Financial income and expenses

Financial income consists of interest income, the gain on the sale of securities and other financial income.  Financial expenses consist of interest expense, impairment charges on securities, foreign exchange losses and other financial expenses.

Net interest expense for 2009 was EUR 147 million higher than in 2008, mainly driven by lower interest rates applied to the liquid assets in combination with higher interest costs associated with hedging the Group’s foreign currency funding positions. In 2009, income from the sale of securities totaled EUR 126 million. This included EUR 69 million gain from the sale of remaining shares in LG Display, and EUR 48 million gain from the sale of remaining shares in Pace Micro Technology.  These gains were partially offset by impairment charges amounting to EUR 58 million, mainly from shareholdings in NXP. Other financial income in 2009, primarily consisted of a EUR 19 million gain related to the revaluation of the convertible bonds received from TPV Technology and CBAY; as well as dividend income totaling EUR 16 million, of which EUR 12 million related to holdings in LG Display. Other financial expenses included EUR 15 million accretion expenses mainly associated with discounted asbestos and environmental provisions.

In 2008, income from the sale of securities totaled EUR 1,406 million. This included EUR 1,205 million gain from the sale of shares in TSMC, EUR 158 million gain on the sale of shares in LG Display, and EUR 20 million gain on the sale of shares in D&M. These gains were offset by impairment charges amounting to EUR 1,148 million. This included EUR 599 million for NXP, EUR 448 million for LG Display, EUR 71 million for TPO and EUR 30 million for Pace Micro Technology. Furthermore, other financial expense primarily consisted of a EUR 37 million loss related to the revaluation of the convertible bond received from TPV Technology. The largest portion of other financial income was a EUR 23 million dividend from TSMC.

In 2007, income from the sale of securities totaled EUR 2,804 million. This included EUR 2,783 million gain on the sale of shares in TSMC, EUR 31 million gain on the sale of shares in Nuance Communications, and EUR 10 million loss on sale of shares in JDS Uniphase. These gains were offset by an impairment of EUR 36 million for JDS Uniphase. Furthermore, other financial income included a EUR 12 million gain related to the revaluation of the convertible bond received from TPV Technology and a EUR 128 million cash dividend from TSMC.