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In 2001, the semiconductor
industry experienced its worst ever downturn. The market correction began
abruptly in the last quarter of the year 2000 while the industry specialists
were still anticipating for 2001 a growth for the semiconductor industry in
most regions of the world.
During 2001, STMicroelectronics'
revenues declined by 18.6% while the semiconductor market (TAM) declined by an
estimated 32% and STMicroelectronics' served market (SAM) declined by an
estimated 24%. Significantly the Company, with the full concurrence and support
of the Supervisory Board, reacted rapidly to the situation by deciding and
implementing a program of cost reductions, yield improvements and optimization
measures that enabled the Company to avoid the major employee layoffs that
characterized most of the semiconductor industry during such period.
The budgeted CAPEX of $2.5 billion
was reduced to $1.7 billion for the year.
As a result of its forceful and
timely actions, the Company remained profitable in 2001 with a net income,
after impairments and exceptional items, of $257.1 million or $0.29 per diluted
share.
Considering these results, and
upon the proposal of the Managing Board, we recommend to the General Meeting of
Shareholders the adoption of the annual accounts for the financial year 2001
and the distribution, out of the Company's profit realized during 2001, of a
cash dividend of $0.04 per share.
Among the important events of the
year 2001, we would like to report to the General Meeting of Shareholders the
launch in December 2001 by STMicroelectronics Holding II B.V., the main
shareholder of the Company, of a private placement with institutional
investors, concerning 69 million of the Company's common shares. Concurrently
with the share offering, France Telecom completed an offering of Euro 1.5
billion of notes exchangeable into 30 million of Company's common shares with a
maturity on December 17, 2004.
At the suggestion and upon
approval of the Supervisory Board, the Managing Board has completed a buyback
of 9.4 million common shares of the Company for covering the existing 2001
stock options issued in conformity with the 2001 Stock Option Plan.
During 2001, the Supervisory Board
increased the number of its meetings so as to closely monitor the difficult
economic situation and the Company strategy. The specific committees set up by
the Supervisory Board were also very active.
The Compensation Committee met
four times and upon proposal of the Managing Board, increased the number of
employees who benefit from stock option grants as an incentive for their
participation to the development of the Company. In addition, employees were
offered the opportunity once in the spring and once in the autumn to
participate to employee share purchase plans.
During 2001, the Audit Committee
met six times and considered the recommendations of the Blue Ribbon Committee
issued by the U.S. Securities and Exchange Commission. In particular, the Audit
Committee met before each quarterly announcement and examined, |
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in cooperation with the Auditors
of the Company in particular, the quarterly accounts, the Company's audit
practices, all litigation-related risks, the execution by the Company of the
Auditors' recommendations regarding corporate auditing rules as well as the
independence of the Company's external Auditors.
The Strategic Committee examined,
together with the Company's CEO, every subject of material importance for the
Company, in particular plans and projects involving external growth and
acquisitions, strategic partnerships, major license agreements and asset
purchases, but also the Company's cost reduction program.
On this basis, we are happy to
propose to the General Annual Meeting of Shareholders the following main
resolutions:
- to adopt the annual accounts for the financial year 2001 and to
distribute a cash dividend of US$0.04 per share;
- to amend some articles of association of the Company, such as:
a. Modification of
Art. 4.5 with respect to quorum requirements in the event of limitation or
exclusion of preemptive rights on issuance of new shares;
b. Modification of Art.
20.2 concerning delegation of certain powers by the Supervisory Board to
committees made up of Supervisory Board Members;
c. Other amendments of an
administrative or clerical nature to clarify and update the articles in line
with Dutch law; and d. Authorization to De Brauw Blackstone
Westbroek N.V. to execute the deed of amendment;
- to renew the mandate of the sole member of the Managing Board, the
mandates of the existing members of the Supervisory Board and the mandates of
the Auditors for a period of three years up to the Annual General Meeting
called in 2005 to adopt the accounts for financial year 2004;
- to approve a new Stock Option Plan for the members of the Supervisory
Board of the Company and professionals for a new period of three years.
With respect to the new five-year
employee Stock Option Plan adopted last year by the General Meeting of
Shareholders, we note that 9,599,000 stock options were granted during the
first year of such Stock Options Plan for directors, managers and selected
employees of the Company.
BRUNO
STEVE
Chairman
JEAN-PIERRE
NOBLANC
Vice
Chairman
REMY DULLIEUX
ALESSANDRO OVI
FRANCIS GAVOIS
RICCARDO GALLO
TOM
DE WAARD
ROBERT M. WHITE
DOUGLAS J. DUNN
March 27, 2002*
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