,191
</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">JPY 1,245,418
</FONT></TD>

    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">GBP 11,251</FONT></TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><FONT size="2"><B>Hedging position<SUP>(2)</SUP></B></FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">
USD 352,972<BR>
<I>125% of the net
balance sheet
position before
hedging</I>
</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">JPY 1,553,249<BR>
<I>125% of the net
balance sheet
position before
hedging</I>
</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">GBP 18,904<BR>
<I>168% of the net
balance sheet
position before
hedging</I></FONT></TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><FONT size="2"><B>Net balance sheet position after hedging<SUP>(3)</SUP></B></FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">
USD 69,781
</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">JPY 307,831
</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">GBP 7,653</FONT></TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><FONT size="2"><B>Forecasted 2003 commercial
transactions on December&nbsp;31, 2002<SUP>(4)</SUP></B></FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">
USD 98,724
</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">JPY 423,534
</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">GBP 11,368</FONT></TD>
</TR>
</TABLE>
</CENTER>
<P>
<HR size="1" width="18%" align="left" noshade>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">
<TR valign="top">
    <TD width="1%" align="left" nowrap><FONT size="2"><I>(1)</I></FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="96%"><FONT size="2"><I>Including currencies closely correlated to the U.S. dollar: mainly Canadian
dollar, Arab Emirates dirham and Singapore dollar.</I></FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="1%" align="left" nowrap><FONT size="2"><I>(2)</I></FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="96%"><FONT size="2"><I>The Company manages its foreign exchange risk using: foreign exchange swaps and
forward contracts, as well as foreign exchange currency options.</I></FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="1%" align="left" nowrap><FONT size="2"><I>(3)</I></FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="96%"><FONT size="2"><I>The hedging position beyond the net balance sheet position is allocated to the
hedge of the forecasted 2003 commercial transactions.</I></FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="top">
    <TD width="1%" align="left" nowrap><FONT size="2"><I>(4)</I></FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="96%"><FONT size="2"><I>Forecasted 2003 commercial
transactions hedged under the Company&#146;s foreign exchange risk
management policy.</I></FONT></TD>
</TR>
</TABLE>

<P align="center"><FONT size="2">97</FONT>
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#toc">Table of Contents</A></H5><P>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The following table sets forth our estimated positions in millions of
euros for all existing currency hedging instruments as of December&nbsp;31, 2002 by
type of instrument. Forward contracts are valued at the contract forward rate
and option contracts at the contract strike rate.
</FONT>
<CENTER>
<TABLE cellspacing="0" border="0" cellpadding="0" width="95%">
<TR valign="bottom">
    <TD width="5%">&nbsp;</TD>
    <TD width="86%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>(<FONT face="'Times New Roman',Times">&#128;</FONT> in millions)</B></FONT></TD>
</TR>
<TR>
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="3"><HR size="1" noshade></TD>
</TR>






<TR valign="bottom" bgcolor="#eeeeee">
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2"><B>Derivatives qualifying as Hedge Effective under IAS 39</B></FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2"><B>Forward Purchases:</B></FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">British Pound</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">5.6</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Singapore Dollar</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">15.1</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">US Dollar</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">12.2</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Other</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">10.4</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR>
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Total</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">43.3</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR>
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom">
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2"><B>Forward Sales:</B></FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">British Pound</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">6.1</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Singapore Dollar</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">2.2</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">US Dollar</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">52.9</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Other</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">13.5</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR>
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Total</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">74.7</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR>
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom">
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2"><B>Purchases of Call Options:</B></FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Singapore Dollar</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">11.4</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Total</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">11.4</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR>
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2"><B>Purchases of Put Options:</B></FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">British Pound</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">12.6</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">US Dollar</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">109.8</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR>
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom">
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Total</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">122.4</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR>
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2"><B>Derivatives not qualifying as Hedge Effective under IAS 39</B></FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2"><B>Forward Purchases:</B></FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">British Pound</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">5.4</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">US Dollar</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">9.0</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Other</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">0.3</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR>
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom">
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Total</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">14.7</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR>
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2"><B>Forward Sales:</B></FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">British Pound</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">6.9</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">US Dollar</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">192.3</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Other</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">11.4</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR>
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Total</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">210.6</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR>
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom">
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2"><B>Sales of Call Options:</B></FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">British Pound</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">3.1</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">US Dollar</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">26.9</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR>
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Total</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">30.0</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR>
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
</TABLE>
</CENTER>
<P align="center"><FONT size="2">98</FONT>
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#toc">Table of Contents</A></H5><P>

<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In addition, because we have subsidiaries that present their financial
statements in a currency different from euro, the euro-denominated value of our
consolidated equity is exposed to fluctuations in exchange rates. All exchange
differences resulting from translating those financial statements into our
reporting currency, the euro, are classified as translation difference in our
consolidated equity. We do not hedge our equity exposure arising from net
investments in foreign entities.
</FONT>
<P align="left"><FONT size="2"><B>Interest Rate Risk</B>
</FONT>

<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Company has a low level of indebtedness and is not significantly exposed to
interest rate risk fluctuations. Consequently, it has not entered into any
derivative contracts to hedge interest rate risk. See Note 2 &#151; Summary of
significant accounting policies and Note 25 &#151; Financial instruments and market
related exposures.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The following maturity schedule describes the exposure of the Company to
interest rate risk. Financial assets are short-term investments in money market
instruments with a duration of one week or less. The company financial
liabilities are primarily short-term debt, the longer term portion being mainly
leasing at floating rates. The Company is therefore in a net, short duration,
financial asset position. Fair market value of the Company&#146;s financial positions do not significantly
deviate from their book value. The Company, however, faces re-investment risk: when interest rates are
increasing (or decreasing), interest income is increasing (or respectively
decreasing).
</FONT>
<P align="left"><FONT size="2"><B>Maturity schedule</B>
</FONT>
<CENTER>
<TABLE cellspacing="0" border="0" cellpadding="0" width="100%">
<TR valign="bottom">
    <TD width="70%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&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="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>From</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>&nbsp;</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom">
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>December
31, 2002</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>From</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom">
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>to</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>1 year to</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>Beyond</B></FONT></TD>
</TR>
<TR valign="bottom">
    <TD nowrap align="center"><FONT size="1"><B>(in thousand of euros)</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>December 31, 2003</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>5 years</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>5 years</B></FONT></TD>
</TR>
<TR valign="bottom">
    <TD nowrap align="center"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="3"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="3"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="3"><HR size="1" noshade></TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Financial liabilities</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(6,098</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(21,554</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(20,986</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Financial assets</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">417,226</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2"><B>Net balance sheet
position before
hedging</B></FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2"><B>411,128</B></FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2"><B>(21,554</B></FONT></TD>
    <TD nowrap><FONT size="2"><B>)</B></FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2"><B>(20,986</B></FONT></TD>
    <TD nowrap><FONT size="2"><B>)</B></FONT></TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Hedging</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2"><B>Net balance sheet
position after
hedging</B></FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2"><B>411,128</B></FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2"><B>(21,554</B></FONT></TD>
    <TD nowrap><FONT size="2"><B>)</B></FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2"><B>(20,986</B></FONT></TD>
    <TD nowrap><FONT size="2"><B>)</B></FONT></TD>
</TR>
</TABLE>
</CENTER>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Most of the Company&#146;s financial investments are floating rate investments.
</FONT>

<P align="left"><FONT size="2"><B>Equity Risk in Minority Investments</B>
</FONT>

<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We have several minority equity investments in publicly traded companies.
The book value of our minority equity investments in publicly traded companies
was totally provided for, as of December&nbsp;31, 2002. Because these investments
are relatively small, we currently do not have any outstanding derivative
financial instruments to hedge fluctuations in these marketable equity
investments.
</FONT>
<P align="center"><FONT size="2">99</FONT>
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#toc">Table of Contents</A></H5><P>
<!-- link2 "Item&nbsp;12. Description of Securities Other than Equity Securities" -->
<DIV align="left"><A NAME="014"></A></DIV>
<P align="left"><FONT size="2"><B>Item&nbsp;12. Description of Securities Other than Equity Securities</B>
</FONT>

<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Not applicable.
</FONT>
<!-- link1 "PART II" -->
<DIV align="left"><A NAME="015"></A></DIV>
<P align="center"><FONT size="2"><B>PART II</B>
</FONT>

<!-- link2 "Item&nbsp;13. Defaults, Dividend Arrearages and Delinquencies" -->
<DIV align="left"><A NAME="016"></A></DIV>
<P align="left"><FONT size="2"><B>Item&nbsp;13. Defaults, Dividend Arrearages and Delinquencies</B>
</FONT>

<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;None.
</FONT>
<!-- link2 "Item&nbsp;14. Material Modifications to the Rights of Security Holders and Use of Proceeds" -->
<DIV align="left"><A NAME="017"></A></DIV>
<P align="left"><FONT size="2"><B>Item&nbsp;14. Material Modifications to the Rights of Security Holders and Use of Proceeds</B>
</FONT>

<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Prior to April&nbsp;29, 2003, the board members were elected by cumulative
voting. On April&nbsp;29, 2003, our shareholders voted to eliminate cumulative voting
and accordingly, to amend our articles of incorporation.
</FONT>
<!-- link2 "Item&nbsp;15. Controls and Procedures" -->
<DIV align="left"><A NAME="018"></A></DIV>
<P align="left"><FONT size="2"><B>Item&nbsp;15. Controls and Procedures</B>
</FONT>

<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Within 90&nbsp;days prior to the filing of this Annual Report, our management,
including our Chief Executive Officer and Chief Financial Officer, have
conducted an evaluation as to the effectiveness of our disclosure controls and
procedures (as defined in Rule&nbsp;13a-14(c) under the Securities Exchange Act of
1934, as amended). Based on that evaluation the Chief Executive Officer and
the Chief Financial Officer have concluded that our disclosure controls and
procedures are effective in ensuring that all material information required to
be filed in this Annual Report has been made known to them in a timely fashion.
They also concluded that there have been no significant changes in internal
controls or in other factors that could significantly affect internal controls,
and no corrective actions were identified as necessary, and there were no
significant deficiencies or material weaknesses.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;As part of the evaluation, our management, including our Chief Executive
Officer and Chief Financial Officer, reviewed materials with the auditors and
the Audit Committee and found no significant deficiencies in the design or
operation of internal controls which could adversely affect our ability to
record, process, summarize and report financial data. The review found no
material weaknesses in internal controls or fraud, whether or not material,
involving management or other employees who have a significant role in our
internal controls.
</FONT>
<!-- link2 "Item&nbsp;16. &#091;Reserved&#093;." -->
<DIV align="left"><A NAME="019"></A></DIV>
<P align="left"><FONT size="2"><B>Item&nbsp;16. &#091;Reserved&#093;.</B>
</FONT>

<!-- link1 "PART III" -->
<DIV align="left"><A NAME="020"></A></DIV>
<P align="center"><FONT size="2"><B>PART III</B>
</FONT>

<!-- link2 "Item&nbsp;17. Financial Statements" -->
<DIV align="left"><A NAME="021"></A></DIV>
<P align="left"><FONT size="2"><B>Item&nbsp;17. Financial Statements</B>
</FONT>

<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Not applicable.
</FONT>
<!-- link2 "Item&nbsp;18. Financial Statements" -->
<DIV align="left"><A NAME="022"></A></DIV>
<P align="left"><FONT size="2"><B>Item&nbsp;18. Financial Statements</B>
</FONT>

<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;See pages F-1 through F-67, incorporated herein by reference.
</FONT>
<P align="center"><FONT size="2">100</FONT>
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#toc">Table of Contents</A></H5><P>


<!-- link2 "Item&nbsp;19. Exhibits" -->
<DIV align="left"><A NAME="023"></A></DIV>
<P align="left"><FONT size="2"><B>Item&nbsp;19. Exhibits</B>
</FONT>

<P align="left"><FONT size="2">(a)&nbsp;List of Financial Statements</FONT>

<CENTER>
<TABLE cellspacing="0" border="0" cellpadding="0" width="75%">
<TR valign="bottom">
    <TD width="92%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Report of Independent Accountants</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">F-1</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Consolidated Statements of Income
for the Years Ended December&nbsp;31, 2002, 2001, and 2000</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">F-2</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Consolidated Balance Sheets as of December&nbsp;31, 2002, 2001 and 2000</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">F-3</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Consolidated Statements of Cash Flows
for the Years Ended December&nbsp;31, 2002, 2001 and 2000</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">F-4</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Consolidated Statements of Changes in Shareholders&#146; Equity
for the Years Ended December&nbsp;31, 2002, 2001 and 2000</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">F-5</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Notes to the consolidated financial statements</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">F-8</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
</TABLE>
</CENTER>
<P align="left"><FONT size="2">(b)&nbsp;List of Exhibits
</FONT>

<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">
<TR valign="top">
    <TD width="1%" align="left" nowrap><FONT size="2">1.</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="96%"><FONT size="2">Updated and consolidated Articles of Incorporation of Gemplus
International SA as amended to date (English translation included).</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="1%" align="left" nowrap><FONT size="2">2.</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="96%"><FONT size="2">Deposit Agreement, Supplemental agreement to Deposit Agreement and
Termination Letter to Citibank, N.A., incorporated by reference to the
Form&nbsp;F-6 dated February&nbsp;28, 2003.</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="1%" align="left" nowrap><FONT size="2">4.1</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="96%"><FONT size="2">Employment Agreement among Gemplus International SA, Gemplus Corp.,
Gemplus Management &#038; Trading SA and Alex Mandl dated
August&nbsp;29, 2002.</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="1%" align="left" nowrap><FONT size="2">4.2</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="96%"><FONT size="2">Second Amended and Restated Employment Agreement dated as of July&nbsp;11,
2001 among Gemplus Americas, Inc., Gemplus International S.A. and Antonio
Perez, incorporated by reference to the Annual Report of the company
contained in the company&#146;s Report on Form&nbsp;20-F dated
July&nbsp;1, 2002.</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="1%" align="left" nowrap><FONT size="2">4.3</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="96%"><FONT size="2">Loan Repayment Agreement between Antonio Perez and Zenzus Holdings
Limited, dated October&nbsp;20, 2001, and Letter Agreement by Antonio Perez,
dated December&nbsp;19, 2001, incorporated by reference to the Annual Report of
the company contained in the company&#146;s Report on Form&nbsp;20-F dated July&nbsp;1,
2002.</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="1%" align="left" nowrap><FONT size="2">4.4</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="96%"><FONT size="2">Agreement between Gemplus International S.A., Zenzus Holdings Limited and
Marc Lassus, dated December&nbsp;19, 2001, incorporated by reference to the
Annual Report of the company contained in the company&#146;s Report on Form
20-F dated July&nbsp;1, 2002.</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="top">
    <TD width="1%" align="left" nowrap><FONT size="2">4.5</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="96%"><FONT size="2">Agreement among Gemplus SA, Gemplus Trading SA, Gemplus
Electronics SA, Gemplus Telematics SARL, Gemplus Support GIE, Gemplus Development GIE, Gemplus
Europe Services and Unions U.S.G, C.F.D.T., C.F.T.C, and C.F.E.-C.G.C. dated May&nbsp;15, 2003.</FONT></TD>
</TR>





<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="1%" align="left" nowrap><FONT size="2">8.</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="96%"><FONT size="2">List of significant subsidiaries.</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="1%" align="left" nowrap><FONT size="2">10.1</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="96%"><FONT size="2">Certification by Chief Executive Officer pursuant to Section&nbsp;906 of the
Sarbannes-Oxley Act of 2002.</FONT></TD>
</TR>
</TABLE>
<P align="center"><FONT size="2">101</FONT>
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#toc">Table of Contents</A></H5><P>




<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">
<TR valign="top">
    <TD width="1%" align="left" nowrap><FONT size="2">10.2</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="96%"><FONT size="2">Certification by Chief Financial Officer pursuant to Section&nbsp;906 of the
Sarbannes-Oxley Act of 2002.</FONT></TD>
</TR>
<TR valign="top">
    <TD width="1%" align="left" nowrap><FONT size="2">12.1</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="96%"><FONT size="2">Consent from PricewaterhouseCoopers</FONT></TD>
</TR>

</TABLE>
<P align="center"><FONT size="2">102</FONT>
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#toc">Table of Contents</A></H5><P>



<P align="center"><FONT size="2"><B>SIGNATURE</B>
</FONT>

<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Pursuant to the requirements of Section&nbsp;12 of the Securities Exchange Act
of 1934, the registrant certifies that it meets all of the requirements for
filing on Form&nbsp;20-F and has duly caused this Annual Report to be signed on its
behalf by the undersigned, thereunto duly authorized.
</FONT>
<P align="left"><FONT size="2">Date: July&nbsp;15, 2003
</FONT>
<CENTER>
<TABLE cellspacing="0" border="0" cellpadding="0" width="100%">
<TR valign="bottom">
    <TD width="61%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="33%">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="3" valign="top" align="left"><FONT size="2">GEMPLUS INTERNATIONAL SA</FONT></TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">
By:
</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">/s/ Yves Guillaumot<BR>
<HR size="1" width="55%" noshade>
Yves Guillaumot</FONT></TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">Chief Financial
Officer</FONT></TD>
</TR>
</TABLE>
</CENTER>

<P align="center"><FONT size="2">&nbsp;</FONT>



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

<P align="center"><FONT size="2"><B>CERTIFICATION OF CHIEF EXECUTIVE OFFICER</B>
</FONT>

<P align="left"><FONT size="2">I, Alex Mandl, Chief Executive Officer of Gemplus International SA,
certify that:
</FONT>

<P align="left"><FONT size="2">1.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;I have reviewed this annual report on Form&nbsp;20-F of Gemplus
International SA;
</FONT>

<P align="left"><FONT size="2">2.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Based on my knowledge, this annual report does not contain any untrue
statement of a material fact or omit to state a material fact necessary
to make the statements made, in light of the circumstances under which
such statements were made, not misleading with respect to the period
covered by this annual report;
</FONT>

<P align="left"><FONT size="2">3.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Based on my knowledge, the financial statements, and other financial
information included in this annual report, fairly present in all
material respects the financial condition, results of operations and cash
flows of the registrant as of, and for, the periods presented in this
annual report;
</FONT>

<P align="left"><FONT size="2">4.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The registrant&#146;s other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules&nbsp;13a-14 and 15d-14) for the registrant and
have:
</FONT>


<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">
<TR valign="top">
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" align="left" nowrap><FONT size="2">a)</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="93%"><FONT size="2">designed such disclosure controls and procedures to ensure that
material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within
those entities, particularly during the period in which this
annual report is being prepared;</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" align="left" nowrap><FONT size="2">b)</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="93%"><FONT size="2">evaluated the effectiveness of the registrant&#146;s disclosure
controls and procedures as of a date within 90&nbsp;days prior to the
filing date of this annual report (the &#147;Evaluation Date&#148;); and</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" align="left" nowrap><FONT size="2">c)</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="93%"><FONT size="2">presented in this annual report our conclusions about the
effectiveness of the disclosure controls and procedures based on
our evaluation as of the Evaluation Date;</FONT></TD>
</TR>
</TABLE>
<P align="left"><FONT size="2">5.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The registrant&#146;s other certifying officers and I have disclosed,
based on our most recent evaluation, to the registrant&#146;s auditors and the
audit committee of registrant&#146;s board of directors (or persons performing
the equivalent function):
</FONT>


<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">
<TR valign="top">
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" align="left" nowrap><FONT size="2">a)</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="93%"><FONT size="2">all significant deficiencies in the design or operation of
internal controls which could adversely affect the registrant&#146;s
ability to record, process, summarize and report financial data
and have identified for the registrant&#146;s auditors any material
weaknesses in internal controls; and</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" align="left" nowrap><FONT size="2">b)</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="93%"><FONT size="2">any fraud, whether or not material, that involves management or
other employees who have a significant role in the registrant&#146;s
internal controls; and</FONT></TD>
</TR>
</TABLE>

<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">
<TR valign="top">
    <TD width="1%" align="left" nowrap><FONT size="2">6.</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="96%"><FONT size="2">The registrant&#146;s other certifying officers and I have
indicated in this annual report whether or not there were
significant changes in internal controls or in other factors that
could significantly affect internal controls subsequent to the date
of our most recent evaluation, including any corrective actions with
regard to significant deficiencies and material weaknesses.</FONT></TD>
</TR>
</TABLE>
<CENTER>
<TABLE cellspacing="0" border="0" cellpadding="0" width="55%">
<TR valign="bottom">
    <TD width="26%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="69%">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><FONT size="2">Date: July&nbsp;15, 2003</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="center" valign="top"><FONT size="2">/s/ Alex Mandl</FONT></TD>
</TR>
<TR>
    <TD valign="top"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">
<HR size="1" noshade></FONT></TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="center" valign="top"><FONT size="2">
Alex Mandl<br><br>
Chief Executive Officer</FONT></TD>
</TR>
</TABLE>
</CENTER>

<P align="center"><FONT size="2">104</FONT>





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



<P align="center"><FONT size="2"><B>CERTIFICATION OF CHIEF FINANCIAL OFFICER</B>
</FONT>

<P align="left"><FONT size="2">I, Yves Guillaumot, Chief Financial Officer of Gemplus International SA,
certify that:
</FONT>

<P align="left"><FONT size="2">1.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;I have reviewed this annual report on Form&nbsp;20-F of Gemplus
International SA;
</FONT>

<P align="left"><FONT size="2">2.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Based on my knowledge, this annual report does not contain any untrue
statement of a material fact or omit to state a material fact necessary
to make the statements made, in light of the circumstances under which
such statements were made, not misleading with respect to the period
covered by this annual report;
</FONT>

<P align="left"><FONT size="2">3.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Based on my knowledge, the financial statements, and other financial
information included in this annual report, fairly present in all
material respects the financial condition, results of operations and cash
flows of the registrant as of, and for, the periods presented in this
annual report;
</FONT>

<P align="left"><FONT size="2">4.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The registrant&#146;s other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules&nbsp;13a-14 and 15d-14) for the registrant and
have:
</FONT>


<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">
<TR valign="top">
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" align="left" nowrap><FONT size="2">a)</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="93%"><FONT size="2">designed such disclosure controls and procedures to ensure that
material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within
those entities, particularly during the period in which this
annual report is being prepared;</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" align="left" nowrap><FONT size="2">b)</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="93%"><FONT size="2">evaluated the effectiveness of the registrant&#146;s disclosure
controls and procedures as of a date within 90&nbsp;days prior to the
filing date of this annual report (the &#147;Evaluation Date&#148;); and</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" align="left" nowrap><FONT size="2">c)</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="93%"><FONT size="2">presented in this annual report our conclusions about the
effectiveness of the disclosure controls and procedures based on
our evaluation as of the Evaluation Date;</FONT></TD>
</TR>
</TABLE>
<P align="left"><FONT size="2">5.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The registrant&#146;s other certifying officers and I have disclosed,
based on our most recent evaluation, to the registrant&#146;s auditors and the
audit committee of registrant&#146;s board of directors (or persons performing
the equivalent function):
</FONT>


<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">
<TR valign="top">
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" align="left" nowrap><FONT size="2">a)</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="93%"><FONT size="2">all significant deficiencies in the design or operation of
internal controls which could adversely affect the registrant&#146;s
ability to record, process, summarize and report financial data
and have identified for the registrant&#146;s auditors any material
weaknesses in internal controls; and</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" align="left" nowrap><FONT size="2">b)</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="93%"><FONT size="2">any fraud, whether or not material, that involves management or
other employees who have a significant role in the registrant&#146;s
internal controls; and</FONT></TD>
</TR>
</TABLE>
<P align="left"><FONT size="2">6.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The registrant&#146;s other certifying officers and I have indicated in
this annual report whether or not there were significant changes in
internal controls or in other factors that could significantly affect
internal controls subsequent to the date of our most recent evaluation,
including any corrective actions with regard to significant deficiencies
and material weaknesses.
</FONT>

<CENTER>
<TABLE cellspacing="0" border="0" cellpadding="0" width="55%">
<TR valign="bottom">
    <TD width="26%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="69%">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><FONT size="2">Date: July&nbsp;15, 2003</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="center" valign="top"><FONT size="2">/s/ Yves Guillaumot</FONT></TD>
</TR>
<TR>
    <TD valign="top"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">
<HR size="1" noshade></FONT></TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="center" valign="top"><FONT size="2">
Yves Guillaumot<br><br>
Chief Financial Officer</FONT></TD>
</TR>
</TABLE>
</CENTER>

<P align="center"><FONT size="2">105</FONT>


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


<P align="right"><FONT size="2"><B>GEMPLUS INTERNATIONAL SA</B>
</FONT>


<P align="left"><FONT size="2"><B>Report of Independent Accountants</B>
</FONT>

<P align="left"><FONT size="2">To the Board of Directors and Shareholders,
</FONT>

<P align="left"><FONT size="2">In our opinion, the accompanying consolidated balance
sheets and the related consolidated statements of
income, of cash flows and of changes in shareholders&#146;
equity present fairly, in all material respects, the
financial position of Gemplus International SA and its
subsidiaries at December&nbsp;31, 2002, 2001 and 2000, and
the results of their operations and their cash flows for
each of the three years in the period ended December&nbsp;31,
2002, in accordance with International Accounting
Standards. These financial statements are the
responsibility of the Company&#146;s management; our
responsibility is to express an opinion on these
financial statements based on our audits.
</FONT>

<P align="left"><FONT size="2">We conducted our audits of these statements in
accordance with Auditing Standards generally accepted in the United
States of America.
Those standards require that we plan and perform the
audit to obtain reasonable assurance about whether
the financial statements are free of material
misstatement. An audit includes examining, on a test
basis, evidence supporting the amounts and disclosures
in the financial statements, assessing the accounting
principles used and significant estimates made by
management, and evaluating the overall financial
statement presentation. We believe that our audits
provide a reasonable basis for the opinion expressed
above.
</FONT>

<P align="left"><FONT size="2">Accounting principles generally accepted in accordance with International Accounting Standards vary in certain
respects from accounting principles generally accepted
in the United States of America. The application of the
latter would have affected the determination of
consolidated net income for each of the three years in
the period ended December&nbsp;31, 2002, and the
determination of shareholders&#146; equity at December&nbsp;31,
2002, 2001 and 2000 to the extent summarized in Note 32
to the consolidated financial statements.
</FONT>


<P align="left"><FONT size="2">PricewaterhouseCoopers
</FONT>

<P align="left"><FONT size="2"><IMG src="y00627y0062700.gif" alt="(PRICEWATERHOUSECOOPERS LOGO)">
</FONT>
<P align="left"><FONT size="2">Paris, France
</FONT>
<P align="left"><FONT size="2">March&nbsp;11, 2003
</FONT>
<P align="right"><FONT size="2">F-1</FONT>

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

<P align="right"><FONT size="2"><B>GEMPLUS INTERNATIONAL S A</B>
</FONT>


<P align="left"><FONT size="2"><B>Consolidated Financial Statements<BR>
for the years ended December&nbsp;31, 2002, 2001 and 2000</B>
</FONT>


<P align="left"><FONT size="2"><B>Consolidated Statements of Income</B>
</FONT>


<P align="right"><FONT size="2">(in thousands of euros, except shares and per share amounts)
</FONT>

<CENTER>
<TABLE cellspacing="0" border="0" cellpadding="0" width="100%">
<TR valign="bottom">
    <TD width="46%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD nowrap align="center"><FONT size="1"><B>Years ended December 31</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>Notes</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>2002</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>2001</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>2000</B></FONT></TD>
</TR>
<TR valign="bottom">
    <TD nowrap align="center"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="3"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="3"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="3"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="3"><HR size="1" noshade></TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Net sales</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">787,434</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">1,022,986</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">1,204,600</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Cost of sales</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(587,722</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(715,516</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(750,714</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
</TR>
<TR>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2"><B>Gross profit</B></FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2"><B>199,712</B></FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2"><B>307,470</B></FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2"><B>453,886</B></FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Research and development expenses</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(10</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(92,240</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(112,885</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(90,778</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Reversal of research credit allowance</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(10</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">12,486</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Selling and marketing expenses</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(112,227</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(165,276</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(158,545</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">General and administrative expenses</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(89,896</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(110,657</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(89,666</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Restructuring expenses</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(17</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(90,003</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(28,466</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Litigation expenses</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(26</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(18,120</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Management severance expenses</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(31</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(25,691</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Goodwill amortization and impairments</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(8</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(47,117</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(27,162</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(11,204</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
</TR>
<TR>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2"><B>Operating income (loss)</B></FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2"><B>(231,771</B></FONT></TD>
    <TD nowrap><FONT size="2"><B>)</B></FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2"><B>(180,787</B></FONT></TD>
    <TD nowrap><FONT size="2"><B>)</B></FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2"><B>116,179</B></FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Financial income</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">19,782</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">28,234</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">21,427</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Financial expense</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(29</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(70,874</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(7,532</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(8,869</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Other income (expense), net</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(18</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(28,904</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">45,681</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(28</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
</TR>
<TR>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2"><B>Income (loss)&nbsp;before taxes</B></FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2"><B>(311,767</B></FONT></TD>
    <TD nowrap><FONT size="2"><B>)</B></FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2"><B>(114,404</B></FONT></TD>
    <TD nowrap><FONT size="2"><B>)</B></FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2"><B>128,709</B></FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>



<TR valign="bottom" bgcolor="#eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Income taxes benefit (provision)</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(19</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(9,124</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">14,184</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(29,631</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
</TR>
<TR>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2"><B>NET INCOME (LOSS)</B></FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2"><B>(320,891</B></FONT></TD>
    <TD nowrap><FONT size="2"><B>)</B></FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2"><B>(100,220</B></FONT></TD>
    <TD nowrap><FONT size="2"><B>)</B></FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2"><B>99,078</B></FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Net income (loss)&nbsp;per share</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(21</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&#149; Basic</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(0.53</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(0.16</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">0.20</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&#149; Diluted</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(0.53</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(0.16</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">0.18</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Shares used in net income (loss)&nbsp;per
share calculation</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(21</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&#149; Basic</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">606,222,660</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">636,992,392</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">497,523,946</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&#149; Diluted</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">606,222,660</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">636,992,392</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">539,256,206</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
</TABLE>
</CENTER>
<P align="left"><FONT size="2"><B>Note:</B>
</FONT>

<P align="left"><FONT size="2">In filings with Commission des Op&#233;rations de Bourses and its
annual report to shareholders, the Company has included goodwill
amortization below operating income. See Note 33.
</FONT>


<P align="center"><FONT size="2">The accompanying notes are an integral part of the consolidated financial statements.
</FONT>

<P align="right"><FONT size="2">F-2</FONT>

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

<P align="right"><FONT size="2"><B>GEMPLUS INTERNATIONAL S A</B>
</FONT>


<P align="left"><FONT size="2"><B>Consolidated Balance Sheets</B>
</FONT>


<P align="right"><FONT size="2">(in thousands of euros)
</FONT>

<CENTER>
<TABLE cellspacing="0" border="0" cellpadding="0" width="100%">
<TR valign="bottom">
    <TD width="58%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD nowrap align="center"><FONT size="1"><B>December 31</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>Notes</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>2002</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>2001</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>2000</B></FONT></TD>
</TR>

<TR>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><HR size="1" noshade></TD>
        <TD><FONT size="1">&nbsp;</FONT></TD>
        <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
</TR>







<TR valign="bottom" bgcolor="#eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2"><B>ASSETS</B></FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2"><B>Current assets:</B></FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Cash and cash equivalents</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">417,226</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">490,652</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">636,284</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Trade accounts receivable, net</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(4</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">144,913</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">188,635</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">311,276</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Inventory, net</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(5</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">96,513</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">139,794</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">174,101</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Other current assets</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(6</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">93,482</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">103,733</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">97,377</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2"><B>Total current assets</B></FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2"><B>752,134</B></FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2"><B>922,814</B></FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2"><B>1,219,038</B></FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2"><B>Non-current assets:</B></FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Property, plant and equipment, net</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(7</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">216,944</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">268,784</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">249,916</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Goodwill, net</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(8</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">73,187</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">116,580</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">155,809</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Other non-current assets</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(9</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">84,819</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">150,472</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">234,043</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Deferred development costs, net</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(10</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">25,910</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">28,470</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">26,349</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Deferred tax assets</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(18</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">41,674</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">22,148</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">7,120</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Investments</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(11</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">23,088</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">21,424</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">16,734</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2"><B>Total non-current assets</B></FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2"><B>465,622</B></FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2"><B>607,878</B></FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2"><B>689,971</B></FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2"><B>TOTAL ASSETS</B></FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2"><B>1,217,756</B></FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2"><B>1,530,692</B></FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2"><B>1,909,009</B></FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2"><B>LIABILITIES</B></FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2"><B>Current liabilities:</B></FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Accounts payable</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(12</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">80,256</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">109,661</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">261,047</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Salaries, wages and related items</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">51,188</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">55,967</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">70,738</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Other current liabilities</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(13</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">81,133</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">86,411</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">54,867</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Accrued taxes</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">27,209</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">26,527</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">31,005</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Current portion of long-term debt</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(14</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">1,867</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Current obligations under capital leases</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(15</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">6,098</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">3,734</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">3,414</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2"><B>Total current liabilities</B></FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2"><B>245,884</B></FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2"><B>282,300</B></FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2"><B>422,938</B></FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2"><B>Non-current liabilities:</B></FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Long-term obligations under capital leases</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(15</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">42,540</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">32,581</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">31,885</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Long-term debt, less current portion</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(14</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">14</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">5,865</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Deferred tax liabilities</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(18</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">2,296</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Other non-current liabilities</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(16</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">53,714</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">30,859</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">43,717</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2"><B>Total non-current liabilities</B></FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2"><B>96,254</B></FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2"><B>63,454</B></FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2"><B>83,763</B></FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2"><B>Minority interest</B></FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2"><B>15,167</B></FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2"><B>17,176</B></FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2"><B>17,313</B></FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2"><B>Shareholders&#146; equity:</B></FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Ordinary shares no legal par value,
2,000,000,000 shares authorized,
637,859,088, 641,396,497, and 636,256,258 shares
issued
at December&nbsp;31, 2002, 2001 and 2000, respectively</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(20</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">127,644</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">127,056</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">124,263</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Additional paid-in capital</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">1,028,920</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">1,027,850</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">1,026,063</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Retained earnings</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(210,358</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">125,016</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">235,972</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Other comprehensive income</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(22</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">8,571</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(3,968</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">376</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Less, cost of treasury shares</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(94,326</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(108,192</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(1,679</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
</TR>
<TR>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2"><B>Total shareholders&#146; equity</B></FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2"><B>860,451</B></FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2"><B>1,167,762</B></FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2"><B>1,384,995</B></FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2"><B>TOTAL LIABILITIES AND SHAREHOLDERS&#146; EQUITY</B></FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2"><B>1,217,756</B></FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2"><B>1,530,692</B></FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2"><B>1,909,009</B></FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
</TABLE>
</CENTER>

<P align="center"><FONT size="2">The accompanying notes are an integral part of the consolidated financial statements.
</FONT>

<P align="right"><FONT size="2">F-3</FONT>

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

<P align="right"><FONT size="2"><B>GEMPLUS INTERNATIONAL S A</B>
</FONT>


<P align="left"><FONT size="2"><B>Consolidated Statements of Cash Flows</B>
</FONT>


<P align="right"><FONT size="2">(in thousands of euros)
</FONT>

<CENTER>
<TABLE cellspacing="0" border="0" cellpadding="0" width="100%">
<TR valign="bottom">
    <TD width="67%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD nowrap align="center"><FONT size="1"><B>Years ended December 31</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>2002</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>2001</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>2000</B></FONT></TD>
</TR>
<TR valign="bottom">
    <TD nowrap align="center"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="3"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="3"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="3"><HR size="1" noshade></TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2"><B>Cash flow from operating activities:</B></FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Net income (loss)</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(320,891</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(100,220</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">99,078</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Adjustments to reconcile net income (loss)&nbsp;to net cash from
operating activities:</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&#149; Depreciation and amortization</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">133,359</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">120,409</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">79,080</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&#149; Changes in other non-current liabilities</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">9,420</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(3,387</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(10,244</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&#149; Provision for deferred income taxes</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(1,234</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(15,976</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">1,045</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&#149; (Gain) / loss on sale and disposal of assets</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">6,051</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(65,996</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(9,311</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&#149; Other, net</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">2,263</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">1,594</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">4,886</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Changes in operating assets and liabilities:</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&#149; Trade accounts receivable and related current liabilities</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">40,598</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">100,063</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(88,840</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&#149; Trade accounts payable and related current assets</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(27,405</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(126,920</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">92,596</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&#149; Inventories</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">35,675</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">11,509</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(76,140</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&#149; Value-added and income taxes</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(12,656</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(9,232</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(20,374</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&#149; Other, net</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(2,716</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">14,850</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(2,557</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&#149; Restructuring reserve payable</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">35,958</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">6,177</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&#149; Litigation expenses payable</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(18,120</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">18,120</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&#149; Management severance expenses</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(10,629</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">25,691</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&#149; Provision for a loan to a former Chairman of the Board</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">67,582</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2"><B>Net cash (used for) from operating activities</B></FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2"><B>(62,745</B></FONT></TD>
    <TD nowrap><FONT size="2"><B>)</B></FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2"><B>(23,318</B></FONT></TD>
    <TD nowrap><FONT size="2"><B>)</B></FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2"><B>69,219</B></FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2"><B>Cash flows from investing activities:</B></FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Sale / Purchase of activities net of cash disposed / acquired</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">108,731</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(99,040</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Other investments</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(14,720</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(42,035</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(51,021</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Purchase of property, plant and equipment</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(31,953</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(102,555</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(102,453</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Purchase of other assets</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(2,860</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(19,623</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(17,630</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Change in non-trade accounts payable and other current assets</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">2,403</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(9,843</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">3,810</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2"><B>Net cash used for investing activities</B></FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2"><B>(47,130</B></FONT></TD>
    <TD nowrap><FONT size="2"><B>)</B></FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2"><B>(65,325</B></FONT></TD>
    <TD nowrap><FONT size="2"><B>)</B></FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2"><B>(266,334</B></FONT></TD>
    <TD nowrap><FONT size="2"><B>)</B></FONT></TD>
</TR>
<TR>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2"><B>Cash flows from financing activities:</B></FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Proceeds from conversion of debentures and exercise of warrants</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">191,753</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Proceeds from shareholders contribution</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">613,267</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Proceeds from exercise of share options</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">1,657</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">7,762</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">18,237</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Purchase of Gemplus SA shares</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(14,544</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Payments on long-term borrowings</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(134</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(2,301</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(3,589</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Proceeds from sales-leaseback operations</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">15,962</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">5,711</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Principal payments on obligations under capital leases</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(3,883</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(3,373</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(3,195</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Increase (decrease)&nbsp;in bank overdrafts</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(3,205</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">4,462</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">832</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Dividends paid by subsidiaries to minority shareholders</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(4,297</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(4,256</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(3,826</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Change in treasury shares</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(617</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(15,117</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">85</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Interests receivable on loans to senior management</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(1,706</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(4,877</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(3,139</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Change in non-trade accounts payable on financing activities</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(8,114</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">7,495</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2"><B>Net cash (used for) from financing activities</B></FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2"><B>3,777</B></FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2"><B>(34,647</B></FONT></TD>
    <TD nowrap><FONT size="2"><B>)</B></FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2"><B>817,920</B></FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Effect of exchange rate changes on cash</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">32,672</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(22,342</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(11,627</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Net increase (decrease)&nbsp;in cash and cash equivalents</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(106,098</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(123,290</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">620,805</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Cash and cash equivalents, beginning of year</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">490,652</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">636,284</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">27,106</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2"><B>Cash and cash equivalents, end of period</B></FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2"><B>417,226</B></FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2"><B>490,652</B></FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2"><B>636,284</B></FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
</TABLE>
</CENTER>

<P align="center"><FONT size="2">The accompanying notes are an integral part of the consolidated financial statements.
</FONT>

<P align="right"><FONT size="2">F-4</FONT>

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

<P align="right"><FONT size="2"><B>GEMPLUS INTERNATIONAL S A</B>
</FONT>


<P align="left"><FONT size="2"><B>Consolidated Statements of Changes in Shareholders&#146; Equity</B>
</FONT>


<P align="right"><FONT size="2">(in thousands of euros, except number of shares)
</FONT>

<CENTER>
<TABLE cellspacing="0" border="0" cellpadding="0" width="100%">
<TR valign="bottom">
    <TD width="28%">&nbsp;</TD>

    <TD width="2%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&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="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&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="2%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>Other</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom">
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>Additional</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>Net</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>compre-</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom">
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>Number</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>Share</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>paid-in</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>Retained</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>income</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>hensive</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>Treasury</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom">
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>Note</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>of shares</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>value</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>capital</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>earnings</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>(loss)</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>income</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>shares</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>Total</B></FONT></TD>
</TR>
<TR valign="bottom">
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="3"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="3"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="3"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="3"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="3"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="3"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="3"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="3"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="3"><HR size="1" noshade></TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2"><B>Balance at December&nbsp;31, 1999</B></FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2"><B>334,135,600</B></FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2"><B>10,188</B></FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2"><B>145,825</B></FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2"><B>169,223</B></FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2"><B>(32,133</B></FONT></TD>
    <TD nowrap><FONT size="2"><B>)</B></FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2"><B>2,814</B></FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2"><B>(1,764</B></FONT></TD>
    <TD nowrap><FONT size="2"><B>)</B></FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2"><B>294,153</B></FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Allocation of prior year earnings</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(32,133</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">32,133</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Net income</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">99,078</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">99,078</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Contribution of Gemplus SA shares
to Gemplus International SA</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(3</FONT></TD>
    <TD><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">56,323</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(67,728</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(11,405</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
</TR>
<TR>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Gemplus SA shares to be contributed</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(3</FONT></TD>
    <TD><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">11,405</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">11,405</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Shares issued by Gemplus SA
pursuant to share
options exercised to be contributed</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(20</FONT></TD>
    <TD><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">13,360,000</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">18,237</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">18,237</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Shares issued pursuant to capital
contribution, net of issuance costs <FONT face="'Times New Roman',Times">&#128;</FONT>14,747</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(20</FONT></TD>
    <TD><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">155,873,300</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">31,174</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">500,616</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">531,790</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>


<TR>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Options and free shares issued,
net of issuance costs <FONT face="'Times New Roman',Times">&#128;</FONT>1,102</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(20</FONT></TD>
    <TD><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">61,487,358</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">12,298</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">130,317</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">142,615</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Shares issued following exercice
of warrants,
net of issuance cost <FONT face="'Times New Roman',Times">&#128;</FONT>6,002</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(20</FONT></TD>
    <TD><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">56,400,000</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">11,280</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">180,473</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">191,753</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Shares issued following Gemplus
IPO,
net of issuance costs <FONT face="'Times New Roman',Times">&#128;</FONT>7,410</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(20</FONT></TD>
    <TD><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">15,000,000</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">3,000</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">79,590</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">82,590</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Shares to be issued following
acquisitions
of Celocom Ltd and SLP InfoWare SA</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(3</FONT></TD>
    <TD><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">27,328</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">27,328</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Purchase of 149,550 shares of
treasury shares</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(3</FONT></TD>
    <TD><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(425</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(425</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
</TR>
<TR>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Sale of 378,550 shares of treasury
shares</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(3</FONT></TD>
    <TD><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(196</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">510</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">314</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Change in other comprehensive
income</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(22</FONT></TD>
    <TD><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(2,438</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(2,438</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
</TR>
<TR>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2"><B>Balance at December&nbsp;31, 2000</B></FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2"><B>636,256,258</B></FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2"><B>124,263</B></FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2"><B>1,026,063</B></FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2"><B>136,894</B></FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2"><B>99,078</B></FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2"><B>376</B></FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2"><B>(1,679</B></FONT></TD>
    <TD nowrap><FONT size="2"><B>)</B></FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2"><B>1,384,995</B></FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
</TR>
</TABLE>
</CENTER>


<P align="center"><FONT size="2">The accompanying notes are an integral part of the consolidated financial statements.
</FONT>



<P align="right"><FONT size="2">F-5</FONT>




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


<P align="right"><FONT size="2"><B>GEMPLUS INTERNATIONAL SA</B>
</FONT>


<P align="left"><FONT size="2"><B>Consolidated Statements of Changes in Shareholders&#146; Equity </B>(continued)
</FONT>

<CENTER>
<TABLE cellspacing="0" border="0" cellpadding="0" width="100%">
<TR valign="bottom">
    <TD width="28%">&nbsp;</TD>

    <TD width="2%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&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="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&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="2%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>Other</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom">
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>Additional</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>Net</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>compre-</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom">
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>Number</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>Share</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>paid-in</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>Retained</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>income</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>hensive</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>Treasury</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom">
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>Note</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>of shares</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>value</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>capital</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>earnings</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>(loss)</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>income</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>shares</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>Total</B></FONT></TD>
</TR>
<TR valign="bottom">
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="3"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="3"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="3"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="3"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="3"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="3"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="3"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="3"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="3"><HR size="1" noshade></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="1"><B>Balance at December&nbsp;31, 2000</B></FONT></DIV></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="1"><B>636,256,258</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="1"><B>124,263</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="1"><B>1,026,063</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="1"><B>136,894</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="1"><B>99,078</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="1"><B>376</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="1"><B>(1,679</B></FONT></TD>
    <TD nowrap><FONT size="1"><B>)</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="1"><B>1,384,995</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="1">Allocation of prior year earnings</FONT></DIV></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="1">&#151;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="1">&#151;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="1">&#151;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="1">99,078</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="1">(99,078</FONT></TD>
    <TD nowrap><FONT size="1">)</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="1">&#151;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="1">&#151;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="1">&#151;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="1">Net loss</FONT></DIV></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="1">&#151;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="1">&#151;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="1">&#151;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="1">&#151;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="1">(100,220</FONT></TD>
    <TD nowrap><FONT size="1">)</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="1">&#151;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="1">&#151;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="1">(100,220</FONT></TD>
    <TD nowrap><FONT size="1">)</FONT></TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="1">Effect of adopting IAS 39</FONT></DIV></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="1">(22</FONT></TD>
    <TD><FONT size="1">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="1">&#151;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="1">&#151;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="1">&#151;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="1">(5,003</FONT></TD>
    <TD nowrap><FONT size="1">)</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="1">&#151;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="1">9,093</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="1">&#151;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="1">4,090</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="1">Shares issued following acquisitions
of Celocom Ltd and SLP&nbsp;InfoWare SA</FONT></DIV></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="1">(3</FONT></TD>
    <TD><FONT size="1">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="1">4,554,639</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="1">911</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="1">(911</FONT></TD>
    <TD nowrap><FONT size="1">)</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="1">&#151;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="1">&#151;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="1">&#151;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="1">&#151;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="1">&#151;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="1">Contribution of Gemplus SA shares to
Gemplus International SA</FONT></DIV></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="1">(3</FONT></TD>
    <TD><FONT size="1">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="1">&#151;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="1">1,460</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="1">(1,460</FONT></TD>
    <TD nowrap><FONT size="1">)</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="1">&#151;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="1">&#151;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="1">&#151;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="1">&#151;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="1">&#151;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="1">Shares issued by Gemplus SA pursuant
to share options exercised to be contributed</FONT></DIV></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="1">(20</FONT></TD>
    <TD><FONT size="1">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="1">2,498,100</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="1">&#151;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="1">4,167</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="1">&#151;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="1">&#151;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="1">&#151;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="1">&#151;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="1">4,167</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="1">Purchase of Gemplus SA shares
by Gemplus International</FONT></DIV></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="1">(20</FONT></TD>
    <TD><FONT size="1">)</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>

    <TD nowrap align="right"><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="1">(4,029,350</FONT></TD>
    <TD nowrap><FONT size="1">)</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="1">&#151;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="1">(9,450</FONT></TD>
    <TD nowrap><FONT size="1">)</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="1">(5,094</FONT></TD>
    <TD nowrap><FONT size="1">)</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="1">&#151;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="1">&#151;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="1">&#151;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="1">(14,544</FONT></TD>
    <TD nowrap><FONT size="1">)</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="1">Shares issued by Gemplus International SA
pursuant to share options exercised</FONT></DIV></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="1">(20</FONT></TD>
    <TD><FONT size="1">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="1">2,116,850</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="1">422</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="1">3,311</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="1">&#151;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="1">&#151;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="1">&#151;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="1">&#151;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="1">3,733</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="1">Treasury shares held following transfer
of shares by senior management</FONT></DIV></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="1">(3</FONT></TD>
    <TD><FONT size="1">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="1">&#151;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="1">&#151;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="1">6,130</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="1">&#151;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="1">&#151;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="1">&#151;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="1">(92,756</FONT></TD>
    <TD nowrap><FONT size="1">)</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="1">(86,626</FONT></TD>
    <TD nowrap><FONT size="1">)</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="1">Purchase of 4,900,534 shares
of treasury shares</FONT></DIV></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="1">(3</FONT></TD>
    <TD><FONT size="1">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="1">&#151;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="1">&#151;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="1">&#151;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="1">&#151;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="1">&#151;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="1">&#151;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="1">(15,522</FONT></TD>
    <TD nowrap><FONT size="1">)</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="1">(15,522</FONT></TD>
    <TD nowrap><FONT size="1">)</FONT></TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="1">Sale of 636,527 shares of treasury shares</FONT></DIV></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="1">(3</FONT></TD>
    <TD><FONT size="1">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="1">&#151;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="1">&#151;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="1">&#151;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="1">(639</FONT></TD>
    <TD nowrap><FONT size="1">)</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="1">&#151;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="1">&#151;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="1">1,765</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="1">1,126</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="1">Change in other comprehensive income</FONT></DIV></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="1">(22</FONT></TD>
    <TD><FONT size="1">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="1">&#151;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="1">&#151;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="1">&#151;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="1">&#151;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="1">&#151;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="1">(13,437</FONT></TD>
    <TD nowrap><FONT size="1">)</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="1">&#151;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="1">(13,437</FONT></TD>
    <TD nowrap><FONT size="1">)</FONT></TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="1"><B>Balance at December&nbsp;31, 2001</B></FONT></DIV></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="1"><B>641,396,497</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="1"><B>127,056</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="1"><B>1,027,850</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="1"><B>225,236</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="1"><B>(100,220</B></FONT></TD>
    <TD nowrap><FONT size="1"><B>)</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="1"><B>(3,968</B></FONT></TD>
    <TD nowrap><FONT size="1"><B>)</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="1"><B>(108,192</B></FONT></TD>
    <TD nowrap><FONT size="1"><B>)</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="1"><B>1,167,762</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="1">Allocation of prior year earnings</FONT></DIV></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="1">&#151;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="1">&#151;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="1">&#151;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="1">(100,220</FONT></TD>
    <TD nowrap><FONT size="1">)</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="1">100,220</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="1">&#151;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="1">&#151;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="1">&#151;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="1">Net loss</FONT></DIV></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="1">&#151;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="1">&#151;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="1">&#151;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="1">&#151;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="1">(320,891</FONT></TD>
    <TD nowrap><FONT size="1">)</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="1">&#151;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="1">&#151;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="1">(320,891</FONT></TD>
    <TD nowrap><FONT size="1">)</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="1">Shares issued by Gemplus SA pursuant
to share options exercised to be contributed</FONT></DIV></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="1">(20</FONT></TD>
    <TD><FONT size="1">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="1">699,100</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="1">&#151;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="1">992</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="1">&#151;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="1">&#151;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="1">&#151;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="1">&#151;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="1">992</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="1">Contribution of Gemplus SA shares
to Gemplus International SA</FONT></DIV></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="1">(3</FONT></TD>
    <TD><FONT size="1">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="1">&#151;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="1">508</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="1">(508</FONT></TD>
    <TD nowrap><FONT size="1">)</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="1">&#151;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="1">&#151;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="1">&#151;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="1">&#151;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="1">&#151;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="1">Shares issued by Gemplus International SA
pursuant to share options exercised</FONT></DIV></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="1">(20</FONT></TD>
    <TD><FONT size="1">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="1">398,350</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="1">80</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="1">586</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="1">&#151;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="1">&#151;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="1">&#151;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="1">&#151;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="1">666</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="1">Cancellation of treasury shares</FONT></DIV></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="1">(20</FONT></TD>
    <TD><FONT size="1">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="1">(4,634,859</FONT></TD>
    <TD nowrap><FONT size="1">)</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="1">&#151;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="1">&#151;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="1">(14,483</FONT></TD>
    <TD nowrap><FONT size="1">)</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="1">&#151;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="1">&#151;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="1">14,483</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="1">&#151;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="1">Purchase of 656,024 shares of treasury shares</FONT></DIV></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="1">(3</FONT></TD>
    <TD><FONT size="1">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="1">&#151;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="1">&#151;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="1">&#151;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="1">&#151;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="1">&#151;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="1">&#151;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="1">(617</FONT></TD>
    <TD nowrap><FONT size="1">)</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="1">(617</FONT></TD>
    <TD nowrap><FONT size="1">)</FONT></TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="1">Change in other comprehensive income</FONT></DIV></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="1">(22</FONT></TD>
    <TD><FONT size="1">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="1">&#151;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="1">&#151;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="1">&#151;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="1">&#151;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="1">&#151;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="1">12,539</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="1">&#151;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="1">12,539</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="1"><B>Balance at December&nbsp;31, 2002</B></FONT></DIV></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="1"><B>637,859,088</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="1"><B>127,644</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="1"><B>1,028,920</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="1"><B>110,533</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="1"><B>(320,891</B></FONT></TD>
    <TD nowrap><FONT size="1"><B>)</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="1"><B>8,571</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="1"><B>(94,326</B></FONT></TD>
    <TD nowrap><FONT size="1"><B>)</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="1"><B>860,451</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
</TR>
</TABLE>
</CENTER>

<P align="center"><FONT size="2">The accompanying notes are an integral part of the consolidated financial statements.
</FONT>

<P align="right"><FONT size="2">F-6</FONT>


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



<P align="right"><FONT size="2"><B>NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS</B>
</FONT>


<P align="left"><FONT size="2"><B>Notes to the Consolidated<BR>
Financial Statements</B>
</FONT>

<CENTER>
<TABLE cellspacing="0" border="0" cellpadding="0" width="100%">
<TR valign="bottom">
    <TD width="92%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">1. The Company</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">F-8</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">2. Summary of significant accounting policies</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">F-8</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">3. Public offering, common control transactions,
treasury shares, acquired and disposed operations</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">F-12</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">4. Trade accounts receivable</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">F-14</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">5. Inventory</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">F-14</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">6. Other current assets</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">F-14</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">7. Property, plant and equipment</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">F-15</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">8. Goodwill</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">F-15</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">9. Other non-current assets</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">F-16</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">10. Research and development costs</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">F-16</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">11. Investments</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">F-17</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">12. Accounts payable</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">F-17</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">13. Other current liabilities</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">F-17</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">14. Long-term debt</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">F-17</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">15. Capital leases</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">F-18</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">16. Other non-current liabilities</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">F-18</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">17. Restructuring</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">F-19</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">18. Other income (expense)&nbsp;net</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">F-21</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">19. Income taxes</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">F-21</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">20. Ordinary shares</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">F-22</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">21. Net income (loss)&nbsp;per share calculation</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">F-24</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">22. Comprehensive income</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">F-24</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">23. Pension plans</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">F-25</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">24. Share option plans</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">F-25</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">25. Financial instruments and market related exposures</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">F-27</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">26. Commitments and contingencies</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">F-30</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">27. Supplemental disclosure of cash flow information</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">F-31</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">28. Wages, benefits and number of employees
(unaudited)</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">F-31</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">29. Related party transactions</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">F-31</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">30. Segment information</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">F-32</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">31. Management severance expenses</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">F-33</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">32. Differences between international accounting
standards and US generally accepted accounting
principles</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">F-34</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">33. Other required US GAAP disclosures</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">F-37</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
</TABLE>
</CENTER>
<P align="right"><FONT size="2">F-7</FONT>

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

<P align="right"><FONT size="2"><B>NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS</B>
</FONT>

<P align="left"><FONT size="2"><B>1.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;THE COMPANY</B>
</FONT>

<P align="left"><FONT size="2">Gemplus International SA, including its
consolidated subsidiaries (the &#147;Company&#146;&#146;),
is a leading provider of enabling
technology products and services for secure
wireless communications and transactions.
The Company designs, develops, manufactures
and markets microprocessor solutions and
non-chip-based products for customers in
the telecommunications and financial
services and security industries. The
Company is incorporated in the Grand Duchy
of Luxembourg.
</FONT>

<P align="left"><FONT size="2"><B>2.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;SUMMARY OF SIGNIFICANT
ACCOUNTING POLICIES</B>
</FONT>

<P align="left"><FONT size="2"><B>Basis of presentation</B>
</FONT>

<P align="left"><FONT size="2">The annual consolidated financial statements
of the Company have been prepared in
accordance with International Accounting
Standards (IAS). The IAS financial
statements are in accordance with Luxembourg
Regulation, with the exception of applying
IAS 39. A reconciliation of net income and
shareholders&#146; equity between IAS and the
accounting principles generally accepted in
the United States (US GAAP) is included in
Note 32.
</FONT>

<P align="left"><FONT size="2"><B>Principles of consolidation</B>
</FONT>

<P align="left"><FONT size="2">The consolidated financial statements
include the accounts of Gemplus
International SA and its majority owned
subsidiaries. Investments in associated
undertakings are accounted for by the equity
method. These are undertakings in which the
Company has between 20% and 50% of the
voting rights and over which the Company
exercises significant influence, but not
control. All intercompany balances and
transactions are eliminated.
</FONT>

<P align="left"><FONT size="2">Non-marketable equity investments in which
the Company has less than 20% of the
investee&#146;s outstanding voting stock are
accounted for
under the cost method, because the Company
does not have the ability to significantly
influence the operating and financial
policies of the investee. Gains or losses
recognized on sale of equity securities are
recorded in the income statement. Any loss
resulting from impairment in the value of
investments which represents an other than
temporary decline is recorded in the period
in which the loss occurs.
</FONT>

<P align="left"><FONT size="2"><B>Foreign currency</B>
</FONT>

<P align="left"><FONT size="2">Most of the Company&#146;s international
subsidiaries use their local currency as
their functional currency. For those
subsidiaries using their non-euro local
currency as their functional currency, assets
and liabilities are translated into euro at
exchange rates in effect at the balance sheet
date, and income and expense accounts at
average exchange rates during the year.</FONT>

<P align="left"><FONT size="2">
Translation adjustments arising upon the
consolidation of such subsidiary financial
statements are not included in determining
net income for the period, but are included
in shareholders&#146; equity as other
comprehensive income. For all transactions
involving a currency other than the
functional currency, the Company&#146;s
subsidiaries record the resulting
transaction gains and losses directly to the
Statement of Income.
</FONT>

<P align="left"><FONT size="2"><B>Change in accounting policies</B>
</FONT>

<P align="left"><FONT size="2">As at January&nbsp;1, 2001, the Company adopted
IAS 39 &#147;Financial Instruments: Recognition
and Measurement&#148;.
</FONT>

<P align="left"><FONT size="2">IAS 39 establishes principles for
recognizing, measuring and disclosing
information about financial assets and
financial liabilities. IAS 39 defines
several categories of financial assets and
liabilities. It requires the Company to
measure at fair value assets and liabilities
qualified as trading or available-for-sale.
It requires also that changes in fair value
of trading assets and liabilities be
recognized through income, while changes in
fair value of available-for-sale assets
recorded either in equity or through income.
</FONT>

<P align="left"><FONT size="2">IAS 39 requires the Company to recognize all
derivative instruments on the balance sheet
at fair value. If the derivative is a
hedge, depending on the nature of the hedge,
changes in the fair value of the derivative
will either be offset against the change in
fair value of the hedged assets and
liabilities through earnings or recognized
directly in equity until the hedged item is
recognized in earnings. Any ineffective
portion of a derivative&#146;s change in fair
value will be immediately recognized in
earnings and any derivatives that do not
qualify as hedges will be adjusted to fair
value through income.
</FONT>

<P align="left"><FONT size="2">Adoption of this new standard resulted in a
cumulative after tax increase of
shareholders&#146; equity as of January&nbsp;1, 2001
of <FONT face="'Times New Roman',Times">&#128;</FONT> 4,090 thousand. The impact on
shareholders&#146; equity at January&nbsp;1, 2001 of
the adoption of IAS 39 is presented in Note
25 &#147;Financial instruments and market related
exposures&#148;. In accordance with IAS 39, the
comparative financial statements for the
year ended December&nbsp;31, 2000 were not
restated.
</FONT>

<P align="left"><FONT size="2"><B>Use of estimates</B>
</FONT>

<P align="left"><FONT size="2">The preparation of financial statements in
conformity with generally accepted
accounting principles requires management to
make certain estimates and assumptions that
affect the reported amounts of assets and
liabilities and disclosure of contingent
assets and liabilities at the date of the
financial statements and the reported
amounts of revenue and expenses during the
reporting period.
Estimates are used for, but not limited to,
the accounting of doubtful accounts,
depreciation and amortization, sales
returns, warranty costs, taxes, and
contingencies. Actual results could differ
from these estimates.
</FONT>

<P align="right"><FONT size="2">F-8</FONT>


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

<P align="right"><FONT size="2"><B>NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS</B>
</FONT>

<P align="left"><FONT size="2"><B>Revenue recognition</B>
</FONT>

<P align="left"><FONT size="2">Revenues from product sales are recorded upon
transfer of title and risk of loss provided
that no significant obligations of the
Company remain and collection of the
resulting receivable is probable. The
Company records deferred revenue for sales
invoiced which are delayed at the buyer&#146;s
request where transfer of title and risk of
loss has not occurred.
</FONT>

<P align="left"><FONT size="2">The Company also provides systems design and
integration services. Revenues are recognized
when delivery has occurred, contractual
obligations have been met, collection is
probable and the fee is fixed or
determinable.
</FONT>

<P align="left"><FONT size="2"><B>Inventory</B>
</FONT>

<P align="left"><FONT size="2">Inventories are carried at the lower of cost
or net realizable value, with cost being
determined principally on the
weighted-average cost basis. Cost elements
included in inventories are raw materials,
labor and manufacturing overhead. Allowances
for obsolescence, scrap and slow-moving
inventory are provided based upon the
Company&#146;s periodic review of inventory.
</FONT>

<P align="left"><FONT size="2"><B>Property, plant and equipment</B>
</FONT>

<P align="left"><FONT size="2">Property, plant and equipment are carried at
cost. Major renewals and improvements are
capitalized while repairs and maintenance are
expensed as incurred. Depreciation is
computed over the estimated useful lives of
depreciable assets using the straight-line
method. Leasehold improvements are amortized
over the shorter of the life of the
improvement or the remaining lease term.
</FONT>

<P align="left"><FONT size="2">The estimated useful lives are as follows:
</FONT>

<CENTER>
<TABLE cellspacing="0" border="0" cellpadding="0" width="100%">
<TR valign="bottom">
    <TD width="70%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="12%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="12%">&nbsp;</TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Buildings</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="3" align="center"><FONT size="2">20 years</FONT></TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Equipment and machinery</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="3" align="center"><FONT size="2">5 years</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Furniture and fixtures</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="3" align="center"><FONT size="2">5-10 years</FONT></TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Leasehold improvements</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="3" align="center"><FONT size="2">8-12 years</FONT></TD>
</TR>
</TABLE>
</CENTER>
<P align="left"><FONT size="2">When the Company leases assets under the
terms of a long-term contract or other
arrangement that transfers substantially all
the benefits and risks of ownership to the
Company, the fair market value of the leased
property is capitalized and depreciated (as
described above) and the corresponding
obligation is recorded as a liability.
</FONT>

<P align="left"><FONT size="2"><B>Goodwill</B>
</FONT>

<P align="left"><FONT size="2">The excess of the purchase price over the
fair market value of net assets acquired is
recorded as goodwill. The Company&#146;s
rationale behind its acquisitions generally
relates to (i)&nbsp;acquiring market share or
(ii)&nbsp;acquiring conventional technology or
(iii)&nbsp;acquiring technology in the Company&#146;s
core business.
</FONT>

<P align="left"><FONT size="2">Goodwill amounts are amortized over a maximum
period of twenty years on a straight-line
basis (twenty years, ten years, and five
years, respectively, for acquisitions of type
(i), (ii)&nbsp;and (iii)).
</FONT>

<P align="left"><FONT size="2">Goodwill is reviewed for impairment based on
expectations of future cash flows, which by
definition are uncertain, at each balance
sheet date, or whenever events or changes in
circumstances indicate that
the carrying value may not be recoverable.
The Company considers significant
underperformance relative to expected
historical or projected future operating
results, significant change in the manner of
its use of the acquired assets or the
strategy for its overall business, and
significant negative industry or economic
trends.
</FONT>

<P align="left"><FONT size="2"><B>Patents</B>
</FONT>

<P align="left"><FONT size="2">Patents and patent rights are stated at cost
and are amortized using the straight-line
method over their economic useful life,
which does not exceed the shorter of three
years or the legal life.
</FONT>

<P align="left"><FONT size="2"><B>Impairment of long-lived assets</B>
</FONT>

<P align="left"><FONT size="2">The Company assesses at each balance sheet
date whether events or changes in
circumstances that would indicate that the
carrying amount of long-lived assets such as
property, plant and equipment, licenses,
goodwill and research and development have
been impaired. If the total of the expected
discounted cash flows or sales price,
whichever is higher, is less than the
carrying amount of the asset, a loss is
recognized for the difference between the
greater of the value in use or sales price
and the carrying value of the asset.
</FONT>

<P align="left"><FONT size="2"><B>Research and Development</B>
</FONT>

<P align="left"><FONT size="2">Costs associated with developing software to
be sold are recognized as an expense as
incurred, except for development costs
incurred from the time technological
feasibility is established until the software
to be sold is ready to provide service to
customers which are capitalized. The
capitalized costs related to software are
included in deferred development costs and
are amortized based on the greater of (a)&nbsp;the
ratio of current gross revenues for that
product to the total of current and estimated
gross revenues for that product, or (b)&nbsp;the
straight-line basis over their estimated
useful life, which normally does not exceed
three years.
</FONT>

<P align="left"><FONT size="2">Certain direct development costs associated
with internal-use software including
external direct costs of material and
services and payroll costs for employees
devoting time to the software products are
included in other non-current assets and are
amortized over a period not to exceed three
years beginning when the asset is
substantially ready for use. Costs incurred
during the preliminary project stage, as
well as maintenance and training costs, are
expensed as incurred.
</FONT>

<P align="right"><FONT size="2">F-9</FONT>

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

<P align="right"><FONT size="2"><B>NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS</B>
</FONT>

<P align="left"><FONT size="2">Research and development costs other than
software are expensed as incurred, except
for development cost where it is expected
that the product under development will be
produced and will be profitable, and
technical feasibility has been demonstrated.
Costs are capitalized and amortized on a
straight-line basis over the period of
expected future benefit. The period of
amortization normally does not exceed three
years.
</FONT>

<P align="left"><FONT size="2">Development costs of a project are written
down to the extent that the unamortized
balance is no longer capable of being
recovered from the expected future economic
benefits and when the criteria for
recognition of the development costs as an
asset ceases to be met. The write-down or
write-off is recognized as an expense in
the period in which such determination is
made.
</FONT>

<P align="left"><FONT size="2"><B>Cash and cash equivalents</B>
</FONT>

<P align="left"><FONT size="2">The Company considers all highly liquid
investments purchased with an original
or remaining maturity of three months or
less at the date of purchase to be cash
equivalents.
</FONT>

<P align="left"><FONT size="2">During 2000, the Company increased its
capital through various capital infusions.
The cash received has been invested during
2000, 2001 and 2002 in money market fixed
term deposits and mutual funds, all of which
are liquid investments with no risk on
capital.
</FONT>

<P align="left"><FONT size="2"><B>Income taxes</B>
</FONT>

<P align="left"><FONT size="2">The Company accounts for income taxes using
the liability method, which requires the
recognition of deferred tax assets and
liabilities based on differences between
financial reporting and tax basis of assets
and liabilities, and measures these
differences using the enacted tax rates and
laws that will be in effect when the
differences are expected to reverse.
Valuation allowances are established when
necessary to reduce deferred tax assets to
amounts expected to be realized and are
reviewed and adjusted accordingly when there
is a change in circumstances that causes a
change in judgement about the realizability
of the related deferred tax asset.
</FONT>

<P align="left"><FONT size="2"><B>Research credit</B>
</FONT>

<P align="left"><FONT size="2">Research credits are provided by the French
government to give incentives for companies
to perform technical and scientific
research. Companies that have qualifying
expenses can receive such grants in the form
of a tax credit irrespective of taxes ever
paid or ever to be paid, therefore these
research credits are presented as a
reduction of research and development
expenses. The Company records the benefit
of this grant only when all qualifying
research has been performed and the Company
has obtained sufficient evidence from the
relevant French government authority that
the credit will be granted.
</FONT>

<P align="left"><FONT size="2"><B>Earnings per share</B>
</FONT>

<P align="left"><FONT size="2">Basic earnings per share are computed by
dividing net income by the weighted average
number of shares outstanding. Diluted
earnings per share are computed by dividing
net income by the weighted average number of
shares outstanding plus dilutive potential
ordinary shares outstanding, i.e., additional
share equivalents, using the treasury stock
method assuming the exercise of warrants and
share options. Dilutive potential ordinary
shares are additional ordinary shares to be
issued. The effects of anti-dilutive
potential ordinary shares are ignored in
calculating diluted earnings per share. When
net losses are reported, the dilutive
potential ordinary shares outstanding are
excluded from the net loss per share
calculation.
</FONT>

<P align="left"><FONT size="2"><B>Treasury shares</B>
</FONT>

<P align="left"><FONT size="2">From time to time the Company, with the
approval of the Board of Directors, may
repurchase a portion of its outstanding
ordinary shares. Shares repurchased by the
Company could be used to fulfill its
obligations under the stock option plans or
are intended for cancellation. Treasury
shares are recorded at cost and reported as a
reduction of shareholders&#146; equity.
</FONT>

<P align="left"><FONT size="2"><B>Share options accounting</B>
</FONT>

<P align="left"><FONT size="2">Equity benefits in such forms as shares, share options, and other
equity instruments, issued to executive officers and employees at
less than the fair value at which those instruments would be issued
to a third party, do not generate any compensation expense and have
thus no impact on the consolidated statement of income in the year they are granted. Upon the
issuance of the shares, or exercise of the
share options, the impact of those benefits is recorded directly in
&#147;share capital&#148; and &#147;paid-in-capital&#148; within
shareholders&#146; equity, and the dilutive effect of the shares is taken into account in the
calculation of the net income (loss) per share.
</FONT>

<P align="left"><FONT size="2"><B>Derivative financial instruments</B>
</FONT>

<P align="left"><FONT size="2"><B>Foreign currency risk</B>
</FONT>

<P align="left"><FONT size="2">The Company operates both its selling and
manufacturing activities on a worldwide
basis. In most cases, the Company&#146;s sales
are denominated in the domestic currency of
customers. As manufacturing sites are
located in different countries, parts of
their costs are also denominated in various
currencies. Therefore, the Company is
exposed to foreign exchange risk on its
operating transactions, whether anticipated
or firm.
</FONT>

<P align="left"><FONT size="2">The policy of the Company is to hedge its
foreign currency exposure on most of its
firm and anticipated purchases and sales
commitments denominated in currencies other
than its subsidiaries functional currencies
for periods commensurate with its known or
forecasted transactions. The contracts
generally mature within twelve months. In
order to achieve this objective, the Company
uses foreign currency derivative
instruments, entering into foreign exchange
forward contracts and purchasing or selling
foreign exchange option contracts. Written
options are only used as part of combination
strategies. The derivative instruments are
traded &#147;over the counter&#148; with major
financial institutions. The Company does
not enter into any derivative contracts for
purposes other than hedging.
</FONT>

<P align="left"><FONT size="2">The Company uses foreign exchange swaps to
monitor its cash flows, mainly to finance
its affiliates in their functional currency,
through inter-company current accounts. The
foreign exchange swaps are combinations of
spot purchase (respectively sales) and
forward sales (respectively purchases) in
the same currency and traded at the same
time.
</FONT>

<P align="right"><FONT size="2">F-10</FONT>

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

<P align="right"><FONT size="2"><B>NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS</B>
</FONT>

<P align="left"><FONT size="2">The Company has written risk management
policies and guidelines which set out its
tolerance for risk, its general risk
management philosophy and has established
processes to determine the group exposure to
foreign exchange risk, to monitor and
control hedging transactions in a timely and
accurate manner. Such written policies are
approved by the Audit Committee and reviewed
annually.
</FONT>

<P align="left"><FONT size="2">All hedging instruments are allocated to underlying transactions.
</FONT>

<P align="left"><FONT size="2">Most of the derivative financial instruments
used to hedge the Company&#146;s foreign exchange
exposure qualify as cash flow hedges as they
reduce variability in cash flows attributable
forecasted transactions. For those hedges
associated with forecast transactions which
meet special hedge accounting criteria, the
portion of their change in fair value that is
determined to be an effective hedge is
recognized directly in equity through the
Statement of Changes in Equity and the
ineffective portion is recognized in the net
profit and loss in the foreign exchange gains
and losses. The gains or losses which are
recognized in equity are transferred to the
net profit and loss in the same period in
which the hedged forecasted transaction
affects the foreign exchange gains and losses
(e.g., when the forecasted transaction
actually occurs), as part of the cost of
sales.
</FONT>

<P align="left"><FONT size="2">For hedges that do not qualify for special
hedge accounting, any gains or losses
arising from changes in the fair value of
the hedged item and the hedging instrument
are recorded as foreign exchange gains and
losses for the period, except for gains and
losses generated by swaps used to finance
the group affiliates which are recorded as
an adjustment of the interest expense.
</FONT>

<P align="left"><FONT size="2">Conventional way purchases and sales of
financial assets are accounted for at
trade date.
</FONT>

<P align="left"><FONT size="2">Hedge accounting is discontinued when the
hedging instrument expires or is sold,
terminated or exercised, or no longer
qualifies for special hedge accounting. At
that point in time, any cumulative gain or
loss on the hedging instrument recognized in
equity is kept in equity until the forecasted
transaction occurs. Where the hedged
transaction is no longer expected to occur,
the net cumulative gain or loss recognized in
equity is transferred to the net profit and
loss for the period. Such transactions had
no significant impact on the 2002 foreign
exchange result.
</FONT>

<P align="left"><FONT size="2"><B>Interest rate exposure</B>
</FONT>

<P align="left"><FONT size="2">Following the 2000 capital increases, the
Company has reached a low level of
indebtedness. As a result, the Company is
not significantly exposed to interest rate
risk fluctuations. Consequently,
it has not entered into any derivative
contracts to hedge interest rate risk.
</FONT>

<P align="left"><FONT size="2"><B>Financial counterparty risk</B>
</FONT>

<P align="left"><FONT size="2">Derivatives and all significant cash
deposits are undertaken with major
financial institutions having an
investment grade rating. Regarding cash
deposits, a few exceptions exist in
certain countries for operational reasons
when individual amounts are not
significant.
</FONT>

<P align="left"><FONT size="2"><B>Fair value of derivatives</B>
</FONT>

<P align="left"><FONT size="2">Derivatives financial instruments&#146; fair
value is calculated at inception and
over the life of the derivative.
</FONT>

<P align="left"><FONT size="2">Forward exchange contracts&#146; fair value at inception is zero.
Valuation during and at expiration of the
forward contract term is calculated
according to the following parameters
communicated by the Company&#146;s banks&#146;
counterparts:
</FONT>


<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">
<TR valign="top">
    <TD width="1%" align="left" nowrap><FONT size="2">&#149;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="96%"><FONT size="2">spot foreign exchange rate
when valuation is performed,</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="1%" align="left" nowrap><FONT size="2">&#149;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="96%"><FONT size="2">interest rate
differential between the two currencies,</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="1%" align="left" nowrap><FONT size="2">&#149;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="96%"><FONT size="2">time to expiration,</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="1%" align="left" nowrap><FONT size="2">&#149;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="96%"><FONT size="2">notional amount of the
contract.</FONT></TD>
</TR>
</TABLE>
<P align="left"><FONT size="2">Fair value is then obtained by
discounting, for the remaining maturity,
the difference between the contract rate
and the market forward rate multiplied by
the nominal amount.
</FONT>

<P align="left"><FONT size="2">Option contracts&#146; value, at
origination, is the initial premium
paid or received.
</FONT>

<P align="left"><FONT size="2">Over the life of the option and at
expiration, fair value is determined using
standard option pricing methodology (Black &#038;
Scholes model), based on market parameters
obtained from official information providers
or indicative central banks fixings, and
using the following basic variables:
</FONT>


<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">
<TR valign="top">
    <TD width="1%" align="left" nowrap><FONT size="2">&#149;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="96%"><FONT size="2">market value of the underlying security,</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="1%" align="left" nowrap><FONT size="2">&#149;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="96%"><FONT size="2">option strike price,</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="1%" align="left" nowrap><FONT size="2">&#149;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="96%"><FONT size="2">volatility,
communicated by the Company&#146;s banks&#146;
counterparts,</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="1%" align="left" nowrap><FONT size="2">&#149;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="96%"><FONT size="2">risk-free interest rate,</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="1%" align="left" nowrap><FONT size="2">&#149;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="96%"><FONT size="2">expiration date of the option.</FONT></TD>
</TR>
</TABLE>
<P align="left"><FONT size="2"><B>Concentration of credit risk</B>
</FONT>

<P align="left"><FONT size="2">Financial instruments that could potentially
subject the Company to concentrations of
credit risk are limited due to its broad
geographic and customer distribution. No
single customer accounted for more than 10%
of the Company&#146;s sales during the years
ended December&nbsp;31, 2002, 2001 and 2000. The
Company maintains adequate allowances for
potential credit losses and performs ongoing
credit evaluations. As of December&nbsp;31,
2002, the Company did not have any
significant concentration of business
transacted with a particular customer or
lender that could, if suddenly eliminated,
severely impact our operations. Cash and
cash equivalents are invested with several
major financial institutions.
</FONT>

<P align="left"><FONT size="2"><B>Advertising and promotional costs</B>
</FONT>

<P align="left"><FONT size="2">The Company expenses the costs of
advertising and promotional costs when such
costs are incurred. Advertising and
promotional expense was
<FONT face="'Times New Roman',Times">&#128;</FONT> 5,735 thousand, <FONT face="'Times New Roman',Times">&#128;</FONT> 6,995 thousand and <FONT face="'Times New Roman',Times">&#128;</FONT>
9,331 thousand for the years ended December
31, 2002, 2001, and 2000, respectively.
</FONT>

<P align="right"><FONT size="2">F-11</FONT>

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

<P align="right"><FONT size="2"><B>NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS</B>
</FONT>

<P align="left"><FONT size="2"><B>3.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;PUBLIC OFFERING, COMMON CONTROL
TRANSACTIONS, TREASURY SHARES,
ACQUIRED AND DISPOSED OPERATIONS</B>
</FONT>

<P align="left"><FONT size="2"><B>Public offering</B>
</FONT>

<P align="left"><FONT size="2">On December&nbsp;8, 2000 the Company completed a
public offering of 15,000,000 new ordinary
shares. These shares were sold in a single
global offering totaling 81,401,445 shares of
which 15,000,000 new ordinary shares were
offered by the Company and 66,401,445 shares
were offered by certain existing shareholders
of the Company. Total proceeds from the
global offering, before underwriting
discounts, commissions and fees of <FONT face="'Times New Roman',Times">&#128;</FONT> 37,068
thousand, were <FONT face="'Times New Roman',Times">&#128;</FONT> 488,409 thousand which
resulted in an allocation of proceeds of <FONT face="'Times New Roman',Times">&#128;</FONT>
90,000 thousand to the Company and
<FONT face="'Times New Roman',Times">&#128;</FONT> 398,409 thousand to selling shareholders.
The Company&#146;s net proceeds from the
offering, after underwriting discounts,
commissions and fees of <FONT face="'Times New Roman',Times">&#128;</FONT> 7,410 thousand,
were <FONT face="'Times New Roman',Times">&#128;</FONT> 82,590 thousand.
</FONT>

<P align="left"><FONT size="2"><B>Common control transactions</B>
</FONT>

<P align="left"><FONT size="2">In February 2000, 95.1% of the shareholders
of Gemplus SA, a French corporation and
former holding company of the Group,
exchanged their shares of Gemplus SA for
shares in Gemplus International SA, a newly
formed Luxembourg corporation on a one for
one basis. This transaction has been
accounted for using historical cost basis
accounting.
</FONT>

<P align="left"><FONT size="2">As at December&nbsp;31, 2002, certain shares held
by employees or former employees had not yet
been contributed. Shares still to be
contributed correspond to the equivalent of
4,288,150 Gemplus International SA shares
representing 0.67% of the shareholdings of
Gemplus International SA, which in total was
represented by 637,859,088 shares as at
December&nbsp;31, 2002. Since the shares of
Gemplus SA are not available for sale to the
general public but can be converted into
shares of Gemplus International SA upon
request, it has been considered certain that
the shares will be converted. They have thus
been included in both the basic and diluted
earnings per share calculations. As of
December&nbsp;31, 2002, certain options held by
employees under the Gemplus SA share option
plans had not been exercised. Following
exercise of these options, the corresponding
Gemplus SA shares will be contributed by
their holders to Gemplus International SA.
</FONT>

<P align="left"><FONT size="2"><B>Treasury shares</B>
</FONT>

<P align="left"><FONT size="2">During the third quarter of 2001, the
Company started the implementation of its
share repurchase program, as approved by the
Annual General Meeting held on April&nbsp;18,
2001 and authorized by the Commission des
Op&#233;rations de Bourse on May&nbsp;4, 2001. During
2001, the Company repurchased 4,900,534
shares of its outstanding common stock, at
an average price of <FONT face="'Times New Roman',Times">&#128;</FONT> 3.17 per share. In
addition, as described in Note 31, the
Company&#146;s former Chief Executive Officer,
Mr.&nbsp;Perez, returned all of the 30,743,679
Gemplus International SA shares that he had
received in August and September 2000 to an
indirect subsidiary of the Company, in
reimbursement of the loans that such
indirect subsidiary had made to him in 2000
and in 2001. As at December&nbsp;31, 2001, the
Company held 35,705,936 shares of its
outstanding common stock. At the
Extraordinary General Meeting of
Shareholders held on April&nbsp;17, 2002,
shareholders approved the cancellation of
4,634,859 shares held directly pursuant to
the Company&#146;s stock repurchase program, as
well as the cancellation of the 30,743,679
shares held by its indirect subsidiary at
the time as such shares may be transferred
to the Company. The 4,634,859 shares were
cancelled without reduction of the issued
share capital of the Company but with a
consequential increase of the accounting par
of the shares in issue. During the third
quarter of 2002, the Company purchased
656,024 shares of its outstanding common
stock from two former Celocom Limited
employees pursuant to the provisions of the
2000 Celocom Limited share purchase
agreement. As at December&nbsp;31, 2002, the
Company held 31,727,101 shares of its
outstanding common stock. The 30,743,679
shares transferred by Mr.&nbsp;Perez to the
Company&#146;s indirect subsidiary were
distributed to the Company and cancelled on
March&nbsp;10, 2003.
</FONT>

<P align="left"><FONT size="2">Treasury shares variation is as follows:
</FONT>

<CENTER>
<TABLE cellspacing="0" border="0" cellpadding="0" width="100%">
<TR valign="bottom">
    <TD width="77%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="8%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="9%">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD nowrap align="center"><FONT size="1"><B>&nbsp;</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>Number of treasury shares</B></FONT></TD>
</TR>
<TR valign="bottom">
    <TD nowrap align="center">&nbsp;</TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="3"><HR size="1" noshade></TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2"><B>As at December&nbsp;31, 2000</B></FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2"><B>698,250</B></FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Purchase of shares pursuant to the Company&#146;s
share repurchase program</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">4,900,534</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Shares
held by the Company&#146;s indirect subsidiary
following transfer of shares by senior
management</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">30,743,679</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Sale of treasury shares</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(636,527</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
</TR>
<TR>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2"><B>As at December&nbsp;31, 2001</B></FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2"><B>35,705,936</B></FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Cancellation of treasury shares</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(4,634,859</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Purchase of shares pursuant to the 2000
Celocom Limited share purchase agreement</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">656,024</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2"><B>As at December&nbsp;31, 2002</B></FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2"><B>31,727,101</B></FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
</TABLE>
</CENTER>
<P align="left"><FONT size="2"><B>Acquired operations</B>
</FONT>

<P align="left"><FONT size="2">In November 2000, the Company completed
its acquisition of Celocom Limited
(&#147;Celo&#148;), an electronic transaction
security business. The total purchase
consideration of <FONT face="'Times New Roman',Times">&#128;</FONT> 55,725 thousand was
comprised of cash of <FONT face="'Times New Roman',Times">&#128;</FONT> 30,574 thousand
and 4,191,776 ordinary shares amounting
to
<FONT face="'Times New Roman',Times">&#128;</FONT> 25,151 thousand. The acquisition was
recorded under the purchase method of
accounting, and accordingly, the assets
acquired and liabilities assumed were
recorded at estimated fair values.
Incremental fair value adjustments included
<FONT face="'Times New Roman',Times">&#128;</FONT> 3,387 thousand for developed software.
Such intangible asset is being amortized
using the straight-line method over its
estimated useful lives of three years. The
excess of the purchase price over the fair
market value of net assets acquired
generated goodwill of <FONT face="'Times New Roman',Times">&#128;</FONT> 54,385 thousand.
Such goodwill is being amortized using the
straight-line method over five years.
</FONT>

<P align="right"><FONT size="2">F-12</FONT>


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

<P align="right"><FONT size="2"><B>NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS</B>
</FONT>

<P align="left"><FONT size="2">In October 2000, the Company completed its
acquisition of SLP InfoWare SA (&#147;SLP&#148;), a
software developer in the wireless services
business. The total purchase price paid for
SLP was <FONT face="'Times New Roman',Times">&#128;</FONT> 51,177 thousand, comprised of cash
of <FONT face="'Times New Roman',Times">&#128;</FONT> 49,000 thousand and 362,863 in ordinary
shares amounting to
<FONT face="'Times New Roman',Times">&#128;</FONT> 2,177 thousand. The acquisition was
recorded under the purchase method of
accounting, and accordingly, the assets
acquired and liabilities assumed were
recorded at estimated fair values.
Incremental fair value adjustments included
<FONT face="'Times New Roman',Times">&#128;</FONT> 8,400 thousand for developed software and
<FONT face="'Times New Roman',Times">&#128;</FONT> 1,700 thousand for patents. Developed
software and patents are being amortized
using the straight-line method over their
estimated useful lives of three years. The
excess of the purchase price over the fair
market value of net assets acquired generated
goodwill of <FONT face="'Times New Roman',Times">&#128;</FONT>&nbsp;37,153 thousand.
</FONT>

<P align="left"><FONT size="2">During 2002, goodwill was written-off based
on impairment testing. As a result, a <FONT face="'Times New Roman',Times">&#128;</FONT>
22,124 thousand goodwill amortization expense
was recorded in the 2002 statement of income
(see Note 8). Due to significantly declining
sales of SLP software, the Company decided to
either cease or sell SLP operations. The
net book value of other intangible assets
resulting from the acquisition (developed
software and patents) was also expensed,
resulting in a restructuring charge amounting
to <FONT face="'Times New Roman',Times">&#128;</FONT>&nbsp;2,750 thousand in the 2002 Consolidated
Statement of Income.
</FONT>

<P align="left"><FONT size="2">On a pro-forma basis, as if Celo and SLP had
been acquired at the beginning of fiscal year
2000, revenue and expenses with the exception
of goodwill amortization would not differ
materially from the amounts reported in the
Company&#146;s accompanying consolidated financial
statements for the year ended December&nbsp;31,
2000. On a pro-forma basis, amortization of
related goodwill would have reduced net
income by <FONT face="'Times New Roman',Times">&#128;</FONT>&nbsp;15,586 thousand in 2000. On a
pro-forma basis, basic earnings per share and
diluted earnings per share would have been
reduced by 0.03 and 0.03, respectively, for
the year ended December&nbsp;31, 2000.
</FONT>

<P align="left"><FONT size="2">In April 2000, the Company completed its
acquisition of ODS (Oldenbourg Daten
System), a German manufacturer of memory
chip phone and bankcards as well as
microprocessor pay-TV cards. The final
purchase consideration was <FONT face="'Times New Roman',Times">&#128;</FONT> 21,713
thousand. The excess of the purchase price
over the fair market value of net assets
acquired generated goodwill of <FONT face="'Times New Roman',Times">&#128;</FONT> 8,138
thousand. Such goodwill is being amortized
using the straight-line method over five
years.
</FONT>

<P align="left"><FONT size="2">During 2002, 2001 and 2000, the Company
acquired various other companies, mainly with
activities in the field of research and
development. The impact of these
acquisitions on the consolidated financial
statements was not material.
</FONT>

<P align="left"><FONT size="2">In 2000,
purchase of activities net of cash acquired
and corresponding goodwill can be analyzed as
follows:
</FONT>

<CENTER>
<TABLE cellspacing="0" border="0" cellpadding="0" width="100%">
<TR valign="bottom">
    <TD width="59%">&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="4%">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD nowrap align="center"><FONT size="1"><B>&nbsp;</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="15"><FONT size="1"><B>(in thousands of euros)</B></FONT></TD>
</TR>
<TR valign="bottom">
    <TD nowrap align="center">&nbsp;</TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="15"><HR size="1" noshade></TD>
</TR>
<TR valign="bottom">
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>Celo</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>SLP</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>ODS and others</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>Total</B></FONT></TD>
</TR>
<TR valign="bottom">
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="3"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="3"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="3"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="3"><HR size="1" noshade></TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Cash payments</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">30,574</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">49,000</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">19,801</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">99,375</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Cash acquired</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(325</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(10</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(335</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
</TR>
<TR>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2"><B>Purchase of activities net of cash acquired</B></FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2"><B>30,249</B></FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2"><B>48,990</B></FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2"><B>19,801</B></FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2"><B>99,040</B></FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Advance payments made during 1999</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">3,990</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">3,990</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Consideration paid in shares</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">25,151</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">2,177</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">27,328</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2"><B>Acquisition costs net of cash acquired</B></FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2"><B>55,400</B></FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2"><B>51,167</B></FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2"><B>23,791</B></FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2"><B>130,358</B></FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Developed software</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">3,387</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">8,400</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">11,787</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Patents</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">1,700</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">1,700</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Property, plant and equipment</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">466</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">144</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">11,344</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">11,954</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Accounts receivable and other current assets</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">965</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">5,549</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">9,470</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">15,984</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Deferred tax assets (liabilities)&nbsp;net</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(102</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">1,165</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">2,795</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">3,858</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Bank overdrafts</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(3,173</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(135</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(3,308</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Accounts payable and other current liabilities</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(528</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(2,809</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(9,680</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(13,017</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
</TR>
<TR>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2"><B>Fair value of net assets acquired</B></FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2"><B>1,015</B></FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2"><B>14,014</B></FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2"><B>13,929</B></FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2"><B>28,958</B></FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2"><B>Goodwill</B></FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2"><B>54,385</B></FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2"><B>37,153</B></FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2"><B>9,862</B></FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2"><B>101,400</B></FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
</TABLE>
</CENTER>
<P align="left"><FONT size="2"><B>Disposed operations</B>
</FONT>

<P align="left"><FONT size="2">On August&nbsp;23, 2001, the Company completed
the sale of its subsidiary SkiData AG
(&#147;SkiData&#148;), the Company&#146;s electronic
access-control solutions business unit, to
Kudelski SA, for <FONT face="'Times New Roman',Times">&#128;</FONT> 117,500 thousand, of
which
<FONT face="'Times New Roman',Times">&#128;</FONT> 33,500 thousand was received in cash
and <FONT face="'Times New Roman',Times">&#128;</FONT> 84,000 thousand was received in
shares, which the Company immediately
resold for
<FONT face="'Times New Roman',Times">&#128;</FONT> 84,000 thousand to a designee of Kudelski.
As a result of the transaction, the Company&#146;s
2001 Consolidated Statement of Income only
includes SkiData&#146;s operational results up to
August&nbsp;23, 2001.
</FONT>

<P align="left"><FONT size="2">In connection with the agreement that was
reached between the Company and Kudelski SA
to sell SkiData, the Company entered into an
agreement with Meridiana-Werzalit BV
(&#147;Meridiana&#148;) to purchase the remaining
shares of SkiData held by Meridiana, a
minority shareholder. Pursuant to this
agreement signed on June&nbsp;23, 2001, the
Company purchased 700,000 shares of SkiData,
representing 20% of SkiData&#146;s issued share
capital, for a total purchase consideration
of</FONT>
 <FONT face="'Times New Roman',Times">&#128;</FONT> <FONT size="2">13,081 thousand. This consideration was
negotiated on the basis of an amendment to
the purchase agreement dated</FONT>
<P align="right"><FONT size="2">F-13</FONT>



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


<P align="right"><FONT size="2"><B>NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS</B>
</FONT>

<P align="left"><FONT size="2">March 1997 pursuant to which the Company had
purchased the first 80% of SkiData&#146;s shares.
</FONT>

<P align="left"><FONT size="2">In addition, on June&nbsp;23, 2001, the Company
entered into an agreement with Meridiana,
pursuant to which Meridiana transferred to
the Company in exchange for a payment of <FONT face="'Times New Roman',Times">&#128;</FONT> 1
all of its rights concerning a loan of <FONT face="'Times New Roman',Times">&#128;</FONT>
3,634 thousand granted to SkiData. This
loan had been granted to SkiData in 1996 by
Constantia, an Austrian corporation,
subsidiary of Meridiana and former principal
shareholder of SkiData, and was repayable
under specific conditions, none of which had
been met as at June&nbsp;23, 2001. This
transaction was recorded by the Company as a
reduction of the
<FONT face="'Times New Roman',Times">&#128;</FONT> 13,081 thousand consideration paid to
Meridiana to acquire the remaining 20% of
SkiData&#146;s shares.
</FONT>

<P align="left"><FONT size="2">The acquisition of the remaining 20% of
SkiData&#146;s shares was recorded under the
purchase method of accounting. The excess
of
the net purchase price of <FONT face="'Times New Roman',Times">&#128;</FONT> 9,446 thousand
over the fair market value of the shares
acquired generated a goodwill of <FONT face="'Times New Roman',Times">&#128;</FONT> 7,530
thousand.
</FONT>

<P align="left"><FONT size="2">On July&nbsp;31, 2001, the Company completed the
sale of its Tag electronic smart labels
solutions business to Axa Private Equity, for
<FONT face="'Times New Roman',Times">&#128;</FONT> 3,007 thousand. As a result of the
transaction, the Company&#146;s 2001 consolidated
statement of income only includes Tag
activities&#146; operational results up to July
31, 2001.
</FONT>

<P align="left"><FONT size="2">In 2001, disposal of activities net of
cash disposed could be analyzed as
follows:
</FONT>

<CENTER>
<TABLE cellspacing="0" border="0" cellpadding="0" width="100%">
<TR valign="bottom">
    <TD width="84%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD nowrap align="center"><FONT size="1"><B>&nbsp;</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>(in thousands of euros)</B></FONT></TD>
</TR>
<TR valign="bottom">
    <TD nowrap align="center">&nbsp;</TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="3"><HR size="1" noshade></TD>
</TR>
<TR valign="bottom">
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>SkiData and Tag</B></FONT></TD>
</TR>
<TR valign="bottom">
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="3"><HR size="1" noshade></TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Consideration received in cash</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">36,507</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Consideration received in shares
immediately resold</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">84,000</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2"><B>Proceeds from sale of activities</B></FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2"><B>120,507</B></FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Cash disposed</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(3,506</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
</TR>
<TR>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2"><B>Proceeds from sale of activities,
net of cash disposed</B></FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2"><B>117,001</B></FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Fees</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(8,270</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
</TR>
<TR>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2"><B>Proceeds from sale of activities,
net of fees</B></FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2"><B>108,731</B></FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Intangible assets</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">1,010</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Property, plant and equipment</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">5,972</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Financial assets</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">2,335</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Accounts receivable and other current assets</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">60,485</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Bank overdrafts</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(25,538</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Accounts payable and other current liabilities</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(26,504</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Long-term liabilities</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(895</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Currency translation adjustment</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">577</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2"><B>Net assets sold</B></FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2"><B>17,442</B></FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2"><B>Goodwill disposed</B></FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2"><B>22,975</B></FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2"><B>Net gain
on disposal of activities</B></FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2"><B>68,314</B></FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
</TABLE>
</CENTER>
<P align="left"><FONT size="2"><B>4.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;TRADE ACCOUNTS RECEIVABLE</B>
</FONT>

<P align="left"><FONT size="2">Trade accounts receivable consist of the following:
</FONT>

<CENTER>
<TABLE cellspacing="0" border="0" cellpadding="0" width="100%">
<TR valign="bottom">
    <TD width="55%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD nowrap align="center"><FONT size="1"><B>&nbsp;</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="11"><FONT size="1"><B>(in thousands of euros)</B></FONT></TD>
</TR>
<TR valign="bottom">
    <TD nowrap align="center">&nbsp;</TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="11"><HR size="1" noshade></TD>
</TR>
<TR valign="bottom">
    <TD nowrap align="center"><FONT size="1"><B>December 31</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>2002</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>2001</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>2000</B></FONT></TD>
</TR>
<TR valign="bottom">
    <TD nowrap align="center"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="3"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="3"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="3"><HR size="1" noshade></TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Trade accounts receivable, gross</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">157,399</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">201,481</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">323,987</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Less, allowances for doubtful
accounts</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(12,486</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(12,846</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(12,711</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
</TR>
<TR>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2"><B>Trade accounts receivable, net</B></FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2"><B>144,913</B></FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2"><B>188,635</B></FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2"><B>311,276</B></FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
</TABLE>
</CENTER>
<P align="left"><FONT size="2"><B>5.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;INVENTORY</B>
</FONT>

<P align="left"><FONT size="2">Inventory consists of the following:
</FONT>

<CENTER>
<TABLE cellspacing="0" border="0" cellpadding="0" width="100%">
<TR valign="bottom">
    <TD width="49%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD nowrap align="center"><FONT size="1"><B>&nbsp;</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="11"><FONT size="1"><B>(in thousands of euros)</B></FONT></TD>
</TR>
<TR valign="bottom">
    <TD nowrap align="center">&nbsp;</TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="11"><HR size="1" noshade></TD>
</TR>
<TR valign="bottom">
    <TD nowrap align="center"><FONT size="1"><B>December 31</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>2002</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>2001</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>2000</B></FONT></TD>
</TR>
<TR valign="bottom">
    <TD nowrap align="center"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="3"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="3"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="3"><HR size="1" noshade></TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Raw materials and supplies</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">34,098</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">63,621</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">60,540</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Work-in-process</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">67,883</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">79,394</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">79,103</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Finished goods</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">8,901</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">14,738</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">45,586</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2"><B>Inventory, gross</B></FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2"><B>110,882</B></FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2"><B>157,753</B></FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2"><B>185,229</B></FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Less, inventory allowance</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(14,369</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(17,959</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(11,128</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
</TR>
<TR>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2"><B>Inventory, net</B></FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2"><B>96,513</B></FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2"><B>139,794</B></FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2"><B>174,101</B></FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
</TABLE>
</CENTER>
<P align="left"><FONT size="2"><B>6.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;OTHER CURRENT ASSETS</B>
</FONT>

<P align="left"><FONT size="2">Other current assets include the following:
</FONT>

<CENTER>
<TABLE cellspacing="0" border="0" cellpadding="0" width="100%">
<TR valign="bottom">
    <TD width="62%">&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="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD nowrap align="center"><FONT size="1"><B>&nbsp;</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="11"><FONT size="1"><B>(in thousands of euros)</B></FONT></TD>
</TR>
<TR valign="bottom">
    <TD nowrap align="center">&nbsp;</TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="11"><HR size="1" noshade></TD>
</TR>
<TR valign="bottom">
    <TD nowrap align="center"><FONT size="1"><B>December 31</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>2002</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>2001</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>2000</B></FONT></TD>
</TR>
<TR valign="bottom">
    <TD nowrap align="center"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="3"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="3"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="3"><HR size="1" noshade></TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Value added tax receivable</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">40,349</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">36,209</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">36,205</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Other taxes receivable</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">9,175</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">13,870</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">596</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Foreign currency hedges</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">10,371</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">23,284</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Advance facility to supplier</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">9,598</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">21,539</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">10,747</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Advance payments to non-trade
suppliers</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">2,356</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">7,816</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">7,328</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Prepaid expenses</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">15,129</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">9,646</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">9,293</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Advance payments to trade suppliers</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">3,369</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">4,572</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">2,049</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Prepaid pension cost</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">504</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">982</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">1,032</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Other current assets</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">2,631</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">9,099</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">6,843</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2"><B>Total other current assets</B></FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2"><B>93,482</B></FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2"><B>103,733</B></FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2"><B>97,377</B></FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
</TABLE>
</CENTER>
<P align="left"><FONT size="2">During the fourth quarter 2000, to reduce
supply risk associated with obtaining
microprocessor chips, the Company entered
into a long-term
supply agreement with a major microprocessor
manufacturer. In connection with this supply
agreement, the Company financed enhancements
of this supplier&#146;s production capacity with
an unsecured advance facility for <FONT face="'Times New Roman',Times">&#128;</FONT> 37.6
million. The advance facility matured over a
period of three years and earns rebates at a
rate of 7.5% per annum, such rebate being
deemed to include interest receivable on the
loan. Following the economic downturn
</FONT>

<P align="right"><FONT size="2">F-14</FONT>

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

<P align="right"><FONT size="2"><B>NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS</B>
</FONT>

<P align="left"><FONT size="2">in the wireless market, the Company has
reduced its purchases of microprocessor chips
and therefore could not earn enough rebates
to cover the interest receivable on the loan.
As a result, the advance facility was
remeasured at amortized cost, resulting in a
<FONT face="'Times New Roman',Times">&#128;</FONT> 2,022 thousand financial expense in the
2001 consolidated statement of income. As of
December&nbsp;31, 2001, no repayment had occurred
and the outstanding balance of the advance
facility was <FONT face="'Times New Roman',Times">&#128;</FONT> 37,694 thousand, of which <FONT face="'Times New Roman',Times">&#128;</FONT>
21,539 thousand was recorded under other
current assets and <FONT face="'Times New Roman',Times">&#128;</FONT> 16,154 thousand under
other non-current assets. An amendment to
the supply and advance facility agreement was
signed in October 2002, pursuant to which
loan reimbursement and interest were
disconnected from volumes of purchases.
Repayments were rescheduled and extended
until December 2004. In 2002, payments
amounted to <FONT face="'Times New Roman',Times">&#128;</FONT> 9,892 thousand. The
measurement at amortized cost of the advance
resulted in an amount of <FONT face="'Times New Roman',Times">&#128;</FONT> 1,913 thousand
recorded as financial in the 2002
Consolidated Statement of Income.
As of December&nbsp;31, 2002, the outstanding
balance of the advance facility was <FONT face="'Times New Roman',Times">&#128;</FONT>
23,994 thousand, of which <FONT face="'Times New Roman',Times">&#128;</FONT> 9,598 thousand
was recorded under other current assets and
<FONT face="'Times New Roman',Times">&#128;</FONT> 14,396 under other non-current assets.
</FONT>

<P align="left"><FONT size="2">Fair values of hedging instruments on
foreign currency contracts are recorded in
other current assets or liabilities. The
corresponding changes in fair value are
recognized in earnings or in equity.
</FONT>

<P align="left"><FONT size="2"><B>7.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;PROPERTY, PLANT AND EQUIPMENT</B>
</FONT>

<P align="left"><FONT size="2">Property, plant and equipment includes the following:
</FONT>

<CENTER>
<TABLE cellspacing="0" border="0" cellpadding="0" width="100%">
<TR valign="bottom">
    <TD width="55%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD nowrap align="center"><FONT size="1"><B>&nbsp;</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="11"><FONT size="1"><B>(in thousands of euros)</B></FONT></TD>
</TR>
<TR valign="bottom">
    <TD nowrap align="center">&nbsp;</TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="11"><HR size="1" noshade></TD>
</TR>
<TR valign="bottom">
    <TD nowrap align="center"><FONT size="1"><B>December 31</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>2002</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>2001</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>2000</B></FONT></TD>
</TR>
<TR valign="bottom">
    <TD nowrap align="center"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="3"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="3"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="3"><HR size="1" noshade></TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Land</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">6,838</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">7,169</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">5,204</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Buildings</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">162,996</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">136,570</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">104,023</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Machinery and equipment</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">319,760</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">346,267</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">334,620</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Buildings and Machinery in progress</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">23,083</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">36,807</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">18,187</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2"><B>Property, plant and
equipment, gross amount</B></FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2"><B>512,677</B></FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2"><B>526,813</B></FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2"><B>462,034</B></FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Buildings, accumulated
depreciation</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(53,275</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(44,606</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(35,072</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Machinery and equipment,
accumulated depreciation</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(242,458</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(213,423</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(177,046</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
</TR>
<TR>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2"><B>Property, plant and equipment,
accumulated depreciation</B></FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2"><B>(295,733</B></FONT></TD>
    <TD nowrap><FONT size="2"><B>)</B></FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2"><B>(258,029</B></FONT></TD>
    <TD nowrap><FONT size="2"><B>)</B></FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2"><B>(212,118</B></FONT></TD>
    <TD nowrap><FONT size="2"><B>)</B></FONT></TD>
</TR>
<TR>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2"><B>Property, plant
and equipment, net</B></FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2"><B>216,944</B></FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2"><B>268,784</B></FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2"><B>249,916</B></FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
</TABLE>
</CENTER>
<P align="left"><FONT size="2">Interest is capitalized during the new
construction or upgrade of qualifying assets.
In 2002, interest was capitalized in the
amount <FONT face="'Times New Roman',Times">&#128;</FONT> 324 thousand, in connection with the
construction of a research and development
and office building located in La Ciotat,
France. No interest was capitalized in 2001
and 2000.
</FONT>

<P align="left"><FONT size="2">Property, plant and equipment variation analysis is as follows:
</FONT>

<CENTER>
<TABLE cellspacing="0" border="0" cellpadding="0" width="100%">
<TR valign="bottom">
    <TD width="66%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="7"><FONT size="1"><B>(in
thousands of euros)</B></FONT></TD>
</TR>
<TR valign="bottom">
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="7"><HR size="1" noshade></TD>
</TR>
<TR valign="bottom">
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>Gross</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>Accumulated</B></FONT></TD>
</TR>
<TR valign="bottom">
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>amount</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>depreciation</B></FONT></TD>
</TR>
<TR valign="bottom">
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="3"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="3"><HR size="1" noshade></TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">December&nbsp;31, 2001</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">526,813</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(258,029</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
</TR>
<TR>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Additions and amortization expense</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">31,953</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(72,376</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Disposals and retirements</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(24,521</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">22,896</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Effect of acquisitions and disposals</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">2,547</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(511</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Exchange rate differences</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(24,115</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">12,287</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2"><B>December&nbsp;31, 2002</B></FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2"><B>512,677</B></FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2"><B>(295,733</B></FONT></TD>
    <TD nowrap><FONT size="2"><B>)</B></FONT></TD>
</TR>
</TABLE>
</CENTER>
<P align="left"><FONT size="2">Included below are amounts related to assets
subject to capital leases, which have been
included in the balance of property, plant
and equipment.
</FONT>

<CENTER>
<TABLE cellspacing="0" border="0" cellpadding="0" width="100%">
<TR valign="bottom">
    <TD width="55%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD nowrap align="center"><FONT size="1"><B>&nbsp;</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="11"><FONT size="1"><B>(in thousands of euros)</B></FONT></TD>
</TR>
<TR valign="bottom">
    <TD nowrap align="center">&nbsp;</TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="11"><HR size="1" noshade></TD>
</TR>
<TR valign="bottom">
    <TD nowrap align="center"><FONT size="1"><B>December 31</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>2002</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>2001</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>2000</B></FONT></TD>
</TR>
<TR valign="bottom">
    <TD nowrap align="center"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="3"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="3"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="3"><HR size="1" noshade></TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Land</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">3,334</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">3,459</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">2,756</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Buildings</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">64,579</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">42,672</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">45,937</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Construction in progress</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">1,494</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">5,711</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2"><B>Property, plant and equipment
under capital lease, gross</B></FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2"><B>69,407</B></FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2"><B>51,842</B></FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2"><B>48,693</B></FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Less, accumulated depreciation</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(18,865</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(15,887</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(14,779</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
</TR>
<TR>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2"><B>Property, plant and equipment
under capital lease, net</B></FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2"><B>50,542</B></FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2"><B>35,955</B></FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2"><B>33,914</B></FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
</TABLE>
</CENTER>
<P align="left"><FONT size="2"><B>8.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;GOODWILL</B>
</FONT>

<P align="left"><FONT size="2">Goodwill consists of the following:
</FONT>

<CENTER>
<TABLE cellspacing="0" border="0" cellpadding="0" width="100%">
<TR valign="bottom">
    <TD width="58%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD nowrap align="center"><FONT size="1"><B>&nbsp;</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="11"><FONT size="1"><B>(in thousands of euros)</B></FONT></TD>
</TR>
<TR valign="bottom">
    <TD nowrap align="center">&nbsp;</TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="11"><HR size="1" noshade></TD>
</TR>
<TR valign="bottom">
    <TD nowrap align="center"><FONT size="1"><B>December 31</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>2002</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>2001</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>2000</B></FONT></TD>
</TR>
<TR valign="bottom">
    <TD nowrap align="center"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="3"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="3"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="3"><HR size="1" noshade></TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Goodwill</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">165,443</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">163,402</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">186,080</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Goodwill, accumulated amortization</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(92,256</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(46,822</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(30,271</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
</TR>
<TR>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2"><B>Goodwill, net</B></FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2"><B>73,187</B></FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2"><B>116,580</B></FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2"><B>155,809</B></FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
</TABLE>
</CENTER>
<P align="left"><FONT size="2">Goodwill variation analysis is as follows:
</FONT>

<CENTER>
<TABLE cellspacing="0" border="0" cellpadding="0" width="100%">
<TR valign="bottom">
    <TD width="68%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD nowrap align="center"><FONT size="1"><B>&nbsp;</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="7"><FONT size="1"><B>(in thousands of euros)</B></FONT></TD>
</TR>
<TR valign="bottom">
    <TD nowrap align="center">&nbsp;</TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="7"><HR size="1" noshade></TD>
</TR>
<TR valign="bottom">
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>Gross</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>Accumulated</B></FONT></TD>
</TR>
<TR valign="bottom">
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>amount</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>depreciation</B></FONT></TD>
</TR>
<TR valign="bottom">
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="3"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="3"><HR size="1" noshade></TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">December&nbsp;31, 2001</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">163,402</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(46,822</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
</TR>
<TR>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Additions and amortization expense</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">1,093</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(47,117</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Effect of change for acquisitions
and disposals</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">5,344</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">167</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Exchange rate differences</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(4,396</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">1,516</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2"><B>December&nbsp;31, 2002</B></FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2"><B>165,443</B></FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2"><B>(92,256</B></FONT></TD>
    <TD nowrap><FONT size="2"><B>)</B></FONT></TD>
</TR>
</TABLE>
</CENTER>
<P align="left"><FONT size="2">Goodwill is being amortized on a
straight-line basis over periods of five to
twenty years. Goodwill is reviewed for
impairment based on expectations</FONT>
<P align="right"><FONT size="2">F-15</FONT>


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



<P align="right"><FONT size="2"><B>NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS</B>
</FONT>

<P align="left"><FONT size="2">of future cash flows, at each balance
sheet date, or whenever events or changes
in circumstances indicate that the
carrying value may not be recoverable.
</FONT>

<P align="left"><FONT size="2">During 2002, the Company recorded a goodwill write-down of
<FONT face="'Times New Roman',Times">&#128;</FONT> 22,124 thousand based on impairment
testing. This write-down concerned the
goodwill generated following the
acquisition of SLP InfoWare SA (&#147;SLP&#148;) in
October 2000. This charge was included in
the statement of income under the caption
&#147;goodwill amortization&#148;. During 2002, the
Company decided to either sell or cease SLP
operations, owing to a significant decline
in sales of SLP software.
</FONT>

<P align="left"><FONT size="2"><B>9.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;OTHER NON-CURRENT ASSETS</B>
</FONT>

<P align="left"><FONT size="2">Other non-current assets consist of the following:
</FONT>

<CENTER>
<TABLE cellspacing="0" border="0" cellpadding="0" width="100%">
<TR valign="bottom">
    <TD width="72%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&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 valign="bottom">
    <TD nowrap align="center"><FONT size="1"><B>&nbsp;</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="11"><FONT size="1"><B>(in thousands of euros)</B></FONT></TD>
</TR>
<TR valign="bottom">
    <TD nowrap align="center">&nbsp;</TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="11"><HR size="1" noshade></TD>
</TR>
<TR valign="bottom">
    <TD nowrap align="center"><FONT size="1"><B>December 31</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>2002</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>2001</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>2000</B></FONT></TD>
</TR>
<TR valign="bottom">
    <TD nowrap align="center"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="3"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="3"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="3"><HR size="1" noshade></TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Loans receivable from senior management, net of provision
(67,582 in 2002, 0 in 2001 and 2000)</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">11,183</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">75,317</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">150,324</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Software, net of accumulated
amortization (19,550 in 2002, 12,381 in 2001
and 12,549 in 2000)</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">25,364</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">31,347</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">21,961</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Long-term portion of advance facility to
supplier (Note 6)</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">14,396</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">16,154</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">26,867</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Research tax credit</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">13,215</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">12,144</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">18,877</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Patents and patent rights, net of
accumulated amortization (4,388 in 2002,
4,865 in 2001 and 5,046 in 2000)</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">5,370</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">6,150</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">5,798</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Rental deposits</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">1,902</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">1,622</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">1,978</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Employee loans and other related loans</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">275</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">850</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">1,778</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Prepaid expenses &#151; long-term
portion</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">8,738</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Other loans and assets</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">4,376</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">6,888</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">6,460</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2"><B>Total other non-current assets</B></FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2"><B>84,819</B></FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2"><B>150,472</B></FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2"><B>234,043</B></FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
</TABLE>
</CENTER>
<P align="left"><FONT size="2">As described in Note 31, loans were granted
in 2000 to Mr.&nbsp;Perez and to Dr.&nbsp;Lassus
pursuant to the terms of their employment.
During
2001, Mr.&nbsp;Perez partially reimbursed the
loans that were granted to him and the
unreimbursed portion of the loans was charged
to the Company&#146;s Consolidated Statement of
Income. Pursuant to an
agreement dated December&nbsp;19, 2001, as of January&nbsp;10, 2002 Mr.&nbsp;Lassus
ceased his office as Chairman of our board of directors and resigned
from all other positions that he held with our company and any of its
affiliates, except for his position as a non-executive director of
our company. As of January&nbsp;10, 2002, Mr.&nbsp;Lassus was no longer an
employee of our company or any of its affiliates. Effective
June&nbsp;30, 2002, a provision amounting
to <FONT face="'Times New Roman',Times">&#128;</FONT> 67,582 thousand was recorded to cover
the risk of possible non-reimbursement of the
loan granted to Dr.&nbsp;Lassus, net of the
amounts owned to Dr.&nbsp;Lassus. However, the
Company has not forgiven the loan and is
seeking repayment by Dr.&nbsp;Lassus through legal
proceedings. As at December&nbsp;31, 2002, the
outstanding balance of the loan, net of
provision, was <FONT face="'Times New Roman',Times">&#128;</FONT> 11,183 thousand. This net
balance reflects a claimed amount offset
against accrued management severance expenses
with respect to Dr.&nbsp;Lassus (see Note 31).
</FONT>

<P align="left"><FONT size="2">Prepaid expenses &#150; long-term portion relates to a one-time
<FONT face="'Times New Roman',Times">&#128;</FONT> 11,200 thousand pre-payment of royalties
made in the second quarter 2002 in favor of a
supplier. The pre-paid amount is being
expensed through 2005, proportionally based
on number of units sold to our customers.
</FONT>

<P align="left"><FONT size="2"><B>10.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;RESEARCH AND DEVELOPMENT COSTS</B>
</FONT>

<P align="left"><FONT size="2">Deferred development costs can be analyzed as follows:
</FONT>

<CENTER>
<TABLE cellspacing="0" border="0" cellpadding="0" width="100%">
<TR valign="bottom">
    <TD width="65%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD nowrap align="center"><FONT size="1"><B>&nbsp;</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="11"><FONT size="1"><B>(in thousands of euros)</B></FONT></TD>
</TR>
<TR valign="bottom">
    <TD nowrap align="center">&nbsp;</TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="11"><HR size="1" noshade></TD>
</TR>
<TR valign="bottom">
    <TD nowrap align="center"><FONT size="1"><B>December 31</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>2002</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>2001</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>2000</B></FONT></TD>
</TR>
<TR valign="bottom">
    <TD nowrap align="center"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="3"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="3"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="3"><HR size="1" noshade></TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Gross amount at beginning of year</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">41,357</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">34,846</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">9,074</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Accumulated amortization at beginning of year</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(12,887</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(8,497</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(1,376</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
</TR>
<TR>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2"><B>Balance of beginning of year</B></FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2"><B>28,470</B></FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2"><B>26,349</B></FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2"><B>7,698</B></FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Deferred during the year</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">15,301</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">6,511</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">13,984</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Less, allowances</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(17,861</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(4,390</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(7,120</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
</TR>
<TR>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2"><B>Impact for the year on income before tax</B></FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2"><B>(2,560</B></FONT></TD>
    <TD nowrap><FONT size="2"><B>)</B></FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2"><B>2,121</B></FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2"><B>6,864</B></FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Software development arising from acquisition</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">11,787</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2"><B>Balance at end of year</B></FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2"><B>25,910</B></FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2"><B>28,470</B></FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2"><B>26,349</B></FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Gross amount at end of year</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">56,658</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">41,357</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">34,846</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Accumulated amortization</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(30,748</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(12,887</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(8,497</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
</TR>
<TR>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2"><B>Balance at end of year</B></FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2"><B>25,910</B></FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2"><B>28,470</B></FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2"><B>26,349</B></FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
</TABLE>
</CENTER>
<P align="left"><FONT size="2">Capitalized development costs comprise software to be sold including
software development arising from acquisitions (see Note 3).
</FONT>

<P align="left"><FONT size="2">Research and development expenses incurred during the year consist
of the following:
</FONT>

<CENTER>
<TABLE cellspacing="0" border="0" cellpadding="0" width="100%">
<TR valign="bottom">
    <TD width="61%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD nowrap align="center"><FONT size="1"><B>&nbsp;</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="11"><FONT size="1"><B>(in thousands of euros)</B></FONT></TD>
</TR>
<TR valign="bottom">
    <TD nowrap align="center">&nbsp;</TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="11"><HR size="1" noshade></TD>
</TR>
<TR valign="bottom">
    <TD nowrap align="center"><FONT size="1"><B>Years ended December 31</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>2002</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>2001</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>2000</B></FONT></TD>
</TR>
<TR valign="bottom">
    <TD nowrap align="center"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="3"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="3"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="3"><HR size="1" noshade></TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Research and development
expenditures</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">95,288</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">124,567</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">104,344</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Deferred development costs, net</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">2,560</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(2,121</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(6,864</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Grants including research tax credit</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(5,608</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(9,561</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(6,702</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
</TR>
<TR>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2"><B>Total research
and development</B></FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2"><B>92,240</B></FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2"><B>112,885</B></FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2"><B>90,778</B></FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
</TABLE>
</CENTER>
<P align="left"><FONT size="2">Due to the special tax status of the Company
until 1999, the Company&#146;s eligibility for
certain research tax credits was legally
uncertain. For this reason, the Company
recorded an allowance against certain
research tax credits arising between 1993
and 1999 that were included as a component
of other non-current assets. In 2000, the
Company obtained formal confirmation that
these research tax credits will be received
and reversed the allowance accordingly. The
reversal amounting to <FONT face="'Times New Roman',Times">&#128;</FONT> 12,486 thousand has
been included as a separate line item of
operating income in 2000.
</FONT>

<P align="right"><FONT size="2">F-16</FONT>

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

<P align="right"><FONT size="2"><B>NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS</B>
</FONT>

<P align="left"><FONT size="2"><B>11.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;INVESTMENTS</B>
</FONT>

<P align="left"><FONT size="2">Investments consist of the following:
</FONT>

<CENTER>
<TABLE cellspacing="0" border="0" cellpadding="0" width="100%">
<TR valign="bottom">
    <TD width="58%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD nowrap align="center"><FONT size="1"><B>&nbsp;</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="11"><FONT size="1"><B>(in thousands of euros)</B></FONT></TD>
</TR>
<TR valign="bottom">
    <TD nowrap align="center">&nbsp;</TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="11"><HR size="1" noshade></TD>
</TR>
<TR valign="bottom">
    <TD nowrap align="center"><FONT size="1"><B>December 31</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>2002</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>2001</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>2000</B></FONT></TD>
</TR>
<TR valign="bottom">
    <TD nowrap align="center"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="3"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="3"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="3"><HR size="1" noshade></TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Equity affiliates</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">7,968</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">4,358</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">5,551</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Goodwill related to equity affiliates</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">15,100</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Accumulated depreciation on
goodwill related to equity affiliates</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(2,060</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Investments in non-marketable
equity securities</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">17,367</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">31,173</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">22,867</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Valuation allowance on investments</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(15,287</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(14,107</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(11,684</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
</TR>
<TR>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2"><B>Investments</B></FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2"><B>23,088</B></FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2"><B>21,424</B></FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2"><B>16,734</B></FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
</TABLE>
</CENTER>
<P align="left"><FONT size="2">As at December&nbsp;31, 2000, investments in
equity securities included one public
company, SCM, listed on the Nasdaq, which
has a reasonably sized public float. Such
shares were sold during 2001.
</FONT>

<P align="left"><FONT size="2">The Company has minority shareholdings in
numerous non-public start-up companies.
These shareholdings are recorded at cost.
An allowance is recorded when there is
reason to believe that an impairment in
value has occurred, i.e., that the business
model is questioned or that the business
plan is not met.
</FONT>

<P align="left"><FONT size="2"><B>12.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;ACCOUNTS PAYABLE</B>
</FONT>

<P align="left"><FONT size="2">Accounts payable consist of the following:
</FONT>

<CENTER>
<TABLE cellspacing="0" border="0" cellpadding="0" width="100%">
<TR valign="bottom">
    <TD width="54%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD nowrap align="center"><FONT size="1"><B>&nbsp;</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="11"><FONT size="1"><B>(in thousands of euros)</B></FONT></TD>
</TR>
<TR valign="bottom">
    <TD nowrap align="center">&nbsp;</TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="11"><HR size="1" noshade></TD>
</TR>
<TR valign="bottom">
    <TD nowrap align="center"><FONT size="1"><B>December 31</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>2002</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>2001</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>2000</B></FONT></TD>
</TR>
<TR valign="bottom">
    <TD nowrap align="center"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="3"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="3"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="3"><HR size="1" noshade></TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Trade accounts payable</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">73,930</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">102,566</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">235,982</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Non-trade accounts payable</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">6,326</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">7,095</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">25,065</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2"><B>Total</B></FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2"><B>80,256</B></FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2"><B>109,661</B></FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2"><B>261,047</B></FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
</TABLE>
</CENTER>
<P align="left"><FONT size="2"><B>13.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;OTHER CURRENT LIABILITIES</B>
</FONT>

<P align="left"><FONT size="2">Other current liabilities consist of the following:
</FONT>

<CENTER>
<TABLE cellspacing="0" border="0" cellpadding="0" width="100%">
<TR valign="bottom">
    <TD width="67%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD nowrap align="center"><FONT size="1"><B>&nbsp;</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="11"><FONT size="1"><B>(in thousands of euros)</B></FONT></TD>
</TR>
<TR valign="bottom">
    <TD nowrap align="center">&nbsp;</TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="11"><HR size="1" noshade></TD>
</TR>
<TR valign="bottom">
    <TD nowrap align="center"><FONT size="1"><B>December 31</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>2002</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>2001</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>2000</B></FONT></TD>
</TR>
<TR valign="bottom">
    <TD nowrap align="center"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="3"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="3"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="3"><HR size="1" noshade></TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Restructuring &#151; provision for reduction
of workforce and
other cash outlays</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">40,975</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">6,177</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Deferred revenue</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">14,088</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">5,662</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">9,688</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Management severance liability</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">9,975</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">21,113</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Other accrued liabilities</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">5,767</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">5,700</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">4,614</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Customer deposits</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">4,554</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">8,897</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">10,344</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Allowances for customer claims</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">2,552</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">5,848</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">2,821</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Short-term debt</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">1,677</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">4,840</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">24,307</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Tax reimbursement liability on interest
forgiven
on loans to senior management</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">1,545</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">3,585</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Litigation expenses</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">19,411</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Foreign currency hedges</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">5,178</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Provision for employee terminations</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">338</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Other purchase acquisition liability</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">2,755</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2"><B>Total other current liabilities</B></FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2"><B>81,133</B></FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2"><B>86,411</B></FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2"><B>54,867</B></FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
</TABLE>
</CENTER>
<P align="left"><FONT size="2">As described in Note 31, the Company recorded
in its 2001 Consolidated Statement of Income
a <FONT face="'Times New Roman',Times">&#128;</FONT> 25,691 thousand management severance
expense. As at December&nbsp;31, 2002 and 2001,
the corresponding liability amounted to <FONT face="'Times New Roman',Times">&#128;</FONT>
9,975 thousand and <FONT face="'Times New Roman',Times">&#128;</FONT> 21,113 thousand,
respectively. Respectively in 2002 and in
2001, this liability was comprised of a tax
reimbursement payable on the portion of the
loan that has been forgiven for <FONT face="'Times New Roman',Times">&#128;</FONT> 337
thousand and <FONT face="'Times New Roman',Times">&#128;</FONT> 6,502 thousand and termination
benefits payable in cash for <FONT face="'Times New Roman',Times">&#128;</FONT> 9,638 thousand
and <FONT face="'Times New Roman',Times">&#128;</FONT> 14,611 thousand.
</FONT>

<P align="left"><FONT size="2">As per the December&nbsp;19, 2001 agreement
with Dr.&nbsp;Lassus, the amount of <FONT face="'Times New Roman',Times">&#128;</FONT> 9,638
thousand will be payable upon fulfillment
of certain specific conditions.
</FONT>

<P align="left"><FONT size="2">Short-term debt consists of overdrafts that
either result from the daily usage of cash in
some of the Company&#146;s foreign locations or
from subsidiaries that are not wholly owned
and that do not benefit from the Company&#146;s
treasury management.
</FONT>

<P align="left"><FONT size="2">Pursuant to the terms of the loans granted
to Messrs.&nbsp;Perez and Lassus in 2000, one of
the Company&#146;s indirect subsidiaries has
agreed to arrange for the interest on these
loans to be forgiven from July 1st to
December&nbsp;31, 2001, and to assume any income
tax resulting from this forgiveness.
Interest related to the loans was accrued in
the Consolidated Statement of Income,
totaling <FONT face="'Times New Roman',Times">&#128;</FONT> 3,139 thousand in 2000, <FONT face="'Times New Roman',Times">&#128;</FONT> 4,877
thousand in 2001 and <FONT face="'Times New Roman',Times">&#128;</FONT> 1,706 thousand in
2002. Income tax resulting from the
forgiveness of interest from July 1st to
December&nbsp;31, 2001 was accrued in the 2001
Consolidated Statement of Income, resulting
in a compensation expense of <FONT face="'Times New Roman',Times">&#128;</FONT> 3,585
thousand reflected under general and
administrative expenses.
</FONT>

<P align="left"><FONT size="2">As described in Note 26, the Company recorded
a charge of <FONT face="'Times New Roman',Times">&#128;</FONT> 18,120 thousand in its 2001
Consolidated Statement of Income with respect
to the judgment on appeal rendered in October
2001 concerning the
Humetrix litigation. This charge resulted in
a total current liability (including a
previously existing provision) of <FONT face="'Times New Roman',Times">&#128;</FONT> 19,411
thousand in the balance sheet as at December
31, 2001. This liability has been settled in
2002.
</FONT>

<P align="left"><FONT size="2">Fair values of hedging instruments on
foreign currency contracts are recorded in
other current assets or liabilities. The
corresponding changes in fair value are
recognized in earnings or in equity.
</FONT>

<P align="left"><FONT size="2"><B>14.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;LONG-TERM DEBT</B>
</FONT>

<P align="left"><FONT size="2">Long-term debt consists of the following:
</FONT>

<CENTER>
<TABLE cellspacing="0" border="0" cellpadding="0" width="100%">
<TR valign="bottom">
    <TD width="64%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD nowrap align="center"><FONT size="1"><B>&nbsp;</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="11"><FONT size="1"><B>(in thousands of euros)</B></FONT></TD>
</TR>
<TR valign="bottom">
    <TD nowrap align="center">&nbsp;</TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="11"><HR size="1" noshade></TD>
</TR>
<TR valign="bottom">
    <TD nowrap align="center"><FONT size="1"><B>December 31</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>2002</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>2001</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>2000</B></FONT></TD>
</TR>
<TR valign="bottom">
    <TD nowrap align="center"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="3"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="3"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="3"><HR size="1" noshade></TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Long-term debt</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">3,688</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Use of medium and long-term
credit lines</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">14</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">4,044</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2"><B>Total long-term debt</B></FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2"><B>&#151;</B></FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2"><B>14</B></FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2"><B>7,732</B></FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Less, current portion</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(1,867</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
</TR>
<TR>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2"><B>Total long-term debt,
less current portion</B></FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2"><B>&#151;</B></FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2"><B>14</B></FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2"><B>5,865</B></FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
</TABLE>
</CENTER>
<P align="right"><FONT size="2">F-17</FONT>

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

<P align="right"><FONT size="2"><B>NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS</B>
</FONT>

<P align="left"><FONT size="2">As at December&nbsp;31, 2000, long-term debt
included a loan of <FONT face="'Times New Roman',Times">&#128;</FONT> 3,634 thousand, granted
in 1996 to SkiData by the former shareholder
of SkiData, Meridiana. As described in Note
3, in connection with the sale of its SkiData
subsidiary, the Company entered in 2001 into
an agreement with Meridiana, pursuant to
which Meridiana transferred to the Company in
exchange for a payment of <FONT face="'Times New Roman',Times">&#128;</FONT> 1 all of its
rights concerning this loan.
</FONT>

<P align="left"><FONT size="2">At December&nbsp;31, 2002, the confirmed
credit facility available for the
Company amounted to <FONT face="'Times New Roman',Times">&#128;</FONT> 73,125 thousand.
</FONT>

<P align="left"><FONT size="2">In 1999, the Company entered into a <FONT face="'Times New Roman',Times">&#128;</FONT>
150,000 thousand revolving credit facility
with a syndicate of international banking
institutions that bore interest at a
floating rate, out of which <FONT face="'Times New Roman',Times">&#128;</FONT> 73,125
thousand was available as at December&nbsp;31,
2002. The Company has never drawn any
amount under this revolving credit facility
and decided in January 2003 to terminate it
before its due date.
</FONT>

<P align="left"><FONT size="2"><B>15.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;CAPITAL LEASES</B>
</FONT>

<P align="left"><FONT size="2">Capital leases obligations outstanding as at December&nbsp;31, 2002
are analyzed as follows:
</FONT>

<CENTER>
<TABLE cellspacing="0" border="0" cellpadding="0" width="100%">
<TR valign="bottom">
    <TD width="86%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD nowrap align="center"><FONT size="1"><B>&nbsp;</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>(in thousands of euros)</B></FONT></TD>
</TR>
<TR valign="bottom">
    <TD nowrap align="center">&nbsp;</TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="3"><HR size="1" noshade></TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">2003</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">8,060</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">2004</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">7,447</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">2005</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">9,272</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">2006</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">6,681</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">2007</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">6,358</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Thereafter</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">23,038</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2"><B>Total minimum lease payments</B></FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2"><B>60,856</B></FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Less, amount representing interest</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(12,218</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
</TR>
<TR>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2"><B>Present value of minimum obligations under capital leases</B></FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2"><B>48,638</B></FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Less, current portion of obligations under capital leases</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(6,098</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
</TR>
<TR>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2"><B>Long-term obligations under capital leases</B></FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2"><B>42,540</B></FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
</TABLE>
</CENTER>
<P align="left"><FONT size="2">In 1999, the Company entered into a
sale-leaseback transaction with two major
financial institutions for a duration of
eleven years ending on December&nbsp;31, 2010.
The proceeds received amounted to
<FONT face="'Times New Roman',Times">&#128;</FONT> 28,270 thousand and relate to land and an
industrial and office building located in
G&#233;menos, France. This sale-leaseback
transaction resulted in no gain or loss in
the Consolidated Statement of Income.
</FONT>

<P align="left"><FONT size="2">In 2001, the Company entered into a
sale-leaseback transaction with a major
financial institution related to land and a
research and development and office building
located in La Ciotat, France. The building
was under construction as at December&nbsp;31,
2001 and was completed in October 2002. The
capital lease will have a duration of twelve
years ending in September, 2014. The
proceeds received in 2002 amounted to <FONT face="'Times New Roman',Times">&#128;</FONT>
15,962 thousand (2001: <FONT face="'Times New Roman',Times">&#128;</FONT> 5,711 thousand).
This sale-leaseback transaction resulted in
no gain or loss in the Consolidated
Statement of Income.
</FONT>

<P align="left"><FONT size="2"><B>16.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;OTHER NON-CURRENT LIABILITIES</B>
</FONT>

<P align="left"><FONT size="2">Other non-current liabilities consist of the following:
</FONT>

<CENTER>
<TABLE cellspacing="0" border="0" cellpadding="0" width="100%">
<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 valign="bottom">
    <TD nowrap align="center"><FONT size="1"><B>&nbsp;</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="11"><FONT size="1"><B>(in thousands of euros)</B></FONT></TD>
</TR>
<TR valign="bottom">
    <TD nowrap align="center">&nbsp;</TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="11"><HR size="1" noshade></TD>
</TR>
<TR valign="bottom">
    <TD nowrap align="center"><FONT size="1"><B>December 31</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>2002</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>2001</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>2000</B></FONT></TD>
</TR>
<TR valign="bottom">
    <TD nowrap align="center"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="3"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="3"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="3"><HR size="1" noshade></TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Non-current liabilities</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">53,293</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">29,989</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">42,184</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Equity investments commitments</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">421</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">870</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">1,533</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2"><B>Total other non-current liabilities</B></FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2"><B>53,714</B></FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2"><B>30,859</B></FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2"><B>43,717</B></FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
</TABLE>
</CENTER>
<P align="left"><FONT size="2">Non-current liabilities variation analysis is as follows:
</FONT>


<CENTER>
<TABLE cellspacing="0" border="0" cellpadding="0" width="100%">
<TR valign="bottom">
    <TD width="41%">&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="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&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="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&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="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD nowrap align="center"><FONT size="1"><B>(Note 16 - continued)</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="27"><FONT size="1"><B>(in thousands of euros)</B></FONT></TD>
</TR>
<TR valign="bottom">
    <TD nowrap align="center">&nbsp;</TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="27"><HR size="1" noshade></TD>
</TR>
<TR valign="bottom">
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>Effect of</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>Increase in</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>Transfer within</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>Amounts</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>Amounts</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom">
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>December 31,</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>exchange</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>long-term</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>balance sheets</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>unused during</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>used during</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>December 31,</B></FONT></TD>
</TR>
<TR valign="bottom">
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>2001</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>rate changes</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>liabilities</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>items</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>the period</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>the period</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>2002</B></FONT></TD>
</TR>
<TR valign="bottom">
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="3"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="3"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="3"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="3"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="3"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="3"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="3"><HR size="1" noshade></TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Provision for patents claims</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">9,000</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">9,000</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Provision for tax claims</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">13,727</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(3</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">5,932</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">20,300</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(2,630</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">37,326</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Provision for litigation claims</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">2,300</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(112</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(2,188</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Provision for pension costs</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">1,853</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(58</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">113</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(42</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(86</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">1,780</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Other provisions</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">2,712</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">16</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">1,997</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(1,435</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">3,290</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Government loans received</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">397</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(11</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">1,823</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(265</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(47</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">1,897</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2"><B>Total</B></FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2"><B>29,989</B></FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2"><B>(168</B></FONT></TD>
    <TD nowrap><FONT size="2"><B>)</B></FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2"><B>9,865</B></FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2"><B>18,112</B></FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2"><B>(307</B></FONT></TD>
    <TD nowrap><FONT size="2"><B>)</B></FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2"><B>(4,198</B></FONT></TD>
    <TD nowrap><FONT size="2"><B>)</B></FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2"><B>53,293</B></FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
</TABLE>
</CENTER>


<P align="right"><FONT size="2">F-18</FONT>



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


<P align="right"><FONT size="2"><B>NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS</B>
</FONT>

<P align="left"><FONT size="2">The Company pays royalties for the use of certain patents. In certain cases,
due to the nature of the technology involved, the portion covered and the
timing during which royalties are paid under the patent license agreements
may be questioned. Based on past experience and known facts and
circumstances as of the balance sheet date, the Company records
a provision for potential claims.
</FONT>

<P align="left"><FONT size="2">From time to time, the Company and its subsidiaries are subject to tax
claims from the tax authorities in the jurisdictions where the Company and
its subsidiaries do business. The Company records a provision for tax risk
based upon the most current information available to it and management&#146;s
judgment regarding the possible outcomes of any tax claim.
</FONT>

<P align="left"><FONT size="2">In November 2002, three French subsidiaries of the Company, including
Gemplus SA, received a tax assessment from the French tax authority
primarily relating to the fiscal years 1998 through 2000. The major
components of the assessment relate to intercompany transactions,
including transfer pricing, the invoicing of management fees and forgiveness
of intercompany debt, as well as the adequacy of documentation relating
to certain commissions paid to agents. Although the aggregate assessment,
including interest and penalties, approximates <FONT face="'Times New Roman',Times">&#128;</FONT> 120&nbsp;million, the Company
believes that significant aspects of the claim are without justification and
intends to contest the assessment vigorously. The amount of the
assessment was reduced to
<FONT face="'Times New Roman',Times">&#128;</FONT> 83.5 million in
April 2003.
</FONT>

<P align="left"><FONT size="2">By reason of the assessment, the Company increased its provision for tax
risks at December&nbsp;31, 2002 by <FONT face="'Times New Roman',Times">&#128;</FONT> 5,932 thousand, and transferred the
amount of <FONT face="'Times New Roman',Times">&#128;</FONT> 20,300 thousand from a valuation allowance against deferred
tax assets to provision for tax risks (see Note 19). The Company does not
believe that the assessment will have a material effect on the Company&#146;s
liquidity and notes that certain of the taxes assessed result from timing
adjustments that could reduce taxes in subsequent periods.
</FONT>

<P align="left"><FONT size="2">Certain subsidiaries of Gemplus International SA are eligible to receive
government loans. These loans are only repayable when financed projects
are commercially successful. For unsuccessful projects, the funds received
do not have to be repaid and as appropriate the Company reverses the
recorded liability.
</FONT>


<P align="left"><FONT size="2"><B>17. RESTRUCTURING</B>
</FONT>

<P align="left"><FONT size="2">In addition to the restructuring program that was implemented in the
second quarter of 2001 (the &#147;first restructuring program&#148;), the Company
announced two further restructuring and rationalization programs in 2002,
on February 6 (the &#147;second restructuring program&#148;), and on December 9
(the &#147;third restructuring program&#148;). The Company recorded a total pre-tax
restructuring charge of <FONT face="'Times New Roman',Times">&#128;</FONT> 90,003 thousand in its 2002 consolidated
statement of income, inclusive of all three restructuring programs,
respectively <FONT face="'Times New Roman',Times">&#128;</FONT> 1,514 thousand, <FONT face="'Times New Roman',Times">&#128;</FONT> 80,808 thousand and <FONT face="'Times New Roman',Times">&#128;</FONT> 7,681 thousand
for the first, second and third program.
</FONT>


<P align="left"><FONT size="2"><B>First restructuring program<BR>
(announced on May&nbsp;2, 2001)</B>
</FONT>

<P align="left"><FONT size="2">Pursuant to the Company&#146;s announcement on May&nbsp;2, 2001 of a plan
to restructure its operations worldwide, the Company recorded a pre-tax
restructuring charge of <FONT face="'Times New Roman',Times">&#128;</FONT> 28,466 thousand in its 2001 statement
of income. This restructuring charge was in connection with the closure
of a manufacturing facility in Germany, the downsizing of a research and
development and services center in Canada, a reduction of the workforce
following the combination of the Company&#146;s financial services and e-business
activities, and the rationalization of office facilities on a worldwide basis.
An additional <FONT face="'Times New Roman',Times">&#128;</FONT> 1,514 thousand pre-tax restructuring charge was recorded
in the 2002 statement of income, reflecting primarily adjustments
on consolidation of facilities charges.
</FONT>

<P align="left"><FONT size="2">The <FONT face="'Times New Roman',Times">&#128;</FONT> 28,466 thousand charge recorded in 2001 consisted
of <FONT face="'Times New Roman',Times">&#128;</FONT> 15,386 thousand for headcount reductions, <FONT face="'Times New Roman',Times">&#128;</FONT> 11,977 thousand
for consolidation of facilities and related fixed assets and <FONT face="'Times New Roman',Times">&#128;</FONT> 1,103 thousand
for inventory write-offs.
</FONT>

<P align="left"><FONT size="2">The restructuring actions were taken to reduce manufacturing capacity,
and, from a business standpoint, to better integrate resources, leverage
technology trends, and minimize overlapping market requirements
and partnerships in the financial services and e-business sectors.
</FONT>

<P align="left"><FONT size="2">The plan included the termination benefits of 497 employees representing
7% of the Company&#146;s global workforce. Employee reductions occurred
in the following areas: manufacturing organization 200 employees, research
and development 123 employees, selling and marketing organizations
100 employees, system integration and consulting services 34 employees,
and support functions 40 employees.
</FONT>

<P align="left"><FONT size="2">The majority of employee terminations were located in Germany
(214 people), due principally to the closure of the Seebach manufacturing
facility (198 people), and Canada (167 people), due to the downsizing
of the research and development and services center in Montreal.
The remaining 116 terminations of employment were located in different
countries of the world.
</FONT>

<P align="left"><FONT size="2">Total cash outlays for the restructuring program are expected to amount
to <FONT face="'Times New Roman',Times">&#128;</FONT> 23,537 thousand, including <FONT face="'Times New Roman',Times">&#128;</FONT>15,829 thousand for termination
of employment, and <FONT face="'Times New Roman',Times">&#128;</FONT> 7,708 thousand for other related exit costs.
Non-cash related actions, primarily consisting of assets and inventory
write-offs, amounted to <FONT face="'Times New Roman',Times">&#128;</FONT> 6,444 thousand.
</FONT>


<P align="left"><FONT size="2"><B>Second restructuring program<BR>
(announced on February&nbsp;6, 2002)</B>
</FONT>

<P align="left"><FONT size="2">Pursuant to the Company&#146;s announcement on February&nbsp;6, 2002 of a plan
to restructure its operations worldwide, the Company recorded a pre-tax
restructuring charge of <FONT face="'Times New Roman',Times">&#128;</FONT> 80,808 thousand in its 2002 statement of income.
</FONT>

<P align="right"><FONT size="2">F-19</FONT>

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

<P align="right"><FONT size="2"><B>NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS</B>
</FONT>

<P align="left"><FONT size="2">This restructuring charge is in connection with the overall termination
of 1,140 employees (including non-renewal of temporary employment
contracts, reduction of subcontractors and natural attrition), representing
approximately 16% of the Company&#146;s global workforce
as at December&nbsp;31, 2001.
</FONT>

<P align="left"><FONT size="2">The second restructuring program affected all areas within the Company
(Manufacturing, Selling, Marketing, Research and Development and General
and Administrative functions). The overall reduction of the workforce
was broken down as follows:
</FONT>


<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">
<TR valign="top">
    <TD width="1%" align="left" nowrap><FONT size="2">&#149;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="96%"><FONT size="2">manufacturing organization: 550 employees,</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="1%" align="left" nowrap><FONT size="2">&#149;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="96%"><FONT size="2">general and administrative functions: 245 employees,</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="1%" align="left" nowrap><FONT size="2">&#149;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="96%"><FONT size="2">selling and marketing organization: 215 employees, and</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="1%" align="left" nowrap><FONT size="2">&#149;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="96%"><FONT size="2">research and development organization: 130 employees.</FONT></TD>
</TR>
</TABLE>
<P align="left"><FONT size="2">The <FONT face="'Times New Roman',Times">&#128;</FONT> 80,808 thousand restructuring charge recorded in 2002 consisted
of <FONT face="'Times New Roman',Times">&#128;</FONT> 50,500 thousand for headcount reductions, <FONT face="'Times New Roman',Times">&#128;</FONT> 16,600 thousand for
consolidation of facilities and other exit costs, <FONT face="'Times New Roman',Times">&#128;</FONT> 12,600 thousand related to
fixed asset write-offs and <FONT face="'Times New Roman',Times">&#128;</FONT> 1,108 thousand related to inventory write-offs.
</FONT>

<P align="left"><FONT size="2">The majority of headcount reductions are related to the social plans
in France (587 employees), North America (180 employees), Germany
(69 employees) and United Kingdom (68 employees). It also included
reductions made in South America, Northern Europe, Eastern Europe
and Asia.
</FONT>

<P align="left"><FONT size="2">The restructuring charge also included costs related to the rationalization
of office facilities primarily in North America, the United Kingdom, Northern
Europe and in the South of France, as well as asset write-offs related to the
rationalization of these facilities. It also included costs related to the
shutdown of a personalization center near Paris, France, to the reduction
of production floor space in one of the German factories as well as to the
closure of a research and development center in Europe. Asset write-offs
also included the costs associated with the write-down of a research
and development project in Europe.
</FONT>

<P align="left"><FONT size="2">The Company expects to record an additional <FONT face="'Times New Roman',Times">&#128;</FONT> 500 thousand restructuring
charge related to additional employee terminations in North America.
As accounting criteria for recognition were not met at December&nbsp;31, 2002,
these costs will be recorded during the first quarter of 2003.
</FONT>


<P align="left"><FONT size="2"><B>Third restructuring program<BR>
(announced on December&nbsp;9, 2002)</B>
</FONT>

<P align="left"><FONT size="2">Pursuant to the Company&#146;s announcement on December&nbsp;9, 2002 of a plan
to restructure its operations worldwide, the Company recorded a pre-tax
restructuring charge of <FONT face="'Times New Roman',Times">&#128;</FONT> 7,681 thousand in its 2002 statement of income.
This restructuring charge consisted of <FONT face="'Times New Roman',Times">&#128;</FONT> 6,926 thousand for the write-off
of certain assets, primarily in relation to SLP and China operations,
and of <FONT face="'Times New Roman',Times">&#128;</FONT> 755 thousand for other exit costs.
</FONT>

<P align="left"><FONT size="2">The Company expects to record a total restructuring charge of
approximately <FONT face="'Times New Roman',Times">&#128;</FONT> 82,100 thousand in connection with this further
restructuring program, which involves the termination of about
1,100 employees globally (483 in France), and the rationalization
of production sites of office facilities on a worldwide basis.
</FONT>

<P align="left"><FONT size="2">The third restructuring program will affect all organizations within the
Company (manufacturing, selling, marketing, research and development
and general and administrative functions). The overall expected reduction
in the workforce (including subcontractors) can be broken down
as follows:
</FONT>


<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">
<TR valign="top">
    <TD width="1%" align="left" nowrap><FONT size="2">&#149;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="96%"><FONT size="2">manufacturing organization: 695 employees,</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="1%" align="left" nowrap><FONT size="2">&#149;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="96%"><FONT size="2">general and administrative functions: 183 employees,</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="1%" align="left" nowrap><FONT size="2">&#149;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="96%"><FONT size="2">selling and marketing organization: 95 employees, and</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="1%" align="left" nowrap><FONT size="2">&#149;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="96%"><FONT size="2">research and development organization: 127 employees.</FONT></TD>
</TR>
</TABLE>
<P align="left"><FONT size="2">The total expected restructuring charge of <FONT face="'Times New Roman',Times">&#128;</FONT> 82,100 thousand relating
to this program includes <FONT face="'Times New Roman',Times">&#128;</FONT> 59,100 thousand for termination of employment,
and <FONT face="'Times New Roman',Times">&#128;</FONT> 9,100 thousand for other related exit costs. Non-cash related items,
primarily consisting of the write-off of assets, amount to <FONT face="'Times New Roman',Times">&#128;</FONT> 13,900 thousand.
</FONT>

<P align="left"><FONT size="2">As at December&nbsp;31, 2002, the Company had not met the requirements
to record the severance obligations and other exit costs as required
by International Accounting Standards.
</FONT>


<P align="left"><FONT size="2"><B>Total cash outlays</B>
</FONT>

<P align="left"><FONT size="2">In 2002, total cash outlays for the restructuring programs amounted
to <FONT face="'Times New Roman',Times">&#128;</FONT> 33,400 thousand. This can be broken down as follows:
</FONT>


<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">
<TR valign="top">
    <TD width="1%" align="left" nowrap><FONT size="2">&#149;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="96%"><FONT size="2"><FONT face="'Times New Roman',Times">&#128;</FONT> 5,500 thousand for the first restructuring program,</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="1%" align="left" nowrap><FONT size="2">&#149;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="96%"><FONT size="2"><FONT face="'Times New Roman',Times">&#128;</FONT> 27,500 thousand for the second restructuring program,</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="1%" align="left" nowrap><FONT size="2">&#149;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="96%"><FONT size="2"><FONT face="'Times New Roman',Times">&#128;</FONT> 400 thousand for the third restructuring program.</FONT></TD>
</TR>
</TABLE>
<P align="right"><FONT size="2">F-20</FONT>

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

<P align="right"><FONT size="2"><B>NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS</B>
</FONT>


<P align="left"><FONT size="2"><B>Restructuring activity</B>
</FONT>

<P align="left"><FONT size="2">for the years ended December&nbsp;31, 2002 and 2001
</FONT>
<CENTER>
<TABLE cellspacing="0" border="0" cellpadding="0" width="100%">
<TR valign="bottom">
    <TD width="59%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="6%">&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 valign="bottom">
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" colspan="13"><FONT size="1"><B>(in thousands of euros)</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom">
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>Reduction</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom">
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>of workforce</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>Non-cash</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom">
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>and other</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>write-offs</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom">
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>cash outflows</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>of assets</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>Total</B></FONT></TD>
</TR>
<TR valign="bottom">
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="3"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="3"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="3"><HR size="1" noshade></TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2"><B>FIRST RESTRUCTURING
PROGRAM</B></FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2"><B>2001 restructuring charge</B></FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2"><B>22,022</B></FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2"><B>6,444</B></FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2"><B>28,466</B></FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Amount utilized in 2001</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(15,466</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Exchange rate differences</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(379</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2"><B>Restructuring reserve
as at December&nbsp;31, 2001</B></FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2"><B>6,177</B></FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2"><B>&#151;</B></FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2"><B>2002 restructuring charge</B></FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2"><B>1,514</B></FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2"><B>&#151;</B></FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2"><B>1,514</B></FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Amount utilized in 2002</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(5,492</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Exchange rate differences</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(141</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2"><B>Restructuring reserve
as at December&nbsp;31, 2002</B></FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2"><B>2,058</B></FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2"><B>&#151;</B></FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2"><B>SECOND RESTRUCTURING
PROGRAM</B></FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2"><B>2002 restructuring charge</B></FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2"><B>66,919</B></FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2"><B>13,889</B></FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2"><B>80,808</B></FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Amount utilized in 2002</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(27,446</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Exchange rate differences</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(868</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2"><B>Restructuring reserve
as at December&nbsp;31, 2002</B></FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2"><B>38,605</B></FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2"><B>&#151;</B></FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2"><B>THIRD RESTRUCTURING
PROGRAM</B></FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2"><B>2002 restructuring charge</B></FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2"><B>755</B></FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2"><B>6,926</B></FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2"><B>7,681</B></FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Amount utilized in 2002</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(443</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2"><B>Restructuring reserve
as at December&nbsp;31, 2002</B></FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2"><B>312</B></FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2"><B>&#151;</B></FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2"><B>TOTAL 2002 restructuring charge</B></FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2"><B>69,188</B></FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2"><B>20,815</B></FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2"><B>90,003</B></FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2"><B>TOTAL restructuring reserve
as at December&nbsp;31, 2002</B></FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2"><B>40,975</B></FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2"><B>&#151;</B></FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
</TABLE>
</CENTER>
<P align="left"><FONT size="2">Restructuring provisions amounting to <FONT face="'Times New Roman',Times">&#128;</FONT> 40,975 thousand as at December
31, 2002 are mainly related to termination benefits payable in cash to
employees as well as rental costs for unused space.
</FONT>
<P align="left"><FONT size="2">In 2002, there has been no reversal of
unused restructuring provisions
through the consolidated statement of income.
</FONT>

<P align="left"><FONT size="2"><B>18. OTHER INCOME (EXPENSE)&nbsp;NET</B>
</FONT>

<P align="left"><FONT size="2">Other income (expense)&nbsp;net consists of the following:
</FONT>
<CENTER>
<TABLE cellspacing="0" border="0" cellpadding="0" width="100%">
<TR valign="bottom">
    <TD width="57%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" colspan="11"><FONT size="1"><B>(in thousands of euros)</B></FONT></TD>
</TR>
<TR valign="bottom">
    <TD nowrap align="center"><FONT size="1"><B>Years ended December 31</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>2002</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>2001</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>2000</B></FONT></TD>
</TR>
<TR valign="bottom">
    <TD nowrap align="center"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="3"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="3"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="3"><HR size="1" noshade></TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Gain (loss)&nbsp;on investments</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(6,444</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">66,425</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">14,035</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Gain (loss)&nbsp;on equity investments</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(3,084</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(3,505</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(4,542</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Foreign exchange gain (loss)</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(15,106</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(12,618</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(889</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Gain (loss)&nbsp;on sale
and disposal of fixed assets</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">63</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(189</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">169</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Minority interests</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(4,333</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(4,432</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(8,801</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
</TR>
<TR>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2"><B>Total other income (expense)
net</B></FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2"><B>(28,904</B></FONT></TD>
    <TD nowrap><FONT size="2"><B>)</B></FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2"><B>45,681</B></FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2"><B>(28</B></FONT></TD>
    <TD nowrap><FONT size="2"><B>)</B></FONT></TD>
</TR>
</TABLE>
</CENTER>
<P align="left"><FONT size="2">As indicated in Note 11, the Company may hold minority shareholdings
in various related high technology companies. In 2000, the sale of Intercall
shares generated a profit of <FONT face="'Times New Roman',Times">&#128;</FONT> 11,765 thousand. Prior to these sales
of shares, the Company owned approximately 6% in both Intercall and SCM
and less than 2% in Verisign. Subsequent to these share sales the Company
owned less than 2% interest in each of these respective companies.
As at December&nbsp;31, 2002 and 2001, the Company had no more interests
in these companies.
</FONT>

<P align="left"><FONT size="2">The <FONT face="'Times New Roman',Times">&#128;</FONT> 66,425 thousand net gain on investments recorded in 2001 primarily
included a <FONT face="'Times New Roman',Times">&#128;</FONT> 68,314 thousand one-time gain generated from our SkiData
and Tag divestitures (see Note 3).
</FONT>


<P align="left"><FONT size="2"><B>19. INCOME TAXES</B>
</FONT>

<P align="left"><FONT size="2">The components of income taxes benefit (provision)&nbsp;are as follows:
</FONT>

<CENTER>
<TABLE cellspacing="0" border="0" cellpadding="0" width="100%">
<TR valign="bottom">
    <TD width="56%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" colspan="11"><FONT size="1"><B>(in thousands of euros)</B></FONT></TD>
</TR>
<TR valign="bottom">
    <TD nowrap align="center"><FONT size="1"><B>Years ended December 31</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>2002</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>2001</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>2000</B></FONT></TD>
</TR>
<TR valign="bottom">
    <TD nowrap align="center"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="3"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="3"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="3"><HR size="1" noshade></TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Current taxes</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(9,667</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(4,074</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(28,044</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Deferred taxes</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">543</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">18,258</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(1,587</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
</TR>
<TR>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2"><B>Total taxes benefit (provision)</B></FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2"><B>(9,124</B></FONT></TD>
    <TD nowrap><FONT size="2"><B>)</B></FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2"><B>14,184</B></FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2"><B>(29,631</B></FONT></TD>
    <TD nowrap><FONT size="2"><B>)</B></FONT></TD>
</TR>
</TABLE>
</CENTER>
<P align="left"><FONT size="2">A reconciliation between the reported income tax expense and the
theoretical amount that would arise using a standard tax rate is as follows:
</FONT>

<CENTER>
<TABLE cellspacing="0" border="0" cellpadding="0" width="100%">
<TR valign="bottom">
    <TD width="54%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" colspan="11"><FONT size="1"><B>(in thousands of euros)</B></FONT></TD>
</TR>
<TR valign="bottom">
    <TD nowrap align="center"><FONT size="1"><B>Years ended December 31</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>2002</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>2001</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>2000</B></FONT></TD>
</TR>
<TR valign="bottom">
    <TD nowrap align="center"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="3"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="3"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="3"><HR size="1" noshade></TD>
</TR>


<TR valign="bottom" bgcolor="#eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2"><B>Income (loss)&nbsp;before taxes</B></FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2"><B>(311,767</B></FONT></TD>
    <TD nowrap><FONT size="2"><B>)</B></FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2"><B>(114,404</B></FONT></TD>
    <TD nowrap><FONT size="2"><B>)</B></FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2"><B>128,709</B></FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>




<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Income tax calculated at corporate
tax rate*</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">94,715</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">42,845</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(48,202</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Effect of tax exemption</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(15,551</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">15,144</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">12,496</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Effect of different tax rates</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">13,434</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(916</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">17,180</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Effect of release of valuation
allowance</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">1,351</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">4,154</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Effect of unrecognized tax assets</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(79,548</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(40,533</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(9,367</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Provision for tax risks</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(5,932</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Effect of expenses non deductible
and revenues non taxable</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(3,900</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">353</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">2,458</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Effect of goodwill amortization
resulting from mergers and
acquisitions (Note 3)</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(13,693</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(6,863</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(4,196</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
</TR>
<TR>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2"><B>Income tax expense
for the year</B></FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2"><B>(9,124</B></FONT></TD>
    <TD nowrap><FONT size="2"><B>)</B></FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2"><B>14,184</B></FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2"><B>(29,631</B></FONT></TD>
    <TD nowrap><FONT size="2"><B>)</B></FONT></TD>
</TR>
</TABLE>
</CENTER>
<P align="left"><FONT size="2">*&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Luxembourg tax rate of 30.38% in 2002, 37.45% in 2001 and 2000.
</FONT>

<P align="right"><FONT size="2">F-21</FONT>

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

<P align="right"><FONT size="2"><B>NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS</B>
</FONT>

<P align="left"><FONT size="2">The components of the net deferred tax asset recorded at December&nbsp;31,
2002, 2001 and 2000 are:
</FONT>

<CENTER>
<TABLE cellspacing="0" border="0" cellpadding="0" width="100%">
<TR valign="bottom">
    <TD width="53%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" colspan="11"><FONT size="1"><B>(in thousands of euros)</B></FONT></TD>
</TR>
<TR valign="bottom">
    <TD nowrap align="center"><FONT size="1"><B>December 31</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>2002</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>2001</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>2000</B></FONT></TD>
</TR>
<TR valign="bottom">
    <TD nowrap align="center"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="3"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="3"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="3"><HR size="1" noshade></TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2"><B>ASSETS</B></FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Loss carryforward</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">158,538</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">82,978</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">39,806</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Excess book over tax depreciation
and amortization</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">4,681</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">2,646</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">2,957</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Other temporary differences</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">54,807</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">32,674</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">21,961</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Valuation allowance</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(138,229</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(82,048</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(48,358</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
</TR>
<TR>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2"><B>LIABILITIES</B></FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Excess tax over book depreciation
and amortization</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(18,175</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(4,349</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(2,296</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Other temporary differences</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(19,948</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(9,753</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(9,246</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
</TR>
<TR>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2"><B>Net deferred tax asset</B></FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2"><B>41,674</B></FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2"><B>22,148</B></FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2"><B>4,824</B></FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Deferred tax asset</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">41,674</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">22,148</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">7,120</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Deferred tax liability</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(2,296</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
</TR>
<TR>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2"><B>Net deferred tax asset</B></FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2"><B>41,674</B></FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2"><B>22,148</B></FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2"><B>4,824</B></FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
</TABLE>
</CENTER>
<P align="left"><FONT size="2">Certain French subsidiaries, including Gemplus SA, incurred significant
losses during 2001 and 2002. As the restructuring plan announced
in December 2002 will continue to be implemented in 2003, it is anticipated
that further tax losses will be generated in that fiscal year in France.
The use of the operating losses on a carry forward basis will mainly depend
upon the successful implementation of the restructuring plan and the
recovery of the wireless communication market, which is difficult to predict
accurately. Management recognizes that, given the guidelines
under Generally Accepted Accounting Principles, future profitability, thus,
cannot be clearly evidenced taking into account the uncertainty of the
market and the current losses anticipated for our French operations.
As a result, in 2002, the Company has booked a valuation allowance
against these operating losses, net of other deferred tax assets and
liabilities, in the amount of <FONT face="'Times New Roman',Times">&#128;</FONT> 57,699 thousand. This valuation allowance
has no significant impact on the 2002 result because it mainly includes
net deferred tax assets generated in that particular fiscal year.
In 2001, the valuation allowance had been partially released following
favorable outcomes on certain tax investigations by tax authorities.
</FONT>

<P align="left"><FONT size="2">In late November 2002, three French subsidiaries, including Gemplus SA,
received a tax assessment primarily relating to the fiscal years 1998 through
2000. The total amount of tax assessed, including penalties and interest,
approximates <FONT face="'Times New Roman',Times">&#128;</FONT>
120&nbsp;million. This amount was reduced to
<FONT face="'Times New Roman',Times">&#128;</FONT> 83.5 million in
April 2003. The major components of the main
assessment relate to intercompany transactions, including transfer pricing,
the invoicing of management fees and forgiveness of intercompany debt,
as well as the adequacy of documentation relating to certain commissions
paid to agents. A number of the reassessments are of a temporary nature
where future adjustments, if any, will have a positive impact in later taxable
periods. The Company believes that significant aspects of the assessments
are without justification and intends to vigorously contest them.
</FONT>

<P align="left"><FONT size="2">Consequently, the provision for tax claims was increased by
<FONT face="'Times New Roman',Times">&#128;</FONT> 5,932 thousand in 2002, and an amount of <FONT face="'Times New Roman',Times">&#128;</FONT> 20,300 thousand was
transferred from valuation allowance to provision for tax risks (see Note 16).
</FONT>

<P align="left"><FONT size="2">At December&nbsp;31, 2002, the Company had net operating loss carry forwards
totaling <FONT face="'Times New Roman',Times">&#128;</FONT> 158,538 thousand of which <FONT face="'Times New Roman',Times">&#128;</FONT> 66,549 thousand and
<FONT face="'Times New Roman',Times">&#128;</FONT> 45,735 thousand are limited to five years and ten years respectively,
and <FONT face="'Times New Roman',Times">&#128;</FONT> 46,254 thousand may be used indefinitely. In those situations where
under Generally Accepted Accounting Principles it is inappropriate to
recognize deferred tax assets and other tax benefit items, management
has provided a valuation allowance to reduce net deferred tax assets
to the estimated realizable value.
</FONT>

<P align="left"><FONT size="2">Deferred income taxes on the undistributed earnings of the Company&#146;s
foreign subsidiaries are provided for when it is intended that these earnings
will not be indefinitely reinvested in these entities.
</FONT>

<P align="left"><FONT size="2">Gemplus SA and certain of its French subsidiaries previously operated in
a tax-exempt enterprise zone and the income related to their manufacturing
activities in such a zone were exempt from income taxes for a ten-year
period expiring between the fiscal years 1999 to 2002. The tax-free status
for some of the major French entities expired during 1999. The Company
has benefited from new temporary tax exemptions in 2000, 2001 and 2002,
in certain countries.
</FONT>

<P align="left"><FONT size="2">The contribution of shares of Gemplus SA to Gemplus International SA,
a Luxembourg company, has no effect on deferred tax assets and
liabilities previously recognized.
</FONT>


<P align="left"><FONT size="2"><B>20. ORDINARY SHARES</B>
</FONT>

<P align="left"><FONT size="2">Gemplus International SA is a corporation incorporated in the Grand Duchy
of Luxembourg. The authorized share capital of the Company is currently
<FONT face="'Times New Roman',Times">&#128;</FONT> 400&nbsp;million consisting of two billion shares with no legal par value.
</FONT>

<P align="left"><FONT size="2">On February&nbsp;18, 2000, the Company issued 94,000,000 shares to
Texas Pacific Group at <FONT face="'Times New Roman',Times">&#128;</FONT> 3.51 per ordinary share, the fair value determined
by the Board of Directors on February&nbsp;2, 2000. Net proceeds from the
issuance were <FONT face="'Times New Roman',Times">&#128;</FONT> 319,704 thousand. In connection with this capital increase,
the Company entered into a warrant agreement with Texas Pacific Group,
a Company shareholder, and Dr.&nbsp;Lassus, the Company&#146;s former chairman
of the Board of Directors. Under this agreement, the Company granted
the right to purchase another 56,400,000 shares at <FONT face="'Times New Roman',Times">&#128;</FONT> 3.51 per share.
These warrants were exercised on September&nbsp;28, 2000, resulting in net
additional proceeds of <FONT face="'Times New Roman',Times">&#128;</FONT> 191,753 thousand (see Note 24).
</FONT>

<P align="left"><FONT size="2">In connection with the February&nbsp;18, 2000 capital increase, the Company
entered into an agreement, granting Texas Pacific Group, a Company
shareholder, and Dr.&nbsp;Lassus the right to acquire additional shares
at <FONT face="'Times New Roman',Times">&#128;</FONT> 3.51 per share. On May&nbsp;29 and 31, 2000, pursuant to this agreement,
the Company increased its capital by issuing 61,873,300 new shares,
which generated net proceeds of <FONT face="'Times New Roman',Times">&#128;</FONT> 212,088 thousand.
</FONT>

<P align="right"><FONT size="2">F-22</FONT>

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

<P align="right"><FONT size="2"><B>NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS</B>
</FONT>

<P align="left"><FONT size="2">On June&nbsp;21, 2000, a general meeting of shareholders approved
a fifty-for-one stock split of the Company&#146;s ordinary shares held by
shareholders of record as of the close of business on June&nbsp;20, 2000.
All references to the number of common shares and per share amounts
elsewhere in the consolidated financial statements and related footnotes
have been restated as appropriate to reflect the effect of the split
for all periods presented.
</FONT>

<P align="left"><FONT size="2">On August&nbsp;25, 2000 and September&nbsp;28, 2000, the Company issued
61,487,358 shares pursuant to employment arrangements with Mr.&nbsp;Perez
and with Dr.&nbsp;Lassus (see Note 31). These shares included 20,495,786 free
shares and 40,991,572 shares resulting from the exercise of stock options
at an exercise price of <FONT face="'Times New Roman',Times">&#128;</FONT> 3.51 per share. The corresponding capital increase
net of issuance costs was <FONT face="'Times New Roman',Times">&#128;</FONT> 142,615 thousand.
</FONT>

<P align="left"><FONT size="2">On December&nbsp;8, 2000 the Company completed a public offering resulting
in the issuance of 15,000,000 new ordinary shares. The Company&#146;s net
proceeds from the offering were <FONT face="'Times New Roman',Times">&#128;</FONT> 82,590 thousand (see Note 3).
</FONT>

<P align="left"><FONT size="2">As part of the purchase price related to the acquisition of Celocom Limited
in November 2000, the Company issued on February&nbsp;20, 2001,
4,191,776 shares representing a value of <FONT face="'Times New Roman',Times">&#128;</FONT> 25,151 thousand. Out of these
<FONT face="'Times New Roman',Times">&#128;</FONT> 25,151 thousand recorded in paid-in capital as at December&nbsp;31, 2000,
an amount of <FONT face="'Times New Roman',Times">&#128;</FONT> 838 thousand was allocated to share capital, as the
corresponding shares were issued. Pursuant to the acquisition agreement,
the shares issued have been transferred to a financial institution and put
in escrow with such institution until release of such shares in accordance
with the terms of the agreement.
As at December&nbsp;31, 2002, all shares had been released and are no longer
in escrow.
</FONT>

<P align="left"><FONT size="2">As part of the purchase price related to the acquisition of SLP InfoWare SA
in October 2000, the Company issued on March&nbsp;13, 2001, 362,863 shares
representing a value of <FONT face="'Times New Roman',Times">&#128;</FONT> 2,177 thousand. Out of these <FONT face="'Times New Roman',Times">&#128;</FONT> 2,177 thousand
recorded in paid-in capital as at December&nbsp;31, 2000, an amount
of <FONT face="'Times New Roman',Times">&#128;</FONT> 73 thousand was allocated to share capital, as the corresponding
shares were issued.
</FONT>

<P align="left"><FONT size="2">During 2001, the Company issued 7,296,500 shares following the
contribution of 145,930 shares of Gemplus SA held mainly by employees.
For accounting purposes, these shares were already assumed to be
a component of the shareholder&#146;s equity.
</FONT>

<P align="left"><FONT size="2">During 2001, the Company issued 2,116,850 shares following the exercise
of Gemplus International SA stock options held by employees.
</FONT>

<P align="left"><FONT size="2">In addition, in 2001, the Company purchased at fair market value
80,587 shares of Gemplus SA, equivalent to 4,029,350 shares of Gemplus
International SA, held by two former executive officers of the Company,
thus reducing the Company&#146;s shareholders&#146; equity.
During 2002, the Company issued 699,100 shares following the exercise
of Gemplus SA stock options held by employees.
</FONT>

<P align="left"><FONT size="2">During 2002, the Company issued 2,525,150 shares following the
contribution of 50,503 shares of Gemplus SA held mainly by employees.
For accounting purposes, these shares were already assumed to be
a component of shareholders&#146; equity (see Note&nbsp;3).
</FONT>

<P align="left"><FONT size="2">During 2002, the Company issued 398,350 shares following the exercise
of Gemplus International SA stock options held by employees.
</FONT>

<P align="left"><FONT size="2">During the third quarter of 2001, the Company started the implementation
of its share repurchase program, as approved by the Annual General
Meeting held on April&nbsp;18, 2001 and authorized by the Commission des
Op&#233;rations de Bourse on May&nbsp;4, 2001. During 2001, the Company
repurchased 4,900,534 shares of its outstanding common stock, at an
average price of <FONT face="'Times New Roman',Times">&#128;</FONT> 3.17 per share. In addition, as described in Note 31,
the Company&#146;s former Chief Executive Officer, Mr.&nbsp;Perez, returned all
of the 30,743,679 Gemplus International SA shares that he had received
in August and September 2000 to an indirect subsidiary of the Company,
in reimbursement of the loans that such indirect subsidiary made to him
in 2000 and in 2001. Consequently, as at December&nbsp;31, 2001,
the Company held directly 4,780,907 shares of its outstanding common
stock and an indirect subsidiary held 30,925,029 shares of its outstanding
common stock.
</FONT>

<P align="left"><FONT size="2">At the Extraordinary General Meeting of shareholders held on April&nbsp;17, 2002,
shareholders approved the cancellation of 4,634,859 shares held directly
pursuant to the Company&#146;s stock repurchase program, in addition to the
cancellation of 30,743,679 shares held by its indirect subsidiary at the time
as such shares may be transferred to the Company. The 4,634,859 shares
were cancelled without reducing the issued share capital of the Company
but this caused a consequential increase of the accounting par of the shares
in issue.
</FONT>

<P align="left"><FONT size="2">During the third quarter of 2002, the Company purchased 656,024 shares
of its outstanding common stock from two former Celocom Limited
employees pursuant to the conditions stipulated in the 2000
Celocom Limited share purchase agreement.
</FONT>

<P align="left"><FONT size="2">As at December&nbsp;31, 2002, the Company held 31,727,101 shares of its
outstanding common stock. The 30,743,679 shares returned by Mr.&nbsp;Perez
were cancelled on March&nbsp;10, 2003. The cancellation of those shares in 2003 had no impact on the consolidated
shareholders&#146; equity, in accordance with the accounting policies described in
Note&nbsp;2.
</FONT>

<P align="left"><FONT size="2">As described in Note 3, the total amount of shares to be issued
by Gemplus International SA upon the contribution of Gemplus SA shares
amounted to 4,288,150 shares, representing 0.67% of the shareholdings
of Gemplus International SA, which represented a total
of 637,859,088 shares outstanding as at December&nbsp;31, 2002.
</FONT>


<P align="right"><FONT size="2">F-23</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#toc">Table of Contents</A></H5><P>
<P align="left"><FONT size="2">The number of shares as of December&nbsp;31, 2002 can be analyzed
as follows:
</FONT>

<P align="right"><FONT size="2"><B>NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS</B>
</FONT>

<CENTER>
<TABLE cellspacing="0" border="0" cellpadding="0" width="100%">
<TR valign="bottom">
    <TD width="74%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="10%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="10%">&nbsp;</TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Number of shares outstanding</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">633,570,938</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Gemplus SA shares to be contributed</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">4,288,150</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2"><B>Number of shares outstanding
including shares to be contributed</B></FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2"><B>637,859,088</B></FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Treasury shares</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(31,727,101</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
</TR>
<TR>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2"><B>Basic number of shares outstanding</B></FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2"><B>606,131,987</B></FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Options outstanding</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">76,017,819</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Warrants outstanding</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">2,561,973</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2"><B>Number of shares on a fully diluted basis</B></FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2"><B>684,711,779</B></FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
</TABLE>
</CENTER>
<P align="left"><FONT size="2">The number of shares on a fully diluted basis is not representative
of the number of shares used in computing net income per share.
Net income per share is calculated using the weighted average number
of shares and dilutive equivalent shares from stock options and warrants
using the treasury stock method (see Note 21).
</FONT>

<P align="left"><FONT size="2">As at December&nbsp;31, 2002, 69,135,081 shares are reserved for shares
issuable under the different share options plans (see Note 24)
</FONT>


<P align="left"><FONT size="2"><B>21. NET INCOME (LOSS) PER SHARE CALCULATION</B>
</FONT>

<P align="left"><FONT size="2">A reconciliation of the numerator and denominator of basic and diluted
net income per share is provided as follows. As net losses have been
reported in 2002 and 2001, the dilutive effects of stock options, warrants
and shares to be issued following acquisitions in 2000 of Celocom Limited
and SLP InfoWare SA were excluded of net loss per share calculation
in these periods.
</FONT>

<P align="left"><FONT size="2">Gemplus SA shares to be contributed are included in the weighted average
number of common shares outstanding (see Note 3 &#151; Common control
transactions).
</FONT>

<CENTER>
<TABLE cellspacing="0" border="0" cellpadding="0" width="100%">
<TR valign="bottom">
    <TD width="61%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD nowrap align="center"><FONT size="1"><B>(Note 21 - continued)</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="right" colspan="11"><FONT size="1"><B>(in thousands of euros, except shares and per share data)</B></FONT></TD>
</TR>
<TR valign="bottom">
    <TD nowrap align="center"><FONT size="1"><B>Years ended December 31</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>2002</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>2001</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>2000</B></FONT></TD>
</TR>
<TR valign="bottom">
    <TD nowrap align="center"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="3"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="3"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="3"><HR size="1" noshade></TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2"><B>Net income / (loss) (numerator)</B></FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2"><B>(320,891</B></FONT></TD>
    <TD nowrap><FONT size="2"><B>)</B></FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2"><B>(100,220</B></FONT></TD>
    <TD nowrap><FONT size="2"><B>)</B></FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2"><B>99,078</B></FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Shares used in basic net income per share calculation
(denominator):</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2"><B>Weighted average number of common shares outstanding</B></FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2"><B>606,222,660</B></FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2"><B>636,992,392</B></FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2"><B>497,523,946</B></FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Dilutive effect of stock options</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">1,516,176</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">24,661,319</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">33,981,118</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Dilutive effect of warrants</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">28,073</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">1,006,546</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">7,672,160</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Dilutive effect of shares to be issued following
acquisitions of Celo and SLP</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">167,936</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">78,982</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2"><B>Weighted average diluted number of shares outstanding</B></FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2"><B>607,766,909</B></FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2"><B>662,828,193</B></FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2"><B>539,256,206</B></FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2"><B>Shares used in diluted net income per share (denominator)</B></FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2"><B>606,222,660</B></FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2"><B>636,992,392</B></FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2"><B>539,256,206</B></FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
</TABLE>
</CENTER>

<P align="left"><FONT size="2"><B>22. COMPREHENSIVE INCOME</B>
</FONT>

<P align="left"><FONT size="2">Certain items defined as other comprehensive income, such as foreign
currency translation adjustments, are reported separately from retained
earnings and additional paid-in capital in the shareholders&#146; equity section
of the balance sheets.
</FONT>

<P align="left"><FONT size="2">The components of cumulative other comprehensive income in the
shareholders&#146; equity section of the balance sheets as at December&nbsp;31, 2002,
2001 and 2000, respectively, were as follows:
</FONT>

<CENTER>
<TABLE cellspacing="0" border="0" cellpadding="0" width="100%">
<TR valign="bottom">
    <TD width="66%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" colspan="11"><FONT size="1"><B>(in thousands of euros)</B></FONT></TD>
</TR>
<TR valign="bottom">
    <TD nowrap align="center"><FONT size="1"><B>December 31</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>2002</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>2001</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>2000</B></FONT></TD>
</TR>
<TR valign="bottom">
    <TD nowrap align="center"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="3"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="3"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="3"><HR size="1" noshade></TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Cumulative translation adjustment</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">1,873</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(3,567</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">376</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Net unrealized gain (loss)&nbsp;on hedging
instruments qualifying as effective</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">6,698</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(401</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2"><B>Cumulative other
comprehensive income</B></FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2"><B>8,571</B></FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2"><B>(3,968</B></FONT></TD>
    <TD nowrap><FONT size="2"><B>)</B></FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2"><B>376</B></FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
</TABLE>
</CENTER>
<P align="left"><FONT size="2">The components of comprehensive income for the year ended December&nbsp;31,
2002, 2001 and 2000, respectively, were as follows:
</FONT>

<CENTER>
<TABLE cellspacing="0" border="0" cellpadding="0" width="100%">
<TR valign="bottom">
    <TD width="53%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" colspan="11"><FONT size="1"><B>(in thousands of euros)</B></FONT></TD>
</TR>
<TR valign="bottom">
    <TD nowrap align="center"><FONT size="1"><B>Years ended December 31</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>2002</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>2001</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>2000</B></FONT></TD>
</TR>
<TR valign="bottom">
    <TD nowrap align="center"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="3"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="3"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="3"><HR size="1" noshade></TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Net income (loss)</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(320,891</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(100,220</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">99,078</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Change in cumulative translation
adjustment</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">5,440</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(3,943</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(2,438</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Effect of adopting IAS 39
as at January&nbsp;1, 2001</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">9,093</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Change in fair value
of available-for-sale financial
assets</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(286</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Change in fair value
of derivatives qualifying
as effective hedging instruments</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">7,099</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(9,208</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2"><B>Change in cumulative
other comprehensive income</B></FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2"><B>12,539</B></FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2"><B>(4,344</B></FONT></TD>
    <TD nowrap><FONT size="2"><B>)</B></FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2"><B>(2,438</B></FONT></TD>
    <TD nowrap><FONT size="2"><B>)</B></FONT></TD>
</TR>
<TR>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2"><B>Comprehensive net income
(loss)</B></FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2"><B>(308,352</B></FONT></TD>
    <TD nowrap><FONT size="2"><B>)</B></FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2"><B>(104,564</B></FONT></TD>
    <TD nowrap><FONT size="2"><B>)</B></FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2"><B>96,640</B></FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
</TABLE>
</CENTER>
<P align="right"><FONT size="2">F-24</FONT>

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

<P align="right"><FONT size="2"><B>NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS</B>
</FONT>


<P align="left"><FONT size="2"><B>23. PENSION PLANS</B>
</FONT>


<P align="left"><FONT size="2"><B>Pensions</B>
</FONT>

<P align="left"><FONT size="2">In France, the Company contributes to the national pension system and its
obligations to employees in terms of pensions are restricted to a lump-sum
length of service award payable at the date that the employee reaches
retirement age, such award being determined for each individual based
upon years of service provided and projected final salary. The current
evaluation of the future length of service award liability is recorded as
a long-term liability in the balance sheet, together with pension liabilities.
The pension obligation in France amounts to <FONT face="'Times New Roman',Times">&#128;</FONT> 1,338 thousand,
<FONT face="'Times New Roman',Times">&#128;</FONT> 1,295 thousand and <FONT face="'Times New Roman',Times">&#128;</FONT> 1,079 thousand at December&nbsp;31, 2002, 2001
and 2000, respectively.
</FONT>

<P align="left"><FONT size="2">The Company operates pension plans in other countries. The Company&#146;s
principal plan is a contributory defined benefit plan open to all employees
in the United Kingdom.
</FONT>

<P align="left"><FONT size="2">The Company also offers an Employee Investment Plan (EIP)&nbsp;to all United
States employees under section 401 (k)&nbsp;of the United States Internal
Revenue Code. Company contributions to the EIP plan amounted to
approximately <FONT face="'Times New Roman',Times">&#128;</FONT> 1,240 thousand, <FONT face="'Times New Roman',Times">&#128;</FONT> 1,903 thousand and <FONT face="'Times New Roman',Times">&#128;</FONT> 1,749 thousand
in 2002, 2001 and 2000, respectively.
</FONT>

<P align="left"><FONT size="2">Net periodic pension costs for the principal defined benefit plan
for the years ended December&nbsp;31, 2002, 2001 and 2000, comprise the
following elements:
</FONT>

<CENTER>
<TABLE cellspacing="0" border="0" cellpadding="0" width="100%">
<TR valign="bottom">
    <TD width="55%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" colspan="11"><FONT size="1"><B>(in thousands of euros)</B></FONT></TD>
</TR>
<TR valign="bottom">
    <TD nowrap align="center"><FONT size="1"><B>December 31</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>2002</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>2001</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>2000</B></FONT></TD>
</TR>
<TR valign="bottom">
    <TD nowrap align="center"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="3"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="3"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="3"><HR size="1" noshade></TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Current year service cost</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">1,549</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">1,640</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">1,088</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Interest accrued on pension
obligations</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">1,346</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">1,275</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">1,109</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Actual loss (return)
on plan assets</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">2,915</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">2,621</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">477</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Net deferral</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(4,339</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(4,261</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(1,974</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
</TR>
<TR>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2"><B>Total pension costs</B></FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2"><B>1,471</B></FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2"><B>1,275</B></FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2"><B>700</B></FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
</TABLE>
</CENTER>
<P align="left"><FONT size="2">The following table sets forth the funded status of pension plans:
</FONT>

<CENTER>
<TABLE cellspacing="0" border="0" cellpadding="0" width="100%">
<TR valign="bottom">
    <TD width="56%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" colspan="11"><FONT size="1"><B>(in thousands of euros)</B></FONT></TD>
</TR>
<TR valign="bottom">
    <TD nowrap align="center"><FONT size="1"><B>December 31</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>2002</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>2001</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>2000</B></FONT></TD>
</TR>
<TR valign="bottom">
    <TD nowrap align="center"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="3"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="3"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="3"><HR size="1" noshade></TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Accumulated benefit obligation</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">26,234</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">23,880</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">20,683</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Projected benefit obligation</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">27,745</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">25,287</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">21,873</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Plan assets at fair value</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">15,233</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">18,110</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">19,043</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2"><B>Projected benefit obligation
in excess of plan assets</B></FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2"><B>(12,512</B></FONT></TD>
    <TD nowrap><FONT size="2"><B>)</B></FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2"><B>(7,177</B></FONT></TD>
    <TD nowrap><FONT size="2"><B>)</B></FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2"><B>(2,830</B></FONT></TD>
    <TD nowrap><FONT size="2"><B>)</B></FONT></TD>
</TR>
<TR>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Unrecognized net loss</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">12,951</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">8,138</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">3,846</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2"><B>Net prepaid pension cost</B></FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2"><B>439</B></FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2"><B>961</B></FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2"><B>1,016</B></FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
</TABLE>
</CENTER>
<P align="left"><FONT size="2">The following weighted average rates were used in the calculation
of projected benefit obligation:
</FONT>

<CENTER>
<TABLE cellspacing="0" border="0" cellpadding="0" width="100%">
<TR valign="bottom">
    <TD width="76%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD nowrap align="center"><FONT size="1"><B>December 31</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>2002</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>2001</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>2000</B></FONT></TD>
</TR>
<TR valign="bottom">
    <TD nowrap align="center"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="3"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="3"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="3"><HR size="1" noshade></TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Discount rate</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">6</FONT></TD>
    <TD nowrap><FONT size="2">%</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">6</FONT></TD>
    <TD nowrap><FONT size="2">%</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">6</FONT></TD>
    <TD nowrap><FONT size="2">%</FONT></TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Expected rate of return
on plan assets</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">8</FONT></TD>
    <TD nowrap><FONT size="2">%</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">8</FONT></TD>
    <TD nowrap><FONT size="2">%</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">8</FONT></TD>
    <TD nowrap><FONT size="2">%</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Assumed rate of compensation
increase</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">4</FONT></TD>
    <TD nowrap><FONT size="2">%</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">4</FONT></TD>
    <TD nowrap><FONT size="2">%</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">4</FONT></TD>
    <TD nowrap><FONT size="2">%</FONT></TD>
</TR>
</TABLE>
</CENTER>

<P align="left"><FONT size="2"><B>Post-retirement benefits<BR>
other than pensions</B>
</FONT>

<P align="left"><FONT size="2">Substantially all of the Company&#146;s employees are covered under
Government-sponsored post-retirement health and life insurance benefit
plans. Accordingly, the Company has no significant liability to its employees
in terms of post-retirement benefits other than pensions and therefore
no provision is made.
</FONT>


<P align="left"><FONT size="2"><B>24. SHARE OPTION PLANS</B>
</FONT>

<P align="left"><FONT size="2">The Company may grant, under various employee share option plans
(the &#147;Plans&#148;), options to purchase or subscribe ordinary shares to
its employees and officers. Under the various Plans, the exercise price
of options granted may be less than the fair market value of the ordinary
common shares at the date of grant.
</FONT>

<P align="left"><FONT size="2">The options must be exercised within seven to ten years of the date of grant
and typically vest equally over a period of three to four years.
</FONT>



<P align="right"><FONT size="2">F-25</FONT>



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


<P align="right"><FONT size="2"><B>NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS</B>
</FONT>


<P align="left"><FONT size="2">Share option activity was as follows:
</FONT>

<CENTER>
<TABLE cellspacing="0" border="0" cellpadding="0" width="100%">
<TR valign="bottom">
    <TD width="40%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="8%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>Number of options</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>Number of</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>Price</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>Average price</B></FONT></TD>
</TR>
<TR valign="bottom">
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>authorized not yet granted</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>options outstanding</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>per share</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>per share</B></FONT></TD>
</TR>
<TR valign="bottom">
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="3"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="3"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="3"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="3"><HR size="1" noshade></TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2"><B>Balances, December&nbsp;31, 1999</B></FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2"><B>9,781,100</B></FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2"><B>47,623,950</B></FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2"><B><FONT face="'Times New Roman',Times">&#128;</FONT> 0.47 - <FONT face="'Times New Roman',Times">&#128;</FONT> 2.29</B></FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2"><B><FONT face="'Times New Roman',Times">&#128;</FONT> 1.80</B></FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Options exercised</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(54,730,122</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2"><FONT face="'Times New Roman',Times">&#128;</FONT> 0.47 - <FONT face="'Times New Roman',Times">&#128;</FONT> 3.51</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2"><FONT face="'Times New Roman',Times">&#128;</FONT> 2.99</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Options granted</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(115,636,673</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">115,636,673</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2"><FONT face="'Times New Roman',Times">&#128;</FONT> 2.29 - <FONT face="'Times New Roman',Times">&#128;</FONT> 6.00</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2"><FONT face="'Times New Roman',Times">&#128;</FONT> 4.26</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Options authorized</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">150,991,572</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2"><B>Balances, December&nbsp;31, 2000</B></FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2"><B>45,135,999</B></FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2"><B>108,530,501</B></FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2"><B><FONT face="'Times New Roman',Times">&#128;</FONT> 0.77 - <FONT face="'Times New Roman',Times">&#128;</FONT> 6.00</B></FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2"><B><FONT face="'Times New Roman',Times">&#128;</FONT> 3.82</B></FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Options exercised</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(5,114,850</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2"><FONT face="'Times New Roman',Times">&#128;</FONT> 0.77 - <FONT face="'Times New Roman',Times">&#128;</FONT> 3.51</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2"><FONT face="'Times New Roman',Times">&#128;</FONT> 1.62</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Options granted</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(2,554,590</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">2,554,590</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2"><FONT face="'Times New Roman',Times">&#128;</FONT> 2.80 - <FONT face="'Times New Roman',Times">&#128;</FONT> 7.96</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2"><FONT face="'Times New Roman',Times">&#128;</FONT> 2.97</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Option terminated unexercised</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">9,208,833</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(11,510,133</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2"><FONT face="'Times New Roman',Times">&#128;</FONT> 0.77 - <FONT face="'Times New Roman',Times">&#128;</FONT> 7.96</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2"><FONT face="'Times New Roman',Times">&#128;</FONT> 4.66</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Options authorized</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2"><B>Balances, December&nbsp;31, 2001</B></FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2"><B>51,790,242</B></FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2"><B>94,460,108</B></FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2"><B><FONT face="'Times New Roman',Times">&#128;</FONT> 0.77 - <FONT face="'Times New Roman',Times">&#128;</FONT> 7.96</B></FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2"><B><FONT face="'Times New Roman',Times">&#128;</FONT> 3.82</B></FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Options exercised</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(1,097,450</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2"><FONT face="'Times New Roman',Times">&#128;</FONT> 0.83 - <FONT face="'Times New Roman',Times">&#128;</FONT> 2.29</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2"><FONT face="'Times New Roman',Times">&#128;</FONT> 1.51</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Options granted</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(31,389,884</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">31,389,884</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2"><FONT face="'Times New Roman',Times">&#128;</FONT> 0.84 - <FONT face="'Times New Roman',Times">&#128;</FONT> 2.68</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2"><FONT face="'Times New Roman',Times">&#128;</FONT> 1.24</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Option terminated unexercised</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">48,734,723</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(48,734,723</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2"><FONT face="'Times New Roman',Times">&#128;</FONT> 0.83 - <FONT face="'Times New Roman',Times">&#128;</FONT> 7.96</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2"><FONT face="'Times New Roman',Times">&#128;</FONT> 4.71</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Options authorized</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2"><B>Balances, December&nbsp;31, 2002</B></FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2"><B>69,135,081</B></FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2"><B>76,017,819</B></FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2"><B><FONT face="'Times New Roman',Times">&#128;</FONT> 0.83 - <FONT face="'Times New Roman',Times">&#128;</FONT> 7.96</B></FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2"><B><FONT face="'Times New Roman',Times">&#128;</FONT> 2.17</B></FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
</TABLE>
</CENTER>
<P align="left"><FONT size="2">The following table summarizes information
with respect to share options outstanding
and exercisable at December&nbsp;31, 2002:
</FONT>

<CENTER>
<TABLE cellspacing="0" border="0" cellpadding="0" width="100%">
<TR valign="bottom">
    <TD width="28%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="13%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="13%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="12%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="13%">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>Weighted average</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom">
    <TD nowrap align="center"><FONT size="1"><B>Exercise</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>Number</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>remaining</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>Number</B></FONT></TD>
</TR>
<TR valign="bottom">
    <TD nowrap align="center"><FONT size="1"><B>prices</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>of options</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>contractual life</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>of options</B></FONT></TD>
</TR>
<TR valign="bottom">
    <TD nowrap align="center"><FONT size="1"><B>(in euros)</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>outstanding</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>(years)</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>exercisable</B></FONT></TD>
</TR>
<TR valign="bottom">
    <TD nowrap align="center"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="3"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="3"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="3"><HR size="1" noshade></TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">0.83</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">995,250</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">1.0</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">995,250</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">0.84</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">8,000,000</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">9.7</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">1.13</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">16,949,508</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">9.9</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">1.14</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">20,000</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">9.6</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">1.28</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">285,500</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">9.6</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">1.31</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">160,000</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">9.5</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">160,000</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">1.35</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">378,550</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">2.0</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">378,550</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">1.52</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">975,250</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">2.6</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">975,250</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">1.42</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">1,000,000</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">9.5</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">1.71</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">5,862,400</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">5.0</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">5,628,000</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">2.25</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">4,000,000</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">9.7</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">2.29</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">18,644,800</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">6.3</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">15,687,500</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">2.60</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">74,200</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">9.1</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">2.68</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">466,000</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">9.1</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">2.87</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">86,440</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">8.8</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">21,610</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">2.90</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">427,225</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">8.7</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">106,806</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">3.17</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">60,000</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">8.9</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">15,000</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">3.18</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">50,000</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">8.9</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">12,500</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">3.51</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">13,824,723</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">7.4</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">7,012,487</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">3.79</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">744,367</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">8.4</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">186,092</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">4.14</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">33,750</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">8.4</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">8,438</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">6.00</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">2,972,356</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">7.9</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">1,486,178</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">7.96</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">7,500</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">8.1</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2"><B>76,017,819</B></FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2"><B>7.8</B></FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2"><B>32,673,661</B></FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2"><B>Weighted
average
exercice
price
(in euros)</B></FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2"><B>2.17</B></FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
</TABLE>
</CENTER>
<P align="left"><FONT size="2">On April&nbsp;17, 2002, the Company&#146;s Board of
Directors voted to approve a plan whereby the
employees were offered an option to cancel
stock options previously granted under plans
adopted in 2000 and received reissued options
at a new exercise price. This plan was
launched on May&nbsp;23, 2002 and 17,106,162 stock
options with an average exercise price of <FONT face="'Times New Roman',Times">&#128;</FONT>
4.52 were cancelled on June&nbsp;5, 2002.
17,034,084 new stock options were granted on
December&nbsp;10, 2002 at an exercise price of <FONT face="'Times New Roman',Times">&#128;</FONT>
1.13 corresponding to the market price of the
Company&#146;s shares on the date of the grant.
</FONT>


<P align="left"><FONT size="2"><B>Warrants</B>
</FONT>

<P align="left"><FONT size="2">In connection with the issuance of ordinary
shares on February&nbsp;18, 2000 (see Note 20),
the Company issued 1,880,000 warrants. The
warrants were granted at a value of <FONT face="'Times New Roman',Times">&#128;</FONT> 3.51
on the date of issuance, resulting in an
underlying per share value of <FONT face="'Times New Roman',Times">&#128;</FONT> 3.20 using
the Black &#038; Scholes option pricing model
with the following assumptions: dividend
yield of 0%, expected volatility of 45%,
risk free interest rate of 4.09% and an
expected life of 10&nbsp;months. Each warrant
provides the holder the right to purchase
300 ordinary shares in
exchange for 10 warrants. The warrants were
exercised in full on September&nbsp;28, 2000
resulting in the issue of 56,400,000 shares.
</FONT>

<P align="left"><FONT size="2">In July 2000, in connection with the hiring
of its former CEO, Mr.&nbsp;Perez, the Company
entered into a warrant agreement with an
executive search firm. Under this
agreement, the Company granted the right to
purchase 2,561,973 ordinary shares at a
purchase price of <FONT face="'Times New Roman',Times">&#128;</FONT> 2,3375 per share,
resulting in an underlying per share value
of <FONT face="'Times New Roman',Times">&#128;</FONT> 3.51 using the Black &#038; Scholes option
pricing model with the following
assumptions: dividend yield of 0%, expected
volatility of 45%, risk free interest rate
</FONT>

<P align="right"><FONT size="2">F-26</FONT>

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

<P align="right"><FONT size="2"><B>NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS</B>
</FONT>

<P align="left"><FONT size="2">of 4% and an expected life of 12&nbsp;months.
The warrants are exercisable at any time for
seven years after the grant date. As at
December&nbsp;31, 2002, no warrant had been
exercised.
</FONT>


<P align="left"><FONT size="2"><B>25. FINANCIAL INSTRUMENTS AND MARKET RELATED EXPOSURES</B>
</FONT>


<P align="left"><FONT size="2"><B>Adoption of IAS 39</B>
</FONT>

<P align="left"><FONT size="2">As indicated in Note 2, the Company adopted
on January&nbsp;1, 2001 IAS 39 &#147;Financial
Instruments: Recognition and Measurement&#148;.</font>

<P align="left"><FONT size="2">The adoption of IAS 39 resulted in a
cumulative after tax increase of
shareholders&#146; equity as of January&nbsp;1, 2001 of
<FONT face="'Times New Roman',Times">&#128;</FONT> 4,090 thousand. The impact on
shareholders&#146; equity at January&nbsp;1, 2001 of
the adoption of IAS 39 is shown below. In
accordance with IAS 39, the comparative
financial statements for the year ended
December&nbsp;31, 2000 were not restated.</FONT>

<P align="left"><FONT size="2">Summary of impact of adopting IAS 39 at January&nbsp;1, 2001:
</FONT>

<CENTER>
<TABLE cellspacing="0" border="0" cellpadding="0" width="100%">
<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="4%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="RIGHT" colspan="11"><FONT size="1"><B>(in thousands of euros)</B></FONT></TD>
</TR>
<TR valign="bottom">
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>Other</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom">
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>Retained</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>comprehensive</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom">
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>earnings</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>income</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>Total</B></FONT></TD>
</TR>
<TR valign="bottom">
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="3"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="3"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="3"><HR size="1" noshade></TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Hedges not qualifying as effective</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(5,003</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(5,003</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Hedges qualifying as effective</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">8,807</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">8,807</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Unrealized gains and losses on
available-for-sale financial assets</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">286</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">286</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2"><B>Impact as at January&nbsp;1, 2001
on shareholders&#146; equity,
net of deferred income taxes</B></FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2"><B>(5,003</B></FONT></TD>
    <TD nowrap><FONT size="2"><B>)</B></FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2"><B>9,093</B></FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2"><B>4,090</B></FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
</TABLE>
</CENTER>
<P align="left"><FONT size="2">In accordance with the transitional
requirements of IAS 39, the Company recorded
in 2001 a net loss of <FONT face="'Times New Roman',Times">&#128;</FONT> 5,003 thousand in
retained earnings to recognize at fair value
all derivatives not qualifying as effective
hedging instruments. The Company also
recorded a net gain of <FONT face="'Times New Roman',Times">&#128;</FONT> 8,807 thousand in
other comprehensive income to recognize at
fair value all derivatives qualifying as
effective hedging instruments. These amounts
were net of deferred income taxes. The
Company also recorded a net gain of <FONT face="'Times New Roman',Times">&#128;</FONT> 286
thousand in other comprehensive income to
recognize at fair value its
available-for-sale financial assets.
Consequently, comprehensive income was
impacted by <FONT face="'Times New Roman',Times">&#128;</FONT> 9,093 thousand as at January&nbsp;1,
2001. This amount was recorded in foreign
exchange result during 2001.
</FONT>


<P align="left"><FONT size="2"><B>Foreign exchange exposure</B>
</FONT>

<P align="left"><FONT size="2">As indicated in Note 2, the Company uses
financial instruments to manage its foreign
currency exposure incurred in the normal
course of business.
</FONT>

<P align="left"><FONT size="2">The policy of the Company is to hedge its
currency risk exposure arising from
commercial transactions and financing. In
order to achieve this objective, the Company
uses foreign currency derivative
instruments, entering into foreign exchange
swaps and forward contracts and purchasing
or selling foreign exchange option
contracts. Written options are only used as
part of combination strategies. The
derivative instruments are traded &#147;over the
counter&#148; with major financial institutions.
The Company does not enter into any
derivative contracts for purposes other than
hedging.
</FONT>

<P align="left"><FONT size="2">Most of the derivative instruments that the
Company uses to manage its foreign exchange
risk exposure qualify as cash flow hedges
under IAS 39, including, since October&nbsp;1,
2002, foreign exchange swaps rolling over
prior currency risk hedging positions.
</FONT>

<P align="left"><FONT size="2">Some derivatives do not qualify as cash flow
hedges under IAS 39. These include:
</FONT>


<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">
<TR valign="top">
    <TD width="1%" align="left" nowrap><FONT size="2">(i)</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="96%"><FONT size="2">the foreign exchange swaps entered into by the Company to meet the group affiliates financing requirements because they are managed on an aggregate basis, and</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="1%" align="left" nowrap><FONT size="2">(ii)</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="96%"><FONT size="2">the written options comprising the call component of strategies hedging our commercial exposure that are not recognized as Hedge Effective by definition under IAS 39.</FONT></TD>
</TR>
</TABLE>
<P align="right"><FONT size="2">F-27</FONT>

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




<P align="right"><FONT size="2"><B>NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS</B>
</FONT>

<P align="left"><FONT size="2">Outstanding forward contracts euro counter
value is calculated as described below are at
closing dates. As at December&nbsp;31, 2002, such
contracts are broken down into two
categories:
</FONT>


<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">
<TR valign="top">
    <TD width="1%" align="left" nowrap><FONT size="2">(i)</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="96%"><FONT size="2">those meeting hedging qualification criteria under IAS 39, and</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="1%" align="left" nowrap><FONT size="2">(ii)</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="96%"><FONT size="2">others that do not meet hedge accounting criteria:</FONT></TD>
</TR>
</TABLE>
<CENTER>
<TABLE cellspacing="0" border="0" cellpadding="0" width="100%">
<TR valign="bottom">
    <TD width="41%">&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="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 valign="bottom">
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" colspan="23"><FONT size="1"><B>(in thousands of euros)</B></FONT></TD>
</TR>


<TR valign="bottom">
    <TD colspan="25"><HR size="1" noshade></TD>
</TR>





<TR valign="bottom">
    <TD nowrap align="left"><FONT size="1"><B>December 31</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="7"><FONT size="1"><B>2002</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="7"><FONT size="1"><B>2001</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="7"><FONT size="1"><B>2000</B></FONT></TD>
</TR>

<TR valign="bottom">
    <TD nowrap align="center"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="7"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="7"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="7"><HR size="1" noshade></TD>
</TR>
<TR valign="bottom">
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>Purchased</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>Sold</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>Purchased</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>Sold</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>Purchased</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>Sold</B></FONT></TD>
</TR>
<TR valign="bottom">
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>items</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>items</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>items</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>items</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>items</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>items</B></FONT></TD>
</TR>
<TR valign="bottom">
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="3"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="3"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="3"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="3"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="3"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="3"><HR size="1" noshade></TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2"><B>Derivatives qualifying
as Hedge Effective under IAS 39</B></FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">GBP</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">5,633</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">6,149</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">8,017</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">36,774</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">35,418</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">SGD</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">15,097</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">2,236</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">2,450</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">123,121</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">122,414</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">USD</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">12,201</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">52,870</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">45,404</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">40,034</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">328,420</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">ZAR</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">4,990</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">6,364</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">4,713</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Other</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">10,329</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">8,509</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">309</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">1,429</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">15,368</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">25,021</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2"><B>Derivatives not qualifying
as Hedge Effective under IAS 39</B></FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">GBP</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">5,432</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">6,902</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">2,787</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">11,309</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">SGD</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">73,952</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">61,241</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">USD</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">8,991</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">192,314</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">59,051</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">292,951</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">ZAR</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">588</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">1,838</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Other</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">325</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">11,411</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">20,528</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">29,937</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2"><B>Total forwards</B></FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2"><B>58,008</B></FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2"><B>285,381</B></FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2"><B>159,665</B></FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2"><B>458,490</B></FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2"><B>215,297</B></FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2"><B>515,986</B></FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
</TABLE>
</CENTER>
<P align="left"><FONT size="2">Forward contracts euro counter value is
calculated using the contract forward
rate.
</FONT>

<P align="left"><FONT size="2">Outstanding optional contracts at closing date are as follows.
</FONT>

<P align="left"><FONT size="2">As at December&nbsp;31, 2002, such contracts
are broken down into two categories: (i)
those meeting hedging qualification
criteria under IAS 39 and (ii)&nbsp;others that
do not meet hedge accounting criteria:
</FONT>

<CENTER>
<TABLE cellspacing="0" border="0" cellpadding="0" width="100%">
<TR valign="bottom">
    <TD width="42%">&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="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&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="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" colspan="23"><FONT size="1"><B>(in thousands of euros)</B></FONT></TD>
</TR>

<TR valign="bottom">
    <TD colspan="25"><HR size="1" noshade></TD>
</TR>


<TR valign="bottom">
    <TD nowrap align="left"><FONT size="1"><B>December 31</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="7"><FONT size="1"><B>2002</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="7"><FONT size="1"><B>2001</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="7"><FONT size="1"><B>2000</B></FONT></TD>
</TR>
<TR valign="bottom">
    <TD nowrap align="center"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="7"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="7"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="7"><HR size="1" noshade></TD>
</TR>
<TR valign="bottom">
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>Purchased</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>Sold</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>Purchased</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>Sold</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>Purchased</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>Sold</B></FONT></TD>
</TR>
<TR valign="bottom">
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>items</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>items</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>items</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>items</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>items</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>items</B></FONT></TD>
</TR>
<TR valign="bottom">
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="3"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="3"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="3"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="3"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="3"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="3"><HR size="1" noshade></TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2"><B>Derivatives qualifying
as Hedge Effective under IAS 39</B></FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">GBP</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">12,598</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">3,205</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">37,076</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">8,330</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">USD</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">109,802</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">6,794</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">49,615</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">164,563</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">22,606</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">SGD</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">11,434</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">9,259</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">74,060</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">20,182</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Other</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">1,371</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">8,185</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">2,817</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2"><B>Derivatives not qualifying
as Hedge Effective under IAS 39</B></FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">GBP</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">3,090</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">USD</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">26,918</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">SGD</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Other</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2"><B>Total options</B></FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2"><B>11,434</B></FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2"><B>152,408</B></FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2"><B>17,424</B></FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2"><B>52,820</B></FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2"><B>283,884</B></FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2"><B>53,935</B></FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
</TABLE>
</CENTER>
<P align="right"><FONT size="2">F-28</FONT>

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

<P align="right"><FONT size="2"><B>NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS</B>
</FONT>

<P align="left"><FONT size="2">Option contracts euro counter value is
calculated using the contract strike rate.
Hedge effective option contracts hedge long
exposure (currency put/call, euro
call/put). In some cases, purchased and
sold options are used as combinations
(strategies).
</FONT>

<P align="left"><FONT size="2">On December&nbsp;31, 2002 outstanding derivative
financial instruments qualifying for hedge
accounting have been entered into as a hedge
of highly probable cash flows denominated in
various currencies as described above, and
according to the identified forecasted
commercial transactions data collection.
Derivatives allow the Company to sell or
purchase at a predetermined rate with
settlement date that range from one month up
to one year, according to the hedging
relationship allocation performed by year and
by quarter. The euro counter value of
derivatives are presented in the following
table with a conversion at the contracts&#146;
strike.
</FONT>

<CENTER>
<TABLE cellspacing="0" border="0" cellpadding="0" width="100%">
<TR valign="bottom">
    <TD width="51%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&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="2%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" colspan="23"><FONT size="1"><B>(in thousands of euros)</B></FONT></TD>
</TR>

<TR valign="bottom">
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="23"><HR size="1" noshade></TD>
</TR>



<TR valign="bottom">
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>Sales</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>Purchases</B></FONT></TD>
</TR>
<TR valign="bottom">
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>GBP</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>SGD</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>USD</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>USD</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>of other</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>of other</B></FONT></TD>
</TR>
<TR valign="bottom">
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>sales</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>purchases</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>sales</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>purchases</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>currencies</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>currencies</B></FONT></TD>
</TR>
<TR valign="bottom">
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="3"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="3"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="3"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="3"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="3"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="3"><HR size="1" noshade></TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2"><B>Derivatives qualifying
as Hedge Effective under IAS 39
Classification by allocation</B></FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Three-month period ending March&nbsp;31, 2003</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">7,860</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">12,165</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">84,815</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">12,201</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">13,998</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">14,525</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Three-month period ending June&nbsp;30, 2003</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">6,162</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">2,932</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">41,307</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">867</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">1,437</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Three-month period ending September&nbsp;30, 2003</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">4,725</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">5,778</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">36,550</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">870</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Three-month period ending December&nbsp;31, 2003</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">5,656</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2"><B>Derivatives not qualifying
as Hedge Effective under IAS 39
Classification by allocation</B></FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Three-month period ending March&nbsp;31, 2003</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">6,902</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">192,314</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">8,991</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">11,411</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">5,757</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Three-month period ending June&nbsp;30, 2003</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">3,090</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">10,870</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Three-month period ending September&nbsp;30, 2003</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">16,048</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Three-month period ending December&nbsp;31, 2003</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2"><B>Total</B></FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2"><B>28,739</B></FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2"><B>26,531</B></FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2"><B>381,904</B></FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2"><B>21,192</B></FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2"><B>27,146</B></FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2"><B>21,719</B></FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
</TABLE>
</CENTER>

<P align="left"><FONT size="2"><B>Net unrealized gain on hedging<BR>
instruments qualifying as effective</B>
</FONT>

<P align="left"><FONT size="2">As of December&nbsp;31, 2002, unrealized gain of
<FONT face="'Times New Roman',Times">&#128;</FONT> 6,698 thousand net of taxes were
recognized in equity, under comprehensive
income, as being the effective portion of
hedging instruments fair value changes
associated with forecasted transactions (see
Note 22).
</FONT>


<P align="left"><FONT size="2"><B>Interest rate exposure</B>
</FONT>

<P align="left"><FONT size="2">As the Company is not significantly exposed
to risk associated with interest rates
fluctuations, it has not entered into any
derivative contracts to hedge interest rate
risk.
</FONT>


<P align="left"><FONT size="2"><B>Financial counterparty risk</B>
</FONT>

<P align="left"><FONT size="2">Derivatives and all significant cash
deposits are undertaken with major financial
institutions having an investment grade
rating. Regarding cash deposits, a few
exceptions exist in certain countries for
operational reasons when individual amounts
are not significant.
</FONT>


<P align="left"><FONT size="2"><B>Fair value of financial instruments</B>
</FONT>

<P align="left"><FONT size="2">The following table provides information
about the carrying amounts and estimated
fair values of certain of the Company&#146;s
financial instruments, excluding cash and
cash equivalents, cash deposits, accounts
receivable, accounts payable and accrued
expenses.
</FONT>

<P align="left"><FONT size="2">Following the adoption of IAS 39 in January
2001, the Company measures at fair value
assets and liabilities qualified as trading
or available-for-sale. Therefore, there is no
difference between the carrying amounts and
the estimated fair values of these assets and
liabilities as at December&nbsp;31, 2002.
</FONT>

<P align="left"><FONT size="2">The fair value of investments in equity
securities is determined based on quoted
market prices if companies are publicly
listed. If the companies are not publicly
listed, the fair value of investments in
equity securities is determined by valuation
techniques appropriate for the nature of the
security. The fair market value of loans,
deposits and other non-current assets is
determined by discounting the nominal amount
using appropriate interest rates.
</FONT>

<P align="left"><FONT size="2">The fair value of the Company&#146;s fixed rate
long-term debt, including capital leases, is
determined by discounting estimated future
cash flows using borrowing rates prevailing
at year-end for similar maturities and
contracts. The book values of the Company&#146;s
long-term floating-rate borrowings
approximate fair value.
</FONT>

<P align="left"><FONT size="2">The fair value of forward exchange
contracts and of currency options
contracts is determined as described in
Note 2 &#147;Summary of significant accounting
policies&#148;.
</FONT>

<P align="right"><FONT size="2">F-29</FONT>

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

<P align="right"><FONT size="2"><B>NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS</B>
</FONT>

<CENTER>
<TABLE cellspacing="0" border="0" cellpadding="0" width="100%">
<TR valign="bottom">
    <TD width="60%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" colspan="23"><FONT size="1"><B>(in thousands of euros)</B></FONT></TD>
</TR>

<TR valign="bottom">
    <TD colspan="25"><HR size="1" noshade></TD>
</TR>




<TR valign="bottom">
    <TD nowrap align="left"><FONT size="1"><B>December 31</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="7"><FONT size="1"><B>2002</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="7"><FONT size="1"><B>2001</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="7"><FONT size="1"><B>2000</B></FONT></TD>
</TR>
<TR valign="bottom">
    <TD nowrap align="center"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="7"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="7"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="7"><HR size="1" noshade></TD>
</TR>
<TR valign="bottom">
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>Net book</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>Fair</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>Net book</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>Fair</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>Net book</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>Fair</B></FONT></TD>
</TR>
<TR valign="bottom">
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>value</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>value</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>value</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>value</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>value</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>value</B></FONT></TD>
</TR>
<TR valign="bottom">
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="3"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="3"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="3"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="3"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="3"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="3"><HR size="1" noshade></TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2"><B>BALANCE SHEET</B></FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2"><B>Assets</B></FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Investments in equity securities</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">2,080</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">2,080</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">17,066</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">17,066</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">11,183</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">11,626</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Loan, deposits and other non-current assets</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">32,132</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">32,132</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">99,701</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">99,701</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">187,405</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">186,898</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2"><B>Total assets</B></FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2"><B>34,212</B></FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2"><B>34,212</B></FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2"><B>116,767</B></FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2"><B>116,767</B></FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2"><B>198,588</B></FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2"><B>198,524</B></FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2"><B>Liabilities</B></FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Long-term debt (including current portion and capital lease):</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Fixed rates</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">18,100</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">18,000</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Floating rates</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">48,638</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">48,638</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">36,329</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">36,329</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">24,931</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">24,900</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2"><B>Total liabilities</B></FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2"><B>48,638</B></FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2"><B>48,638</B></FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2"><B>36,329</B></FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2"><B>36,329</B></FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2"><B>43,031</B></FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2"><B>42,900</B></FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Hedging instruments on foreign currency contracts
(in other current assets or other current liabilities)</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">10,371</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">10,371</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(5,178</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(5,178</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">23,284</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">25,340</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Options contracts (in cash and cash equivalent)</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">3,266</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">3,266</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">2,187</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">2,187</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">8,909</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">10,943</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2"><B>Total </B>(1) <B>(off-balance sheet </B>(2) <B>in 2000)</B></FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2"><B>13,637</B></FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2"><B>13,637</B></FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2"><B>(2,991</B></FONT></TD>
    <TD nowrap><FONT size="2"><B>)</B></FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2"><B>(2,991</B></FONT></TD>
    <TD nowrap><FONT size="2"><B>)</B></FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2"><B>32,193</B></FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2"><B>36,283</B></FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
</TABLE>
</CENTER>

<P>
<HR size="1" width="18%" align="left" noshade>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">
<TR valign="top">
    <TD width="1%" align="left" nowrap><FONT size="2">(1)</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="96%"><FONT size="2">In the amount reported above, assets are presented as positive amounts and liabilities as negative amounts.</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="1%" align="left" nowrap><FONT size="2">(2)</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="96%"><FONT size="2">The net book value and fair value of forward foreign exchange contracts and
currency option contracts include unrealized gains and losses relating to
hedges of firm and anticipated commitments, which have been deferred.
Unrealized gains are recorded in the line item &#147;Other current liabilities&#148; and
unrealized losses in the line item &#147;Other current assets.&#148;</FONT></TD>
</TR>
</TABLE>

<P align="left"><FONT size="2"><B>26. COMMITMENTS AND CONTINGENCIES</B>
</FONT>


<P align="left"><FONT size="2"><B>Guarantees</B>
</FONT>

<P align="left"><FONT size="2">As of December&nbsp;31, 2002, the amount of
guarantees delivered by the Company
reached <FONT face="'Times New Roman',Times">&#128;</FONT> 25,157 thousand and represents
mainly performance bonds and bid
bonds, as part of normal operations. Financial assets worth <FONT face="'Times New Roman',Times">&#128;</FONT> 7,448 thousands
were pledged to issue these guarantees.
</FONT>

<P align="left"><FONT size="2">As of December&nbsp;31, 2002, guarantees consist of the following:
</FONT>
<CENTER>
<TABLE cellspacing="0" border="0" cellpadding="0" width="55%">
<TR valign="bottom">
    <TD width="90%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD align="center"><FONT size="1"><B>(in thousands of euros)</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom">
    <TD align="center"><FONT size="1"><B><HR size="1" noshade></B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Commercial bid and performance bonds</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">15,752</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Other guarantees</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">9,405</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Total guarantees</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">25,157</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
</TABLE>
</CENTER>


<P align="left"><FONT size="2"><B>Purchase agreements</B>
</FONT>

<P align="left"><FONT size="2">As of December&nbsp;31, 2002, the Company had
purchase commitments for microprocessor
chips with various suppliers aggregating
approximately
<FONT face="'Times New Roman',Times">&#128;</FONT> 29.7&nbsp;million.
</FONT>


<P align="left"><FONT size="2"><B>Legal proceedings</B>
</FONT>

<P align="left"><FONT size="2">In October 2001, the United States Court of
Appeals for the Ninth Circuit affirmed a
District Court judgment against the Company
in favor of Humetrix Inc, based on the
claimed breach of an agreement to jointly
market products in the US health care sector.
The judgment was in the amount of US$ 15
million plus interest. The Company&#146;s
petition seeking a rehearing was denied in
November 2001, and the parties entered into a
Mutual Release and Settlement Agreement on
March&nbsp;25, 2002. As a result of the above
decision, the Company recorded a charge of <FONT face="'Times New Roman',Times">&#128;</FONT>
18.1&nbsp;million, adversely impacting 2001
operating results and resulting in a total
current liability (including a previously
existing provision) of <FONT face="'Times New Roman',Times">&#128;</FONT> 19.4&nbsp;million in the
balance sheet as at December&nbsp;31, 2001. The
Company paid all amounts due under the Mutual
Release and Settlement Agreement in 2002, and
no further obligations remain.
</FONT>

<P align="left"><FONT size="2">In late
November 2002, three French subsidiaries,
including Gemplus SA, received a tax
assessment primarily relating to the fiscal
years 1998 through 2000. The total amount of
tax assessed, including penalties and
interests, approximates
<FONT face="'Times New Roman',Times">&#128;</FONT> 120&nbsp;million.
This amount was reduced to
<FONT face="'Times New Roman',Times">&#128;</FONT> 83.5 million in
April 2003. The
Company believes that significant aspects of
the claim are without justification and
intends to vigorously contest the tax
assessment (see Note 19). As at December&nbsp;31,
2002, a provision for risk amounting to <FONT face="'Times New Roman',Times">&#128;</FONT>
34,790 thousand is recorded under non-current
liabilities.
</FONT>

<P align="left"><FONT size="2">In addition to the litigation and claims
mentioned above, the Company is subject to
legal proceedings, claims, and litigation
arising in the ordinary course of business.
The Company&#146;s management does not expect
that the ultimate costs to resolve these
matters will have a material adverse effect
on the Company&#146;s consolidated financial
position, results of operations, or cash
flows.
</FONT>

<P align="left"><FONT size="2">See &#147;Item&nbsp;8. Financial
Information &#151; Legal Proceedings&#148; for additional information.
</FONT>


<P align="right"><FONT size="2">F-30</FONT>



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


<P align="right"><FONT size="2"><B>NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS</B>
</FONT>


<P align="left"><FONT size="2"><B>Lease commitments</B>
</FONT>

<P align="left"><FONT size="2">The Company leases some of its
manufacturing and office space under
non-cancelable operating leases. These
leases contain various expiration dates and
renewal options.
</FONT>

<P align="left"><FONT size="2">Future minimum annual lease payments under
all non-cancelable operating leases as of
December&nbsp;31, 2002 are as follows:
</FONT>

<CENTER>
<TABLE cellspacing="0" border="0" cellpadding="0" width="100%">
<TR valign="bottom">
    <TD width="67%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="13%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="14%">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD nowrap align="left"><FONT size="1"><B>December 31</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="center" colspan="3"><FONT size="1"><B>(in thousands of euros)</B></FONT></TD>
</TR>
<TR valign="bottom">
    <TD nowrap align="center"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="center" colspan="3"><FONT size="1"><B><HR size="1" noshade></B></FONT></TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">2003</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">8,490</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">2004</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">7,395</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">2005</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">5,841</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">2006</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">4,593</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">2007</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">4,387</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Thereafter</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">2,722</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
</TABLE>
</CENTER>
<P align="left"><FONT size="2">Total rental expenses for all operating
leases except those with terms of one month
that were not renewed were <FONT face="'Times New Roman',Times">&#128;</FONT> 14,042 thousand,
<FONT face="'Times New Roman',Times">&#128;</FONT> 12,499 thousand and <FONT face="'Times New Roman',Times">&#128;</FONT> 14,242 thousand for
the years ended December&nbsp;31, 2002, 2001 and
2000 respectively.
</FONT>

<P align="left"><FONT size="2"><B>Summary of Contractual Obligations</B>
</FONT>

<P align="left"><FONT size="2">Contractual obligations and purchase
commitments are payable as follows as of December&nbsp;31, 2002:
</FONT>
<CENTER>
<TABLE cellspacing="0" border="0" cellpadding="0" width="100%">
<TR valign="bottom">
    <TD width="3%">&nbsp;</TD>
    <TD width="57%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&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="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&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>
</TR>
<TR valign="bottom">
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>Less than</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>Between one</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>More than</B></FONT></TD>
</TR>
<TR valign="bottom">
    <TD nowrap align="center" colspan="2"><FONT size="1"><B>(in millions of euros)</B></FONT></TD>
    <TD nowrap align="center" colspan="4"><FONT size="1"><B>Total</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>one year</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>and 5 years</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>five years</B></FONT></TD>
</TR>
<TR valign="bottom">
    <TD colspan="2"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="3"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="3"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="3"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="3"><HR size="1" noshade></TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Long term debt</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Capital leases</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">60.9</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">8.1</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">29.8</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">23.0</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Lease commitments</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">33.4</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">8.5</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">22.2</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">2.7</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Purchase commitments *</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">39.2</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">39.2</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Other long-term commitments</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2"><B>Total</B></FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2"><B>133.5</B></FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2"><B>55.8</B></FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2"><B>52.0</B></FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2"><B>25.7</B></FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
</TABLE>
</CENTER>
<P>
<HR size="1" width="18%" align="left" noshade>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">
<TR valign="top">
    <TD width="1%" align="left" nowrap><FONT size="2">*</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="96%"><FONT size="2">Includes microprocessor chips
purchase commitments amounting to
<FONT face="'Times New Roman',Times">&#128;</FONT> 29.7
millions.</FONT></TD>
</TR>
</TABLE>
<P align="left"><FONT size="2">As of December&nbsp;31, 2002, the Company does not have any other commitments
that could have a significant impact on either its financial situation,
statement of income or cash flows.
</FONT>


<P align="left"><FONT size="2"><B>27.</B>&nbsp; <B>SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION</B>
</FONT>

<P align="left"><FONT size="2">Cash paid for interest and income taxes were as follows:
</FONT>

<CENTER>
<TABLE cellspacing="0" border="0" cellpadding="0" width="100%">
<TR valign="bottom">
    <TD width="41%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="8%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="8%">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" colspan="11"><FONT size="1"><B>(in thousands of euros)</B></FONT></TD>
</TR>
<tr><td>&nbsp;</td></tr>
<TR valign="bottom">
    <TD nowrap align="center"><FONT size="1"><B>Years ended December 31</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>2002</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>2001</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>2000</B></FONT></TD>
</TR>
<TR valign="bottom">
    <TD nowrap align="center"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="3"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="3"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="3"><HR size="1" noshade></TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Cash paid for:</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&#149; Interest</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">1,175</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">2,928</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">3,061</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&#149; Income taxes</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">1,729</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">14,338</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">22,308</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
</TABLE>
</CENTER>

<P align="left"><FONT size="2"><B>28.</B>&nbsp; <B>WAGES, BENEFITS AND NUMBER OF EMPLOYEES (UNAUDITED)</B>
</FONT>

<P align="left"><FONT size="2">Wages and benefits including social security
taxes amounted to approximately <FONT face="'Times New Roman',Times">&#128;</FONT> 296
million, <FONT face="'Times New Roman',Times">&#128;</FONT> 339&nbsp;million, and <FONT face="'Times New Roman',Times">&#128;</FONT> 291&nbsp;million
for the years ended December&nbsp;31, 2002, 2001
and 2000 respectively.
</FONT>

<P align="left"><FONT size="2">Headcount was 5,680, 6,721 and 7,870 as of
December&nbsp;31, 2002, 2001 and 2000
respectively.
</FONT>


<P align="left"><FONT size="2"><B>29.</B>&nbsp; <B>RELATED PARTY TRANSACTIONS</B>
</FONT>

<P align="left"><FONT size="2">During 2002, the Company paid amounts
totaling <FONT face="'Times New Roman',Times">&#128;</FONT> 10,629 thousand in connection
with the resignation and cessation,
respectively, of its former Chief Executive
Officer, Mr.&nbsp;Perez, on December&nbsp;19, 2001 and
its former Chairman of the Board of
Directors, Dr.&nbsp;Lassus, on January&nbsp;10, 2002.
</FONT>

<P align="left"><FONT size="2">In 2000, one of the Company&#146;s indirect
subsidiaries granted to Dr.&nbsp;Lassus a loan to
permit him to exercise stock options, pursuant
to his then-current terms of employment.
Pursuant to an
agreement dated December&nbsp;19, 2001, as of January&nbsp;10, 2002 Mr.&nbsp;Lassus
ceased his office as Chairman of our board of directors and resigned
from all other positions that he held with our company and any of its
affiliates, except for his position as a non-executive director of
our company. As of January&nbsp;10, 2002, Mr.&nbsp;Lassus was no longer an
employee of our company or any of its affiliates. Effective June&nbsp;30, 2002, the Company recorded a financial
expense of <FONT face="'Times New Roman',Times">&#128;</FONT> 67.6&nbsp;million following the
write-down of this loan. The write-down was
recorded to cover the risk of possible
non-reimbursement, as the Company had not yet
received the guarantees of reimbursement
(including a pledge of his option shares) that
Dr.&nbsp;Lassus was required to provide, inter alia, and as confirmed in the letter agreement
signed with him on December&nbsp;19, 2001. The
Company has not forgiven the loan and is
seeking repayment by Dr.&nbsp;Lassus through legal
proceedings. In 2002, the Company&#146;s Board of
Directors established a special committee that
recommended that it was appropriate for the
Company&#146;s indirect subsidiary to take action
to seek security for the loan and its
repayment. The Company&#146;s Board of Directors
agreed on the special committee&#146;s
recommendations based on the opinion of
special independent legal counsel. In January
2003, the Company and its indirect subsidiary
initiated arbitration proceedings against Dr.
Lassus intending to seek inter alia security
for the loan and its repayment.
</FONT>

<P align="left"><FONT size="2">During 2001, the Company entered into an
agreement with a service company, Differentis, whose Chief
Executive Officer, Mr.&nbsp;Ronald Mackintosh,
also served on our Board of Directors. Mr.
Mackintosh served as our interim Chief Executive Officer from December&nbsp;19, 2001 to
August&nbsp;31, 2002 and resigned as Chief
Executive Officer of the service company
effective on December&nbsp;19, 2001. He remains a
member of its Board of Directors and our
Board of Directors. This service company was
appointed to provide an independent review of
the Company&#146;s management, information,
organization and business systems as well as
identification and recommendation of
improvements. In 2002, the Company continued
to use the services of this company and the
total cost recorded in its consolidated
statement of income in 2002 for this
arrangement amounted to <FONT face="'Times New Roman',Times">&#128;</FONT> 1,737 thousand.
</FONT>

<P align="left"><FONT size="2">During 2000, the Company entered into loan
agreements with certain senior executives of
the Company. These loans were partially
reimbursed in 2001, as discussed further
below in Note 31. In December 2001, the
Company recorded severance expenses in the
amount of <FONT face="'Times New Roman',Times">&#128;</FONT> 25,691 thousand due to Mr.&nbsp;Perez and to
Dr.&nbsp;Lassus in connection with their
resignation as Chief Executive Officer of
the Company and cessation as Chairman of the
Board of Directors, respectively, as
described further below in Note 31.
</FONT>

<P align="right"><FONT size="2">F-31</FONT>

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

<P align="right"><FONT size="2"><B>NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS</B>
</FONT>

<P align="left"><FONT size="2">Pursuant to the terms of the loans granted
to Messrs.&nbsp;Perez and Lassus in 2000, one of
the Company&#146;s indirect subsidiaries agreed
in 2001 to arrange for the interest on these
loans to be forgiven starting July&nbsp;1, 2001,
and to assume any income tax resulting from
this forgiveness. As described in Note 13,
the Company recorded in 2001 a compensation
expense of <FONT face="'Times New Roman',Times">&#128;</FONT> 3,585 thousand corresponding to
the income tax resulting from the
forgiveness of interest.
</FONT>

<P align="left"><FONT size="2">During the years 2001 and 2000, the Company
had a financial consulting agreement with a
firm that included an individual who served
on the Company&#146;s Board of Directors. The
consulting services primarily related to
investment and business opportunity advice
for the Company. The Company recognized <FONT face="'Times New Roman',Times">&#128;</FONT>
20,785 thousand in the year 2000 for such
advice. Effective in September 2000, this
consultant no longer serves on the Board.
During 2001, the Company recognized <FONT face="'Times New Roman',Times">&#128;</FONT> 319
thousand according to this consulting
agreement, which was terminated December&nbsp;31,
2001.
</FONT>

<P align="left"><FONT size="2">During 2001, the Company reimbursed Dr.
Lassus funds that he had advanced in a
project involving a number of consultants
who provided smart card and related
business services, including services
linked to card operating systems and card
management systems. The funds, in the
amount of <FONT face="'Times New Roman',Times">&#128;</FONT> 160 thousand (GBP 100
thousand), were reimbursed to Dr.&nbsp;Lassus in
November 2001.
</FONT>


<P align="left"><FONT size="2"><B>30.</B>&nbsp; <B>SEGMENT INFORMATION</B>
</FONT>

<P align="left"><FONT size="2">As of January&nbsp;1, 2002, the Company
elected to change the reporting of its
business segments, and restated its prior
periods&#146; presentation to conform to this
revised segment reporting.
</FONT>

<P align="left"><FONT size="2">All the activities formerly reported as part
of the Network Systems segment and the Other
operating segment have been transferred to
the Financial Services and Security segment,
except the access control systems activities
of the Company&#146;s former subsidiary SkiData
and the electronic smart labels solutions
activities of the Company&#146;s former Tag
subsidiary, which have been reported
separately under &#147;Disposed Operations&#148;, as
they were sold during the third quarter of
2001.
</FONT>


<P align="left"><FONT size="2"><B>Financial Services and Security segment</B>
</FONT>

<P align="left"><FONT size="2">Consequently, the Financial Services and
Security segment includes systems and
services based on chip card technology in
areas such as financial services,
identification, health care, corporate
security, loyalty programs, transportation
access, pay-television applications,
e-business security activities as well as
magnetic stripe plastic cards for banking
applications. The Company&#146;s activities in
this segment also include the sales of smart
card readers to customers as well as smart
card interfacing technologies to device
manufacturers.
</FONT>


<P align="left"><FONT size="2"><B>Telecommunications segment</B>
</FONT>

<P align="left"><FONT size="2">There is no change with respect to the
Telecommunications segment, which
includes the Company&#146;s wireless
solutions, as well as prepaid telephone
cards and other products.
</FONT>

<P align="left"><FONT size="2">This change in business segment reporting is
consistent with the changes in the Company&#146;s
financial reporting structure incorporated
in its management reporting. The Company&#146;s
two operating segments, the
Telecommunications segment and the Financial
Services and Security segment, have a
different customer base, and each of them
has separate financial information
available. These segments are evaluated
regularly by the management in deciding how
to allocate resources and in assessing
performance. The Company&#146;s management makes
decisions about resources to be allocated to
the segments and assesses their performance
using revenues and gross margins. The
Company does not identify or allocate assets
to the operating or geographic segments and
the management does not evaluate the
segments on this criterion on a regular
basis.
</FONT>

<P align="left"><FONT size="2">The accounting policies of the segments are
substantially the same as those described in
the summary of significant accounting
policies as discussed in Note 2.
</FONT>

<P align="left"><FONT size="2">The following tables present selected
data for the years ended December&nbsp;31,
2002, 2001 and 2000:
</FONT>

<CENTER>
<TABLE cellspacing="0" border="0" cellpadding="0" width="100%">
<TR valign="bottom">
    <TD width="52%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" colspan="11"><FONT size="1"><B>(in thousands of euros)</B></FONT></TD>
</TR>
<tr><td>&nbsp;</td></tr>
<TR valign="bottom">
    <TD nowrap align="center"><FONT size="1"><B>Years ended December 31</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>2002</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>2001</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>2000</B></FONT></TD>
</TR>
<TR valign="bottom">
    <TD nowrap align="center"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="3"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="3"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="3"><HR size="1" noshade></TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2"><B>Net sales</B></FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Telecommunications</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">544,471</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">681,933</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">883,695</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Financial Services and Security</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">242,963</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">296,775</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">233,217</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Disposed operations</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">44,278</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">87,688</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2"><B>Net sales</B></FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2"><B>787,434</B></FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2"><B>1,022,986</B></FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2"><B>1,204,600</B></FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2"><B>Gross profit</B></FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Telecommunications</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">154,526</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">228,814</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">378,874</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Financial Services and Security</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">45,186</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">62,594</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">43,636</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Disposed operations</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">16,062</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">31,376</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2"><B>Gross profit</B></FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2"><B>199,712</B></FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2"><B>307,470</B></FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2"><B>453,886</B></FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Research and development
expenses</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(92,240</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(112,885</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(90,778</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Reversal of research credit
allowance</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">12,486</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Selling and marketing expenses</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(112,227</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(165,276</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(158,545</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">General and administrative
expenses</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(89,896</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(110,657</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(89,666</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Litigation expenses</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(18,120</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Management severance expenses</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(25,691</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Restructuring expenses</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(90,003</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(28,466</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Goodwill amortization</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(47,117</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(27,162</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(11,204</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
</TR>
<TR>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2"><B>Operating income (loss)</B></FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2"><B>(231,771</B></FONT></TD>
    <TD nowrap><FONT size="2"><B>)</B></FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2"><B>(180,787</B></FONT></TD>
    <TD nowrap><FONT size="2"><B>)</B></FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2"><B>116,179</B></FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
</TABLE>
</CENTER>
<P align="left"><FONT size="2">Note: Disposed operations include SkiData
and Tag activities, which were sold during
the third quarter of 2001.
</FONT>

<P align="right"><FONT size="2">F-32</FONT>

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

<P align="right"><FONT size="2"><B>NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS</B>
</FONT>

<P align="left"><FONT size="2">The following is a summary of sales to
external customers by geographic area for
the years ended 2002, 2001 and 2000:
</FONT>

<CENTER>
<TABLE cellspacing="0" border="0" cellpadding="0" width="100%">
<TR valign="bottom">
    <TD width="50%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" colspan="11"><FONT size="1"><B>(in thousands of euros)</B></FONT></TD>
</TR>

<TR><TD><DIV>&nbsp;</DIV></TD></TR>


<TR valign="bottom">
    <TD nowrap align="center"><FONT size="1"><B>Years ended December 31</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>2002</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>2001</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>2000</B></FONT></TD>
</TR>
<TR valign="bottom">
    <TD nowrap align="center"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="3"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="3"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="3"><HR size="1" noshade></TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Americas</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">171,717</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">231,606</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">185,400</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Europe, Middle-East, Africa</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">416,220</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">473,996</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">613,612</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Asia</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">199,497</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">273,106</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">317,900</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Disposed operation</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">44,278</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">87,688</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2"><B>Net sales</B></FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2"><B>787,434</B></FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2"><B>1,022,986</B></FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2"><B>1,204,600</B></FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
</TABLE>
</CENTER>
<P align="left"><FONT size="2">Note: Disposed operations include SkiData
and Tag activities, which were sold during
the third quarter of 2001, and were
reported primarily in the Europe,
Middle-East and Africa region.
</FONT>

<P align="left"><FONT size="2">Revenues from external customers are based
on the customers&#146; billing location.
Accordingly, there are no sales transactions
between operating segments. The Company
does not allocate long-lived assets by
location for each geographic area. The
Company&#146;s country of domicile is Luxembourg
in which sales to customers are
insignificant.
</FONT>

<P align="left"><FONT size="2">No single customer accounted for more than
10% of the Company&#146;s sales during the years
ended December&nbsp;31, 2002, 2001 and 2000.
</FONT>


<P align="left"><FONT size="2"><B>31.</B>&nbsp; <B>MANAGEMENT SEVERANCE EXPENSES</B>
</FONT>

<P align="left"><FONT size="2">In 2001, the Company recorded a total <FONT face="'Times New Roman',Times">&#128;</FONT>
25,691 thousand charge in its Consolidated
Statement of Income with respect to the
changes in its management decided at its
Board meeting of December&nbsp;19, 2001.
</FONT>

<P align="left"><FONT size="2">There were no accruals in 2002 for
management severance expenses relating to
Messrs.&nbsp;Perrez and Lassus.
</FONT>

<P align="left"><FONT size="2">During 2000, the Company entered into an
employment agreement with Mr.&nbsp;Perez, its
former CEO, whereby he was granted 10,247,893
free shares, 10,247,893 service options and
10,247,893 performance options. The stock
options had an exercise price of <FONT face="'Times New Roman',Times">&#128;</FONT> 3.51 per
share. In addition, one of the Company&#146;s
indirect finance subsidiaries made loans to
Mr.&nbsp;Perez between September 2000 and March
2001 in an aggregate amount of <FONT face="'Times New Roman',Times">&#128;</FONT> 88.9
million. Each loan bore interest at the rate
provided in Section&nbsp;1274 (b) (2) (b)&nbsp;of the
US Internal Revenue Code of 1986, which is
based on the US Federal short-term rate.
Therefore interest rates ranged from 5.58% to
6.4% per annum. These loans were made to
allow Mr.&nbsp;Perez to exercise the stock options
and pay the exercise price (for an aggregate
amount of
<FONT face="'Times New Roman',Times">&#128;</FONT> 71.9&nbsp;million) and taxes related to the
free shares (for an aggregate amount of <FONT face="'Times New Roman',Times">&#128;</FONT>
17&nbsp;million) and were secured by the
shares purchased by Mr.&nbsp;Perez upon
exercise of the options.
</FONT>

<P align="left"><FONT size="2">Concurrently with the issuance of free shares
and options to Mr.&nbsp;Perez, the Company issued
10,247,893 free shares and 20,495,786 stock
options to Dr.&nbsp;Lassus, the founder of the
Company and former Chairman of the Board
of Directors. The stock options had an
exercise price of <FONT face="'Times New Roman',Times">&#128;</FONT> 3.51 per share. In
addition, one of the Company&#146;s indirect
finance subsidiaries has made loans to Dr.
Lassus in an aggregate amount of <FONT face="'Times New Roman',Times">&#128;</FONT> 71.9
million on the same interest and repayment
terms as the loans to Mr.&nbsp;Perez. Dr.&nbsp;Lassus
used the loan proceeds to exercise the stock
options that were granted to him. On November
2, 2001, the Company announced that its Chief
Executive Officer, Mr.&nbsp;Perez, had signed an
agreement with one of its indirect
subsidiaries pursuant to which he committed
to return all of the Gemplus International SA
shares that he received in August and
September 2000 to such indirect subsidiary of
the Company, in reimbursement of the loans
that such indirect subsidiary made to him in
2000 and in 2001.
</FONT>

<P align="left"><FONT size="2">Mr.&nbsp;Perez transferred these shares pursuant
to two agreements. The first agreement was
signed on October&nbsp;20, 2001. Mr.&nbsp;Perez
transferred 18,574,306 shares to the
Company&#146;s indirect subsidiary, at a price
of <FONT face="'Times New Roman',Times">&#128;</FONT> 2.79 per share, representing <FONT face="'Times New Roman',Times">&#128;</FONT> 51,822
thousand that were recorded in reimbursement
of a portion of the loans in the same
amount. The difference between the value of
the shares pursuant to the agreement (<FONT face="'Times New Roman',Times">&#128;</FONT> 2.79
per share) and the market closing price of
the Company&#146;s shares as at the time of the
effective transfer of the shares (<FONT face="'Times New Roman',Times">&#128;</FONT> 3.12 per
share) was reflected in shareholders&#146;
equity, resulting in an increase of <FONT face="'Times New Roman',Times">&#128;</FONT> 6,130
thousand of the caption &#147;paid-in capital&#148;.
</FONT>

<P align="left"><FONT size="2">The second agreement was signed on December
19, 2001, at the time Mr.&nbsp;Perez resigned his
position as President and Chief Executive
Officer of the Company. Mr.&nbsp;Perez
transferred 12,169,373 shares to the
Company&#146;s indirect subsidiary, at a price of
<FONT face="'Times New Roman',Times">&#128;</FONT> 2.86 per share, representing the market
closing price of the Company&#146;s shares as at
December&nbsp;19, 2001, totaling
<FONT face="'Times New Roman',Times">&#128;</FONT> 34,804 thousand. The difference between
the fair value of the shares and the
remaining loan outstanding was recorded in
the Company&#146;s Consolidated Statement of
Income, resulting in a charge of <FONT face="'Times New Roman',Times">&#128;</FONT> 6,838
thousand.
</FONT>

<P align="left"><FONT size="2">Mr.&nbsp;Perez was also entitled to a tax
reimbursement on the portion of the loan
that was forgiven. Such reimbursement was
accrued in 2001 in an amount of <FONT face="'Times New Roman',Times">&#128;</FONT> 6,502
thousand. In addition, Mr.&nbsp;Perez is
entitled, pursuant to his employment
agreement, to receive a severance payment,
that was accrued in 2001 in an amount of <FONT face="'Times New Roman',Times">&#128;</FONT>
1,161 thousand. Consequently, the total
charges associated with Mr.&nbsp;Perez's
resignation amounted to
<FONT face="'Times New Roman',Times">&#128;</FONT> 14,501 thousand. Such amounts were paid
in 2002, with the exception of an amount of
<FONT face="'Times New Roman',Times">&#128;</FONT> 337 thousand included under the caption
other current liabilities in the Company&#146;s
balance sheet as at December&nbsp;31, 2002 as a
reserve for the tax reimbursement.
</FONT>

<P align="left"><FONT size="2">Pursuant to an
agreement dated December&nbsp;19, 2001, as of January&nbsp;10, 2002 Mr.&nbsp;Lassus
ceased his office as Chairman of our board of directors and resigned
from all other positions that he held with our company and any of its
affiliates, except for his position as a non-executive director of
our company. As of January&nbsp;10, 2002, Mr.&nbsp;Lassus was no longer an
employee of our company or any of its affiliates. In accordance with
an agreement signed with Dr.&nbsp;Lassus in 2000,
the replacement of Dr.&nbsp;Lassus as Chairman of
the Board required the Company to make a
payment to Dr.&nbsp;Lassus in the amount of US$
12&nbsp;million (<FONT face="'Times New Roman',Times">&#128;</FONT> 13,450 thousand), such payment
representing partly a severance payment (<FONT face="'Times New Roman',Times">&#128;</FONT>
11,190 thousand) and partly the cost of a
pledge of Dr.&nbsp;Lassus&#146; 20,495,786 option
shares as security for the loans (<FONT face="'Times New Roman',Times">&#128;</FONT> 2,260
thousand). The cost of the pledge was
deferred in the balance
</FONT>

<P align="right"><FONT size="2">F-33</FONT>

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

<P align="right"><FONT size="2"><B>NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS</B>
</FONT>

<P align="left"><FONT size="2">sheet as at December&nbsp;31, 2001. As discussed
in Note 29 &#147;Related party transactions&#148;, the
shares ultimately were not pledged, and
therefore the cost of the pledge was charged
to expenses in the Company&#146;s 2002
Consolidated Statement of Income. The total
charges for the fiscal year ended December
31, 2001 associated with Dr.&nbsp;Lassus&#146;
cessation as Chairman amounted to <FONT face="'Times New Roman',Times">&#128;</FONT> 11,190
thousand. As at December&nbsp;31, 2002, an amount
of <FONT face="'Times New Roman',Times">&#128;</FONT> 9,638 thousand included under the
caption other current liabilities, was
payable upon fulfillment of certain specific
conditions pursuant to the agreement with Dr.
Lassus dated December&nbsp;19, 2001, including the
condition of pledging his option shares.
Such conditions have not been fulfilled. The
Company has not paid this sum, and claims it
in offset against amounts payable pursuant to
the loan granted to Dr.&nbsp;Lassus to permit him
to exercise stock options in 2000.
</FONT>


<P align="left"><FONT size="2"><B>32.</B>&nbsp; <B>DIFFERENCES BETWEEN INTERNATIONAL ACCOUNTING STANDARDS AND US GENERALLY ACCEPTED ACCOUNTING PRINCIPLES</B>
</FONT>

<P align="left"><FONT size="2">The Company&#146;s consolidated financial
statements are prepared in accordance with
IAS, which differ in certain respects from
generally accepted accounting principles in
the United States (US GAAP).
</FONT>

<P align="left"><FONT size="2">The principal differences between IAS and
US GAAP are presented below together with
explanations of certain adjustments that
affect consolidated net income and total
shareholders&#146; equity:
</FONT>

<CENTER>
<TABLE cellspacing="0" border="0" cellpadding="0" width="100%">
<TR valign="bottom">
    <TD width="67%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD nowrap align="center"><FONT size="1"><B>(Note 32 - continued)</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="right" colspan="11"><FONT size="1"><B>(in thousands of euros, except shares and per share amounts)</B></FONT></TD>
</TR>
<TR valign="bottom">
    <TD nowrap align="center"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="11"><HR size="1" noshade></TD>
</TR>
<TR valign="bottom">
    <TD nowrap align="center"><FONT size="1"><B>Years ended December 31</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>2002</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>2001</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>2000</B></FONT></TD>
</TR>
<TR valign="bottom">
    <TD nowrap align="center"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="3"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="3"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="3"><HR size="1" noshade></TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2"><B>Net income (loss)&nbsp;in accordance with IAS</B></FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2"><B>(320,891</B></FONT></TD>
    <TD nowrap><FONT size="2"><B>)</B></FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2"><B>(100,220</B></FONT></TD>
    <TD nowrap><FONT size="2"><B>)</B></FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2"><B>99,078</B></FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Capitalized development costs</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(1,803</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(3,227</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(2,291</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Hedge accounting</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">8,030</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Share options accounting</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(2,887</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">69,262</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(229,724</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Purchase accounting</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(2,351</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(8,104</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Goodwill amortization</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">49,177</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Other differences</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">360</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">564</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">1,256</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Deferred tax effect of US GAAP adjustments</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(1,277</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">1,057</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">408</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2"><B>Total differences between US GAAP and IAS</B></FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2"><B>41,219</B></FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2"><B>59,552</B></FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2"><B>(222,321</B></FONT></TD>
    <TD nowrap><FONT size="2"><B>)</B></FONT></TD>
</TR>
<TR>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2"><B>Net income (loss)&nbsp;per US GAAP before change in accounting principle</B></FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2"><B>(279,672</B></FONT></TD>
    <TD nowrap><FONT size="2"><B>)</B></FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2"><B>(40,668</B></FONT></TD>
    <TD nowrap><FONT size="2"><B>)</B></FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2"><B>(123,243</B></FONT></TD>
    <TD nowrap><FONT size="2"><B>)</B></FONT></TD>
</TR>
<TR>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Changes in accounting principles:</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Hedge accounting</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(8,807</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2"><B>Net income (loss)&nbsp;per US GAAP</B></FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2"><B>(279,672</B></FONT></TD>
    <TD nowrap><FONT size="2"><B>)</B></FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2"><B>(49,475</B></FONT></TD>
    <TD nowrap><FONT size="2"><B>)</B></FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2"><B>(123,243</B></FONT></TD>
    <TD nowrap><FONT size="2"><B>)</B></FONT></TD>
</TR>
<TR>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Change in cumulative other comprehensive adjustment in accordance with IAS</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">12,538</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(4,344</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(2,438</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Change in effect of IAS/US GAAP adjustments on other comprehensive income</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(3,233</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(5,054</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(9,476</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
</TR>
<TR>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2"><B>Other comprehensive income (loss), net of tax</B></FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2"><B>9,305</B></FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2"><B>(9,398</B></FONT></TD>
    <TD nowrap><FONT size="2"><B>)</B></FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2"><B>(11,914</B></FONT></TD>
    <TD nowrap><FONT size="2"><B>)</B></FONT></TD>
</TR>
<TR>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2"><B>Comprehensive income (loss)</B></FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2"><B>(270,367</B></FONT></TD>
    <TD nowrap><FONT size="2"><B>)</B></FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2"><B>(58,873</B></FONT></TD>
    <TD nowrap><FONT size="2"><B>)</B></FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2"><B>(135,157</B></FONT></TD>
    <TD nowrap><FONT size="2"><B>)</B></FONT></TD>
</TR>
<TR>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Net income (loss)&nbsp;per share before changes in accounting principles:</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&#149; Basic</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(0.46</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(0.06</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(0.25</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&#149; Diluted</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(0.46</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(0.06</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(0.25</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
</TR>
<TR>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Changes in accounting principles:</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&#149; Basic</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(0.01</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&#149; Diluted</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(0.01</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Net income (loss)&nbsp;per share:</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&#149; Basic</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(0.46</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(0.08</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(0.25</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&#149; Diluted</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(0.46</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(0.08</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(0.25</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
</TR>
<TR>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Number of shares:</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&#149; Basic</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">606,222,660</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">636,992,392</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">497,523,946</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&#149; Diluted</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">606,222,660</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">636,992,392</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">497,523,946</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
</TABLE>
</CENTER>
<P align="right"><FONT size="2">F-34</FONT>

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

<P align="right"><FONT size="2"><B>NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS</B>
</FONT>

<CENTER>
<TABLE cellspacing="0" border="0" cellpadding="0" width="100%">
<TR valign="bottom">
    <TD width="68%">&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="4%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" colspan="11"><FONT size="1"><B>(in thousands of euros)</B></FONT></TD>
</TR>
<tr><td>&nbsp;</td></tr>
<TR valign="bottom">
    <TD nowrap align="center"><FONT size="1"><B>December 31</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>2002</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>2001</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>2000</B></FONT></TD>
</TR>
<TR valign="bottom">
    <TD nowrap align="center"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="3"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="3"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="3"><HR size="1" noshade></TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2"><B>Shareholders&#146; equity in accordance with IAS</B></FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2"><B>860,451</B></FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2"><B>1,167,762</B></FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2"><B>1,384,995</B></FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Capitalized development costs</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(7,321</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(5,518</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(2,291</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Hedge accounting</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">4,090</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Non-recourse loans</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(4,918</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(71,856</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(143,712</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Purchase consideration</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(10,455</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(8,104</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Goodwill amortization</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">49,177</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Effect of IAS/US GAAP adjustments on other comprehensive income</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(8,144</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(4,911</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">143</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Other differences</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">50</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(310</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(874</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Deferred tax effect of US GAAP adjustments</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(30</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">1,224</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">408</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2"><B>Total difference between US GAAP and IAS</B></FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2"><B>18,359</B></FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2"><B>(89,475</B></FONT></TD>
    <TD nowrap><FONT size="2"><B>)</B></FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2"><B>(142,236</B></FONT></TD>
    <TD nowrap><FONT size="2"><B>)</B></FONT></TD>
</TR>
<TR>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2"><B>Shareholders&#146; equity in accordance with US GAAP</B></FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2"><B>878,810</B></FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2"><B>1,078,287</B></FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2"><B>1,242,759</B></FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
</TABLE>
</CENTER>

<P align="left"><FONT size="2"><B>Capitalized development costs</B>
</FONT>

<P align="left"><FONT size="2">The Company capitalizes certain research and
development costs other than for software
development where it is expected that the
product under development will be produced
and will be profitable. Such capitalized
research and development costs are amortized
over a period no longer than three years.
Under US GAAP, research and development costs
other than for software development are
expensed as incurred.
</FONT>


<P align="left"><FONT size="2"><B>Hedge accounting and financial instruments</B>
</FONT>

<P align="left"><FONT size="2">Until the adoption of IAS 39, the Company
allocated certain instruments designed as
hedge to the underlying transactions and
therefore the gains and losses arising from
the performance of the instruments on
forecasted transactions were deferred to
future periods. Hedge accounting on
forecasted transactions was not allowed by
US accounting standards and contracts were
marked to market under US GAAP with changes
in fair value recorded in the Statement of
Income in the current period.
</FONT>

<P align="left"><FONT size="2">Commencing January&nbsp;1, 2001 new standards are
effective for the Company under both IAS and
US GAAP with respect to accounting policies
of financial instruments, IAS 39 &#147;Accounting
for Financial Instruments and SFAS No.&nbsp;133
(SFAS 133), &#147;Accounting for Derivative
Instruments and Hedging Activities&#148;, as
amended by SFAS No.&nbsp;137 and SFAS No.&nbsp;138.
</FONT>

<P align="left"><FONT size="2">After implementation of IAS 39, there are no
reconciling items between IAS and US GAAP
related to hedge accounting when reporting
net income.
</FONT>


<P align="left"><FONT size="2"><B>Share options accounting</B>
</FONT>

<P align="left"><FONT size="2">Certain of the Company&#146;s share option
plans (Note 24) are treated as
compensatory plans under US GAAP.
For the purpose of this reconciliation, the
Company has adopted Accounting Principles
Board Opinion No.&nbsp;25 &#147;Accounting for Stock
Issued to Employees&#146;&#146; (APB 25) and related
interpretations in accounting for its
employees share options.
</FONT>

<P align="left"><FONT size="2">Under APB 25, unearned compensation is
recognized as a reduction in shareholders&#146;
equity when the exercise price of share
options is below the fair value of the
underlying shares on the grant date.
Unearned compensation is amortized to
compensation expense over the vesting period
of the applicable options. From 1989 to
December&nbsp;31, 2002, the Company granted share
options to employees, which generally vest
over four years, with exercise prices at or
below the fair value of the underlying
shares.
</FONT>

<P align="left"><FONT size="2">For purposes of financial reporting under US
GAAP, the Company is required to follow the
disclosure provisions of Statement of
Financial Accounting Standards No.&nbsp;123 (FAS
123), &#147;Accounting for Stock-Based
Compensation&#148;, which requires that the
Company disclose pro forma net income and
earnings per share as if the Company&#146;s
compensation expense had been calculated
using the minimum value method prescribed by
FAS 123. Had compensation expense for the
Plans been determined based upon the
estimated grant date fair value using the
fair value method as provided by FAS 123, the
Company&#146;s net income and earnings per share
for the years ended December&nbsp;31, 2002, 2001
and 2000, would have been as follows:
</FONT>

<CENTER>
<TABLE cellspacing="0" border="0" cellpadding="0" width="100%">
<TR valign="bottom">
    <TD width="43%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD align="right" colspan="13"><FONT size="1"><B>(in thousands of euros, except for net income per share)</B></FONT></TD>
</TR>
<tr><td>&nbsp;</td></tr>
<TR valign="bottom">
    <TD nowrap align="center"><FONT size="1"><B>Years ended December 31</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>2002</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>2001</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>2000</B></FONT></TD>
</TR>
<TR valign="bottom">
    <TD nowrap align="center"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="3"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="3"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="3"><HR size="1" noshade></TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Net income per US GAAP:</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&#149; As reported</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(279,672</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(49,475</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(123,243</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&#149; Pro forma</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(254,754</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(139,700</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(134,770</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
</TR>
<TR>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Net income per share
per US GAAP &#151; Proforma:</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&#149; Basic</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(0.42</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(0.22</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(0.27</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&#149; Diluted</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(0.42</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(0.22</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(0.27</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
</TR>
<TR>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
</TABLE>
</CENTER>
<P align="right"><FONT size="2">F-35</FONT>

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

<P align="right"><FONT size="2"><B>NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS</B>
</FONT>

<P align="left"><FONT size="2">The fair value of each option grant is
estimated on the date of grant using the
Black &#038; Scholes option pricing model, with
the following assumptions for grants made
during 2002, 2001 and 2000: dividend yields
of 0% for all periods; annual risk-free
interest rate of 3.3%, 4.1% and 5% for 2002,
2001 and 2000 respectively; expected
volatility of 83%, 79% and 30% for 2002, 2001
and 2000 respectively; and the expected
option vesting period of four years for all
periods.
</FONT>

<P align="left"><FONT size="2">In 2000, the Company entered into employment
arrangements with Mr.&nbsp;Perez and Dr.&nbsp;Lassus,
whereby each was granted a certain number of
free shares and a certain number of service
and performance options (see Note 31). Each
of the option agreements included loan
provisions whereby the two individuals could
obtain loans representing 100% of the option
exercise price. The loan agreements included
certain prepayment features and, as a result,
the related amount of interest to be paid on
the loans was uncertain and, therefore, the
ultimate option price was uncertain. Under US
GAAP, when the number of shares and the
option price are unknown, variable plan
accounting must be followed. Under variable
plan accounting, compensation cost is
re-measured each period based on the
difference between the exercise price and the
fair market value of the stock. This
re-measurement occurs up until there is a
measurement date (i.e. the date at which both
the number of shares and the option or award
prices are known). Both the service options
and performance options granted to these
individuals are accounted for under variable
plan accounting when determining employee
compensation expense under US GAAP. A
compensation expense of <FONT face="'Times New Roman',Times">&#128;</FONT> 94,080 thousand was
recorded in 2000 with respect to the service
options and performance options granted to
these individuals, which was reversed in 2001
when the fair market value of the stock went below
the exercise price of the options. No
compensation expense or benefit was recorded
in 2002 with respect to such issuances. In US
GAAP, pursuant to EITF 95-16 &#147;Accounting for
Stock Compensation Arrangements with Loan
Features&#148;, the loans are presented as a
reduction to shareholders&#146; equity, and interest on the loans is presented as a
reduction of compensation expense. The
Company recorded interest with respect to
these loans in the amount of <FONT face="'Times New Roman',Times">&#128;</FONT> 3,139 thousand
in 2000,
<FONT face="'Times New Roman',Times">&#128;</FONT> 4,877 thousand in 2001 and <FONT face="'Times New Roman',Times">&#128;</FONT> 1,706 thousand in 2002 (net of provision).
They were reflected in the Consolidated
Statement of Income in interest income under
IAS and in general and administrative
expenses under US GAAP.
</FONT>


<P align="left"><FONT size="2"><B>Purchase consideration</B>
</FONT>

<P align="left"><FONT size="2">Under US GAAP, certain considerations
exchanged in a business combination that
requires continued employment of the selling
shareholders are treated as compensation
expenses. Under IAS, these considerations
are treated as part of the purchase price
allocation.
</FONT>


<P align="left"><FONT size="2"><B>Goodwill amortization</B>
</FONT>

<P align="left"><FONT size="2">On January&nbsp;1, 2002 the Company adopted the
provisions of the Statement of Financial
Accounting Standard SFAS No 142, &#147;Goodwill
and other intangible assets&#148;, issued by the
Financial Accounting Standards Board
(&#147;FASB&#148;) in July 2001. SFAS 142 requires
that goodwill and intangible assets with
indefinite lives no longer be amortized but
be tested for impairment at least annually
in accordance with the provisions of SFAS
142. Statement 142 also requires that
intangible assets with definite useful lives
be amortized over their respective estimated
useful lives to their estimated residual
values and be reviewed for impairment in
accordance with SFAS No 144, &#147;Accounting for
the impairment of long-lived assets to be
disposed of&#148;, which was also adopted on
January&nbsp;1, 2002.
</FONT>

<P align="left"><FONT size="2">During 2002, as a result of its adoption,
the Company did not recognize amortization
expense under US GAAP. The Company has
reassessed the useful lives of its
intangible assets and has not made any
adjustment. The Company did not reclassify
any indefinite-life intangible assets from
goodwill, nor did the Company reclassify any
intangible assets as goodwill. Based on
impairment testing, the Company recorded in
2002 a goodwill write-down of <FONT face="'Times New Roman',Times">&#128;</FONT> 22,124
thousand under IAS (see Note 8). This
write-down was reversed under US GAAP
pursuant to the provisions of SFAS 142.
</FONT>

<P align="left"><FONT size="2">For the years ended December&nbsp;31, 2001 and
2000, the net income (loss)&nbsp;adjusted for
effect of no amortization of goodwill is as
follows:
</FONT>

<CENTER>
<TABLE cellspacing="0" border="0" cellpadding="0" width="100%">
<TR valign="bottom">
    <TD width="66%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" colspan="7"><FONT size="1"><B>(in thousands of euros)</B></FONT></TD>
</TR>
<tr><td>&nbsp;</td></tr>
<TR valign="bottom">
    <TD nowrap align="center"><FONT size="1"><B>Years ended December 31</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>2001</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>2000</B></FONT></TD>
</TR>
<TR valign="bottom">
    <TD nowrap align="center"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="3"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="3"><HR size="1" noshade></TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Net loss in accordance with US GAAP</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(49,475</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(123,243</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Goodwill amortization</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">27,162</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">11,204</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2"><B>Net loss adjusted for effect
of no amortization of goodwill</B></FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2"><B>(22,313</B></FONT></TD>
    <TD nowrap><FONT size="2"><B>)</B></FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2"><B>(112,039</B></FONT></TD>
    <TD nowrap><FONT size="2"><B>)</B></FONT></TD>
</TR>
<TR>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Adjusted net income (loss)&nbsp;per share:</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&#149; Basic</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(0.04</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(0.23</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&#149; Diluted</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(0.04</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(0.23</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
</TR>
<TR>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
</TABLE>
</CENTER>
<P align="left"><FONT size="2">The allocation of goodwill to the
Company&#146;s reportable segments is as
follows:
</FONT>

<CENTER>
<TABLE cellspacing="0" border="0" cellpadding="0" width="100%">
<TR valign="bottom">
    <TD width="54%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" colspan="11"><FONT size="1"><B>(in thousands of euros)</B></FONT></TD>
</TR>
<tr><td>&nbsp;</td></tr>
<TR valign="bottom">
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>Financial</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom">
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>Services</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom">
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>Telecommunications</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>and Security</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>Total</B></FONT></TD>
</TR>
<TR valign="bottom">
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="3"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="3"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="3"><HR size="1" noshade></TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2"><B>December&nbsp;31, 2001</B></FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2"><B>32,906</B></FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2"><B>83,674</B></FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2"><B>116,580</B></FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Additions</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">1,093</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">1,093</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Effect of change for
acquisitions
and disposals</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">5,511</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">5,511</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Exchange rate differences</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(384</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(1,340</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(1,724</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
</TR>
<TR>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2"><B>December&nbsp;31, 2002</B></FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2"><B>38,033</B></FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2"><B>83,427</B></FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2"><B>121,460</B></FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
</TABLE>
</CENTER>

<P align="left"><FONT size="2"><B>Other comprehensive income</B>
</FONT>

<P align="left"><FONT size="2">For the purpose of this reconciliation,
the Company has adopted the accounting
treatment prescribed by SFAS No 130,
&#147;Reporting Comprehensive Income&#146;&#146; (FAS
130). FAS 130 establishes standards
</FONT>

<P align="right"><FONT size="2">F-36</FONT>

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

<P align="right"><FONT size="2"><B>NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS</B>
</FONT>

<P align="left"><FONT size="2">for reporting comprehensive income (loss)
and its components in financial statements.
Comprehensive income (loss), which includes
all changes in equity during a period from
non-owner sources, is composed primarily of
the unrealized gains and losses on
marketable equity investments, net of tax,
and foreign currency translation
adjustments, not recorded in the
consolidated statements of income. After
implementation of IAS 39, there are no
reconciling items between IAS and US GAAP
related to other comprehensive income,
except for the accounting for pension (<FONT face="'Times New Roman',Times">&#128;</FONT>
4,712 thousand in 2001, <FONT face="'Times New Roman',Times">&#128;</FONT> 8,008 thousand in
2002) and for the foreign currency
translation adjustment effect of US GAAP
adjustments (<FONT face="'Times New Roman',Times">&#128;</FONT> 199 thousand in 2001, <FONT face="'Times New Roman',Times">&#128;</FONT> 136
thousand in 2002).
</FONT>

<P align="left"><FONT size="2">FASB Statement No 87, &#147;Employers&#146; Accounting
for Pension&#148;, requires the Company to
recognize a minimum pension liability equal
to the amount by which the actuarial present
value of the accumulated benefit obligations
exceeds the fair value of plan&#146;s assets,
i.e. the unfunded amount. This liability is
recorded, net of tax, within other
comprehensive income.
</FONT>


<P align="left"><FONT size="2"><B>33.</B>&nbsp; <B>OTHER REQUIRED US GAAP DISCLOSURES</B>
</FONT>


<P align="left"><FONT size="2"><B>Revenue Recognition</B>
</FONT>

<P align="left"><FONT size="2">In December 1999, the Securities and Exchange
Commission (&#147;SEC&#148;) issued Staff Accounting
Bulletin No 101, &#147;Revenue Recognition in
Financial Statements&#148; (SAB 101) and has
amended it in March 2000. The Company has
assessed that its revenue recognition as
described in Note 2 complies with the
principles identified in SAB 101.
</FONT>

<P align="left"><FONT size="2">The Company has considered SOP 97-2,
&#147;Software Revenue Recognition&#148;. As at
December&nbsp;31, 2002, the Company has assessed
that its revenue recognition related to
licensing, selling, leasing, or otherwise
marketing computer software complies with
the principles identified in SOP 97-2 and
SOP 98-9, &#147;Modification of SOP 97-2
Software Revenue Recognition with Respect
to Certain Transactions&#148;.
</FONT>


<P align="left"><FONT size="2"><B>New accounting pronouncements under US GAAP</B>
</FONT>


<P align="left"><FONT size="2"><B>SFAS 141</B>
</FONT>

<P align="left"><FONT size="2">In July 2001, the FASB issued Statement No
141, &#147;Business Combinations&#148;. The provisions
of this Statement were required to be
adopted immediately. Statement 141 requires
that the purchase method of accounting be
used for all business combinations initiated
after June&nbsp;30, 2001 as well as all purchase
method business combinations completed after
June&nbsp;30, 2001.
</FONT>

<P align="left"><FONT size="2">Statement 141 also specifies criteria that
must be met in order for intangible assets
acquired in a purchase method business
combination to be recognized and reported apart from
goodwill. During 2002, the Company has not
entered into any business combination
transactions.
</FONT>


<P align="left"><FONT size="2"><B>SFAS 143</B>
</FONT>

<P align="left"><FONT size="2">In July 2001, the FASB issued FAS No 143,
&#147;Accounting for Asset Retirement Obligations&#148;
(&#147;FAS 143&#148;). FAS 143 prescribes the
accounting for retirement obligations
associated with tangible long-lived assets,
including the timing of liability recognition
and initial measurement of the liability.
FAS 143 requires that an asset retirement
cost should be capitalized as part of the
cost of the related long-lived asset and
subsequently allocated to expense using a
systematic and rational method. FAS 143 is
effective for fiscal years beginning after
June&nbsp;15, 2002 (January&nbsp;1, 2003 for the
Company). The Company does not expect the
adoption of FAS 143 have a material effect on
the consolidated financial statements.
</FONT>


<P align="left"><FONT size="2"><B>SFAS 144</B>
</FONT>

<P align="left"><FONT size="2">As mentioned above, the Company adopted SFAS
No 144, &#147;Accounting for the impairment or
disposal of long-lived assets&#148;, which was
issued by the FASB on October&nbsp;3, 2001. SFAS
144 supersedes SFAS No 121, &#147;Accounting for
the Impairment of Long-Lived Assets and for
Long-Lived Assets to Be Disposed of&#148;.
However, it retains many of the fundamental
provisions of that Statement. SFAS 144 also
amends the accounting and reporting
provisions of APB 30, &#147;Reporting the Results
of Operations-Discontinued Events and
Extraordinary, Unusual and Infrequently
Occurring Events and Transactions&#148;, to
broaden the definition of what constitutes a
discontinued operation, amends the accounting
and presentation for discontinued operations,
and amends ARB 51, &#147;Consolidated Financial
Statements to eliminate the exception to
consolidation for a temporarily controlled
subsidiary&#148;. SFAS 144 is effective for
fiscal years beginning after December&nbsp;31,
2001. The adoption of this standard does not
have a material impact on the Company&#146;s
consolidated net income and total
shareholders&#146; equity under US GAAP.
</FONT>


<P align="left"><FONT size="2"><B>SFAS 145</B>
</FONT>

<P align="left"><FONT size="2">In April 2002, the FASB issued FAS No 145, &#147;Revision of FASB
Statements No 4, 44 and 64, Amendment of FASB
Statement No 13, and Technical Connections&#148;
(&#147;FAS 145&#148;). Among other amendments and
rescissions, FAS 145 eliminates the
requirement that gains and losses from the
extinguishment of debt be aggregated and, if
material, classified as an extraordinary
item, net of the related income tax effect,
unless such gains and losses meet the
criteria in paragraph 20 of Accounting
Principles Board Opinion No 30, &#147;Reporting
the Results of Operation &#151; Reporting the
Effects of Disposal of a Segment of a
Business, and Extraordinary, Unusual and
Infrequently Occurring Events and
Transactions&#148;. FAS 145 is partially
effective for transactions occurring after
May&nbsp;15, 2002 and partially effective for
fiscal years beginning after May&nbsp;15, 2002.
The Company does not expect the adoption of
FAS 145 to have a material effect on its
consolidated financial statements.
</FONT>

<P align="right"><FONT size="2">F-37</FONT>

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

<P align="right"><FONT size="2"><B>NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS</B>
</FONT>


<P align="left"><FONT size="2"><B>SFAS 146</B>
</FONT>

<P align="left"><FONT size="2">In June 2002, the FASB issued FAS No 146
&#147;Accounting for Costs Associated with Exit or
Disposal activities&#148; (&#147;FAS 146&#148;). FAS 146
addresses financial accounting and reporting
for costs associated with exit or disposal
activities and nullifies EITF 94-3 &#147;Liability
Recognition for Certain Employee Termination
Benefits and other Costs to Exit an Activity
(including Certain Costs Incurred in a
restructuring)&#148;. FAS 146 requires that a
liability for a cost associated with an exit
or disposal activity to be recognized when
the liability is incurred. Under EITF 94-3,
a liability for an exit cost as generally
defined in EITF 94-3 was recognized at the
date of the commitment to an exit plan. FAS
146 states that a commitment to a plan, by
itself, does not create an obligation that
meets the definition of a liability.
Therefore, FAS 146 eliminates the definition
and requirements for recognition of exit
costs in EITF 94-3. It also establishes that
fair value is the objective for
initial measurement of the liability. FAS
146 is to be applied prospectively to exit or
disposal activities initiated after December
31, 2002. The applicability of FAS 146 to
future exit activities will depend on the
facts and circumstances surrounding such
activities, and such applicability will be
considered by management for any future exit
or disposal activities.
</FONT>


<P align="left"><FONT size="2"><B>FAS 148</B>
</FONT>

<P align="left"><FONT size="2">In December 2002, the FASB issued FAS No.
148, &#147;Accounting for Stock-Based Compensation
&#150; Transition and Disclosure &#150; an amendment of
FASB Statement No.&nbsp;123&#148;. FAS 148 amends FAS
123 to provide alternative methods of
transition for a voluntary change to the fair
value based method of accounting for
stock-based employee compensation. In
addition, FAS 148 amends the disclosure
requirements of FAS 123 to require prominent
disclosures in the financial statements about
the method of accounting for stock-based
employee compensation and the effect of the
method used on reported results. The
transition guidance and annual disclosure
provisions of FAS 148 are effective for
financial statements issued for fiscal years
ending after December&nbsp;15, 2002.
The Company has elected to continue
accounting for employee stock based
compensation in accordance with APB 25 and
related interpretations and has applied the
disclosure provisions of FAS 148 in Note 32
of its consolidated financial statements.
</FONT>


<P align="left"><FONT size="2"><B>FIN 45</B>
</FONT>

<P align="left"><FONT size="2">In November 2002, the FASB issued FASB
Interpretation No 45 &#147;Guarantor&#146;s Accounting
and Disclosure Requirements for Guarantees,
Including Indirect Guarantees of Indebtedness
of Others&#148; (&#147;FIN 45&#148;). FIN 45 requires the
guarantor to recognize, at the inception of a
guarantee, a liability for the fair value of
the obligation undertaken in issuing the
guarantee. It also elaborates on the
disclosures to be made by a guarantor in its
financial statements about its obligations
under certain guarantees that it has issued.
Disclosures required under FIN 45 are already
included in these financial statements,
however, the initial recognition and initial
measurement provisions of FIN 45 are
applicable on a prospective basis to
guarantees issued or modified after December
31, 2002. The Company does not expect the
adoption of FIN 45 to have a material effect
on its Consolidated Financial Statements.
</FONT>


<P align="left"><FONT size="2"><B>FIN 46</B>
</FONT>

<P align="left"><FONT size="2">In January 2003, the FASB issued FASB
Interpretation No 46 &#147;Consolidation of
Variable Interest Entities&#148; (&#147;FIN 46&#148;). Under
this FIN entities are separated into two
populations: (1)&nbsp;these for which voting
interests are used to determine consolidation
(this is the most common situation) and (2)
these for which variable interests are used
to determine consolidation. The FIN explains
how to identify Variable Interest Entities
(VIE)&nbsp;and how to determine when a business
enterprise should include the assets,
liabilities, non controlling interests, and
results of activities of a VIE in its
consolidated financial statements. The FIN is
effective as follows: for variable interests
in variable interest entities created after
January&nbsp;31, 2003 the FIN shall apply
immediately, for variable interests in
variable interest entities created before
that date, the FIN shall apply for public
entities &#150; as of the beginning of the first
interim or annual reporting period beginning
after June&nbsp;15, 2003. The Company has
performed initial review and has determined
that it does not have any interests in VIEs
as of the issuance of these financial
statements. The Company does not expect the
adoption of this FIN to have a material
effect on its consolidated financial
statements.
</FONT>


<P align="left"><FONT size="2"><B>Income taxes</B>
</FONT>

<P align="left"><FONT size="2">The components of income (loss)&nbsp;before income tax are as follows:
</FONT>

<CENTER>
<TABLE cellspacing="0" border="0" cellpadding="0" width="100%">
<TR valign="bottom">
    <TD width="45%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" colspan="11"><FONT size="1"><B>(in thousands of euros)</B></FONT></TD>
</TR>
<tr><td>&nbsp;</td></tr>
<TR valign="bottom">
    <TD nowrap align="center"><FONT size="1"><B>Years ended December 31</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>2002</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>2001</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>2000</B></FONT></TD>
</TR>
<TR valign="bottom">
    <TD nowrap align="center"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="3"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="3"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="3"><HR size="1" noshade></TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Domestic*</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">10,299</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(1,436</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(51,630</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Foreign</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(322,067</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(112,968</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">180,339</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2"><B>Income (loss)&nbsp;before tax</B></FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2"><B>(311,768</B></FONT></TD>
    <TD nowrap><FONT size="2"><B>)</B></FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2"><B>(114,404</B></FONT></TD>
    <TD nowrap><FONT size="2"><B>)</B></FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2"><B>128,709</B></FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
</TABLE>
</CENTER>

<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">
<TR valign="top">
    <TD width="1%" align="left" nowrap><FONT size="2">*</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="96%"><FONT size="2">Luxembourg.</FONT></TD>
</TR>
</TABLE>

<P align="left"><FONT size="2"><B>Presentation of the Consolidated Statement of Income</B>
</FONT>

<P align="left"><FONT size="2">Under US GAAP, the consolidated statements
of income should be restated to present
goodwill amortization above operating income
(loss).
</FONT>

<P align="left"><FONT size="2">As a result of the adoption of SFAS 142 as of
January&nbsp;1, 2002, the Company no longer
amortizes goodwill under US GAAP.
Consequently, goodwill amortization no longer
represents a presentation difference between
operating income (loss)&nbsp;under IAS and
operating income (loss)&nbsp;under US GAAP.
</FONT>

<P align="right"><FONT size="2">F-38</FONT>

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

<P align="right"><FONT size="2"><B>NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS</B>
</FONT>

<P align="left"><FONT size="2">The operating income would have been as follows under US GAAP:
</FONT>

<CENTER>
<TABLE cellspacing="0" border="0" cellpadding="0" width="100%">
<TR valign="bottom">
    <TD width="52%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" colspan="11"><FONT size="1"><B>(in thousands of euros)</B></FONT></TD>
</TR>
<tr><td>&nbsp;</td></tr>
<TR valign="bottom">
    <TD nowrap align="center"><FONT size="1"><B>Years ended December 31</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>2002</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>2001</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>2000</B></FONT></TD>
</TR>
<TR valign="bottom">
    <TD nowrap align="center"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="3"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="3"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="3"><HR size="1" noshade></TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2"><B>Operating income (loss)&nbsp;per IAS</B></FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2"><B>(184,654</B></FONT></TD>
    <TD nowrap><FONT size="2"><B>)</B></FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2"><B>(153,625</B></FONT></TD>
    <TD nowrap><FONT size="2"><B>)</B></FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2"><B>127,383</B></FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Goodwill amortization
on consolidated subsidiaries</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(47,117</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(27,162</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(11,204</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
</TR>
<TR>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2"><B>Operating income (loss) -
US presentation</B></FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2"><B>(231,771</B></FONT></TD>
    <TD nowrap><FONT size="2"><B>)</B></FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2"><B>(180,787</B></FONT></TD>
    <TD nowrap><FONT size="2"><B>)</B></FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2"><B>116,179</B></FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Goodwill amortization
on consolidated subsidiaries</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">47,117</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Provision for a loan to the former
Chairman of the Board</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(67,582</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Purchase consideration</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(2,351</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(8,104</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Capitalized development costs</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(1,803</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(3,227</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(2,291</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Share options accounting</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(2,887</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">69,262</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(229,724</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Interests accrued on loans
related to share options</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">1,706</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">4,877</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">3,139</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Other differences</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">360</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">564</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">1,256</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2"><B>Operating income
per US GAAP</B></FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2"><B>(257,211</B></FONT></TD>
    <TD nowrap><FONT size="2"><B>)</B></FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2"><B>(117,415</B></FONT></TD>
    <TD nowrap><FONT size="2"><B>)</B></FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2"><B>(111,441</B></FONT></TD>
    <TD nowrap><FONT size="2"><B>)</B></FONT></TD>
</TR>
</TABLE>
</CENTER>


<P align="right"><FONT size="2">F-39</FONT>



</BODY>
</HTML>
[{"type": "20-F", "sequence": "1", "filename": "y00627e20vf.htm", "description": "FORM 20-F", "secsgml_size_bytes": 1710443}]
{"company-data": {"conformed-name": "GEMPLUS INTERNATIONAL SA", "cik": "0001128749", "assigned-sic": "3674", "irs-number": "000000000"}, "filing-values": {"form-type": "20-F", "act": "34", "file-number": "000-31052", "film-number": "03787089"}, "business-address": {"street1": "AEROGOLF CENTER 1 HOHENHOF", "street2": "SENNINGERBERG 011-352-2634-6100", "city": "GRAND DUCHY OF LUXEM", "state": "N4", "zip": "L-2633"}, "mail-address": {"street1": "AEROGOLF CENTER 1 HOHENHOF", "street2": "SENNINGERBERG GRAND DUCHY OF LUXEMBOURG"}}
FORM 20-F
Table of Contents
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 20-F
o
REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR (g) OF THE SECURITIES EXCHANGE ACT OF 1934
OR
x
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2002
OR
o
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from           to           .
Commission file number: 0-31052
Gemplus International S.A.
(Exact name of registrant as specified in its charter)
Not Applicable
(Translation of registrant's name into English)
Grand Duchy of Luxembour
g
(Jurisdiction of incorporation or organization)
Aerogolf Center
1 A, Hohenhof
L-2633 Senningerberg
Grand Duchy of Luxembourg
(Address of principal executive offices)
Securities registered or to be registered pursuant to Section 12(b) of the Act:
None.
Securities registered or to be registered pursuant to Section 12(g) of the Act:
Ordinary Shares, without par value
Securities for which there is a reporting obligation pursuant to Section 15(d)
of the Act:
None
Indicate the number of outstanding shares of each of the issuer's classes of
capital or common stock as of the close of the period covered by the annual
report:
633,570,938
Ordinary Shares, without par value
Indicate by check mark whether the registrant: (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports) and (2) has been subject to such
filing requirements for the past 90 days.
x
Yes
o
No
Indicate by check mark which financial statement item the registrant has
elected to follow.
o
Item 17
x
Item 18
1
TABLE OF CONTENTS
Special Note Regarding Forward-Looking Statements
Summary
PART I
Item 1. Identity of Directors, Senior Management and Advisors
Item 2. Offer Statistics and Expected Timetable
Item 3. Key Information
Item 4. Information on the Company
Item 5. Operating and Financial Review and Prospects
Item 6. Directors, Senior Management and Employees
Item 7. Major Shareholders and Related Party Transactions
Item 8. Financial Information
Item 9. The Offer and Listing
Item 10. Additional Information
Item 11. Quantitative and Qualitative Disclosures About Market Risk
Item 12. Description of Securities Other than Equity Securities
PART II
Item 13. Defaults, Dividend Arrearages and Delinquencies
Item 14. Material Modifications to the Rights of Security Holders and Use of Proceeds
Item 15. Controls and Procedures
Item 16. [Reserved].
PART III
Item 17. Financial Statements
Item 18. Financial Statements
Item 19. Exhibits
Table of Contents
TABLE OF CONTENTS
Special Note Regarding Forward-Looking Statements
4
Summary
4
PART 1
Item 1. Identity of Directors, Senior
    Management and Advisors
7
Item 2. Offer Statistics and Expected
    Timetable
7
Item 3. Key Information
7
Item 4. Information on the Company
21
Item 5. Operating and Financial Review and
    Prospects
43
Item 6. Directors, Senior Management and
    Employees
61
Item 7. Major Shareholders and Related Party
    Transactions
78
Item 8. Financial Information
82
Item 9. The Offer and Listing
86
Item 10. Additional Information
88
Item 11. Quantitative and Qualitative
    Disclosures About Market Risk
97
Item 12. Description of Securities Other
    than Equity Securities
100
PART II
Item 13. Defaults, Dividend Arrearages and
    Delinquencies
100
Item 14. Material Modifications to the
    Rights of Security Holders and Use of Proceeds
100
Item 15. Controls and Procedures
100
Item 16. [Reserved]
100
PART III
Item 17. Financial Statements
100
Item 18. Financial Statements
100
Item 19. Exhibits
101
2
Table of Contents
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
Some of the statements in this Annual Report constitute forward-looking
statements. These statements relate to future events or our future financial
performance and involve assumptions, known and unknown risks, uncertainties,
and other factors that may cause our or our industry's actual results, levels
of activity, performance or achievements to be materially different from any
future results, levels of activities, performance or achievements expressed or
implied by such forward-looking statements. In some cases, you can identify
forward-looking statements by terminology such as "may," "will," "predicts,"
"potential," or "continue" or the negative of such terms or other comparable
terminology. These statements are only predictions. Actual events or results
may differ materially.
The assumptions, risks and uncertainties involved in forward-looking
statements include without limitation: economic, competitive and technological factors affecting
markets, services, and prices; changes in spending on technology and technology
upgrades; the extent and timing of a potential recovery in the
telecommunications industry segment; continued demand for smart cards and
related solutions; development of new markets for wireless communications
products, financial services and network systems products using chip card
technology; success of restructuring efforts; chip card technology being
adopted in wireless transmission standards and other technology
standards; political, regulatory and commercial risks inherent in international
operations, including the risk of currency exchange rate fluctuations; and
general economic and business conditions in various regions of the world.
Although we believe that the expectations reflected in the forward-looking
statements are reasonable, we cannot guarantee future results, levels of
activity, performance or achievements. Factors that could cause actual results
to differ materially from those estimated by the forward-looking statements
contained in this Annual Report include, but are not limited to, the risk
factors set forth under "Item 3. Key Information — Risk Factors", "Item 5.
Operating and Financial Review and Prospects" and elsewhere in this Annual
Report.
You are cautioned not to place undue reliance on forward-looking
statements, which speak only as of the date of this Annual Report. We are not
under any obligation, and we expressly disclaim any obligation, to update or
alter any forward looking statements, whether as a result of new information,
future events or otherwise, except to the extent that, as a result of
fulfilling our disclosure obligations under applicable U.S. securities laws and
regulations, we determine that such an update is necessary.
SUMMARY
The following summary should be read together with the more detailed
information regarding Gemplus International S.A. and our consolidated financial
statements and notes thereto appearing elsewhere in this Annual Report.
Our Business
We are a leading provider of technology, products and services that enable
wireless network operators to offer their customers secure communications and
transactions through mobile phones, and that enable companies, financial
institutions and public entities to provide customized services to their
customers and employees through a range of systems, including financial card
networks, loyalty programs, identification and Internet security systems.
4
Table of Contents
We currently have two main business segments:
•
Telecommunications
, which includes our wireless products and
services, as well as prepaid telephone cards and other products; and
•
Financial Services and Security
, which includes systems and
services based on chip card technology in areas such as financial
services, identification, health care, corporate security, loyalty
programs, transportation access, pay-television applications,
e-business security activities as well as magnetic stripe
("conventional") cards for banking applications.
Our wireless products and services are used in the Global System for
Mobile Communications standard (GSM), which is the mobile phone transmission
standard that is dominant in Europe and the most widely used in the world. Our
wireless products consist primarily of subscriber identity modules (SIM cards), which are small plastic modules with embedded microcontroller chips that
are inserted in mobile phones. These microcontroller chips are capable of
storing and processing data like a miniature computer, transferring processed
data to a network reader and running software programs or "applets" that
interact remotely with server-based applications.
The wireless communication market is entering a new era during which
mobile telephone operators increasingly use their wireless networks for data
transmission in addition to voice transmission services. We believe that this
shift in the wireless communication market will accelerate as wireless operators
construct and develop networks that use new wireless transmission standards.
These new generation networks will allow wireless operators to provide data
transmission services that go well beyond what existing mobile telephones
provide, including high speed Internet access and mobile commerce. Because of
its security, portability and flexibility, identification module technology has
been included in the specifications for the new wireless transmission standards
in many regions, including Europe and most of Asia, and we anticipate that
wireless operators in other regions, including the United States and other
parts of Asia, will also choose to adopt this technology for their new wireless
networks.
Our chip card technology also offers a platform for a variety of service
applications over other network systems. In the financial services market, for
example, banks can issue credit and debit cards with embedded chips to reduce
fraud and to provide their customers with premium value services, including
e-purse applications (meaning applications that store cash values that can be
used to make purchases) and mobile banking services. In the identification
systems and security networks markets, plastic cards with embedded chips can be
used to provide more secure access to restricted facilities or computer
networks and to increase the effectiveness of identification and security
systems.
In our core telecommunications and financial services and security
segments, we provide a broad range of software and services that allow our
customers to implement and manage sophisticated systems that take advantage of
our chip card technology. Our services include customization, technical
support, consulting, system design and integration and system operation.
We also provide non-chip card products and services in other areas related
to our main telecommunications and financial services and security segments,
such as magnetic stripe credit cards for banks, card based transportation
access products and authentification and non-repudiation software.
Our revenues totaled
€
787.4 million in 2002. Sales of our wireless
products and services represented 51% of our overall revenues in 2002, while
sales of our chip card products and services in our financial services and
security segment represented approximately 31%. Based on the 2002 worldwide
chip card vendor shipments ranking of Gartner Dataquest, an industry analyst,
we are the leading provider of chip cards with a global market share of
approximately 32% in terms of units sold. Based on
5
Table of Contents
information published by Eurosmart, a chip card industry association, in
April 2003, we estimate that our global market share was approximately 31.6% in
terms of units sold in 2002.
We are registered with the Registrar of Commerce in Luxembourg under RC
No. B73145. Our registered office is located at Aerogolf Center, 1 A
Hohenhof, L-2633 Senningerberg, Grand Duchy of Luxembourg and our telephone
number is +352.26.34.61.00. Our World Wide Web site address is
www.gemplus.com. The information in our Web site is not incorporated by
reference into this Annual Report.
6
Table of Contents
PART I
Item 1. Identity of Directors, Senior Management and Advisors
Not applicable.
Item 2. Offer Statistics and Expected Timetable
Not applicable.
Item 3. Key Information
SELECTED CONSOLIDATED FINANCIAL DATA
The selected consolidated financial data set forth below has been derived
from, and is qualified in its entirety by reference to our audited consolidated
financial statements and notes thereto, which have been prepared in accordance
with international accounting standards, commonly referred to as IAS, which
differ in certain significant respects from U.S. generally accepted accounting
principles, commonly referred to as U.S. GAAP. Note 32 to our audited
consolidated financial statements describes the principal differences between
IAS and U.S. GAAP as they relate to us, and reconciles our net income and
shareholders' equity to U.S. GAAP. All references below are in millions, except
per share amounts or as otherwise stated.
Year ended
and as at December 31,
1998
1999
2000
2001
2002
€
€
€
€
€
$
(1)
INCOME STATEMENT DATA:
Net sales
583
767
1,205
1,023
787
869
Cost of sales
(383
)
(487
)
(751
)
(716
)
(587
)
(649
)
Gross profit
200
280
454
307
200
220
Research and development expenses
(45
)
(62
)
(91
)
(113
)
(92
)
(102
)
Reversal of research credit allowance
—
—
12
—
—
—
Selling and marketing expenses
(78
)
(97
)
(159
)
(165
)
(112
)
(124
)
General and administrative expenses
(48
)
(64
)
(90
)
(111
)
(90
)
(99
)
Litigation expenses
—
—
—
(18
)
—
—
Management severance expenses
—
—
—
(26
)
—
—
Restructuring expenses
—
—
—
(28
)
(90
)
(99
)
Goodwill amortization and impairments
(5
)
(7
)
(11
)
(27
)
(47
)
(52
)
Legal reorganization expense
—
(65
)
—
—
—
—
Operating income (loss)
24
(15
)
116
(181
)
(232
)
(256
)
Financial income
0
1
21
28
28
32
Financial expense
(5
)
(5
)
(9
)
(8
)
(80
)
(88
)
Other income (expense), net
12
(1
)
0
46
(29
)
(32
)
Income (loss) before taxes
31
(20
)
129
(114
)
(312
)
(344
)
Provision for income taxes
(7
)
(12
)
(30
)
14
(9
)
(10
)
Net income (loss)
24
(32
)
99
(100
)
(321
)
(354
)
Net income (loss) per share
(2)
– Basic
0.08
(0.10
)
0.20
(0.16
)
(0.53
)
(0.58
)
– Diluted
0.08
(0.10
)
0.18
(0.16
)
(0.53
)
(0.58
)
7
Table of Contents
Year ended
and as at December 31,
1998
1999
2000
2001
2002
€
€
€
€
€
$
(1)
Amount in accordance with U.S. GAAP
– Net income (loss) per U.S. GAAP
23
(44
)
(123
)
(49
)
(282
)
(311
)
– Net income (loss) per share
(2)
– Basic
0.08
(0.14
)
(0.25
)
(0.08
)
(0.46
)
(0.51
)
– Diluted
0.07
(0.14
)
(0.25
)
(0.08
)
(0.46
)
(0.51
)
OTHER DATA:
Adjusted
EBITDA
(3)
69
104
195
(60
)
(98
)
(109
)
Net cash from (used for) operating
activities
85
75
69
(23
)
(63
)
(69
)
Net cash (used for) investing activities
(41
)
(74
)
(266
)
(65
)
(47
)
(52
)
Net cash from (used for) financing
activities
(61
)
29
818
(35
)
4
4
BALANCE SHEET DATA:
Cash and cash equivalents
18
27
636
491
417
461
Trade accounts receivable, net
151
201
311
189
145
160
Other current assets
29
46
97
104
93
107
Inventory, net
56
96
174
140
97
103
Total assets
495
667
1,909
1,531
1,218
1,344
Long-term debt, less current portion
10
8
6
—
—
—
Minority interest
5
9
17
17
15
17
Shareholders' equity
260
294
1,385
1,168
860
950
Total assets under U.S. GAAP
500
671
1,767
1,441
1,234
1,362
Shareholders' equity under U.S. GAAP
265
298
1,243
1,078
879
970
(1)
Dollar amounts have been translated for convenience at the Noon Buying Rate
on April 25, 2003, of US $1.00 =
€
0.91.
(2)
Basic net income per share under IAS and U.S. GAAP is calculated by
dividing net income by the weighted average number of our ordinary shares
outstanding during each period, in each case adjusted for a fifty-for-one
share split that took place on June 21, 2000. The weighted average number
of shares used in calculating the basic net income per share was
298,523,800, 313,120,400 497,523,946, 636,992,392 and 606,222,660 for the
years ended December 31, 1998, 1999, 2000, 2001 and 2002. Diluted net
income per share under IAS and U.S. GAAP is calculated in the same manner
as basic net income per share, except that dilutive effect of the exercise
of our outstanding share options and warrants is included in the
determination of the weighted average number of shares outstanding for
each period. The weighted average number of shares used in calculating
the diluted net income per share was 307,274,750, 313,120,400,
539,256,206, 636,992,392 and 606,222,660 for the years ended December 31,
1998, 1999, 2000, 2001 and 2002.
(3)
Adjusted EBITDA is defined as earnings before interest expense (net of
interest income), provision for income taxes and depreciation and
amortization expense and legal reorganization expense. We believe that
Adjusted EBITDA is a useful indicator of operational strength and
performance of our business. However, Adjusted EBITDA is not a
measurement of operating performance calculated in accordance with IAS or
U.S. GAAP, and should not be considered a substitute for operating income
or net income as a measure of profitability, or a substitute for cash
flows from operating activities as a measure of liquidity, in each case
determined in accordance with IAS or U.S. GAAP. Because all companies do
not calculate EBITDA identically, and because our adjustments relate to a
legal reorganization that is unique to our company, the presentation of
Adjusted EBITDA contained herein may not be comparable to similarly
entitled measures of other companies.
The reconciliation of the adjusted EBITDA with the operating income
is as follows:
1998
1999
2000
2001
2002
€
€
€
€
€
$
(1)
Operating
income (loss)
24
(15
)
116
(181
)
(232
)
(256
)
Depreciation, amortization and
impairment
45
54
79
121
134
147
Legal reorganization expense
—
65
—
—
—
—
Adjusted EBITDA
69
104
195
(60
)
(98
)
(109
)
8
Table of Contents
Exchange Rate Information And The European Monetary System
Under the provisions of the Treaty on European Monetary Union negotiated
at Maastricht in 1991 and signed by the then 12 member states of the European
Union in early 1992, a European Monetary Union, known as EMU, was implemented
on January 1, 1999, and a single European currency, known as the euro, was
introduced. The following 11 member states participate in EMU and have adopted
the euro as their national currency: Austria, Belgium, Finland, France,
Germany, Ireland, Italy, Luxembourg, the Netherlands, Portugal and Spain.
Greece joined the EMU in January 2001. The legal rate of conversion between
French francs and the euro was fixed on December 31, 1998, at
€
1.00 = FF
6.55957.
For your convenience, this Annual Report contains translations of certain
euro amounts into U.S. dollars. Unless otherwise indicated, dollar amounts
have been translated from euros at the rate of US $1.00 =
€
0.91, the Noon
Buying Rate for the euro on April 25, 2003. The "Noon Buying Rate" is the noon
buying rate in New York City for cable transfers in foreign currencies as
certified for customs purposes by the Federal Reserve Bank of New York. This
does not mean that we actually converted these amounts into U.S. dollars at
that rate, and you should not assume that they could have been converted at
that or any other rate.
Fluctuations in the exchange rate between the euro and the U.S. dollar
will affect the U.S. dollar price of our American Depositary Shares (ADSs) on
the Nasdaq National Market.
Our reporting currency during 1998 and 1999 was the French franc. We
began reporting in euros on January 1, 2000. The following table shows the
French franc/U.S. dollar and euro/U.S. dollar exchange rates based on the Noon
Buying Rate expressed in French francs per U.S. dollar and euros per U.S.
dollar.
French francs
euros
Period-
Average
Period-
Average
end Rate
Rate
(1)
High
Low
end Rate
Rate
High
Low
1998
5.59
5.90
6.21
5.39
—
—
—
—
1999
(2)
6.51
6.16
6.56
5.49
1.00
0.94
1.00
0.84
2000
—
—
—
—
1.07
1.08
1.21
0.97
2001
—
—
—
—
1.12
1.12
1.19
1.05
2002
—
—
—
—
0.95
1.06
1.16
0.95
December
—
—
—
—
1.00
1.06
1.45
0.82
2003
January
—
—
—
—
0.96
1.03
1.16
0.92
February
—
—
—
—
0.84
0.88
1.01
0.81
March
—
—
—
—
0.83
0.77
0.89
0.63
April
—
—
—
—
0.94
0.87
1.00
0.79
May
—
—
—
—
1.29
1.08
1.35
0.95
June 1 - through June 26
1.17
1.20
1.17
1.13
(1)
The average of the Noon Buying Rates on the last business day of each
month (or portion thereof) during the relevant period.
(2)
The Federal Reserve Bank of New York stopped publishing Noon Buying Rates
for the French franc on January 15, 1999. Noon Buying Rates for French
francs for periods subsequent to January 15, 1999 have been calculated by
applying the fixed exchange rate of FF 6.55957 per
€
1.00 to the Noon
Buying Rate for euros.
9
Table of Contents
RISK FACTORS
Risks Related to Our Business
The significant downturn in the wireless communications industry may continue
to adversely affect our business.
Our business is significantly affected by trends in the wireless
communications industry, because a substantial portion of our revenues is
derived from sales of wireless products and services, which accounted for
approximately 51% of our revenues in 2002. Although the wireless
communications industry experienced tremendous growth through 2000, demand for
wireless products and services fell abruptly in 2001 and continued to fall in
2002, particularly in Europe and the United States, resulting in a 19% decline
in our overall revenues in 2002 compared to 2001. Because we typically earn
our highest margins from sales of wireless products, reduced demand for
wireless products also affected our profitability, resulting in an operating
loss of
€
232 million in 2002. In addition, the slowdown in the wireless
industry has led wireless operators to delay making the necessary investments
for the introduction of new wireless systems and technologies, which may limit
our ability to return to profitability through the introduction of new products
and services. If the slowdown in the wireless industry continues, our business
may be adversely affected.
The markets that we target for a substantial part of our future growth are in
very early stages of development, and may not develop rapidly or at all.
Many of the markets that we target for our future growth are currently
small or non-existent and need to develop if we are to achieve our growth
objectives. If some or all of these markets do not develop, or if they develop
more slowly than we anticipate, then our business may be adversely
affected. For example:
•
We are seeking to take advantage of the development of new
markets for wireless communications products and services, including
mobile commerce, mobile banking and mobile Internet services. These
markets are only just starting to develop. Since early 2001, these
markets have experienced a significant slowdown in investment
levels, and companies in these markets have had limited access to
capital.
•
We are also developing chip card products and services for
the financial services market. Chip card technology has not yet
been widely adopted by the financial services industry outside
France, Germany and the United Kingdom, largely due to the cost of
the necessary infrastructure, lack of internationally compatible
standards and the relatively limited capabilities of all but the
newest chip cards.
•
We are investing in identification and security networks
products and services, but so far we have not deployed our systems
on a widespread basis. Our businesses in all of these markets
currently represent start-up operations, and we do not know whether
these operations will be profitable. The development of these
markets will depend on many factors that are beyond our control,
including the factors that are discussed below.
10
Table of Contents
In 2001 and 2002 we had rapid and significant changes in our senior management,
and while we do not expect similar changes to occur in the near term, we cannot
be assured such changes will not occur.
We believe that having stable management is important to the management of
our company. In 2001 and 2002 we had rapid and significant changes in our
senior management, and although we do not expect similar changes to occur in
the near term, we cannot be assured that such changes will not occur and
adversely affect our business. Improvements in our performance and
operations depend significantly on the success of a
management team including a new Chief Executive Officer, who joined our company in September 2002, and a
new Executive Vice President of Operations, who joined our company in February
2003.
Our restructuring and repositioning strategies, or our implementation of those
strategies, may fail to provide positive results.
We implemented a restructuring plan in the second quarter of 2001 to address
the effects on our business of the global slowdown in the wireless
communications industry, which slowdown has led to a decline in sales of our
wireless products and services and an increase in our operating costs. We also
implemented a second restructuring plan in February 2002, which included
reducing approximately 1,140 employees from our workforce. In December 2002,
we announced and began consultations and implementation of a third
restructuring plan by which we aim to reduce our workforce by an additional
1,100 employees. If we are not able to reduce our operating costs and increase
our productivity because our restructuring plans do not provide the results
that we expect or are not implemented adequately, we may continue to experience
difficulties in growing our business.
Chip card technology may not be adopted in new wireless transmission standards
and infrastructure or in the financial services industry, such that we may lose
some of our existing customers or not obtain future customers.
Our ability to grow depends significantly on whether government and
industry organizations adopt chip card technology as part of their new
standards. These standards include the wireless 2G, 2.5G and 3G standards
promoted by various organizations around the world. If these organizations do
not adopt chip card technology, then we might not be able to penetrate some of
the new markets we are targeting, or we might lose some of our existing
customer base.
In order for us to achieve our growth objectives, chip card technology
must be adopted in a variety of areas, including:
•
some wireless communication devices that are currently not
equipped to read smart cards;
•
bank credit and debit card systems, which in most countries
still use magnetic stripe cards as their main technology;
•
computer equipment, which must include chip card readers as
standard equipment if the use of chip cards for Internet and other
applications is to become common;
•
widely used digital signature information technology security systems; and
•
national identity card programs.
11
Table of Contents
The decisions of standard setting bodies that may decide whether to
adopt chip card technology are likely to be based on factors such as:
•
the cost of adopting chip card technology relative to alternative systems;
•
the degree of security provided by chip card technology;
•
the development of competing technology to provide security and premium value services;
•
the relative ease or difficulty of implementing chip card technology; and
•
whether chip card technology becomes generally accepted by businesses and consumers.
We need to maintain and further develop our position as a provider of software
and services to earn higher margins from our technology.
The increasing sophistication of chip card technology places a premium on
providing innovative software, systems and  specialized consulting and services to
customers, in addition to manufacturing and supplying chip cards. Although we
have had some early success positioning ourselves as a provider of services and
systems, we cannot assure you that we will continue to be successful with this
strategy, or that we will be able to capture a significant share of the market
for the sophisticated services and systems that we believe are likely to
produce more attractive margins in the future. A significant portion of the
value of chip card technology lies in the development of operating systems and
applications that will permit the use of chip cards in new markets. In
contrast, the margins involved in manufacturing and selling chip cards can be
relatively small, and might not be sufficient to permit us to earn an
attractive return on our development investments.
We may fail to optimally manage our inventories of microcontroller chips or
suffer distruptions in our supply chain.
Our technology is based principally on microcontroller chips that run
software and downloaded applications. Because the wireless communications
industry has proven volatile in the past few years, experiencing rapid growth
in 2000, a sudden downturn in 2001, and a continued slowdown in 2002, we have
had difficulty managing our inventory levels of microcontroller chips.
Although in 2002 we reduced our inventory to more acceptable levels, managing
our inventory supply in the future, particularly if the industry undergoes
tremendous and rapid change, will remain a challenge to our procurement
strategy.
In addition, if the wireless communications industry experiences a sudden
upturn with significant levels of growth in the future, we will need to secure
adequate supplies of microcontroller chips to expand our production. If we are
not able to secure these supplies, or experience supply problems with the
newest generation of microcontroller chips that generate our highest margins,
we may record lower revenues and profits and lose market share to
competitors that have secured adequate chip supplies.
Until 1999, STMicroelectronics and Infineon were the only two major
silicon suppliers for the smart card industry, covering roughly 90% of market
needs. In 2000, we invested in an intensive multisourcing program to enlarge
our supplier base to include Atmel, Infineon and Philips.
12
Table of Contents
In 2002, we purchased approximately 90% of our microcontroller chips from
those three suppliers. While there are several other chip suppliers in the
market, the failure by one or more of our three main suppliers to continue to
meet our needs could have a material adverse affect on our business.
In order to secure an adequate supply of chips in the future, we may also
decide to provide financing for the expansion of a chip supplier's capacity by
pre-purchasing chips, which could expose us to the supplier's credit risk.
If we are unable to keep up with rapid changes in chip card technology, our
existing products and services could become obsolete or not competitive.
The market for our products and services is marked by rapid technological
change, frequent new product introductions and chip card technology
enhancements, uncertain product life cycles, changes in client demands and
evolving industry standards. New products and services based on new or
improved technologies or new industry standards can render existing products
and services obsolete and unmarketable. To succeed, we will need to enhance
our current products and service offerings and develop new products and
services on a timely basis to keep pace with developments related to chip card
technology and to satisfy the increasingly sophisticated requirements of our
customers. Any delays in developing and releasing enhanced or new products and
services or in keeping pace with continuous technological change may cause us
to lose our existing customer base.
The introduction of non-portable security devices onto PC motherboards
could limit the use of smart card technology as a means of securing computer
networks.
The process of developing our products and services is extremely complex
and requires significant continuing development efforts and investements. Our
investments in research and development have been considerable and may need to
increase, and may adversely affect our operating results and financial
condition.
Our quarterly financial results fluctuate and are difficult to predict, and if
our future results are below the expectations of investors, the price of our
shares or ADSs may decline.
Our operating results have varied substantially from quarter to quarter,
and we anticipate that this pattern will continue, particularly as we develop
our products and services in new markets. This variability makes it difficult
to use our quarterly results of operations as an indicator of possible trends.
Although these quarterly variations are a historical part of our business,
they could affect the market price of our shares or ADSs. In particular, if
our results of operations in any quarter are below the expectations of
investors, the trading price of our shares or ADSs may decrease materially.
In addition to general economic factors and factors that affect companies
generally, a number of factors specific to us are likely to cause quarterly
variations, including:
•
the mix of products and services that we are able to provide,
including in particular whether we are able to increase our higher
margin product and services, such as those we provide in the
wireless communications market, as a percentage of our sales;
•
the geographical mix of our sales, including the relative
extent of our growth in countries where our products and services
are sold at the most attractive prices;
13
Table of Contents
•
costs related to possible acquisitions of technology or
businesses, including costs related to the integration of acquired
businesses into our operations; and
•
success in maintaining and enhancing existing relationships
and developing new relationships with strategic partners, including
operating systems developers, systems integrators and other
implementation partners.
The period between our initial contact with a potential customer and a sale of
our products or services tends to be long and may be subject to delays.
The period between our initial contact with a potential customer and the
purchase of our products and services is often long and subject to delays
associated with the budgeting, approval and competitive evaluation processes
that frequently accompany significant capital expenditures. A lengthy sales
cycle may have an impact on the timing of our revenue, which may cause our
quarterly operating results to fall below investor expectations. We believe
that a customer's decision to purchase our products and services is often
discretionary, involves a significant commitment of resources, and is
influenced by customer budgetary cycles. To successfully sell our products and
services, we generally must educate our potential customers regarding their use
and benefits, which can require significant time and resources. There can be
no assurance that this significant expenditure of time and resources will
result in actual sales of our software and services.
If our products contain defects or if we make errors in providing services, we
could lose customers and revenue and become subject to costly claims.
Complex chip card based products such as ours can contain errors and
defects, particularly when first introduced or when new versions or
enhancements are released. Similarly, our services involve sophisticated
decisions that result in our customers making significant investments and
changes to their business organizations. Serious defects or errors in our
products or services could result in lost revenues or a delay in market
acceptance and would be detrimental to our reputation, which would harm our
business, operating results and financial condition.
Defects or other performance problems in our products and services could
also result in financial or other losses to our customers, in which case our
customers could seek compensation for losses from us. If these kinds of claims
were to occur, they could be time consuming and costly to defend and could harm
our reputation, which could result in a loss of our customers and a decrease in
our revenues. Although our sales and services agreements typically contain
provisions designed to limit our exposure to claims, existing or future laws or
unfavorable judicial decisions could potentially limit the effectiveness of
these limitation of liability provisions.
If our strategic relationships terminate or do not develop, we may lose
important sales and marketing opportunities.
We have established strategic relationships with telecommunications
carriers, operating systems and security software developers, financial
institutions and several government agencies and organizations. These
organizations are not always obligated to continue their relations with us, and
could terminate those relations at any time to work instead with our
competitors, or they could terminate their programs that use our products and
technology. If our strategic relationships are terminated, we might lose
important sales and marketing opportunities. These relationships expose our
products and services to many potential customers to which we may not otherwise
have access. In addition, these relationships provide us with insights into
new technology and with access to third-party service providers that our
customers can use for implementation assistance.
14
Table of Contents
Challenges to our intellectual property rights could cause us to incur costly
litigation, and if we are not successful, could result in our losing valuable
assets or market share.
Our success depends, in part, upon our proprietary technology and other
intellectual property rights. If we are not able to defend successfully our
industrial or intellectual property rights, we might lose rights to technology
that we need to develop our business, which may cause us to lose market share,
or we might be required to pay significant license fees for the use of such
technology. To date, we have relied primarily on a combination of patent,
trade secret and copyright laws, as well as nondisclosure and other contractual
restrictions on copying, reverse engineering and distribution to protect our
proprietary technology. We regularly prepare patent applications for
technology related to our chip cards, but there can no assurance that these
applications will be successful.
Litigation to enforce our intellectual property rights or protect our
trade secrets could result in substantial costs and may not be successful. Any
inability to protect intellectual property in our technology could seriously
harm our business, operating results and financial condition. In addition, the
laws of certain foreign countries may not protect our intellectual property
rights to the same extent as do the laws of France or the United States. Our
means of protecting our intellectual property rights in France, the United
States or any other country in which we operate may not be adequate to fully
protect our intellectual property rights. Similarly, if third parties claim
that we infringe on their intellectual property rights, we might be required to
incur significant costs and to devote substantial resources to the defense of
such claims, and if we are unsuccessful we could suffer costly judgments and
injunctions that could materially adversely affect our business, operating
results or financial condition.
We might be forced to change our product and service offerings or to pay higher
costs if the third-party technology that we use in our products changes or if
the price of such technology increases.
Most of our products integrate third-party technology that we license or
otherwise obtain the right to use, including:
•
third party operating systems;
•
security and cryptography technology for card operating
systems, which prevents unauthorized parties from tampering with our
cards; and
•
public key infrastructure technology that is used in Internet
and corporate security networks.
Technology providers frequently change their products and cease supporting
prior versions of their products. Should such cessation of support occur, we
cannot be assured that we will be able to adapt our products and services to
accommodate changes in the third party technology that we use. If not, we may
have to change the features of our products and services or to discontinue some
or all of them. Some changes in technology are accompanied by significant
price increases, which could increase our costs.
We have multinational operations that are subject to risks inherent in
international operations, including currency exchange rate fluctuations.
We conduct our business in all regions of the world, including in many
countries outside the United States and the European Union. As a result, we
are subject to political, regulatory and commercial risks inherent in
international operations, including the risk of currency exchange rate
fluctuations,
15
Table of Contents
particularly in relation to the U.S. dollar, the British pound, the
Chinese renminbi and the Singapore dollar.
Our operations are subject to the risks associated with international operations, which include:
•
slowdown or recession in global, regional or national economic growth;
•
tariffs and trade barriers;
•
exchange controls;
•
fluctuations in national currencies;
•
social and political risks;
•
national and regional labor disputes;
•
required compliance with a variety of foreign laws, regulations and standards; and
•
the difficulty of enforcing legal claims and agreements through certain legal systems.
Furthermore, our regional businesses are subject to cyclical fluctuations
in the industries and economies in which they operate. Any of the risks
discussed above could adversely affect our results of operations.
In 2002, we earned 12% of our revenues in China, and we expect to continue
to earn a material portion of our revenues in China. Conducting business and
manufacturing activities in the China is subject to special risks that may not
arise in other countries, including:
•
the possible failure to adopt, or the adoption of
inconsistent or ineffectual, market-oriented economic reforms by the
government;
•
uncertainties regarding the interpretation and enforcement of
laws and regulations; and
•
the devaluation of the local currency or the imposition of
restrictions on currency conversion or expatriation of profits.
16
Table of Contents
Future acquisitions may adversely affect our business.
Our strategy to achieve growth may lead us to make significant
acquisitions of businesses that are believed to be complementary to our own.
Future acquisitions may require us to use significant financial resources, to
make potentially dilutive issuances of equity securities, to incur debt and to
incur amortization expenses related to goodwill and other intangible assets.
Acquisitions involve numerous other risks, including difficulties in
integrating the operations, technologies and products acquired and the
employees of the acquired businesses, the diversion of management's attention
from other business concerns, the risk of entering geographic markets in which
we have no prior experience, and the potential loss of key employees of
acquired businesses.
Risks Related to Our Industry
Our markets are highly competitive and competition could harm our ability to
sell products and services and could reduce our margins and market share.
The market for chip card products and services is rapidly changing and
intensely competitive. We expect competition to increase as the industry grows
and as chip card technology begins to converge with the wireless communications
and information technology industries. Recently, intense competition among
suppliers has led to increase pricing pressures on our products. We may not be
able to compete successfully against current or future competitors. The
competitive pressures facing us may harm our business, operating results and
financial condition.
Our current principal competitors include, among others, chip card product
and service providers such as Schlumberger, Giesecke & Devrient, Oberthur Card
Systems and Orga Kartensysteme. We are experiencing the presence of new
entrants in the industry with low-cost operating models, especially in China,
with aggressive pricing policies that could threaten our market share in the
future. As the market for chip card products and services in the wireless,
financial services and Internet security industries grows, and as these markets
converge, we may experience competition from companies that are currently our
suppliers, customers and strategic partners, including:
•
operating system developers, such as Microsoft and IBM;
•
electronic security product and service providers, such as
Baltimore Technologies, Entrust, RSA and Verisign;
•
wireless device manufacturers, such as Nokia, Motorola, Samsung and Sony-Ericsson;
•
systems integrators, such as IBM, Siemens and EDS;
•
microcontroller chip manufacturers, such as
STMicroelectronics, Infineon, Philips, Atmel, Samsung and Sony; and
•
wireless infrastructure software providers, such as Sonera
SmarTrust.
17
Table of Contents
Some of our competitors and potential competitors have larger technical
staffs, larger customer bases, more established distribution channels, greater
brand recognition and greater financial, marketing and other resources than we
do. Our competitors may be able to develop products and services that are
superior to our products and services, that achieve greater customer acceptance
or that have significantly improved functionality as compared to our existing
and future chip card products and services. In addition, our competitors may
be able to negotiate strategic relationships on more favorable terms than we
are able to negotiate. Many of our competitors may also have well-established
relationships with our existing and prospective customers. Increased
competition may result in reduced margins, loss of sales or decreased market
shares, which in turn could harm our business, operating results and financial
condition.
The Internet and other communications networks may not expand as a commerce and
business medium.
Our growth will suffer if the use of the Internet for commercial
transactions does not grow, or if wireless devices do not become an accepted
method of accessing the Internet for commercial transactions.
The acceptance and use of the Internet and wireless communications
networks for Internet commerce, mobile banking and mobile commerce could be
limited by a number of factors, including:
•
inadequate development of network infrastructure;
•
inconsistent quality of service;
•
excessive cost of high-speed service;
•
concerns about transaction security and fraud or theft of
stored data and information communicated on the Internet and
wireless communications networks;
•
increased government regulation and taxation of transactions
conducted over the Internet and wireless communications networks;
and
•
delays in development or adoption of new standards or
protocols to handle increased levels of activity.
In addition, companies and government agencies that have already invested
substantial resources in other methods of conducting business may be reluctant
to adopt new Internet-based or wireless-based methods.
Future regulations could be enacted that either directly restrict our business
or indirectly affect our business by limiting the growth of Internet and mobile
commerce.
Our products and services are sold in numerous markets around the world,
each of which imposes regulations affecting our operations, including product
controls, trade restrictions, tariffs and charges, and labor and other social
controls. Many countries impose regulatory restrictions or bans on the use or
transfer of cryptography, which is an essential part of our chip card products
and services. Regulation of the Internet in general, and of e-commerce and
mobile commerce in particular is largely unsettled.
18
Table of Contents
As Internet and mobile commerce evolves, we expect that various
governmental entities will enact or revise laws, rules and regulations covering
issues such as user privacy, consumer fraud, pricing, content and quality of
products and services and the use of cryptography. If enacted or revised, such
laws, rules or regulations could increase the costs or administrative burdens
of doing business using the Internet and wireless communications networks and
cause companies to seek alternative means of transacting business. The
limitations on the use and transfer of cryptography and the enactment of laws
increasing the cost or burdens of using the Internet or wireless communications
would limit the market for our products and services.
New developments may render chip card encryption technology inadequate or
ineffective.
Chip cards use cryptographic technology to secure transactions and
exchange confidential information. Each chip card is equipped with its own
secret key that is required to encrypt and decode messages through the
application of algorithms. The security afforded by this technology depends on
the integrity of a user's secret key and the complexity of the algorithms used
to encrypt and decode information. Any significant advance in techniques for
attacking cryptographic systems, including the successful decoding of
cryptographic messages or the misappropriation of private keys, could result in
a decline in the security of our technology and affect the market's acceptance
of or demand for our products.
The role of chip cards may be relegated to that of simple identity tokens with
limited additional added value.
The primary role of chip cards has historically been to ensure
authentication, and they are widely used as identity tokens. Chip cards can
also provide additional value with on-board applications running in a
stand-alone or in a client-server mode. This value is created if:
•
chip cards are technically enabled to play an effective role in applications; and
•
applications relying on chip cards are actually developed and used.
If an insufficient number of applications rely on the chip cards, chip
cards risk having their role reduced to that of simple identity tokens,
providing limited additional value. In these circumstances, the value of chip
cards would be greatly diminished and that could materially adversely affect
our business operating results and financial condition.
19
Table of Contents
Risks Related To Trading of Our Shares and ADSs
Technology-related stock prices are especially volatile, and this volatility
may depress our stock price and the trading in our shares and ADSs often
experience low volumes.
Because we operate in the highly volatile technology sector, the market
price of our shares and ADSs is likely to continue to be highly volatile. In
addition, there is often low market volume in our shares or ADSs.
If we are unable to meet the continued listing standards of the exchanges
or quotation systems on which our securities trade, we may be required to
delist and investors may not be able to as easily resell their shares or ADSs.
Because several existing stockholders own a large percentage of our voting
stock, other stockholders' effective voting power may be limited.
As of April 29, 2003, our executive officers, directors and their
affiliates beneficially own or control approximately 7.24% of our shares
(excluding shares held by Texas Pacific Group and its affiliates and the Quandt
family) and have options to acquire an additional 2.4% of our shares. In
addition, Texas Pacific Group and the Quandt family own or control 26.4% and
19.1% of our shares, respectively, or 23.3% and 16.9% on a fully diluted basis,
respectively. As of June 18, 2003, Sagem Group was the beneficial owner of
9.62% of our shares. If some or all of such persons act together, they can
have the ability to control matters submitted to our shareholders for approval,
including the election and removal of directors and the approval of any merger,
consolidation or sale of all or substantially all of our assets. This
potential concentration of control can affect the value of our traded
securities.
If we are deemed a passive foreign investment company certain unfavorable U.S.
tax rules may apply.
Due to the decline in our market capitalization, comparatively minor
changes in our assets or share price could result in our becoming a "passive
foreign investment company" or "PFIC" for U.S. tax purposes for reasons outside
our control. Certain unfavorable U.S. tax rules apply to shareholders in
companies that are PFICs in respect of even a single year. See "Item 10.
Additional Information — Taxation — United States Federal Income Tax
Considerations — Passive Foreign Investment Company Considerations."
20
Table of Contents
Item 4. Information on the Company
HISTORY AND DEVELOPMENT OF THE COMPANY
Our business was founded in 1988 by Dr. Marc Lassus, our former Chairman
of the board of directors, who pioneered chip card technology while working for
Motorola and SGS-Thompson in the early 1980s. We started our chip card
operations in 1988 as a major supplier of prepaid phonecards in France and
elsewhere. Because of our strength in the prepaid phonecard market during the
1990s, we developed strong ties with the telecommunications industry and, as a
result, we helped pioneer the development of chip card technology for wireless
communications.
Our business was originally conducted through a French limited partnership
known as Gemplus SCA. In December 1999, we merged Gemplus Associates, the
general partner of Gemplus SCA, into Gemplus SCA and transformed the surviving
entity into a French corporation, Gemplus SA. In February 2000, we reorganized
our corporate structure with a new holding company, Gemplus International SA, a
Luxembourg corporation created in December 1999. The shareholders of Gemplus
SA contributed to Gemplus International SA substantially all of the shares of
Gemplus SA in exchange for shares of our capital stock. As a result of these
transactions, as of December 31, 2002, our company held 98.1% of the
outstanding shares of Gemplus SA, which is our largest operating subsidiary.
Texas Pacific Group became a shareholder of our company at the time of its
equity contribution in February 2000. In December 2000, we completed an
initial public offering of our capital stock, in the form of ordinary shares
and ADSs.
Our company is organized under the laws of the Grand Duchy of Luxembourg.
Our company's registered office is located at Aerogolf Center, 1 A Hohenhof,
L-2633 Senningerberg, Grand Duchy of Luxembourg, telephone +352.26.34.61.00.
Our agent for U.S. federal securities law purposes is Gemplus Corp., located at
1350 Old Bayshore Hwy., Suite 445, Burlingame, California 94010, telephone
+1.650.373.0200.
Capital Expenditures and Divestitures
The following table sets forth our capital expenditures, before
retirements and disposals, for each year in the three-year period ended
December 31, 2002.
Year ended December 31,
2000
2001
2002
(millions of euros)
Research and development equipment
4.7
5.2
1.8
Manufacturing
57.7
18.1
12.1
Buildings
16.8
63.0
17.7
Other
23.3
16.3
0.3
Total capital expenditures
102.5
102.6
31.9
In 2002, we implemented a second, and began consultations and
implementation of third, restructuring and rationalization program. These
plans include the rationalization of office facilities on a worldwide basis.
In 2002, capital expenditures were made primarily in Europe, and included
principally
€
17.7 million related to a research and development and office
building located in La Ciotat, France, which was mainly financed through a
sale-leaseback transaction.
21
Table of Contents
We have budgeted limited capital expenditures of approximately
€
10 million
for the year ended December 31, 2003, including
€
7 million related to equipment
for our manufacturing and research and development activities.
On July 31, 2001, we completed the sale of our Tag electronic smart labels
solutions business to Axa Private Equity, for
€
3,007 thousand. On August 23,
2001, we completed the sale of our subsidiary SkiData A.G., our electronic
access-control solutions business unit, to Kudelski SA, for
€
117,500 thousand,
of which
€
33,500 thousand was received in cash and
€
84,000 thousand was
received in shares, which we immediately resold for
€
84,000 thousand to a
designee of Kudelski.
See "Item 5. Operating and Financial Review and Prospects—Liquidity and
Capital Resources" for a description of our sources of financing for our
budgeted capital expenditures.
BUSINESS OVERVIEW
Overview
We are a leading provider of technology, products and services that enable
wireless network operators to offer their customers secure communications and
transactions through mobile phones, and that enable companies, financial
institutions and public entities to provide customized services to their
customers and employees through a range of systems, including financial card
networks, loyalty and bonus point programs, identification and Internet
security systems.
We currently have two main business segments:
•
Telecommunications, which includes our wireless products such
as subscriber identification modules (SIM), software and services,
as well as prepaid phonecards; and
•
Financial Services and Security, which includes our chip card
products and services centered around payment applications such as
financial services and retail, and security applications for
governments and other large nationwide identity or health care
programs and corporations or other closed user groups for physical
and logical identification.
Within our telecommunications business segment, our wireless products and
services are based on subscriber identification modules (SIMs), which are small
plastic modules with embedded microcontroller chips, and related systems.
Subscriber identification modules are used in the Global System for Mobile
(GSM) wireless communication standard, which is dominant in Europe and the most
widely used in the world, in terms of both the number of subscribers and number
of countries. SIMs are also increasingly used in other wireless
communications systems standards, such as in CDMAOne, WCDMA and CDMA2000.
Our chip card technology enables a variety of service
applications over network systems. Our chip card products and services
are used in financial, retail, government and other businesses to provide a
wide array of services, and management of customer relationships and databases.
In the financial services market, for example, banks can issue credit and
debit cards with embedded chips to reduce fraud and to provide their customers
with premium value services, including e-purse applications (i.e., applications
that store cash values that can be used to make purchases) and mobile banking
services. In the identification systems and security networks markets, plastic
cards with
22
Table of Contents
embedded chips can be used to provide secure access to restricted
facilities or computer networks and to increase the effectiveness of
identification and security systems.
In both our telecommunications and financial services and security
businesses we provide a broad range of software and services that allow our
customers to implement and manage sophisticated systems. Our software includes
card management systems that allow our customers to manage card issuance,
update data, download applications and obtain user information. Our services
include customization, technical support, consulting, system design and
integration and system operation.
We also provide non-chip card products and services in other areas that
are related to our main telecommunications, financial services and security
segments, such as magnetic stripe credit cards for banks, card based
transportation access products and authentication and non-repudiation software.
Our revenues totaled
€
787.4 million in 2002. Sales of wireless products
and services in the telecommunications segment represented 51% of our overall
revenues in 2002, while sales of our chip card products and services in our
financial services and security segment represented 31% of our overall
revenues. Based on the 2002 worldwide chip card vendor shipments ranking of
Gartner Dataquest, an industry analyst, we are the leading provider of chip
cards with a global market share of approximately 32% in terms of units sold.
Based on information published by Eurosmart, a smart card industry
organization, in April 2003 we estimate that our global market share was
approximately 31.6% in terms of units sold in 2002.
Our Strategy
We are pursuing a vision of expanding and enabling the market for safe
electronic services involving our products, including a broad set of services
delivered through wireless or fixed wire networks, while increasing the use of
high-volume, portable, secure and personalizable devices.
Our strategy for attaining this vision is to be a leading provider of
applications and services enabled by chip cards. We will seek to grow our core
businesses, while restoring and maintaining their profitability.
Simultaneously, we will seek stronger positions in new promising markets
involving the use of chip cards and related software in identity, corporate
security and wireless local area network systems (WLANs).
Restoring the company to profitable growth through restructuring, improved
efficiency and increased market share:
•
We are working to adapt our cost structure and increase our
competitiveness in an environment where price is an overriding factor.
•
We are restructuring in the effort to adapt our industrial,
operational and administrative structures while limiting impacts on
research and development and on our sales force. Certain of our key
industrial and customer support processes are being re-engineered for
improved efficiency.
•
We are working on increasing our market share in the wireless
communications market, in particular, by working closely with key
customers, enhancing our product mix, improving our supply chain and
customer business processes, and using differentiating account
strategies.
23
Table of Contents
Differentiating on value
Our strategic plan focuses on a number of promising high-value markets:
•
Software and services in wireless communications, including SIM
administration, content delivery, mobile-payment, and over the air
(OTA) platform markets. Our position as a supplier of OTA platforms
should enable us to further strengthen our relationships with our
customers.
•
Identity. These card programs represent a large and fast-growing
opportunity for us. Our potential in this area, together with
strategic partnerships, should help further our success.
•
Corporate security (controlling access to buildings and
information). Many organizations have found that smart card enabled
technology is the best way to secure their networks. With our leading
skills in relevant security technologies, we hope to
become a major player in this field.
•
WLAN (wireless local area network). The functionality of this
technology is enhanced by using the smart cards as a key to access
control. Our research and development capabilities should help provide
us a leading position in the development of this segment. The
deployment of this new technology is facing major issues regarding
security, roaming and billing. The SIM card offers an excellent point
of access control for WLAN operators to enable secured authentication
while seeking to use the roaming and billing capabilities of the
existing telecom networks.
Getting closer to our customers
We are strengthening our regional structures in order to improve customer
responsiveness worldwide. We believe that improved regional sales and sales
support functions will enhance customer relationships by combining the ability
to design and deliver complex high-end solutions with the support of efficient
local offices and direct supply chain management on commodities.
Excelling in execution is a key goal
We are re-engineering our organizational structure and its processes in
the effort to further improve accountability, and monitor and reach employee,
customer and shareholder satisfaction targets.
Technology Overview
Chip Card Technology
Our products and services are part of a class of technology that involves
small modules or cards with embedded electronic chips known as chip cards or
smart cards. Chip card technology has evolved significantly since chip cards
were first introduced in France in the 1970s. Our founder, Dr. Marc Lassus,
was instrumental in the initial development of chip cards, and since our
inception in 1988, we have played, and continue to play, an important role in
the evolution of chip cards and related applications.
24
Table of Contents
There are two major categories of chip cards:
•
Memory cards, which contain chips that provide only secure
storage of data, that can be modified at a special reading terminal.
Memory cards are used for single applications that do not require
sophisticated data processing functions, such as prepaid phonecards
and loyalty cards.
•
Microcontroller cards, which contain chips that are capable
of storing and processing data like a miniature computer,
transferring processed data to a network and running software
programs or "applets" that interact remotely with server-based
applications. The most sophisticated new chip cards, such as
subscriber identification modules (SIMs) used in wireless
communications, are all microcontroller cards.
Chip card technology is developing rapidly as the capability of
microcontroller chips to conduct sophisticated operations continually expands.
Some of the most important recent technological developments in chip card
technology include:
•
The development of operating systems for microcontroller
chips that allow card issuers to load multiple applets on a single
card. This allows our customers to offer their users several
functions on the same card. For example, a single multi-application
card can be used to access facilities or computer networks, to make
payments as a debit or credit card, to store bonus points that can
be used to make purchases and to authenticate Internet transactions.
•
The development of open standards for chip card operating
systems. These operating systems contain an embedded virtual
machine or interpreter, which interacts with the operating system
and a documented application programming interface (API) to execute
applets. The API allows software programmers to design new applets
in a standardized format, without reference to the technical
specifications of the virtual machine, improving ease of use and
programming time. Microcontroller chips based on open operating
systems are interoperable with more systems. This means that
software programmers can create new applications based on a standard
language or protocol, which can be used to provide services through
the chip cards of different manufacturers. The most widely used
open platforms today are based on Java Card technology, a software
API specification for chip cards based on technology from Sun
Microsystems and adopted by the smart card industry.
•
The development of sophisticated card management software for
chip cards, which helps card issuers use new chip card capabilities
by enabling them to manage their cards remotely, and to update,
download and install new information or applets as they become
available without replacing the card. These new software
capabilities have also created a demand for system design,
integration and management services that allow card technology
companies to develop closer ties with their customers.
•
Significant advances in the memory structure and capacity of
microcontroller chips with the development of silicon-based flash
memory technology. Such chips are able to store substantially more
information, conduct more sophisticated operations and load a higher
number of applets. In addition to greater memory capacity, the
flash memory chips give card manufacturers increased flexibility to
modify the chip's operating system.
25
Table of Contents
•
The development of chip cards designed to work with the most
advanced security technologies, such as public key infrastructure
(PKI) systems and secure downloadable applets. Cards with public
key infrastructure capability can be offered to customers requiring
the highest level of security, such as individuals or companies that
conduct transactions or business over the Internet, and banks
implementing mobile payment systems.
We believe that chip card products and related services include
features that are attractive to customers in the sophisticated wireless,
financial, Internet and corporate security markets. The features we
believe are most significant include:
•
Security
. Chip cards are capable of storing complex
algorithms that can be used to identify a user or to encrypt
information, such as a digital certificate. Because a user needs
both a card and an activation mechanism, such as a personal
identification number (PIN), to use a card, security is not
entirely compromised by either the loss of a card or the communication of a
PIN. As a result, chip cards can be used to authenticate mobile and
electronic commerce transactions, significantly reducing the
incidence of fraud. In addition, microcontroller chips can contain
sophisticated cryptographic algorithms and functions that prevent
unauthorized parties from tampering with the contents of the card.
•
Portability
. Chip cards can be easily transferred from one
device to another. As a result, for example, a mobile phone
subscriber can purchase a new mobile phone without changing his
service subscription, a feature that mobile phone operators find
attractive as it reduces customer churn. Similarly, a chip card
used to authenticate the user of a company's computer network can be
inserted into any computer equipped with a reader, and include
certain user profile information so the user is not limited to a
particular computer.
•
Flexibility
. The newest chip cards can carry and run
multiple applets that can be updated remotely without the need to
replace the card. This increases the flexibility of banks and their
companies to use chip cards as customer management tools by changing
applications in response to changes in product offerings or customer
preferences. This also allows them to offer multiple services on a
single platform, such as wireless, banking, payment and loyalty
applications.
Despite these advantages, chip card technology has not yet been widely
deployed in some areas, particularly in financial services. This is primarily
because the replacement of existing terminals with devices capable of reading
chip cards, and the implementation of related network infrastructure, can be
costly and time consuming. See "Item 3. Key Information—Risk Factors—Risks
Related to Our Business." The markets that we target for a substantial part of
our future growth are in very early stages of development, and if they do not
develop our business may be adversely affected.
Use of Our Chip Card Technology in Wireless Communications
Currently, one of the largest uses for chip card technology is in wireless
communications, due to the security and flexibility provided by chip cards.
There are various wireless network standards:
•
Wireless 2G standards are the second major type of
technology used of wireless communication. 2G standards mainly
support voice transmission, as well as some data transmission
capability. The Global System for Mobile communications (GSM)
is the most widely used 2G standard both in terms of number of
subscribers and number of countries. The GSM standard requires
the use of subscriber identification module (SIM) technology.
26
Table of Contents
•
Wireless 2.5G standards support higher data
transmission capability than GSM and other 2G standards.
Wireless 2.5G standards incorporate identification module
technology similar to that used in 2G SIM cards. The technology
is included in a removable card or in the telephone handset. In
the transition from 2G to 2.5G, some operators located outside of
Europe are migrating to the European GSM-originated standard.
•
Wireless 3G standards, in particular WCDMA and
CDMA2000, with higher data transmission capability than 2.5G, are
in the process of being deployed. As with 2.5G, the wireless 3G
standards incorporate identification module technology similar to
that used in SIM cards, either as a removable card or in the
telephone handset.
The following table generally summarizes the principal 2G, 2.5G and 3G
transmission standards, indicating the principal geographical regions where
they are used or are anticipated to be used, and whether they incorporate
removable identification module technology. Some countries use more than one
standard, and thus are listed in more than one place in the table.
Use of Removable Card
Transmission Standard
Principal Regions
Identification Modules
2G
GSM
Europe, Asia
(including China),
several regions in the
United
States
Yes
CDMA
United States, China
No
TDMA
United States
No
2.5G
GPRS (based on GSM)
Europe, most of Asia
Yes
CDMAOne
United States, China,
South
Korea
Yes in China and South
Korea;
Operator-specific in
United States
IDEN
United-States
Yes
3G
WCDMA
Europe, Asia
(including Japan),
United States
Yes
CDMA2000
United States, Asia
Operator-specific
Market Overview
The market for chip card technology, products and services is developing
rapidly, both in terms of size and sophistication. According to Eurosmart,
1,786 million chip cards – including microcontroller cards and memory cards –
were sold worldwide in 2002, and we believe that we are the world's largest
chip card provider, with 31.6% of the global market in terms of volume in 2002.
As the market has grown, the capability of chip cards to carry
sophisticated functions has also increased. As a result, a new market is
developing for designing and implementing integrated systems and services based
on chip card technology and software, and for providing services to assist
users in taking advantage of the enhanced capabilities of chip cards.
27
Table of Contents
Wireless Market
The wireless communications market, particularly the GSM wireless market,
recorded strong growth prior to 2001, primarily as a result of a significant
increase in the use of mobile phones around the world for voice transmission.
Since then, growth in the wireless communications market has slowed
significantly as, among other things, the market and the technology for
wireless voice transmission services have matured, although demand for wireless
data transmission services has begun to increase. According to Eurosmart,
approximately 430 million SIM cards were sold in 2002, as compared to 390
million in 2001.
Wireless communication operators are seeking to enhance their offerings
with new premium value services based on the increasing demand for wireless
data transmission services. For example, Short Message Service (SMS) allows
text messaging through mobile phones. In anticipation of the growing demand
for wireless data services, including the provision of pictures, streaming
audio and video, and high-speed Internet access through mobile phones,
operators have made significant investments in 3G licenses, and are beginning
to develop the infrastructures necessary to deliver 3G services. We believe
that the growth of the wireless data market may be important for the growth of
the chip card market, and that demand for new wireless data services could
increase demand for more sophisticated chip cards. Because identification
module technology allows wireless operators to facilitate and control the
access between wireless subscribers and content providers, we believe that our
chip card products, software and services represent a core technology for our
wireless customers to address this new market.
Financial Services and Security Market
According to Eurosmart, approximately 175 million chip cards were sold in
the financial services industry in 2002 and we estimate that we are we are one
of the top three providers of financial chip cards with approximately 20% of
the market in terms of units sold. We believe that demand for chip card
products and services in the financial services market will continue to grow
due to increasing concerns regarding security and fraud and due to growth in
the use of e-commerce and e-banking services, which allow end-users to conduct
commercial and banking transactions over the Internet.
Our Products and Services
The following table sets forth our revenues for the year ended December 31,
2002:
Revenues -Year ended
December 31, 2002
(millions of
(as a % of total
euros)
revenues)
Telecommunications
544.5
69
%
Financial Services and Security
242.9
31
%
Total
787.4
100
%
See "Item 5. Operating and Financial Review and Prospects" for a
discussion of our total revenues, broken down by category of activity and
geographic market, for each of the last three financial years.
28
Table of Contents
Delivering a complete solution
We provide our customers with a portfolio of products, software and
services that can enable the delivery of turnkey solutions:
•
Products: we provide a complete range of chip card products,
from low-end to high-end, with proprietary and open operating
systems, offering various amounts of available memory, with features
and embedded applications dedicated to specific markets. Our chip
card reader products and software development tools are a direct
complement to our chip cards.
•
Software: we provide software products that help manage the
client-server architecture and enable interactions between the
applets stored on the chip cards and the card issuer's central
computing system. We also provide card management systems that
enable the tracking of issued cards and the management of
information stored on the chip card.
•
Technical Support: we provide our customers with a full range
of maintenance and technical support and help desk services for their
card solutions. Our regional Gemplus service centers are responsible
for our help desk services in their applicable region, with several
sub-regional or local technical support staffs as needed.
•
Consulting, System Design, Customization and Integration: our
consulting services focus on key topics and issues in the development
and implementation of chip card systems, including marketing and
commercial analysis and recommendations, feasibility studies and
possible implementation scenarios and training in chip card
technology and applications.
o
Our system design services provide our
customers with an overall design of chip card systems,
including security parameters and detailed component
design.
o
Our customization services include the
development of customized software applets for particular
card issuers.
o
We provide system integration services to
deliver complete systems through a project management
approach. This involves coordinating with contractors to
obtain and integrate the required system components,
including customized software applications and operational
system support during acceptance testing, pilot programs
and the roll-out of the final, customized card system.
29
Table of Contents
•
Personalization: our personalization services involve the
process of loading personal data or premium value applications onto
the memory or microcontroller chips embedded in cards. We also
emboss and print customized card bodies for our customers, and
customize the card carriers used to deliver cards to end-users. We
prepare and distribute products directly to end-users on behalf of
our customers.
•
Outsourced Operations: we provide our customers with the
flexibility to outsource to us a variety of operations associated
with the administration of a card management system, including
network management, server management and data archiving. We also
provide other operational services for chip card system managers,
such as certificate authority and management services for trusted
third party systems and certification authorities.
Telecommunications Products and Services
Our telecommunications products and services consist primarily of
SIM-based products, software and services for wireless communications
operators, and chip-based prepaid phonecards for public pay telephone
operators.
Wireless Products, Software and Services
SIM cards were introduced to provide standardized and secure subscriber
identification and authentication. Technology evolution and subscriber demand
has helped turn the SIM into a wireless data service enabler within an open
client-server architecture.
SIM cards are well adapted for applications that need to be highly
personalized, secure and portable. SIM-enabled systems can be used to enhance
customer relationships, to enable content delivery and to secure mobile
transactions. We design many of our products around interoperable SIM
platforms that connect to networks and remote applications and over the air
(OTA) platform technology. These telecommunications products include:
•
GemXplore - the card platform and its immediate environment.
We offer a range of products for all major wireless network
types and generations. Working primarily with open, Java-based
operating systems, we provide developers with software development
tools to create and test applications.
•
GemConnect - software modules and agents that communicate
with remote content and services. Our open OTA infrastructure is an
essential link between subscribers and personalized content. Our
device manager provides a remote, automatic handset configuration
for settings such as WAP (wireless application protocol), GPRS
(global pocket radio service) and MMS (multi-media messaging).
•
GemSuite - market-facing applications. Gemplus, customer and
trusted partner applications, which are integrated to the OTA
platform, include predictive CRM (customer relationship management),
customer care and mobile payment (electronic prepaid reload and
M-payment).
•
SIMXplore - access to partnered applications and services.
Integrates third party solutions by uniting our expertise with
content and application providers selected for their expertise and
innovative applications. This portfolio includes mobile
entertainment, location-based services, corporate, instant messaging
and other services.
30
Table of Contents
•
GemServices - professional services and outsourcing. Our
professional services group provides the expertise to design,
develop and deploy mobile services. These services cover all phases
from consulting, development, integration to post-installation,
support and training for wireless communication operators. We are
able to operate services on our customers' behalf, offering large
service portfolios, while limiting infrastructure and resource
investments. Operators can access our equipment, technology and
expertise through a connection to our hosting center.
Phonecards
Based on information published by Eurosmart, we believe we are one of the
world's leading manufacturers of prepaid phonecards and associated phonecard
security products with a 37% share of the worldwide phonecard market in 2002.
As of May, 30 2003, we have produced 3 billion phonecards since our inception
in 1988. Our main customers include more than 20 major telecommunications
operators, including CANTV, China Telecom, France Telecom, and Telmex. Our
multi-application solutions help operators take advantage of the convergence of
telephony with banking, loyalty and transportation applications. These
products generate increased revenues by helping to enable innovative marketing
opportunities. For example, CANTV, the Venezuelan national telecommunications
carrier, currently uses a line of our prepaid phonecards that allow public
telephony customers to use phonecards to pay for other consumer products, such
as soft drinks and snacks, at designated points of sale.
Scratch Cards
We provide a range of scratch cards under the name GemScratch, which are
cards that incorporate a scratch-off panel revealing unique numbers to be used
by the end-user of the card. We sell our GemScratch cards primarily to our
wireless customers, who want to provide prepaid services. Our GSM Prepaid Kit
includes a SIM card and a scratch card in a single package, allowing wireless
operators to offer their subscribers an integrated communications package. Our
scratch-off products are also used by fixed-line telecommunications operators
to provide calling card services to their customers.
Financial Services
Secure chip card technology offers a platform for a variety of financial
and banking service applications, such as credit/debit cards and e-purse cards
(cards that store cash values that can be used to make purchases),
multi-application services and mobile banking services. Credit/debit cards and
e-purse cards contain an embedded microcontroller chip that processes
transaction information received at the point of sale and carries information
that allows a card reader to accept or reject a transaction up to a specified
amount without on-line authorization. Because the smart card is inserted into a
reader at a point of sale and the cardholder enters a PIN code with the reader
rather than signing a printed card receipt, chip cards reduce fraud associated
with existing magnetic stripe card based systems by helping to prevent, among
other things, the use of stolen cards to make unauthorized purchases. In
addition, microcontroller chips contain sophisticated cryptographic algorithms
and functions that help to prevent unauthorized parties from tampering with
their contents, in contrast with the more limited security safeguards of
magnetic stripe cards.
Microcontroller chips were first embedded in credit/debit cards in France,
where microcontroller chip technology was introduced as a standard for
credit/debit cards in the early 1990s, and the technology has expanded into
Germany and now the United Kingdom. According to Eurosmart, approximately 175
million chip cards were sold in the financial services industry in 2002, and we
believe that we are one of the largest providers of financial chip cards with
20% of the market in terms of units sold.
31
Table of Contents
Several large bank and financial card systems, including American Express,
Visa International and MasterCard International, have introduced chip cards in
their systems. Banking and credit card associations in countries around the
world, such as in Australia, Austria, Brazil, China, Denmark, Taiwan, Korea,
Finland, Spain and Switzerland, have recently announced plans to adopt chip
cards to replace magnetic stripe cards. The adoption of chip card technology
in these countries represents a new phase in the financial services industry,
which has been slow to adopt this technology outside France and a few other
countries, in large part due to the cost of associated infrastructure. We
believe that new developments have the potential to accelerate the adoption of
this technology in the financial services industry, including:
•
Interoperability. An obstacle to the widespread adoption of
microcontroller chip technology in the financial services market has
been the fact that card specifications have been adopted by each
country on an individual basis, which prevents the interoperability
of credit/debit chip cards issued in different countries. To
address this problem, in 1996, the major global credit card payment
associations, Europay International, MasterCard International and
Visa International (together known as EMV), adopted standard
controller specifications for credit/debit chip cards, which enable
interoperability between different payment systems. Migration to
the EMV standard is now a well-established expectation in the
industry that could contribute to a structural change in the
financial services market.
•
New Services. The capabilities of microcontroller chip
technology can permit banks to offer their customers new services
that were not available when they initially studied the technology.
Areas in which banks can offer their customers new services include
online authentication, instant rewards and more advanced loyalty
programs, mobile banking, mobile commerce and other services
available with the development of multi-application cards, such as
multiple payment options and loyalty programs on a single card.
Single Application Cards
We design and develop chip card products and services that enable
financial card issuers to offer a wide range of single-application services to
their clients. Our financial services products are designed to meet the
requirements and specifications of the most important industry standards, such
as the EMV specifications for credit/debit cards. In addition, our chip card
products have been individually certified by the major financial and banking
organizations and bodies, such as Visa International, Europay International,
MasterCard International, Cartes Bancaires (France), Banksys (Belgium) and
APACS (United Kingdom). Our main product offering includes:
•
GemVision, a range of credit/debit cards developed for banks
that are members of Visa International; and
•
GemShare, a range of credit/debit cards developed for members
of Europay International and MasterCard International.
We also develop and market a full range of chip cards for e-purse systems,
which involve cards that store cash values that can be used to make payments.
Our e-purse products have been individually certified by the major e-purse
system operators, such as CEPS, Zentral Kredit Auschuss (Germany), Proton World
International, Visa International and Mondex. Our main product offerings
include Geldkarte, an e-purse card developed for German e-purse systems, and
Mondex E-Purse, which is an e-purse application developed for the Multos
multi-application card and mainly used in the United Kingdom, Latin America,
South Korea, Australia and the Philippines.
32
Table of Contents
Multi-Application Cards
One of our main multi-application cards for financial services is based on
MPCOS, a multi-application standard, commonly used in Asia. This card contains
credit/debit and e-purse applications, loyalty programs and transportation
ticketing, and is also available in a contact/contactless mode under the
designation "GemCombi" that allows interaction with the card using radio
frequencies. We have also developed a line of multi-application Java-based
cards that provide our customers with the flexibility to quickly develop and
bring to market new financial and other services. Our line of Java-based
financial cards, GemXpresso Lite, is also targeted to retail banking and
e-commerce payment applications.
We believe that in 2002 we were the leader in providing major banking
institutions and retailers in the United States with multi-application chip
card products. These products support debit/credit, e-purse, web
authentication as well as loyalty applications. Major banks in the United
States, however, have not been as responsive as their European counterparts in
adopting chip card technology, and some have reduced or suspended their chip
card technology programs.
Loyalty and Retail
We have developed chip card products for a wide variety of loyalty and
retail programs, including bonus point and reward programs, such as our
microcontroller chip card based system for Boots, a United Kingdom retailer,
Shell U.K., and Esso Netherlands. Our loyalty applications can also be
combined with other applications, such as credit/debit cards and e-purse
applications, by using our multi-application chip cards. We believe that chip
cards should facilitate the next generation of loyalty programs because they
enable retailers to set up card based programs to offer customers a combination
of in-store and Internet-based benefits, such as instant rewards, online
coupons and privileged access to websites and points systems.
Bank Conventional Cards
In addition to chip cards, we provide our customers with magnetic stripe
("conventional") cards that do not contain embedded microchips, mostly for our
banking customers. Our conventional card operations were launched in 1995 with
our acquisition of the United States and European conventional card and
personalization operations of DataCard, a conventional card manufacturer with
substantial sales in the United States and Europe. We decided to enter the
conventional card market to strengthen our position both in the financial
services market and in several geographic markets in which conventional cards
are the principal product in the local card industry, such as the United
States. We hope to leverage our position in the conventional card market to
assume a prominent role in the transition of these conventional card markets to
chip card network systems.
We offer a wide range of magnetic stripe and encoding options to meet the
demands of our different customers. We delivered over 100 million magnetic
stripe cards to our customers in the banking sector in 2002. We also provide
certified card personalization and production and disaster recovery services to
MasterCard, Visa and American Express card issuers in various regions around
the world.
Other Businesses
In addition to conventional cards for banks, we also serve customers where
our cards are used for identification together with a payment application such
as:
33
Table of Contents
•
transportation access, which includes contactless chip
systems that are used for highway tolls and access to metros and
other transportation facilities;
•
pay television chip cards, which are used to give pay
television subscribers access to programs and services over cable
and satellite television systems; and
•
loyalty and identification programs that do not use chip
cards.
Identity and Security
The smart card is not simply a security device, it can serve as a valuable
component in enabling management systems for governments and corporations.
The security and portability of chip cards make them well suited as
security products, particularly in developing markets for business conducted
over the Internet, which we call e-business security. According to the
International Data Corporation, the success of the e-business market depends on
the development of secure identification, encryption and transaction systems.
Chip card technology allows users to access corporate and external networks,
identify themselves, send encrypted messages and digitally "sign" transactions
and documents.
The most recent generation of chip cards has been designed to work with
the most sophisticated security technologies, such as public key infrastructure
(PKI) systems, which are used to control access to computer networks and to
secure e-business transactions. Chip cards can store digital certificates that
identify users of computer networks and parties to e-business transactions, as
well as keys or mathematical algorithms that facilitate secure information
exchange between trading partners over the Internet and authenticate
transactions. Microcontroller chip technology also permits certificate
authorities to revoke certificates and change authorization levels remotely,
without issuing new cards.
We are working actively with our corporate customers to design security
software and services based on microcontroller chip technology to control
access to corporate computer networks and to permit the secure exchange of
information.
We have identified three demands in this market:
Internal Security
In this segment we offer cards, readers, software and services, such as
personalization or consulting. The infrastructure can be based on contact or
contactless technology, so our cards and readers can use either of these
technologies. The cards can also include digital signature capability for
electronic business transactions. Our software functions with chip card based
password management and chip card based user-authentication. In this market,
we typically offer solutions and project management to a customer, and not only
card products.
Government to Business
Using chip card technology, electronic information can be securely
accessed, and exchanged. The chip card can help build a network of trust,
facilitating authentication, authorization and non-repudiation. Our customers in
this market typically order complete solutions composed of some secure chip
cards with digital signatures enabled, the associated readers in our "PC link"
range for logical access control (connecting to computer serial ports, and
other ports such as those complying with universal serial bus or Personal
Computer Memory Card International Association specifications), and software in
our
34
Table of Contents
GemSafe line (GemSafe Libraries for user authentication, GemSafe Logon for
password management, and GemSafe eSigner for card enabled digital signature).
We provide server software that manages verification, time stamping and logging
of all operations performed with digital signatures, as well as client
software. These products enable trusted parties such as post offices,
government agencies or major financial institutions to provide the security
levels necessary to support secure, non-repudiable delivery of on-line
documents and the completion of transactions.
Government to Citizens
In this market, programs include identification (including passports and
driver's licenses), healthcare services, citizens' rights projects, freedom and
privacy, and fraud prevention.
Typical applications include:
•
Chip card based vehicle registration and driver's license
systems for government agencies allowing authorities to keep a
closer track of vehicle ownership and driving records, and to verify
fines and offenses.
•
Chip card systems for accurate identification of travelers at
borders and other ports of entry into a country, enabling
authorities to facilitate the entry of millions of foreign travelers
or workers while helping to ensure compliance with national
immigration regulations. With our Automated Border Clearance
system, an electronic visa is stored on a microcontroller chip
embedded in an immigration card, which interacts with a secure
automated access control reader at a country's ports of entry using
contactless technology. In Singapore, for example, the Ministry of
Home Affairs is using our Automated Border Clearance system to
facilitate entry to cross-border workers from Malaysia.
•
Chip card based national identification programs that involve
the issuance of chip cards by national governments to their
residents. In the Sultanate of Oman, for example, we have signed an
agreement to provide consultancy, project management and integration
services, as well as software and chip cards for a broad-based
national identification card program.
Health Care
We provide systems integration services that allow health care and
insurance providers to use our chip cards for on-site access to, and management
of, medical and insurance information. We sell our health care products
primarily in Europe, particularly in France, Germany, Belgium and Slovenia.
Our health card systems help enable an automated and secure insurance claim
system that allows the electronic transfer of claims from the point of care to
insurance providers, generating significant administrative cost savings and
reduced paperwork for health care providers and insurers.
GemVentures
To further promote the use of chip card technology and applications across
a broad range of markets, we have created GemVentures, a wholly owned venture
capital company. GemVentures has invested in start-up and developing companies
that create and market innovative technologies, applications and services in
our core markets, such as wireless communications and computer security
infrastructure and service providers. GemVentures leverages our management's
expertise in the chip card industry to provide target companies with strategic
advice and support in the development of new chip card technologies,
applications and services.
35
Table of Contents
Customers
We have a broad base of customers, including many of the largest wireless
operators in each of the markets where we operate, as well as major banking and
financial institutions around the world. Some principal customers in each
of our major business lines include:
•
Telecommunications
– China Mobile, China Telecom, China
Unicom, France Telecom, MTS, Nextel, STC, Telemar, Telmex, Turkcell
and Vodafone;
•
Financial Services
– BNP Paribas, Société Générale, Banques
Populaires, MBNA Europe, Lloyds TSB, Halifax, FDR, Personix
Saint-Paul, Target Corporation, DSV, Raiffeisendrückerei, PPC Card
and ICBC;
•
Loyalty and Retail –
Banpol SA, Total Fina Elf, Royal
Dutch/Shell Group, Compuworks ; and
•
Identity and Security –
Argentina, Germany, France, Royal
Oman Police, Singapore, for government to citizen and government to
business programs.
In 2002,
our largest customer represented 7.5% of our total revenues, our five
largest customers together represented 19.5% of our total revenues,
our ten largest customers together represented approximately 28% and
our fifteen largest customers together represented approximately 35%
of our total revenues. No single customer accounted for more than 10% of our
revenues in 2002.
Suppliers
We rely on a number of different suppliers of materials and components to
manufacture our products. The three basic components of our products are
electronic chips, plastic cards and other materials used in the manufacturing
process, such as lamination film and inks.
We have restructured our chip-purchasing strategy by implementing balanced
sourcing with three major suppliers (Atmel, Infineon and Philips) that we
anticipate should be able to meet our requirements in terms of cost and
volumes. Our main plastic supplier is Bayer, which produces several types of
resins for injection-molding in Europe, Asia and the United States. We also
have supply arrangements for specific types of plastic with BASF, Dupont,
General Electric and several other plastic suppliers. We have diverse supply
arrangements for our other materials, including lamination film, for each of
which we have at least two supply sources.
Competition
The chip card market is highly competitive. We face competition in all of
our markets from chip card manufacturers, software developers, security
providers and chip manufacturers. Moreover, our customers and companies with
whom we currently have strategic relationships may become competitors in the
future.
Chip card manufacturers are currently our main source of competition in
all of our markets. According to Gartner Dataquest, our overall share of the
global chip card market was approximately 32% in terms of chip card units sold
on a worldwide basis in 2002, followed by Schlumberger with 23.1%, Giesecke &
Devrient with 14% Oberthur Card Systems with 7%, Orga Kartensysteme with 4% and
Incard with 4%. The relative strengths and market shares of each of our
competitors, however, vary in each of the chip card markets, depending on their
core competencies and strategic alliances and partnerships. In 2002, we also
experienced new entrants into the industry with low-cost operating
36
Table of Contents
models, especially in China, with aggressive pricing policies that could
threaten our market share and profit margins in the future.
Telecommunications Markets
Wireless Products and Services
The market for wireless infrastructure products and services is
characterized by intense competition and rapidly changing technology. Our main
competitors in this market include Schlumberger, Giesecke & Devrient, Oberthur
Card Systems and Orga Kartensysteme.
Success in the market for wireless infrastructure products and services is
determined by the ability to consistently provide products and software at
attractive prices that enable our customers to provide premium value services
to their clients. We believe that our extensive research and development
activities allow us to be positioned as an innovator in SIM technology, and our
global manufacturing capacity provides us with production volumes that enable
us to offer competitive prices. Because wireless infrastructure providers work
closely with wireless operators to design and implement customized SIM-based
systems, the development of strong customer relationships and the joint
creation of product development plans are also important elements in competing
in this market.
Because of the enhanced capabilities of microcontroller chip technology,
we will also face new competition from operating system and software
application developers. The development of open operating systems or platforms
will lead to the creation of a new market for application development tools, in
which software development providers create and market premium value
applications, either as generic packages or customized software for specific
customers. The enhanced capabilities of chip cards will create the potential
for a variety of products and services that may attract a number of new
competitors into software, services and infrastructure markets, including:
•
operating system developers, such as Microsoft and IBM;
•
electronic security product and service providers, such as
Baltimore Technologies, Entrust, RSA and Verisign;
•
wireless device manufacturers, such as Nokia, Motorola, Samsung and Sony-Ericsson;
•
systems integrators, such as IBM, Siemens and EDS;
•
silicon chip manufacturers, such as STMicroelectronics, Infineon, Philips and Atmel; and
•
wireless infrastructure software providers, such as Sonera SmarTrust.
Phonecards
Public telephony is a mature market, and is highly competitive. Our
presence in this market since its origins in the late 1980s
has allowed us to become a leading provider of phonecards on a worldwide basis.
According to Eurosmart, approximately 950 million phonecards were sold
worldwide in 2002. Our main competitor in this market is Schlumberger,
followed by other chip card manufacturers such as Giesecke & Devrient and
Oberthur Card Systems. The ability to deliver large volumes of phonecards at
competitive prices, as well as the capability of meeting changing customer
demands, such as increased requirements, in the short term are key competitive
factors in this market. We
37
Table of Contents
believe that our global manufacturing capacity has enabled us to meet our
customers' requirements in the past, which has allowed us to develop strong
ties with the public telephony industry.
Financial Services and Security Markets
Financial Services
The financial services market is currently fragmented and subject to
intense competition. Many of the companies that provide chip card products and
services to banks also manufacture plastic bank cards with magnetic stripes.
Our competitors include Giesecke & Devrient, Oberthur Card Systems and
Schlumberger. The financial chip card market is currently focused in Europe,
where competitors such as Oberthur Card Systems have a strong presence in the
banking industry. The financial chip card market in the United States is
beginning to emerge due to the deployment of multi-application cards, and we
believe that Oberthur Card Systems will be among our competitors in this
market. We expect that our worldwide presence in the financial chip card
market may allow us to take a prominent position in the migration to chip cards
in the global financial services industry.
Identity and Security
The market for identification and security products is currently in its
development stage. There are a number of contracts for government
identification and security chip card based systems that are currently being
offered through public tender procedures. We and our competitors compete in
these tenders in association with major system integrators to provide the chip
card products used in these systems.
Marketing
We use a direct sales force to market and sell our products and services.
In addition, we use some local distributors in certain markets.
Strategic relationships are an important part of our overall marketing
strategy, in addition to sales through our other channels. Through our Gemplus
Partners Program we facilitate new product development, collaborative marketing
initiatives and joint sales efforts with a select group of value added
resellers, systems integrators, consultants and developers.
Intellectual Property
We seek to take appropriate and reasonable measures under the intellectual
property laws of applicable jurisdictions to protect our rights to our chip
card technology. Performance in the chip card industry can depend, among other
factors, on patent protection. Our policy is to regularly identify patentable
subject matter developed within our company and to systematically seek to
acquire patent rights upon such technologies. Many of our current patents
expire between 2008 and 2021. We mainly develop and patent technology in the
fields of card body manufacturing, chip operating software, card readers, chip
design and cryptographic processes. We seek to obtain a reasonably broad
territorial protection for our patented technologies. We usually file initial
patent applications in France, and subsequently extend such protection to
European countries, the United States, Canada and Japan, as well as China and
other foreign countries depending on the relevant circumstances. We also hold
co-ownership rights in patents developed through joint venture companies
established with our business partners. Proprietary rights in technologies
developed through such joint ventures usually vest in the jointly owned
companies.
38
Table of Contents
We have entered into non-exclusive licenses from third parties for
technologies relevant to our business, such as from Sun Microsystems with
respect to Java Card technology, from IBM with respect to IBM mask data for
certain chip cards operating systems, and from Bull CP8 with respect to Bull
mask data for banking chip cards. See "Item 3. Key Information—Risk Factors."
We include third party technology in our products, and our business would be
harmed if we were not able to continue using this third party technology.
Despite our efforts to protect our intellectual property rights,
unauthorized parties may attempt to copy aspects of our products or to obtain
and use information that we regard as proprietary. Policing unauthorized use
of our property is difficult, and while we are sometimes able to determine and
reduce the extent to which misappropriation of our intellectual property rights
exists, such infringement can be expected to be a persistent problem. In
addition, the laws of some foreign countries do not protect our proprietary
rights to as great an extent as do the laws of countries like France and the
United States. Our means of protecting our proprietary rights may not be
adequate and our competitors may independently develop similar technology,
duplicate our products or design around patents issued to us or our other
intellectual property rights.
Due to the importance of proprietary technology in the chip card industry,
our business involves a substantial risk of overlap with third party patents
and subsequent litigation with competitors or patent-holders. Any claims, with
or without merit, could be time-consuming, result in costly litigation, cause
product shipment delays or require us to enter into royalty bearing licensing
agreements.
Regulation
Although our chip card products and services are not directly subject to
any regulations, our security enabling technology could be affected by laws and
regulations imposing controls on the development and transfer of encryption
technology, while our manufacturing and personalization activities could be
subject to environmental laws and regulations.
Encryption Technology Controls
Our security products and services rely on the ability of our chip cards
to perform cryptographic functions, such as the encryption and decryption of
information sent by chip card users over the Internet. The domestic use and
transfer, and the export of systems and equipment, with encryption
capabilities, including hardware, software, modules and cards, have been
subject recently to national regulation and international controls. As a
result, the domestic use and transfer and the export of cryptographic products
are subject in many countries to strict controls and governmental scrutiny,
often requiring the user or transferor to obtain special licenses.
In the effort to reduce delays arising from the above restrictions in the
development and delivery of our chip card based security technology, in 2001,
we created a centralized organization within our company to coordinate all of
our operations that involve the transfer of our cryptographic-enabled products
and services and ensure compliance with all relevant laws and regulations.
Environmental Matters
Our manufacturing and personalization operations may be subject to
extensive, evolving and increasingly stringent environmental and occupational
health and safety laws and regulations in a number of jurisdictions, including
regulations governing the management, use and release or discharge of hazardous
and toxic materials into the environment. Compliance with current and future
environmental,
39
Table of Contents
health and safety laws and regulations could result in significant costs
and could restrict our ability to modify or expand our facilities or continue
production.
To avoid incurring liability under applicable environmental, health and
safety laws and regulations, we have adopted global environment, health and
safety guidelines for the layout, construction and operation of our facilities.
These guidelines have been defined to comply with current laws and regulations
and are to be completed or modified by our local environment, health and safety
officers to ensure compliance with all applicable local laws and regulations.
If there are no local environmental, health and safety laws or regulations, or
if our guidelines contain environmental, health and safety rules that are
stricter than local laws or regulations, our guidelines will be generally
applied in those localities.
Geographic Organization
We are a global company, with headquarters located in Luxembourg. Our
largest operating subsidiary is located in France, and we have operations and
facilities located throughout Europe, North America, South America and Asia.
We have organized our global operations into three world regions:
•
EMEA, which consists of Europe, the Middle East and Africa;
•
Americas, which consists of North, Central and South America and the Caribbean; and
•
Asia, which consists of three sub regions: PACAS (composed of
South Asia and the Pacific; Japan and Korea; and Greater China
(composed of China, Hong Kong and Taiwan).
Our manufacturing and research and development activities are organized on
a global basis, while our sales and marketing activities are organized on a
regional basis. As of December 31, 2002, we operated 46 sales offices in over
33 countries, 17 personalization centers and 17 manufacturing centers in 14
countries worldwide and 4 research and development centers in 3 countries. We
own most of our properties. We have implemented several restructuring plans
including staff reductions and rationalization of office facilities on a
worldwide basis. See "Item 6. Directors, Senior Management and
Employees—Employees."
Organizational Structure
Our company is the sole parent company of its
group with approximately 70 direct and indirect subsidiaries located
throughout the world. The following table sets forth our significant direct
and indirect subsidiaries as of December 31, 2002:
Name of Company
Percentage Owned
Gemplus SA, a French corporation
98.1
%
(1)
Gemplus GmbH, a German corporation
100.0
%
(2)
Gemplus Limited, a British corporation
100.0
%
(2)
Gemplus Electronics SA, a French corporation
100.0
%
(2)
Gemplus Technologies Asia Limited, a Singapore corporation
100.0
%
(2)
Gemplus Electronics Asia Limited, a Singapore corporation
100.0
%
(2)
Tianjin Gemplus Smart Card Company Limited, a Chinese corporation
51.0
%
(2)
Gemplus Tianjin New Technologies Company Limited, a Chinese corporation
100.0
%
(2)
Gemplus Corp., a Delaware corporation
100.0
%
(2)
Gemplus Card International de Mexico SA de C.V., a Mexican corporation
100.0
%
(2)
40
Table of Contents
Name of Company
Percentage Owned
Gemplus Finance SA, a Luxembourg corporation
100.0
%
Gemplus Pologne S.P.Z.o.o., a Polish corporation
100.0
%
Zenzus Holdings Ltd., a Gibraltar corporation
100.0
%
(1)
The remaining shares are mainly held by our employees pursuant to
the exercise of stock options, who may contribute to our company the
shares of Gemplus SA received upon exercise of these options in
exchange for shares of our company. For accounting purposes, these
shares are already assumed to be a component of the company's
shareholder's equity.
(2)
A subsidiary of Gemplus SA.
Property, Plants and Equipment
Our manufacturing operations are organized on a global basis with a view
to achieving timely and cost-efficient production and delivery of our products
in each of our world regions. We have developed a high degree of
sophistication in the manufacturing of chip cards. Our expertise in chip card
manufacturing includes:
•
Chip Design: we work with our main suppliers to design chips
that meet our customer's requirements, including chip geometry,
speed and circuit and architecture design. We have dedicated a part
of our research and development activities to the conception of chip
designs, which we seek to protect with the relevant industrial
property authorities.
•
Micro-electronics: we receive memory and microcontroller
chips from our suppliers in wafer form. In clean rooms that have a
high level of dust filtration, we proceed to assemble our chip
micromodules, each of which consists of a chip and a printed circuit
board, using microelectronic technologies.
•
Embedding: the printed card body is prepared for the
assembled chip micromodule, which is then embedded onto the card
body using various techniques.
Our chip cards are subject to in-process visual inspections designed to
ensure that each card meets the customer's physical specifications. We perform
a series of electric tests on our micromodules prior to embedding them onto the
card body designed for electrical functionality of our chip cards. We also
perform a final visual inspection of our chip cards to ensure quality control
and compliance with our chip card specifications.
As of December 31, 2002, we operated 17 card manufacturing centers,
located in 14 countries throughout the world with a global annual production
capacity of 1.3 billion cards. Our main chip card manufacturing centers are
currently located in France, Germany, Poland, China, Singapore, Mexico and the
United States. All of these centers have microcontroller and memory card
manufacturing capabilities. Our main plastic card manufacturing centers are
located in China, Germany, Singapore, the United Kingdom and the United States.
We constantly seek to enhance the efficiency of our global manufacturing
operations in order to increase production capacity, to reduce production and
delivery time and to lower operational costs through upgrades in our chip card
manufacturing technology, by outsourcing non-critical manufacturing processes
and constructing new manufacturing capacity in lower-cost regions. To further
these goals, in the second quarter of 2001, we implemented a plan to
restructure our manufacturing operations. This restructuring included the
closure of a factory in Seebach, Germany and a reallocation of our production
requirements among our manufacturing and other facilities around the world. In
February 2002, we announced a further restructuring program to rationalize our
production and sourcing strategy. In
41
Table of Contents
addition, in December 2002, we announced a further plan to restructure our
operations worldwide, affecting all organizations within our company, including
the manufacturing organization. See "Item 6. Directors, Senior Management and
Employees—Employees."
We own or lease 17 manufacturing facilities around the world. Except as
noted for in "Item 5. Operating and Financial Review and Prospects" regarding
the La Ciotat facility, there are no material encumbrances on these assets.
42
Table of Contents
Item 5. Operating and Financial Review and Prospects
OPERATING RESULTS
The financial information included in the discussion below for the three
years prior to December 31, 2002, is derived from the audited consolidated
financial statements included in this Annual Report. You should read the
following discussion together with the audited consolidated financial
statements and related notes. Our audited consolidated financial statements
have been prepared in accordance with IAS, which differs from U.S. GAAP. Note
32 to our audited consolidated financial statements describes the principal
differences between IAS and U.S. GAAP as they relate to our company, and
reconcile our net income and shareholders' equity to U.S. GAAP.
The year 2002 was a difficult one, as we generated lower revenues than in
2001 and increased net loss. However, 2002 was also a transition year for our
company, as we implemented a strategy designed to restore profitable growth.
We have taken considerable steps to adapt our company to the current
market conditions, and our results show that we may have made some progress
on the path to restoring profitability. Given the continuing price pressure,
our 2002 results also reflect our need to further significantly reduce costs.
Our revenues decreased 23%, from
€
1,023 million in 2001 to
€
787.4 million
in 2002. Operational performance was affected by weak sales in our financial
services and security segment and continuous pricing pressure in the
telecommunications segment, particularly in the wireless segment in Asia. This
unfavorable trend was partly offset by encouraging growth in software and
services, primarily in the telecommunications segment.
Our operating income declined, as we recorded an operating loss of
€
231.8
million in 2002 as compared to an operating loss of
€
180.8 million in 2001.
Both operational and non-recurring factors impacted our operating loss in 2002.
The principal non-recurring factor was the
€
90 million restructuring charge
associated with the implementation of our first and second restructuring
programs. Implementation of the third restructuring program is currently
underway.
The factors affecting our operating income were primarily:
•
continuous pricing pressure on our products used in wireless communications;
•
weak sales in the financial services and security segment; and
•
unfavorable currency fluctuations.
These three unfavorable operational factors were partly offset by higher
wireless cards shipments, lower purchase prices for wireless microcontroller
chips and significant reduction in our operating expenses following the
implementation of our restructuring programs.
Our financial position remained strong in 2002. Excluding non-recurring
items, which included the use of cash to finance our restructuring programs, we
reduced cash outflows during 2002. Our capital expenditures were limited to
approximately one-third of the 2001 level, mainly driven by limited expenditure
on facility expansion. Cash and cash equivalents were
€
417.2 million at
December 31, 2002, as compared to
€
490.7 million at December 31, 2001.
43
Table of Contents
Factors Affecting Revenues
Most of our historical revenues have been earned from sales of our
products, which are typically invoiced to customers on the basis of the number
of cards supplied. We generally record revenues from our product sales when we
transfer title and risk of loss to the customer. We have begun to provide
systems design and integration services, for which we recognize revenues as the
services are completed.
Our sales of wireless products continue to represent a large percentage of
our sales. Our prices for our most sophisticated wireless identification
modules are higher than our prices for our earlier generation wireless
identification modules. When we introduce a new card, it can initially have
the effect of decreasing our average prices, because our prices decline for our
earlier generation cards before our sales volumes migrate to the new cards.
In our financial services and security segment, which includes systems and
services based on chip card technology in areas such as financial services,
identification, health care, corporate security, loyalty programs,
transportation access, pay-television applications, e-business security
activities as well as magnetic stripe ("conventional") cards for banking
applications, our sales declined in 2002, resulting mainly from the fact that
2001 included significant revenues in the banking and retail sectors that
did not recur in 2002. Our revenues in this segment can vary over the life of
our contracts to design, develop and implement chip card based systems. We
typically record a larger share of our revenues early in the life of a
contract, when we receive progress and completion revenues for the
implementation of a system, and card sale revenues to supply the initial needs
of a customer. As a contract matures, our revenues consist to a greater extent of sales of
cards as new cardholders join the system and replace cards that expire or are
lost. We also provide ongoing services such as technical support, which we
bill separately.
Factors Affecting Operating Income
Our operating income is affected by a number of factors. Until 2001, the
most significant factor in recent years has been our product mix, as our
wireless products and services generated margins that were higher than many of
our other products and services, particularly our magnetic stripe bank cards.
Historically, as our sales of wireless products and services have grown, our
gross margin and operating margin have also grown. Starting in 2001, however, the
overall market decline led us to reduce our prices on wireless communications
products, which reduced our gross margin. While margins are still higher in
our telecommunications segment than in other segments, the difference has
become smaller.
Our cost of sales consists principally of the cost of our microcontroller
chips, the plastic that is used in our cards, tools and equipment used to
manufacture and personalize our chip cards and personnel related to
manufacturing, supply, logistics and management of production. Our margins are
significantly impacted by the extent to which we are able to match our
inventory and production capacity with demand for our products. Our operating
income is also affected by our selling and marketing, research and development
and administrative expenses, all of which are typically a function of planning
that is based on projected capacity needs and business demand.
When we initiate a major card program or open a new manufacturing
facility, we typically incur costs in connection with the establishment of the
program or the facility, including the cost of manufacturing tools and
equipment and personnel who are trained to implement the program or hired to
operate the new facility. Depending on when the start up phase occurs in
relation to our accounting periods, we may incur significant startup costs in a
period before we earn substantial revenues. When this happens, our operating
income is negatively affected during the startup period. In contrast, once the
program begins to generate revenues or the new manufacturing facility begins to
run, our operating income typically increases.
44
Table of Contents
Impact of Exchange Rates
We report our financial statements in euros. Because we earn a
significant portion of revenues in countries where the euro is not the local
currency, results of operations can be significantly impacted by exchange rate
movements between the euro and other currencies, primarily the Chinese
renminbi, the U.S. dollar, the Singapore dollar and the British pound. In
2002, we earned 12% of our revenues in China, 10% in the United States, 10% in
Asia outside China, and 6% in the United Kingdom. A substantial portion of
sales to the rest of Asia, other than China, is denominated in Singapore
dollars and in U.S. dollars.
The following table sets forth information relating to the average
exchange rates between the euro and the British pound, the Chinese renminbi,
the U.S. dollar and the Singapore dollar since January 1, 2000, calculated
based on daily indicative fixing publicly supplied by European Central Bank
("ECB") and indicative quotations supplied on Internet sites of bank
counterparties for currencies ECB does not establish fixing on.
December 31,
2002
2001
2000
(in euros per unit of foreign currency)
British Pound
1.58881
1.60836
1.64133
Chinese Renminbi
0.12787
0.13502
0.13116
US Dollar
1.05419
1.11735
1.08742
Singapore Dollar
0.59074
0.62351
0.62903
Reporting segments
As of January 1, 2002, we elected to change the reporting of our business
segments. All the activities formerly reported as part of our network systems
segment and our other operating segment have been transferred to our financial
services and security segment, except the access control systems activities of
our former subsidiary SkiData and the electronic smart labels solutions
activities of our former Tag subsidiary, which have been reported separately
under "Disposed Operations", as they were sold during the third quarter of
2001. Consequently, the financial services and security segment includes
systems and services based on chip card technology in areas such as financial
services, identification, health care, corporate security, loyalty programs,
transportation access, pay-television applications as well as magnetic stripe
cards for banking applications. Our activities in this segment also include
the sales of smart card readers to our customers as well as smart card
interfacing technologies to device manufacturers. There is no change with
respect to the telecommunications segment, which includes our wireless
solutions, as well as prepaid telephone cards and other products. This change
in business segment reporting is consistent with the changes in our financial
reporting structure incorporated in our management reporting.
Recent Developments
In addition to the restructuring programs that were put into place in 2001
and in February 2002, we announced in December 2002 a third restructuring and
rationalization program. This new program needed to be implemented in response
to further market deterioration and price erosion beyond what was anticipated.
It involves the termination of about 1,100 employees around the world
(including 500 in France) and the rationalization of production sites of office
facilities and a worldwide basis. This program is expected to deliver savings
in the range of
€
100 million, the full benefit of which is expected
45
Table of Contents
to be seen in 2004. We believe that we will be able to achieve the costs
savings objectives associated with this restructuring program. However, our
ability to reach this objective will depend on a number of factors, including
the actual expenses that we incur as the program is fully implemented and the
impact of market conditions.
We have filed press releases that include
our announcement of our results
of operations for the first quarter of 2003. See "Item 10. Additional
Information—Documents on Display" for instructions on how to obtain copies of
our Forms 6-K filed with the U.S. Securities and Exchange
Commission. Our Form 6-K's are not incorporated by reference into this Annual Report.
Year ended December 31, 2002 compared to year ended December 31, 2001
Net Sales
Net sales for the year ended December 31, 2002 amounted to
€
787.4 million,
a 23% decrease compared with net sales of
€
1,023 million for the year ended
December 31, 2001. After adjusting for currency fluctuations and discontinued
operations, net sales decreased by 17%.
The following table shows the breakdown of our net sales in 2002 and 2001 by
market segment:
Years ended December 31
2002
2001
% change
(in millions of euros)
Telecommunications
544.5
681.9
(20
%)
Financial Services and Security
242.9
296.8
(18
%)
Disposed Operations (*)
—
44.3
—
Total
787.4
1,023.0
(23
%)
(*) including SkiData and Tag activities, which divestitures occurred during
the third quarter of 2001.
Net sales in our telecommunications segment declined 20%, from
€
681.9
million in 2001 to
€
544.5 million in 2002. After adjusting for currency
fluctuations, net sales in this segment decreased by 17%. This decrease was
primarily due to a 19% decline in sales of wireless products, from
€
491.7
million in 2001 to
€
400.6 million in 2002, resulting mainly from a continuous
pricing pressure in this activity. While there was a shift to high-end
wireless products in 2002 and stronger demand for wireless products, including
software and services, this impact was not sufficient to overcome the pricing
pressure. Other cards sales decreased significantly in 2002 compared to 2001,
mainly driven by lower demand for phonecard products and stronger price
pressure. Excluding SkiData and Tag activities, the telecommunications segment
represented 69% of our revenue in 2002, as compared to 70% in 2001.
Net sales in our financial services and security segment declined 18%,
from
€
296.8 million in 2001 to
€
242.9 million in 2002 (excluding SkiData and
Tag activities). After adjusting for currency fluctuations, net sales in this
segment decreased by 16%. The decline in our financial services and security
segment resulted mainly from a significant decline in revenues from the banking
and retail sectors in the United States compared to 2001. The financial
services and security segment represented 31% of our revenue in 2002, as
compared to 30% in 2001, excluding SkiData and Tag activities.
The following table breaks down our net sales among our three regions:
46
Table of Contents
Years ended December 31
2002
2001
% change
(in millions of euros)
Europe, Middle-East and Africa
416.2
474.0
(12
%)
Asia
199.5
273.1
(27
%)
Americas
171.7
231.6
(26
%)
Disposed Operations (*)
—
44.3
—
Total
787.4
1,023.0
(23
%)
(*) including SkiData and Tag activities, which divestitures occurred during
the third quarter of 2001.
The decline in net sales in the Europe, Middle-East and Africa region,
which represented 53% of our revenue in 2002, was primarily due to the poor
performance of the wireless segment which was partly offset by an increase of
the sales in the banking sector. In Asia, lower sales reflected a
deterioration of pricing conditions in the wireless segment. In Americas, we
experienced a significant decrease in our financial services chip cards
sales to United States banks and retailers.
Gross profit
Gross profit decreased by 35%, from
€
307.5 million in 2001 to
€
199.7
million in 2002 (the decrease was 31%, excluding disposed operations). Our
gross margin decreased from 30.1% in 2001 to 25.4% in 2002. This decrease was
mainly due to pricing pressure in the telecommunications segment. In addition,
in 2001, our gross profit was impacted by a
€
10.6 million one-time favorable
adjustment resulting from the partial reversal of a provision for a patent
claim that was settled in 2001. However, the decline in our gross profit was
partially offset by a better regional and product mix, the depletion of
expensive microcontroller chip inventories purchased during prior periods, as
well as higher sales volumes and productivity gains.
The following table breaks down our gross profit and gross margin by segment.
2002
2001
% change
(millions
(millions
in gross
Years ended December 31
of euros)
(% of sales)
of euros)
(% of sales)
profit
Telecommunications
154.5
28.4
%
228.8
33.6
%
(32
%)
Financial Services and
Security
45.2
18.6
%
62.6
21.1
%
(28
%)
Disposed Operations (*)
—
—
16.1
36.3
%
—
Total
199.7
25.4
%
307.5
30.1
%
(35
%)
(*) including SkiData and Tag activities, which divestitures occurred during
the third quarter of 2001.
The gross margin of our telecommunications segment decreased from 33.6% in
2001 to 28.4% in 2002. This decrease resulted primarily from the strong price
pressure in the wireless segment. This decrease was only partially offset by
lower purchase prices for wireless microcontroller chips, and higher sales
volumes in the wireless segment, including in related software and services
which generate higher margins. In addition, in 2001, our gross margin was
favorably impacted by the one-time royalty expense adjustment described above.
The decrease in our financial services and security segment gross margin,
from 21.1% in 2001 to 18.6% in 2002, resulted primarily from lower sales
volumes, lower prices, unfavorable product mix and
47
Table of Contents
customer mix for smart card products. The lower purchase prices for
microcontroller chips only partially offset this decrease.
Operating income (loss)
We recorded an operating loss of
€
231.8 million in 2002 compared to an
operating loss of
€
180.8 million in 2001. The 2002 operating loss resulted
from declining sales, declining gross margins in both our segments and higher
restructuring expenses. Restructuring expenses in 2002 amounted to
€
90 million
compared to
€
28.5 million in 2001. This increase was partly offset by a
significant decrease of our operating expenses which represented
€
294.4 million
in 2002 compared to
€
388.8 million in 2001 (excluding goodwill amortization
expense in 2002 and 2001 and two one-time items incurred in 2001: the
management severance expenses amounting to
€
25.7 million, and the litigation
expenses amounting to
€
18.1 million). The operating expenses decrease
reflected the effect of the restructuring plans announced in 2001 and in 2002
combined with other cost saving programs.
For the year as a whole, research and development expenses decreased by
18%, from
€
112.9 million in 2001 to
€
92.2 million in 2002, while general and
administrative expenses decreased by 19%, from
€
110.7 million in 2001 to
€
89.9
million in 2002. Selling and marketing expenses fell more aggressively by 32%
from
€
165.3 million in 2001 to
€
112.2 million in 2002.
Goodwill amortization amounted to
€
47.1 million in 2002, as compared to
€
27.2 million in 2001. In 2002, goodwill amortization included a goodwill
write-down of
€
22.1 million following an impairment testing. This write-down
concerned the goodwill generated following the acquisition of SLP InfoWare SA
("SLP") in October 2000 and was due to significantly declining sales of SLP
software. (See Note 8 to our consolidated financial statements). Goodwill
amortization recorded in 2001 included a one-time
€
1.1 million charge resulting
from a write-off of goodwill previously recorded from the acquisition of a 21%
equity interest in Softcard due to Softcard's decision to cease its operations.
Restructuring expenses
The deteriorating economic conditions and the continuation of the turmoil
in the telecommunications industry led us to announce a second restructuring
plan in February 2002 and a third plan in December 2002. As in 2001, we
responded to the rapidly changing environment by implementing a program to
control costs and restructure our activities. The program involved a reduction
of our workforce and the rationalization of office operations on a worldwide
basis. In 2002 we recorded a restructuring charge of
€
90 million, of which
€
80.8 million were related to our second restructuring plan. The goal of the
program was to achieve
€
100 million in annualized cost savings, an objective
that we continue to maintain. Our ability to reach this objective will depend
on a number of factors, including the actual expenses that we incur as the
program is fully implemented and the impact of market conditions.
Despite progress on cost saving efforts initiated in 2001 and 2002, a
third restructuring program needed to be implemented in response to further
market deterioration and price erosion beyond what could have previously been
anticipated. This program was announced in December 2002, and will impact most
parts of the company. This program is expected to deliver annual savings in
the range of
€
100 million, the full benefit of which is expected to be seen in
the second half of 2004. The restructuring charge of
€
90 million recorded in
2002 included an amount of
€
7.7 million relating to this plan.
48
Table of Contents
Net financial income and expense
We recorded net financial expense of
€
51.1 million in 2002 compared to
€
20.7 million net income in 2001. Net financial expense and income were
impacted by the following specific factors:
•
Provision for a loan to the former Chairman of the
board. In 2000, one of our indirect subsidiaries granted a loan
to Dr. Lassus, our former Chairman of the board. Pursuant to an
agreement dated December 19, 2001, as of January 10, 2002 Mr. Lassus
ceased his office as Chairman of our board of directors and resigned
from all other positions that he held with our company and any of its
affiliates, except for his position as a non-executive director of
our company. As of January 10, 2002, Mr. Lassus was no longer an
employee of our company or any of its affiliates. Effective June 30, 2002, we
recorded in financial expense a
€
67.6 million non-cash charge to
cover the risk of possible non-reimbursement of the loan.
Our company has not forgiven the loan and is seeking
repayment by Dr. Lassus through legal proceedings (see Note 9 to
our consolidated financial statements).
•
Interest receivable on loans to senior management. Net
financial expense incurred in 2001 included
€
4.9 million of
interest income on the loans granted in 2000 by one of our
indirect subsidiaries to Mr. Antonio Perez, our former Chief
Executive Officer, and to Dr. Lassus. During 2001, Mr. Perez
partially reimbursed the loans that were granted to him and the
unreimbursed portion of the loans was charged to our Consolidated
Statement of Income. Net interest accrued in 2002 on the loan
granted to Dr. Lassus was
€
1.7 million corresponding to interest
accrued in the first half of 2002.
•
Amortized cost of an advance made to a trade supplier.
Net interest income incurred in 2001 included a
€
2.0 million
interest expense following the measurement at amortized cost of
an advance made to a trade supplier, as compared to
€
1.9 million
of interest income following such measurement in 2002 (see Note 6
to our consolidated financial statements).
Excluding these specific items, net financial income reported in 2002
amounted to
€
12.9 million, as compared to net financial income of
€
17.8 million
in 2001, reflecting primarily the decrease in our cash balances and the
decrease in the market interest rate.
Other income and expense, net
We recorded net other expense of
€
28.9 million in 2002 compared to a net
other income of
€
45.7 million in 2001. In 2001, net other income primarily
included a one-time
€
68.3 million gain generated from the divestiture of our
SkiData and Tag activities, which was only partially offset by foreign exchange
losses and minority interests. Net other expense in 2002 was primarily
attributable to foreign exchange losses (
€
15.1 million), losses on investments
(
€
6.4 million) and minority interests (
€
4.3 million).
Income tax
We recorded an income tax expense of
€
9.1 million in 2002. This tax
expense reflected the fact that we did not recognize additional deferred income
taxes on the losses incurred in France in 2002, and that a provision for tax
risks amounting to
€
5.9 million had been recorded following a tax audit in
France. In 2001, we recorded an income tax credit of
€
14.2 million, reflecting
an effective tax rate of 16.3%. In 2001, our effective tax rate was impacted
by the management severance expenses which created losses in certain countries
with low effective tax rates and by the one-time
€
68.3 million gain from the
SkiData and Tag divestitures.
Net loss
We recorded a net loss of
€
320.9 million in 2002, or
€
0.53 per share, as
compared to a net loss of
€
100.2 million in 2001, or
€
0.16 per share. Net loss
recorded in 2002 primarily reflected the
€
90 million
49
Table of Contents
restructuring charge, the
€
67.6 million non-cash write-down of a loan
granted in 2000 to one of our directors and the decline in our gross margin,
which were, however, significantly offset by the reduction of our operating
expenses as a result of our restructuring program. Net loss recorded in 2001
primarily reflected the decrease of our operating income, the
€
28.5 million
restructuring expense and the
€
18.1 million one-time charge for the Humetrix
lawsuit, which were partially offset by the impact of the
€
68.3 million
one-time gains from our SkiData and Tag divestitures.
Year ended December 31, 2001 compared to year ended December 31, 2000
Net Sales
Net sales for the year ended December 31, 2001 amounted to
€
1,023 million,
a 15% decrease compared with net sales of
€
1,204.6 million for the year ended
December 31, 2000. Excluding SkiData and Tag activities, net sales decreased
12%, from
€
1,117 million in 2000 to
€
978.7 million in 2001.
The following table shows the breakdown of our net sales in 2001 and 2000
by market segment:
Years ended December 31
2001
2000
% change
(millions of euros)
Telecommunications
681.9
883.7
(23
%)
Network systems
Continuing businesses
188.7
115.3
64
%
SkiData
40.6
81.1
(50
%)
Total
229.3
196.4
17
%
Other
Continuing businesses
108.1
118.0
(8
%)
Tag
3.7
6.5
(43
%)
Total
111.8
124.5
(10
%)
Total
1,023.0
1,204.6
(15
%)
Net sales in our telecommunications segment declined 23%, from
€
883.7
million in 2000 to
€
681.9 million in 2001, primarily due to a 30% decline in
sales of wireless products, from
€
698.5 million in 2000 to
€
491.7 million in
2001, including sales of our next generation network products for
€
9.5 million
and
€
32 million, in 2000 and 2001, respectively. The decrease in net sales in
2001 resulted primarily from the decrease in wireless product sales and
declining sales prices, both of which were the result of a dramatic drop in
mobile telephone sales and high levels of SIM card inventories accumulated by
mobile telecommunications operators in 2000. While there was a shift to
high-end wireless products in 2001, the impact was not sufficient to overcome
the overall condition of the market. Phone card sales remained stable in 2001
compared to 2000, although we experienced a shift between regions, as growth in
Latin America offset weaker demand in Asia. Excluding SkiData and Tag
activities, the telecommunications segment represented 70% of our revenues in
2001 as compared to 79% in 2000.
Net sales in our network systems segment grew by 17%, from
€
196.4 million
in 2000 to
€
229.3 million in 2001, or by 64% excluding sales from SkiData.
Growth in our network systems segment resulted mainly from a significant
increase in sales of chip cards to the banking sector in the United States and
Germany and to retailers in the United States. As a result of strong sales in
our network systems
50
Table of Contents
segment and decreased sales in our telecommunications segment, our network
systems segment generated 19% of our revenues in 2001, as compared to 10% in
2000, in each case excluding SkiData and Tag activities.
Net sales in our other segment decreased by 10% in 2001 compared to 2000,
reflecting weaker demand for magnetic stripe cards and a shift in our
pay-television chip card activities, where in 2001 we embedded chips in cards
that were consigned to us by some of our customers, rather than producing and
selling the cards to them. Net sales in this segment represented 11% of our
revenues in 2001, as compared to 10% in 2000, in each case excluding sales from
our Tag and SkiData units.
Our revenue decline was most pronounced in Europe and Asia, where the
dominant mobile telephone systems incorporate our SIM card technology to a much
greater degree than in the Americas. Our sales increased in the Americas in
2001 due to the network systems segment. The following table breaks down our
net sales among our three regions:
Years ended December 31
2001
2000
% change
(millions of euros)
Europe, Middle East and Africa
518.3
701.3
(26
%)
Asia
273.1
317.9
(14
%)
Americas
231.6
185.4
25
%
Total
1,023.0
1,204.6
(15
%)
The decline in net sales in the Europe, Middle East and Africa region,
which represented 51% of our revenues in 2001, resulted primarily from the
slowdown in the wireless industry and the sale of SkiData, which were only
partially offset by growth in financial services smart card sales in Central
and Eastern Europe. In Asia, decreased sales primarily reflected a decline in
wireless product sales and a deterioration of pricing conditions throughout the
region, as Asian wireless network operators, particularly those in China,
reduced their SIM card inventories to better match lower demand for wireless
products. An increase in sales in the network systems segment in Asia
partially offset decreased sales in our telecommunications segment. The
increase in net sales in the Americas region resulted primarily from the
significant growth in our financial services chip card sales to U.S. banks and
retailers and from increased sales of phone cards in Latin America.
Gross profit
Gross profit decreased 32%, from
€
453.9 million in 2000 to
€
307.5 million
in 2001. Our gross margin decreased from 37.7% in 2000 to 30.1% in 2001,
resulting both from declining gross margins in our telecommunications segment
and the shift in our business mix between our telecommunications and network
systems segments. Because network systems gross margins remain lower than
gross margins of wireless products and services, decreased sales in our
telecommunications segment adversely affected our gross margins. Excluding a
one-time favorable adjustment of a
€
10.6 million royalty expense resulting from
the partial reversal of a provision for a patent claim that was settled in
2001, our gross margin would have been 29% in 2001.
51
Table of Contents
The following table breaks down our gross profit and gross margin by
segment.
Years ended December 31
2001
2000
% change
(millions of
(% of
(millions of
(% of
in gross
euros)
sales)
euros)
sales)
profit
Telecommunications
228.8
33.6
%
378.9
42.9
%
(40
%)
Network systems
Continuing businesses
50.5
26.7
%
31.5
27.3
%
60
%
SkiData
16.6
40.9
%
30.5
37.6
%
(45
%)
Total
67.1
29.3
%
62.0
31.6
%
8
%
Other
Continuing businesses
12.2
11.3
%
12.2
10.3
%
0
%
Tag
(0.6
)
n.s.
0.8
12.3
%
n.s.
Total
11.6
10.4
%
13.0
10.4
%
(11
%)
Total
307.5
30.1
%
453.9
37.7
%
(32
%)
The gross margin of our telecommunications segment decreased from 42.9% in
2000 to 33.6% in 2001. This decrease resulted primarily from unfavorable
manufacturing variances reflecting overcapacity, primarily in our
European-based factories, overcapacity of high cost inventory that we purchased
or ordered in 2000 and declining prices of wireless products due to the
downturn in the telecommunications market. This decrease was only partially
offset by the favorable impact of the one-time royalty expense adjustment
described above.
The decrease in our network systems gross margin, from 31.6% in 2000 to
29.3% in 2001, resulted primarily from the disposal of our SkiData activities,
where we typically generated higher margins. Excluding SkiData, the gross
margin of the network systems segment remained stable, representing 26.7% in
2001, as compared to 27.3% in 2000.
In our other activities segment, gross margins remained essentially stable
from 2000 to 2001.
Operating income (loss)
We recorded an operating loss of
€
180.8 million in 2001 compared to
operating income of
€
116.2 million in 2000. Before goodwill amortization, the
operating loss amounted to
€
153.6 million in 2001 compared to operating income
of
€
127.4 million in 2000. The 2001 operating loss resulted from declining
gross margins in our telecommunications segment and from several non-recurring
charges, described below, which were only partially offset by the
€
10.6 million
one-time royalty expense adjustment described above. Excluding these one-time
factors, our operating loss was
€
119.1 million in 2001. Our operating income
in 2000 benefited from a one-time recognition of a
€
12.5 million credit
corresponding to French research tax credits from previous years.
52
Table of Contents
Our operating loss resulted from a combination of our lower sales and
gross margins, as well as the expansion of our operating structure during the
second half of 2000 in anticipation of continued growth. The costs associated
with our operating structure were reduced in the second half of 2001 after we
began to implement our restructuring plan. For the year as a whole, research
and development expenses grew by 24%, from
€
90.8 million in 2000 (excluding the
impact of the research tax credit) to
€
112.9 million in 2001, while general and
administrative expenses increased by 23%, from
€
89.7 million in 2000 to
€
110.7
million in 2001 excluding one-time charges described below. Selling and
marketing expenses also grew, but more modestly on a percentage basis.
Our operating loss reflected the impact of three non-recurring factors.
First, we implemented a major restructuring program in 2001. Second, we
incurred costs in connection with a change in our management at the end of
2001. Third, we recorded costs in connection with the loss of a significant
litigation matter. We also recorded a
€
10.6 million one-time favorable royalty
expense adjustment, which only partially offset these three unfavorable
factors, impacting our gross margin, as described above.
Goodwill amortization amounted to
€
27.2 million in 2001, compared to
€
11.2
million in 2000, as a result of acquisitions in 2000, particularly the
acquisitions of Celocom Limited and SLP InfoWare SA, which were completed
during the last quarter of 2000. In addition, goodwill amortization recorded
in 2001 included a one-time
€
1.1 million charge resulting from a write-off of
goodwill previously recorded from the acquisition of a 21% equity interest in
Softcard due to Softcard's decision to cease its operations.
Restructuring expenses
In 2001, we responded to the rapidly changing telecommunications market by
implementing a program to control costs and restructure our activities. The
program, announced on May 2, 2001, involved the closure of a manufacturing
facility, the downsizing of a research and development facility, a reduction of
our workforce following the combination of our financial services and Internet
security activities, and the rationalization of office operations on a
worldwide basis. We recorded a restructuring charge of
€
28.5 million in the
second quarter of 2001 as a result of the restructuring plan. The goal of the
program was to achieve
€
40 million in annualized cost savings, an objective
that we completed during 2002.
Management severance expenses
On December 19, 2001, we announced changes in our management, as our Chief
Executive Officer, Mr. Antonio Perez, and our Chairman of the board, Dr. Marc
Lassus, ceased their functions as Chief Executive Officer and Chairman of the
board, respectively, and new members of management were appointed. In
connection with these changes, we recorded a
€
25.7 million charge in the fourth
quarter of 2001. The charge reflected several factors. First, we recorded a
charge of
€
6.8 million in connection with the cancellation of a portion of
certain loans made to Mr. Perez by one of our indirect subsidiaries, Zenzus
Holdings Ltd., to permit Mr. Perez to exercise stock options and pay taxes
relating to his receipt of a grant of free shares in 2000. The charge reflects
the difference between the loan balance at the time Mr. Perez resigned and the
fair market value of the shares that Mr. Perez transferred to the indirect
subsidiary of our company. Those shares were transferred to the indirect
finance subsidiary pursuant to two agreements, the first signed in October and
the second at the time of Mr. Perez's resignation in December. Second, we
recorded a charge of
€
6.5 million in respect of a payment to Mr. Perez to
compensate for the tax consequences of the loan forgiveness. Third, we
recorded a
€
1.2 million charge with respect to a severance payment due to Mr.
Perez. Fourth, we recorded a charge of
€
11.2 million with respect to Dr.
Lassus, representing the fulfillment of an agreement signed in 2000 that
required us to make such payment upon the replacement of Dr. Lassus as our
Chairman of the board.
There was no accruals in 2002 for management severance expenses relating
to Messrs. Perez and Lassus.
53
Table of Contents
Litigation Expense
In October 2001, the United States Court of Appeals for the Ninth Circuit
affirmed a district court judgment against us in favor of Humetrix Inc. based
on a claim by Humetrix that we had breached an agreement to jointly market
several products in the U.S. health care sector. The judgment was in the
amount of US $15 million plus interest. Our petition seeking a rehearing was
denied in November 2001. As a result of this decision, we recorded a charge of
€
18.1 million in 2001. No further action is possible with respect to this
litigation.
Net financial income and expense
We recorded net financial income of
€
20.7 million in 2001 compared to
€
12.6 million in 2000. The increase reflected principally interest earned on
the proceeds of the initial public offering of our ordinary shares in December
2000 and other capital contributions from the exercise of warrants and stock
options by our shareholders and employees, as well as substantial equity
investments by the Texas Pacific Group in February and May 2000.
Other income and expense, net
We recorded net other income of
€
45.7 million in 2001 compared to net
other expense of
€
28 thousand in 2000. This increase resulted primarily from a
one-time
€
68.3 million gain generated from our SkiData and Tag divestitures,
which was only partially offset by foreign exchange losses and minority
interests. Net other expense in 2000 was primarily attributable to minority
interests and gains on investments.
Income tax
We recorded an income tax credit of
€
14.2 million in 2001, reflecting an
effective tax rate of 16.3%. In 2000, we recorded an income tax expense of
€
29.6 million, which reflected an effective tax rate of 21.2%. Our effective
tax rate in 2001 declined mainly due to the management severance expenses which
created losses in certain countries with low effective tax rates.
Net income (loss)
We recorded a net loss of
€
100.2 million in 2001, or
€
0.16 per share, as
compared to net income of
€
99.1 million in 2000, or
€
0.18 per diluted share.
The net loss primarily reflected the decline in our operating income, which was
only partially offset by the one-time gain from the SkiData and Tag activities
divestitures.
54
Table of Contents
LIQUIDITY AND CAPITAL RESOURCES
Our financial position remained strong in 2002. Cash and cash equivalents
were
€
417.2 million at December 31, 2002, as compared to a
€
490.7 million at
December 31, 2001. Excluding non-recurring items, primarily restructuring
charges, one-time royalty prepayment, amounts paid in connection with a
litigation expense and management severance costs accrued in 2001, cash
outflows during 2002 were contained. We also used limited amounts of cash to
fund our purchases of property, plant and equipment and investments.
Operating activities used
€
62.7 million of cash in 2002, compared to
€
23.3
million in 2001. Net cash used in operating activities in 2002 was impacted by
four non-recurring items:
(i)
€
33.4 million paid in connection with our restructuring
programs;
(ii)
€
11.2 million of a one-time royalty prepayment for the period
through 2005;
(iii)
€
18.1 million paid with respect to the exceptional costs
relating to the Humetrix litigation; and
(iv)
€
10.6 million paid in management severance costs accrued in
2001.
Excluding these exceptional items, 2002 operating activities generated
€
10.6 million, as a result of significant improvements produced by working
capital management. Accounts receivable declined
€
43.7 million as compared to
December 31, 2001, reflecting the lower revenue levels. Our days of sales outstanding, at an average of 53
days, compared to 57 days at the end of December 2001. Inventory levels
as of December 31, 2002 declined by
€
43.3 million as compared to December 31, 2001, representing
111 days of supply compared to 110 days of supply as of December 31, 2001.
Net cash used in investing activities in 2002 was
€
47.1 million compared
to
€
65.3 million in 2001. Cash used in 2001 included a cash inflow of
€
108.7
million net of fees due to the divestiture of our SkiData and Tag businesses.
Excluding this one-time item, net cash used in investing activities in 2001
amounted to
€
174 million. The decrease in cash used in investing activities in
2002 was primarily due to the decrease in capital expenditures as compared to
2001. Capital expenditures were
€
31.9 million in 2002 as compared to
€
102.6
million in 2001. In 2002, capital expenditures were made primarily in Europe,
and included principally
€
17.7 million related to a research and development
and office building located in La Ciotat, France, which was mainly financed
through a sale-leaseback transaction. Cash used in investing activities also
included
€
14.7 million in connection with investments in start-up technology
companies. Cash used in investing activities in 2001 also included a
€
13
million cash disbursement for the purchase of 20% of SkiData's issued share
capital in anticipation of the sale of this subsidiary which was completed
during the third quarter of 2001, and investments made primarily in two
technology companies in the wireless communications market. In addition, in
March 2001, we extended a
€
14 million loan to Mr. Perez, our former Chief
Executive Officer, to fund tax liabilities relating to his receipt of a grant
of free shares in 2000. This loan was later partially reimbursed in the form
of Gemplus International S.A. shares (see Note 31 to our consolidated financial
statements).
Financing activities generated
€
3.8 million of cash during 2002, compared
to
€
34.7 million cash used in 2001. The 2002 figure was primarily the result
of the
€
15.9 million proceeds generated by a sale-leaseback transaction entered
into to finance land and a research and development and office building located
in La Ciotat, France. Cash generated by financing activities in 2002 was also
impacted by the payment of dividends to minority shareholders of one of our
Asian subsidiaries in the amount of
€
6.2 million. Negative cash flow from
financing activities in 2001 principally resulted from the initial
55
Table of Contents
implementation of our share repurchase program, pursuant to which we
repurchased shares of our outstanding common stock for
€
15.1 million, the
purchase at fair market value of shares of Gemplus SA held by two of our former
executive officers for
€
14.5 million, the payment of
€
8.1 million for expenses
incurred in 2000 in connection with sales of equity securities to Texas Pacific
Group and our initial public offering, and the payment of
€
4.3 million in
dividends to minority shareholders of one of our Asian subsidiaries.
In 1999, we entered into a
€
150 million revolving credit facility with a
syndicate of international banking institutions that bore interest at a
floating rate, out of which
€
73.1 million was available as at December 31,
2002. We had never drawn any amount under this revolving credit facility and
in January 2003 we terminated it before its due date.
We believe that our existing cash resources and our anticipated cash flow
from operations are sufficient to provide for our foreseeable near term and
medium term liquidity needs. At December 31, 2002, cash and cash equivalents
amounted to
€
417.2 million. Our off balance sheet commitments at December 31,
2002 were not significant.
Critical accounting policies
The significant accounting policies that we believe are the most critical
to assist in fully understanding and evaluating our reported financial results
include the following:
Revenue Recognition
Revenues from product sales are recorded upon transfer of title and risk
of loss provided that no significant obligations of the company remain and
collection of the resulting receivable is probable. We record deferred revenue
for sales invoiced which are delayed at the buyer's request where transfer of
title and risk of loss have not occurred. We regularly review our procedures
to ensure that the policy is consistently applied throughout our subsidiaries
worldwide.
Goodwill
Goodwill is reviewed for impairment based on expectations of future cash
flows, which are uncertain, at each balance sheet date, or whenever events or
changes in circumstances indicate that the carrying value may not be
recoverable. We consider significant underperformance relative to expected
historical or projected future operating results, significant change in the
manner of our use of the acquired assets or the strategy for our overall
business, and significant negative industry or economic trends. Under the
current assumptions we believe that no further material impairment of goodwill
exists.
Loans and receivables
According to International Accounting Standards, we adjust the carrying
amount of loans and receivables to their estimated recoverable amount when it
is probable that we will not be able to collect all amounts due – principal and
interest – according to the contractual terms of such loans and receivables.
Inventory
Our industry is highly competitive and characterized by rapid
technological change, frequent new product development, and rapid product
obsolescence. We regularly review inventory quantities on hand and record
provisions for excess and obsolete inventory based primarily on our estimated
forecast of product demand and production requirements.
56
Table of Contents
Inventories are carried at the lower of cost or market, with cost being
determined principally on the weighted-average cost basis. Cost elements
included in inventories are raw materials, labor and manufacturing overhead
excluding the impact of low activity, if any. A significant component of the
cost of production relates to the acquisition of microcontroller chips. The
cost of microcontroller chips decreased significantly in recent months.
Our provision for microcontroller chips inventory is determined based on the
anticipated net realizable value of finished products which includes cost of
production, raw materials, labor and manufacturing overheads.
Research and Development
Development costs are recognized as an expense when incurred, except for
development costs incurred from the time technological feasibility is
established until the product under development is produced and future
profitability is demonstrated. Judgment is exercised in determining
technological feasibility and future profitability, the capitalization of such
costs being reviewed on a quarterly basis. In addition, we continually
evaluate the recoverability of capitalized costs and make write-downs when
necessary.
Restructuring
As required by International Accounting Standards, we record restructuring
expenses only when, prior to the date of the financial statements, the
enterprise is committed to the plan of termination, the benefits that current
employees will receive upon termination are established and the benefit
arrangements are communicated.
Special Purpose Entities
We have not had any transactions involving special purpose entities as an
investment vehicle. We do not intend to enter into transactions with such
entities.
Market Risk
In the conduct of our business, we are exposed to a number of market
risks, including currency exchange risks, interest rate risks and credit risks.
To hedge our market risk exposures, we use several types of derivative
instruments. We discuss our exposure to market risks and our hedging
activities in "Item 11. Quantitative and Qualitative Disclosures About Market
Risk."
U.S. GAAP Reconciliation
We prepare our audited consolidated financial statements in accordance
with IAS, which differ in several respects from U.S. GAAP. As a result, our
net income and shareholders' equity are different under U.S. GAAP and under
IAS.
The following table sets forth our consolidated net income under IAS and
under U.S. GAAP for the periods indicated.
Year ended December 31,
2000
2001
2002
(millions of euros)
IAS net income (loss)
99.1
(100.2
)
(320.9
)
U.S. GAAP net income (loss)
(123.2
)
(49.5
)
(279.7
)
57
Table of Contents
One of the principal differences affecting the determination of our net
income under U.S. GAAP compared with IAS resulted in 2000 and 2001 from the
granting of share options to our executive officers and employees. In
accordance with IAS, the issuance of share options do not have any impact on
net income at the time of grant or of exercise of the options. Under IAS, upon
exercise of the options, the price paid for the underlying shares is allocated
to share capital and paid-in-capital. Under U.S. GAAP the difference between
the exercise price and the fair market value of our shares at the time the
options are granted generates compensation expense. In addition, in connection
with the issuance of stock options to our former Chief Executive Officer and
our former Chairman of the board in the second half of 2000, we made several
loans to these individuals for the exercise of these options, as described
under "Item 7. Major Shareholders and Related Party Transactions—Related Party
Transactions." Because these loans may be prepaid prior to maturity, the
amount of interest to be paid on the loans was uncertain and, as a result, the
ultimate option price was also uncertain. Under U.S. GAAP, the issuance of
stock options with an unknown exercise price must be accounted for as a
variable plan, which requires us to measure compensation in each period based
on the difference between the exercise price and the fair market value of the
shares. A compensation expense of
€
94.1 million was recorded in 2000 with
respect to the options granted to these individuals, which was reversed in 2001
when the fair market value of the stock went below the exercise price of the
options. No compensation expense or benefit was recorded in 2002 with respect
to such issuance.
Consequently, the accounting for share options in accordance with U.S.
GAAP resulted in a compensation expense of
€
2.9 million for the year ended
December 31, 2002, as compared to a net total benefit of
€
69.3 million for the
year ended December 31, 2001 and a net compensation expense of
€
229.7 million
for the year ended December 31, 2000.
Another significant difference affecting the determination of our net
income under U.S. GAAP compared with IAS results from goodwill amortization.
As a result of the adoption of SFAS 142 as of January 1, 2002, our company no
longer amortizes goodwill under U.S. GAAP.
One of the principal differences affecting the determination of our
shareholders' equity under U.S. GAAP are the impact of several loans made to
our former Chief Executive Officer and our former Chairman of the board for the
exercise of the stock options granted in the second half of 2000, which, in
aggregate, amounted to
€
4.9 million,
€
71.9 million and
€
143.7 million and are
recorded as a decrease in shareholders' equity under U.S. GAAP as at December
31, 2002, 2001 and 2000, respectively.
58
Table of Contents
The following table sets forth our shareholders' equity under IAS and U.S.
GAAP as of the dates indicated.
Year ended December 31,
2000
2001
2002
(millions of euros)
IAS shareholders' equity
1,385.0
1,167.8
860.5
U.S. GAAP shareholders' equity
1,242.8
1,078.3
878.8
For a discussion of the differences between IAS and U.S. GAAP as they
relate to our consolidated net income and shareholders' equity, see Note 32 to
our audited consolidated financial statements.
RESEARCH AND DEVELOPMENT
We maintain a longstanding commitment to investing in a broad range of
research and development initiatives to strengthen our leadership in the
development of chip card technology and software, such as open operating
systems, cryptographic processes and application development and remote
management tools. The focus of our research and development is to develop new
software and integrated systems based on our microcontroller chip technology
and to reduce the time required to bring new products and applications to
market.
We carry out our research and development activities through two main
groups:
•
Product Development, which coordinates the development of
enabling software and software-related technology, such as operating
systems, server software applications and applets; and
•
the Applied Research & Security Center, which, coordinates
our long-term research and development regarding advanced security,
embedded software and hardware technologies.
Our research and development activities are organized on a global basis,
with our main research and development centers located in France, Singapore,
and China. We have one of the largest research and development teams in the
chip card industry. As of December 31, 2002, we had 711 engineers working in
our research and development centers around the world, compared to 760
engineers as of December 31, 2001 and 924 engineers as of December 31, 2000.
In 2002, our gross research and development expenditures were
€
95.3
million, or approximately 12.1% of our net sales, compared to gross research
and development expenditures of
€
124.6 million, or approximately 12.2% of our
net sales in 2001, and of
€
104.3 million, or approximately 8.7% of our net
sales in 2000. A portion of these expenditures was financed through grants and
research tax credits available under certain government programs, which
amounted to
€
5.6 million in 2002,
€
9.6 million in 2001 and
€
6.7 million in
2000.
We also maintain certain licenses to third parties technologies. See
"Item 4. Information on the Company—Business Overview—Intellectual Property."
59
Table of Contents
TREND INFORMATION
We believe that there are some signs of a recovery in the
telecommunications market, showing potential single-digit unit volume growth.
Continuous price pressure from factors such as new competition, especially in
Asia, may affect this growth. Such price pressure may be offset, at least to
some extent, by improvements in our product mix towards higher margin products.
A shift to higher margin products may be assisted by the continued adoption of
open standards that can encourage our customers to invest in systems that use
newer and higher-value products that we offer in both our reporting segments.
Year 2003 will be a challenging for our financial services and security
segment. For example, EMV migration remains slow, and the anticipated growth
in revenues from such development will consequently be slower than we would
hope. Also, the markets for corporate and government security and identity
products are building relatively gradually, although there has appeared to be
some acceleration in the growth of such markets recently.
In addition, it is possible that recent
unfavorable currency fluctuations between the euro and U.S. dollar
may continue to negatively affect our revenue, along with other currency fluctuations.
See Special Note regarding Forward Looking Statements on page 4 of this
Annual Report.
60
Table of Contents
Item 6. Directors, Senior Management and Employees
BOARD OF DIRECTORS
Under Luxembourg law, the board of directors is vested with broad powers
to manage our company. All powers not expressly reserved by law or by the
articles of incorporation to the shareholders fall within the powers of the
board of directors.
Our board of directors currently has twelve members. Members of the board
are appointed by the shareholders to serve terms not to exceed three years and
may be re-appointed for consecutive terms. They may resign at any time, and
their functions as members of the board may be terminated at any time by a
simple majority of the votes of the shareholders voting at a general meeting.
Under Luxembourg law, a director may be an individual or a corporation. Our
board of directors met fourteen times during 2002, with an attendance rate in 2002 (physically or by telephone) of approximately 85%.
Prior to April 29, 2003,
the board members were elected by cumulative voting. On April 29, 2003, our
shareholders voted to eliminate cumulative voting and to accordingly amend our
articles of incorporation.
As of January 1, 2002, our board of directors consisted of Mr. David
Bonderman, Dr. Marc Lassus, Mr. William S. Price III, Mr. Abel Halpern, Mr.
Kheng Nam Lee, Mr. Randy Christofferson and Dr. Hasso von Falkenhausen. Dr.
Hasso von Falkenhausen became our Chairman of the board on January 10, 2002
(Dr. von Falkenhausen's and Mr. Bonderman's election by the board to fill
vacancies on December 19, 2001 was subject to definitive election by the
shareholders). At our annual general shareholders meeting on April 17, 2002,
our shareholders approved a resolution to increase the number of board members
to thirteen, elected Mr. Thierry Dassault, Dr. Peter Kraljic, Mr. Daniel Le
Gal, Mr. Gilles Lisimaque, Mr. Ronald W. Mackintosh and Mr. Ziad Takieddine to
the board of directors and ratified the election of Mr. David Bonderman and Dr.
Hasso von Falkenhausen to the board of directors. The resolutions to increase
the number of board members and to elect Mr. Bonderman were ratified at a
further extraordinary general meeting of shareholders on May 15, 2002.
At the board of directors meeting held on June 21, 2002, Mr. Gilles
Lisimaque resigned from our board of directors, with effect as of that date,
and Mr. Dominique Vignon was elected by the board to fill the vacancy and was
appointed as Chairman of the board with immediate effect, succeeding Dr. Hasso
von Falkenhausen who resigned as Chairman with immediate effect and as director
with effect as of September 23, 2002, due to the age limit of 70 years in the
company's by-laws.
The board of directors elected Mr. Alex Mandl as a director on October 29,
2002. Mr. Mandl's appointment was further ratified by the extraordinary
general meeting of shareholders on December 19, 2002. On December 19, 2002,
Dr. Marc Lassus and Mr. Ziad Takieddine resigned from our board, the number of
board members was reduced from thirteen to twelve and Dr. Johannes Fritz was
appointed as director by the shareholders at the extraordinary general meeting
of shareholders.
Our board of directors conducts its activities in accordance with governance
principles set forth in applicable regulations, exchange rules, and the
company's articles of incorporation, committee charters and other adopted
practices.
61
Table of Contents
The following table sets forth the name, age, date of appointment and
occupation of each of our twelve directors as of April 29, 2003:
Date of
Expiration
Name
Age
appointment
of Term
Occupation
Mr. Dominique Vignon
55
June 21, 2002
April 2004
Chairman of our board of
directors
Mr. Alex Mandl
59
October 29, 2002
April 2004
Chief Executive Officer
Mr. David Bonderman
60
December 19, 2001
April 2004
Vice-Chairman of our
board of directors;
Managing Partner, Texas
Pacific Group
Mr. Randy Christofferson
45
November 13, 2000
April 2004
Managing Director, MIOGA
Ventures, L.L.C.
Mr. Thierry Dassault
45
April 17, 2002
April 2004
Chairman and Chief
Executive Officer,
Dassault Multimédia
Mr. Abel Halpern
35
February 1, 2000
April 2004
Partner, HMD, Partners LP
Dr. Peter Kraljic
64
April 17, 2002
April 2004
Member of the McKinsey
Advisory Board
Mr. Daniel Le Gal
52
April 17, 2002
April 2004
Partner and Managing
Director, Finadvance
Mr. Kheng Nam Lee
54
October 12, 2000
April 2004
President, Vertex
Venture Holding Ltd and
Vickers Capital Ltd
Mr. Ronald W. Mackintosh
54
April 17, 2002 *
April 2004
Chairman, Differentis
Mr. William S. Price
45
February 1, 2000
April 2004
Managing Director, Texas
Pacific Group
Mr. Johannes Fritz
48
December 19, 2002
April 2004
Managing Director,
Quandt family office
*
Ronald W. Mackintosh had been a board member since April 18, 2001 and
resigned from such position on December 19, 2001 due to his appointment as
interim Chief Executive Officer of our company; he was then re-elected as a
board member on April 17, 2002.
62
Table of Contents
Board Committees
Our board of directors has three committees: an Audit Committee, a
Compensation Committee and a Strategy Committee.
Audit Committee
The Audit Committee consists of Mr. William S. Price III (Chairman)
1
, Mr.
Randy Christofferson, Mr. Kheng Nam Lee and Dr. Johannes Fritz. This committee
was created by the board of directors on October 12, 2000, and met five times
during 2002, with an attendance rate in 2002 (physically or by telephone) of approximately 81%. The activity of the committee is governed by a specific committee
charter. This committee reviews our budgets and financial statements and any
potential conflicts of interests with a director or any other related party and
all other activities as required by law and securities exchange rules. During
2002, the Audit Committee reviewed, among other items, our financial statements
for 2001 and our quarterly statements for 2002, reviewed the quarterly
accounting judgments and the quarterly audit comments made by our auditors, as
well as the status of our goodwill, and analyzed related party transactions.
Main off-balance sheet liabilities (and particularly guarantees and
foreign exchange operation) are regularly reviewed by the members of the Audit
Committee and our Chief Executive Officer.
Luxembourg laws require our auditors to be appointed by the shareholders;
therefore, our shareholders appoint the auditors upon recommendation of the
Audit Committee.
Compensation Committee
The Compensation Committee consists
of Mr. Dominique Vignon (Chairman), Mr. Thierry Dassault, Mr. David Bonderman and Mr. Kheng Nam Lee. This
committee was created by the board of directors on October 12, 2000, and met
four times during 2002, with an attendance rate in 2002 (physically or by telephone) of approximately 93%. The activity of the committee is governed by a
specific committee charter. This committee reviews our Chief Executive Officer
compensation, makes recommendations on the compensation of executive officers
and directors and supervises the administration of stock option plans for our
employees. The Compensation Committee follows guidelines that generally call for the
adjustable portion of executive compensation to vary between 50% and 100% of the
applicable salary depending on the executive's position. Generally, half of
this bonus depends on the operating income of the group and the other half
depends on achievement criteria based on pre-set objectives related to the
activities of the individual executive. Stock options are granted to executives
when they are hired, and potential additional grants are subject to annual
review based on individual and collective company achievement criteria.
The committee also evaluates and recommends candidates for new
board members and for the selection of our Chairman and Chief Executive
Officer. During 2002, the Compensation Committee reviewed, among other items,
the expenses related to our Chief Executive Officer and the process of grant of
stock options to top managers and senior executives and analyzed our future
stock options needs, the stock option and rollover plans and the stock option
reserve.
Strategy Committee
The Strategy Committee consists of
Mr. Dominique Vignon (Chairman), Mr. Peter Kraljic,
Mr. Daniel Le Gal, Mr. Alex Mandl and
Mr. William S. Price III. The activity of the
committee is governed by a specific committee charter. The Strategy
Committee's role is to advise the Board concerning the Company's strategies, major plans of action and significant acquisitions or divestitures.
1
Mr. Price is a shareholder of the general partner of Texas Pacific Group, one
of our major shareholders, and, as a result, it is not certain whether Mr.
Price may be considered an "independent director" in accordance with Rule 4350
of the NASD Manual. See "Item 7. Major Shareholders and Related Party
Transactions—Major Shareholders." Our board of directors determined that the
appointment of Mr. Price to the Audit Committee in November 2000 is in the best
interests of our company and our shareholders because Mr. Price has extensive
experience in finance and management and has served as a director of a
significant number of public and privately-held companies in the United States
and abroad. See "Item 6. Directors, Senior Management and Employees—Director
and Executive Officer Biographies" for a description of Mr. Price's
professional and academic background.
63
Table of Contents
SENIOR MANAGEMENT
Our board of directors has, with the authorization of our shareholders,
delegated the day-to-day management of our company, including the power to act
on behalf of our company, to the Chief Executive Officer, except for any
matters that exceed
€
30 million, subject to powers expressly reserved by law to
the board of directors or our shareholders.
In December 2001, Mr. Antonio Perez resigned from his position as Chief
Executive Officer and was replaced by Mr. Ronald W. Mackintosh, who served as
interim Chief Executive Officer until his resignation effective on August 31,
2002. In February 2002, Mr. William Lloyd resigned from his position as Chief
Technology Officer and was replaced by Mr. Tony Engberg. In February 2002, Mr.
Phil Faraci resigned from his position as Executive Vice President, General
Manager of the Telecommunications Business Unit and was replaced by Mr.
Philippe Vallée. In March 2002, Mr. Steven Gomo resigned from his position as
Chief Financial Officer and was replaced by Mr. Yves Guillaumot, as interim
Chief Financial Officer. Mr. Frédéric Spagnou who served as our Vice President
in charge of business development resigned in March 2002.
On August 29, 2002, the board of directors appointed Mr. Alex Mandl as
Chief Executive Officer, with effect as of September 9, 2002, in replacement of
Mr. Mackintosh. In November 2002, our Chief Executive Officer, Mr. Mandl
announced a management reorganization, appointing Mr. Jacques Villières as
Executive Vice President Operations and confirming Mr. Stephen Juge as
Executive Vice President General Counsel, Mr. Didier Lachaud as Executive Vice
President Human Resources, Mr. Gilles Michel as Executive Vice President
Financial and Security Services Business Unit, Mr. Philippe Vallée as Executive
Vice President Telecom Business Unit and Mr. Yves Guillaumot as interim Chief
Financial Officer.
In February 2003, Mr. Mandl announced a reorganization, appointing Mr.
Jacques Sénéca as Executive Vice President Business Development Group, Mr. Philippe Combes as Executive Vice President Operations, replacing Mr. Jacques
Villières who decided to retire from Gemplus as of April 15, 2003, and Mr. Guillaumot as Executive Vice President and Chief Financial Officer. Mr. Tony
Engberg resigned as Executive Vice President, Research and Development as of
March 15, 2003, and his responsibilities have been transferred to the Business
Development Group. In July 2003, Mr. Mandl announced the
appointment of Mr. Philippe Duranton as Executive Vice President
Human Resources, replacing Mr. Didier Lachaud.
64
Table of Contents
The following table sets forth the name, age and current position of each
of our executive officers as of July 10, 2003:
Name
Age
Position
Mr. Alex Mandl
59
Chief Executive Officer
Mr. Philippe Combes
49
Executive Vice President, Operations
Mr. Philippe Duranton
43
Executive Vice President, Human Resources
Mr. Yves Guillaumot
44
Executive Vice President, Chief Financial
Officer
Mr. Stephen Juge
49
Executive Vice President, General
Counsel
Dr. Gilles Michel
51
Executive Vice President, Financial and
Security Services Business Unit
Mr. Jacques Sénéca
43
Executive Vice President, Business
Development Group
Mr. Philippe Vallée
38
Executive Vice President, Telecom Business
Unit
DIRECTOR AND EXECUTIVE OFFICER BIOGRAPHIES
Dominique Vignon
has served as Chairman of the board of directors since
June 21, 2002. Mr. Vignon served as Chairman of the board of directors and
Chief Executive Officer of the Framatome Group from 1996 to the end of 2001,
where he also developed that group's connector business. From the end of 2000
to the end of 2001, he served as President of Framatome ANP and led the merger
of the Framatome and Siemens corresponding activities. From 1990 to 2001, Mr.
Vignon held various management positions within the Framatome Group. From 1995
to 1996, he was President of Framatome's nuclear business. From 1993 to 1995,
he was Chairman of Jeumont Industrie. From 1990 to 1993, Mr. Vignon was General
Manager of Nuclear Power International (NPI), the joint venture of Framatome
and Siemens. From 1975 to 1990, he worked at Electricité de France, where he
was in charge of major new generation projects in France and abroad. Mr.
Vignon is a graduate of France's Ecole Polytechnique, and of the leading French
Engineering School, the Ecole Nationale des Ponts et Chaussées. He also holds
a master in Economics. Mr. Vignon serves on the board of Completel Europe N.V.
65
Table of Contents
Alex
Mandl
has served as Chief Executive Officer since September 2002, and
as director since October 29, 2002. Previously, Mr. Mandl served as Chairman
and Chief Executive Officer of Teligent. Prior to Teligent, Mr. Mandl served
as President and Chief Operating Officer of AT&T, where he was responsible for
directing the company's long distance, wireless and local communications
services, as well as Direct TV, credit card and Internet businesses. Earlier,
Mr. Mandl served as AT&T's Chief Financial Officer and Group Executive.
Between 1987 and 1991, Mr. Mandl was Chairman and Chief Executive Officer of
Sea-Land Services, Inc., the world's leading global provider of ocean transport
and distribution services. Mr. Mandl began his business career in 1969, when
he joined Boise Cascade Corp., as a merger and acquisition analyst. He held
various financial posts with increasing responsibilities during the next eleven
years. In 1980, he joined Seaboard Coast Line Industries, a diversified
transportation company, as Senior Vice President and Chief Financial Officer.
After Seaboard merged with Chessie Systems to become CSX Corp., Mr. Mandl was
named Senior Vice President in charge of corporate development, human resources
and chief information officer. In addition, he had operating responsibility
for three transportation and information technology subsidiaries. Mr. Mandl
holds an M.B.A. from the University of California at Berkeley and a B.A. in
economics from Willamette University in Salem, Oregon. Mr. Mandl serves on the
boards of Dell Computer Corporation, the Walter A. Haas School of Business at
the University of California at Berkeley, Willamette University and the
American Enterprise Institute for Public Policy Research.
David Bonderman
has served as Vice-Chairman of the board of directors
since December 2001. He is a principal, general partner and one of the
founders of Texas Pacific Group ("TPG"). Prior to forming TPG, Mr. Bonderman
was Chief Operating Officer of the Robert M. Bass Group, Inc. (now doing
business as Keystone, Inc.) ("RMBG") in Fort Worth, Texas. Prior to joining
RMBG in 1983, Mr. Bonderman was a partner in the law firm of Arnold & Porter in
Washington, DC where he specialized in corporate, securities, bankruptcy, and
antitrust litigation. From 1969 to 1970, Mr. Bonderman was a Fellow in Foreign
and Comparative Law in conjunction with Harvard University and from 1968 to
1969, he was Special Assistant to the U.S. Attorney General in the Civil Rights
Division. From 1967 to 1968, Mr. Bonderman was Assistant Professor at Tulane
University School of Law in New Orleans. Mr. Bonderman graduated magna cum
laude from Harvard Law School in 1966. He was a member of the Harvard Law
Review and a Sheldon Fellow. He is a 1963 graduate of the University of
Washington in Seattle. Mr. Bonderman serves on the boards of Continental
Airlines, Inc., ProQuest Company, Ducati Motor Holding, S.p.A., Co-Star Group,
Inc., Denbury Resources, Inc., Ryanair Holdings, plc, Oxford Health Plans,
Inc., ON Semiconductors, Magellan Health Services, Inc., Paradyne Networks,
Inc., and Korea First Bank. He also serves on the boards of The Wilderness
Society, the Grand Canyon Trust, and the American Himalayan Foundation. In
addition, he serves on the board of directors of the University of Washington
Foundation as well as the Harvard Law School Dean's Advisory Board.
Randy L. Christofferson
has served as a director since November 2000. Mr.
Christofferson has been the Managing Director of MIOGA Ventures since 2000.
From August 1999 to September 2000, Mr. Christofferson served as Chief
Executive Officer of Walker Digital. From 1995 to 1999, Mr. Christofferson
served as President of First USA Bank. From 1990 to 1995, Mr. Christofferson
held several senior management positions at the American Express Company,
including President of Amex Relationship Services, Senior Vice President of
Worldwide Quality and Reengineering and Senior Vice President of Corporate
Strategy and Advanced Technology. Prior to 1990, Mr. Christofferson was a
partner of Bain & Company. Mr. Christofferson received his Master of Business
Administration from Harvard University and graduated with highest honors from
Michigan State University, where he earned a B.S. in Chemical Engineering. Mr.
Christofferson serves on the boards of directors of IntelliRisk Management
Corporation, FineStationery.com, DeNovo, Inc. and the Delaware Art Museum.
66
Table of Contents
Philippe Combes
was appointed Executive Vice President Operations on
February 12, 2003, with effect as of February 24, 2003. In 1998, he had pursued
his international career as CEO of Philips Displays in Holland, and most
recently has been running his own Executive Coaching consultancy. In 1975 he
had joined Schlumberger Industries where he held various operational
responsibilities in France, Brazil and Indonesia. Mr. Combes graduated from
ENSAM (Ecole Nationale Supérieure d'Arts et Métiers) with a degree in robotics
and electronic.
Thierry Dassault
has served as a director since April 2002.
He currently serves as the Chairman and Chief Executive Officer of Dassault
Multimedia, a venture capital company that holds investments in companies such
as Infogrames, Hi-Média, Net2one and Welcome Real Time. Prior to that, from
1985 to 1993, he was Producer Partner at Claude Delon Productions Company.
From 1982 to 1984, he was General Manager in an alarm systems company, and from
1979 to 1981, he was director of the Equipements Civils pour l'Electronique
Serge Dassault company in Brazil. Mr. Dassault has served on the supervisory
board of Gemplus SA since 1998 and as Vice-Chairman since March 2001. He
serves on the boards of various companies, including Cdandco, Chapitre.com,
Dassault Multimedia, FCC and SERF (BFM), Gaumont and Groupe Industriel Marcel
Dassault. He also serves on the supervisory board of Société du Journal des
Finances.
Philippe Duranton
has served as our Executive Vice President, Human Resources
since July 2003. Prior to joining Gemplus, Mr. Duranton served as Human
Resources EVP at Canal+ and Co-Managing Director, General Affairs, for the
Television and Film Division of Vivendi Universal from 1998 to 2002. Prior to
joining Canal+, Mr. Duranton spent nine years (1989 to 1998) at Thales where he
held numerous Human Resource management positions across the company's
divisions. Mr. Duranton began his career in education and held
various positions
from 1985 to 1988 in both the public and private sectors. Mr. Duranton holds a variety of academic distinctions including a D.E.S.S. diploma
in Human Resource Management from the Institute of Administration for Business,
Bordeaux, France, and a master's degree in History.
Dr. Johannes Fritz
has served as a director since December 2002. He is
the general head of the Quandt family office since June 2000. From 1991 to
June 2000, he was a managing director responsible for all financial affairs of
the Quandt family office and running its day-to-day-business. In 1989 he
joined the Quandt family office. Prior to that, he spent five years at KPMG
covering financial institutions and industrial companies. From 1982 to 1983,
he worked with Bertelsmann AG in the area of human resources. Dr. Fritz
studied at Mannheim University where he was awarded a Master and Doctor degree
in Business Administration. As a research associate he followed a postgraduate
education at the business school of the New York University. Dr. Fritz earned
a degree as a tax advisor and a certified public accountant (CPA). He serves
on the advisory board of Drees & Sommer AG, as a member of the regional council
of Deutsche Bank and on the advisory board of ING BHF-Bank.
Yves Guillaumot
has served as our Executive Vice President Chief Financial
Officer from November 2002, and as Vice President, Interim Chief Financial
Officer from March 2002 to November 2002. Mr. Guillaumot joined our company in
July 1998 as Corporate Controller. He was promoted to Vice President in March
2001. Prior to joining Gemplus, from 1987 to 1998, Mr. Guillaumot held various
financial management positions with Digital Equipment, including as director of
Finance for Southern Europe, Middle East and Africa from 1997 to 1998 and
Controller of the PC division from 1996 to 1997. Prior to 1996, Mr. Guillaumot
held positions with Arthur Andersen and Arthur Young. Mr. Guillaumot graduated
from the Ecole de Hautes Etudes Commerciales du Nord in France.
Abel G. Halpern
has served as a director since December 2001 and served as
Vice-Chairman of the board of directors from February 2000 to December 2001.
Mr. Halpern is a partner with HMD Partners LP, a private equity investment firm
focused on middle market companies in Europe. From 1994 through 2002, Mr.
Halpern was with Texas Pacific Group, where he was a partner and served as
Managing Director of their European activities. Mr. Halpern remains a
consultant to Texas Pacific Group. Prior to joining Texas Pacific Group, Mr.
Halpern was a management and strategy consultant with Bain & Company, an
international strategic consultancy firm. Mr. Halpern received a Masters of
Business Administration from Harvard University and a Bachelor of Arts degree
magna cum laude and
67
Table of Contents
with distinction from Yale University. In addition to Gemplus
International SA, Mr. Halpern's directorships include Bally International and
Ducati Motor Holding, among others.
Stephen Juge
has served as our Executive Vice President, General Counsel
since November 2000. Prior to joining Gemplus, Mr. Juge served from January to
October 2000, as Senior Vice President and General Counsel of Walt Disney
Europe. From April 1996 to January 2000, Mr. Juge served as Senior Vice
President and European Legal Counsel of The Walt Disney Company (Europe) SA.
From November 1987 to March 1996, Mr. Juge served as Vice President and General
Counsel of Disneyland Paris (Euro Disney S.C.A.). Prior to joining Disneyland
Paris, Mr. Juge was an associate at the international law firm of Coudert
Frères in Paris between 1981 and 1987. Mr. Juge attended Louisiana State
University, received a Juris Doctor degree from the Tulane University School of
Law and studied comparative law at the University of Oxford on a Marshall
Foundation Fellowship.
Dr. Peter Kraljic
has served as a director since April 2002. He is a
member of the McKinsey Advisory Board. He retired as a senior director with
McKinsey & Company, Inc., Düsseldorf, Germany in June 2002. Dr. Kraljic joined
McKinsey in 1970 and has worked extensively on strategic, organizational,
operational and restructuring programs for industrial companies in Germany,
Austria, France as well as in Central and Eastern Europe. From 1993 to 1998,
he was responsible for McKinsey's activities in France as "Directeur Général".
Prior to joining McKinsey, Dr. Kraljic worked as researcher in La Continentale
Nucleaire, Luxembourg, as well as for the Welding Institute Ljubljana,
Slovenia. Dr. Kraljic holds a degree in metallurgy from the University of
Ljubljana, a Doctorate from the Technical University Hanover and a Masters in
Business Administration from INSEAD, Fontainebleau, France. Dr. Kraljic serves
on the supervisory board of the Wolfsburg AG association, LEK d.d. and of the
IEDC Bled Management School.
Didier Lachaud
has served as our Executive Vice President, Human Resources
since September 1997. Prior to joining Gemplus, Mr. Lachaud served as
Corporate Human Resources Manager at Fives-Lille from September 1995 to August
1997. Prior to August 1997, Mr. Lachaud held several senior management
positions at Air Liquide from September 1990, and served as Personnel Manager
at Schlumberger from 1985. Mr. Lachaud holds a Degree from the Institut
d'Etudes Politiques de Paris.
Daniel Le Gal
has served as a director since April 2002. He currently
serves as a partner and Managing Director of Finadvance. One of our
co-founders in 1988, Mr. Le Gal served as our Chief Executive Officer from 1997
to 1999, prior to which he held several management positions in Sales,
Marketing and Strategic Planning for our company. Prior to founding our
company, from 1982 to 1987, Mr. Le Gal served as Marketing Manager in the
Telecommunication Unit of Thomson Semiconductors. From 1975 to 1982, he held
various positions at France Telecom. Daniel Le Gal holds an Engineering Degree
from Supelec, in Paris, France. Mr. Le Gal serves on the boards of directors
of Tornado, T.O.D, Qualicontrol and S.E.A.
Kheng Nam Lee
has served as a director since October 2000. Mr. Lee is the
President of Vertex Group and of Vickers Capital. Prior to serving as
President of the Vertex Group, Mr. Lee managed several venture capital funds of
the Vertex Group since 1988. Prior to joining the Vertex Group, Mr. Lee served
as head of strategic and venture capital investments at the Singapore
Technologies Group. He holds a Bachelor of Science degree in Mechanical
Engineering (with First Class honors) from Queen's University, Canada, and a
Master of Science in Operations Research and Systems Analysis (with
distinction) from the U.S. Naval Postgraduate School. Mr. Lee serves on the
boards of directors of Creative Technology Ltd., GRIC Communications Inc.,
Activcard SA, and Innomedia Pte. Ltd.
68
Table of Contents
Ronald W. Mackintosh
was elected as a director in April 2001. He also
served as interim Chief Executive Officer from December 19, 2001 (when he
resigned as a director) until August 31, 2002 and was re-elected director at
the annual general meeting of shareholders held on April 17, 2002. Mr.
Mackintosh was the Chief Executive Officer of Differentis from July 2000
through December 2001, when he resigned from that position in order to take the
interim role at Gemplus. Since completing the interim role for Gemplus he has
returned to Differentis as Chairman. Mr. Mackintosh served as Chief Executive
Officer of Computer Sciences Corporation, European Business since October 1992.
From June 1990 to September 1992, Mr. Mackintosh served as Chief Executive,
CSC UK. From November 1987 to June 1990, Mr. Mackintosh served as Chief
Executive Officer at Index Group Europe. Prior to October 1987, Mr. Mackintosh
was a Partner at Nolan Norton & Co. Europe. Mr. Mackintosh serves on the board
of directors of Differentis. Mr. Mackintosh graduated from Arbroath High
School, Scotland.
Dr. Gilles Michel
has served as President and General Manager of our
Financial and Security Services Business Unit since May 2001. Prior to May
2001, Dr. Michel served as Executive Vice President, Financial Services from
November 2000 and as Senior Vice President, Strategy, Mergers and Acquisitions
from February 2000. Prior to joining Gemplus, Dr. Michel served as Vice
President, Regional Business Segment (North and South America) at Schlumberger
from September 1999 to January 2000. Prior to September 1999, Dr. Michel held
various senior management positions at Schlumberger, including Vice President,
Marketing and Vice President, Engineering and Manufacturing. Dr. Michel holds
a Degree in Physics from the Ecole Supérieure de Physique et de Chimie, Paris,
France, and a Ph.D. in Computer Science from the University of Paris VI.
William S. Price, III
has served as a director since February 2000. Mr.
Price was a founding partner of TPG in 1992. Prior to forming TPG, Mr. Price
was Vice President of Strategic Planning and Business Development for General
Electric Capital Corporation. From 1985 to 1991, Mr. Price was employed by the
management consulting firm of Bain & Company, attaining partnership status and
acting as co-head of the Financial Services Practice. Prior to 1985, Mr. Price
was employed as an associate specializing in corporate securities transactions
with the law firm of Gibson, Dunn & Crutcher LLP. Mr. Price is a member of the
California Bar and graduated with honors in 1981 from the Boalt Hall School of
Law at the University of California, Berkeley. He is a 1978 Phi Beta Kappa
graduate of Stanford University. Mr. Price serves on the boards of directors
of Continental Airlines, Inc, Del Monte Foods, Denbury Resources, Inc, Belden &
Blake Corp. Bally, DoveBid, Petco Animal Supplies, Inc, and Findexa.
Jacques Sénéca
has served as our Executive Vice President, Business
Development Unit since January 2003. Prior to that date, he served as General
Manager of our GemVentures Services Unit from September 1, 2001, and continues
in that role. Mr. Sénéca joined Gemplus in 1989 as Project Manager. He has
held several management positions as Products Department Manager, General
Manager for Sales and Manufacturing Operations in Germany, General Manager for
the Telecom Business Division, and as Executive Vice President for Gemplus
Marketing & Technology. Prior to joining our company, he worked with
ST-Microelectronics where he held various positions in the fields of
manufacturing, marketing and business development. Mr. Sénéca holds a
Bachelors degree from ENSAM (Ecole Nationale Supérieure d'Arts et Métiers) and
a Business Administration degree from IAE of Aix-en-Provence in France.
69
Table of Contents
Philippe Vallée
has served as our Executive Vice President, General
Manager of our Telecom Business Unit since February 2002. He was
Vice-President Marketing of the Telecom Business Unit from May 2001 to February
2002. He was previously based in Singapore as Executive Vice-President of
Gemplus Technologies Asia, and headed the marketing and development activities
and professional services operations of Gemplus Asia Pacific. Mr. Vallée has
10 years of experience in the smart card industry and has served in various
marketing, product management and sales capacities in our company. Prior to
joining our company, Mr. Vallée served as product manager on the first
generation of GSM mobile phones for Matra Communications (now Lagardère Group)
in France. Mr. Vallée has a Bachelor's degree in Electronics and
Telecommunications Engineering and a Masters of Science in Marketing Management
from ESSEC.
COMPENSATION OF DIRECTORS AND PRINCIPAL EXECUTIVE OFFICERS
Aggregate compensation paid by us with respect to our directors and
executive officers as a group for the fiscal year ended December 31, 2002 was
approximately
€
11,800 thousand. This amount includes compensation paid to Dr.
Lassus who ceased serving as our Chairman of the board in December 2001, with
effect as of January 10, 2002 and who remained a director of our company until
December 19, 2002, to Mr. Gilles Lisimaque who resigned as a director on June
21, 2002, to Mr. Steven Gomo, Mr. Phil Faraci, Mr. William Lloyd and Mr.
Frédéric Spagnou, all of whom resigned in February and March 2002. Total
compensation excludes amounts related to the forgiveness of loans we made to
certain of our executive officers in 2000 and 2001. For a discussion of these
loans, see "Item 7. Major Shareholders and Related Party Transactions—Related
Party Transactions" and Note 31 to our consolidated financial statements.
The following table presents the compensation paid for the fiscal year
ended December 31, 2002 to our
mandataires sociaux
(as defined under French
law), which include our Chief Executive Officer and certain directors of our
company*:
Total amount in
Name
euros
Mr. Bertrand Cambou
725,000
Mr. Randy Christofferson
40,000
Dr. Hasso von Falkenhaussen
138,000
Dr. Marc Lassus
2,000,000
**
Mr. Gilles Lisimaque
167,000
Mr. Ronald W. Mackintosh
837,000
Mr. Alex Mandl
987,000
***
Mr. Antonio Perez
1,161,000
**
Mr. Dominique Vignon
184,000
Total
6,239,000
*Directors not listed did not receive any compensation from our company for the year 2002.
**Includes compensation paid for sums accrued in 2001.
***Includes a signing bonus and housing fees.
70
Table of Contents
At an extraordinary meeting of the shareholders held on April 17, 2002,
our shareholders approved the compensation to be paid to our directors in 2002
in an aggregate amount of
€
900,000. On April 17, 2002, our board of directors
decided to allocate compensation to individual directors amounting to
€
40
thousand per year per director as compensation in connection with services
performed as a member of our board and an additional annual payment of
€
10
thousand to the chairman of each board committee for services in that capacity.
However, on December 7, 2002 each director was asked to renounce personally
and individually his compensation for 2002 due to the financial situation of
the company. As of April 29, 2003, all but two board members have renounced
their compensation. Our current Chairman of the board, Mr. Dominique Vignon,
receives annual compensation of
€
300 thousand (net of social charges). For
2002, Mr. Vignon was paid a pro rata portion of such amount for his service
beginning June 21, 2002.
During 2002, our company issued to directors and executive officers an
aggregate of 13,160,000 options to subscribe for our ordinary shares. Of the
aggregate number of options issued to directors and executive officers in 2002,
Mr. Mandl was granted 12,000,000 stock options as of August 29, 2002, Mr.
Vignon was granted 1,000,000 stock options as of July 14, 2002, and as of July
14, 2002, Mr. von Falkenhausen was granted 160,000 stock options that vested
immediately. None of them had exercised any options, and all options were
still outstanding as of April 29, 2003.
None of
the non-employee directors have any agreement with our company that
provides for benefits upon termination of service (Mr. Vignon is an employee of
our company).
STOCK OPTIONS
In General
On July 27, 2000, we adopted a stock option plan that provides for the
grant of stock options to any employees who are employed by our company or its
affiliates. The term of the options granted under the plan are determined by
the notice of grant, but will not exceed ten years from the date of the grant
of the option. Pursuant to an authorization of the shareholders during an
extraordinary general meeting held on April 29, 2003, options may be granted
under the current plan until May 31, 2006.
The maximum number of shares of common stock that may be issued under the
stock option plan is 50,000,000. As of March 31, 2003, 29,662,859 stock
options were outstanding.
Our employees are also currently beneficiaries under the stock option
plans previously adopted for Gemplus SA, our main operating subsidiary in
France. Our employees may contribute to our company the stock options or the
shares of Gemplus SA received upon exercise of these options in exchange for
options or shares, as applicable, of our company. As of March 31, 2003,
472,019 options for subscription of shares of Gemplus SA were outstanding under
the old plans. If such Gemplus SA stock options outstanding as of March 31,
2003 were exercised or exchanged for options of our company and if all the
shares resulting from the exercise of these options were contributed to our
company, the beneficiaries would be the holders of 23,600,950 of our shares.
In addition, certain employees of Gemplus SA have elected to receive stock
options of our company in exchange for their Gemplus SA stock options. As of
March 31, 2003, 2,877,500 options resulting from the conversion of Gemplus SA
stock options were outstanding. Consequently, as at March 31, 2003, a total of
26,478,450 stock options were outstanding in relation to the Gemplus SA stock
options plans.
71
Table of Contents
The terms and conditions of Gemplus SA's stock option plans are
substantially consistent with those of our stock option plan as described
below, except for the method of determination of the option exercise price and
the vesting period. The exercise price was determined at the time of issuance
of the options based on the fair market value of the securities as determined
by the board of directors of Gemplus SA. One-third of the options vest each
year over a three-year term for beneficiaries in France under the Gemplus SA
stock option plan issued to employees in France in 1999 and 2000, while 25% of
the options vest each year over a four-year term for beneficiaries outside of
France. No more options may be granted under the Gemplus SA stock option
plans.
Plan Administration
Our company's stock option plans are administered by the Stock
Administration Committee that reports plan activities to the Compensation
Committee of our board of directors on a quarterly basis. Under the option
plan and other guidelines, the Stock Administration Committee has limited
authority to determine, in its discretion:
•
the persons to whom options are granted
(except grant of options to directors and senior executive
officers, which is under the authority of the Compensation
Committee);
•
the number of shares of common stock
underlying each option;
•
the vesting schedule and conditions under
which the options may be exercised, including any lockup
periods; and
•
any other matters necessary or desirable
for the administration of the option plan.
Vesting Period
Unless otherwise decided by the Stock Administration Committee, the
vesting period for options granted under the company's stock option plans will
be four years, with 25% of the granted options vesting in each year,
exercisable upon each anniversary of the date of grant, subject to specific
provisions pursuant to local regulations as applicable.
Option Exercise Price
Our company's stock option plans require that the exercise price for
issued options be 100% of the fair market value of the underlying shares of
common stock on the date of grant as determined by the Compensation Committee
or the Stock Administration Committee subject to specific provisions pursuant
to local regulations as applicable. The exercise price may not be less than
100% of the value of the underlying shares on the relevant stock exchange on
the date of grant, subject to applicable law.
On April 17, 2002, our board of directors approved a plan whereby our
employees were offered the opportunity to waive and cancel 0%, 50% or 100% of
the stock options previously granted between July 2000 and December 31, 2001
and to receive newly issued options. This plan was launched on May 23, 2002.
On June 5, 2002, 17,106,162 options were cancelled according to the
instructions of the option holders. On December 10, 2002, 17,034,084 new
options were granted. The new exercise price was
€
1.13, corresponding to the
fair market value of our shares on the date the new options were granted. The
new options will vest over a period of 3.5 years subject to the following
schedule: 25% will vest after 6 months from the date of grant, 25% will vest
after 1.5 years from the date of grant, 25% will vest after 2.5 years from the
date of grant, 25% will vest after 3.5 years from the date of grant (subject to
certain
72
Table of Contents
specific provisions pursuant to local regulations). Out of the 16,784,084
stock options granted on December 10, 2002, 16,037,819 stock options were
outstanding on March 31, 2003.
General Plan Provisions
Share Counting
. If any outstanding option expires, terminates or is canceled
for any reason, the shares of common stock subject to the unexercised portion
of such option will become available for future grants under the option plan.
Effect of Termination of Employment
. If an option holder's employment is
terminated:
(i)
for any reason other than the option holder's death, he or
she may exercise options which were exercisable at the time of the
option holder's termination within twelve months after such
termination, and all other options will expire at such time;
(ii)
on account of the death of the option holder, his or her
designated beneficiary may exercise all options granted to the
beneficiary within six months following the option holder's death.
Adjustments upon Changes in Capitalization
.
Our company's stock option plans
provide for an adjustment in the number of shares of common stock available to
be issued under the plans, the number of shares subject to options and the
exercise prices of options upon changes in the capitalization of our company.
No Assignment or Transfer
. During an option holder's lifetime, each option
granted to an option holder is exercisable only by him or her and is not
transferable.
Amendment
. The Stock Administration Committee may at any time amend the stock
option plans to adjust to or comply with applicable local legal, tax and
accounting requirements. However, any modification or adaptation that would
impair the rights of an option holder requires the prior consent of that option
holder.
Senior Management Stock Options
On November 10, 2000, our shareholders authorized our board of directors
to increase our share capital and issue up to 60,000,000 shares to directors
and executive officers of our company (including any of its subsidiaries or
affiliates) in the form of stock options or, except in the case of directors,
in the form of free shares, in each case on terms and conditions determined by
our board of directors in its sole discretion. Our board of directors may
issue these stock options and free shares from time to time over a five-year
period from the date of publication of the shareholder resolution and in
accordance with Luxembourg law. As of March 31, 2003, 16,937,500 such stock
options were outstanding. The stock options issued pursuant to this
shareholder resolution are not subject to the terms and conditions of our stock
option plans, but are subject to the terms of a separate plan for this reserve
of stock options.
On April 17, 2002, our board of directors approved a plan whereby members
of our senior management were offered the opportunity to waive and cancel 0%,
50% or 100% of the stock options previously granted between July, 2000 and
December 31, 2001 and receive newly issued options. This plan was launched on
May 23, 2002. On June 5, 2002, 250,000 options were cancelled according to the
instructions of the holders. On December 10, 2002, 250,000 new options were
granted. The new exercise price was
€
1.13, corresponding to the fair market
value of our shares on the date the new options were granted. The new options
will vest over a period of 3.5 years subject to the following schedule: 25%
will
73
Table of Contents
vest after 6 months from the date of grant, 25% will vest after 1.5 years
from the date of grant, 25% will vest after 2.5 years from the date of grant,
and 25% will vest after 3.5 years from the date of grant (subject to certain
specific provisions pursuant to local regulations). All stock options granted
on December 10, 2002, were outstanding on April 29, 2003.
The following table sets forth certain information with respect to: (i)
stock options granted to the ten employees of the company (excluding the
officers identified above) who received the largest number of stock options
granted in 2002; and (ii) the exercise of these options by them:
Weighted average
Total amount
price of the
of options
options granted
granted or
or shares
shares
subscribed or
subscribed
acquired
or acquired *
(in
€
)
Stock Option Plan
Options for shares in Gemplus International S.A. granted in
2002
814,200
2.06
Plans adopted on
July 27 and on
November 10, 2000
Options for shares in Gemplus International S.A. exercised
in 2002
0
Not applicable
Plans adopted on
July 27 and on
November 10, 2000
Options for shares in Gemplus SA exercised
in 2002
358,350
1.60
Gemplus SA plans
adopted on December
17, 1997 and on
December 31,1997
*
Excluding stock options in relation to the options exchanged under an
option exchange plan.
SHARE OWNERSHIP
As of April 29, 2003, while Mr. Kheng Nam Lee disclaimed beneficial
ownership of any of our shares, he was the President of Vertex Group and
Vickers Capital, which together held 10,308,174 of our shares representing 1.7%
of the shares outstanding. While Messrs. Bonderman, Halpern and Price
disclaimed beneficial ownership of any of our shares, Mr. Bonderman was a
Managing Director of Texas Pacific Group, Mr. Halpern was a consultant to Texas
Pacific Group and Mr. Price was a Managing Director of Texas Pacific Group,
affiliates of which held 159,305,600 of our shares representing 26.4% of the
shares outstanding. While Mr. Thierry Dassault disclaimed beneficial ownership
of any of our shares, Mr. Dassault was the Chairman and Chief Executive Officer
of Dassault Multimédia which held 32,737,666 of our shares, representing
approximately 5.4% of the shares outstanding. None of our other officers or
directors was the beneficial owner of more than 1% of our capital stock. See
also "Item 7. Major Shareholders and Related Party Transactions—Major
Shareholders."
74
Table of Contents
EMPLOYEES
The following table sets forth the number of employees and a breakdown of
employees by main category of activity and geographic location as of the end of
each year in the three-year period ended December 31, 2002:
December 31,
2000
2001
2002
Number of employees
7,870
6,721
5,680
Category of activity
Manufacturing
4,312
3,745
3,241
Research and Development
993
819
702
Sales and Marketing
1,353
897
745
Services
270
309
242
General and Administrative
942
951
750
Geographic location
France
2,922
2,778
2,187
Rest of Europe
2,067
1,340
1,208
Asia
1,617
1,562
1,527
Americas
1,264
1,041
758
Following the announcement of our restructuring program on May 2, 2001,
the workers' committee of our main operating subsidiary in France, Gemplus SA,
commenced an "alert" procedure under French labor law based upon alleged
concerns about the financial situation of Gemplus SA. An accounting firm
appointed by the workers' committee issued a report about these alleged
concerns. The management of Gemplus SA believes that these alleged concerns
were unfounded. The "alert" procedure was completed with a review of the
report at a Gemplus SA shareholders meeting on May 28, 2002.
On March 7, 2003, the workers' committee of Gemplus SA filed an action
before the Marseille Commercial Court requesting the court to nominate an
expert to analyze certain decisions allegedly taken by the management or the
supervisory board of Gemplus SA, to prohibit Gemplus SA from taking or
implementing certain of such alleged decisions and to appoint a
court-designated representative to monitor such requested prohibition. On
April 2, 2003, the court nominated two experts qualified to act before the
French Supreme Court. The court rejected the workers' committee's other
requests. The purpose of this proceeding under French law is to permit the
workers' committee to obtain information regarding the alleged management
decisions cited. Our company believes that the workers' committee already had
sufficient information regarding the alleged management decisions cited and
intends to cooperate fully with the experts' mission. See "Item 8. Financial
Information—Legal Proceedings" for additional details.
On May 19, 2003, the company was informed that the workers' committee of
Gemplus SA had initiated legal proceedings regarding an alleged unlawful
failure of the company to adequately inform and consult the workers' committee
in November 1999 regarding the exchange by shareholders of Gemplus SA of their
shares for shares of our company to occur in early 2000. The company
believes that the information and consultation process was adequate.
75
Table of Contents
On February 6, 2002, we had announced plans for a further restructuring of
our operations and production and procurement processes in order to improve our
financial competitiveness. These plans called for targeted savings of
€
100
million per year and a one-time restructuring charge of
€
65 million and
included proposed staff reductions of approximately 1,140 positions worldwide.
As of December 31, 2002, Gemplus had completed staff reductions of 1,010 under
these plans. See "Item 5. Operating and Financial Review and
Prospects—Results of Operations—Recent Developments." In connection with this
plan, on February 14, 2002, Gemplus SA initiated the process of consultation
with its workers' committee and union representatives regarding a plan for the
reduction of approximately 416 positions in France. The first phase of this
consultation process was completed on March 22, 2002, and the second phase
began on May 6, 2002, and was completed on June 5, 2002, in accordance with the
French plan requirements. Following the end of the second phase, the content
of the plan was determined precisely and communicated to the employees. The
employees concerned by the 2002 restructuring plan started leaving their employment in
the middle of July 2002. As of February 24, 2003, all such employees have
terminated their employment except for approximately 10 employees under the
plans.
On December 9, 2002, we announced a third restructuring program. This
plan calls for targeted savings of
€
108 million per year (out of which
€
66
million is expected through workforce reductions) and a one-time restructuring
charge of
€
90 million. This restructuring program affects all areas within the
company (manufacturing, selling, marketing, research and development and
general and administrative functions). The overall reduction of the workforce
(including temporary employees and independent) is broken down as follows: (i)
manufacturing organization 695 employees; (ii) general and administrative
functions 183 employees; (iii) selling and marketing organization 95 employees;
and (iv) research and development organization 127 employees. The majority of
employees terminated are located in France, Germany, the United States,
Singapore and Mexico. As of February 24, 2003, 168 employees were terminated on
a worldwide basis: China (143 persons), United States (25 persons), and the
restructuring is in process in Singapore and Mexico. In France and Germany, we
are required to engage in consultations with employee representatives before
implementing workforce reductions. See "Item 5. Operating and Financial
Review and Prospects—Results of Operations—Recent Developments." In connection
with this plan, on December 18, 2002, Gemplus SA initiated the process of
consultation with its workers' committee and union representatives regarding a
plan for the reduction of approximately 483 positions in France. This
consultation process was completed in May 2003.
During May 2003, some of the employees of Gemplus SA (mainly manufacturing workers)
engaged in a strike for approximately one week.
On
May 15, 2003, Gemplus SA entered into an agreement with certain
labor unions representing some members of its workforce in France
that amended and replaced a previous agreement dated April 15,
2003, and that provides for a period of three years for
minimum production volumes in the manufacturing
facilities of Gemplus SA located in Gémenos and La Ciotat, France, on condition
of such facilities meeting certain productivity criteria. The
agreement also provides for maintaining certain marketing, research and development, new
product introduction and related administrative functions in the
Gémenos and La Ciotat areas.
76
Table of Contents
Under French law, all employers of more than 20 employees in France are
required to implement a 35-hour workweek. In February 1999, we entered into an
agreement to implement the 35-hour workweek mandated by French law. Under this
agreement, employees could work more than 35 hours in some weeks, but in
exchange were required to reduce the number of hours worked in other weeks to
ensure that they do not work more than 35 hours per week on an annual basis.
This agreement was modified in the beginning of 2000. Under the new agreement,
the number of hours worked during the week is not modified (i.e., employees can
work 40 hours a week), but the employees are entitled to 22 additional paid
days off a year. Although the workweek is shorter on average and we have not
reduced salaries, the agreement allows us greater flexibility than before to
organize the use of employee time. We believe this added flexibility partly
compensates for the reduction in hours, and that the mandated 35-hour week
should not have a material adverse effect on our operations or financial
condition.
We use temporary labor from time to time to provide short-term increases
in capacity as and when required. During 2002 we did not employ a significant
number of full time equivalent temporary staff.
77
Table of Contents
Item 7. Major Shareholders and Related Party Transactions
MAJOR SHAREHOLDERS
The capital stock of our company consists of ordinary shares, with no par
value, which are issued in registered form. Under our articles of
incorporation, each ordinary share represents one vote. The following table
sets forth information with respect to the beneficial ownership of our shares
as of April 29, 2003 by each person who is known by us to own beneficially more
than 2% of our outstanding shares. The existence of treasury shares accounts
for the difference between outstanding shares percentage and voting rights
percentage.
Beneficial ownership of shares after April 29, 2003 is determined in
accordance with the rules of the U.S. Securities and Exchange
Commission, based on factors including voting and investment power with respect
to shares. Shares subject to options currently exercisable, or exercisable
within 60 days of the date of this Annual Report, are deemed outstanding for
purposes of computing the percentage of shares owned by the person holding such
options, but are not deemed outstanding for purposes of computing the
percentage of shares owned by any other person. Unless otherwise indicated in
the footnotes to the below table, the following people have sole voting and
sole investment control with respect to the shares they beneficially own.
78
Table of Contents
Number of shares
Percentage of outstanding shares
Percentage of voting rights
Name of
Beneficial
Dec. 31,
Dec. 31,
April 29,
Dec. 31,
Dec. 31,
April 29,
Ownership
Dec. 31, 2001
Dec. 31, 2002
Apr. 29, 2003
2001
2002
2003
2001
2002
2003
Dr. Marc Lassus
108,842,529
(1)
5,875,050
5,875,050
17.1
%
0.9
%
1
%
18.1
%
1
%
1
%
Quandt family(2)
115,508,200
115,508,200
115,508,200
18.2
%
18.2
%
19.1
%
19.3
%
19.2
%
19.2
%
Sagem (3)
60,888,639
63,252,839
0
%
9.6
%
10.5
%
0
%
10.1
%
10.5
%
Texas Pacific Group(4)
159,305,600
159,305,600
159,305,600
25.1
%
25.1
%
26.4
%
26.6
%
26.5
%
26.5
%
Centro Bank Group
9,624,444
26,977,423
27,167,181
1.5
%
4.3
%
4.5
%
1.6
%
4.5
%
4.5
%
GE Capital
24,443,311
24,443,311
24,443,311
3.8
%
3.9
%
4.1
%
4.1
%
4.1
%
4.1
%
Groupe Dassault
28,300,000
28,300,000
32,737,666
4.5
%
4.5
%
5.4
%
4.7
%
4.7
%
5.4
%
Brunei
Investment Agency
22,500,000
22,500,000
22,500,000
3.5
%
3.6
%
3.7
%
3.8
%
3.7
%
3.7
%
Treasury shares (5)
35,524,586
31,545,751
1,319,229
5.6
%
5.0
%
0.2
%
Other shareholders
131,233,627
158,226,964
151,428,333
20.7
%
25.0
%
25.1
%
21.9
%
26.2
%
25.1
%
Outstanding shares (6)
635,282,297
633,570,938
603,537,409
(1)
Includes 25,864,000 shares held of
record by Sormiou Holdings. Dr. Marc Lassus sold a portion of his shares in December 2002, and remains the beneficial owner of
5,875,050 shares.
(2)
Mr. Stefan Quandt was a member of the board of directors of Gemplus SA from July 1999 to February 2000, and of our board of directors from February to November 2000. On
May 2, 2002, the Quandt family reorganized their holdings of our shares. As of that date, 100 shares were held of record by Stefan Quandt and 100 shares were held of record
by Johanna Quandt. In addition, 33,236,428 shares were held by Acton 1 Beteiligungs GmbH, 35,700,770 shares by Acton 2 Beteiligungs GmbH and 46,570,802 shares by Acton 3
Beteiligungs GmbH, all companies controlled by members of the Quandt family.
(3)
In December 2002, Sagem Group acquired 60,888,639 shares. 11,053,465 shares were held by Sagem SA, 45,402,562 shares were held by Sagem International and 4,432,612
shares were held by TREL PARTICIPATION, Sagem International and TREL PARTICIPATION being companies affiliated with Sagem SA. To our knowledge a substantial portion of these shares were acquired from Dr. Marc Lassus.
(4)
Texas Pacific Group is a group of investment funds founded by Messrs. David Bonderman, James G. Coulter and William S. Price III to pursue public and private investment
opportunities through a variety of methods, including leveraged buyouts, recapitalizations, joint ventures, restructurings and strategic public securities investments.
Messrs. Bonderman, Coulter and Price are the shareholders of the general partner of the Texas Pacific Group funds. Each of Messrs. Bonderman, Coulter and Price disclaims
beneficial ownership of the shares of our company held by Texas Pacific Group. Messrs. Bonderman and Price are also directors of our company. Mr. Abel Halpern, a
consultant to Texas Pacific Group, is also a director of our company.
(5)
Including 30,743,679 shares, following the transfer of shares made by our former Chief Executive Officer in 2001, and cancelled as of March 10, 2003.
(6)
Excludes ordinary shares issuable upon the contribution of shares of Gemplus SA held by our employees.
79
Table of Contents
To our knowledge, there are no other shareholders holding more than 2% of
our voting rights as of April 29, 2003.
As of May 7, 2003, there were 4,302,091 of our ADSs outstanding,
representing 8,604,182 ordinary shares, or 1.43% of our total shares
outstanding. There are currently 28 record holders of our ADSs of which 27
have registered addresses in the United States and one in Canada. In addition,
as of May 7, 2003, 159,380,179, or approximately 26%, of our ordinary shares
were held by 11 record holders with registered addresses in the United States.
As of April 29, 2003 our total amount of shares was divided into 381,845,746 shares held under street name held
through Euroclear and 221,691,663 registered shares.
In 2002 we ordered a partial bearer share register through Euroclear for
shareholders holding more than 100,000 shares as of July 18, 2002. We also
ordered a complete bearer share register through Euroclear as of October 1st
2002, listing 31,851 bearer shareholders.
From our last bearer share register we note that less than 4% of our
outstanding shares are held by financial institutions based in Luxembourg. We
have no other shareholders who are residents of Luxembourg.
As of
December 31, 2002, approximately 5% of our registered shares were
held by French residents. To our knowledge, approximately 9.6% of our shares are held by Sagem through Euroclear. Out of the remaining 50.9% of our shares held through Euroclear, the percentage of those shares held by French residents cannot be identified.
See also "Item 6. Directors, Senior Management and Employees—Share
Ownership."
RELATED PARTY TRANSACTIONS
We have engaged in the following transactions with our directors, senior
executives and shareholders.
During 2002, our company paid amounts totaling
€
10,629 thousand in
connection with the resignation and cessation, respectively, of its former
Chief Executive Officer, Mr. Perez, on December 19, 2001, and its former
Chairman of the board of directors, Dr. Lassus, on January 10, 2002.
During 2000, we entered into loan agreements with certain of our senior
executives officers. One of our indirect subsidiaries, Zenzus Holdings Ltd,
extended these loans to Mr. Antonio Perez, our former Chief Executive Officer,
and Dr. Marc Lassus, our former Chairman of the board of directors, to allow
them to exercise stock options granted to them in 2000, and to allow Mr. Perez
to pay taxes due in connection with the grant to him of free shares. We
granted to each of Mr. Perez and Dr. Lassus 10,247,893 free shares and
20,495,786 stock options with an exercise price of
€
3.51 per share in 2000.
These loans were partially reimbursed in 2001, as discussed in Note 31 to our
audited consolidated financial statements. In December 2001, we recorded
severance expenses in the amount of
€
25,691 thousand relating to Mr. Perez and
to Dr. Lassus in connection with their resignation as Chief Executive Officer
and cessation as Chairman of the board of directors, respectively, as described
in Note 31 to our audited consolidated financial statements. See "Item 8.
Financial Information—Legal Proceedings" for additional information on Dr.
Lassus loan.
Pursuant to the terms of the loans granted to Messrs. Perez and Lassus in
2000, one of the company's indirect subsidiaries has agreed to arrange for the
interest on these loans to be forgiven from July 1st to December 31, 2001, and
to assume any income tax resulting from this forgiveness. As described in Note
13 to our audited consolidated financial statements, interest related to the
loans was
80
Table of Contents
accrued in the Consolidated Statement of Income, totaling
€
3,139 thousand in
2000,
€
4,877 thousand in 2001 and
€
1,706 thousand in 2002. Income tax
resulting from the forgiveness of interest from July 1st to December 31, 2001
was accrued in our 2001 Consolidated Statement of Income, resulting in a
compensation expense of
€
3,585 thousand reflected under general and
administrative expenses.
During 2001, we entered into an agreement with a service company whose
chief executive officer, Mr. Ronald Mackintosh, also served on our board of
directors. Mr. Mackintosh served as our interim chief executive officer from
December 19, 2001 to August 31, 2002 and resigned as chief executive officer of
the service company effective on December 19, 2001. He remains a member of its
board of directors and of our board of directors. This service company was
appointed to provide an independent review of our management, information,
organization and business systems as well as identification and recommendation
of improvements. In 2002, our company continued to use the services of this
service company and the total cost recorded in our consolidated statement of
income in 2002 for this arrangement amounted to
€
1,737 thousand. During 2000,
we granted loans to Mr. Steven Gomo and Mr. Phil Faraci, two of our former
executive officers. Pursuant to their employment agreements, each obtained a
US $300 thousand interest-free loan to be forgiven in 24 monthly installments
effective from the date of their employment. Upon their resignations in 2002,
we forgave the entire loan balances that were still outstanding at the time
they left our company. As a result, we recorded
€
6,000 in compensation expense
in 2000,
€
150 thousand in compensation expense in 2001 and
€
144 thousand in
compensation expense in 2002.
In 2001, we provided three interest-bearing loans to three executive
officers, to assist them to cover certain advance income tax payments they were
required to make in France by acceleration upon their relocation from our
offices in France to those in Switzerland, in accordance with our policy
regarding expatriation assignments. One loan in the amount of
€
122 thousand
was made to Mr. Didier Lachaud, another in the amount of
€
97 thousand was made
to Mr. Jacques Sénéca and another in the amount of
€
98 thousand was made to Mr.
Stephen Juge. As of March 1, 2003, the three loans had been fully repaid.
In 2001, we provided an interest-bearing loan in the amount of
€
43
thousand to Mr. Philippe Vallée, one of our executive officers, to cover
certain advance income tax payments he was required to make in Singapore by
acceleration upon his relocation from our offices in Singapore to those in
France, in accordance with our policy regarding expatriation assignments. This
loan was fully repaid in July 2002.
81
Table of Contents
Item 8. Financial Information
AUDITED CONSOLIDATED FINANCIAL STATEMENTS
See "Item 18. Financial Statements" and pages F-1 through F-67.
OTHER FINANCIAL INFORMATION
Legal Proceedings
We are involved in litigation from time to time in the ordinary course of
business. We believe that none of the ordinary course litigation in which we
are currently involved will have a material adverse effect on our results of
operations, liquidity or financial condition.
In October 2001, the United States Court of Appeals for the Ninth Circuit
affirmed a district court judgment against us in favor of Humetrix Inc. based
on a claim by Humetrix that we had breached an agreement to jointly market
several products in the U.S. health care sector. The judgment was in the
amount of US $15 million plus interest. Our petition seeking a rehearing was
denied in November 2001, and the parties entered into a Mutual Release and
Settlement Agreement on March 25, 2002. As a result of the above decision, we
recorded a charge of
€
18.1 million, adversely impacting our 2001 operating
results and resulting in a total current liability (including a previously
existing provision) of
€
19.4 million in the balance sheet as at December 31,
2001. Our company paid all amounts due under the Mutual Release and Settlement
Agreement in 2002, and no further obligations remain.
A former director of our company, Mr. Ziad Takieddine, who resigned from
the board of directors on December 19, 2002, has initiated certain legal
proceedings against our company before the commercial court in Luxembourg. On
October 1, 2002, Mr. Takieddine filed an injunction-type lawsuit (or "référé"
proceeding) seeking the annulment of the effects of the board meeting of
September 23, 2002, or alternatively the cancellation or suspension of the
effects of the decisions of the board meeting of September 23, 2002, on various
procedural grounds. Such procedural grounds include: the alleged failure to
send documents to board members sufficiently in advance of the meeting; alleged
failure to provide to the board, or for the board to approve, draft minutes of
previous board meetings; the holding of the meeting by telephone conference
call rather than in person; the alleged unjustified attendance at the meeting
of non-board members; and other procedural grounds. On October 17, 2002, the
court ordered the suspension of the effects of the board meeting of September
23, 2002. At a meeting on October 29, 2002, the board re-adopted and
re-approved most of the decisions of the board meeting of September 23, 2002.
Our company contests and has appealed the court's order of October 17, 2002,
and on May 13, 2003 a hearing was held on the appeal. The court will issue its
decision on June 24, 2003.
On November 5, 2002, Mr. Takieddine filed a second injunction-type lawsuit
seeking the annulment of the effects of the board meeting of October 29, 2002,
or alternatively cancellation or suspension of the effects of the decisions of
the board meeting of October 29, 2002, on similar grounds to those involved in
his initial lawsuit mentioned above. On November 18, 2002, the court rejected
and dismissed Mr. Takieddine's claims. Our company is not aware of any appeal
of this decision.
82
Table of Contents
On October 23, 2002, Mr. Takieddine filed a lawsuit on the merits
challenging the validity and requesting the annulment of the decisions of the
board at its meetings of July 30, August 29 and September 23, 2002, and the
board's decision on October 29, 2002, to convene a shareholders meeting on
November 21, 2002 (later adjourned and re-scheduled for unrelated reasons to
December 19, 2002). At a hearing on January 22, 2003, which had been set on an
expedited basis at Mr. Takieddine's request, this lawsuit was stricken without
prejudice from the current docket by the court for failure by the plaintiff to
actively prosecute the case. Either party may petition the court to set a
future hearing date. Our company has not been informed of any step by Mr.
Takieddine to request the court to set a new hearing date. Our company
believes that the claims asserted by Mr. Takieddine in each of these three
legal proceedings are without merit.
In 2000, one of our indirect subsidiaries made a loan to Dr. Lassus to
assist Dr. Lassus to exercise stock options, pursuant to his then current terms
of employment. Pursuant to an
agreement dated December 19, 2001, as of January 10, 2002 Mr. Lassus
ceased his office as Chairman of our board of directors and resigned
from all other positions that he held with our company and any of its
affiliates, except for his position as a non-executive director of
our company. As of January 10, 2002, Mr. Lassus was no longer an
employee of our company or any of its affiliates. We have not yet received the guarantees of reimbursement
(including a pledge of Dr. Lassus's option shares) that Dr. Lassus was required
to provide,
inter alia
, as confirmed in a letter agreement dated December 19,
2001. Although we recorded an expense of
€
67.6 million
effective June 30, 2002, following the write-down of the loan, we have not forgiven the loan. A special
committee of our board of directors recommended that our indirect subsidiary
initiate legal action to seek security for the loan and its repayment. Our
board of directors agreed with the special committee's recommendations, also
based on the opinion of special independent legal counsel, and an
ad hoc
arbitration proceeding was commenced by our company and its indirect subsidiary
against Dr. Lassus in London, England, in January 2003.
In November 2002, three French subsidiaries of our company, including
Gemplus SA, received a tax assessment from the French tax authority primarily
relating to the fiscal years 1998 through 2000. The major components of the
assessment relate to intercompany transactions, including transfer pricing, the
invoicing of management fees and forgiveness of intercompany debt, as well as
the adequacy of documentation relating to certain commissions paid to agents.
Although the aggregate assessment, including interest and penalties, originally
approximated
€
120 million, we believe that significant aspects of the claim are
without justification and intend to vigorously contest the assessment. By
reason of the assessment, we increased our provision for tax risks at December
31, 2002 by
€
5.9
million, and transferred the amount of
€
20.3 million from a valuation allowance against deferred tax assets to provision for tax
risks (see Note 19 to our consolidated financial statements). By letter in
April 2003, the French tax authority reduced the tax assessment to
approximately
€
83.5 million. Our company does not believe that the assessment
will have a material effect on our company's liquidity and notes that certain
of the taxes assessed result from timing adjustments that could reduce taxes in
subsequent periods.
In December 1997, Mr. Alain Nicolaï brought a legal action before the
Marseille Commercial Court against Gemplus S.A. on the one hand, and the
companies Gaming Chips International S.A.R.L. ("G.C.I.") and F.N.2.C. S.A. on
the other hand, alleging a breach of a contract relating the promotion of a
smart card reading system device in the area of casino slot machines. Mr.
Nicolaï requested the Commercial Court to nominate an expert to determine the
amount of his damages. G.C.I. and F.N.2.C. then adopted the arguments developed by
Mr. Nicolaï, joined in the request for designation of an expert and, in
addition, sought an order for the payment by Gemplus S.A. to them respectively
of FRF 3 million (
€
457 thousand) and FRF 21,250 thousand (
€
3,240 thousand) as
a provisional advance on damages. On June 21, 2000, the Marseille Commercial
Court (i) rejected all of Mr. Nicolaï's claims; (ii) found that Mr. Nicolaï's
contract rights had been transferred to G.C.I. and F.N.2.C.; (iii) appointed an
expert; and (iv) awarded G.C.I. and F.N.2.C. a provisional advance on damages
respectively of FRF 500 thousand (
€
76 thousand) and FRF 400 thousand (
€
61
thousand). Gemplus S.A. appealed this decision before the Aix en Provence
Court of Appeal.
83
Table of Contents
In April 2003, the expert transmitted to the parties a preliminary report
indicating that the amount estimated by the expert of the plaintiffs' damages would be
on the order of
€
13 million. Gemplus S.A. immediately formally contested this
evaluation on the grounds that the expert (i) had not responded to the subject
matter of the assignment given to him by the Commercial Court; (ii) had not
answered the challenges raised by Gemplus S.A. in its prior submissions to the
expert; and (iii) had not given any details on the evolution of the price of smart
cards, on the number of cards necessary for each device per year and on the
number of gambling machines already equipped with smart cards systems in the
world. In conclusion, Gemplus S.A. relied upon the absence of a significant
market for smart cards applications in the area of casino slot machines. Under
these circumstances, Gemplus S.A. made a provision for this litigation in the
first quarter of 2003 in an amount of
€
1,800 thousand.
On March 7, 2003, the workers' committee of Gemplus SA, our main French
subsidiary, filed an action before the Marseille Commercial Court with the
support of Sagem SA, one of our main shareholders, requesting the Commercial
Court to nominate an expert to analyze certain decisions allegedly taken by the
management or the supervisory board of Gemplus SA, to prohibit Gemplus SA from
taking or implementing certain of such alleged decisions and to appoint a
Court-designated representative to monitor such requested prohibition. On
April 2, 2003, the Commercial Court nominated two experts qualified to act
before the French Supreme Court, with the mission to analyze, and to prepare
and file with the Commercial Court a report within three months, regarding (i)
the alleged re-capitalization of the U.S. subsidiaries of Gemplus SA; (ii) a
list of the tax credits and tax subsidies received by Gemplus SA and of patents
and trademarks filed by Gemplus SA during the fiscal years 1998-2002, and to
describe the intragroup transfers and licenses of such patents, related know
how and trademarks during such period; and (iii) whether during the period
1999-2002 the evolution in the level of the workforce of Gemplus SA was
proportional to the evolution of the level of activity and revenue; whether the
variation in the size of the workforce was the result of management decisions
or seems to have been dictated by market conditions; and whether internal
forecasts of management would appear to indicate future significant staff
reductions. The Commercial Court rejected the workers' committee's other
requests. The purpose of this proceeding under French law is to permit the
workers' committee to obtain information regarding the alleged management
decisions cited. Our company believes that the workers' committee already had
sufficient information regarding the alleged management decisions cited and
intends to cooperate fully with the experts' mission.
Insurance
The company maintains certain liability insurance with respect to our
operations and trading losses under appropriate insurance plans with high
credit rated first-class insurance companies.
The company also maintains certain insurance plans with respect to liabilities
and claims arising from acts or omissions of directors and officers acting in
their respective capacities for the company. On November 13, 2000 the board of
directors authorized the company to purchase additional insurance with respect
to liabilities and claims arising from acts or omissions of directors or
officers related to the listing of the company's securities in December 2000.
The company's facilities and their activities as a whole are covered under
group plans. These plans include among other items: (i) liability insurance
called "operations/after delivery" (each entity, however, purchases a local
insurance plan for operation risks); (ii) damages to trading assets/trading
losses coverage (some entities, however, purchase a local insurance plan with
respect to these risks); (iii) fraud/intentional acts coverage; and (iv)
transport coverage.
The company also maintains local insurance plans covering certain types of
risks or lesser amounts than those applicable for our group insurance plans.
Under certain circumstances, the company's group plans may be an alternative to
local plans after a local plan is exhausted.
Casualties
with respect to assets and resulting trading losses are
covered under a casualty insurance plan with a compensation cap of
approximately
€
230 million for each incident and each facility, with certain
exclusions and limitation provisions that we consider standard for companies of
similar size and activities.
With respect to the company's third party liability insurance, the company
believes that it maintains an appropriate level of insurance for the risks of
third party claims that the company faces.
Dividend Policy
We have not declared any dividends on our ordinary shares since our
inception, and do not anticipate paying dividends in the foreseeable future.
We currently expect to retain all future earnings, if any, for use in the
operation and expansion of our business.
We may declare dividends out of funds or reserves legally available for
distributions upon the recommendation of our board of directors and the
approval of our shareholders at their annual general meeting. In general,
under Luxembourg law, only realized profits or distributable reserves
(including profits that are carried forward) determined in accordance with
Luxembourg accounting principles are available for distribution as dividends.
Luxembourg law requires us to allocate 5% of our annual net profits to a legal
reserve. We must make this annual allocation until the legal reserve reaches
10% of our subscribed capital.
We discuss certain aspects of Luxembourg and U.S. taxation of dividends in
"Item 10. Additional Information—Taxation" in this Annual Report.
84
Table of Contents
SIGNIFICANT CHANGES
For a discussion of recent developments, see "Item 5. Operating and
Financial Review and Prospects—Results of Operations—Recent Developments."
85
Table of Contents
Item 9. The Offer and Listing
NATURE OF TRADING MARKET
Deutsche Bank Trust Company Americas is currently the depositary for our
American Depositary Shares (ADSs) pursuant to a Supplemental Agreement to
Deposit Agreement dated February 11, 2003. Our ADSs have been traded on the
Nasdaq National Market under ticker symbol GEMP and our ordinary shares have
been traded on the
Premier Marché
of Euronext Paris under
the ticker symbol LU0121 706294-GEM since December 11, 2000.
The following table sets forth, for the periods indicated, the reported
high and low sales prices for the ordinary shares and ADSs from December 11,
2000, the first day on which our ordinary shares traded on the
Premier Marché
and our ADSs traded on the Nasdaq National Market. See "Item 3. Key
Information—Exchange Rate Information" with respect to rates of exchange
between the dollar and the euro applicable during the periods set forth below.
Monthly Highs and Lows
Euronext Paris
Nasdaq National Market
€
per share
U.S.$ per ADS
High
Low
High
Low
2000
From December 11, 2000
€
9.99
€
6.55
$
18.88
$
12.00
2001
First Quarter
€
9.90
€
5.13
$
17.88
$
9.25
Second Quarter
6.00
3.20
10.19
5.80
Third Quarter
3.60
2.42
6.18
4.35
Fourth Quarter
3.86
1.93
6.90
3.60
2002
First Quarter
€
3.08
€
3.08
$
5.47
$
3.15
Second Quarter
2.16
1.32
3.88
2.63
Third Quarter
1.50
0.37
2.86
0.77
Fourth Quarter
1.45
0.45
3.08
0.90
2003
January
€
1.16
€
0.92
$
2.48
$
2.00
February
1.01
0.81
2.10
1.76
March
0.89
0.63
2.00
1.47
April
1.00
0.79
2.25
1.68
May
1.35
0.95
3.20
2.16
June
1.46
1.08
3.40
2.53
86
Table of Contents
Trading on the
Premier Marché
On September 22, 2000, the
Société des Bourses Françaises SA
(known as the
ParisBourse
SBF
SA), Amsterdam Exchange N.V. and the
Société de la Bourse de
Valeurs Mobilières de Bruxelles SA
merged to create Euronext N.V., a Dutch
holding company and the first pan-European stock exchange. Subsequently,
PariBourse
SBF
SA changed its name to Euronext Paris. Securities quoted on any
of the stock exchanges participating in Euronext will be traded through a
common Euronext platform, with central clearinghouse, settlement and custody
structures. However, these securities will remain listed on their respective
local exchanges. Euronext Paris retains responsibility for the admission of
securities to its trading markets, as well as the regulation of these markets.
Securities approved for listing by Euronext Paris are traded in one of two
regulated markets, the
Bourse de Paris
, which in turn comprises the
Premier
Marché
and the
Second Marché
, and the
Nouveau Marché
. These markets are all
operated and managed by Euronext Paris, a market operator (
entreprise de
marché
) responsible for the admission of securities and the supervision of
trading in listed securities. Euronext Paris publishes a daily official price
list that includes price information on listed securities. The securities of
most large public companies are listed on the
Premier Marché
, with the
Second
Marché
available for small and medium-sized companies. Trading on the
Nouveau
Marché
was introduced in March 1996 to allow small capitalization and start-up
companies to access the stock market. In addition, the securities of certain
other companies are traded on a non-regulated, over-the-counter market, the
Marché Libre OTC
.
Trading by our company in our own shares
Under Luxembourg law, we may not issue shares to our company, but we may
purchase our shares in limited cases. See "Item 10. Additional
Information—Articles of Incorporation."
87
Table of Contents
Item 10. Additional Information
ARTICLES OF INCORPORATION
The following description summarizes several aspects of our articles of
incorporation and our share capital, which consists of ordinary shares only.
For information regarding Organization and Register, Objects and Purposes,
Disclosure of Interests, Indivisibility, General Meetings of Shareholders,
Liquidation, Preferential Subscription Rights, No Limitation on Foreign
Ownership, Change in Control, see our Annual Report on Form 20-F dated July 1,
2002. A copy of our articles of incorporation has been filed as an exhibit to
this Annual Report.
Directors
Our articles of incorporation provide that in the case of a conflict of
interest of a director, the director must inform the board of directors of the
conflict, have a record of his statement included in the minutes of the
meeting, and refrain from deliberating and voting on the matter. At the
following general meeting, a special report shall be made on any transactions
in which any of the directors has had an interest conflicting with our own.
Our articles of incorporation provide that the age limit of directors is
seventy (70) years. There is no share ownership requirement for directors.
See "Item 6. Directors, Senior Management and Employees—Board of Directors"
for additional information about our board of directors. There is no explicit
restriction in the articles of incorporation on the borrowing power of
directors. Director compensation is determined by the Compensation Committee
or the board.
Share Capital
As of April 29, 2003, our subscribed capital is fixed at
€
127,787,050.4
consisting of 603,537,409 shares with no par value. As of April 29, 2003, our
authorized share capital was
€
400 million, consisting of 2 billion shares with
no par value. Our authorized share capital may be increased or reduced by
resolution passed with a two-thirds majority vote at a meeting of shareholders.
Luxembourg law provides that shareholders have preemptive rights to subscribe
for any new share issued by us for cash consideration.
On
November 10, 2000, our shareholders authorized our board of directors to
increase our share capital by a maximum amount of
€
394 million and issue up to
1.97 billion new shares on terms and conditions and at such times as it deems
appropriate, during a three-year period from the date of publication of the
minutes of the extraordinary general meeting, except for issues of shares for
any of the purposes listed below, which may occur within five years of this
date:
•
the issuance of a maximum of 20 million shares in
exchange for shares of Gemplus SA at a ratio of 50 shares of our
company for 1 share of Gemplus SA;
•
the issuance of a maximum of 56,845,700 shares in
exchange for shares of Gemplus SA to be issued under any of
Gemplus SA's stock option plans in existence on or prior to
February 1, 2000, at a ratio of 50 shares of our company for 1
share of Gemplus SA, or with respect to options to be issued by
us to subscribe for shares in our company on terms identical to
those existing for options issued under any of these stock option
plans against surrender or exchange of, or renunciation to, these
stock options in the same amounts on an adjusted basis (subject
to the applicable ratio);
•
the issuance of a maximum of 50 million shares with
respect to the options granted to the employees or officers of
our company (including any of its subsidiaries or affiliates) in
88
Table of Contents
accordance with the stock option plans as from time to time adopted
by the board of directors, subject to such further conditions as
may be imposed by a general meeting of our shareholders; and
•
the issuance of a maximum of 60 million shares without
nominal value to senior management, board members and/or
executives of our company (including any of its subsidiaries or
affiliates) in the form of stock options or, except in the case
of board members, in the form of free shares, on terms and
conditions determined by the board of directors in its sole
discretion. Upon any issues of free shares, we will be required
to record an amount equal to the accounting par value of these
shares in our shareholders' equity and deduct an equivalent
amount from our realized profits or distributable reserves, which
may limit our ability to pay dividends or make other
distributions to our shareholders.
Our shareholders have waived their preemptive subscription rights with
respect to any issuance of these authorized new shares.
On December 5, 2000, our shareholders authorized our board of directors to
issue a maximum of 30 million shares to be sold in connection with our initial
public offering, with no pre-emptive subscription rights for existing
shareholders. On December 7, 2000, our board of directors resolved that up to
15 million shares be issued in connection with our initial public offering with
no pre-emptive subscription rights for existing shareholders. These 15 million
shares were subsequently issued in our initial public offering on December 13,
2000.
Form, Ownership and Transfer
Our shares are issued in registered form. Pursuant to
Luxembourg law, we keep a register of all of the holders of our registered
shares. Ownership of registered shares will be established by inscription in
the register and confirmations of these inscriptions are issued to our
shareholders upon request. We may appoint registrars in different
jurisdictions, each of whom will maintain a separate register for the shares
entered in each of these registers. Holders of our shares may elect to be
entered into one of these registers and to transfer their shares from one
register to another. We currently have no separate registers other than our
Luxembourg share register.
The transfer of our shares is governed by Luxembourg law and our articles
of incorporation. Transfers of our shares are carried out by means of a
declaration of transfer entered into the register, dated and signed by the
transferor and the transferee or by their duly authorized representatives.
Transfers will be accepted and entered into the register by presentation of
correspondence or other documents recording the agreement between the
transferor and the transferee.
Voting Rights
Each share is entitled to one vote. The shareholders shall vote on each
candidate individually. Board members are elected by the simple majority of
votes of the shareholders present or presented and voting at the relevant
meeting pursuant to the simple majority rules for election of directors under
applicable Luxembourg law. A shareholder may appear and act at any general
meeting of shareholders by appointing a proxy in writing, cable, telegram,
telex or telefax sent to our registered office. The board of directors may
establish other conditions that must be fulfilled by shareholders to take part
in any
89
Table of Contents
general meeting of shareholders, including the determination of the record
date on which a shareholder needs to be registered to be convened to a
shareholders' meeting.
Shareholder resolutions at an annual general meeting are approved by a
simple majority of the shares represented at the meeting in person or by proxy.
There are no quorum requirements applicable to annual general meetings.
Amendments to our articles of incorporation require approval at an
extraordinary general meeting, at which at least 50% of the voting shares must
be present or represented, by shareholders present in person or by proxy,
holding at least two thirds of the voting shares present or represented. If
the quorum requirement for an extraordinary shareholders' meeting is not met,
the resolution to amend the articles may be passed at a second extraordinary
shareholders' meeting with no quorum requirement. Amendments to change our
jurisdiction or to impose additional financial obligations on the shareholders
may only be approved with the unanimous consent of all shareholders.
Dividend Rights/Exchange Controls
Our shares will be entitled to any dividends declared by the shareholders
at a general shareholders' meeting or by our board of directors out of funds or
reserves legally available for distributions. In general, under Luxembourg
law, only realized profits or distributable reserves (including profits that
are carried forward) determined in accordance with Luxembourg accounting
principles are available for distribution as dividends. Interim dividends can
be declared by our board of directors up to two times in any fiscal year if a
financial statement prepared for the declaration of interim dividends shows
that there are sufficient funds available for distribution.
Luxembourg law requires us to allocate 5% of our annual net profits to a
legal reserve. We must make this annual allocation until the legal reserve
reaches 10% of our subscribed capital. If we issue new shares, we will be
required to continue making this annual allocation until the legal reserve
reaches 10% of our subscribed capital once more. The legal reserve is not
available for dividends.
Purchase of and Trading in our Own Shares
In accordance with Luxembourg law, we may repurchase our own shares
subject to certain limits and conditions, including, in several cases, the
prior approval of a general meeting of shareholders. At the general meeting
held on April 29, 2003, our shareholders authorized us to repurchase our shares
from time to time through October 28, 2004, in an aggregate amount of up to 10%
of our issued shares of capital stock. These shares can be purchased at prices
ranging from
€
0.01 to
€
20 per share. Under Luxembourg law, we cannot lend or
grant security for, or give financial assistance in the purchase of, our own
shares, except for any loans, guarantees or other financial assistance provided
to our employees.
Our share repurchase program was implemented during the third quarter of
2001, we started the implementation of our share repurchase program, as
approved by the Annual General Meeting held on April 18, 2001 and authorized by
the Commission des Opérations de Bourse on May 4, 2001. During 2001 and 2002, we
repurchased 6,073,715 shares of our outstanding common stock, at an average
price of
€
3.06 per share. In addition, as described in Note 31 to our
consolidated financial statements, our former Chief Executive Officer, Mr.
Perez, returned all of the 30,743,679 shares that he had received in August and
September 2000 to an indirect subsidiary of our company, in reimbursement of
the loans that such indirect subsidiary had made to him in 2000 and in 2001.
As at December 31, 2001, we held 35,705,936 shares of our outstanding common
stock. At the Extraordinary General Meeting of Shareholders held on April 17,
2002, our shareholders approved the cancellation of 4,634,859 shares held
directly and purchased pursuant to our stock repurchase program, as well as the
cancellation of the 30,743,679 shares held by our indirect subsidiary at the
time as such shares may be transferred to us. The 4,634,859 shares were
cancelled on April 17, 2002 without reduction of our issued share capital but
with a consequential
90
Table of Contents
increase of the accounting par of the shares in issue. During the third
quarter of 2002, we purchased 656,024 shares of our outstanding common stock
from two former Celocom Limited employees pursuant to the provisions of the
2000 Celocom Limited share purchase agreement. As at December 31, 2002, we
held 31,727,101 shares of our outstanding common stock. The 30,743,679 shares
transferred by Mr. Perez to our company's indirect subsidiary were distributed
to our company and cancelled on March 10, 2003. As of April 29, 2003, we held
2,319,229 shares of our outstanding common stock.
MATERIAL CONTRACTS
On
July 12, 2000, we entered into an employment agreement (as amended on
September 1, 2000 and July 11, 2001) with Mr. Antonio Perez, regarding his
employment as our Chief Executive Officer. Pursuant to this agreement, we
granted Mr. Perez 10,247,893 shares of our company and options to purchase
20,495,786 shares at a purchase price of
€
3.51 per share. One of our indirect
finance subsidiaries, Zenzus Holdings Ltd., granted Mr. Perez several loans to
assist him in exercising these options.
On October 20, 2001, we entered into a loan repayment agreement with Mr.
Perez, and on December 19, 2001, we entered into an additional agreement with
Mr. Perez. Pursuant to these agreements, Mr. Perez returned all of the
10,247,893 shares granted to him pursuant to his employment agreement and
the 20,495,786 shares purchased upon the exercise of options as satisfaction in full
of the loans extended to him by Zenzus Holdings Ltd. Mr. Perez resigned from
his position as our Chief Executive Officer on December 19, 2001.
By letter agreement dated December 19, 2001, between our company and Dr.
Lassus in connection with his cessation as our Chairman of the board, we agreed
to pay Dr. Lassus US$12 million. The amounts agreed to be paid to Dr. Lassus
represented amounts we were obligated to pay under certain circumstances
pursuant to the terms of an agreement in connection with his appointment as our
Chairman, and Dr. Lassus agreed to regularize the arrangements for his existing
option loans, which one of our indirect finance subsidiaries, Zenzus Holdings
Ltd., had granted to him in connection with the grant of options to him in
2000. See "Item 8. Financial Information—Legal Proceedings."
We entered into a four-year employment agreement with Mr. Alex Mandl,
dated August 29, 2002, the compensation-related terms of which were approved by
our shareholders on December 19, 2002. That agreement provides essentially the
following:
•
Mr. Mandl will serve as the President and Chief Executive Officer
of the company with a base salary of
€
600 thousand and an annual
performance bonus of up to 120% of his base salary, guaranteed for one
year. Mr. Mandl also received a signing bonus of
€
500 thousand that he
must repay if he voluntarily terminates his employment or is terminated
for Good Cause (as defined in the agreement) prior to September 9,
2003. The company will provide Mr. Mandl with benefits comparable to
those generally made available to senior company executives. The
company also agreed to reimburse Mr. Mandl for his legal and accounting
costs in preparing the agreement up to a maximum of US$50 thousand.
•
Mr. Mandl is required to and has purchased, directly and indirectly
company shares having a market value of US$200 thousand at the public
market price.
•
Mr. Mandl will be entitled to receive directly or indirectly two
tranches of options to purchase a total of 12,000,000 shares of company
common stock, 8,000,000 of which will be granted with an exercise price
of
€
0.84 and the remaining 4,000,000 of which will be granted with an
exercise
91
Table of Contents
price equal to
€
2.25. The options shall vest in equal twenty five
percent annual installments beginning on August 29, 2003, except that if
the company is sold fifty percent of the options shall vest immediately
prior to the consummation of such sale.
•
The company will reimburse Mr. Mandl for certain costs and losses
in the operation and sale of his former home in the United States as a
result of his relocation to Geneva, Switzerland. These amounts,
depending on specific circumstances, may be up to US $4,920 thousand.
As of April 29, 2003, Mr. Mandl has not sold this former home.
•
If Mr. Mandl's employment is terminated by our company without Good
Cause, by Mr. Mandl for Good Reason (as defined in the agreement,
including if Mr. Mandl is not permitted to sell shares of our company
which he owns, directly or through vested options, in connection with a
sale of more than 50% of the shares of the company by certain major
shareholders) or due to his death or disability, our company will pay
him (or his estate) an amount equal to between one and two years' base
salary, incentive bonus, and benefits. He will also receive up to
twenty-four months' vesting on his options. If Mr. Mandl voluntarily
terminates his employment with our company or is terminated for Good
Cause, our company will pay him his base salary and annual incentive
bonus through the date of termination. All options that have not
vested as of such date will be forfeited. In the event Mr. Mandl is
subject to any excise tax pursuant to Section 280G of the United States
Internal Revenue Code (due on certain severance payments made after a
change of control of the company), our company will pay Mr. Mandl a
gross-up payment equaling such amount.
•
Mr. Mandl is bound by a confidentiality agreement, an intellectual
property agreement, a non-competition and non-solicitation agreement
and an arbitration clause.
See also "Item 5. Operating and Financial Review and Prospects—Operating
Income (Loss)—Management severance expenses" and "Item 7. Major Shareholders
and Related Party Transactions—Related Party Transactions."
92
Table of Contents
TAXATION
The following is a summary of the principal Luxembourg and U.S. federal
income tax considerations that are likely to be material to the ownership and
disposition of ordinary shares or ADSs. The summary does not purport to be a
comprehensive description of all of the tax considerations that may be relevant
to the ownership and disposition of ordinary shares or ADSs. This summary
applies to you only if you hold ordinary shares or ADSs as capital assets for
tax purposes, and does not apply to you if you are a member of a class of
holders subject to special rules, such as:
•
a dealer in securities or currencies;
•
a trader in securities that elects to use a mark-to-market method of accounting for your securities holdings;
•
a bank;
•
a life insurance company;
•
a tax-exempt organization;
•
a person that holds ordinary shares or ADSs that are a hedge or that are hedged against interest rate or currency risks;
•
a person that holds ordinary shares or ADSs as part of a straddle or conversion transaction for tax purposes;
•
a person whose functional currency for tax purposes is not the U.S. dollar; or
•
a person that holds ordinary shares or ADSs and owns or is deemed to own ten percent or more of any class of our stock.
The summary is based on laws, treaties and regulatory interpretations in
effect on the date hereof, all of which are subject to change. You should
consult your own advisers regarding the tax consequences of owning or disposing
of the ordinary shares or ADSs in the light of your particular circumstances,
including the effect of any state, local, or other national laws.
Luxembourg Tax Considerations
The following is a summary of the principal Luxembourg tax considerations
that are likely to be material to the ownership and disposition of ordinary
shares or ADSs by you if you are not domiciled, resident, or formerly resident
in Luxembourg and do not hold ordinary shares or ADSs in connection with a
permanent establishment or fixed base in Luxembourg.
Dividends on Ordinary Shares or ADSs
Dividends paid by us to you are generally subject to Luxembourg
withholding tax at a 20 percent rate. You may, however, qualify for a reduced
rate of withholding under an applicable income tax treaty. If you so qualify,
you may be able to claim a refund of the difference between the amount
initially withheld and the amount determined by applying the applicable treaty
rate. The income tax treaty between Luxembourg and the United States (the
"Treaty") generally provides for Luxembourg withholding tax at a reduced rate
of 15 percent. You should consult your own tax advisers regarding the specific
procedures for claiming a refund of Luxembourg withholding tax.
93
Table of Contents
Sale or other Disposition of Ordinary Shares or ADSs
Holders of ordinary shares or ADSs that (i) are not Luxembourg residents,
(ii) have not formerly been Luxembourg residents, and (iii) have never owned
(alone or together with a spouse or any children under age, directly or
indirectly) more than 10% of our ordinary shares or ADSs, will not be subject
to Luxembourg tax on capital gains on a disposal of such ordinary shares or
ADSs.
United States Federal Income Tax Considerations
The following is a summary of the principal U.S. federal income tax
considerations that are likely to be material to the ownership and disposition
of ordinary shares or ADSs by you if you are a U.S. holder. You are a U.S.
holder if you are a resident of the United States for the purposes of, and
fully eligible for benefits under, the Treaty. You will generally be entitled
to Treaty benefits in respect of ordinary shares or ADSs if you are:
•
the beneficial owner of the ordinary shares or ADSs (and any dividends
paid with respect thereto);
•
(i) an individual citizen or resident of the United States that has a
substantial presence, permanent home, or habitual abode in the United
States, or (ii) a U.S. corporation;
•
not also a resident of Luxembourg for Luxembourg tax purposes; and
•
not subject to an anti-treaty shopping article that applies under limited circumstances.
The treaty benefits discussed herein generally are not available to
holders that hold ordinary shares or ADSs in connection with the conduct of a
business through a permanent establishment, or the performance of personal
services through a fixed base, in Luxembourg. This summary does not discuss
the treatment of such holders.
Comparatively minor changes in our assets or share price could result in
our becoming a passive foreign investment company. See "Item 3. Key
Information—Passive Foreign Investment Company Considerations."
In general, if you hold ADSs, you will be treated as the holder of the
ordinary shares represented by those ADSs for U.S. federal income tax purposes.
Dividends on Ordinary Shares or ADSs
The gross amount of any dividends distributed by us with respect to
ordinary shares or ADSs (including amounts withheld in respect of Luxembourg
tax) generally will be subject to U.S. federal income taxation as ordinary
income to a U.S. holder. Such dividends generally will be treated as foreign
source income and will generally be classified as passive income for U.S.
foreign tax credit purposes. A U.S. holder will include dividends paid in a
currency other than the U.S. dollar in income in a dollar amount calculated by
reference to the exchange rate in effect on the date a U.S. holder received the
dividends (or, in the case of ADSs, the date the depositary receives them). If
dividends paid in a foreign currency are converted into dollars on the date of
receipt, the U.S. holder should not be required to recognize foreign currency
gain or loss in respect of the dividend income. A U.S. holder may be required
to recognize foreign currency gain or loss on the receipt of a refund of
Luxembourg withholding tax pursuant to the Treaty to the extent the dollar
value of the refund differs from the dollar equivalent of that amount on the
date of receipt of the underlying dividend.
94
Table of Contents
Subject to generally applicable limitations under U.S. law, Luxembourg
withholding tax at the rate provided under the Treaty will constitute a foreign
income tax that is eligible for credit against a U.S. holder's U.S. federal
income tax liability or, at the election of the recipient, may be deducted in
computing taxable income. Foreign tax credits will not be allowed for
withholding taxes imposed in respect of certain short-term or hedged positions
and arrangements in which the U.S. holder's expected economic profit is
insubstantial.
Sale or other Disposition of Ordinary Shares or ADSs
Subject to the discussion below under "Item 3. Key Information—Passive
Foreign Investment Company Considerations", for U.S. federal income tax
purposes, gain or loss realized by a U.S. holder on the sale or other
disposition of ordinary shares or ADSs will be capital gain or loss, and will
be long-term capital gain or loss if the ordinary shares or ADSs were held for
more than one year. The net amount of long-term capital gain recognized by an
individual U.S. holder generally is subject to taxation at a maximum rate of
20%. A U.S. holder's ability to use capital losses to offset ordinary income
is limited.
Passive Foreign Investment Company Considerations
Unfavorable U.S. tax rules apply to companies that are considered passive
foreign investment companies ("PFICs"). We will be classified as a PFIC in a
particular taxable year if either:
•
75% or more of our gross income is treated as passive income for purposes of the PFIC rules; or
•
the average percentage of the value of our assets that produce or are held for the production of passive income is at least
50%.
The decline in our market capitalization has increased the relative
proportion of our assets that would be considered to produce passive income for
purposes of the PFIC rules. Comparatively minor changes in our assets or share
price could result in our becoming a PFIC for reasons outside our control.
Although we continue to believe that we should not be classified as a PFIC in
the current year, investors should consult their own tax advisers regarding the
advisability of making a mark-to-market election, as described below.
If we are a PFIC in respect of any year, then a U.S. holder who holds
shares during that year and does not make a mark-to-market election will be
subject to a special tax at ordinary income tax rates on certain dividends
received from us and on gains realized on a sale of ordinary shares or ADSs
("excess distributions") in all subsequent years, without regard to whether we
were a PFIC in the year an excess distribution was received. The amount of
this tax will be increased by an interest charge to compensate for tax
deferral, calculated as if the excess distribution had been earned ratably over
the period the U.S. holder held its ordinary shares or ADSs. Classification as
a PFIC may also have other adverse tax consequences, including the denial of a
step-up in the basis of ordinary shares and ADSs at death.
A U.S. holder may avoid the unfavorable rules described above by electing
to mark such U.S. holder's ordinary shares or ADSs to market. For any year in
which we are a PFIC, a U.S. holder who makes a mark-to-market election would
include as ordinary income the excess of the fair market value of the ordinary
shares or ADSs at year-end over the holder's basis in those ordinary shares or
ADSs. In addition, any gain recognized upon a sale of ordinary shares or ADSs
would be taxed as ordinary income in the year of sale.
We do not intend to furnish holders with the information necessary to make
a qualified electing fund election.
95
Table of Contents
A U.S. holder should consult its own tax advisers regarding the U.S.
federal income tax considerations discussed above and should carefully consider
whether to make a mark-to-market election.
U.S. Information Reporting and Backup Withholding Rules
Payments in respect of the ordinary shares or ADSs that are made in the
United States or by a U.S. related financial intermediary will be subject to
information reporting and may be subject to a backup withholding unless you:
•
are a corporation or other exempt recipient; or
•
provide a taxpayer identification number and certify that no loss of
exemption from backup withholding has occurred.
If you are not a U.S. person, you generally are not subject to these rules, but
may be required to provide certification of non-U.S. status in order to
establish that you are exempt.
DOCUMENTS ON DISPLAY
We are subject to the reporting requirements of the Securities Exchange
Act of 1934, as amended. In accordance with these requirements, we file
reports and other information with the U.S. Securities and Exchange Commission.
These materials, including this Annual Report and the exhibits thereto, may be
inspected and copied at the SEC's public reference room at 450 Fifth Street,
N.W., Washington D.C. 20549. Please call the SEC at 1-800-SEC-0330 for more
information on the public reference room and their copy charges. Our SEC
filings are also available on the Internet at the SEC's website at
http://www.sec.gov.
96
Table of Contents
Item 11. Quantitative and Qualitative Disclosures About Market Risk
We develop products in our worldwide manufacturing centers and sell these
products and provide related services around the world. Generally, our sales
are made in the local currency of the place of delivery or where the service is
rendered, and part of our manufacturing costs are incurred in the local
currency of the place of each of our manufacturing sites. As a result, our
results of operations are affected by factors such as changes in foreign
currency exchange rates or weak economic conditions in foreign markets. To
minimize the impact of these factors on the profitability of our business and
our overall financial performance, we seek to provide cost efficient funding to
our business and our subsidiaries and to identify, evaluate and hedge financial
risks in cooperation with our subsidiaries around the world.
Our policy is to hedge against changes in foreign currency rates. The
management of our hedging activity is carried out centrally by our corporate
treasury in accordance with the objectives and procedures established by
management and approved by our Audit Committee. Our operating policies cover
specific areas such as foreign exchange risk (including the use of derivative
financial instruments), interest rate risk and credit risk. Affiliated
companies are not permitted to enter into derivative contracts other than with
our corporate treasury. Derivative instruments are used for hedging purposes
only.
Foreign exchange risk
We measure our foreign exchange exposure based on anticipated and
identified transactions, both on purchases and sales. Each of our subsidiaries
regularly measures its exposure and reports it to our corporate treasury. Our
corporate treasury department seeks to hedge our foreign currency exposure on
most of our firm and anticipated purchases and sales commitments denominated in
currencies other than the subsidiaries' functional currencies for periods
commensurate with their known or forecasted transactions. Our foreign currency
hedging contracts generally mature within twelve months. Our corporate
treasury uses currency derivative instruments such as foreign exchange forward
contracts and foreign exchange option contracts. These derivative instruments
are generally traded over-the-counter with major financial institutions. From
its trade date, each hedging operation is allocated to an underlying exposure.
The financing of most of our subsidiaries is managed by our corporate
treasury through inter-company current accounts, using foreign exchange spot
and forward transactions to convert our cash denominated in euros into the
subsidiary's functional currency. We place any excess liquidity in money
market investments with not more than three-month maturity dates. Our money
market investments are placed with major financial institutions in order to
reduce our credit risk exposure.
Net exposure to foreign exchange risk
As of December 31, 2002,
in thousands of currencies
USD and USD area
(1)
JPY
GBP
Net balance sheet position before hedging
USD 283,191
JPY 1,245,418
GBP 11,251
Hedging position
(2)
USD 352,972
125% of the net
balance sheet
position before
hedging
JPY 1,553,249
125% of the net
balance sheet
position before
hedging
GBP 18,904
168% of the net
balance sheet
position before
hedging
Net balance sheet position after hedging
(3)
USD 69,781
JPY 307,831
GBP 7,653
Forecasted 2003 commercial
transactions on December 31, 2002
(4)
USD 98,724
JPY 423,534
GBP 11,368
(1)
Including currencies closely correlated to the U.S. dollar: mainly Canadian
dollar, Arab Emirates dirham and Singapore dollar.
(2)
The Company manages its foreign exchange risk using: foreign exchange swaps and
forward contracts, as well as foreign exchange currency options.
(3)
The hedging position beyond the net balance sheet position is allocated to the
hedge of the forecasted 2003 commercial transactions.
(4)
Forecasted 2003 commercial
transactions hedged under the Company's foreign exchange risk
management policy.
97
Table of Contents
The following table sets forth our estimated positions in millions of
euros for all existing currency hedging instruments as of December 31, 2002 by
type of instrument. Forward contracts are valued at the contract forward rate
and option contracts at the contract strike rate.
(
€
in millions)
Derivatives qualifying as Hedge Effective under IAS 39
Forward Purchases:
British Pound
5.6
Singapore Dollar
15.1
US Dollar
12.2
Other
10.4
Total
43.3
Forward Sales:
British Pound
6.1
Singapore Dollar
2.2
US Dollar
52.9
Other
13.5
Total
74.7
Purchases of Call Options:
Singapore Dollar
11.4
Total
11.4
Purchases of Put Options:
British Pound
12.6
US Dollar
109.8
Total
122.4
Derivatives not qualifying as Hedge Effective under IAS 39
Forward Purchases:
British Pound
5.4
US Dollar
9.0
Other
0.3
Total
14.7
Forward Sales:
British Pound
6.9
US Dollar
192.3
Other
11.4
Total
210.6
Sales of Call Options:
British Pound
3.1
US Dollar
26.9
Total
30.0
98
Table of Contents
In addition, because we have subsidiaries that present their financial
statements in a currency different from euro, the euro-denominated value of our
consolidated equity is exposed to fluctuations in exchange rates. All exchange
differences resulting from translating those financial statements into our
reporting currency, the euro, are classified as translation difference in our
consolidated equity. We do not hedge our equity exposure arising from net
investments in foreign entities.
Interest Rate Risk
The Company has a low level of indebtedness and is not significantly exposed to
interest rate risk fluctuations. Consequently, it has not entered into any
derivative contracts to hedge interest rate risk. See Note 2 — Summary of
significant accounting policies and Note 25 — Financial instruments and market
related exposures.
The following maturity schedule describes the exposure of the Company to
interest rate risk. Financial assets are short-term investments in money market
instruments with a duration of one week or less. The company financial
liabilities are primarily short-term debt, the longer term portion being mainly
leasing at floating rates. The Company is therefore in a net, short duration,
financial asset position. Fair market value of the Company's financial positions do not significantly
deviate from their book value. The Company, however, faces re-investment risk: when interest rates are
increasing (or decreasing), interest income is increasing (or respectively
decreasing).
Maturity schedule
From
December
31, 2002
From
to
1 year to
Beyond
(in thousand of euros)
December 31, 2003
5 years
5 years
Financial liabilities
(6,098
)
(21,554
)
(20,986
)
Financial assets
417,226
—
—
Net balance sheet
position before
hedging
411,128
(21,554
)
(20,986
)
Hedging
—
—
—
Net balance sheet
position after
hedging
411,128
(21,554
)
(20,986
)
Most of the Company's financial investments are floating rate investments.
Equity Risk in Minority Investments
We have several minority equity investments in publicly traded companies.
The book value of our minority equity investments in publicly traded companies
was totally provided for, as of December 31, 2002. Because these investments
are relatively small, we currently do not have any outstanding derivative
financial instruments to hedge fluctuations in these marketable equity
investments.
99
Table of Contents
Item 12. Description of Securities Other than Equity Securities
Not applicable.
PART II
Item 13. Defaults, Dividend Arrearages and Delinquencies
None.
Item 14. Material Modifications to the Rights of Security Holders and Use of Proceeds
Prior to April 29, 2003, the board members were elected by cumulative
voting. On April 29, 2003, our shareholders voted to eliminate cumulative voting
and accordingly, to amend our articles of incorporation.
Item 15. Controls and Procedures
Within 90 days prior to the filing of this Annual Report, our management,
including our Chief Executive Officer and Chief Financial Officer, have
conducted an evaluation as to the effectiveness of our disclosure controls and
procedures (as defined in Rule 13a-14(c) under the Securities Exchange Act of
1934, as amended). Based on that evaluation the Chief Executive Officer and
the Chief Financial Officer have concluded that our disclosure controls and
procedures are effective in ensuring that all material information required to
be filed in this Annual Report has been made known to them in a timely fashion.
They also concluded that there have been no significant changes in internal
controls or in other factors that could significantly affect internal controls,
and no corrective actions were identified as necessary, and there were no
significant deficiencies or material weaknesses.
As part of the evaluation, our management, including our Chief Executive
Officer and Chief Financial Officer, reviewed materials with the auditors and
the Audit Committee and found no significant deficiencies in the design or
operation of internal controls which could adversely affect our ability to
record, process, summarize and report financial data. The review found no
material weaknesses in internal controls or fraud, whether or not material,
involving management or other employees who have a significant role in our
internal controls.
Item 16. [Reserved].
PART III
Item 17. Financial Statements
Not applicable.
Item 18. Financial Statements
See pages F-1 through F-67, incorporated herein by reference.
100
Table of Contents
Item 19. Exhibits
(a) List of Financial Statements
Report of Independent Accountants
F-1
Consolidated Statements of Income
for the Years Ended December 31, 2002, 2001, and 2000
F-2
Consolidated Balance Sheets as of December 31, 2002, 2001 and 2000
F-3
Consolidated Statements of Cash Flows
for the Years Ended December 31, 2002, 2001 and 2000
F-4
Consolidated Statements of Changes in Shareholders' Equity
for the Years Ended December 31, 2002, 2001 and 2000
F-5
Notes to the consolidated financial statements
F-8
(b) List of Exhibits
1.
Updated and consolidated Articles of Incorporation of Gemplus
International SA as amended to date (English translation included).
2.
Deposit Agreement, Supplemental agreement to Deposit Agreement and
Termination Letter to Citibank, N.A., incorporated by reference to the
Form F-6 dated February 28, 2003.
4.1
Employment Agreement among Gemplus International SA, Gemplus Corp.,
Gemplus Management & Trading SA and Alex Mandl dated
August 29, 2002.
4.2
Second Amended and Restated Employment Agreement dated as of July 11,
2001 among Gemplus Americas, Inc., Gemplus International S.A. and Antonio
Perez, incorporated by reference to the Annual Report of the company
contained in the company's Report on Form 20-F dated
July 1, 2002.
4.3
Loan Repayment Agreement between Antonio Perez and Zenzus Holdings
Limited, dated October 20, 2001, and Letter Agreement by Antonio Perez,
dated December 19, 2001, incorporated by reference to the Annual Report of
the company contained in the company's Report on Form 20-F dated July 1,
2002.
4.4
Agreement between Gemplus International S.A., Zenzus Holdings Limited and
Marc Lassus, dated December 19, 2001, incorporated by reference to the
Annual Report of the company contained in the company's Report on Form
20-F dated July 1, 2002.
4.5
Agreement among Gemplus SA, Gemplus Trading SA, Gemplus
Electronics SA, Gemplus Telematics SARL, Gemplus Support GIE, Gemplus Development GIE, Gemplus
Europe Services and Unions U.S.G, C.F.D.T., C.F.T.C, and C.F.E.-C.G.C. dated May 15, 2003.
8.
List of significant subsidiaries.
10.1
Certification by Chief Executive Officer pursuant to Section 906 of the
Sarbannes-Oxley Act of 2002.
101
Table of Contents
10.2
Certification by Chief Financial Officer pursuant to Section 906 of the
Sarbannes-Oxley Act of 2002.
12.1
Consent from PricewaterhouseCoopers
102
Table of Contents
SIGNATURE
Pursuant to the requirements of Section 12 of the Securities Exchange Act
of 1934, the registrant certifies that it meets all of the requirements for
filing on Form 20-F and has duly caused this Annual Report to be signed on its
behalf by the undersigned, thereunto duly authorized.
Date: July 15, 2003
GEMPLUS INTERNATIONAL SA
By:
/s/ Yves Guillaumot
Yves Guillaumot
Chief Financial
Officer
Table of Contents
CERTIFICATION OF CHIEF EXECUTIVE OFFICER
I, Alex Mandl, Chief Executive Officer of Gemplus International SA,
certify that:
1.     I have reviewed this annual report on Form 20-F of Gemplus
International SA;
2.     Based on my knowledge, this annual report does not contain any untrue
statement of a material fact or omit to state a material fact necessary
to make the statements made, in light of the circumstances under which
such statements were made, not misleading with respect to the period
covered by this annual report;
3.     Based on my knowledge, the financial statements, and other financial
information included in this annual report, fairly present in all
material respects the financial condition, results of operations and cash
flows of the registrant as of, and for, the periods presented in this
annual report;
4.     The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and
have:
a)
designed such disclosure controls and procedures to ensure that
material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within
those entities, particularly during the period in which this
annual report is being prepared;
b)
evaluated the effectiveness of the registrant's disclosure
controls and procedures as of a date within 90 days prior to the
filing date of this annual report (the "Evaluation Date"); and
c)
presented in this annual report our conclusions about the
effectiveness of the disclosure controls and procedures based on
our evaluation as of the Evaluation Date;
5.     The registrant's other certifying officers and I have disclosed,
based on our most recent evaluation, to the registrant's auditors and the
audit committee of registrant's board of directors (or persons performing
the equivalent function):
a)
all significant deficiencies in the design or operation of
internal controls which could adversely affect the registrant's
ability to record, process, summarize and report financial data
and have identified for the registrant's auditors any material
weaknesses in internal controls; and
b)
any fraud, whether or not material, that involves management or
other employees who have a significant role in the registrant's
internal controls; and
6.
The registrant's other certifying officers and I have
indicated in this annual report whether or not there were
significant changes in internal controls or in other factors that
could significantly affect internal controls subsequent to the date
of our most recent evaluation, including any corrective actions with
regard to significant deficiencies and material weaknesses.
Date: July 15, 2003
/s/ Alex Mandl
Alex Mandl
Chief Executive Officer
104
Table of Contents
CERTIFICATION OF CHIEF FINANCIAL OFFICER
I, Yves Guillaumot, Chief Financial Officer of Gemplus International SA,
certify that:
1.     I have reviewed this annual report on Form 20-F of Gemplus
International SA;
2.     Based on my knowledge, this annual report does not contain any untrue
statement of a material fact or omit to state a material fact necessary
to make the statements made, in light of the circumstances under which
such statements were made, not misleading with respect to the period
covered by this annual report;
3.     Based on my knowledge, the financial statements, and other financial
information included in this annual report, fairly present in all
material respects the financial condition, results of operations and cash
flows of the registrant as of, and for, the periods presented in this
annual report;
4.     The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and
have:
a)
designed such disclosure controls and procedures to ensure that
material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within
those entities, particularly during the period in which this
annual report is being prepared;
b)
evaluated the effectiveness of the registrant's disclosure
controls and procedures as of a date within 90 days prior to the
filing date of this annual report (the "Evaluation Date"); and
c)
presented in this annual report our conclusions about the
effectiveness of the disclosure controls and procedures based on
our evaluation as of the Evaluation Date;
5.     The registrant's other certifying officers and I have disclosed,
based on our most recent evaluation, to the registrant's auditors and the
audit committee of registrant's board of directors (or persons performing
the equivalent function):
a)
all significant deficiencies in the design or operation of
internal controls which could adversely affect the registrant's
ability to record, process, summarize and report financial data
and have identified for the registrant's auditors any material
weaknesses in internal controls; and
b)
any fraud, whether or not material, that involves management or
other employees who have a significant role in the registrant's
internal controls; and
6.     The registrant's other certifying officers and I have indicated in
this annual report whether or not there were significant changes in
internal controls or in other factors that could significantly affect
internal controls subsequent to the date of our most recent evaluation,
including any corrective actions with regard to significant deficiencies
and material weaknesses.
Date: July 15, 2003
/s/ Yves Guillaumot
Yves Guillaumot
Chief Financial Officer
105
Table of Contents
GEMPLUS INTERNATIONAL SA
Report of Independent Accountants
To the Board of Directors and Shareholders,
In our opinion, the accompanying consolidated balance
sheets and the related consolidated statements of
income, of cash flows and of changes in shareholders'
equity present fairly, in all material respects, the
financial position of Gemplus International SA and its
subsidiaries at December 31, 2002, 2001 and 2000, and
the results of their operations and their cash flows for
each of the three years in the period ended December 31,
2002, in accordance with International Accounting
Standards. These financial statements are the
responsibility of the Company's management; our
responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits of these statements in
accordance with Auditing Standards generally accepted in the United
States of America.
Those standards require that we plan and perform the
audit to obtain reasonable assurance about whether
the financial statements are free of material
misstatement. An audit includes examining, on a test
basis, evidence supporting the amounts and disclosures
in the financial statements, assessing the accounting
principles used and significant estimates made by
management, and evaluating the overall financial
statement presentation. We believe that our audits
provide a reasonable basis for the opinion expressed
above.
Accounting principles generally accepted in accordance with International Accounting Standards vary in certain
respects from accounting principles generally accepted
in the United States of America. The application of the
latter would have affected the determination of
consolidated net income for each of the three years in
the period ended December 31, 2002, and the
determination of shareholders' equity at December 31,
2002, 2001 and 2000 to the extent summarized in Note 32
to the consolidated financial statements.
PricewaterhouseCoopers
Paris, France
March 11, 2003
F-1
Table of Contents
GEMPLUS INTERNATIONAL S A
Consolidated Financial Statements
for the years ended December 31, 2002, 2001 and 2000
Consolidated Statements of Income
(in thousands of euros, except shares and per share amounts)
Years ended December 31
Notes
2002
2001
2000
Net sales
787,434
1,022,986
1,204,600
Cost of sales
(587,722
)
(715,516
)
(750,714
)
Gross profit
199,712
307,470
453,886
Research and development expenses
(10
)
(92,240
)
(112,885
)
(90,778
)
Reversal of research credit allowance
(10
)
—
—
12,486
Selling and marketing expenses
(112,227
)
(165,276
)
(158,545
)
General and administrative expenses
(89,896
)
(110,657
)
(89,666
)
Restructuring expenses
(17
)
(90,003
)
(28,466
)
—
Litigation expenses
(26
)
—
(18,120
)
—
Management severance expenses
(31
)
—
(25,691
)
—
Goodwill amortization and impairments
(8
)
(47,117
)
(27,162
)
(11,204
)
Operating income (loss)
(231,771
)
(180,787
)
116,179
Financial income
19,782
28,234
21,427
Financial expense
(29
)
(70,874
)
(7,532
)
(8,869
)
Other income (expense), net
(18
)
(28,904
)
45,681
(28
)
Income (loss) before taxes
(311,767
)
(114,404
)
128,709
Income taxes benefit (provision)
(19
)
(9,124
)
14,184
(29,631
)
NET INCOME (LOSS)
(320,891
)
(100,220
)
99,078
Net income (loss) per share
(21
)
• Basic
(0.53
)
(0.16
)
0.20
• Diluted
(0.53
)
(0.16
)
0.18
Shares used in net income (loss) per
share calculation
(21
)
• Basic
606,222,660
636,992,392
497,523,946
• Diluted
606,222,660
636,992,392
539,256,206
Note:
In filings with Commission des Opérations de Bourses and its
annual report to shareholders, the Company has included goodwill
amortization below operating income. See Note 33.
The accompanying notes are an integral part of the consolidated financial statements.
F-2
Table of Contents
GEMPLUS INTERNATIONAL S A
Consolidated Balance Sheets
(in thousands of euros)
December 31
Notes
2002
2001
2000
ASSETS
Current assets:
Cash and cash equivalents
417,226
490,652
636,284
Trade accounts receivable, net
(4
)
144,913
188,635
311,276
Inventory, net
(5
)
96,513
139,794
174,101
Other current assets
(6
)
93,482
103,733
97,377
Total current assets
752,134
922,814
1,219,038
Non-current assets:
Property, plant and equipment, net
(7
)
216,944
268,784
249,916
Goodwill, net
(8
)
73,187
116,580
155,809
Other non-current assets
(9
)
84,819
150,472
234,043
Deferred development costs, net
(10
)
25,910
28,470
26,349
Deferred tax assets
(18
)
41,674
22,148
7,120
Investments
(11
)
23,088
21,424
16,734
Total non-current assets
465,622
607,878
689,971
TOTAL ASSETS
1,217,756
1,530,692
1,909,009
LIABILITIES
Current liabilities:
Accounts payable
(12
)
80,256
109,661
261,047
Salaries, wages and related items
51,188
55,967
70,738
Other current liabilities
(13
)
81,133
86,411
54,867
Accrued taxes
27,209
26,527
31,005
Current portion of long-term debt
(14
)
—
—
1,867
Current obligations under capital leases
(15
)
6,098
3,734
3,414
Total current liabilities
245,884
282,300
422,938
Non-current liabilities:
Long-term obligations under capital leases
(15
)
42,540
32,581
31,885
Long-term debt, less current portion
(14
)
—
14
5,865
Deferred tax liabilities
(18
)
—
—
2,296
Other non-current liabilities
(16
)
53,714
30,859
43,717
Total non-current liabilities
96,254
63,454
83,763
Minority interest
15,167
17,176
17,313
Shareholders' equity:
Ordinary shares no legal par value,
2,000,000,000 shares authorized,
637,859,088, 641,396,497, and 636,256,258 shares
issued
at December 31, 2002, 2001 and 2000, respectively
(20
)
127,644
127,056
124,263
Additional paid-in capital
1,028,920
1,027,850
1,026,063
Retained earnings
(210,358
)
125,016
235,972
Other comprehensive income
(22
)
8,571
(3,968
)
376
Less, cost of treasury shares
(94,326
)
(108,192
)
(1,679
)
Total shareholders' equity
860,451
1,167,762
1,384,995
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY
1,217,756
1,530,692
1,909,009
The accompanying notes are an integral part of the consolidated financial statements.
F-3
Table of Contents
GEMPLUS INTERNATIONAL S A
Consolidated Statements of Cash Flows
(in thousands of euros)
Years ended December 31
2002
2001
2000
Cash flow from operating activities:
Net income (loss)
(320,891
)
(100,220
)
99,078
Adjustments to reconcile net income (loss) to net cash from
operating activities:
• Depreciation and amortization
133,359
120,409
79,080
• Changes in other non-current liabilities
9,420
(3,387
)
(10,244
)
• Provision for deferred income taxes
(1,234
)
(15,976
)
1,045
• (Gain) / loss on sale and disposal of assets
6,051
(65,996
)
(9,311
)
• Other, net
2,263
1,594
4,886
Changes in operating assets and liabilities:
• Trade accounts receivable and related current liabilities
40,598
100,063
(88,840
)
• Trade accounts payable and related current assets
(27,405
)
(126,920
)
92,596
• Inventories
35,675
11,509
(76,140
)
• Value-added and income taxes
(12,656
)
(9,232
)
(20,374
)
• Other, net
(2,716
)
14,850
(2,557
)
• Restructuring reserve payable
35,958
6,177
—
• Litigation expenses payable
(18,120
)
18,120
—
• Management severance expenses
(10,629
)
25,691
—
• Provision for a loan to a former Chairman of the Board
67,582
—
—
Net cash (used for) from operating activities
(62,745
)
(23,318
)
69,219
Cash flows from investing activities:
Sale / Purchase of activities net of cash disposed / acquired
—
108,731
(99,040
)
Other investments
(14,720
)
(42,035
)
(51,021
)
Purchase of property, plant and equipment
(31,953
)
(102,555
)
(102,453
)
Purchase of other assets
(2,860
)
(19,623
)
(17,630
)
Change in non-trade accounts payable and other current assets
2,403
(9,843
)
3,810
Net cash used for investing activities
(47,130
)
(65,325
)
(266,334
)
Cash flows from financing activities:
Proceeds from conversion of debentures and exercise of warrants
—
—
191,753
Proceeds from shareholders contribution
—
—
613,267
Proceeds from exercise of share options
1,657
7,762
18,237
Purchase of Gemplus SA shares
—
(14,544
)
—
Payments on long-term borrowings
(134
)
(2,301
)
(3,589
)
Proceeds from sales-leaseback operations
15,962
5,711
—
Principal payments on obligations under capital leases
(3,883
)
(3,373
)
(3,195
)
Increase (decrease) in bank overdrafts
(3,205
)
4,462
832
Dividends paid by subsidiaries to minority shareholders
(4,297
)
(4,256
)
(3,826
)
Change in treasury shares
(617
)
(15,117
)
85
Interests receivable on loans to senior management
(1,706
)
(4,877
)
(3,139
)
Change in non-trade accounts payable on financing activities
—
(8,114
)
7,495
Net cash (used for) from financing activities
3,777
(34,647
)
817,920
Effect of exchange rate changes on cash
32,672
(22,342
)
(11,627
)
Net increase (decrease) in cash and cash equivalents
(106,098
)
(123,290
)
620,805
Cash and cash equivalents, beginning of year
490,652
636,284
27,106
Cash and cash equivalents, end of period
417,226
490,652
636,284
The accompanying notes are an integral part of the consolidated financial statements.
F-4
Table of Contents
GEMPLUS INTERNATIONAL S A
Consolidated Statements of Changes in Shareholders' Equity
(in thousands of euros, except number of shares)
Other
Additional
Net
compre-
Number
Share
paid-in
Retained
income
hensive
Treasury
Note
of shares
value
capital
earnings
(loss)
income
shares
Total
Balance at December 31, 1999
334,135,600
10,188
145,825
169,223
(32,133
)
2,814
(1,764
)
294,153
Allocation of prior year earnings
—
—
—
(32,133
)
32,133
—
—
—
Net income
—
—
—
—
99,078
—
—
99,078
Contribution of Gemplus SA shares
to Gemplus International SA
(3
)
—
56,323
(67,728
)
—
—
—
—
(11,405
)
Gemplus SA shares to be contributed
(3
)
—
—
11,405
—
—
—
—
11,405
Shares issued by Gemplus SA
pursuant to share
options exercised to be contributed
(20
)
13,360,000
—
18,237
—
—
—
—
18,237
Shares issued pursuant to capital
contribution, net of issuance costs
€
14,747
(20
)
155,873,300
31,174
500,616
—
—
—
—
531,790
Options and free shares issued,
net of issuance costs
€
1,102
(20
)
61,487,358
12,298
130,317
—
—
—
—
142,615
Shares issued following exercice
of warrants,
net of issuance cost
€
6,002
(20
)
56,400,000
11,280
180,473
—
—
—
—
191,753
Shares issued following Gemplus
IPO,
net of issuance costs
€
7,410
(20
)
15,000,000
3,000
79,590
—
—
—
—
82,590
Shares to be issued following
acquisitions
of Celocom Ltd and SLP InfoWare SA
(3
)
—
—
27,328
—
—
—
—
27,328
Purchase of 149,550 shares of
treasury shares
(3
)
—
—
—
—
—
—
(425
)
(425
)
Sale of 378,550 shares of treasury
shares
(3
)
—
—
—
(196
)
—
—
510
314
Change in other comprehensive
income
(22
)
—
—
—
—
—
(2,438
)
—
(2,438
)
Balance at December 31, 2000
636,256,258
124,263
1,026,063
136,894
99,078
376
(1,679
)
1,384,995
The accompanying notes are an integral part of the consolidated financial statements.
F-5
Table of Contents
GEMPLUS INTERNATIONAL SA
Consolidated Statements of Changes in Shareholders' Equity
(continued)
Other
Additional
Net
compre-
Number
Share
paid-in
Retained
income
hensive
Treasury
Note
of shares
value
capital
earnings
(loss)
income
shares
Total
Balance at December 31, 2000
636,256,258
124,263
1,026,063
136,894
99,078
376
(1,679
)
1,384,995
Allocation of prior year earnings
—
—
—
99,078
(99,078
)
—
—
—
Net loss
—
—
—
—
(100,220
)
—
—
(100,220
)
Effect of adopting IAS 39
(22
)
—
—
—
(5,003
)
—
9,093
—
4,090
Shares issued following acquisitions
of Celocom Ltd and SLP InfoWare SA
(3
)
4,554,639
911
(911
)
—
—
—
—
—
Contribution of Gemplus SA shares to
Gemplus International SA
(3
)
—
1,460
(1,460
)
—
—
—
—
—
Shares issued by Gemplus SA pursuant
to share options exercised to be contributed
(20
)
2,498,100
—
4,167
—
—
—
—
4,167
Purchase of Gemplus SA shares
by Gemplus International
(20
)
(4,029,350
)
—
(9,450
)
(5,094
)
—
—
—
(14,544
)
Shares issued by Gemplus International SA
pursuant to share options exercised
(20
)
2,116,850
422
3,311
—
—
—
—
3,733
Treasury shares held following transfer
of shares by senior management
(3
)
—
—
6,130
—
—
—
(92,756
)
(86,626
)
Purchase of 4,900,534 shares
of treasury shares
(3
)
—
—
—
—
—
—
(15,522
)
(15,522
)
Sale of 636,527 shares of treasury shares
(3
)
—
—
—
(639
)
—
—
1,765
1,126
Change in other comprehensive income
(22
)
—
—
—
—
—
(13,437
)
—
(13,437
)
Balance at December 31, 2001
641,396,497
127,056
1,027,850
225,236
(100,220
)
(3,968
)
(108,192
)
1,167,762
Allocation of prior year earnings
—
—
—
(100,220
)
100,220
—
—
—
Net loss
—
—
—
—
(320,891
)
—
—
(320,891
)
Shares issued by Gemplus SA pursuant
to share options exercised to be contributed
(20
)
699,100
—
992
—
—
—
—
992
Contribution of Gemplus SA shares
to Gemplus International SA
(3
)
—
508
(508
)
—
—
—
—
—
Shares issued by Gemplus International SA
pursuant to share options exercised
(20
)
398,350
80
586
—
—
—
—
666
Cancellation of treasury shares
(20
)
(4,634,859
)
—
—
(14,483
)
—
—
14,483
—
Purchase of 656,024 shares of treasury shares
(3
)
—
—
—
—
—
—
(617
)
(617
)
Change in other comprehensive income
(22
)
—
—
—
—
—
12,539
—
12,539
Balance at December 31, 2002
637,859,088
127,644
1,028,920
110,533
(320,891
)
8,571
(94,326
)
860,451
The accompanying notes are an integral part of the consolidated financial statements.
F-6
Table of Contents
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Notes to the Consolidated
Financial Statements
1. The Company
F-8
2. Summary of significant accounting policies
F-8
3. Public offering, common control transactions,
treasury shares, acquired and disposed operations
F-12
4. Trade accounts receivable
F-14
5. Inventory
F-14
6. Other current assets
F-14
7. Property, plant and equipment
F-15
8. Goodwill
F-15
9. Other non-current assets
F-16
10. Research and development costs
F-16
11. Investments
F-17
12. Accounts payable
F-17
13. Other current liabilities
F-17
14. Long-term debt
F-17
15. Capital leases
F-18
16. Other non-current liabilities
F-18
17. Restructuring
F-19
18. Other income (expense) net
F-21
19. Income taxes
F-21
20. Ordinary shares
F-22
21. Net income (loss) per share calculation
F-24
22. Comprehensive income
F-24
23. Pension plans
F-25
24. Share option plans
F-25
25. Financial instruments and market related exposures
F-27
26. Commitments and contingencies
F-30
27. Supplemental disclosure of cash flow information
F-31
28. Wages, benefits and number of employees
(unaudited)
F-31
29. Related party transactions
F-31
30. Segment information
F-32
31. Management severance expenses
F-33
32. Differences between international accounting
standards and US generally accepted accounting
principles
F-34
33. Other required US GAAP disclosures
F-37
F-7
Table of Contents
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
1.     THE COMPANY
Gemplus International SA, including its
consolidated subsidiaries (the "Company''),
is a leading provider of enabling
technology products and services for secure
wireless communications and transactions.
The Company designs, develops, manufactures
and markets microprocessor solutions and
non-chip-based products for customers in
the telecommunications and financial
services and security industries. The
Company is incorporated in the Grand Duchy
of Luxembourg.
2.     SUMMARY OF SIGNIFICANT
ACCOUNTING POLICIES
Basis of presentation
The annual consolidated financial statements
of the Company have been prepared in
accordance with International Accounting
Standards (IAS). The IAS financial
statements are in accordance with Luxembourg
Regulation, with the exception of applying
IAS 39. A reconciliation of net income and
shareholders' equity between IAS and the
accounting principles generally accepted in
the United States (US GAAP) is included in
Note 32.
Principles of consolidation
The consolidated financial statements
include the accounts of Gemplus
International SA and its majority owned
subsidiaries. Investments in associated
undertakings are accounted for by the equity
method. These are undertakings in which the
Company has between 20% and 50% of the
voting rights and over which the Company
exercises significant influence, but not
control. All intercompany balances and
transactions are eliminated.
Non-marketable equity investments in which
the Company has less than 20% of the
investee's outstanding voting stock are
accounted for
under the cost method, because the Company
does not have the ability to significantly
influence the operating and financial
policies of the investee. Gains or losses
recognized on sale of equity securities are
recorded in the income statement. Any loss
resulting from impairment in the value of
investments which represents an other than
temporary decline is recorded in the period
in which the loss occurs.
Foreign currency
Most of the Company's international
subsidiaries use their local currency as
their functional currency. For those
subsidiaries using their non-euro local
currency as their functional currency, assets
and liabilities are translated into euro at
exchange rates in effect at the balance sheet
date, and income and expense accounts at
average exchange rates during the year.
Translation adjustments arising upon the
consolidation of such subsidiary financial
statements are not included in determining
net income for the period, but are included
in shareholders' equity as other
comprehensive income. For all transactions
involving a currency other than the
functional currency, the Company's
subsidiaries record the resulting
transaction gains and losses directly to the
Statement of Income.
Change in accounting policies
As at January 1, 2001, the Company adopted
IAS 39 "Financial Instruments: Recognition
and Measurement".
IAS 39 establishes principles for
recognizing, measuring and disclosing
information about financial assets and
financial liabilities. IAS 39 defines
several categories of financial assets and
liabilities. It requires the Company to
measure at fair value assets and liabilities
qualified as trading or available-for-sale.
It requires also that changes in fair value
of trading assets and liabilities be
recognized through income, while changes in
fair value of available-for-sale assets
recorded either in equity or through income.
IAS 39 requires the Company to recognize all
derivative instruments on the balance sheet
at fair value. If the derivative is a
hedge, depending on the nature of the hedge,
changes in the fair value of the derivative
will either be offset against the change in
fair value of the hedged assets and
liabilities through earnings or recognized
directly in equity until the hedged item is
recognized in earnings. Any ineffective
portion of a derivative's change in fair
value will be immediately recognized in
earnings and any derivatives that do not
qualify as hedges will be adjusted to fair
value through income.
Adoption of this new standard resulted in a
cumulative after tax increase of
shareholders' equity as of January 1, 2001
of
€
4,090 thousand. The impact on
shareholders' equity at January 1, 2001 of
the adoption of IAS 39 is presented in Note
25 "Financial instruments and market related
exposures". In accordance with IAS 39, the
comparative financial statements for the
year ended December 31, 2000 were not
restated.
Use of estimates
The preparation of financial statements in
conformity with generally accepted
accounting principles requires management to
make certain estimates and assumptions that
affect the reported amounts of assets and
liabilities and disclosure of contingent
assets and liabilities at the date of the
financial statements and the reported
amounts of revenue and expenses during the
reporting period.
Estimates are used for, but not limited to,
the accounting of doubtful accounts,
depreciation and amortization, sales
returns, warranty costs, taxes, and
contingencies. Actual results could differ
from these estimates.
F-8
Table of Contents
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Revenue recognition
Revenues from product sales are recorded upon
transfer of title and risk of loss provided
that no significant obligations of the
Company remain and collection of the
resulting receivable is probable. The
Company records deferred revenue for sales
invoiced which are delayed at the buyer's
request where transfer of title and risk of
loss has not occurred.
The Company also provides systems design and
integration services. Revenues are recognized
when delivery has occurred, contractual
obligations have been met, collection is
probable and the fee is fixed or
determinable.
Inventory
Inventories are carried at the lower of cost
or net realizable value, with cost being
determined principally on the
weighted-average cost basis. Cost elements
included in inventories are raw materials,
labor and manufacturing overhead. Allowances
for obsolescence, scrap and slow-moving
inventory are provided based upon the
Company's periodic review of inventory.
Property, plant and equipment
Property, plant and equipment are carried at
cost. Major renewals and improvements are
capitalized while repairs and maintenance are
expensed as incurred. Depreciation is
computed over the estimated useful lives of
depreciable assets using the straight-line
method. Leasehold improvements are amortized
over the shorter of the life of the
improvement or the remaining lease term.
The estimated useful lives are as follows:
Buildings
20 years
Equipment and machinery
5 years
Furniture and fixtures
5-10 years
Leasehold improvements
8-12 years
When the Company leases assets under the
terms of a long-term contract or other
arrangement that transfers substantially all
the benefits and risks of ownership to the
Company, the fair market value of the leased
property is capitalized and depreciated (as
described above) and the corresponding
obligation is recorded as a liability.
Goodwill
The excess of the purchase price over the
fair market value of net assets acquired is
recorded as goodwill. The Company's
rationale behind its acquisitions generally
relates to (i) acquiring market share or
(ii) acquiring conventional technology or
(iii) acquiring technology in the Company's
core business.
Goodwill amounts are amortized over a maximum
period of twenty years on a straight-line
basis (twenty years, ten years, and five
years, respectively, for acquisitions of type
(i), (ii) and (iii)).
Goodwill is reviewed for impairment based on
expectations of future cash flows, which by
definition are uncertain, at each balance
sheet date, or whenever events or changes in
circumstances indicate that
the carrying value may not be recoverable.
The Company considers significant
underperformance relative to expected
historical or projected future operating
results, significant change in the manner of
its use of the acquired assets or the
strategy for its overall business, and
significant negative industry or economic
trends.
Patents
Patents and patent rights are stated at cost
and are amortized using the straight-line
method over their economic useful life,
which does not exceed the shorter of three
years or the legal life.
Impairment of long-lived assets
The Company assesses at each balance sheet
date whether events or changes in
circumstances that would indicate that the
carrying amount of long-lived assets such as
property, plant and equipment, licenses,
goodwill and research and development have
been impaired. If the total of the expected
discounted cash flows or sales price,
whichever is higher, is less than the
carrying amount of the asset, a loss is
recognized for the difference between the
greater of the value in use or sales price
and the carrying value of the asset.
Research and Development
Costs associated with developing software to
be sold are recognized as an expense as
incurred, except for development costs
incurred from the time technological
feasibility is established until the software
to be sold is ready to provide service to
customers which are capitalized. The
capitalized costs related to software are
included in deferred development costs and
are amortized based on the greater of (a) the
ratio of current gross revenues for that
product to the total of current and estimated
gross revenues for that product, or (b) the
straight-line basis over their estimated
useful life, which normally does not exceed
three years.
Certain direct development costs associated
with internal-use software including
external direct costs of material and
services and payroll costs for employees
devoting time to the software products are
included in other non-current assets and are
amortized over a period not to exceed three
years beginning when the asset is
substantially ready for use. Costs incurred
during the preliminary project stage, as
well as maintenance and training costs, are
expensed as incurred.
F-9
Table of Contents
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Research and development costs other than
software are expensed as incurred, except
for development cost where it is expected
that the product under development will be
produced and will be profitable, and
technical feasibility has been demonstrated.
Costs are capitalized and amortized on a
straight-line basis over the period of
expected future benefit. The period of
amortization normally does not exceed three
years.
Development costs of a project are written
down to the extent that the unamortized
balance is no longer capable of being
recovered from the expected future economic
benefits and when the criteria for
recognition of the development costs as an
asset ceases to be met. The write-down or
write-off is recognized as an expense in
the period in which such determination is
made.
Cash and cash equivalents
The Company considers all highly liquid
investments purchased with an original
or remaining maturity of three months or
less at the date of purchase to be cash
equivalents.
During 2000, the Company increased its
capital through various capital infusions.
The cash received has been invested during
2000, 2001 and 2002 in money market fixed
term deposits and mutual funds, all of which
are liquid investments with no risk on
capital.
Income taxes
The Company accounts for income taxes using
the liability method, which requires the
recognition of deferred tax assets and
liabilities based on differences between
financial reporting and tax basis of assets
and liabilities, and measures these
differences using the enacted tax rates and
laws that will be in effect when the
differences are expected to reverse.
Valuation allowances are established when
necessary to reduce deferred tax assets to
amounts expected to be realized and are
reviewed and adjusted accordingly when there
is a change in circumstances that causes a
change in judgement about the realizability
of the related deferred tax asset.
Research credit
Research credits are provided by the French
government to give incentives for companies
to perform technical and scientific
research. Companies that have qualifying
expenses can receive such grants in the form
of a tax credit irrespective of taxes ever
paid or ever to be paid, therefore these
research credits are presented as a
reduction of research and development
expenses. The Company records the benefit
of this grant only when all qualifying
research has been performed and the Company
has obtained sufficient evidence from the
relevant French government authority that
the credit will be granted.
Earnings per share
Basic earnings per share are computed by
dividing net income by the weighted average
number of shares outstanding. Diluted
earnings per share are computed by dividing
net income by the weighted average number of
shares outstanding plus dilutive potential
ordinary shares outstanding, i.e., additional
share equivalents, using the treasury stock
method assuming the exercise of warrants and
share options. Dilutive potential ordinary
shares are additional ordinary shares to be
issued. The effects of anti-dilutive
potential ordinary shares are ignored in
calculating diluted earnings per share. When
net losses are reported, the dilutive
potential ordinary shares outstanding are
excluded from the net loss per share
calculation.
Treasury shares
From time to time the Company, with the
approval of the Board of Directors, may
repurchase a portion of its outstanding
ordinary shares. Shares repurchased by the
Company could be used to fulfill its
obligations under the stock option plans or
are intended for cancellation. Treasury
shares are recorded at cost and reported as a
reduction of shareholders' equity.
Share options accounting
Equity benefits in such forms as shares, share options, and other
equity instruments, issued to executive officers and employees at
less than the fair value at which those instruments would be issued
to a third party, do not generate any compensation expense and have
thus no impact on the consolidated statement of income in the year they are granted. Upon the
issuance of the shares, or exercise of the
share options, the impact of those benefits is recorded directly in
"share capital" and "paid-in-capital" within
shareholders' equity, and the dilutive effect of the shares is taken into account in the
calculation of the net income (loss) per share.
Derivative financial instruments
Foreign currency risk
The Company operates both its selling and
manufacturing activities on a worldwide
basis. In most cases, the Company's sales
are denominated in the domestic currency of
customers. As manufacturing sites are
located in different countries, parts of
their costs are also denominated in various
currencies. Therefore, the Company is
exposed to foreign exchange risk on its
operating transactions, whether anticipated
or firm.
The policy of the Company is to hedge its
foreign currency exposure on most of its
firm and anticipated purchases and sales
commitments denominated in currencies other
than its subsidiaries functional currencies
for periods commensurate with its known or
forecasted transactions. The contracts
generally mature within twelve months. In
order to achieve this objective, the Company
uses foreign currency derivative
instruments, entering into foreign exchange
forward contracts and purchasing or selling
foreign exchange option contracts. Written
options are only used as part of combination
strategies. The derivative instruments are
traded "over the counter" with major
financial institutions. The Company does
not enter into any derivative contracts for
purposes other than hedging.
The Company uses foreign exchange swaps to
monitor its cash flows, mainly to finance
its affiliates in their functional currency,
through inter-company current accounts. The
foreign exchange swaps are combinations of
spot purchase (respectively sales) and
forward sales (respectively purchases) in
the same currency and traded at the same
time.
F-10
Table of Contents
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
The Company has written risk management
policies and guidelines which set out its
tolerance for risk, its general risk
management philosophy and has established
processes to determine the group exposure to
foreign exchange risk, to monitor and
control hedging transactions in a timely and
accurate manner. Such written policies are
approved by the Audit Committee and reviewed
annually.
All hedging instruments are allocated to underlying transactions.
Most of the derivative financial instruments
used to hedge the Company's foreign exchange
exposure qualify as cash flow hedges as they
reduce variability in cash flows attributable
forecasted transactions. For those hedges
associated with forecast transactions which
meet special hedge accounting criteria, the
portion of their change in fair value that is
determined to be an effective hedge is
recognized directly in equity through the
Statement of Changes in Equity and the
ineffective portion is recognized in the net
profit and loss in the foreign exchange gains
and losses. The gains or losses which are
recognized in equity are transferred to the
net profit and loss in the same period in
which the hedged forecasted transaction
affects the foreign exchange gains and losses
(e.g., when the forecasted transaction
actually occurs), as part of the cost of
sales.
For hedges that do not qualify for special
hedge accounting, any gains or losses
arising from changes in the fair value of
the hedged item and the hedging instrument
are recorded as foreign exchange gains and
losses for the period, except for gains and
losses generated by swaps used to finance
the group affiliates which are recorded as
an adjustment of the interest expense.
Conventional way purchases and sales of
financial assets are accounted for at
trade date.
Hedge accounting is discontinued when the
hedging instrument expires or is sold,
terminated or exercised, or no longer
qualifies for special hedge accounting. At
that point in time, any cumulative gain or
loss on the hedging instrument recognized in
equity is kept in equity until the forecasted
transaction occurs. Where the hedged
transaction is no longer expected to occur,
the net cumulative gain or loss recognized in
equity is transferred to the net profit and
loss for the period. Such transactions had
no significant impact on the 2002 foreign
exchange result.
Interest rate exposure
Following the 2000 capital increases, the
Company has reached a low level of
indebtedness. As a result, the Company is
not significantly exposed to interest rate
risk fluctuations. Consequently,
it has not entered into any derivative
contracts to hedge interest rate risk.
Financial counterparty risk
Derivatives and all significant cash
deposits are undertaken with major
financial institutions having an
investment grade rating. Regarding cash
deposits, a few exceptions exist in
certain countries for operational reasons
when individual amounts are not
significant.
Fair value of derivatives
Derivatives financial instruments' fair
value is calculated at inception and
over the life of the derivative.
Forward exchange contracts' fair value at inception is zero.
Valuation during and at expiration of the
forward contract term is calculated
according to the following parameters
communicated by the Company's banks'
counterparts:
•
spot foreign exchange rate
when valuation is performed,
•
interest rate
differential between the two currencies,
•
time to expiration,
•
notional amount of the
contract.
Fair value is then obtained by
discounting, for the remaining maturity,
the difference between the contract rate
and the market forward rate multiplied by
the nominal amount.
Option contracts' value, at
origination, is the initial premium
paid or received.
Over the life of the option and at
expiration, fair value is determined using
standard option pricing methodology (Black &
Scholes model), based on market parameters
obtained from official information providers
or indicative central banks fixings, and
using the following basic variables:
•
market value of the underlying security,
•
option strike price,
•
volatility,
communicated by the Company's banks'
counterparts,
•
risk-free interest rate,
•
expiration date of the option.
Concentration of credit risk
Financial instruments that could potentially
subject the Company to concentrations of
credit risk are limited due to its broad
geographic and customer distribution. No
single customer accounted for more than 10%
of the Company's sales during the years
ended December 31, 2002, 2001 and 2000. The
Company maintains adequate allowances for
potential credit losses and performs ongoing
credit evaluations. As of December 31,
2002, the Company did not have any
significant concentration of business
transacted with a particular customer or
lender that could, if suddenly eliminated,
severely impact our operations. Cash and
cash equivalents are invested with several
major financial institutions.
Advertising and promotional costs
The Company expenses the costs of
advertising and promotional costs when such
costs are incurred. Advertising and
promotional expense was
€
5,735 thousand,
€
6,995 thousand and
€
9,331 thousand for the years ended December
31, 2002, 2001, and 2000, respectively.
F-11
Table of Contents
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
3.     PUBLIC OFFERING, COMMON CONTROL
TRANSACTIONS, TREASURY SHARES,
ACQUIRED AND DISPOSED OPERATIONS
Public offering
On December 8, 2000 the Company completed a
public offering of 15,000,000 new ordinary
shares. These shares were sold in a single
global offering totaling 81,401,445 shares of
which 15,000,000 new ordinary shares were
offered by the Company and 66,401,445 shares
were offered by certain existing shareholders
of the Company. Total proceeds from the
global offering, before underwriting
discounts, commissions and fees of
€
37,068
thousand, were
€
488,409 thousand which
resulted in an allocation of proceeds of
€
90,000 thousand to the Company and
€
398,409 thousand to selling shareholders.
The Company's net proceeds from the
offering, after underwriting discounts,
commissions and fees of
€
7,410 thousand,
were
€
82,590 thousand.
Common control transactions
In February 2000, 95.1% of the shareholders
of Gemplus SA, a French corporation and
former holding company of the Group,
exchanged their shares of Gemplus SA for
shares in Gemplus International SA, a newly
formed Luxembourg corporation on a one for
one basis. This transaction has been
accounted for using historical cost basis
accounting.
As at December 31, 2002, certain shares held
by employees or former employees had not yet
been contributed. Shares still to be
contributed correspond to the equivalent of
4,288,150 Gemplus International SA shares
representing 0.67% of the shareholdings of
Gemplus International SA, which in total was
represented by 637,859,088 shares as at
December 31, 2002. Since the shares of
Gemplus SA are not available for sale to the
general public but can be converted into
shares of Gemplus International SA upon
request, it has been considered certain that
the shares will be converted. They have thus
been included in both the basic and diluted
earnings per share calculations. As of
December 31, 2002, certain options held by
employees under the Gemplus SA share option
plans had not been exercised. Following
exercise of these options, the corresponding
Gemplus SA shares will be contributed by
their holders to Gemplus International SA.
Treasury shares
During the third quarter of 2001, the
Company started the implementation of its
share repurchase program, as approved by the
Annual General Meeting held on April 18,
2001 and authorized by the Commission des
Opérations de Bourse on May 4, 2001. During
2001, the Company repurchased 4,900,534
shares of its outstanding common stock, at
an average price of
€
3.17 per share. In
addition, as described in Note 31, the
Company's former Chief Executive Officer,
Mr. Perez, returned all of the 30,743,679
Gemplus International SA shares that he had
received in August and September 2000 to an
indirect subsidiary of the Company, in
reimbursement of the loans that such
indirect subsidiary had made to him in 2000
and in 2001. As at December 31, 2001, the
Company held 35,705,936 shares of its
outstanding common stock. At the
Extraordinary General Meeting of
Shareholders held on April 17, 2002,
shareholders approved the cancellation of
4,634,859 shares held directly pursuant to
the Company's stock repurchase program, as
well as the cancellation of the 30,743,679
shares held by its indirect subsidiary at
the time as such shares may be transferred
to the Company. The 4,634,859 shares were
cancelled without reduction of the issued
share capital of the Company but with a
consequential increase of the accounting par
of the shares in issue. During the third
quarter of 2002, the Company purchased
656,024 shares of its outstanding common
stock from two former Celocom Limited
employees pursuant to the provisions of the
2000 Celocom Limited share purchase
agreement. As at December 31, 2002, the
Company held 31,727,101 shares of its
outstanding common stock. The 30,743,679
shares transferred by Mr. Perez to the
Company's indirect subsidiary were
distributed to the Company and cancelled on
March 10, 2003.
Treasury shares variation is as follows:
Number of treasury shares
As at December 31, 2000
698,250
Purchase of shares pursuant to the Company's
share repurchase program
4,900,534
Shares
held by the Company's indirect subsidiary
following transfer of shares by senior
management
30,743,679
Sale of treasury shares
(636,527
)
As at December 31, 2001
35,705,936
Cancellation of treasury shares
(4,634,859
)
Purchase of shares pursuant to the 2000
Celocom Limited share purchase agreement
656,024
As at December 31, 2002
31,727,101
Acquired operations
In November 2000, the Company completed
its acquisition of Celocom Limited
("Celo"), an electronic transaction
security business. The total purchase
consideration of
€
55,725 thousand was
comprised of cash of
€
30,574 thousand
and 4,191,776 ordinary shares amounting
to
€
25,151 thousand. The acquisition was
recorded under the purchase method of
accounting, and accordingly, the assets
acquired and liabilities assumed were
recorded at estimated fair values.
Incremental fair value adjustments included
€
3,387 thousand for developed software.
Such intangible asset is being amortized
using the straight-line method over its
estimated useful lives of three years. The
excess of the purchase price over the fair
market value of net assets acquired
generated goodwill of
€
54,385 thousand.
Such goodwill is being amortized using the
straight-line method over five years.
F-12
Table of Contents
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
In October 2000, the Company completed its
acquisition of SLP InfoWare SA ("SLP"), a
software developer in the wireless services
business. The total purchase price paid for
SLP was
€
51,177 thousand, comprised of cash
of
€
49,000 thousand and 362,863 in ordinary
shares amounting to
€
2,177 thousand. The acquisition was
recorded under the purchase method of
accounting, and accordingly, the assets
acquired and liabilities assumed were
recorded at estimated fair values.
Incremental fair value adjustments included
€
8,400 thousand for developed software and
€
1,700 thousand for patents. Developed
software and patents are being amortized
using the straight-line method over their
estimated useful lives of three years. The
excess of the purchase price over the fair
market value of net assets acquired generated
goodwill of
€
37,153 thousand.
During 2002, goodwill was written-off based
on impairment testing. As a result, a
€
22,124 thousand goodwill amortization expense
was recorded in the 2002 statement of income
(see Note 8). Due to significantly declining
sales of SLP software, the Company decided to
either cease or sell SLP operations. The
net book value of other intangible assets
resulting from the acquisition (developed
software and patents) was also expensed,
resulting in a restructuring charge amounting
to
€
2,750 thousand in the 2002 Consolidated
Statement of Income.
On a pro-forma basis, as if Celo and SLP had
been acquired at the beginning of fiscal year
2000, revenue and expenses with the exception
of goodwill amortization would not differ
materially from the amounts reported in the
Company's accompanying consolidated financial
statements for the year ended December 31,
2000. On a pro-forma basis, amortization of
related goodwill would have reduced net
income by
€
15,586 thousand in 2000. On a
pro-forma basis, basic earnings per share and
diluted earnings per share would have been
reduced by 0.03 and 0.03, respectively, for
the year ended December 31, 2000.
In April 2000, the Company completed its
acquisition of ODS (Oldenbourg Daten
System), a German manufacturer of memory
chip phone and bankcards as well as
microprocessor pay-TV cards. The final
purchase consideration was
€
21,713
thousand. The excess of the purchase price
over the fair market value of net assets
acquired generated goodwill of
€
8,138
thousand. Such goodwill is being amortized
using the straight-line method over five
years.
During 2002, 2001 and 2000, the Company
acquired various other companies, mainly with
activities in the field of research and
development. The impact of these
acquisitions on the consolidated financial
statements was not material.
In 2000,
purchase of activities net of cash acquired
and corresponding goodwill can be analyzed as
follows:
(in thousands of euros)
Celo
SLP
ODS and others
Total
Cash payments
30,574
49,000
19,801
99,375
Cash acquired
(325
)
(10
)
—
(335
)
Purchase of activities net of cash acquired
30,249
48,990
19,801
99,040
Advance payments made during 1999
—
—
3,990
3,990
Consideration paid in shares
25,151
2,177
—
27,328
Acquisition costs net of cash acquired
55,400
51,167
23,791
130,358
Developed software
3,387
8,400
—
11,787
Patents
—
1,700
—
1,700
Property, plant and equipment
466
144
11,344
11,954
Accounts receivable and other current assets
965
5,549
9,470
15,984
Deferred tax assets (liabilities) net
(102
)
1,165
2,795
3,858
Bank overdrafts
(3,173
)
(135
)
—
(3,308
)
Accounts payable and other current liabilities
(528
)
(2,809
)
(9,680
)
(13,017
)
Fair value of net assets acquired
1,015
14,014
13,929
28,958
Goodwill
54,385
37,153
9,862
101,400
Disposed operations
On August 23, 2001, the Company completed
the sale of its subsidiary SkiData AG
("SkiData"), the Company's electronic
access-control solutions business unit, to
Kudelski SA, for
€
117,500 thousand, of
which
€
33,500 thousand was received in cash
and
€
84,000 thousand was received in
shares, which the Company immediately
resold for
€
84,000 thousand to a designee of Kudelski.
As a result of the transaction, the Company's
2001 Consolidated Statement of Income only
includes SkiData's operational results up to
August 23, 2001.
In connection with the agreement that was
reached between the Company and Kudelski SA
to sell SkiData, the Company entered into an
agreement with Meridiana-Werzalit BV
("Meridiana") to purchase the remaining
shares of SkiData held by Meridiana, a
minority shareholder. Pursuant to this
agreement signed on June 23, 2001, the
Company purchased 700,000 shares of SkiData,
representing 20% of SkiData's issued share
capital, for a total purchase consideration
of
€
13,081 thousand. This consideration was
negotiated on the basis of an amendment to
the purchase agreement dated
F-13
Table of Contents
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
March 1997 pursuant to which the Company had
purchased the first 80% of SkiData's shares.
In addition, on June 23, 2001, the Company
entered into an agreement with Meridiana,
pursuant to which Meridiana transferred to
the Company in exchange for a payment of
€
1
all of its rights concerning a loan of
€
3,634 thousand granted to SkiData. This
loan had been granted to SkiData in 1996 by
Constantia, an Austrian corporation,
subsidiary of Meridiana and former principal
shareholder of SkiData, and was repayable
under specific conditions, none of which had
been met as at June 23, 2001. This
transaction was recorded by the Company as a
reduction of the
€
13,081 thousand consideration paid to
Meridiana to acquire the remaining 20% of
SkiData's shares.
The acquisition of the remaining 20% of
SkiData's shares was recorded under the
purchase method of accounting. The excess
of
the net purchase price of
€
9,446 thousand
over the fair market value of the shares
acquired generated a goodwill of
€
7,530
thousand.
On July 31, 2001, the Company completed the
sale of its Tag electronic smart labels
solutions business to Axa Private Equity, for
€
3,007 thousand. As a result of the
transaction, the Company's 2001 consolidated
statement of income only includes Tag
activities' operational results up to July
31, 2001.
In 2001, disposal of activities net of
cash disposed could be analyzed as
follows:
(in thousands of euros)
SkiData and Tag
Consideration received in cash
36,507
Consideration received in shares
immediately resold
84,000
Proceeds from sale of activities
120,507
Cash disposed
(3,506
)
Proceeds from sale of activities,
net of cash disposed
117,001
Fees
(8,270
)
Proceeds from sale of activities,
net of fees
108,731
Intangible assets
1,010
Property, plant and equipment
5,972
Financial assets
2,335
Accounts receivable and other current assets
60,485
Bank overdrafts
(25,538
)
Accounts payable and other current liabilities
(26,504
)
Long-term liabilities
(895
)
Currency translation adjustment
577
Net assets sold
17,442
Goodwill disposed
22,975
Net gain
on disposal of activities
68,314
4.     TRADE ACCOUNTS RECEIVABLE
Trade accounts receivable consist of the following:
(in thousands of euros)
December 31
2002
2001
2000
Trade accounts receivable, gross
157,399
201,481
323,987
Less, allowances for doubtful
accounts
(12,486
)
(12,846
)
(12,711
)
Trade accounts receivable, net
144,913
188,635
311,276
5.     INVENTORY
Inventory consists of the following:
(in thousands of euros)
December 31
2002
2001
2000
Raw materials and supplies
34,098
63,621
60,540
Work-in-process
67,883
79,394
79,103
Finished goods
8,901
14,738
45,586
Inventory, gross
110,882
157,753
185,229
Less, inventory allowance
(14,369
)
(17,959
)
(11,128
)
Inventory, net
96,513
139,794
174,101
6.     OTHER CURRENT ASSETS
Other current assets include the following:
(in thousands of euros)
December 31
2002
2001
2000
Value added tax receivable
40,349
36,209
36,205
Other taxes receivable
9,175
13,870
596
Foreign currency hedges
10,371
—
23,284
Advance facility to supplier
9,598
21,539
10,747
Advance payments to non-trade
suppliers
2,356
7,816
7,328
Prepaid expenses
15,129
9,646
9,293
Advance payments to trade suppliers
3,369
4,572
2,049
Prepaid pension cost
504
982
1,032
Other current assets
2,631
9,099
6,843
Total other current assets
93,482
103,733
97,377
During the fourth quarter 2000, to reduce
supply risk associated with obtaining
microprocessor chips, the Company entered
into a long-term
supply agreement with a major microprocessor
manufacturer. In connection with this supply
agreement, the Company financed enhancements
of this supplier's production capacity with
an unsecured advance facility for
€
37.6
million. The advance facility matured over a
period of three years and earns rebates at a
rate of 7.5% per annum, such rebate being
deemed to include interest receivable on the
loan. Following the economic downturn
F-14
Table of Contents
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
in the wireless market, the Company has
reduced its purchases of microprocessor chips
and therefore could not earn enough rebates
to cover the interest receivable on the loan.
As a result, the advance facility was
remeasured at amortized cost, resulting in a
€
2,022 thousand financial expense in the
2001 consolidated statement of income. As of
December 31, 2001, no repayment had occurred
and the outstanding balance of the advance
facility was
€
37,694 thousand, of which
€
21,539 thousand was recorded under other
current assets and
€
16,154 thousand under
other non-current assets. An amendment to
the supply and advance facility agreement was
signed in October 2002, pursuant to which
loan reimbursement and interest were
disconnected from volumes of purchases.
Repayments were rescheduled and extended
until December 2004. In 2002, payments
amounted to
€
9,892 thousand. The
measurement at amortized cost of the advance
resulted in an amount of
€
1,913 thousand
recorded as financial in the 2002
Consolidated Statement of Income.
As of December 31, 2002, the outstanding
balance of the advance facility was
€
23,994 thousand, of which
€
9,598 thousand
was recorded under other current assets and
€
14,396 under other non-current assets.
Fair values of hedging instruments on
foreign currency contracts are recorded in
other current assets or liabilities. The
corresponding changes in fair value are
recognized in earnings or in equity.
7.     PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment includes the following:
(in thousands of euros)
December 31
2002
2001
2000
Land
6,838
7,169
5,204
Buildings
162,996
136,570
104,023
Machinery and equipment
319,760
346,267
334,620
Buildings and Machinery in progress
23,083
36,807
18,187
Property, plant and
equipment, gross amount
512,677
526,813
462,034
Buildings, accumulated
depreciation
(53,275
)
(44,606
)
(35,072
)
Machinery and equipment,
accumulated depreciation
(242,458
)
(213,423
)
(177,046
)
Property, plant and equipment,
accumulated depreciation
(295,733
)
(258,029
)
(212,118
)
Property, plant
and equipment, net
216,944
268,784
249,916
Interest is capitalized during the new
construction or upgrade of qualifying assets.
In 2002, interest was capitalized in the
amount
€
324 thousand, in connection with the
construction of a research and development
and office building located in La Ciotat,
France. No interest was capitalized in 2001
and 2000.
Property, plant and equipment variation analysis is as follows:
(in
thousands of euros)
Gross
Accumulated
amount
depreciation
December 31, 2001
526,813
(258,029
)
Additions and amortization expense
31,953
(72,376
)
Disposals and retirements
(24,521
)
22,896
Effect of acquisitions and disposals
2,547
(511
)
Exchange rate differences
(24,115
)
12,287
December 31, 2002
512,677
(295,733
)
Included below are amounts related to assets
subject to capital leases, which have been
included in the balance of property, plant
and equipment.
(in thousands of euros)
December 31
2002
2001
2000
Land
3,334
3,459
2,756
Buildings
64,579
42,672
45,937
Construction in progress
1,494
5,711
—
Property, plant and equipment
under capital lease, gross
69,407
51,842
48,693
Less, accumulated depreciation
(18,865
)
(15,887
)
(14,779
)
Property, plant and equipment
under capital lease, net
50,542
35,955
33,914
8.     GOODWILL
Goodwill consists of the following:
(in thousands of euros)
December 31
2002
2001
2000
Goodwill
165,443
163,402
186,080
Goodwill, accumulated amortization
(92,256
)
(46,822
)
(30,271
)
Goodwill, net
73,187
116,580
155,809
Goodwill variation analysis is as follows:
(in thousands of euros)
Gross
Accumulated
amount
depreciation
December 31, 2001
163,402
(46,822
)
Additions and amortization expense
1,093
(47,117
)
Effect of change for acquisitions
and disposals
5,344
167
Exchange rate differences
(4,396
)
1,516
December 31, 2002
165,443
(92,256
)
Goodwill is being amortized on a
straight-line basis over periods of five to
twenty years. Goodwill is reviewed for
impairment based on expectations
F-15
Table of Contents
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
of future cash flows, at each balance
sheet date, or whenever events or changes
in circumstances indicate that the
carrying value may not be recoverable.
During 2002, the Company recorded a goodwill write-down of
€
22,124 thousand based on impairment
testing. This write-down concerned the
goodwill generated following the
acquisition of SLP InfoWare SA ("SLP") in
October 2000. This charge was included in
the statement of income under the caption
"goodwill amortization". During 2002, the
Company decided to either sell or cease SLP
operations, owing to a significant decline
in sales of SLP software.
9.     OTHER NON-CURRENT ASSETS
Other non-current assets consist of the following:
(in thousands of euros)
December 31
2002
2001
2000
Loans receivable from senior management, net of provision
(67,582 in 2002, 0 in 2001 and 2000)
11,183
75,317
150,324
Software, net of accumulated
amortization (19,550 in 2002, 12,381 in 2001
and 12,549 in 2000)
25,364
31,347
21,961
Long-term portion of advance facility to
supplier (Note 6)
14,396
16,154
26,867
Research tax credit
13,215
12,144
18,877
Patents and patent rights, net of
accumulated amortization (4,388 in 2002,
4,865 in 2001 and 5,046 in 2000)
5,370
6,150
5,798
Rental deposits
1,902
1,622
1,978
Employee loans and other related loans
275
850
1,778
Prepaid expenses — long-term
portion
8,738
—
—
Other loans and assets
4,376
6,888
6,460
Total other non-current assets
84,819
150,472
234,043
As described in Note 31, loans were granted
in 2000 to Mr. Perez and to Dr. Lassus
pursuant to the terms of their employment.
During
2001, Mr. Perez partially reimbursed the
loans that were granted to him and the
unreimbursed portion of the loans was charged
to the Company's Consolidated Statement of
Income. Pursuant to an
agreement dated December 19, 2001, as of January 10, 2002 Mr. Lassus
ceased his office as Chairman of our board of directors and resigned
from all other positions that he held with our company and any of its
affiliates, except for his position as a non-executive director of
our company. As of January 10, 2002, Mr. Lassus was no longer an
employee of our company or any of its affiliates. Effective
June 30, 2002, a provision amounting
to
€
67,582 thousand was recorded to cover
the risk of possible non-reimbursement of the
loan granted to Dr. Lassus, net of the
amounts owned to Dr. Lassus. However, the
Company has not forgiven the loan and is
seeking repayment by Dr. Lassus through legal
proceedings. As at December 31, 2002, the
outstanding balance of the loan, net of
provision, was
€
11,183 thousand. This net
balance reflects a claimed amount offset
against accrued management severance expenses
with respect to Dr. Lassus (see Note 31).
Prepaid expenses – long-term portion relates to a one-time
€
11,200 thousand pre-payment of royalties
made in the second quarter 2002 in favor of a
supplier. The pre-paid amount is being
expensed through 2005, proportionally based
on number of units sold to our customers.
10.     RESEARCH AND DEVELOPMENT COSTS
Deferred development costs can be analyzed as follows:
(in thousands of euros)
December 31
2002
2001
2000
Gross amount at beginning of year
41,357
34,846
9,074
Accumulated amortization at beginning of year
(12,887
)
(8,497
)
(1,376
)
Balance of beginning of year
28,470
26,349
7,698
Deferred during the year
15,301
6,511
13,984
Less, allowances
(17,861
)
(4,390
)
(7,120
)
Impact for the year on income before tax
(2,560
)
2,121
6,864
Software development arising from acquisition
—
—
11,787
Balance at end of year
25,910
28,470
26,349
Gross amount at end of year
56,658
41,357
34,846
Accumulated amortization
(30,748
)
(12,887
)
(8,497
)
Balance at end of year
25,910
28,470
26,349
Capitalized development costs comprise software to be sold including
software development arising from acquisitions (see Note 3).
Research and development expenses incurred during the year consist
of the following:
(in thousands of euros)
Years ended December 31
2002
2001
2000
Research and development
expenditures
95,288
124,567
104,344
Deferred development costs, net
2,560
(2,121
)
(6,864
)
Grants including research tax credit
(5,608
)
(9,561
)
(6,702
)
Total research
and development
92,240
112,885
90,778
Due to the special tax status of the Company
until 1999, the Company's eligibility for
certain research tax credits was legally
uncertain. For this reason, the Company
recorded an allowance against certain
research tax credits arising between 1993
and 1999 that were included as a component
of other non-current assets. In 2000, the
Company obtained formal confirmation that
these research tax credits will be received
and reversed the allowance accordingly. The
reversal amounting to
€
12,486 thousand has
been included as a separate line item of
operating income in 2000.
F-16
Table of Contents
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
11.     INVESTMENTS
Investments consist of the following:
(in thousands of euros)
December 31
2002
2001
2000
Equity affiliates
7,968
4,358
5,551
Goodwill related to equity affiliates
15,100
—
—
Accumulated depreciation on
goodwill related to equity affiliates
(2,060
)
—
—
Investments in non-marketable
equity securities
17,367
31,173
22,867
Valuation allowance on investments
(15,287
)
(14,107
)
(11,684
)
Investments
23,088
21,424
16,734
As at December 31, 2000, investments in
equity securities included one public
company, SCM, listed on the Nasdaq, which
has a reasonably sized public float. Such
shares were sold during 2001.
The Company has minority shareholdings in
numerous non-public start-up companies.
These shareholdings are recorded at cost.
An allowance is recorded when there is
reason to believe that an impairment in
value has occurred, i.e., that the business
model is questioned or that the business
plan is not met.
12.     ACCOUNTS PAYABLE
Accounts payable consist of the following:
(in thousands of euros)
December 31
2002
2001
2000
Trade accounts payable
73,930
102,566
235,982
Non-trade accounts payable
6,326
7,095
25,065
Total
80,256
109,661
261,047
13.     OTHER CURRENT LIABILITIES
Other current liabilities consist of the following:
(in thousands of euros)
December 31
2002
2001
2000
Restructuring — provision for reduction
of workforce and
other cash outlays
40,975
6,177
—
Deferred revenue
14,088
5,662
9,688
Management severance liability
9,975
21,113
—
Other accrued liabilities
5,767
5,700
4,614
Customer deposits
4,554
8,897
10,344
Allowances for customer claims
2,552
5,848
2,821
Short-term debt
1,677
4,840
24,307
Tax reimbursement liability on interest
forgiven
on loans to senior management
1,545
3,585
—
Litigation expenses
—
19,411
—
Foreign currency hedges
—
5,178
—
Provision for employee terminations
—
—
338
Other purchase acquisition liability
—
—
2,755
Total other current liabilities
81,133
86,411
54,867
As described in Note 31, the Company recorded
in its 2001 Consolidated Statement of Income
a
€
25,691 thousand management severance
expense. As at December 31, 2002 and 2001,
the corresponding liability amounted to
€
9,975 thousand and
€
21,113 thousand,
respectively. Respectively in 2002 and in
2001, this liability was comprised of a tax
reimbursement payable on the portion of the
loan that has been forgiven for
€
337
thousand and
€
6,502 thousand and termination
benefits payable in cash for
€
9,638 thousand
and
€
14,611 thousand.
As per the December 19, 2001 agreement
with Dr. Lassus, the amount of
€
9,638
thousand will be payable upon fulfillment
of certain specific conditions.
Short-term debt consists of overdrafts that
either result from the daily usage of cash in
some of the Company's foreign locations or
from subsidiaries that are not wholly owned
and that do not benefit from the Company's
treasury management.
Pursuant to the terms of the loans granted
to Messrs. Perez and Lassus in 2000, one of
the Company's indirect subsidiaries has
agreed to arrange for the interest on these
loans to be forgiven from July 1st to
December 31, 2001, and to assume any income
tax resulting from this forgiveness.
Interest related to the loans was accrued in
the Consolidated Statement of Income,
totaling
€
3,139 thousand in 2000,
€
4,877
thousand in 2001 and
€
1,706 thousand in
2002. Income tax resulting from the
forgiveness of interest from July 1st to
December 31, 2001 was accrued in the 2001
Consolidated Statement of Income, resulting
in a compensation expense of
€
3,585
thousand reflected under general and
administrative expenses.
As described in Note 26, the Company recorded
a charge of
€
18,120 thousand in its 2001
Consolidated Statement of Income with respect
to the judgment on appeal rendered in October
2001 concerning the
Humetrix litigation. This charge resulted in
a total current liability (including a
previously existing provision) of
€
19,411
thousand in the balance sheet as at December
31, 2001. This liability has been settled in
2002.
Fair values of hedging instruments on
foreign currency contracts are recorded in
other current assets or liabilities. The
corresponding changes in fair value are
recognized in earnings or in equity.
14.     LONG-TERM DEBT
Long-term debt consists of the following:
(in thousands of euros)
December 31
2002
2001
2000
Long-term debt
—
—
3,688
Use of medium and long-term
credit lines
—
14
4,044
Total long-term debt
—
14
7,732
Less, current portion
—
—
(1,867
)
Total long-term debt,
less current portion
—
14
5,865
F-17
Table of Contents
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
As at December 31, 2000, long-term debt
included a loan of
€
3,634 thousand, granted
in 1996 to SkiData by the former shareholder
of SkiData, Meridiana. As described in Note
3, in connection with the sale of its SkiData
subsidiary, the Company entered in 2001 into
an agreement with Meridiana, pursuant to
which Meridiana transferred to the Company in
exchange for a payment of
€
1 all of its
rights concerning this loan.
At December 31, 2002, the confirmed
credit facility available for the
Company amounted to
€
73,125 thousand.
In 1999, the Company entered into a
€
150,000 thousand revolving credit facility
with a syndicate of international banking
institutions that bore interest at a
floating rate, out of which
€
73,125
thousand was available as at December 31,
2002. The Company has never drawn any
amount under this revolving credit facility
and decided in January 2003 to terminate it
before its due date.
15.     CAPITAL LEASES
Capital leases obligations outstanding as at December 31, 2002
are analyzed as follows:
(in thousands of euros)
2003
8,060
2004
7,447
2005
9,272
2006
6,681
2007
6,358
Thereafter
23,038
Total minimum lease payments
60,856
Less, amount representing interest
(12,218
)
Present value of minimum obligations under capital leases
48,638
Less, current portion of obligations under capital leases
(6,098
)
Long-term obligations under capital leases
42,540
In 1999, the Company entered into a
sale-leaseback transaction with two major
financial institutions for a duration of
eleven years ending on December 31, 2010.
The proceeds received amounted to
€
28,270 thousand and relate to land and an
industrial and office building located in
Gémenos, France. This sale-leaseback
transaction resulted in no gain or loss in
the Consolidated Statement of Income.
In 2001, the Company entered into a
sale-leaseback transaction with a major
financial institution related to land and a
research and development and office building
located in La Ciotat, France. The building
was under construction as at December 31,
2001 and was completed in October 2002. The
capital lease will have a duration of twelve
years ending in September, 2014. The
proceeds received in 2002 amounted to
€
15,962 thousand (2001:
€
5,711 thousand).
This sale-leaseback transaction resulted in
no gain or loss in the Consolidated
Statement of Income.
16.     OTHER NON-CURRENT LIABILITIES
Other non-current liabilities consist of the following:
(in thousands of euros)
December 31
2002
2001
2000
Non-current liabilities
53,293
29,989
42,184
Equity investments commitments
421
870
1,533
Total other non-current liabilities
53,714
30,859
43,717
Non-current liabilities variation analysis is as follows:
(Note 16 - continued)
(in thousands of euros)
Effect of
Increase in
Transfer within
Amounts
Amounts
December 31,
exchange
long-term
balance sheets
unused during
used during
December 31,
2001
rate changes
liabilities
items
the period
the period
2002
Provision for patents claims
9,000
—
—
—
—
—
9,000
Provision for tax claims
13,727
(3
)
5,932
20,300
—
(2,630
)
37,326
Provision for litigation claims
2,300
(112
)
—
(2,188
)
—
—
—
Provision for pension costs
1,853
(58
)
113
—
(42
)
(86
)
1,780
Other provisions
2,712
16
1,997
—
—
(1,435
)
3,290
Government loans received
397
(11
)
1,823
—
(265
)
(47
)
1,897
Total
29,989
(168
)
9,865
18,112
(307
)
(4,198
)
53,293
F-18
Table of Contents
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
The Company pays royalties for the use of certain patents. In certain cases,
due to the nature of the technology involved, the portion covered and the
timing during which royalties are paid under the patent license agreements
may be questioned. Based on past experience and known facts and
circumstances as of the balance sheet date, the Company records
a provision for potential claims.
From time to time, the Company and its subsidiaries are subject to tax
claims from the tax authorities in the jurisdictions where the Company and
its subsidiaries do business. The Company records a provision for tax risk
based upon the most current information available to it and management's
judgment regarding the possible outcomes of any tax claim.
In November 2002, three French subsidiaries of the Company, including
Gemplus SA, received a tax assessment from the French tax authority
primarily relating to the fiscal years 1998 through 2000. The major
components of the assessment relate to intercompany transactions,
including transfer pricing, the invoicing of management fees and forgiveness
of intercompany debt, as well as the adequacy of documentation relating
to certain commissions paid to agents. Although the aggregate assessment,
including interest and penalties, approximates
€
120 million, the Company
believes that significant aspects of the claim are without justification and
intends to contest the assessment vigorously. The amount of the
assessment was reduced to
€
83.5 million in
April 2003.
By reason of the assessment, the Company increased its provision for tax
risks at December 31, 2002 by
€
5,932 thousand, and transferred the
amount of
€
20,300 thousand from a valuation allowance against deferred
tax assets to provision for tax risks (see Note 19). The Company does not
believe that the assessment will have a material effect on the Company's
liquidity and notes that certain of the taxes assessed result from timing
adjustments that could reduce taxes in subsequent periods.
Certain subsidiaries of Gemplus International SA are eligible to receive
government loans. These loans are only repayable when financed projects
are commercially successful. For unsuccessful projects, the funds received
do not have to be repaid and as appropriate the Company reverses the
recorded liability.
17. RESTRUCTURING
In addition to the restructuring program that was implemented in the
second quarter of 2001 (the "first restructuring program"), the Company
announced two further restructuring and rationalization programs in 2002,
on February 6 (the "second restructuring program"), and on December 9
(the "third restructuring program"). The Company recorded a total pre-tax
restructuring charge of
€
90,003 thousand in its 2002 consolidated
statement of income, inclusive of all three restructuring programs,
respectively
€
1,514 thousand,
€
80,808 thousand and
€
7,681 thousand
for the first, second and third program.
First restructuring program
(announced on May 2, 2001)
Pursuant to the Company's announcement on May 2, 2001 of a plan
to restructure its operations worldwide, the Company recorded a pre-tax
restructuring charge of
€
28,466 thousand in its 2001 statement
of income. This restructuring charge was in connection with the closure
of a manufacturing facility in Germany, the downsizing of a research and
development and services center in Canada, a reduction of the workforce
following the combination of the Company's financial services and e-business
activities, and the rationalization of office facilities on a worldwide basis.
An additional
€
1,514 thousand pre-tax restructuring charge was recorded
in the 2002 statement of income, reflecting primarily adjustments
on consolidation of facilities charges.
The
€
28,466 thousand charge recorded in 2001 consisted
of
€
15,386 thousand for headcount reductions,
€
11,977 thousand
for consolidation of facilities and related fixed assets and
€
1,103 thousand
for inventory write-offs.
The restructuring actions were taken to reduce manufacturing capacity,
and, from a business standpoint, to better integrate resources, leverage
technology trends, and minimize overlapping market requirements
and partnerships in the financial services and e-business sectors.
The plan included the termination benefits of 497 employees representing
7% of the Company's global workforce. Employee reductions occurred
in the following areas: manufacturing organization 200 employees, research
and development 123 employees, selling and marketing organizations
100 employees, system integration and consulting services 34 employees,
and support functions 40 employees.
The majority of employee terminations were located in Germany
(214 people), due principally to the closure of the Seebach manufacturing
facility (198 people), and Canada (167 people), due to the downsizing
of the research and development and services center in Montreal.
The remaining 116 terminations of employment were located in different
countries of the world.
Total cash outlays for the restructuring program are expected to amount
to
€
23,537 thousand, including
€
15,829 thousand for termination
of employment, and
€
7,708 thousand for other related exit costs.
Non-cash related actions, primarily consisting of assets and inventory
write-offs, amounted to
€
6,444 thousand.
Second restructuring program
(announced on February 6, 2002)
Pursuant to the Company's announcement on February 6, 2002 of a plan
to restructure its operations worldwide, the Company recorded a pre-tax
restructuring charge of
€
80,808 thousand in its 2002 statement of income.
F-19
Table of Contents
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
This restructuring charge is in connection with the overall termination
of 1,140 employees (including non-renewal of temporary employment
contracts, reduction of subcontractors and natural attrition), representing
approximately 16% of the Company's global workforce
as at December 31, 2001.
The second restructuring program affected all areas within the Company
(Manufacturing, Selling, Marketing, Research and Development and General
and Administrative functions). The overall reduction of the workforce
was broken down as follows:
•
manufacturing organization: 550 employees,
•
general and administrative functions: 245 employees,
•
selling and marketing organization: 215 employees, and
•
research and development organization: 130 employees.
The
€
80,808 thousand restructuring charge recorded in 2002 consisted
of
€
50,500 thousand for headcount reductions,
€
16,600 thousand for
consolidation of facilities and other exit costs,
€
12,600 thousand related to
fixed asset write-offs and
€
1,108 thousand related to inventory write-offs.
The majority of headcount reductions are related to the social plans
in France (587 employees), North America (180 employees), Germany
(69 employees) and United Kingdom (68 employees). It also included
reductions made in South America, Northern Europe, Eastern Europe
and Asia.
The restructuring charge also included costs related to the rationalization
of office facilities primarily in North America, the United Kingdom, Northern
Europe and in the South of France, as well as asset write-offs related to the
rationalization of these facilities. It also included costs related to the
shutdown of a personalization center near Paris, France, to the reduction
of production floor space in one of the German factories as well as to the
closure of a research and development center in Europe. Asset write-offs
also included the costs associated with the write-down of a research
and development project in Europe.
The Company expects to record an additional
€
500 thousand restructuring
charge related to additional employee terminations in North America.
As accounting criteria for recognition were not met at December 31, 2002,
these costs will be recorded during the first quarter of 2003.
Third restructuring program
(announced on December 9, 2002)
Pursuant to the Company's announcement on December 9, 2002 of a plan
to restructure its operations worldwide, the Company recorded a pre-tax
restructuring charge of
€
7,681 thousand in its 2002 statement of income.
This restructuring charge consisted of
€
6,926 thousand for the write-off
of certain assets, primarily in relation to SLP and China operations,
and of
€
755 thousand for other exit costs.
The Company expects to record a total restructuring charge of
approximately
€
82,100 thousand in connection with this further
restructuring program, which involves the termination of about
1,100 employees globally (483 in France), and the rationalization
of production sites of office facilities on a worldwide basis.
The third restructuring program will affect all organizations within the
Company (manufacturing, selling, marketing, research and development
and general and administrative functions). The overall expected reduction
in the workforce (including subcontractors) can be broken down
as follows:
•
manufacturing organization: 695 employees,
•
general and administrative functions: 183 employees,
•
selling and marketing organization: 95 employees, and
•
research and development organization: 127 employees.
The total expected restructuring charge of
€
82,100 thousand relating
to this program includes
€
59,100 thousand for termination of employment,
and
€
9,100 thousand for other related exit costs. Non-cash related items,
primarily consisting of the write-off of assets, amount to
€
13,900 thousand.
As at December 31, 2002, the Company had not met the requirements
to record the severance obligations and other exit costs as required
by International Accounting Standards.
Total cash outlays
In 2002, total cash outlays for the restructuring programs amounted
to
€
33,400 thousand. This can be broken down as follows:
•
€
5,500 thousand for the first restructuring program,
•
€
27,500 thousand for the second restructuring program,
•
€
400 thousand for the third restructuring program.
F-20
Table of Contents
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Restructuring activity
for the years ended December 31, 2002 and 2001
(in thousands of euros)
Reduction
of workforce
Non-cash
and other
write-offs
cash outflows
of assets
Total
FIRST RESTRUCTURING
PROGRAM
2001 restructuring charge
22,022
6,444
28,466
Amount utilized in 2001
(15,466
)
—
—
Exchange rate differences
(379
)
—
—
Restructuring reserve
as at December 31, 2001
6,177
—
—
2002 restructuring charge
1,514
—
1,514
Amount utilized in 2002
(5,492
)
—
—
Exchange rate differences
(141
)
—
—
Restructuring reserve
as at December 31, 2002
2,058
—
—
SECOND RESTRUCTURING
PROGRAM
2002 restructuring charge
66,919
13,889
80,808
Amount utilized in 2002
(27,446
)
—
—
Exchange rate differences
(868
)
—
—
Restructuring reserve
as at December 31, 2002
38,605
—
—
THIRD RESTRUCTURING
PROGRAM
2002 restructuring charge
755
6,926
7,681
Amount utilized in 2002
(443
)
—
—
Restructuring reserve
as at December 31, 2002
312
—
—
TOTAL 2002 restructuring charge
69,188
20,815
90,003
TOTAL restructuring reserve
as at December 31, 2002
40,975
—
—
Restructuring provisions amounting to
€
40,975 thousand as at December
31, 2002 are mainly related to termination benefits payable in cash to
employees as well as rental costs for unused space.
In 2002, there has been no reversal of
unused restructuring provisions
through the consolidated statement of income.
18. OTHER INCOME (EXPENSE) NET
Other income (expense) net consists of the following:
(in thousands of euros)
Years ended December 31
2002
2001
2000
Gain (loss) on investments
(6,444
)
66,425
14,035
Gain (loss) on equity investments
(3,084
)
(3,505
)
(4,542
)
Foreign exchange gain (loss)
(15,106
)
(12,618
)
(889
)
Gain (loss) on sale
and disposal of fixed assets
63
(189
)
169
Minority interests
(4,333
)
(4,432
)
(8,801
)
Total other income (expense)
net
(28,904
)
45,681
(28
)
As indicated in Note 11, the Company may hold minority shareholdings
in various related high technology companies. In 2000, the sale of Intercall
shares generated a profit of
€
11,765 thousand. Prior to these sales
of shares, the Company owned approximately 6% in both Intercall and SCM
and less than 2% in Verisign. Subsequent to these share sales the Company
owned less than 2% interest in each of these respective companies.
As at December 31, 2002 and 2001, the Company had no more interests
in these companies.
The
€
66,425 thousand net gain on investments recorded in 2001 primarily
included a
€
68,314 thousand one-time gain generated from our SkiData
and Tag divestitures (see Note 3).
19. INCOME TAXES
The components of income taxes benefit (provision) are as follows:
(in thousands of euros)
Years ended December 31
2002
2001
2000
Current taxes
(9,667
)
(4,074
)
(28,044
)
Deferred taxes
543
18,258
(1,587
)
Total taxes benefit (provision)
(9,124
)
14,184
(29,631
)
A reconciliation between the reported income tax expense and the
theoretical amount that would arise using a standard tax rate is as follows:
(in thousands of euros)
Years ended December 31
2002
2001
2000
Income (loss) before taxes
(311,767
)
(114,404
)
128,709
Income tax calculated at corporate
tax rate*
94,715
42,845
(48,202
)
Effect of tax exemption
(15,551
)
15,144
12,496
Effect of different tax rates
13,434
(916
)
17,180
Effect of release of valuation
allowance
1,351
4,154
—
Effect of unrecognized tax assets
(79,548
)
(40,533
)
(9,367
)
Provision for tax risks
(5,932
)
—
—
Effect of expenses non deductible
and revenues non taxable
(3,900
)
353
2,458
Effect of goodwill amortization
resulting from mergers and
acquisitions (Note 3)
(13,693
)
(6,863
)
(4,196
)
Income tax expense
for the year
(9,124
)
14,184
(29,631
)
*     Luxembourg tax rate of 30.38% in 2002, 37.45% in 2001 and 2000.
F-21
Table of Contents
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
The components of the net deferred tax asset recorded at December 31,
2002, 2001 and 2000 are:
(in thousands of euros)
December 31
2002
2001
2000
ASSETS
Loss carryforward
158,538
82,978
39,806
Excess book over tax depreciation
and amortization
4,681
2,646
2,957
Other temporary differences
54,807
32,674
21,961
Valuation allowance
(138,229
)
(82,048
)
(48,358
)
LIABILITIES
Excess tax over book depreciation
and amortization
(18,175
)
(4,349
)
(2,296
)
Other temporary differences
(19,948
)
(9,753
)
(9,246
)
Net deferred tax asset
41,674
22,148
4,824
Deferred tax asset
41,674
22,148
7,120
Deferred tax liability
—
—
(2,296
)
Net deferred tax asset
41,674
22,148
4,824
Certain French subsidiaries, including Gemplus SA, incurred significant
losses during 2001 and 2002. As the restructuring plan announced
in December 2002 will continue to be implemented in 2003, it is anticipated
that further tax losses will be generated in that fiscal year in France.
The use of the operating losses on a carry forward basis will mainly depend
upon the successful implementation of the restructuring plan and the
recovery of the wireless communication market, which is difficult to predict
accurately. Management recognizes that, given the guidelines
under Generally Accepted Accounting Principles, future profitability, thus,
cannot be clearly evidenced taking into account the uncertainty of the
market and the current losses anticipated for our French operations.
As a result, in 2002, the Company has booked a valuation allowance
against these operating losses, net of other deferred tax assets and
liabilities, in the amount of
€
57,699 thousand. This valuation allowance
has no significant impact on the 2002 result because it mainly includes
net deferred tax assets generated in that particular fiscal year.
In 2001, the valuation allowance had been partially released following
favorable outcomes on certain tax investigations by tax authorities.
In late November 2002, three French subsidiaries, including Gemplus SA,
received a tax assessment primarily relating to the fiscal years 1998 through
2000. The total amount of tax assessed, including penalties and interest,
approximates
€
120 million. This amount was reduced to
€
83.5 million in
April 2003. The major components of the main
assessment relate to intercompany transactions, including transfer pricing,
the invoicing of management fees and forgiveness of intercompany debt,
as well as the adequacy of documentation relating to certain commissions
paid to agents. A number of the reassessments are of a temporary nature
where future adjustments, if any, will have a positive impact in later taxable
periods. The Company believes that significant aspects of the assessments
are without justification and intends to vigorously contest them.
Consequently, the provision for tax claims was increased by
€
5,932 thousand in 2002, and an amount of
€
20,300 thousand was
transferred from valuation allowance to provision for tax risks (see Note 16).
At December 31, 2002, the Company had net operating loss carry forwards
totaling
€
158,538 thousand of which
€
66,549 thousand and
€
45,735 thousand are limited to five years and ten years respectively,
and
€
46,254 thousand may be used indefinitely. In those situations where
under Generally Accepted Accounting Principles it is inappropriate to
recognize deferred tax assets and other tax benefit items, management
has provided a valuation allowance to reduce net deferred tax assets
to the estimated realizable value.
Deferred income taxes on the undistributed earnings of the Company's
foreign subsidiaries are provided for when it is intended that these earnings
will not be indefinitely reinvested in these entities.
Gemplus SA and certain of its French subsidiaries previously operated in
a tax-exempt enterprise zone and the income related to their manufacturing
activities in such a zone were exempt from income taxes for a ten-year
period expiring between the fiscal years 1999 to 2002. The tax-free status
for some of the major French entities expired during 1999. The Company
has benefited from new temporary tax exemptions in 2000, 2001 and 2002,
in certain countries.
The contribution of shares of Gemplus SA to Gemplus International SA,
a Luxembourg company, has no effect on deferred tax assets and
liabilities previously recognized.
20. ORDINARY SHARES
Gemplus International SA is a corporation incorporated in the Grand Duchy
of Luxembourg. The authorized share capital of the Company is currently
€
400 million consisting of two billion shares with no legal par value.
On February 18, 2000, the Company issued 94,000,000 shares to
Texas Pacific Group at
€
3.51 per ordinary share, the fair value determined
by the Board of Directors on February 2, 2000. Net proceeds from the
issuance were
€
319,704 thousand. In connection with this capital increase,
the Company entered into a warrant agreement with Texas Pacific Group,
a Company shareholder, and Dr. Lassus, the Company's former chairman
of the Board of Directors. Under this agreement, the Company granted
the right to purchase another 56,400,000 shares at
€
3.51 per share.
These warrants were exercised on September 28, 2000, resulting in net
additional proceeds of
€
191,753 thousand (see Note 24).
In connection with the February 18, 2000 capital increase, the Company
entered into an agreement, granting Texas Pacific Group, a Company
shareholder, and Dr. Lassus the right to acquire additional shares
at
€
3.51 per share. On May 29 and 31, 2000, pursuant to this agreement,
the Company increased its capital by issuing 61,873,300 new shares,
which generated net proceeds of
€
212,088 thousand.
F-22
Table of Contents
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
On June 21, 2000, a general meeting of shareholders approved
a fifty-for-one stock split of the Company's ordinary shares held by
shareholders of record as of the close of business on June 20, 2000.
All references to the number of common shares and per share amounts
elsewhere in the consolidated financial statements and related footnotes
have been restated as appropriate to reflect the effect of the split
for all periods presented.
On August 25, 2000 and September 28, 2000, the Company issued
61,487,358 shares pursuant to employment arrangements with Mr. Perez
and with Dr. Lassus (see Note 31). These shares included 20,495,786 free
shares and 40,991,572 shares resulting from the exercise of stock options
at an exercise price of
€
3.51 per share. The corresponding capital increase
net of issuance costs was
€
142,615 thousand.
On December 8, 2000 the Company completed a public offering resulting
in the issuance of 15,000,000 new ordinary shares. The Company's net
proceeds from the offering were
€
82,590 thousand (see Note 3).
As part of the purchase price related to the acquisition of Celocom Limited
in November 2000, the Company issued on February 20, 2001,
4,191,776 shares representing a value of
€
25,151 thousand. Out of these
€
25,151 thousand recorded in paid-in capital as at December 31, 2000,
an amount of
€
838 thousand was allocated to share capital, as the
corresponding shares were issued. Pursuant to the acquisition agreement,
the shares issued have been transferred to a financial institution and put
in escrow with such institution until release of such shares in accordance
with the terms of the agreement.
As at December 31, 2002, all shares had been released and are no longer
in escrow.
As part of the purchase price related to the acquisition of SLP InfoWare SA
in October 2000, the Company issued on March 13, 2001, 362,863 shares
representing a value of
€
2,177 thousand. Out of these
€
2,177 thousand
recorded in paid-in capital as at December 31, 2000, an amount
of
€
73 thousand was allocated to share capital, as the corresponding
shares were issued.
During 2001, the Company issued 7,296,500 shares following the
contribution of 145,930 shares of Gemplus SA held mainly by employees.
For accounting purposes, these shares were already assumed to be
a component of the shareholder's equity.
During 2001, the Company issued 2,116,850 shares following the exercise
of Gemplus International SA stock options held by employees.
In addition, in 2001, the Company purchased at fair market value
80,587 shares of Gemplus SA, equivalent to 4,029,350 shares of Gemplus
International SA, held by two former executive officers of the Company,
thus reducing the Company's shareholders' equity.
During 2002, the Company issued 699,100 shares following the exercise
of Gemplus SA stock options held by employees.
During 2002, the Company issued 2,525,150 shares following the
contribution of 50,503 shares of Gemplus SA held mainly by employees.
For accounting purposes, these shares were already assumed to be
a component of shareholders' equity (see Note 3).
During 2002, the Company issued 398,350 shares following the exercise
of Gemplus International SA stock options held by employees.
During the third quarter of 2001, the Company started the implementation
of its share repurchase program, as approved by the Annual General
Meeting held on April 18, 2001 and authorized by the Commission des
Opérations de Bourse on May 4, 2001. During 2001, the Company
repurchased 4,900,534 shares of its outstanding common stock, at an
average price of
€
3.17 per share. In addition, as described in Note 31,
the Company's former Chief Executive Officer, Mr. Perez, returned all
of the 30,743,679 Gemplus International SA shares that he had received
in August and September 2000 to an indirect subsidiary of the Company,
in reimbursement of the loans that such indirect subsidiary made to him
in 2000 and in 2001. Consequently, as at December 31, 2001,
the Company held directly 4,780,907 shares of its outstanding common
stock and an indirect subsidiary held 30,925,029 shares of its outstanding
common stock.
At the Extraordinary General Meeting of shareholders held on April 17, 2002,
shareholders approved the cancellation of 4,634,859 shares held directly
pursuant to the Company's stock repurchase program, in addition to the
cancellation of 30,743,679 shares held by its indirect subsidiary at the time
as such shares may be transferred to the Company. The 4,634,859 shares
were cancelled without reducing the issued share capital of the Company
but this caused a consequential increase of the accounting par of the shares
in issue.
During the third quarter of 2002, the Company purchased 656,024 shares
of its outstanding common stock from two former Celocom Limited
employees pursuant to the conditions stipulated in the 2000
Celocom Limited share purchase agreement.
As at December 31, 2002, the Company held 31,727,101 shares of its
outstanding common stock. The 30,743,679 shares returned by Mr. Perez
were cancelled on March 10, 2003. The cancellation of those shares in 2003 had no impact on the consolidated
shareholders' equity, in accordance with the accounting policies described in
Note 2.
As described in Note 3, the total amount of shares to be issued
by Gemplus International SA upon the contribution of Gemplus SA shares
amounted to 4,288,150 shares, representing 0.67% of the shareholdings
of Gemplus International SA, which represented a total
of 637,859,088 shares outstanding as at December 31, 2002.
F-23
Table of Contents
The number of shares as of December 31, 2002 can be analyzed
as follows:
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Number of shares outstanding
633,570,938
Gemplus SA shares to be contributed
4,288,150
Number of shares outstanding
including shares to be contributed
637,859,088
Treasury shares
(31,727,101
)
Basic number of shares outstanding
606,131,987
Options outstanding
76,017,819
Warrants outstanding
2,561,973
Number of shares on a fully diluted basis
684,711,779
The number of shares on a fully diluted basis is not representative
of the number of shares used in computing net income per share.
Net income per share is calculated using the weighted average number
of shares and dilutive equivalent shares from stock options and warrants
using the treasury stock method (see Note 21).
As at December 31, 2002, 69,135,081 shares are reserved for shares
issuable under the different share options plans (see Note 24)
21. NET INCOME (LOSS) PER SHARE CALCULATION
A reconciliation of the numerator and denominator of basic and diluted
net income per share is provided as follows. As net losses have been
reported in 2002 and 2001, the dilutive effects of stock options, warrants
and shares to be issued following acquisitions in 2000 of Celocom Limited
and SLP InfoWare SA were excluded of net loss per share calculation
in these periods.
Gemplus SA shares to be contributed are included in the weighted average
number of common shares outstanding (see Note 3 — Common control
transactions).
(Note 21 - continued)
(in thousands of euros, except shares and per share data)
Years ended December 31
2002
2001
2000
Net income / (loss) (numerator)
(320,891
)
(100,220
)
99,078
Shares used in basic net income per share calculation
(denominator):
Weighted average number of common shares outstanding
606,222,660
636,992,392
497,523,946
Dilutive effect of stock options
1,516,176
24,661,319
33,981,118
Dilutive effect of warrants
28,073
1,006,546
7,672,160
Dilutive effect of shares to be issued following
acquisitions of Celo and SLP
—
167,936
78,982
Weighted average diluted number of shares outstanding
607,766,909
662,828,193
539,256,206
Shares used in diluted net income per share (denominator)
606,222,660
636,992,392
539,256,206
22. COMPREHENSIVE INCOME
Certain items defined as other comprehensive income, such as foreign
currency translation adjustments, are reported separately from retained
earnings and additional paid-in capital in the shareholders' equity section
of the balance sheets.
The components of cumulative other comprehensive income in the
shareholders' equity section of the balance sheets as at December 31, 2002,
2001 and 2000, respectively, were as follows:
(in thousands of euros)
December 31
2002
2001
2000
Cumulative translation adjustment
1,873
(3,567
)
376
Net unrealized gain (loss) on hedging
instruments qualifying as effective
6,698
(401
)
—
Cumulative other
comprehensive income
8,571
(3,968
)
376
The components of comprehensive income for the year ended December 31,
2002, 2001 and 2000, respectively, were as follows:
(in thousands of euros)
Years ended December 31
2002
2001
2000
Net income (loss)
(320,891
)
(100,220
)
99,078
Change in cumulative translation
adjustment
5,440
(3,943
)
(2,438
)
Effect of adopting IAS 39
as at January 1, 2001
—
9,093
—
Change in fair value
of available-for-sale financial
assets
—
(286
)
—
Change in fair value
of derivatives qualifying
as effective hedging instruments
7,099
(9,208
)
—
Change in cumulative
other comprehensive income
12,539
(4,344
)
(2,438
)
Comprehensive net income
(loss)
(308,352
)
(104,564
)
96,640
F-24
Table of Contents
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
23. PENSION PLANS
Pensions
In France, the Company contributes to the national pension system and its
obligations to employees in terms of pensions are restricted to a lump-sum
length of service award payable at the date that the employee reaches
retirement age, such award being determined for each individual based
upon years of service provided and projected final salary. The current
evaluation of the future length of service award liability is recorded as
a long-term liability in the balance sheet, together with pension liabilities.
The pension obligation in France amounts to
€
1,338 thousand,
€
1,295 thousand and
€
1,079 thousand at December 31, 2002, 2001
and 2000, respectively.
The Company operates pension plans in other countries. The Company's
principal plan is a contributory defined benefit plan open to all employees
in the United Kingdom.
The Company also offers an Employee Investment Plan (EIP) to all United
States employees under section 401 (k) of the United States Internal
Revenue Code. Company contributions to the EIP plan amounted to
approximately
€
1,240 thousand,
€
1,903 thousand and
€
1,749 thousand
in 2002, 2001 and 2000, respectively.
Net periodic pension costs for the principal defined benefit plan
for the years ended December 31, 2002, 2001 and 2000, comprise the
following elements:
(in thousands of euros)
December 31
2002
2001
2000
Current year service cost
1,549
1,640
1,088
Interest accrued on pension
obligations
1,346
1,275
1,109
Actual loss (return)
on plan assets
2,915
2,621
477
Net deferral
(4,339
)
(4,261
)
(1,974
)
Total pension costs
1,471
1,275
700
The following table sets forth the funded status of pension plans:
(in thousands of euros)
December 31
2002
2001
2000
Accumulated benefit obligation
26,234
23,880
20,683
Projected benefit obligation
27,745
25,287
21,873
Plan assets at fair value
15,233
18,110
19,043
Projected benefit obligation
in excess of plan assets
(12,512
)
(7,177
)
(2,830
)
Unrecognized net loss
12,951
8,138
3,846
Net prepaid pension cost
439
961
1,016
The following weighted average rates were used in the calculation
of projected benefit obligation:
December 31
2002
2001
2000
Discount rate
6
%
6
%
6
%
Expected rate of return
on plan assets
8
%
8
%
8
%
Assumed rate of compensation
increase
4
%
4
%
4
%
Post-retirement benefits
other than pensions
Substantially all of the Company's employees are covered under
Government-sponsored post-retirement health and life insurance benefit
plans. Accordingly, the Company has no significant liability to its employees
in terms of post-retirement benefits other than pensions and therefore
no provision is made.
24. SHARE OPTION PLANS
The Company may grant, under various employee share option plans
(the "Plans"), options to purchase or subscribe ordinary shares to
its employees and officers. Under the various Plans, the exercise price
of options granted may be less than the fair market value of the ordinary
common shares at the date of grant.
The options must be exercised within seven to ten years of the date of grant
and typically vest equally over a period of three to four years.
F-25
Table of Contents
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Share option activity was as follows:
Number of options
Number of
Price
Average price
authorized not yet granted
options outstanding
per share
per share
Balances, December 31, 1999
9,781,100
47,623,950
€
0.47 -
€
2.29
€
1.80
Options exercised
—
(54,730,122
)
€
0.47 -
€
3.51
€
2.99
Options granted
(115,636,673
)
115,636,673
€
2.29 -
€
6.00
€
4.26
Options authorized
150,991,572
—
—
—
Balances, December 31, 2000
45,135,999
108,530,501
€
0.77 -
€
6.00
€
3.82
Options exercised
—
(5,114,850
)
€
0.77 -
€
3.51
€
1.62
Options granted
(2,554,590
)
2,554,590
€
2.80 -
€
7.96
€
2.97
Option terminated unexercised
9,208,833
(11,510,133
)
€
0.77 -
€
7.96
€
4.66
Options authorized
—
—
—
—
Balances, December 31, 2001
51,790,242
94,460,108
€
0.77 -
€
7.96
€
3.82
Options exercised
—
(1,097,450
)
€
0.83 -
€
2.29
€
1.51
Options granted
(31,389,884
)
31,389,884
€
0.84 -
€
2.68
€
1.24
Option terminated unexercised
48,734,723
(48,734,723
)
€
0.83 -
€
7.96
€
4.71
Options authorized
—
—
—
—
Balances, December 31, 2002
69,135,081
76,017,819
€
0.83 -
€
7.96
€
2.17
The following table summarizes information
with respect to share options outstanding
and exercisable at December 31, 2002:
Weighted average
Exercise
Number
remaining
Number
prices
of options
contractual life
of options
(in euros)
outstanding
(years)
exercisable
0.83
995,250
1.0
995,250
0.84
8,000,000
9.7
—
1.13
16,949,508
9.9
—
1.14
20,000
9.6
—
1.28
285,500
9.6
—
1.31
160,000
9.5
160,000
1.35
378,550
2.0
378,550
1.52
975,250
2.6
975,250
1.42
1,000,000
9.5
—
1.71
5,862,400
5.0
5,628,000
2.25
4,000,000
9.7
—
2.29
18,644,800
6.3
15,687,500
2.60
74,200
9.1
—
2.68
466,000
9.1
—
2.87
86,440
8.8
21,610
2.90
427,225
8.7
106,806
3.17
60,000
8.9
15,000
3.18
50,000
8.9
12,500
3.51
13,824,723
7.4
7,012,487
3.79
744,367
8.4
186,092
4.14
33,750
8.4
8,438
6.00
2,972,356
7.9
1,486,178
7.96
7,500
8.1
—
76,017,819
7.8
32,673,661
Weighted
average
exercice
price
(in euros)
2.17
On April 17, 2002, the Company's Board of
Directors voted to approve a plan whereby the
employees were offered an option to cancel
stock options previously granted under plans
adopted in 2000 and received reissued options
at a new exercise price. This plan was
launched on May 23, 2002 and 17,106,162 stock
options with an average exercise price of
€
4.52 were cancelled on June 5, 2002.
17,034,084 new stock options were granted on
December 10, 2002 at an exercise price of
€
1.13 corresponding to the market price of the
Company's shares on the date of the grant.
Warrants
In connection with the issuance of ordinary
shares on February 18, 2000 (see Note 20),
the Company issued 1,880,000 warrants. The
warrants were granted at a value of
€
3.51
on the date of issuance, resulting in an
underlying per share value of
€
3.20 using
the Black & Scholes option pricing model
with the following assumptions: dividend
yield of 0%, expected volatility of 45%,
risk free interest rate of 4.09% and an
expected life of 10 months. Each warrant
provides the holder the right to purchase
300 ordinary shares in
exchange for 10 warrants. The warrants were
exercised in full on September 28, 2000
resulting in the issue of 56,400,000 shares.
In July 2000, in connection with the hiring
of its former CEO, Mr. Perez, the Company
entered into a warrant agreement with an
executive search firm. Under this
agreement, the Company granted the right to
purchase 2,561,973 ordinary shares at a
purchase price of
€
2,3375 per share,
resulting in an underlying per share value
of
€
3.51 using the Black & Scholes option
pricing model with the following
assumptions: dividend yield of 0%, expected
volatility of 45%, risk free interest rate
F-26
Table of Contents
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
of 4% and an expected life of 12 months.
The warrants are exercisable at any time for
seven years after the grant date. As at
December 31, 2002, no warrant had been
exercised.
25. FINANCIAL INSTRUMENTS AND MARKET RELATED EXPOSURES
Adoption of IAS 39
As indicated in Note 2, the Company adopted
on January 1, 2001 IAS 39 "Financial
Instruments: Recognition and Measurement".
The adoption of IAS 39 resulted in a
cumulative after tax increase of
shareholders' equity as of January 1, 2001 of
€
4,090 thousand. The impact on
shareholders' equity at January 1, 2001 of
the adoption of IAS 39 is shown below. In
accordance with IAS 39, the comparative
financial statements for the year ended
December 31, 2000 were not restated.
Summary of impact of adopting IAS 39 at January 1, 2001:
(in thousands of euros)
Other
Retained
comprehensive
earnings
income
Total
Hedges not qualifying as effective
(5,003
)
—
(5,003
)
Hedges qualifying as effective
—
8,807
8,807
Unrealized gains and losses on
available-for-sale financial assets
—
286
286
Impact as at January 1, 2001
on shareholders' equity,
net of deferred income taxes
(5,003
)
9,093
4,090
In accordance with the transitional
requirements of IAS 39, the Company recorded
in 2001 a net loss of
€
5,003 thousand in
retained earnings to recognize at fair value
all derivatives not qualifying as effective
hedging instruments. The Company also
recorded a net gain of
€
8,807 thousand in
other comprehensive income to recognize at
fair value all derivatives qualifying as
effective hedging instruments. These amounts
were net of deferred income taxes. The
Company also recorded a net gain of
€
286
thousand in other comprehensive income to
recognize at fair value its
available-for-sale financial assets.
Consequently, comprehensive income was
impacted by
€
9,093 thousand as at January 1,
2001. This amount was recorded in foreign
exchange result during 2001.
Foreign exchange exposure
As indicated in Note 2, the Company uses
financial instruments to manage its foreign
currency exposure incurred in the normal
course of business.
The policy of the Company is to hedge its
currency risk exposure arising from
commercial transactions and financing. In
order to achieve this objective, the Company
uses foreign currency derivative
instruments, entering into foreign exchange
swaps and forward contracts and purchasing
or selling foreign exchange option
contracts. Written options are only used as
part of combination strategies. The
derivative instruments are traded "over the
counter" with major financial institutions.
The Company does not enter into any
derivative contracts for purposes other than
hedging.
Most of the derivative instruments that the
Company uses to manage its foreign exchange
risk exposure qualify as cash flow hedges
under IAS 39, including, since October 1,
2002, foreign exchange swaps rolling over
prior currency risk hedging positions.
Some derivatives do not qualify as cash flow
hedges under IAS 39. These include:
(i)
the foreign exchange swaps entered into by the Company to meet the group affiliates financing requirements because they are managed on an aggregate basis, and
(ii)
the written options comprising the call component of strategies hedging our commercial exposure that are not recognized as Hedge Effective by definition under IAS 39.
F-27
Table of Contents
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Outstanding forward contracts euro counter
value is calculated as described below are at
closing dates. As at December 31, 2002, such
contracts are broken down into two
categories:
(i)
those meeting hedging qualification criteria under IAS 39, and
(ii)
others that do not meet hedge accounting criteria:
(in thousands of euros)
December 31
2002
2001
2000
Purchased
Sold
Purchased
Sold
Purchased
Sold
items
items
items
items
items
items
Derivatives qualifying
as Hedge Effective under IAS 39
GBP
5,633
6,149
—
8,017
36,774
35,418
SGD
15,097
2,236
2,450
—
123,121
122,414
USD
12,201
52,870
—
45,404
40,034
328,420
ZAR
—
4,990
—
6,364
—
4,713
Other
10,329
8,509
309
1,429
15,368
25,021
Derivatives not qualifying
as Hedge Effective under IAS 39
GBP
5,432
6,902
2,787
11,309
—
—
SGD
—
—
73,952
61,241
—
—
USD
8,991
192,314
59,051
292,951
—
—
ZAR
—
—
588
1,838
—
—
Other
325
11,411
20,528
29,937
—
—
Total forwards
58,008
285,381
159,665
458,490
215,297
515,986
Forward contracts euro counter value is
calculated using the contract forward
rate.
Outstanding optional contracts at closing date are as follows.
As at December 31, 2002, such contracts
are broken down into two categories: (i)
those meeting hedging qualification
criteria under IAS 39 and (ii) others that
do not meet hedge accounting criteria:
(in thousands of euros)
December 31
2002
2001
2000
Purchased
Sold
Purchased
Sold
Purchased
Sold
items
items
items
items
items
items
Derivatives qualifying
as Hedge Effective under IAS 39
GBP
—
12,598
—
3,205
37,076
8,330
USD
—
109,802
6,794
49,615
164,563
22,606
SGD
11,434
—
9,259
—
74,060
20,182
Other
—
—
1,371
—
8,185
2,817
Derivatives not qualifying
as Hedge Effective under IAS 39
GBP
—
3,090
—
—
—
—
USD
—
26,918
—
—
—
—
SGD
—
—
—
—
—
—
Other
—
—
—
—
—
—
Total options
11,434
152,408
17,424
52,820
283,884
53,935
F-28
Table of Contents
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Option contracts euro counter value is
calculated using the contract strike rate.
Hedge effective option contracts hedge long
exposure (currency put/call, euro
call/put). In some cases, purchased and
sold options are used as combinations
(strategies).
On December 31, 2002 outstanding derivative
financial instruments qualifying for hedge
accounting have been entered into as a hedge
of highly probable cash flows denominated in
various currencies as described above, and
according to the identified forecasted
commercial transactions data collection.
Derivatives allow the Company to sell or
purchase at a predetermined rate with
settlement date that range from one month up
to one year, according to the hedging
relationship allocation performed by year and
by quarter. The euro counter value of
derivatives are presented in the following
table with a conversion at the contracts'
strike.
(in thousands of euros)
Sales
Purchases
GBP
SGD
USD
USD
of other
of other
sales
purchases
sales
purchases
currencies
currencies
Derivatives qualifying
as Hedge Effective under IAS 39
Classification by allocation
Three-month period ending March 31, 2003
7,860
12,165
84,815
12,201
13,998
14,525
Three-month period ending June 30, 2003
6,162
2,932
41,307
—
867
1,437
Three-month period ending September 30, 2003
4,725
5,778
36,550
—
870
—
Three-month period ending December 31, 2003
—
5,656
—
—
—
—
Derivatives not qualifying
as Hedge Effective under IAS 39
Classification by allocation
Three-month period ending March 31, 2003
6,902
—
192,314
8,991
11,411
5,757
Three-month period ending June 30, 2003
3,090
—
10,870
—
—
—
Three-month period ending September 30, 2003
—
—
16,048
—
—
—
Three-month period ending December 31, 2003
—
—
—
—
—
—
Total
28,739
26,531
381,904
21,192
27,146
21,719
Net unrealized gain on hedging
instruments qualifying as effective
As of December 31, 2002, unrealized gain of
€
6,698 thousand net of taxes were
recognized in equity, under comprehensive
income, as being the effective portion of
hedging instruments fair value changes
associated with forecasted transactions (see
Note 22).
Interest rate exposure
As the Company is not significantly exposed
to risk associated with interest rates
fluctuations, it has not entered into any
derivative contracts to hedge interest rate
risk.
Financial counterparty risk
Derivatives and all significant cash
deposits are undertaken with major financial
institutions having an investment grade
rating. Regarding cash deposits, a few
exceptions exist in certain countries for
operational reasons when individual amounts
are not significant.
Fair value of financial instruments
The following table provides information
about the carrying amounts and estimated
fair values of certain of the Company's
financial instruments, excluding cash and
cash equivalents, cash deposits, accounts
receivable, accounts payable and accrued
expenses.
Following the adoption of IAS 39 in January
2001, the Company measures at fair value
assets and liabilities qualified as trading
or available-for-sale. Therefore, there is no
difference between the carrying amounts and
the estimated fair values of these assets and
liabilities as at December 31, 2002.
The fair value of investments in equity
securities is determined based on quoted
market prices if companies are publicly
listed. If the companies are not publicly
listed, the fair value of investments in
equity securities is determined by valuation
techniques appropriate for the nature of the
security. The fair market value of loans,
deposits and other non-current assets is
determined by discounting the nominal amount
using appropriate interest rates.
The fair value of the Company's fixed rate
long-term debt, including capital leases, is
determined by discounting estimated future
cash flows using borrowing rates prevailing
at year-end for similar maturities and
contracts. The book values of the Company's
long-term floating-rate borrowings
approximate fair value.
The fair value of forward exchange
contracts and of currency options
contracts is determined as described in
Note 2 "Summary of significant accounting
policies".
F-29
Table of Contents
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(in thousands of euros)
December 31
2002
2001
2000
Net book
Fair
Net book
Fair
Net book
Fair
value
value
value
value
value
value
BALANCE SHEET
Assets
Investments in equity securities
2,080
2,080
17,066
17,066
11,183
11,626
Loan, deposits and other non-current assets
32,132
32,132
99,701
99,701
187,405
186,898
Total assets
34,212
34,212
116,767
116,767
198,588
198,524
Liabilities
Long-term debt (including current portion and capital lease):
Fixed rates
—
—
—
—
18,100
18,000
Floating rates
48,638
48,638
36,329
36,329
24,931
24,900
Total liabilities
48,638
48,638
36,329
36,329
43,031
42,900
Hedging instruments on foreign currency contracts
(in other current assets or other current liabilities)
10,371
10,371
(5,178
)
(5,178
)
23,284
25,340
Options contracts (in cash and cash equivalent)
3,266
3,266
2,187
2,187
8,909
10,943
Total
(1)
(off-balance sheet
(2)
in 2000)
13,637
13,637
(2,991
)
(2,991
)
32,193
36,283
(1)
In the amount reported above, assets are presented as positive amounts and liabilities as negative amounts.
(2)
The net book value and fair value of forward foreign exchange contracts and
currency option contracts include unrealized gains and losses relating to
hedges of firm and anticipated commitments, which have been deferred.
Unrealized gains are recorded in the line item "Other current liabilities" and
unrealized losses in the line item "Other current assets."
26. COMMITMENTS AND CONTINGENCIES
Guarantees
As of December 31, 2002, the amount of
guarantees delivered by the Company
reached
€
25,157 thousand and represents
mainly performance bonds and bid
bonds, as part of normal operations. Financial assets worth
€
7,448 thousands
were pledged to issue these guarantees.
As of December 31, 2002, guarantees consist of the following:
(in thousands of euros)
Commercial bid and performance bonds
15,752
Other guarantees
9,405
Total guarantees
25,157
Purchase agreements
As of December 31, 2002, the Company had
purchase commitments for microprocessor
chips with various suppliers aggregating
approximately
€
29.7 million.
Legal proceedings
In October 2001, the United States Court of
Appeals for the Ninth Circuit affirmed a
District Court judgment against the Company
in favor of Humetrix Inc, based on the
claimed breach of an agreement to jointly
market products in the US health care sector.
The judgment was in the amount of US$ 15
million plus interest. The Company's
petition seeking a rehearing was denied in
November 2001, and the parties entered into a
Mutual Release and Settlement Agreement on
March 25, 2002. As a result of the above
decision, the Company recorded a charge of
€
18.1 million, adversely impacting 2001
operating results and resulting in a total
current liability (including a previously
existing provision) of
€
19.4 million in the
balance sheet as at December 31, 2001. The
Company paid all amounts due under the Mutual
Release and Settlement Agreement in 2002, and
no further obligations remain.
In late
November 2002, three French subsidiaries,
including Gemplus SA, received a tax
assessment primarily relating to the fiscal
years 1998 through 2000. The total amount of
tax assessed, including penalties and
interests, approximates
€
120 million.
This amount was reduced to
€
83.5 million in
April 2003. The
Company believes that significant aspects of
the claim are without justification and
intends to vigorously contest the tax
assessment (see Note 19). As at December 31,
2002, a provision for risk amounting to
€
34,790 thousand is recorded under non-current
liabilities.
In addition to the litigation and claims
mentioned above, the Company is subject to
legal proceedings, claims, and litigation
arising in the ordinary course of business.
The Company's management does not expect
that the ultimate costs to resolve these
matters will have a material adverse effect
on the Company's consolidated financial
position, results of operations, or cash
flows.
See "Item 8. Financial
Information — Legal Proceedings" for additional information.
F-30
Table of Contents
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Lease commitments
The Company leases some of its
manufacturing and office space under
non-cancelable operating leases. These
leases contain various expiration dates and
renewal options.
Future minimum annual lease payments under
all non-cancelable operating leases as of
December 31, 2002 are as follows:
December 31
(in thousands of euros)
2003
8,490
2004
7,395
2005
5,841
2006
4,593
2007
4,387
Thereafter
2,722
Total rental expenses for all operating
leases except those with terms of one month
that were not renewed were
€
14,042 thousand,
€
12,499 thousand and
€
14,242 thousand for
the years ended December 31, 2002, 2001 and
2000 respectively.
Summary of Contractual Obligations
Contractual obligations and purchase
commitments are payable as follows as of December 31, 2002:
Less than
Between one
More than
(in millions of euros)
Total
one year
and 5 years
five years
Long term debt
—
—
—
—
Capital leases
60.9
8.1
29.8
23.0
Lease commitments
33.4
8.5
22.2
2.7
Purchase commitments *
39.2
39.2
—
—
Other long-term commitments
—
—
—
—
Total
133.5
55.8
52.0
25.7
*
Includes microprocessor chips
purchase commitments amounting to
€
29.7
millions.
As of December 31, 2002, the Company does not have any other commitments
that could have a significant impact on either its financial situation,
statement of income or cash flows.
27.
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Cash paid for interest and income taxes were as follows:
(in thousands of euros)
Years ended December 31
2002
2001
2000
Cash paid for:
• Interest
1,175
2,928
3,061
• Income taxes
1,729
14,338
22,308
28.
WAGES, BENEFITS AND NUMBER OF EMPLOYEES (UNAUDITED)
Wages and benefits including social security
taxes amounted to approximately
€
296
million,
€
339 million, and
€
291 million
for the years ended December 31, 2002, 2001
and 2000 respectively.
Headcount was 5,680, 6,721 and 7,870 as of
December 31, 2002, 2001 and 2000
respectively.
29.
RELATED PARTY TRANSACTIONS
During 2002, the Company paid amounts
totaling
€
10,629 thousand in connection
with the resignation and cessation,
respectively, of its former Chief Executive
Officer, Mr. Perez, on December 19, 2001 and
its former Chairman of the Board of
Directors, Dr. Lassus, on January 10, 2002.
In 2000, one of the Company's indirect
subsidiaries granted to Dr. Lassus a loan to
permit him to exercise stock options, pursuant
to his then-current terms of employment.
Pursuant to an
agreement dated December 19, 2001, as of January 10, 2002 Mr. Lassus
ceased his office as Chairman of our board of directors and resigned
from all other positions that he held with our company and any of its
affiliates, except for his position as a non-executive director of
our company. As of January 10, 2002, Mr. Lassus was no longer an
employee of our company or any of its affiliates. Effective June 30, 2002, the Company recorded a financial
expense of
€
67.6 million following the
write-down of this loan. The write-down was
recorded to cover the risk of possible
non-reimbursement, as the Company had not yet
received the guarantees of reimbursement
(including a pledge of his option shares) that
Dr. Lassus was required to provide, inter alia, and as confirmed in the letter agreement
signed with him on December 19, 2001. The
Company has not forgiven the loan and is
seeking repayment by Dr. Lassus through legal
proceedings. In 2002, the Company's Board of
Directors established a special committee that
recommended that it was appropriate for the
Company's indirect subsidiary to take action
to seek security for the loan and its
repayment. The Company's Board of Directors
agreed on the special committee's
recommendations based on the opinion of
special independent legal counsel. In January
2003, the Company and its indirect subsidiary
initiated arbitration proceedings against Dr.
Lassus intending to seek inter alia security
for the loan and its repayment.
During 2001, the Company entered into an
agreement with a service company, Differentis, whose Chief
Executive Officer, Mr. Ronald Mackintosh,
also served on our Board of Directors. Mr.
Mackintosh served as our interim Chief Executive Officer from December 19, 2001 to
August 31, 2002 and resigned as Chief
Executive Officer of the service company
effective on December 19, 2001. He remains a
member of its Board of Directors and our
Board of Directors. This service company was
appointed to provide an independent review of
the Company's management, information,
organization and business systems as well as
identification and recommendation of
improvements. In 2002, the Company continued
to use the services of this company and the
total cost recorded in its consolidated
statement of income in 2002 for this
arrangement amounted to
€
1,737 thousand.
During 2000, the Company entered into loan
agreements with certain senior executives of
the Company. These loans were partially
reimbursed in 2001, as discussed further
below in Note 31. In December 2001, the
Company recorded severance expenses in the
amount of
€
25,691 thousand due to Mr. Perez and to
Dr. Lassus in connection with their
resignation as Chief Executive Officer of
the Company and cessation as Chairman of the
Board of Directors, respectively, as
described further below in Note 31.
F-31
Table of Contents
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Pursuant to the terms of the loans granted
to Messrs. Perez and Lassus in 2000, one of
the Company's indirect subsidiaries agreed
in 2001 to arrange for the interest on these
loans to be forgiven starting July 1, 2001,
and to assume any income tax resulting from
this forgiveness. As described in Note 13,
the Company recorded in 2001 a compensation
expense of
€
3,585 thousand corresponding to
the income tax resulting from the
forgiveness of interest.
During the years 2001 and 2000, the Company
had a financial consulting agreement with a
firm that included an individual who served
on the Company's Board of Directors. The
consulting services primarily related to
investment and business opportunity advice
for the Company. The Company recognized
€
20,785 thousand in the year 2000 for such
advice. Effective in September 2000, this
consultant no longer serves on the Board.
During 2001, the Company recognized
€
319
thousand according to this consulting
agreement, which was terminated December 31,
2001.
During 2001, the Company reimbursed Dr.
Lassus funds that he had advanced in a
project involving a number of consultants
who provided smart card and related
business services, including services
linked to card operating systems and card
management systems. The funds, in the
amount of
€
160 thousand (GBP 100
thousand), were reimbursed to Dr. Lassus in
November 2001.
30.
SEGMENT INFORMATION
As of January 1, 2002, the Company
elected to change the reporting of its
business segments, and restated its prior
periods' presentation to conform to this
revised segment reporting.
All the activities formerly reported as part
of the Network Systems segment and the Other
operating segment have been transferred to
the Financial Services and Security segment,
except the access control systems activities
of the Company's former subsidiary SkiData
and the electronic smart labels solutions
activities of the Company's former Tag
subsidiary, which have been reported
separately under "Disposed Operations", as
they were sold during the third quarter of
2001.
Financial Services and Security segment
Consequently, the Financial Services and
Security segment includes systems and
services based on chip card technology in
areas such as financial services,
identification, health care, corporate
security, loyalty programs, transportation
access, pay-television applications,
e-business security activities as well as
magnetic stripe plastic cards for banking
applications. The Company's activities in
this segment also include the sales of smart
card readers to customers as well as smart
card interfacing technologies to device
manufacturers.
Telecommunications segment
There is no change with respect to the
Telecommunications segment, which
includes the Company's wireless
solutions, as well as prepaid telephone
cards and other products.
This change in business segment reporting is
consistent with the changes in the Company's
financial reporting structure incorporated
in its management reporting. The Company's
two operating segments, the
Telecommunications segment and the Financial
Services and Security segment, have a
different customer base, and each of them
has separate financial information
available. These segments are evaluated
regularly by the management in deciding how
to allocate resources and in assessing
performance. The Company's management makes
decisions about resources to be allocated to
the segments and assesses their performance
using revenues and gross margins. The
Company does not identify or allocate assets
to the operating or geographic segments and
the management does not evaluate the
segments on this criterion on a regular
basis.
The accounting policies of the segments are
substantially the same as those described in
the summary of significant accounting
policies as discussed in Note 2.
The following tables present selected
data for the years ended December 31,
2002, 2001 and 2000:
(in thousands of euros)
Years ended December 31
2002
2001
2000
Net sales
Telecommunications
544,471
681,933
883,695
Financial Services and Security
242,963
296,775
233,217
Disposed operations
—
44,278
87,688
Net sales
787,434
1,022,986
1,204,600
Gross profit
Telecommunications
154,526
228,814
378,874
Financial Services and Security
45,186
62,594
43,636
Disposed operations
—
16,062
31,376
Gross profit
199,712
307,470
453,886
Research and development
expenses
(92,240
)
(112,885
)
(90,778
)
Reversal of research credit
allowance
—
—
12,486
Selling and marketing expenses
(112,227
)
(165,276
)
(158,545
)
General and administrative
expenses
(89,896
)
(110,657
)
(89,666
)
Litigation expenses
—
(18,120
)
—
Management severance expenses
—
(25,691
)
—
Restructuring expenses
(90,003
)
(28,466
)
—
Goodwill amortization
(47,117
)
(27,162
)
(11,204
)
Operating income (loss)
(231,771
)
(180,787
)
116,179
Note: Disposed operations include SkiData
and Tag activities, which were sold during
the third quarter of 2001.
F-32
Table of Contents
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
The following is a summary of sales to
external customers by geographic area for
the years ended 2002, 2001 and 2000:
(in thousands of euros)
Years ended December 31
2002
2001
2000
Americas
171,717
231,606
185,400
Europe, Middle-East, Africa
416,220
473,996
613,612
Asia
199,497
273,106
317,900
Disposed operation
—
44,278
87,688
Net sales
787,434
1,022,986
1,204,600
Note: Disposed operations include SkiData
and Tag activities, which were sold during
the third quarter of 2001, and were
reported primarily in the Europe,
Middle-East and Africa region.
Revenues from external customers are based
on the customers' billing location.
Accordingly, there are no sales transactions
between operating segments. The Company
does not allocate long-lived assets by
location for each geographic area. The
Company's country of domicile is Luxembourg
in which sales to customers are
insignificant.
No single customer accounted for more than
10% of the Company's sales during the years
ended December 31, 2002, 2001 and 2000.
31.
MANAGEMENT SEVERANCE EXPENSES
In 2001, the Company recorded a total
€
25,691 thousand charge in its Consolidated
Statement of Income with respect to the
changes in its management decided at its
Board meeting of December 19, 2001.
There were no accruals in 2002 for
management severance expenses relating to
Messrs. Perrez and Lassus.
During 2000, the Company entered into an
employment agreement with Mr. Perez, its
former CEO, whereby he was granted 10,247,893
free shares, 10,247,893 service options and
10,247,893 performance options. The stock
options had an exercise price of
€
3.51 per
share. In addition, one of the Company's
indirect finance subsidiaries made loans to
Mr. Perez between September 2000 and March
2001 in an aggregate amount of
€
88.9
million. Each loan bore interest at the rate
provided in Section 1274 (b) (2) (b) of the
US Internal Revenue Code of 1986, which is
based on the US Federal short-term rate.
Therefore interest rates ranged from 5.58% to
6.4% per annum. These loans were made to
allow Mr. Perez to exercise the stock options
and pay the exercise price (for an aggregate
amount of
€
71.9 million) and taxes related to the
free shares (for an aggregate amount of
€
17 million) and were secured by the
shares purchased by Mr. Perez upon
exercise of the options.
Concurrently with the issuance of free shares
and options to Mr. Perez, the Company issued
10,247,893 free shares and 20,495,786 stock
options to Dr. Lassus, the founder of the
Company and former Chairman of the Board
of Directors. The stock options had an
exercise price of
€
3.51 per share. In
addition, one of the Company's indirect
finance subsidiaries has made loans to Dr.
Lassus in an aggregate amount of
€
71.9
million on the same interest and repayment
terms as the loans to Mr. Perez. Dr. Lassus
used the loan proceeds to exercise the stock
options that were granted to him. On November
2, 2001, the Company announced that its Chief
Executive Officer, Mr. Perez, had signed an
agreement with one of its indirect
subsidiaries pursuant to which he committed
to return all of the Gemplus International SA
shares that he received in August and
September 2000 to such indirect subsidiary of
the Company, in reimbursement of the loans
that such indirect subsidiary made to him in
2000 and in 2001.
Mr. Perez transferred these shares pursuant
to two agreements. The first agreement was
signed on October 20, 2001. Mr. Perez
transferred 18,574,306 shares to the
Company's indirect subsidiary, at a price
of
€
2.79 per share, representing
€
51,822
thousand that were recorded in reimbursement
of a portion of the loans in the same
amount. The difference between the value of
the shares pursuant to the agreement (
€
2.79
per share) and the market closing price of
the Company's shares as at the time of the
effective transfer of the shares (
€
3.12 per
share) was reflected in shareholders'
equity, resulting in an increase of
€
6,130
thousand of the caption "paid-in capital".
The second agreement was signed on December
19, 2001, at the time Mr. Perez resigned his
position as President and Chief Executive
Officer of the Company. Mr. Perez
transferred 12,169,373 shares to the
Company's indirect subsidiary, at a price of
€
2.86 per share, representing the market
closing price of the Company's shares as at
December 19, 2001, totaling
€
34,804 thousand. The difference between
the fair value of the shares and the
remaining loan outstanding was recorded in
the Company's Consolidated Statement of
Income, resulting in a charge of
€
6,838
thousand.
Mr. Perez was also entitled to a tax
reimbursement on the portion of the loan
that was forgiven. Such reimbursement was
accrued in 2001 in an amount of
€
6,502
thousand. In addition, Mr. Perez is
entitled, pursuant to his employment
agreement, to receive a severance payment,
that was accrued in 2001 in an amount of
€
1,161 thousand. Consequently, the total
charges associated with Mr. Perez's
resignation amounted to
€
14,501 thousand. Such amounts were paid
in 2002, with the exception of an amount of
€
337 thousand included under the caption
other current liabilities in the Company's
balance sheet as at December 31, 2002 as a
reserve for the tax reimbursement.
Pursuant to an
agreement dated December 19, 2001, as of January 10, 2002 Mr. Lassus
ceased his office as Chairman of our board of directors and resigned
from all other positions that he held with our company and any of its
affiliates, except for his position as a non-executive director of
our company. As of January 10, 2002, Mr. Lassus was no longer an
employee of our company or any of its affiliates. In accordance with
an agreement signed with Dr. Lassus in 2000,
the replacement of Dr. Lassus as Chairman of
the Board required the Company to make a
payment to Dr. Lassus in the amount of US$
12 million (
€
13,450 thousand), such payment
representing partly a severance payment (
€
11,190 thousand) and partly the cost of a
pledge of Dr. Lassus' 20,495,786 option
shares as security for the loans (
€
2,260
thousand). The cost of the pledge was
deferred in the balance
F-33
Table of Contents
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
sheet as at December 31, 2001. As discussed
in Note 29 "Related party transactions", the
shares ultimately were not pledged, and
therefore the cost of the pledge was charged
to expenses in the Company's 2002
Consolidated Statement of Income. The total
charges for the fiscal year ended December
31, 2001 associated with Dr. Lassus'
cessation as Chairman amounted to
€
11,190
thousand. As at December 31, 2002, an amount
of
€
9,638 thousand included under the
caption other current liabilities, was
payable upon fulfillment of certain specific
conditions pursuant to the agreement with Dr.
Lassus dated December 19, 2001, including the
condition of pledging his option shares.
Such conditions have not been fulfilled. The
Company has not paid this sum, and claims it
in offset against amounts payable pursuant to
the loan granted to Dr. Lassus to permit him
to exercise stock options in 2000.
32.
DIFFERENCES BETWEEN INTERNATIONAL ACCOUNTING STANDARDS AND US GENERALLY ACCEPTED ACCOUNTING PRINCIPLES
The Company's consolidated financial
statements are prepared in accordance with
IAS, which differ in certain respects from
generally accepted accounting principles in
the United States (US GAAP).
The principal differences between IAS and
US GAAP are presented below together with
explanations of certain adjustments that
affect consolidated net income and total
shareholders' equity:
(Note 32 - continued)
(in thousands of euros, except shares and per share amounts)
Years ended December 31
2002
2001
2000
Net income (loss) in accordance with IAS
(320,891
)
(100,220
)
99,078
Capitalized development costs
(1,803
)
(3,227
)
(2,291
)
Hedge accounting
—
—
8,030
Share options accounting
(2,887
)
69,262
(229,724
)
Purchase accounting
(2,351
)
(8,104
)
—
Goodwill amortization
49,177
—
—
Other differences
360
564
1,256
Deferred tax effect of US GAAP adjustments
(1,277
)
1,057
408
Total differences between US GAAP and IAS
41,219
59,552
(222,321
)
Net income (loss) per US GAAP before change in accounting principle
(279,672
)
(40,668
)
(123,243
)
Changes in accounting principles:
Hedge accounting
—
(8,807
)
—
Net income (loss) per US GAAP
(279,672
)
(49,475
)
(123,243
)
Change in cumulative other comprehensive adjustment in accordance with IAS
12,538
(4,344
)
(2,438
)
Change in effect of IAS/US GAAP adjustments on other comprehensive income
(3,233
)
(5,054
)
(9,476
)
Other comprehensive income (loss), net of tax
9,305
(9,398
)
(11,914
)
Comprehensive income (loss)
(270,367
)
(58,873
)
(135,157
)
Net income (loss) per share before changes in accounting principles:
• Basic
(0.46
)
(0.06
)
(0.25
)
• Diluted
(0.46
)
(0.06
)
(0.25
)
Changes in accounting principles:
• Basic
—
(0.01
)
—
• Diluted
—
(0.01
)
—
Net income (loss) per share:
• Basic
(0.46
)
(0.08
)
(0.25
)
• Diluted
(0.46
)
(0.08
)
(0.25
)
Number of shares:
• Basic
606,222,660
636,992,392
497,523,946
• Diluted
606,222,660
636,992,392
497,523,946
F-34
Table of Contents
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(in thousands of euros)
December 31
2002
2001
2000
Shareholders' equity in accordance with IAS
860,451
1,167,762
1,384,995
Capitalized development costs
(7,321
)
(5,518
)
(2,291
)
Hedge accounting
—
—
4,090
Non-recourse loans
(4,918
)
(71,856
)
(143,712
)
Purchase consideration
(10,455
)
(8,104
)
—
Goodwill amortization
49,177
—
—
Effect of IAS/US GAAP adjustments on other comprehensive income
(8,144
)
(4,911
)
143
Other differences
50
(310
)
(874
)
Deferred tax effect of US GAAP adjustments
(30
)
1,224
408
Total difference between US GAAP and IAS
18,359
(89,475
)
(142,236
)
Shareholders' equity in accordance with US GAAP
878,810
1,078,287
1,242,759
Capitalized development costs
The Company capitalizes certain research and
development costs other than for software
development where it is expected that the
product under development will be produced
and will be profitable. Such capitalized
research and development costs are amortized
over a period no longer than three years.
Under US GAAP, research and development costs
other than for software development are
expensed as incurred.
Hedge accounting and financial instruments
Until the adoption of IAS 39, the Company
allocated certain instruments designed as
hedge to the underlying transactions and
therefore the gains and losses arising from
the performance of the instruments on
forecasted transactions were deferred to
future periods. Hedge accounting on
forecasted transactions was not allowed by
US accounting standards and contracts were
marked to market under US GAAP with changes
in fair value recorded in the Statement of
Income in the current period.
Commencing January 1, 2001 new standards are
effective for the Company under both IAS and
US GAAP with respect to accounting policies
of financial instruments, IAS 39 "Accounting
for Financial Instruments and SFAS No. 133
(SFAS 133), "Accounting for Derivative
Instruments and Hedging Activities", as
amended by SFAS No. 137 and SFAS No. 138.
After implementation of IAS 39, there are no
reconciling items between IAS and US GAAP
related to hedge accounting when reporting
net income.
Share options accounting
Certain of the Company's share option
plans (Note 24) are treated as
compensatory plans under US GAAP.
For the purpose of this reconciliation, the
Company has adopted Accounting Principles
Board Opinion No. 25 "Accounting for Stock
Issued to Employees'' (APB 25) and related
interpretations in accounting for its
employees share options.
Under APB 25, unearned compensation is
recognized as a reduction in shareholders'
equity when the exercise price of share
options is below the fair value of the
underlying shares on the grant date.
Unearned compensation is amortized to
compensation expense over the vesting period
of the applicable options. From 1989 to
December 31, 2002, the Company granted share
options to employees, which generally vest
over four years, with exercise prices at or
below the fair value of the underlying
shares.
For purposes of financial reporting under US
GAAP, the Company is required to follow the
disclosure provisions of Statement of
Financial Accounting Standards No. 123 (FAS
123), "Accounting for Stock-Based
Compensation", which requires that the
Company disclose pro forma net income and
earnings per share as if the Company's
compensation expense had been calculated
using the minimum value method prescribed by
FAS 123. Had compensation expense for the
Plans been determined based upon the
estimated grant date fair value using the
fair value method as provided by FAS 123, the
Company's net income and earnings per share
for the years ended December 31, 2002, 2001
and 2000, would have been as follows:
(in thousands of euros, except for net income per share)
Years ended December 31
2002
2001
2000
Net income per US GAAP:
• As reported
(279,672
)
(49,475
)
(123,243
)
• Pro forma
(254,754
)
(139,700
)
(134,770
)
Net income per share
per US GAAP — Proforma:
• Basic
(0.42
)
(0.22
)
(0.27
)
• Diluted
(0.42
)
(0.22
)
(0.27
)
F-35
Table of Contents
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
The fair value of each option grant is
estimated on the date of grant using the
Black & Scholes option pricing model, with
the following assumptions for grants made
during 2002, 2001 and 2000: dividend yields
of 0% for all periods; annual risk-free
interest rate of 3.3%, 4.1% and 5% for 2002,
2001 and 2000 respectively; expected
volatility of 83%, 79% and 30% for 2002, 2001
and 2000 respectively; and the expected
option vesting period of four years for all
periods.
In 2000, the Company entered into employment
arrangements with Mr. Perez and Dr. Lassus,
whereby each was granted a certain number of
free shares and a certain number of service
and performance options (see Note 31). Each
of the option agreements included loan
provisions whereby the two individuals could
obtain loans representing 100% of the option
exercise price. The loan agreements included
certain prepayment features and, as a result,
the related amount of interest to be paid on
the loans was uncertain and, therefore, the
ultimate option price was uncertain. Under US
GAAP, when the number of shares and the
option price are unknown, variable plan
accounting must be followed. Under variable
plan accounting, compensation cost is
re-measured each period based on the
difference between the exercise price and the
fair market value of the stock. This
re-measurement occurs up until there is a
measurement date (i.e. the date at which both
the number of shares and the option or award
prices are known). Both the service options
and performance options granted to these
individuals are accounted for under variable
plan accounting when determining employee
compensation expense under US GAAP. A
compensation expense of
€
94,080 thousand was
recorded in 2000 with respect to the service
options and performance options granted to
these individuals, which was reversed in 2001
when the fair market value of the stock went below
the exercise price of the options. No
compensation expense or benefit was recorded
in 2002 with respect to such issuances. In US
GAAP, pursuant to EITF 95-16 "Accounting for
Stock Compensation Arrangements with Loan
Features", the loans are presented as a
reduction to shareholders' equity, and interest on the loans is presented as a
reduction of compensation expense. The
Company recorded interest with respect to
these loans in the amount of
€
3,139 thousand
in 2000,
€
4,877 thousand in 2001 and
€
1,706 thousand in 2002 (net of provision).
They were reflected in the Consolidated
Statement of Income in interest income under
IAS and in general and administrative
expenses under US GAAP.
Purchase consideration
Under US GAAP, certain considerations
exchanged in a business combination that
requires continued employment of the selling
shareholders are treated as compensation
expenses. Under IAS, these considerations
are treated as part of the purchase price
allocation.
Goodwill amortization
On January 1, 2002 the Company adopted the
provisions of the Statement of Financial
Accounting Standard SFAS No 142, "Goodwill
and other intangible assets", issued by the
Financial Accounting Standards Board
("FASB") in July 2001. SFAS 142 requires
that goodwill and intangible assets with
indefinite lives no longer be amortized but
be tested for impairment at least annually
in accordance with the provisions of SFAS
142. Statement 142 also requires that
intangible assets with definite useful lives
be amortized over their respective estimated
useful lives to their estimated residual
values and be reviewed for impairment in
accordance with SFAS No 144, "Accounting for
the impairment of long-lived assets to be
disposed of", which was also adopted on
January 1, 2002.
During 2002, as a result of its adoption,
the Company did not recognize amortization
expense under US GAAP. The Company has
reassessed the useful lives of its
intangible assets and has not made any
adjustment. The Company did not reclassify
any indefinite-life intangible assets from
goodwill, nor did the Company reclassify any
intangible assets as goodwill. Based on
impairment testing, the Company recorded in
2002 a goodwill write-down of
€
22,124
thousand under IAS (see Note 8). This
write-down was reversed under US GAAP
pursuant to the provisions of SFAS 142.
For the years ended December 31, 2001 and
2000, the net income (loss) adjusted for
effect of no amortization of goodwill is as
follows:
(in thousands of euros)
Years ended December 31
2001
2000
Net loss in accordance with US GAAP
(49,475
)
(123,243
)
Goodwill amortization
27,162
11,204
Net loss adjusted for effect
of no amortization of goodwill
(22,313
)
(112,039
)
Adjusted net income (loss) per share:
• Basic
(0.04
)
(0.23
)
• Diluted
(0.04
)
(0.23
)
The allocation of goodwill to the
Company's reportable segments is as
follows:
(in thousands of euros)
Financial
Services
Telecommunications
and Security
Total
December 31, 2001
32,906
83,674
116,580
Additions
—
1,093
1,093
Effect of change for
acquisitions
and disposals
5,511
—
5,511
Exchange rate differences
(384
)
(1,340
)
(1,724
)
December 31, 2002
38,033
83,427
121,460
Other comprehensive income
For the purpose of this reconciliation,
the Company has adopted the accounting
treatment prescribed by SFAS No 130,
"Reporting Comprehensive Income'' (FAS
130). FAS 130 establishes standards
F-36
Table of Contents
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
for reporting comprehensive income (loss)
and its components in financial statements.
Comprehensive income (loss), which includes
all changes in equity during a period from
non-owner sources, is composed primarily of
the unrealized gains and losses on
marketable equity investments, net of tax,
and foreign currency translation
adjustments, not recorded in the
consolidated statements of income. After
implementation of IAS 39, there are no
reconciling items between IAS and US GAAP
related to other comprehensive income,
except for the accounting for pension (
€
4,712 thousand in 2001,
€
8,008 thousand in
2002) and for the foreign currency
translation adjustment effect of US GAAP
adjustments (
€
199 thousand in 2001,
€
136
thousand in 2002).
FASB Statement No 87, "Employers' Accounting
for Pension", requires the Company to
recognize a minimum pension liability equal
to the amount by which the actuarial present
value of the accumulated benefit obligations
exceeds the fair value of plan's assets,
i.e. the unfunded amount. This liability is
recorded, net of tax, within other
comprehensive income.
33.
OTHER REQUIRED US GAAP DISCLOSURES
Revenue Recognition
In December 1999, the Securities and Exchange
Commission ("SEC") issued Staff Accounting
Bulletin No 101, "Revenue Recognition in
Financial Statements" (SAB 101) and has
amended it in March 2000. The Company has
assessed that its revenue recognition as
described in Note 2 complies with the
principles identified in SAB 101.
The Company has considered SOP 97-2,
"Software Revenue Recognition". As at
December 31, 2002, the Company has assessed
that its revenue recognition related to
licensing, selling, leasing, or otherwise
marketing computer software complies with
the principles identified in SOP 97-2 and
SOP 98-9, "Modification of SOP 97-2
Software Revenue Recognition with Respect
to Certain Transactions".
New accounting pronouncements under US GAAP
SFAS 141
In July 2001, the FASB issued Statement No
141, "Business Combinations". The provisions
of this Statement were required to be
adopted immediately. Statement 141 requires
that the purchase method of accounting be
used for all business combinations initiated
after June 30, 2001 as well as all purchase
method business combinations completed after
June 30, 2001.
Statement 141 also specifies criteria that
must be met in order for intangible assets
acquired in a purchase method business
combination to be recognized and reported apart from
goodwill. During 2002, the Company has not
entered into any business combination
transactions.
SFAS 143
In July 2001, the FASB issued FAS No 143,
"Accounting for Asset Retirement Obligations"
("FAS 143"). FAS 143 prescribes the
accounting for retirement obligations
associated with tangible long-lived assets,
including the timing of liability recognition
and initial measurement of the liability.
FAS 143 requires that an asset retirement
cost should be capitalized as part of the
cost of the related long-lived asset and
subsequently allocated to expense using a
systematic and rational method. FAS 143 is
effective for fiscal years beginning after
June 15, 2002 (January 1, 2003 for the
Company). The Company does not expect the
adoption of FAS 143 have a material effect on
the consolidated financial statements.
SFAS 144
As mentioned above, the Company adopted SFAS
No 144, "Accounting for the impairment or
disposal of long-lived assets", which was
issued by the FASB on October 3, 2001. SFAS
144 supersedes SFAS No 121, "Accounting for
the Impairment of Long-Lived Assets and for
Long-Lived Assets to Be Disposed of".
However, it retains many of the fundamental
provisions of that Statement. SFAS 144 also
amends the accounting and reporting
provisions of APB 30, "Reporting the Results
of Operations-Discontinued Events and
Extraordinary, Unusual and Infrequently
Occurring Events and Transactions", to
broaden the definition of what constitutes a
discontinued operation, amends the accounting
and presentation for discontinued operations,
and amends ARB 51, "Consolidated Financial
Statements to eliminate the exception to
consolidation for a temporarily controlled
subsidiary". SFAS 144 is effective for
fiscal years beginning after December 31,
2001. The adoption of this standard does not
have a material impact on the Company's
consolidated net income and total
shareholders' equity under US GAAP.
SFAS 145
In April 2002, the FASB issued FAS No 145, "Revision of FASB
Statements No 4, 44 and 64, Amendment of FASB
Statement No 13, and Technical Connections"
("FAS 145"). Among other amendments and
rescissions, FAS 145 eliminates the
requirement that gains and losses from the
extinguishment of debt be aggregated and, if
material, classified as an extraordinary
item, net of the related income tax effect,
unless such gains and losses meet the
criteria in paragraph 20 of Accounting
Principles Board Opinion No 30, "Reporting
the Results of Operation — Reporting the
Effects of Disposal of a Segment of a
Business, and Extraordinary, Unusual and
Infrequently Occurring Events and
Transactions". FAS 145 is partially
effective for transactions occurring after
May 15, 2002 and partially effective for
fiscal years beginning after May 15, 2002.
The Company does not expect the adoption of
FAS 145 to have a material effect on its
consolidated financial statements.
F-37
Table of Contents
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
SFAS 146
In June 2002, the FASB issued FAS No 146
"Accounting for Costs Associated with Exit or
Disposal activities" ("FAS 146"). FAS 146
addresses financial accounting and reporting
for costs associated with exit or disposal
activities and nullifies EITF 94-3 "Liability
Recognition for Certain Employee Termination
Benefits and other Costs to Exit an Activity
(including Certain Costs Incurred in a
restructuring)". FAS 146 requires that a
liability for a cost associated with an exit
or disposal activity to be recognized when
the liability is incurred. Under EITF 94-3,
a liability for an exit cost as generally
defined in EITF 94-3 was recognized at the
date of the commitment to an exit plan. FAS
146 states that a commitment to a plan, by
itself, does not create an obligation that
meets the definition of a liability.
Therefore, FAS 146 eliminates the definition
and requirements for recognition of exit
costs in EITF 94-3. It also establishes that
fair value is the objective for
initial measurement of the liability. FAS
146 is to be applied prospectively to exit or
disposal activities initiated after December
31, 2002. The applicability of FAS 146 to
future exit activities will depend on the
facts and circumstances surrounding such
activities, and such applicability will be
considered by management for any future exit
or disposal activities.
FAS 148
In December 2002, the FASB issued FAS No.
148, "Accounting for Stock-Based Compensation
– Transition and Disclosure – an amendment of
FASB Statement No. 123". FAS 148 amends FAS
123 to provide alternative methods of
transition for a voluntary change to the fair
value based method of accounting for
stock-based employee compensation. In
addition, FAS 148 amends the disclosure
requirements of FAS 123 to require prominent
disclosures in the financial statements about
the method of accounting for stock-based
employee compensation and the effect of the
method used on reported results. The
transition guidance and annual disclosure
provisions of FAS 148 are effective for
financial statements issued for fiscal years
ending after December 15, 2002.
The Company has elected to continue
accounting for employee stock based
compensation in accordance with APB 25 and
related interpretations and has applied the
disclosure provisions of FAS 148 in Note 32
of its consolidated financial statements.
FIN 45
In November 2002, the FASB issued FASB
Interpretation No 45 "Guarantor's Accounting
and Disclosure Requirements for Guarantees,
Including Indirect Guarantees of Indebtedness
of Others" ("FIN 45"). FIN 45 requires the
guarantor to recognize, at the inception of a
guarantee, a liability for the fair value of
the obligation undertaken in issuing the
guarantee. It also elaborates on the
disclosures to be made by a guarantor in its
financial statements about its obligations
under certain guarantees that it has issued.
Disclosures required under FIN 45 are already
included in these financial statements,
however, the initial recognition and initial
measurement provisions of FIN 45 are
applicable on a prospective basis to
guarantees issued or modified after December
31, 2002. The Company does not expect the
adoption of FIN 45 to have a material effect
on its Consolidated Financial Statements.
FIN 46
In January 2003, the FASB issued FASB
Interpretation No 46 "Consolidation of
Variable Interest Entities" ("FIN 46"). Under
this FIN entities are separated into two
populations: (1) these for which voting
interests are used to determine consolidation
(this is the most common situation) and (2)
these for which variable interests are used
to determine consolidation. The FIN explains
how to identify Variable Interest Entities
(VIE) and how to determine when a business
enterprise should include the assets,
liabilities, non controlling interests, and
results of activities of a VIE in its
consolidated financial statements. The FIN is
effective as follows: for variable interests
in variable interest entities created after
January 31, 2003 the FIN shall apply
immediately, for variable interests in
variable interest entities created before
that date, the FIN shall apply for public
entities – as of the beginning of the first
interim or annual reporting period beginning
after June 15, 2003. The Company has
performed initial review and has determined
that it does not have any interests in VIEs
as of the issuance of these financial
statements. The Company does not expect the
adoption of this FIN to have a material
effect on its consolidated financial
statements.
Income taxes
The components of income (loss) before income tax are as follows:
(in thousands of euros)
Years ended December 31
2002
2001
2000
Domestic*
10,299
(1,436
)
(51,630
)
Foreign
(322,067
)
(112,968
)
180,339
Income (loss) before tax
(311,768
)
(114,404
)
128,709
*
Luxembourg.
Presentation of the Consolidated Statement of Income
Under US GAAP, the consolidated statements
of income should be restated to present
goodwill amortization above operating income
(loss).
As a result of the adoption of SFAS 142 as of
January 1, 2002, the Company no longer
amortizes goodwill under US GAAP.
Consequently, goodwill amortization no longer
represents a presentation difference between
operating income (loss) under IAS and
operating income (loss) under US GAAP.
F-38
Table of Contents
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
The operating income would have been as follows under US GAAP:
(in thousands of euros)
Years ended December 31
2002
2001
2000
Operating income (loss) per IAS
(184,654
)
(153,625
)
127,383
Goodwill amortization
on consolidated subsidiaries
(47,117
)
(27,162
)
(11,204
)
Operating income (loss) -
US presentation
(231,771
)
(180,787
)
116,179
Goodwill amortization
on consolidated subsidiaries
47,117
—
—
Provision for a loan to the former
Chairman of the Board
(67,582
)
—
—
Purchase consideration
(2,351
)
(8,104
)
—
Capitalized development costs
(1,803
)
(3,227
)
(2,291
)
Share options accounting
(2,887
)
69,262
(229,724
)
Interests accrued on loans
related to share options
1,706
4,877
3,139
Other differences
360
564
1,256
Operating income
per US GAAP
(257,211
)
(117,415
)
(111,441
)
F-39