Pierre-Jean Sivignon - CFO

Simon Smith - Citigroup Nicolas Gaudois - UBS Simon Schafer - Goldman Sachs Julian Mitchell - Credit Suisse Robert Sanders - DresdnerKleinwort Andreas Willi - JP Morgan Jan-Willem Berghuis - Kempen Alex Thurler - Merrill Lynch Luc Mouzon - Exane BNP Paribas Didier Scemama - ABN Amro Tim Schultz - Bear Stearns Marcel van de Hoef - Bloomberg Harm Lutterhead - BetternFinancial News Olubunmi Asaolu - Lehman Brothers

Welcome to the Royal PhilipsElectronics' Third Quarter Results 2007 Conference Call on Monday, the 15th ofOctober, 2007. For the introduction, we have Mr. Pierre-Jean Sivignon, ChiefFinancial Officer. All participants will be in a listen-only mode. After theintroduction there will be an opportunity to ask questions. (OperatorInstructions). Please note that this call willbe recorded and is available by webcast on the website of Royal PhilipsElectronics. I will now hand the conferenceover to Mr. Pierre-Jean Sivignon. Please go ahead, sir. Pierre-Jean Sivignon: Thank you. Ladies and gentlemen,let me first welcome you to this conference call for the third quarter resultsof 2007 for Royal Philips Electronics. As usual, I will make a few introductoryremarks and then will open up the calls to your questions. The third quarter was anotherencouraging step towards achieving our objectives for the year andstrengthening ourselves for our 'Vision 2010'. The EBITA in the quarter wasEUR438 million or 6.7% of sales and this compares to 5.3% one year ago afterexcluding the product liability related charge that we had. This increase isanother good step towards achieving our target of above 7.5% for this year. Comparable sales growth for thecompany was a robust 7% for the quarter. DAP took prime position with 20% andCE recovered to 8% as we had predicted. We were particularly pleased with ourgrowth across all key emerging markets. In Medical Systems, thecomparable growth was 3% with strong growth outside the United States and the non-imaging businesswithin the United States.Equipment order intake showed a 3% increase compared to one year ago, whichagain was strong outside the USand in the non-imaging businesses within the United States. We were negativelyimpacted by our US Imaging Systems business mainly as a result of the DRAimpact. The EBITA percentage declined compared to one year ago and this was dueto Imaging Systems, but more specifically in CT. If we were to exclude CT thenthe EBITA percentage would have increased by 70 basis points. As we mentioned a few months ago,we are currently reviewing our options for our shareholding in MedQuist andwill inform you about this as soon as possible. In DAP; the excellent quarterhas given us a 20% comparable growth following 17% in Q1 and 14% in the secondquarter. This very strong growth came in virtually all product groups andgeographical regions. Once again, we are benefitingfrom our investments in innovation, emerging markets and brand. We continue toforesee good growth for DAP, however the comparisons start to get tougher. EBITAof 18.8% in the quarter was strong and mainly a function of the higher salesand the managements of our costs. Sales in Consumer Electronics, ona comparable basis, increased by 8% in line with our predictions. The growthcame in all the individual businesses and with good growth in all key emergingmarkets. The EBITA margin at 1.4% was alittle higher than one year ago. We have seen improvements in all ourbusinesses except connected display where margin pressure is ongoing,particularly in North America. We continue to see the benefitsof our business model which has kept the net operating capital at a minimallevel. The Lighting sales growth was 2%,being impacted by the contracting UHP market and our exit from LCD backlighting.Excluding these two areas the sales growth would have been 7%, being driven bythe global demand for energy-efficient lighting solutions and emerging markets.The lighting EBITA percentage was higher than the third quarter of '06, evenafter allowing for items that we could consider as a one-off nature. The resultfor innovation and emerging businesses was inline with our expectations. In Group Management & Services,we see the impact of our cost reduction actions that we announced almost oneyear ago. The brand expenditure at EUR26 million was a fraction lower than whatwe originally planned. We'll complete our EUR75 million cost reduction programthis year, which will require one-off cost of approximately EUR10 million to beincurred in the fourth quarter of this year. In OpEx figure, there is anon-cash charge of EUR91 million resulting from the reduction of the corporatetax rate in Germany,which lowered the value of our tax loss claims. This will give us a smallpositive impact on our global tax rate in the future. During the quarter, we consumedEUR1.1 billion of cash, but this was for the purchase of Color Kinetics forEUR550 million and EUR789 million for the purchase of our own shares. We didn'tconsume any cash for working capital purposes. The inventory percentage of 14.1%is 1.4 percentage points higher than one year ago. This is partly due to theimpact of acquisition. We have no special concerns about our inventoryposition. Results relating toequity-accounted investees had significantly improved due to the improvedperformance of LG Philips LCD. There are virtually no other items in this areaof our results. I will reiterate our intention tohave leveraged balance sheet at the end of 2009 consistent with our ratingobjectives. As you saw a few days ago, wehave continued to reduce our stakes. In this case, LG Philips LCD and announcedan expansion to our buyback at the particular time, details of which we willgive you with the publication of our fourth quarter results on January 21st. We continue to look foracquisition in the areas that we have designated that would add value inlinewith our guiding principles. We once again confirm our sales growth target ofan annual average comparable growth of 5% to 6% and an EBITA of above 7.5% for2007. Let me now open the call for yourquestions.

Thank you, sir. (OperatorInstructions). Thank you. Our first question comes from Mr. Simon Smith withCitigroup. Please go ahead, sir. Simon Smith - Citigroup: Hi, yes. I had a couple ofquestions. One was on the Medical side and one was on the comments with regardto the next stage or next step in the capital return program. In terms ofMedical, obviously, we've known for while there was toughness in the market. I am always slightly curious toknow why, sort of given ample opportunity to lower guidance through the year onthe lower trends that you had in terms of margin. Why you so waited to thismoment to accept the margins becoming that much lower. Has there been a very sharpdeterioration in the market, which caught you as a surprise? And leading onfrom that, the impact that you had this year, what would you now move yourguidance down to and how would that affect the guidance that you've beentalking about in 2008? In terms of the capital return, Iguess my question was really along the lines of -- your freight has been thenext step in the program of capital return. Now, would I be right in thinkingthat that's indicating something more beyond just announcing another sharebuyback program? Pierre-Jean Sivignon: Okay. To your first question, interms of guidance on Medical, I think we have said on the back of the DRA, wesaid at the end of Q1, we talked about 1 point. We said the exposure is 1points of growth. I think on the back of the Q2 revenue, we talked about 1.5points. I think what we are saying in essence at the end of this quarter isthat it could be 2 points. I think it's been progressive.When you look really at the detail of the numbers, which we have, basically,what you will find is that we are doing pretty strongly out of the US and thatis true across modalities. And we are doing in the US, well in the monitoringas well as ultrasound technologies. And I think that has actually offset to alarge extent, the impact of the DRA. And to be specific, I think ifyou ask me now for the guidance of revenue, I would say that the 1.5 percentagepoint that I've talked about at the end of Q2 is probably now more like 2points. And we have seen deterioration inthe third quarter. I would say that late in the third quarter, we saw probablysomething a little bit more, I would say, strong than what we had anticipatedon CT. And there, when you really trim down, you are a little bit splitbetween, is it basically DRA or is it the fact that in the particular territoryof CT, a new technology is expected at RSNA in a few weeks from now. So, I would say, it has beenprogressive. The two points of lower progression of the growth is somethingwhich has come I would say almost 0.5 points by 0.5 points. And to your point,yeah, there has been may be something a bit worse than we planned late in thefirst quarter on CT. Simon Smith - Citigroup: Could you maybe expand that intodiscussion of margin? Pierre-Jean Sivignon: In terms of margin, basically theguidance was 14 plus. And in terms of margin for the quarter, we absolutelyconfirmed the 75 for Philips. And as far as Medical is concerned, we could havereverse the guidance up to 1 point. We could do better than that but at thispoint of time, and up to 1 point of risk. Simon Smith - Citigroup: And obviously, I think in 2008out of the back of the Capital Markets Day, we had the expectation of thosemargins rising probably up to 15% level. I mean obviously now if you're goingto be 13% as a run rate, would that be an overly optimistic step up now? Pierre-Jean Sivignon: No. I don't want to guide youright now on next year. But I think in terms of progress, first of all, weexpect a strong fourth quarter. What I want to make clear is that incomingorders year-to-date are at 4.3%. So, I think that's something to keep in mind.We believe that we are doing better than the competition. We believe as wellthat there will be innovation coming out of RSNA. And the other thing to keepin mind is that, we are making progress not only in the non-imaging sales -- inorders I am sorry, in the US but we are making progress as well out of theNorth America. So, I wouldn't change what we'vesaid in terms of trend for 2008. Simon Smith - Citigroup: Okay. Pierre-Jean Sivignon: Yes to your second question. Ithink, well I think what I can say is actually in the press release, what wemean is what we've said, we have announced as you saw just literally a few daysago and until we could make that move, we were not too sure because we wantedabsolutely to optimize and we were capable of selling down to 19.9% of LPL, buthad to play very late as you saw last week, was a very successful transactionand I think you don't read more than what we've said, I think the next stage incapital reallocation, two shareholders will be announced at the end of Q4. Imean, we normally do that once a year and I think the next stage will takeplace at the end of Q4. I don't read more than what is actually in the releasethere. Simon Smith - Citigroup: Thank you.

Thank you. Our next questioncomes from Mr. Nicolas Gaudois, of UBS. Please go ahead sir. Nicolas Gaudois - UBS: Yes, hi, good morningPierre-Jean. My first question would be back on Medical. Just to clarify, whenyou talk about 32 percentage point of impact for DRA, that respectively implythat your guidance for full year is closer to 4% top-line growth versus 6%initial. Pierre-Jean Sivignon: Yeah. I think that's up to 2points, yes Nicolas that's correct. Nicolas Gaudois - UBS: Okay, kind of, and just as afollow up on Medical, as well, for new product introduction you talked early onabout having a new PET/CT platform before year end, is this the long track andcould this have an impact on [operating] the growth for rest of the year. Pierre-Jean Sivignon: No, I think I can't say. Nicolas,I think it's -- I can't comment on any thing, I want to keep all disclosure forthe benefit of the RSNA, but I do reiterate that into the questions whathappens next year, there will be innovation of RSNA which gives us confidencethat we will be able indeed to resume goal. I think I want to leave it as thatand for the particular time Nicolas being so close to the RSNA. Nicolas Gaudois - UBS: Right, fine sort of. Thank youvery much.

Thank you. Our next questioncomes from Simon Schafer of Goldman Sachs. Please go ahead sir. Simon Schafer - Goldman Sachs: Yeah, hi thanks so much. So, aquestion on Medical actually on the domestic appliances side clearly the flipside in terms of margin execution. Now, given what you've just said with thetwo point impact on Medical margins obviously to get to your overall corporatetargets, how much upside should we be assuming in domestic appliances then on arun rate basis, in terms of margins? Pierre-Jean Sivignon: Sorry, no-no just correction, Ididn't say two points of margin on Medical. I said two points of revenue growthand up to one point of margin. Simon Schafer - Goldman Sachs: Understood. Pierre-Jean Sivignon: So, just to be absolutelyspecific. So, yeah, I think the 7.5% EBITA guidance is confirmed then I thinkin case we do not deliver on Medical, we will have to catch-up here and therein the rest of the portfolio and certainly the DAP is one of the candidates.Yes, I think I don't want to guide you more because, there you have a minimumguidance on the margin. But that is certainly one of the product divisionswhere we could do little bit better than the guidance in terms of coming up tothe 7.5 only for Philips that's for sure. Simon Schafer - Goldman Sachs: Understood. And then, just on theConsumer Electronic segment, the good amount of revenue upside. I am justwondering, whether revenue upside may have come from clearly not TV. So, wherewas the upside from in the quarter on the revenue line? Pierre-Jean Sivignon: No, actually it came from TV, aswell. We made progress everywhere including in television. What I said in thecall, in the introduction, and I think it's mentioned in the release as well,was that, there were some pricing pressure on television in particular in NorthAmerica but the growth was there, we had double-digit or shy of double-digitgrowth across the various business units of Consumer Electronics. So, I don'twant you to read that television was a poor performer in terms of revenue. Itdid deliver growth in the third quarter as expected. Simon Schafer - Goldman Sachs: Okay, thanks. And my lastquestion is on MedQuist. You said, potentially reviewing your shareholding,what would be the options for you and what type of timeline should we belooking after that? Pierre-Jean Sivignon: I think in terms of, there isnothing new. I think what is new is that they are now fully current with theirfiling with the SEC. I think that's a new piece of news where not only they arefiled '06 but the first two quarters of '07 have now been filed. So, comparedto where we were at the end of Q2, so the new piece of news is that theiraccounts are fully current. If you look at our press release of Q2, wementioned about looking at more options. We've just renewed that particularcomment on the back of what is now fully current account and that is a newpiece of news on that third quarter. Simon Schafer - Goldman Sachs: All right, thanks so much. Pierre-Jean Sivignon: All options are open. Simon Schafer - Goldman Sachs: Thanks guys.

As a reminder, would you pleaselimit yourself to one question with the maximum of one follow up by this wewill give more people the opportunity to ask question. Thank you, our nextquestion comes from Mr. Julian Mitchell of Credit Suisse, please go ahead. Julian Mitchell - Credit Suisse: Yes. Thanks. The first questionwas again just on Medical, because in year-to-date, you've done around about an11% EBITA margin as you said for next year, looking at 15 to 16. So, just interms of the bridge between the two, are you planning any cost reductionactivities in that division or are you relying on price and volume to increasesignificantly over the next 12 months or so? And then secondly, just withinDAP, there was some sense I thought after the Q2 numbers. That in Q3, you wouldsee a significant boost in SG&A expenses that might limit your marginexpansion. Obviously, that hasn't happened. Should we expect a big SG&Aboost in Q4 or is it just that the revenue growth is so strong that will offsetthat? Thank you. Pierre-Jean Sivignon: Okay. Let's take them one-by-one.On Medical, you are correct. I think the year-to-date Medical EBITA margin isat 10.6%. Now, if you look at the pattern of margin across quarters, you willsee that it's not always recognized. But the seasonality of Medical is quitestrong. We always have a very strongfourth quarter. We are expecting a strong fourth quarter again this year. Iwould say particularly strong this year because obviously, we have a bit of aback-ended situation this year. And the explanation to the numbers youmentioned for next year comes from the fact that we are very back-ended. Andthis year as well as probably next year, even though we tried to avoid that butthat's difficult thing to try to push forward in the year of the deliveries ofimaging equipments. But you will see that consistently, we have a very strongfourth quarter which helps you bridge to the kind of numbers you talked about. Now, to your question on costcutting, we always have plans and the plans that we have disclosed to you forthis year will continue next year. And for reference purposes, those plans arereduction of IT expenses. Secondly, leveraging of selling expenses with astructure we have put in place in particular in Asia. And the third driver is,of course, the increase of the low cost sourcing of both components andsub-assemblies in order to actually help our cost of goods sold. And thoseinitiatives are not one-year initiative. They will help us this year and theywill continue to help us next year. Now, to your question on DAP.Yes, we had guided you on an increase of selling expenses below the line in thefourth quarter and that will indeed take place as it did if you remember lastyear at the same quarter time. So, we are expecting an increase of the sellingexpenses. And if you want to compare basically with last year, it should be anotch above what we actually experienced last year. So, no change in ourpattern and no change in our business model in DAP. We want of course thegrowth to continue there. So, there is no reason to change our business modelthere. Julian Mitchell - Credit Suisse: Great. Thanks.

Thank you. The next questioncomes from Mr. Robert Sanders of Dresdner Kleinwort. As a reminder, pleaselimit yourself to one question. Robert Sanders - Dresdner Kleinwort: Yeah. Hi, guys. Just waswondering about the introduction of the Luxeon Rebel in lighting in Q4. I wasjust wondering if that was going to lead to an up tick in margin in the fourthquarter. And then finally, the second question is just on RSNA. You said youare launching a lot of new products like portable ultrasound, et cetera. Justwondering if any of those are going to be contributing to this year's sale oris that more about next year's sale? Pierre-Jean Sivignon: Okay. I think to your firstquestion, Rebel is absolutely there. It has actually been a bit late in termsof availability and orders consequences. But we've seen a clear pattern beingestablished between actually July and September. In September, it startedhaving an impact. And yes, I think it would certainly contribute on the backlogthat we have on Rebel. It will contribute to the margin of lighting in thefourth quarter for lighting to make it number. So, Rebel starts being a player,starts in Q4 absolutely. Your next question is on RSNA.Well, RSNA, I am mentioning it, because of course I want to send some signalfor the growth next year of Medical. But I am really reluctant to say muchmore. We are very disciplined not to talk ahead of it in terms of specifics. Will that have an impact on therevenue of this year? I don't think so. I think the revenue of the this year islargely happening out of the orders that we have done this year combined with astrong backlog that we currently have. So, I would say RSNA impact is for nextyear. Robert Sanders - Dresdner Kleinwort: Okay. Thanks a lot.

Thank you. Our next questioncomes from Mr. Andreas Willi of JP Morgan. Please ensure you limit yourself toone question. Andreas Willi - JP Morgan: My question is also on Medical interms of the pricing in the market. You talked about a negative mix effect, thehospital where the customer straight down due to the more difficult market.Could you also talk about the pricing environment? Have you seen lessdiscipline there from your competitors to may be an effort to shift somevolumes this year? And my follow-up question thenwill be on consumer electronics, where you talked about the good top-lineoutlook. You're not giving divisional guidance anymore, but are you still ontrack for the 3% EBITA margin in consumer electronics despite the marginpressure in the US TV business? Pierre-Jean Sivignon: I think the reference to thepricing pressure is really a reference to a mix pressure in CT. I think it'sspecific to that particular modality. And there as I just mentioned on thefirst question it's odd to make the distinction between customers wanting tocome down in the mix on the back of the DRA and of course customer expectingwhat comes up in terms of new technologies post the 64 slices, that wasintroduced in '05 on the back of, as we've said, in the announcement of RSNA. So, that modality there was a mixpressure, as mentioned, we translated into a margin pressure. As far as theother modalities are concerned, I can't relate to any lack of discipline, webelieve and I'll let you judge that by yourself from the presentation made bycompetition in the last of days. We believe that we are doing better thancompetition, we believe that we are gaining share. Basically I am notunderstanding that this is being done at the expense of margin and disciplinein pricing. I think that, I would like to keep it on the particular subject ofCT. To your question on ConsumerElectronics, you are correct, we are not guiding for next year, by productdivision which will now be called a sector, but we certainly have no intentionto change the underlying model including in Consumer Electronics and I thinkthat the situation, the pressure on connected display which is being referredto in the introduction of this call, as well as in the release, we haveactually to offset it with the performance of the other BUs whether it isentertainment solution, whether it is home networks, or whether it isperipheral accessories as we had actually I think the opportunity to discuss,when we explain to you the strategy behind the consumer lifestyle, territoryand the halo-effect of that models on some of the BUs of Consumer Electronics. Andreas Willi - JP Morgan: So, you are on track to also meetthe 3% EBITA margin in Consumer Electronics this year? Pierre-Jean Sivignon: No-no absolutely, there is nochange there.

Thank you. Our next questioncomes from Jan-Willem Berghuis of Kempen. Please ensure you limit yourself toone question. Jan-Willem Berghuis - Kempen: Yes, good morning. My questionwas on CT again, you mentioned in the press release that without CT you wouldnot have a decline of 70 basis points but actually increase of 80 basis points,I think. Obviously, if you sell less machines, there is some utilization rateeffects. But is there also a cost effect related maybe to the introduction ofthe new machines or any other effect on the cost side of the equation becausethe impact of the CT margin pressure is quite significant? Pierre-Jean Sivignon: Well, I think couple of things.We are talking margin now specifically for Q3, besides CT, we had a couple ofissues related to supply. I think which are of a lower importance. We had onthe X-Ray side and couple of issues on supply. So, I think, I don't want tomake it completely and strictly the CT issues, some of the elements whichimpacted our margin in Q3, we will recover in Q4. So, I wouldn't want that thewhole issue of Q3 is made strictly and thoroughly CT. Now, as far asintroduction of new CT equipment is concerned. I think we've been in CT now forsometime and I am expecting that if we were to announce the new products on theback of RSNA, we would be able to do that in an efficient manner without anyloss of altitude in the early days of the introduction of those products, Ithink CT is one of our strength. That's referred on the back of the DRA in thelast couple of quarters as well as on the back of technologies which is 64slices which was introduced two years ago, and of course, and that's goes onand new things will have to be introduced and will have to be done in aprofessional manner and I think that's what we're counting on. Jan-Willem Berghuis - Kempen: Okay. Thank you.

Thank you. Our next questioncomes from Mr. Alex [Thurler] of Merrill Lynch. Please ensure you limityourself to one question. Alex Thurler - Merrill Lynch: Good morning. Just one questionon Medical. The question is on, you've had about three quarters or so oflooking at the behavior of your customers in relation in the United States andrelation to the steps as reduction act and it's impact, what is your gutfeeling say for 2008, would you expect the demand to pickup as you annualizethe impact of the Deficit Reduction Act i.e. some of the purchases werepostponed and they will comeback, or will we continue to see this kind of anegative price mix where hospitals are simply trying to keep theirprofitability therefore for 2008, you wouldn't expect a pickup in volume, butrather just a straight through continuing of sales as it goes now withhospitals looking to go down to lower value add products. Pierre-Jean Sivignon: Okay. Just to go back to the DRAfor one second. I think the DRA is essentially private centers and clinics andso-called private hospitals. Alex Thurler - Merrill Lynch: Yes. Pierre-Jean Sivignon: It's not really a hospital. Andin terms of modality as far as the portfolio of Philips is concerned itessentially just for the record on CT, on MR and on what we called a nuclearmedicine. I think those are the territories which are impacted and that's what wehave to talk about. So, as far as the US market is concerned, I think that wehave seen good performance, actually better than planned performance inmonitoring and ultrasound. So that is clearly helping us and we expect that tocontinue next year. As far as, basically X-ray, weexpect the market as well which is not as I mentioned impacted by DRA toprogress next year. Now for the particular DRA exposed territory, we've beenthere before. It has normally lasted quarters. It's never really been somethingwhich has lasted for years. But I will be cautious because until such time, wereally see it bouncing back. It's a bit hard to make comments. At the end of Q4, if hopefully wecan see the market reaction on the back of RSNA introduction, may be that wouldbe a good time to do a bit more of an update on the budget reduction deficitportion of the market which is exposed to that. I think it's probably a bitearly to say that today. There are lots of discussionswhich are currently going. Some of them are positive. Some of them arenegative. So, it's fluid. And I think we need one more quarter to see whatcould be the impact on next year. But the important thing though is that therewill be innovation. As I said ultrasound and monitoring are doing better. Someof the imaging modalities are not exposed and we have to see what happens. Andof course rest of the world for us is doing well. Alex Thurler - Merrill Lynch: Maybe then the follow up questionon the RSNA impact, given that those would probably be premium productlaunches. Are you saying that you expect the markets still to buy thoseproducts despite some of the negative price mix in the CT segment we will seeon the DRA year-to-date? Pierre-Jean Sivignon: Well, I think in terms of CT, themarket basically is spread. I mean it's really segmented. We have customers whoare clearly interested in high-end products. So, they will feel that diversityis a way to attract customers to their business and they will feel that's ofvalid importance to have the latest technology. And as that portion of the marketis still there, for the customers, for whom, obviously it's less important andit's positioned in the path of the segment which is less, I would say,technology sensitive. There is an interest more than I would say normally atthis point of time and that's part of uncertainty. There is probably anincreased interest for the lower end of the mix. But we have to wait. I thinkas I just mentioned, we have to wait until the end of Q4 to see the impact oftechnology and to see where we will be with DRA at the end of Q4. Alex Thurler - Merrill Lynch: Thank you.

Thank you. Our next questioncomes from Mr. Luc Mouzon of Exane BNP Paribas. Please go ahead. Luc Mouzon - Exane BNP Paribas: Yeah. Good afternoon. Just aquestion with regards to the cash flow trends. It's about the secondconsecutive quarter that we had a bit of negative figures with regards toworking capital. And just wondering going forward in the fourth quarter as weshould get to normal, let's say, reduction especially on the inventory side andif you could just elaborate a bit on, how the cash flow from operations islikely to move over the fourth quarter? Thanks. Pierre-Jean Sivignon: There is no change in our cashflow pattern. If you remember, last year, the Q3 numbers were actually a littlebit polluted by the impact of the transaction on semiconductor. So, thosenumbers were corrected actually in the closing working capital and cash flowstatements at the [unit control]. So, if you actually extract the elements onthat line which is related to the semi conductor transaction as I mentioned inthe opening to the call, there was no consumption of working cap in the thirdquarter despite the 7% growth. So, no change to the workingcapital pattern and no change to the pattern of cash generation and a lot of ithappening in Q4, and again on the particular subject of Q3, you have to ignorethe amounts which would actually put Q3 statement on the back of thesemiconductor transaction. Luc Mouzon - Exane BNP Paribas: Yeah. And one follow-up, if Imay? Still about the cash flow, as we have seen the trends of the share buybackis about 1.5 from January to September. Could we anticipate the remaining partto be done on the coming months or would you consider expanding that sharebuyback program? Pierre-Jean Sivignon: Yeah. I think on the sharebuyback, you have to split it in two to be absolutely specific. We have a bitmore than 850 million which is part of the initial 1.6 billion on the so-calledsecond trading line. We are expecting more mileage probably -- I mean couple ofhundred millions and more. We are pushing hard on that particular one to get asclose as possible to the 1.6 billion by year end. So, you will see moreactivities there. What we have done is that weannounced with the press release of Q2 is we have launched another avenue ofbuyback, which has amounted to about EUR460 million in the course of the thirdquarter and there that was buying shares to actually expand the edgingmechanism on our long-term intensive plans. So, this is adding up indeed to theamount that you just mentioned. So, on the hedging side, you won't see moreactivity in the rest of this year. On the second trading line, you will seelittle bit more on the second trading line still to take place in the fourthquarter. Luc Mouzon - Exane BNP Paribas: Okay, thank you.

Thank you, the next questioncomes from Didier Scemama of ABN Amro, please go ahead. Didier Scemama - ABN Amro: Good morning, Sciemama Didierfrom ABN Amro. A quick question on Medical, if I may, and then just a quickfollow-up on CE. On Medical, I am just a bit surprised by in fact that thedecline in margins given that you said that your exposure to the US CT marketthat was impacted by the DRA was relatively limited. So, whether can youexplain quickly on that? I know you touched on it, but if you could explain alittle bit on that. And related to Medical actually, can you talk about thebacklog at the end of Q3 versus Q2. The direction it has taken? And on the CEside, given the fantastic performance you had in revenue. Are you a bitdisappointed or not, maybe by the margin leverage? Pierre-Jean Sivignon: Okay. That was on CE your lastquestion? Didier Scemama - ABN Amro: Yes. Pierre-Jean Sivignon: Okay, all right. So, if you goback to Medical. Yeah actually, we had a shortage versus expectation, we had ashortage of revenue for the reason you mentioned. And basically on the margin,we were impacted by the reduction of the mix. The other thing which impactedus, as I mentioned was that, we had beyond, the strict DRA related situation,we had a few logistic issues on each way and some issue related as well tocustomer readiness. So, we didn't have all the revenue we were accounting on inQ3 and that actually related to the impact on the margin. One more thing youshould not ignore is that we had at MedQuist as well a reduction of the revenuethere of 9% which had a bit of an impact as well on the margin on thatparticular one. So, the combination of that led to, I would say the impact onthe margin that we've just discussed. On the CE… Didier Scemama - ABN Amro: Also, can you just talk about thebacklog in Q3 please? Pierre-Jean Sivignon: Yeah. The backlog in Q3, if youlook at our incoming orders for the quarter, 3% and that's pretty much in linewith the growth of the revenue, actually, quite comparable to the growth of therevenue for the quarter, so the backlog more or less stayed intact and we arestarting this fourth quarter with the strong backlog, which is why we've guidedyou on the strong fourth quarter for Medical. Didier Scemama - ABN Amro: Okay. So, the backlog was flat Q3versus Q2, but orders were up year-over-year? Pierre-Jean Sivignon: Yeah. I think, if you look at ourorders you've seen that we are at 3% for the quarter, but we are year-to-dateat 4.3%, because you'll remember that we had a particularly strong secondquarter at 12%, so we are actually finishing this third quarter with a strongbacklog to address the fourth quarter. Didier Scemama - ABN Amro: Okay. And the margin leverage inCE? Pierre-Jean Sivignon: The margin leverage in CE as youknow, it's in that particular case it's a gain of model where we want to shoot3% for the year, and we don't basically try to do more than that. We try todeliver consistently the 3%, so, was they disappointed by the leverage? No. I meanespecially if you consider that there was some pricing pressure on ConnectedDisplay in North America. So, I would say all-in-all for CE it was a goodquarter. I think the interesting thing is in CE, what we had alluded to inprevious calls and on the back of the 'Vision 2010' communication, we areseeing some of the views of Consumer Electronics again having an halo-effectfrom the DAP model and we are seeing some progress there. So, I thinkall-in-all the 3% stand but maybe with some nice progression in some of theother BUs. Didier Scemama - ABN Amro: Okay. Thanks very much.

Thank you. Our next question fromMr. [Tim Schultz from Milan]of Bear Stearns. Please go ahead sir. Tim Schultz - Bear Stearns: Hi morning. Two questions if Imay. First just a follow-up on what you just talked on DAP, you talked abouthalo-effect from DAP to Consumer Electronics. Have you got any examples thatyou can share with us because as you say I mean that the margins still remainedpretty flat and the pricing pressure is still there so? Pierre-Jean Sivignon: Yeah, I think one element ofcomparison would certainly be peripheral and accessories. I think we don't liketo talk explicitly about margin down to the BU level that's something we don'tdo and I will not do it around this phone but I can tell you that the marginsthere are above the average of the Consumer Electronics mix. And the secondthing is in terms of model you're very much closer to a DAP model. Why? Becausethe shelf life of the products is longer, it would be longer than thetraditional connected display shelf life which where if counted in months ormay be semester, if you are lucky. Peripheral accessories you go with somethingwhich is beyond that particular horizon and the product category management, aswell, and I would say the design are extremely important elements of the modeland those are three criteria which you will find in the DAP model. So, that'swhat I mean by saying, hollow-effect from the DAP model. Tim Schultz - Bear Stearns: Okay. But you are not suggestingthat it applies to the two-thirds of revenues that is connected displays? Pierre-Jean Sivignon: I think in connected display, aswe've said in the past, we've only recently introduced a Philip design to thedisplay of our connected display. So, there I believe that the full impact, forinstance, bringing design is something which is still very new in connecteddisplay and the impact of that will have to come in the future. So, I would say, this is probablythe business unit which was the last in the line in introducing a design. Asfar as shelf life, the nature of connected display is that in the strictconsumer electronics industry there, shelf life is as you know quite short andthat's not something which is changing. Tim Schultz - Bear Stearns: Okay. And just a follow up wouldbe just on Intermagnetics. Since you acquired that business in the November oflast year, could you just talk about what you've seen in terms of externalsales and I'm guessing most specifically, over the last couple of quarters,what have you been seeing there? Pierre-Jean Sivignon: Well, I think we have discussedthis at the end of the last quarter. MR is of course one of the modalitieswhich is impacted by the so-called having our own modality. But I think what'sinteresting on the MR is -- or market share and the progress we make and werestating that we are regaining a little bit of the mileage on that particularmodality. I think it's a modality where have stabilized the situation. We wereI would say defensive until last year and the bringing of Intermagnetics isbringing us a new strength, which is still to come. So, I would say that we arefeeling better about MR on the back of the Intermagnetics, post the acquisitionof Intermagnetics at the end of last year. Tim Schultz - Bear Stearns: Great. Thank you.

Thank you. Our next questioncomes from Mr. (inaudible). Please go ahead, sir.

Yes. Good morning. Maybe onequestion, only to (inaudible) business units and maybe what you are forecastingfor Q4? How much maybe since has changed compared to the situation at thebeginning of the year? So far, is it positive or negative? Pierre-Jean Sivignon: Yeah. I think when I was quizzedon -- what's happening was the margin of the Medical, I mean that's one reason,I didn't use and maybe I should use it because it's real. We are in terms oftranslation exposure -- we have some exposure. We do make money in NorthAmerica usually in Medical and there we are impacted on the translation side. I wouldn't tell exactly how much,because if I do you could almost immediately calculate our profit in NorthAmerica in Medical. But we have got some exposure there and it has played arole in the EBITA margin of Q3 and probably will continue a LIFO likecomparison in Q4. That's on the translation exposure. On the transaction exposure,which is of course the one to follow, there we continue to be between I wouldsay the nature of our costs in terms of currency mix as well as combined withour edging strategies, I think we have largely a balanced situation from atransaction exposure point of view.

For the whole company not only forMedical? Pierre-Jean Sivignon: For the overall company,absolutely. Not only for Medical. That is correct.

Okay. And then ConsumerElectronics, its positive, the dollar is weak or not? Pierre-Jean Sivignon: Well, I think on ConsumerElectronics where we are punished is essentially on the revenue growth, becauseas even though we convert dollars into euros and there we take a beating, it isactually an industry which is really driven by the difference between Asiancurrency and the dollar. And I would say that we take probably more of abeating than proceed on the revenue side. But on the margin side and I amtalking their at comparable growth. On the margin side, as much as we can, wetry to have our cost located at the center at which where we have revenue.Given that most of our fixed costs are outsourced and we try to locate them asclose as we can to the geography of our revenue generation.

Okay. Thanks a lot.

Thank you. Our next questioncomes from Mr. Marcel van de Hoef of Bloomberg. Please go ahead. Marcel van de Hoef - Bloomberg: Yes. Good morning. Just onequestion for clarification, the EBITA margin of the Medical unit in 2007, willit be around 13%. And secondly, do you expect to finish the EUR1.6 billionshare buyback through the second trading line or did I understand that there isalso other ways to get to that amount. And will your Medical performance affectthe group's sales growth forecast. Will it be between 5% to 6% this year orwill there be a change there? Pierre-Jean Sivignon: Okay. Let me take them. So, yourfirst question is the guidance on the Medical. I mentioned in the call that wecould be up to 1 point short of the guidance on the EBITA margin for the Medical.I think that is your answer there. Your second question relates tothe buyback. Yes, I think we have 1.6 billion on which we are using asso-called second trading line. There we are at 850 plus with still more actionto come. And we have combined that with another avenue, which was announced inthe course of Q3 which is a change in the hedging, I would say approach to ourlong-term incentive plans and that has led to an additional EUR450 million ofbuyback which has already taken place in the course of Q3. So, if you combinethe [SDL] and the change of hedging approach to long-term incentive, yeah, wemight be in excess of 1.6 billion if you combine those two, yeah. Your last question is on theguidance on the revenue growth. As you know there, we don't have guidance peryear, we have average 5 to 6 our goals and we stick to that. Marcel van de Hoef - Bloomberg: One short follow-up question. Soyou said, you might exceed the 1.6 billion share buyback program, because youalso, you see other avenue? Pierre-Jean Sivignon: No. I am saying that the 1.6billion, which was announced, was using one particular vehicle which is calledthe SDL. There we're not quite there and we're making progress. Right now, we areslightly north of 850, but what I am saying is that in addition to thatprogram, we announced that we were going to increase or hedging via sharesowned by Philips and accordingly, both on the market, so increase our hedging,although a long-term incentive program and that led to an additional EUR450million worth of Philips shares which were acquired in the course of Q3. Marcel van de Hoef - Bloomberg: But does that mean you still haveEUR750 million to go on the second trading line or will you take the 450 ofthat amount? Pierre-Jean Sivignon: No. That means that we willcontinue to work to get as close as we can get to the 1.6 billion. I mean thoseare two different vehicles on the second trading line. Marcel van de Hoef -Bloomberg: Thanks.

(Operator Instructions). Thankyou. The next question comes from Mr. Harm Lutterhead of Bettern FinancialNews. Harm Lutterhead - Bettern Financial News: Yeah, hi. Question about the newproducts, how are they picking up? Pierre-Jean Sivignon: Basically, I think you have tolook at product division by product division. If you look at DAP the 20% growthof this quarter is clearly something which is showing that innovation works. Imean to give you three examples, in DAP we have a new line of shavers which iscalled Arcitec, which is now being introduced just about everywhere. We have anew line of LC and cooking appliances which is being introduced right now andwe have new oral healthcare electric power toothbrushes which are beingintroduced as well in the market where we propose that product. So, that'scalled DAP and that's all doing extremely well. In the case of lighting, wehave the products which are basically so called growing products which are lowenergy consumption products. Lot of it aroundthe products which are innovative that has grown by 17% in the course of thethird quarter. So, we have good growth there. In Consumer Electronics, youcould see that the negative growth of the Q2 has transformed into 8% positivegrowth in that third quarter. We have new products across all productcategories and I think that certainly shows that if I have to designate oneAurea which is a brand new flat panel or LCD television, certainly is helpingus to give one example in the domain of Consumer Electronics. And in Medical besides the issueof DRA, we have innovation which we introduced along the year, which arehelping us towards goals, which is certainly above competition on these quarterand which I think has there as well across modality and as I said waiting forwhatever will be announced in the RSNA in the few weeks to come. Harm Lutterhead - Bettern Financial News: Yes but the Aurea you mentionedand the shavers have they made a contribution yet into the third quarter? Pierre-Jean Sivignon: Yes they have started, shavershave started contributing, will certainly contribute even more in Q4. Butshavers, cooking appliances definitely has contributed as far as innovation isconcerned, there were other factors to that growth, but that's certainly one ofthe contributor to that growth in Q3. Harm Lutterhead - Bettern Financial News: And do you think, those newproducts will even make it possible for higher margin in the deficient DAP? Pierre-Jean Sivignon: Well, I think the model hasn'tchanged, I think, I have said earlier in the call that there is a chance thatthe margin of DAP would be above guidance for the year. But we've said as wellin an earlier question that we will have selling expenses which is started onmodel in Q4, which will take a bit of a negative affect on the margin of DAPfor the year. But yeah, I think clearly as DAP is on a very strong yeah, bothin terms of margin as well as in terms of revenue growth. Harm Lutterhead - Bettern Financial News: And one last question about theAurea. I have been told by one of your people that it's been sold out for thewhole year already. Is that correct? Pierre-Jean Sivignon: Yeah. This is true. Yes. That's afact. Harm Lutterhead - Bettern Financial News: Only for 2007 or also for well ayear-to-date? Pierre-Jean Sivignon: No. I think we don't have it.It's not a business where you have such a long backlog. Aurea was introducedwith a relatively small quantity of products, because we wanted to test amarketing concept with price points, which was significantly different fromwhat we were doing on the CT until this day. And the answer is that it is forwhat we can see, a success. But the impact on Aurea in Q4 and in Q3 will bemodest, and to talk about next year is too early, because this is not anindustrialist's backlog. Harm Lutterhead - Bettern Financial News: Could you say anything aboutnumbers regarding the Aurea? Pierre-Jean Sivignon: Aurea is very insignificant. Iwon't give you numbers. But it is not significant to the connected display andbroadly Consumer Electronics sales. Harm Lutterhead - Bettern Financial News: Okay. So that has to speed upnext year? Pierre-Jean Sivignon: Yeah. But certainly we plan toextend it and broaden the range of Aurea next year. But that's bit too early totalk about it.

Thanks. The next question comesfrom Mr. Olubunmi Asaolu of Lehman Brothers. Please go ahead. Olubunmi Asaolu - Lehman Brothers: Hi. Good morning. Just onequestion on your 2010 target and the contribution of CE to that. I know thatyou said you won't disclose your divisional targets from next year, but alsobackend with the absolute numbers, if one were to look at these divisionsindependently. So, since those divisions are on target and fixed with set ofgroups year-on-year, anyways, can we assume that your sales growth for consumerwill be close to 6% as well going forward? And if that's the case in what areasactually that will basically come from? Thanks. Pierre-Jean Sivignon: Well, first of all, the 6%guidance which was a 7 plus percent guidance on DAP for this year, thatguidance did not apply to Consumer Electronics for 2007. Moving forward, youhave mentioned that, while the model won't change. The guidance for Philipsgoes from average 5 to 6 to minimum of 6 and obviously, the models and growthwill have to have a little bit of growth from everywhere, I guess, right. I thinkwe haven't guided you there. But we don't expect any major change there eventhough we won't guide you on it. There is nothing really going to change in thefuture in our models and in the way we operate. Olubunmi Asaolu - Lehman Brothers: The reason why I ask is, becauseCE with the divestments that happened recently, I would assume that the growthreally hasn't picked up that much. So, to get to that average 6% if the otherdivisions are growing grossly around at least 6% to maybe 7% in some of thedivisions, then CE will have pick up. Pierre-Jean Sivignon: Yes. You are correct. But on theother hand, as far as CE is concerned, we will give a priority always to themargin in particular in the domain of connected displays. But the margin of CEright now is rebounding and we believe that over the period of next threeyears, the portfolio we will have -- we are confident that we will able todeliver the kind of growth we have guided you on. Olubunmi Asaolu - Lehman Brothers: Thank you.

Thank you. The final fourquestions are follow-up questions. Please make sure you limit yourself to onequestion each. The first question comes from Mr. Simon Smith at Citigroup.Please go ahead. Thank you, Mr. Smith. Your line is open. Please continue. Simon Smith - Citigroup: Yes. The question I have is withregard to MedQuist. I just wondered if you could give us some clarity as towhat financial impact within your number has been from MedQuist and what you'dthink that would be going forward? Pierre-Jean Sivignon: Basically, in this particularquarter, you saw that we have actually disclosed the reduction of revenue of9%. In terms of impact on the bottom line, it has a few millions, because asyou know we are still, and I guess we are coming to the end of this becausethem being [current] as I mentioned earlier on the call that was the result ofquite a lot of work. We are absolutely happy that's now done. So, but that addsstill a few million of euros of negative impact on the EBITA of Philips Medicalin the third quarter. Simon Smith - Citigroup: So, a few million negative in Q3and my timing at that run-rate? Pierre-Jean Sivignon: Yeah. I think, until everythingis basically taken care of, i.e. not only being current but taking caring ofyour very shoes, it's never gone to be very accretive or very negative, but weare around that kind of number. And if you want to know on which side of thezero it is, it was slightly on the negative side of the zero, all in for Q3 forus. Simon Smith - Citigroup: Thank you.

Thank you. Your next questioncomes from Julian Mitchell of Credit Suisse. Please go ahead. Julian Mitchell - Credit Suisse: Yes. Thanks. My follow-up wasreally just on your USmarket. Overall I think you saw comparable sales in the Q3 down 1%. Obviouslylot of that is Medical CTrelated. You said several times. So I was just wondering if you could commenton the general trends that you are seeing in your US demand sort of across thedifferent businesses. Obviously a lot of concerns about the macro situation andso if could just tell us what you are seeing there? Pierre-Jean Sivignon: Yeah, I think for the consumerside you can clearly see that DAP is doing well, so there I would say theimportant element is to continue to deliver some growth on the back ofinnovation that we are introducing. I think in the US what I want to add is forMedical, we are positive I mean I wouldn't want you to conclude that US wasnegative growth in Q3, thanks to the performance in the non-DRA impactedmodalities, we add positive growth in the US for Medical in the third quarter.I think so these two were actually basically up, where we took a little bit ofa negative growth in lighting essentially because of UHP. I think the reallighting in television, as it was disclosed in the release, that market istaking a beating right now and that is impacting us. But we are dealing withdifficult comparables year-on-year and looking forward we would be looking ateasier comparables and of course with the impact of the growth coming from thenew product range of Lumiled that would help us moving forward for lightingNorth America. And finally on the consumer electronics, there -- we as you know,and we've been very explicit about that, we do very careful category productmanagement in the domain of CE and in particular in connected display. Thatmeans that if we don't like the margins that are on the table, we tend torunaway from that particular revenue. So I would be a bit more prudenton CE, because there as we have said a couple of times in this call whatgoverns is our module. So to summarize the two [period] work which were Medicaland DAP. CE, there was driven by careful category management on the back of ourmodule and Lighting was hurt by the particular situation of UHP, was a goodnews to come on the back of Lumiled and less difficult comparables for UHP forthe quarters to come. So that indeed concluded in that the -1% for the US for that Q3. Julian Mitchell - Credit Suisse: Great. Thanks.

Thanks. The next question comesfrom Mr. Nicolas Gaudois of UBS. Please go ahead. Nicolas Gaudois - UBS: Yes, hi, quick follow-up on theUS CE actually. I mean are we back in the situation, now where we were inaround breakeven or slight negative or breakeven margins there or are you stillmaintaining above breakeven? Pierre-Jean Sivignon: No I think what it depends -- itdepends on the product division. Are you talking about? Nicolas Gaudois - UBS: Consumer electronics business? Pierre-Jean Sivignon: Consumer electronics. I think inconsumer electronics it's probably going to be tough call this year tobreakeven. I believe given pricing pressure on connected display. And I thinkequally on this one, we are doing category management. We're doing goodprogress, because we are making very nice progress in the other BUs, which Ihave described, whether its home networks, whether its peripherals or whetherits entertainment solution, but pricing pressure on connected display mightmake that one a tough call consolidated in the US this year. Nicolas Gaudois - UBS: Okay fair enough and just verybriefly on the consumer healthcare solution side, could you just gives an ideaof what have been the revenues for the first nine months, just to help usmodeling this into Medical for next year? Pierre-Jean Sivignon: Yes, I think what I can tell youis that it was one of the good news, what I can tell is that we had in terms ofEBITA a contribution to what is today in Emerging and Innovation on thatparticular line, we were in positive EBITA territory for the third quarter, andthis will actually continue to make progress next year. And in terms of revenue, I thinkthat you should be looking at a couple of hundred millions I would say for nextyear on the full year basis, coming in from that line into coming fromInnovation and Emerging businesses in to PMS for next year. Nicolas Gaudois - UBS: Excellent. Thank you very much.

Thank you. The next questioncomes from Mr. Didier Scemama of ABN Amro. Please go ahead. Didier Scemama - ABN Amro: Yes, thanks for taking myfollow-up. My follow-up is on the DAP business. It has been an exceptionalperformer over the last few years, but I think in your introductory remarks yousaid that you thought the comparables were getting a bit tougher. And I mean Iguess the Innovation will sustain the performance, but how much upside is therereally in the margins of that business? Pierre-Jean Sivignon: Well I think Didier if you goback to last year, you will see that the fourth quarter of last year for DAPwas up 13%, I mean this is when I -- I think this a quarter where we startedgoing into double digits and we have been in double digits consistently now foralmost a year, if you include that fourth quarter. The good news though is that alot of the Innovation we talked about was introduced very late in the year. Ithink in the domain of the new [personal] care products have just beingintroduced. So, the mileage from that brand new line is just coming out. Arcitec, which is a new line ofshavers, has just been introduced. And as you probably know, we get the bestmileage in terms of growth normally at the end of year one, of a productintroduction. So, that means that we normally statistically -- those newinnovation as of now, which are quite significant for DAP should give usmileage in particular in the later part of next year when we actually need it. So, in terms of growth we areentering more difficult quarters, because we are now starting to compare to thedouble-digit growth quarter, which started with the fourth quarter of '06. Butagain, we are doing this on the back of strong product innovation and asmentioned probably very strict category management in emerging markets, whichfor now two quarters, is really helping us on DAP. To the margin again, it would bevery tempting to let the margin go up. But, we will continue to invest. So, Ithink as far as the margin of DAP is concerned, there is probably a bit ofupside, but we will be controlling that upside, so that the growth can continuebecause we want the growth to continue at the kind of level we had guided youfor the year. If you remember it was a seven plus. And to continue to do thaton the back of the strong comparables that we now have, we need to be verydisciplined with our business models. So, I would not expect the margin to gowell above the model and the guidance that we had given you so far. We will tryto stick to that. Didier Scemama - ABN Amro: Great. Whether just can youactually explain quickly on the margin offset in Q3, I know it's normally oneof the strongest quarter for DAP, but was there any particular event that drovethe significant upside? Pierre-Jean Sivignon: No. I think -- no, I believe thatthe volume is quite strong. The mix is obviously, quite, quite strong as well.We've had double-digit growth in all categories with the, except of one. And asyou know that the selling expenses are usually stronger in Q4 because that'swhen you prepare for -- because right now as you are aware, basically, you getready for the Q4, for the so-called selling season, but you spend quite a bitof money, ironically, late in Q4 in order to make sure that the first quartercontinues to be a good quarter. So, I think in Q3, we have a complete homerunin terms of growth, in terms of hitting all the right targets with the rightproduct mix and countries, and in Q4 we will have the usual investments ofselling expenses, to not only to make Q4, but more importantly to deliver astrong Q1. So, nothing particular there Didier. Didier Scemama - ABN Amro: Okay. Thanks very much.

Thank you. The final questioncomes from Mr. Tim Schultz from Milan of Bear Stearns. Please go ahead. Tim Schultz - Bear Stearns: Well, I just had a quickhousekeeping one actually. I don't know if I missed it. On the Semiconductordivision disposal you have some tax. I think the (inaudible). Can you justremind me what the magnitude and timing of that is? Pierre-Jean Sivignon: Well this is still -- we havenever really disclosed that because we still have discussions currently going. Wehave said that in the course of this year we would have some tax related --cash related, sorry some cash related tax payments on the back of thesemi-transactions, but those payments have not really taken place yet, and it'snot for me to guide you because we want obviously to minimize those and we arehaving discussion with various tax administrations. So for the sake of keepingas much leverage as we can I would prefer to leave it at that for the timebeing. Tim Schultz - Bear Stearns: Not even a sort of double digits,I mean just an order of magnitude? Pierre-Jean Sivignon: Well, in any case it would beessentially -- it would be a completely a cash element because we believe thatin terms of bottom line impact the provision that we have taken are sufficient.So I can give you comforts from a P&L point of view. From a cash point ofview we could have a few hundreds of millions related to that in the quartersto come but I can't be much more specific at this particular point of time. Butthe P&L is not going to be impacted. Tim Schultz - Bear Stearns: Okay, very helpful. Thank you.

Thank you, Mr. Sivignon there areno further questions. Please continue with any further points you wish toraise. Pierre-Jean Sivignon: No, I think we have no particularpoints. We want to thank you for your questions and good bye to you.

Ladies and gentlemen, thatconcludes today's conference call. Thank you for participating. You may nowdisconnect.