Tait Sorensen – Director-Investor Relations Carlo Bozotti – President & Chief Executive Officer Carlo Ferro – Chief Financial Officer Jean-Marc Chery – Chief Operating Officer

Sandeep S. Deshpande – JP Morgan Chase & Co, Research Division Andrew Gardiner – Barclays Capital Marie Mawad – Bloomberg Gareth Jenkins – UBS Investment Bank, Research Division Francois Meunier – Morgan Stanley Stephane Houri – Natixis Johannes Schaller – Deutsche Bank AG Jerome Ramel – Exane BNP Paribas Adithya Metuku – BofA Merrill Lynch, Research Division Bernd Laux – Kepler Cheuvreux, Research Division Lee Simpson – Jefferies & Company Amit B. Harchandani – Citigroup Inc, Research Division Gianmarco Bonacina – Equita SIM Spa, Research Division Guenther Hollfelder – Baader Bank AG Francesco Previtera – Banka Akros

Ladies and gentlemen, good morning. Welcome to the STMicroelectronics Second Quarter 2014 Earnings Results Conference Call and live webcast. I'm Joya, the Chorus Call operator. I would like to remind you that all participants will be in listen-only mode and the conference is being recorded. After the presentation there will be a Q&A session. (Operator Instructions) The conference must not be recorded for publication or broadcast. At this time, it's my pleasure to hand over to Mr. Tait Sorensen, Group Vice President, Investor Relations. Please go ahead, sir.

Thank you for joining our Second Quarter 2014 Financial Results conference call. We hope that this new time-table for earnings release and conference call is helpful. We have also decided with this change to combine both the investment community and press participants on one call to share our commentary and answers to your questions altogether. Hosting the call today is Carlo Bozotti, ST's President and Chief Executive Officer. Joining Carlo on the call today are Jean-Marc Chery, Chief Operating Officer; Carlo Ferro, Chief Financial Officer; Georges Penalver, Chief Strategy Officer; Carmelo Papa, Executive Vice President, General Manager of the Industrial & Power Discrete Group; and familiar voice to the media, Claudia Levo, Corporate Vice President External Communication. This call is being broadcast live over the web and can be accessed through ST's website. A replay will be available shortly after the conclusion of this call. This call will include forward-looking statements that may involve risk factors that could cause ST's results to differ materially from management's expectations and plans. We encourage you to review the Safe Harbor statement contained in this press release that was issued, and also in ST's most recent regulatory filings for a full description of these risk factors. Also to ensure all participants have an opportunity to ask questions during the Q&A session please limit yourself to one question and a brief follow-up. I'd now like to turn the call over to Carlo Bozotti, ST's President and CEO. Carlo?

Thank you, Tait. And welcome to our Second Quarter Earnings Conference Call. For the benefit of all, the agenda today includes a review of our financial highlights and of our two product segments, further details on our product groups within the segment, and then our outlook for the third quarter. So let us begin. Our quarterly results were well-aligned with our guidance. Revenue came in at the midpoint of our outlook of 2% sequential growth. Gross margin was 34% above the 33.6% mid-point of our range improving both quarter-to-quarter and year-over-year. Operating expenses were again, we're on track with our financial model and we return to a net profit at the bottom line. We also further strengthened our capital structure and significantly enhanced our financial flexibility to boost growth with the $1 billion convertible debt offering completed in July, which will be visible in our third quarter balance sheet. ST simultaneously launched a buyback program for 20 million shares in order to meet the company's obligations in relation to its employee stock award plans. Moreover, we returned capital to our shareholders with the payment of a quarter dividend of $0.10 per share or $90 million in the aggregate. Turning to the second quarter results in more of that, revenues came in at $1.86 billion, up 2.1% sequentially. Excluding legacy ST-Ericsson products and one-time licensing revenue in the first quarter, this represents a sequential progression of 4.7%. In our Sense & Power and Automotive Product segment, the key drivers of our top line growth were the Industrial & Power Discrete and Automotive product groups, IPD and APG increased 7.4% and 4.2% sequentially respectively. And in our Embedded Processing Solutions segment, EPS, our Microcontroller, Memory & Secure microcontrollers grew 14.5% sequentially, so all three of our largest groups perform very well. Our customer diversification across market channels continued. Distribution represented 31% of total sales in the second quarter, up from 26% at this time last year and slightly increasing from the first quarter. Gross margin improved sequentially up 120 basis points, thanks to manufacturing efficiencies, a favorable product mix, and product pruning. So we continue to move towards our target range of 36% to 38%. Turning to operating expenses, we are well aligned with our objective, combined R&D and SG&A totaled $626 million in the second quarter with the sequential increase mainly due to higher number of days in the quarter. Year-over-year, our operating costs are significantly lower due to the exit of ST-Ericsson and our cost reduction programs. Also in the second quarter, the European Union approved the funding of €400 million for the Nano2017 R&D program. This funding granted by the France authorities to ST for the development of new technologies in the Nanoelectronics sector is for the period 2013 to 2017. Apart from the catch-up of the Nano2017 program recorded in the second quarter going forward and in combination with other smaller programs, R&D grants are expected to total about $30 million for quarter. This is helping us to keep our net operating expenses at the lower end of our target range. We also posted a significant improvement in our operating income before restructuring of about $52 million year-over-year on a comparable basis, excluding the impact of the Nano2017 grants catch-up in the second quarter this year and the Ericsson portion of the ST-Ericsson results during the second quarter of 2013. Now, let's move to our product segment results starting with Embedded Processing Solutions. With the second quarter, we have begun what we anticipate being a positive growth trajectory for EPS. EPS revenues increased 4.6% on a sequential basis. This is mainly due to growth in MMS and DCG, the latter when excluding legacy ST-Ericsson products. As expected, legacy ST-Ericsson revenues decreased to $34 million in Q2 compared to $63 million in Q1. Our Digital Consumer and ASIC business grew 4.2% sequentially after reaching an inflation point in the first quarter, also not yet at the pace we are expecting for the coming quarter. In the set-top box business, we expanded our ecosystem around 4K ultra-high definition TV. This is the right place to be since the industry expects 4K TV sets to account for 5% of the global TV market this year and to rise to 42% by 2018. Overall, in the connected client-server and Home-Gateway families, we now have about 30 designs with major customers and operators. During the quarter, we also secured wins for cable chipsets in new generation high-definition zappers from several operators. The interest and momentum in next-generation ASICs is also continuing with two major design wins, one for computer peripherals and one for communication infrastructure in FD-SOI. Turning to IBP, our photonic sensors for proximity sensing applications based on our flight sense technology are well-suited to a wide range of applications. During the quarter, we began volume shipments of our time-of-flight proximity sensor for the LG G3 smartphone that began its global roll out from the second quarter of 2014. We also started volume shipments for the mass-market driven by Internet of things and robotics applications. In MMS, this was another record revenue quarter for our general-purpose microcontroller, the fifth in a row. These strong results reflect our success in the mass-market, which represented in the quarter about 70% of total general-purpose microcontroller sales and with key OEMs. For example, we ramped the production of our STM32 for a new Samsung smartphone that was launched in the second quarter of 2014. We also captured STM32 design wins in a mobile phone accessory at another major OEM and in a new platform for a major factor in the metering industry. Finally, we sampled our latest Secure MCU's to ID and Banking customers and revealed our latest STPay dual interface product line for the U.S. EMV banking-card migration. From an operating margin perspective, EPS saw an improvement both sequentially and year-over-year, largely reflecting the catch-up of funding for the Nano2017 R&D program. Let's now cover the Sense & Power and Automotive segment starting with our Automotive Product Group, APG. APG increased 4.2% sequentially and 11.3% year-over-year, and we achieved a record quarter in terms of billing, the highest ever in ST's history, benefiting from solid execution of our strategy combined with healthy market conditions. In fact, during the first-half of the year, light vehicle sales were up almost 4% versus the first-half of 2013, driven by China, but showing also improved conditions in Europe. Let me share some of the highlights for Automotive in the quarter. First, we saw continued expansion in infotainment, where we are either number one or number two in each of the two of the – in each of the main subsegments. Here our latest-generation car-radio processor one, is first important design win at the major Chinese customer, as well as in Europe and in U.S. Second, our strategy of partnerships with carmakers to address radical innovation is progressing. In Q2, we announced a partnership with Changan, the fastest growing Chinese carmaker with over 40% car sales growth year to-date. We also signed another significant partnership with a European premium car brand in addition to those partnerships that we had already disclosed with Audi, Hyundai Autron, and Great Wall. Third, I would like to mention some wins in automotive microcontrollers for parking assistance and transmission applications for European customers as well as our continued expansion overall in the U.S for car body with design wins at a large American tier-1 supplier. Industrial & Power Discrete products, IPD, increased at 7.4% on a sequential basis and 1.9% year-over-year. Here, we are seeing improving market conditions and are benefiting from our marketing efforts in the mass-market and distribution. We captured a number of design wins in some of our focus areas. For example, we landed a design win with IGBT for an air-conditioner application with leading manufacturer in Asia. We won sockets in server power supply applications from a global leader for ultra high-performance silicon carbide diodes and we earned a design-win for a fully integrated motor driver in a new project for textile equipment and we qualified high-voltage MOSFETs for power supplies and LED lighting applications with numerous top-tier vendors around the world. : Our new products including microphone, touch-controllers, 6-axis gyroscopes, and pressure sensors have been recently selected in different combinations for forthcoming flagship smartphone models. In terms of market diversification, we expanded our business in China and Taiwan supplying MEMS products to Asus, Lenovo, Oppo, Meizu, among others. We also enjoyed high volume ramp up of our 6-axis MEMS combo in Huawei Ascend P7 phone and started to ramp up 6-axis smart sensors with Xiaomi. In our Analog business, we are seeing good traction with our Bluetooth Low Energy Solution with over design 700 design registrations since we started sampling the product during Q1. The broad interest and success in the mass-market will deliver revenues in the second-half of this year, alongside our other low-power RF solutions for the internet of things. Overall, SP&A's operating margin improved again this quarter to 10.5% from 8.7% in the first quarter and was up substantially from a year-ago quarter level of 3.5%. This is in line with our previously communicated expectation of margin improvement, thanks to increased revenues from new products, a favorable product mix, low-margin product pruning and manufacturing efficiencies. Let me now comment on our outlook for the third quarter. The general macroeconomic environment has been improving and is strong in certain areas such as automotive and industrial. So we begin with a favorable backdrop. From ST's perspective we see sequential revenue growth in all areas of our product portfolio. MMS, which has led the way with record revenues quarter-after- quarter, will temporarily slow in Q3. Also we are still expecting sequential growth. IPD and APG will perform better than seasonal, thanks to both favorable industry trends and solid market positions. Importantly AMS and DCG will become again significant contributors to ST's growth. Looking at our specific guidance for the third quarter we expect net revenues to grow by about 3% at the mid-point. Based upon our revenue growth outlook as well as product-mix between analog and digital, we anticipate that our third-quarter gross margin will increase to about 34.4% at the mid-point despite a higher level of unused capacity charges as our manufacturing capacity in digital technology is not yet fully utilized. Excluding the second quarter one-time effect related to the Nano2017, we anticipate further improvement in our operating margin in the third quarter. Last but not the least, in the third quarter we expect to return to positive free cash flow generation. So, to conclude, ST made solid progress in the second quarter from many perspectives. Revenue and gross margin improvement, a solid pipeline of design wins across our products, important steps towards DCG's turnaround and AMS renewed acceleration, a further refocus of our portfolio and ultimately financial return. But for sure, more has to be done. This is our continued focus and commitment in order to continue to generate revenue for all of our stakeholders. My colleagues and I are now ready to take your questions. Thank you.

We will now begin the question-and-answer session. (Operator Instructions) The first question comes from Sandeep Deshpande from JP Morgan. Please go ahead. Sandeep S. Deshpande – JP Morgan Chase & Co, Research Division: Yes, hi. Thanks for letting me on. My question would be on top line growth. You've seen in the second quarter, Samsung had softer second quarter. Samsung is an important customer to STMicro. Also based on your mid-next year 10% margin guidance, you need to grow revenues from the current level by about 17%. So, do you see that progress towards that point and particularly associated with DCG where you've talked about the biggest level of revenue growth over this period and how is the progress on that front? And I have one follow-up.

Yes, indeed. I think we are progressing and I think DCG as we said is going to be an important contributor to the growth during the next few quarters. We also have a look and get to the third quarter this year and additional decline of ST-Ericsson that we are not communicating any longer. So, if you take Q2, we had a sequential growth on our core business over 4.7% and we will have another stack in Q4. I believe we are encouraged by the progress in DCG when looking at all the new design-wins, customer traction. Also the 4K – as I was mentioning the 4K pervasion in the area of TV, of course, we are not in the TV business but for us it's the set-top box business and this is higher-end chipsets and we expect that pervasiveness here will go from about 5% this year to more than 40% in the year 2018. So, the progress is significant in terms of design wins for the set-top box but also in terms of basic products on the FD-SOI. On the other end, we are also pruning products. I think I want to underline this, this is already announced as part of our strategy. Of course, it's not helping the growth, but it's important, because ultimately we want to land in a model where our gross margin is in between 36% and 38%. Clearly, today a part of the company if we look at the manufacturing activity is in a good loading situation, but there is a part of the company, the digital – the digital technology fabs that are not yet at an optimal level of loading, which is another opportunity in terms of gross margin expansion. So Q2 is a step, we will make another step in Q3, and we are all working hard and we are committed to move on the trajectory to our financial model target. Sandeep S. Deshpande – JP Morgan Chase & Co, Research Division: A follow-up on the gross margin to Carlo Ferro, I mean, Carlo you’ve talked about this roadmap on the gross margin, the 100 basis points from ST-Ericsson, then something from the fab loading, something from the product pruning. Can you give us an update on that at this point? I mean, clearly the ST-Ericsson seems to be almost gone, so maybe the 100 basis points from ST-Ericsson is already in the numbers. So what is now the upside from here, from the 34.4% that you’ve guided in the third quarter upside to the middle of next year?

Good morning, Sandeep. Good morning, everyone. Yes, you referred the end of roadmap very well decline in respect to the guidance contributor to improving the gross margin. They went down over ST-Ericsson product, the restructuring initiative in manufacturing, the pruning of low-margin product, the efficiency and the better loading of the fab. Indeed, in respect to the former ST-Ericsson product, you are correct that the ways [ph] on revenues is much lower. However, meanwhile the gross margin even deteriorated for the obvious erosion on these legacy product. So we have made progress, but we still see about half-a-point of gross margin progression coming from replacing the ST-Ericsson legacy product that we've average [ph] product of our portfolio. The other block is the one of the manufacturing initiative. This is about the conversion from six towards 8-inch in Singapore, the phase-out of the assembly manufacturing in Longgang. And here at the end as I said, the benefit that we will be evident at completion of the initiative and this is about half to one full point of benefit still to come. The third block is the one of the product – low-margin product optimization. Here as Carlo's mentioned, we've made some good progress, also maybe at the cost sometimes of lower revenues growth particularly for AMS and what we see about one point to come from this block. And then the better loading and the efficiency starting from the situation of the second quarter still are going to be an important contributor net of the expected price effect and mix in the period, we do anticipate over one point of benefit from this other block of initiatives. Sandeep S. Deshpande – JP Morgan Chase & Co, Research Division: Thank you, Carlo.

You're welcome.

Thank you, Sandeep. Next question?

The next question comes from Andrew Gardiner from Barclays. Please go ahead, sir. Andrew Gardiner – Barclays Capital: Good morning. Thanks for taking my question. I was just interested in diving a bit deeper into some of the product areas. Firstly, on AMS and in particular within in MEMS, I mean we saw a bit of pressure on AMS revenue in 1Q, that’s clearly accelerated in the second quarter, you are now saying you are looking for Q-on-Q growth again in 3Q. :

Yes. Well, I think that clearly AMS is at the bottom in Q2. It is also the group that has been most impacted by the product pruning on certain families and in products, like for instance, standard logic and certain standard linear products. And we have also worked a lot on differentiation in terms of products and in terms of applications and in terms of customers. I believe that, and I was mentioning just two minutes ago, we have now a family of new products from microphones, including analog, microphones, FingerTip and new family of gyroscope and also new environmental sensors like our pressure sensors that are going to be very good products. They have been selected by major customers. They are flagship for their flagship models. I think we are also working as I was saying on the diversification from a geographical point of view with a major, major effort in China. We have now, I was listing some of the key customers that we have in China. We are progressing in the automotive with new wins in the automotive business also in China. And ultimately, I think growth is important. But as I said, pruning here is also impacting and ultimately we wanted to have AMS as in the past contributing to the overall operating income of Sense & Power and Automotive, where we have despite limited sales growth during the last 12 months, a very significant improvement in the operating income moving from 3.5% in Q2 last year to 10.5% in Q2 this year, this is not enough. As you know, we want to make another step in the top line and also in terms of operating income. But AMS first of all, we'll start growing again in the next quarter and is very, very important that we move on also with our product pruning activity and making sure that the overall AMS contribution to the operating income of SP&A we continue as in the past. Andrew Gardiner – Barclays Capital: Okay, thank you for that explanation. Also just quickly on wireless. I mean as you highlighted in some of your comments, you haven’t detailed your expectation for where that goes from here in the press release. It did hog in the second quarter, we're at a pretty low level in the $30 million range. But can you give us any sense as to where that will go in the second-half, are we going quickly to zero, is it end of lives or does it sort of drag on for a little longer?

No, there will be another step down, of course, we do not want to report, we do not want to report any longer, because I mean, we also need to be from – this is really the last quarter that we report on our wireless activity, but there will be other decline in revenues. I think in Q2, we have done about $34 million. I think ultimately we will land to about $15 million or so. So there will be other steps down. But again, we do not wanted to report this any longer also to make our number simpler and to move on from where we are now. So – but indeed, there is another $20 million to step down here. Andrew Gardiner – Barclays Capital: Thank you, Carlo.

Thank you.

Thank you, Andrew. Next question?

The next question comes from Marie Mawad from Bloomberg. Please go ahead, madam. Marie Mawad – Bloomberg: Yes, good morning, everyone. My question is about your outlook. Basically your Q3 outlook is broadly in line with what the consensus is expecting, whereas we've seen more generally in industry, lots of optimism coming from some of your rivals, expectations were below with some of them announced the forecast. Can you explain a little bit why that is and what that means for the coming quarter in terms of the market share? Thank you.

Yes. Overall, we see a good traction in important market for ST. If we look at the automotive industry, is an area where we see traction across the board from an application point of view, customer point of view, geographical point of view, so Q3 clearly will be about seasonal in the automotive so we have a strong backlog and good momentum. Industrial, Industrial is the same, I mean, if there is an area that is really strong today our performance in distribution, and of course, industrial is the main area of focus and distribution with a wide – very wide number of customers fragmented and this is an area where, of course, we also track our inventory at the distribution level and they can say, you can report that these in a healthy situation. So, these are areas where there is a strong traction and a strong momentum. In other areas, of course, it's more customer-specific. I mean, this is if you take wireless, of course, is more customer-specific. Of course the smartphone, the smartphone industry is an important – very important industry. We are not present any longer with a digital core but with a lot of peripheral products. Something that I would like to underline is this new proximity sensor that we have recently introduced is in – is very nice one of LG. And this for us is a new business and may become material business in the next future. But clearly here it's more customer-specific. The general trend, of course, the weight of the Chinese is increasing. So we need to make sure that we are present in China, in covering all the market there where the fragmentation in terms of customers is pretty high. And I would say in the area of the set-top box that for us is the area in the consumer where we are present, really what is very important for us is the pervasiveness of the 4K screens, the 4K displays, the evolution where we believe there will a strong growth and we want to be there, we want to be there with new products that is higher value – our value products. So overall the momentum is good. I think in industrial, in the automotive is very much driven by the market. It's a good trend. It's a good traction and of course, it's important for ST. If we look at other businesses, it's more customer-specific, but I believe it's a good momentum. And the inventory position, I would say, is pretty healthy everywhere. Marie Mawad – Bloomberg: Would you say globally that your outlook that you took a cautious stand on the outlook or that you've left yourself room for a good surprise there?

No, we always give realistic number. The outlook, of course, is the result of many, many things, growth, transitions, ST-Ericsson going down, product pruning. So, ultimately what is important for us is to make another step in terms of operating income and making sure that we have progress, that we are on the right trajectory but we always give realistic figures. Marie Mawad – Bloomberg: Thank you.

Thank you.

Thank you for your question. Next question, please.

The next question comes from Gareth Jenkins from UBS. Please go ahead. Gareth Jenkins – UBS Investment Bank, Research Division: A couple if I could, please. Just wondered, your revenues down 2% year-over-year if we exclude wireless. I just wondered, could you give us a sense of the total impact of pruning has had in the quarter just so that we can get a sense of how much is proactively being managed down.

Yes. Gareth Jenkins – UBS Investment Bank, Research Division: And secondly, I just wondered, if you could comment, you've talked historically this year about very good book-to-bill and the bookings improving. Could you talk about the bookings environment related to that utilization rates, please?

Yes. So I will cover the part of the bookings, and then Carlo will cover, of course, the evolution year-over-year and those are in the loading situation in our fab. I think the booking in Q2 was good. We had a positive book-to-bill. We have – we saw also for instance a good month of June. June was pretty good. I think, in fact, June was the best month in the quarter in terms of booking, and, very much across the board. I mean, this was a global trend that we see by product family and also by geography. So it was a good – it was a good booking momentum. I think from this point of view I have nothing new to report. I mean this was the same trend that we had before. I think the book-to-bill is positive and I can say that the month of June was pretty good, better than May and April. Carlo?

Okay, Gareth, I guess, you have two questions. One is on the year-over-year revenue dynamic. Indeed, yes, product pruning has somehow mitigated the year-over-year dynamics. We could estimate in the range of 1.5 point at least the impact. So, you see that out of that at the end and excluding the phase out from the former ST-Ericsson legacy product revenues are substantially flat. These again they very much reflect different trend, as you noted by product group. For Sense & Power and Automotive, if we exclude the effect of the product pruning, before the effect of the product pruning, revenues year-over-year grow. And they grew as a result of very strong growth in Automotive and dynamic that this year for the many reasons we said was not positive for AMS. And then in the area of the embedded processing solution, at the end revenues excluding the ST-Ericsson former product did not grow year-over-year. And again, this is a little different trend with micro-controllers having experience a very strong growth and the area of the digital convergence which is fixing the transition in these product offering.

Your second question is about the utilization rate. Utilization rate for the second quarter has been in average 87%, 88%, so in line substantially with the expectation, resulting in some but mild impact of unused capacity under gross margin. We estimate in the range of 20 basis points. And then for the current quarter what we see overall, on all the fabs and all the technology, we expect a similar level of overall utilization in the range of 87%, where these includes technologies and especially those in the mixed signal and analog technologies with a very high utilization rate, while we have in 80-inch two fabs below 80% expected utilization this quarter but more importantly in 300mm we expect utilization below 70%. And these overall may result in about 80 basis points negative hit to the gross margin already of course incorporated in the gross margin outlook for the quarter. Gareth Jenkins – UBS Investment Bank, Research Division: All right, so thank you.

Thank you, Gareth. Next question, please.

Next question comes from Francois Meunier from Morgan Stanley. Please go ahead, sir. Francois Meunier – Morgan Stanley: Yes, thanks for taking my question. The first question is about Carlo's comments you made about Bluetooth low energy. You said, you had more than 700 product registration for this product. Is it like design-win or is it like people downloading the development kit?

No, no, no, this is a formal design-wins with our distributors so there is a process, there is a precise formal process, because of course then there is also some form of design protection for our distributors that are helping us to design in these products. No, no, it's a formalization of design-win effort. Of course, it's very fragmented and I have reported what we have done in distribution. So this is the design activity that we have run with our distribution that we track formally because it's also one of the area where there is a recognition to our distributions in terms of design registration. Francois Meunier – Morgan Stanley: Okay. Thank you. Maybe, now a question more for Carlo Ferro and it's about the new convertible bonds you’ve issued this quarter. I would like to understand a bit more what is the plan to use this $1 billion? Is there are any debt you could reimburse quite quickly given the interest on this one is quite low and what's going to be the impact on the share count of this convertible bond? Thank you.

First of all, thank you very much for the question. I hope that at the end you appreciate the transaction. Really, what we want at the point has been really to take opportunities existing on the capital market in a form as much as possible friendly to the equity investors. And at the end as we have noted, our issuance is substantially neutral in terms of equity dilution as the combination of the net share settlement option's ability of redeeming in cash the principal amount and the simultaneous launch of a share buy-back program at the end make us substantially neutral, the impact on the number of shares. Then to answer the third of your question, under accounting for EPS perspective and earnings per share in this case not embedded processing, the EPS perspective, there will be no addition on the share count to the extent that the bond remains below the conversion price, which I would remind you is of – in the range of $12. So no addition to the denominator of the EPS. In term of use of proceeds, in term of use proceeds at the end, they're really the rationale behind the issuance is basically to raise fund when the market make it available at very appealing condition as opposed off on as-needed basis. So there is no specific need. This is for general corporate purposes, these for sure of lot of flexibility for the company to boost the growth and strength of the capital structure, also reinforcing our objective of return of capital to shareholder through dividend distribution. There is no opportunity frankly to use the proceeds to redeem outstanding debt, as the outstanding debt at the end is mostly with the European investment bank, and its term and cost remains very appealing. So again, and the cost of – finally, the cost of carrying will be really known a very minor as you may note the cost of the instruments is very minor. We have issued the five-year tranche at zero yield, zero coupon to minority. This is the fifth one issued zero yield, zero coupon in U.S. dollar since before the credit crunch in 2008 and the seven years at 1% yield equals on a floating basis a LIBOR minus 210 basis points. So very, very, very little cost ability of some user yield from the use of liquidity and the opportunity to get flexibility for opportunity of those. Francois Meunier – Morgan Stanley: Okay, that’s very clear. Thank you, Carlo and Carlo.

Thank you, Francois. Next question please?

Your next question comes from Stephane Houri from Natixis. Please go ahead. Stephane Houri – Natixis: Yes. Hello, this is Stephane Houri from Natixis. I have a question about FD-SOI. You’ve said that you had two new major design wins. Can you specify those design wins are still in 28-nanometer or if they are in 14-nanometer? And you just start to see some traction for 14-nanometer FD-SOI, can you remind us how much design win you have in FD-SOI so far. And looking at DCG division dynamic, from which side are you expecting more? Are you expecting more from set-top box ASICs or from FD-SOI to achieve your target to double the revenues by the end of 2015? Thank you. Jean-Marc Chery: So Jean-Marc Chery speaking, good morning. So first okay about the two new design win, one is in bulk technology on 28-nanometer and the second one is for communication infrastructure is on the next generation of FD-SOI. Stephane Houri – Natixis: You mean 14-nanometer? Jean-Marc Chery: This is 14-nanometer. So overall, okay, now we are at 18 design-win overall on the FD-SOI. Coming back to DCG dynamic, you should remember well what we always state that this dynamic will be in two waves. So the first wave is ECIR [ph] encompassing the broadcast set-top box on 14-nanometer, and then during the last quarter on communication infrastructure using 32-nanometer technology. : Stephane Houri – Natixis: Okay. And just looking short-term, I heard you say that the growth – sequential growth in Q2 for DCG excluding ST-Ericsson was about 4%, and you said, this is not yet what you are expecting. Do you mean that you expect an acceleration over those plus 4% starting in Q3 already?

Yes, this Carlo will take. Carlo?

You know, Stephane at the end giving guidance quarter-after-quarter on growth by product group is a bit of (inaudible) in respect to the way we do normally guide and outlook. I believe, here the message the digital convergence group really reached the inflation point in the course of the first quarter. We experienced, they experienced as Carlo said 4.6% growth in the second quarter sequentially and we do expect the third quarter to grow again then to quantify it give us the patience of…

Another indication for instance is the information that we have from our automotive customers, carmakers et cetera about their activity during the course of Q3 that of course in certain regions is vacation time, and is a positive indication. So of course, what I'm reporting here is what we know, what we saw and so far there are no signs of specific weaknesses. In other sectors, if you take wireless for instance is maybe more customer specific. I already mentioned the trend before we see the ways of the Chinese, the smartphone makers increasing. So, but – so far so good. Stephane Houri – Natixis: Okay. Thank you very much. And just a brief follow-up on the operating expenses for modeling. Carlo you were guiding at including the $30 million which you will now get from the Nano2017 funding that you will be at the low end of the range. So should we sort of – excluding the grant, will you see an increase from the $626 million that you had in Q2, is that the way we should look at it, and then you put in the additional money and so you will come back to close to the $600 million level, is that the way we should be modeling it for the next few quarters?

Maybe I take, Carlo Ferro is taking your question, Genard [ph]. I would say we should eventually make some difference between the third and the fourth quarter for – so some reason of different length of the accounting landed in Q4. And obvious reasons are the seasonality between the two quarters. For Q3, you may expect gross expenses similar or a few million dollars different from the $626 million gross we've experienced in the second quarter. So net of the grant they will be at the low of the range. For the fourth quarter, we have some increase due to the seasonality and longer number of days in the accounting calendar whether on the net you may expect net operating expenses around the midpoint of the range, of the $650 million net OpEx range. Stephane Houri – Natixis: Thank you very much.

You're welcome.

Thank you, Genard [ph]. Next question please?

The next question comes from Johannes Schaller from Deutsche Bank. Johannes Schaller – Deutsche Bank AG: Yes. Hi, there. Thanks for taking my question. Just on secure microcontrollers, could you maybe, quickly remind us, how much of the MMS segment that roughly accounts for at the moment? And then just over the course of this year share some of the dynamics there with us. I think tax rates for embedded Secure Elements seem to have come down quite a bit, some of your competitors also quite vocal on share gains and embedded Secure Elements. So I was just wondering how we should be thinking about the segment, are there some more positive dynamics that helps supporting growth, should we maybe think about declines over the course of this year? Thank you.

Yes. First of all, I think I cannot provide the detail number for. This is one of the divisions that we have for MMS. And I think here, I believe there are areas where we see a very, very strong momentum and everything that is around banking for instance, we see the positive trend in America, but also in China, this is a positive trend. If we look at – if we look at the smartphone, I think there is number of opportunities in the smartphone and some is related to the sensor hub. This is a good opportunity. And other one is related to the Secure SIM, that one is related to the Secure Element. Some of our customers decided not to include the Secure Element solution in their flagship model in the vast majority of their volume for 2014. But this is in fact, more of Q2 I would say impact. We see a good trend, good opportunity with the Near Field Communication, also in this area. So I think overall for us is a good business. So, of course, there are situation that are specific to customers, but I believe we have excellent technology here and this of course, secure microcontrollers are contributing positively to the overall MMS performance. Clearly, banking will be important here. In the next quarter, I believe Secure SIMs will be important and Near Field Communication will be important. So I think is continuing the contribution that this business unit is giving to MMS. Johannes Schaller – Deutsche Bank AG: Okay, that’s helpful. Just a quick follow-up, so I mean that's obviously at one of your customers, as you’ve said, let’s say reduced attach rate, but if my understanding right that the remaining volumes, you are still shipping the Embedded Secure Element, is that correct?

This is too much of detail, and is really, really customer specific, so again I cannot comment here. Johannes Schaller – Deutsche Bank AG: Understood. Thank you.

Okay, thank you.

Thank you, Johannes. Next question?

The next question comes from Jerome Ramel with Exane BNP Paribas. Please go ahead. Jerome Ramel – Exane BNP Paribas: Yes, good morning. Just a quick question on Q2, just I would like to understand how you have allocated the catch-up of the grant from Nano2017 between the SPA and EPS division just to have to fine tune model.

Okay, Jerome, Carlo Ferro is taking your question and I'm quite prepared as I have all my fellow colleagues and our managers of the group very keen on the same question as well. The answer is very easy, at the end of the day, we do adopt a rule based on technical expert and future utilization of technology that to allocate the process technology effort to each of the product group. On top of that of course, it’s easy to allocate the R&D cost for product design programs that are directly attached to the group. As the grants follow the specific program, the allocation of the grants exactly mirror the allocation of the related R&D cost. Jerome Ramel – Exane BNP Paribas: Okay. And maybe just a follow-up on what Jean-Marc said on FD-SOI, you got 18 design-wins, but with how many clients?

We took on the clients with several clients. Jean-Marc Chery: Yes, anyways, they are spread between communication infrastructure and consumer. Jerome Ramel – Exane BNP Paribas: But it’s more than two clients. Jean-Marc Chery: Yes, of course, yes. Jerome Ramel – Exane BNP Paribas: Okay. Thank you.

Thank you, Jerome. Next question please?

The next question comes from Adithya Metuku from Bank of America Merrill Lynch. Please go ahead. Adithya Metuku – BofA Merrill Lynch, Research Division: All right. Actually my questions have been answered. Thanks, gents.

Thank you. Next question please?

The next question comes from Bernd Laux from Kepler Cheuvreux. Please go ahead. Bernd Laux – Kepler Cheuvreux, Research Division: Good morning, gentlemen. Most of my questions also have been answered. So there is just one left, it relates to the announced exit from the joint venture 3Sun, is this now completely behind or should we anticipate any follow-up costs and in terms of restructuring, you had this $20 million in the second quarter, should we model roughly the same for the next few quarters or will that come down? Thank you.

Bernd, thank you for the question, and give out the opportunity to expand on this subject which at the end we're communicated together with the earnings as we signed the agreement just yesterday. At the end the decision to exit 3Sun is part of our strategy to focus on the core business. At the end as you’ve noted from a prior period, the result, the joint venture is not delivering the effected return, started also to become retracted to the tender and to the cash flow of the company. Additionally, more recently, they should all be in partnership ahead overall to be reconsidered given the recent evaluation of the corporate situation at one of the three partner at Sharp. And frankly the joint venture mission fits much better with one of – and they empower their value chain. They have committed to continue the industrial operation in Catania on this joint venture, so at this point, we (inaudible) with respect to all the stakeholders to exit the 3Sun joint venture. The second quarter P&L impact captured the definitive impact of 3Sun for us, so there will not be any next tail in this respect. This includes the impairment, the (inaudible) the loan, the loss of the second quarter, a contribution to the value against the full release obviously from any future liability and the current obligations. And as you noted, it’s a total charge of $51 million out of which the largest part is not cash. Bernd Laux – Kepler Cheuvreux, Research Division: Thank you.

Thank you, Bernd. Next question, please.

And there was another question on the restricting cost for the following quarters.

I'm sorry. The restructuring for the following quarter, you may expect there is some follow-up on the ongoing initiative, I would say in the size of a few million dollar up to $5 million for each of Q3 and Q4. Bernd Laux – Kepler Cheuvreux, Research Division: Thanks.

Thank you. Next question please.

Next question comes from Lee Simpson from Jefferies. Please go ahead. Lee Simpson – Jefferies & Company: : And secondly, is it working capital here that will be the focus this quarter?

Well, it’s quite elaborated and please understand we could not validate or discuss any of the individual ingredient of your model that are in the call. However, high level I believe to project our cash flow for the next couple of quarter, you correctly consider that, we are going to have some substantial recovery in working capital. Also take into account that there are ingredients like, for instance, the grants, (inaudible) the tax, the R&D tax credit in France that at the end happen to be collected normally on, I would batch event during the year as opposed of ratably during the year. And of course, these reflect then on the full-year as well. And the other important ingredient I wanted to reiterate is we are on track in our capital expenditure plan and we reiterate the guidance of CapEx in the range of $510 million and $530 million for the full-year 2014. Lee Simpson – Jefferies & Company: Thank you very much. And maybe as a quick follow-up, if I could, on the DCG growth in particular as it relates to set-top boxes, I'm just trying to understand end-market dynamics and how do you tie through to, to the growth that you see? I mean, are we looking specifically for signs of upgrade cycles particularly in Europe for set-top boxes, or are we looking for a specific competitive swap-out, maybe say in U.S. cable. I mean, maybe just as we touch on the U.S., can you give us a sense for how any end customer consolidation especially say in the U.S. is affecting any design win progress there? Thanks.

Well, clearly the driver for us is the 4K. Is this is clear. I think in the short-term we also have expansion the of our, as I said before zapper set-top box with what we define as the new class II that is 40-nanometer family. But the real driver here is very much related to the 4K evolution and for us to a new business. And the new business is the American market and in particular the cable, the American market where today our presence is marginal. I think we have already won a number of important operators and of course the customers that are serving these operators and making the boxes. But in the short-term as Jean-Marc was saying before, the growth this year is more related to the 40-noanometer product that is for the traditional set-top box devices. And – but the real focus is two things, number one is the evolution in terms of TV screens and the evolution of the 4K, and number two is the American market, it's a very important market, it's a market of $1.3 billion, it's a market where we are participating only marginally today. Now you mentioned certain M&A activities related to the United States. In fact, I – for us it’s important to be present in all operators, and of course, we do not expect that these mergers would have any impact on our recent designs with most important operators there. One area that for us is also new and is becoming important is really is a device that we define as Alicante, it's the name of a city, but is really the interface with the cable is DOCSIS 3.0 that is a completely new business for us, so we are certified by cable apps [ph] in the United States and we are focusing the next the standard that is the DOCSIS 3.1. So I'm trying to give you the drivers and these are higher-end products and for us, of course, is very important to move on with the design and then enjoy good draft [ph] during the course of 2015. Lee Simpson – Jefferies & Company: Great. That’s very informative. Thank you very much.

Thank you.

Thank you, Lee. Next question please.

The next question comes from Amit Harchandani from Citigroup. Please go ahead. Amit B. Harchandani – Citigroup Inc, Research Division: Hi, good morning, gents. I'm Amit Harchandani from Citigroup. Thanks for taking my question. Just two quick clarifications, if I may.

Sure. Amit B. Harchandani – Citigroup Inc, Research Division: Firstly, in terms of the catch-up contribution R&D funding, could you confirm if that's included within the cash flow that we have for the second quarter?

No, we recognize the P&L impact, we have not collected yet. So zero effect on the cash flow of Q2. Amit B. Harchandani – Citigroup Inc, Research Division: Okay, thank you. And secondly, just to clarify, are you still reiterating your targets for hitting 10% margin by third quarter 2015, and doubling your DCG revenues by fourth quarter 2015?

These remains the target for the company. Amit B. Harchandani – Citigroup Inc, Research Division: Fantastic. Thank you very much.

Thank you, Amit. Next question please?

The next question comes from Gianmarco Bonacina from Equita SIM. Please go ahead. Gianmarco Bonacina – Equita SIM Spa, Research Division: Yes, good morning, a couple of question. One on AMS, just the – because the performance in the first-half if I look year-over-year was quite weak, you mentioned some portfolio pruning and some, let’s say, recovery, thanks to new product in the second-half. But just to understand for the full-year, is it fair to say that full-year 2014 in terms of revenues will be somewhat lower than full-year 2013 and because even if I'm assuming some recovery in the second-half, probably that’s not enough to offset the decline in the first half? And then the second question about the recent convertible bond, if you can, I mean, I understand that you don’t have any short-term plans to do acquisitions, but just in the mid-term, is this bond issue also can be used to do some bolt-on M&A and if yes, in which area do you see opportunity to, let’s say, to make some target acquisitions? Thank you.

Okay. Answer to question number one, Marco, is yes, is substantially correct understanding. As with the question number two, is of course a little bit more elaborated. As at the end when we talk about flexibility for future growth, there are many ingredients of organic growth of development of capabilities and capacities in our own infrastructure and on foreseeable M&A. But frankly at this point would we have identified any specific target, we will not talk about future flexibility, would have been more explicit on these respect. So I believe, unfortunately, there is very little to add to what we said so far on this respect. We remain vigilant. We have a clear understanding that each of the two segments wants and there has to be self-standing under financial standpoint and if possible M&A has to deliver the appropriate return both in term of acceleration of growth and in term of accretion of any pressure to the overall company.

Thank you, Gianmarco. Gianmarco Bonacina – Equita SIM Spa, Research Division: Thank you.

We will move to the next question please.

The next question comes from Guenther Hollfelder from Baader Bank. Please go ahead. Guenther Hollfelder – Baader Bank AG: Hello, thank you. One question, on the automotive strengths better than normal seasonal patterns were you are expecting in the third quarter. Could you provide some color, what's of your products driving this strength in Q3? And also from a customer perspective what regions or what segments? Thanks.

Yes, I think in Q3 the driver are more the core automotive products, I mean, everything that is related to power-train, everything that is related to body for instance, and a little bit less in terms of car infotainment. But as I said before, we have good momentum in the four regions where we operate in all the regions. And of course, microcontrollers is becoming probably more important. We have – and we have already anticipated the cumulative value of design-wins with the new family of microcontrollers that we started to develop, and now it's six, seven years ago that was –is now starting to pay off, so is a material growth this year. And finally, safety, safety, there are a lot of new applications, strong traction, so I would say that all the core of the car in Q3 is contributing maybe a little bit less in infotainment part during the course of third quarter. Guenther Hollfelder – Baader Bank AG: And any comments on premium versus low and medium range what you are seeing right now?

I think, I have to say that our presence in Germany is very, very strong. So this is typically contributing a lot and this is more on premium car. But we are good – we are making good – very good progress in China. In China we are number one, in fact, in automotive. And – but clearly the weight of the – weight of the premium car is important and our presence in Germany and with all the German ecosystem is of course is a very, very important driver for the growth. Guenther Hollfelder – Baader Bank AG: Okay. Thank you.

Thank you, Guenther. At this point, we'll take our last question.

The last question for today comes from Francesco Previtera from Banka Akros. Please go ahead. Francesco Previtera – Banka Akros: Yes, thank you for taking my question. It's about cash flow generation. What are the elements that can improve the capacity in the coming quarter in terms of cash flow, free cash flow generation?

Well, of course, first of all the fundamentals, I think we – now back to profit and we want to improve from where we are there in terms of a net income. Clearly an important ingredient here will be working capital in the second part of the year and Carlo has already mentioned this. But I want to underline the fundamentals. I think our EBITDA is improving. And for us this is top, top priority, of course, and we want to move on from there and we expect an important turnaround in the cash flow in the second-half of this year. Francesco Previtera – Banka Akros: Okay. Thank you.

Thank you.

Thank you, Francesco. At this point I think we'll close and Carlo, do you have any comments? Okay. At this point, Joya, we'll close the conference call. Thank you, everyone, for participating.

Ladies and gentlemen, the conference is now over. Thank you for choosing Chorus Call, and thank you for participating in the conference. You may now disconnect your lines. Goodbye.